UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-7820 --------------------------------------------- American Century Capital Portfolios, Inc. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 4500 Main Street, Kansas City, Missouri 64141 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) David C. Tucker, Esq., 4500 Main Street, 9th Floor, Kansas City, Missouri 64111 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 816-531-5575 ---------------------------- Date of fiscal year end: March 31, 2003 -------------------------------------------------------- Date of reporting period: September 30, 2003 ------------------------------------------------------- ITEM 1. REPORTS TO STOCKHOLDERS. [front cover] September 30, 2003 American Century Semiannual Report [graphic of market line chart] [graphic of starfish] [graphic of two bridges] Equity Income Small Cap Value [american century logo and text logo (reg. sm)] [inside front cover] Table of Contents Our Message to You....................................................... 1 EQUITY INCOME Performance.............................................................. 2 Portfolio Commentary..................................................... 3 Top Ten Holdings...................................................... 3 Top Five Industries................................................... 4 Types of Investments in Portfolio..................................... 4 Schedule of Investments.................................................. 5 SMALL CAP VALUE Performance.............................................................. 9 Portfolio Commentary..................................................... 10 Top Ten Holdings...................................................... 10 Top Five Industries................................................... 11 Types of Investments in Portfolio..................................... 11 Schedule of Investments.................................................. 12 FINANCIAL STATEMENTS Statement of Assets and Liabilities...................................... 16 Statement of Operations.................................................. 17 Statement of Changes in Net Assets....................................... 18 Notes to Financial Statements............................................ 19 Financial Highlights..................................................... 25 OTHER INFORMATION Share Class Information.................................................. 34 Additional Information................................................... 35 Index Definitions........................................................ 36 The opinions expressed in the Portfolio Commentary reflect those of the portfolio management team as of the date of the report, and do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] James E. Stowers III with James E. Stowers, Jr. We are pleased to provide you with the semiannual report for the American Century Equity Income and Small Cap Value funds for the six months ended September 30, 2003. The report includes comparative performance figures, commentary, summary tables, a full list of portfolio holdings and financial statements and highlights. We hope you find this information helpful in monitoring your investment. Many of you have called or written to express your concern about allegations of wrongdoing by other mutual fund investment management firms. We share your concern--fund companies must put investors first and do everything possible to maintain investor trust. Through the Investment Company Institute, the mutual fund trade association, American Century has advocated industry-wide proposals that strengthen protections for fund investors. We believe that decisive action is needed to show that we are committed, as an industry, to the interests of the 95 million investors we serve. As information about alleged trading abuses in the mutual fund industry has come to light, we have posted messages and commentary about these issues on www.americancentury.com. Beyond what's currently in the headlines, American Century has been a champion of many important investor and industry issues, which are outlined in a document titled Putting Investors First. We invite you to visit our Web site and read about how our values have influenced these positions. As always, we deeply appreciate your investment with American Century. Sincerely, /s/James E. Stowers, Jr. Founder and Chairman /s/James E. Stowers III Co-Chairman of the Board ----- 1 Equity Income - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2003 ---------------------- AVERAGE ANNUAL RETURNS - ------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS INCEPTION DATE - ------------------------------------------------------------------------------- INVESTOR CLASS 20.17% 10.37% 14.06% 8/1/1994 - ------------------------------------------------------------------------------- LIPPER EQUITY INCOME INDEX 20.48% 2.31% 8.60%(1) -- - ------------------------------------------------------------------------------- S&P 500 INDEX 24.40% 1.00% 10.76%(1) -- - ------------------------------------------------------------------------------- Institutional Class 20.40% 10.59% 8.65% 7/8/1998 - ------------------------------------------------------------------------------- Advisor Class 19.88% 10.10% 10.93% 3/7/1997 - ------------------------------------------------------------------------------- C Class 18.86% -- 3.99% 7/13/2001 - ------------------------------------------------------------------------------- R Class -- -- -0.41%(2) 8/29/2003 - ------------------------------------------------------------------------------- (1) Since 7/31/94, the date nearest the Investor Class's inception for which data are available. (2) Returns for periods less than one year are not annualized. GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made August 1, 1994
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ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - ------------------------------------------------------------------------------- 1994* 1995 1996 1997 1998 - ------------------------------------------------------------------------------- Investor Class 2.48% 20.48% 20.89% 34.35% 1.67% - ------------------------------------------------------------------------------- S&P 500 Index 1.55% 29.75% 20.33% 40.45% 9.05% - ------------------------------------------------------------------------------- Lipper Equity Income 1.37% 20.28% 15.51% 33.25% 1.29% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1999 2000 2001 2002 2003 - ------------------------------------------------------------------------------- Investor Class 15.98% 6.80% 14.30% -3.72% 20.17% - ------------------------------------------------------------------------------- S&P 500 Index 27.80% 13.28% -26.62% -20.49% 24.40% - ------------------------------------------------------------------------------- Lipper Equity Income 13.36% 8.10% -8.82% -16.74% 20.48% - ------------------------------------------------------------------------------- * From 8/1/94, the Investor Class's inception date. Indices from 7/31/94, the date nearest the Investor Class's inception for which data are available. Not annualized. The charts on the performance page give historical return data for the fund. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. Unless otherwise indicated, the charts are based on Investor Class shares; performance for other classes will vary due to differences in fee structures. Past performance does not guarantee future results. None of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. - ----- 2 Equity Income - Portfolio Commentary [photo of Phil Davidson and Scott Moore] A portfolio commentary from Phil Davidson and Scott Moore, portfolio managers on the Equity Income investment team. Equity Income posted a total return of 16.25%* for the six months ending September 30, 2003, slightly trailing its benchmark, the Lipper Equity Income Index, which returned 17.54% for the period. Equity Income's long-term performance against its benchmark index has been strong--from the fund's inception on August 1, 1994, it has produced an average annual total return of 14.06%, significantly ahead of the 8.60% return recorded by the Lipper Equity Income Index for the same time period. AN UPBEAT MARKET The U.S. economy continued to rebound during the period covered by this report, albeit at a somewhat sluggish pace. Despite deepening unemployment, higher oil prices and a faltering dollar, inflation remained low, prompting the Federal Reserve to cut interest rates to a 45-year low in June. At the same time, rising corporate profits, solid retail activity, and strength in the housing market buoyed investor confidence and helped drive stocks steadily higher. The S&P 500, considered representative of the broad market, gained 18.45% during the six months. Both value-oriented and growth shares performed well during the period, while smaller companies pulled ahead of their larger-cap counterparts. THE GREATEST GAINS Financial stocks, which represented Equity Income's largest sector concentration on average, contributed the most to performance during the period. Our bottom-up approach and emphasis on quality led us to a number of well-performing banks, property and casualty insurers, and securities & asset managers that continued to thrive in a low-interest-rate environment. Standout performers included securities and asset management firm A.G. Edwards and investment manager T. Rowe Price Group, whose success during the period was fueled by investors' growing confidence about the improving economy and corresponding heightened activity in the equities market. - ------------------------------------------------------------------------------- TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2003 - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 9/30/03 3/31/03 - ------------------------------------------------------------------------------- Exxon Mobil Corp. 4.2% 1.5% - ------------------------------------------------------------------------------- Kimberly-Clark Corp. 3.6% 4.0% - ------------------------------------------------------------------------------- Bank of America Corp. 3.0% -- - ------------------------------------------------------------------------------- Ameren Corp., 9.75%, 5/15/05 2.7% 3.0% - ------------------------------------------------------------------------------- SBC Communications Inc. 2.6% 1.6% - ------------------------------------------------------------------------------- Emerson Electric Co. 2.6% 3.1% - ------------------------------------------------------------------------------- BP plc ADR 2.4% 3.8% - ------------------------------------------------------------------------------- WGL Holdings Inc. 2.4% 2.0% - ------------------------------------------------------------------------------- Allstate Corp. 2.3% 2.2% - ------------------------------------------------------------------------------- Union Pacific Capital Trust, 6.25%, 4/1/28 2.3% 3.9% - ------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. (continued) ----- 3 Equity Income - Portfolio Commentary The consumer non-cyclical sector was another source of absolute performance during the period. Selected holdings in the food & beverage industry were particularly noteworthy. Campbell Soup Company's success in recent months was the result of the firm's successful launch of new products, improved marketing and increased investment in its more successful brands. A top performer in the home products arena was Kimberly Clark Corp., which benefited from its meaningful dividend-increase and an ongoing share repurchase effort. Equity Income's stake in the industrials sector also boosted performance. Topping the list of contributors in this group was Emerson Electric, a global supplier of electronic products and systems. Although Emerson has been impacted by slowing demand in its U.S. and Latin American markets, and in particular from its telecommunications equipment supplier clients, effective cost containment efforts, restructuring and successful new-product launches nonetheless boosted earnings. A second contributor was tool maker Stanley Works, whose business is recovering in line with the improving economy. A FEW TROUBLE SPOTS Telecommunications stocks also posted positive returns during the period, but not all stocks benefited equally. Key holdings Verizon and SBC Communications declined due to investors' ongoing wariness of the increased competitive pressures on the sector. We have added to our stake in both firms because we expect them to emerge as leaders in their industry as conditions improve over time. The health care sector was also a bit of a mixed bag, producing some of the fund's best and worst performers. Industry leaders Abbott Labs and Bristol-Myer - ------------------------------------------------------------------------------- TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2003 - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 9/30/03 3/31/03 - ------------------------------------------------------------------------------- Energy Reserves & Production 12.6% 9.4% - ------------------------------------------------------------------------------- Banks 7.7% 3.2% - ------------------------------------------------------------------------------- Food & Beverage 7.3% 3.7% - ------------------------------------------------------------------------------- Gas & Water Utilities 5.3% 5.8% - ------------------------------------------------------------------------------- Electrical Utilities 4.8% 6.7% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - ------------------------------------------------------------------------------- AS OF AS OF 9/30/03 3/31/03 - ------------------------------------------------------------------------------- U.S. Common Stocks, Futures, and Options 67.1% 71.2% - ------------------------------------------------------------------------------- Foreign Common Stocks 6.0% 6.8% - ------------------------------------------------------------------------------- Preferred Stocks 0.9% -- - ------------------------------------------------------------------------------- Convertible Preferred Stocks 12.1% 12.5% - ------------------------------------------------------------------------------- Convertible Bonds 12.8% 8.6% - ------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 98.9% 99.1% - ------------------------------------------------------------------------------- Temporary Cash Investments 1.1% 0.9% - ------------------------------------------------------------------------------- Squibb added to results. At the same time, rival drug maker Schering-Plough Corp., which has been struggling with competitive issues as well as several legal, regulatory and manufacturing difficulties, emerged as one of the fund's greatest detractors. Despite Schering's recent performance, we remain confident about both the firm's fundamental strength and its plans to turn its operation around, and are maintaining our position. We will continue to both seek out fundamentally sound businesses that have transitory issues affecting the price of their stock and pursue a relatively high income stream while waiting for the market to recognize undervaluation. - ----- 4 Equity Income - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - ------------------------------------------------------------------------------- COMMON STOCKS - 73.0% APPAREL & TEXTILES - 0.2% - ------------------------------------------------------------------------------- 140,500 VF Corp. $5,466,855 - ------------------------------------------------------------------------------- BANKS - 7.2% - ------------------------------------------------------------------------------- 847,800 Bank of America Corp. 66,162,311 - ------------------------------------------------------------------------------- 802,525 Commerce Bancshares, Inc. 35,110,469 - ------------------------------------------------------------------------------- 526,600 Mercantile Bankshares Corporation 21,064,000 - ------------------------------------------------------------------------------- 555,170 UMB Financial Corp. 26,187,369 - ------------------------------------------------------------------------------- 321,000 Whitney Holding Corp. 10,914,000 - ------------------------------------------------------------------------------- 159,438,149 - ------------------------------------------------------------------------------- CHEMICALS - 3.0% - ------------------------------------------------------------------------------- 345,700 Air Products & Chemicals, Inc. 15,591,070 - ------------------------------------------------------------------------------- 198,100 Albemarle Corp. 5,437,845 - ------------------------------------------------------------------------------- 840,600 du Pont (E.I.) de Nemours & Co. 33,632,406 - ------------------------------------------------------------------------------- 338,800 Rohm and Haas Co. 11,332,860 - ------------------------------------------------------------------------------- 65,994,181 - ------------------------------------------------------------------------------- CLOTHING STORES - 0.8% - ------------------------------------------------------------------------------- 1,112,400 Limited Brands 16,774,992 - ------------------------------------------------------------------------------- COMPUTER HARDWARE & BUSINESS MACHINES - 0.3% - ------------------------------------------------------------------------------- 199,600 Pitney Bowes, Inc. 7,648,672 - ------------------------------------------------------------------------------- COMPUTER SOFTWARE - 0.3% - ------------------------------------------------------------------------------- 429,631 Autodesk, Inc. 7,312,320 - ------------------------------------------------------------------------------- CONSTRUCTION & REAL PROPERTY - 0.8% - ------------------------------------------------------------------------------- 427,021 Vulcan Materials Co. 17,042,408 - ------------------------------------------------------------------------------- CONSUMER DURABLES - 0.2% - ------------------------------------------------------------------------------- 149,487 Hunter Douglas N.V. ORD 5,214,296 - ------------------------------------------------------------------------------- DEFENSE/AEROSPACE - 1.3% - ------------------------------------------------------------------------------- 194,800 Honeywell International Inc. 5,132,980 - ------------------------------------------------------------------------------- 913,900 Rockwell Collins 23,075,975 - ------------------------------------------------------------------------------- 28,208,955 - ------------------------------------------------------------------------------- DIVERSIFIED - 2.0% - ------------------------------------------------------------------------------- 443,500 Standard and Poor's 500 Depositary Receipt 44,314,569 - ------------------------------------------------------------------------------- DRUGS - 4.5% - ------------------------------------------------------------------------------- 835,200 Abbott Laboratories 35,537,760 - ------------------------------------------------------------------------------- 1,282,500 Bristol-Myers Squibb Co. 32,908,950 - ------------------------------------------------------------------------------- 330,700 Merck & Co., Inc. 16,740,034 - ------------------------------------------------------------------------------- 918,800 Schering-Plough Corp. 14,002,512 - ------------------------------------------------------------------------------- 99,189,256 - ------------------------------------------------------------------------------- ELECTRICAL UTILITY - 1.2% - ------------------------------------------------------------------------------- 319,900 Ameren Corp. 13,726,909 - ------------------------------------------------------------------------------- 546,500 IDACORP, Inc. 13,935,750 - ------------------------------------------------------------------------------- 27,662,659 - ------------------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------------------- ENERGY RESERVES & PRODUCTION - 8.7% - ------------------------------------------------------------------------------- 1,283,200 BP plc ADR $54,022,720 - ------------------------------------------------------------------------------- 2,555,400 Exxon Mobil Corp. 93,527,639 - ------------------------------------------------------------------------------- 1,043,392 Royal Dutch Petroleum Co. New York Shares 46,117,926 - ------------------------------------------------------------------------------- 193,668,285 - ------------------------------------------------------------------------------- ENVIRONMENTAL SERVICES - 0.3% - ------------------------------------------------------------------------------- 288,600 Waste Management, Inc. 7,552,662 - ------------------------------------------------------------------------------- FINANCIAL SERVICES - 0.9% - ------------------------------------------------------------------------------- 374,500 Freddie Mac 19,605,075 - ------------------------------------------------------------------------------- FOOD & BEVERAGE - 6.7% - ------------------------------------------------------------------------------- 1,968,500 Archer-Daniels-Midland Co. 25,807,035 - ------------------------------------------------------------------------------- 438,300 Campbell Soup Company 11,614,950 - ------------------------------------------------------------------------------- 644,700 ConAgra Foods, Inc. 13,693,428 - ------------------------------------------------------------------------------- 823,100 H.J. Heinz Company 28,215,868 - ------------------------------------------------------------------------------- 1,019,500 Kellogg Co. 34,000,325 - ------------------------------------------------------------------------------- 266,900 Kraft Foods Inc. 7,873,550 - ------------------------------------------------------------------------------- 445,000 Unilever N.V. New York Shares 26,335,100 - ------------------------------------------------------------------------------- 147,540,256 - ------------------------------------------------------------------------------- FOREST PRODUCTS & PAPER - 3.6% - ------------------------------------------------------------------------------- 256,100 MeadWestvaco Corp. 6,530,550 - ------------------------------------------------------------------------------- 1,142,700 Rayonier, Inc. 46,393,620 - ------------------------------------------------------------------------------- 1,264,400 Sonoco Products Co. 27,753,580 - ------------------------------------------------------------------------------- 80,677,750 - ------------------------------------------------------------------------------- GAS & WATER UTILITIES - 5.3% - ------------------------------------------------------------------------------- 779,726 AGL Resources Inc. 21,964,881 - ------------------------------------------------------------------------------- 400,463 Cascade Natural Gas Corp. 7,849,075 - ------------------------------------------------------------------------------- 857,077 Piedmont Natural Gas Co., Inc. 33,426,003 - ------------------------------------------------------------------------------- 1,925,400 WGL Holdings Inc. 53,102,532 - ------------------------------------------------------------------------------- 116,342,491 - ------------------------------------------------------------------------------- HEAVY ELECTRICAL EQUIPMENT - 4.1% - ------------------------------------------------------------------------------- 1,079,400 Emerson Electric Co. 56,830,410 - ------------------------------------------------------------------------------- 913,136 Hubbell Inc. Cl B 33,320,333 - ------------------------------------------------------------------------------- 90,150,743 - ------------------------------------------------------------------------------- HOME PRODUCTS - 3.6% - ------------------------------------------------------------------------------- 1,532,600 Kimberly-Clark Corp. 78,653,032 - ------------------------------------------------------------------------------- INDUSTRIAL PARTS - 3.8% - ------------------------------------------------------------------------------- 1,495,704 Nordson Corp. 38,723,777 - ------------------------------------------------------------------------------- 519,893 Snap-on Incorporated 14,375,041 - ------------------------------------------------------------------------------- 1,037,900 Stanley Works (The) 30,638,808 - ------------------------------------------------------------------------------- 83,737,626 - ------------------------------------------------------------------------------- INDUSTRIAL SERVICES - 0.3% - ------------------------------------------------------------------------------- 573,000 ServiceMaster Co. 5,878,980 - ------------------------------------------------------------------------------- LIFE & HEALTH INSURANCE - 1.2% - ------------------------------------------------------------------------------- 521,500 Jefferson-Pilot Corp. 23,144,170 - ------------------------------------------------------------------------------- 83,566 Kansas City Life Insurance Company 3,832,337 - ------------------------------------------------------------------------------- 26,976,507 - ------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) ----- 5 Equity Income - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares/Principal Amount Value - ------------------------------------------------------------------------------- MOTOR VEHICLES & PARTS - 0.7% - ------------------------------------------------------------------------------- 474,800 Cooper Tire & Rubber $7,535,076 - ------------------------------------------------------------------------------- 244,200 Genuine Parts Company 7,809,516 - ------------------------------------------------------------------------------- 15,344,592 - ------------------------------------------------------------------------------- OIL SERVICES - 1.0% - ------------------------------------------------------------------------------- 1,174,000 Diamond Offshore Drilling, Inc. 22,423,400 - ------------------------------------------------------------------------------- PROPERTY AND CASUALTY INSURANCE - 3.1% - ------------------------------------------------------------------------------- 1,419,000 Allstate Corp. 51,836,070 - ------------------------------------------------------------------------------- 1,160,500 CNA Surety Corp.(1) 11,663,025 - ------------------------------------------------------------------------------- 22,045 Erie Indemnity Company 857,551 - ------------------------------------------------------------------------------- 99,600 Hartford Financial Services Group Inc. (The) 5,241,948 - ------------------------------------------------------------------------------- 69,598,594 - ------------------------------------------------------------------------------- RAILROADS - 0.6% - ------------------------------------------------------------------------------- 423,200 Burlington Northern Santa Fe Corp. 12,217,784 - ------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUST - 0.3% - ------------------------------------------------------------------------------- 197,149 Manufactured Home Communities, Inc. 7,724,298 - ------------------------------------------------------------------------------- SECURITIES & ASSET MANAGEMENT - 0.5% - ------------------------------------------------------------------------------- 284,200 Edwards (A.G.), Inc. 10,916,122 - ------------------------------------------------------------------------------- TELEPHONE - 4.5% - ------------------------------------------------------------------------------- 578,300 BellSouth Corp. 13,694,144 - ------------------------------------------------------------------------------- 2,557,922 SBC Communications Inc.(2) 56,913,765 - ------------------------------------------------------------------------------- 882,300 Verizon Communications 28,621,812 - ------------------------------------------------------------------------------- 99,229,721 - ------------------------------------------------------------------------------- THRIFTS - 0.9% - ------------------------------------------------------------------------------- 762,289 Washington Federal, Inc. 19,217,306 - ------------------------------------------------------------------------------- TOBACCO - 1.1% - ------------------------------------------------------------------------------- 720,089 UST Inc. 25,332,731 - ------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $1,498,205,706) 1,617,055,267 - ------------------------------------------------------------------------------- CONVERTIBLE BONDS - 12.8% APPAREL & TEXTILES - 1.2% - ------------------------------------------------------------------------------- $48,355,000 Jones Apparel Group, Inc., 3.41%, 2/1/21(3) 26,776,581 - ------------------------------------------------------------------------------- CLOTHING STORES - 0.1% - ------------------------------------------------------------------------------- 2,132,000 Foot Locker Inc., 5.50%, 6/1/08 2,425,150 - ------------------------------------------------------------------------------- COMPUTER HARDWARE & BUSINESS MACHINES - 0.8% - ------------------------------------------------------------------------------- 32,742,000 Hewlett-Packard Co., 4.19%, 10/14/17(3) 17,762,535 - ------------------------------------------------------------------------------- CONSTRUCTION & REAL PROPERTY - 0.5% - ------------------------------------------------------------------------------- 24,916,000 Masco Corp., 3.01%, 7/20/31(3) 11,025,330 - ------------------------------------------------------------------------------- Principal Amount Value - ------------------------------------------------------------------------------- CONSUMER DURABLES - 1.2% - ------------------------------------------------------------------------------- $27,887,000 Goldman Sachs Group Inc., (convertible into Whirlpool Corp.), 3.00%, 6/11/13(4) $26,956,969 - ------------------------------------------------------------------------------- DEPARTMENT STORES - 0.6% - ------------------------------------------------------------------------------- 17,280,000 Costco Wholesale Corp., 2.38%, 8/19/17(3) 12,549,600 - ------------------------------------------------------------------------------- ENERGY RESERVES & PRODUCTION - 2.6% - ------------------------------------------------------------------------------- 24,451,000 Devon Energy Corporation, (convertible into ChevronTexaco Corp.), 4.90%, 8/15/08(4) 25,001,148 - ------------------------------------------------------------------------------- 32,923,000 Devon Energy Corporation, (convertible into ChevronTexaco Corp.), 4.95%, 8/15/08(4) 33,663,767 - ------------------------------------------------------------------------------- 58,664,915 - ------------------------------------------------------------------------------- ENVIRONMENTAL SERVICES - 1.2% - ------------------------------------------------------------------------------- 25,487,000 Goldman Sachs Group Inc., (convertible into Waste Management Inc.), 2.50%, 5/9/10(4) 25,489,038 - ------------------------------------------------------------------------------- 657,000 Waste Management, Inc., 2.00%, 1/24/05 612,653 - ------------------------------------------------------------------------------- 26,101,691 - ------------------------------------------------------------------------------- INFORMATION SERVICES - 1.1% - ------------------------------------------------------------------------------- 11,374,000 BISYS Group Inc. (The), 4.00%, 3/15/06 10,975,910 - ------------------------------------------------------------------------------- 21,055,000 Valassis Communications Inc., 3.06%, 6/6/21(3) 12,317,175 - ------------------------------------------------------------------------------- 23,293,085 - ------------------------------------------------------------------------------- MEDIA - 0.2% - ------------------------------------------------------------------------------- 3,960,000 Disney (Walt) Company, 2.125%, 4/15/23 4,063,950 - ------------------------------------------------------------------------------- MEDICAL PRODUCTS & SUPPLIES - 0.4% - ------------------------------------------------------------------------------- 9,645,000 Invitrogen Corp., 2.25%, 12/15/06 9,512,381 - ------------------------------------------------------------------------------- OIL SERVICES - 2.5% - ------------------------------------------------------------------------------- 23,793,000 Loews Corp., (convertible into Diamond Offshore Drilling, Inc.), 3.125%, 9/15/07(4) 22,038,266 - ------------------------------------------------------------------------------- 34,695,000 Schlumberger Technology Corp., 2.125%, 6/1/23 (Acquired 8/11/03-9/30/03, Cost $32,041,350)(5) 33,046,988 - ------------------------------------------------------------------------------- 55,085,254 - ------------------------------------------------------------------------------- SEMICONDUCTOR - 0.3% - ------------------------------------------------------------------------------- 3,141,000 Agilent Technologies Inc., 3.00%, 12/1/21 3,184,189 - ------------------------------------------------------------------------------- 2,441,000 Teradyne, Inc., 3.75%, 10/15/06 2,526,435 - ------------------------------------------------------------------------------- 5,710,624 - ------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ----- 6 Equity Income - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares/Principal Amount Value - ------------------------------------------------------------------------------- TELEPHONE - 0.1% - ------------------------------------------------------------------------------- $2,543,000 Commonwealth Telephone Enterprises Inc., 3.25%, 7/15/23 (Acquired 8/13/03-8/14/03, Cost $2,468,845)(5) $2,593,860 - ------------------------------------------------------------------------------- TOTAL CONVERTIBLE BONDS (Cost $280,113,355) 282,521,925 - ------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS - 12.1% DEFENSE/AEROSPACE - 1.9% - ------------------------------------------------------------------------------- 781,668 Raytheon Company, 8.25%, 5/15/06 41,389,321 - ------------------------------------------------------------------------------- ELECTRICAL UTILITY - 3.6% - ------------------------------------------------------------------------------- 2,112,800 Ameren Corp., 9.75%, 5/15/05 58,841,479 - ------------------------------------------------------------------------------- 392,200 FPL Group, Inc., 8.00%, 2/16/06 21,649,440 - ------------------------------------------------------------------------------- 80,490,919 - ------------------------------------------------------------------------------- ENERGY RESERVES & PRODUCTION - 1.3% - ------------------------------------------------------------------------------- 538,700 Unocal Corp., 6.25%, 9/01/26 27,743,050 - ------------------------------------------------------------------------------- FOOD & BEVERAGE - 0.6% - ------------------------------------------------------------------------------- 466,200 Goldman Sachs Group Inc., (convertible into Kraft Foods Inc.), 6.375%, 6/11/04 14,210,242 - ------------------------------------------------------------------------------- FOREST PRODUCTS & PAPER - 0.4% - ------------------------------------------------------------------------------- 187,000 International Paper, 5.25%, 7/20/25 9,186,375 - ------------------------------------------------------------------------------- HOME PRODUCTS - 0.8% - ------------------------------------------------------------------------------- 400,700 Newell Financial Trust I, 5.25%, 12/1/27 16,879,488 - ------------------------------------------------------------------------------- PROPERTY AND CASUALTY INSURANCE - 1.2% - ------------------------------------------------------------------------------- 364,891 Chubb Corp., 7.00%, 11/16/05 10,085,587 - ------------------------------------------------------------------------------- 302,390 Hartford Financial Services Group Inc. (The), 7.00%, 8/16/06 16,912,673 - ------------------------------------------------------------------------------- 26,998,260 - ------------------------------------------------------------------------------- RAILROADS - 2.3% - ------------------------------------------------------------------------------- 1,008,731 Union Pacific Capital Trust, 6.25%, 4/1/28 51,067,007 - ------------------------------------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $260,364,106) 267,964,662 - ------------------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------------------- PREFERRED STOCKS - 0.9% BANKS - 0.5% - ------------------------------------------------------------------------------- 483,500 Citigroup Inc., 6.00%, 2/14/33 $12,087,500 - ------------------------------------------------------------------------------- DEFENSE/AEROSPACE - 0.4% - ------------------------------------------------------------------------------- 66,700 Northrop Grumman Corp., 7.00%, 4/4/21 7,863,930 - ------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (Cost $20,351,227) 19,951,430 - ------------------------------------------------------------------------------- PURCHASED PUT OPTIONS - 0.1% CONTRACTS - ------------------------------------------------------------------------------- 3,908 SBC Communications Inc., strike at $25.00, expires 10/18/03 (Cost $675,420) 1,250,560 - ------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS - 1.1% Repurchase Agreement, Morgan Stanley Group, Inc., (U.S. Treasury obligations), in a joint trading account at 0.91%, dated 9/30/03, due 10/1/03 (Delivery value $25,400,642) (Cost $25,400,000) 25,400,000 - ------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 100.0% (Cost $2,085,109,814) $2,214,143,844 =============================================================================== See Notes to Financial Statements. (continued) ----- 7 Equity Income - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS* Contracts to Sell Settlement Date Value Unrealized Loss - ------------------------------------------------------------------------------- 2,781,719 EURO 10/31/03 $3,236,919 $(47,150) =================================== (Value on Settlement Date $3,189,769) *FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS are designed to protect the fund's foreign investments against declines in foreign currencies (also known as hedging). The contracts are called "forward" because they allow the fund to exchange a foreign currency for U.S. dollars on a specific date in the future -- and at a prearranged exchange rate. - ------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS - ------------------------------------------------------------------------------- ADR = American Depositary Receipt ORD = Foreign Ordinary Share (1) Non-income producing. (2) Security, or a portion thereof, is being held in connection with an open put option. (3) Security is a zero-coupon bond. The rate indicated is the yield to maturity at purchase. Zero-coupon securities are issued at a substantial discount from their value at maturity. (4) Equity-linked debt security. The aggregate value of these securities at September 30, 2003, was $133,149,188, which represented 6.0% of net assets. (5) Security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of restricted securities at September 30, 2003, was $35,640,848, which represented 1.6% of net assets. See Notes to Financial Statements. - ----- 8 Small Cap Value - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2003 ---------------------- AVERAGE ANNUAL RETURNS - ------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS INCEPTION DATE - ------------------------------------------------------------------------------- INVESTOR CLASS 25.63% 16.81% 13.93% 7/31/1998 - ------------------------------------------------------------------------------- S&P SMALLCAP 600/BARRA VALUE INDEX 25.73% 10.35% 6.91% -- - ------------------------------------------------------------------------------- Institutional Class 25.70% -- 15.69% 10/26/1998 - ------------------------------------------------------------------------------- Advisor Class 25.10% -- 18.65% 12/31/1999 - ------------------------------------------------------------------------------- C Class 24.07% -- 4.73% 6/1/2001 - ------------------------------------------------------------------------------- GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made July 31, 1998
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ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - ------------------------------------------------------------------------------- 1998* 1999 2000 2001 2002 2003 - ------------------------------------------------------------------------------- Investor Class -9.80% 13.25% 21.76% 27.06% -1.21% 25.63% - ------------------------------------------------------------------------------- S&P SmallCap 600/BARRA Value Index -13.69% 13.56% 15.81% 0.03% -1.05% 25.73% - ------------------------------------------------------------------------------- * From 7/31/98 to 9/30/98. Not annualized. The charts on the performance page give historical return data for the fund. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. Unless otherwise indicated, the charts are based on Investor Class shares; performance for other classes will vary due to differences in fee structures. Past performance does not guarantee future results. None of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. ----- 9 Small Cap Value - Portfolio Commentary [photo of Ben Giele and Kevin Laub] A portfolio commentary from Ben Giele and Kevin Laub, portfolio managers on the Small Cap Value investment team. For the six months ended September 30, 2003, Small Cap Value gained 24.84%*, underperforming its benchmark, the S&P SmallCap 600/BARRA Value Index, which returned 30.52%. The S&P 500 Index, representing the broader market, rose 18.45%. RECOVERY TAKES HOLD The past six months were rewarding ones for investors as the stock market rebounded off March 11 lows. Much of the advance came in the first half of the period, when easing geopolitical tensions, a handful of surprisingly strong earnings reports, and liquidity growth generated by monetary and fiscal policies sparked bullish sentiment. Confident that business and economic outlooks were improving, investors registered their conviction with buying that by June had given the major indices their best quarterly finish in four years. Though profit taking eroded some of those gains, by late September the Dow, the Nasdaq and the S&P 500 all had climbed to their highest levels in more than a year. BROAD-BASED STRENGTH Small Cap Value received positive contribution from every sector to which it was exposed, a welcome reversal since our last report to you when the portfolio suffered precipitous declines in a punishing market. Though the scope of the rally lifted companies across industries, many lacked the fundamental strength necessary for inclusion in the portfolio. In addition, rising prices meant fewer value opportunities. Consequently, we were underrepresented in some advancing areas, which cost us performance against our benchmark. While this is disappointing, we're hopeful that the market will rediscover the same kind of high-quality businesses Small Cap Value seeks. During the period, technology companies led the market as economic recovery renewed hopes for increased capital - ------------------------------------------------------------------------------- TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2003 - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 9/30/03 3/31/03 - ------------------------------------------------------------------------------- Too Inc. 1.5% -- - ------------------------------------------------------------------------------- Platinum Underwriters Holdings 1.4% 1.1% - ------------------------------------------------------------------------------- BISYS Group Inc. (The) 1.4% -- - ------------------------------------------------------------------------------- Snap-on Incorporated 1.3% -- - ------------------------------------------------------------------------------- PMI Group, Inc. (The) 1.3% 0.6% - ------------------------------------------------------------------------------- Insituform Technologies, Inc. Cl A 1.3% 1.4% - ------------------------------------------------------------------------------- Kaydon Corporation 1.3% 0.7% - ------------------------------------------------------------------------------- IDACORP, Inc. 1.3% 1.1% - ------------------------------------------------------------------------------- Bemis Co. 1.3% -- - ------------------------------------------------------------------------------- USF Corp.(1) 1.3% 0.8% - ------------------------------------------------------------------------------- (1) Formerly known as USFreightways Corp. *All fund returns referenced in this commentary are for Investor Class shares. (continued) - ----- 10 Small Cap Value - Portfolio Commentary spending. Our sizeable technology stake delivered the biggest contribution to returns and effective stock selection enabled our complement of technology companies to outperform those in the heavier-weighted benchmark. Exposure to the computer software industry yielded two of the portfolio's best stocks. One was long-time holding Parametric Technology Co., a detractor in the past but the portfolio's top-contribution stock this time. Another was Sybase, Inc. Our faith in these companies' innovative products, installed bases of customers and healthy balance sheets was validated when the market recognized these quality businesses. The financial sector--the portfolio's largest weighting--was another source of strength. Banks, the largest position in this arena, added substantial value. Elsewhere, generous exposure to the property and casualty industry produced another top contributor, PMI Group Inc., a mortgage insurance firm. Still, Small Cap Value underperformed its benchmark in the financial sector when companies represented in the index--many of which were too risky or fundamentally weak for the portfolio--posted substantial gains. Our stake in the basic materials sector also delivered ample contribution, and stock selection produced another top contributor in FMC Corp., a chemical company. SOME DISAPPOINTMENTS Occasionally, security selection produces disappointments in an otherwise positive environment. One, from the consumer cyclicals sector, was Too, Inc., the period's top-detracting stock. Too, Inc. owns and operates Limited, Too clothing stores that target pre-teen girls. The company - ------------------------------------------------------------------------------- TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2003 - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 9/30/03 3/31/03 - ------------------------------------------------------------------------------- Banks 8.9% 6.5% - ------------------------------------------------------------------------------- Property & Casualty Insurance 5.8% 5.5% - ------------------------------------------------------------------------------- Chemicals 5.5% 2.6% - ------------------------------------------------------------------------------- Industrial Parts 4.9% 3.9% - ------------------------------------------------------------------------------- Computer Software 4.6% 5.4% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - ------------------------------------------------------------------------------- AS OF AS OF 9/30/03 3/31/03 - ------------------------------------------------------------------------------- U.S. Common Stocks 91.7% 86.4% - ------------------------------------------------------------------------------- Foreign Stocks 2.2% 1.8% - ------------------------------------------------------------------------------- Other 3.5% 6.5% - ------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 97.4% 94.7% - ------------------------------------------------------------------------------- Temporary Cash Investments 2.6% 5.3% - ------------------------------------------------------------------------------- has struggled with its merchandise mix, but its sound balance sheet and competent management continue to make it a compelling choice, so it remains in the portfolio. Another that fell short, this time from the commercial services sector, was BISYS Group, an information services firm that supports business in various segments of the financial industry. THE ROAD AHEAD While the sustainability of the recovery remains uncertain, we will not be distracted by economic currents or investment trends. Instead, we will stand by our discipline of seeking high-quality, undervalued companies that we believe offer our investors the opportunity for reward over time. ----- 11 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - ------------------------------------------------------------------------------- COMMON STOCKS - 93.9% ALCOHOL - 1.0% - ------------------------------------------------------------------------------- 215,000 Adolph Coors Company Cl B $11,558,400 - ------------------------------------------------------------------------------- APPAREL & TEXTILES - 1.1% - ------------------------------------------------------------------------------- 210,000 Polo Ralph Lauren Corp. 5,632,200 - ------------------------------------------------------------------------------- 385,000 Wolverine World Wide, Inc. 7,469,000 - ------------------------------------------------------------------------------- 13,101,200 - ------------------------------------------------------------------------------- BANKS - 8.5% - ------------------------------------------------------------------------------- 150,000 Associated Banc-Corp. 5,670,000 - ------------------------------------------------------------------------------- 145,000 BancorpSouth Inc. 3,175,500 - ------------------------------------------------------------------------------- 210,000 Chittenden Corp. 6,247,500 - ------------------------------------------------------------------------------- 85,000 City National Corp. 4,331,600 - ------------------------------------------------------------------------------- 410,000 Commercial Federal Corp. 9,983,500 - ------------------------------------------------------------------------------- 265,000 Cullen/Frost Bankers, Inc. 9,865,950 - ------------------------------------------------------------------------------- 150,000 FirstMerit Corp. 3,711,000 - ------------------------------------------------------------------------------- 485,000 Hibernia Corp. Cl A 9,826,100 - ------------------------------------------------------------------------------- 125,000 Mercantile Bankshares Corporation 5,000,000 - ------------------------------------------------------------------------------- 225,000 Sky Financial Group Inc. 5,064,750 - ------------------------------------------------------------------------------- 790,000 Sterling Bancshares, Inc. 9,424,700 - ------------------------------------------------------------------------------- 245,000 TCF Financial Corp. 11,747,751 - ------------------------------------------------------------------------------- 200,000 Whitney Holding Corp. 6,800,000 - ------------------------------------------------------------------------------- 345,000 Wilmington Trust Corporation 10,612,200 - ------------------------------------------------------------------------------- 101,460,551 - ------------------------------------------------------------------------------- CHEMICALS - 5.5% - ------------------------------------------------------------------------------- 170,000 AptarGroup, Inc. 6,237,300 - ------------------------------------------------------------------------------- 345,000 Bemis Co. 15,283,500 - ------------------------------------------------------------------------------- 345,000 Ferro Corp. 7,369,200 - ------------------------------------------------------------------------------- 445,000 FMC Corp.(1) 11,214,000 - ------------------------------------------------------------------------------- 625,000 Georgia Gulf Corporation 14,593,750 - ------------------------------------------------------------------------------- 195,000 Ionics Inc.(1) 4,769,700 - ------------------------------------------------------------------------------- 120,000 Minerals Technologies Inc. 6,108,000 - ------------------------------------------------------------------------------- 65,575,450 - ------------------------------------------------------------------------------- CLOTHING STORES - 2.7% - ------------------------------------------------------------------------------- 115,000 Abercrombie & Fitch Co. Cl A(1) 3,186,650 - ------------------------------------------------------------------------------- 295,000 American Eagle Outfitters, Inc.(1) 4,383,700 - ------------------------------------------------------------------------------- 165,902 Cato Corp. (The) 3,346,243 - ------------------------------------------------------------------------------- 230,000 Foot Locker Inc. 3,726,000 - ------------------------------------------------------------------------------- 1,245,000 Too Inc.(1) 18,338,850 - ------------------------------------------------------------------------------- 32,981,443 - ------------------------------------------------------------------------------- COMPUTER HARDWARE & BUSINESS MACHINES - 2.4% - ------------------------------------------------------------------------------- 820,000 Adaptec, Inc.(1) 6,199,200 - ------------------------------------------------------------------------------- 168,596 Black Box Corporation 6,711,807 - ------------------------------------------------------------------------------- 270,000 Electronics for Imaging, Inc.(1) 6,296,400 - ------------------------------------------------------------------------------- 285,000 Imation Corporation 9,305,250 - ------------------------------------------------------------------------------- 28,512,657 - ------------------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------------------- COMPUTER SOFTWARE - 4.6% - ------------------------------------------------------------------------------- 710,000 Activision, Inc.(1) $8,484,500 - ------------------------------------------------------------------------------- 355,000 Autodesk, Inc. 6,042,100 - ------------------------------------------------------------------------------- 325,000 Compuware Corp.(1) 1,742,000 - ------------------------------------------------------------------------------- 225,000 Novell, Inc.(1) 1,199,250 - ------------------------------------------------------------------------------- 4,393,028 Parametric Technology Corp.(1) 13,706,247 - ------------------------------------------------------------------------------- 895,000 Sybase, Inc.(1) 15,223,950 - ------------------------------------------------------------------------------- 565,000 THQ, Inc.(1) 9,277,300 - ------------------------------------------------------------------------------- 42,162 Ulticom Inc.(1) 443,966 - ------------------------------------------------------------------------------- 56,119,313 - ------------------------------------------------------------------------------- CONSTRUCTION & REAL PROPERTY - 2.7% - ------------------------------------------------------------------------------- 895,000 Insituform Technologies, Inc. Cl A(1) 15,895,200 - ------------------------------------------------------------------------------- 280,000 Martin Marietta Materials, Inc. 10,206,000 - ------------------------------------------------------------------------------- 394,008 WCI Communities Inc.(1) 6,501,132 - ------------------------------------------------------------------------------- 32,602,332 - ------------------------------------------------------------------------------- DEFENSE/AEROSPACE - 0.4% - ------------------------------------------------------------------------------- 125,000 Moog Inc.(1) 4,900,000 - ------------------------------------------------------------------------------- DIVERSIFIED - 2.2% - ------------------------------------------------------------------------------- 10,000 iShares Russell 2000 Index Fund 969,700 - ------------------------------------------------------------------------------- 95,000 iShares Russell 2000 Value Index Fund 13,163,200 - ------------------------------------------------------------------------------- 5,000 iShares S&P SmallCap 600 Index Fund 585,900 - ------------------------------------------------------------------------------- 140,000 iShares S&P SmallCap 600/BARRA Value Index Fund 12,096,000 - ------------------------------------------------------------------------------- 26,814,800 - ------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 3.1% - ------------------------------------------------------------------------------- 405,000 Andrew Corporation(1) 4,977,450 - ------------------------------------------------------------------------------- 410,000 Anixter International Inc.(1) 9,335,700 - ------------------------------------------------------------------------------- 25,000 Benchmark Electronics Inc.(1) 1,056,750 - ------------------------------------------------------------------------------- 510,000 Cable Design Technologies Corp.(1) 4,080,000 - ------------------------------------------------------------------------------- 325,000 Coherent, Inc.(1) 8,004,750 - ------------------------------------------------------------------------------- 245,000 Littelfuse, Inc.(1) 5,635,000 - ------------------------------------------------------------------------------- 378,994 Methode Electronics, Inc. 4,475,919 - ------------------------------------------------------------------------------- 37,565,569 - ------------------------------------------------------------------------------- ELECTRICAL UTILITY - 2.3% - ------------------------------------------------------------------------------- 536,524 Empire District Electric Co. 11,803,528 - ------------------------------------------------------------------------------- 605,000 IDACORP, Inc. 15,427,500 - ------------------------------------------------------------------------------- 27,231,028 - ------------------------------------------------------------------------------- ENERGY RESERVES & PRODUCTION - 1.9% - ------------------------------------------------------------------------------- 95,000 Berry Petroleum Company Cl A 1,736,600 - ------------------------------------------------------------------------------- 260,000 Denbury Resources Inc.(1) 3,213,600 - ------------------------------------------------------------------------------- 230,000 Spinnaker Exploration Company(1) 5,520,000 - ------------------------------------------------------------------------------- 470,000 Tom Brown, Inc.(1) 12,079,000 - ------------------------------------------------------------------------------- 22,549,200 - ------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ----- 12 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - ------------------------------------------------------------------------------- FINANCIAL SERVICES - 0.5% - ------------------------------------------------------------------------------- 585,000 Medallion Financial Corp. $3,685,500 - ------------------------------------------------------------------------------- 99,429 National Financial Partners Corp.(1) 2,684,583 - ------------------------------------------------------------------------------- 6,370,083 - ------------------------------------------------------------------------------- FOOD & BEVERAGE - 1.5% - ------------------------------------------------------------------------------- 360,000 Hormel Foods Corp. 8,272,800 - ------------------------------------------------------------------------------- 285,000 Interstate Bakeries Corp. 4,275,000 - ------------------------------------------------------------------------------- 560,000 Lance, Inc. 5,566,400 - ------------------------------------------------------------------------------- 18,114,200 - ------------------------------------------------------------------------------- FOREST PRODUCTS & PAPER - 1.7% - ------------------------------------------------------------------------------- 245,000 Rayonier, Inc. 9,947,000 - ------------------------------------------------------------------------------- 225,000 Sonoco Products Co. 4,938,750 - ------------------------------------------------------------------------------- 490,000 Wausau-Mosinee Paper Corp. 5,982,900 - ------------------------------------------------------------------------------- 20,868,650 - ------------------------------------------------------------------------------- GAS & WATER UTILITIES - 2.6% - ------------------------------------------------------------------------------- 400,000 AGL Resources Inc. 11,268,000 - ------------------------------------------------------------------------------- 325,000 Northwest Natural Gas Co. 9,425,000 - ------------------------------------------------------------------------------- 371,000 WGL Holdings Inc. 10,232,180 - ------------------------------------------------------------------------------- 30,925,180 - ------------------------------------------------------------------------------- GROCERY STORES - 0.9% - ------------------------------------------------------------------------------- 750,000 Casey's General Stores, Inc. 10,522,500 - ------------------------------------------------------------------------------- HEAVY ELECTRICAL EQUIPMENT - 1.7% - ------------------------------------------------------------------------------- 390,000 Crane Co. 9,129,900 - ------------------------------------------------------------------------------- 400,000 Smith (A.O.) Corp. 11,204,000 - ------------------------------------------------------------------------------- 20,333,900 - ------------------------------------------------------------------------------- HEAVY MACHINERY - 0.6% - ------------------------------------------------------------------------------- 330,000 Regal-Beloit Corp. 6,732,000 - ------------------------------------------------------------------------------- HOME PRODUCTS - 1.7% - ------------------------------------------------------------------------------- 380,000 Libbey Inc. 10,567,800 - ------------------------------------------------------------------------------- 705,000 Rayovac Corporation(1) 10,293,000 - ------------------------------------------------------------------------------- 20,860,800 - ------------------------------------------------------------------------------- INDUSTRIAL PARTS - 4.9% - ------------------------------------------------------------------------------- 50,000 Briggs & Stratton Corp. 2,938,000 - ------------------------------------------------------------------------------- 154,435 Circor International Inc. 2,965,152 - ------------------------------------------------------------------------------- 223,263 Kadant Inc.(1) 4,277,719 - ------------------------------------------------------------------------------- 650,000 Kaydon Corporation 15,431,000 - ------------------------------------------------------------------------------- 305,000 Kennametal Inc. 11,407,000 - ------------------------------------------------------------------------------- 580,000 Snap-on Incorporated 16,037,000 - ------------------------------------------------------------------------------- 160,000 Tecumseh Products Cl A 5,969,600 - ------------------------------------------------------------------------------- 59,025,471 - ------------------------------------------------------------------------------- INDUSTRIAL SERVICES - 1.7% - ------------------------------------------------------------------------------- 445,000 ABM Industries Inc. 6,296,750 - ------------------------------------------------------------------------------- 245,000 G&K Services Inc. Cl A 8,575,000 - ------------------------------------------------------------------------------- 245,000 Kelly Services, Inc. Cl A 6,110,300 - ------------------------------------------------------------------------------- 20,982,050 - ------------------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------------------- INFORMATION SERVICES - 4.0% - ------------------------------------------------------------------------------- 60,000 ADVO, Inc.(1) $2,497,800 - ------------------------------------------------------------------------------- 1,270,000 BISYS Group Inc. (The)(1) 16,700,500 - ------------------------------------------------------------------------------- 90,000 MAXIMUS, Inc.(1) 3,100,500 - ------------------------------------------------------------------------------- 435,000 MedQuist Inc.(1) 8,421,600 - ------------------------------------------------------------------------------- 280,000 Valassis Communications, Inc.(1) 7,392,000 - ------------------------------------------------------------------------------- 415,000 Viad Corp. 9,910,200 - ------------------------------------------------------------------------------- 48,022,600 - ------------------------------------------------------------------------------- LEISURE - 1.6% - ------------------------------------------------------------------------------- 485,000 Callaway Golf Co. 6,920,950 - ------------------------------------------------------------------------------- 665,000 Jakks Pacific Inc.(1) 8,106,350 - ------------------------------------------------------------------------------- 115,000 Russ Berrie and Co., Inc. 3,874,350 - ------------------------------------------------------------------------------- 18,901,650 - ------------------------------------------------------------------------------- MEDIA - 1.1% - ------------------------------------------------------------------------------- 325,000 Liberty Corp. (The) 13,633,750 - ------------------------------------------------------------------------------- MEDICAL PRODUCTS & SUPPLIES - 3.3% - ------------------------------------------------------------------------------- 360,000 Apogent Technologies Inc.(1) 7,509,600 - ------------------------------------------------------------------------------- 370,000 Arrow International Inc. 8,510,000 - ------------------------------------------------------------------------------- 180,000 Beckman Coulter Inc. 8,197,200 - ------------------------------------------------------------------------------- 255,000 Orthofix International N.V.(1) 9,333,000 - ------------------------------------------------------------------------------- 205,000 Owens & Minor Inc. 4,940,500 - ------------------------------------------------------------------------------- 75,000 Sybron Dental Specialties Inc.(1) 1,880,250 - ------------------------------------------------------------------------------- 40,370,550 - ------------------------------------------------------------------------------- MEDICAL PROVIDERS & SERVICES - 2.7% - ------------------------------------------------------------------------------- 760,000 Alliance Imaging Inc.(1) 2,614,400 - ------------------------------------------------------------------------------- 520,000 LifePoint Hospitals Inc.(1) 12,506,000 - ------------------------------------------------------------------------------- 455,000 RehabCare Group, Inc.(1) 7,757,750 - ------------------------------------------------------------------------------- 300,000 Renal Care Group Inc.(1) 10,245,000 - ------------------------------------------------------------------------------- 33,123,150 - ------------------------------------------------------------------------------- MINING & METALS - 0.9% - ------------------------------------------------------------------------------- 690,000 Olin Corp. 10,915,800 - ------------------------------------------------------------------------------- MOTOR VEHICLES & PARTS - 2.7% - ------------------------------------------------------------------------------- 130,000 Bandag, Incorporated 4,384,900 - ------------------------------------------------------------------------------- 505,000 Cooper Tire & Rubber 8,014,350 - ------------------------------------------------------------------------------- 190,000 Lear Corporation(1) 10,001,600 - ------------------------------------------------------------------------------- 260,000 Superior Industries International, Inc. 10,543,000 - ------------------------------------------------------------------------------- 32,943,850 - ------------------------------------------------------------------------------- MULTI-INDUSTRY - 0.8% - ------------------------------------------------------------------------------- 560,614 Griffon Corp.(1) 10,068,627 - ------------------------------------------------------------------------------- OIL SERVICES - 3.9% - ------------------------------------------------------------------------------- 450,000 Cal Dive International Inc.(1) 8,748,000 - ------------------------------------------------------------------------------- 265,000 Helmerich & Payne, Inc. 6,927,100 - ------------------------------------------------------------------------------- 390,000 Hydril Co.(1) 7,901,400 - ------------------------------------------------------------------------------- 1,180,000 Key Energy Group, Inc.(1) 11,387,000 - ------------------------------------------------------------------------------- 390,000 Unit Corporation(1) 7,347,600 - ------------------------------------------------------------------------------- 280,000 W-H Energy Services Inc.(1) 4,984,000 - ------------------------------------------------------------------------------- 47,295,100 - ------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) ----- 13 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - ------------------------------------------------------------------------------- PROPERTY AND CASUALTY INSURANCE - 4.8% - ------------------------------------------------------------------------------- 120,000 Direct General Corp.(1) $3,008,400 - ------------------------------------------------------------------------------- 95,000 Erie Indemnity Company 3,695,500 - ------------------------------------------------------------------------------- 255,000 HCC Insurance Holdings, Inc. 7,415,400 - ------------------------------------------------------------------------------- 470,000 Horace Mann Educators Corp. 6,819,700 - ------------------------------------------------------------------------------- 600,000 Platinum Underwriters Holdings 16,860,000 - ------------------------------------------------------------------------------- 475,000 PMI Group, Inc. (The) 16,031,250 - ------------------------------------------------------------------------------- 170,000 ProAssurance Corp.(1) 4,391,100 - ------------------------------------------------------------------------------- 58,221,350 - ------------------------------------------------------------------------------- PUBLISHING - 1.5% - ------------------------------------------------------------------------------- 270,000 Banta Corp. 9,720,000 - ------------------------------------------------------------------------------- 490,000 Journal Communications Inc.(1) 8,109,500 - ------------------------------------------------------------------------------- 17,829,500 - ------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUST - 1.9% - ------------------------------------------------------------------------------- 440,000 Getty Realty Corp. 10,780,000 - ------------------------------------------------------------------------------- 90,000 Heritage Property Investment Trust 2,599,200 - ------------------------------------------------------------------------------- 480,000 Maguire Properties, Inc. 9,840,000 - ------------------------------------------------------------------------------- 23,219,200 - ------------------------------------------------------------------------------- RESTAURANTS - 4.0% - ------------------------------------------------------------------------------- 225,000 AFC Enterprises Inc.(1) 3,622,500 - ------------------------------------------------------------------------------- 350,000 CEC Entertainment Inc.(1) 13,720,000 - ------------------------------------------------------------------------------- 655,000 Jack in the Box Inc.(1) 11,659,000 - ------------------------------------------------------------------------------- 867,700 O'Charleys Inc.(1) 12,867,991 - ------------------------------------------------------------------------------- 250,000 Papa John's International, Inc.(1) 6,202,500 - ------------------------------------------------------------------------------- 48,071,991 - ------------------------------------------------------------------------------- SECURITIES & ASSET MANAGEMENT - 0.2% - ------------------------------------------------------------------------------- 70,000 Raymond James Financial, Inc. 2,544,500 - ------------------------------------------------------------------------------- SEMICONDUCTOR - 0.1% - ------------------------------------------------------------------------------- 75,000 Avnet Inc.(1) 1,239,000 - ------------------------------------------------------------------------------- 25,000 DuPont Photomasks, Inc.(1) 567,750 - ------------------------------------------------------------------------------- 1,806,750 - ------------------------------------------------------------------------------- SPECIALTY STORES - 1.3% - ------------------------------------------------------------------------------- 380,000 Genesco Inc.(1) 6,102,800 - ------------------------------------------------------------------------------- 415,000 Linens 'n Things, Inc.(1) 9,868,700 - ------------------------------------------------------------------------------- 15,971,500 - ------------------------------------------------------------------------------- THRIFTS - 1.1% - ------------------------------------------------------------------------------- 545,000 Washington Federal, Inc. 13,739,450 - ------------------------------------------------------------------------------- TRUCKING & SHIPPING & AIR FREIGHT - 1.8% - ------------------------------------------------------------------------------- 210,000 Ryder System, Inc. 6,157,200 - ------------------------------------------------------------------------------- 485,000 USF Corp. 15,262,950 - ------------------------------------------------------------------------------- 21,420,150 - ------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $1,019,231,393) 1,133,806,245 - ------------------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS - 2.2% ENERGY RESERVES & PRODUCTION - 0.3% - ------------------------------------------------------------------------------- 65,000 Chesapeake Energy Corp., 6.00%, 12/31/49 (Acquired 2/27/03-2/28/03, Cost $3,345,666)(2) $4,078,750 - ------------------------------------------------------------------------------- LIFE & HEALTH INSURANCE - 0.5% - ------------------------------------------------------------------------------- 175,000 Phoenix Companies Inc., 7.25%, 2/16/06 6,300,000 - ------------------------------------------------------------------------------- MINING & METALS - 0.4% - ------------------------------------------------------------------------------- 76,000 Arch Coal Inc., 5.00%, 12/31/49 4,930,120 - ------------------------------------------------------------------------------- PROPERTY AND CASUALTY INSURANCE - 1.0% - ------------------------------------------------------------------------------- 378,981 United Fire & Casualty Co., Series A, 6.375%, 5/15/14 10,668,315 - ------------------------------------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $21,095,568) 25,977,185 - ------------------------------------------------------------------------------- PREFERRED STOCKS - 0.8% BANKS - 0.4% - ------------------------------------------------------------------------------- 43,000 BancorpSouth Capital Trust I, 8.15%, 1/28/32 1,145,950 - ------------------------------------------------------------------------------- 30,000 Chittenden Capital Trust I, 8.00%, 7/1/32 804,000 - ------------------------------------------------------------------------------- 74,500 MB Financial Capital Trust I, 8.60%, 9/30/32 2,029,380 - ------------------------------------------------------------------------------- 32,000 Sterling Bancshares Capital Trust III, 8.30%, 9/26/32 855,520 - ------------------------------------------------------------------------------- 4,834,850 - ------------------------------------------------------------------------------- GAS & WATER UTILITIES - 0.1% - ------------------------------------------------------------------------------- 47,500 AGL Capital Trust II, 8.00%, 5/15/41 1,282,500 - ------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUST - 0.3% - ------------------------------------------------------------------------------- 56,000 Hospitality Properties, Series B, 8.875%, 12/10/07 1,492,400 - ------------------------------------------------------------------------------- 81,000 Mills Corp. (The), Series B, 9.00%, 10/9/07 2,154,600 - ------------------------------------------------------------------------------- 3,647,000 - ------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (Cost $9,239,676) 9,764,350 - ------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ----- 14 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Principal Value Value - ------------------------------------------------------------------------------- CONVERTIBLE BONDS - 0.5% MEDICAL PROVIDERS & SERVICES - 0.5% - ------------------------------------------------------------------------------- $6,670,000 LifePoint Hospitals Holdings Inc., 4.50%, 6/1/09 (Cost $6,435,485) $6,311,488 - ------------------------------------------------------------------------------- Value - ------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS - 2.6% Repurchase Agreement, Deutsche Bank Inc., (U.S. Treasury obligations), in a joint trading account at 0.90%, dated 9/30/03, due 10/1/03 (Delivery value $31,300,783) (Cost $31,300,000) 431,300,000 - ------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 100.0% (Cost $1,087,302,122) $1,207,159,268 =============================================================================== NOTES TO SCHEDULE OF INVESTMENTS (1) Non-income producing. (2) Security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of restricted securities at September 30, 2003, was $4,078,750, which represented 0.3% of net assets. See Notes to Financial Statements. ----- 15 Statement of Assets and Liabilities SEPTEMBER 30, 2003 (UNAUDITED) - ------------------------------------------------------------------------------- EQUITY INCOME SMALL CAP VALUE - ------------------------------------------------------------------------------- ASSETS - ------------------------------------------------------------------------------- Investment securities, at value (cost of $2,085,109,814 and $1,087,302,122, respectively) $2,214,143,844 $1,207,159,268 - ------------------------------------------------------------------------------- Receivable for investments sold 12,628,680 53,523,578 - ---------------------------------------------- Receivable for capital shares sold 2,037,799 34,568 - ---------------------------------------------- Dividends and interest receivable 4,621,451 1,156,285 - ------------------------------------------------------------------------------- 2,233,431,774 1,261,873,699 - ------------------------------------------------------------------------------- LIABILITIES - ------------------------------------------------------------------------------- Disbursements in excess of demand deposit cash 4,443,982 213,661 - ---------------------------------------------- Payable for investments purchased 23,066,086 33,091,349 - ---------------------------------------------- Payable for forward foreign currency exchange contracts 47,150 -- - ---------------------------------------------- Payable for capital shares redeemed 1,212 -- - ---------------------------------------------- Accrued management fees 1,734,118 1,227,290 - ---------------------------------------------- Distribution fees payable 76,804 60,069 - ---------------------------------------------- Service fees payable 67,362 58,659 - ------------------------------------------------------------------------------- 29,436,714 34,651,028 - ------------------------------------------------------------------------------- NET ASSETS $2,203,995,060 $1,227,222,671 =============================================================================== NET ASSETS CONSIST OF: - ---------------------------------------------- Capital (par value and paid-in surplus) $2,083,611,665 $1,171,927,245 - ---------------------------------------------- Undistributed net investment income 1,648,984 1,132,319 - ---------------------------------------------- Accumulated net realized loss on investment and foreign currency transactions (10,254,703) (65,694,039) - ---------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 128,989,114 119,857,146 - ------------------------------------------------------------------------------- $2,203,995,060 $1,227,222,671 =============================================================================== INVESTOR CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------- Net assets $1,766,238,606 $837,451,366 - ---------------------------------------------- Shares outstanding 246,956,904 104,315,103 - ---------------------------------------------- Net asset value per share $7.15 $8.03 - ------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------- Net assets $108,436,077 $112,497,464 - ---------------------------------------------- Shares outstanding 15,152,716 13,985,004 - ---------------------------------------------- Net asset value per share $7.16 $8.04 - ------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------- Net assets $305,792,604 $273,952,194 - ---------------------------------------------- Shares outstanding 42,773,798 34,164,808 - ---------------------------------------------- Net asset value per share $7.15 $8.02 - ------------------------------------------------------------------------------- C CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------- Net assets $23,525,284 $3,321,647 - ---------------------------------------------- Shares outstanding 3,294,464 420,796 - ---------------------------------------------- Net asset value per share $7.14 $7.89 - ------------------------------------------------------------------------------- R CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------- Net assets $2,489 N/A - ---------------------------------------------- Shares outstanding 348 N/A - ---------------------------------------------- Net asset value per share $7.15 N/A - ------------------------------------------------------------------------------- See Notes to Financial Statements. - ----- 16 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) - ------------------------------------------------------------------------------- EQUITY INCOME SMALL CAP VALUE - ------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: - ---------------------------------------------- Dividends (including $437,586 and $0 from affiliates, respectively, and net of foreign taxes withheld of $367,796 and $0, respectively) $ 30,466,815 $ 8,973,492 - ---------------------------------------------- Interest 4,289,832 525,045 - ------------------------------------------------------------------------------- 34,756,647 9,498,537 - ------------------------------------------------------------------------------- EXPENSES: - ---------------------------------------------- Management fees 9,239,851 6,650,248 - ---------------------------------------------- Distribution fees: - ---------------------------------------------- Advisor Class 293,478 291,519 - ---------------------------------------------- C Class 67,671 12,179 - ---------------------------------------------- Service fees: - ---------------------------------------------- Advisor Class 293,478 291,519 - ---------------------------------------------- C Class 22,557 4,060 - ---------------------------------------------- Service and distribution fees - R Class 1 -- - ---------------------------------------------- Directors' fees and expenses 19,188 12,773 - ---------------------------------------------- Other expenses 9,488 4,527 - ------------------------------------------------------------------------------- 9,945,712 7,266,825 - ------------------------------------------------------------------------------- NET INVESTMENT INCOME 24,810,935 2,231,712 - ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: - ---------------------------------------------- Investment transactions (including $12,603 and $(227,577) from affiliates, respectively) 77,279,916 50,208,895 - ---------------------------------------------- Foreign currency transactions (75,978) -- - ------------------------------------------------------------------------------- 77,203,938 50,208,895 - ------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: - ---------------------------------------------- Investments 156,858,047 178,544,662 - ---------------------------------------------- Translation of assets and liabilities in foreign currencies (44,917) -- - ------------------------------------------------------------------------------- 156,813,130 178,544,662 - ------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN 234,017,068 228,753,557 - ------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $258,828,003 $230,985,269 =============================================================================== See Notes to Financial Statements. ----- 17 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) AND YEAR ENDED MARCH 31, 2003 - ----------------------------------------------------------------------------------------------------------------- EQUITY INCOME SMALL CAP VALUE - ----------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT 30, 2003 MARCH 31, 2003 SEPT 30, 2003 MARCH 31, 2003 - ----------------------------------------------------------------------------------------------------------------- OPERATIONS - --------------------------------- Net investment income $ 24,810,935 $ 34,031,293 $ 2,231,712 $ 4,238,703 - ------------------------------------- Net realized gain (loss) 77,203,938 (86,742,952) 50,208,895 (106,206,454) - ------------------------------------- Change in net unrealized appreciation (depreciation) 156,813,130 (117,808,831) 178,544,662 (247,914,277) - ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 258,828,003 (170,520,490) 230,985,269 (349,882,028) - ----------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - --------------------------------- From net investment income: - --------------------------------- Investor Class (19,073,363) (28,852,243) (982,766) (2,197,018) - ------------------------------------- Institutional Class (1,285,252) (2,051,311) (175,246) (438,373) - ------------------------------------- Advisor Class (2,637,943) (2,523,809) (134,217) (146,630) - ------------------------------------- C Class (129,488) (139,021) -- -- - ------------------------------------- R Class (14) -- -- -- - ------------------------------------- From net realized gains: - --------------------------------- Investor Class -- (17,093,197) -- (35,958,617) - ------------------------------------- Institutional Class -- (1,246,174) -- (4,104,621) - ------------------------------------- Advisor Class -- (1,733,545) -- (8,177,684) - ------------------------------------- C Class -- (129,993) -- (128,344) - ------------------------------------- R Class -- -- -- -- - ----------------------------------------------------------------------------------------------------------------- Decrease in net assets from distributions (23,126,060) (53,769,293) (1,292,229) (51,151,287) - ----------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions 443,813,574 579,060,036 71,227,863 (249,311,127) - ----------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 679,515,517 354,770,253 300,920,903 (650,344,442) - ----------------------------------------------------------------------------------------------------------------- NET ASSETS Beginning of period 1,524,479,543 1,169,709,290 926,301,768 1,576,646,210 - ----------------------------------------------------------------------------------------------------------------- End of period $2,203,995,060 $1,524,479,543 $1,227,222,671 $926,301,768 ================================================================================================================= Accumulated undistributed net investment income (loss) $1,648,984 $(35,891) $1,132,319 $192,836 ================================================================================================================= See Notes to Financial Statements. - ----- 18 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Equity Income Fund (Equity Income) and Small Cap Value Fund (Small Cap Value) (collectively, the funds) are two funds in a series issued by the corporation. The funds are diversified under the 1940 Act. Equity Income's investment objective is the production of current income; capital appreciation is a secondary objective. The fund pursues its investment objective by investing in securities of companies with a favorable income-paying history. Small Cap Value's investment objective is long-term capital growth. The production of income is a secondary objective. Small Cap Value seeks to achieve its investment objective by investing in stocks of smaller market capitalization companies that management believes to be undervalued at the time of purchase. The following is a summary of the funds' significant accounting policies. MULTIPLE CLASS -- Equity Income is authorized to issue the Investor Class, the Institutional Class, the Advisor Class, the C Class and the R Class. Small Cap Value is authorized to issue the Investor Class, the Institutional Class, the Advisor Class and the C Class. The C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and shareholder servicing and distribution expenses and arrangements. All shares of each fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the funds are allocated to each class of shares based on their relative net assets. Sale of the R Class for Equity Income commenced on August 29, 2003. SECURITY VALUATIONS -- Securities traded primarily on a principal securities exchange are valued at the last reported sales price, or at the mean of the latest bid and asked prices where no last sales price is available. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official close price. Debt securities not traded on a principal securities exchange are valued through a commercial pricing service or at the mean of the most recent bid and asked prices. Discount notes are valued through a commercial pricing service. When valuations are not readily available, securities are valued at fair value as determined in accordance with procedures adopted by the Board of Directors. SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes. INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. FUTURES AND OPTIONS CONTRACTS -- The funds may enter into futures contracts and purchase put options in order to manage the funds' exposure to changes in market conditions. One of the risks of entering into futures contracts and options is the possibility that the change in value of the contract may not correlate with the changes in value of the underlying securities. Options purchased by the funds are accounted for in the same manner as marketable portfolio securities. The proceeds from securities sold through the exercise of put options are decreased by the premium paid to purchase the put options. Upon entering into a futures contract, the funds are required to deposit either cash or securities in an amount equal to a certain percentage of the contract value (initial margin). Subsequent payments (variation margin) are made or received daily, in cash, by the funds. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. The funds recognize a realized gain or loss when the contract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of realized gain (loss) on investment transactions and unrealized appreciation (depreciation) on investments, respectively. EQUITY-LINKED DEBT SECURITIES -- The funds may invest in hybrid equity securities, which usually convert into common stock at a date predetermined by the issuer. These securities generally offer a higher dividend yield than that of the common stock to which the security is linked. These instruments are issued by a company other than the one to which the security is linked and carry the credit of the issuer, not that of the underlying common stock. The securities' appreciation is limited based on a predetermined final cap price at the date of the conversion. Risks of investing in these securities include, but are not limited to, a set time to capture the yield advantage, limited appreciation potential, decline in value of the underlying stock, and failure of the issuer to pay dividends or to deliver common stock at maturity. ----- 19 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. For assets and liabilities, other than investments in securities, net realized and unrealized gains and losses from foreign currency translations arise from changes in currency exchange rates. Net realized and unrealized foreign currency exchange gains or losses occurring during the holding period of investment securities are a component of realized gain (loss) on investment transactions and unrealized appreciation (depreciation) on investments, respectively. Certain countries may impose taxes on the contract amount of purchases and sales of foreign currency contracts in their currency. The funds record the foreign tax expense, if any, as a reduction to the net realized gain (loss) on foreign currency transactions. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The funds may enter into forward foreign currency exchange contracts to facilitate transactions of securities denominated in a foreign currency or to hedge the funds' exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the funds and the resulting unrealized appreciation or depreciation are determined daily using prevailing exchange rates. The funds bear the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses may arise if the counterparties do not perform under the contract terms. REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with institutions that the funds' investment manager, American Century Investment Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria adopted by the Board of Directors. Each repurchase agreement is recorded at cost. Each fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable each fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to each fund under each repurchase agreement. JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, each fund, along with other registered investment companies having management agreements with ACIM, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations. INCOME TAX STATUS -- It is the funds' policy to distribute all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for federal or state income taxes. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on the ex-dividend date. Distributions from net investment income are declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually. USE OF ESTIMATES -- The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee per class. The Agreement provides that all expenses of the funds, except brokerage commissions, taxes, interest, fees and expenses of those directors who are not considered "interested persons" as defined in the 1940 Act (including counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is computed daily and paid monthly in arrears based on each class's pro rata share of the funds' average daily closing net assets during the previous month. Following are the annual management fee schedules for the funds: (continued) - ----- 20 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) EQUITY INCOME SMALL CAP VALUE - ------------------------------------------------------------------------------- Investor 1.00% 1.25% - ------------------------------------------------------------------------------- Institutional 0.80% 1.05% - ------------------------------------------------------------------------------- Advisor 0.75% 1.00% - ------------------------------------------------------------------------------- C Class 1.00% 1.25% - ------------------------------------------------------------------------------- R Class 1.00% N/A - ------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master Distribution and Shareholder Services Plan for the Advisor Class (the Advisor Class plan) and a separate Master Distribution and Individual Shareholder Services Plan for each of the C Class and R Class (collectively with the Advisor Class Plan, the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the Advisor Class and C Class will pay American Century Investment Services, Inc. (ACIS) the following annual distribution and service fees: - -------------------------------------------------------------------------------- ADVISOR C - -------------------------------------------------------------------------------- Distribution Fee 0.25% 0.75% - -------------------------------------------------------------------------------- Service Fee 0.25% 0.25% - -------------------------------------------------------------------------------- The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed daily and paid monthly in arrears based on each class's average daily closing net assets during the previous month. The distribution fee provides compensation for expenses incurred in connection with distributing shares of the classes including, but not limited to, payments to brokers, dealers, and financial institutions that have entered into sales agreements with respect to shares of the funds. The service fee provides compensation for shareholder and administrative services rendered by ACIS, its affiliates or independent third party providers for Advisor Class shares and for individual shareholder services rendered by broker/dealers or other independent financial intermediaries for C Class and R Class shares. Fees incurred under the plans during the six months ended September 30, 2003, are detailed in the Statement of Operations. RELATED PARTIES -- Certain officers and directors of the corporation are also officers and/or directors, and, as a group, controlling stockholders of American Century Companies, Inc. (ACC), the parent of the corporation's investment manager, ACIM, the distributor of the corporation, ACIS, and the corporation's transfer agent, American Century Services Corporation. During the six months ended September 30, 2003, the funds invested in a money market fund for temporary purposes, which was managed by J.P. Morgan Investment Management, Inc. (JPMIM). JPMIM is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The funds have a bank line of credit agreement with JPM. 3. INVESTMENT TRANSACTIONS Investment transactions, excluding short-term investments, for the six months ended September 30, 2003, were as follows: - -------------------------------------------------------------------------------- EQUITY INCOME SMALL CAP VALUE - -------------------------------------------------------------------------------- Purchases $1,411,484,238 $784,405,087 - -------------------------------------------------------------------------------- Proceeds from sales $909,927,191 $724,534,750 - -------------------------------------------------------------------------------- (continued) ----- 21 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the funds were as follows: - -------------------------------------------------------------------------------------------------------------- EQUITY INCOME SMALL CAP VALUE - -------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 450,000,000 300,000,000 ============================================================================================================== Sold 77,769,056 $545,583,740 16,900,846 $129,941,699 - ------------------------------------------------ Issued in reinvestment of distributions 2,385,179 17,322,913 118,719 926,010 - ------------------------------------------------ Redeemed (38,445,478) (270,275,830) (16,931,306) (127,899,509) - -------------------------------------------------------------------------------------------------------------- Net increase 41,708,757 $292,630,823 88,259 $2,968,200 ============================================================================================================== YEAR ENDED MARCH 31, 2003 SHARES AUTHORIZED 400,000,000 500,000,000 ============================================================================================================== Sold 126,869,218 $844,893,488 49,792,237 $390,740,182 - ------------------------------------------------ Issued in reinvestment of distributions 6,523,806 42,636,828 5,162,512 35,290,424 - ------------------------------------------------ Redeemed (67,396,686) (441,407,719) (102,245,090) (749,618,497) - -------------------------------------------------------------------------------------------------------------- Net increase (decrease) 65,996,338 $446,122,597 (47,290,341) $(323,587,891) ============================================================================================================== INSTITUTIONAL CLASS - -------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 35,000,000 50,000,000 ============================================================================================================== Sold 4,442,277 $30,901,719 3,184,239 $24,349,345 - ------------------------------------------------ Issued in reinvestment of distributions 154,917 1,125,918 21,441 167,456 - ------------------------------------------------ Redeemed (1,942,986) (13,627,175) (1,562,877) (11,843,708) - -------------------------------------------------------------------------------------------------------------- Net increase 2,654,208 $18,400,462 1,642,803 $12,673,093 ============================================================================================================== YEAR ENDED MARCH 31, 2003 SHARES AUTHORIZED 35,000,000 50,000,000 ============================================================================================================== Sold 10,215,767 $68,080,282 9,080,438 $72,796,248 - ------------------------------------------------ Issued in reinvestment of distributions 464,724 3,042,376 630,987 4,316,912 - ------------------------------------------------ Redeemed (7,108,997) (46,593,748) (7,073,336) (51,307,724) - -------------------------------------------------------------------------------------------------------------- Net increase 3,571,494 $24,528,910 2,638,089 $25,805,436 ============================================================================================================== ADVISOR CLASS - -------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 75,000,000 100,000,000 ============================================================================================================== Sold 22,887,220 $160,514,387 12,435,106 $95,790,488 - ------------------------------------------------ Issued in reinvestment of distributions 324,965 2,359,539 14,899 116,210 - ------------------------------------------------ Redeemed (5,659,564) (39,387,694) (5,192,819) (40,019,420) - -------------------------------------------------------------------------------------------------------------- Net increase 17,552,621 $123,486,232 7,257,186 $55,887,278 ============================================================================================================== YEAR ENDED MARCH 31, 2003 SHARES AUTHORIZED 35,000,000 100,000,000 ============================================================================================================== Sold 21,307,401 $140,186,652 14,031,466 $108,771,082 - ------------------------------------------------ Issued in reinvestment of distributions 646,462 4,213,686 1,036,024 7,089,436 - ------------------------------------------------ Redeemed (6,902,549) (45,592,711) (9,384,344) (67,240,456) - -------------------------------------------------------------------------------------------------------------- Net increase 15,051,314 $98,807,627 5,683,146 $48,620,062 ============================================================================================================== (continued) - ----- 22 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) Transactions in shares of the funds were as follows: EQUITY INCOME SMALL CAP VALUE - --------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - --------------------------------------------------------------------------------------------------------------- C Class - --------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 10,000,000 12,500,000 =============================================================================================================== Sold 1,405,435 $9,857,530 2,234 $ 18,024 - ------------------------------------------------ Issued in reinvestment of distributions 14,532 105,463 -- -- - ------------------------------------------------ Redeemed (97,337) (669,451) (43,733) (318,732) - --------------------------------------------------------------------------------------------------------------- Net increase (decrease) 1,322,630 $9,293,542 (41,499) $(300,708) =============================================================================================================== YEAR ENDED MARCH 31, 2003 SHARES AUTHORIZED 10,000,000 12,500,000 =============================================================================================================== Sold 1,617,121 $10,754,876 70,196 $ 457,189 - ------------------------------------------------ Issued in reinvestment of distributions 34,947 228,049 15,446 104,723 - ------------------------------------------------ Redeemed (218,221) (1,382,023) (88,518) (710,646) - --------------------------------------------------------------------------------------------------------------- Net increase (decrease) 1,433,847 $9,600,902 (2,876) $(148,734) =============================================================================================================== R CLASS - --------------------------------------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2003(1) SHARES AUTHORIZED 50,000,000 N/A =============================================================================================================== Sold 346 $2,501 -- -- - ------------------------------------------------ Issued in reinvestment of distributions 2 14 -- -- - ------------------------------------------------ Redeemed -- -- -- -- - --------------------------------------------------------------------------------------------------------------- Net increase 348 $2,515 -- -- =============================================================================================================== (1) August 29, 2003 (commencement of sale) through September 30, 2003 for Equity Income. 5. AFFILIATED COMPANY TRANSACTIONS If a fund's holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended Septmeber 30, 2003 follows: - ----------------------------------------------------------------------------------------------------------------------- SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND SEPTEMBER 30, 2003 FUND/COMPANY 3/31/03 COST COST GAIN (LOSS) INCOME SHARE BALANCE MARKET VALUE - ----------------------------------------------------------------------------------------------------------------------- EQUITY INCOME - ----------------------------------------------------------------------------------------------------------------------- Nordson Corp.(1) 1,190,141 $9,597,001 $2,595,870 $12,603 $437,586 1,495,704 $38,723,777 ======================================================================================================================= SMALL CAP VALUE - ----------------------------------------------------------------------------------------------------------------------- O'Charleys Inc.(1)(2) -- $15,900,854 $1,394,262 $(227,577) -- 867,700 $12,867,991 ======================================================================================================================= (1) Company was not an affiliate at September 30, 2003. (2) Non-income producing (continued) ----- 23 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 6. BANK LINE OF CREDIT The funds, along with certain other funds managed by ACIM, have a $620,000,000 unsecured bank line of credit agreement with JPM. 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 September 30, 2003. 7. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts. As of September 30, 2003, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- EQUITY INCOME SMALL CAP VALUE - -------------------------------------------------------------------------------- Federal tax cost of investments $2,122,956,656 $1,126,243,040 ================================================================================ Gross tax appreciation of investments $143,152,878 $138,761,044 - -------------------------------------------- Gross tax depreciation of investments (51,965,690) (57,844,816) - -------------------------------------------------------------------------------- Net tax appreciation of investments $91,187,188 $80,916,228 ================================================================================ The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales. Following are the capital loss carryovers and capital loss deferral amounts as of March 31, 2003: - -------------------------------------------------------------------------------- EQUITY INCOME SMALL CAP VALUE - -------------------------------------------------------------------------------- Accumulated capital losses $(45,509,616) $(29,073,102) - -------------------------------------------- Capital loss deferral $(4,923,272) $(47,888,914) - -------------------------------------------------------------------------------- The accumulated capital losses listed above represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers expire in 2011 for both Equity Income and Small Cap Value. The capital loss deferrals represent net capital losses incurred in the five-month period ended March 31, 2003. The funds have elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. - ----- 24 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - --------------------------------------------------------------------------------------------------------------------- INVESTOR CLASS - --------------------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000 1999 ===================================================================================================================== PER-SHARE DATA Net Asset Value, Beginning of Period $6.22 $7.36 $6.47 $5.50 $5.95 $7.15 - --------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------------- Net Investment Income(2) 0.09 0.17 0.17 0.18 0.21 0.22 - ---------------------------------------- Net Realized and Unrealized Gain (Loss) 0.92 (1.05) 0.93 0.96 0.03 (0.23) - --------------------------------------------------------------------------------------------------------------------- Total From Investment Operations 1.01 (0.88) 1.10 1.14 0.24 (0.01) - --------------------------------------------------------------------------------------------------------------------- Distributions - ---------------------------------------- From Net Investment Income (0.08) (0.16) (0.17) (0.17) (0.21) (0.23) - ---------------------------------------- From Net Realized Gains -- (0.10) (0.04) -- (0.48) (0.96) - --------------------------------------------------------------------------------------------------------------------- Total Distributions (0.08) (0.26) (0.21) (0.17) (0.69) (1.19) - --------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.15 $6.22 $7.36 $6.47 $5.50 $5.95 ===================================================================================================================== TOTAL RETURN(3) 16.25% (12.09)% 17.35% 20.85% 3.88% (0.44)% ===================================================================================================================== RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.00%(4) 1.00% 1.00% 1.00% 1.00% 1.00% - ---------------------------------------- Ratio of Net Investment Income to Average Net Assets 2.61%(4) 2.60% 2.49% 3.02% 3.41% 3.31% - ---------------------------------------- Portfolio Turnover Rate 49% 120% 139% 169% 141% 180% - ---------------------------------------- Net Assets, End of Period (in thousands) $1,766,239 $1,277,478 $1,025,143 $467,425 $282,692 $296,585 - --------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. ------ 25 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000 1999(2) - -------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $6.23 $7.36 $6.47 $5.50 $5.95 $6.96 - -------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------------- Net Investment Income(3) 0.10 0.19 0.19 0.20 0.22 0.07 - ---------------------------------------- Net Realized and Unrealized Gain (Loss) 0.92 (1.04) 0.92 0.95 0.03 0.06 - -------------------------------------------------------------------------------------------------------------------- Total From Investment Operations 1.02 (0.85) 1.11 1.15 0.25 0.13 - -------------------------------------------------------------------------------------------------------------------- Distributions - ---------------------------------------- From Net Investment Income (0.09) (0.18) (0.18) (0.18) (0.22) (0.18) - ---------------------------------------- From Net Realized Gains -- (0.10) (0.04) -- (0.48) (0.96) - -------------------------------------------------------------------------------------------------------------------- Total Distributions (0.09) (0.28) (0.22) (0.18) (0.70) (1.14) - -------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.16 $6.23 $7.36 $6.47 $5.50 $5.95 ==================================================================================================================== TOTAL RETURN(4) 16.18% (11.77)% 17.40% 21.26% 4.09% 1.60% ==================================================================================================================== RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.80%(5) 0.80% 0.80% 0.80% 0.80% 0.80%(5) - ---------------------------------------- Ratio of Net Investment Income to Average Net Assets 2.81%(5) 2.80% 2.69% 3.22% 3.61% 1.61%(5) - ---------------------------------------- Portfolio Turnover Rate 49% 120% 139% 169% 141% 180%(6) - ---------------------------------------- Net Assets, End of Period (in thousands) $108,436 $77,837 $65,738 $19,130 $13,716 $2,654 - -------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) July 8, 1998 (commencement of sale) through March 31, 1999. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 1999. See Notes to Financial Statements. - ----- 26 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------------------------------------------- ADVISOR CLASS - -------------------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $6.22 $7.36 $6.47 $5.50 $5.95 $7.16 - -------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - --------------------------------------- Net Investment Income(2) 0.08 0.16 0.16 0.17 0.20 0.21 - --------------------------------------- Net Realized and Unrealized Gain (Loss) 0.92 (1.05) 0.92 0.96 0.02 (0.24) - -------------------------------------------------------------------------------------------------------------------- Total From Investment Operations 1.00 (0.89) 1.08 1.13 0.22 (0.03) - -------------------------------------------------------------------------------------------------------------------- Distributions - --------------------------------------- From Net Investment Income (0.07) (0.15) (0.15) (0.16) (0.19) (0.22) - --------------------------------------- From Net Realized Gains -- (0.10) (0.04) -- (0.48) (0.96) - -------------------------------------------------------------------------------------------------------------------- Total Distributions (0.07) (0.25) (0.19) (0.16) (0.67) (1.18) - -------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.15 $6.22 $7.36 $6.47 $5.50 $5.95 ==================================================================================================================== TOTAL RETURN(3) 16.11% (12.30)% 17.05% 20.55% 3.61% (0.75)% ==================================================================================================================== RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.25%(4) 1.25% 1.25% 1.25% 1.25% 1.25% - --------------------------------------- Ratio of Net Investment Income to Average Net Assets 2.36%(4) 2.35% 2.24% 2.77% 3.16% 3.06% - --------------------------------------- Portfolio Turnover Rate 49% 120% 139% 169% 141% 180% - --------------------------------------- Net Assets, End of Period (in thousands) $305,793 $156,911 $74,868 $27,887 $20,281 $12,251 - -------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. ------ 27 Equity Income- Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ----------------------------------------------------------------------------------------- C CLASS - ----------------------------------------------------------------------------------------- 2003(1) 2003 2002(2) - ----------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $6.21 $7.36 $6.89 - ----------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------------------- Net Investment Income(3) 0.06 0.11 0.07 - ----------------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.92 (1.06) 0.50 - ----------------------------------------------------------------------------------------- Total From Investment Operations 0.98 (0.95) 0.57 - ----------------------------------------------------------------------------------------- Distributions - ----------------------------------------------------- From Net Investment Income (0.05) (0.10) (0.06) - ----------------------------------------------------- From Net Realized Gains -- (0.10) (0.04) - ----------------------------------------------------------------------------------------- Total Distributions (0.05) (0.20) (0.10) - ----------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.14 $6.21 $7.36 ========================================================================================= TOTAL RETURN(4) 15.70% (13.08)% 8.45% - ----------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 2.00%(5) 2.00% 2.00%(5) - ----------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.61%(5) 1.60% 1.36%(5) - ----------------------------------------------------- Portfolio Turnover Rate 49% 120% 139%(6) - ----------------------------------------------------- Net Assets, End of Period (in thousands) $23,525 $12,254 $3,960 - ----------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) July 13, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and do not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ----- 28 Equity Income - Financial Highlights For a Share Outstanding Throughout the Period Indicated - -------------------------------------------------------------------------------- R CLASS - -------------------------------------------------------------------------------- 2003(1) - -------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $7.22 - -------------------------------------------------------------------------------- Income From Investment Operations - --------------------------------------------------------------- Net Investment Income(2) 0.01 - --------------------------------------------------------------- Net Realized and Unrealized Loss (0.04) - -------------------------------------------------------------------------------- Total From Investment Operations (0.03) - -------------------------------------------------------------------------------- Distributions - ---------------------------------------------------------------- From Net Investment Income (0.04) - ---------------------------------------------------------------- From Net Realized Gains -- - -------------------------------------------------------------------------------- Total Distributions (0.04) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $7.15 ================================================================================ TOTAL RETURN(3) (0.41)% ================================================================================ RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.50%(4) - ---------------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.42%(4) - ---------------------------------------------------------------- Portfolio Turnover Rate 49%(5) - ---------------------------------------------------------------- Net Assets, End of Period (in thousands) $2 - -------------------------------------------------------------------------------- (1) August 29, 2003 (commencement of sale) through September 30, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended September 30, 2003. See Notes to Financial Statements. ----- 29 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ----------------------------------------------------------------------------------------------------------------------- INVESTOR CLASS - ----------------------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000 1999(2) - ----------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $6.44 $8.62 $6.60 $5.04 $4.73 $5.00 - ----------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------ Net Investment Income(3) 0.02 0.03 0.02 0.07 0.05 0.03 - ------------------------------------ Net Realized and Unrealized Gain (Loss) 1.58 (1.87) 2.20 1.74 0.60 (0.24) - ----------------------------------------------------------------------------------------------------------------------- Total From Investment Operations 1.60 (1.84) 2.22 1.81 0.65 (0.21) - ----------------------------------------------------------------------------------------------------------------------- Distributions - ------------------------------------ From Net Investment Income (0.01) (0.02) (0.02) (0.05) (0.06) (0.02) - ------------------------------------ From Net Realized Gains -- (0.32) (0.18) (0.20) (0.28) (0.04) - ----------------------------------------------------------------------------------------------------------------------- Total Distributions (0.01) (0.34) (0.20) (0.25) (0.34) (0.06) - ----------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.03 $6.44 $8.62 $6.60 $5.04 $4.73 ======================================================================================================================= TOTAL RETURN(4) 24.84% (21.55)% 33.97% 36.51% 14.37% (4.24)% ======================================================================================================================= RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.25%(5) 1.25% 1.25% 1.25% 1.25% 1.25%(5) - ------------------------------------ Ratio of Net Investment Income to Average Net Assets 0.44%(5) 0.37% 0.27% 1.10% 1.04% 1.02%(5) - ------------------------------------ Portfolio Turnover Rate 67% 104% 73% 144% 178% 153% - ------------------------------------ Net Assets, End of Period (in thousands) $837,451 $670,755 $1,305,952 $225,517 $17,690 $11,410 - ----------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) July 31, 1998 (inception) through March 31, 1999. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. See Notes to Financial Statements. - ----- 30 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ---------------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ---------------------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000 1999(2) - ---------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $6.45 $8.63 $6.61 $5.04 $4.74 $4.83 - ---------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - --------------------------------------- Net Investment Income(3) 0.02 0.04 0.03 0.07 0.07 0.03 - --------------------------------------- Net Realized and Unrealized Gain (Loss) 1.58 (1.87) 2.20 1.76 0.58 (0.06) - ---------------------------------------------------------------------------------------------------------------------- Total From Investment Operations 1.60 (1.83) 2.23 1.83 0.65 (0.03) - ---------------------------------------------------------------------------------------------------------------------- Distributions - --------------------------------------- From Net Investment Income (0.01) (0.03) (0.03) (0.06) (0.07) (0.02) - --------------------------------------- From Net Realized Gains -- (0.32) (0.18) (0.20) (0.28) (0.04) - ---------------------------------------------------------------------------------------------------------------------- Total Distributions (0.01) (0.35) (0.21) (0.26) (0.35) (0.06) - ---------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.04 $6.45 $8.63 $6.61 $5.04 $4.74 ====================================================================================================================== TOTAL RETURN(4) 24.86% (21.38)% 34.11% 36.99% 14.39% (0.60)% ====================================================================================================================== RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.05%(5) 1.05% 1.05% 1.05% 1.05% 1.05%(5) - --------------------------------------- Ratio of Net Investment Income to Average Net Assets 0.64%(5) 0.57% 0.47% 1.30% 1.24% 1.22%(5) - --------------------------------------- Portfolio Turnover Rate 67% 104% 73% 144% 178% 153%(6) - --------------------------------------- Net Assets, End of Period (in thousands) $112,497 $79,546 $83,712 $8,593 $2,359 $986 - ---------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) October 26, 1998 (commencement of sale) through March 31, 1999. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the period July 31, 1998 (fund inception) through March 31, 1999. See Notes to Financial Statements. ----- 31 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - --------------------------------------------------------------------------------------------------------------------- ADVISOR CLASS - --------------------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000(2) - --------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $6.43 $8.62 $6.60 $5.04 $4.73 - --------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------------------- Net Investment Income(3) 0.01 0.01 --(4) 0.05 0.03 - ----------------------------------------------------- Net Realized and Unrealized Gain (Loss) 1.58 (1.87) 2.21 1.75 0.29 - --------------------------------------------------------------------------------------------------------------------- Total From Investment Operations 1.59 (1.86) 2.21 1.80 0.32 - --------------------------------------------------------------------------------------------------------------------- Distributions - ----------------------------------------------------- From Net Investment Income --(4) (0.01) (0.01) (0.04) (0.01) - ----------------------------------------------------- From Net Realized Gains -- (0.32) (0.18) (0.20) -- - --------------------------------------------------------------------------------------------------------------------- Total Distributions --(4) (0.33) (0.19) (0.24) (0.01) - --------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.02 $6.43 $8.62 $6.60 $5.04 ===================================================================================================================== TOTAL RETURN(5) 24.80% (21.85)% 33.74% 36.18% 6.86% - --------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.50%(6) 1.50% 1.50% 1.50% 1.50%(6) - ----------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 0.19%(6) 0.12% 0.02% 0.85% 2.21%(6) - ----------------------------------------------------- Portfolio Turnover Rate 67% 104% 73% 144% 178%(7) - ----------------------------------------------------- Net Assets, End of Period (in thousands) $273,952 $173,064 $182,986 $20,600 $91 - --------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) December 31, 1999 (commencement of sale) through March 31, 2000. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount is less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2000. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 32 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ----------------------------------------------------------------------------------------------- C CLASS - ----------------------------------------------------------------------------------------------- 2003(1) 2003 2002(2) - ----------------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $6.35 $8.59 $7.57 - ----------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------------------- Net Investment Loss(3) (0.02) (0.04) (0.05) - ----------------------------------------------------- Net Realized and Unrealized Gain (Loss) 1.56 (1.88) 1.23 - ----------------------------------------------------------------------------------------------- Total From Investment Operations 1.54 (1.92) 1.18 - ----------------------------------------------------------------------------------------------- Distributions - ----------------------------------------------------- From Net Investment Income -- -- --(4) - ----------------------------------------------------- From Net Realized Gains -- (0.32) (0.16) - ----------------------------------------------------------------------------------------------- Total Distributions -- (0.32) (0.16) - ----------------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.89 $6.35 $8.59 =============================================================================================== TOTAL RETURN(5) 24.25% (22.58)% 15.80% - ----------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 2.25%(6) 2.25% 2.25%(6) - ----------------------------------------------------- Ratio of Net Investment Loss to Average Net Assets (0.56)%(6) (0.63)% (0.78)%(6) - ----------------------------------------------------- Portfolio Turnover Rate 67% 104% 73%(7) - ----------------------------------------------------- Net Assets, End of Period (in thousands) $3,322 $2,936 $3,997 - ----------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) June 1, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and do not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. ----- 33 Share Class Information Five classes of shares are authorized for sale by Equity Income: Investor Class, Institutional Class, Advisor Class, C Class, and R Class. Four classes of shares are authorized for sale by Small Cap Value: Investor Class, Institutional Class, Advisor Class, and C Class. The total expense ratios for Advisor, C, and R Class shares are higher than those of Investor Class. The expense ratio of Institutional Class shares is lower. INVESTOR CLASS shares are available for purchase in two ways: 1) directly from American Century without any commissions or other fees; or 2) through a broker-dealer, which may require payment of a transaction fee to the broker. INSTITUTIONAL CLASS shares are available to large investors such as endowments, foundations, and retirement plans, and to financial intermediaries serving these investors. This class recognizes the relatively lower cost of serving institutional customers and others who invest at least $5 million ($3 million for endowments and foundations) in an American Century fund or at least $10 million in multiple funds. In recognition of the larger investments and account balances and comparatively lower transaction costs, the total expense ratio of Institutional Class shares is 0.20% less than the total expense ratio of Investor Class shares. ADVISOR CLASS shares are sold primarily through institutions such as investment advisors, banks, broker-dealers, insurance companies, and financial advisors. Advisor Class shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee. The total expense ratio of Advisor Class shares is 0.25% higher than the total expense ratio of Investor Class shares. C CLASS shares are sold primarily through employer-sponsored retirement plans and through institutions such as investment advisors, banks, broker-dealers, and insurance companies. C Class shares redeemed within 12 months of purchase are subject to a CDSC of 1.00%. There is no CDSC on shares acquired through reinvestment of dividends or capital gains. C Class shares also are subject to a Rule 12b-1 service and distribution fee of up to 1.00%. R CLASS shares are sold primarily through employer-sponsored retirement plans and through institutions such as investment advisors, banks, broker-dealers, and insurance companies. R Class shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee. All classes of shares represent a pro rata interest in the funds and generally have the same rights and preferences. - ----- 34 Additional Information RETIREMENT ACCOUNT INFORMATION As required by law, any distributions you receive from an IRA or certain 403(b) and qualified plans [those not eligible for rollover to an IRA or to another qualified plan] are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld. If you don't want us to withhold on this amount, you must notify us to not withhold the federal income tax. Even if you plan to roll over the amount you withdraw to another tax-deferred account, the withholding rate still applies to the withdrawn amount unless we have received notice not to withhold federal income tax prior to the withdrawal. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election. Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don't have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules. PROXY VOTING GUIDELINES American Century Investment Management, Inc., the Funds' manager, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the manager uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century's Web site at www.americancentury.com and on the Securities and Exchange Commission's Web site at www.sec.gov. ----- 35 Index Definitions The following indices are used to illustrate investment market, sector, or style performance or to serve as fund performance comparisons. They are not investment products available for purchase. The LIPPER EQUITY INCOME INDEX is an equally-weighted index of, typically, the 30 largest equity income mutual funds that purchase securities of companies of all market capitalizations. The S&P 500 INDEX is a market-value weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. The S&P SMALLCAP 600 INDEX, a capitalization-weighted index consisting of 600 domestic stocks, measures the small company segment of the U.S. market. The S&P SMALLCAP 600/BARRA VALUE INDEX is a capitalization-weighted index consisting of S&P SmallCap 600 stocks with lower price-to-book ratios that are slower growing or undervalued. - ----- 36 [inside back cover - blank page] [back cover] CONTACT US WWW.AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR RELATIONS: 1-800-345-2021 or 816-531-5575 BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS: 1-800-345-3533 BANKS AND TRUST COMPANIES, BROKER-DEALERS, FINANCIAL ADVISORS, INSURANCE COMPANIES: 1-800-345-6488 TELECOMMUNICATIONS DEVICE FOR THE DEAF: 1-800-634-4113 or 816-444-3485 AMERICAN CENTURY CAPITAL PORTFILIOS, INC. INVESTMENT MANAGER: American Century Investment Management, Inc. Kansas City, Missouri THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. American Century Investments PRSRT STD P.O. Box 419200 U.S. POSTAGE PAID Kansas City, MO 64141-6200 AMERICAN CENTURY COMPANIES 0311 American Century Investment Services, Inc. SH-SAN-36280S (c)2003 American Century Services Corporation
[front cover] September 30, 2003 American Century Semiannual Report [graphic of market line chart] [graphic of starfish] [graphic of side-by-side bridges] Value Large Company Value [american century logo and text logo (reg.sm)] Table of Contents Our Message to You..................................................... 1 VALUE Performance............................................................ 2 Portfolio Commentary................................................... 4 Top Ten Holdings.................................................... 4 Top Five Industries................................................. 5 Types of Investments in Portfolio................................... 5 Schedule of Investments................................................ 6 LARGE COMPANY VALUE Performance............................................................ 9 Portfolio Commentary................................................... 11 Top Ten Holdings.................................................... 11 Top Five Industries................................................. 12 Types of Investments in Portfolio................................... 12 Schedule of Investments................................................ 13 FINANCIAL STATEMENTS Statement of Assets and Liabilities.................................... 15 Statement of Operations................................................ 17 Statement of Changes in Net Assets..................................... 18 Notes to Financial Statements.......................................... 19 Financial Highlights................................................... 27 OTHER INFORMATION Share Class Information................................................ 40 Additional Information................................................. 42 Index Definitions...................................................... 43 The opinions expressed in the Portfolio Commentary reflect those of the portfolio management team as of the date of the report, and do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. Our Message to You [photo James E. Stowers, Jr. and James E. Stowers III] James E. Stowers III with James E. Stowers, Jr. We are pleased to provide you with the semiannual report for the American Century Value and Large Company Value funds for the six months ended September 30, 2003. The report includes comparative performance figures, commentary, summary tables, a full list of portfolio holdings and financial statements and highlights. We hope you find this information helpful in monitoring your investment. Many of you have called or written to express your concern about allegations of wrongdoing by other mutual fund investment management firms. We share your concern--fund companies must put investors first and do everything possible to maintain investor trust. Through the Investment Company Institute, the mutual fund trade association, American Century has advocated industry-wide proposals that strengthen protections for fund investors. We believe that decisive action is needed to show that we are committed, as an industry, to the interests of the 95 million investors we serve. As information about alleged trading abuses in the mutual fund industry has come to light, we have posted messages and commentary about these issues on www.americancentury.com. Beyond what's currently in the headlines, American Century has been a champion of many important investor and industry issues, which are outlined in a document titled Putting Investors First. We invite you to visit our Web site and read about how our values have influenced these positions. As always, we deeply appreciate your investment with American Century. Sincerely, /s/James E. Stowers, Jr. James E. Stowers, Jr. Founder and Chairman /s/James E. Stowers III James E. Stowers III Co-Chairman of the Board ----- 1 Value - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2003 ----------------------------------- AVERAGE ANNUAL RETURNS - ------------------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - ------------------------------------------------------------------------------------------- INVESTOR CLASS 23.02% 7.83% 11.87% 11.77% 9/1/1993 - ------------------------------------------------------------------------------------------- LIPPER MULTI-CAP VALUE INDEX 27.08% 5.49% 9.57% 9.48%(1) -- - ------------------------------------------------------------------------------------------- S&P 500 INDEX 24.40% 1.00% 10.05% 9.88%(1) -- - ------------------------------------------------------------------------------------------- Institutional Class 23.43% 8.05% -- 6.41% 7/31/1997 - ------------------------------------------------------------------------------------------- Advisor Class 22.73% 7.58% -- 9.12% 10/2/1996 - ------------------------------------------------------------------------------------------- A Class 1/31/2003 No sales charge* -- -- -- 16.88%(2) With sales charge* -- -- -- 10.20%(2) - ------------------------------------------------------------------------------------------- B Class 1/31/2003 No sales charge* -- -- -- 16.34%(2) With sales charge* -- -- -- 11.34%(2) - ------------------------------------------------------------------------------------------- C Class* 21.53% -- -- 0.23% 6/4/2001 - ------------------------------------------------------------------------------------------- *Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. (A Class shares have an initial sales charge and CDSC; B and C Class shares have CDSCs. Please see the Share Class Information pages for more about the applicable sales charges for each share class.) The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied. (1) Since 8/31/93, the date nearest the Investor Class's inception for which data are available. (2) Returns for periods less than one year are not annualized. (continued) - ----- 2 Value - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made September 30, 1993
![](https://capedge.com/proxy/N-CSRS/0000908186-03-000019/growthvalue0311.gif)
ONE-YEAR RETURNS OVER 10 YEARS Periods ended September 30 - -------------------------------------------------------------------------------------------------------- 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 - -------------------------------------------------------------------------------------------------------- Investor Class 7.41% 23.88% 22.15% 37.80% -5.98% 12.04% 2.95% 12.36% -8.55% 23.02% - -------------------------------------------------------------------------------------------------------- Lipper Multi-Cap Value Index 4.27% 23.51% 16.13% 37.54% -7.19% 15.36% 10.61% -6.04% -14.25% 27.08% - -------------------------------------------------------------------------------------------------------- S&P 500 Index 3.69% 29.75% 20.33% 40.45% 9.05% 27.80% 13.28% -26.62% -20.49% 24.40% - -------------------------------------------------------------------------------------------------------- The charts on the performance pages give historical return data for the fund. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. Unless otherwise indicated, the charts are based on Investor Class shares; performance for other classes will vary due to differences in fee structures (see the Total Returns table on the previous page). Past performance does not guarantee future results. None of these charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. ----- 3 Value - Portfolio Commentary [Photo of Phil Davidson and Scott Moore] A portfolio commentary from Phil Davidson (left) and Scott Moore, portfolio managers on the Value investment team. PERFORMANCE SUMMARY Value posted a total return of 20.02%* for the six months ending September 30, 2003. Value's benchmark, the Lipper Multi-Cap Value Index, gained 22.61% for the period. Value's long-term performance against its benchmark index has been strong--from the fund's inception on September 1, 1993, it has produced an average annual total return of 11.77%, significantly ahead of the 9.48% return recorded by the Lipper Multi-Cap Value Index for the same time period. AN UPBEAT MARKET The U.S. economy continued to rebound during the period covered by this report, albeit at a somewhat sluggish pace. Despite deepening unemployment, higher oil prices and a faltering dollar, inflation remained low, prompting the Federal Reserve to cut interest rates to a 45-year low in June. At the same time, rising corporate profits, solid retail activity, and strength in the housing market buoyed investor confidence and drove stocks steadily higher. The S&P 500, considered representative of the broad market, gained 18.45% during the six months. Both value-oriented and growth shares performed well during the period, while smaller companies pulled ahead of their larger-cap counterparts. TRENDING HIGHER Financial stocks moved higher with the market, making this sector Value's richest source of absolute performance during the period. Our focus on quality and fundamental strength directed us to several well-performing names in the banking, insurance, and securities & asset management industries--groups that generally were helped by lower interest rates and perceptions of an improving economy. Top names in these groups included securities and asset management firm A.G. Edwards and investment management firm T. Rowe Price, whose recent progress reflected investors' growing optimism and increased participation in the stock market. TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 9/30/03 3/31/03 - -------------------------------------------------------------------------------- Standard and Poor's 500 Depositary Receipt 4.8% -- - -------------------------------------------------------------------------------- Kimberly-Clark Corp. 3.9% 4.0% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 3.8% 3.0% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 3.8% 2.4% - -------------------------------------------------------------------------------- Freddie Mac 3.3% 3.7% - -------------------------------------------------------------------------------- Allstate Corp. 3.2% 2.1% - -------------------------------------------------------------------------------- BP plc ADR 3.0% 3.1% - -------------------------------------------------------------------------------- Emerson Electric Co. 3.0% 2.5% - -------------------------------------------------------------------------------- Ameren Corp. 2.7% 2.4% - -------------------------------------------------------------------------------- Kraft Foods Inc. 2.5% 1.4% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. (continued) - ----- 4 Value - Portfolio Commentary As conditions improved during the period, investors gravitated toward firms whose earnings typically track the business cycle, which lifted Value's stake in the consumer cyclicals sector. Our best holding in this arena was Martin Marietta Materials, a leading manufacturer of aggregates for the construction industry. Other names that helped were Federated Department Stores, owner of such recognized chains as Macy's and Bloomingdale's, and Whirlpool Corp. Both of these high-quality firms saw their shares decline in response to the economic downturn but recovered nicely in recent months. MIXED RESULTS The health care sector produced mixed results, yielding both some of our best names and a few that detracted. Beckman Coulter, a leading provider of laboratory instruments and products, ranked among the fund's top contributors. Beckman's success in recent months has been fueled primarily by the successful launch of two new products in its Clinical Diagnostics business. At the same time, drug maker Schering-Plough Corp. restrained performance. This leading firm has been struggling for some time with competitive pressures as well as several legal, regulatory, and manufacturing challenges. Despite Schering's recent troubles, we remain confident about both its fundamental strength and plans to turn its operations around, and are therefore maintaining our position. Although Value benefited from each of the technology industries to which it was exposed, performance was uneven, and not all holdings contributed. Electrical equipment maker Dover Corp., which makes industrial products and manufacturing equipment, was among our top contributors. Another top name was aerospace firm Rockwell Collins, which benefited from speculations of a rebound in the commercial aerospace industry. However, results were markedly different for defense contractors Northrop Grumman Corp., whose share prices declined due to perceptions that defense spending will decrease over the immediate term, and Raytheon, which struggled with disappointing results in one of its subsidiaries. We remain committed to our discipline of buying fundamentally sound businesses that have transitory issues affecting the price of their stock. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 9/30/03 3/31/03 - -------------------------------------------------------------------------------- Energy Reserves & Production 8.9% 8.5% - -------------------------------------------------------------------------------- Food & Beverage 7.1% 3.4% - -------------------------------------------------------------------------------- Banks 6.0% 4.7% - -------------------------------------------------------------------------------- Defense/Aerospace 5.4% 4.4% - -------------------------------------------------------------------------------- Home Products 5.1% 4.5% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - ------------------------------------------------------------------------------- AS OF AS OF 9/30/03 3/31/03 - ------------------------------------------------------------------------------- U.S. Common Stocks 88.0% 89.6% - ------------------------------------------------------------------------------- Foreign Common Stocks 8.7% 6.4% - ------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 96.7% 96.0% - ------------------------------------------------------------------------------- Temporary Cash Investments 3.3% 4.0% - ------------------------------------------------------------------------------- ----- 5 Value - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - ----------------------------------------------------------------------------- COMMON STOCKS -- 96.7% APPAREL & TEXTILES -- 1.6% - ----------------------------------------------------------------------------- 1,219,050 Jones Apparel Group, Inc. $ 36,486,167 - ----------------------------------------------------------------------------- BANKS -- 6.0% - ----------------------------------------------------------------------------- 446,502 BB&T Corporation 16,033,887 - ----------------------------------------------------------------------------- 1,145,600 Marshall & Ilsley Corp. 36,109,312 - ----------------------------------------------------------------------------- 1,428,100 SunTrust Banks, Inc. 86,214,397 - ----------------------------------------------------------------------------- 138,357,596 - ----------------------------------------------------------------------------- CHEMICALS -- 4.6% - ----------------------------------------------------------------------------- 548,400 Air Products & Chemicals, Inc. 24,732,840 - ----------------------------------------------------------------------------- 861,700 Great Lakes Chemical Corp. 17,328,787 - ----------------------------------------------------------------------------- 835,500 Rohm and Haas Co. 27,947,475 - ----------------------------------------------------------------------------- 1,197,900 Sherwin-Williams Co. 35,230,239 - ----------------------------------------------------------------------------- 105,239,341 - ----------------------------------------------------------------------------- CONSTRUCTION & REAL PROPERTY -- 3.0% - ----------------------------------------------------------------------------- 214,800 Fluor Corp. 8,018,484 - ----------------------------------------------------------------------------- 1,438,080 Martin Marietta Materials, Inc. 52,418,016 - ----------------------------------------------------------------------------- 334,800 Masco Corp. 8,195,904 - ----------------------------------------------------------------------------- 68,632,404 - ----------------------------------------------------------------------------- DEFENSE/AEROSPACE -- 5.4% - ----------------------------------------------------------------------------- 412,900 Honeywell International Inc. 10,879,915 - ----------------------------------------------------------------------------- 319,400 Northrop Grumman Corp. 27,538,668 - ----------------------------------------------------------------------------- 1,526,300 Raytheon Company 42,736,400 - ----------------------------------------------------------------------------- 1,802,800 Rockwell Collins 45,520,700 - ----------------------------------------------------------------------------- 126,675,683 - ----------------------------------------------------------------------------- DEPARTMENT STORES -- 0.1% - ----------------------------------------------------------------------------- 59,100 Target Corporation 2,223,933 - ----------------------------------------------------------------------------- DIVERSIFIED -- 4.8% - ----------------------------------------------------------------------------- 1,091,800 Standard and Poor's 500 Depositary Receipt 109,092,656 - ----------------------------------------------------------------------------- DRUGS -- 4.4% - ----------------------------------------------------------------------------- 727,000 Abbott Laboratories 30,933,850 - ----------------------------------------------------------------------------- 1,565,476 Bristol-Myers Squibb Co. 40,170,114 - ----------------------------------------------------------------------------- 236,300 Merck & Co., Inc. 11,961,506 - ----------------------------------------------------------------------------- 1,120,000 Schering-Plough Corp. 17,068,800 - ----------------------------------------------------------------------------- 100,134,270 - ----------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 3.0% - ----------------------------------------------------------------------------- 807,400 AVX Corp. 11,053,306 - ----------------------------------------------------------------------------- 472,949 Dover Corp. 16,728,206 - ----------------------------------------------------------------------------- 1,159,600 Littelfuse, Inc.(1)(2) 26,670,800 - ----------------------------------------------------------------------------- 901,100 Nokia Corp. ADR 14,057,160 - ----------------------------------------------------------------------------- 68,509,472 - ----------------------------------------------------------------------------- Shares Value - ----------------------------------------------------------------------------- ELECTRICAL UTILITY -- 4.6% - ----------------------------------------------------------------------------- 1,414,709 Ameren Corp. $ 60,705,163 - ----------------------------------------------------------------------------- 414,729 FirstEnergy Corp. 13,229,855 - ----------------------------------------------------------------------------- 290,540 FPL Group, Inc. 18,362,128 - ----------------------------------------------------------------------------- 396,700 Wisconsin Energy Corp. 12,127,119 - ----------------------------------------------------------------------------- 104,424,265 - ----------------------------------------------------------------------------- ENERGY RESERVES & PRODUCTION -- 8.9% - ----------------------------------------------------------------------------- 1,620,500 BP plc ADR 68,223,050 - ----------------------------------------------------------------------------- 2,374,100 Exxon Mobil Corp. 86,892,059 - ----------------------------------------------------------------------------- 1,135,305 Royal Dutch Petroleum Co. New York Shares 50,180,481 - ----------------------------------------------------------------------------- 205,295,590 - ----------------------------------------------------------------------------- ENVIRONMENTAL SERVICES -- 1.6% - ----------------------------------------------------------------------------- 1,370,961 Waste Management, Inc. 35,878,049 - ----------------------------------------------------------------------------- FINANCIAL SERVICES -- 3.6% - ----------------------------------------------------------------------------- 1,448,900 Freddie Mac 75,849,915 - ----------------------------------------------------------------------------- 46,000 Student Loan Corp. (The) 5,489,180 - ----------------------------------------------------------------------------- 81,339,095 - ----------------------------------------------------------------------------- FOOD & BEVERAGE -- 7.1% - ----------------------------------------------------------------------------- 780,400 Campbell Soup Company 20,680,600 - ----------------------------------------------------------------------------- 889,600 Coca-Cola Enterprises 16,955,776 - ----------------------------------------------------------------------------- 400,200 ConAgra Foods, Inc. 8,500,248 - ----------------------------------------------------------------------------- 139,100 Interstate Bakeries Corp. 2,086,500 - ----------------------------------------------------------------------------- 259,700 Kellogg Co. 8,660,995 - ----------------------------------------------------------------------------- 1,909,800 Kraft Foods Inc. 56,339,100 - ----------------------------------------------------------------------------- 572,900 Pepsi Bottling Group Inc. 11,790,282 - ----------------------------------------------------------------------------- 664,700 Unilever N.V. New York Shares 39,336,946 - ----------------------------------------------------------------------------- 164,350,447 - ----------------------------------------------------------------------------- GAS & WATER UTILITIES -- 3.6% - ----------------------------------------------------------------------------- 1,632,754 AGL Resources Inc. 45,994,680 - ----------------------------------------------------------------------------- 1,287,700 WGL Holdings Inc. 35,514,766 - ----------------------------------------------------------------------------- 81,509,446 - ----------------------------------------------------------------------------- HEAVY ELECTRICAL EQUIPMENT -- 3.0% - ----------------------------------------------------------------------------- 1,286,700 Emerson Electric Co. 67,744,755 - ----------------------------------------------------------------------------- HOME PRODUCTS -- 5.1% - ----------------------------------------------------------------------------- 300,400 Clorox Company 13,779,348 - ----------------------------------------------------------------------------- 1,743,400 Kimberly-Clark Corp. 89,471,288 - ----------------------------------------------------------------------------- 623,400 Newell Rubbermaid Inc. 13,509,078 - ----------------------------------------------------------------------------- 116,759,714 - ----------------------------------------------------------------------------- INDUSTRIAL PARTS -- 0.5% - ----------------------------------------------------------------------------- 210,000 Black & Decker Corporation 8,515,500 - ----------------------------------------------------------------------------- 76,605 Parker-Hannifin Corp. 3,424,244 - ----------------------------------------------------------------------------- 11,939,744 - ----------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ----- 6 Value - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - ----------------------------------------------------------------------------- INFORMATION SERVICES -- 1.8% - ----------------------------------------------------------------------------- 137,697 ADVO, Inc.(1) $ 5,732,326 - ----------------------------------------------------------------------------- 1,403,800 BISYS Group Inc. (The)(1) 18,459,970 - ----------------------------------------------------------------------------- 636,500 Valassis Communications, Inc.(1) 16,803,600 - ----------------------------------------------------------------------------- 40,995,896 - ----------------------------------------------------------------------------- LEISURE -- 0.3% - ----------------------------------------------------------------------------- 77,700 International Speedway Corp. 3,410,253 - ----------------------------------------------------------------------------- 95,520 Speedway Motorsports Inc. 2,818,795 - ----------------------------------------------------------------------------- 6,229,048 - ----------------------------------------------------------------------------- LIFE & HEALTH INSURANCE -- 1.6% - ----------------------------------------------------------------------------- 1,262,400 MetLife, Inc. 35,410,320 - ----------------------------------------------------------------------------- MEDICAL PRODUCTS & SUPPLIES -- 2.5% - ----------------------------------------------------------------------------- 584,942 Beckman Coulter Inc. 26,638,259 - ----------------------------------------------------------------------------- 575,092 Becton Dickinson & Co. 20,772,323 - ----------------------------------------------------------------------------- 246,800 Mettler-Toledo International, Inc.(1) 8,872,460 - ----------------------------------------------------------------------------- 56,283,042 - ----------------------------------------------------------------------------- MEDICAL PROVIDERS & SERVICES -- 0.4% - ----------------------------------------------------------------------------- 557,900 Tenet Healthcare Corp.(1) 8,078,392 - ----------------------------------------------------------------------------- MOTOR VEHICLES & PARTS -- 0.9% - ----------------------------------------------------------------------------- 40,200 Superior Industries International, Inc. 1,630,110 - ----------------------------------------------------------------------------- 628,900 Toyota Motor Corp. ORD 18,507,016 - ----------------------------------------------------------------------------- 20,137,126 - ----------------------------------------------------------------------------- OIL SERVICES -- 1.9% - ----------------------------------------------------------------------------- 1,534,100 Diamond Offshore Drilling, Inc. 29,301,310 - ----------------------------------------------------------------------------- 570,965 Global SantaFe Corp. 13,674,612 - ----------------------------------------------------------------------------- 42,975,922 - ----------------------------------------------------------------------------- PROPERTY AND CASUALTY INSURANCE -- 3.7% - ----------------------------------------------------------------------------- 1,987,100 Allstate Corp. 72,588,763 - ----------------------------------------------------------------------------- 801,900 Horace Mann Educators Corp. 11,635,569 - ----------------------------------------------------------------------------- 84,224,332 - ----------------------------------------------------------------------------- PUBLISHING -- 0.6% - ----------------------------------------------------------------------------- 97,928 Dow Jones & Co. Inc. 4,636,891 - ----------------------------------------------------------------------------- 141,100 McGraw-Hill Companies, Inc. (The) 8,766,543 - ----------------------------------------------------------------------------- 13,403,434 - ----------------------------------------------------------------------------- RAILROADS -- 1.9% - ----------------------------------------------------------------------------- 729,700 Union Pacific Corp. 42,446,649 - ----------------------------------------------------------------------------- RESTAURANTS -- 1.8% - ----------------------------------------------------------------------------- 285,100 Brinker International, Inc.(1) 9,510,936 - ----------------------------------------------------------------------------- 369,300 Darden Restaurants, Inc. 7,016,700 - ----------------------------------------------------------------------------- 734,400 Wendy's International, Inc. 23,721,120 - ----------------------------------------------------------------------------- 40,248,756 - ----------------------------------------------------------------------------- Shares/Principal Amount Value - ----------------------------------------------------------------------------- SECURITIES & ASSET MANAGEMENT -- 2.3% - ----------------------------------------------------------------------------- 1,245,800 Edwards (A.G.), Inc. $ 47,851,178 - ----------------------------------------------------------------------------- 109,047 T. Rowe Price Group Inc. 4,499,279 - ----------------------------------------------------------------------------- 52,350,457 - ----------------------------------------------------------------------------- TELEPHONE -- 4.8% - ----------------------------------------------------------------------------- 613,100 BellSouth Corp. 14,518,208 - ----------------------------------------------------------------------------- 174,804 Commonwealth Telephone Enterprise Inc.(1) 7,014,885 - ----------------------------------------------------------------------------- 2,105,992 SBC Communications Inc. 46,858,322 - ----------------------------------------------------------------------------- 1,279,800 Verizon Communications 41,516,712 - ----------------------------------------------------------------------------- 109,908,127 - ----------------------------------------------------------------------------- TOBACCO -- 0.9% - ----------------------------------------------------------------------------- 604,173 UST Inc. 21,254,806 - ----------------------------------------------------------------------------- TRUCKING & SHIPPING & AIR FREIGHT -- 0.4% - ----------------------------------------------------------------------------- 275,600 CNF Inc. 8,832,980 - ----------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $2,075,848,881) 2,207,371,914 - ----------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 3.3% $50,900,000 FHLB, 0.96%, 10/1/03(3) 50,900,000 - ----------------------------------------------------------------------------- Repurchase Agreement, Bank of America Securities, LLC, (U.S. Treasury obligations), in a joint trading account at 0.89%, dated 9/30/03, due 10/1/03 (Delivery value $24,200,598) 24,200,000 - ----------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $75,100,000) 75,100,000 - ----------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.0% (Cost $2,150,948,881) $2,282,471,914 ============================================================================= COLLATERAL RECEIVED FOR SECURITIES LENDING(4) REPURCHASE AGREEMENTS - ----------------------------------------------------------------------------- Repurchase Agreement, BNP Paribas Securities Corp., (U.S. Government Agency obligations), 1.13%, dated 9/30/03, due 10/1/03 (Delivery value $61,709,189) $61,707,252 - ----------------------------------------------------------------------------- SHORT-TERM DEBT - ----------------------------------------------------------------------------- $12,000,000 Bear Stearns Companies, Inc. Master Note, VRN, 1.37%, 10/1/03 12,000,000 - ----------------------------------------------------------------------------- 10,006,223 Ford Credit Floorplan Master Owner Trust, Series 2001-1, Class A, VRN, 1.21%, 10/15/03, resets monthly off the 1-month LIBOR plus 0.09% with no caps 10,006,223 - ----------------------------------------------------------------------------- 22,006,223 - ----------------------------------------------------------------------------- TOTAL COLLATERAL RECEIVED FOR SECURITIES LENDING (Cost $83,713,475) $83,713,475 ============================================================================= See Notes to Financial Statements. (continued) ----- 7 Value - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS* Contracts to Sell Settlement Date Value Unrealized Loss - ------------------------------------------------------------------------------- 1,267,862,400 JPY 10/31/2003 $11,386,351 $(52,996) ================================== (Value on Settlement Date $11,333,355) *FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS are designed to protect the fund's foreign investments against declines in foreign currencies (also known as hedging). The contracts are called "forward" because they allow the fund to exchange a foreign currency for U.S. dollars on a specific date in the future -- and at a prearranged exchange rate. NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt FHLB = Federal Home Loan Bank JPY = Japanese Yen LIBOR = London Interbank Offered Rate ORD = Foreign Ordinary Share resets = The frequency with which a security's coupon changes, based on current market conditions or an underlying index. The more frequently a security resets, the less risk the investor is taking that the coupon will vary significantly from current market rates. VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is effective September 30, 2003. (1) Non-income producing. (2) Affiliated Company: the fund's holding represents ownership of 5% or more of the voting securities of the company; therefore, the company is affiliated as defined in the Investment Company Act of 1940. (See Note 5 in Notes to Financial Statements for a summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2003.) (3) The rate indicated is the yield to maturity at purchase. (4) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. - ----- 8 Large Company Value - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2003 -------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 23.93% 1.98% 7/30/1999 - -------------------------------------------------------------------------------- RUSSELL 1000 VALUE INDEX 24.37% -1.17%(1) -- - -------------------------------------------------------------------------------- S&P 500 INDEX 24.40% -5.34%(1) -- - -------------------------------------------------------------------------------- Institutional Class 24.16% -1.29% 8/10/2001 - -------------------------------------------------------------------------------- Advisor Class 23.63% 4.16% 10/26/2000 - -------------------------------------------------------------------------------- A Class 1/31/2003 No sales charge* -- 15.50%(2) With sales charge* -- 8.91%(2) - -------------------------------------------------------------------------------- B Class 1/31/2003 No sales charge* -- 14.96%(2) With sales charge* -- 9.96%(2) - -------------------------------------------------------------------------------- C Class* 22.50% 0.05% 11/7/2001 - -------------------------------------------------------------------------------- R Class -- -1.17%(2) 8/29/2003 - -------------------------------------------------------------------------------- *Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. (A Class shares have an initial sales charge and CDSC; B and C Class shares have CDSCs. Please see the Share Class Information pages for more about the applicable sales charges for each share class.) The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied. (1) Since 7/31/99, the date nearest the Investor Class's inception for which data are available. (2) Returns for periods less than one year are not annualized. (continued) ----- 9 Large Company Value - Performance GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made July 30, 1999
![](https://capedge.com/proxy/N-CSRS/0000908186-03-000019/growthlargecovalue0311.gif)
ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - -------------------------------------------------------------------------------- 1999* 2000 2001 2002 2003 - -------------------------------------------------------------------------------- Investor Class -8.56% 5.67% 4.99% -13.70% 23.93% - -------------------------------------------------------------------------------- Russell 1000 Value Index -7.08% 8.91% -8.91% -16.95% 24.37% - -------------------------------------------------------------------------------- S&P 500 Index -3.22% 13.28% -26.62% -20.49% 24.40% - -------------------------------------------------------------------------------- * From 7/30/99, the Investor Class's inception date. Index data from 7/31/99, the date nearest the Investor Class's inception for which data are available. Not annualized. The charts on the performance pages give historical return data for the fund. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. Unless otherwise indicated, the charts are based on Investor Class shares; performance for other classes will vary due to differences in fee structures (see the Total Returns table on the previous page). Past performance does not guarantee future results. None of these charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. - ----- 10 Large Company Value - Portfolio Commentary [photo of Chuck Ritter and Mark Mallon] A portfolio commentary from Chuck Ritter (left) and Mark Mallon, portfolio managers on the Large Company Value investment team. Large Company Value advanced 19.83%* during the six months ended September 30, 2003, slightly outperforming its benchmark, the Russell 1000 Value Index, which gained 19.70%. During the period, most major indices tracked by the Frank Russell Company advanced, regardless of investment style. As is often the case when the economy heats up, stocks of smaller companies performed best in both the growth and value universes. Still, the rally was felt throughout Large Company Value: all of the sectors to which the portfolio was exposed contributed to performance during the six-month period, and none of the industry groups declined. Financials, representing the portfolio's largest sector weighting on average, was also its largest contributor to performance. Large Company Value found positive performers in every industry group within the sector. Bank holdings contributed the most, led by Citigroup, the nation's largest bank. Citigroup's success was attributable to its higher third-quarter dividend, higher second-quarter earnings, and stable credit quality in both its consumer and corporate portfolios. The stock market's six-month rally also lifted revenues for securities dealers, helping make Morgan Stanley and Merrill Lynch two of the portfolio's strongest contributors. During the second quarter business spending rose at its fastest rate in three years. That helped many of Large Company Value's technology holdings, including software maker Computer Associates. The portfolio's computer hardware stocks advanced, led by PC and printer manufacturer Hewlett-Packard. However, the fund's progress in the technology realm was restrained by its lack of Internet and semiconductor stocks, which also performed well over the period. While household spending did not match the pace of business spending, it remained solid, and that was enough to boost a variety of Large Company Value's consumer-oriented stocks. TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 9/30/03 3/31/03 - -------------------------------------------------------------------------------- Standard and Poor's 500 Depositary Receipt 4.5% 4.9% - -------------------------------------------------------------------------------- Citigroup Inc. 4.4% 4.2% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 3.9% 4.0% - -------------------------------------------------------------------------------- Freddie Mac 3.9% 3.8% - -------------------------------------------------------------------------------- Royal Dutch Petroleum Co. New York Shares 2.5% 2.6% - -------------------------------------------------------------------------------- SBC Communications Inc. 2.5% 2.5% - -------------------------------------------------------------------------------- Bank of America Corp. 2.4% 2.4% - -------------------------------------------------------------------------------- Hewlett-Packard Co. 1.8% 1.6% - -------------------------------------------------------------------------------- Merck & Co., Inc. 1.8% 2.2% - -------------------------------------------------------------------------------- Altria Group Inc. 1.8% 1.3% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. (continued) ----- 11 Large Company Value - Portfolio Commentary Among the portfolio's largest contributors was department store Sears Roebuck, which enjoyed better-than-expected comparable store sales during the period, primarily from home appliance products. Consumer services companies contributed as well, led by McDonald's, which gained as new menu items sparked sales growth. Non-cyclicals, companies that make products that consumer tend to continue to purchase regardless of the economic environment, advanced as well. A top contributor in this sector was Altria Group, whose Philip Morris USA tobacco unit received a favorable federal court ruling. Within the same sector, one of the fund's largest detractors was Newell Rubbermaid, which slumped after the home products maker reported lower second-quarter profits, reduced its earnings forecast and cancelled a public meeting with analysts. Telecommunications stocks added to performance, thanks, in part, to gains by long-distance providers. However, Verizon, the largest "Baby Bell" company, was one of the portfolio's biggest detractors during the period. Verizon's shares fell after it reduced its 2003 earnings outlook because of disappointing demand for business voice and consumer landline services. While stakes in the health care and utility sectors added to results, both groups produced some of the Large Company Value's most significant detractors. The fund's health care stake was slowed by Tenet Healthcare, the nation's second-largest hospital chain, which underwent regulatory scrutiny over its handling of Medicare payments. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2003* - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 9/30/03 3/31/03 - -------------------------------------------------------------------------------- Banks 15.7% 14.5% - -------------------------------------------------------------------------------- Energy Reserves & Production 8.9% 10.8% - -------------------------------------------------------------------------------- Telephone 5.9% 5.8% - -------------------------------------------------------------------------------- Financial Services 5.7% 5.7% - -------------------------------------------------------------------------------- Drugs 3.9% 4.5% - -------------------------------------------------------------------------------- *Excludes securities in the Diversified industry category. These securities represent investments in diversified pools of underlying securities in multiple industry categories. TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- AS OF AS OF 9/30/03 3/31/03 - -------------------------------------------------------------------------------- U.S. Common Stocks 91.4% 91.5% - -------------------------------------------------------------------------------- Foreign Stocks 3.2% 3.2% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 94.6% 94.7% - -------------------------------------------------------------------------------- Temporary Cash Investments 5.4% 5.3% - -------------------------------------------------------------------------------- In the utility area, DTE Energy detracted as revenues were squeezed by several factors, including mild weather, the restoration costs from an April 2003 ice storm, and increased costs for customer service improvements and employee benefits. As investors hope that the economic recovery continues into 2004, Large Company Value will continue to follow its disciplined investment approach--searching for large businesses selling at prices below our view of fair market value. - ----- 12 Large Company Value - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - ------------------------------------------------------------------------------ COMMON STOCKS -- 94.6% ALCOHOL -- 0.4% - ------------------------------------------------------------------------------ 21,200 Adolph Coors Company Cl B $ 1,139,712 - ------------------------------------------------------------------------------ APPAREL & TEXTILES -- 1.2% - ------------------------------------------------------------------------------ 61,200 Liz Claiborne, Inc. 2,083,860 - ------------------------------------------------------------------------------ 38,900 VF Corp. 1,513,599 - ------------------------------------------------------------------------------ 3,597,459 - ------------------------------------------------------------------------------ BANKS -- 15.7% - ------------------------------------------------------------------------------ 94,600 Bank of America Corp. 7,382,584 - ------------------------------------------------------------------------------ 104,400 Bank One Corp. 4,035,060 - ------------------------------------------------------------------------------ 295,300 Citigroup Inc. 13,439,103 - ------------------------------------------------------------------------------ 87,100 FleetBoston Financial Corp. 2,626,065 - ------------------------------------------------------------------------------ 92,200 KeyCorp 2,357,554 - ------------------------------------------------------------------------------ 111,000 National City Corp. 3,270,060 - ------------------------------------------------------------------------------ 70,100 PNC Financial Services Group 3,335,358 - ------------------------------------------------------------------------------ 170,500 U.S. Bancorp 4,090,295 - ------------------------------------------------------------------------------ 100,000 Wachovia Corp. 4,119,000 - ------------------------------------------------------------------------------ 72,500 Wells Fargo & Co. 3,733,750 - ------------------------------------------------------------------------------ 48,388,829 - ------------------------------------------------------------------------------ CHEMICALS -- 0.9% - ------------------------------------------------------------------------------ 50,000 PPG Industries, Inc. 2,611,000 - ------------------------------------------------------------------------------ CLOTHING STORES -- 0.7% - ------------------------------------------------------------------------------ 133,600 Limited Brands 2,014,688 - ------------------------------------------------------------------------------ COMPUTER HARDWARE & BUSINESS MACHINES -- 1.8% - ------------------------------------------------------------------------------ 284,700 Hewlett-Packard Co. 5,511,792 - ------------------------------------------------------------------------------ COMPUTER SOFTWARE -- 0.8% - ------------------------------------------------------------------------------ 88,500 Computer Associates International, Inc. 2,310,735 - ------------------------------------------------------------------------------ CONSUMER DURABLES -- 0.6% - ------------------------------------------------------------------------------ 28,400 Whirlpool Corp. 1,924,668 - ------------------------------------------------------------------------------ DEFENSE/AEROSPACE -- 2.4% - ------------------------------------------------------------------------------ 71,000 Boeing Co. 2,437,430 - ------------------------------------------------------------------------------ 120,400 Honeywell International Inc. 3,172,540 - ------------------------------------------------------------------------------ 58,000 Raytheon Company 1,624,000 - ------------------------------------------------------------------------------ 7,233,970 - ------------------------------------------------------------------------------ DEPARTMENT STORES -- 1.8% - ------------------------------------------------------------------------------ 132,200 May Department Stores Co. (The) 3,256,086 - ------------------------------------------------------------------------------ 52,400 Sears, Roebuck & Co. 2,291,452 - ------------------------------------------------------------------------------ 5,547,538 - ------------------------------------------------------------------------------ DIVERSIFIED -- 4.5% - ------------------------------------------------------------------------------ 139,000 Standard and Poor's 500 Depositary Receipt 13,888,880 - ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ DRUGS -- 3.9% - ------------------------------------------------------------------------------ 78,600 Abbott Laboratories $ 3,344,430 - ------------------------------------------------------------------------------ 126,300 Bristol-Myers Squibb Co. 3,240,858 - ------------------------------------------------------------------------------ 108,800 Merck & Co., Inc. 5,507,456 - ------------------------------------------------------------------------------ 12,092,744 - ------------------------------------------------------------------------------ ELECTRICAL EQUIPMENT -- 0.7% - ------------------------------------------------------------------------------ 57,700 Dover Corp. 2,040,849 - ------------------------------------------------------------------------------ ELECTRICAL UTILITY -- 2.3% - ------------------------------------------------------------------------------ 88,500 American Electric Power 2,655,000 - ------------------------------------------------------------------------------ 70,600 Exelon Corporation 4,483,100 - ------------------------------------------------------------------------------ 7,138,100 - ------------------------------------------------------------------------------ ENERGY RESERVES & PRODUCTION -- 8.9% - ------------------------------------------------------------------------------ 56,700 ChevronTexaco Corp. 4,051,215 - ------------------------------------------------------------------------------ 325,000 Exxon Mobil Corp. 11,895,000 - ------------------------------------------------------------------------------ 100,400 Occidental Petroleum Corp. 3,537,092 - ------------------------------------------------------------------------------ 176,700 Royal Dutch Petroleum Co. New York Shares 7,810,140 - ------------------------------------------------------------------------------ 27,293,447 - ------------------------------------------------------------------------------ ENVIRONMENTAL SERVICES -- 0.8% - ------------------------------------------------------------------------------ 99,300 Waste Management, Inc. 2,598,681 - ------------------------------------------------------------------------------ FINANCIAL SERVICES -- 5.7% - ------------------------------------------------------------------------------ 227,200 Freddie Mac 11,893,920 - ------------------------------------------------------------------------------ 109,200 General Electric Co. 3,255,252 - ------------------------------------------------------------------------------ 42,500 MGIC Investment Corp. 2,212,975 - ------------------------------------------------------------------------------ 17,362,147 - ------------------------------------------------------------------------------ FOOD & BEVERAGE -- 2.1% - ------------------------------------------------------------------------------ 78,000 H.J. Heinz Company 2,673,840 - ------------------------------------------------------------------------------ 97,900 Sara Lee Corp. 1,797,444 - ------------------------------------------------------------------------------ 35,500 Unilever N.V. New York Shares 2,100,890 - ------------------------------------------------------------------------------ 6,572,174 - ------------------------------------------------------------------------------ GAS & WATER UTILITIES -- 0.6% - ------------------------------------------------------------------------------ 92,300 NiSource Inc. 1,844,154 - ------------------------------------------------------------------------------ GROCERY STORES -- 0.7% - ------------------------------------------------------------------------------ 121,600 Kroger Co. (The)(1) 2,172,992 - ------------------------------------------------------------------------------ HEAVY ELECTRICAL EQUIPMENT -- 0.6% - ------------------------------------------------------------------------------ 37,900 Emerson Electric Co. 1,995,435 - ------------------------------------------------------------------------------ HOME PRODUCTS -- 1.3% - ------------------------------------------------------------------------------ 47,400 Kimberly-Clark Corp. 2,432,568 - ------------------------------------------------------------------------------ 73,300 Newell Rubbermaid Inc. 1,588,411 - ------------------------------------------------------------------------------ 4,020,979 - ------------------------------------------------------------------------------ HOTELS -- 0.6% - ------------------------------------------------------------------------------ 44,000 Harrah's Entertainment, Inc. 1,852,840 - ------------------------------------------------------------------------------ See Notes to Financial Statements. (continued) ----- 13 Large Company Value - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - ------------------------------------------------------------------------------ INDUSTRIAL PARTS -- 3.4% - ------------------------------------------------------------------------------ 44,900 Black & Decker Corporation $ 1,820,695 - ------------------------------------------------------------------------------ 49,300 Ingersoll-Rand Company 2,634,592 - ------------------------------------------------------------------------------ 45,100 Parker-Hannifin Corp. 2,015,970 - ------------------------------------------------------------------------------ 41,827 Snap-on Incorporated 1,156,517 - ------------------------------------------------------------------------------ 137,200 Tyco International Ltd. 2,802,996 - ------------------------------------------------------------------------------ 10,430,770 - ------------------------------------------------------------------------------ INFORMATION SERVICES -- 2.3% - ------------------------------------------------------------------------------ 51,900 Computer Sciences Corp.(1) 1,949,883 - ------------------------------------------------------------------------------ 120,400 Electronic Data Systems Corp. 2,432,080 - ------------------------------------------------------------------------------ 30,500 International Business Machines Corp. 2,694,065 - ------------------------------------------------------------------------------ 7,076,028 - ------------------------------------------------------------------------------ LIFE & HEALTH INSURANCE -- 1.5% - ------------------------------------------------------------------------------ 43,800 CIGNA Corp. 1,955,670 - ------------------------------------------------------------------------------ 61,700 Torchmark Corp. 2,507,488 - ------------------------------------------------------------------------------ 4,463,158 - ------------------------------------------------------------------------------ MEDIA -- 0.6% - ------------------------------------------------------------------------------ 131,500 AOL Time Warner Inc.(1) 1,986,965 - ------------------------------------------------------------------------------ MEDICAL PRODUCTS & SUPPLIES -- 1.4% - ------------------------------------------------------------------------------ 83,300 Baxter International, Inc. 2,420,698 - ------------------------------------------------------------------------------ 54,600 Becton Dickinson & Co. 1,972,152 - ------------------------------------------------------------------------------ 4,392,850 - ------------------------------------------------------------------------------ MEDICAL PROVIDERS & SERVICES -- 1.2% - ------------------------------------------------------------------------------ 59,500 HCA Inc. 2,193,170 - ------------------------------------------------------------------------------ 97,000 Tenet Healthcare Corp.(1) 1,404,560 - ------------------------------------------------------------------------------ 3,597,730 - ------------------------------------------------------------------------------ MINING & METALS -- 1.3% - ------------------------------------------------------------------------------ 74,800 Alcoa Inc. 1,956,768 - ------------------------------------------------------------------------------ 44,600 Nucor Corp. 2,046,248 - ------------------------------------------------------------------------------ 4,003,016 - ------------------------------------------------------------------------------ MOTOR VEHICLES & PARTS -- 0.9% - ------------------------------------------------------------------------------ 67,500 General Motors Corp. 2,762,775 - ------------------------------------------------------------------------------ OIL REFINING -- 1.4% - ------------------------------------------------------------------------------ 76,800 ConocoPhillips 4,204,800 - ------------------------------------------------------------------------------ OIL SERVICES -- 0.5% - ------------------------------------------------------------------------------ 84,200 Transocean Inc.(1) 1,684,000 - ------------------------------------------------------------------------------ PROPERTY AND CASUALTY INSURANCE -- 3.6% - ------------------------------------------------------------------------------ 114,000 Allstate Corp. 4,164,420 - ------------------------------------------------------------------------------ 67,600 Hartford Financial Services Group Inc. (The) 3,557,788 - ------------------------------------------------------------------------------ 79,900 Loews Corp. 3,225,563 - ------------------------------------------------------------------------------ 10,947,771 - ------------------------------------------------------------------------------ PUBLISHING -- 1.8% - ------------------------------------------------------------------------------ 80,100 Donnelley (R.R.) & Sons Co. 1,992,087 - ------------------------------------------------------------------------------ 45,800 Gannett Co., Inc. 3,552,248 - ------------------------------------------------------------------------------ 5,544,335 - ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ RAILROADS -- 0.8% - ------------------------------------------------------------------------------ 83,300 Burlington Northern Santa Fe Corp. $ 2,404,871 - ------------------------------------------------------------------------------ REAL ESTATE INVESTMENT TRUST -- 0.5% - ------------------------------------------------------------------------------ 52,000 Equity Residential 1,522,560 - ------------------------------------------------------------------------------ RESTAURANTS -- 1.4% - ------------------------------------------------------------------------------ 185,900 McDonald's Corporation 4,376,086 - ------------------------------------------------------------------------------ SECURITIES & ASSET MANAGEMENT -- 2.9% - ------------------------------------------------------------------------------ 80,700 Merrill Lynch & Co., Inc. 4,319,871 - ------------------------------------------------------------------------------ 88,000 Morgan Stanley 4,440,480 - ------------------------------------------------------------------------------ 8,760,351 - ------------------------------------------------------------------------------ SPECIALTY STORES -- 1.0% - ------------------------------------------------------------------------------ 63,500 Blockbuster Inc. 1,333,500 - ------------------------------------------------------------------------------ 59,300 CVS Corp. 1,841,858 - ------------------------------------------------------------------------------ 3,175,358 - ------------------------------------------------------------------------------ TELEPHONE -- 5.9% - ------------------------------------------------------------------------------ 111,800 AT&T Corp. 2,409,290 - ------------------------------------------------------------------------------ 131,500 BellSouth Corp. 3,113,920 - ------------------------------------------------------------------------------ 350,800 SBC Communications Inc. 7,805,300 - ------------------------------------------------------------------------------ 166,900 Sprint Corp. 2,520,190 - ------------------------------------------------------------------------------ 74,600 Verizon Communications 2,420,024 - ------------------------------------------------------------------------------ 18,268,724 - ------------------------------------------------------------------------------ THRIFTS -- 1.4% - ------------------------------------------------------------------------------ 109,200 Washington Mutual, Inc. 4,299,204 - ------------------------------------------------------------------------------ TOBACCO -- 1.8% - ------------------------------------------------------------------------------ 123,700 Altria Group Inc. 5,418,066 - ------------------------------------------------------------------------------ TOTAL COMMON STOCKS (Cost $271,317,759) 290,473,231 - ------------------------------------------------------------------------------ TEMPORARY CASH INVESTMENTS -- 5.4% Repurchase Agreement, Deutsche Bank Inc., (U.S. Treasury obligations), in a joint trading account at 0.90%, dated 9/30/03, due 10/1/03 (Delivery value $2,100,053) 2,100,000 - ------------------------------------------------------------------------------ Repurchase Agreement, Goldman Sachs & Co., (U.S. Treasury obligations), in a joint trading account at 0.90%, dated 9/30/03, due 10/1/03 (Delivery value $14,600,365) 14,600,000 - ------------------------------------------------------------------------------ TOTAL TEMPORARY CASH INVESTMENTS (Cost $16,700,000) 16,700,000 - ------------------------------------------------------------------------------ TOTAL INVESTMENT SECURITIES -- 100.0% (Cost $288,017,759) $307,173,231 ============================================================================== NOTES TO SCHEDULE OF INVESTMENTS (1) Non-income producing. See Notes to Financial Statements. - ----- 14 Statement of Assets and Liabilities SEPTEMBER 30, 2003 (UNAUDITED) - ------------------------------------------------------------------------------------------ LARGE COMPANY VALUE VALUE - ------------------------------------------------------------------------------------------ ASSETS - --------------------------------------------------------- Investment securities -- unaffiliated, at value (cost of $2,122,662,177 and $288,017,759, respectively) -- including $81,936,697 and $0 of securities loaned, respectively $2,255,801,114 $307,173,231 - --------------------------------------------------------- Investment securities -- affiliated, at value (cost of $28,286,704 and $0, respectively) 26,670,800 -- - --------------------------------------------------------- Collateral received for securities loaned, at value (cost of $83,713,475 and $0, respectively) 83,713,475 -- - --------------------------------------------------------- Cash -- 1,779,162 - --------------------------------------------------------- Receivable for investments sold 24,894,162 -- - --------------------------------------------------------- Receivable for capital shares sold 142,474 494,602 - --------------------------------------------------------- Dividends and interest receivable 2,579,931 514,767 - ------------------------------------------------------------------------------------------ 2,393,801,956 309,961,762 - ------------------------------------------------------------------------------------------ LIABILITIES - --------------------------------------------------------- Payable for collateral received on securities loaned 83,713,475 -- - --------------------------------------------------------- Disbursements in excess of demand deposit cash 10,906,124 -- - --------------------------------------------------------- Payable for investments purchased 15,048,861 16,287,193 - --------------------------------------------------------- Payable for forward foreign currency exchange contracts 52,996 -- - --------------------------------------------------------- Accrued management fees 1,837,300 209,125 - --------------------------------------------------------- Distribution fees payable 65,289 4,777 - --------------------------------------------------------- Service fees payable 63,832 7,745 - ------------------------------------------------------------------------------------------ 111,687,877 16,508,840 - ------------------------------------------------------------------------------------------ NET ASSETS $2,282,114,079 $293,452,922 ========================================================================================== See Notes to Financial Statements. (continued) ----- 15 Statement of Assets and Liabilities SEPTEMBER 30, 2003 (UNAUDITED) - ------------------------------------------------------------------------------------------ LARGE COMPANY VALUE VALUE - ------------------------------------------------------------------------------------------ NET ASSETS CONSIST OF: - --------------------------------------------------------- Capital (par value and paid-in surplus) $2,219,163,406 $279,254,438 - --------------------------------------------------------- Accumulated undistributed net investment income (loss) (67,459) 77,715 - --------------------------------------------------------- Accumulated net realized loss on investment and foreign currency transactions (68,452,365) (5,034,703) - --------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 131,470,497 19,155,472 - ------------------------------------------------------------------------------------------ $2,282,114,079 $293,452,922 ========================================================================================== INVESTOR CLASS, $0.01 PAR VALUE - --------------------------------------------------------- Net assets $1,801,302,901 $218,781,974 - --------------------------------------------------------- Shares outstanding 269,110,536 42,904,611 - --------------------------------------------------------- Net asset value per share $6.69 $5.10 - ------------------------------------------------------------------------------------------ INSTITUTIONAL CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------------------ Net assets $174,408,127 $34,481,754 - --------------------------------------------------------- Shares outstanding 26,023,232 6,759,946 - --------------------------------------------------------- Net asset value per share $6.70 $5.10 - ------------------------------------------------------------------------------------------ ADVISOR CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------------------ Net assets $296,825,088 $2,779,107 - --------------------------------------------------------- Shares outstanding 44,382,690 545,398 - --------------------------------------------------------- Net asset value per share $6.69 $5.10 - ------------------------------------------------------------------------------------------ A CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------------------ Net assets $4,026,612 $30,017,602 - --------------------------------------------------------- Shares outstanding 601,641 5,886,590 - --------------------------------------------------------- Net asset value per share $6.69 $5.10 - --------------------------------------------------------- Maximum offering price (net asset value divided by 0.9425) $7.10 $5.41 - ------------------------------------------------------------------------------------------ B CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------------------ Net assets $1,235,250 $2,544,993 - --------------------------------------------------------- Shares outstanding 184,532 499,103 - --------------------------------------------------------- Net asset value per share $6.69 $5.10 - ------------------------------------------------------------------------------------------ C CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------------------ Net assets $4,316,101 $4,845,022 - --------------------------------------------------------- Shares outstanding 647,727 952,732 - --------------------------------------------------------- Net asset value per share $6.66 $5.09 - ------------------------------------------------------------------------------------------ R CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------------------ Net assets N/A $2,470 - --------------------------------------------------------- Shares outstanding N/A 484 - --------------------------------------------------------- Net asset value per share N/A $5.10 - ------------------------------------------------------------------------------------------ See Notes to Financial Statements. - ----- 16 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) - ------------------------------------------------------------------------------------------ LARGE COMPANY VALUE VALUE - ------------------------------------------------------------------------------------------ INVESTMENT INCOME - ------------------------------------------------------------------------------------------ INCOME: - --------------------------------------------------------- Dividends (net of foreign taxes withheld of $402,227 and $42,953, respectively) $ 25,400,854 $ 3,210,412 - --------------------------------------------------------- Interest 750,827 68,942 - --------------------------------------------------------- Securities lending 55,901 -- - ------------------------------------------------------------------------------------------ 26,207,582 3,279,354 - ------------------------------------------------------------------------------------------ EXPENSES: - --------------------------------------------------------- Management fees 10,624,790 1,085,404 - --------------------------------------------------------- Distribution fees: - --------------------------------------------------------- Advisor Class 332,936 2,341 - -------------------------------------------------------- B Class 2,371 4,798 - -------------------------------------------------------- C Class 12,661 10,028 - -------------------------------------------------------- Service fees: - -------------------------------------------------------- Advisor Class 332,936 2,341 - -------------------------------------------------------- B Class 790 1,599 - -------------------------------------------------------- C Class 4,220 3,343 - -------------------------------------------------------- Service and distribution fees: - -------------------------------------------------------- A Class 2,255 22,097 - -------------------------------------------------------- R Class -- 1 - -------------------------------------------------------- Directors' fees and expenses 22,575 2,151 - -------------------------------------------------------- Other expenses 13,584 545 - ------------------------------------------------------------------------------------------ 11,349,118 1,134,648 - ------------------------------------------------------------------------------------------ NET INVESTMENT INCOME 14,858,464 2,144,706 - ------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) - ------------------------------------------------------------------------------------------ NET REALIZED GAIN (LOSS) ON: - --------------------------------------------------------- Investment transactions 116,274,269 (1,118,024) - --------------------------------------------------------- Foreign currency transactions (827,132) -- - ------------------------------------------------------------------------------------------ 115,447,137 (1,118,024) - ------------------------------------------------------------------------------------------ CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: - --------------------------------------------------------- Investments 260,465,467 37,302,051 - --------------------------------------------------------- Translation of assets and liabilities in foreign currencies (52,536) -- - ------------------------------------------------------------------------------------------ 260,412,931 37,302,051 - ------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAIN 375,860,068 36,184,027 - ------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $390,718,532 $38,328,733 ========================================================================================== See Notes to Financial Statements. ----- 17 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) AND YEAR ENDED MARCH 31, 2003 - -------------------------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - -------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2003 MARCH 31, 2003 SEPT. 30, 2003 MARCH 31, 2003 - -------------------------------------------------------------------------------------------------------------- OPERATIONS - -------------------------------------------------------------------------------------------------------------- Net investment income $ 14,858,464 $ 25,623,824 $ 2,144,706 $ 1,850,826 - ------------------------------------------- Net realized gain (loss) 115,447,137 (154,162,282) (1,118,024) (3,115,568) - ------------------------------------------- Change in net unrealized appreciation 260,412,931 (383,936,730) 37,302,051 (23,352,588) - -------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 390,718,532 (512,475,188) 38,328,733 (24,617,330) - -------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - -------------------------------------------------------------------------------------------------------------- From net investment income: - ------------------------------------------- Investor Class (11,902,581) (20,012,666) (1,652,132) (1,639,313) - ------------------------------------------- Institutional Class (1,515,543) (2,544,363) (294,249) (121,258) - ------------------------------------------- Advisor Class (1,489,427) (1,949,696) (14,285) (4,739) - ------------------------------------------- A Class (11,964) (960) (153,507) (11,183) - ------------------------------------------- B Class (1,087) (178) (5,120) (87) - ------------------------------------------- C Class (5,321) (5,826) (10,223) (4,053) - ------------------------------------------- R Class -- -- (10) -- - ------------------------------------------- From net realized gains: - ------------------------------------------- Investor Class -- (28,222,986) -- -- - ------------------------------------------- Institutional Class -- (3,025,083) -- -- - ------------------------------------------- Advisor Class -- (3,462,074) -- -- - ------------------------------------------- C Class -- (37,202) -- -- - -------------------------------------------------------------------------------------------------------------- Decrease in net assets from distributions (14,925,923) (59,261,034) (2,129,526) (1,780,633) - -------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - -------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions (39,427,431) 11,725,960 77,430,516 133,365,187 - -------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 336,365,178 (560,010,262) 113,629,723 106,967,224 NET ASSETS - -------------------------------------------------------------------------------------------------------------- Beginning of period 1,945,748,901 2,505,759,163 179,823,199 72,855,975 - -------------------------------------------------------------------------------------------------------------- End of period $2,282,114,079 $1,945,748,901 $293,452,922 $179,823,199 ============================================================================================================== Accumulated undistributed net investment income (loss) $(67,459) -- $77,715 $62,535 ============================================================================================================== See Notes to Financial Statements. - ----- 18 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Value Fund (Value) and Large Company Value Fund (Large Company Value) (collectively, the funds) are two funds in a series issued by the corporation. The funds are diversified under the 1940 Act. The funds' investment objectives are long-term capital growth. The production of income is a secondary objective. The funds seek to achieve their investment objective by investing in stocks of companies that management believes to be undervalued at the time of purchase. Value invests in companies with small, medium, and large market capitalization and Large Company Value invests in companies with larger market capitalization. The following is a summary of the funds' significant accounting policies. MULTIPLE CLASS -- Value is authorized to issue the Investor Class, the Institutional Class, the Advisor Class, the A Class, the B Class and the C Class. Large Company Value is authorized to issue the Investor Class, the Institutional Class, the Advisor Class, the A Class, the B Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and shareholder servicing and distribution expenses and arrangements. All shares of each fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the funds are allocated to each class of shares based on their relative net assets. Sale of the R Class commenced on August 29, 2003. SECURITY VALUATIONS -- Securities traded primarily on a principal securities exchange are valued at the last reported sales price, or at the mean of the latest bid and asked prices where no last sales price is available. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official close price. Debt securities not traded on a principal securities exchange are valued through a commercial pricing service or at the mean of the most recent bid and asked prices. Discount notes are valued through a commercial pricing service. When valuations are not readily available, securities are valued at fair value as determined in accordance with procedures adopted by the Board of Directors. SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes. Certain countries impose taxes on realized gains on the sale of securities registered in their country. The funds record the foreign tax expense, if any, on an accrual basis. The realized and unrealized tax provision reduces the net realized gain (loss) on investment transactions and net unrealized appreciation (depreciation) on investments, respectively. INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. SECURITIES ON LOAN -- Value may lend portfolio securities through the lending agent to certain approved borrowers in order to earn additional income. Value continues to recognize any gain or loss in the market price of the securities loaned and records any interest earned or dividends declared. FUTURES CONTRACTS -- The funds may enter into 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 change 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 unrealized gains and losses. The funds recognize a realized gain or loss when the contract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of realized gain (loss) on investment transactions and unrealized appreciation (depreciation) on investments, respectively. FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. Purchases and (continued) ----- 19 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. For assets and liabilities, other than investments in securities, net realized and unrealized gains and losses from foreign currency translations arise from changes in currency exchange rates. Net realized and unrealized foreign currency exchange gains or losses occurring during the holding period of investment securities are a component of realized gain (loss) on investment transactions and unrealized appreciation (depreciation) on investments, respectively. Certain countries may impose taxes on the contract amount of purchases and sales of foreign currency contracts in their currency. The funds record the foreign tax expense, if any, as a reduction to the net realized gain (loss) on foreign currency transactions. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The funds may enter into forward foreign currency exchange contracts to facilitate transactions of securities denominated in a foreign currency or to hedge the funds' exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the funds and the resulting unrealized appreciation or depreciation are determined daily using prevailing exchange rates. The funds bear the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses may arise if the counterparties do not perform under the contract terms. REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with institutions that the funds' investment manager, American Century Investment Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria adopted by the Board of Directors. Each repurchase agreement is recorded at cost. Each fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable each fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to each fund under each repurchase agreement. JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, each fund, along with other registered investment companies having management agreements with ACIM, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations. INCOME TAX STATUS -- It is the funds' policy to distribute all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for federal or state income taxes. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on the ex-dividend date. Distributions from net investment income are declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually. USE OF ESTIMATES -- The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. (continued) - ----- 20 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee per class. The Agreement provides that all expenses of the funds, except brokerage commissions, taxes, interest, fees and expenses of those directors who are not considered "interested persons" as defined in the 1940 Act (including counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is computed daily and paid monthly in arrears based on each class's pro rata share of the funds' average daily closing net assets during the previous month. The annual management fee schedule for each class of Value is as follows: - ---------------------------------------------------------------------------------------------------- INVESTOR INSTITUTIONAL ADVISOR A B C - ---------------------------------------------------------------------------------------------------- FUND AVERAGE NET ASSETS - ---------------------------------------------------------------------------------------------------- First $6 billion 1.00% 0.80% 0.75% 1.00% 1.00% 1.00% - ---------------------------------------------------------------------------------------------------- Over $6 billion 0.95% 0.75% 0.70% 0.95% 0.95% 0.95% - ---------------------------------------------------------------------------------------------------- The annual management fee schedule for each class of Large Company Value is as follows: - --------------------------------------------------------------------------------------------------------- INVESTOR INSTITUTIONAL ADVISOR A B C R - --------------------------------------------------------------------------------------------------------- FUND AVERAGE NET ASSETS - --------------------------------------------------------------------------------------------------------- First $1 billion 0.90% 0.70% 0.65% 0.90% 0.90% 0.90% 0.90% - --------------------------------------------------------------------------------------------------------- Next $4 billion 0.80% 0.60% 0.55% 0.80% 0.80% 0.80% 0.80% - --------------------------------------------------------------------------------------------------------- Over $5 billion 0.70% 0.50% 0.45% 0.70% 0.70% 0.70% 0.70% - --------------------------------------------------------------------------------------------------------- For the six months ended September 30, 2003, the effective annual management fee for each class of each fund was as follows: - --------------------------------------------------------------------------------------------------------- INVESTOR INSTITUTIONAL ADVISOR A B C R - --------------------------------------------------------------------------------------------------------- Value 1.00% 0.80% 0.75% 1.00% 1.00% 1.00% N/A - --------------------------------------------------------------------------------------------------------- Large Company Value 0.90% 0.70% 0.65% 0.90% 0.90% 0.90% 0.90% - --------------------------------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master Distribution and Shareholder Services Plan for the Advisor Class (the Advisor Class plan) and a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, B Class, C Class and R Class (collectively with the Advisor Class Plan, the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the Advisor Class, B Class and C Class will pay American Century Investment Services, Inc. (ACIS) the following annual distribution and service fees: - -------------------------------------------------------------------------------- ADVISOR B C - -------------------------------------------------------------------------------- Distribution Fee 0.25% 0.75% 0.75% - -------------------------------------------------------------------------------- Service Fee 0.25% 0.25% 0.25% - -------------------------------------------------------------------------------- The plans provide that the A Class and the R Class will pay ACIS an annual distribution and service fee of 0.25% and 0.50%, respectively. The fees are computed daily and paid monthly in arrears based on each class's average daily closing net assets during the previous month. The distribution fee provides compensation for expenses incurred in connection with distributing shares of the classes including, but not limited to, payments to brokers, dealers, and financial institutions that have entered into sales agreements with respect to shares of the funds. The service fee provides compensation for shareholder and administrative services rendered by ACIS, its affiliates or independent third party providers for Advisor Class shares and for individual shareholder services rendered by broker/dealers or other independent financial intermediaries for A, B, C and R Class shares. Fees incurred under the plans during the six months ended September 30, 2003, are detailed in the Statement of Operations. (continued) ----- 21 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) RELATED PARTIES -- Certain officers and directors of the corporation are also officers and/or directors, and, as a group, controlling stockholders of American Century Companies, Inc. (ACC), the parent of the corporation's investment manager, ACIM, the distributor of the corporation, ACIS, and the corporation's transfer agent, American Century Services Corporation. During the six months ended September 30, 2003, the funds invested in a money market fund for temporary purposes, which was managed by J.P. Morgan Investment Management, Inc. (JPMIM). JPMIM is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The funds have a bank line of credit agreement with JPM. Value has a securities lending agreement with JPMorgan Chase Bank (Chase). Chase is a wholly owned subsidiary of JPM. 3. INVESTMENT TRANSACTIONS Investment transactions, excluding short-term investments, for the six months ended September 30, 2003, were as follows: - -------------------------------------------------------------------------------- LARGE COMPANY VALUE VALUE - -------------------------------------------------------------------------------- Purchases $1,175,409,616 $107,991,994 - -------------------------------------------------------------------------------- Proceeds from sales $1,200,657,346 $23,516,678 - -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the funds were as follows: - ------------------------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - ------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------------- INVESTOR CLASS - ------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 800,000,000 100,000,000 ============================================================================================================= Sold 21,930,255 $ 141,383,307 12,725,642 $ 62,965,452 - ------------------------------------------ Issued in reinvestment of distributions 1,650,757 11,198,883 222,434 1,156,793 - ------------------------------------------ Redeemed (31,473,891) (202,318,028) (5,639,224) (28,294,534) - ------------------------------------------------------------------------------------------------------------- Net increase (decrease) (7,892,879) $ (49,735,838) 7,308,852 $ 35,827,711 ============================================================================================================= YEAR ENDED MARCH 31, 2003 SHARES AUTHORIZED 900,000,000 50,000,000 ============================================================================================================= Sold 73,918,310 $ 469,965,715 28,952,978 $133,643,326 - ------------------------------------------ Issued in reinvestment of distributions 7,678,392 46,147,410 183,291 823,420 - ------------------------------------------ Redeemed (92,150,131) (565,670,196) (6,193,575) (28,451,543) - ------------------------------------------------------------------------------------------------------------- Net increase (decrease) (10,553,429) $ (49,557,071) 22,942,694 $106,015,203 ============================================================================================================= (continued) - ----- 22 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - -------------------------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - -------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 100,000,000 12,500,000 ============================================================================================================== Sold 3,465,143 $ 22,192,476 1,988,647 $10,139,089 - ----------------------------------------- Issued in reinvestment of distributions 216,401 1,468,532 56,553 294,119 - ----------------------------------------- Redeemed (9,588,791) (62,659,002) (206,630) (1,066,949) - -------------------------------------------------------------------------------------------------------------- Net increase (decrease) (5,907,247) $(38,997,994) 1,838,570 $ 9,366,259 ============================================================================================================== YEAR ENDED MARCH 31, 2003 SHARES AUTHORIZED 120,000,000 12,500,000 ============================================================================================================== Sold 7,645,861 $ 47,545,907 4,720,713 $22,586,514 - ----------------------------------------- Issued in reinvestment of distributions 909,275 5,460,073 27,343 121,031 - ----------------------------------------- Redeemed (8,110,625) (49,214,694) (302,874) (1,407,149) - -------------------------------------------------------------------------------------------------------------- Net increase 444,511 $ 3,791,286 4,445,182 $21,300,396 ============================================================================================================== ADVISOR CLASS - -------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 100,000,000 12,500,000 ============================================================================================================== Sold 11,793,277 $ 76,508,396 350,631 $1,778,405 - ----------------------------------------- Issued in reinvestment of distributions 216,914 1,472,691 2,666 13,866 - ----------------------------------------- Redeemed (5,301,128) (34,623,909) (62,173) (319,193) - -------------------------------------------------------------------------------------------------------------- Net increase 6,709,063 $ 43,357,178 291,124 $1,473,078 ============================================================================================================== YEAR ENDED MARCH 31, 2003 SHARES AUTHORIZED 100,000,000 12,500,000 ============================================================================================================== Sold 21,339,960 $134,031,449 264,486 $1,197,278 - ----------------------------------------- Issued in reinvestment of distributions 896,976 5,384,698 1,074 4,739 - ----------------------------------------- Redeemed (13,520,688) (83,554,880) (12,389) (54,238) - -------------------------------------------------------------------------------------------------------------- Net increase 8,716,248 $ 55,861,267 253,171 $1,147,779 ============================================================================================================== A CLASS - -------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 12,500,000 12,500,000 ============================================================================================================== Sold 543,886 $3,571,242 5,340,567 $26,573,160 - ----------------------------------------- Issued in reinvestment of distributions 1,734 11,831 28,082 146,095 - ----------------------------------------- Redeemed (12,748) (80,280) (352,640) (1,790,791) - -------------------------------------------------------------------------------------------------------------- Net increase 532,872 $3,502,793 5,016,009 $24,928,464 ============================================================================================================== PERIOD ENDED MARCH 31, 2003(1) SHARES AUTHORIZED 12,500,000 12,500,000 ============================================================================================================== Sold 68,601 $382,117 879,004 $3,832,685 - ----------------------------------------- Issued in reinvestment of distributions 168 960 2,565 11,183 - ----------------------------------------- Redeemed -- -- (10,988) (47,541) - -------------------------------------------------------------------------------------------------------------- Net increase 68,769 $383,077 870,581 $3,796,327 ============================================================================================================== (1) January 31, 2003 (commencement of sale) through March 31, 2003. (continued) ----- 23 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - ------------------------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - ------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------------- B CLASS - ------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 12,500,000 12,500,000 ============================================================================================================= Sold 168,804 $1,099,504 478,361 $2,380,733 - ----------------------------------------- Issued in reinvestment of distributions 156 1,066 896 4,665 - ----------------------------------------- Redeemed (625) (3,850) (561) (2,467) - ------------------------------------------------------------------------------------------------------------- Net increase 168,335 $1,096,720 478,696 $2,382,931 ============================================================================================================= PERIOD ENDED MARCH 31, 2003(1) SHARES AUTHORIZED 12,500,000 12,500,000 ============================================================================================================= Sold 16,166 $88,356 20,387 $88,403 - ----------------------------------------- Issued in reinvestment of distributions 31 178 20 87 - ------------------------------------------------------------------------------------------------------------- Net increase 16,197 $88,534 20,407 $88,490 ============================================================================================================= C CLASS - ------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 50,000,000 12,500,000 ============================================================================================================= Sold 213,141 $1,391,920 712,924 $3,599,595 - ----------------------------------------- Issued in reinvestment of distributions 736 4,975 1,262 6,553 - ----------------------------------------- Redeemed (7,254) (47,185) (33,292) (156,585) - ------------------------------------------------------------------------------------------------------------- Net increase 206,623 $1,349,710 680,894 $3,449,563 ============================================================================================================= YEAR ENDED MARCH 31, 2003 SHARES AUTHORIZED 50,000,000 12,500,000 ============================================================================================================= Sold 227,828 $1,428,806 240,718 $1,085,147 - ----------------------------------------- Issued in reinvestment of distributions 6,947 41,666 782 3,482 - ----------------------------------------- Redeemed (53,371) (311,605) (16,074) (71,637) - ------------------------------------------------------------------------------------------------------------- Net increase 181,404 $1,158,867 225,426 $1,016,992 ============================================================================================================= R CLASS - ------------------------------------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2003(2) SHARES AUTHORIZED N/A 50,000,000 ============================================================================================================= Sold 482 $2,500 - ----------------------------------------- Issued in reinvestment of distributions 2 10 - ------------------------------------------------------------------------------------------------------------- Net increase 484 $2,510 ============================================================================================================= (1) January 31, 2003 (commencement of sale) through March 31, 2003. (2) August 29, 2003 (commencement of sale) through September 30, 2003 for Large Company Value. (continued) - ----- 24 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 5. AFFILIATED COMPANY TRANSACTIONS If a fund's holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2003 follows: - ---------------------------------------------------------------------------------------------- SHARE BALANCE PURCHASE SALES REALIZED SEPTEMBER 30, 2003 COMPANY 3/31/03 COST COST LOSS SHARE BALANCE MARKET VALUE - ---------------------------------------------------------------------------------------------- VALUE - ---------------------------------------------------------------------------------------------- Littelfuse, Inc.(1) 1,136,200 $443,936 $ -- $ -- 1,159,600 $26,670,800 ============================================================================================== (1) Non-income producing. 6. SECURITIES LENDING As of September 30, 2003, securities in Value valued at $81,936,697 were on loan through the lending agent, Chase, to certain approved borrowers. Chase receives and maintains collateral in the form of cash and/or acceptable securities as approved by ACIM. Cash collateral is invested in authorized investments by the lending agent in a pooled account. The value of cash collateral received at period end is disclosed in the Statement of Assets and Liabilities and investments made with the cash by the lending agent are listed in the Schedule of Investments. The total value of all collateral received, at this date, was $83,713,475. Value's risks in securities lending are that the borrower may not provide additional collateral when required or return the securities when due. If the borrower defaults, receipt of the collateral by Value may be delayed or limited. 7. BANK LINE OF CREDIT The funds, along with certain other funds managed by ACIM, have a $620,000,000 unsecured bank line of credit agreement with JPM. 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 September 30, 2003. (continued) ----- 25 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 8. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts. As of September 30, 2003, the components of investments for federal income tax purposes were as follows: - ------------------------------------------------------------------------------- LARGE COMPANY VALUE VALUE - ------------------------------------------------------------------------------- Federal tax cost of investments $2,235,291,816 $290,358,923 =============================================================================== Gross tax appreciation of investments $ 151,192,783 $22,887,768 - ---------------------------------------- Gross tax depreciation of investments (104,012,685) (6,073,460) - ------------------------------------------------------------------------------- Net tax appreciation of investments $ 47,180,098 $16,814,308 =============================================================================== The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales. Following are the capital loss carryovers and capital loss deferral amounts as of March 31, 2003: - -------------------------------------------------------------------------------- LARGE COMPANY VALUE VALUE - -------------------------------------------------------------------------------- Accumulated capital losses $(92,229,547) $(420,720) - -------------------------------------------------------------------------------- Capital loss deferral $(7,327,020) $(1,154,795) - -------------------------------------------------------------------------------- The accumulated capital losses listed above represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers expire in 2011 for Value and 2008 through 2011 for Large Company Value. The capital loss deferrals represent net capital losses incurred in the five-month period ended March 31, 2003. The funds have elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. - ----- 26 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------------------ INVESTOR CLASS - ------------------------------------------------------------------------------------------------------------ 2003(1) 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------ PER-SHARE DATA - ------------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $5.61 $7.19 $6.27 $5.35 $5.77 $7.73 - ------------------------------------------------------------------------------------------------------------ Income From Investment Operations - ------------------------------------- Net Investment Income(2) 0.04 0.07 0.08 0.10 0.09 0.08 - ------------------------------------- Net Realized and Unrealized Gain (Loss) 1.08 (1.48) 1.03 0.92 (0.01) (0.80) - ------------------------------------------------------------------------------------------------------------ Total From Investment Operations 1.12 (1.41) 1.11 1.02 0.08 (0.72) - ------------------------------------------------------------------------------------------------------------ Distributions - ------------------------------------- From Net Investment Income (0.04) (0.07) (0.08) (0.10) (0.09) (0.09) - ------------------------------------- From Net Realized Gains -- (0.10) (0.11) -- (0.41) (1.15) - ------------------------------------------------------------------------------------------------------------ Total Distributions (0.04) (0.17) (0.19) (0.10) (0.50) (1.24) - ------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $6.69 $5.61 $7.19 $6.27 $5.35 $5.77 ============================================================================================================ TOTAL RETURN(3) 20.02% (19.85)% 17.96% 19.20% 1.42% (9.88)% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------ Ratio of Operating Expenses to Average Net Assets 1.00%(4) 1.00% 1.00% 1.00% 1.00% 1.00% - ------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.35%(4) 1.19% 1.11% 1.71% 1.48% 1.19% - ------------------------------------- Portfolio Turnover Rate 56% 102% 151% 150% 115% 130% - ------------------------------------- Net Assets, End of Period (in thousands) $1,801,303 $1,552,632 $2,068,901 $1,532,113 $1,388,646 $1,719,367 - ------------------------------------------------------------------------------------------------------------ (1) Six months ended September 30, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class an another. (4) Annualized. See Notes to Financial Statements. - ----- 27 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.61 $7.20 $6.27 $5.36 $5.78 $7.73 - -------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------- Net Investment Income(2) 0.05 0.09 0.09 0.11 0.10 0.10 - ------------------------------------- Net Realized and Unrealized Gain (Loss) 1.09 (1.50) 1.04 0.91 (0.01) (0.80) - -------------------------------------------------------------------------------------------------------------- Total From Investment Operations 1.14 (1.41) 1.13 1.02 0.09 (0.70) - -------------------------------------------------------------------------------------------------------------- Distributions - ------------------------------------- From Net Investment Income (0.05) (0.08) (0.09) (0.11) (0.10) (0.10) - ------------------------------------- From Net Realized Gains -- (0.10) (0.11) -- (0.41) (1.15) - -------------------------------------------------------------------------------------------------------------- Total Distributions (0.05) (0.18) (0.20) (0.11) (0.51) (1.25) - -------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $6.70 $5.61 $7.20 $6.27 $5.36 $5.78 ============================================================================================================== TOTAL RETURN(3) 20.32% (19.70)% 18.19% 19.24% 1.65% (9.52)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.80%(4) 0.80% 0.80% 0.80% 0.80% 0.80% - ------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.55%(4) 1.38% 1.31% 1.91% 1.68% 1.39% - ------------------------------------- Portfolio Turnover Rate 56% 102% 151% 150% 115% 130% - ------------------------------------- Net Assets, End of Period (in thousands) $174,408 $179,196 $226,681 $186,987 $95,202 $36,318 - -------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class an another. (4) Annualized. See Notes to Financial Statements. - ----- 28 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------------------- ADVISOR CLASS - ------------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------- PER-SHARE DATA - ------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.60 $7.19 $6.27 $5.36 $5.77 $7.73 - ------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------- Net Investment Income(2) 0.04 0.06 0.06 0.08 0.07 0.06 - ------------------------------------- Net Realized and Unrealized Gain (Loss) 1.09 (1.49) 1.03 0.92 0.01 (0.80) - ------------------------------------------------------------------------------------------------------------- Total From Investment Operations 1.13 (1.43) 1.09 1.00 0.08 (0.74) - ------------------------------------------------------------------------------------------------------------- Distributions - ------------------------------------- From Net Investment Income (0.04) (0.06) (0.06) (0.09) (0.08) (0.07) - ------------------------------------- From Net Realized Gains -- (0.10) (0.11) -- (0.41) (1.15) - ------------------------------------------------------------------------------------------------------------- Total Distributions (0.04) (0.16) (0.17) (0.09) (0.49) (1.22) - ------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $6.69 $5.60 $7.19 $6.27 $5.36 $5.77 ============================================================================================================= TOTAL RETURN(3) 20.09% (20.07)% 17.51% 18.72% 1.36% (10.09)% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.25%(4) 1.25% 1.25% 1.25% 1.25% 1.25% - ------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.10%(4) 0.94% 0.86% 1.46% 1.23% 0.94% - ------------------------------------- Portfolio Turnover Rate 56% 102% 151% 150% 115% 130% - ------------------------------------- Net Assets, End of Period (in thousands) $296,825 $210,984 $208,311 $102,357 $61,323 $54,277 - ------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class an another. (4) Annualized. See Notes to Financial Statements. ----- 29 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- 2003(1) 2003(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.60 $5.77 - -------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------------------------------- Net Investment Income(3) 0.03 0.01 - ---------------------------------------------------------- Net Realized and Unrealized Gain (Loss) 1.10 (0.16) - -------------------------------------------------------------------------------- Total From Investment Operations 1.13 (0.15) - -------------------------------------------------------------------------------- Distributions - ---------------------------------------------------------- From Net Investment Income (0.04) (0.02) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $6.69 $5.60 ================================================================================ TOTAL RETURN(4) 20.09% (2.67)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.25%(5) 1.25%(5) - ---------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.10%(5) 0.62%(5) - ---------------------------------------------------------- Portfolio Turnover Rate 56% 102%(6) - ---------------------------------------------------------- Net Assets, End of Period (in thousands) $4,027 $385 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class an another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ----- 30 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED - ------------------------------------------------------------------------------ B CLASS - ------------------------------------------------------------------------------ 2003(1) 2003(2) - ------------------------------------------------------------------------------ PER-SHARE DATA - ------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $5.61 $5.77 - ------------------------------------------------------------------------------ Income From Investment Operations - --------------------------------------------------- Net Investment Income (Loss)(3) 0.01 --(4) - --------------------------------------------------- Net Realized and Unrealized Gain (Loss) 1.08 (0.15) - ------------------------------------------------------------------------------- Total From Investment Operations 1.09 (0.15) - ------------------------------------------------------------------------------ Distributions - --------------------------------------------------- From Net Investment Income (0.01) (0.01) - ------------------------------------------------------------------------------ Net Asset Value, End of Period $6.69 $5.61 ============================================================================== TOTAL RETURN(5) 19.42% (2.59)% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------ Ratio of Operating Expenses to Average Net Assets 2.00%(6) 1.98%(6) - --------------------------------------------------- Ratio of Operating Expenses to Average Net Assets (Before Expense Waiver)(7) 2.00%(6) 2.00%(6) - --------------------------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.35%(6) (0.17)%(6) - --------------------------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets (Before Expense Waiver)(7) 0.35%(6) (0.19)%(6) - --------------------------------------------------- Portfolio Turnover Rate 56% 102%(8) - --------------------------------------------------- Net Assets, End of Period (in thousands) $1,235 $91 - ------------------------------------------------------------------------------ (1) Six months ended September 30, 2003 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class an another. (6) Annualized. (7) During the period ended March 31, 2003, the distributor voluntarily waived a portion of the distribution and service fees. (8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. ----- 31 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- 2003(1) 2003 2002(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.58 $7.18 $6.90 - -------------------------------------------------------------------------------- Income From Investment Operations - --------------------------------------------- Net Investment Income (Loss)(3) 0.01 0.01 --(4) - --------------------------------------------- Net Realized and Unrealized Gain (Loss) 1.08 (1.50) 0.42 - -------------------------------------------------------------------------------- Total From Investment Operations 1.09 (1.49) 0.42 - -------------------------------------------------------------------------------- Distributions - --------------------------------------------- From Net Investment Income (0.01) (0.01) (0.03) - --------------------------------------------- From Net Realized Gains -- (0.10) (0.11) - --------------------------------------------- Total Distributions (0.01) (0.11) (0.14) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $6.66 $5.58 $7.18 ================================================================================ TOTAL RETURN(5) 19.53% (20.90)% 6.33% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 2.00%(6) 2.00% 2.00%(6) - --------------------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.35%(6) 0.19% (0.06)%(6) - --------------------------------------------- Portfolio Turnover Rate 56% 102% 151%(7) - --------------------------------------------- Net Assets, End of Period (in thousands) $4,316 $2,461 $1,866 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) June 4, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class an another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ----- 32 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ----------------------------------------------------------------------------------------------------------- INVESTOR CLASS - ----------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000(2) - ---------------------------------------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $4.29 $5.53 $5.08 $4.59 $5.00 - ---------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------------------- Net Investment Income(3) 0.04 0.08 0.07 0.08 0.05 - ----------------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.81 (1.25) 0.45 0.48 (0.41) - ---------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.85 (1.17) 0.52 0.56 (0.36) - ---------------------------------------------------------------------------------------------------------- Distributions - ----------------------------------------------------- From Net Investment Income (0.04) (0.07) (0.07) (0.07) (0.05) - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $5.10 $4.29 $5.53 $5.08 $4.59 ========================================================================================================== TOTAL RETURN(4) 19.83% (21.19)% 10.20% 12.38% (7.22)% RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.90%(5) 0.90% 0.90% 0.90% 0.90%(5) - ----------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.74%(5) 1.75% 1.34% 1.62% 1.72%(5) - ----------------------------------------------------- Portfolio Turnover Rate 10% 30% 34% 55% 51% - ----------------------------------------------------- Net Assets, End of Period (in thousands) $218,782 $152,641 $69,961 $19,348 $12,671 - ---------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) July 30, 1999 (inception) through March 31, 2000. (3) Computed using the average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class an another. (5) Annualized. See Notes to Financial Statements. ----- 33 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ----------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ----------------------------------------------------------------------------------------------- 2003(1) 2003 2002(2) - ----------------------------------------------------------------------------------------------- PER-SHARE DATA - ----------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $4.29 $5.53 $5.44 - ----------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------------------ Net Investment Income(3) 0.05 0.09 0.06 - ------------------------------------------------------ Net Realized and Unrealized Gain (Loss) 0.81 (1.25) 0.08 - ----------------------------------------------------------------------------------------------- Total From Investment Operations 0.86 (1.16) 0.14 - ----------------------------------------------------------------------------------------------- Distributions - ------------------------------------------------------ From Net Investment Income (0.05) (0.08) (0.05) - ----------------------------------------------------------------------------------------------- Net Asset Value, End of Period $5.10 $4.29 $5.53 =============================================================================================== TOTAL RETURN(4) 19.94% (21.03)% 2.69% RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.70%(5) 0.70% 0.70%(5) - ------------------------------------------------------ Ratio of Net Investment Income to Average Net Assets 1.94%(5) 1.95% 1.74%(5) - ------------------------------------------------------ Portfolio Turnover Rate 10% 30% 34%(6) - ------------------------------------------------------ Net Assets, End of Period (in thousands) $34,482 $21,110 $2,632 - ----------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) August 10, 2001 (commencement of sale) through March 31, 2002. (3) Computed using the average shares throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class an another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ----- 34 Large Company Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------------------------------ ADVISOR CLASS - ------------------------------------------------------------------------------------------------------ 2003(1) 2003 2002 2001(2) - ----------------------------------------------------------------------------------------------------- PER-SHARE DATA - ----------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $4.29 $5.53 $5.08 $4.69 - ----------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------------------- Net Investment Income(3) 0.04 0.07 0.06 0.03 - ----------------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.80 (1.25) 0.44 0.39 - ----------------------------------------------------------------------------------------------------- Total From Investment Operations 0.84 (1.18) 0.50 0.42 - ----------------------------------------------------------------------------------------------------- Distributions - ----------------------------------------------------- From Net Investment Income (0.03) (0.06) (0.05) (0.03) - ----------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $5.10 $4.29 $5.53 $5.08 ===================================================================================================== TOTAL RETURN(4) 19.68% (21.38)% 9.93% 8.94% RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.15%(5) 1.15% 1.15% 1.15%(5) - ----------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.49%(5) 1.50% 1.09% 1.53%(5) - ----------------------------------------------------- Portfolio Turnover Rate 10% 30% 34% 55%(6) - ----------------------------------------------------- Net Assets, End of Period (in thousands) $2,779 $1,090 $6 $121 - ----------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) October 26, 2000 (commencement of sale) through March 31, 2001. (3) Computed using the average shares throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class an another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2001. See Notes to Financial Statements. ----- 35 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- 2003(1) 2003(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $4.29 $4.46 - -------------------------------------------------------------------------------- Income From Investment Operations - -------------------------------------------------------- Net Investment Income(3) 0.04 0.01 - -------------------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.80 (0.17) - -------------------------------------------------------------------------------- Total From Investment Operations 0.84 (0.16) - -------------------------------------------------------------------------------- Distributions - -------------------------------------------------------- From Net Investment Income (0.03) (0.01) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $5.10 $4.29 ================================================================================ TOTAL RETURN(4) 19.68% (3.49)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.15%(5) 1.15%(5) - -------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.49%(5) 1.79%(5) - -------------------------------------------------------- Portfolio Turnover Rate 10% 30%(6) - -------------------------------------------------------- Net Assets, End of Period (in thousands) $30,018 $3,733 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class an another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ----- 36 Large Company Value - Financial Highlights For a Share Outstanding Throughout the Periods Indicated - -------------------------------------------------------------------------------- B CLASS - -------------------------------------------------------------------------------- 2003(1) 2003(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $4.29 $4.46 - -------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------------------- Net Investment Income(3) 0.02 0.01 - ----------------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.81 (0.17) - -------------------------------------------------------------------------------- Total From Investment Operations 0.83 (0.16) - -------------------------------------------------------------------------------- Distributions - ----------------------------------------------------- From Net Investment Income (0.02) (0.01) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $5.10 $4.29 ================================================================================ TOTAL RETURN(4) 19.23% (3.58)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.90%(5) 1.88%(5) - ----------------------------------------------------- Ratio of Operating Expenses to Average Net Assets (Before Expense Waiver)(6) 1.90%(5) 1.90%(5) - ----------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 0.74%(5) 0.74%(5) - ----------------------------------------------------- Ratio of Net Investment Income to Average Net Assets (Before Expense Waiver)(6) 0.74%(5) 0.72%(5) - ----------------------------------------------------- Portfolio Turnover Rate 10% 30%(7) - ----------------------------------------------------- Net Assets, End of Period (in thousands) $2,545 $88 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class an another. (5) Annualized. (6) During the period ended March 31, 2003, the distributor voluntarily waived a portion of the distribution and service fees. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. ----- 37 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------------- 2003(1) 2003 2002(2) - -------------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $4.28 $5.53 $5.14 - -------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------------------- Net Investment Income(3) 0.02 0.03 0.01 - ----------------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.81 (1.25) 0.39 - -------------------------------------------------------------------------------------- Total From Investment Operations 0.83 (1.22) 0.40 - -------------------------------------------------------------------------------------- Distributions - ----------------------------------------------------- From Net Investment Income (0.02) (0.03) (0.01) - -------------------------------------------------------------------------------------- Net Asset Value, End of Period $5.09 $4.28 $5.53 ====================================================================================== TOTAL RETURN(4) 19.27% (22.13)% 7.78% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.90%(5) 1.90% 1.90%(5) - ----------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 0.74%(5) 0.75% 0.33%(5) - ----------------------------------------------------- Portfolio Turnover Rate 10% 30% 34%(6) - ----------------------------------------------------- Net Assets, End of Period (in thousands) $4,845 $1,163 $257 - -------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) November 7, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not include applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class an another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ----- 38 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED - -------------------------------------------------------------------------------- R CLASS - -------------------------------------------------------------------------------- 2003(1) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.18 - -------------------------------------------------------------------------------- Income From Investment Operations - --------------------------------------------------------------------- Net Investment Income(2) --(3) - --------------------------------------------------------------------- Net Realized and Unrealized Loss (0.06) - -------------------------------------------------------------------------------- Total From Investment Operations (0.06) - -------------------------------------------------------------------------------- Distributions - --------------------------------------------------------------------- From Net Investment Income (0.02) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $5.10 ================================================================================ TOTAL RETURN(4) (1.17)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.40%(5) - --------------------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.00%(5) - --------------------------------------------------------------------- Portfolio Turnover Rate 10%(6) - --------------------------------------------------------------------- Net Assets, End of Period (in thousands) $2 - -------------------------------------------------------------------------------- (1) August 29, 2003 (commencement of sale) through September 30, 2003. (2) Computed using average shares outstanding throughout the period. (3) Per-share amount was less than $0.005. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class an another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended September 30, 2003. See Notes to Financial Statements. ----- 39 Share Class Information Six classes of shares are authorized for sale by Value: Investor Class, Institutional Class, Advisor Class, A Class, B Class, and C Class. Seven classes of shares are authorized for sale by Large Company Value: Investor Class, Institutional Class, Advisor Class, A Class, B Class, C Class, and R Class. The expense ratios of Advisor, A, B, C, and R Class shares are higher than that of Investor Class. The total expense ratio of Institutional Class shares is lower. ON JANUARY 31, 2003, INVESTOR CLASS SHARES BECAME UNAVAILABLE TO NEW INVESTORS. INVESTOR CLASS shares are available for purchase BY EXISTING SHAREHOLDERS in two ways: 1) directly from American Century without any commissions or other fees; or 2) through a broker-dealer, which may require payment of a transaction fee to the broker. INSTITUTIONAL CLASS shares are available to large investors such as endowments, foundations, and retirement plans, and to financial intermediaries serving these investors. This class recognizes the relatively lower cost of serving institutional customers and others who invest at least $5 million ($3 million for endowments and foundations) in an American Century fund or at least $10 million in multiple funds. In recognition of the larger investments and account balances and comparatively lower transaction costs, the total expense ratio of Institutional Class shares is 0.20% less than the total expense ratio of Investor Class shares. ADVISOR CLASS shares are sold primarily through institutions such as investment advisors, banks, broker-dealers, insurance companies, and financial advisors. Advisor Class shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee. The total expense ratio of Advisor Class shares is 0.25% higher than the total expense ratio of Investor Class shares. A CLASS shares are sold primarily through employer-sponsored retirement plans and through institutions such as investment advisors, banks, broker-dealers, and insurance companies. A Class shares are sold at their offering price, which is net asset value plus an initial sales charge that ranges from 4.50% to 0.00% for fixed-income funds and 5.75% to 0.00% for equity funds, depending on the amount invested. The initial sales charge is deducted from the purchase amount before it is invested. A Class shares may be subject to a contingent deferred sales charge (CDSC). There is no CDSC on shares acquired through reinvestment of dividends or capital gains. The prospectus contains information regarding reductions and waivers of sales charges for A Class shares. A Class shares also are subject to a 0.25% annual Rule 12b-1 service and distribution fee. B CLASS shares are sold primarily through employer-sponsored retirement plans and through institutions such as investment advisors, banks, broker-dealers, and insurance companies. B Class shares redeemed within six years of purchase are subject to a CDSC that declines from 5.00% during the first year after purchase to 0.00% the sixth year after purchase. There is no CDSC on shares acquired through reinvestment of dividends or capital gains. B Class shares also are subject to a 1.00% annual Rule 12b-1 service and distribution fee. B Class shares automatically convert to A Class shares (with lower expenses) eight years after their purchase date. (continued) - ----- 40 Share Class Information C CLASS shares are sold primarily through employer-sponsored retirement plans and through institutions such as investment advisors, banks, broker-dealers, and insurance companies. C Class shares redeemed within 12 months of purchase are subject to a CDSC of 1.00%. There is no CDSC on shares acquired through reinvestment of dividends or capital gains. C Class shares also are subject to a Rule 12b-1 service and distribution fee of up to 1.00%. R CLASS shares are sold primarily through employer-sponsored retirement plans and through institutions such as investment advisors, banks, broker-dealers, and insurance companies. R Class shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee. All classes of shares represent a pro rata interest in the funds and generally have the same rights and preferences. ----- 41 Additional Information RETIREMENT ACCOUNT INFORMATION As required by law, any distributions you receive from an IRA or certain 403(b) and qualified plans [those not eligible for rollover to an IRA or to another qualified plan] are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld. If you don't want us to withhold on this amount, you must notify us to not withhold the federal income tax. Even if you plan to roll over the amount you withdraw to another tax-deferred account, the withholding rate still applies to the withdrawn amount unless we have received notice not to withhold federal income tax prior to the withdrawal. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election. Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don't have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules. PROXY VOTING GUIDELINES American Century Investment Management, Inc., the fund's manager, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the manager uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century's Web site at www.americancentury.com and on the Securities and Exchange Commission's Web site at www.sec.gov. - ----- 42 Index Definitions The following indices are used to illustrate investment market, sector, or style performance or to serve as fund performance comparisons. They are not investment products available for purchase. The LIPPER MULTI-CAP VALUE INDEX is an equally-weighted index of, typically, the 30 largest mutual funds that use a value investment strategy to purchase securities of companies of all market capitalizations. The S&P 500 INDEX is a market-value weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. The RUSSELL 1000 VALUE INDEX measures the performance of those Russell 1000 companies (the 1,000 largest of the 3,000 largest publicly traded U.S. companies, based on total market capitalization) with lower price-to-book ratios and lower forecasted growth rates. ----- 43 Notes - ----- 44 [back cover] American Century Investments PRSRT STD P.O. Box 419200 U.S. POSTAGE PAID Kansas City, MO 64141-6200 AMERICAN CENTURY COMPANIES CONTACT US WWW.AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR RELATIONS: 1-800-345-2021 or 816-531-5575 INVESTORS USING ADVISORS: 1-800-378-9878 BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS: 1-800-345-3533 BANKS AND TRUST COMPANIES, BROKER-DEALERS, FINANCIAL ADVISORS, INSURANCE COMPANIES: 1-800-345-6488 TELECOMMUNICATIONS DEVICE FOR THE DEAF: 1-800-634-4113 or 816-444-3485 AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. INVESTMENT MANAGER: American Century Investment Management, Inc. Kansas City, Missouri THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. 0311 American Century Investment Services, Inc. SH-SAN-36279S (c)2003 American Century Services Corporation
[front cover] September 30, 2003 American Century Semiannual Report [graphic of market line chart] [graphic of starfish] [graphic of two bridges] Equity Index [american century logo and text logo (reg. sm)] Table of Contents Our Message to You....................................................... 1 EQUITY INDEX Performance.............................................................. 2 Portfolio Commentary..................................................... 3 Top Ten Holdings...................................................... 3 Top Five Industries................................................... 4 Types of Investments in Portfolio..................................... 4 Schedule of Investments.................................................. 5 FINANCIAL STATEMENTS Statement of Assets and Liabilities...................................... 13 Statement of Operations.................................................. 14 Statement of Changes in Net Assets....................................... 15 Notes to Financial Statements............................................ 16 Financial Highlights..................................................... 20 OTHER INFORMATION Share Class Information.................................................. 22 Additional Information................................................... 23 Index Definition......................................................... 24 The opinions expressed in the Portfolio Commentary reflect those of the portfolio management team as of the date of the report, and do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] James E. Stowers III with James E. Stowers, Jr. We are pleased to provide you with the semiannual report for the American Century Equity Index fund for the six months ended September 30, 2003. The report includes comparative performance figures, commentary, summary tables, a full list of portfolio holdings and financial statements and highlights. We hope you find this information helpful in monitoring your investment. Many of you have called or written to express your concern about allegations of wrongdoing by other mutual fund investment management firms. We share your concern--fund companies must put investors first and do everything possible to maintain investor trust. Through the Investment Company Institute, the mutual fund trade association, American Century has advocated industry-wide proposals that strengthen protections for fund investors. We believe that decisive action is needed to show that we are committed, as an industry, to the interests of the 95 million investors we serve. As information about alleged trading abuses in the mutual fund industry has come to light, we have posted messages and commentary about these issues on www.americancentury.com. Beyond what's currently in the headlines, American Century has been a champion of many important investor and industry issues, which are outlined in a document titled Putting Investors First. We invite you to visit our Web site and read about how our values have influenced these positions. As always, we deeply appreciate your investment with American Century. Sincerely, /s/James E. Stowers, Jr. Founder and Chairman /s/James E. Stowers III Co-Chairman of the Board ----- 1 Equity Index - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2003 -------------- AVERAGE ANNUAL RETURNS - ------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR INCEPTION DATE - ------------------------------------------------------------------------------- INVESTOR CLASS 23.56% -3.74% 2/26/1999 - ------------------------------------------------------------------------------- S&P 500 INDEX 24.40% -3.28%(1) -- - ------------------------------------------------------------------------------- Institutional Class 23.80% -3.55% 2/26/1999 - ------------------------------------------------------------------------------- (1) Since 2/28/99, the date nearest the Investor Class's inception for which data are available. GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made February 26, 1999
![](https://capedge.com/proxy/N-CSRS/0000908186-03-000019/growthequityindex0310.gif)
ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - -------------------------------------------------------------------------------- 1999* 2000 2001 2002 2003 - -------------------------------------------------------------------------------- Investor Class 4.02% 12.54% -26.89% -20.61% 23.56% - -------------------------------------------------------------------------------- S&P 500 Index 4.38% 13.28% -26.63% -20.49% 24.40% - -------------------------------------------------------------------------------- * From 2/26/99, the Investor Class's inception date. Index data from 2/28/99, the date nearest the Investor Class's inception for which data are available. Not annualized. The charts on the performance page give historical return data for the fund. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. Unless otherwise indicated, the charts are based on Investor Class shares; performance for other classes will vary due to differences in fee structures. Past performance does not guarantee future results. None of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. - ----- 2 Equity Index - Portfolio Commentary A portfolio commentary from Barclays Global Fund Advisors, the subadvisor for the Equity Index Fund. For the six months ended September 30, 2003, Equity Index gained 18.05%*, in line with the 18.45% increase by the S&P 500 Index, which the portfolio is designed to track. The portfolio's results typically trail the index by a narrow margin due to costs associated with the fund's operations, such as management fees, which are deducted from assets. The period was marked by the fall of Baghdad to American troops, improving earnings growth, and the second quarter's rising gross domestic product, which expanded at its fastest rate in almost a year. A $350 billion package of federal tax cuts, which included reductions on taxes paid on dividends and capital gains, was also approved in May. Through August 31, the S&P 500 Index had six consecutive months of advances, the first time that had happened since 1998. The streak fell short of a seventh month when the index, after hitting a 15-month high on September 18, fell as OPEC announced a production cut, unemployment remained higher than the previous year, and the U.S. dollar faltered. Despite the index's slight retreat, all but 37 of the S&P 500 stocks gained ground over the six months covered by this report. As a result, all of the sectors to which Equity Index was exposed contributed to performance, and none of the industry groups declined. Financial stocks, the largest sector within the S&P 500, contributed the most to the fund's results. Citigroup, one of the portfolio's best performers, boosted its third-quarter dividend, posted higher second- quarter earnings and reported that credit quality remained stable for both its consumer and corporate portfolios. During the second quarter, business spending rose at its fastest quarterly rate in three years. Sectors affected by capital expenditures, such as technology, industrials and commercial services, increased during the period. Technology stocks have been the S&P 500's fastest rising group on a year-to-date basis. Intel, the world's largest semiconductor maker, and Microsoft, the largest software manufacturer, both increased their sales forecasts and were among the portfolio's tech contributors. While household spending did not accelerate at the same pace as business spending, it remained solid, and that was enough to boost a variety of consumer-oriented stocks in the portfolio. Consumer cyclical stocks contributed strongly, led by specialty and department stores and automakers. - -------------------------------------------------------------------------------- TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 09/30/03 03/31/03 - -------------------------------------------------------------------------------- Microsoft Corporation 3.2% 3.1% - -------------------------------------------------------------------------------- General Electric Co. 3.2% 3.0% - -------------------------------------------------------------------------------- Wal-Mart Stores, Inc. 2.6% 2.7% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 2.6% 2.8% - -------------------------------------------------------------------------------- Pfizer, Inc. 2.5% 2.3% - -------------------------------------------------------------------------------- Citigroup Inc. 2.5% 2.1% - -------------------------------------------------------------------------------- Intel Corp. 1.9% 1.3% - -------------------------------------------------------------------------------- International Business Machines Corp. 1.6% 1.6% - -------------------------------------------------------------------------------- American International Group, Inc. 1.6% 1.5% - -------------------------------------------------------------------------------- Johnson & Johnson 1.6% 2.1% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. (continued) ----- 3 Equity Index - Portfolio Commentary Non-cyclicals, companies that make products that consumers tend to continue to purchase regardless of the economic environment, advanced as well. But among the portfolio's largest detractors was Newell Rubbermaid, which slumped after the home products maker reported lower second-quarter profits, reduced its earnings forecast and cancelled a public meeting with analysts. The consumer services sector was led by AOL Time Warner, as the entertainment unit of the world's largest media company reported higher earnings on the strength of movies such as "The Matrix Reloaded" and cost-cutting at its America Online unit. However, Eastman Kodak shares slumped to their lowest price in more than two decades after the world's largest photography company cut its dividend. While the health care sector as a whole was up, it contained some of the portfolio's most significant detractors. Within pharmaceuticals, one of Equity Index's largest industry groups, Johnson & Johnson, Pfizer, and Schering-Plough fell. Tenet Healthcare retreated as the nation's second-biggest hospital chain underwent regulatory scrutiny over its handling of Medicare payments. Utility shares gained as well. An exception was Mirant, an energy company that produces electricity in North America, the Caribbean, and the Philippines, which - -------------------------------------------------------------------------------- TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 09/30/03 03/31/03 - -------------------------------------------------------------------------------- Banks 10.0% 9.0% - -------------------------------------------------------------------------------- Drugs 8.5% 9.8% - -------------------------------------------------------------------------------- Financial Services 6.4% 6.1% - -------------------------------------------------------------------------------- Computer Software 4.9% 4.6% - -------------------------------------------------------------------------------- Energy Reserves & Production 4.3% 5.0% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- AS OF AS OF 09/30/03 03/31/03 - -------------------------------------------------------------------------------- U.S. Common Stocks & Futures 99.8% 99.8% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 99.8% 99.8% - -------------------------------------------------------------------------------- Temporary Cash Investments 0.2% 0.2% - -------------------------------------------------------------------------------- declined after filing for protection from creditors under Chapter 11 of the federal bankruptcy code. Telecommunications stocks also added to performance, thanks to gains by long distance providers. But Verizon, the largest "Baby Bell" company, slid after reducing 2003 earnings outlook because of rising labor costs and stiffer competition for business and residential clients. - ----- 4 Equity Index - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS - 97% AIRLINES - 0.2% - -------------------------------------------------------------------------------- 10,325 Delta Air Lines Inc. $ 137,323 - -------------------------------------------------------------------------------- 64,046 Southwest Airlines Co. 1,133,614 - -------------------------------------------------------------------------------- 1,270,937 - -------------------------------------------------------------------------------- ALCOHOL - 0.5% - -------------------------------------------------------------------------------- 3,037 Adolph Coors Company Cl B 163,269 - -------------------------------------------------------------------------------- 67,693 Anheuser-Busch Companies, Inc. 3,339,973 - -------------------------------------------------------------------------------- 5,027 Brown-Forman Corp. 397,736 - -------------------------------------------------------------------------------- 3,900,978 - -------------------------------------------------------------------------------- APPAREL & TEXTILES - 0.3% - -------------------------------------------------------------------------------- 10,352 Jones Apparel Group, Inc. 309,835 - -------------------------------------------------------------------------------- 9,006 Liz Claiborne, Inc. 306,654 - -------------------------------------------------------------------------------- 21,735 NIKE, Inc. Cl B 1,321,923 - -------------------------------------------------------------------------------- 4,925 Reebok International Ltd. 164,643 - -------------------------------------------------------------------------------- 8,835 VF Corp. 343,770 - -------------------------------------------------------------------------------- 2,446,825 - -------------------------------------------------------------------------------- BANKS - 10.0% - -------------------------------------------------------------------------------- 28,605 AmSouth Bancorporation 606,998 - -------------------------------------------------------------------------------- 122,724 Bank of America Corp. 9,577,381 - -------------------------------------------------------------------------------- 63,419 Bank of New York Co., Inc. (The) 1,846,127 - -------------------------------------------------------------------------------- 92,956 Bank One Corp. 3,592,749 - -------------------------------------------------------------------------------- 44,245 BB&T Corporation 1,588,838 - -------------------------------------------------------------------------------- 18,724 Charter One Financial Inc. 572,954 - -------------------------------------------------------------------------------- 423,339 Citigroup Inc. 19,266,159 - -------------------------------------------------------------------------------- 14,359 Comerica Inc. 669,129 - -------------------------------------------------------------------------------- 46,937 Fifth Third Bancorp 2,594,208 - -------------------------------------------------------------------------------- 10,264 First Tennessee National Corp. 435,809 - -------------------------------------------------------------------------------- 86,923 FleetBoston Financial Corp. 2,620,728 - -------------------------------------------------------------------------------- 18,646 Huntington Bancshares Inc. 369,004 - -------------------------------------------------------------------------------- 167,600 JP Morgan Chase & Co. 5,753,708 - -------------------------------------------------------------------------------- 34,831 KeyCorp 890,629 - -------------------------------------------------------------------------------- 18,833 Marshall & Ilsley Corp. 593,616 - -------------------------------------------------------------------------------- 35,354 Mellon Financial Corp. 1,065,570 - -------------------------------------------------------------------------------- 50,110 National City Corp. 1,476,241 - -------------------------------------------------------------------------------- 12,441 North Fork Bancorporation, Inc. 432,325 - -------------------------------------------------------------------------------- 18,264 Northern Trust Corp. 775,124 - -------------------------------------------------------------------------------- 22,874 PNC Financial Services Group 1,088,345 - -------------------------------------------------------------------------------- 18,391 Regions Financial Corp. 629,892 - -------------------------------------------------------------------------------- 27,973 SouthTrust Corp. 822,126 - -------------------------------------------------------------------------------- 27,366 State Street Corp. 1,231,470 - -------------------------------------------------------------------------------- 22,984 SunTrust Banks, Inc. 1,387,544 - -------------------------------------------------------------------------------- 24,841 Synovus Financial Corp. 620,777 - -------------------------------------------------------------------------------- 158,169 U.S. Bancorp 3,794,474 - -------------------------------------------------------------------------------- 16,019 Union Planters Corp. 506,841 - -------------------------------------------------------------------------------- 109,817 Wachovia Corp. 4,523,362 - -------------------------------------------------------------------------------- 137,922 Wells Fargo & Co. 7,102,983 - -------------------------------------------------------------------------------- 7,474 Zions Bancorporation 417,423 - -------------------------------------------------------------------------------- 76,852,534 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- BIOTECHNOLOGY - 1.3% - -------------------------------------------------------------------------------- 106,068 Amgen Inc.(1) $6,848,811 - -------------------------------------------------------------------------------- 17,299 Applera Corporation-Applied Biosystems Group 385,941 - -------------------------------------------------------------------------------- 12,267 Biogen, Inc.(1) 468,967 - -------------------------------------------------------------------------------- 15,411 Chiron Corp.(1) 796,595 - -------------------------------------------------------------------------------- 18,233 Genzyme Corp.(1) 843,276 - -------------------------------------------------------------------------------- 20,409 MedImmune, Inc.(1) 673,701 - -------------------------------------------------------------------------------- 10,017,291 - -------------------------------------------------------------------------------- CHEMICALS - 2.1% - -------------------------------------------------------------------------------- 64,054 3M Co. 4,424,209 - -------------------------------------------------------------------------------- 18,660 Air Products & Chemicals, Inc. 841,566 - -------------------------------------------------------------------------------- 5,650 Ashland Inc. 185,603 - -------------------------------------------------------------------------------- 9,088 Avery Dennison Corp. 459,126 - -------------------------------------------------------------------------------- 4,327 Bemis Co. 191,686 - -------------------------------------------------------------------------------- 75,714 Dow Chemical Co. 2,463,734 - -------------------------------------------------------------------------------- 81,763 du Pont (E.I.) de Nemours & Co. 3,271,338 - -------------------------------------------------------------------------------- 6,428 Eastman Chemical Company 215,338 - -------------------------------------------------------------------------------- 21,226 Ecolab Inc. 535,957 - -------------------------------------------------------------------------------- 14,264 Goodyear Tire & Rubber Co. (The) 93,714 - -------------------------------------------------------------------------------- 4,375 Great Lakes Chemical Corp. 87,981 - -------------------------------------------------------------------------------- 9,020 Hercules Inc.(1) 102,197 - -------------------------------------------------------------------------------- 21,567 Monsanto Co. 516,314 - -------------------------------------------------------------------------------- 12,891 Pactiv Corp.(1) 261,429 - -------------------------------------------------------------------------------- 13,979 PPG Industries, Inc. 729,983 - -------------------------------------------------------------------------------- 13,361 Praxair, Inc. 827,714 - -------------------------------------------------------------------------------- 18,388 Rohm and Haas Co. 615,079 - -------------------------------------------------------------------------------- 7,054 Sealed Air Corp.(1) 333,160 - -------------------------------------------------------------------------------- 12,010 Sherwin-Williams Co. 353,214 - -------------------------------------------------------------------------------- 16,509,342 - -------------------------------------------------------------------------------- CLOTHING STORES - 0.4% - -------------------------------------------------------------------------------- 73,564 Gap, Inc. (The) 1,259,415 - -------------------------------------------------------------------------------- 42,532 Limited Brands 641,383 - -------------------------------------------------------------------------------- 11,249 Nordstrom, Inc. 279,088 - -------------------------------------------------------------------------------- 41,645 TJX Companies, Inc. (The) 808,746 - -------------------------------------------------------------------------------- 2,988,632 - -------------------------------------------------------------------------------- COMPUTER HARDWARE & BUSINESS MACHINES - 4.0% - -------------------------------------------------------------------------------- 16,079 American Power Conversion Corp. 275,594 - -------------------------------------------------------------------------------- 29,618 Apple Computer, Inc.(1) 611,019 - -------------------------------------------------------------------------------- 34,404 Avaya Inc.(1) 375,004 - -------------------------------------------------------------------------------- 576,876 Cisco Systems Inc.(1) 11,272,156 - -------------------------------------------------------------------------------- 211,467 Dell Inc.(1) 7,060,883 - -------------------------------------------------------------------------------- 180,086 EMC Corp.(1) 2,274,486 - -------------------------------------------------------------------------------- 26,394 Gateway, Inc.(1) 149,390 - -------------------------------------------------------------------------------- 251,126 Hewlett-Packard Co. 4,861,799 - -------------------------------------------------------------------------------- 10,514 Lexmark International, Inc.(1) 662,487 - -------------------------------------------------------------------------------- 7,762 NCR Corp.(1) 245,978 - -------------------------------------------------------------------------------- 28,037 Network Appliance, Inc.(1) 575,600 - -------------------------------------------------------------------------------- 19,299 Pitney Bowes, Inc. 739,538 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) ------ 5 Equity Index - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 7,838 QLogic Corp.(1) $368,464 - -------------------------------------------------------------------------------- 263,760 Sun Microsystems, Inc.(1) 873,046 - -------------------------------------------------------------------------------- 18,790 Symbol Technologies, Inc. 224,541 - -------------------------------------------------------------------------------- 64,502 Xerox Corp.(1) 661,791 - -------------------------------------------------------------------------------- 31,231,776 - -------------------------------------------------------------------------------- COMPUTER SOFTWARE - 4.9% - -------------------------------------------------------------------------------- 65,494 ADC Telecommunications Inc.(1) 152,601 - -------------------------------------------------------------------------------- 19,297 Adobe Systems Inc. 757,600 - -------------------------------------------------------------------------------- 9,105 Autodesk, Inc. 154,967 - -------------------------------------------------------------------------------- 18,630 BMC Software Inc.(1) 259,516 - -------------------------------------------------------------------------------- 13,415 Citrix Systems, Inc.(1) 296,203 - -------------------------------------------------------------------------------- 47,707 Computer Associates International, Inc. 1,245,630 - -------------------------------------------------------------------------------- 31,174 Compuware Corp.(1) 167,093 - -------------------------------------------------------------------------------- 12,114 Electronic Arts Inc.(1) 1,117,274 - -------------------------------------------------------------------------------- 16,928 Intuit Inc.(1) 816,607 - -------------------------------------------------------------------------------- 7,134 Mercury Interactive Corp.(1) 323,955 - -------------------------------------------------------------------------------- 888,982 Microsoft Corporation 24,704,809 - -------------------------------------------------------------------------------- 30,245 Novell, Inc.(1) 161,206 - -------------------------------------------------------------------------------- 429,332 Oracle Corp.(1) 4,817,105 - -------------------------------------------------------------------------------- 21,637 Parametric Technology Corp.(1) 67,507 - -------------------------------------------------------------------------------- 29,728 PeopleSoft, Inc.(1) 540,752 - -------------------------------------------------------------------------------- 40,393 Siebel Systems, Inc.(1) 392,620 - -------------------------------------------------------------------------------- 12,543 Symantec Corp.(1) 790,460 - -------------------------------------------------------------------------------- 34,998 Veritas Software Corp.(1) 1,098,937 - -------------------------------------------------------------------------------- 37,864,842 - -------------------------------------------------------------------------------- CONSTRUCTION & REAL PROPERTY - 0.3% - -------------------------------------------------------------------------------- 5,050 Centex Corp. 393,294 - -------------------------------------------------------------------------------- 6,808 Fluor Corp. 254,143 - -------------------------------------------------------------------------------- 3,900 KB Home 232,674 - -------------------------------------------------------------------------------- 38,387 Masco Corp. 939,714 - -------------------------------------------------------------------------------- 5,022 Pulte Homes Inc. 341,546 - -------------------------------------------------------------------------------- 8,600 Vulcan Materials Co. 343,226 - -------------------------------------------------------------------------------- 2,504,597 - -------------------------------------------------------------------------------- CONSUMER DURABLES - 0.1% - -------------------------------------------------------------------------------- 15,873 Leggett & Platt, Inc. 343,333 - -------------------------------------------------------------------------------- 6,565 Maytag Corporation 163,928 - -------------------------------------------------------------------------------- 5,682 Whirlpool Corp. 385,069 - -------------------------------------------------------------------------------- 892,330 - -------------------------------------------------------------------------------- DEFENSE/AEROSPACE - 1.4% - -------------------------------------------------------------------------------- 69,363 Boeing Co. 2,381,233 - -------------------------------------------------------------------------------- 16,158 General Dynamics Corp. 1,261,293 - -------------------------------------------------------------------------------- 9,709 Goodrich Corporation 235,346 - -------------------------------------------------------------------------------- 70,778 Honeywell International Inc. 1,865,000 - -------------------------------------------------------------------------------- 7,582 ITT Industries, Inc. 453,707 - -------------------------------------------------------------------------------- 36,971 Lockheed Martin Corp. 1,706,212 - -------------------------------------------------------------------------------- 14,938 Northrop Grumman Corp. 1,287,954 - -------------------------------------------------------------------------------- 33,993 Raytheon Company 951,804 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 14,741 Rockwell Collins $372,210 - -------------------------------------------------------------------------------- 11,161 Textron Inc. 440,301 - -------------------------------------------------------------------------------- 10,955,060 - -------------------------------------------------------------------------------- DEPARTMENT STORES - 3.8% - -------------------------------------------------------------------------------- 37,556 Costco Wholesale Corporation(1) 1,167,240 - -------------------------------------------------------------------------------- 6,799 Dillard's Inc. 95,050 - -------------------------------------------------------------------------------- 27,466 Dollar General Corp. 549,320 - -------------------------------------------------------------------------------- 14,174 Family Dollar Stores, Inc. 565,401 - -------------------------------------------------------------------------------- 15,257 Federated Department Stores, Inc. 639,268 - -------------------------------------------------------------------------------- 22,143 J.C. Penney Co. Inc. Holding Company 473,196 - -------------------------------------------------------------------------------- 27,886 Kohl's Corp.(1) 1,491,901 - -------------------------------------------------------------------------------- 23,528 May Department Stores Co. (The) 579,495 - -------------------------------------------------------------------------------- 23,395 Sears, Roebuck & Co. 1,023,063 - -------------------------------------------------------------------------------- 74,996 Target Corporation 2,822,099 - -------------------------------------------------------------------------------- 359,230 Wal-Mart Stores, Inc. 20,062,997 - -------------------------------------------------------------------------------- 29,469,030 - -------------------------------------------------------------------------------- DRUGS - 8.5% - -------------------------------------------------------------------------------- 128,512 Abbott Laboratories 5,468,186 - -------------------------------------------------------------------------------- 10,711 Allergan, Inc. 843,277 - -------------------------------------------------------------------------------- 158,846 Bristol-Myers Squibb Co. 4,075,988 - -------------------------------------------------------------------------------- 29,878 Forest Laboratories, Inc. Cl A(1) 1,537,223 - -------------------------------------------------------------------------------- 244,028 Johnson & Johnson 12,084,266 - -------------------------------------------------------------------------------- 19,652 King Pharmaceuticals, Inc.(1) 297,728 - -------------------------------------------------------------------------------- 92,337 Lilly (Eli) & Co. 5,484,818 - -------------------------------------------------------------------------------- 184,279 Merck & Co., Inc. 9,328,203 - -------------------------------------------------------------------------------- 640,249 Pfizer, Inc. 19,450,764 - -------------------------------------------------------------------------------- 120,119 Schering-Plough Corp. 1,830,614 - -------------------------------------------------------------------------------- 5,770 Sigma-Aldrich Corp. 299,694 - -------------------------------------------------------------------------------- 8,784 Watson Pharmaceuticals, Inc.(1) 366,205 - -------------------------------------------------------------------------------- 109,554 Wyeth 5,050,439 - -------------------------------------------------------------------------------- 66,117,405 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 1.1% - -------------------------------------------------------------------------------- 12,507 Andrew Corporation(1) 153,711 - -------------------------------------------------------------------------------- 38,394 CIENA Corporation(1) 226,909 - -------------------------------------------------------------------------------- 15,345 Comverse Technology, Inc.(1) 229,561 - -------------------------------------------------------------------------------- 108,796 Corning Inc.(1) 1,024,857 - -------------------------------------------------------------------------------- 16,810 Dover Corp. 594,570 - -------------------------------------------------------------------------------- 16,335 Jabil Circuit, Inc.(1) 425,527 - -------------------------------------------------------------------------------- 116,630 JDS Uniphase Corp.(1) 419,868 - -------------------------------------------------------------------------------- 339,874 Lucent Technologies Inc.(1) 734,127 - -------------------------------------------------------------------------------- 15,915 Molex Inc. 455,010 - -------------------------------------------------------------------------------- 190,844 Motorola, Inc. 2,284,402 - -------------------------------------------------------------------------------- 6,751 Power-One Inc.(1) 69,468 - -------------------------------------------------------------------------------- 41,598 Sanmina-SCI Corp.(1) 403,501 - -------------------------------------------------------------------------------- 12,333 Scientific-Atlanta, Inc. 384,173 - -------------------------------------------------------------------------------- 67,668 Solectron Corp.(1) 395,858 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ----- 6 Equity Index - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 7,362 Tektronix, Inc.(1) $182,210 - -------------------------------------------------------------------------------- 33,649 Tellabs, Inc.(1) 228,477 - -------------------------------------------------------------------------------- 8,212,229 - -------------------------------------------------------------------------------- ELECTRICAL UTILITY - 2.5% - -------------------------------------------------------------------------------- 50,529 AES Corporation (The)(1) 374,925 - -------------------------------------------------------------------------------- 10,220 Allegheny Energy, Inc.(1) 93,411 - -------------------------------------------------------------------------------- 13,341 Ameren Corp. 572,462 - -------------------------------------------------------------------------------- 32,816 American Electric Power 984,480 - -------------------------------------------------------------------------------- 31,193 Calpine Corporation(1) 152,534 - -------------------------------------------------------------------------------- 24,914 CenterPoint Energy, Inc. 228,461 - -------------------------------------------------------------------------------- 14,592 Cinergy Corp. 535,526 - -------------------------------------------------------------------------------- 18,423 Consolidated Edison, Inc. 750,921 - -------------------------------------------------------------------------------- 13,693 Constellation Energy Group Inc. 489,936 - -------------------------------------------------------------------------------- 26,668 Dominion Resources Inc. 1,650,749 - -------------------------------------------------------------------------------- 13,751 DTE Energy Company 507,274 - -------------------------------------------------------------------------------- 74,391 Duke Energy Corp. 1,324,904 - -------------------------------------------------------------------------------- 26,818 Edison International(1) 512,224 - -------------------------------------------------------------------------------- 18,673 Entergy Corp. 1,011,143 - -------------------------------------------------------------------------------- 26,587 Exelon Corporation 1,688,275 - -------------------------------------------------------------------------------- 27,029 FirstEnergy Corp. 862,225 - -------------------------------------------------------------------------------- 14,981 FPL Group, Inc. 946,799 - -------------------------------------------------------------------------------- 34,270 PG&E Corp.(1) 819,053 - -------------------------------------------------------------------------------- 7,597 Pinnacle West Capital Corp. 269,694 - -------------------------------------------------------------------------------- 14,564 PPL Corporation 596,396 - -------------------------------------------------------------------------------- 19,859 Progress Energy Inc. 882,931 - -------------------------------------------------------------------------------- 18,492 Public Service Enterprise Group Inc. 776,664 - -------------------------------------------------------------------------------- 59,615 Southern Co. 1,747,912 - -------------------------------------------------------------------------------- 15,289 TECO Energy, Inc. 211,294 - -------------------------------------------------------------------------------- 26,596 TXU Corp. 626,602 - -------------------------------------------------------------------------------- 32,787 XCEL Energy Inc. 507,215 - -------------------------------------------------------------------------------- 19,124,010 - -------------------------------------------------------------------------------- ENERGY RESERVES & PRODUCTION - 4.3% - -------------------------------------------------------------------------------- 7,612 Amerada Hess Corp. 381,361 - -------------------------------------------------------------------------------- 20,382 Anadarko Petroleum Corp. 851,152 - -------------------------------------------------------------------------------- 13,295 Apache Corp. 921,875 - -------------------------------------------------------------------------------- 16,485 Burlington Resources, Inc. 794,577 - -------------------------------------------------------------------------------- 87,732 ChevronTexaco Corp. 6,268,451 - -------------------------------------------------------------------------------- 19,002 Devon Energy Corporation 915,706 - -------------------------------------------------------------------------------- 30,789 Dynegy Inc. Cl A(1) 110,840 - -------------------------------------------------------------------------------- 9,488 EOG Resources Inc. 396,029 - -------------------------------------------------------------------------------- 545,451 Exxon Mobil Corp. 19,963,507 - -------------------------------------------------------------------------------- 8,223 Kerr-McGee Corp. 367,075 - -------------------------------------------------------------------------------- 31,450 Occidental Petroleum Corp. 1,107,984 - -------------------------------------------------------------------------------- 21,461 Unocal Corp. 676,451 - -------------------------------------------------------------------------------- 32,755,008 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- ENTERTAINMENT - 0.9% - -------------------------------------------------------------------------------- 51,493 Carnival Corporation 41,693,605 - -------------------------------------------------------------------------------- 144,493 Viacom, Inc. Cl B 5,534,082 - -------------------------------------------------------------------------------- 7,227,687 - -------------------------------------------------------------------------------- ENVIRONMENTAL SERVICES - 0.2% - -------------------------------------------------------------------------------- 17,056 Allied Waste Industries Inc.(1) 184,205 - -------------------------------------------------------------------------------- 48,784 Waste Management, Inc. 1,276,677 - -------------------------------------------------------------------------------- 1,460,882 - -------------------------------------------------------------------------------- FINANCIAL SERVICES - 6.4% - -------------------------------------------------------------------------------- 105,727 American Express Co. 4,764,059 - -------------------------------------------------------------------------------- 14,780 Block (H & R), Inc. 637,757 - -------------------------------------------------------------------------------- 18,727 Capital One Financial Corp. 1,068,188 - -------------------------------------------------------------------------------- 11,186 Countrywide Financial Corporation 875,640 - -------------------------------------------------------------------------------- 80,094 Fannie Mae 5,622,599 - -------------------------------------------------------------------------------- 57,183 Freddie Mac 2,993,530 - -------------------------------------------------------------------------------- 823,218 General Electric Co. 24,540,129 - -------------------------------------------------------------------------------- 43,886 Marsh & McLennan Companies, Inc. 2,089,412 - -------------------------------------------------------------------------------- 11,957 MBIA Inc. 657,276 - -------------------------------------------------------------------------------- 105,003 MBNA Corporation 2,394,068 - -------------------------------------------------------------------------------- 8,031 MGIC Investment Corp. 418,174 - -------------------------------------------------------------------------------- 23,649 Providian Financial Corp.(1) 278,822 - -------------------------------------------------------------------------------- 45,043 Prudential Financial Inc. 1,682,806 - -------------------------------------------------------------------------------- 37,049 SLM Corporation 1,443,429 - -------------------------------------------------------------------------------- 49,465,889 - -------------------------------------------------------------------------------- FOOD & BEVERAGE - 3.5% - -------------------------------------------------------------------------------- 52,681 Archer-Daniels-Midland Co. 690,648 - -------------------------------------------------------------------------------- 34,158 Campbell Soup Company 905,187 - -------------------------------------------------------------------------------- 202,213 Coca-Cola Company (The) 8,687,070 - -------------------------------------------------------------------------------- 37,292 Coca-Cola Enterprises 710,786 - -------------------------------------------------------------------------------- 43,807 ConAgra Foods, Inc. 930,461 - -------------------------------------------------------------------------------- 30,497 General Mills, Inc. 1,435,494 - -------------------------------------------------------------------------------- 29,085 H.J. Heinz Company 997,034 - -------------------------------------------------------------------------------- 10,669 Hershey Foods Corp. 775,423 - -------------------------------------------------------------------------------- 33,613 Kellogg Co. 1,120,994 - -------------------------------------------------------------------------------- 11,370 McCormick & Company, Incorporated 311,765 - -------------------------------------------------------------------------------- 22,041 Pepsi Bottling Group Inc. 453,604 - -------------------------------------------------------------------------------- 141,964 PepsiCo, Inc. 6,506,210 - -------------------------------------------------------------------------------- 63,404 Sara Lee Corp. 1,164,097 - -------------------------------------------------------------------------------- 53,475 Sysco Corp. 1,749,167 - -------------------------------------------------------------------------------- 18,470 Wrigley (Wm.) Jr. Company 1,021,391 - -------------------------------------------------------------------------------- 27,459,331 - -------------------------------------------------------------------------------- FOREST PRODUCTS & PAPER - 0.5% - -------------------------------------------------------------------------------- 5,076 Boise Cascade Corp. 140,098 - -------------------------------------------------------------------------------- 21,040 Georgia-Pacific Corp. 510,010 - -------------------------------------------------------------------------------- 39,453 International Paper Company 1,539,455 - -------------------------------------------------------------------------------- 8,513 Louisiana-Pacific Corp.(1) 117,309 - -------------------------------------------------------------------------------- 16,341 MeadWestvaco Corp. 416,696 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) ----- 7 Equity Index - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 4,488 Temple-Inland Inc. $217,892 - -------------------------------------------------------------------------------- 18,137 Weyerhaeuser Co. 1,060,108 - -------------------------------------------------------------------------------- 4,001,568 - -------------------------------------------------------------------------------- GAS & WATER UTILITIES - 0.3% - -------------------------------------------------------------------------------- 11,712 CMS Energy Corp. 86,317 - -------------------------------------------------------------------------------- 49,107 El Paso Corp. 358,481 - -------------------------------------------------------------------------------- 12,924 KeySpan Corporation 453,374 - -------------------------------------------------------------------------------- 3,583 NICOR Inc. 125,907 - -------------------------------------------------------------------------------- 21,753 NiSource Inc. 434,625 - -------------------------------------------------------------------------------- 2,984 People's Energy Corp. 123,478 - -------------------------------------------------------------------------------- 17,498 Sempra Energy 513,741 - -------------------------------------------------------------------------------- 42,570 Williams Companies, Inc. (The) 401,009 - -------------------------------------------------------------------------------- 2,496,932 - -------------------------------------------------------------------------------- GOLD - 0.2% - -------------------------------------------------------------------------------- 33,370 Newmont Mining Corporation 1,304,433 - -------------------------------------------------------------------------------- GROCERY STORES - 0.4% - -------------------------------------------------------------------------------- 30,149 Albertson's Inc. 620,165 - -------------------------------------------------------------------------------- 61,650 Kroger Co. (The)(1) 1,101,685 - -------------------------------------------------------------------------------- 36,369 Safeway Inc.(1) 834,305 - -------------------------------------------------------------------------------- 11,036 Supervalu Inc. 263,319 - -------------------------------------------------------------------------------- 11,458 Winn-Dixie Stores, Inc. 110,570 - -------------------------------------------------------------------------------- 2,930,044 - -------------------------------------------------------------------------------- HEAVY ELECTRICAL EQUIPMENT - 0.8% - -------------------------------------------------------------------------------- 7,708 Cooper Industries, Ltd. 370,215 - -------------------------------------------------------------------------------- 4,825 Crane Co. 112,953 - -------------------------------------------------------------------------------- 3,458 Cummins Inc. 153,639 - -------------------------------------------------------------------------------- 6,159 Eaton Corp. 545,811 - -------------------------------------------------------------------------------- 34,583 Emerson Electric Co. 1,820,795 - -------------------------------------------------------------------------------- 15,182 Rockwell Automation Inc. 398,528 - -------------------------------------------------------------------------------- 4,751 Thomas & Betts Corp.(1) 75,303 - -------------------------------------------------------------------------------- 38,535 United Technologies Corp. 2,977,985 - -------------------------------------------------------------------------------- 6,455,229 - -------------------------------------------------------------------------------- HEAVY MACHINERY - 0.4% - -------------------------------------------------------------------------------- 28,283 Caterpillar Inc. 1,947,002 - -------------------------------------------------------------------------------- 19,613 Deere & Co. 1,045,569 - -------------------------------------------------------------------------------- 2,992,571 - -------------------------------------------------------------------------------- HOME PRODUCTS - 2.7% - -------------------------------------------------------------------------------- 4,841 Alberto-Culver Company Cl B 284,748 - -------------------------------------------------------------------------------- 19,456 Avon Products, Inc. 1,256,079 - -------------------------------------------------------------------------------- 17,871 Clorox Company 819,743 - -------------------------------------------------------------------------------- 44,267 Colgate-Palmolive Co. 2,474,083 - -------------------------------------------------------------------------------- 12,071 Fortune Brands, Inc. 685,029 - -------------------------------------------------------------------------------- 83,907 Gillette Company 2,683,346 - -------------------------------------------------------------------------------- 7,792 International Flavors & Fragrances Inc. 257,759 - -------------------------------------------------------------------------------- 41,618 Kimberly-Clark Corp. 2,135,836 - -------------------------------------------------------------------------------- 22,520 Newell Rubbermaid Inc. 488,008 - -------------------------------------------------------------------------------- 106,408 Procter & Gamble Co. (The) 9,876,791 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 4,748 Tupperware Corp. $63,528 - -------------------------------------------------------------------------------- 21,024,950 - -------------------------------------------------------------------------------- HOTELS - 0.5% - -------------------------------------------------------------------------------- 83,313 Cendant Corporation(1) 1,557,121 - -------------------------------------------------------------------------------- 9,044 Harrah's Entertainment, Inc. 380,843 - -------------------------------------------------------------------------------- 30,982 Hilton Hotels Corporation 502,528 - -------------------------------------------------------------------------------- 19,179 Marriott International, Inc. 825,272 - -------------------------------------------------------------------------------- 16,693 Starwood Hotels & Resorts Worldwide, Inc. 580,916 - -------------------------------------------------------------------------------- 3,846,680 - -------------------------------------------------------------------------------- INDUSTRIAL PARTS - 1.1% - -------------------------------------------------------------------------------- 5,937 American Standard Companies Inc.(1) 500,192 - -------------------------------------------------------------------------------- 6,358 Black & Decker Corporation 257,817 - -------------------------------------------------------------------------------- 12,582 Danaher Corp. 929,307 - -------------------------------------------------------------------------------- 7,558 Grainger (W.W.), Inc. 359,383 - -------------------------------------------------------------------------------- 25,163 Illinois Tool Works Inc. 1,667,300 - -------------------------------------------------------------------------------- 14,263 Ingersoll-Rand Company 762,215 - -------------------------------------------------------------------------------- 10,113 Pall Corp. 226,936 - -------------------------------------------------------------------------------- 9,704 Parker-Hannifin Corp. 433,769 - -------------------------------------------------------------------------------- 4,859 Snap-on Incorporated 134,351 - -------------------------------------------------------------------------------- 7,170 Stanley Works (The) 211,658 - -------------------------------------------------------------------------------- 164,372 Tyco International Ltd. 3,358,120 - -------------------------------------------------------------------------------- 8,841,048 - -------------------------------------------------------------------------------- INDUSTRIAL SERVICES - 0.1% - -------------------------------------------------------------------------------- 13,930 Cintas Corp. 513,181 - -------------------------------------------------------------------------------- 13,891 Robert Half International Inc.(1) 270,875 - -------------------------------------------------------------------------------- 784,056 - -------------------------------------------------------------------------------- INFORMATION SERVICES - 3.2% - -------------------------------------------------------------------------------- 14,473 Apollo Group Inc. Cl A(1) 955,652 - -------------------------------------------------------------------------------- 49,290 Automatic Data Processing, Inc. 1,767,047 - -------------------------------------------------------------------------------- 15,470 Computer Sciences Corp.(1) 581,208 - -------------------------------------------------------------------------------- 39,701 Concord EFS, Inc.(1) 542,713 - -------------------------------------------------------------------------------- 11,693 Convergys Corp.(1) 214,450 - -------------------------------------------------------------------------------- 39,600 Electronic Data Systems Corp. 799,920 - -------------------------------------------------------------------------------- 11,436 Equifax Inc. 254,680 - -------------------------------------------------------------------------------- 60,692 First Data Corp. 2,425,252 - -------------------------------------------------------------------------------- 15,787 Fiserv, Inc.(1) 571,963 - -------------------------------------------------------------------------------- 19,548 IMS Health Inc. 412,463 - -------------------------------------------------------------------------------- 142,283 International Business Machines Corp. 12,567,856 - -------------------------------------------------------------------------------- 31,918 Interpublic Group of Companies, Inc. 450,682 - -------------------------------------------------------------------------------- 9,271 Monster Worldwide Inc. 233,444 - -------------------------------------------------------------------------------- 12,397 Moody's Corp. 681,463 - -------------------------------------------------------------------------------- 30,970 Paychex, Inc. 1,050,812 - -------------------------------------------------------------------------------- 11,705 Sabre Holdings Corp. 251,540 - -------------------------------------------------------------------------------- 23,392 SunGard Data Systems Inc.(1) 615,444 - -------------------------------------------------------------------------------- 26,838 Unisys Corp.(1) 363,118 - -------------------------------------------------------------------------------- 24,739,707 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ----- 8 Equity Index - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- INTERNET - 0.6% - -------------------------------------------------------------------------------- 52,873 eBay Inc.(1) $2,818,131 - -------------------------------------------------------------------------------- 50,203 Yahoo! Inc.(1) 1,776,182 - -------------------------------------------------------------------------------- 4,594,313 - -------------------------------------------------------------------------------- LEISURE - 0.3% - -------------------------------------------------------------------------------- 7,493 Brunswick Corp. 192,420 - -------------------------------------------------------------------------------- 23,370 Eastman Kodak Co. 489,368 - -------------------------------------------------------------------------------- 14,158 Hasbro, Inc. 264,471 - -------------------------------------------------------------------------------- 28,148 International Game Technology 792,366 - -------------------------------------------------------------------------------- 35,861 Mattel, Inc. 679,925 - -------------------------------------------------------------------------------- 2,418,550 - -------------------------------------------------------------------------------- LIFE & HEALTH INSURANCE - 1.0% - -------------------------------------------------------------------------------- 42,177 Aflac Inc. 1,362,317 - -------------------------------------------------------------------------------- 8,721 Ambac Financial Group, Inc. 558,144 - -------------------------------------------------------------------------------- 25,566 AON Corp. 533,051 - -------------------------------------------------------------------------------- 11,673 CIGNA Corp. 521,199 - -------------------------------------------------------------------------------- 11,564 Jefferson-Pilot Corp. 513,210 - -------------------------------------------------------------------------------- 23,587 John Hancock Financial Services, Inc. 797,241 - -------------------------------------------------------------------------------- 14,771 Lincoln National Corp. 522,598 - -------------------------------------------------------------------------------- 62,591 MetLife, Inc. 1,755,679 - -------------------------------------------------------------------------------- 26,671 Principal Financial Group 826,534 - -------------------------------------------------------------------------------- 9,338 Torchmark Corp. 379,496 - -------------------------------------------------------------------------------- 24,366 UnumProvident Corp. 359,886 - -------------------------------------------------------------------------------- 8,129,355 - -------------------------------------------------------------------------------- MEDIA - 2.4% - -------------------------------------------------------------------------------- 371,241 AOL Time Warner Inc.(1) 5,609,452 - -------------------------------------------------------------------------------- 50,542 Clear Channel Communications, Inc. 1,935,759 - -------------------------------------------------------------------------------- 185,029 Comcast Corporation(1) 5,713,695 - -------------------------------------------------------------------------------- 168,017 Disney (Walt) Co. 3,388,903 - -------------------------------------------------------------------------------- 15,545 Omnicom Group Inc. 1,116,908 - -------------------------------------------------------------------------------- 26,582 Univision Communications Inc. Cl A(1) 848,763 - -------------------------------------------------------------------------------- 18,613,480 - -------------------------------------------------------------------------------- MEDICAL PRODUCTS & SUPPLIES - 2.0% - -------------------------------------------------------------------------------- 4,225 Bard (C.R.), Inc. 299,975 - -------------------------------------------------------------------------------- 4,337 Bausch & Lomb Inc. Cl A 191,479 - -------------------------------------------------------------------------------- 50,097 Baxter International, Inc. 1,455,819 - -------------------------------------------------------------------------------- 20,744 Becton Dickinson & Co. 749,273 - -------------------------------------------------------------------------------- 20,947 Biomet Inc. 704,029 - -------------------------------------------------------------------------------- 33,895 Boston Scientific Corp.(1) 2,162,501 - -------------------------------------------------------------------------------- 25,393 Guidant Corp. 1,189,662 - -------------------------------------------------------------------------------- 100,058 Medtronic, Inc. 4,694,720 - -------------------------------------------------------------------------------- 4,038 Millipore Corp.(1) 185,990 - -------------------------------------------------------------------------------- 10,322 PerkinElmer, Inc. 158,030 - -------------------------------------------------------------------------------- 14,087 St. Jude Medical, Inc.(1) 757,458 - -------------------------------------------------------------------------------- 16,432 Stryker Corp. 1,237,494 - -------------------------------------------------------------------------------- 13,229 Thermo Electron Corp.(1) 287,069 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 10,055 Waters Corp.(1) $275,809 - -------------------------------------------------------------------------------- 18,568 Zimmer Holdings Inc.(1) 1,023,097 - -------------------------------------------------------------------------------- 15,372,405 - -------------------------------------------------------------------------------- MEDICAL PROVIDERS & SERVICES - 1.7% - -------------------------------------------------------------------------------- 12,694 AETNA Inc. 774,715 - -------------------------------------------------------------------------------- 9,182 AmerisourceBergen Corp. 496,287 - -------------------------------------------------------------------------------- 11,323 Anthem, Inc.(1) 807,670 - -------------------------------------------------------------------------------- 36,765 Cardinal Health, Inc. 2,146,708 - -------------------------------------------------------------------------------- 6,462 Express Scripts, Inc. Cl A(1) 395,151 - -------------------------------------------------------------------------------- 41,127 HCA Inc. 1,515,941 - -------------------------------------------------------------------------------- 19,555 Health Management Associates, Inc. Cl A 426,495 - -------------------------------------------------------------------------------- 13,347 Humana Inc.(1) 240,913 - -------------------------------------------------------------------------------- 7,534 Manor Care, Inc. 226,020 - -------------------------------------------------------------------------------- 23,954 McKesson Corp. 797,429 - -------------------------------------------------------------------------------- 22,327 Medco Health Solutions Inc.(1) 578,939 - -------------------------------------------------------------------------------- 8,628 Quest Diagnostics Inc.(1) 523,202 - -------------------------------------------------------------------------------- 38,192 Tenet Healthcare Corp.(1) 553,020 - -------------------------------------------------------------------------------- 49,033 UnitedHealth Group Incorporated 2,467,341 - -------------------------------------------------------------------------------- 11,977 Wellpoint Health Networks Inc.(1) 923,187 - -------------------------------------------------------------------------------- 12,873,018 - -------------------------------------------------------------------------------- MINING & METALS - 0.5% - -------------------------------------------------------------------------------- 69,697 Alcoa Inc. 1,823,273 - -------------------------------------------------------------------------------- 6,576 Allegheny Technologies Inc. 43,073 - -------------------------------------------------------------------------------- 4,673 Ball Corp. 252,342 - -------------------------------------------------------------------------------- 10,209 Engelhard Corporation 282,483 - -------------------------------------------------------------------------------- 14,085 Freeport-McMoRan Copper & Gold, Inc. Cl B 466,214 - -------------------------------------------------------------------------------- 6,375 Nucor Corp. 292,485 - -------------------------------------------------------------------------------- 7,388 Phelps Dodge Corp.(1) 345,758 - -------------------------------------------------------------------------------- 8,468 United States Steel Corp. 155,642 - -------------------------------------------------------------------------------- 6,986 Worthington Industries, Inc. 87,744 - -------------------------------------------------------------------------------- 3,749,014 - -------------------------------------------------------------------------------- MOTOR VEHICLES & PARTS - 1.0% - -------------------------------------------------------------------------------- 5,996 Cooper Tire & Rubber 95,157 - -------------------------------------------------------------------------------- 12,567 Dana Corp. 193,909 - -------------------------------------------------------------------------------- 45,689 Delphi Corp. 413,485 - -------------------------------------------------------------------------------- 149,748 Ford Motor Company 1,612,786 - -------------------------------------------------------------------------------- 46,205 General Motors Corp. 1,891,171 - -------------------------------------------------------------------------------- 14,434 Genuine Parts Company 461,599 - -------------------------------------------------------------------------------- 25,020 Harley-Davidson, Inc. 1,205,964 - -------------------------------------------------------------------------------- 7,357 Johnson Controls, Inc. 695,972 - -------------------------------------------------------------------------------- 5,664 Navistar International Corp.(1) 211,154 - -------------------------------------------------------------------------------- 9,509 Paccar Inc. 710,227 - -------------------------------------------------------------------------------- 10,619 Visteon Corp. 70,085 - -------------------------------------------------------------------------------- 7,561,509 - -------------------------------------------------------------------------------- OIL REFINING - 0.6% - -------------------------------------------------------------------------------- 55,610 ConocoPhillips 3,044,647 - -------------------------------------------------------------------------------- 10,187 Kinder Morgan, Inc. 550,200 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ----- 9 Equity Index - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 25,560 Marathon Oil Corp. $728,460 - -------------------------------------------------------------------------------- 6,345 Sunoco, Inc. 255,196 - -------------------------------------------------------------------------------- 4,578,503 - -------------------------------------------------------------------------------- OIL SERVICES - 0.8% - -------------------------------------------------------------------------------- 27,339 Baker Hughes Inc. 808,961 - -------------------------------------------------------------------------------- 13,108 BJ Services Co.(1) 447,900 - -------------------------------------------------------------------------------- 35,725 Halliburton Co. 866,331 - -------------------------------------------------------------------------------- 12,294 Nabors Industries Ltd.(1) 458,074 - -------------------------------------------------------------------------------- 11,047 Noble Corp.(1) 375,488 - -------------------------------------------------------------------------------- 7,691 Rowan Companies, Inc.(1) 189,045 - -------------------------------------------------------------------------------- 47,601 Schlumberger Ltd. 2,303,889 - -------------------------------------------------------------------------------- 27,063 Transocean Inc.(1) 541,260 - -------------------------------------------------------------------------------- 5,990,948 - -------------------------------------------------------------------------------- PROPERTY AND CASUALTY INSURANCE - 3.0% - -------------------------------------------------------------------------------- 23,136 Ace, Ltd. 765,339 - -------------------------------------------------------------------------------- 57,786 Allstate Corp. 2,110,922 - -------------------------------------------------------------------------------- 214,444 American International Group, Inc. 12,373,418 - -------------------------------------------------------------------------------- 15,393 Chubb Corp. 998,698 - -------------------------------------------------------------------------------- 13,214 Cincinnati Financial Corp. 528,031 - -------------------------------------------------------------------------------- 23,250 Hartford Financial Services Group Inc. (The) 1,223,648 - -------------------------------------------------------------------------------- 15,327 Loews Corp. 618,751 - -------------------------------------------------------------------------------- 17,896 Progressive Corp. 1,236,793 - -------------------------------------------------------------------------------- 11,379 Safeco Corp. 401,224 - -------------------------------------------------------------------------------- 18,662 St. Paul Companies, Inc. 691,054 - -------------------------------------------------------------------------------- 82,158 Travelers Property Casualty Corp. 1,304,669 - -------------------------------------------------------------------------------- 11,221 XL Capital Ltd. Cl A 868,954 - -------------------------------------------------------------------------------- 23,121,501 - -------------------------------------------------------------------------------- PUBLISHING - 0.8% - -------------------------------------------------------------------------------- 5,366 American Greetings(1) 104,261 - -------------------------------------------------------------------------------- 4,357 Deluxe Corp. 174,890 - -------------------------------------------------------------------------------- 9,241 Donnelley (R.R.) & Sons Co. 229,824 - -------------------------------------------------------------------------------- 6,864 Dow Jones & Co. Inc. 325,010 - -------------------------------------------------------------------------------- 22,067 Gannett Co., Inc. 1,711,517 - -------------------------------------------------------------------------------- 6,572 Knight-Ridder, Inc. 438,352 - -------------------------------------------------------------------------------- 15,719 McGraw-Hill Companies, Inc. (The) 976,621 - -------------------------------------------------------------------------------- 4,181 Meredith Corp. 193,037 - -------------------------------------------------------------------------------- 12,212 New York Times Co. (The) Cl A 530,734 - -------------------------------------------------------------------------------- 25,750 Tribune Co. 1,181,925 - -------------------------------------------------------------------------------- 5,866,171 - -------------------------------------------------------------------------------- RAILROADS - 0.4% - -------------------------------------------------------------------------------- 30,951 Burlington Northern Santa Fe Corp. 893,555 - ------------------------------------------------------------------------------- 17,486 CSX Corporation 511,466 - -------------------------------------------------------------------------------- 31,826 Norfolk Southern Corp. 588,781 - -------------------------------------------------------------------------------- 20,792 Union Pacific Corp. 1,209,471 - -------------------------------------------------------------------------------- 3,203,273 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUST - 0.4% - -------------------------------------------------------------------------------- 7,814 Apartment Investment and Management Co. $307,559 - -------------------------------------------------------------------------------- 32,585 Equity Office Properties Trust 897,064 - -------------------------------------------------------------------------------- 22,503 Equity Residential 658,888 - -------------------------------------------------------------------------------- 14,919 Plum Creek Timber Co. Inc. 379,539 - -------------------------------------------------------------------------------- 15,038 Prologis 454,900 - -------------------------------------------------------------------------------- 15,758 Simon Property Group, Inc. 686,734 - -------------------------------------------------------------------------------- 3,384,684 - -------------------------------------------------------------------------------- RESTAURANTS - 0.6% - -------------------------------------------------------------------------------- 13,445 Darden Restaurants, Inc. 255,455 - -------------------------------------------------------------------------------- 105,024 McDonald's Corporation 2,472,265 - -------------------------------------------------------------------------------- 32,088 Starbucks Corporation(1) 924,134 - -------------------------------------------------------------------------------- 9,283 Wendy's International, Inc. 299,841 - -------------------------------------------------------------------------------- 24,080 Yum! Brands, Inc.(1) 713,250 - -------------------------------------------------------------------------------- 4,664,945 - -------------------------------------------------------------------------------- SECURITIES & ASSET MANAGEMENT - 2.2% - -------------------------------------------------------------------------------- 8,184 Bear Stearns Companies Inc. (The) 612,163 - -------------------------------------------------------------------------------- 8,852 Federated Investors Inc. 245,200 - -------------------------------------------------------------------------------- 20,816 Franklin Resources, Inc. 920,275 - -------------------------------------------------------------------------------- 38,883 Goldman Sachs Group, Inc. (The) 3,262,284 - -------------------------------------------------------------------------------- 19,503 Janus Capital Group Inc. 272,457 - -------------------------------------------------------------------------------- 19,893 Lehman Brothers Holdings Inc. 1,374,208 - -------------------------------------------------------------------------------- 76,880 Merrill Lynch & Co., Inc. 4,115,386 - -------------------------------------------------------------------------------- 89,491 Morgan Stanley 4,515,717 - -------------------------------------------------------------------------------- 110,910 Schwab (Charles) Corp. 1,320,938 - -------------------------------------------------------------------------------- 10,283 T. Rowe Price Group Inc. 424,277 - -------------------------------------------------------------------------------- 17,062,905 - -------------------------------------------------------------------------------- SEMICONDUCTOR - 4.3% - -------------------------------------------------------------------------------- 28,287 Advanced Micro Devices, Inc.(1) 314,269 - -------------------------------------------------------------------------------- 38,926 Agilent Technologies, Inc.(1) 860,654 - -------------------------------------------------------------------------------- 31,244 Altera Corp.(1) 590,512 - -------------------------------------------------------------------------------- 30,126 Analog Devices, Inc.(1) 1,145,391 - -------------------------------------------------------------------------------- 135,910 Applied Materials, Inc.(1) 2,465,407 - -------------------------------------------------------------------------------- 24,802 Applied Micro Circuits Corp.(1) 120,786 - -------------------------------------------------------------------------------- 24,559 Broadcom Corp.(1) 653,761 - -------------------------------------------------------------------------------- 535,309 Intel Corp. 14,726,350 - -------------------------------------------------------------------------------- 15,706 KLA-Tencor Corp.(1) 807,288 - -------------------------------------------------------------------------------- 25,745 Linear Technology Corp. 921,928 - -------------------------------------------------------------------------------- 30,880 LSI Logic Corp.(1) 277,611 - -------------------------------------------------------------------------------- 26,751 Maxim Integrated Products, Inc. 1,056,665 - -------------------------------------------------------------------------------- 50,111 Micron Technology, Inc.(1) 672,490 - -------------------------------------------------------------------------------- 15,266 National Semiconductor Corp.(1) 492,939 - -------------------------------------------------------------------------------- 12,375 Novellus Systems, Inc.(1) 417,656 - -------------------------------------------------------------------------------- 12,964 NVIDIA Corp.(1) 206,270 - -------------------------------------------------------------------------------- 13,885 PMC-Sierra, Inc.(1) 183,157 - -------------------------------------------------------------------------------- 65,296 QUALCOMM Inc. 2,718,925 - -------------------------------------------------------------------------------- 15,537 Teradyne, Inc.(1) 288,988 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ----- 10 Equity Index - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 142,382 Texas Instruments Inc. $3,246,310 - -------------------------------------------------------------------------------- 27,996 Xilinx, Inc.(1) 798,166 - -------------------------------------------------------------------------------- 32,965,523 - -------------------------------------------------------------------------------- SPECIALTY STORES - 2.4% - -------------------------------------------------------------------------------- 22,488 AutoNation, Inc.(1) 394,440 - -------------------------------------------------------------------------------- 7,299 Autozone Inc.(1) 653,479 - -------------------------------------------------------------------------------- 24,222 Bed Bath & Beyond Inc.(1) 924,796 - -------------------------------------------------------------------------------- 26,589 Best Buy Co., Inc.(1) 1,263,509 - -------------------------------------------------------------------------------- 9,507 Big Lots Inc.(1) 150,306 - -------------------------------------------------------------------------------- 17,012 Circuit City Stores-Circuit City Group 162,124 - -------------------------------------------------------------------------------- 32,530 CVS Corp. 1,010,382 - -------------------------------------------------------------------------------- 189,185 Home Depot, Inc. 6,025,542 - -------------------------------------------------------------------------------- 64,544 Lowe's Companies, Inc. 3,349,834 - -------------------------------------------------------------------------------- 25,264 Office Depot, Inc.(1) 354,959 - -------------------------------------------------------------------------------- 13,539 RadioShack Corp. 384,643 - -------------------------------------------------------------------------------- 40,155 Staples, Inc.(1) 953,681 - -------------------------------------------------------------------------------- 11,966 Tiffany & Co. 446,691 - -------------------------------------------------------------------------------- 17,386 Toys 'R' Us, Inc.(1) 209,154 - -------------------------------------------------------------------------------- 84,425 Walgreen Co. 2,586,782 - -------------------------------------------------------------------------------- 18,870,322 - -------------------------------------------------------------------------------- TELEPHONE - 2.7% - -------------------------------------------------------------------------------- 65,128 AT&T Corp. 1,403,508 - -------------------------------------------------------------------------------- 151,888 BellSouth Corp. 3,596,708 - -------------------------------------------------------------------------------- 11,989 CenturyTel Inc. 406,307 - -------------------------------------------------------------------------------- 23,172 Citizens Communications Company(1) 259,758 - -------------------------------------------------------------------------------- 138,271 Qwest Communications International Inc.(1) 470,121 - -------------------------------------------------------------------------------- 272,934 SBC Communications Inc. 6,072,782 - -------------------------------------------------------------------------------- 74,085 Sprint Corp. 1,118,684 - -------------------------------------------------------------------------------- 226,699 Verizon Communications 7,354,116 - -------------------------------------------------------------------------------- 20,681,984 - -------------------------------------------------------------------------------- THRIFTS - 0.5% - -------------------------------------------------------------------------------- 12,437 Golden West Financial Corp. 1,113,236 - -------------------------------------------------------------------------------- 75,970 Washington Mutual, Inc. 2,990,939 - -------------------------------------------------------------------------------- 4,104,175 - -------------------------------------------------------------------------------- TOBACCO - 1.0% - -------------------------------------------------------------------------------- 166,824 Altria Group Inc. 7,306,892 - -------------------------------------------------------------------------------- 6,971 R.J. Reynolds Tobacco Holdings, Inc. 275,633 - -------------------------------------------------------------------------------- 13,719 UST Inc. 482,634 - -------------------------------------------------------------------------------- 8,065,159 - -------------------------------------------------------------------------------- Shares/Principal Amount Value - -------------------------------------------------------------------------------- TRUCKING & SHIPPING & AIR FREIGHT - 1.0% - -------------------------------------------------------------------------------- 24,505 FedEx Corporation $1,578,857 - -------------------------------------------------------------------------------- 5,166 Ryder System, Inc. 151,467 - -------------------------------------------------------------------------------- 92,433 United Parcel Service, Inc. Cl B 5,897,226 - -------------------------------------------------------------------------------- 7,627,550 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATIONS - 0.7% - -------------------------------------------------------------------------------- 25,792 ALLTEL Corp. 1,195,201 - -------------------------------------------------------------------------------- 221,874 AT&T Wireless Services Inc.(1) 1,814,930 - -------------------------------------------------------------------------------- 85,048 Nextel Communications, Inc.(1) 1,674,595 - -------------------------------------------------------------------------------- 84,545 Sprint Corp. (PCS Group)(1) 484,444 - -------------------------------------------------------------------------------- 5,169,170 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $767,167,728) 756,812,290 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS - SEGREGATED FOR FUTURES* - 2.0% Repurchase Agreement, Morgan Stanley Group, Inc., (U.S. Treasury obligations), in a joint trading account at 0.91%, dated 9/30/03, due 10/1/03 (Delivery value $14,808,331) 14,807,957 - -------------------------------------------------------------------------------- $1,100,000 U.S. Treasury Bills, 0.92%, 12/26/03(2)(3) 1,097,643 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS - SEGREGATED FOR FUTURES (Cost $15,905,539) 15,905,600 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS - 0.2% Repurchase Agreement, Morgan Stanley Group, Inc., (U.S. Treasury obligations), in a joint trading account at 0.91%, dated 9/30/03, due 10/1/03 (Delivery value $1,792,088) (Cost $1,792,043) 1,792,043 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 100.0% (Cost $784,865,310) $774,509,933 ================================================================================ See Notes to Financial Statements. (continued) ----- 11 Equity Index - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- EQUITY FUTURES CONTRACTS* Underlying Face Purchased Expiration Date Amount at Value Unrealized Loss - -------------------------------------------------------------------------------- 64 S&P 500 Futures December 2003 $15,905,600 $(448,118) ===================================== *EQUITY FUTURES CONTRACTS typically are based on a stock index 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 has increased equity exposure while maintaining easy access to cash. - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (1) Non-income producing. (2) The rate indicated is the yield to maturity at purchase. (3) Security, or a portion thereof, has been segregated at the custodian bank or with the broker as initial margin or as collateral for futures contracts. See Notes to Financial Statements. - ----- 12 Statement of Assets and Liabilities SEPTEMBER 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------- Investment securities, at value (cost of $784,865,310) $774,509,933 - -------------------------------------------------------------------- Cash 5,446,264 - -------------------------------------------------------------------- Dividends and interest receivable 889,891 - -------------------------------------------------------------------------------- 780,846,088 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------- Payable for investments purchased 5,502,880 - -------------------------------------------------------------------- Payable for variation margin on futures contracts 191,590 - -------------------------------------------------------------------- Accrued management fees 207,557 - -------------------------------------------------------------------------------- 5,902,027 - -------------------------------------------------------------------------------- NET ASSETS $774,944,061 ================================================================================ NET ASSETS CONSIST OF: - -------------------------------------------------------------------- Capital (par value and paid-in surplus) $916,999,300 - -------------------------------------------------------------------- Undistributed net investment income 279,198 - -------------------------------------------------------------------- Accumulated net realized loss on investment transactions (131,530,942) - -------------------------------------------------------------------- Net unrealized depreciation on investments (10,803,495) - -------------------------------------------------------------------------------- $774,944,061 ================================================================================ INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $122,956,296 - -------------------------------------------------------------------- Shares outstanding 30,928,052 - -------------------------------------------------------------------- Net asset value per share $3.98 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $651,987,765 - -------------------------------------------------------------------- Shares outstanding 163,758,387 - -------------------------------------------------------------------- Net asset value per share $3.98 - -------------------------------------------------------------------------------- See Notes to Financial Statements. ----- 13 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: - -------------------------------------------------------------------- Dividends $ 5,310,595 - -------------------------------------------------------------------- Interest 148,022 - -------------------------------------------------------------------------------- 5,458,617 - -------------------------------------------------------------------------------- EXPENSES: - -------------------------------------------------------------------- Management fees 1,030,716 - -------------------------------------------------------------------- Directors' fees and expenses 4,989 - -------------------------------------------------------------------- Other expenses 2,016 - -------------------------------------------------------------------------------- 1,037,721 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 4,420,896 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------------------------- Net realized loss on investment transactions (23,224,480) - -------------------------------------------------------------------- Change in net unrealized depreciation on investments 103,332,691 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN 80,108,211 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $84,529,107 ================================================================================ See Notes to Financial Statements. - ----- 14 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) AND YEAR ENDED MARCH 31, 2003 - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2003 MARCH 31, 2003 - -------------------------------------------------------------------------------- OPERATIONS - ---------------------------------------- Net investment income $ 4,420,896 $ 6,112,381 - ---------------------------------------- Net realized loss (23,224,480) (72,582,191) - ---------------------------------------- Change in net unrealized depreciation 103,332,691 (68,749,000) - -------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 84,529,107 (135,218,810) - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - ---------------------------------------- From net investment income: - ---------------------------------------- Investor Class (667,793) (1,126,595) - ---------------------------------------- Institutional Class (3,529,437) (4,947,464) - -------------------------------------------------------------------------------- Decrease in net assets from distributions (4,197,230) (6,074,059) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Net increase in net assets from capital share transactions 253,704,576 23,849,350 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 334,036,453 (117,443,519) - -------------------------------------------------------------------------------- NET ASSETS Beginning of period 440,907,608 558,351,127 - -------------------------------------------------------------------------------- End of period $774,944,061 $440,907,608 ================================================================================ Undistributed net investment income $279,198 $55,532 ================================================================================ See Notes to Financial Statements. ----- 15 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. American Century Equity Index Fund (the fund) is one fund in a series issued by the corporation. The fund is non-diversified under the 1940 Act. The fund's investment objective is long-term capital growth. The fund seeks to achieve this objective by matching, as closely as possible, the investment characteristics and results of the Standard & Poor's 500 Composite Price Index. The following is a summary of the fund's significant accounting policies. MULTIPLE CLASS -- The fund is authorized to issue the Investor Class and the Institutional Class. The share classes 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 net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets. SECURITY VALUATIONS -- Securities traded primarily on a principal securities exchange are valued at the last reported sales price, or at the mean of the latest bid and asked prices where no last sales price is available. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official close price. Debt securities not traded on a principal securities exchange are valued through a commercial pricing service or at the mean of the most recent bid and asked prices. Discount notes are valued through a commercial pricing service. When valuations are not readily available, securities are valued at fair value as determined in accordance with procedures adopted by the Board of Directors. SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes. INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. FUTURES CONTRACTS -- The fund may enter into futures contracts in order to manage the fund's exposure to changes in market conditions. One of the risks of entering into futures contracts is the possibility that the change in value of the contract may not correlate with the changes in value of the underlying securities. Upon entering into a futures contract, the fund is 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 fund. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. The fund recognizes a realized gain or loss when the contract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of realized gain (loss) on investment transactions and unrealized appreciation (depreciation) on investments, respectively. 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 equal to or greater than amounts owed to the fund under each repurchase agreement. JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other registered investment companies having management agreements with ACIM, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations. INCOME TAX STATUS -- It is the fund's policy to distribute all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for federal or state income taxes. (continued) - ----- 16 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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, if any, are generally declared and paid annually. USE OF ESTIMATES -- The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee per class. The Agreement provides that all expenses of the fund, except brokerage commissions, taxes, interest, fees and expenses of those directors who are not considered "interested persons" as defined in the 1940 Act (including counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is computed daily and paid monthly in arrears based on each class's pro rata share of the fund's average daily closing net assets during the previous month. The annual management fee is 0.49% and 0.29% for the Investor and Institutional Classes, respectively. ACIM has entered into a Subadvisory Agreement with Barclays Global Fund Advisors (BGFA) on behalf of the fund. The subadvisor makes investment decisions for the fund in accordance with the fund's investment objectives, policies and restrictions under the supervision of ACIM and the Board of Directors. ACIM pays all costs associated with retaining BGFA as the subadvisor of the fund. RELATED PARTIES -- Certain officers and directors of the corporation are also officers and/or directors, and, as a group, controlling stockholders of American Century Companies, Inc. (ACC), the parent of the corporation's investment manager, ACIM, the distributor of the corporation, American Century Investment Services, Inc., and the corporation's transfer agent, American Century Services Corporation. During the six months ended September 30, 2003, the fund invested in a money market fund for temporary purposes, which was managed by J.P. Morgan Investment Management Inc. (JPMIM). JPMIM is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The fund has a bank line of credit agreement with JPM. 3. INVESTMENT TRANSACTIONS Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2003, were $398,214,994 and $118,153,233, respectively. (continued) ----- 17 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the fund were as follows: - -------------------------------------------------------------------------------- SHARES AMOUNT - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 100,000,000 ================================================================================ Sold 7,503,777 $28,987,771 - -------------------------------------------------- Issued in reinvestment of distributions 158,440 646,204 - -------------------------------------------------- Redeemed (3,347,671) (12,893,291) - -------------------------------------------------------------------------------- Net increase 4,314,546 $16,740,684 ================================================================================ YEAR ENDED MARCH 31, 2003 SHARES AUTHORIZED 100,000,000 ================================================================================ Sold 13,566,898 $49,261,581 - -------------------------------------------------- Issued in reinvestment of distributions 307,323 1,086,505 - -------------------------------------------------- Redeemed (11,011,245) (39,968,754) - -------------------------------------------------------------------------------- Net increase 2,862,976 $10,379,332 ================================================================================ INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 350,000,000 ================================================================================ Sold 81,534,605 $318,811,932 - -------------------------------------------------- Issued in reinvestment of distributions 864,167 3,529,437 - -------------------------------------------------- Redeemed (22,123,338) (85,377,477) - -------------------------------------------------------------------------------- Net increase 60,275,434 $236,963,892 ================================================================================ YEAR ENDED MARCH 31, 2003 SHARES AUTHORIZED 350,000,000 ================================================================================ Sold 47,643,172 $172,078,406 - -------------------------------------------------- Issued in reinvestment of distributions 1,369,205 4,840,187 - -------------------------------------------------- Redeemed (43,629,899) (163,448,575) - -------------------------------------------------------------------------------- Net increase 5,382,478 $13,470,018 ================================================================================ 5. BANK LINE OF CREDIT The fund, along with certain other funds managed by ACIM, has a $620,000,000 unsecured bank line of credit agreement with JPM. 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 September 30, 2003. (continued) - ----- 18 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 6. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts. As of September 30, 2003, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- Federal tax cost of investments $828,656,951 ================================================================================ Gross tax appreciation of investments $56,672,908 - -------------------------------------------------------------- Gross tax depreciation of investments (110,819,926) - -------------------------------------------------------------------------------- Net tax depreciation of investments $(54,147,018) ================================================================================ The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales and the realization for tax purposes of unrealized gain (loss) on certain futures contracts. At March 31, 2003, the fund had accumulated capital losses of $62,638,656, which represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers expire in 2009 through 2011. The fund had capital loss deferrals of $2,539,213, which represent net capital losses incurred in the five-month period ended March 31, 2003. The fund has elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. ----- 19 Equity Index - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------------------------------- INVESTOR CLASS - ------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000 1999(2) - ------------------------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $3.39 $4.58 $4.63 $5.99 $5.20 $5.00 - ------------------------------------------------------------------------------------------------------- Income From Investment Operations - -------------------------- Net Investment Income(3) 0.02 0.05 0.04 0.05 0.05 0.01 - ----------------------------------------- Net Realized and Unrealized Gain (Loss) 0.59 (1.19) (0.05) (1.36) 0.83 0.19 - ------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.61 (1.14) (0.01) (1.31) 0.88 0.20 - ------------------------------------------------------------------------------------------------------- Distributions - -------------------------- From Net Investment Income (0.02) (0.05) (0.04) (0.05) (0.05) -- - ----------------------------------------- From Net Realized Gains -- -- -- -- (0.04) -- - ------------------------------------------------------------------------------------------------------- Total Distributions (0.02) (0.05) (0.04) (0.05) (0.09) -- - ------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $3.98 $3.39 $4.58 $4.63 $5.99 $5.20 ======================================================================================================= TOTAL RETURN(4) 18.05% (25.02)% (0.16)% (22.04)% 17.17% 4.00% ======================================================================================================= RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.49%(5) 0.49% 0.49% 0.49% 0.49% 0.49%(5) - ----------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.23%(5) 1.24% 0.91% 0.83% 0.94% 1.13%(5) - ----------------------------------------- Portfolio Turnover Rate 19% 21% 4% 10% 13% 0% - ----------------------------------------- Net Assets, End of Period (in thousands) $122,956 $90,093 $108,760 $71,415 $68,905 $17,010 - -------------------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) February 26, 1999 (inception) through March 31, 1999. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. See Notes to Financial Statements. - ----- 20 Equity Index - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ----------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ----------------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000 1999(2) ================================================================================================================= PER-SHARE DATA Net Asset Value, Beginning of Period $3.39 $4.58 $4.64 $5.99 $5.20 $5.00 - ----------------------------------------------------------------------------------------------------------------- Income From Investment Operations - -------------------------- Net Investment Income(3) 0.03 0.05 0.05 0.06 0.06 0.01 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 0.59 (1.19) (0.06) (1.35) 0.84 0.19 - ----------------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.62 (1.14) (0.01) (1.29) 0.90 0.20 - ----------------------------------------------------------------------------------------------------------------- Distributions - -------------------------- From Net Investment Income (0.03) (0.05) (0.05) (0.06) (0.07) -- - ------------------------------------------ From Net Realized Gains -- -- -- -- (0.04) -- - ----------------------------------------------------------------------------------------------------------------- Total Distributions (0.03) (0.05) (0.05) (0.06) (0.11) -- - ----------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $3.98 $3.39 $4.58 $4.64 $5.99 $5.20 ================================================================================================================= TOTAL RETURN(4) 18.16% (24.87)% (0.17)% (21.72)% 17.43% 4.00% ================================================================================================================= RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.29%(5) 0.29% 0.29% 0.29% 0.29% 0.29%(5) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 1.43%(5) 1.44% 1.11% 1.03% 1.14% 1.33%(5) - ------------------------------------------ Portfolio Turnover Rate 19% 21% 4% 10% 13% 0% - ------------------------------------------ Net Assets, End of Period (in thousands) $651,988 $350,815 $449,591 $441,959 $398,560 $264,580 - ------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) February 26, 1999 (inception) through March 31, 1999. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. See Notes to Financial Statements. ----- 21 Share Class Information Two classes of shares are authorized for sale by Equity Index: Investor Class and Institutional Class. The total expense ratio of Institutional Class shares is lower than that of Investor Class shares. INVESTOR CLASS shares are available for purchase in two ways: 1) directly from American Century without any commissions or other fees; or 2) through a broker-dealer, which may require payment of a transaction fee to the broker. INSTITUTIONAL CLASS shares are available to large investors such as endowments, foundations, and retirement plans, and to financial intermediaries serving these investors. This class recognizes the relatively lower cost of serving institutional customers and others who invest at least $5 million ($3 million for endowments and foundations) in an American Century fund or at least $10 million in multiple funds. In recognition of the larger investments and account balances and comparatively lower transaction costs, the total expense ratio of Institutional Class shares is 0.20% less than the total expense ratio of Investor Class shares. All classes of shares represent a pro rata interest in the fund and generally have the same rights and preferences. - ----- 22 Additional Information RETIREMENT ACCOUNT INFORMATION As required by law, any distributions you receive from an IRA or certain 403(b) and qualified plans [those not eligible for rollover to an IRA or to another qualified plan] are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld. If you don't want us to withhold on this amount, you must notify us to not withhold the federal income tax. Even if you plan to roll over the amount you withdraw to another tax-deferred account, the withholding rate still applies to the withdrawn amount unless we have received notice not to withhold federal income tax prior to the withdrawal. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election. Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don't have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules. PROXY VOTING GUIDELINES American Century Investment Management, Inc., the fund's manager, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the manager uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century's Web site at www.americancentury.com and on the Securities and Exchange Commission's Web site at www.sec.gov. ----- 23 Index Definition The following index is used to illustrate investment market, sector, or style performance or to serve as fund performance comparisons. They are not investment products available for purchase. The S&P 500 INDEX is a market-value weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. - ----- 24 [inside back cover - blank page] [back cover] CONTACT US WWW.AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR RELATIONS: 1-800-345-2021 or 816-531-5575 BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS: 1-800-345-3533 BANKS AND TRUST COMPANIES, BROKER-DEALERS, FINANCIAL ADVISORS, INSURANCE COMPANIES: 1-800-345-6488 TELECOMMUNICATIONS DEVICE FOR THE DEAF: 1-800-634-4113 or 816-444-3485 AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. INVESTMENT MANAGER: American Century Investment Management, Inc. Kansas City, Missouri THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. 0311 American Century Investment Services, Inc. SH-SAN-36277N (c)2003 American Century Services Corporation
[front cover] September 30, 2003 American Century Semiannual Report [graphic of market line chart] [graphic of starfish] [graphic of side-by-side bridges] Real Estate [american century logo and text logo (reg.sm) ] Table of Contents Our Message to You........................................................ 1 REAL ESTATE Performance............................................................... 2 Portfolio Commentary...................................................... 3 Top Ten Holdings....................................................... 3 Yields................................................................. 3 Fund Allocation........................................................ 4 Types of Investments in Portfolio...................................... 4 Schedule of Investments................................................... 5 FINANCIAL STATEMENTS Statement of Assets and Liabilities....................................... 6 Statement of Operations................................................... 7 Statement of Changes in Net Assets........................................ 8 Notes to Financial Statements............................................. 9 Financial Highlights...................................................... 13 OTHER INFORMATION Share Class Information................................................... 16 Additional Information.................................................... 17 Index Definitions......................................................... 18 The opinions expressed in the Portfolio Commentary reflect those of the portfolio management team as of the date of the report, and do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] James E. Stowers III with James E. Stowers, Jr. We are pleased to provide you with the semiannual report for the American Century Real Estate fund for the six months ended September 30, 2003. The report includes comparative performance figures, commentary, summary tables, a full list of portfolio holdings and financial statements and highlights. We hope you find this information helpful in monitoring your investment. Many of you have called or written to express your concern about allegations of wrongdoing by other mutual fund investment management firms. We share your concern--fund companies must put investors first and do everything possible to maintain investor trust. Through the Investment Company Institute, the mutual fund trade association, American Century has advocated industry-wide proposals that strengthen protections for fund investors. We believe that decisive action is needed to show that we are committed, as an industry, to the interests of the 95 million investors we serve. As information about alleged trading abuses in the mutual fund industry has come to light, we have posted messages and commentary about these issues on www.americancentury.com. Beyond what's currently in the headlines, American Century has been a champion of many important investor and industry issues, which are outlined in a document titled Putting Investors First. We invite you to visit our Web site and read about how our values have influenced these positions. As always, we deeply appreciate your investment with American Century. Sincerely, /s/James E. Stowers, Jr. James E. Stowers, Jr. Founder and Chairman /s/James E. Stowers III James E. Stowers III Co-Chairman of the Board ----- 1 Real Estate - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2003 ---------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 28.35% 13.04% 13.71% 9/21/1995(1) - -------------------------------------------------------------------------------- MSCI REIT INDEX 25.11% 11.59% 11.97%(2) -- - -------------------------------------------------------------------------------- Institutional Class 28.64% 13.30% 9.89% 6/16/1997 - -------------------------------------------------------------------------------- Advisor Class 28.04% N/A 14.37% 10/6/1998 - -------------------------------------------------------------------------------- (1) The inception date for RREEF Real Estate Securities Fund, Real Estate's predecessor. That fund merged with Real Estate on 6/13/97 and was first offered to the public on 6/16/97. (2) Since 9/30/95, the date nearest the Investor Class's inception for which data are available.
GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made September 21, 1995
![](https://capedge.com/proxy/N-CSRS/0000908186-03-000019/growthrealestate0311.gif)
ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - ---------------------------------------------------------------------------------------- 1996* 1997 1998 1999 2000 2001 2002 2003 - ---------------------------------------------------------------------------------------- Investor Class 23.28% 49.58% -17.62% -2.94% 21.61% 10.96% 9.78% 28.35% - ---------------------------------------------------------------------------------------- MSCI REIT Index 18.27% 40.88% -14.26% -5.88% 21.25% 11.62% 8.56% 25.11% - ---------------------------------------------------------------------------------------- * From 9/21/95, the Investor Class's inception date. Index data from 9/30/95, the date nearest the Investor Class's inception for which data are available. Not annualized. The charts on the performance page give historical return data for the fund. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. Unless otherwise indicated, the charts are based on Investor Class shares; performance for other classes will vary due to differences in fee structures. Past performance does not guarantee future results. None of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. - ----- 2 Real Estate - Portfolio Commentary [photo of Scott Blasdell} A portfolio commentary from Scott Blasdell, portfolio manager on the Real Estate investment team. PERFORMANCE SUMMARY For the six months ended September 30, 2003, the Real Estate fund posted a total return of 24.17%*, outperforming the 23.56% return of its benchmark, the Morgan Stanley Capital International REIT (MSCI REIT) Index. The fund also outpaced the 18.45% return of the S&P 500, a broad stock market measure. (See page 2 for additional performance details.) MARKET REVIEW U.S. stocks rallied sharply during the six-month period, rebounding after three years of steady declines. Positive factors included improving economic conditions and positive earnings reports from many public companies. In addition, the federal government approved a fiscal stimulus package that included a tax cut on stock dividends. YIELDS AS OF SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- ANNUALIZED 30-DAY DISTRIBUTION SEC YIELD RATE (ADR) - -------------------------------------------------------------------------------- Investor Class 4.43% 2.74% - -------------------------------------------------------------------------------- Institutional Class 4.63% 2.94% - -------------------------------------------------------------------------------- Advisor Class 4.18% 2.50% - -------------------------------------------------------------------------------- For the six months, many of the major stock indices recorded significant gains. Real estate investment trusts (REITs) outperformed the overall stock market during the period. With interest rates still near historically low levels, REITs' relatively high dividend yields and greater stability attracted investors to the sector. REITs also reported better earnings results. All segments of the REIT market posted double-digit gains during the period, but hotel REITs were the top performers, benefiting from a nascent recovery in the travel industry. PORTFOLIO OVERVIEW The key to the Real Estate fund's outperformance of the MSCI REIT Index was an overweight in hotel companies. TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 9/30/03 3/31/03 - -------------------------------------------------------------------------------- Equity Office Properties Trust 8.7% 10.0% - -------------------------------------------------------------------------------- Prologis(1) 6.5% 6.7% - -------------------------------------------------------------------------------- Duke Realty Corporation 5.6% 6.4% - -------------------------------------------------------------------------------- Equity Residential 4.4% 1.7% - -------------------------------------------------------------------------------- Rouse Company 4.3% 6.0% - -------------------------------------------------------------------------------- Hospitality Properties Trust 4.0% - - -------------------------------------------------------------------------------- CarrAmerica Realty Corp. 4.0% 4.7% - -------------------------------------------------------------------------------- General Growth Properties, Inc. 3.9% 2.7% - -------------------------------------------------------------------------------- Sun Communities, Inc. 3.8% 3.7% - -------------------------------------------------------------------------------- Highwoods Properties, Inc. 3.6% 4.4% - -------------------------------------------------------------------------------- (1) Formerly Prologis Trust. *All fund returns referenced in this commentary are for Investor Class shares. (continued) ----- 3 Real Estate - Portfolio Commentary We increased our holdings of hotels from 5% to nearly 12% of the portfolio during the past six months, compared with a 4% weighting in the index. Non-index hotel holdings such as La Quinta (+104% for the six-month period) and Hilton Group plc (+40%) were among the top contributors to fund performance. The portfolio's retail holdings also performed well and contributed the most to overall performance. A resurgence in consumer spending, driven in part by the recent federal tax cuts, helped boost this segment of the REIT sector. We reduced the portfolio's retail holdings during the past six months, taking profits after several years of strong returns. In addition, we shifted away from grocery-anchored shopping centers, which were significantly overvalued in our view, and focused on regional malls, which tend to be more sensitive to consumer spending activity. The fund's larger retail holdings performed the best, including top-ten holdings General Growth Properties (+36%) and Rouse (+23%). The office and apartment segments lagged the rest of the REIT sector. Demand for office space waned as job growth stalled, while apartment vacancies rose as low interest rates encouraged home-buying instead of renting. We are not enthusiastic about either of these segments, but we have maintained a modest overweight in office REITs because of their relatively high dividend yields. Among the best contributors to fund performance included office holdings CarrAmerica Realty (+22%) and Highwoods Properties (+21%). FUND ALLOCATION AS OF SEPTEMBER 30, 2003 - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 9/30/03 3/31/03 - -------------------------------------------------------------------------------- Office Management 25.2% 32.9% - -------------------------------------------------------------------------------- Regional Malls 18.1% 17.0% - -------------------------------------------------------------------------------- Multi-Family Residential 13.4% 11.2% - -------------------------------------------------------------------------------- Hotels & Leisure 11.8% 5.3% - -------------------------------------------------------------------------------- Diversified Companies 10.8% 4.6% - -------------------------------------------------------------------------------- Industrial 6.5% 7.3% - -------------------------------------------------------------------------------- Neighborhood & Community Shopping Centers 5.3% 8.6% - -------------------------------------------------------------------------------- Property Management 4.4% - - -------------------------------------------------------------------------------- Other(1) 4.5% 13.1% - -------------------------------------------------------------------------------- (1) Includes Temporary Cash Investments. TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- AS OF AS OF 9/30/03 3/31/03 - -------------------------------------------------------------------------------- Common Stocks 96.9% 91.8% - -------------------------------------------------------------------------------- Preferred Stocks - 1.9% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 96.9% 93.7% - -------------------------------------------------------------------------------- Temporary Cash Investments 3.1% 6.3% - -------------------------------------------------------------------------------- REITs are currently trading at a 15% premium to their underlying property values, more than three times the average premium over the past 10 years. Many REITs are taking advantage of these high prices to issue equity and expand their property portfolios. In this environment, we are focusing on REITs that stand to benefit the most from an economic recovery. - ----- 4 Real Estate - Schedule of Investments SEPTEMBER 30, 2003 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS - 96.9% DIVERSIFIED COMPANIES - 10.8% - -------------------------------------------------------------------------------- 217,317 Capital Automotive REIT $ 6,630,342 - -------------------------------------------------------------------------------- 551,524 Duke Realty Corporation 16,104,501 - -------------------------------------------------------------------------------- 122,600 Lexington Corporate Properties Trust 2,349,016 - -------------------------------------------------------------------------------- 124,900 Vornado Realty Trust 6,000,196 - -------------------------------------------------------------------------------- 31,084,055 - -------------------------------------------------------------------------------- HEALTH CARE - 0.9% - -------------------------------------------------------------------------------- 100,300 Universal Health Realty Income Trust 2,723,145 - -------------------------------------------------------------------------------- HOTELS & LEISURE - 11.8% - -------------------------------------------------------------------------------- 685,500 Equity Inns Inc. 5,161,815 - -------------------------------------------------------------------------------- 1,287,100 Hilton Group plc ORD 3,845,140 - -------------------------------------------------------------------------------- 327,100 Hospitality Properties Trust 11,474,668 - -------------------------------------------------------------------------------- 240,500 Host Marriott Corp.(1) 2,580,565 - -------------------------------------------------------------------------------- 345,700 Innkeepers USA Trust 3,007,590 - -------------------------------------------------------------------------------- 156,400 InterContinental Hotels Group plc ORD 1,247,697 - -------------------------------------------------------------------------------- 407,800 La Quinta Corp.(1) 2,540,594 - -------------------------------------------------------------------------------- 65,155 Orient Express Hotels(1) 1,016,418 - -------------------------------------------------------------------------------- 339,800 Winston Hotels Inc. 3,092,180 - -------------------------------------------------------------------------------- 33,966,667 - -------------------------------------------------------------------------------- INDUSTRIAL - 6.5% - -------------------------------------------------------------------------------- 617,110 Prologis 18,667,578 - -------------------------------------------------------------------------------- MEDICAL PROVIDERS & SERVICES - 0.5% - -------------------------------------------------------------------------------- 50,000 Sunrise Senior Living, Inc.(1) 1,311,500 - -------------------------------------------------------------------------------- MULTI-FAMILY RESIDENTIAL - 13.4% - -------------------------------------------------------------------------------- 390,017 Archstone-Smith Trust 10,288,648 - -------------------------------------------------------------------------------- 431,400 Equity Residential 12,631,392 - -------------------------------------------------------------------------------- 92,900 Manufactured Home Communities, Inc. 3,639,822 - -------------------------------------------------------------------------------- 114,800 Mid-America Apartment Communities Inc. 3,464,664 - -------------------------------------------------------------------------------- 313,500 Post Properties Inc. 8,536,605 - -------------------------------------------------------------------------------- 38,561,131 - -------------------------------------------------------------------------------- NEIGHBORHOOD & COMMUNITY SHOPPING CENTERS - 5.3% - -------------------------------------------------------------------------------- 190,800 Federal Realty Investors Trust 7,032,888 - -------------------------------------------------------------------------------- 147,912 Regency Centers Corp. 5,450,557 - -------------------------------------------------------------------------------- 203,925 Urstadt Biddle Properties Inc. 2,752,988 - -------------------------------------------------------------------------------- 15,236,433 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- OFFICE MANAGEMENT - 25.2% - -------------------------------------------------------------------------------- 80,420 Alexandria Real Estate Equities Inc. $ 3,862,573 - -------------------------------------------------------------------------------- 383,600 CarrAmerica Realty Corp. 11,450,460 - ------------------------------------------------------------------------------- 422,400 Crescent Real Estate Equities Co. 6,124,800 - ------------------------------------------------------------------------------- 908,748 Equity Office Properties Trust 25,017,831 - ------------------------------------------------------------------------------- 434,186 Highwoods Properties, Inc. 10,359,678 - ------------------------------------------------------------------------------- 170,900 Mack-Cali Realty Corp. 6,699,280 - ------------------------------------------------------------------------------- 276,700 Maguire Properties, Inc. 5,672,350 - ------------------------------------------------------------------------------- 237,400 Trizec Properties Inc. 2,910,524 - ------------------------------------------------------------------------------- 72,097,496 - ------------------------------------------------------------------------------- PROPERTY MANAGEMENT - 4.4% - ------------------------------------------------------------------------------- 93,200 Jones Lang LaSalle Inc.(1) 1,724,200 - ------------------------------------------------------------------------------- 278,985 Sun Communities, Inc. 10,992,009 - ------------------------------------------------------------------------------- 12,716,209 - ------------------------------------------------------------------------------- REGIONAL MALLS - 18.1% - ------------------------------------------------------------------------------- 12,600 Crown American Realty Trust 149,940 - ------------------------------------------------------------------------------- 157,700 General Growth Properties, Inc. 11,307,090 - ------------------------------------------------------------------------------- 120,831 Macerich Company (The) 4,561,370 - ------------------------------------------------------------------------------- 138,707 Mills Corp. 5,458,120 - ------------------------------------------------------------------------------- 196,878 Pennsylvania Real Estate Investment Trust 6,585,569 - ------------------------------------------------------------------------------- 294,200 Rouse Company 12,268,141 - ------------------------------------------------------------------------------- 234,900 Simon Property Group, Inc. 10,236,942 - ------------------------------------------------------------------------------- 66,100 Taubman Centers Inc. 1,295,560 - ------------------------------------------------------------------------------- 51,862,732 - ------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $242,329,368) 278,226,946 - ------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS - 3.1% Repurchase Agreement, Goldman Sachs amp; Co., (U.S. Treasury obligations), in a joint trading account at 0.90%, dated 9/30/03, due 10/1/03 (Delivery value $8,900,223) (Cost $8,900,000) 8,900,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 100.0% (Cost $251,229,368) $287,126,946 ================================================================================ NOTES TO SCHEDULE OF INVESTMENTS ORD = Foreign Ordinary Share REIT = Real Estate Investment Trust (1)Non-income producing. See Notes to Financial Statements. ----- 5 Statement of Assets and Liabilities SEPTEMBER 30, 2003 (UNAUDITED) ASSETS Investment securities, at value (cost of $251,229,368) $287,126,946 - -------------------------------------------------------- Cash 1,666,670 - -------------------------------------------------------- Receivable for investments sold 16,098,434 - -------------------------------------------------------- Receivable for capital shares sold 814,673 - -------------------------------------------------------- Dividends and interest receivable 1,290,971 - -------------------------------------------------------------------------- 306,997,694 - -------------------------------------------------------------------------- LIABILITIES Payable for investments purchased 11,780,002 - -------------------------------------------------------- Accrued management fees 258,606 - -------------------------------------------------------- Distribution fees payable 7,973 - -------------------------------------------------------- Service fees payable 7,973 - -------------------------------------------------------------------------- 12,054,554 - -------------------------------------------------------------------------- NET ASSETS $294,943,140 ========================================================================== NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $259,756,842 - -------------------------------------------------------- Undistributed net investment income 2,229,030 - -------------------------------------------------------- Accumulated net realized loss on investment transactions (2,944,265) - -------------------------------------------------------- Net unrealized appreciation on investments 35,901,533 - -------------------------------------------------------------------------- $294,943,140 ========================================================================== INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------- Net assets $214,700,039 - -------------------------------------------------------- Shares outstanding 11,076,596 - -------------------------------------------------------- Net asset value per share $19.38 - -------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------- Net assets $39,465,234 - -------------------------------------------------------- Shares outstanding 2,034,092 - -------------------------------------------------------- Net asset value per share $19.40 - -------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------- Net assets $40,777,867 - -------------------------------------------------------- Shares outstanding 2,103,623 - -------------------------------------------------------- Net asset value per share $19.38 - -------------------------------------------------------------------------- See Notes to Financial Statements. - ----- 6 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) INVESTMENT INCOME INCOME: - -------------------------------------------------------- Dividends (net of foreign taxes withheld of $15,933) $ 6,366,103 - -------------------------------------------------------- Interest 51,920 - -------------------------------------------------------------------------- 6,418,023 - -------------------------------------------------------------------------- EXPENSES: - -------------------------------------------------------- Management fees 1,307,293 - -------------------------------------------------------- Distribution fees - Advisor Class 35,191 - -------------------------------------------------------- Service fees - Advisor Class 35,191 - -------------------------------------------------------- Directors' fees and expenses 2,242 - -------------------------------------------------------- Other expenses 850 - -------------------------------------------------------------------------- 1,380,767 - -------------------------------------------------------------------------- NET INVESTMENT INCOME 5,037,256 - -------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN Net realized gain on investment transactions 18,950,675 - -------------------------------------------------------- Change in net unrealized appreciation on investments 24,841,665 - -------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN 43,792,340 - -------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $48,829,596 ========================================================================== See Notes to Financial Statements. ----- 7 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED) AND YEAR ENDED MARCH 31, 2003 - ------------------------------------------------------------------------------ INCREASE IN NET ASSETS SEPT. 30, 2003 MARCH 31, 2003 OPERATIONS Net investment income $ 5,037,256 $ 9,022,262 - -------------------------------------- Net realized gain (loss) 18,950,675 (2,190,580) - -------------------------------------- Change in net unrealized appreciation 24,841,665 (7,311,149) - ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 48,829,596 (479,467) - ------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income: - -------------------------------------- Investor Class (2,644,080) (4,460,713) - -------------------------------------- Institutional Class (505,406) (742,377) - -------------------------------------- Advisor Class (409,843) (664,754) - ------------------------------------------------------------------------------ Decrease in net assets from distributions (3,559,329) (5,867,844) - ------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Net increase in net assets from capital share transactions 72,125,708 43,231,919 - ------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS 117,395,975 36,884,608 NET ASSETS Beginning of period 177,547,165 140,662,557 - ------------------------------------------------------------------------------ End of period $294,943,140 $177,547,165 ============================================================================== Undistributed net investment income $2,229,030 $751,103 ============================================================================== See Notes to Financial Statements. - ----- 8 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Real Estate Fund (the fund) is one fund in a series issued by the corporation. The fund is non-diversified under the 1940 Act. The fund's investment objective is long-term capital appreciation with income as a secondary objective. The fund seeks to achieve its objective by investing primarily in securities issued by real estate investment trusts and in the securities of companies which are principally engaged in the real estate industry. There are certain additional risks involved with investing in the fund, as compared to investing in a more diversified portfolio of investments. The fund may be subject to certain risks similar to those associated with direct investment in real estate including but not limited to: local or regional economic conditions, changes in zoning laws, changes in property values, property tax increases, overbuilding, increased competition, environmental contamination, natural disasters, and interest rate risk. The following is a summary of the fund's significant accounting policies. MULTIPLE CLASS -- The fund is authorized to issue the Investor Class, the Institutional Class and the Advisor Class. The share classes 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 net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets. SECURITY VALUATIONS -- Securities traded primarily on a principal securities exchange are valued at the last reported sales price, or at the mean of the latest bid and asked prices where no last sales price is available. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official close price. Debt securities not traded on a principal securities exchange are valued through a commercial pricing service or at the mean of the most recent bid and asked prices. Discount notes are valued through a commercial pricing service. When valuations are not readily available, securities are valued at fair value as determined in accordance with procedures adopted by the Board of Directors. SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes. INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. 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 equal to or greater than amounts owed to the fund under each repurchase agreement. JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other registered investment companies having management agreements with ACIM, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations. INCOME TAX STATUS -- It is the fund's policy to distribute all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for federal or state income taxes. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on the ex-dividend date. Distributions from net investment income are declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually. USE OF ESTIMATES -- The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. (continued) ----- 9 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee per class. The Agreement provides that all expenses of the fund, except brokerage commissions, taxes, interest, fees and expenses of those directors who are not considered "interested persons" as defined in the 1940 Act (including counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is computed daily and paid monthly in arrears based on each class's pro rata share of the fund's average daily closing net assets during the previous month. The effective annual management fee for the six months ended September 30, 2003 was 1.17%, 0.97%, and 0.92% for the Investor, Institutional and Advisor Classes, respectively. The annual management fee schedule for each class of the fund is as follows: INVESTOR INSTITUTIONAL ADVISOR CLASS CLASS CLASS - -------------------------------------------------------------------------------- FUND AVERAGE NET ASSETS - -------------------------------------------------------------------------------- First $100,000,000 1.20% 1.00% 0.95% - -------------------------------------------------------------------------------- Over $100,000,000 1.15% 0.95% 0.90% - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master Distribution and Shareholder Services Plan (the plan) for the Advisor Class, pursuant to Rule 12b-1 of the 1940 Act. The plan provides that the Advisor Class will pay American Century Investment Services, Inc. (ACIS) an annual distribution fee equal to 0.25% and an annual service fee equal to 0.25%. The fees are computed daily and paid monthly in arrears based on the Advisor Class's average daily closing net assets during the previous month. The distribution fee provides compensation for 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 ACIS, its affiliates or independent third party providers. Fees incurred under the plan during the six months ended September 30, 2003, are detailed in the Statement of Operations. RELATED PARTIES -- Certain officers and directors of the corporation are also officers and/or directors, and, as a group, controlling stockholders of American Century Companies, Inc. (ACC), the parent of the corporation's investment manager, ACIM, the distributor of the corporation, ACIS, and the corporation's transfer agent, American Century Services Corporation. ACIM has entered into a Subadvisory Agreement with J.P. Morgan Investment Management, Inc. (JPMIM) on behalf of the fund. The subadvisor makes investment decisions for the fund in accordance with the fund's investment objectives, policies, and restrictions under the supervision of ACIM and the Board of Directors. ACIM pays all costs associated with retaining JPMIM as the subadvisor of the fund. JPMIM is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. During the six months ended September 30, 2003, the fund invested in a money market fund for temporary purposes, which was managed by JPMIM. The fund has a bank line of credit agreement with JPM. 3. INVESTMENT TRANSACTIONS Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2003, were $267,790,029 and $200,850,003, respectively. (continued) - ----- 10 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the fund were as follows: SHARES AMOUNT - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 30,000,000 ================================================================================ Sold 6,149,446 $110,841,382 - -------------------------------------------- Issued in reinvestment of distributions 132,703 2,427,474 - -------------------------------------------- Redeemed (3,725,939) (67,406,865) - -------------------------------------------------------------------------------- Net increase 2,556,210 $ 45,861,991 ================================================================================ YEAR ENDED MARCH 31, 2003 SHARES AUTHORIZED 50,000,000 ================================================================================ Sold 9,678,331 $152,863,476 - -------------------------------------------- Issued in reinvestment of distributions 252,353 4,004,445 - -------------------------------------------- Redeemed (8,045,925) (124,728,214) - -------------------------------------------------------------------------------- Net increase 1,884,759 $ 32,139,707 ================================================================================ INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 12,500,000 ================================================================================ Sold 954,801 $17,184,896 - -------------------------------------------- Issued in reinvestment of distributions 27,347 501,074 - -------------------------------------------- Redeemed (422,850) (7,554,700) - -------------------------------------------------------------------------------- Net increase 559,298 $10,131,270 ================================================================================ YEAR ENDED MARCH 31, 2003 SHARES AUTHORIZED 12,500,000 ================================================================================ Sold 1,266,104 $20,174,333 - -------------------------------------------- Issued in reinvestment of distributions 46,698 741,060 - -------------------------------------------- Redeemed (842,689) (13,144,349) - -------------------------------------------------------------------------------- Net increase 470,113 $ 7,771,044 ================================================================================ ADVISOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2003 SHARES AUTHORIZED 12,500,000 ================================================================================ Sold 1,307,021 $23,914,062 - -------------------------------------------- Issued in reinvestment of distributions 22,100 406,271 - -------------------------------------------- Redeemed (443,058) (8,187,886) - -------------------------------------------------------------------------------- Net increase 886,063 $16,132,447 ================================================================================ YEAR ENDED MARCH 31, 2003 SHARES AUTHORIZED 12,500,000 ================================================================================ Sold 1,096,108 $17,202,424 - -------------------------------------------- Issued in reinvestment of distributions 41,308 654,892 - -------------------------------------------- Redeemed (953,205) (14,536,148) - -------------------------------------------------------------------------------- Net increase 184,211 $ 3,321,168 ================================================================================ (continued) ----- 11 Notes to Financial Statements SEPTEMBER 30, 2003 (UNAUDITED) 5. BANK LINE OF CREDIT The fund, along with certain other funds managed by ACIM, has a $620,000,000 unsecured bank line of credit agreement with JPM. 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 September 30, 2003. 6. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts. As of September 30, 2003, the components of investments for federal income tax purposes were as follows: Federal tax cost of investments $252,705,322 ================================================================================ Gross tax appreciation of investments $35,550,228 - ---------------------------------------------------------------- Gross tax depreciation of investments (1,128,604) - -------------------------------------------------------------------------------- Net tax appreciation of investments $34,421,624 ================================================================================ The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales and return of capital dividends received from Real Estate Investment Trust securities. As of March 31, 2003, the fund had accumulated capital losses of $19,321,016, which represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers expire in 2007 through 2009. The fund incurred net capital losses incurred in the five-month period ended March 31, 2003, of $1,097,970. The fund has elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. Real Estate - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ---------------------------------------------------------------------------------------------------------- INVESTOR CLASS - ---------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000 1999 PER-SHARE DATA Net Asset Value, Beginning of Period $15.83 $16.22 $14.00 $11.74 $12.10 $16.12 - --------------------------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------- Net Investment Income(2) 0.39 0.85 0.78 0.71 0.74 0.73 - ---------------------------------- Net Realized and Unrealized Gain (Loss) 3.42 (0.70) 2.00 2.14 (0.41) (4.09) - --------------------------------------------------------------------------------------------------------- Total From Investment Operations 3.81 0.15 2.78 2.85 0.33 (3.36) - --------------------------------------------------------------------------------------------------------- Distributions - ---------------------------------- From Net Investment Income (0.26) (0.54) (0.56) (0.59) (0.69) (0.54) - ---------------------------------- From Net Realized Gains - - - - - (0.12) - --------------------------------------------------------------------------------------------------------- Total Distributions (0.26) (0.54) (0.56) (0.59) (0.69) (0.66) - --------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $19.38 $15.83 $16.22 $14.00 $11.74 $12.10 ========================================================================================================= TOTAL RETURN(3) 24.17% 0.93% 20.23% 24.57% 2.87% (21.04)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.17%(4) 1.18% 1.20% 1.19% 1.20% 1.20% - ---------------------------------- Ratio of Net Investment Income to Average Net Assets 4.30%(4) 5.41% 5.18% 5.32% 5.95% 5.41% - ---------------------------------- Portfolio Turnover Rate 90% 162% 156% 242% 102% 66% - ---------------------------------- Net Assets, End of Period (in thousands) $214,700 $134,898 $107,599 $74,776 $73,812 $110,285 - ---------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. ----- 13 Real Estate - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ---------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ---------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000 1999 PER-SHARE DATA Net Asset Value, Beginning of Period $15.85 $16.23 $14.01 $11.75 $12.11 $16.12 - ---------------------------------------------------------------------------------------------------------- Income From Investment Operations - --------------------------------- Net Investment Income(2) 0.40 0.89 0.80 0.73 0.75 0.78 - --------------------------------- Net Realized and Unrealized Gain (Loss) 3.43 (0.70) 2.01 2.15 (0.38) (4.09) - ---------------------------------------------------------------------------------------------------------- Total From Investment Operations 3.83 0.19 2.81 2.88 0.37 (3.31) - ---------------------------------------------------------------------------------------------------------- Distributions - --------------------------------- From Net Investment Income (0.28) (0.57) (0.59) (0.62) (0.73) (0.58) - --------------------------------- From Net Realized Gains - - - - - (0.12) - ---------------------------------------------------------------------------------------------------------- Total Distributions (0.28) (0.57) (0.59) (0.62) (0.73) (0.70) - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $19.40 $15.85 $16.23 $14.01 $11.75 $12.11 ========================================================================================================== TOTAL RETURN(3) 24.26% 1.19% 20.45% 24.80% 3.18% (20.77)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.97%(4) 0.98% 1.00% 0.99% 1.00% 1.00% - --------------------------------- Ratio of Net Investment Income to Average Net Assets 4.50%(4) 5.61% 5.38% 5.52% 6.15% 5.61% - --------------------------------- Portfolio Turnover Rate 90% 162% 156% 242% 102% 66% - --------------------------------- Net Assets, End of Period (in thousands) $39,465 $23,371 $16,305 $12,390 $15,457 $26,315 - ---------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ----- 14 Real Estate - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ---------------------------------------------------------------------------------------------------------- ADVISOR CLASS - ---------------------------------------------------------------------------------------------------------- 2003(1) 2003 2002 2001 2000 1999(2) PER-SHARE DATA Net Asset Value, Beginning of Period $15.83 $16.22 $14.00 $11.74 $12.10 $12.22 - ---------------------------------------------------------------------------------------------------------- Income From Investment Operations - --------------------------------- Net Investment Income(3) 0.37 0.81 0.74 0.68 0.75 0.43 - --------------------------------- Net Realized and Unrealized Gain (Loss) 3.42 (0.70) 2.00 2.14 (0.45) (0.15) - ---------------------------------------------------------------------------------------------------------- Total From Investment Operations 3.79 0.11 2.74 2.82 0.30 0.28 - ---------------------------------------------------------------------------------------------------------- Distributions - --------------------------------- From Net Investment Income (0.24) (0.50) (0.52) (0.56) (0.66) (0.28) - --------------------------------- From Net Realized Gains - - - - - (0.12) - ---------------------------------------------------------------------------------------------------------- Total Distributions (0.24) (0.50) (0.52) (0.56) (0.66) (0.40) - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $19.38 $15.83 $16.22 $14.00 $11.74 $12.10 ========================================================================================================== TOTAL RETURN(4) 24.01% 0.69% 19.93% 24.28% 2.62% 2.25% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.42%(5) 1.43% 1.45% 1.44% 1.45% 1.45%(5) - --------------------------------- Ratio of Net Investment Income to Average Net Assets 4.05%(5) 5.16% 4.93% 5.07% 5.70% 5.16%(5) - --------------------------------- Portfolio Turnover Rate 90% 162% 156% 242% 102% 66%(6) - --------------------------------- Net Assets, End of Period (in thousands) $40,778 $19,278 $16,759 $9,046 $5,353 $449 - ---------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2003 (unaudited). (2) October 6, 1998 (commencement of sale) through March 31, 1999. (3) Computed using averages shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 1999. See Notes to Financial Statements. ----- 15 Share Class Information Three classes of shares are authorized for sale by Real Estate: Investor Class, Institutional Class, and Advisor Class. The total expense ratio of Advisor Class shares is higher than that of Investor Class; the total expense ratio of Institutional Class shares is lower. INVESTOR CLASS shares are available for purchase in two ways: 1) directly from American Century without any commissions or other fees; or 2) through a broker-dealer, which may require payment of a transaction fee to the broker. INSTITUTIONAL CLASS shares are available to large investors such as endowments, foundations, and retirement plans, and to financial intermediaries serving these investors. This class recognizes the relatively lower cost of serving institutional customers and others who invest at least $5 million ($3 million for endowments and foundations) in an American Century fund or at least $10 million in multiple funds. In recognition of the larger investments and account balances and comparatively lower transaction costs, the total expense ratio of Institutional Class shares is 0.20% less than the total expense ratio of Investor Class shares. ADVISOR CLASS shares are sold primarily through institutions such as investment advisors, banks, broker-dealers, insurance companies, and financial advisors. Advisor Class shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee. The total expense ratio of Advisor Class shares is 0.25% higher than the total expense ratio of Investor Class shares. All classes of shares represent a pro rata interest in the fund and generally have the same rights and preferences. - ----- 16 Additional Information RETIREMENT ACCOUNT INFORMATION As required by law, any distributions you receive from an IRA or certain 403(b) and qualified plans [those not eligible for rollover to an IRA or to another qualified plan] are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld. If you don't want us to withhold on this amount, you must notify us to not withhold the federal income tax. Even if you plan to roll over the amount you withdraw to another tax-deferred account, the withholding rate still applies to the withdrawn amount unless we have received notice not to withhold federal income tax prior to the withdrawal. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election. Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don't have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules. PROXY VOTING GUIDELINES American Century Investment Management, Inc., the fund's manager, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the manager uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century's Web site at www.americancentury.com and on the Securities and Exchange Commission's Web site at www.sec.gov. ----- 17 Index Definition The following index is used to illustrate investment market, sector, or style performance or to serve as fund performance comparisons. It is not an investment product available for purchase. The MORGAN STANLEY CAPITAL INTERNATIONAL REAL ESTATE INVESTMENT TRUST (MSCI REIT) INDEX is a market value-weighted index that tracks the daily stock prices performance of equity securities of the most actively traded REITs. - ----- 18 Notes ----- 19 Notes - ----- 20 [back cover] CONTACT US WWW.AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR RELATIONS: 1-800-345-2021 or 816-531-5575 BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS: 1-800-345-3533 BANKS AND TRUST COMPANIES, BROKER-DEALERS, FINANCIAL ADVISORS, INSURANCE COMPANIES: 1-800-345-6488 TELECOMMUNICATIONS DEVICE FOR THE DEAF: 1-800-634-4113 or 816-444-3485 AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. INVESTMENT MANAGER: American Century Investment Management, Inc. Kansas City, Missouri THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. 0311 American Century Investment Services, Inc. SH-SAN-36278N (c)2003 American Century Services Corporation
ITEM 2. CODE OF ETHICS. Not applicable for semiannual report filings. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for semiannual report filings. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable prior to annual filings for fiscal years ending after December 15, 2003. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the registrant's last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10. EXHIBITS. (a) Not applicable for semiannual report filings. (b) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are filed and attached hereto as Exhibit 99.302CERT. (c) A certification by the registrant's chief executive officer and chief financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is furnished and attached hereto as Exhibit 99.906CERT.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: American Century Capital Portfolios, Inc. By: /s/ William M. Lyons ---------------------------------------------- Name: William M. Lyons Title: President Date: November 24, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ William M. Lyons ----------------------------------------------- Name: William M. Lyons Title: President (principal executive officer) Date: November 24, 2003 By: /s/ Maryanne L. Roepke ----------------------------------------------- Name: Maryanne L. Roepke Title: Sr. Vice President, Treasurer, and Chief Accounting Officer (principal financial officer) Date: November 24, 2003