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.
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(Exact name of registrant as specified in charter)
4500 MAIN STREET, KANSAS CITY, MISSOURI 64111
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(Address of principal executive offices) (Zip code)
DAVID C. TUCKER, ESQ., 4500 MAIN STREET, 9TH FLOOR, KANSAS CITY, MISSOURI 64111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 816-531-5575
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Date of fiscal year end: MARCH 31, 2004
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Date of reporting period: MARCH 31, 2004
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ITEM 1. REPORTS TO STOCKHOLDERS.
[front cover]
MARCH 31, 2004
American Century Investments
Annual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of two bridges]
Equity Income Fund
Mid Cap Value Fund
Small Cap Value Fund
[american century investments logo and text logo]
[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
MID CAP VALUE
Portfolio Commentary..................................................... 9
Top Ten Holdings...................................................... 9
Top Five Industries................................................... 10
Schedule of Investments.................................................. 11
SMALL CAP VALUE
Performance.............................................................. 13
Portfolio Commentary..................................................... 14
Top Ten Holdings...................................................... 14
Top Five Industries................................................... 15
Types of Investments in Portfolio..................................... 15
Schedule of Investments.................................................. 16
FINANCIAL STATEMENTS
Statement of Assets and Liabilities...................................... 20
Statement of Operations.................................................. 22
Statement of Changes in Net Assets....................................... 23
Notes to Financial Statements............................................ 25
Financial Highlights..................................................... 32
Independent Auditors' Report............................................. 42
OTHER INFORMATION
Management............................................................... 43
Share Class Information.................................................. 46
Additional Information................................................... 47
Index Definitions........................................................ 48
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 annual report for the Equity Income, Mid
Cap Value and Small Cap Value funds for the year ended March 31, 2004.
The report includes comparative performance figures, portfolio and market
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.
Also, through our Web site, americancentury.com, we provide quarterly
commentaries on all American Century portfolios, the views of our senior
investment officers, and other communications about investments, portfolio
strategy, and the markets.
Your next shareholder report for these funds will be the semiannual report dated
September 30, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
[signature]
James E. Stowers, Jr.
FOUNDER AND CHAIRMAN
[signature]
James E. Stowers III
CO-CHAIRMAN OF THE BOARD
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1
Equity Income - Performance
TOTAL RETURNS AS OF MARCH 31, 2004
----------------------
AVERAGE ANNUAL RETURNS
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SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
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INVESTOR CLASS 31.30% 11.20% 14.73% 8/1/94
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LIPPER EQUITY INCOME INDEX 35.57% 2.67% 9.75%(1) --
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S&P 500 INDEX 35.12% -1.20% 11.69%(1) --
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Institutional Class 31.51% 11.45% 10.23% 7/8/98
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Advisor Class 30.97% 10.92% 12.01% 3/7/97
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C Class 30.37% -- 7.89% 7/13/01
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R Class -- -- 12.19%(2) 8/29/03
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(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
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended March 31
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1995* 1996 1997 1998 1999
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Investor Class 10.69% 25.69% 16.23% 37.78% -0.44%
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Lipper Equity
Income Index 6.32% 25.95% 14.99% 37.71% 1.59%
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S&P 500 Index 11.43% 32.10% 19.83% 48.00% 18.46%
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2000 2001 2002 2003 2004
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Investor Class 3.88% 20.85% 17.35% -12.09% 31.30%
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Lipper Equity
Income Index 3.25% 1.73% 3.91% -22.91% 35.57%
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S&P 500 Index 17.94% -21.68% 0.24% -24.76% 35.12%
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* 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.
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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 gained 31.30%* during the 12 months ended March 31, 2004, compared
to a 35.57% return posted by its benchmark, the Lipper Equity Income Index.
Equity Income's long-term performance against its benchmark has been strong --
from the fund's inception on August 1, 1994, it has produced an average annual
total return of 14.73%, dramatically ahead of the 9.75%** average annual return
posted by the Lipper Equity Income Index.
A WELCOME RALLY
The stock market staged an impressive rally during the period covered by this
report. Stocks began to rebound in mid-March 2003, effectively ending a
protracted three-year bear market, and maintained their positive momentum
throughout 2003.
The stock market's recovery mirrored that of the U.S. economy. Low interest
rates, tame inflation and strong profit growth boosted economic activity, and in
the third quarter, the economy recorded its strongest growth in nearly two
decades. However, progress slowed somewhat in early 2004. Concern about higher
interest rates, rising energy prices and growing fears about terrorism
ultimately restrained equities, which erased some of their earlier gains as the
period drew to a close.
Despite the market's downward trend toward the end of the period, all of the
broad stock indices posted healthy gains. The Nasdaq Composite led the pack,
gaining 49.38% for the year, while the S&P 500 and Dow Industrials indices
posted returns of 35.12% and 32.55%, respectively. In this environment,
value-oriented firms -- the focus of this portfolio -- generally fared better
than their growth counterparts, with small- and mid-sized companies recording
the strongest gains.
FINANCIAL STOCKS LEAD
Financial holdings contributed the most to performance. As we discussed in our
last semiannual report, our bottom-up methodology led us to firms whose
TOP TEN HOLDINGS AS OF MARCH 31, 2004
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% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/04 9/30/03
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Standard and Poor's
500 Depositary Receipt 4.8% 2.0%
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Exxon Mobil Corp. 4.3% 4.2%
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Royal Dutch Petroleum
Co. New York Shares 3.6% 2.1%
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BP plc ADR 3.0% 2.4%
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Marsh & McLennan
Companies, Inc. 2.8% --
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Emerson Electric Co. 2.5% 2.6%
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Bank of America Corp. 2.5% 3.0%
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Kimberly-Clark Corp. 2.5% 3.6%
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Ameren Corp.,
9.75%, 5/15/05 2.3% 2.7%
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Bristol-Meyers Squibb Co. 2.0% 1.5%
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* All fund returns referenced in this commentary are for Investor Class shares.
**From 7/31/94, the date nearest the Investor Class's inception for which data
are available. (continued)
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3
Equity Income - Portfolio Commentary
progress was spurred by the positive economic environment. Performance was
boosted by Allstate Corp., which benefited from improvement in its auto and
homeowners' lines, and Rayonier, which moved higher following its decision to
restructure as a Real Estate Investment Trust (REIT). A.G. Edwards and T. Rowe
Price continued to add to returns.
Our investment process also led us to selected names in the industrials sector,
where heavy electrical equipment maker Emerson Electric and machinery
manufacturer Nordson contributed significantly. Another top name was Rockwell
Collins, which benefited from an improving commercial aviation outlook.
A tightening worldwide petroleum supply, rising demand and concerns that
violence in Iraq could disrupt Middle Eastern oil shipments drove energy prices
markedly higher during the year, which lifted oil & gas holdings BP plc and
Exxon Mobil, two of our largest and best names for the year.
The upbeat economic environment also boosted household products giant
Kimberly-Clark Corp., which benefited also from higher sales volumes and growing
market share in the disposal diapers arena.
SELECTED CONVERTIBLES, PHARMACEUTICALS DISAPPOINTED
Equity Income's long-term record of solid returns has been aided by the tactical
use of convertible securities, but our allocation in several during the period
proved disappointing. These securities generally are less volatile than
corresponding common stock and typically perform better in down markets than in
periods of market strength, such as the one covered by this report. Despite the
recent performance of the few that lagged, we believe their issuing companies
are sound and well managed and are maintaining these stakes.
Returns also were restrained by selected drug companies. Schering-Plough
continued to struggle with competitive pressures and manufacturing difficulties;
we are eliminating this position. Rival Merck declined after it halted
development of experimental drugs to treat depression and diabetes. However, we
believe Merck will successfully weather its current difficulties and are
therefore maintaining this position.
We will continue to seek 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 under valuation.
TOP FIVE INDUSTRIES AS OF MARCH 31, 2004
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% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/04 9/30/03
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Oil & Gas 15.1% 12.6%
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Commercial Banks 7.9% 7.1%
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Insurance 7.0% 5.6%
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Electric Utilities 5.8% 4.9%
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Gas Utilities 5.3% 5.3%
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TYPES OF INVESTMENTS IN PORTFOLIO
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AS OF AS OF
3/31/04 9/30/03
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Common Stocks
and Options 76.1% 73.1%
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Convertible
Preferred Stocks 11.4% 12.1%
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Convertible Bonds 10.4% 12.8%
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Preferred Stocks 1.5% 0.9%
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TOTAL EQUITY EXPOSURE 99.4% 98.9%
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Temporary Cash
Investments 0.6% 1.1%
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4
Equity Income - Schedule of Investments
MARCH 31, 2004
Shares Value
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COMMON STOCKS -- 76.1%
AEROSPACE & DEFENSE -- 2.2%
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1,260,100 Honeywell International Inc. $ 42,654,385
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695,900 Rockwell Collins 21,997,399
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64,651,784
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CAPITAL MARKETS -- 0.8%
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570,311 Edwards (A.G.), Inc. 22,310,566
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CHEMICALS -- 2.4%
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701,821 Air Products & Chemicals, Inc. 35,175,268
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267,300 du Pont (E.I.) de Nemours & Co. 11,285,406
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316,400 International Flavors &
Fragrances Inc. 11,232,200
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638,830 Olin Corp. 11,403,116
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69,095,990
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COMMERCIAL BANKS -- 7.9%
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907,700 Bank of America Corp.(1) 73,505,546
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190,800 BB&T Corporation 6,735,240
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665,252 Commerce Bancshares, Inc. 31,739,173
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789,000 Mercantile Bankshares
Corporation 33,903,330
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442,900 SunTrust Banks, Inc. 30,874,559
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611,170 UMB Financial Corp. 30,986,319
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252,600 United Bankshares Inc. 7,704,300
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424,200 Whitney Holding Corp. 17,706,108
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233,154,575
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COMMERCIAL SERVICES & SUPPLIES -- 1.0%
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488,900 Pitney Bowes, Inc. 20,832,029
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254,400 Waste Management, Inc. 7,677,792
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28,509,821
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CONSTRUCTION MATERIALS -- 0.8%
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514,921 Vulcan Materials Co. 24,427,852
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CONTAINERS & PACKAGING -- 2.0%
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1,574,000 Bemis Co. 40,924,000
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716,300 Sonoco Products Co. 17,391,764
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58,315,764
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DISTRIBUTORS -- 0.9%
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816,400 Genuine Parts Company 26,712,608
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DIVERSIFIED -- 4.8%
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1,237,400 Standard and Poor's 500
Depositary Receipt 139,789,078
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DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.9%
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1,152,522 SBC Communications Inc. 28,282,890
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1,549,900 Verizon Communications 56,633,346
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84,916,236
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Shares Value
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ELECTRIC UTILITIES -- 1.5%
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536,499 Ameren Corp. $ 24,727,239
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684,000 IDACORP, Inc. 20,451,600
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45,178,839
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ELECTRICAL EQUIPMENT -- 3.7%
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1,234,800 Emerson Electric Co. 73,989,216
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838,336 Hubbell Inc. Cl B 33,642,424
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107,631,640
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FOOD PRODUCTS -- 4.0%
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339,200 Archer-Daniels-Midland Co. 5,722,304
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264,500 Campbell Soup Company 7,212,915
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513,500 ConAgra Foods, Inc. 13,833,690
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944,500 H.J. Heinz Company 35,220,405
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632,700 Kellogg Co. 24,827,148
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566,000 Kraft Foods Inc. 18,117,660
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194,400 Unilever N.V. New York Shares 13,499,136
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118,433,258
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GAS UTILITIES -- 5.3%
- --------------------------------------------------------------------------------
1,137,026 AGL Resources Inc. 32,996,495
- --------------------------------------------------------------------------------
492,691 Cascade Natural Gas Corp. 10,735,737
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331,200 NICOR Inc. 11,668,176
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1,001,841 Piedmont Natural Gas Co., Inc. 42,297,727
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1,872,900 WGL Holdings Inc. 56,374,289
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154,072,424
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HOUSEHOLD DURABLES -- 2.6%
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147,287 Hunter Douglas N.V. ORD 7,431,307
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1,456,800 Snap-on Incorporated 47,112,912
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114,100 Stanley Works (The) 4,869,788
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234,900 Whirlpool Corp. 16,177,563
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75,591,570
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HOUSEHOLD PRODUCTS -- 3.3%
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456,100 Clorox Company 22,307,851
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1,157,700 Kimberly-Clark Corp. 73,050,870
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95,358,721
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INSURANCE -- 5.6%
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886,800 Allstate Corp. 40,313,928
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1,181,474 CNA Surety Corp.(2) 13,055,288
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454,100 Jefferson-Pilot Corp. 24,980,041
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104,066 Kansas City Life Insurance
Company 4,452,984
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1,785,600 Marsh & McLennan
Companies, Inc. 82,673,280
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165,475,521
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LEISURE EQUIPMENT & PRODUCTS -- 0.6%
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975,900 Mattel, Inc. 17,995,596
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MACHINERY -- 0.1%
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100,804 Nordson Corp. 3,776,118
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See Notes to Financial Statements. (continued)
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5
Equity Income - Schedule of Investments
MARCH 31, 2004
Shares Value
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MULTI-UTILITIES & UNREGULATED POWER -- 0.6%
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871,749 Westar Energy Inc. $ 18,271,859
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OIL & GAS -- 10.8%
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1,714,300 BP plc ADR 87,772,160
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2,996,200 Exxon Mobil Corp. 124,611,958
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2,210,392 Royal Dutch Petroleum Co.
New York Shares 105,170,451
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317,554,569
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PHARMACEUTICALS -- 4.7%
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1,104,900 Abbott Laboratories 45,411,390
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2,460,800 Bristol-Myers Squibb Co. 59,625,184
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646,700 Merck & Co., Inc. 28,577,673
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164,700 Schering-Plough Corp. 2,671,434
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136,285,681
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REAL ESTATE -- 1.9%
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989,322 Rayonier, Inc. 43,243,265
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287,200 Sun Communities, Inc. 12,297,904
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55,541,169
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ROAD & RAIL -- 1.0%
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961,200 Burlington Northern
Santa Fe Corp. 30,277,800
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SOFTWARE -- 0.9%
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1,004,000 Microsoft Corporation 25,069,880
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SPECIALTY RETAIL -- 1.8%
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2,678,100 Limited Brands 53,562,000
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TEXTILES, APPAREL & LUXURY GOODS -- 0.2%
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101,100 VF Corp. 4,721,370
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THRIFTS & MORTGAGE FINANCE -- 1.4%
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406,000 Freddie Mac 23,978,360
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619,067 Washington Federal, Inc. 15,804,781
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39,783,141
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TOBACCO -- 0.4%
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323,089 UST Inc. 11,663,513
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TOTAL COMMON STOCKS
(Cost $1,955,058,062) 2,228,128,943
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CONVERTIBLE PREFERRED STOCKS -- 11.4%
AEROSPACE & DEFENSE -- 2.0%
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1,139,100 Raytheon Company,
8.25%, 5/15/06 58,037,145
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COMPUTERS & PERIPHERALS -- 0.4%
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612,900 Goldman Sachs Group Inc.,
(convertible into Seagate
Technology Holdings)(3)
11.50%, 8/19/04 10,413,784
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Shares/Principal Amount Value
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 4.3%
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2,368,600 Ameren Corp.,
9.75%, 5/15/05 $ 66,202,370
- --------------------------------------------------------------------------------
961,900 FPL Group, Inc.,
8.00%, 2/16/06 55,780,581
- --------------------------------------------------------------------------------
121,982,951
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 0.3%
- --------------------------------------------------------------------------------
238,000 Goldman Sachs Group Inc.,
(convertible into Cooper
Cameron Corp.)(3)
6.125%, 2/7/05 10,112,858
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.5%
- --------------------------------------------------------------------------------
466,200 Goldman Sachs Group Inc.,
(convertible into Kraft Foods Inc.),
6.375%, 6/11/04(3) 15,204,647
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 0.5%
- --------------------------------------------------------------------------------
483,800 Goldman Sachs Group Inc.,
(convertible into Brinker
International, Inc.)(3)
6.625%, 11/1/04 15,999,750
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.4%
- --------------------------------------------------------------------------------
219,000 Newell Financial Trust I,
5.25%, 12/1/27 10,265,625
- --------------------------------------------------------------------------------
INSURANCE -- 1.4%
- --------------------------------------------------------------------------------
693,691 Chubb Corp.,
7.00%, 11/16/05 19,770,194
- --------------------------------------------------------------------------------
347,390 Hartford Financial Services,
7.00%, 8/16/06 22,146,112
- --------------------------------------------------------------------------------
41,916,306
- --------------------------------------------------------------------------------
OIL & GAS -- 1.1%
- --------------------------------------------------------------------------------
637,000 Unocal Corp.,
6.25%, 9/01/26 33,362,875
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.5%
- --------------------------------------------------------------------------------
304,200 International Paper,
5.25%, 7/20/25 15,248,025
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $320,438,375) 332,543,966
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 10.4%
BUILDING PRODUCTS -- 0.5%
- --------------------------------------------------------------------------------
$28,832,000 Masco Corp.,
3.00%, 7/20/31(4) 13,515,000
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 0.9%
- --------------------------------------------------------------------------------
25,487,000 Goldman Sachs Group Inc.,
(convertible into Waste
Management Inc.),
2.50%, 5/9/10(3) 26,218,477
- --------------------------------------------------------------------------------
657,000 Waste Management, Inc.,
2.00%, 1/24/05 628,552
- --------------------------------------------------------------------------------
26,847,029
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
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6
Equity Income - Schedule of Investments
MARCH 31, 2004
Principal Amount Value
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 1.1%
- --------------------------------------------------------------------------------
$54,034,000 Hewlett-Packard Co.,
4.20%, 10/14/17(4) $ 31,407,263
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.3%
- --------------------------------------------------------------------------------
7,504,000 Commonwealth Telephone
Enterprises Inc., 3.25%, 7/15/23
(Acquired 8/13/03-2/10/04,
Cost $7,521,333)(5) 7,832,300
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 1.6%
- --------------------------------------------------------------------------------
23,793,000 Loews Corp., (convertible into
Diamond Offshore Drilling, Inc.),
3.125%, 9/15/07(3) 23,614,552
- --------------------------------------------------------------------------------
21,355,000 Schlumberger Ltd.,
2.125%, 6/1/23 23,196,868
- --------------------------------------------------------------------------------
46,811,420
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 0.7%
- --------------------------------------------------------------------------------
15,526,000 LifePoint Hospitals Holdings Inc.,
4.50%, 6/1/09 16,224,670
- --------------------------------------------------------------------------------
5,755,000 Universal Health Services Inc.,
0.43%, 6/23/20 3,510,550
- --------------------------------------------------------------------------------
19,735,220
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.9%
- --------------------------------------------------------------------------------
27,887,000 Goldman Sachs Group Inc.,
(convertible into Whirlpool Corp.),
3.00%, 6/11/05(3) 26,909,003
- --------------------------------------------------------------------------------
IT SERVICES -- 0.8%
- --------------------------------------------------------------------------------
12,370,000 BISYS Group Inc. (The),
4.00%, 3/15/06 12,493,700
- --------------------------------------------------------------------------------
9,156,000 DST Systems Inc.,
3.625%, 8/20/08 10,998,645
- --------------------------------------------------------------------------------
23,492,345
- --------------------------------------------------------------------------------
MEDIA -- 0.4%
- --------------------------------------------------------------------------------
21,055,000 Valassis Communications Inc.,
3.06%, 6/6/21(4) 12,790,913
- --------------------------------------------------------------------------------
OIL & GAS -- 3.2%
- --------------------------------------------------------------------------------
35,539,000 Devon Energy Corporation,
(convertible into
ChevronTexaco Corp.),
4.90%, 8/15/08(3) 36,694,018
- --------------------------------------------------------------------------------
55,738,000 Devon Energy Corporation,
(convertible into
ChevronTexaco Corp.),
4.95%, 8/15/08(3) 57,549,484
- --------------------------------------------------------------------------------
94,243,502
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(Cost $294,917,654) 303,583,995
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 1.5%
AEROSPACE & DEFENSE -- 0.5%
- --------------------------------------------------------------------------------
108,700 Northrop Grumman Corp.,
7.00%, 4/4/21 $ 14,049,475
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 0.5%
- --------------------------------------------------------------------------------
571,100 Citigroup Inc.,
6.00%, 2/14/33 14,717,247
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.5%
- --------------------------------------------------------------------------------
604,900 CenturyTel Inc.,
6.875%, 5/15/05 14,505,502
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $42,091,739) 43,272,224
- --------------------------------------------------------------------------------
PURCHASED PUT OPTIONS(6)
CONTRACTS
- --------------------------------------------------------------------------------
3,180 Bank of America Corp., strike
at $80.00, expires 8/21/04
(Cost $1,631,340) 1,081,200
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 0.6%
Repurchase Agreement, Deutsche Bank, Inc.,
(U.S. Treasury obligations), in a
joint trading account at 0.99%, dated 3/31/04, due 4/1/04
(Delivery value $17,700,487)
(Cost $17,700,000) 17,700,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $2,631,837,170) $2,926,310,328
================================================================================
See Notes to Financial Statements. (continued)
- ------
7
Equity Income - Schedule of Investments
MARCH 31, 2004
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS*
Contracts to Sell Settlement Date Value Unrealized Loss
- -------------------------------------------------------------------------------
47,336,797 EURO 4/30/04 $ 58,193,402 $ (742,453)
- -------------------------------------------------------------------------------
17,919,420 EURO 4/30/04 22,029,206 (257,110)
- -------------------------------------------------------------------------------
36,348,473 EURO 4/30/04 44,684,927 (554,172)
- -------------------------------------------------------------------------------
19,665,298 GBP 4/30/04 36,162,491 (445,393)
- -------------------------------------------------------------------------------
27,694,582 GBP 4/30/04 50,927,532 (671,558)
- -------------------------------------------------------------------------------
$ 211,997,558 $ (2,670,686)
=====================================
(Value on Settlement Date $209,326,872)
*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
GBP = British Pound
ORD = Foreign Ordinary Share
(1) Security, or a portion thereof, is being held in connection with an open
put option.
(2) Non-income producing.
(3) Equity-linked debt or linked-equity security. The aggregate value of these
securities at March 31, 2004, was $222,716,573, which represented 7.6% of net
assets.
(4) 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.
(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 March 31, 2004, was $7,832,300,
which represented 0.3% of net assets.
(6) Category is less than 0.05% of total investment securities.
See Notes to Financial Statements.
- ------
8
Mid Cap Value - Portfolio Commentary
[A PHOTO OF MICHAEL LISS, PHIL DAVIDSON AND SCOTT MOORE]
A PORTFOLIO COMMENTARY FROM MICHAEL LISS, PHIL DAVIDSON AND SCOTT MOORE,
PORTFOLIO MANAGERS ON THE MID CAP VALUE INVESTMENT TEAM.
We are pleased to introduce American Century's newest value fund. American
Century Mid Cap Value seeks long-term capital appreciation, with income as a
secondary objective, by targeting compelling value opportunities among mid-sized
businesses.
Like its American Century value-style siblings, Mid Cap Value seeks financially
sound firms whose stock prices have been beaten down due to cyclical trends or
transitory factors that are unrelated to their fundamental health. We apply the
same bottom-up stock selection process and the same disciplined buy and sell
strategies that we use in managing American Century's other value-oriented
funds. What sets this fund apart from our other value funds is that it focuses
primarily on mid-sized companies.
To find good value opportunities for Mid Cap Value's portfolio, we rely on a
system of price-filter screens that evaluates stocks using traditional value
measures. The system ranks companies after comparing their stock price to their
earnings, cash flow and book value, among other factors.
After we identify those companies that appear most attractively valued, we apply
fundamental analysis, carefully scrutinizing each firm's financial statements,
operating prospects, financial flexibility and market share, to make sure we're
seeing the whole picture. We want to buy companies with qualities that speak to
a strong future -- experienced management, clearly defined, well-executed
strategies, and sound financial structures -- whose prices do not reflect their
upside potential.
We manage Mid Cap Value's portfolio on a bottom-up basis, evaluating each firm
individually on its own merits. We trim or eliminate stocks based on how they
perform against the valuation measures. To protect the fund's mid-cap charter,
we keep at least 80% of Mid Cap Value's assets in securities of companies whose
market capitalization at the time of purchase is within the capitalization
TOP TEN HOLDINGS
AS OF MARCH 31, 2004
- --------------------------------------------------------------------------------
% of fund
investments
as of
3/31/04
- --------------------------------------------------------------------------------
Union Pacific Corp. 1.7%
- --------------------------------------------------------------------------------
SunTrust Banks, Inc. 1.5%
- --------------------------------------------------------------------------------
AGL Resources Inc. 1.4%
- --------------------------------------------------------------------------------
New York Times Co. (The) Cl A 1.2%
- --------------------------------------------------------------------------------
Zions Bancorporation 1.2%
- --------------------------------------------------------------------------------
Kimberly-Clark Corp. 1.0%
- --------------------------------------------------------------------------------
Minerals Technologies Inc. 1.0%
- --------------------------------------------------------------------------------
Chubb Corp. 1.0%
- --------------------------------------------------------------------------------
MetLife, Inc. 1.0%
- --------------------------------------------------------------------------------
Martin Marietta Materials, Inc. 1.0%
- --------------------------------------------------------------------------------
(continued)
- ------
9
Mid Cap Value - Portfolio Commentary
range of the Russell 3000 Index, excluding the largest 100 such companies, so
that the fund's weighted capitalization falls within the cap range of the
members of the Russell Midcap Index.
While Mid Cap Value may be a compelling investment opportunity, it's important
to remember that equity investing involves risk. For that reason, this fund is
an appropriate choice for investors who have a long investment horizon and are
comfortable with the volatility associated with investing in common stock funds.
We appreciate your confidence in the new fund, and hope it will play and
important and rewarding part in your portfolio.
TOP FIVE INDUSTRIES
AS OF MARCH 31, 2004
- --------------------------------------------------------------------------------
% of fund
investments
as of
3/31/04
- --------------------------------------------------------------------------------
Commercial Banks 4.5%
- --------------------------------------------------------------------------------
Insurance 4.5%
- --------------------------------------------------------------------------------
Chemicals 2.8%
- --------------------------------------------------------------------------------
Road & Rail 2.8%
- --------------------------------------------------------------------------------
Gas Utilities 2.4%
- --------------------------------------------------------------------------------
- ------
10
Mid Cap Value - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 49.0%
AEROSPACE & DEFENSE -- 1.8%
- --------------------------------------------------------------------------------
296 Honeywell International Inc. $ 10,020
- --------------------------------------------------------------------------------
222 Lockheed Martin Corp. 10,132
- --------------------------------------------------------------------------------
483 Raytheon Company 15,137
- --------------------------------------------------------------------------------
35,289
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 1.4%
- --------------------------------------------------------------------------------
248 Cooper Tire & Rubber 4,997
- --------------------------------------------------------------------------------
210 Superior Industries
International, Inc. 7,442
- --------------------------------------------------------------------------------
680 TRW Automotive
Holdings Corp.(1) 14,804
- --------------------------------------------------------------------------------
27,243
- --------------------------------------------------------------------------------
BEVERAGES -- 0.6%
- --------------------------------------------------------------------------------
245 Anheuser-Busch Companies, Inc. 12,495
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 0.8%
- --------------------------------------------------------------------------------
386 Edwards (A.G.), Inc. 15,100
- --------------------------------------------------------------------------------
CHEMICALS -- 2.8%
- --------------------------------------------------------------------------------
447 Ecolab Inc. 12,753
- --------------------------------------------------------------------------------
387 Ferro Corp. 10,120
- --------------------------------------------------------------------------------
179 HB Fuller Company 5,091
- --------------------------------------------------------------------------------
213 International Flavors
& Fragrances Inc. 7,562
- --------------------------------------------------------------------------------
354 Minerals Technologies Inc. 20,213
- --------------------------------------------------------------------------------
55,739
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 4.5%
- --------------------------------------------------------------------------------
461 BancorpSouth Inc. 10,087
- --------------------------------------------------------------------------------
142 BB&T Corporation 5,013
- --------------------------------------------------------------------------------
350 Mercantile Bankshares Corporation 15,040
- --------------------------------------------------------------------------------
430 SunTrust Banks, Inc. 29,974
- --------------------------------------------------------------------------------
249 United Bankshares Inc. 7,595
- --------------------------------------------------------------------------------
396 Zions Bancorporation 22,651
- --------------------------------------------------------------------------------
90,360
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 0.3%
- --------------------------------------------------------------------------------
168 Waste Management, Inc. 5,070
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 0.3%
- --------------------------------------------------------------------------------
310 Seagate Technology 5,000
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 1.8%
- --------------------------------------------------------------------------------
432 Martin Marietta Materials, Inc. 19,941
- --------------------------------------------------------------------------------
318 Vulcan Materials Co. 15,086
- --------------------------------------------------------------------------------
35,027
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.9%
- --------------------------------------------------------------------------------
676 Bemis Co. 17,576
- --------------------------------------------------------------------------------
DISTRIBUTORS -- 0.4%
- --------------------------------------------------------------------------------
228 Genuine Parts Company 7,460
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.5%
- --------------------------------------------------------------------------------
368 CenturyTel Inc. $ 10,116
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 2.3%
- --------------------------------------------------------------------------------
261 FPL Group, Inc. 17,448
- --------------------------------------------------------------------------------
500 IDACORP, Inc. 14,950
- --------------------------------------------------------------------------------
391 Wisconsin Energy Corp. 12,571
- --------------------------------------------------------------------------------
44,969
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.2%
- --------------------------------------------------------------------------------
292 Emerson Electric Co. 17,497
- --------------------------------------------------------------------------------
372 Hubbell Inc. Cl B 14,928
- --------------------------------------------------------------------------------
458 Thomas & Betts Corp. 9,994
- --------------------------------------------------------------------------------
42,419
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.5%
- --------------------------------------------------------------------------------
609 AVX Corp. 10,042
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.8%
- --------------------------------------------------------------------------------
277 Campbell Soup Company 7,554
- --------------------------------------------------------------------------------
203 H.J. Heinz Company 7,570
- --------------------------------------------------------------------------------
394 Kraft Foods Inc. 12,611
- --------------------------------------------------------------------------------
108 Unilever N.V. New York Shares 7,500
- --------------------------------------------------------------------------------
35,235
- --------------------------------------------------------------------------------
GAS UTILITIES -- 2.4%
- --------------------------------------------------------------------------------
954 AGL Resources Inc. 27,685
- --------------------------------------------------------------------------------
283 NICOR Inc. 9,970
- --------------------------------------------------------------------------------
335 WGL Holdings Inc. 10,084
- --------------------------------------------------------------------------------
47,739
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 1.3%
- --------------------------------------------------------------------------------
166 Analogic Corporation 7,551
- --------------------------------------------------------------------------------
185 Beckman Coulter Inc. 10,090
- --------------------------------------------------------------------------------
270 National Dentex Corp.(1) 7,344
- --------------------------------------------------------------------------------
24,985
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 1.0%
- --------------------------------------------------------------------------------
186 HCA Inc. 7,555
- --------------------------------------------------------------------------------
156 LifePoint Hospitals Inc.(1) 5,045
- --------------------------------------------------------------------------------
164 Universal Health Services, Inc. Cl B 7,556
- --------------------------------------------------------------------------------
20,156
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 0.3%
- --------------------------------------------------------------------------------
132 Brinker International, Inc.(1) 5,007
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.9%
- --------------------------------------------------------------------------------
325 Newell Rubbermaid Inc. 7,540
- --------------------------------------------------------------------------------
156 Snap-on Incorporated 5,045
- --------------------------------------------------------------------------------
73 Whirlpool Corp. 5,028
- --------------------------------------------------------------------------------
17,613
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.6%
- --------------------------------------------------------------------------------
207 Clorox Company 10,124
- --------------------------------------------------------------------------------
323 Kimberly-Clark Corp. 20,382
- --------------------------------------------------------------------------------
30,506
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
11
Mid Cap Value - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
INSURANCE -- 4.5%
- --------------------------------------------------------------------------------
111 Allstate Corp. $ 5,046
- --------------------------------------------------------------------------------
288 Chubb Corp. 20,027
- --------------------------------------------------------------------------------
901 CNA Surety Corp.(1) 9,956
- --------------------------------------------------------------------------------
480 Horace Mann Educators Corp. 7,546
- --------------------------------------------------------------------------------
233 Kansas City Life Insurance Company 9,970
- --------------------------------------------------------------------------------
379 Marsh & McLennan Companies, Inc. 17,548
- --------------------------------------------------------------------------------
560 MetLife, Inc. 19,981
- --------------------------------------------------------------------------------
90,074
- --------------------------------------------------------------------------------
IT SERVICES -- 1.3%
- --------------------------------------------------------------------------------
608 BISYS Group Inc. (The)(1) 10,190
- --------------------------------------------------------------------------------
329 DST Systems, Inc.(1) 14,920
- --------------------------------------------------------------------------------
25,110
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS -- 0.3%
- --------------------------------------------------------------------------------
270 Mattel, Inc. 4,979
- --------------------------------------------------------------------------------
MACHINERY -- 0.4%
- --------------------------------------------------------------------------------
194 Dover Corp. 7,521
- --------------------------------------------------------------------------------
MEDIA -- 1.9%
- --------------------------------------------------------------------------------
157 Dow Jones & Co. Inc. 7,522
- --------------------------------------------------------------------------------
513 New York Times Co. (The) Cl A 22,674
- --------------------------------------------------------------------------------
249 Valassis Communications, Inc.(1) 7,570
- --------------------------------------------------------------------------------
37,766
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER -- 0.6%
- --------------------------------------------------------------------------------
601 Westar Energy Inc. 12,597
- --------------------------------------------------------------------------------
OIL & GAS -- 0.4%
- --------------------------------------------------------------------------------
205 Unocal Corp. 7,642
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 1.0%
- --------------------------------------------------------------------------------
620 Bristol-Myers Squibb Co. 15,023
- --------------------------------------------------------------------------------
309 Schering-Plough Corp. 5,012
- --------------------------------------------------------------------------------
20,035
- --------------------------------------------------------------------------------
REAL ESTATE -- 0.8%
- --------------------------------------------------------------------------------
114 Rayonier, Inc. 4,983
- --------------------------------------------------------------------------------
240 Sun Communities, Inc. 10,277
- --------------------------------------------------------------------------------
15,260
- --------------------------------------------------------------------------------
ROAD & RAIL -- 2.8%
- --------------------------------------------------------------------------------
321 Burlington Northern Santa Fe Corp. 10,112
- --------------------------------------------------------------------------------
327 Heartland Express, Inc. 7,449
- --------------------------------------------------------------------------------
217 Overnite Corp. 4,991
- --------------------------------------------------------------------------------
546 Union Pacific Corp. 32,661
- --------------------------------------------------------------------------------
55,213
- --------------------------------------------------------------------------------
Shares/Principal Amount Value
- --------------------------------------------------------------------------------
SOFTWARE -- 0.8%
- --------------------------------------------------------------------------------
521 Synopsys, Inc.(1) $ 15,088
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 1.0%
- --------------------------------------------------------------------------------
253 Limited Brands 5,060
- --------------------------------------------------------------------------------
398 Sherwin-Williams Co. 15,295
- --------------------------------------------------------------------------------
20,355
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.9%
- --------------------------------------------------------------------------------
280 Jones Apparel Group, Inc. 10,122
- --------------------------------------------------------------------------------
205 Liz Claiborne, Inc. 7,521
- --------------------------------------------------------------------------------
17,643
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 1.0%
- --------------------------------------------------------------------------------
211 Freddie Mac 12,462
- --------------------------------------------------------------------------------
117 MGIC Investment Corp. 7,515
- --------------------------------------------------------------------------------
19,977
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS -- 0.9%
- --------------------------------------------------------------------------------
366 Grainger (W.W.), Inc. 17,568
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $958,208) 961,974
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS(2) -- 51.0%
$1,000,000 FNMA Discount Notes,
0.98%, 4/1/04(3)
(Cost $1,000,000) 1,000,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $1,958,208) $1,961,974
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
FNMA = Federal National Mortgage Association
(1) Non-income producing.
(2) The fund commenced operations on March 31, 2004. Available cash was
invested on that day in accordance with the fund's prospectus. Temporary
Cash Investments reflected on the Schedule of Investments represents
cash segregated for future settlement of investments purchased on
March 31, 2004.
(3) The rate indicated is the yield to maturity at purchase.
See Notes to Financial Statements.
- ------
12
Small Cap Value - Performance
TOTAL RETURNS AS OF MARCH 31, 2004
----------------------
AVERAGE ANNUAL RETURNS
- -------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------
INVESTOR CLASS 51.53% 19.98% 16.55% 7/31/98
- -------------------------------------------------------------------------------
S&P SMALLCAP 600/BARRA VALUE INDEX 62.26% 14.74% 10.45% --
- -------------------------------------------------------------------------------
Institutional Class 51.75% 20.18% 18.33% 10/26/98
- -------------------------------------------------------------------------------
Advisor Class 51.38% -- 21.70% 12/31/99
- -------------------------------------------------------------------------------
C Class 50.71% -- 11.22% 6/1/01
- -------------------------------------------------------------------------------
GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made July 31, 1998
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended March 31
- --------------------------------------------------------------------------------
1999* 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------
Investor Class -4.24% 14.37% 36.51% 33.97% -21.55% 51.53%
- --------------------------------------------------------------------------------
S&P SmallCap 600/
BARRA Value Index -11.71% 17.14% 16.44% 25.86% -28.60% 62.26%
- --------------------------------------------------------------------------------
* From 7/31/98, the Investor Class's inception date. Not annualized.
The charts on the performance page give historical return data for the fund.
Returns for the index are provided for comparison. The fund's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the index do not. Unless otherwise
indicated, the charts are based on Investor Class shares; performance for other
classes will vary due to differences in fee structures. Past performance does
not guarantee future results. None of the charts reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost.
- ------
13
Small Cap Value - Portfolio Commentary
[A 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 year ended March 31, 2004, Small Cap Value gained 51.53%,* trailing the
62.26% return posted by its benchmark, the S&P SmallCap 600/BARRA Value Index,
but ahead of the 35.12% gain of the S&P 500, representing the broader market.
Small Cap Value's long-term performance has been strong. Since the portfolio's
July 31, 1998 inception, it has posted an average annual return of 16.55%, far
outdistancing the 10.45% return posted by its benchmark for the same period.
THE BULL RETURNS
The year covered by this report ended the bear market and heralded the beginning
of a powerful upswing. The healthy pace of economic expansion alongside
record-low interest rates, tame inflation and continued profit growth encouraged
investors. They registered their confidence with rallies that sent the Dow, the
Nasdaq and the broader S&P 500 to levels not seen in years. Still, challenges
remained, including labor-market weakness and renewed terrorism concerns. And
while stocks pulled back some from their earlier highs, the major U.S. indices
nonetheless booked substantial gains for the year.
A SOLID YEAR
Small Cap Value received generous absolute contribution from each sector in
which it was invested. However, we underperformed our benchmark, an outcome
largely attributable to the same themes we discussed in our semiannual report.
We sought undervalued companies demonstrating the markers of fundamental
strength -- good cash flow, a healthy balance sheet, and solid returns on
capital. But for much of the year, companies such as these lagged behind as
higher-risk stocks paced the market's advance, a factor that was particularly
influential in the financials and consumer discretionary arenas. While
underperformance is always disappointing, we're optimistic that the market will
soon rediscover the kinds of companies we seek.
TOP TEN HOLDINGS
AS OF MARCH 31, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Snap-on Incorporated 1.8% 1.3%
- --------------------------------------------------------------------------------
Bemis Co. 1.7% 1.3%
- --------------------------------------------------------------------------------
AptarGroup, Inc. 1.5% 0.5%
- --------------------------------------------------------------------------------
Superior Industries
International, Inc. 1.3% 0.9%
- --------------------------------------------------------------------------------
Universal Health
Services, Inc. Cl B 1.3% --
- --------------------------------------------------------------------------------
Imation Corporation 1.3% 0.8%
- --------------------------------------------------------------------------------
Kaydon Corporation 1.3% 1.3%
- --------------------------------------------------------------------------------
Platinum Underwriters
Holdings 1.3% 1.4%
- --------------------------------------------------------------------------------
Sybase, Inc. 1.3% 1.3%
- --------------------------------------------------------------------------------
Sonoco Products Co. 1.2% 0.4%
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary are for Investor Class shares.
(continued)
- ------
14
Small Cap Value - Portfolio Commentary
THE STRONGEST PERFORMERS
The search for fundamentally sound, bargain-priced companies led us to the
information technology sector, which provided the best absolute performance. We
found plentiful opportunity in the software and the electrical equipment and
instruments industries, and each group yielded several contributors, including
Parametric Technology Corp. and Sybase, Inc. Another contributor was Andrew
Corporation, a communications equipment firm. The company completed its product
line through a merger with Allen Telecom, generating an improvement in
fundamentals for which investors rewarded the stock.
Exposure to the financials sector, our largest single stake on average, also
bolstered results. Much of our position was devoted to commercial banks, which
delivered considerable contribution. Hibernia Corp. and TCF Financial Corp. were
the top contributors in this group. Nevertheless, performance against the
benchmark suffered in this sector when companies that did not merit inclusion in
the portfolio posted solid gains.
Our bottom-up strategy also led us to select companies in the industrials
sector, and several holdings provided substantial lift, including Crane Co. from
the machinery industry, and United Stationers Inc., a commercial services and
supplies firm.
INDIVIDUAL SETBACKS
Despite overall strength from each of our sector positions, there were some
individual setbacks. Well-performing stocks that did not meet our criteria for
the portfolio caused results versus the benchmark to fall short in the consumer
discretionary sector, a significant area of exposure and a source of absolute
strength. Also, the group produced some detractors. One was O'Charley's, which
owns and operates full-service, casual-atmosphere restaurants in the southeast
and Midwest. Another, the top-detracting stock for the year, was Superior
Industries, a leading supplier of aluminum wheels that suffered during the
period because of competitive pressures and transitional start-up costs.
However, we continue to have confidence in the long-term fundamental vitality of
this company and are maintaining the position.
In the months ahead, we will continue to seek fundamentally sound, attractively
priced companies that we believe offer investors the potential for long-term
reward.
TOP FIVE INDUSTRIES
AS OF MARCH 31, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Commercial Banks 7.5% 7.9%
- --------------------------------------------------------------------------------
Healthcare Equipment
& Supplies 4.9% 2.9%
- --------------------------------------------------------------------------------
Chemicals 4.6% 4.2%
- --------------------------------------------------------------------------------
Healthcare Providers
& Services 4.5% 3.7%
- --------------------------------------------------------------------------------
Containers & Packaging 4.5% 2.2%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Common Stocks 93.3% 93.9%
- --------------------------------------------------------------------------------
Convertible
Preferred Stocks 1.3% 2.2%
- --------------------------------------------------------------------------------
Convertible Bonds 0.9% 0.5%
- --------------------------------------------------------------------------------
Preferred Stocks 0.3% 0.8%
- --------------------------------------------------------------------------------
TOTAL EQUITY EXPOSURE 95.8% 97.4%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 4.2% 2.6%
- --------------------------------------------------------------------------------
- ------
15
Small Cap Value - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 93.3%
AEROSPACE & DEFENSE -- 1.0%
- --------------------------------------------------------------------------------
25,000 Moog Inc.(1) $ 853,000
- --------------------------------------------------------------------------------
475,000 United Defense
Industries, Inc.(1) 15,100,250
- --------------------------------------------------------------------------------
15,953,250
- --------------------------------------------------------------------------------
AIRLINES -- 1.0%
- --------------------------------------------------------------------------------
830,000 SkyWest, Inc. 15,969,200
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 1.9%
- --------------------------------------------------------------------------------
470,000 Cooper Tire & Rubber 9,470,500
- --------------------------------------------------------------------------------
615,000 Superior Industries
International, Inc. 21,795,600
- --------------------------------------------------------------------------------
31,266,100
- --------------------------------------------------------------------------------
BEVERAGES -- 0.6%
- --------------------------------------------------------------------------------
145,000 Adolph Coors Company Cl B 10,070,250
- --------------------------------------------------------------------------------
BUILDING PRODUCTS -- 0.7%
- --------------------------------------------------------------------------------
575,000 Griffon Corp.(1) 12,420,000
- --------------------------------------------------------------------------------
CHEMICALS -- 4.6%
- --------------------------------------------------------------------------------
225,000 Ferro Corp. 5,883,750
- --------------------------------------------------------------------------------
95,000 FMC Corp.(1) 4,067,900
- --------------------------------------------------------------------------------
145,000 Georgia Gulf Corporation 4,371,750
- --------------------------------------------------------------------------------
590,000 HB Fuller Company 16,779,600
- --------------------------------------------------------------------------------
155,000 Minerals Technologies Inc. 8,850,500
- --------------------------------------------------------------------------------
1,110,000 Olin Corp. 19,813,500
- --------------------------------------------------------------------------------
880,000 Sensient Technologies Corp. 16,429,600
- --------------------------------------------------------------------------------
76,196,600
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 7.3%
- --------------------------------------------------------------------------------
165,000 Associated Banc-Corp. 7,390,350
- --------------------------------------------------------------------------------
265,000 BancorpSouth Inc. 5,798,200
- --------------------------------------------------------------------------------
322,019 Chittenden Corp. 10,626,627
- --------------------------------------------------------------------------------
260,000 Cullen/Frost Bankers, Inc. 11,117,600
- --------------------------------------------------------------------------------
275,000 First Financial Bancorp 5,087,500
- --------------------------------------------------------------------------------
560,000 Hibernia Corp. Cl A 13,154,400
- --------------------------------------------------------------------------------
155,000 Mercantile Bankshares
Corporation 6,660,350
- --------------------------------------------------------------------------------
230,000 Sky Financial Group Inc. 5,968,500
- --------------------------------------------------------------------------------
1,330,000 Sterling Bancshares, Inc. 17,808,700
- --------------------------------------------------------------------------------
350,000 TCF Financial Corp. 17,874,500
- --------------------------------------------------------------------------------
175,000 Whitney Holding Corp. 7,304,500
- --------------------------------------------------------------------------------
305,000 Wilmington Trust Corporation 11,397,850
- --------------------------------------------------------------------------------
120,189,077
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 3.5%
- --------------------------------------------------------------------------------
615,000 ABM Industries Inc. $ 11,039,250
- --------------------------------------------------------------------------------
270,000 Asset Acceptance
Capital Corp.(1) 5,022,000
- --------------------------------------------------------------------------------
110,000 Banta Corp. 5,091,900
- --------------------------------------------------------------------------------
360,000 G&K Services Inc. Cl A 13,399,200
- --------------------------------------------------------------------------------
280,000 Kelly Services, Inc. Cl A 8,290,800
- --------------------------------------------------------------------------------
625,000 Viad Corp. 15,106,250
- --------------------------------------------------------------------------------
57,949,400
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 0.9%
- --------------------------------------------------------------------------------
270,000 Adaptec, Inc.(1) 2,365,200
- --------------------------------------------------------------------------------
235,000 Andrew Corporation(1) 4,112,500
- --------------------------------------------------------------------------------
110,000 Black Box Corporation 5,894,900
- --------------------------------------------------------------------------------
325,000 Cable Design
Technologies Corp.(1) 3,081,000
- --------------------------------------------------------------------------------
15,453,600
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 1.5%
- --------------------------------------------------------------------------------
165,000 Electronics for Imaging, Inc.(1) 4,054,050
- --------------------------------------------------------------------------------
575,000 Imation Corporation 21,631,500
- --------------------------------------------------------------------------------
25,685,550
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING -- 1.1%
- --------------------------------------------------------------------------------
155,000 EMCOR Group Inc.(1) 5,688,500
- --------------------------------------------------------------------------------
800,000 Insituform Technologies,
Inc. Cl A(1) 12,504,000
- --------------------------------------------------------------------------------
18,192,500
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 1.0%
- --------------------------------------------------------------------------------
355,000 Martin Marietta Materials, Inc. 16,386,800
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 4.5%
- --------------------------------------------------------------------------------
645,000 AptarGroup, Inc. 24,768,000
- --------------------------------------------------------------------------------
1,105,000 Bemis Co. 28,730,000
- --------------------------------------------------------------------------------
850,000 Sonoco Products Co. 20,638,000
- --------------------------------------------------------------------------------
74,136,000
- --------------------------------------------------------------------------------
DIVERSIFIED -- 3.9%
- --------------------------------------------------------------------------------
140,000 iShares Russell 2000
Index Fund 16,440,200
- --------------------------------------------------------------------------------
95,000 iShares Russell 2000
Value Index Fund 16,264,000
- --------------------------------------------------------------------------------
105,000 iShares S&P SmallCap 600
Index Fund 14,917,350
- --------------------------------------------------------------------------------
155,000 iShares S&P SmallCap 600/
BARRA Value Index Fund 16,536,950
- --------------------------------------------------------------------------------
64,158,500
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 0.2%
- --------------------------------------------------------------------------------
455,000 Medallion Financial Corp. 3,935,750
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 1.8%
- --------------------------------------------------------------------------------
470,000 Empire District Electric Co. 10,645,500
- --------------------------------------------------------------------------------
645,000 IDACORP, Inc. 19,285,500
- --------------------------------------------------------------------------------
29,931,000
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
16
Small Cap Value - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.3%
- --------------------------------------------------------------------------------
300,000 Regal-Beloit Corp. $ 5,994,000
- --------------------------------------------------------------------------------
560,000 Smith (A.O.) Corp. 16,212,000
- --------------------------------------------------------------------------------
22,206,000
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 3.3%
- --------------------------------------------------------------------------------
495,000 Anixter International Inc. 13,983,750
- --------------------------------------------------------------------------------
130,000 Benchmark Electronics Inc.(1) 4,092,400
- --------------------------------------------------------------------------------
500,000 Coherent, Inc.(1) 13,145,000
- --------------------------------------------------------------------------------
840,000 Methode Electronics, Inc. 10,836,000
- --------------------------------------------------------------------------------
905,000 Paxar Corp.(1) 13,348,750
- --------------------------------------------------------------------------------
55,405,900
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 4.2%
- --------------------------------------------------------------------------------
530,000 Cal Dive International Inc.(1) 13,689,900
- --------------------------------------------------------------------------------
295,000 Helmerich & Payne, Inc. 8,451,750
- --------------------------------------------------------------------------------
435,000 Hydril Co.(1) 11,397,000
- --------------------------------------------------------------------------------
1,230,000 Key Energy Group, Inc.(1) 13,530,000
- --------------------------------------------------------------------------------
465,000 Unit Corporation(1) 12,750,300
- --------------------------------------------------------------------------------
720,000 W-H Energy Services Inc.(1) 10,418,400
- --------------------------------------------------------------------------------
70,237,350
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 0.9%
- --------------------------------------------------------------------------------
890,000 Casey's General Stores, Inc. 14,774,000
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.9%
- --------------------------------------------------------------------------------
295,000 Corn Products International Inc. 11,800,000
- --------------------------------------------------------------------------------
255,000 Interstate Bakeries Corp. 2,899,350
- --------------------------------------------------------------------------------
8,017 Lancaster Colony Corp. 323,887
- --------------------------------------------------------------------------------
15,023,237
- --------------------------------------------------------------------------------
GAS UTILITIES -- 2.4%
- --------------------------------------------------------------------------------
510,000 AGL Resources Inc. 14,800,200
- --------------------------------------------------------------------------------
410,000 Northwest Natural Gas Co. 12,812,500
- --------------------------------------------------------------------------------
410,700 WGL Holdings Inc. 12,362,070
- --------------------------------------------------------------------------------
39,974,770
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 4.5%
- --------------------------------------------------------------------------------
305,000 Analogic Corporation 13,874,450
- --------------------------------------------------------------------------------
215,000 Apogent Technologies Inc.(1) 6,596,200
- --------------------------------------------------------------------------------
385,000 Arrow International Inc. 11,507,650
- --------------------------------------------------------------------------------
195,000 Beckman Coulter Inc. 10,635,300
- --------------------------------------------------------------------------------
450,000 Dade Behring Holdings Inc.(1) 20,016,000
- --------------------------------------------------------------------------------
160,000 Orthofix International N.V.(1) 7,910,400
- --------------------------------------------------------------------------------
765,000 Osteotech Inc.(1) 4,934,250
- --------------------------------------------------------------------------------
75,474,250
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 4.0%
- --------------------------------------------------------------------------------
870,000 Alliance Imaging Inc.(1) 3,393,000
- --------------------------------------------------------------------------------
405,000 LifePoint Hospitals Inc.(1) 13,097,700
- --------------------------------------------------------------------------------
495,000 Owens & Minor Inc. 12,523,500
- --------------------------------------------------------------------------------
200,000 RehabCare Group, Inc.(1) 3,976,000
- --------------------------------------------------------------------------------
275,000 Renal Care Group Inc.(1) 12,584,000
- --------------------------------------------------------------------------------
470,000 Universal Health
Services, Inc. Cl B 21,652,900
- --------------------------------------------------------------------------------
67,227,100
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 1.5%
- --------------------------------------------------------------------------------
310,000 CEC Entertainment Inc.(1) $ 10,757,000
- --------------------------------------------------------------------------------
595,000 Jack in the Box Inc.(1) 14,857,150
- --------------------------------------------------------------------------------
25,614,150
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 3.4%
- --------------------------------------------------------------------------------
420,000 Libbey Inc. 10,890,600
- --------------------------------------------------------------------------------
115,000 Russ Berrie and Co., Inc. 4,025,000
- --------------------------------------------------------------------------------
905,000 Snap-on Incorporated 29,267,700
- --------------------------------------------------------------------------------
475,000 WCI Communities Inc.(1) 11,889,250
- --------------------------------------------------------------------------------
56,072,550
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.3%
- --------------------------------------------------------------------------------
200,000 Rayovac Corporation(1) 5,720,000
- --------------------------------------------------------------------------------
INSURANCE -- 3.1%
- --------------------------------------------------------------------------------
160,000 Aspen Insurance Holdings Ltd. 4,120,000
- --------------------------------------------------------------------------------
115,000 Erie Indemnity Company 5,549,900
- --------------------------------------------------------------------------------
275,000 HCC Insurance Holdings, Inc. 8,890,750
- --------------------------------------------------------------------------------
430,000 Horace Mann Educators Corp. 6,759,600
- --------------------------------------------------------------------------------
660,000 Platinum Underwriters Holdings 21,153,000
- --------------------------------------------------------------------------------
150,000 ProAssurance Corp.(1) 5,250,000
- --------------------------------------------------------------------------------
51,723,250
- --------------------------------------------------------------------------------
IT SERVICES -- 1.7%
- --------------------------------------------------------------------------------
730,000 BISYS Group Inc. (The)(1) 12,234,800
- --------------------------------------------------------------------------------
585,000 MedQuist Inc.(1) 9,207,900
- --------------------------------------------------------------------------------
385,000 National Processing Inc.(1) 7,315,000
- --------------------------------------------------------------------------------
28,757,700
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS -- 1.0%
- --------------------------------------------------------------------------------
310,000 Callaway Golf Co. 5,883,800
- --------------------------------------------------------------------------------
320,000 Jakks Pacific Inc.(1) 4,800,000
- --------------------------------------------------------------------------------
335,000 Leapfrog Enterprises Inc.(1) 6,482,250
- --------------------------------------------------------------------------------
17,166,050
- --------------------------------------------------------------------------------
MACHINERY -- 3.6%
- --------------------------------------------------------------------------------
75,000 Circor International Inc. 1,695,000
- --------------------------------------------------------------------------------
380,000 Crane Co. 12,540,000
- --------------------------------------------------------------------------------
235,000 Kadant Inc.(1) 4,899,750
- --------------------------------------------------------------------------------
770,000 Kaydon Corporation 21,198,100
- --------------------------------------------------------------------------------
365,000 Kennametal Inc. 15,063,550
- --------------------------------------------------------------------------------
95,000 Tecumseh Products Cl A 3,999,500
- --------------------------------------------------------------------------------
59,395,900
- --------------------------------------------------------------------------------
MEDIA -- 3.1%
- --------------------------------------------------------------------------------
205,000 ADVO, Inc. 6,605,100
- --------------------------------------------------------------------------------
320,000 Hearst-Argyle Television, Inc. 8,604,800
- --------------------------------------------------------------------------------
560,000 Journal Communications Inc. 11,200,000
- --------------------------------------------------------------------------------
320,000 Liberty Corp. (The) 14,806,400
- --------------------------------------------------------------------------------
315,000 Valassis Communications, Inc.(1) 9,576,000
- --------------------------------------------------------------------------------
50,792,300
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER -- 0.5%
- --------------------------------------------------------------------------------
385,000 Westar Energy Inc. 8,069,600
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
17
Small Cap Value - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
OIL & GAS -- 2.2%
- --------------------------------------------------------------------------------
395,000 Denbury Resources Inc.(1) $ 6,659,700
- --------------------------------------------------------------------------------
165,000 Spinnaker Exploration
Company(1) 5,926,800
- --------------------------------------------------------------------------------
370,000 Tom Brown, Inc.(1) 13,912,000
- --------------------------------------------------------------------------------
440,000 Whiting Petroleum Corp.(1) 10,379,600
- --------------------------------------------------------------------------------
36,878,100
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.5%
- --------------------------------------------------------------------------------
605,000 Wausau-Mosinee Paper Corp. 8,524,450
- --------------------------------------------------------------------------------
REAL ESTATE -- 2.4%
- --------------------------------------------------------------------------------
195,000 BRE Properties 6,692,400
- --------------------------------------------------------------------------------
450,000 Getty Realty Corp. 11,956,500
- --------------------------------------------------------------------------------
80,000 Heritage Property
Investment Trust 2,488,000
- --------------------------------------------------------------------------------
410,000 Maguire Properties, Inc. 10,496,000
- --------------------------------------------------------------------------------
185,000 Rayonier, Inc. 8,086,350
- --------------------------------------------------------------------------------
39,719,250
- --------------------------------------------------------------------------------
ROAD & RAIL -- 2.3%
- --------------------------------------------------------------------------------
380,000 Arkansas Best Corporation 10,180,200
- --------------------------------------------------------------------------------
530,000 Heartland Express, Inc. 12,073,400
- --------------------------------------------------------------------------------
445,000 USF Corp. 15,227,900
- --------------------------------------------------------------------------------
37,481,500
- --------------------------------------------------------------------------------
SEMICONDUCTORS &
SEMICONDUCTOR EQUIPMENT -- 0.4%
- --------------------------------------------------------------------------------
305,000 DuPont Photomasks, Inc.(1) 7,094,300
- --------------------------------------------------------------------------------
SOFTWARE -- 3.7%
- --------------------------------------------------------------------------------
233,402 Barra Inc. 8,166,736
- --------------------------------------------------------------------------------
670,000 Compuware Corp.(1) 4,991,500
- --------------------------------------------------------------------------------
2,275,000 Parametric Technology Corp.(1) 10,283,000
- --------------------------------------------------------------------------------
1,000,000 Sybase, Inc.(1) 20,990,000
- --------------------------------------------------------------------------------
225,000 Take-Two Interactive
Software, Inc.(1) 8,275,500
- --------------------------------------------------------------------------------
405,000 THQ Inc.(1) 8,193,150
- --------------------------------------------------------------------------------
60,899,886
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 2.8%
- --------------------------------------------------------------------------------
120,000 Abercrombie & Fitch Co. Cl A 4,060,800
- --------------------------------------------------------------------------------
345,000 Burlington Coat Factory
Warehouse Corp. 6,831,000
- --------------------------------------------------------------------------------
655,000 Cato Corp. (The) 13,152,400
- --------------------------------------------------------------------------------
165,000 Linens 'n Things, Inc.(1) 5,842,650
- --------------------------------------------------------------------------------
335,000 Talbots Inc. 11,986,300
- --------------------------------------------------------------------------------
195,000 Too Inc.(1) 4,085,250
- --------------------------------------------------------------------------------
45,958,400
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 1.1%
- --------------------------------------------------------------------------------
215,000 Polo Ralph Lauren Corp. 7,370,200
- --------------------------------------------------------------------------------
425,000 Wolverine World Wide, Inc. 10,255,250
- --------------------------------------------------------------------------------
17,625,450
- --------------------------------------------------------------------------------
Shares/Principal Amount Value
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 2.7%
- --------------------------------------------------------------------------------
355,000 Commercial Federal Corp. $ 9,798,000
- --------------------------------------------------------------------------------
530,000 PMI Group, Inc. (The) 19,800,800
- --------------------------------------------------------------------------------
585,000 Washington Federal, Inc. 14,935,050
- --------------------------------------------------------------------------------
44,533,850
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $1,277,534,918) 1,550,242,870
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 1.3%
INSURANCE -- 1.1%
- --------------------------------------------------------------------------------
172,500 Phoenix Companies Inc.,
7.25%, 2/16/06 7,151,850
- --------------------------------------------------------------------------------
380,000 United Fire & Casualty Co.,
Series A, 6.375%, 5/15/14 11,396,200
- --------------------------------------------------------------------------------
18,548,050
- --------------------------------------------------------------------------------
OIL & GAS -- 0.2%
- --------------------------------------------------------------------------------
50,000 Chesapeake Energy Corp.,
6.00%, 12/31/49
(Acquired 2/27/03-2/28/03,
Cost $2,552,830)(2) 3,712,500
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $16,458,510) 22,260,550
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 0.9%
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.4%
- --------------------------------------------------------------------------------
$5,960,000 Apogent Technologies Inc.,
2.25%, 10/15/21 6,511,300
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 0.5%
- --------------------------------------------------------------------------------
8,197,000 LifePoint Hospitals Holdings Inc.,
4.50%, 6/1/09 8,565,865
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(Cost $14,284,584) 15,077,165
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 0.3%
COMMERCIAL BANKS -- 0.2%
- --------------------------------------------------------------------------------
73,500 MB Financial Capital Trust I,
8.60%, 9/30/32 2,040,360
- --------------------------------------------------------------------------------
28,200 Sterling Bancshares Capital
Trust III, 8.30%, 9/26/32 769,014
- --------------------------------------------------------------------------------
2,809,374
- --------------------------------------------------------------------------------
REAL ESTATE -- 0.1%
- --------------------------------------------------------------------------------
35,700 Hospitality Properties, Series B,
8.875%, 12/10/07 986,748
- --------------------------------------------------------------------------------
66,500 Mills Corp. (The), Series B,
9.00%, 10/9/07 1,851,360
- --------------------------------------------------------------------------------
2,838,108
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $5,097,500) 5,647,482
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
18
Small Cap Value - Schedule of Investments
MARCH 31, 2004
Value
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 4.2%
Repurchase Agreement, State Street Corp.,
(U.S. Treasury obligations), in a
joint trading account at 0.95%, dated 3/31/04,
due 4/1/04 (Delivery value $69,301,829)
(Cost $69,300,000) $ 69,300,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $1,382,675,512) $1,662,528,067
================================================================================
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 March 31, 2004, was
$3,712,500, which represented 0.2% of net assets.
See Notes to Financial Statements.
- ------
19
Statement of Assets and Liabilities
MARCH 31, 2004
- -------------------------------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
ASSETS
- -------------------------------------------------------------------------------------------------------
Investment securities, at value
(cost of $2,631,837,170,
$1,958,208 and $1,382,675,512, respectively) $2,926,310,328 $1,961,974 $1,662,528,067
- -----------------------------------------------
Cash -- 598,738 1,562,581
- -----------------------------------------------
Receivable for investments sold 27,438,705 -- 6,907,745
- -----------------------------------------------
Receivable for capital shares sold 6,293,054 16,359 124,320
- -----------------------------------------------
Dividends and interest receivable 6,250,751 -- 2,917,486
- -------------------------------------------------------------------------------------------------------
2,966,292,838 2,577,071 1,674,040,199
- -------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------
Disbursements in excess of
demand deposit cash 4,329,701 -- --
- -----------------------------------------------
Payable for investments purchased 24,832,867 958,209 14,991,815
- -----------------------------------------------
Payable for forward foreign currency
exchange contracts 2,670,686 -- --
- -----------------------------------------------
Payable for capital shares redeemed 67,837 -- --
- -----------------------------------------------
Accrued management fees 2,341,775 27 1,610,922
- -----------------------------------------------
Distribution fees payable 124,241 -- 91,584
- -----------------------------------------------
Service fees payable 106,522 -- 90,020
- -------------------------------------------------------------------------------------------------------
34,473,629 958,236 16,784,341
- -------------------------------------------------------------------------------------------------------
NET ASSETS $2,931,819,209 $1,618,835 $1,657,255,858
=======================================================================================================
See Notes to Financial Statements. (continued)
- ------
20
Statement of Assets and Liabilities
MARCH 31, 2004
- ------------------------------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $2,583,538,656 $1,615,069 $1,334,137,623
- ---------------------------------------------
Undistributed net investment income 8,420,513 -- 50,247
- ---------------------------------------------
Accumulated net realized gain on investment
and foreign currency transactions 48,057,568 -- 43,215,433
- ---------------------------------------------
Net unrealized appreciation on investments
and translation of assets and liabilities
in foreign currencies 291,802,472 3,766 279,852,555
- ------------------------------------------------------------------------------------------------------
$2,931,819,209 $1,618,835 $1,657,255,858
======================================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- ------------------------------------------------------------------------------------------------------
Net assets $2,248,157,727 $1,618,835 $1,050,500,297
- ---------------------------------------------
Shares outstanding 286,589,647 161,507 108,157,027
- ---------------------------------------------
Net asset value per share $7.84 $10.02 $9.71
- ------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- ------------------------------------------------------------------------------------------------------
Net assets $183,330,448 N/A $170,783,516
- ---------------------------------------------
Shares outstanding 23,365,986 N/A 17,567,252
- ---------------------------------------------
Net asset value per share $7.85 N/A $9.72
- ------------------------------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE
- ------------------------------------------------------------------------------------------------------
Net assets $457,359,684 N/A $432,261,385
- ---------------------------------------------
Shares outstanding 58,299,808 N/A 44,494,387
- ---------------------------------------------
Net asset value per share $7.84 N/A $9.71
- ------------------------------------------------------------------------------------------------------
C CLASS, $0.01 PAR VALUE
- ------------------------------------------------------------------------------------------------------
Net assets $42,579,188 N/A $3,710,660
- ---------------------------------------------
Shares outstanding 5,426,124 N/A 387,851
- ---------------------------------------------
Net asset value per share $7.85 N/A $9.57
- ------------------------------------------------------------------------------------------------------
R CLASS, $0.01 PAR VALUE
- ------------------------------------------------------------------------------------------------------
Net assets $392,162 N/A N/A
- ---------------------------------------------
Shares outstanding 50,003 N/A N/A
- ---------------------------------------------
Net asset value per share $7.84 N/A N/A
- ------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
21
Statement of Operations
YEAR ENDED MARCH 31, 2004 (EXCEPT AS NOTED)
- ----------------------------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE(1) SMALL CAP VALUE
INVESTMENT INCOME
INCOME:
- ----------------------------------------------------------------------------------------------------
Dividends (including $645,597 from
affiliates for Equity Income and
net of foreign taxes withheld of
$534,987 for Equity Income) $ 80,160,522 $ -- $ 23,156,157
- ---------------------------------------------
Interest 10,072,910 27 1,007,407
- ----------------------------------------------------------------------------------------------------
90,233,432 27 24,163,564
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------
Management fees 21,804,707 27 15,308,934
- ---------------------------------------------
Distribution fees:
- ---------------------------------------------
Advisor Class 792,512 -- 739,454
- ---------------------------------------------
C Class 194,346 -- 25,910
- ---------------------------------------------
Service fees:
- ---------------------------------------------
Advisor Class 792,512 -- 739,454
- ---------------------------------------------
C Class 64,782 -- 8,637
- ---------------------------------------------
Service and distribution fees - R Class 375 -- --
- ---------------------------------------------
Directors' fees and expenses 38,961 -- 25,261
- ---------------------------------------------
Other expenses 22,735 -- 10,627
- ----------------------------------------------------------------------------------------------------
23,710,930 27 16,858,277
- ----------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 66,522,502 -- 7,305,287
- ----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------
NET REALIZED GAIN ON:
- ---------------------------------------------
Investment transactions
(including $13,914,062, $-- and
$(841,295) from affiliates, respectively) 173,431,118 -- 158,244,596
- ---------------------------------------------
Foreign currency transactions 4,824,227 -- --
- ----------------------------------------------------------------------------------------------------
178,255,345 -- 158,244,596
- ----------------------------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION ON:
- ---------------------------------------------
Investments 322,297,174 3,766 338,540,071
- ---------------------------------------------
Translation of assets and liabilities
in foreign currencies (2,670,686) -- --
- ----------------------------------------------------------------------------------------------------
319,626,488 3,766 338,540,071
- ----------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 497,881,833 3,766 496,784,667
- ----------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $564,404,335 $3,766 $504,089,954
====================================================================================================
(1) March 31, 2004 was the inception date of Mid Cap Value.
See Notes to Financial Statements.
- ------
22
Statement of Changes in Net Assets
YEARS ENDED MARCH 31, 2004 AND MARCH 31, 2003 (EXCEPT AS NOTED)
- -------------------------------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE
- -------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 2004 2003 2004(1)
OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment income $ 66,522,502 $ 34,031,293 $ --
- ---------------------------------------------
Net realized gain (loss) 178,255,345 (86,742,952) --
- ---------------------------------------------
Change in net unrealized appreciation 319,626,488 (117,808,831) 3,766
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 564,404,335 (170,520,490) 3,766
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------
From net investment income:
- ---------------------------------------------
Investor Class (49,739,501) (28,852,243) --
- ---------------------------------------------
Institutional Class (3,881,824) (2,051,311) --
- ---------------------------------------------
Advisor Class (8,244,304) (2,523,809) --
- ---------------------------------------------
C Class (476,461) (139,021) --
- ---------------------------------------------
R Class (1,670) -- --
- ---------------------------------------------
From net realized gains:
- ---------------------------------------------
Investor Class (29,995,592) (17,093,197) --
- ---------------------------------------------
Institutional Class (2,250,432) (1,246,174) --
- ---------------------------------------------
Advisor Class (5,738,165) (1,733,545) --
- ---------------------------------------------
C Class (477,245) (129,993) --
- ---------------------------------------------
R Class (40) -- --
- -------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (100,805,234) (53,769,293) --
- -------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- -------------------------------------------------------------------------------------------------------
Net increase in net assets from capital
share transactions 943,740,565 579,060,036 1,615,069
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 1,407,339,666 354,770,253 1,618,835
NET ASSETS
- -------------------------------------------------------------------------------------------------------
Beginning of period 1,524,479,543 1,169,709,290 --
- -------------------------------------------------------------------------------------------------------
End of period $2,931,819,209 $1,524,479,543 $1,618,835
=======================================================================================================
Undistributed accumulated net
investment income (loss) $8,420,513 $(35,891) --
=======================================================================================================
(1) March 31, 2004 was the inception date of Mid Cap Value.
See Notes to Financial Statements. (continued)
- ------
23
Statement of Changes in Net Assets
YEARS ENDED MARCH 31, 2004 AND MARCH 31, 2003
- ----------------------------------------------------------------------------------------------
SMALL CAP VALUE
- ----------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2004 2003
OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income $ 7,305,287 $ 4,238,703
- --------------------------------------------------
Net realized gain (loss) 158,244,596
(106,206,454)
- --------------------------------------------------
Change in net unrealized appreciation 338,540,071 (247,914,277)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 504,089,954 (349,882,028)
- ----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------
From net investment income:
- --------------------------------------------------
Investor Class (4,736,989) (2,197,018)
- --------------------------------------------------
Institutional Class (974,045) (438,373)
- --------------------------------------------------
Advisor Class (863,071) (146,630)
- --------------------------------------------------
From net realized gains:
- --------------------------------------------------
Investor Class -- (35,958,617)
- --------------------------------------------------
Institutional Class -- (4,104,621)
- --------------------------------------------------
Advisor Class -- (8,177,684)
- --------------------------------------------------
C Class -- (128,344)
- ----------------------------------------------------------------------------------------------
Decrease in net assets from distributions (6,574,105) (51,151,287)
- ----------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets
from capital share transactions 233,438,241 (249,311,127)
- ----------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 730,954,090 (650,344,442)
NET ASSETS
- ----------------------------------------------------------------------------------------------
Beginning of period 926,301,768 1,576,646,210
- ----------------------------------------------------------------------------------------------
End of period $1,657,255,858 $ 926,301,768
==============================================================================================
Undistributed net investment income $50,247 $192,836
==============================================================================================
See Notes to Financial Statements.
- ------
24
Notes to Financial Statements
MARCH 31, 2004
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), Mid
Cap Value Fund (Mid Cap Value) and Small Cap Value Fund (Small Cap Value)
(collectively, the funds) are three 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. Mid Cap Value
and Small Cap Value's investment objective is long-term capital growth. The
production of income is a secondary objective. Mid Cap Value seeks to achieve
its investment objective by investing in stocks of mid-sized market
capitalization companies that management believes to be undervalued at the time
of purchase. 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. Mid Cap
Value is authorized to issue the Investor 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 Equity Income's R Class commenced on
August 29, 2003. Mid Cap Value's Investor Class incepted on March 31, 2004.
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 may be valued through a
commercial pricing service or at amortized cost, which approximates fair value.
When valuations are not readily available, securities are valued at fair value
as determined in accordance with procedures adopted by the Board of Directors.
If an event were to occur after the close of the foreign exchange on which a
portfolio security principally trades, but before the net asset value per-share
of the fund was determined that was likely to materially affect the net asset
value of the fund, then that security would be 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.
(continued)
- ------
25
Notes to Financial Statements
MARCH 31, 2004
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EQUITY-LINKED DEBT AND LINKED-EQUITY 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.
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 each fund's policy to distribute substantially 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)
- ------
26
Notes to Financial Statements
MARCH 31, 2004
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 each
funds' average daily closing net assets during the previous month.
Following are the annual management fee schedules for the funds:
- --------------------------------------------------------------------------------
EQUITY MID CAP SMALL CAP
INCOME VALUE VALUE
- --------------------------------------------------------------------------------
Investor 1.00% 1.00% 1.25%
- --------------------------------------------------------------------------------
Institutional 0.80% N/A 1.05%
- --------------------------------------------------------------------------------
Advisor 0.75% N/A 1.00%
- --------------------------------------------------------------------------------
C Class 1.00% N/A 1.25%
- --------------------------------------------------------------------------------
R Class 1.00% N/A 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 year ended March 31, 2004, 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. On March 31, 2004, ACIM
purchased 100,000 shares to seed operations of Mid Cap Value. ACIM owned
approximately 61% of Mid Cap Value as of March 31, 2004.
During the year ended March 31, 2004, Equity Income and Small Cap Value 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. Equity Income and
Small Cap Value have a bank line of credit agreement with JPMorgan Chase Bank
(JPMCB). JPMCB is a wholly owned subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the year ended
March 31, 2004, were as follows:
- --------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- --------------------------------------------------------------------------------
Purchases $2,965,644,817 $958,208 $1,587,642,855
- --------------------------------------------------------------------------------
Proceeds from sales $2,007,936,513 -- $1,378,452,245
- --------------------------------------------------------------------------------
(continued)
- ------
27
Notes to Financial Statements
MARCH 31, 2004
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows:
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- ---------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004(1)
SHARES AUTHORIZED 500,000,000 15,000,000 300,000,000
=====================================================================================================================
Sold 153,270,708 $1,124,269,043 161,507 $1,615,069 36,737,953 $310,869,747
- ----------------------------
Issued in reinvestment
of distributions 9,669,527 73,026,020 -- -- 503,785 4,504,869
- ----------------------------
Redeemed (81,598,735) (601,812,279) -- -- (33,311,555) (277,480,949)
- ---------------------------------------------------------------------------------------------------------------------
Net increase 81,341,500 $ 595,482,784 161,507 $1,615,069 3,930,183 $ 37,893,667
=====================================================================================================================
YEAR ENDED MARCH 31, 2003
SHARES AUTHORIZED 400,000,000 N/A 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
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 50,000,000 N/A 50,000,000
=====================================================================================================================
Sold 14,063,270 $103,964,067 8,317,379 $ 71,230,263
- ----------------------------
Issued in reinvestment
of distributions 710,310 5,375,991 98,503 884,214
- ----------------------------
Redeemed (3,906,102) (28,792,635) (3,190,831) (26,869,610)
- ---------------------------------------------------------------------------------------------------------------------
Net increase 10,867,478 $ 80,547,423 5,225,051 $ 45,244,867
=====================================================================================================================
YEAR ENDED MARCH 31, 2003
SHARES AUTHORIZED 35,000,000 N/A 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
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 125,000,000 N/A 100,000,000
=====================================================================================================================
Sold 48,332,802 $ 355,587,095 26,516,995 $224,990,870
- ----------------------------
Issued in reinvestment
of distributions 1,630,619 12,334,828 85,130 772,301
- ----------------------------
Redeemed (16,884,790) (126,222,969) (9,015,360) (74,871,466)
- ---------------------------------------------------------------------------------------------------------------------
Net increase 33,078,631 $ 241,698,954 17,586,765 $150,891,705
=====================================================================================================================
YEAR ENDED MARCH 31, 2003
SHARES AUTHORIZED 35,000,000 N/A 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
=====================================================================================================================
(1) March 31, 2004 was the inception date of Mid Cap Value.
(continued)
- ------
28
Notes to Financial Statements
MARCH 31, 2004
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
Transactions in shares of the funds were as follows:
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- --------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 20,000,000 N/A 12,500,000
====================================================================================================================
Sold 3,634,191 $26,938,054 4,333 $ 47,526
- ----------------------------
Issued in reinvestment
of distributions 108,371 816,769 -- --
- ----------------------------
Redeemed (288,272) (2,134,229) (78,777) (639,524)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 3,454,290 $25,620,594 (74,444) $(591,998)
====================================================================================================================
YEAR ENDED MARCH 31, 2003
SHARES AUTHORIZED 10,000,000 N/A 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
- --------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004(1)
SHARES AUTHORIZED 10,000,000 N/A N/A
====================================================================================================================
Sold 53,482 $418,526
- ----------------------------
Issued in reinvestment
of distributions 221 1,710
- ----------------------------
Redeemed (3,700) (29,426)
- --------------------------------------------------------------------------------------------------------------------
Net increase 50,003 $390,810
====================================================================================================================
(1) August 29, 2003 (commencement of sale) through March 31, 2004 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 year
ended March 31, 2004 follows:
- --------------------------------------------------------------------------------
SHARE BALANCE PURCHASE SALES REALIZED
FUND/COMPANY 3/31/03 COST COST GAIN (LOSS)
- --------------------------------------------------------------------------------
EQUITY INCOME
- --------------------------------------------------------------------------------
Nordson Corp.(1) 1,190,141 $10,129,897 $36,752,600 $13,914,062
================================================================================
SMALL CAP VALUE
- --------------------------------------------------------------------------------
O'Charleys Inc.(1)(2) -- $16,531,070 $16,531,070 $(886,787)
- ---------------------
Osteotech Inc.(1)(2) -- 7,091,840 1,375,763 45,492
- --------------------------------------------------------------------------------
$23,622,910 $17,906,833 $(841,295)
================================================================================
- --------------------------------------------------------------------------------
DIVIDEND MARCH 31, 2004
FUND/COMPANY INCOME SHARE BALANCE MARKET VALUE
- --------------------------------------------------------------------------------
EQUITY INCOME
- --------------------------------------------------------------------------------
Nordson Corp.(1) $645,597 100,804 $3,776,118
================================================================================
SMALL CAP VALUE
- --------------------------------------------------------------------------------
O'Charleys Inc.(1)(2) -- -- --
- ---------------------
Osteotech Inc.(1)(2) -- 765,000 $4,934,250
- --------------------------------------------------------------------------------
-- $4,934,250
================================================================================
(1) Issuer was not an affiliate at March 31, 2004.
(2) Non-income producing.
(continued)
- ------
29
Notes to Financial Statements
MARCH 31, 2004
6. BANK LINE OF CREDIT
Equity Income and Small Cap Value, along with certain other funds managed by
ACIM, have a $650,000,000 unsecured bank line of credit agreement with JPMCB,
which was renewed from $620,000,000 effective December 17, 2003. Equity Income
and Small Cap Value 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%. Equity Income and Small Cap Value did not borrow
from the line during the year ended March 31, 2004.
7. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2004
and March 31, 2003 were as follows:
EQUITY INCOME MID CAP VALUE
- --------------------------------------------------------------------------------
2004 2003 2004
- --------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
- --------------------------------------------------------------------------------
Ordinary income $92,565,875 $53,769,293 --
- --------------------------------------------------------------------------------
Long-term capital gains $8,239,359 -- --
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SMALL CAP VALUE
- --------------------------------------------------------------------------------
2004 2003
- --------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
- --------------------------------------------------------------------------------
Ordinary income $6,574,105 $48,700,444
- --------------------------------------------------------------------------------
Long-term capital gains -- $2,450,843
- --------------------------------------------------------------------------------
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 on the financial statements.
As of March 31, 2004, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- ----------------------------------------------------------------------------------------------
COMPONENTS OF DISTRIBUTABLE EARNINGS
AND TAX COST
- ----------------------------------------------------------------------------------------------
Federal tax cost of investments $2,659,162,189 $1,958,208 $1,409,306,152
==============================================================================================
Gross tax appreciation of investments $287,044,322 $5,118 $271,161,028
- -----------------------------------------
Gross tax depreciation of investments (19,896,183) (1,352) (17,939,113)
- ----------------------------------------------------------------------------------------------
Net tax appreciation of investments $267,148,139 $3,766 $253,221,915
==============================================================================================
Net tax depreciation on derivatives
and translation of
assets and liabilities in
foreign currencies -- -- --
- ----------------------------------------------------------------------------------------------
Net tax appreciation $267,148,139 $3,766 $253,221,915
==============================================================================================
Undistributed ordinary income $62,987,228 -- $55,860,768
- -----------------------------------------
Accumulated long-term gains $18,145,186 -- $14,035,552
- ----------------------------------------------------------------------------------------------
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, received return of capital dividends and the realization for tax purposes
of unrealized gains on certain forward foreign currency contracts.
(continued)
- ------
30
Notes to Financial Statements
MARCH 31, 2004
8. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
Equity Income and Small Cap Value hereby designate $75,956,598 and $6,574,105,
respectively, of qualified dividend income for the fiscal year ended March 31,
2004.
During the fiscal year ended March 31, 2004, Equity Income distributed
$8,239,359, which was designated as capital gains dividends.
For corporate taxpayers, the following percentage of the ordinary income
distributions paid during the fiscal year ended March 31, 2004, qualify for the
corporate dividends received deduction.
- --------------------------------------------------------------------------------
EQUITY INCOME SMALL CAP VALUE
- --------------------------------------------------------------------------------
100% 100%
- --------------------------------------------------------------------------------
- ------
31
Equity Income - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER-SHARE DATA
Net Asset Value, Beginning of Period $6.22 $7.36 $6.47 $5.50 $5.95
- ------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Income(1) 0.22 0.17 0.17 0.18 0.21
- -------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.71 (1.05) 0.93 0.96 0.03
- ------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.93 (0.88) 1.10 1.14 0.24
- ------------------------------------------------------------------------------------------------------------------
Distributions
- -------------------------------------------
From Net Investment Income (0.19) (0.16) (0.17) (0.17) (0.21)
- -------------------------------------------
From Net Realized Gains (0.12) (0.10) (0.04) -- (0.48)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.31) (0.26) (0.21) (0.17) (0.69)
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $7.84 $6.22 $7.36 $6.47 $5.50
==================================================================================================================
TOTAL RETURN(2) 31.30% (12.09)% 17.35% 20.85% 3.88%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.00% 1.00% 1.00% 1.00% 1.00%
- -------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 2.95% 2.60% 2.49% 3.02% 3.41%
- -------------------------------------------
Portfolio Turnover Rate 91% 120% 139% 169% 141%
- -------------------------------------------
Net Assets, End of Period
(in thousands) $2,248,158 $1,277,478 $1,025,143 $467,425 $282,692
- ------------------------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. 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.
See Notes to Financial Statements.
- ------
32
Equity Income - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ------------------------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER-SHARE DATA
Net Asset Value, Beginning of Period $6.23 $7.36 $6.47 $5.50 $5.95
- ------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------------
Net Investment Income(1) 0.24 0.19 0.19 0.20 0.22
- --------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.71 (1.04) 0.92 0.95 0.03
- ------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.95 (0.85) 1.11 1.15 0.25
- ------------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------------------------
From Net Investment Income (0.21) (0.18) (0.18) (0.18) (0.22)
- --------------------------------------------
From Net Realized Gains (0.12) (0.10) (0.04) -- (0.48)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.33) (0.28) (0.22) (0.18) (0.70)
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $7.85 $6.23 $7.36 $6.47 $5.50
==================================================================================================================
TOTAL RETURN(2) 31.51% (11.77)% 17.40% 21.26% 4.09%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.80% 0.80% 0.80% 0.80% 0.80%
- --------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 3.15% 2.80% 2.69% 3.22% 3.61%
- --------------------------------------------
Portfolio Turnover Rate 91% 120% 139% 169% 141%
- --------------------------------------------
Net Assets, End of Period (in thousands) $183,330 $77,837 $65,738 $19,130 $13,716
- ------------------------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. 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.
See Notes to Financial Statements.
- ------
33
Equity Income - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER-SHARE DATA
Net Asset Value, Beginning of Period $6.22 $7.36 $6.47 $5.50 $5.95
- ------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Income(1) 0.20 0.16 0.16 0.17 0.20
- -------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.72 (1.05) 0.92 0.96 0.02
- ------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.92 (0.89) 1.08 1.13 0.22
- ------------------------------------------------------------------------------------------------------------------
Distributions
- -------------------------------------------
From Net Investment Income (0.18) (0.15) (0.15) (0.16) (0.19)
- -------------------------------------------
From Net Realized Gains (0.12) (0.10) (0.04) -- (0.48)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (0.25) (0.19) (0.16) (0.67)
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $7.84 $6.22 $7.36 $6.47 $5.50
==================================================================================================================
TOTAL RETURN(2) 30.97% (12.30)% 17.05% 20.55% 3.61%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.25% 1.25% 1.25% 1.25% 1.25%
- -------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 2.70% 2.35% 2.24% 2.77% 3.16%
- -------------------------------------------
Portfolio Turnover Rate 91% 120% 139% 169% 141%
- -------------------------------------------
Net Assets, End of Period (in thousands) $457,360 $156,911 $74,868 $27,887 $20,281
- ------------------------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. 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.
See Notes to Financial Statements.
- ------
34
Equity Income - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- ----------------------------------------------------------------------------------------------
C CLASS
- ----------------------------------------------------------------------------------------------
2004 2003 2002(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $6.21 $7.36 $6.89
- ----------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------
Net Investment Income(2) 0.15 0.11 0.07
- ------------------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.73 (1.06) 0.50
- ----------------------------------------------------------------------------------------------
Total From Investment Operations 1.88 (0.95) 0.57
- ----------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------
From Net Investment Income (0.12) (0.10) (0.06)
- ------------------------------------------------------
From Net Realized Gains (0.12) (0.10) (0.04)
- ----------------------------------------------------------------------------------------------
Total Distributions (0.24) (0.20) (0.10)
- ----------------------------------------------------------------------------------------------
Net Asset Value, End of Period $7.85 $6.21 $7.36
==============================================================================================
TOTAL RETURN(3) 30.37% (13.08)% 8.45%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 2.00% 2.00% 2.00%(4)
- ------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 1.95% 1.60% 1.36%(4)
- ------------------------------------------------------
Portfolio Turnover Rate 91% 120% 139%(5)
- ------------------------------------------------------
Net Assets, End of Period (in thousands) $42,579 $12,254 $3,960
- ----------------------------------------------------------------------------------------------
(1) July 13, 2001 (commencement of sale) through March 31, 2002.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2002.
See Notes to Financial Statements.
- ------
35
Equity Income - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
- --------------------------------------------------------------------------------
R CLASS
- --------------------------------------------------------------------------------
2004(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $7.22
- --------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------------------
Net Investment Income(2) 0.11
- -----------------------------------------------------------------
Net Realized and Unrealized Gain 0.76
- --------------------------------------------------------------------------------
Total From Investment Operations 0.87
- --------------------------------------------------------------------------------
Distributions
- -----------------------------------------------------------------
From Net Investment Income (0.13)
- -----------------------------------------------------------------
From Net Realized Gains (0.12)
- --------------------------------------------------------------------------------
Total Distributions (0.25)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $7.84
================================================================================
TOTAL RETURN(3) 12.19%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.50%(4)
- -----------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 2.44%(4)
- -----------------------------------------------------------------
Portfolio Turnover Rate 91%(5)
- -----------------------------------------------------------------
Net Assets, End of Period (in thousands) $392
- --------------------------------------------------------------------------------
(1) August 29, 2003 (commencement of sale) through March 31, 2004.
(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 year ended March 31, 2004.
See Notes to Financial Statements.
- ------
36
Mid Cap Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
2004(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------------------
Net Investment Income --(2)
- -----------------------------------------------------------------
Net Realized and Unrealized Gain 0.02
- --------------------------------------------------------------------------------
Total From Investment Operations 0.02
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $10.02
================================================================================
TOTAL RETURN(3) 0.20%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.00%(4)
- -----------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 0.00%(4)
- -----------------------------------------------------------------
Portfolio Turnover Rate 0%
- -----------------------------------------------------------------
Net Assets, End of Period (in thousands) $1,619
- --------------------------------------------------------------------------------
(1) For the one day period ended March 31, 2004 (inception date).
(2) Per-share amount was less than $0.005.
(3) Total returns for periods less than one year are not annualized.
(4) Annualized.
See Notes to Financial Statements.
- ------
37
Small Cap Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ----------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ----------------------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER-SHARE DATA
Net Asset Value, Beginning of Period $6.44 $8.62 $6.60 $5.04 $4.73
- ----------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Income(1) 0.05 0.03 0.02 0.07 0.05
- -------------------------------------------
Net Realized and Unrealized Gain (Loss) 3.26 (1.87) 2.20 1.74 0.60
- ----------------------------------------------------------------------------------------------------------------
Total From Investment Operations 3.31 (1.84) 2.22 1.81 0.65
- ----------------------------------------------------------------------------------------------------------------
Distributions
- -------------------------------------------
From Net Investment Income (0.04) (0.02) (0.02) (0.05) (0.06)
- -------------------------------------------
From Net Realized Gains -- (0.32) (0.18) (0.20) (0.28)
- ----------------------------------------------------------------------------------------------------------------
Total Distributions (0.04) (0.34) (0.20) (0.25) (0.34)
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.71 $6.44 $8.62 $6.60 $5.04
================================================================================================================
TOTAL RETURN(2) 51.53% (21.55)% 33.97% 36.51% 14.37%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.26% 1.25% 1.25% 1.25% 1.25%
- -------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 0.59% 0.37% 0.27% 1.10% 1.04%
- -------------------------------------------
Portfolio Turnover Rate 110% 104% 73% 144% 178%
- -------------------------------------------
Net Assets, End of Period (in thousands) $1,050,500 $670,755 $1,305,952 $225,517 $17,690
- ----------------------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. 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.
See Notes to Financial Statements.
- ------
38
Small Cap Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ------------------------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER-SHARE DATA
Net Asset Value, Beginning of Period $6.45 $8.63 $6.61 $5.04 $4.74
- ------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------------
Net Investment Income(1) 0.07 0.04 0.03 0.07 0.07
- --------------------------------------------
Net Realized and Unrealized Gain (Loss) 3.26 (1.87) 2.20 1.76 0.58
- ------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 3.33 (1.83) 2.23 1.83 0.65
- ------------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------------------------
From Net Investment Income (0.06) (0.03) (0.03) (0.06) (0.07)
- --------------------------------------------
From Net Realized Gains -- (0.32) (0.18) (0.20) (0.28)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.06) (0.35) (0.21) (0.26) (0.35)
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.72 $6.45 $8.63 $6.61 $5.04
==================================================================================================================
TOTAL RETURN(2) 51.75% (21.38)% 34.11% 36.99% 14.39%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.06% 1.05% 1.05% 1.05% 1.05%
- --------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 0.79% 0.57% 0.47% 1.30% 1.24%
- --------------------------------------------
Portfolio Turnover Rate 110% 104% 73% 144% 178%
- -------------------------------------------
Net Assets, End of Period (in thousands) $170,784 $79,546 $83,712 $8,593 $2,359
- ------------------------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. 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.
See Notes to Financial Statements.
- ------
39
Small Cap Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- ------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000(1)
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(2) 0.03 0.01 --(3) 0.05 0.03
- -------------------------------------------
Net Realized and Unrealized Gain (Loss) 3.27 (1.87) 2.21 1.75 0.29
- ------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 3.30 (1.86) 2.21 1.80 0.32
- ------------------------------------------------------------------------------------------------------------------
Distributions
- -------------------------------------------
From Net Investment Income (0.02) (0.01) (0.01) (0.04) (0.01)
- -------------------------------------------
From Net Realized Gains -- (0.32) (0.18) (0.20) --
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.02) (0.33) (0.19) (0.24) (0.01)
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.71 $6.43 $8.62 $6.60 $5.04
==================================================================================================================
TOTAL RETURN(4) 51.38% (21.85)% 33.74% 36.18% 6.86%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.51% 1.50% 1.50% 1.50% 1.50%(5)
- -------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 0.34% 0.12% 0.02% 0.85% 2.21%(5)
- -------------------------------------------
Portfolio Turnover Rate 110% 104% 73% 144% 178%(6)
- -------------------------------------------
Net Assets, End of Period
(in thousands) $432,261 $173,064 $182,986 $20,600 $91
- ------------------------------------------------------------------------------------------------------------------
(1) December 31, 1999 (commencement of sale) through March 31, 2000.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount is less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2000.
See Notes to Financial Statements.
- ------
40
Small Cap Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- ---------------------------------------------------------------------------------------------
C CLASS
- ---------------------------------------------------------------------------------------------
2004 2003 2002(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $6.35 $8.59 $7.57
- ---------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------
Net Investment Loss(2) (0.03) (0.04) (0.05)
- ----------------------------------------------------
Net Realized and Unrealized Gain (Loss) 3.25 (1.88) 1.23
- ---------------------------------------------------------------------------------------------
Total From Investment Operations 3.22 (1.92) 1.18
- ---------------------------------------------------------------------------------------------
Distributions
- ----------------------------------------------------
From Net Investment Income -- -- --(3)
- ----------------------------------------------------
From Net Realized Gains -- (0.32) (0.16)
- ---------------------------------------------------------------------------------------------
Total Distributions -- (0.32) (0.16)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.57 $6.35 $8.59
=============================================================================================
TOTAL RETURN(4) 50.71% (22.58)% 15.80%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 2.26% 2.25% 2.25%(5)
- ----------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (0.41)% (0.63)% (0.78)%(5)
- ----------------------------------------------------
Portfolio Turnover Rate 110% 104% 73%(6)
- ----------------------------------------------------
Net Assets, End of Period (in thousands) $3,711 $2,936 $3,997
- ---------------------------------------------------------------------------------------------
(1) June 1, 2001 (commencement of sale) through March 31, 2002.
(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, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2002.
See Notes to Financial Statements.
- ------
41
Independent Auditors' Report
The Board of Directors and Shareholders
American Century Capital Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedule of investments, of Equity Income Fund, Mid Cap Value Fund, and
Small Cap Value Fund, (collectively, the "Funds"), three of the funds comprising
American Century Capital Portfolios, Inc., as of March 31, 2004, and the related
statements of operations for the year then ended (for March 31, 2004 for Mid Cap
Value Fund), the statements of changes in net assets for each of the two years
in the period then ended (for March 31, 2004 for Mid Cap Value Fund), and the
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2004, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of
Equity Income Fund, Mid Cap Value Fund, and Small Cap Value Fund as of March 31,
2004, the results of their operations for the year then ended (for March 31,
2004 for Mid Cap Value Fund), the changes in their net assets for each of the
two years in the period then ended (for March 31, 2004 for Mid Cap Value Fund),
and their financial highlights for the periods presented, in conformity with
accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 11, 2004
- ------
42
Management
The individuals listed below serve as directors or officers of the funds. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
75, although the remaining independent directors may temporarily waive this
requirement on a case-by-case basis. Those listed as interested directors are
"interested" primarily by virtue of their engagement as officers of American
Century Companies, Inc. (ACC) or its wholly-owned subsidiaries, including the
fund's investment advisor, American Century Investment Management, Inc. (ACIM);
the fund's principal underwriter, American Century Investment Services, Inc.
(ACIS); and the fund's transfer agent, American Century Services Corporation
(ACSC).
The other directors (more than three-fourths of the total number) are
independent; that is, they are not employees or officers of, and have no
financial interest in, ACC or any of its wholly-owned subsidiaries, including
ACIM, ACIS, and ACSC. The directors serve in this capacity for five registered
investment companies in the American Century family of funds.
All persons named as officers of the funds also serve in a similar capacity for
the other 12 investment companies advised by ACIM, unless otherwise noted. Only
officers with policy-making functions are listed. No officer is compensated for
his or her service as an officer of the funds. The listed officers are
interested persons of the funds and are appointed or re-appointed on an annual
basis.
INDEPENDENT DIRECTORS
- --------------------------------------------------------------------------------
THOMAS A. BROWN (64), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 23
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Strategic Account Implementation
Manager, Applied Industrial Technologies, Inc., a corporation engaged in the
sale of bearings and power transmission products
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
ROBERT W. DOERING, M.D. (71), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director Emeritus(1)
LENGTH OF TIME SERVED (YEARS): 2
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly a general surgeon
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
ANDREA C. HALL, PH.D. (59), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, Midwest
Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Midwest Research Institute
- --------------------------------------------------------------------------------
(1) Dr. Robert Doering resigned as full-time director, effective November 5,
2001, after serving in such capacity for 33 years. Dr. Doering continues to
serve the board in an advisory capacity. His position as Director Emeritus is
an advisory position and involves attendance at one board meeting per year to
review prior year-end results for the funds. He receives all regular board
communications, including monthly mailings, industry newsletters, email
communications, and company information, but not quarterly board and
committee materials relating to meetings that he does not attend. Dr. Doering
is not a director or a member of the board and has no voting power relating
to any matters relating to fund operations. He is not an interested person of
the funds or ACIM. He receives an annual stipend of $2,500 for his services.
(continued)
- ------
43
Management
INDEPENDENT DIRECTORS (CONTINUED)
- --------------------------------------------------------------------------------
D.D. (DEL) HOCK (69), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Chairman, Public
Service Company of Colorado
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Allied Motion Technologies, Inc.
and J.D. Edwards & Company
- --------------------------------------------------------------------------------
DONALD H. PRATT (66), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director, Vice Chairman of the Board
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Western Investments,
Inc.; Retired Chairman of the Board, Butler Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Butler Manufacturing Company and
Atlas-Copco, North America Inc.
- --------------------------------------------------------------------------------
GALE E. SAYERS (60), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer,
and Founder, Sayers Computer Source
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
M. JEANNINE STRANDJORD (58), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 9
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President and Chief
Integration Officer, Sprint Corporation (September 2003 to present); Senior Vice
President - Financial Services, Sprint Corporation (January 2003 to September
2003); Senior Vice President, Finance - Global Markets Group, Sprint Corporation
(November 1998 to January 2003)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide
- --------------------------------------------------------------------------------
TIMOTHY S. WEBSTER (42), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 2
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, American Italian Pasta Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JAMES E. STOWERS, JR. (80),(1) 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director, Chairman of the Board
LENGTH OF TIME SERVED (YEARS): 45
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Director, and controlling
shareholder, ACC; Chairman, ACSC and other ACC subsidiaries; Director, ACIM,
ACSC, and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
JAMES E. STOWERS III (45),(1) 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 13
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Co-Chairman, ACC (September 2000 to
present); Chief Executive Officer, ACC (June 1996 to September 2000); Director,
ACC, ACIM, ACSC and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
(1) James E. Stowers, Jr. is the father of James E. Stowers III.
(continued)
- ------
44
Management
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM M. LYONS (48), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: President
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC and
other ACC subsidiaries (September 2000 to present); President, ACC (June 1997 to
present); President, ACIM (September 2002 to present); President, ACIS (July
2003 to present); Chief Operating Officer, ACC (June 1996 to September 2000);
Also serves as: Executive Vice President, ACSC and other ACC subsidiaries
- --------------------------------------------------------------------------------
ROBERT T. JACKSON (58), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Executive Vice President
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Administrative Officer, ACC
(August 1997 to present); Chief Financial Officer, ACC (May 1995 to October
2002); President, ACSC (January 1999 to present); Executive Vice President, ACC
(May 1995 to present); Also serves as: Executive Vice President and Chief
Financial Officer, ACIM, ACIS and other ACC subsidiaries; and Treasurer, ACIM
- --------------------------------------------------------------------------------
MARYANNE ROEPKE (48), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer, and Chief
Accounting Officer
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President (April 1998
to present) and Assistant Treasurer (September 1985 to present), ACSC
- --------------------------------------------------------------------------------
DAVID C. TUCKER (45), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, ACIM, ACIS,
ACSC and other ACC subsidiaries (June 1998 to present); General Counsel, ACC,
ACIM, ACIS, ACSC and other ACC subsidiaries (June 1998 to present)
- --------------------------------------------------------------------------------
ROBERT LEACH (37), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Controller
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACSC (February 2000
to present); Controller-Fund Accounting, ACSC (June 1997 to present)
- --------------------------------------------------------------------------------
JON ZINDEL (36), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Tax Officer
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, Corporate Tax, ACSC
(April 1998 to present); Vice President, ACIM, ACIS, and other ACC subsidiaries
(April 1999 to present); President, American Century Employee Benefit Services,
Inc. (January 2000 to December 2000); Treasurer, American Century Employee
Benefit Services, Inc. (December 2000 to December 2003); Treasurer, American
Century Ventures, Inc. (December 1999 to January 2001)
- --------------------------------------------------------------------------------
The SAI has additional information about the funds' directors and is available
without charge upon request by calling 1-800-345-2021.
- ------
45
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. One class of shares is
authorized for sale by Mid Cap Value: Investor Class. Four classes of shares are
authorized by Small Cap Value: Investor Class, Institutional Class, Advisor
Class, and C Class. The total expense ratios of Advisor, C, and R Class shares
are higher than that of Investor Class shares. The total expense ratio of
Institutional Class shares is lower.
INVESTOR CLASS shares are available for purchase in two ways: 1) directly from
American Century without any commissions or other fees; or 2) through a
broker-dealer, which may require payment of a transaction fee to the broker.
INSTITUTIONAL CLASS shares are available to large investors such as endowments,
foundations, and retirement plans, and to financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million ($3 million
for endowments and foundations) in an American Century fund or at least $10
million in multiple funds. In recognition of the larger investments and account
balances and comparatively lower transaction costs, the total expense ratio of
Institutional Class shares is 0.20% less than the total expense ratio of
Investor Class shares.
ADVISOR CLASS shares are sold primarily through institutions such as 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 contingent deferred sales charge (CDSC) of 1.00%. There is no CDSC
on shares acquired through reinvestment of dividends or capital gains. C Class
shares also are subject to a Rule 12b-1 service and distribution fee of 1.00%.
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.
- ------
46
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 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 funds. 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 americancentury.com and on the Securities and
Exchange Commission's Web site at sec.gov.
- ------
47
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 NASDAQ COMPOSITE INDEX is a market-value weighted index of all domestic and
international common stocks listed on the Nasdaq stock market.
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 DOW JONES INDUSTRIAL AVERAGE (DJIA) is a price-weighted average of 30
actively traded blue chip stocks, primarily industrials but including
service-oriented firms. Prepared and published by Dow Jones & Co., it is the
oldest and most widely quoted of all the market indicators.
The RUSSELL 3000 INDEX is a market-capitalization weighted index created by
Frank Russell Company to measure the performance of the 3,000 largest publicly
traded U.S. companies.
The RUSSELL MIDCAP INDEX measures the performance of the 800 smallest of the
1,000 largest publicly traded U.S. companies, based on total market
capitalization.
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.
- ------
48
[inside back cover - blank]
[back cover]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
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1-800-345-2021 or 816-531-5575
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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.
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
COMPANIES
The American Century logo, American Century and
American Century Investments are service marks
of American Century Services Corporation.
0405 American Century Investment Services, Inc.
SH-ANN-38154S (c)2004 American Century Services Corporation
MARCH 31, 2004
American Century Investments
Annual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of side-by-side bridges]
Value Fund
Large Company Value Fund
[american century logo and text logo]
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
Independent Auditors' Report............................................. 40
OTHER INFORMATION
Management............................................................... 41
Share Class Information.................................................. 44
Additional Information................................................... 46
Index Definitions........................................................ 47
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 annual report for the Value and Large
Company Value funds for the year ended March 31, 2004.
The report includes comparative performance figures, portfolio and market
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.
Also, through our Web site, americancentury.com, we provide quarterly
commentaries on all American Century portfolios, the views of our senior
investment officers, and other communications about investments, portfolio
strategy, and the markets.
Your next shareholder report for these funds will be the semiannual report dated
September 30, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
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 MARCH 31, 2004
--------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 40.66% 9.96% 13.57% 12.87% 9/1/93
- --------------------------------------------------------------------------------
LIPPER MULTI-CAP
VALUE INDEX 42.99% 5.68% 11.35% 10.61%(1) --
- --------------------------------------------------------------------------------
S&P 500 INDEX 35.12% -1.20% 11.68% 10.76%(1) --
- --------------------------------------------------------------------------------
Institutional Class 40.93% 10.14% -- 8.46% 7/31/97
- --------------------------------------------------------------------------------
Advisor Class 40.56% 9.70% -- 10.79% 10/2/96
- --------------------------------------------------------------------------------
A Class 1/31/03
No sales charge* 40.55% -- -- 30.96%
With sales charge* 32.51% -- -- 24.49%
- --------------------------------------------------------------------------------
B Class 1/31/03
No sales charge* 39.51% -- -- 30.23%
With sales charge* 35.51% -- -- 26.92%
- --------------------------------------------------------------------------------
C Class 39.73% -- -- 5.89% 6/4/01
- --------------------------------------------------------------------------------
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. (A Class shares have an initial sales charge
and CDSC; B and C Class shares have CDSCs. Please see the Share Class
Information pages for more about the applicable sales charges for each share
class.) The SEC requires that mutual funds provide performance information net
of maximum sales charges in all cases where charges could be applied.
(1) Since 8/31/93, the date nearest the Investor Class's inception for which
data are available.
(continued)
- ------
2
Value - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made March 31, 1994
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended March 31
- ---------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
- ---------------------------------------------------------------------------------------------------
Investor Class 18.56% 27.94% 16.03% 39.94% -9.88% 1.42% 19.20% 17.96% -19.85% 40.66%
- ---------------------------------------------------------------------------------------------------
Lipper Multi-Cap
Value Index 11.22% 28.30% 16.29% 39.07% -3.71% 5.42% 6.54% 6.47% -22.91% 42.99%
- ---------------------------------------------------------------------------------------------------
S&P 500 Index 15.57% 32.10% 19.83% 48.00% 18.46% 17.94% -21.68% 0.24% -24.76% 35.12%
- ---------------------------------------------------------------------------------------------------
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 AND SCOTT MOORE, PORTFOLIO MANAGERS
ON THE VALUE INVESTMENT TEAM.
PERFORMANCE SUMMARY
Value gained 40.66%* during the 12 months ended March 31, 2004, compared to a
42.99% gain recorded by its benchmark, the Lipper Multi-Cap Value Index.
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 12.87%, significantly ahead of the 10.61%** average annual
return posted by the Lipper Multi-Cap Value Index for the same period.
A TURN FOR THE BETTER
The stock market staged an impressive rally during the period covered by this
report. After stumbling in early 2003, stocks began to rebound in mid-March,
officially marking the end of a protracted three-year bear market, and
maintained their positive momentum throughout 2003.
The stock market's recovery mirrored that of the U.S. economy. Low interest
rates, tame inflation and strong profit growth boosted economic activity, and in
the third quarter of 2003, the economy recorded its strongest growth rate in
nearly two decades. Yet progress slowed somewhat in early 2004. Speculation
about higher interest rates, rising energy prices and growing terrorism concerns
restrained equities, which erased some of their earlier gains as the period drew
to a close.
Despite the market's downward trend toward the end of the period, all of the
broad stock indices posted healthy gains. The Nasdaq Composite led the pack,
gaining 49.38% for the year, while the S&P 500 and Dow Industrials indices
posted returns of 35.12% and 32.55%, respectively. In this environment,
value-oriented firms--the focus of this portfolio--generally fared better than
their growth counterparts, with small- and mid-sized companies recording the
strongest gains.
TOP TEN HOLDINGS AS OF MARCH 31, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Standard and Poor's 500
Depositary Receipt 4.9% 4.8%
- --------------------------------------------------------------------------------
SunTrust Banks, Inc. 4.0% 3.8%
- --------------------------------------------------------------------------------
Royal Dutch Petroleum
Co. New York Shares 3.5% 2.2%
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 3.0% 3.8%
- --------------------------------------------------------------------------------
Union Pacific Corp. 3.0% 1.9%
- --------------------------------------------------------------------------------
BP plc ADR 2.7% 3.0%
- --------------------------------------------------------------------------------
Kimberly-Clark Corp. 2.5% 3.9%
- --------------------------------------------------------------------------------
MetLife, Inc. 2.5% 1.6%
- --------------------------------------------------------------------------------
Martin Marietta
Materials, Inc. 2.3% 2.3%
- --------------------------------------------------------------------------------
Freddie Mac 2.2% 3.3%
- --------------------------------------------------------------------------------
* All fund returns referenced in this commentary are for Investor Class shares.
**From 8/31/93, the date nearest the Investor Class's inception for which data
are available. (continued)
- ------
4
Value - Portfolio Commentary
STRENGTH ACROSS SECTORS, INDUSTRIES
Financial stocks proved to be a rich source of absolute performance. Selected
holdings we discussed in our semiannual report that continued to perform well
included T. Rowe Price and A.G. Edwards, which benefited from investors'
increased participation in the stock market. Our investment process also led us
to several top-performing insurance companies and banks whose businesses were
similarly boosted by positive economic conditions during the period. Noteworthy
names included Allstate Corp., SunTrust Banks and financial services firm
Marshall & Isley.
Materials and industrials holdings also helped. Standout performers in these
arenas included chemicals and adhesives maker Martin Marietta Materials, Value's
top contributor for the year, and Rockwell Collins, which benefited from an
improving commercial aviation outlook. Meanwhile, Emerson Electric, a global
supplier of electronic products and systems, continued to flourish in the
positive economic environment.
Continued economic progress and strong consumer sentiment lifted household
products giant Kimberly-Clark Corp., whose success was linked to higher sales
volumes as well as a growing market share in the disposable diapers arena.
Higher energy prices boosted firms in the oil & gas industry, many of which
enjoyed a marked run up in response to rising demand in the United States and
growing concerns that violence in Iraq could disrupt Middle Eastern oil
shipments. The greatest performance in this group was delivered by oil & gas
firms BP plc and Exxon Mobil.
FEW DETRACTORS
Few holdings detracted from absolute performance during the period. Two that
did, however, hailed from the auto components industry. Superior Industries
International struggled due to pricing and margin pressures resulting from
overcapacity and a slowdown in auto production, while aluminum wheel maker TRW
Automotive's progress was restrained due to costs associated with a
restructuring. However, we believe both firm's problems are transitory and are
maintaining our stake in each firm.
Looking ahead, we will continue to adhere to our discipline of buying
fundamentally sound businesses that have transitory issues affecting the price
of their stock.
TOP FIVE INDUSTRIES* AS OF MARCH 31, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Insurance 10.0% 5.2%
- --------------------------------------------------------------------------------
Oil & Gas 9.3% 8.9%
- --------------------------------------------------------------------------------
Commercial Banks 7.9% 6.1%
- --------------------------------------------------------------------------------
Pharmaceuticals 5.1% 4.4%
- --------------------------------------------------------------------------------
Food Products 4.5% 5.9%
- --------------------------------------------------------------------------------
*Excludes securities in the Diversified category. These securities represent
investments in diversified pools of underlying securities in multiple industry
categories.
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Common Stocks 98.7% 96.7%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 1.3% 3.3%
- --------------------------------------------------------------------------------
- ------
5
Value - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.7%
AEROSPACE & DEFENSE -- 4.5%
- --------------------------------------------------------------------------------
1,394,200 Honeywell International Inc. $ 47,193,670
- --------------------------------------------------------------------------------
472,900 Lockheed Martin Corp. 21,583,156
- --------------------------------------------------------------------------------
1,603,600 Raytheon Company 50,256,824
- --------------------------------------------------------------------------------
228,600 Rockwell Collins 7,226,046
- --------------------------------------------------------------------------------
126,259,696
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 1.5%
- --------------------------------------------------------------------------------
581,900 Superior Industries
International, Inc.(1) 20,622,536
- --------------------------------------------------------------------------------
951,800 TRW Automotive
Holdings Corp.(2) 20,720,686
- --------------------------------------------------------------------------------
41,343,222
- --------------------------------------------------------------------------------
AUTOMOBILES -- 1.0%
- --------------------------------------------------------------------------------
753,700 Toyota Motor Corp. ORD 28,013,756
- --------------------------------------------------------------------------------
BEVERAGES -- 1.5%
- --------------------------------------------------------------------------------
677,700 Anheuser-Busch
Companies, Inc. 34,562,700
- --------------------------------------------------------------------------------
298,300 Coca-Cola Enterprises 7,209,911
- --------------------------------------------------------------------------------
41,772,611
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 1.7%
- --------------------------------------------------------------------------------
1,184,100 Edwards (A.G.), Inc. 46,321,992
- --------------------------------------------------------------------------------
CHEMICALS -- 2.9%
- --------------------------------------------------------------------------------
467,142 Air Products &
Chemicals, Inc. 23,413,157
- --------------------------------------------------------------------------------
753,500 Ecolab Inc. 21,497,355
- --------------------------------------------------------------------------------
534,660 International Flavors &
Fragrances Inc. 18,980,430
- --------------------------------------------------------------------------------
178,188 Minerals Technologies Inc. 10,174,535
- --------------------------------------------------------------------------------
198,033 Rohm and Haas Co. 7,889,635
- --------------------------------------------------------------------------------
81,955,112
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 7.9%
- --------------------------------------------------------------------------------
696,700 Bank of America Corp. 56,418,766
- --------------------------------------------------------------------------------
181,850 BB&T Corporation 6,419,305
- --------------------------------------------------------------------------------
474,700 Marshall & Ilsley Corp. 17,948,407
- --------------------------------------------------------------------------------
1,621,903 SunTrust Banks, Inc. 113,062,858
- --------------------------------------------------------------------------------
493,000 Zions Bancorporation 28,199,600
- --------------------------------------------------------------------------------
222,048,936
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES
& SUPPLIES -- 0.9%
- --------------------------------------------------------------------------------
112,900 Avery Dennison Corp. 7,023,509
- --------------------------------------------------------------------------------
610,850 Waste Management, Inc.(1) 18,435,453
- --------------------------------------------------------------------------------
25,458,962
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 0.5%
- --------------------------------------------------------------------------------
713,400 Nokia Oyj ADR 14,467,752
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 0.5%
- --------------------------------------------------------------------------------
920,600 Seagate Technology 14,849,278
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
CONSTRUCTION &
ENGINEERING -- 0.4%
- --------------------------------------------------------------------------------
275,495 Fluor Corp. $ 10,658,902
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 2.3%
- --------------------------------------------------------------------------------
1,397,580 Martin Marietta Materials, Inc. 64,512,293
- --------------------------------------------------------------------------------
DISTRIBUTORS -- 0.6%
- --------------------------------------------------------------------------------
527,400 Genuine Parts Company 17,256,528
- --------------------------------------------------------------------------------
DIVERSIFIED -- 4.9%
- --------------------------------------------------------------------------------
1,215,500 Standard and Poor's 500
Depositary Receipt 137,315,035
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 4.1%
- --------------------------------------------------------------------------------
718,134 CenturyTel Inc. 19,741,504
- --------------------------------------------------------------------------------
510,825 Commonwealth Telephone
Enterprise Inc.(1)(2) 20,948,933
- --------------------------------------------------------------------------------
674,492 SBC Communications Inc. 16,552,034
- --------------------------------------------------------------------------------
1,567,900 Verizon Communications 57,291,066
- --------------------------------------------------------------------------------
114,533,537
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 3.3%
- --------------------------------------------------------------------------------
635,737 Ameren Corp. 29,301,118
- --------------------------------------------------------------------------------
708,940 FPL Group, Inc. 47,392,639
- --------------------------------------------------------------------------------
480,800 Wisconsin Energy Corp. 15,457,720
- --------------------------------------------------------------------------------
92,151,477
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.6%
- --------------------------------------------------------------------------------
873,500 Emerson Electric Co. 52,340,120
- --------------------------------------------------------------------------------
904,704 Thomas & Betts Corp. 19,740,641
- --------------------------------------------------------------------------------
72,080,761
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT
& INSTRUMENTS -- 1.3%
- --------------------------------------------------------------------------------
899,898 AVX Corp.(1) 14,839,318
- --------------------------------------------------------------------------------
584,391 Littelfuse, Inc.(2) 21,739,345
- --------------------------------------------------------------------------------
36,578,663
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 4.5%
- --------------------------------------------------------------------------------
1,008,400 Campbell Soup Company 27,499,068
- --------------------------------------------------------------------------------
369,200 Kellogg Co. 14,487,408
- --------------------------------------------------------------------------------
1,852,500 Kraft Foods Inc. 59,298,525
- --------------------------------------------------------------------------------
366,400 Unilever N.V.
New York Shares 25,442,816
- --------------------------------------------------------------------------------
126,727,817
- --------------------------------------------------------------------------------
GAS UTILITIES -- 2.9%
- --------------------------------------------------------------------------------
1,529,054 AGL Resources Inc. 44,373,147
- --------------------------------------------------------------------------------
1,242,000 WGL Holdings Inc.(1) 37,384,200
- --------------------------------------------------------------------------------
81,757,347
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 1.0%
- --------------------------------------------------------------------------------
517,616 Beckman Coulter Inc. 28,230,777
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
6
Value - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS
& SERVICES -- 0.9%
- --------------------------------------------------------------------------------
423,000 HCA Inc. $ 17,182,260
- --------------------------------------------------------------------------------
204,563 Universal Health
Services, Inc. Cl B 9,424,217
- --------------------------------------------------------------------------------
26,606,477
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS
& LEISURE -- 0.9%
- --------------------------------------------------------------------------------
325,341 Brinker International, Inc.(2) 12,340,185
- --------------------------------------------------------------------------------
297,441 Darden Restaurants, Inc. 7,373,562
- --------------------------------------------------------------------------------
196,620 Speedway Motorsports Inc.(1) 5,959,552
- --------------------------------------------------------------------------------
25,673,299
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.5%
- --------------------------------------------------------------------------------
638,600 Newell Rubbermaid Inc. 14,815,520
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 3.5%
- --------------------------------------------------------------------------------
568,200 Clorox Company 27,790,662
- --------------------------------------------------------------------------------
1,114,900 Kimberly-Clark Corp. 70,350,190
- --------------------------------------------------------------------------------
98,140,852
- --------------------------------------------------------------------------------
INSURANCE -- 10.0%
- --------------------------------------------------------------------------------
778,000 Allstate Corp. 35,367,880
- --------------------------------------------------------------------------------
605,600 American International
Group, Inc. 43,209,560
- --------------------------------------------------------------------------------
233 Berkshire Hathaway Inc. Cl A(2) 21,738,900
- --------------------------------------------------------------------------------
669,700 Chubb Corp. 46,570,938
- --------------------------------------------------------------------------------
904,000 Horace Mann Educators Corp.(1) 14,210,880
- --------------------------------------------------------------------------------
1,070,000 Marsh & McLennan
Companies, Inc. 49,541,000
- --------------------------------------------------------------------------------
1,965,438 MetLife, Inc. 70,126,827
- --------------------------------------------------------------------------------
280,765,985
- --------------------------------------------------------------------------------
IT SERVICES -- 2.3%
- --------------------------------------------------------------------------------
740,600 Accenture Ltd. Cl A(2) 18,366,880
- --------------------------------------------------------------------------------
1,294,294 BISYS Group Inc. (The)(1)(2) 21,692,367
- --------------------------------------------------------------------------------
532,900 DST Systems, Inc.(2) 24,167,015
- --------------------------------------------------------------------------------
64,226,262
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT
& PRODUCTS -- 0.6%
- --------------------------------------------------------------------------------
854,400 Mattel, Inc. 15,755,136
- --------------------------------------------------------------------------------
MACHINERY -- 0.5%
- --------------------------------------------------------------------------------
386,819 Dover Corp. 14,996,973
- --------------------------------------------------------------------------------
MEDIA -- 2.1%
- --------------------------------------------------------------------------------
303,396 ADVO, Inc. 9,775,419
- --------------------------------------------------------------------------------
643,767 New York Times Co. (The) Cl A 28,454,502
- --------------------------------------------------------------------------------
683,800 Valassis
Communications, Inc.(1)(2) 20,787,520
- --------------------------------------------------------------------------------
59,017,441
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
OIL & GAS -- 9.3%
- --------------------------------------------------------------------------------
1,469,100 BP plc ADR $ 75,217,920
- --------------------------------------------------------------------------------
2,039,900 Exxon Mobil Corp. 84,839,441
- --------------------------------------------------------------------------------
2,085,805 Royal Dutch Petroleum Co.
New York Shares 99,242,602
- --------------------------------------------------------------------------------
259,299,963
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 5.1%
- --------------------------------------------------------------------------------
1,268,700 Abbott Laboratories 52,143,570
- --------------------------------------------------------------------------------
1,864,176 Bristol-Myers Squibb Co. 45,168,984
- --------------------------------------------------------------------------------
722,900 Merck & Co., Inc. 31,944,951
- --------------------------------------------------------------------------------
881,000 Schering-Plough Corp. 14,289,820
- --------------------------------------------------------------------------------
143,547,325
- --------------------------------------------------------------------------------
ROAD & RAIL -- 3.0%
- --------------------------------------------------------------------------------
1,413,100 Union Pacific Corp. 84,531,642
- --------------------------------------------------------------------------------
SOFTWARE -- 2.6%
- --------------------------------------------------------------------------------
1,160,700 Microsoft Corporation 28,982,679
- --------------------------------------------------------------------------------
686,193 Reynolds & Reynolds Co. Cl A(1) 19,494,743
- --------------------------------------------------------------------------------
825,000 Synopsys, Inc.(2) 23,892,000
- --------------------------------------------------------------------------------
72,369,422
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 1.2%
- --------------------------------------------------------------------------------
840,147 Sherwin-Williams Co. 32,286,849
- --------------------------------------------------------------------------------
TEXTILES, APPAREL
& LUXURY GOODS -- 0.7%
- --------------------------------------------------------------------------------
542,250 Jones Apparel Group, Inc. 19,602,338
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 2.7%
- --------------------------------------------------------------------------------
1,023,000 Freddie Mac 60,418,380
- --------------------------------------------------------------------------------
229,300 MGIC Investment Corp. 14,727,939
- --------------------------------------------------------------------------------
75,146,319
- --------------------------------------------------------------------------------
TOBACCO -- 0.4%
- --------------------------------------------------------------------------------
293,406 UST Inc. 10,591,957
- --------------------------------------------------------------------------------
TRADING COMPANIES
& DISTRIBUTORS -- 1.6%
- --------------------------------------------------------------------------------
920,244 Grainger (W.W.), Inc. 44,171,712
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $2,454,117,816) 2,765,839,926
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 1.3%
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations),
in a joint trading account at 0.95%,
dated 3/31/04, due 4/1/04
(Delivery value $35,100,926)
(Cost $35,100,000) 35,100,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $2,489,217,816) $2,800,939,926
================================================================================
See Notes to Financial Statements. (continued)
- ------
7
Value - Schedule of Investments
MARCH 31, 2004
Principal Amount Value
- --------------------------------------------------------------------------------
COLLATERAL RECEIVED
FOR SECURITIES LENDING(3)
REPURCHASE AGREEMENTS
- --------------------------------------------------------------------------------
Repurchase Agreement, Deutsche Bank AG,
(U.S. Treasury obligations), 1.04%,
dated 3/31/04, due 4/1/04
(Delivery value $2,826,016) $ 2,825,934
- --------------------------------------------------------------------------------
SHORT-TERM DEBT
- --------------------------------------------------------------------------------
$ 8,019,118 Allstate Financial Global
Funding, VRN, 1.32%, 4/1/04,
resets daily off the Federal
Funds rate plus 0.34% with
no caps (Acquired 3/31/04,
Cost $8,019,118)(4) 8,019,118
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
$17,004,244 Ford Credit Floorplan Master
Owner Trust, Series 2001-1,
Class A, VRN, 1.18%, 4/15/04,
resets monthly off the
1-month LIBOR plus 0.09%
with no caps $17,004,244
- --------------------------------------------------------------------------------
3,000,000 RACERS(reg.sm), Series 2000-7,
Class A3, VRN, 1.29%,
4/15/04, resets monthly
off the 1-month LIBOR
plus 0.20% with no caps
(Acquired 3/15/04,
Cost $3,000,000)(4) 3,000,000
- --------------------------------------------------------------------------------
4,999,433 Westdeutsche Landesbank AG,
VRN, 1.09%, 4/1/04 4,999,433
- --------------------------------------------------------------------------------
33,022,795
- --------------------------------------------------------------------------------
TOTAL COLLATERAL RECEIVED
FOR SECURITIES LENDING
(Cost $35,848,729) $35,848,729
================================================================================
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS*
Contracts to Sell Settlement Date Value Unrealized Loss
- --------------------------------------------------------------------------------
53,168,428 Euro 4/30/2004 $ 65,362,507 $ (815,904)
- --------------------------------------------------------------------------------
39,930,599 Euro 4/30/2004 49,088,606 (608,786)
- --------------------------------------------------------------------------------
19,685,374 Euro 4/30/2004 24,200,177 (282,448)
- --------------------------------------------------------------------------------
26,065,583 GBP 4/30/2004 47,931,967 (632,057)
- --------------------------------------------------------------------------------
18,508,580 GBP 4/30/2004 34,035,403 (419,195)
- --------------------------------------------------------------------------------
2,092,818,000 JPY 4/30/2004 20,067,447 (204,827)
- --------------------------------------------------------------------------------
$240,686,107 $(2,963,217)
=====================================
(Value on Settlement Date $237,722,890)
*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
GBP = British Pound
JPY = Japanese Yen
LIBOR = London Interbank Offered Rate
ORD = Foreign Ordinary Share
RACERS(reg.sm) = Restructured Asset Certificates with Enhanced Returns
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon
will vary significantly from current market rates.
VRN = Variable Rate Note. Interest reset date is indicated, unless otherwise
noted. Rate shown is effective March 31, 2004.
(1) Security, or a portion thereof, was on loan as of March 31, 2004.
(2) Non-income producing
(3) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions. (See Note 6 in
Notes to Financial Statements.)
(4) 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 purchased by the lending agent
with cash collateral received for securities lending at March 31, 2004,
was $11,019,118, which represented 0.4% of net assets.
See Notes to Financial Statements.
- ------
8
Large Company Value - Performance
TOTAL RETURNS AS OF MARCH 31, 2004
----------------
AVERAGE ANNUAL
RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 39.34% 5.11% 7/30/99
- --------------------------------------------------------------------------------
RUSSELL 1000 VALUE INDEX 40.82% 2.46%(1) --
- --------------------------------------------------------------------------------
S&P 500 INDEX 35.12% -2.05%(1) --
- --------------------------------------------------------------------------------
Institutional Class 39.61% 4.81% 8/10/01
- --------------------------------------------------------------------------------
Advisor Class 38.99% 8.16% 10/26/00
- --------------------------------------------------------------------------------
A Class 1/31/03
No sales charge* 39.22% 28.95%
With sales charge* 31.27% 22.59%
- --------------------------------------------------------------------------------
B Class 1/31/03
No sales charge* 38.41% 28.20%
With sales charge* 34.41% 24.89%
- --------------------------------------------------------------------------------
C Class 38.27% 6.41% 11/7/01
- --------------------------------------------------------------------------------
R Class -- 14.63%(2) 8/29/03
- --------------------------------------------------------------------------------
*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
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended March 31
- --------------------------------------------------------------------------------
2000* 2001 2002 2003 2004
- --------------------------------------------------------------------------------
Investor Class -7.22% 12.38% 10.20% -21.19% 39.34%
- --------------------------------------------------------------------------------
Russell 1000 Value Index -1.56% 0.27% 4.39% -22.79% 40.82%
- --------------------------------------------------------------------------------
S&P 500 Index 13.73% -21.68% 0.24% -24.76% 35.12%
- --------------------------------------------------------------------------------
* 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 Brendan Healy, Chuck Ritter, and Mark Mallon]
A PORTFOLIO COMMENTARY FROM (LEFT TO RIGHT) BRENDAN HEALY, CHUCK RITTER, AND
MARK MALLON, PORTFOLIO MANAGERS ON THE LARGE COMPANY VALUE INVESTMENT TEAM.
Large Company Value increased 39.34%* during the 12 months ended March 31, 2004,
modestly trailing its benchmark, the Russell 1000 Value Index, which gained
40.82%. The portfolio's three-year average annual return for the period ended
March 31 was 6.56%, outpacing the benchmark's 4.31% return.
The period began with the stock market's biggest rally in years, as the swift
capture of Baghdad by American and British troops helped clear the shroud of
anxiety that clouded the pre-war investment environment. Consumer and business
confidence grew, reflected in the results of the third quarter of 2003, which
produced the fastest quarterly growth in gross domestic product, corporate
profits and worker productivity in about two decades. That optimism carried into
2004, but faded when geopolitical violence, including the March 11 terrorist
attacks on the Madrid train station, derailed confidence throughout world
markets.
Despite March's shock, the S&P 500 Index ended the period with its longest
string of consecutive quarterly increases since 1998. For the 12-month period,
all of the major indices of the Frank Russell Co. recorded double-digit
percentage increases, regardless of stock size or investment style. Smaller
capitalization stocks rose faster than larger ones, and value outperformed
growth. The Russell 1000 Value Index, which represents the large-capitalization
value stocks that are the focus of this portfolio, ended the period with its
fourth consecutive quarterly gain, its longest streak in three years.
All of Large Company Value's sector stakes contributed during the period, and
the portfolio found success in every industry group in which it invested.
FINANCIAL STOCKS LED
Large Company Value's financial stocks, representing on average about 30% of
assets, contributed the most to performance. The portfolio's leading contributor
was Citigroup, the world's
TOP TEN HOLDINGS AS OF MARCH 31, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Citigroup Inc. 4.5% 4.4%
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 3.8% 3.9%
- --------------------------------------------------------------------------------
Freddie Mac 3.7% 3.9%
- --------------------------------------------------------------------------------
Standard and Poor's 500
Depositary Receipt 3.2% 4.5%
- --------------------------------------------------------------------------------
Royal Dutch Petroleum
Co. New York Shares 2.5% 2.5%
- --------------------------------------------------------------------------------
Bank of America Corp. 2.3% 2.4%
- --------------------------------------------------------------------------------
SBC
Communications Inc. 2.1% 2.5%
- --------------------------------------------------------------------------------
Wells Fargo & Co. 2.1% 1.2%
- --------------------------------------------------------------------------------
Hewlett-Packard Co. 1.8% 1.8%
- --------------------------------------------------------------------------------
Altria Group Inc. 1.6% 1.8%
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary
are for Investor Class shares. (continued)
- ------
11
Large Company Value - Portfolio Commentary
largest diversified financial corporation. The lowest interest rates in decades
aided commercial banks, while the stock market rally produced higher revenues
for securities brokers and boosted the equity assets held by insurers.
Consumer discretionary stocks rode the rebound of consumer confidence. The
portfolio's selection of multiline and specialty retail stores as well as
restaurant and hotels added to performance.
The portfolio's industrial stocks also advanced, led by machinery, aerospace and
defense conglomerates.
Oil prices plummeted near the beginning of the period but steadily rose
throughout the final months, as a tightening worldwide petroleum supply pushed
U.S. average gasoline prices, unadjusted for inflation, to an all-time high.
That helped the portfolio's holdings in energy stocks and the companies that
provide equipment and service to them.
CONSUMER STAPLES ALSO HELPED
Consumer staples stocks contributed, led by Altria, whose American tobacco
division benefited from a favorable U.S. court decision as well as greater
fourth-quarter volume, retail share and profitability. Other gains came from the
portfolio's food, staples and household products selections.
Health care stocks aided performance, due mainly to advances for health care
equipment and supply companies. But progress was restrained by Merck, which
tumbled after discontinuing work on experimental drugs for depression and
diabetes even though they were in the late stages of development. Tenet Health
Care also detracted, declining after reducing its 2004 profit outlook.
Large Company Value will continue to follow its investment discipline--searching
for large, fundamentally-sound businesses that, because of transitory issues,
are selling at what we believe to be below fair market value. Since the fund's
inception on July 30, 1999, our consistent, patient approach has enabled Large
Company Value to surpass its benchmark, producing an average annual rate of
return of 5.11%, versus the Russell 1000 Value's 2.46%** return for the same
period.
TOP FIVE INDUSTRIES AS OF MARCH 31, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Commercial Banks 12.0% 11.3%
- --------------------------------------------------------------------------------
Oil & Gas 9.9% 10.3%
- --------------------------------------------------------------------------------
Insurance 6.2% 4.4%
- --------------------------------------------------------------------------------
Thrifts & Mortgage
Finance 5.6% 6.0%
- --------------------------------------------------------------------------------
Diversified
Telecommunication
Services 5.3% 5.9%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Common Stocks 95.5% 94.6%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 4.5% 5.4%
- --------------------------------------------------------------------------------
**From 7/31/94, the date nearest the Investor Class's inception for which data
are available.
- ------
12
Large Company Value - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 95.5%
AEROSPACE & DEFENSE -- 2.2%
- --------------------------------------------------------------------------------
123,000 Boeing Co. $ 5,051,610
- --------------------------------------------------------------------------------
179,400 Honeywell International Inc. 6,072,690
- --------------------------------------------------------------------------------
93,600 Raytheon Company 2,933,424
- --------------------------------------------------------------------------------
14,057,724
- --------------------------------------------------------------------------------
AUTOMOBILES -- 1.1%
- --------------------------------------------------------------------------------
116,600 General Motors Corp. 5,491,860
- --------------------------------------------------------------------------------
21,900 Toyota Motor Corp. ADR 1,631,550
- --------------------------------------------------------------------------------
7,123,410
- --------------------------------------------------------------------------------
BEVERAGES -- 1.2%
- --------------------------------------------------------------------------------
47,900 Adolph Coors Company Cl B 3,326,655
- --------------------------------------------------------------------------------
134,800 Pepsi Bottling Group Inc. 4,010,300
- --------------------------------------------------------------------------------
7,336,955
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 2.7%
- --------------------------------------------------------------------------------
142,500 Merrill Lynch & Co., Inc. 8,487,300
- --------------------------------------------------------------------------------
145,500 Morgan Stanley 8,337,150
- --------------------------------------------------------------------------------
16,824,450
- --------------------------------------------------------------------------------
CHEMICALS -- 1.1%
- --------------------------------------------------------------------------------
117,900 PPG Industries, Inc. 6,873,570
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 12.0%
- --------------------------------------------------------------------------------
179,100 Bank of America Corp. 14,503,518
- --------------------------------------------------------------------------------
167,000 Bank One Corp. 9,104,840
- --------------------------------------------------------------------------------
99,200 FleetBoston Financial Corp. 4,454,080
- --------------------------------------------------------------------------------
157,600 KeyCorp 4,773,704
- --------------------------------------------------------------------------------
195,100 National City Corp. 6,941,658
- --------------------------------------------------------------------------------
119,500 PNC Financial Services Group 6,622,690
- --------------------------------------------------------------------------------
306,700 U.S. Bancorp 8,480,255
- --------------------------------------------------------------------------------
180,700 Wachovia Corp. 8,492,900
- --------------------------------------------------------------------------------
232,100 Wells Fargo & Co. 13,153,107
- --------------------------------------------------------------------------------
76,526,752
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES
& SUPPLIES -- 1.2%
- --------------------------------------------------------------------------------
132,900 R. R. Donnelley & Sons Company 4,020,225
- --------------------------------------------------------------------------------
114,400 Waste Management, Inc. 3,452,592
- --------------------------------------------------------------------------------
7,472,817
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 2.7%
- --------------------------------------------------------------------------------
512,100 Hewlett-Packard Co. 11,696,364
- --------------------------------------------------------------------------------
55,300 International Business
Machines Corp. 5,078,752
- --------------------------------------------------------------------------------
16,775,116
- --------------------------------------------------------------------------------
DIVERSIFIED -- 3.2%
- --------------------------------------------------------------------------------
179,000 Standard and Poor's 500
Depositary Receipt 20,221,630
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 4.5%
- --------------------------------------------------------------------------------
554,200 Citigroup Inc. 28,652,140
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 5.3%
- --------------------------------------------------------------------------------
207,100 AT&T Corp. $ 4,052,947
- --------------------------------------------------------------------------------
242,900 BellSouth Corp. 6,725,901
- --------------------------------------------------------------------------------
554,000 SBC Communications Inc. 13,595,160
- --------------------------------------------------------------------------------
273,800 Sprint Corp. 5,046,134
- --------------------------------------------------------------------------------
121,100 Verizon Communications 4,424,994
- --------------------------------------------------------------------------------
33,845,136
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 2.4%
- --------------------------------------------------------------------------------
127,800 Exelon Corporation 8,801,586
- --------------------------------------------------------------------------------
139,300 PPL Corporation 6,352,080
- --------------------------------------------------------------------------------
15,153,666
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 1.2%
- --------------------------------------------------------------------------------
106,500 CVS Corp. 3,759,450
- --------------------------------------------------------------------------------
241,500 Kroger Co. (The)(1) 4,018,560
- --------------------------------------------------------------------------------
7,778,010
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 2.2%
- --------------------------------------------------------------------------------
145,400 H.J. Heinz Company 5,421,966
- --------------------------------------------------------------------------------
184,200 Sara Lee Corp. 4,026,612
- --------------------------------------------------------------------------------
60,000 Unilever N.V. New York Shares 4,166,400
- --------------------------------------------------------------------------------
13,614,978
- --------------------------------------------------------------------------------
GAS UTILITIES -- 0.6%
- --------------------------------------------------------------------------------
174,400 NiSource Inc. 3,706,000
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 1.5%
- --------------------------------------------------------------------------------
166,000 Baxter International, Inc. 5,127,740
- --------------------------------------------------------------------------------
90,700 Becton Dickinson & Co. 4,397,136
- --------------------------------------------------------------------------------
9,524,876
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS
& SERVICES -- 1.8%
- --------------------------------------------------------------------------------
62,600 AmerisourceBergen Corp. 3,422,968
- --------------------------------------------------------------------------------
60,000 CIGNA Corp. 3,541,200
- --------------------------------------------------------------------------------
105,100 HCA Inc. 4,269,162
- --------------------------------------------------------------------------------
11,233,330
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 2.0%
- --------------------------------------------------------------------------------
69,600 Harrah's Entertainment, Inc. 3,820,344
- --------------------------------------------------------------------------------
308,600 McDonald's Corporation 8,816,702
- --------------------------------------------------------------------------------
12,637,046
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 1.7%
- --------------------------------------------------------------------------------
74,400 Black & Decker Corporation 4,236,336
- --------------------------------------------------------------------------------
145,100 Newell Rubbermaid Inc. 3,366,320
- --------------------------------------------------------------------------------
55,000 Snap-on Incorporated 1,778,700
- --------------------------------------------------------------------------------
24,500 Whirlpool Corp. 1,687,315
- --------------------------------------------------------------------------------
11,068,671
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.9%
- --------------------------------------------------------------------------------
85,400 Kimberly-Clark Corp. 5,388,740
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
13
Large Company Value - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 2.0%
- --------------------------------------------------------------------------------
220,300 General Electric Co. $ 6,723,556
- --------------------------------------------------------------------------------
196,300 Tyco International Ltd. 5,623,995
- --------------------------------------------------------------------------------
12,347,551
- --------------------------------------------------------------------------------
INSURANCE -- 6.2%
- --------------------------------------------------------------------------------
185,700 Allstate Corp. 8,441,922
- --------------------------------------------------------------------------------
97,700 American International
Group, Inc. 6,970,895
- --------------------------------------------------------------------------------
106,500 Hartford Financial Services
Group Inc. (The) 6,784,050
- --------------------------------------------------------------------------------
121,300 Loews Corp. 7,163,978
- --------------------------------------------------------------------------------
98,300 Marsh & McLennan
Companies, Inc. 4,551,290
- --------------------------------------------------------------------------------
101,700 Torchmark Corp. 5,470,443
- --------------------------------------------------------------------------------
39,382,578
- --------------------------------------------------------------------------------
IT SERVICES -- 1.3%
- --------------------------------------------------------------------------------
121,200 Computer Sciences Corp.(1) 4,887,996
- --------------------------------------------------------------------------------
168,900 Electronic Data Systems Corp. 3,268,215
- --------------------------------------------------------------------------------
8,156,211
- --------------------------------------------------------------------------------
MACHINERY -- 2.0%
- --------------------------------------------------------------------------------
94,600 Dover Corp. 3,667,642
- --------------------------------------------------------------------------------
81,000 Ingersoll-Rand Company 5,479,650
- --------------------------------------------------------------------------------
66,900 Parker-Hannifin Corp. 3,779,850
- --------------------------------------------------------------------------------
12,927,142
- --------------------------------------------------------------------------------
MEDIA -- 2.1%
- --------------------------------------------------------------------------------
81,100 Gannett Co., Inc. 7,148,154
- --------------------------------------------------------------------------------
370,400 Time Warner Inc.(1) 6,244,944
- --------------------------------------------------------------------------------
13,393,098
- --------------------------------------------------------------------------------
METALS & MINING -- 1.2%
- --------------------------------------------------------------------------------
99,300 Alcoa Inc. 3,444,717
- --------------------------------------------------------------------------------
70,900 Nucor Corp. 4,358,932
- --------------------------------------------------------------------------------
7,803,649
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 1.6%
- --------------------------------------------------------------------------------
204,900 May Department
Stores Co. (The) 7,085,442
- --------------------------------------------------------------------------------
74,800 Sears, Roebuck & Co. 3,213,408
- --------------------------------------------------------------------------------
10,298,850
- --------------------------------------------------------------------------------
OIL & GAS -- 9.9%
- --------------------------------------------------------------------------------
97,600 ChevronTexaco Corp. 8,567,328
- --------------------------------------------------------------------------------
101,700 ConocoPhillips 7,099,677
- --------------------------------------------------------------------------------
570,900 Exxon Mobil Corp. 23,743,731
- --------------------------------------------------------------------------------
154,400 Occidental Petroleum Corp. 7,110,120
- --------------------------------------------------------------------------------
332,900 Royal Dutch Petroleum
Co. New York Shares 15,839,382
- --------------------------------------------------------------------------------
62,360,238
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.9%
- --------------------------------------------------------------------------------
82,200 Weyerhaeuser Co. 5,384,100
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 4.1%
- --------------------------------------------------------------------------------
193,900 Abbott Laboratories $ 7,969,290
- --------------------------------------------------------------------------------
211,900 Bristol-Myers Squibb Co. 5,134,337
- --------------------------------------------------------------------------------
105,600 Johnson & Johnson 5,356,032
- --------------------------------------------------------------------------------
168,100 Merck & Co., Inc. 7,428,339
- --------------------------------------------------------------------------------
25,887,998
- --------------------------------------------------------------------------------
ROAD & RAIL -- 0.8%
- --------------------------------------------------------------------------------
158,900 Burlington Northern
Santa Fe Corp. 5,005,350
- --------------------------------------------------------------------------------
SOFTWARE -- 1.9%
- --------------------------------------------------------------------------------
198,900 Computer Associates
International, Inc. 5,342,454
- --------------------------------------------------------------------------------
266,400 Microsoft Corporation 6,652,008
- --------------------------------------------------------------------------------
11,994,462
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 1.0%
- --------------------------------------------------------------------------------
157,600 Blockbuster Inc. 2,758,000
- --------------------------------------------------------------------------------
191,200 Limited Brands 3,824,000
- --------------------------------------------------------------------------------
6,582,000
- --------------------------------------------------------------------------------
TEXTILES, APPAREL
& LUXURY GOODS -- 1.2%
- --------------------------------------------------------------------------------
105,200 Liz Claiborne, Inc. 3,859,788
- --------------------------------------------------------------------------------
75,500 VF Corp. 3,525,850
- --------------------------------------------------------------------------------
7,385,638
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 5.6%
- --------------------------------------------------------------------------------
394,700 Freddie Mac 23,310,982
- --------------------------------------------------------------------------------
60,800 MGIC Investment Corp. 3,905,190
- --------------------------------------------------------------------------------
196,900 Washington Mutual, Inc. 8,409,599
- --------------------------------------------------------------------------------
35,625,771
- --------------------------------------------------------------------------------
TOBACCO -- 1.6%
- --------------------------------------------------------------------------------
182,700 Altria Group Inc. 9,948,015
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.6%
- --------------------------------------------------------------------------------
155,800 Vodafone Group plc ADR 3,723,620
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $533,396,716) 604,021,288
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 4.5%
Repurchase Agreement, Credit Suisse
First Boston, Inc., (U.S. Treasury obligations),
in a joint trading account at 0.97%,
dated 3/31/04, due 4/1/04
(Delivery value $28,700,773)
(Cost $28,700,000) 28,700,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $562,096,716) $632,721,288
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
See Notes to Financial Statements.
- ------
14
Statement of Assets and Liabilities
MARCH 31, 2004
- --------------------------------------------------------------------------------
LARGE COMPANY
VALUE VALUE
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value
(cost of $2,489,217,816 and
$562,096,716, respectively) --
including $35,807,631 and $-
of securities loaned, respectively $2,800,939,926 $632,721,288
- -------------------------------------------
Investments made with cash
collateral received for securities
on loan, at value (cost of
$35,848,729 and $-, respectively) 35,848,729 --
- --------------------------------------------------------------------------------
Total investment securities, at value
(cost of $2,525,066,545 and
$562,096,716, respectively) 2,836,788,655 632,721,288
- -------------------------------------------
Cash 7,028,130 4,054,957
- -------------------------------------------
Receivable for investments sold 41,493,098 --
- -------------------------------------------
Receivable for capital shares sold 150,131 938,666
- -------------------------------------------
Dividends and interest receivable 3,941,356 957,616
- --------------------------------------------------------------------------------
2,889,401,370 638,672,527
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for collateral received
on securities loaned 35,848,729 --
- -------------------------------------------
Payable for investments purchased 45,112,223 7,788,000
- -------------------------------------------
Payable for forward foreign currency
exchange contracts 2,963,217 --
- -------------------------------------------
Payable for capital shares redeemed -- 5,048
- -------------------------------------------
Accrued management fees 2,241,482 428,507
- -------------------------------------------
Distribution fees payable 90,334 13,386
- -------------------------------------------
Service fees and service and
distribution fees payable 88,990 22,430
- --------------------------------------------------------------------------------
86,344,975 8,257,371
- --------------------------------------------------------------------------------
NET ASSETS $2,803,056,395 $630,415,156
================================================================================
See Notes to Financial Statements. (continued)
- ------
15
Statement of Assets and Liabilities
MARCH 31, 2004
- --------------------------------------------------------------------------------
LARGE COMPANY
VALUE VALUE
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $2,385,212,429 $562,548,778
- -------------------------------------------
Undistributed net investment income 7,050,237 82,065
- -------------------------------------------
Accumulated undistributed net realized
gain (loss) on investment and foreign
currency transactions 102,031,237 (2,840,259)
- -------------------------------------------
Net unrealized appreciation on
investments and translation of assets
and liabilities in foreign currencies 308,762,492 70,624,572
- --------------------------------------------------------------------------------
$2,803,056,395 $630,415,156
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $2,152,264,737 $350,516,290
- -------------------------------------------
Shares outstanding 278,895,241 59,464,017
- -------------------------------------------
Net asset value per share $7.72 $5.89
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $223,282,042 $151,621,813
- -------------------------------------------
Shares outstanding 28,909,195 25,725,427
- -------------------------------------------
Net asset value per share $7.72 $5.89
- --------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $403,211,996 $19,264,917
- -------------------------------------------
Shares outstanding 52,263,185 3,268,670
- -------------------------------------------
Net asset value per share $7.72 $5.89
- --------------------------------------------------------------------------------
A CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $15,028,804 $92,171,270
- -------------------------------------------
Shares outstanding 1,946,395 15,626,848
- -------------------------------------------
Net asset value per share $7.72 $5.90
- -------------------------------------------
Maximum offering price
(net asset value divided by 0.9425) $8.19 $6.26
- --------------------------------------------------------------------------------
B CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $2,655,920 $5,642,262
- -------------------------------------------
Shares outstanding 343,505 954,825
- -------------------------------------------
Net asset value per share $7.73 $5.91
- --------------------------------------------------------------------------------
C CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $6,612,896 $11,030,270
- -------------------------------------------
Shares outstanding 859,194 1,871,700
- -------------------------------------------
Net asset value per share $7.70 $5.89
- --------------------------------------------------------------------------------
R CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets N/A $168,334
- -------------------------------------------
Shares outstanding N/A 28,562
- -------------------------------------------
Net asset value per share N/A $5.89
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
16
Statement of Operations
YEAR ENDED MARCH 31, 2004
- --------------------------------------------------------------------------------
LARGE COMPANY
VALUE VALUE
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- -------------------------------------------
Dividends (net of foreign taxes
withheld of $660,027 and $47,650,
respectively) $ 52,946,866 $ 8,516,308
- -------------------------------------------
Interest 1,225,696 186,962
- -------------------------------------------
Securities lending 131,112 --
- --------------------------------------------------------------------------------
54,303,674 8,703,270
- --------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------
Management fees 22,945,559 3,041,732
- -------------------------------------------
Distribution fees:
- -------------------------------------------
Advisor Class 786,327 12,424
- -------------------------------------------
B Class 9,727 20,758
- -------------------------------------------
C Class 33,780 39,785
- -------------------------------------------
Service fees:
- -------------------------------------------
Advisor Class 786,327 12,424
- -------------------------------------------
B Class 3,242 6,919
- -------------------------------------------
C Class 11,260 13,262
- -------------------------------------------
Service and distribution fees:
- -------------------------------------------
A Class 11,828 89,170
- -------------------------------------------
R Class -- 81
- -------------------------------------------
Directors' fees and expenses 41,801 5,012
- -------------------------------------------
Other expenses 21,179 1,617
- --------------------------------------------------------------------------------
24,651,030 3,243,184
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 29,652,644 5,460,086
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON:
- -------------------------------------------
Investment transactions
(including $2,511,095 and $-
from affiliates, respectively) 313,272,577 1,035,451
- -------------------------------------------
Foreign currency transactions 3,989,674 --
- --------------------------------------------------------------------------------
317,262,251 1,035,451
- --------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION ON:
- -------------------------------------------
Investments 440,664,544 88,771,151
- -------------------------------------------
Translation of assets and liabilities
in foreign currencies (2,959,618) --
- --------------------------------------------------------------------------------
437,704,926 88,771,151
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 754,967,177 89,806,602
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $784,619,821 $95,266,688
================================================================================
See Notes to Financial Statements.
- ------
17
Statement of Changes in Net Assets
YEARS ENDED MARCH 31, 2004 AND MARCH 31, 2003
- -----------------------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- -----------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2004 2003 2004 2003
- -----------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income $ 29,652,644 $ 25,623,824 $ 5,460,086 $ 1,850,826
- ----------------------------
Net realized gain (loss) 317,262,251 (154,162,282) 1,035,451 (3,115,568)
- ----------------------------
Change in net
unrealized appreciation 437,704,926 (383,936,730) 88,771,151 (23,352,588)
- -----------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 784,619,821 (512,475,188) 95,266,688 (24,617,330)
- -----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------
From net investment income:
- ----------------------------
Investor Class (21,186,539) (20,012,666) (3,836,516) (1,639,313)
- ----------------------------
Institutional Class (2,637,672) (2,544,363) (958,366) (121,258)
- ----------------------------
Advisor Class (2,721,990) (1,949,696) (71,321) (4,739)
- ----------------------------
A Class (38,958) (960) (492,681) (11,183)
- ----------------------------
B Class (1,219) (178) (13,635) (87)
- ----------------------------
C Class (5,704) (5,826) (26,833) (4,053)
- ----------------------------
R Class -- -- (235) --
- ----------------------------
From net realized gains:
- ----------------------------
Investor Class (21,347,159) (28,222,986) -- --
- ----------------------------
Institutional Class (2,057,045) (3,025,083) -- --
- ----------------------------
Advisor Class (3,792,591) (3,462,074) -- --
- ----------------------------
A Class (67,783) -- -- --
- ----------------------------
B Class (19,684) -- -- --
- ----------------------------
C Class (57,575) (37,202) -- --
- -----------------------------------------------------------------------------------------------
Decrease in net assets
from distributions (53,933,919) (59,261,034) (5,399,587) (1,780,633)
- -----------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- -----------------------------------------------------------------------------------------------
Net increase
in net assets
from capital
share transactions 126,621,592 11,725,960 360,724,856 133,365,187
- -----------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS 857,307,494 (560,010,262) 450,591,957 106,967,224
NET ASSETS
- -----------------------------------------------------------------------------------------------
Beginning of period 1,945,748,901 2,505,759,163 179,823,199 72,855,975
- -----------------------------------------------------------------------------------------------
End of period $2,803,056,395 $1,945,748,901 $630,415,156 $179,823,199
===============================================================================================
Undistributed net
investment income $7,050,237 -- $82,065 $62,535
===============================================================================================
See Notes to Financial Statements.
- ------
18
Notes to Financial Statements
MARCH 31, 2004
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 A Class and B Class commenced on
January 31, 2003. 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 may be valued through a
commercial pricing service or at amortized cost, which approximates fair value.
When valuations are not readily available, securities are valued at fair value
as determined in accordance with procedures adopted by the Board of Directors.
If an event were to occur after the close of the foreign exchange on which a
portfolio security principally trades, but before the net asset value per-share
of a fund was determined that was likely to materially affect the net asset
value of the fund, then that security would be 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.
(continued)
- ------
19
Notes to Financial Statements
MARCH 31, 2004
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 each fund's policy to distribute substantially 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
MARCH 31, 2004
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 each
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 year ended March 31, 2004, 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 year ended
March 31, 2004, are detailed in the Statement of Operations.
(continued)
- ------
21
Notes to Financial Statements
MARCH 31, 2004
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 year ended March 31, 2004, 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 and Value has a securities lending agreement with JPMorgan Chase Bank
(JPMCB). JPMCB is a wholly owned subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the year ended
March 31, 2004, were as follows:
- --------------------------------------------------------------------------------
LARGE COMPANY
VALUE VALUE
- --------------------------------------------------------------------------------
Purchases $2,944,738,871 $389,364,405
- --------------------------------------------------------------------------------
Proceeds from sales $2,788,456,424 $ 44,950,577
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows:
- ----------------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- ----------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------
INVESTOR CLASS
- ----------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 800,000,000 100,000,000
========================================================================================
Sold 52,217,114 $ 367,918,467 33,961,150 $182,433,867
- --------------------------
Issued in reinvestment
of distributions 5,639,922 40,227,665 497,529 2,754,427
- --------------------------
Redeemed (55,965,210) (383,934,039) (10,590,421) (56,725,426)
- ----------------------------------------------------------------------------------------
Net increase 1,891,826 $ 24,212,093 23,868,258 $128,462,868
========================================================================================
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
MARCH 31, 2004
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- ----------------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- ----------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 100,000,000 50,000,000
========================================================================================
Sold 8,572,339 $ 60,347,588 24,963,161 $145,037,955
- --------------------------
Issued in reinvestment
of distributions 650,383 4,640,539 170,563 958,109
- --------------------------
Redeemed (12,244,006) (82,237,755) (4,329,673) (25,234,220)
- ----------------------------------------------------------------------------------------
Net increase (decrease) (3,021,284) $(17,249,628) 20,804,051 $120,761,844
========================================================================================
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
- ----------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 110,000,000 12,500,000
========================================================================================
Sold 23,972,510 $165,968,462 3,170,282 $18,125,512
- --------------------------
Issued in reinvestment
of distributions 903,550 6,449,545 8,327 46,763
- --------------------------
Redeemed (10,286,502) (71,491,749) (164,213) (906,546)
- ----------------------------------------------------------------------------------------
Net increase 14,589,558 $100,926,258 3,014,396 $17,265,729
========================================================================================
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
- ----------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 10,000,000 20,000,000
========================================================================================
Sold 1,908,841 $13,773,320 15,569,657 $84,857,875
- --------------------------
Issued in reinvestment
of distributions 14,682 105,840 84,229 472,507
- --------------------------
Redeemed (45,897) (333,204) (897,619) (4,909,192)
- ----------------------------------------------------------------------------------------
Net increase 1,877,626 $13,545,956 14,756,267 $80,421,190
========================================================================================
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
MARCH 31, 2004
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- ----------------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- ----------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------
B CLASS
- ----------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 10,000,000 10,000,000
========================================================================================
Sold 325,475 $2,262,656 941,958 $5,004,654
- --------------------------
Issued in reinvestment
of distributions 2,870 20,369 2,194 12,206
- --------------------------
Redeemed (1,037) (6,826) (9,734) (55,649)
- ----------------------------------------------------------------------------------------
Net increase 327,308 $2,276,199 934,418 $4,961,211
========================================================================================
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
- ----------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 20,000,000 10,000,000
========================================================================================
Sold 448,094 $3,133,894 1,684,759 $9,139,813
- --------------------------
Issued in reinvestment
of distributions 8,150 57,775 3,044 16,875
- --------------------------
Redeemed (38,154) (280,955) (87,941) (471,870)
- ----------------------------------------------------------------------------------------
Net increase 418,090 $2,910,714 1,599,862 $8,684,818
========================================================================================
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 MARCH 31, 2004(2)
SHARES AUTHORIZED N/A 10,000,000
========================================================================================
Sold 28,522 $166,961
- --------------------------
Issued in reinvestment
of distributions 40 235
- ----------------------------------------------------------------------------------------
Net increase 28,562 $167,196
========================================================================================
(1) January 31, 2003 (commencement of sale) through March 31, 2003.
(2) August 29, 2003 (commencement of sale) through March 31, 2004 for Large Company Value.
(continued)
- ------
24
Notes to Financial Statements
MARCH 31, 2004
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 year
ended March 31, 2004 follows:
- ----------------------------------------------------------------------------------------------------
SHARE BALANCE PURCHASE SALES REALIZED MARCH 31, 2004
FUND/COMPANY 3/31/03 COST COST GAIN SHARE BALANCE MARKET VALUE
- ----------------------------------------------------------------------------------------------------
VALUE
- ----------------------------------------------------------------------------------------------------
Littelfuse, Inc.(1) 1,136,200 $775,896 $15,685,882 $2,511,095 584,391 $21,739,345
====================================================================================================
(1) Non-income producing.
6. SECURITIES LENDING
As of March 31, 2004, securities in Value valued at $35,807,631 were on loan
through the lending agent, JPMCB, to certain approved borrowers. JPMCB 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. Any deficiencies or excess of collateral must be delivered or
transferred by the member firms no later than the close of business on the next
business day. The total value of all collateral received, at this date, was
$35,848,729. 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 $650,000,000
unsecured bank line of credit agreement with JPMCB, which was renewed from
$620,000,000 effective December 17, 2003. The funds may borrow money for
temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement bear interest at the Federal Funds rate plus 0.50%. The
funds did not borrow from the line during the year ended March 31, 2004.
8. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2004
and March 31, 2003 were as follows:
- --------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- --------------------------------------------------------------------------------
2004 2003 2004 2003
- --------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
- --------------------------------------------------------------------------------
Ordinary income $26,592,109 $59,261,034 $5,399,587 $1,780,633
- --------------------------------------------------------------------------------
Long-term capital gains $27,341,810 $-- $-- $--
- --------------------------------------------------------------------------------
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 on the financial statements.
(continued)
- ------
25
Notes to Financial Statements
MARCH 31, 2004
8. FEDERAL TAX INFORMATION (CONTINUED)
As of March 31, 2004, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
- --------------------------------------------------------------------------------
LARGE COMPANY
VALUE VALUE
- --------------------------------------------------------------------------------
COMPONENTS OF DISTRIBUTABLE EARNINGS AND TAX COST
- --------------------------------------------------------------------------------
Federal tax cost of investments $2,579,342,237 $564,855,539
================================================================================
Gross tax appreciation of investments $287,501,496 $71,292,722
- -----------------------------------------------
Gross tax depreciation of investments (30,055,078) (3,426,973)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $257,446,418 $67,865,749
================================================================================
Net tax appreciation on translation
of assets and liabilities
in foreign currencies $ 19,487 --
- --------------------------------------------------------------------------------
Net tax appreciation $257,465,905 $67,865,749
================================================================================
Undistributed ordinary income $91,918,738 $82,065
- -----------------------------------------------
Accumulated long-term gains $68,459,323 $--
- -----------------------------------------------
Accumulated capital losses $-- $(81,436)
- --------------------------------------------------------------------------------
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 gains on certain
forward foreign currency contracts.
The accumulated capital loss listed above represents net capital loss carryovers
that may be used to offset future realized capital gains for federal income tax
purposes. The capital loss carryover expires in 2011.
9. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
During the fiscal year ended March 31, 2004, the following amount distributed
was designated as capital gains dividends.
- --------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- --------------------------------------------------------------------------------
$27,341,810 $--
- --------------------------------------------------------------------------------
For corporate taxpayers, the following percentage of the ordinary income
distributions paid during the fiscal year ended March 31, 2004, qualify for the
corporate dividends received deduction.
- --------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- --------------------------------------------------------------------------------
100% 100%
- --------------------------------------------------------------------------------
Value and Large Company Value hereby designate $26,592,083 and $5,399,587 of
qualified dividend income for the fiscal year end March 31, 2004.
- ------
26
Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- -----------------------------------------------------------------------------------------
INVESTOR CLASS
- -----------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------------------
PER-SHARE DATA
- -----------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $5.61 $7.19 $6.27 $5.35 $5.77
- -----------------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------
Net Investment Income(1) 0.09 0.07 0.08 0.10 0.09
- --------------------------
Net Realized and
Unrealized Gain (Loss) 2.18 (1.48) 1.03 0.92 (0.01)
- -----------------------------------------------------------------------------------------
Total From
Investment Operations 2.27 (1.41) 1.11 1.02 0.08
- -----------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net
Investment Income (0.08) (0.07) (0.08) (0.10) (0.09)
- --------------------------
From Net Realized Gains (0.08) (0.10) (0.11) -- (0.41)
- -----------------------------------------------------------------------------------------
Total Distributions (0.16) (0.17) (0.19) (0.10) (0.50)
- -----------------------------------------------------------------------------------------
Net Asset Value,
End of Period $7.72 $5.61 $7.19 $6.27 $5.35
=========================================================================================
TOTAL RETURN(2) 40.66% (19.85)% 17.96% 19.20% 1.42%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.00% 1.00% 1.00% 1.00% 1.00%
- --------------------------
Ratio of Net
Investment Income
to Average Net Assets 1.26% 1.19% 1.11% 1.71% 1.48%
- --------------------------
Portfolio Turnover Rate 122% 102% 151% 150% 115%
- --------------------------
Net Assets,
End of Period
(in thousands) $2,152,265 $1,552,632 $2,068,901 $1,532,113 $1,388,646
- -----------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. 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.
See Notes to Financial Statements.
- ------
27
Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $5.61 $7.20 $6.27 $5.36 $5.78
- --------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------
Net Investment Income(1) 0.10 0.09 0.09 0.11 0.10
- --------------------------
Net Realized and
Unrealized Gain (Loss) 2.18 (1.50) 1.04 0.91 (0.01)
- --------------------------------------------------------------------------------
Total From
Investment Operations 2.28 (1.41) 1.13 1.02 0.09
- --------------------------------------------------------------------------------
Distributions
- --------------------------
From Net
Investment Income (0.09) (0.08) (0.09) (0.11) (0.10)
- --------------------------
From Net Realized Gains (0.08) (0.10) (0.11) -- (0.41)
- --------------------------------------------------------------------------------
Total Distributions (0.17) (0.18) (0.20) (0.11) (0.51)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $7.72 $5.61 $7.20 $6.27 $5.36
================================================================================
TOTAL RETURN(2) 40.93% (19.70)% 18.19% 19.24% 1.65%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.80% 0.80% 0.80% 0.80% 0.80%
- --------------------------
Ratio of Net
Investment Income to
Average Net Assets 1.46% 1.38% 1.31% 1.91% 1.68%
- --------------------------
Portfolio Turnover Rate 122% 102% 151% 150% 115%
- --------------------------
Net Assets,
End of Period
(in thousands) $223,282 $179,196 $226,681 $186,987 $95,202
- --------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. 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.
See Notes to Financial Statements.
- ------
28
Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $5.60 $7.19 $6.27 $5.36 $5.77
- --------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------
Net Investment Income(1) 0.07 0.06 0.06 0.08 0.07
- --------------------------
Net Realized and
Unrealized Gain (Loss) 2.19 (1.49) 1.03 0.92 0.01
- --------------------------------------------------------------------------------
Total From
Investment Operations 2.26 (1.43) 1.09 1.00 0.08
- --------------------------------------------------------------------------------
Distributions
- --------------------------
From Net
Investment Income (0.06) (0.06) (0.06) (0.09) (0.08)
- --------------------------
From Net
Realized Gains (0.08) (0.10) (0.11) -- (0.41)
- --------------------------------------------------------------------------------
Total Distributions (0.14) (0.16) (0.17) (0.09) (0.49)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $7.72 $5.60 $7.19 $6.27 $5.36
================================================================================
TOTAL RETURN(2) 40.56% (20.07)% 17.51% 18.72% 1.36%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.25% 1.25% 1.25% 1.25% 1.25%
- --------------------------
Ratio of Net
Investment Income
to Average Net Assets 1.01% 0.94% 0.86% 1.46% 1.23%
- --------------------------
Portfolio Turnover Rate 122% 102% 151% 150% 115%
- --------------------------
Net Assets,
End of Period
(in thousands) $403,212 $210,984 $208,311 $102,357 $61,323
- --------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. 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.
See Notes to Financial Statements.
- ------
29
Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2004 2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.60 $5.77
- -------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------------
Net Investment Income(2) 0.07 0.01
- ----------------------------------------------------------
Net Realized and Unrealized Gain (Loss) 2.19 (0.16)
- --------------------------------------------------------------------------------
Total From Investment Operations 2.26 (0.15)
- --------------------------------------------------------------------------------
Distributions
- ----------------------------------------------------------
From Net Investment Income (0.06) (0.02)
- ----------------------------------------------------------
From Net Realized Gains (0.08) --
- --------------------------------------------------------------------------------
Total Distributions (0.14) (0.02)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $7.72 $5.60
================================================================================
TOTAL RETURN(3) 40.55% (2.67)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.25% 1.25%(4)
- ----------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 1.01% 0.62%(4)
- ----------------------------------------------------------
Portfolio Turnover Rate 122% 102%(5)
- ----------------------------------------------------------
Net Assets, End of Period (in thousands) $15,029 $385
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through March 31, 2003.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2003.
See Notes to Financial Statements.
- ------
30
Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2004 2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.61 $5.77
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------
Net Investment Income(2) 0.01 --(3)
- -------------------------------------------------------
Net Realized and Unrealized Gain (Loss) 2.20 (0.15)
- --------------------------------------------------------------------------------
Total From Investment Operations 2.21 (0.15)
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------------------
From Net Investment Income (0.01) (0.01)
- -------------------------------------------------------
From Net Realized Gains (0.08) --
- --------------------------------------------------------------------------------
Total Distributions (0.09) (0.01)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $7.73 $5.61
================================================================================
TOTAL RETURN(4) 39.51% (2.59)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 2.00% 1.98%(5)
- -------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets
(Before Expense Waiver) 2.00% 2.00%(5)(6)
- -------------------------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.26% (0.17)%(5)
- -------------------------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets
(Before Expense Waiver) 0.26% (0.19)%(5)(6)
- -------------------------------------------------------
Portfolio Turnover Rate 122% 102%(7)
- -------------------------------------------------------
Net Assets, End of Period (in thousands) $2,656 $91
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through March 31, 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, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(5) Annualized.
(6) 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.
- ------
31
Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2004 2003 2002(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.58 $7.18 $6.90
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Income(2) 0.02 0.01 --(3)
- -------------------------------------------
Net Realized and Unrealized Gain (Loss) 2.19 (1.50) 0.42
- --------------------------------------------------------------------------------
Total From Investment Operations 2.21 (1.49) 0.42
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------
From Net Investment Income (0.01) (0.01) (0.03)
- -------------------------------------------
From Net Realized Gains (0.08) (0.10) (0.11)
- --------------------------------------------------------------------------------
Total Distributions (0.09) (0.11) (0.14)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $7.70 $5.58 $7.18
================================================================================
TOTAL RETURN(4) 39.73% (20.90)% 6.33%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 2.00% 2.00% 2.00%(5)
- -------------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.26% 0.19% (0.06)%(5)
- -------------------------------------------
Portfolio Turnover Rate 122% 102% 151%(6)
- -------------------------------------------
Net Assets, End of Period (in thousands) $6,613 $2,461 $1,866
- --------------------------------------------------------------------------------
(1) June 4, 2001 (commencement of sale) through March 31, 2002.
(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, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended 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
- --------------------------------------------------------------------------------
2004 2003 2002 2001 2000(1)
- --------------------------------------------------------------------------------
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(2) 0.09 0.08 0.07 0.08 0.05
- --------------------------
Net Realized and
Unrealized Gain (Loss) 1.59 (1.25) 0.45 0.48 (0.41)
- --------------------------------------------------------------------------------
Total From
Investment Operations 1.68 (1.17) 0.52 0.56 (0.36)
- --------------------------------------------------------------------------------
Distributions
- --------------------------
From Net
Investment Income (0.08) (0.07) (0.07) (0.07) (0.05)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $5.89 $4.29 $5.53 $5.08 $4.59
================================================================================
TOTAL RETURN(3) 39.34% (21.19)% 10.20% 12.38% (7.22)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.90% 0.90% 0.90% 0.90% 0.90%(4)
- --------------------------
Ratio of Net
Investment Income
to Average Net Assets 1.58% 1.75% 1.34% 1.62% 1.72%(4)
- --------------------------
Portfolio Turnover Rate 14% 30% 34% 55% 51%
- --------------------------
Net Assets,
End of Period
(in thousands) $350,516 $152,641 $69,961 $19,348 $12,671
- --------------------------------------------------------------------------------
(1) July 30, 1999 (inception) through March 31, 2000.
(2) Computed using the 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.
- ------
33
Large Company Value -
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
2004 2003 2002(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $4.29 $5.53 $5.44
- --------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------
Net Investment Income(2) 0.10 0.09 0.06
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.59 (1.25) 0.08
- --------------------------------------------------------------------------------
Total From Investment Operations 1.69 (1.16) 0.14
- --------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.09) (0.08) (0.05)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $5.89 $4.29 $5.53
================================================================================
TOTAL RETURN(3) 39.61% (21.03)% 2.69%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.70% 0.70% 0.70%(4)
- ------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 1.78% 1.95% 1.74%(4)
- ------------------------------------------
Portfolio Turnover Rate 14% 30% 34%(5)
- ------------------------------------------
Net Assets, End of Period (in thousands) $151,622 $21,110 $2,632
- --------------------------------------------------------------------------------
(1) August 10, 2001 (commencement of sale) through March 31, 2002.
(2) Computed using the average shares 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 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
- --------------------------------------------------------------------------------
2004 2003 2002 2001(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $4.29 $5.53 $5.08 $4.69
- --------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------
Net Investment Income(2) 0.07 0.07 0.06 0.03
- -----------------------------------------
Net Realized and Unrealized Gain (Loss) 1.60 (1.25) 0.44 0.39
- --------------------------------------------------------------------------------
Total From Investment Operations 1.67 (1.18) 0.50 0.42
- --------------------------------------------------------------------------------
Distributions
- -----------------------------------------
From Net Investment Income (0.07) (0.06) (0.05) (0.03)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $5.89 $4.29 $5.53 $5.08
================================================================================
TOTAL RETURN(3) 38.99% (21.38)% 9.93% 8.94%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.15% 1.15% 1.15% 1.15%(4)
- -----------------------------------------
Ratio of Net Investment Income
to Average Net Assets 1.33% 1.50% 1.09% 1.53%(4)
- -----------------------------------------
Portfolio Turnover Rate 14% 30% 34% 55%(5)
- -----------------------------------------
Net Assets, End of Period
(in thousands) $19,265 $1,090 $6 $121
- --------------------------------------------------------------------------------
(1) October 26, 2000 (commencement of sale) through March 31, 2001.
(2) Computed using the average shares 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 year ended March 31, 2001.
See Notes to Financial Statements.
- ------
35
Large Company Value -
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2004 2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $4.29 $4.46
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------
Net Investment Income(2) 0.07 0.01
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.61 (0.17)
- --------------------------------------------------------------------------------
Total From Investment Operations 1.68 (0.16)
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------------------
From Net Investment Income (0.07) (0.01)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $5.90 $4.29
================================================================================
TOTAL RETURN(3) 39.22% (3.49)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.15% 1.15%(4)
- -------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 1.33% 1.79%(4)
- -------------------------------------------------------
Portfolio Turnover Rate 14% 30%(5)
- -------------------------------------------------------
Net Assets, End of Period (in thousands) $92,171 $3,733
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through March 31, 2003.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2003.
See Notes to Financial Statements.
- ------
36
Large Company Value -
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2004 2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $4.29 $4.46
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------
Net Investment Income(2) 0.03 0.01
- -------------------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.62 (0.17)
- --------------------------------------------------------------------------------
Total From Investment Operations 1.65 (0.16)
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------------------
From Net Investment Income (0.03) (0.01)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $5.91 $4.29
================================================================================
TOTAL RETURN(3) 38.41% (3.58)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.90% 1.88%(4)
- -------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets
(Before Expense Waiver) 1.90% 1.90%(4)(5)
- -------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 0.58% 0.74%(4)
- -------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets
(Before Expense Waiver) 0.58% 0.72%(4)(5)
- -------------------------------------------------------
Portfolio Turnover Rate 14% 30%(6)
- -------------------------------------------------------
Net Assets, End of Period (in thousands) $5,642 $88
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through March 31, 2003.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) During the period ended March 31, 2003, the distributor voluntarily waived
a portion of the distribution and service fees.
(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.
- ------
37
Large Company Value -
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2004 2003 2002(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $4.28 $5.53 $5.14
- --------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------
Net Investment Income(2) 0.03 0.03 0.01
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.61 (1.25) 0.39
- --------------------------------------------------------------------------------
Total From Investment Operations 1.64 (1.22) 0.40
- --------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.03) (0.03) (0.01)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $5.89 $4.28 $5.53
================================================================================
TOTAL RETURN(3) 38.27% (22.13)% 7.78%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.90% 1.90% 1.90%(4)
- ------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 0.58% 0.75% 0.33%(4)
- ------------------------------------------
Portfolio Turnover Rate 14% 30% 34%(5)
- ------------------------------------------
Net Assets, End of Period (in thousands) $11,030 $1,163 $257
- --------------------------------------------------------------------------------
(1) November 7, 2001 (commencement of sale) through March 31, 2002.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not include applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) 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
- --------------------------------------------------------------------------------
2004(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.18
- --------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------------------------------------
Net Investment Income(2) 0.03
- --------------------------------------------------------------------
Net Realized and Unrealized Gain 0.72
- --------------------------------------------------------------------------------
Total From Investment Operations 0.75
- --------------------------------------------------------------------------------
Distributions
- --------------------------------------------------------------------
From Net Investment Income (0.04)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $5.89
================================================================================
TOTAL RETURN(3) 14.63%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.40%(4)
- --------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 0.77%(4)
- --------------------------------------------------------------------
Portfolio Turnover Rate 14%(5)
- --------------------------------------------------------------------
Net Assets, End of Period (in thousands) $168
- --------------------------------------------------------------------------------
(1) August 29, 2003 (commencement of sale) through March 31, 2004.
(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 period ended March 31, 2004.
See Notes to Financial Statements.
- ------
39
Independent Auditors' Report
The Board of Directors and Shareholders
American Century Capital Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Value Fund and Large Company Value Fund,
(collectively, the "Funds"), two of the funds comprising American Century
Capital Portfolios, Inc., as of March 31, 2004, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
the periods presented. These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2004, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of Value
Fund and Large Company Value Fund as of March 31, 2004, the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and their financial highlights for the
periods presented, in conformity with accounting principles generally accepted
in the United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 11, 2004
- ------
40
Management
The individuals listed below serve as directors or officers of the funds. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
75, although the remaining independent directors may temporarily waive this
requirement on a case-by-case basis. Those listed as interested directors are
"interested" primarily by virtue of their engagement as officers of American
Century Companies, Inc. (ACC) or its wholly-owned subsidiaries, including the
fund's investment advisor, American Century Investment Management, Inc. (ACIM);
the fund's principal underwriter, American Century Investment Services, Inc.
(ACIS); and the fund's transfer agent, American Century Services Corporation
(ACSC).
The other directors (more than three-fourths of the total number) are
independent; that is, they are not employees or officers of, and have no
financial interest in, ACC or any of its wholly-owned subsidiaries, including
ACIM, ACIS, and ACSC. The directors serve in this capacity for five registered
investment companies in the American Century family of funds.
All persons named as officers of the funds also serve in a similar capacity for
the other 12 investment companies advised by ACIM, unless otherwise noted. Only
officers with policy-making functions are listed. No officer is compensated for
his or her service as an officer of the funds. The listed officers are
interested persons of the funds and are appointed or re-appointed on an annual
basis.
INDEPENDENT DIRECTORS
- --------------------------------------------------------------------------------
THOMAS A. BROWN (64), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 23
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Strategic Account Implementation
Manager, Applied Industrial Technologies, Inc., a corporation engaged in the
sale of bearings and power transmission products
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
ROBERT W. DOERING, M.D. (71), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director Emeritus(1)
LENGTH OF TIME SERVED (YEARS): 2
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly a general
surgeon
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
ANDREA C. HALL, PH.D. (59), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, Midwest
Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Midwest Research Institute
- --------------------------------------------------------------------------------
(1) Dr. Robert Doering resigned as full-time director, effective November 5,
2001, after serving in such capacity for 33 years. Dr. Doering continues to
serve the board in an advisory capacity. His position as Director Emeritus is
an advisory position and involves attendance at one board meeting per year to
review prior year-end results for the funds. He receives all regular board
communications, including monthly mailings, industry newsletters, email
communications, and company information, but not quarterly board and
committee materials relating to meetings that he does not attend. Dr. Doering
is not a director or a member of the board and has no voting power relating
to any matters relating to fund operations. He is not an interested person of
the funds or ACIM. He receives an annual stipend of $2,500 for his services.
(continued)
- ------
41
Management
INDEPENDENT DIRECTORS (CONTINUED)
- --------------------------------------------------------------------------------
D.D. (DEL) HOCK (69), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Chairman, Public
Service Company of Colorado
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Allied Motion Technologies, Inc.
and J.D. Edwards & Company
- --------------------------------------------------------------------------------
DONALD H. PRATT (66), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director, Vice Chairman of the Board
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Western Investments,
Inc.; Retired Chairman of the Board, Butler Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Butler Manufacturing Company and
Atlas-Copco, North America Inc.
- --------------------------------------------------------------------------------
GALE E. SAYERS (60), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer,
and Founder, Sayers Computer Source
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
M. JEANNINE STRANDJORD (58), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 9
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President and Chief
Integration Officer, Sprint Corporation (September 2003 to present); Senior Vice
President - Financial Services, Sprint Corporation (January 2003 to September
2003); Senior Vice President, Finance - Global Markets Group, Sprint Corporation
(November 1998 to January 2003)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide
- --------------------------------------------------------------------------------
TIMOTHY S. WEBSTER (42), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 2
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, American Italian Pasta Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JAMES E. STOWERS, JR. (80)(1), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director, Chairman of the Board
LENGTH OF TIME SERVED (YEARS): 45
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Director, and controlling
shareholder, ACC; Chairman, ACSC and other ACC subsidiaries; Director, ACIM,
ACSC, and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
JAMES E. STOWERS III (45)(1), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 13
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Co-Chairman, ACC (September 2000 to
present); Chief Executive Officer, ACC (June 1996 to September 2000); Director,
ACC, ACIM, ACSC and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
(1) James E. Stowers, Jr. is the father of James E. Stowers III.
(continued)
- ------
42
Management
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM M. LYONS (48), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: President
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC and
other ACC subsidiaries (September 2000 to present); President, ACC (June 1997 to
present); President, ACIM (September 2002 to present); President, ACIS (July
2003 to present); Chief Operating Officer, ACC (June 1996 to September 2000);
Also serves as: Executive Vice President, ACSC and other ACC subsidiaries
- --------------------------------------------------------------------------------
ROBERT T. JACKSON (58), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Executive Vice President
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Administrative Officer, ACC
(August 1997 to present); Chief Financial Officer, ACC (May 1995 to October
2002); President, ACSC (January 1999 to present); Executive Vice President, ACC
(May 1995 to present); Also serves as: Executive Vice President and Chief
Financial Officer, ACIM, ACIS and other ACC subsidiaries; and Treasurer, ACIM
- --------------------------------------------------------------------------------
MARYANNE ROEPKE (48), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer, and Chief
Accounting Officer
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President (April 1998
to present) and Assistant Treasurer (September 1985 to present), ACSC
- --------------------------------------------------------------------------------
DAVID C. TUCKER (45), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, ACIM, ACIS,
ACSC and other ACC subsidiaries (June 1998 to present); General Counsel, ACC,
ACIM, ACIS, ACSC and other ACC subsidiaries (June 1998 to present)
- --------------------------------------------------------------------------------
ROBERT LEACH (37), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Controller
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACSC (February 2000
to present); Controller-Fund Accounting, ACSC (June 1997 to present)
- --------------------------------------------------------------------------------
JON ZINDEL (36), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Tax Officer
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, Corporate Tax, ACSC
(April 1998 to present); Vice President, ACIM, ACIS, and other ACC subsidiaries
(April 1999 to present); President, American Century Employee Benefit Services,
Inc. (January 2000 to December 2000); Treasurer, American Century Employee
Benefit Services, Inc. (December 2000 to December 2003); Treasurer, American
Century Ventures, Inc. (December 1999 to January 2001)
- --------------------------------------------------------------------------------
The SAI has additional information about the funds' directors and is available
without charge upon request by calling 1-800-345-2021.
- ------
43
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)
- ------
44
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 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.
- ------
45
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 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
americancentury.com and on the Securities and Exchange Commission's Web site at
sec.gov.
- ------
46
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.
The NASDAQ COMPOSITE INDEX is a market-value weighted index of all domestic and
international common stocks listed on the Nasdaq stock market.
The DOW JONES INDUSTRIAL AVERAGE (DJIA) is a price-weighted average of 30
actively traded blue chip stocks, primarily industrials but including
service-oriented firms. Prepared and published by Dow Jones & Co., it is the
oldest and most widely quoted of all the market indicators.
- ------
47
Notes
- ------
48
CONTACT US
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.
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
COMPANIES
The American Century logo, American Century and
American Century Investments are service marks
of American Century Services Corporation.
0405 American Century Investment Services, Inc.
SH-ANN-38153S (c)2004 American Century Services Corporation
[front cover]
MARCH 31, 2004
American Century Investments
Annual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of two bridges]
Equity Index Fund
[american century investments logo and text logo]
[inside front cover]
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
Independent Auditors' Report............................................. 22
OTHER INFORMATION
Management............................................................... 23
Share Class Information.................................................. 26
Additional Information................................................... 27
Index Definition......................................................... 28
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 annual report for the Equity Index fund
for the year ended March 31, 2004.
The report includes comparative performance figures, portfolio and market
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.
Also, through our Web site americancentury.com, we provide quarterly
commentaries on all American Century portfolios, the views of our senior
investment officers, and other communications about investments, portfolio
strategy, and the markets.
Your next shareholder report for this fund will be the semiannual report dated
September 30, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
[signature]
James E. Stowers, Jr.
FOUNDER AND CHAIRMAN
[signature]
James E. Stowers III
CO-CHAIRMAN OF THE BOARD
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1
Equity Index - Performance
TOTAL RETURNS AS OF MARCH 31, 2004
----------------------
AVERAGE ANNUAL RETURNS
- -------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------
INVESTOR CLASS 34.27% -1.69% -0.90% 2/26/99
- -------------------------------------------------------------------------------
S&P 500 INDEX 35.12% -1.20% -0.42%(1) --
- -------------------------------------------------------------------------------
Institutional Class 34.53% -1.49% -0.71% 2/26/99
- -------------------------------------------------------------------------------
(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
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended March 31
- --------------------------------------------------------------------------------
1999* 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------
Investor Class 4.00% 17.17% -22.04% -0.16% -25.02% 34.27%
- --------------------------------------------------------------------------------
S&P 500 Index 4.01% 17.94% -21.68% 0.24% -24.76% 35.12%
- --------------------------------------------------------------------------------
* 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.
Equity Index advanced 34.27%* during the 12 months ended March 31, 2004,
slightly behind the benchmark it tracks, the S&P 500 Index, which increased
35.12%. The portfolio's results varied slightly because about 2% of assets were
invested in short-term cash equivalents. Mutual funds typically carry a small
balance of cash to meet redemptions.
OPTIMISM STALLED IN MARCH
The period began with U.S. troops capturing Baghdad, which helped clear the
anxiety that clouded the pre-war investment environment. The second quarter of
2003 produced the S&P 500's biggest rally since the last three months of 1998
and the index's eighth-best quarterly performance since World War II. The next
three months produced the fastest quarterly growth in gross domestic product,
corporate profits and worker productivity in about two decades. Optimism that
the torrid pace would continue into 2004 helped push consumer confidence in
January to its highest level since November 2000. But on March 11, exactly one
month after the S&P 500 Index reached a 23-month high, terrorist bombings of
Madrid commuter trains revived security concerns and optimism stalled.
Despite March's shock, the S&P 500 Index completed the period with four
consecutive quarterly increases, its longest streak since 1998. All 10 of the
index's sector stakes contributed, and more than 92% of the 500 stocks in the
index gained during the period.
FINANCIAL STOCKS ADVANCED
Financial stocks, which represented on average about one-fifth of the total
assets in the index during the period, benefited from a variety of factors.
Citigroup, the world's largest diversified financial corporation, cited the
resurgent global economy, high credit quality, and its acquisition of the credit
card business of Sears Roebuck and Home Depot as factors that produced strong
net income throughout the year. The stock market rally produced higher revenues
for capital markets companies and boosted the equity assets held by insurers.
BUSINESSES INCREASED THEIR SPENDING
The 12-month period included three consecutive quarters of increased business
spending, which had a positive impact
TOP TEN HOLDINGS
AS OF MARCH 31, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
General Electric Co. 2.9% 3.2%
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 2.6% 2.6%
- --------------------------------------------------------------------------------
Microsoft Corporation 2.5% 3.2%
- --------------------------------------------------------------------------------
Pfizer, Inc. 2.5% 2.5%
- --------------------------------------------------------------------------------
Citigroup Inc. 2.5% 2.5%
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 2.4% 2.6%
- --------------------------------------------------------------------------------
American International
Group, Inc. 1.8% 1.6%
- --------------------------------------------------------------------------------
Intel Corp. 1.7% 1.9%
- --------------------------------------------------------------------------------
Cisco Systems Inc. 1.5% 1.5%
- --------------------------------------------------------------------------------
International Business
Machines Corp. 1.5% 1.6%
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary are for Investor Class shares.
(continued)
- ------
3
Equity Index - Portfolio Commentary
on companies that supply products and services to corporations. Many sectors
were lifted, including basic materials and industrials, but the companies that
contributed the most were in information technology. Among the leaders were
communications equipment stocks, paced by network equipment giant Cisco, which
reported its highest quarterly sales in almost three years because of rising
demand for routers and switches. Semiconductor makers were led by Intel, the
world's biggest microchip maker, as demand increased for flash chips that are
used in cellular phones and digital cameras.
CONSUMER CONFIDENCE BUOYED RETAILERS
Rising consumer confidence, the low interest-rate environment and a $350 billion
package of federal tax cuts signed into law during the period benefited consumer
discretionary stocks. Home improvement specialty stores, such as Home Depot,
benefited from the strong housing market, exemplified by seven consecutive
quarters of increased residential investment.
Consumer staples stocks contributed, including Altria, whose American tobacco
division improved from a favorable decision in U.S. courts and greater
fourth-quarter volume, retail share and profitability. Wal-Mart Stores, the
world's largest retailer, gained when it increased its 2004 profit forecast
shortly after it reported higher winter sales.
Oil prices steadily rose throughout the final months, as a tightening worldwide
petroleum supply pushed U.S. average gasoline prices, unadjusted for inflation,
to an all-time high. That helped Exxon Mobil and other energy stocks as well as
the companies that provide equipment and service to them.
HEALTH CARE STOCKS AMONG FEW DETRACTORS
Though many health care firms advanced, some detracted. Two of the biggest
losers were pharmaceuticals. Johnson & Johnson declined after the company
reported its inability to keep up with the demand for its Cypher cardiovascular
stent device. Merck tumbled after discontinuing work on experimental drugs for
depression and diabetes even though they were in the late stages of development.
TOP FIVE INDUSTRIES
AS OF MARCH 31, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Pharmaceuticals 7.8% 8.4%
- --------------------------------------------------------------------------------
Commercial Banks 6.3% 6.1%
- --------------------------------------------------------------------------------
Oil & Gas 5.0% 4.8%
- --------------------------------------------------------------------------------
Insurance 4.7% 4.4%
- --------------------------------------------------------------------------------
Software 4.2% 4.9%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Common Stocks
& Futures 99.9% 99.8%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 0.1% 0.2%
- --------------------------------------------------------------------------------
- ------
4
Equity Index - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.5%
AEROSPACE & DEFENSE -- 1.8%
- --------------------------------------------------------------------------------
77,938 Boeing Co. $ 3,200,913
- --------------------------------------------------------------------------------
18,319 General Dynamics Corp. 1,636,436
- --------------------------------------------------------------------------------
10,969 Goodrich Corporation 307,900
- --------------------------------------------------------------------------------
79,708 Honeywell International Inc. 2,698,116
- --------------------------------------------------------------------------------
41,768 Lockheed Martin Corp. 1,906,292
- --------------------------------------------------------------------------------
17,202 Northrop Grumman Corp. 1,693,021
- --------------------------------------------------------------------------------
38,544 Raytheon Company 1,207,969
- --------------------------------------------------------------------------------
16,426 Rockwell Collins 519,226
- --------------------------------------------------------------------------------
47,735 United Technologies Corp. 4,119,530
- --------------------------------------------------------------------------------
17,289,403
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS -- 1.0%
- --------------------------------------------------------------------------------
27,645 FedEx Corporation 2,077,798
- --------------------------------------------------------------------------------
6,032 Ryder System, Inc. 233,619
- --------------------------------------------------------------------------------
104,446 United Parcel Service, Inc. Cl B 7,294,509
- --------------------------------------------------------------------------------
9,605,926
- --------------------------------------------------------------------------------
AIRLINES -- 0.1%
- --------------------------------------------------------------------------------
11,351 Delta Air Lines Inc. 89,900
- --------------------------------------------------------------------------------
72,946 Southwest Airlines Co. 1,036,563
- --------------------------------------------------------------------------------
1,126,463
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 0.2%
- --------------------------------------------------------------------------------
7,014 Cooper Tire & Rubber 141,332
- --------------------------------------------------------------------------------
13,897 Dana Corp. 275,994
- --------------------------------------------------------------------------------
51,931 Delphi Corp. 517,233
- --------------------------------------------------------------------------------
16,118 Goodyear Tire &
Rubber Co. (The)(1) 137,648
- --------------------------------------------------------------------------------
17,329 Johnson Controls, Inc. 1,025,010
- --------------------------------------------------------------------------------
12,019 Visteon Corp. 115,022
- --------------------------------------------------------------------------------
2,212,239
- --------------------------------------------------------------------------------
AUTOMOBILES -- 0.6%
- --------------------------------------------------------------------------------
169,658 Ford Motor Company 2,302,259
- --------------------------------------------------------------------------------
51,945 General Motors Corp. 2,446,609
- --------------------------------------------------------------------------------
28,067 Harley-Davidson, Inc. 1,497,094
- --------------------------------------------------------------------------------
6,245,962
- --------------------------------------------------------------------------------
BEVERAGES -- 2.7%
- --------------------------------------------------------------------------------
3,346 Adolph Coors Company Cl B 232,380
- --------------------------------------------------------------------------------
75,491 Anheuser-Busch Companies, Inc. 3,850,041
- --------------------------------------------------------------------------------
11,264 Brown-Forman Corp. 536,842
- --------------------------------------------------------------------------------
226,645 Coca-Cola Company (The) 11,400,244
- --------------------------------------------------------------------------------
42,144 Coca-Cola Enterprises 1,018,620
- --------------------------------------------------------------------------------
24,351 Pepsi Bottling Group Inc. 724,442
- --------------------------------------------------------------------------------
158,567 PepsiCo, Inc. 8,538,833
- --------------------------------------------------------------------------------
26,301,402
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.1%
- --------------------------------------------------------------------------------
119,526 Amgen Inc.(1) $ 6,952,827
- ---------------------------------------------------------------------------------
30,336 Biogen Idec Inc.(1) 1,686,682
- ---------------------------------------------------------------------------------
17,392 Chiron Corp.(1) 765,422
- ---------------------------------------------------------------------------------
20,754 Genzyme Corp.(1) 976,268
- ---------------------------------------------------------------------------------
22,978 MedImmune, Inc.(1) 530,332
- ---------------------------------------------------------------------------------
10,911,531
- ---------------------------------------------------------------------------------
BUILDING PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------
6,740 American Standard
Companies Inc.(1) 766,675
- --------------------------------------------------------------------------------
42,231 Masco Corp. 1,285,089
- ---------------------------------------------------------------------------------
2,051,764
- ---------------------------------------------------------------------------------
CAPITAL MARKETS -- 3.8%
- --------------------------------------------------------------------------------
71,653 Bank of New York Co.,
Inc. (The) 2,257,070
- --------------------------------------------------------------------------------
9,608 Bear Stearns Companies
Inc. (The) 842,429
- --------------------------------------------------------------------------------
20,083 E*TRADE Group Inc.(1) 268,108
- ---------------------------------------------------------------------------------
10,148 Federated Investors Inc. 318,952
- ---------------------------------------------------------------------------------
23,238 Franklin Resources, Inc. 1,293,892
- ---------------------------------------------------------------------------------
44,682 Goldman Sachs Group, Inc. (The) 4,662,567
- ---------------------------------------------------------------------------------
190,414 J.P. Morgan Chase & Co. 7,987,866
- ---------------------------------------------------------------------------------
22,435 Janus Capital Group Inc. 367,485
- ---------------------------------------------------------------------------------
25,585 Lehman Brothers Holdings Inc. 2,120,229
- ---------------------------------------------------------------------------------
39,833 Mellon Financial Corp. 1,246,375
- ---------------------------------------------------------------------------------
89,727 Merrill Lynch & Co., Inc. 5,344,140
- ---------------------------------------------------------------------------------
101,455 Morgan Stanley 5,813,372
- ---------------------------------------------------------------------------------
20,409 Northern Trust Corp. 950,855
- ---------------------------------------------------------------------------------
125,688 Schwab (Charles) Corp. 1,459,238
- ---------------------------------------------------------------------------------
30,947 State Street Corp. 1,613,267
- ---------------------------------------------------------------------------------
11,546 T. Rowe Price Group Inc. 621,521
- ---------------------------------------------------------------------------------
37,167,366
- ---------------------------------------------------------------------------------
CHEMICALS -- 1.5%
- --------------------------------------------------------------------------------
21,051 Air Products & Chemicals, Inc. 1,055,076
- ---------------------------------------------------------------------------------
86,096 Dow Chemical Co. 3,467,946
- ---------------------------------------------------------------------------------
92,347 du Pont (E.I.) de Nemours & Co. 3,898,889
- ---------------------------------------------------------------------------------
7,239 Eastman Chemical Company 308,961
- ---------------------------------------------------------------------------------
23,869 Ecolab Inc. 680,983
- ---------------------------------------------------------------------------------
11,700 Engelhard Corporation 349,713
- ---------------------------------------------------------------------------------
4,701 Great Lakes Chemical Corp. 112,119
- ---------------------------------------------------------------------------------
10,197 Hercules Inc.(1) 117,062
- ---------------------------------------------------------------------------------
8,753 International Flavors
& Fragrances Inc. 310,732
- ---------------------------------------------------------------------------------
24,397 Monsanto Co. 894,638
- ---------------------------------------------------------------------------------
15,740 PPG Industries, Inc. 917,642
- ---------------------------------------------------------------------------------
30,121 Praxair, Inc. 1,118,091
- ---------------------------------------------------------------------------------
20,608 Rohm and Haas Co. 821,023
- ---------------------------------------------------------------------------------
6,461 Sigma-Aldrich Corp. 357,552
- ---------------------------------------------------------------------------------
14,410,427
- ---------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
5
Equity Index - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 6.3%
- --------------------------------------------------------------------------------
32,517 AmSouth Bancorporation $ 764,475
- --------------------------------------------------------------------------------
134,306 Bank of America Corp. 10,876,099
- --------------------------------------------------------------------------------
103,576 Bank One Corp. 5,646,964
- --------------------------------------------------------------------------------
50,635 BB&T Corporation 1,787,416
- --------------------------------------------------------------------------------
20,615 Charter One Financial Inc. 728,946
- --------------------------------------------------------------------------------
16,250 Comerica Inc. 882,700
- --------------------------------------------------------------------------------
52,487 Fifth Third Bancorp 2,906,205
- --------------------------------------------------------------------------------
11,653 First Tennessee National Corp. 555,848
- --------------------------------------------------------------------------------
98,901 FleetBoston Financial Corp. 4,440,655
- --------------------------------------------------------------------------------
21,269 Huntington Bancshares Inc. 471,959
- --------------------------------------------------------------------------------
38,813 KeyCorp 1,175,646
- --------------------------------------------------------------------------------
11,110 M&T Bank Corp. 998,234
- --------------------------------------------------------------------------------
20,976 Marshall & Ilsley Corp. 793,103
- --------------------------------------------------------------------------------
56,312 National City Corp. 2,003,581
- --------------------------------------------------------------------------------
14,062 North Fork Bancorporation, Inc. 595,104
- --------------------------------------------------------------------------------
25,683 PNC Financial Services Group 1,423,352
- --------------------------------------------------------------------------------
20,559 Regions Financial Corp. 750,815
- --------------------------------------------------------------------------------
30,726 SouthTrust Corp. 1,018,874
- --------------------------------------------------------------------------------
26,079 SunTrust Banks, Inc. 1,817,967
- --------------------------------------------------------------------------------
27,950 Synovus Financial Corp. 683,378
- --------------------------------------------------------------------------------
178,136 U.S. Bancorp 4,925,460
- --------------------------------------------------------------------------------
17,498 Union Planters Corp. 522,315
- --------------------------------------------------------------------------------
121,967 Wachovia Corp. 5,732,449
- --------------------------------------------------------------------------------
156,777 Wells Fargo & Co. 8,884,552
- --------------------------------------------------------------------------------
8,344 Zions Bancorporation 477,277
- --------------------------------------------------------------------------------
60,863,374
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 1.1%
- --------------------------------------------------------------------------------
29,795 Allied Waste Industries Inc.(1) 396,571
- --------------------------------------------------------------------------------
16,328 Apollo Group Inc. Cl A(1) 1,406,004
- --------------------------------------------------------------------------------
10,241 Avery Dennison Corp. 637,093
- --------------------------------------------------------------------------------
16,517 Block (H & R), Inc. 842,863
- --------------------------------------------------------------------------------
93,630 Cendant Corporation 2,283,635
- --------------------------------------------------------------------------------
15,807 Cintas Corp. 687,446
- --------------------------------------------------------------------------------
4,646 Deluxe Corp. 186,305
- --------------------------------------------------------------------------------
12,991 Equifax Inc. 335,428
- --------------------------------------------------------------------------------
10,366 Monster Worldwide Inc. 271,589
- --------------------------------------------------------------------------------
21,642 Pitney Bowes, Inc. 922,166
- --------------------------------------------------------------------------------
19,844 R. R. Donnelley & Sons Company 600,281
- --------------------------------------------------------------------------------
15,931 Robert Half International Inc.(1) 376,290
- --------------------------------------------------------------------------------
53,745 Waste Management, Inc. 1,622,024
- --------------------------------------------------------------------------------
10,567,695
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 3.0%
- --------------------------------------------------------------------------------
73,987 ADC Telecommunications Inc.(1) 214,562
- --------------------------------------------------------------------------------
14,401 Andrew Corporation(1) 252,018
- --------------------------------------------------------------------------------
38,943 Avaya Inc.(1) 618,415
- --------------------------------------------------------------------------------
44,289 CIENA Corporation(1) 220,116
- --------------------------------------------------------------------------------
636,874 Cisco Systems Inc.(1) 14,979,277
- --------------------------------------------------------------------------------
17,991 Comverse Technology, Inc.(1) 326,357
- --------------------------------------------------------------------------------
124,107 Corning Inc.(1) 1,387,516
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
133,006 JDS Uniphase Corp.(1) $ 541,334
- ---------------------------------------------------------------------------------
392,507 Lucent Technologies Inc.(1) 1,613,204
- ---------------------------------------------------------------------------------
216,304 Motorola, Inc. 3,806,950
- ---------------------------------------------------------------------------------
8,784 QLogic Corp.(1) 289,960
- ---------------------------------------------------------------------------------
74,438 QUALCOMM Inc. 4,944,172
- ---------------------------------------------------------------------------------
14,110 Scientific-Atlanta, Inc. 456,317
- ---------------------------------------------------------------------------------
38,854 Tellabs, Inc.(1) 335,310
- ---------------------------------------------------------------------------------
29,985,508
- ---------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 3.7%
- --------------------------------------------------------------------------------
33,940 Apple Computer, Inc.(1) 918,077
- ---------------------------------------------------------------------------------
237,239 Dell Inc.(1) 7,975,976
- ---------------------------------------------------------------------------------
223,363 EMC Corp.(1) 3,039,970
- ---------------------------------------------------------------------------------
33,254 Gateway, Inc.(1) 175,581
- ---------------------------------------------------------------------------------
282,517 Hewlett-Packard Co. 6,452,688
- ---------------------------------------------------------------------------------
157,480 International Business
Machines Corp. 14,462,964
- ---------------------------------------------------------------------------------
11,901 Lexmark International, Inc.(1) 1,094,892
- ---------------------------------------------------------------------------------
8,821 NCR Corp.(1) 388,653
- ---------------------------------------------------------------------------------
31,973 Network Appliance, Inc.(1) 685,821
- ---------------------------------------------------------------------------------
302,620 Sun Microsystems, Inc.(1) 1,258,899
- ---------------------------------------------------------------------------------
36,453,521
- ---------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING(2)
- --------------------------------------------------------------------------------
7,668 Fluor Corp. 296,675
- ---------------------------------------------------------------------------------
CONSTRUCTION MATERIALS(2)
- --------------------------------------------------------------------------------
9,450 Vulcan Materials Co. 448,308
- ---------------------------------------------------------------------------------
CONSUMER FINANCE -- 1.3%
- --------------------------------------------------------------------------------
119,178 American Express Co. 6,179,379
- ---------------------------------------------------------------------------------
21,383 Capital One Financial Corp. 1,612,920
- ---------------------------------------------------------------------------------
118,369 MBNA Corporation 3,270,535
- ---------------------------------------------------------------------------------
27,107 Providian Financial Corp.(1) 355,102
- ---------------------------------------------------------------------------------
41,747 SLM Corporation 1,747,112
- ---------------------------------------------------------------------------------
13,165,048
- ---------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.2%
- --------------------------------------------------------------------------------
5,181 Ball Corp. 351,168
- ---------------------------------------------------------------------------------
9,767 Bemis Co. 253,942
- ---------------------------------------------------------------------------------
14,680 Pactiv Corp.(1) 326,630
- ---------------------------------------------------------------------------------
7,906 Sealed Air Corp.(1) 393,166
- ---------------------------------------------------------------------------------
5,071 Temple-Inland Inc. 321,197
- ---------------------------------------------------------------------------------
1,646,103
- ---------------------------------------------------------------------------------
DISTRIBUTORS -- 0.1%
- --------------------------------------------------------------------------------
16,144 Genuine Parts Company 528,232
- ---------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 2.7%
- --------------------------------------------------------------------------------
477,191 Citigroup Inc. 24,670,775
- ---------------------------------------------------------------------------------
13,792 Moody's Corp. 976,474
- ---------------------------------------------------------------------------------
29,915 Principal Financial Group 1,065,871
- ---------------------------------------------------------------------------------
26,713,120
- ---------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
6
Equity Index - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.8%
- --------------------------------------------------------------------------------
28,911 ALLTEL Corp. $ 1,442,370
- --------------------------------------------------------------------------------
73,174 AT&T Corp. 1,432,015
- --------------------------------------------------------------------------------
169,962 BellSouth Corp. 4,706,248
- --------------------------------------------------------------------------------
13,413 CenturyTel Inc. 368,723
- --------------------------------------------------------------------------------
26,555 Citizens Communications
Company(1) 343,622
- --------------------------------------------------------------------------------
163,699 Qwest Communications
International Inc.(1) 705,543
- --------------------------------------------------------------------------------
306,552 SBC Communications Inc. 7,522,786
- --------------------------------------------------------------------------------
83,743 Sprint Corp. 1,543,383
- --------------------------------------------------------------------------------
255,854 Verizon Communications 9,348,905
- --------------------------------------------------------------------------------
27,413,595
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 2.1%
- --------------------------------------------------------------------------------
11,674 Allegheny Energy, Inc.(1) 160,051
- --------------------------------------------------------------------------------
16,813 Ameren Corp. 774,911
- --------------------------------------------------------------------------------
36,598 American Electric Power 1,204,806
- --------------------------------------------------------------------------------
28,620 CenterPoint Energy, Inc. 327,127
- --------------------------------------------------------------------------------
16,499 Cinergy Corp. 674,644
- --------------------------------------------------------------------------------
14,813 CMS Energy Corp.(1) 132,576
- --------------------------------------------------------------------------------
20,887 Consolidated Edison, Inc. 921,117
- --------------------------------------------------------------------------------
30,059 Dominion Resources Inc. 1,932,794
- --------------------------------------------------------------------------------
15,599 DTE Energy Company 641,899
- --------------------------------------------------------------------------------
30,175 Edison International 732,951
- --------------------------------------------------------------------------------
21,199 Entergy Corp. 1,261,341
- --------------------------------------------------------------------------------
30,374 Exelon Corporation 2,091,856
- --------------------------------------------------------------------------------
30,560 FirstEnergy Corp. 1,194,285
- --------------------------------------------------------------------------------
17,043 FPL Group, Inc. 1,139,325
- --------------------------------------------------------------------------------
38,571 PG&E Corp.(1) 1,117,402
- --------------------------------------------------------------------------------
8,517 Pinnacle West Capital Corp. 335,144
- --------------------------------------------------------------------------------
16,414 PPL Corporation 748,478
- --------------------------------------------------------------------------------
22,693 Progress Energy Inc. 1,068,386
- --------------------------------------------------------------------------------
67,811 Southern Co. 2,068,235
- --------------------------------------------------------------------------------
17,265 TECO Energy, Inc. 252,587
- --------------------------------------------------------------------------------
29,983 TXU Corp. 859,313
- --------------------------------------------------------------------------------
36,951 XCEL Energy Inc. 658,097
- --------------------------------------------------------------------------------
20,297,325
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.4%
- --------------------------------------------------------------------------------
18,449 American Power Conversion Corp. 424,511
- --------------------------------------------------------------------------------
8,668 Cooper Industries, Ltd. 495,636
- --------------------------------------------------------------------------------
38,983 Emerson Electric Co. 2,335,862
- --------------------------------------------------------------------------------
7,656 Power-One Inc.(1) 84,675
- --------------------------------------------------------------------------------
17,274 Rockwell Automation Inc. 598,890
- --------------------------------------------------------------------------------
5,376 Thomas & Betts Corp. 117,304
- --------------------------------------------------------------------------------
4,056,878
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.5%
- --------------------------------------------------------------------------------
44,033 Agilent Technologies, Inc.(1) 1,392,765
- --------------------------------------------------------------------------------
18,523 Jabil Circuit, Inc.(1) 545,132
- --------------------------------------------------------------------------------
17,647 Molex Inc. 536,292
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
11,661 PerkinElmer, Inc. $ 241,266
- ---------------------------------------------------------------------------------
47,916 Sanmina-SCI Corp.(1) 527,555
- ---------------------------------------------------------------------------------
77,544 Solectron Corp.(1) 428,818
- ---------------------------------------------------------------------------------
21,465 Symbol Technologies, Inc. 296,217
- ---------------------------------------------------------------------------------
7,772 Tektronix, Inc. 254,222
- ---------------------------------------------------------------------------------
15,154 Thermo Electron Corp.(1) 428,555
- ---------------------------------------------------------------------------------
11,301 Waters Corp.(1) 461,533
- ---------------------------------------------------------------------------------
5,112,355
- ---------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 0.9%
- --------------------------------------------------------------------------------
31,004 Baker Hughes Inc. 1,131,026
- ---------------------------------------------------------------------------------
14,685 BJ Services Co.(1) 635,420
- ---------------------------------------------------------------------------------
40,573 Halliburton Co. 1,233,013
- ---------------------------------------------------------------------------------
13,592 Nabors Industries Ltd.(1) 621,834
- ---------------------------------------------------------------------------------
12,434 Noble Corp.(1) 477,714
- ---------------------------------------------------------------------------------
9,311 Rowan Companies, Inc.(1) 196,369
- ---------------------------------------------------------------------------------
54,393 Schlumberger Ltd. 3,472,994
- ---------------------------------------------------------------------------------
29,607 Transocean Inc.(1) 825,739
- ---------------------------------------------------------------------------------
8,594,109
- ---------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 3.6%
- --------------------------------------------------------------------------------
33,977 Albertson's Inc. 752,591
- ---------------------------------------------------------------------------------
42,418 Costco Wholesale Corporation(1) 1,593,220
- ---------------------------------------------------------------------------------
36,581 CVS Corp. 1,291,309
- ---------------------------------------------------------------------------------
68,986 Kroger Co. (The)(1) 1,147,927
- ---------------------------------------------------------------------------------
40,975 Safeway Inc.(1) 843,266
- ---------------------------------------------------------------------------------
12,500 Supervalu Inc. 381,750
- ---------------------------------------------------------------------------------
59,842 Sysco Corp. 2,336,830
- ---------------------------------------------------------------------------------
400,915 Wal-Mart Stores, Inc. 23,930,616
- ---------------------------------------------------------------------------------
94,978 Walgreen Co. 3,129,525
- ---------------------------------------------------------------------------------
13,020 Winn-Dixie Stores, Inc. 98,952
- ---------------------------------------------------------------------------------
35,505,986
- ---------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.2%
- --------------------------------------------------------------------------------
59,926 Archer-Daniels-Midland Co. 1,010,952
- ---------------------------------------------------------------------------------
38,012 Campbell Soup Company 1,036,587
- ---------------------------------------------------------------------------------
49,746 ConAgra Foods, Inc. 1,340,157
- ---------------------------------------------------------------------------------
34,595 General Mills, Inc. 1,614,894
- ---------------------------------------------------------------------------------
32,580 H.J. Heinz Company 1,214,908
- ---------------------------------------------------------------------------------
12,055 Hershey Foods Corp. 998,757
- ---------------------------------------------------------------------------------
37,989 Kellogg Co. 1,490,688
- ---------------------------------------------------------------------------------
12,930 McCormick & Company,
Incorporated 433,414
- ---------------------------------------------------------------------------------
73,185 Sara Lee Corp. 1,599,824
- ---------------------------------------------------------------------------------
20,813 Wrigley (Wm.) Jr. Company 1,230,465
- ---------------------------------------------------------------------------------
11,970,646
- ---------------------------------------------------------------------------------
GAS UTILITIES -- 0.3%
- --------------------------------------------------------------------------------
14,759 KeySpan Corporation 564,089
- ---------------------------------------------------------------------------------
11,412 Kinder Morgan, Inc. 719,184
- ---------------------------------------------------------------------------------
4,048 NICOR Inc. 142,611
- ---------------------------------------------------------------------------------
24,355 NiSource Inc. 517,544
- ---------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
7
Equity Index - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
3,383 People's Energy Corp. $ 151,051
- --------------------------------------------------------------------------------
20,961 Sempra Energy 666,560
- --------------------------------------------------------------------------------
2,761,039
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 2.0%
- --------------------------------------------------------------------------------
19,368 Applera Corporation-Applied
Biosystems Group 383,099
- -------------------------------------------------------------------------------
4,826 Bard (C.R.), Inc. 471,211
- --------------------------------------------------------------------------------
4,914 Bausch & Lomb Inc. Cl A 294,693
- --------------------------------------------------------------------------------
56,541 Baxter International, Inc. 1,746,551
- --------------------------------------------------------------------------------
23,521 Becton Dickinson & Co. 1,140,298
- --------------------------------------------------------------------------------
23,663 Biomet Inc. 907,713
- --------------------------------------------------------------------------------
75,898 Boston Scientific Corp.(1) 3,216,557
- --------------------------------------------------------------------------------
28,815 Guidant Corp. 1,826,007
- --------------------------------------------------------------------------------
112,287 Medtronic, Inc. 5,361,703
- --------------------------------------------------------------------------------
4,486 Millipore Corp.(1) 230,491
- --------------------------------------------------------------------------------
15,981 St. Jude Medical, Inc.(1) 1,152,230
- --------------------------------------------------------------------------------
18,473 Stryker Corp. 1,635,415
- --------------------------------------------------------------------------------
22,404 Zimmer Holdings Inc.(1) 1,652,967
- --------------------------------------------------------------------------------
20,018,935
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 2.1%
- --------------------------------------------------------------------------------
14,133 AETNA Inc. 1,268,013
- --------------------------------------------------------------------------------
10,377 AmerisourceBergen Corp. 567,414
- --------------------------------------------------------------------------------
12,811 Anthem, Inc.(1) 1,161,189
- --------------------------------------------------------------------------------
40,191 Cardinal Health, Inc. 2,769,160
- --------------------------------------------------------------------------------
41,300 Caremark Rx Inc.(1) 1,373,225
- --------------------------------------------------------------------------------
13,002 CIGNA Corp. 767,378
- --------------------------------------------------------------------------------
7,296 Express Scripts, Inc. Cl A(1) 544,209
- --------------------------------------------------------------------------------
45,896 HCA Inc. 1,864,296
- --------------------------------------------------------------------------------
22,249 Health Management
Associates, Inc. Cl A 516,399
- --------------------------------------------------------------------------------
15,035 Humana Inc.(1) 285,966
- --------------------------------------------------------------------------------
22,205 IMS Health Inc. 516,488
- --------------------------------------------------------------------------------
8,346 Manor Care, Inc. 294,530
- --------------------------------------------------------------------------------
26,987 McKesson Corp. 812,039
- --------------------------------------------------------------------------------
25,013 Medco Health Solutions Inc.(1) 850,442
- --------------------------------------------------------------------------------
9,621 Quest Diagnostics Inc. 796,907
- --------------------------------------------------------------------------------
43,017 Tenet Healthcare Corp.(1) 480,070
- --------------------------------------------------------------------------------
57,974 UnitedHealth Group Incorporated 3,735,844
- --------------------------------------------------------------------------------
14,294 Wellpoint Health Networks Inc.(1) 1,625,514
- --------------------------------------------------------------------------------
20,229,083
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 1.4%
- --------------------------------------------------------------------------------
58,367 Carnival Corporation 2,621,262
- --------------------------------------------------------------------------------
15,402 Darden Restaurants, Inc. 381,816
- --------------------------------------------------------------------------------
10,251 Harrah's Entertainment, Inc. 562,677
- --------------------------------------------------------------------------------
35,167 Hilton Hotels Corporation 571,464
- --------------------------------------------------------------------------------
32,050 International Game Technology 1,440,968
- --------------------------------------------------------------------------------
21,413 Marriott International, Inc. 911,123
- --------------------------------------------------------------------------------
117,182 McDonald's Corporation 3,347,889
- --------------------------------------------------------------------------------
36,475 Starbucks Corporation(1) 1,376,931
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
18,727 Starwood Hotels & Resorts
Worldwide, Inc. $ 758,444
- ---------------------------------------------------------------------------------
10,602 Wendy's International, Inc. 431,395
- ---------------------------------------------------------------------------------
27,228 Yum! Brands, Inc.(1) 1,034,392
- ---------------------------------------------------------------------------------
13,438,361
- ---------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.5%
- --------------------------------------------------------------------------------
6,110 American Greetings(1) 139,125
- ---------------------------------------------------------------------------------
7,241 Black & Decker Corporation 412,303
- ---------------------------------------------------------------------------------
11,528 Centex Corp. 623,204
- ---------------------------------------------------------------------------------
13,513 Fortune Brands, Inc. 1,035,500
- ---------------------------------------------------------------------------------
4,336 KB Home 350,349
- ---------------------------------------------------------------------------------
17,873 Leggett & Platt, Inc. 423,769
- ---------------------------------------------------------------------------------
7,220 Maytag Corporation 227,935
- ---------------------------------------------------------------------------------
25,435 Newell Rubbermaid Inc. 590,092
- ---------------------------------------------------------------------------------
11,521 Pulte Homes Inc. 640,567
- ---------------------------------------------------------------------------------
5,356 Snap-on Incorporated 173,213
- ---------------------------------------------------------------------------------
7,579 Stanley Works (The) 323,472
- ---------------------------------------------------------------------------------
6,470 Whirlpool Corp. 445,589
- ---------------------------------------------------------------------------------
5,385,118
- ---------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.0%
- --------------------------------------------------------------------------------
19,548 Clorox Company 956,093
- ---------------------------------------------------------------------------------
49,498 Colgate-Palmolive Co. 2,727,340
- ---------------------------------------------------------------------------------
46,602 Kimberly-Clark Corp. 2,940,586
- ---------------------------------------------------------------------------------
119,777 Procter & Gamble Co. (The) 12,562,211
- ---------------------------------------------------------------------------------
19,186,230
- ---------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 4.1%
- --------------------------------------------------------------------------------
72,658 3M Co. 5,948,510
- ---------------------------------------------------------------------------------
944,153 General Electric Co. 28,815,551
- ---------------------------------------------------------------------------------
12,589 Textron Inc. 669,105
- ---------------------------------------------------------------------------------
185,233 Tyco International Ltd. 5,306,925
- ---------------------------------------------------------------------------------
40,740,091
- ---------------------------------------------------------------------------------
INSURANCE -- 4.7%
- --------------------------------------------------------------------------------
25,843 Ace, Ltd. 1,102,462
- ---------------------------------------------------------------------------------
47,505 Aflac Inc. 1,906,851
- ---------------------------------------------------------------------------------
65,178 Allstate Corp. 2,962,992
- ---------------------------------------------------------------------------------
9,891 Ambac Financial Group, Inc. 729,758
- ---------------------------------------------------------------------------------
241,642 American International
Group, Inc. 17,241,157
- ---------------------------------------------------------------------------------
29,034 AON Corp. 810,339
- ---------------------------------------------------------------------------------
17,388 Chubb Corp. 1,209,162
- ---------------------------------------------------------------------------------
14,864 Cincinnati Financial Corp. 645,841
- ---------------------------------------------------------------------------------
26,857 Hartford Financial Services
Group Inc. (The) 1,710,791
- ---------------------------------------------------------------------------------
13,066 Jefferson-Pilot Corp. 718,761
- ---------------------------------------------------------------------------------
26,792 John Hancock Financial
Services, Inc. 1,170,542
- ---------------------------------------------------------------------------------
16,480 Lincoln National Corp. 779,834
- ---------------------------------------------------------------------------------
17,182 Loews Corp. 1,014,769
- ---------------------------------------------------------------------------------
49,130 Marsh & McLennan
Companies, Inc. 2,274,719
- ---------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
8
Equity Index - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
13,345 MBIA Inc. $ 836,732
- --------------------------------------------------------------------------------
70,411 MetLife, Inc. 2,512,264
- --------------------------------------------------------------------------------
20,011 Progressive Corp. 1,752,964
- --------------------------------------------------------------------------------
50,058 Prudential Financial Inc. 2,241,597
- --------------------------------------------------------------------------------
12,859 Safeco Corp. 555,123
- --------------------------------------------------------------------------------
21,137 St. Paul Companies, Inc. 845,691
- --------------------------------------------------------------------------------
10,514 Torchmark Corp. 565,548
- --------------------------------------------------------------------------------
93,081 Travelers Property Casualty Corp. 1,607,509
- --------------------------------------------------------------------------------
27,533 UnumProvident Corp. 402,808
- --------------------------------------------------------------------------------
12,712 XL Capital Ltd. Cl A 966,620
- --------------------------------------------------------------------------------
46,564,834
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 0.4%
- --------------------------------------------------------------------------------
59,852 eBay Inc.(1) 4,149,539
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 0.3%
- --------------------------------------------------------------------------------
61,424 Yahoo! Inc.(1) 2,984,592
- --------------------------------------------------------------------------------
IT SERVICES -- 1.1%
- --------------------------------------------------------------------------------
54,860 Automatic Data Processing, Inc. 2,304,120
- --------------------------------------------------------------------------------
17,352 Computer Sciences Corp.(1) 699,806
- --------------------------------------------------------------------------------
13,150 Convergys Corp.(1) 199,880
- --------------------------------------------------------------------------------
44,479 Electronic Data Systems Corp. 860,669
- --------------------------------------------------------------------------------
82,422 First Data Corp. 3,474,912
- --------------------------------------------------------------------------------
17,943 Fiserv, Inc.(1) 641,821
- --------------------------------------------------------------------------------
34,929 Paychex, Inc. 1,243,472
- --------------------------------------------------------------------------------
13,426 Sabre Holdings Corp. 333,099
- --------------------------------------------------------------------------------
26,613 SunGard Data Systems Inc.(1) 729,196
- --------------------------------------------------------------------------------
30,703 Unisys Corp.(1) 438,439
- --------------------------------------------------------------------------------
10,925,414
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------
8,566 Brunswick Corp. 349,750
- --------------------------------------------------------------------------------
26,533 Eastman Kodak Co. 694,369
- --------------------------------------------------------------------------------
16,273 Hasbro, Inc. 353,938
- --------------------------------------------------------------------------------
39,775 Mattel, Inc. 733,450
- --------------------------------------------------------------------------------
2,131,507
- --------------------------------------------------------------------------------
MACHINERY -- 1.4%
- --------------------------------------------------------------------------------
32,172 Caterpillar Inc. 2,543,839
- --------------------------------------------------------------------------------
5,462 Crane Co. 180,246
- --------------------------------------------------------------------------------
3,889 Cummins Inc. 227,312
- --------------------------------------------------------------------------------
14,226 Danaher Corp. 1,328,282
- --------------------------------------------------------------------------------
22,432 Deere & Co. 1,554,762
- --------------------------------------------------------------------------------
18,750 Dover Corp. 726,938
- --------------------------------------------------------------------------------
14,078 Eaton Corp. 791,043
- --------------------------------------------------------------------------------
28,549 Illinois Tool Works Inc. 2,261,937
- --------------------------------------------------------------------------------
16,136 Ingersoll-Rand Company 1,091,600
- --------------------------------------------------------------------------------
8,551 ITT Industries, Inc. 652,698
- --------------------------------------------------------------------------------
6,414 Navistar International Corp.(1) 294,082
- --------------------------------------------------------------------------------
16,199 Paccar Inc. 911,032
- --------------------------------------------------------------------------------
11,676 Pall Corp. 264,928
- --------------------------------------------------------------------------------
10,983 Parker-Hannifin Corp. 620,540
- --------------------------------------------------------------------------------
13,449,239
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MEDIA -- 3.7%
- --------------------------------------------------------------------------------
57,040 Clear Channel
Communications, Inc. $ 2,415,644
- --------------------------------------------------------------------------------
208,565 Comcast Corporation(1) 5,994,158
- --------------------------------------------------------------------------------
189,503 Disney (Walt) Co. 4,735,680
- --------------------------------------------------------------------------------
7,596 Dow Jones & Co. Inc. 363,924
- --------------------------------------------------------------------------------
25,106 Gannett Co., Inc. 2,212,843
- --------------------------------------------------------------------------------
38,416 Interpublic Group of
Companies, Inc.(1) 590,838
- --------------------------------------------------------------------------------
7,409 Knight-Ridder, Inc. 542,709
- --------------------------------------------------------------------------------
17,741 McGraw-Hill
Companies, Inc. (The) 1,350,800
- --------------------------------------------------------------------------------
4,612 Meredith Corp. 233,183
- --------------------------------------------------------------------------------
13,797 New York Times Co. (The) Cl A 609,827
- --------------------------------------------------------------------------------
17,607 Omnicom Group Inc. 1,412,962
- --------------------------------------------------------------------------------
421,161 Time Warner Inc.(1) 7,100,774
- --------------------------------------------------------------------------------
30,589 Tribune Co. 1,542,909
- --------------------------------------------------------------------------------
29,869 Univision Communications
Inc. Cl A(1) 985,976
- --------------------------------------------------------------------------------
162,090 Viacom, Inc. Cl B 6,355,549
- --------------------------------------------------------------------------------
36,447,776
- --------------------------------------------------------------------------------
METALS & MINING -- 0.7%
- --------------------------------------------------------------------------------
80,370 Alcoa Inc. 2,788,035
- --------------------------------------------------------------------------------
7,526 Allegheny Technologies Inc. 91,065
- --------------------------------------------------------------------------------
15,947 Freeport-McMoRan
Copper & Gold, Inc. Cl B 623,368
- --------------------------------------------------------------------------------
40,041 Newmont Mining Corporation 1,867,112
- --------------------------------------------------------------------------------
7,289 Nucor Corp. 448,128
- --------------------------------------------------------------------------------
8,496 Phelps Dodge Corp.(1) 693,783
- --------------------------------------------------------------------------------
10,287 United States Steel Corp. 383,396
- --------------------------------------------------------------------------------
7,915 Worthington Industries, Inc. 151,731
- --------------------------------------------------------------------------------
7,046,618
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER -- 0.5%
- --------------------------------------------------------------------------------
57,737 AES Corporation (The)(1) 492,497
- --------------------------------------------------------------------------------
37,979 Calpine Corporation(1) 177,362
- --------------------------------------------------------------------------------
15,503 Constellation Energy Group Inc. 619,345
- --------------------------------------------------------------------------------
84,061 Duke Energy Corp. 1,899,778
- --------------------------------------------------------------------------------
34,658 Dynegy Inc. Cl A(1) 137,246
- --------------------------------------------------------------------------------
58,249 El Paso Corp. 414,150
- --------------------------------------------------------------------------------
21,774 Public Service Enterprise
Group Inc. 1,022,943
- --------------------------------------------------------------------------------
48,095 Williams Cos Inc. 460,269
- --------------------------------------------------------------------------------
5,223,590
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 1.1%
- --------------------------------------------------------------------------------
10,746 Big Lots Inc.(1) 155,817
- --------------------------------------------------------------------------------
7,658 Dillard's Inc. 146,727
- --------------------------------------------------------------------------------
31,203 Dollar General Corp. 599,098
- --------------------------------------------------------------------------------
15,995 Family Dollar Stores, Inc. 575,020
- --------------------------------------------------------------------------------
16,742 Federated Department Stores, Inc. 904,905
- --------------------------------------------------------------------------------
25,287 J.C. Penney Co. Inc.
Holding Company 879,482
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
9
Equity Index - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
31,496 Kohl's Corp.(1) $ 1,522,202
- --------------------------------------------------------------------------------
26,714 May Department
Stores Co. (The) 923,770
- --------------------------------------------------------------------------------
12,768 Nordstrom, Inc. 509,443
- --------------------------------------------------------------------------------
20,858 Sears, Roebuck & Co. 896,060
- --------------------------------------------------------------------------------
84,448 Target Corporation 3,803,538
- --------------------------------------------------------------------------------
10,916,062
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS -- 0.1%
- --------------------------------------------------------------------------------
73,377 Xerox Corp.(1) 1,069,103
- --------------------------------------------------------------------------------
OIL & GAS -- 5.0%
- --------------------------------------------------------------------------------
8,350 Amerada Hess Corp. 545,088
- --------------------------------------------------------------------------------
23,236 Anadarko Petroleum Corp. 1,205,019
- --------------------------------------------------------------------------------
30,009 Apache Corp. 1,295,489
- --------------------------------------------------------------------------------
6,417 Ashland Inc. 298,326
- --------------------------------------------------------------------------------
18,400 Burlington Resources, Inc. 1,170,792
- --------------------------------------------------------------------------------
99,045 ChevronTexaco Corp. 8,694,171
- --------------------------------------------------------------------------------
63,246 ConocoPhillips 4,415,203
- --------------------------------------------------------------------------------
21,536 Devon Energy Corporation 1,252,318
- --------------------------------------------------------------------------------
10,688 EOG Resources Inc. 490,472
- --------------------------------------------------------------------------------
607,498 Exxon Mobil Corp. 25,265,843
- --------------------------------------------------------------------------------
9,372 Kerr-McGee Corp. 482,658
- --------------------------------------------------------------------------------
31,507 Marathon Oil Corp. 1,060,841
- --------------------------------------------------------------------------------
35,788 Occidental Petroleum Corp. 1,648,037
- --------------------------------------------------------------------------------
7,192 Sunoco, Inc. 448,637
- --------------------------------------------------------------------------------
23,983 Unocal Corp. 894,086
- --------------------------------------------------------------------------------
49,166,980
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.5%
- --------------------------------------------------------------------------------
23,525 Georgia-Pacific Corp. 792,557
- --------------------------------------------------------------------------------
44,519 International Paper Company 1,881,373
- --------------------------------------------------------------------------------
9,734 Louisiana-Pacific Corp. 251,137
- --------------------------------------------------------------------------------
18,608 MeadWestvaco Corp. 526,420
- --------------------------------------------------------------------------------
20,369 Weyerhaeuser Co. 1,334,170
- --------------------------------------------------------------------------------
4,785,657
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 0.6%
- --------------------------------------------------------------------------------
8,228 Alberto-Culver Company Cl B 360,962
- --------------------------------------------------------------------------------
21,902 Avon Products, Inc. 1,661,705
- --------------------------------------------------------------------------------
93,504 Gillette Company 3,656,007
- --------------------------------------------------------------------------------
5,678,674
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 7.8%
- --------------------------------------------------------------------------------
144,836 Abbott Laboratories 5,952,760
- --------------------------------------------------------------------------------
12,082 Allergan, Inc. 1,016,821
- --------------------------------------------------------------------------------
179,686 Bristol-Myers Squibb Co. 4,353,792
- --------------------------------------------------------------------------------
104,044 Eli Lilly and Company 6,960,544
- --------------------------------------------------------------------------------
33,952 Forest Laboratories, Inc. Cl A(1) 2,431,642
- --------------------------------------------------------------------------------
275,022 Johnson & Johnson 13,949,116
- --------------------------------------------------------------------------------
22,471 King Pharmaceuticals, Inc.(1) 378,412
- --------------------------------------------------------------------------------
206,152 Merck & Co., Inc. 9,109,857
- --------------------------------------------------------------------------------
706,407 Pfizer, Inc. 24,759,566
- --------------------------------------------------------------------------------
136,147 Schering-Plough Corp. 2,208,304
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
10,031 Watson
Pharmaceuticals, Inc.(1) $ 429,226
- --------------------------------------------------------------------------------
123,399 Wyeth 4,633,632
- --------------------------------------------------------------------------------
76,183,672
- --------------------------------------------------------------------------------
REAL ESTATE -- 0.4%
- --------------------------------------------------------------------------------
8,806 Apartment Investment and
Management Co. 273,779
- --------------------------------------------------------------------------------
37,016 Equity Office Properties Trust 1,069,393
- --------------------------------------------------------------------------------
25,492 Equity Residential 760,936
- --------------------------------------------------------------------------------
16,990 Plum Creek Timber Co. Inc. 551,835
- --------------------------------------------------------------------------------
16,698 Prologis 598,957
- --------------------------------------------------------------------------------
17,705 Simon Property Group, Inc. 1,034,680
- --------------------------------------------------------------------------------
4,289,580
- --------------------------------------------------------------------------------
ROAD & RAIL -- 0.4%
- --------------------------------------------------------------------------------
34,374 Burlington Northern
Santa Fe Corp. 1,082,781
- --------------------------------------------------------------------------------
19,818 CSX Corporation 600,287
- --------------------------------------------------------------------------------
36,146 Norfolk Southern Corp. 798,465
- --------------------------------------------------------------------------------
23,844 Union Pacific Corp. 1,426,348
- --------------------------------------------------------------------------------
3,907,881
- --------------------------------------------------------------------------------
SEMICONDUCTORS
& SEMICONDUCTOR EQUIPMENT -- 3.7%
- --------------------------------------------------------------------------------
32,371 Advanced Micro Devices, Inc.(1) 525,381
- --------------------------------------------------------------------------------
35,055 Altera Corp.(1) 716,875
- --------------------------------------------------------------------------------
34,448 Analog Devices, Inc. 1,653,848
- --------------------------------------------------------------------------------
155,347 Applied Materials, Inc.(1) 3,321,319
- --------------------------------------------------------------------------------
28,221 Applied Micro Circuits Corp.(1) 162,271
- --------------------------------------------------------------------------------
28,041 Broadcom Corp.(1) 1,098,366
- --------------------------------------------------------------------------------
600,808 Intel Corp. 16,341,978
- --------------------------------------------------------------------------------
18,031 KLA-Tencor Corp.(1) 907,861
- --------------------------------------------------------------------------------
28,922 Linear Technology Corp. 1,070,692
- --------------------------------------------------------------------------------
35,323 LSI Logic Corp.(1) 329,917
- --------------------------------------------------------------------------------
30,443 Maxim Integrated Products, Inc. 1,433,561
- --------------------------------------------------------------------------------
56,526 Micron Technology, Inc.(1) 944,549
- --------------------------------------------------------------------------------
16,718 National Semiconductor Corp.(1) 742,781
- --------------------------------------------------------------------------------
14,122 Novellus Systems, Inc.(1) 448,938
- --------------------------------------------------------------------------------
15,114 NVIDIA Corp.(1) 400,370
- --------------------------------------------------------------------------------
16,121 PMC-Sierra, Inc.(1) 273,573
- --------------------------------------------------------------------------------
17,776 Teradyne, Inc.(1) 423,602
- --------------------------------------------------------------------------------
160,348 Texas Instruments Inc. 4,685,369
- --------------------------------------------------------------------------------
31,694 Xilinx, Inc.(1) 1,204,372
- --------------------------------------------------------------------------------
36,685,623
- --------------------------------------------------------------------------------
SOFTWARE -- 4.2%
- --------------------------------------------------------------------------------
21,852 Adobe Systems Inc. 861,624
- --------------------------------------------------------------------------------
10,259 Autodesk, Inc. 324,390
- --------------------------------------------------------------------------------
21,041 BMC Software Inc.(1) 411,352
- --------------------------------------------------------------------------------
15,329 Citrix Systems, Inc.(1) 331,413
- --------------------------------------------------------------------------------
53,649 Computer Associates
International, Inc. 1,441,012
- --------------------------------------------------------------------------------
35,307 Compuware Corp.(1) 263,037
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
10
Equity Index - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
27,595 Electronic Arts Inc.(1) $ 1,489,026
- --------------------------------------------------------------------------------
18,386 Intuit Inc.(1) 825,164
- --------------------------------------------------------------------------------
8,377 Mercury Interactive Corp.(1) 375,290
- --------------------------------------------------------------------------------
1,000,016 Microsoft Corporation 24,970,399
- --------------------------------------------------------------------------------
34,757 Novell, Inc.(1) 395,535
- --------------------------------------------------------------------------------
484,267 Oracle Corp.(1) 5,816,046
- --------------------------------------------------------------------------------
24,439 Parametric Technology Corp.(1) 110,464
- --------------------------------------------------------------------------------
34,219 PeopleSoft, Inc.(1) 632,709
- --------------------------------------------------------------------------------
45,910 Siebel Systems, Inc.(1) 528,424
- --------------------------------------------------------------------------------
28,652 Symantec Corp.(1) 1,326,588
- --------------------------------------------------------------------------------
39,611 Veritas Software Corp.(1) 1,065,932
- --------------------------------------------------------------------------------
41,168,405
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 2.4%
- --------------------------------------------------------------------------------
25,567 AutoNation, Inc.(1) 435,917
- --------------------------------------------------------------------------------
8,157 Autozone Inc.(1) 701,257
- --------------------------------------------------------------------------------
27,421 Bed Bath & Beyond Inc.(1) 1,145,101
- --------------------------------------------------------------------------------
29,987 Best Buy Co., Inc. 1,550,928
- --------------------------------------------------------------------------------
7,949 Boise Cascade Corp. 275,433
- --------------------------------------------------------------------------------
19,255 Circuit City Stores-Circuit
City Group 217,582
- --------------------------------------------------------------------------------
83,007 Gap, Inc. (The) 1,819,513
- --------------------------------------------------------------------------------
210,791 Home Depot, Inc. 7,875,152
- --------------------------------------------------------------------------------
50,519 Limited Brands 1,010,380
- --------------------------------------------------------------------------------
72,857 Lowe's Companies, Inc. 4,089,463
- --------------------------------------------------------------------------------
29,099 Office Depot, Inc.(1) 547,643
- --------------------------------------------------------------------------------
15,250 RadioShack Corp. 505,690
- --------------------------------------------------------------------------------
13,544 Sherwin-Williams Co. 520,496
- --------------------------------------------------------------------------------
45,874 Staples, Inc.(1) 1,164,741
- --------------------------------------------------------------------------------
13,606 Tiffany & Co. 519,341
- --------------------------------------------------------------------------------
46,618 TJX Companies, Inc. (The) 1,144,938
- --------------------------------------------------------------------------------
19,987 Toys 'R' Us, Inc.(1) 335,782
- --------------------------------------------------------------------------------
23,859,357
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.3%
- --------------------------------------------------------------------------------
11,753 Jones Apparel Group, Inc. 424,871
- --------------------------------------------------------------------------------
10,169 Liz Claiborne, Inc. 373,101
- --------------------------------------------------------------------------------
24,314 NIKE, Inc. Cl B 1,893,331
- --------------------------------------------------------------------------------
5,540 Reebok International Ltd. 229,079
- --------------------------------------------------------------------------------
10,050 VF Corp. 469,335
- --------------------------------------------------------------------------------
3,389,717
- --------------------------------------------------------------------------------
Shares/Principal Amount Value
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 1.8%
- --------------------------------------------------------------------------------
17,060 Countrywide Financial
Corporation $ 1,636,054
- --------------------------------------------------------------------------------
90,034 Fannie Mae 6,694,028
- --------------------------------------------------------------------------------
63,916 Freddie Mac 3,774,879
- --------------------------------------------------------------------------------
14,078 Golden West Financial Corp. 1,576,032
- --------------------------------------------------------------------------------
9,122 MGIC Investment Corp. 585,906
- --------------------------------------------------------------------------------
83,333 Washington Mutual, Inc. 3,559,152
- --------------------------------------------------------------------------------
17,826,051
- --------------------------------------------------------------------------------
TOBACCO -- 1.2%
- --------------------------------------------------------------------------------
189,393 Altria Group Inc. 10,312,449
- --------------------------------------------------------------------------------
7,866 R.J. Reynolds Tobacco
Holdings, Inc. 475,893
- --------------------------------------------------------------------------------
15,387 UST Inc. 555,471
- --------------------------------------------------------------------------------
11,343,813
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS(2)
- --------------------------------------------------------------------------------
8,498 Grainger (W.W.), Inc. 407,904
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.7%
- --------------------------------------------------------------------------------
251,882 AT&T Wireless Services Inc.(1) 3,428,113
- --------------------------------------------------------------------------------
101,872 Nextel Communications, Inc.(1) 2,519,295
- --------------------------------------------------------------------------------
95,853 Sprint Corp. (PCS Group)(1) 881,848
- --------------------------------------------------------------------------------
6,829,256
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $878,636,884) 969,130,662
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS --
SEGREGATED FOR FUTURES* -- 1.4%
Repurchase Agreement, Deutsche
Bank, Inc., (U.S. Treasury obligations),
in a joint trading account at 0.99%,
dated 3/31/04, due 4/1/04
(Delivery value $12,401,438) 12,401,097
- --------------------------------------------------------------------------------
$1,100,000 U.S. Treasury Bills, 0.92%,
6/24/04(3)(4) 1,097,703
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS -- SEGREGATED FOR FUTURES
(Cost $13,498,736) 13,498,800
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 0.1%
Repurchase Agreement, Deutsche
Bank, Inc., (U.S. Treasury obligations),
in a joint trading account at 0.99%,
dated 3/31/04, due 4/1/04
(Delivery value $1,098,933)
(Cost $1,098,903) 1,098,903
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $893,234,523) $983,728,365
================================================================================
See Notes to Financial Statements. (continued)
- ------
11
Equity Index - Schedule of Investments
MARCH 31, 2004
EQUITY FUTURES CONTRACTS*
Underlying Face
Purchased Expiration Date Amount at Value Unrealized Loss
- -------------------------------------------------------------------------------
48 S&P 500 Futures June 2004 $13,498,800 $(142,715)
======================================
*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) Industry is less than 0.05% of total investment securities.
(3) The rate indicated is the yield to maturity at purchase.
(4) Security, or a portion thereof, has been segregated at the custodian bank
or with the broker as initial margin on futures contracts.
See Notes to Financial Statements.
- ------
12
Statement of Assets and Liabilities
MARCH 31, 2004
ASSETS
- ---------------------------------------------------------------
Investment securities, at value (cost of $893,234,523) $983,728,365
- ---------------------------------------------------------------
Cash 207,589
- ---------------------------------------------------------------
Receivable for investments sold 82,602
- ---------------------------------------------------------------
Dividends and interest receivable 1,177,350
- -------------------------------------------------------------------------------
985,195,906
- -------------------------------------------------------------------------------
LIABILITIES
- ---------------------------------------------------------------
Payable for investments purchased 320,482
- ---------------------------------------------------------------
Payable for variation margin on futures contracts 14,585
- ---------------------------------------------------------------
Accrued management fees 267,889
- -------------------------------------------------------------------------------
602,956
- -------------------------------------------------------------------------------
NET ASSETS $984,592,950
===============================================================================
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------
Capital (par value and paid-in surplus) $1,023,165,405
- ---------------------------------------------------------------
Undistributed net investment income 196,465
- ---------------------------------------------------------------
Accumulated net realized loss on investment transactions (129,120,047)
- ---------------------------------------------------------------
Net unrealized appreciation on investments 90,351,127
- -------------------------------------------------------------------------------
$ 984,592,950
===============================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- -------------------------------------------------------------------------------
Net assets $142,323,654
- ---------------------------------------------------------------
Shares outstanding 31,650,735
- ---------------------------------------------------------------
Net asset value per share $4.50
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- -------------------------------------------------------------------------------
Net assets $842,269,296
- ---------------------------------------------------------------
Shares outstanding 187,100,025
- ---------------------------------------------------------------
Net asset value per share $4.50
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
13
Statement of Operations
YEAR ENDED MARCH 31, 2004
INVESTMENT INCOME
- ---------------------------------------------------------------
INCOME:
- ---------------------------------------------------------------
Dividends $ 13,011,189
- ---------------------------------------------------------------
Interest 240,056
- -------------------------------------------------------------------------------
13,251,245
- -------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------
Management fees 2,491,286
- ---------------------------------------------------------------
Directors' fees and expenses 10,185
- ---------------------------------------------------------------
Other expenses 5,549
- -------------------------------------------------------------------------------
2,507,020
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 10,744,225
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ---------------------------------------------------------------
Net realized loss on investment transactions (20,901,861)
- ---------------------------------------------------------------
Change in net unrealized appreciation on investments 204,487,313
- -------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 183,585,452
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $194,329,677
===============================================================================
See Notes to Financial Statements.
- ------
14
Statement of Changes in Net Assets
YEARS ENDED MARCH 31, 2004 AND MARCH 31, 2003
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2004 2003
OPERATIONS
- ------------------------------------------
Net investment income $ 10,744,225 $ 6,112,381
- ------------------------------------------
Net realized loss (20,901,861) (72,582,191)
- ------------------------------------------
Change in net unrealized appreciation 204,487,313 (68,749,000)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 194,329,677 (135,218,810)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------
From net investment income:
- ------------------------------------------
Investor Class (1,549,115) (1,126,595)
- ------------------------------------------
Institutional Class (8,965,901) (4,947,464)
- --------------------------------------------------------------------------------
Decrease in net assets from distributions (10,515,016) (6,074,059)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets from
capital share transactions 359,870,681 23,849,350
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 543,685,342 (117,443,519)
NET ASSETS
Beginning of period 440,907,608 558,351,127
- --------------------------------------------------------------------------------
End of period $984,592,950 $ 440,907,608
================================================================================
Undistributed net investment income $196,465 $55,532
================================================================================
See Notes to Financial Statements.
- ------
15
Notes to Financial Statements
MARCH 31, 2004
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 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 (S&P 500 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 may be valued through a
commercial pricing service or at amortized cost, which approximates fair value.
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 substantially 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
MARCH 31, 2004
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 year ended March 31, 2004, 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 JPMorgan Chase Bank (JPMCB). JPMCB is a wholly owned subsidiary
of JPM.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term investments,
for the year ended March 31, 2004, were $513,664,754 and $121,744,122,
respectively.
For the year ended March 31, 2004, the fund incurred a purchase in kind of
equity securities valued at $238,160,141. A purchase in kind occurs when a fund
receives securities into its portfolio in lieu of cash as payment from a
purchasing shareholder.
(continued)
- ------
17
Notes to Financial Statements
MARCH 31, 2004
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows:
SHARES AMOUNT
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 100,000,000
================================================================================
Sold 14,336,422 $59,091,604
- ------------------------------------------
Issued in reinvestment of distributions 351,675 1,503,313
- ------------------------------------------
Redeemed (9,650,868) (40,717,436)
- --------------------------------------------------------------------------------
Net increase 5,037,229 $19,877,481
================================================================================
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
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 400,000,000
================================================================================
Sold 122,967,665 $501,104,432
- ------------------------------------------
Issued in reinvestment of distributions 2,088,596 8,965,901
- ------------------------------------------
Redeemed (41,439,189) (170,077,133)
- --------------------------------------------------------------------------------
Net increase 83,617,072 $339,993,200
================================================================================
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 $650,000,000
unsecured bank line of credit agreement with JPMCB, which was renewed from
$620,000,000 effective December 17, 2003. The fund may borrow money for
temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund
did not borrow from the line during the year ended March 31, 2004.
(continued)
- ------
18
Notes to Financial Statements
MARCH 31, 2004
6. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2004
and March 31, 2003 were as follows:
2004 2003
- --------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
- --------------------------------------------------------------------------------
Ordinary Income $10,515,016 $6,074,059
- --------------------------------------------------------------------------------
Long-Term Capital Gain -- --
- --------------------------------------------------------------------------------
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 on the financial statements.
As of March 31, 2004, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
- --------------------------------------------------------------------------------
COMPONENTS OF DISTRIBUTABLE EARNINGS AND TAX COST
- --------------------------------------------------------------------------------
Federal tax cost of investments $957,903,182
================================================================================
Gross tax appreciation of investments $118,795,460
- ---------------------------------------------------------------
Gross tax depreciation of investments (92,970,277)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $ 25,825,183
================================================================================
Net tax appreciation (depreciation) on derivatives $--
- --------------------------------------------------------------------------------
Net tax appreciation of investments $25,825,183
================================================================================
Undistributed ordinary income 198,769
- ---------------------------------------------------------------
Accumulated capital losses $(64,596,407)
- --------------------------------------------------------------------------------
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.
The accumulated capital losses listed above represent net capital loss
carryovers that may be used to offset future realized capital gains for federal
income tax purposes. The capital loss carryovers expire in 2009 through 2011.
7. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The fund hereby designates $10,515,016 of qualified dividend income for the
fiscal year ended March 31, 2004.
For corporate taxpayers, 100% of the ordinary income distributions paid during
the fiscal year ended March 31, 2004, qualify for the corporate dividends
received deduction.
- ------
19
Equity Index - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31
- ------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER-SHARE DATA
Net Asset Value, Beginning of Period $3.39 $4.58 $4.63 $5.99 $5.20
- ------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------
Net Investment Income(1) 0.05 0.05 0.04 0.05 0.05
- -----------------------------------------
Net Realized and Unrealized Gain (Loss) 1.11 (1.19) (0.05) (1.36) 0.83
- ------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.16 (1.14) (0.01) (1.31) 0.88
- ------------------------------------------------------------------------------------------------------------------
Distributions
- -----------------------------------------
From Net Investment Income (0.05) (0.05) (0.04) (0.05) (0.05)
- -----------------------------------------
From Net Realized Gains -- -- -- -- (0.04)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.05) (0.05) (0.04) (0.05) (0.09)
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $4.50 $3.39 $4.58 $4.63 $5.99
==================================================================================================================
TOTAL RETURN(2) 34.27% (25.02)% (0.16)% (22.04)% 17.17%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.49% 0.49% 0.49% 0.49% 0.49%
- -----------------------------------------
Ratio of Net Investment Income
to Average Net Assets 1.23% 1.24% 0.91% 0.83% 0.94%
- -----------------------------------------
Portfolio Turnover Rate 16% 21% 4% 10% 13%
- -----------------------------------------
Net Assets, End of Period (in thousands) $142,324 $90,093 $108,760 $71,415 $68,905
- ------------------------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. 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.
See Notes to Financial Statements.
- ------
20
Equity Index - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31
- ------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ------------------------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER-SHARE DATA
Net Asset Value, Beginning of Period $3.39 $4.58 $4.64 $5.99 $5.20
- ------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------
Net Investment Income(1) 0.06 0.05 0.05 0.06 0.06
- -----------------------------------------
Net Realized and Unrealized Gain (Loss) 1.11 (1.19) (0.06) (1.35) 0.84
- ------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.17 (1.14) (0.01) (1.29) 0.90
- ------------------------------------------------------------------------------------------------------------------
Distributions
- -----------------------------------------
From Net Investment Income (0.06) (0.05) (0.05) (0.06) (0.07)
- -----------------------------------------
From Net Realized Gains -- -- -- -- (0.04)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.06) (0.05) (0.05) (0.06) (0.11)
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $4.50 $3.39 $4.58 $4.64 $5.99
==================================================================================================================
TOTAL RETURN(2) 34.53% (24.87)% (0.17)% (21.72)% 17.43%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.29% 0.29% 0.29% 0.29% 0.29%
- -----------------------------------------
Ratio of Net Investment Income
to Average Net Assets 1.43% 1.44% 1.11% 1.03% 1.14%
- -----------------------------------------
Portfolio Turnover Rate 16% 21% 4% 10% 13%
- -----------------------------------------
Net Assets, End of Period (in thousands) $842,269 $350,815 $449,591 $441,959 $398,560
- ------------------------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. 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.
See Notes to Financial Statements.
- ------
21
Independent Auditors' Report
The Board of Directors and Shareholders
American Century Capital Portfolios, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Equity Index Fund, (the "Fund"), one of the
funds comprising American Century Capital Portfolios, Inc., as of March 31,
2004, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2004, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Equity
Index Fund as of March 31, 2004, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for the periods presented, in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Kansas City, Missouri
May 11, 2004
- ------
22
Management
The individuals listed below serve as directors or officers of the fund. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
75, although the remaining independent directors may temporarily waive this
requirement on a case-by-case basis. Those listed as interested directors are
"interested" primarily by virtue of their engagement as officers of American
Century Companies, Inc. (ACC) or its wholly-owned subsidiaries, including the
fund's investment advisor, American Century Investment Management, Inc. (ACIM);
the fund's principal underwriter, American Century Investment Services, Inc.
(ACIS); and the fund's transfer agent, American Century Services Corporation
(ACSC).
The other directors (more than three-fourths of the total numbers) are
independent; that is, they are not employees or officers of, and have no
financial interest in, ACC or any of its wholly-owned subsidiaries, including
ACIM, ACIS, and ACSC. The directors serve in this capacity for five registered
investment companies in the American Century family of funds.
All persons named as officers of the fund also serve in a similar capacity for
the other 12 investment companies advised by ACIM, unless otherwise noted. Only
officers with policy-making functions are listed. No officer is compensated for
his or her service as an officer of the fund. The listed officers are interested
persons of the fund and are appointed or re-appointed on an annual basis.
INDEPENDENT DIRECTORS
- --------------------------------------------------------------------------------
THOMAS A. BROWN (64), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 23
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Strategic Account Implementation
Manager, Applied Industrial Technologies, Inc., a corporation engaged in the
sale of bearings and power transmission products
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
ROBERT W. DOERING, M.D. (71), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director Emeritus(1)
LENGTH OF TIME SERVED (YEARS): 2
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly a general surgeon
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
ANDREA C. HALL, PH.D. (59), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, Midwest
Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Midwest Research Institute
- --------------------------------------------------------------------------------
(1) Dr. Robert Doering resigned as full-time director, effective November 5,
2001, after serving in such capacity for 33 years. Dr. Doering continues to
serve the board in an advisory capacity. His position as Director Emeritus is
an advisory position and involves attendance at one board meeting per year to
review prior year-end results for the funds. He receives all regular board
communications, including monthly mailings, industry newsletters, email
communications, and company information, but not quarterly board and
committee materials relating to meetings that he does not attend. Dr. Doering
is not a director or a member of the board and has no voting power relating
to any matters relating to fund operations. He is not an interested person of
the funds or ACIM. He receives an annual stipend of $2,500 for his services.
(continued)
- ------
23
Management
INDEPENDENT DIRECTORS (CONTINUED)
- --------------------------------------------------------------------------------
D.D. (DEL) HOCK (69), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Chairman, Public
Service Company of Colorado
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Allied Motion Technologies, Inc.
and J.D. Edwards & Company
- --------------------------------------------------------------------------------
DONALD H. PRATT (66), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director, Vice Chairman of the Board
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Western Investments,
Inc.; Retired Chairman of the Board, Butler Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Butler Manufacturing Company and
Atlas-Copco, North America Inc.
- --------------------------------------------------------------------------------
GALE E. SAYERS (60), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer,
and Founder, Sayers Computer Source
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
M. JEANNINE STRANDJORD (58), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 9
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President and Chief
Integration Officer, Sprint Corporation (September 2003 to present); Senior Vice
President - Financial Services, Sprint Corporation (January 2003 to September
2003); Senior Vice President, Finance - Global Markets Group, Sprint Corporation
(November 1998 to January 2003)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide
- --------------------------------------------------------------------------------
TIMOTHY S. WEBSTER (42), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 2
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, American Italian Pasta Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JAMES E. STOWERS, JR. (80),(1) 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director, Chairman of the Board
LENGTH OF TIME SERVED (YEARS): 45
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Director, and controlling
shareholder, ACC; Chairman, ACSC and other ACC subsidiaries; Director, ACIM,
ACSC, and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
JAMES E. STOWERS III (45),(1) 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 13
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Co-Chairman, ACC (September 2000 to
present); Chief Executive Officer, ACC (June 1996 to September 2000); Director,
ACC, ACIM, ACSC and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
(1) James E. Stowers, Jr. is the father of James E. Stowers III.
(continued)
- ------
24
Management
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM M. LYONS (48), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: President
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC and
other ACC subsidiaries (September 2000 to present); President, ACC (June 1997 to
present); President, ACIM (September 2002 to present); President, ACIS (July
2003 to present); Chief Operating Officer, ACC (June 1996 to September 2000);
Also serves as: Executive Vice President, ACSC and other ACC subsidiaries
- --------------------------------------------------------------------------------
ROBERT T. JACKSON (58), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Executive Vice President
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Administrative Officer, ACC
(August 1997 to present); Chief Financial Officer, ACC (May 1995 to October
2002); President, ACSC (January 1999 to present); Executive Vice President, ACC
(May 1995 to present); Also serves as: Executive Vice President and Chief
Financial Officer, ACIM, ACIS and other ACC subsidiaries; and Treasurer, ACIM
- --------------------------------------------------------------------------------
MARYANNE ROEPKE (48), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer, and Chief
Accounting Officer
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President (April 1998
to present) and Assistant Treasurer (September 1985 to present), ACSC
- --------------------------------------------------------------------------------
DAVID C. TUCKER (45), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, ACIM, ACIS,
ACSC and other ACC subsidiaries (June 1998 to present); General Counsel, ACC,
ACIM, ACIS, ACSC and other ACC subsidiaries (June 1998 to present)
- --------------------------------------------------------------------------------
ROBERT LEACH (37), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Controller
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACSC (February 2000
to present); Controller-Fund Accounting, ACSC (June 1997 to present)
- --------------------------------------------------------------------------------
JON ZINDEL (36), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Tax Officer
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, Corporate Tax, ACSC
(April 1998 to present); Vice President, ACIM, ACIS, and other ACC subsidiaries
(April 1999 to present); President, American Century Employee Benefit Services,
Inc. (January 2000 to December 2000); Treasurer, American Century Employee
Benefit Services, Inc. (December 2000 to December 2003); Treasurer, American
Century Ventures, Inc. (December 1999 to January 2001)
- --------------------------------------------------------------------------------
The SAI has additional information about the funds' directors and is available
without charge upon request by calling 1-800-345-2021.
- ------
25
Share Class Information
Two classes of shares are authorized for sale by the fund: 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.
- ------
26
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 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
americancentury.com and on the Securities and Exchange Commission's Web site at
sec.gov.
- ------
27
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 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.
[inside back cover - blank]
[back cover]
CONTACT US
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.
The American Century logo, American Century and
American Century Investments are service marks
of American Century Services Corporation.
0405 American Century Investment Services, Inc.
SH-ANN-38151N (c)2004 American Century Services Corporation
[front cover]
MARCH 31, 2004
American Century Investments
Annual Report
[graphic of chart]
[graphic of starfish]
[graphic of two steal bridges]
Real Estate Fund
[american century investments logo and text logo]
Table of Contents
Our Message to You........................................................ 1
REAL ESTATE
Performance............................................................... 2
Portfolio Commentary...................................................... 3
Top Ten Holdings....................................................... 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...................................................... 14
Independent Auditors' Report.............................................. 17
OTHER INFORMATION
Management................................................................ 18
Share Class Information................................................... 21
Additional Information.................................................... 22
Index Definitions......................................................... 23
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 annual report for the American Century
Real Estate fund for the year ended March 31, 2004.
The report includes comparative performance figures, portfolio and market
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.
Also, through our Web site, americancentury.com, we provide quarterly
commentaries on all American Century portfolios, the views of our senior
investment officers, and other communications about investments, portfolio
strategy, and the markets.
Your next shareholder report for this fund will be the semiannual report dated
September 30, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/s/ of James E. Stowers, Jr.
James E. Stowers, Jr.
FOUNDER AND CHAIRMAN
/s/ of James E. Stowers III
James E. Stowers III
CO-CHAIRMAN OF THE BOARD
- ------
1
Real Estate - Performance
TOTAL RETURNS AS OF MARCH 31, 2004
----------------------
AVERAGE ANNUAL RETURNS
- ------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 50.97% 18.61% 15.47% 9/21/95(1)
- --------------------------------------------------------------------------------
MSCI REIT INDEX 51.60% 17.90% 13.94%(2) -
- --------------------------------------------------------------------------------
Institutional Class 51.14% 18.86% 12.33% 6/16/97
- --------------------------------------------------------------------------------
Advisor Class 50.66% 18.33% 17.06% 10/6/98
- --------------------------------------------------------------------------------
(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
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended March 31
- --------------------------------------------------------------------------------------------------
1996* 1997 1998 1999 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------------------------
Investor Class 8.83% 40.77% 20.03% -21.04% 2.87% 24.57% 20.23% 0.93% 50.97%
- --------------------------------------------------------------------------------------------------
MSCI REIT Index 6.51% 33.51% 17.47% -20.32% 2.94% 22.93% 22.79% -3.28% 51.60%
- --------------------------------------------------------------------------------------------------
* 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 fiscal year ended March 31, 2004, the Real Estate fund posted a total
return of 50.97%,* just behind the 51.60% return of its benchmark, the Morgan
Stanley Capital International (MSCI) REIT Index. However, the fund outperformed
the 35.12% return of the S&P 500, a broad stock market measure. (See the
previous page for additional performance details.)
MARKET REVIEW
The U.S. stock market rebounded during the fiscal year as economic conditions
improved markedly. In the second half of 2003, the U.S. economy expanded at a
6.1% annual rate--its best six-month growth rate in nearly 20 years. The
strengthening economy provided a healthy boost to corporate profit growth, which
in turn drove stock prices higher. Despite finishing the period below their
peaks, all of the major stock indexes gained more than 30% for the fiscal year.
The past year was even better for real estate investment trusts (REITs); the
MSCI REIT Index gained more than 50% and outperformed the broad stock market. In
addition to the generally positive environment for stocks, the REIT sector got a
strong boost from yield-hungry investors looking for an alternative to the
historically low yields in the bond market. REIT dividend yields averaged nearly
6% during the fiscal year, compared with a 4% average yield for the 10-year
Treasury bond.
Every segment of the REIT market posted very strong gains during the past year,
but health care and hotel REITs were the top performers, while office and
apartment REITs lagged.
PORTFOLIO OVERVIEW
The fund participated fully in the REIT sector rally but slightly underperformed
its benchmark. This shortfall can be attributed to an underweight in health care
REITs, which gained more
TOP TEN HOLDINGS
AS OF MARCH 31, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Equity Office
Properties Trust 6.1% 8.7%
- --------------------------------------------------------------------------------
Prologis 6.0% 6.5%
- --------------------------------------------------------------------------------
Archstone-Smith Trust 4.9% 3.6%
- --------------------------------------------------------------------------------
Rouse Company 4.8% 4.3%
- --------------------------------------------------------------------------------
Duke Realty Corporation 4.3% 5.6%
- --------------------------------------------------------------------------------
Mack-Cali Realty Corp. 3.9% 2.3%
- --------------------------------------------------------------------------------
Simon Property
Group, Inc. 3.8% 3.6%
- --------------------------------------------------------------------------------
Taubman Centers Inc. 3.2% 0.5%
- --------------------------------------------------------------------------------
General Growth
Properties, Inc. 3.2% 3.9%
- --------------------------------------------------------------------------------
Capital Automotive REIT 3.2% 2.3%
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary are for Investor Class shares.
(continued)
- ------
3
Real Estate - Portfolio Commentary
than 90% as a group during the fiscal year. An underweight in self-storage
REITs, particularly Public Storage (+68% during the fiscal year), also hampered
performance relative to the benchmark.
On the positive side, an overweight in the hotel segment enhanced relative
performance. Although we reduced our holdings over the last six months, hotel
companies comprised approximately 8% of the portfolio at the end of the period,
compared with 4% for the index. The best performers in the portfolio included
non-index hotel holdings La Quinta (+147%) and Hilton Group (+100%).
Several of the fund's retail REITs were also among the top individual
contributors to performance. We emphasized REITs that owned regional malls
rather than grocery-anchored shopping centers, and the top retail contributors
came from the regional mall group, including General Growth Properties (+105%)
and Rouse (+61%).
The fund's office REITs, which made up the largest weighting in the portfolio as
of March 31, 2004, provided a boost to relative performance. Overweights in
CarrAmerica Realty (+43%) and Highwoods Properties (+33%) contributed to the
relative outperformance of the fund's office holdings. We reduced the
portfolio's exposure to office REITs during the period.
FUND ALLOCATION
AS OF MARCH 31, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Office Management 25.2% 25.2%
- --------------------------------------------------------------------------------
Regional Malls 22.3% 18.1%
- --------------------------------------------------------------------------------
Multi-Family Residential 13.2% 13.4%
- --------------------------------------------------------------------------------
Diversified Companies 10.3% 10.8%
- --------------------------------------------------------------------------------
Industrials 8.5% 6.5%
- --------------------------------------------------------------------------------
Hotels, Restaurants
& Leisure 7.7% 11.8%
- --------------------------------------------------------------------------------
Neighborhood & Community Shopping
Centers 7.1% 5.3%
- --------------------------------------------------------------------------------
Other(1) 5.7% 8.9%
- --------------------------------------------------------------------------------
(1) Includes Temporary Cash Investments.
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
3/31/04 9/30/03
- --------------------------------------------------------------------------------
Common Stocks 95.8% 96.9%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 4.2% 3.1%
- --------------------------------------------------------------------------------
The top performance contributor, on both a relative and absolute basis, was
Prologis (+49%), an industrial REIT that was one of the fund's largest
overweights during the past year.
- ------
4
Real Estate - Schedule of Investments
MARCH 31, 2004
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 95.8%
DIVERSIFIED COMPANIES -- 10.3%
- --------------------------------------------------------------------------------
507,515 Capital Automotive REIT $ 17,920,356
- --------------------------------------------------------------------------------
73,200 Catellus Development Corp. 1,903,932
- --------------------------------------------------------------------------------
466,400 Cousins Properties Inc. 15,293,256
- --------------------------------------------------------------------------------
556,000 Lexington Corporate
Properties Trust 12,115,240
- --------------------------------------------------------------------------------
183,700 Vornado Realty Trust 11,110,176
- --------------------------------------------------------------------------------
58,342,960
- --------------------------------------------------------------------------------
HEALTH CARE -- 1.5%
- --------------------------------------------------------------------------------
183,300 Nationwide Health
Properties Inc. 4,082,091
- --------------------------------------------------------------------------------
130,200 Universal Health
Realty Income Trust 4,387,740
- --------------------------------------------------------------------------------
8,469,831
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 7.7%
- --------------------------------------------------------------------------------
926,600 Equity Inns Inc. 8,524,720
- --------------------------------------------------------------------------------
1,779,279 Hilton Group plc ORD 7,445,829
- --------------------------------------------------------------------------------
470,200 Host Marriott Corp.(1) 6,009,156
- --------------------------------------------------------------------------------
963,300 Innkeepers USA Trust 8,804,562
- --------------------------------------------------------------------------------
337,500 Intercontinental Hotels
Group plc ORD 3,092,241
- --------------------------------------------------------------------------------
642,100 La Quinta Corporation(1) 4,841,434
- --------------------------------------------------------------------------------
3,200 LaSalle Hotel Properties 75,520
- --------------------------------------------------------------------------------
70,555 Orient Express Hotels 1,262,229
- --------------------------------------------------------------------------------
369,100 Winston Hotels Inc. 3,890,314
- --------------------------------------------------------------------------------
43,946,005
- --------------------------------------------------------------------------------
INDUSTRIALS -- 8.5%
- --------------------------------------------------------------------------------
68,700 Centerpoint Properties Corp. 5,667,750
- --------------------------------------------------------------------------------
212,800 First Potomac Realty Trust 4,447,520
- --------------------------------------------------------------------------------
951,110 Prologis 4,116,316
- --------------------------------------------------------------------------------
65,500 Shurgard Storage Centers Inc. 2,613,450
- --------------------------------------------------------------------------------
44,000 W.P. Carey & Co. LLC 1,361,800
- --------------------------------------------------------------------------------
48,206,836
- --------------------------------------------------------------------------------
MULTI-FAMILY RESIDENTIAL -- 13.2%
- --------------------------------------------------------------------------------
245,300 Apartment Investment and
Management Co. 7,626,377
- --------------------------------------------------------------------------------
940,417 Archstone-Smith Trust 27,751,706
- --------------------------------------------------------------------------------
74,700 AvalonBay Communities Inc. 4,002,426
- --------------------------------------------------------------------------------
245,600 BRE Properties 8,428,992
- --------------------------------------------------------------------------------
158,800 Camden Property Trust 7,138,060
- --------------------------------------------------------------------------------
447,700 Equity Residential 13,363,845
- --------------------------------------------------------------------------------
38,000 Manufactured Home
Communities, Inc. 1,341,400
- --------------------------------------------------------------------------------
141,000 Mid-America Apartment
Communities Inc. 5,235,330
- --------------------------------------------------------------------------------
74,888,136
- --------------------------------------------------------------------------------
NEIGHBORHOOD & COMMUNITY
SHOPPING CENTERS -- 7.1%
- --------------------------------------------------------------------------------
329,700 Cedar Shopping Centers Inc. 4,678,443
- --------------------------------------------------------------------------------
321,900 Federal Realty Investors Trust 14,871,780
- --------------------------------------------------------------------------------
270,200 Kimco Realty Corporation 13,774,796
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
151,212 Regency Centers Corp. $ 7,066,137
- --------------------------------------------------------------------------------
40,391,156
- --------------------------------------------------------------------------------
OFFICE MANAGEMENT -- 25.2%
- --------------------------------------------------------------------------------
236,820 Alexandria Real Estate
Equities Inc. 14,919,660
- --------------------------------------------------------------------------------
84,200 Arden Realty Inc. 2,722,186
- --------------------------------------------------------------------------------
120,100 Brandywine Realty Trust 3,669,055
- --------------------------------------------------------------------------------
526,600 CarrAmerica Realty Corp. 17,851,740
- --------------------------------------------------------------------------------
145,100 Crescent Real Estate Equities Co. 2,607,447
- --------------------------------------------------------------------------------
706,324 Duke Realty Corporation 24,523,569
- --------------------------------------------------------------------------------
1,197,348 Equity Office Properties Trust 34,591,384
- --------------------------------------------------------------------------------
188,000 Liberty Property Trust 8,460,000
- --------------------------------------------------------------------------------
487,100 Mack-Cali Realty Corp. 21,875,661
- --------------------------------------------------------------------------------
633,800 Trizec Properties Inc. 10,869,670
- --------------------------------------------------------------------------------
142,090,372
- --------------------------------------------------------------------------------
REGIONAL MALLS -- 22.3%
- --------------------------------------------------------------------------------
135,400 Chelsea Property Group Inc. 8,522,076
- --------------------------------------------------------------------------------
510,500 General Growth Properties, Inc. 17,944,075
- --------------------------------------------------------------------------------
160,000 Macerich Company (The) 8,624,000
- --------------------------------------------------------------------------------
243,107 Mills Corp. 12,955,172
- --------------------------------------------------------------------------------
114,976 Pennsylvania Real Estate
Investment Trust 4,329,996
- --------------------------------------------------------------------------------
511,400 Rouse Company 27,411,039
- --------------------------------------------------------------------------------
367,200 Simon Property Group, Inc. 21,459,168
- --------------------------------------------------------------------------------
164,400 Tanger Factory
Outlet Centers 7,450,608
- --------------------------------------------------------------------------------
713,200 Taubman Centers Inc. 17,951,244
- --------------------------------------------------------------------------------
126,647,378
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $452,591,818) 542,982,674
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS - 4.2%
Repurchase Agreement, Credit Suisse
First Boston Corp., (U.S. Treasury obligations),
in a joint trading account at 0.97%, dated
3/31/04, due 4/01/04
(Delivery value $15,200,410) 15,200,000
- --------------------------------------------------------------------------------
Repurchase Agreement, State Street Corp.,
(U.S. Treasury obligations), in a
joint trading account at 0.95%, dated 3/31/04,
due 4/01/04 (Delivery value $8,900,235) 8,900,000
- --------------------------------------------------------------------------------
TOTAL TEMPORARY
CASH INVESTMENTS
(Cost $24,100,000) 24,100,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES - 100.0%
(Cost $476,691,818) $567,082,674
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
ORD = Foreign Ordinary Share
REIT = Real Estate Investment Trust
(1) Non-income producing.
- -----
5
Statement of Assets and Liabilities
MARCH 31, 2004
ASSETS
Investment securities, at value (cost of $476,691,818) $567,082,674
- ----------------------------------------------------------------
Cash 1,820,483
- ----------------------------------------------------------------
Receivable for capital shares sold 1,025,370
- ----------------------------------------------------------------
Dividends and interest receivable 2,243,585
- --------------------------------------------------------------------------------
572,172,112
- --------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 13,093,268
- ----------------------------------------------------------------
Accrued management fees 484,017
- ----------------------------------------------------------------
Distribution fees payable 16,190
- ----------------------------------------------------------------
Service fees payable 16,190
- --------------------------------------------------------------------------------
13,609,665
- --------------------------------------------------------------------------------
NET ASSETS $558,562,447
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $450,950,957
- ----------------------------------------------------------------
Undistributed net realized gain on investment transactions 17,218,664
- ----------------------------------------------------------------
Net unrealized appreciation on investments 90,392,826
- --------------------------------------------------------------------------------
$558,562,447
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $393,604,099
- ----------------------------------------------------------------
Shares outstanding 17,049,081
- ----------------------------------------------------------------
Net asset value per share $23.09
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $82,487,647
- ----------------------------------------------------------------
Shares outstanding 3,571,422
- ----------------------------------------------------------------
Net asset value per share $23.10
- --------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $82,470,701
- ----------------------------------------------------------------
Shares outstanding 3,569,362
- ----------------------------------------------------------------
Net asset value per share $23.11
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
6
Statement of Operations
YEAR ENDED MARCH 31, 2004
INVESTMENT INCOME
INCOME:
- --------------------------------------------------------------------
Dividends
$17,052,199
- --------------------------------------------------------------------
Interest 146,868
- --------------------------------------------------------------------------------
17,199,067
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------
Management fees 3,547,573
- --------------------------------------------------------------------
Distribution fees - Advisor Class 107,084
- --------------------------------------------------------------------
Service fees - Advisor Class 107,084
- --------------------------------------------------------------------
Directors' fees and expenses 5,040
- --------------------------------------------------------------------
Other expenses 2,193
- --------------------------------------------------------------------------------
3,768,974
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 13,430,093
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
Net realized gain on investment transactions 36,713,324
- --------------------------------------------------------------------
Change in net unrealized appreciation on investments 79,332,958
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 116,046,282
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $129,476,375
================================================================================
See Notes to Financial Statements.
- ------
7
Statement of Changes in Net Assets
YEARS ENDED MARCH 31, 2004 AND MARCH 31, 2003
- ---------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 2004 2003
OPERATIONS
Net investment income $ 13,430,093 $ 9,022,262
- -----------------------------------------------------
Net realized gain (loss) 36,713,324 (2,190,580)
- -----------------------------------------------------
Change in net unrealized appreciation 79,332,958 (7,311,149)
- ----------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 129,476,375 (479,467)
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
- -----------------------------------------------------
Investor Class (6,654,103) (4,460,713)
- -----------------------------------------------------
Institutional Class (1,351,811) (742,377)
- -----------------------------------------------------
Advisor Class (1,115,975) (664,754)
- -----------------------------------------------------
From net realized gains:
- -----------------------------------------------------
Investor Class (1,939,003) --
- -----------------------------------------------------
Institutional Class (368,420) --
- -----------------------------------------------------
Advisor Class (351,604) --
- ----------------------------------------------------------------------------------------
Decrease in net assets from distributions (11,780,916) (5,867,844)
- ----------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets from capital
share transactions 263,319,823 43,231,919
- ----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 381,015,282 36,884,608
NET ASSETS
Beginning of period 177,547,165 140,662,557
- ----------------------------------------------------------------------------------------
End of period $558,562,447 $177,547,165
========================================================================================
Undistributed net investment income $- $751,103
========================================================================================
See Notes to Financial Statements.
- ------
8
Notes to Financial Statements
MARCH 31, 2004
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. 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 may be valued through a
commercial pricing service or at amortized cost, which approximates fair value.
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 substantially 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
MARCH 31, 2004
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 year ended March 31, 2004 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 year ended March 31, 2004, 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 year ended March 31, 2004, 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 JPMorgan Chase Bank
(JPMCB). JPMCB is a wholly owned subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term investments,
for the year ended March 31, 2004, were $741,549,199 and $482,103,885,
respectively.
(continued)
- ------
10
Notes to Financial Statements
MARCH 31, 2004
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows:
SHARES AMOUNT
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 30,000,000
================================================================================
Sold 15,731,167 $313,919,072
- -----------------------------------------------
Issued in reinvestment of distributions 394,405 7,932,727
- -----------------------------------------------
Redeemed (7,596,877) (149,060,464)
- --------------------------------------------------------------------------------
Net increase 8,528,695 $172,791,335
================================================================================
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
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 12,500,000
================================================================================
Sold 2,821,119 $57,135,278
- ----------------------------------------------------------------
Issued in reinvestment of distributions 84,111 1,698,449
- ----------------------------------------------------------------
Redeemed (808,602) (15,771,895)
- --------------------------------------------------------------------------------
Net increase 2,096,628 $43,061,832
================================================================================
YEAR ENDED MARCH 31, 2003
- ----------------------------------------------------------------
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
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2004
SHARES AUTHORIZED 12,500,000
================================================================================
Sold 3,635,944 $73,541,512
- ----------------------------------------------------------------
Issued in reinvestment of distributions 72,017 1,456,615
- ----------------------------------------------------------------
Redeemed (1,356,159) (27,531,471)
- --------------------------------------------------------------------------------
Net increase 2,351,802 $47,466,656
================================================================================
YEAR ENDED MARCH 31, 2003
- ----------------------------------------------------------------
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
MARCH 31, 2004
5. BANK LINE OF CREDIT
The fund, along with certain other funds managed by ACIM, has a $650,000,000
unsecured bank line of credit agreement with JPMCB, which was renewed from
$620,000,000 effective December 17, 2003. The fund may borrow money for
temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund
did not borrow from the line during the year ended March 31, 2004.
6. RISK FACTORS
The fund concentrates its investments in a narrow segment of the total market.
Because of this, the fund is subject to certain additional risks 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.
7. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2004
and March 31, 2003 were as follows:
2004 2003
- --------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
- --------------------------------------------------------------------------------
Ordinary Income $9,121,889 $5,867,844
- --------------------------------------------------------------------------------
Long-Term Capital Gain $2,659,027 $--
- --------------------------------------------------------------------------------
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 on the financial statements.
As of March 31, 2004, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
- --------------------------------------------------------------------------------
COMPONENTS OF DISTRIBUTABLE EARNINGS AND TAX COST
- --------------------------------------------------------------------------------
Federal tax cost of investments $476,542,431
================================================================================
Gross tax appreciation of investments $90,958,743
- --------------------------------------------------------------------
Gross tax depreciation of investments (418,500)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $90,540,243
================================================================================
Net tax appreciation on translation of assets and
liabilities in foreign currencies $1,970
- --------------------------------------------------------------------------------
Net tax appreciation $90,542,213
================================================================================
Undistributed ordinary income $6,219,069
- --------------------------------------------------------------------
Accumulated long-term gains $10,850,208
- --------------------------------------------------------------------------------
(continued)
- ------
12
Notes to Financial Statements
MARCH 31, 2004
7. FEDERAL TAX INFORMATION (continued)
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.
8. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
For corporate taxpayers, 1.28% of the ordinary income distributions paid during
the fiscal year ended March 31, 2004, qualify for the corporate dividends
received deduction. The fund hereby designates $641,116 of qualified dividend
income for the fiscal year ended March 31, 2004. During the fiscal year ended
March 31, 2004, the fund distributed $2,659,027, which was designated as capital
gains dividends.
- ------
13
Real Estate - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31
- --------------------------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER-SHARE DATA
Net Asset Value, Beginning of Period $15.83 $16.22 $14.00 $11.74 $12.10
- --------------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------
Net Investment Income(1) 0.83 0.85 0.78 0.71 0.74
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 7.12 (0.70) 2.00 2.14 (0.41)
- --------------------------------------------------------------------------------------------------
Total From Investment Operations 7.95 0.15 2.78 2.85 0.33
- --------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.54) (0.54) (0.56) (0.59) (0.69)
- ------------------------------------------
From Net Realized Gains (0.15) -- -- -- --
- --------------------------------------------------------------------------------------------------
Total Distributions (0.69) (0.54) (0.56) (0.59) (0.69)
- --------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $23.09 $15.83 $16.22 $14.00 $11.74
==================================================================================================
TOTAL RETURN(2) 50.97% 0.93% 20.23% 24.57% 2.87%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets 1.17% 1.18% 1.20% 1.19% 1.20%
- ------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 4.18% 5.41% 5.18% 5.32% 5.95%
- ------------------------------------------
Portfolio Turnover Rate 158% 162% 156% 242% 102%
- ------------------------------------------
Net Assets, End of Period (in thousands) $393,604 $134,898 $107,599 $74,776 $73,812
- --------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. 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.
See Notes to Financial Statements.
- ------
14
Real Estate - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31
- ----------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER-SHARE DATA
Net Asset Value, Beginning of Period $15.85 $16.23 $14.01 $11.75 $12.11
- ----------------------------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Income(1) 0.88 0.89 0.80 0.73 0.75
- -------------------------------------------
Net Realized and Unrealized Gain (Loss) 7.10 (0.70) 2.01 2.15 (0.38)
- ----------------------------------------------------------------------------------------------------
Total From Investment Operations 7.98 0.19 2.81 2.88 0.37
- ----------------------------------------------------------------------------------------------------
Distributions
- -------------------------------------------
From Net Investment Income (0.58) (0.57) (0.59) (0.62) (0.73)
- -------------------------------------------
From Net Realized Gains (0.15) -- -- -- --
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.73) (0.57) (0.59) (0.62) (0.73)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $23.10 $15.85 $16.23 $14.01 $11.75
====================================================================================================
TOTAL RETURN(2) 51.14% 1.19% 20.45% 24.80% 3.18%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets 0.97% 0.98% 1.00% 0.99% 1.00%
- -------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 4.38% 5.61% 5.38% 5.52% 6.15%
- -------------------------------------------
Portfolio Turnover Rate 158% 162% 156% 242% 102%
- -------------------------------------------
Net Assets, End of Period (in thousands) $82,488 $23,371 $16,305 $12,390 $15,457
- ----------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. 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.
See Notes to Financial Statements.
- ------
15
Real Estate - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31
- ------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER-SHARE DATA
Net Asset Value, Beginning of Period $15.83 $16.22 $14.00 $11.74 $12.10
- ------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------
Net Investment Income(1) 0.79 0.81 0.74 0.68 0.75
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 7.13 (0.70) 2.00 2.14 (0.45)
- ------------------------------------------------------------------------------------------------------
Total From Investment Operations 7.92 0.11 2.74 2.82 0.30
- ------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.49) (0.50) (0.52) (0.56) (0.66)
- ------------------------------------------
From Net Realized Gains (0.15) -- -- -- --
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.64) (0.50) (0.52) (0.56) (0.66)
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $23.11 $15.83 $16.22 $14.00 $11.74
======================================================================================================
TOTAL RETURN(2) 50.66% 0.69% 19.93% 24.28% 2.62%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets 1.42% 1.43% 1.45% 1.44% 1.45%
- ------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 3.93% 5.16% 4.93% 5.07% 5.70%
- ------------------------------------------
Portfolio Turnover Rate 158% 162% 156% 242% 102%
- ------------------------------------------
Net Assets, End of Period (in thousands) $82,471 $19,278 $16,759 $9,046 $5,353
- ------------------------------------------------------------------------------------------------------
(1) Computed using averages shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. 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.
See Notes to Financial Statements.
- ------
16
Independent Auditors' Report
The Board of Directors and Shareholders American Century Capital Portfolios, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Real Estate Fund, (the "Fund"), one of the funds
comprising American Century Capital Portfolios, Inc., as of March 31, 2004, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for the periods presented. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2004, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Real
Estate Fund as of March 31, 2004, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for the periods presented, in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Kansas City, Missouri
May 11, 2004
- ------
17
Management
The individuals listed below serve as directors or officers of the fund. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
75, although the remaining independent directors may temporarily waive this
requirement on a case-by-case basis. Those listed as interested directors are
"interested" primarily by virtue of their engagement as officers of American
Century Companies, Inc. (ACC) or its wholly-owned subsidiaries, including the
fund's investment advisor, American Century Investment Management, Inc. (ACIM);
the fund's principal underwriter, American Century Investment Services, Inc.
(ACIS); and the fund's transfer agent, American Century Services Corporation
(ACSC).
The other directors (more than three-fourths of the total numbers) are
independent; that is, they are not employees or officers of, and have no
financial interest in, ACC or any of its wholly-owned subsidiaries, including
ACIM, ACIS, and ACSC. The directors serve in this capacity for five registered
investment companies in the American Century family of funds.
All persons named as officers of the fund also serve in a similar capacity for
the other 12 investment companies advised by ACIM, unless otherwise noted. Only
officers with policy-making functions are listed. No officer is compensated for
his or her service as an officer of the fund. The listed officers are interested
persons of the fund and are appointed or re-appointed on an annual basis.
INDEPENDENT DIRECTORS
- --------------------------------------------------------------------------------
THOMAS A. BROWN (64) 4500, Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 23
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Strategic Account Implementation
Manager, Applied Industrial Technologies, Inc., a corporation engaged in the
sale of bearings and power transmission products
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
ROBERT W. DOERING, M.D. (71), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director Emeritus(1)
LENGTH OF TIME SERVED (YEARS): 2
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly a general surgeon
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
ANDREA C. HALL, PH.D. (59), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, Midwest
Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Midwest Research Institute
- --------------------------------------------------------------------------------
(1) Dr. Robert Doering resigned as full-time director, effective November 5,
2001, after serving in such capacity for 33 years. Dr. Doering continues to
serve the board in an advisory capacity. His position as Director Emeritus is
an advisory position and involves attendance at one board meeting per year to
review prior year-end results for the funds. He receives all regular board
communications, including monthly mailings, industry newsletters, email
communications, and company information, but not quarterly board and
committee materials relating to meetings that he does not attend. Dr. Doering
is not a director or a member of the board and has no voting power relating
to any matters relating to fund operations. He is not an interested person of
the funds or ACIM. He receives an annual stipend of $2,500 for his services.
(continued)
- ------
18
Management
INDEPENDENT DIRECTORS (CONTINUED)
- --------------------------------------------------------------------------------
D.D. (DEL) HOCK (69), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 7
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Chairman, Public
Service Company of Colorado
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Allied Motion Technologies, Inc.
and J.D. Edwards & Company
- --------------------------------------------------------------------------------
DONALD H. PRATT (66), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director, Vice Chairman of the Board
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Western Investments,
Inc.; Retired Chairman of the Board, Butler Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Butler Manufacturing Company and
Atlas-Copco, North America Inc.
- --------------------------------------------------------------------------------
GALE E. SAYERS (60), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer,
and Founder, Sayers Computer Source
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
M. JEANNINE STRANDJORD (58), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 9
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President and Chief
Integration Officer, Sprint Corporation (September 2003 to present); Senior Vice
President - Financial Services, Sprint Corporation (January 2003 to September
2003); Senior Vice President, Finance - Global Markets Group, Sprint Corporation
(November 1998 to January 2003)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide
- --------------------------------------------------------------------------------
TIMOTHY S. WEBSTER (42), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 2
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, American Italian Pasta Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JAMES E. STOWERS, JR. (80)(1), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director, Chairman of the Board
LENGTH OF TIME SERVED (YEARS): 45
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Director, and controlling
shareholder, ACC; Chairman, ACSC and other ACC subsidiaries; Director, ACIM,
ACSC, and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
JAMES E. STOWERS III (45)(1), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Director
LENGTH OF TIME SERVED (YEARS): 13
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Co-Chairman, ACC (September 2000 to
present); Chief Executive Officer, ACC (June 1996 to September 2000); Director,
ACC, ACIM, ACSC and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
(1) James E. Stowers, Jr. is the father of James E. Stowers III.
(continued)
- ------
19
Management
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM M. LYONS (48), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: President
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC and
other ACC subsidiaries (September 2000 to present); President, ACC (June 1997 to
present); President, ACIM (September 2002 to present); President, ACIS (July
2003 to present); Chief Operating Officer, ACC (June 1996 to September 2000);
Also serves as: Executive Vice President, ACSC and other ACC subsidiaries
- --------------------------------------------------------------------------------
ROBERT T. JACKSON (58), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Executive Vice President
LENGTH OF TIME SERVED (YEARS): 8
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Administrative Officer, ACC
(August 1997 to present); Chief Financial Officer, ACC (May 1995 to October
2002); President, ACSC (January 1999 to present); Executive Vice President, ACC
(May 1995 to present); Also serves as: Executive Vice President and Chief
Financial Officer, ACIM, ACIS and other ACC subsidiaries; and Treasurer, ACIM
- --------------------------------------------------------------------------------
MARYANNE ROEPKE (48), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer, and Chief
Accounting Officer
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President (April 1998
to present) and Assistant Treasurer (September 1985 to present), ACSC
- --------------------------------------------------------------------------------
DAVID C. TUCKER (45), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel
LENGTH OF TIME SERVED (YEARS): 3
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, ACIM, ACIS,
ACSC and other ACC subsidiaries (June 1998 to present); General Counsel, ACC,
ACIM, ACIS, ACSC and other ACC subsidiaries (June 1998 to present)
- --------------------------------------------------------------------------------
ROBERT LEACH (37), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Controller
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACSC (February 2000
to present); Controller-Fund Accounting, ACSC (June 1997 to present)
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JON ZINDEL (36), 4500 Main Street, Kansas City, MO 64111
POSITION(S) HELD WITH FUND: Tax Officer
LENGTH OF TIME SERVED (YEARS): 6
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, Corporate Tax, ACSC
(April 1998 to present); Vice President, ACIM, ACIS, and other ACC subsidiaries
(April 1999 to present); President, American Century Employee Benefit Services,
Inc. (January 2000 to December 2000); Treasurer, American Century Employee
Benefit Services, Inc. (December 2000 to December 2003); Treasurer, American
Century Ventures, Inc. (December 1999 to January 2001)
- --------------------------------------------------------------------------------
The SAI has additional information about the fund's directors and is available
without charge upon request by calling 1-800-345-2021.
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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.
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Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 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
americancentury.com and on the Securities and Exchange Commission's Web site at
sec.gov.
RISK FACTORS
The fund concentrates its investments in a narrow segment of the total market.
Because of this, the fund is subject to certain additional risks 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.
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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 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.
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.
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Notes
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24
CONTACT US
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.
The American Century logo, American Century and
American Century Investments are service marks
of American Century Services Corporation.
0405
SH-ANN-38152N
American Century Investment Services, Inc.
(c)2004 American Century Services Corporation
ITEM 2. CODE OF ETHICS.
a. The registrant has adopted a Code of Ethics for Senior Financial
Officers that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer, and persons
performing similar functions.
b. No response required.
c. None.
d. None.
e. Not applicable.
f. The registrant's Code of Ethics for Senior Financial Officers was
filed as Exhibit 10(a) to American Century Mutual Fund, Inc.'s Annual
Certified Shareholder Report on Form N-CSR, File No. 811-0816, on
December 23, 2003, and is incorporated herein by reference.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant's board has determined that the registrant has at least
one audit committee financial expert serving on its audit committee.
(a)(2) D.D. (Del) Hock, Donald H. Pratt and M. Jeannine Strandjord are the
registrant's designated audit committee financial experts. They are
"independent" as defined in Item 3 of Form N-CSR.
(a)(3) Not applicable.
(b) No response required.
(c) No response required.
(d) No response required.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees.
The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the audit of the
registrant's annual financial statements or services that are normally provided
by the accountant in connection with statutory and regulatory filings or
engagements for those fiscal years were as follows:
FY 2003: $73,300.
FY 2004: $92,327.
(b) Audit-Related Fees.
The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are reasonably
related to the performance of the audit of the registrant's financial statements
and are not reported under paragraph (a) of this Item were as follows:
For services rendered to the registrant:
FY 2003: $0.
FY 2004: $0.
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit services
with the registrant's investment adviser and its affiliates):
FY 2003: $0.
FY 2004: $0.
(c) Tax Fees.
The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning were as follows:
For services rendered to the registrant:
FY 2003: $7,423.
FY 2004: $10,714.
These services included review of federal and state income tax forms
and federal excise tax forms.
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit services
with the registrant's investment adviser and its affiliates):
FY 2003: $0.
FY 2004: $0.
(d) All Other Fees.
The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than the
services reported in paragraphs (a) through (c) of this Item were as follows:
For services rendered to the registrant:
FY 2003: $0.
FY 2004: $0.
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit services
with the registrant's investment adviser and its affiliates):
FY 2003: $0.
FY 2004: $0.
(e)(1) In accordance with paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation
S-X, before the accountant is engaged by the registrant to render
audit or non-audit services, the engagement is approved by the
registrant's audit committee. Pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X, the registrant's audit committee also
pre-approves its accountant's engagements for non-audit services with
the registrant's investment adviser, its parent company, and any
entity controlled by, or under common control with the investment
adviser that provides ongoing services to the registrant, if the
engagement relates directly to the operations and financial reporting
of the registrant.
(e)(2) All services described in each of paragraphs (b) through (d) of this
Item were pre-approved before the engagement by the registrant's audit
committee pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of
Regulation S-X. Consequently, none of such services were required to
be approved by the audit committee pursuant to paragraph (c)(7)(i)(C).
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was less than 50%.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen
by another investment adviser), and any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant for each of the last two fiscal years of
the registrant were as follows:
FY 2003: $464,077.
FY 2004: $640,669.
(h) The registrant's investment adviser and accountant have notified the
registrant's audit committee of all non-audit services that were
rendered by the registrant's accountant to the registrant's investment
adviser, its parent company, and any entity controlled by, or under
common control with the investment adviser that provides services to
the registrant, which services were not required to be pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The
notification provided to the registrant's audit committee included
sufficient details regarding such services to allow the registrant's
audit committee to consider the continuing independence of its
principal accountant.
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. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant does not currently have in place procedures by which
shareholders may recommend nominees to the registrant's board.
ITEM 10. 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 11. EXHIBITS.
(a)(1) Registrant's Code of Ethics for Senior Financial Officers, which is
the subject of the disclosure required by Item 2 of Form N-CSR, was
filed as Exhibit 10(a) to American Century Mutual Fund, Inc.'s
Certified Shareholder Report on Form N-CSR, File No. 811-3706, on
December 23, 2003.
(a)(2) 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.
(a)(3) Not applicable.
(b) 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: May 27, 2004
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: May 27, 2004
By: /s/ Maryanne L. Roepke
------------------------------------------
Name: Maryanne L. Roepke
Title: Sr. Vice President, Treasurer, and
Chief Accounting Officer
(principal financial officer)
Date: May 27, 2004