UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-7820 --------------------------------------------- AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) DAVID C. TUCKER, ESQ., 4500 MAIN STREET, 9TH FLOOR, KANSAS CITY, MISSOURI 64111 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 816-531-5575 ---------------------------- Date of fiscal year end: 03-31 ------------------------------------------------------ Date of reporting period: 09-30-2004 ------------------------------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS [front cover] SEPTEMBER 30, 2004 American Century Investments Semiannual 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.................................................... 4 Top Ten Holdings..................................................... 4 Top Five Industries.................................................. 5 Types of Investments in Portfolio.................................... 5 Schedule of Investments................................................. 6 MID CAP VALUE Performance............................................................. 10 Portfolio Commentary.................................................... 11 Top Ten Holdings..................................................... 11 Top Five Industries.................................................. 12 Types of Investments in Portfolio.................................... 12 Schedule of Investments................................................. 13 SMALL CAP VALUE Performance 16 Portfolio Commentary.................................................... 18 Top Ten Holdings..................................................... 18 Top Five Industries.................................................. 19 Types of Investments in Portfolio.................................... 19 Schedule of Investments................................................. 20 Shareholder Fee Example................................................. 24 FINANCIAL STATEMENTS Statement of Assets and Liabilities..................................... 27 Statement of Operations................................................. 29 Statement of Changes in Net Assets...................................... 30 Notes to Financial Statements........................................... 32 Financial Highlights.................................................... 39 OTHER INFORMATION Share Class Information................................................. 50 Additional Information.................................................. 51 Index Definitions....................................................... 53 The opinions expressed in each of the Portfolio Commentaries reflect those of the portfolio management team as of the date of the report, and do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. Our Message to You [photo of JAMES E. STOWERS III and JAMES E. STOWERS, JR.] JAMES E. STOWERS III WITH JAMES E. STOWERS, JR. We are pleased to provide you with the semiannual report for the Equity Income, Mid Cap Value, and Small Cap Value funds for the six months ended September 30, 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. 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 annual report dated March 31, 2005, 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 - ------ 1 Equity Income - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2004 -------------------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 17.22% 10.61% 14.34% 14.37% 8/1/94 - -------------------------------------------------------------------------------- RUSSELL 3000 VALUE INDEX 20.89% 5.03% 12.50% 12.26%(1) -- - -------------------------------------------------------------------------------- S&P 500 INDEX 13.87% -1.31% 11.08% 11.06%(1) -- - -------------------------------------------------------------------------------- LIPPER EQUITY INCOME INDEX 17.09% 2.97% 9.42% 9.41%(1) -- - -------------------------------------------------------------------------------- Institutional Class 17.60% 10.85% -- 10.04% 7/8/98 - -------------------------------------------------------------------------------- Advisor Class 17.08% 10.36% -- 11.72% 3/7/97 - -------------------------------------------------------------------------------- C Class 16.37% -- -- 7.69% 7/13/01 - -------------------------------------------------------------------------------- R Class 16.50% -- -- 14.64% 8/29/03 - -------------------------------------------------------------------------------- (1) Since 7/31/94, the date nearest the Investor Class's inception for which data are available. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. (continued) - ------ 2 Equity Income - Performance GROWTH OF $10,000 OVER 10 YEARS $10,000 investment made September 30, 1994
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ONE-YEAR RETURNS OVER 10 YEARS Periods ended September 30 - -------------------------------------------------------------------------------- 1995 1996 1997 1998 1999 - -------------------------------------------------------------------------------- Investor Class 20.48% 20.89% 34.35% 1.67% 15.98% - -------------------------------------------------------------------------------- Russell 3000 Value Index 26.72% 17.48% 42.33% 1.96% 17.64% - -------------------------------------------------------------------------------- S&P 500 Index 29.75% 20.33% 40.45% 9.05% 27.80% - -------------------------------------------------------------------------------- Lipper Equity Income Index 20.28% 15.51% 33.25% 1.29% 13.36% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2000 2001 2002 2003 2004 - -------------------------------------------------------------------------------- Investor Class 6.80% 14.30% -3.72% 20.17% 17.22% - -------------------------------------------------------------------------------- Russell 3000 Value Index 9.35% -7.98% -15.89% 24.89% 20.89% - -------------------------------------------------------------------------------- S&P 500 Index 13.28% -26.62% -20.49% 24.40% 13.87% - -------------------------------------------------------------------------------- Lipper Equity Income Index 8.10% -8.82% -16.74% 20.48% 17.09% - -------------------------------------------------------------------------------- Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. - ------ 3 Equity Income - Portfolio Commentary [photo of PHIL DAVIDSON AND SCOTT MOORE] PORTFOLIO MANAGERS ON THE EQUITY INCOME INVESTMENT TEAM: PHIL DAVIDSON AND SCOTT MOORE. Equity Income gained 3.79%* for the six months ended September 30, 2004, outperforming the Lipper Equity Income Index, which was up 1.52%. The S&P 500 Index, representative of the broad market, was down 0.18% for the period. Equity Income's long-term performance has been strong. From the fund's inception on August 1, 1994, Equity Income has produced an average annualized total return of 14.37%, significantly ahead of the 9.41%** figure posted by the Lipper Equity Income Index and the S&P 500's 11.06%** return. CLIMATE OF UNCERTAINTY Common stock investors contended with a number of issues during the period. They included the continuing violence in Iraq, surging energy prices, three interest-rate increases, and concerns about the slowing rate of growth of corporate earnings. In this climate of uncertainty, value stocks led their growth counterparts across the capitalization range, with both large and small value companies providing better returns. STRENGTH IN ENERGY Energy stocks proved to be Equity Income's largest contributors to absolute performance on a sector basis. Exxon Mobil Corp., Royal Dutch Petroleum and BP plc were the portfolio's top-three contributors, as they benefited from rising demand for energy worldwide and concern that violence in Iraq could disrupt Middle Eastern oil shipments. INDUSTRIALS A PLUS Our mix of industrial stocks also generated strong absolute results. Holdings in aerospace and defense companies were led by Raytheon Co. and Rockwell Collins Corp. Raytheon improved its operational performance, while also reporting strong defense system sales. Rockwell Collins continues to benefit from an improving commercial aviation outlook and strong defense results. - -------------------------------------------------------------------------------- TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2004 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Standard and Poor's 500 Depositary Receipt 5.0% 4.8% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 3.5% 4.3% - -------------------------------------------------------------------------------- Marsh & McLennan Companies, Inc. 3.3% 2.8% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 3.1% 1.1% - -------------------------------------------------------------------------------- du Pont (E.I.) de Nemours & Co. 2.5% 0.4% - -------------------------------------------------------------------------------- Royal Dutch Petroleum Co. New York Shares 2.3% 3.6% - -------------------------------------------------------------------------------- Kraft Foods Inc. 2.3% 0.6% - -------------------------------------------------------------------------------- BP plc ADR 2.1% 3.0% - -------------------------------------------------------------------------------- Ameren Corp., 9.75%, 5/15/05 2.1% 2.3% - -------------------------------------------------------------------------------- Devon Energy Corporation (convertible into ChevronTexaco Corp.) 4.95%, 8/15/08 2.1% 2.0% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. **From 7/31/1994, the date nearest the Investor Class's inception for which data are available. (continued) - ------ 4 Equity Income - Portfolio Commentary Electrical equipment makers were also additive in the sector. Hubbell Inc. and Emerson Electric Co. both enjoyed stronger demand from their worldwide industrial customers. These are higher-quality companies offering above-average dividend yields, which is consistent with the objective of the fund. SUCCESS IN FINANCIALS Financials, our largest sector exposure, was another bright spot. Investments in commercial banks were rewarding, with SunTrust Banks, Inc. emerging as the portfolio's fourth-largest contributor. Shares of SunTrust rebounded after declining in the spring when the bank announced plans to acquire a competitor, National Commerce Financial Corp. Mercantile Bankshares Corp. and Bank of America Corp. also added to performance. During the period, both companies continued dividend increases. We view this as a reflection of these companies' financial strength. MODEST DETRACTORS Only two sectors, consumer discretionary and information technology, dampened results, and their declines were modest. In household durables, Whirlpool Corp. lost ground. Dow Jones & Co. fell amid depressed technology and financial advertising. In information technology, Seagate Technology, a maker of computer hard drives, and mobile phone maker Nokia Corp. slowed our progress. Competitive pricing squeezed Seagate's bottom line, while Nokia fell as some of the company's main rivals increased their handset shipments during the period. LOOKING AHEAD We will continue to adhere to our discipline of seeking companies whose shares appear to be undervalued for reasons unrelated to the firms' fundamental or financial health, and pursuing a relatively high income stream. - -------------------------------------------------------------------------------- TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2004* - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Oil & Gas 12.4% 15.2% - -------------------------------------------------------------------------------- Commercial Banks 9.9% 8.0% - -------------------------------------------------------------------------------- Electric Utilities 7.7% 5.7% - -------------------------------------------------------------------------------- Insurance 7.0% 7.1% - -------------------------------------------------------------------------------- Gas Utilities 4.8% 5.3% - -------------------------------------------------------------------------------- *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 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Common Stocks, Options and Equity Futures 75.2% 76.0% - -------------------------------------------------------------------------------- Convertible Preferred Stocks 11.8% 11.3% - -------------------------------------------------------------------------------- Convertible Bonds 10.9% 10.4% - -------------------------------------------------------------------------------- Preferred Stocks 0.8% 1.5% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 98.7% 99.2% - -------------------------------------------------------------------------------- Temporary Cash Investments 0.1% 0.6% - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES 98.8% 99.8% - -------------------------------------------------------------------------------- Other Assets and Liabilities 1.2% 0.2% - -------------------------------------------------------------------------------- - ------ 5 Equity Income - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 70.4% AEROSPACE & DEFENSE -- 0.7% - -------------------------------------------------------------------------------- 263,100 Honeywell International Inc. $ 9,434,766 - -------------------------------------------------------------------------------- 140,130 Raytheon Company 5,322,137 - -------------------------------------------------------------------------------- 225,600 Rockwell Collins 8,378,784 - -------------------------------------------------------------------------------- 23,135,687 - -------------------------------------------------------------------------------- AUTOMOBILES -- 0.8% - -------------------------------------------------------------------------------- 640,000 General Motors Corp.(1) 27,187,200 - -------------------------------------------------------------------------------- BEVERAGES -- 1.0% - -------------------------------------------------------------------------------- 842,400 Coca-Cola Company (The) 33,738,120 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 1.8% - -------------------------------------------------------------------------------- 591,136 Edwards (A.G.), Inc. 20,465,128 - -------------------------------------------------------------------------------- 878,100 Morgan Stanley 43,290,330 - -------------------------------------------------------------------------------- 63,755,458 - -------------------------------------------------------------------------------- CHEMICALS -- 2.5% - -------------------------------------------------------------------------------- 2,058,200 du Pont (E.I.) de Nemours & Co. 88,090,960 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 9.9% - -------------------------------------------------------------------------------- 1,549,500 Bank of America Corp. 67,139,835 - -------------------------------------------------------------------------------- 1,375,252 Commerce Bancshares, Inc. 66,135,869 - -------------------------------------------------------------------------------- 544,300 Mercantile Bankshares Corporation 26,104,628 - -------------------------------------------------------------------------------- 1,554,900 SunTrust Banks, Inc. 109,480,510 - -------------------------------------------------------------------------------- 666,487 UMB Financial Corp. 31,771,435 - -------------------------------------------------------------------------------- 175,000 United Bankshares Inc. 6,063,750 - -------------------------------------------------------------------------------- 851,053 Whitney Holding Corp. 35,744,226 - -------------------------------------------------------------------------------- 342,440,253 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 3.8% - -------------------------------------------------------------------------------- 1,184,300 Pitney Bowes, Inc. 52,227,630 - -------------------------------------------------------------------------------- 1,798,137 Republic Services, Inc. Cl A 53,512,557 - -------------------------------------------------------------------------------- 978,900 Waste Management, Inc. 26,763,126 - -------------------------------------------------------------------------------- 132,503,313 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 0.5% - -------------------------------------------------------------------------------- 1,288,700 Nokia Oyj ADR 17,680,964 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 0.5% - -------------------------------------------------------------------------------- 184,100 International Business Machines Corp. 15,784,734 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 0.4% - -------------------------------------------------------------------------------- 240,221 Vulcan Materials Co. 12,239,260 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 0.4% - -------------------------------------------------------------------------------- 522,878 Bemis Co. 13,898,097 - -------------------------------------------------------------------------------- 52,100 Sonoco Products Co. 1,377,524 - -------------------------------------------------------------------------------- 15,275,621 - -------------------------------------------------------------------------------- DISTRIBUTORS -- 0.7% - -------------------------------------------------------------------------------- 641,000 Genuine Parts Company 24,601,580 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- DIVERSIFIED -- 5.0% - -------------------------------------------------------------------------------- 1,542,800 Standard and Poor's 500 Depositary Receipt $ 172,454,185 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.2% - -------------------------------------------------------------------------------- 643,922 SBC Communications Inc. 16,709,776 - --------------------------------------------------------------------------------- 647,900 Verizon Communications 25,514,302 - --------------------------------------------------------------------------------- 42,224,078 - --------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 3.5% - -------------------------------------------------------------------------------- 603,599 Ameren Corp. 27,856,094 - --------------------------------------------------------------------------------- 1,008,778 IDACORP, Inc. 29,315,089 - --------------------------------------------------------------------------------- 1,606,900 Pepco Holdings, Inc. 31,977,310 - --------------------------------------------------------------------------------- 1,632,049 Westar Energy Inc. 32,967,389 - --------------------------------------------------------------------------------- 122,115,882 - --------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 2.7% - -------------------------------------------------------------------------------- 697,900 American Power Conversion Corp. 12,136,481 - -------------------------------------------------------------------------------- 832,500 Emerson Electric Co. 51,523,425 - --------------------------------------------------------------------------------- 670,756 Hubbell Inc. Cl B 30,069,991 - --------------------------------------------------------------------------------- 93,729,897 - --------------------------------------------------------------------------------- FOOD PRODUCTS -- 4.4% - -------------------------------------------------------------------------------- 1,136,600 ConAgra Foods, Inc. 29,221,986 - --------------------------------------------------------------------------------- 2,511,600 Kraft Foods Inc. 79,667,952 - --------------------------------------------------------------------------------- 784,300 Unilever N.V. New York Shares 45,332,540 - --------------------------------------------------------------------------------- 154,222,478 - --------------------------------------------------------------------------------- GAS UTILITIES -- 4.8% - -------------------------------------------------------------------------------- 363,826 AGL Resources Inc. 11,194,926 - --------------------------------------------------------------------------------- 558,691 Cascade Natural Gas Corp.(2) 11,861,010 - --------------------------------------------------------------------------------- 814,200 NICOR Inc. 29,881,140 - --------------------------------------------------------------------------------- 1,145,558 Piedmont Natural Gas Co., Inc. 50,335,819 - --------------------------------------------------------------------------------- 2,161,300 WGL Holdings Inc. 61,078,337 - --------------------------------------------------------------------------------- 164,351,232 - --------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 2.4% - -------------------------------------------------------------------------------- 194,087 Hunter Douglas N.V. ORD 8,924,561 - --------------------------------------------------------------------------------- 1,288,700 Snap-on Incorporated 35,516,572 - --------------------------------------------------------------------------------- 676,855 Whirlpool Corp. 40,672,217 - --------------------------------------------------------------------------------- 85,113,350 - --------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 0.8% - -------------------------------------------------------------------------------- 64,600 Clorox Company 3,443,180 - --------------------------------------------------------------------------------- 402,600 Kimberly-Clark Corp. 26,003,934 - --------------------------------------------------------------------------------- 29,447,114 - --------------------------------------------------------------------------------- INSURANCE -- 4.7% - -------------------------------------------------------------------------------- 1,182,274 CNA Surety Corp.(3) 12,532,104 - --------------------------------------------------------------------------------- 232,600 Jefferson-Pilot Corp. 11,550,916 - --------------------------------------------------------------------------------- 106,466 Kansas City Life Insurance Company 4,532,258 - --------------------------------------------------------------------------------- 2,502,800 Marsh & McLennan Companies Inc. 114,528,128 - --------------------------------------------------------------------------------- 225,600 MetLife, Inc. 8,719,440 - --------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 6 Equity Income - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 399,700 Platinum Underwriters Holdings $ 11,703,216 - -------------------------------------------------------------------------------- 163,566,062 - -------------------------------------------------------------------------------- MEDIA -- 1.1% - -------------------------------------------------------------------------------- 915,300 Dow Jones & Co. Inc. 37,170,333 - -------------------------------------------------------------------------------- METALS & MINING -- 0.2% - -------------------------------------------------------------------------------- 163,700 Barrick Gold Corp. 3,444,248 - -------------------------------------------------------------------------------- 113,600 Newmont Mining Corporation 5,172,208 - -------------------------------------------------------------------------------- 8,616,456 - -------------------------------------------------------------------------------- OIL & GAS -- 8.0% - -------------------------------------------------------------------------------- 1,296,100 BP plc ADR 74,564,633 - -------------------------------------------------------------------------------- 2,490,500 Exxon Mobil Corp. 120,365,866 - -------------------------------------------------------------------------------- 1,583,092 Royal Dutch Petroleum Co. New York Shares 81,687,547 - -------------------------------------------------------------------------------- 276,618,046 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 3.1% - -------------------------------------------------------------------------------- 896,600 Abbott Laboratories 37,979,976 - -------------------------------------------------------------------------------- 2,145,100 Bristol-Myers Squibb Co. 50,774,517 - -------------------------------------------------------------------------------- 574,700 Merck & Co., Inc. 18,965,100 - -------------------------------------------------------------------------------- 107,719,593 - -------------------------------------------------------------------------------- REAL ESTATE -- 0.9% - -------------------------------------------------------------------------------- 697,722 Rayonier, Inc. 31,564,943 - -------------------------------------------------------------------------------- ROAD & RAIL -- 0.7% - -------------------------------------------------------------------------------- 437,661 Union Pacific Corp. 25,646,935 - -------------------------------------------------------------------------------- SOFTWARE -- 0.7% - -------------------------------------------------------------------------------- 819,300 Microsoft Corporation 22,653,645 - -------------------------------------------------------------------------------- 84,600 Reynolds & Reynolds Co. Cl A 2,087,082 - -------------------------------------------------------------------------------- 24,740,727 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 1.3% - -------------------------------------------------------------------------------- 261,600 Freddie Mac 17,066,784 - -------------------------------------------------------------------------------- 706,767 Washington Federal, Inc. 17,775,190 - -------------------------------------------------------------------------------- 310,500 Washington Mutual, Inc. 12,134,340 - -------------------------------------------------------------------------------- 46,976,314 - -------------------------------------------------------------------------------- TOBACCO -- 1.9% - -------------------------------------------------------------------------------- 1,421,600 Altria Group Inc.(1) 66,872,064 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $2,210,377,921) 2,449,582,839 - -------------------------------------------------------------------------------- PURCHASED PUT OPTIONS -- 0.1% CONTRACTS - -------------------------------------------------------------------------------- 14,216 Altria Group Inc., strike at $45.00, expires 1/22/05 2,985,360 - -------------------------------------------------------------------------------- 6,400 General Motors Corp., strike at $42.50, expires 1/22/05 1,440,000 - -------------------------------------------------------------------------------- TOTAL PURCHASED PUT OPTIONS (Cost $6,301,410) 4,425,360 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS -- 11.8% COMPUTERS & PERIPHERALS -- 1.4% - -------------------------------------------------------------------------------- 564,700 Morgan Stanley, (convertible into International Business Machines Corp.), 5.58%, 8/17/05(4) $ 48,479,495 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 4.2% - -------------------------------------------------------------------------------- 2,711,200 Ameren Corp., 9.75%, 5/15/05 74,449,552 - -------------------------------------------------------------------------------- 1,276,400 FPL Group, Inc., 8.00%, 2/16/06 71,440,108 - -------------------------------------------------------------------------------- 145,889,660 - --------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.3% - -------------------------------------------------------------------------------- 626,100 Morgan Stanley, (convertible into Synopsys, Inc.), 9.00%, 5/26/05(4) 10,017,600 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES -- 0.3% - -------------------------------------------------------------------------------- 238,000 Goldman Sachs Group Inc., (convertible into Cooper Cameron Corp.), 6.125%, 2/7/05(4) 11,097,226 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 0.8% - -------------------------------------------------------------------------------- 507,100 Goldman Sachs Group Inc. (convertible into Brinker International, Inc.), 7.00%, 9/2/05(4) 15,836,226 - -------------------------------------------------------------------------------- 289,600 Goldman Sachs Group Inc., (convertible into Outback Steakhouse, Inc.), 6.00%, 8/1/05(4) 11,893,293 - -------------------------------------------------------------------------------- 27,729,519 - --------------------------------------------------------------------------------- INSURANCE -- 1.5% - -------------------------------------------------------------------------------- 926,791 Chubb Corp., 7.00%, 11/16/05 25,950,148 - -------------------------------------------------------------------------------- 423,390 Hartford Financial Services, 7.00%, 8/16/06 25,784,451 - -------------------------------------------------------------------------------- 51,734,599 - --------------------------------------------------------------------------------- OIL & GAS -- 0.8% - -------------------------------------------------------------------------------- 534,700 Unocal Corp., 6.25%, 9/01/26 28,071,750 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 0.6% - -------------------------------------------------------------------------------- 414,600 International Paper, 5.25%, 7/20/25 20,937,300 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.1% - -------------------------------------------------------------------------------- 420,200 Goldman Sachs Group Inc., (convertible into Intel Corporation), 6.75%, 6/13/05(4) 8,622,924 - -------------------------------------------------------------------------------- 1,427,900 Morgan Stanley, (convertible into Intel Corporation), 10.35%, 2/24/05(4) 29,900,226 - -------------------------------------------------------------------------------- 38,523,150 - --------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 7 Equity Income - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares/Principal Amount Value - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 0.2% - -------------------------------------------------------------------------------- 423,700 Goldman Sachs Group Inc., (convertible into Dollar General Corporation), 6.625%, 9/2/05(4) $ 8,477,813 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 0.6% - -------------------------------------------------------------------------------- 392,700 Washington Mutual, Inc. 21,421,931 - -------------------------------------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $404,570,370) 412,380,043 - -------------------------------------------------------------------------------- CONVERTIBLE BONDS -- 10.9% BIOTECHNOLOGY -- 0.9% - -------------------------------------------------------------------------------- $16,379,000 Chiron Corp., 2.75%, 6/30/34 (Acquired 8/27/04-9/30/04, Cost $17,183,172)(5) 17,197,949 - -------------------------------------------------------------------------------- 13,505,000 Invitrogen Corp., 2.25%, 12/15/06 13,353,069 - -------------------------------------------------------------------------------- 30,551,018 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES(6) - -------------------------------------------------------------------------------- 695,000 Waste Management, Inc., 2.00%, 1/24/05 663,845 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 0.8% - -------------------------------------------------------------------------------- 50,797,000 Hewlett-Packard Co., 4.32%, 10/14/17(7) 28,890,794 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.5% - -------------------------------------------------------------------------------- 17,161,000 Commonwealth Telephone Enterprises Inc., 3.25%, 7/15/23 17,354,061 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.4% - -------------------------------------------------------------------------------- 15,345,000 Agilent Technologies Inc., 3.00%, 12/1/21 15,460,088 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES -- 0.1% - -------------------------------------------------------------------------------- 4,000,000 Schlumberger Ltd., 2.125%, 6/1/23 4,320,000 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 0.3% - -------------------------------------------------------------------------------- 10,803,000 Health Management Associates Inc., 1.50%, 8/1/23 11,181,105 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 0.4% - -------------------------------------------------------------------------------- 20,348,000 Brinker International Inc., 2.62%, 10/10/21(7) 13,226,200 - -------------------------------------------------------------------------------- 3,474,000 CBRL Group Inc., 2.90%, 3/26/32(7) 1,663,178 - -------------------------------------------------------------------------------- 14,889,378 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.5% - -------------------------------------------------------------------------------- 18,932,000 Goldman Sachs Group Inc., (convertible into Whirlpool Corp.), 3.00%, 6/11/05(4) 17,490,896 - -------------------------------------------------------------------------------- Principal Amount/Shares Value - -------------------------------------------------------------------------------- INSURANCE -- 0.8% - -------------------------------------------------------------------------------- $29,206,000 Loews Corp., (convertible into Diamond Offshore Drilling, Inc.), 3.125%, 9/15/07(4) $ 28,731,403 - -------------------------------------------------------------------------------- IT SERVICES -- 1.0% - -------------------------------------------------------------------------------- 30,982,000 DST Systems Inc., 3.625%, 8/20/08 35,668,027 - -------------------------------------------------------------------------------- MEDIA -- 0.4% - -------------------------------------------------------------------------------- 22,332,000 Valassis Communications Inc., 3.06%, 6/6/21(7) 13,315,455 - -------------------------------------------------------------------------------- OIL & GAS -- 3.6% - -------------------------------------------------------------------------------- 42,701,000 Devon Energy Corporation, (convertible into ChevronTexaco Corp.), 4.90%, 8/15/08(4) 46,490,713 - -------------------------------------------------------------------------------- 67,870,000 Devon Energy Corporation, (convertible into ChevronTexaco Corp.), 4.95%, 8/15/08(4) 73,893,462 - -------------------------------------------------------------------------------- 120,384,175 - --------------------------------------------------------------------------------- PHARMACEUTICALS -- 0.7% - -------------------------------------------------------------------------------- 24,002,000 Watson Pharmaceuticals Inc., 1.75%, 3/15/23 23,941,995 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.3% - -------------------------------------------------------------------------------- 9,466,000 Teradyne, Inc., 3.75%, 10/15/06 9,477,833 - -------------------------------------------------------------------------------- SOFTWARE -- 0.2% - -------------------------------------------------------------------------------- 8,991,000 Veritas Software Corp., 0.25%, 8/1/13 (Acquired 7/9/04-8/16/04, Cost $8,483,739)(5) 8,518,973 - -------------------------------------------------------------------------------- TOTAL CONVERTIBLE BONDS (Cost $372,195,466) 380,839,046 - -------------------------------------------------------------------------------- PREFERRED STOCKS -- 0.8% AEROSPACE & DEFENSE -- 0.8% - -------------------------------------------------------------------------------- 217,100 Northrop Grumman Corp., 7.00%, 4/4/21 (Cost $26,712,647) 28,440,100 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- SEGREGATED FOR FUTURES* -- 4.7% $164,403,500 FHLB Discount Notes, 1.61%, 10/1/04(8)(9) (Cost $164,403,500) 164,403,500 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 8 Equity Income - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 0.1% $2,396,500 FHLB Discount Notes, 1.61%, 10/1/04(9) $ 2,396,500 - -------------------------------------------------------------------------------- Repurchase Agreement, Merrill Lynch & Co., Inc., (collateralized by various U.S. Treasury obligations, 8.125%, 8/15/21, valued at $1,526,140), in a joint trading account at 1.62%, dated 9/30/04, due 10/1/04 (Delivery value $1,500,068) 1,500,000 - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $3,896,500) $3,896,500 - --------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 98.8% (Cost $3,188,457,814) 3,443,967,388 - --------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- 1.2% 40,686,779 - --------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $3,484,654,167 ================================================================================= EQUITY FUTURES CONTRACTS* Expiration Underlying Face Unrealized Purchased Date Amount at Value Loss - --------------------------------------------------------------------------------- 590 S&P 500 Futures December 2004 $164,403,500 $(345,541) ==================================== *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. ================================================================================ FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS** Contracts Settlement Unrealized to Sell Date Value Loss - -------------------------------------------------------------------------------- 54,881,599 Euro for USD 10/29/04 $ 68,210,287 $ (694,395) - -------------------------------------------------------------------------------- 31,070,736 Euro for USD 10/29/04 38,616,656 (408,040) - -------------------------------------------------------------------------------- 35,307,642 Euro for USD 10/29/04 43,882,547 (457,149) - -------------------------------------------------------------------------------- 16,690,508 GBP for USD 10/29/04 30,175,536 (11,514) - -------------------------------------------------------------------------------- 24,607,290 GBP for USD 10/29/04 44,488,649 (17,231) - -------------------------------------------------------------------------------- $225,373,675 $(1,588,329) ===================================== (Value on Settlement Date $223,785,346) **FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS are designed to protect the fund's foreign investments against declines in foreign currencies (also known as hedging). The contracts are called "forward" because they allow the fund to exchange a foreign currency for U.S. dollars on a specific date in the future - and at a prearranged exchange rate. ================================================================================ NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt FHLB = Federal Home Loan Bank GBP = British Pound ORD = Foreign Ordinary Share USD = United States Dollar (1) Security, or a portion thereof, is being held in connection with an open put option. (2) Affiliated Company: the fund's holding represents ownership of 5% or more of the voting securities of the company; therefore, the company is affiliated as defined in the Investment Company Act of 1940. (See Note 5 in Notes to Financial Statements.) (3) Non-income producing. (4) Equity-linked debt security or linked-equity security. The aggregate value of these securities at September 30, 2004, was $310,931,277, which represented 8.9% of net assets. (5) Security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of restricted securities at September 30, 2004, was $25,716,922, which represented 0.7% of net assets. (6) Category is less than 0.05% of total net assets. (7) 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. (8) Security, or a portion thereof, has been segregated at the custodian bank or with the broker as initial margin on futures contracts. (9) The rate indicated is the yield to maturity at purchase. See Notes to Financial Statements. - ------ 9 Mid Cap Value - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2004 - -------------------------------------------------------------------------------- SINCE INCEPTION INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 2.80%(1) 3/31/04 - -------------------------------------------------------------------------------- RUSSELL MIDCAP VALUE INDEX 3.50% -- - -------------------------------------------------------------------------------- Institutional Class 1.90%(1) 8/2/04 - -------------------------------------------------------------------------------- (1) Returns for periods less than one year are not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. - ------ 10 Mid Cap Value - Portfolio Commentary [photo of MICHAEL LISS, PHIL DAVIDSON AND SCOTT MOORE] PORTFOLIO MANAGERS ON THE MID CAP VALUE INVESTMENT TEAM: MICHAEL LISS, PHIL DAVIDSON AND SCOTT MOORE. Introduced on March 31 of this year, Mid Cap Value posted a gain of 2.59%* for the six months ended September 30, 2004, compared to its benchmark, the Russell Midcap Value Index, which was up 3.50%. CLIMATE OF UNCERTAINTY Common stock investors contended with a number of issues during the period. Chief among them were the continuing violence in Iraq, surging energy prices, three interest-rate increases by the Federal Reserve, and concerns about the slowing rate of growth of corporate earnings. In this climate of uncertainty, value stocks led their growth counterparts across the capitalization range, with both large and small value companies providing better returns. SUCCESS IN FINANCIALS Financial stocks, Mid Cap Value's largest sector weighting on average, proved to be the largest contributors of absolute performance. Investments in commercial banks and insurance companies were the most rewarding, led by BancorpSouth Inc. and Horace Mann Educators Corp., the portfolio's top-two contributors. BancorpSouth, the holding company for BancorpSouth Bank, operates in six southern states. Horace Mann Educators is a multi-line insurance company that focuses on the financial needs of the nation's educators and their families. The company reported strong earnings as a result of increased underwriting coupled with initiatives to increase productivity. INDUSTRIALS CONTRIBUTE Industrial stocks were also positive performers during the period. In the electrical equipment space, American Power Conversion Corp. was an important contributor. The company manufactures power-protection equipment that ensures uninterrupted power supplies to computer networks and sensitive electronic equipment. In commercial services, Republic Services Inc. was a strong performer. This company is a provider of solid waste management - -------------------------------------------------------------------------------- TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2004 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Union Pacific Corp. 3.3% 2.0% - -------------------------------------------------------------------------------- Republic Services, Inc. Cl A 2.7% -- - -------------------------------------------------------------------------------- New York Times Co. (The) Cl A 2.7% 1.4% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 2.5% 1.9% - -------------------------------------------------------------------------------- Edwards (A.G.), Inc. 2.2% 0.9% - -------------------------------------------------------------------------------- Martin Marietta Materials, Inc. 2.1% 1.2% - -------------------------------------------------------------------------------- Universal Health Services, Inc. Cl B 2.1% 0.5% - -------------------------------------------------------------------------------- Synopsys, Inc. 2.1% 0.9% - -------------------------------------------------------------------------------- Marsh & McLennan Companies Inc. 2.0% 1.1% - -------------------------------------------------------------------------------- AVX Corp. 2.0% 0.6% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. (continued) - ------ 11 Mid Cap Value - Portfolio Commentary services for commercial, industrial, municipal and residential customers in 22 states. During the period, Republic Services approved a plan to return more cash to shareholders by doubling its dividend and increasing its share buy-back program. Our investment process also led us to positions in Raytheon Co., an aerospace and defense firm, and industrial products supplier W.W. Grainger Inc. Both contributed to performance during the period. MATERIALS ADD VALUE Companies involved in containers and packaging also added to performance, led by AptarGroup Inc. The company focuses on pump dispensing systems for fragrances and cosmetics, pharmaceuticals, and personal care products. Elsewhere in the sector, chemicals company Rohm & Haas was a standout. The company has been able to pass along price increases in raw materials and energy used in the manufacturing of its adhesives, resins, coatings and related products. INFORMATION TECHNOLOGY DETRACTS Mid Cap Value's investments in technology-based companies slowed the fund the most during the six-month period. Synopsys Inc., which provides software for semiconductor manufacturers, was the portfolio's largest detractor in absolute terms. Its shares declined steeply in August after Synopsys announced that lower bookings would cause its fiscal year results to fall far short of expectations. Electrical equipment makers AVX Corp. and Vishay Intertechnology Inc. were also among our largest detractors, hurt by lower sales outlooks over the period. As of the end of the period, we still owned positions in these companies, reflecting our belief in their future prospects. LOOKING AHEAD We will continue to adhere to our discipline of buying fundamentally sound businesses that we believe have transitory issues affecting the price of their stock. - -------------------------------------------------------------------------------- TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2004 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Insurance 10.1% 5.6% - -------------------------------------------------------------------------------- Media 7.4% 2.3% - -------------------------------------------------------------------------------- Commercial Banks 5.2% 5.6% - -------------------------------------------------------------------------------- Electric Utilities 5.1% 2.8% - -------------------------------------------------------------------------------- Food Products 5.0% 2.2% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF NET ASSETS AS OF 9/30/04 - -------------------------------------------------------------------------------- Common Stocks 96.8% - -------------------------------------------------------------------------------- Temporary Cash Investments 2.8% - -------------------------------------------------------------------------------- Other Assets and Liabilities 0.4% - -------------------------------------------------------------------------------- - ------ 12 Mid Cap Value - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 96.8% AEROSPACE & DEFENSE -- 0.5% - -------------------------------------------------------------------------------- 4,050 Honeywell International Inc. $ 145,233 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 1.5% - -------------------------------------------------------------------------------- 4,580 Superior Industries International, Inc. 137,171 - -------------------------------------------------------------------------------- 14,506 TRW Automotive Holdings Corp.(1) 273,438 - -------------------------------------------------------------------------------- 410,609 - -------------------------------------------------------------------------------- BEVERAGES -- 2.2% - -------------------------------------------------------------------------------- 4,137 Anheuser-Busch Companies, Inc. 206,643 - -------------------------------------------------------------------------------- 12,350 Coca-Cola Enterprises 233,415 - -------------------------------------------------------------------------------- 5,370 Pepsi Bottling Group Inc. 145,796 - -------------------------------------------------------------------------------- 585,854 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 3.0% - -------------------------------------------------------------------------------- 16,814 Edwards (A.G.), Inc. 582,100 - -------------------------------------------------------------------------------- 2,220 Goldman Sachs Group, Inc. (The) 206,993 - -------------------------------------------------------------------------------- 789,093 - -------------------------------------------------------------------------------- CHEMICALS -- 2.8% - -------------------------------------------------------------------------------- 18,403 Ferro Corp. 401,369 - -------------------------------------------------------------------------------- 5,731 Minerals Technologies Inc. 337,327 - -------------------------------------------------------------------------------- 738,696 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 5.2% - -------------------------------------------------------------------------------- 8,930 BancorpSouth Inc. 205,301 - -------------------------------------------------------------------------------- 2,980 Commerce Bancshares, Inc. 143,308 - -------------------------------------------------------------------------------- 9,470 SunTrust Banks, Inc. 666,783 - -------------------------------------------------------------------------------- 6,130 Zions Bancorporation 374,175 - -------------------------------------------------------------------------------- 1,389,567 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 3.8% - -------------------------------------------------------------------------------- 24,617 Republic Services, Inc. Cl A 732,602 - -------------------------------------------------------------------------------- 10,370 Waste Management, Inc. 283,516 - -------------------------------------------------------------------------------- 1,016,118 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 0.5% - -------------------------------------------------------------------------------- 10,649 Seagate Technology 143,974 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 2.6% - -------------------------------------------------------------------------------- 12,270 Martin Marietta Materials, Inc. 555,463 - -------------------------------------------------------------------------------- 2,800 Vulcan Materials Co. 142,660 - -------------------------------------------------------------------------------- 698,123 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 1.1% - -------------------------------------------------------------------------------- 10,630 Bemis Co. 282,545 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.0% - -------------------------------------------------------------------------------- 6,180 Commonwealth Telephone Enterprise Inc.(1) 269,139 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 5.1% - -------------------------------------------------------------------------------- 3,360 FPL Group, Inc. 229,555 - -------------------------------------------------------------------------------- 9,914 IDACORP, Inc. 288,101 - -------------------------------------------------------------------------------- 17,260 Pepco Holdings, Inc. 343,474 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 17,080 Westar Energy Inc. $ 345,016 - --------------------------------------------------------------------------------- 4,500 Wisconsin Energy Corp. 143,550 - --------------------------------------------------------------------------------- 1,349,696 - --------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 2.4% - -------------------------------------------------------------------------------- 13,320 American Power Conversion Corp. 231,635 - --------------------------------------------------------------------------------- 6,730 Emerson Electric Co. 416,520 - --------------------------------------------------------------------------------- 648,155 - --------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 2.7% - -------------------------------------------------------------------------------- 44,933 AVX Corp. 532,456 - --------------------------------------------------------------------------------- 14,600 Vishay Intertechnology, Inc.(1) 188,340 - --------------------------------------------------------------------------------- 720,796 - --------------------------------------------------------------------------------- FOOD PRODUCTS -- 5.0% - -------------------------------------------------------------------------------- 12,660 Campbell Soup Company 332,831 - --------------------------------------------------------------------------------- 5,848 H.J. Heinz Company 210,645 - --------------------------------------------------------------------------------- 12,940 Kraft Foods Inc. 410,457 - --------------------------------------------------------------------------------- 6,340 Unilever N.V. New York Shares 366,452 - --------------------------------------------------------------------------------- 1,320,385 - --------------------------------------------------------------------------------- GAS UTILITIES -- 1.7% - -------------------------------------------------------------------------------- 4,530 AGL Resources Inc. 139,388 - --------------------------------------------------------------------------------- 11,018 WGL Holdings Inc. 311,369 - --------------------------------------------------------------------------------- 450,757 - --------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 3.7% - -------------------------------------------------------------------------------- 5,555 Analogic Corporation 231,588 - --------------------------------------------------------------------------------- 2,530 Beckman Coulter Inc. 141,984 - --------------------------------------------------------------------------------- 11,770 National Dentex Corp.(1) 331,678 - --------------------------------------------------------------------------------- 12,390 Steris Corp.(1) 271,837 - --------------------------------------------------------------------------------- 977,087 - --------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 4.4% - -------------------------------------------------------------------------------- 9,010 HCA Inc. 343,732 - --------------------------------------------------------------------------------- 4,470 LifePoint Hospitals Inc.(1) 134,145 - --------------------------------------------------------------------------------- 6,480 Province Healthcare Co.(1) 135,562 - --------------------------------------------------------------------------------- 12,690 Universal Health Services, Inc. Cl B 552,014 - --------------------------------------------------------------------------------- 1,165,453 - --------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 4.6% - -------------------------------------------------------------------------------- 15,258 Brinker International, Inc.(1) 475,287 - --------------------------------------------------------------------------------- 9,730 Outback Steakhouse, Inc. 404,087 - --------------------------------------------------------------------------------- 6,270 Speedway Motorsports Inc. 208,979 - --------------------------------------------------------------------------------- 4,420 Wendy's International, Inc. 148,512 - --------------------------------------------------------------------------------- 1,236,865 - --------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 4.6% - -------------------------------------------------------------------------------- 10,720 Hunter Douglas N.V. ORD 492,929 - --------------------------------------------------------------------------------- 10,320 Newell Rubbermaid Inc. 206,813 - --------------------------------------------------------------------------------- 6,560 Snap-on Incorporated 180,794 - --------------------------------------------------------------------------------- 5,719 Whirlpool Corp. 343,655 - --------------------------------------------------------------------------------- 1,224,191 - --------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 1.0% - -------------------------------------------------------------------------------- 4,210 Kimberly-Clark Corp. 271,924 - --------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 13 Mid Cap Value - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- INSURANCE -- 10.1% - -------------------------------------------------------------------------------- 6,970 Chubb Corp. $ 489,851 - -------------------------------------------------------------------------------- 26,820 CNA Surety Corp.(1) 284,292 - -------------------------------------------------------------------------------- 19,150 Horace Mann Educators Corp. 336,657 - -------------------------------------------------------------------------------- 6,894 Jefferson-Pilot Corp. 342,356 - -------------------------------------------------------------------------------- 11,894 Marsh & McLennan Companies Inc. 544,268 - -------------------------------------------------------------------------------- 9,210 MetLife, Inc. 355,967 - -------------------------------------------------------------------------------- 10,720 Platinum Underwriters Holdings 313,882 - -------------------------------------------------------------------------------- 2,667,273 - -------------------------------------------------------------------------------- IT SERVICES -- 1.0% - -------------------------------------------------------------------------------- 6,240 DST Systems, Inc.(1) 277,493 - -------------------------------------------------------------------------------- MACHINERY -- 2.3% - -------------------------------------------------------------------------------- 8,210 Dover Corp. 319,123 - -------------------------------------------------------------------------------- 4,430 Nordson Corp. 152,082 - -------------------------------------------------------------------------------- 5,750 Pall Corp. 140,760 - -------------------------------------------------------------------------------- 611,965 - -------------------------------------------------------------------------------- MEDIA -- 7.4% - -------------------------------------------------------------------------------- 6,675 ADVO, Inc. 206,525 - -------------------------------------------------------------------------------- 10,020 Dow Jones & Co. Inc. 406,912 - -------------------------------------------------------------------------------- 19,788 Journal Communications Inc. 347,082 - -------------------------------------------------------------------------------- 18,280 New York Times Co. (The) Cl A 714,748 - -------------------------------------------------------------------------------- 9,680 Valassis Communications, Inc.(1) 286,334 - -------------------------------------------------------------------------------- 1,961,601 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 1.2% - -------------------------------------------------------------------------------- 8,620 Dollar General Corp. 173,693 - -------------------------------------------------------------------------------- 5,160 Family Dollar Stores, Inc. 139,836 - -------------------------------------------------------------------------------- 313,529 - -------------------------------------------------------------------------------- OIL & GAS -- 1.8% - -------------------------------------------------------------------------------- 2,620 ConocoPhillips 217,067 - -------------------------------------------------------------------------------- 6,270 Unocal Corp. 269,610 - -------------------------------------------------------------------------------- 486,677 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 2.7% - -------------------------------------------------------------------------------- 16,690 Bristol-Myers Squibb Co. 395,053 - -------------------------------------------------------------------------------- 11,240 Watson Pharmaceuticals, Inc.(1) 331,130 - -------------------------------------------------------------------------------- 726,183 - -------------------------------------------------------------------------------- Shares/Principal Amount Value - -------------------------------------------------------------------------------- REAL ESTATE -- 0.5% - -------------------------------------------------------------------------------- 3,660 Sun Communities, Inc. $ 143,435 - --------------------------------------------------------------------------------- ROAD & RAIL -- 3.3% - -------------------------------------------------------------------------------- 14,930 Union Pacific Corp. 874,898 - --------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.5% - -------------------------------------------------------------------------------- 10,550 Teradyne, Inc.(1) 141,370 - --------------------------------------------------------------------------------- SOFTWARE -- 3.9% - -------------------------------------------------------------------------------- 11,140 Reynolds & Reynolds Co. Cl A 274,824 - --------------------------------------------------------------------------------- 34,663 Synopsys, Inc.(1) 548,715 - --------------------------------------------------------------------------------- 11,710 Veritas Software Corp.(1) 208,438 - --------------------------------------------------------------------------------- 1,031,977 - --------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.5% - -------------------------------------------------------------------------------- 7,790 Jones Apparel Group, Inc. 278,882 - --------------------------------------------------------------------------------- 3,545 Liz Claiborne, Inc. 133,717 - --------------------------------------------------------------------------------- 412,599 - --------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 1.2% - -------------------------------------------------------------------------------- 2,820 Freddie Mac 183,977 - --------------------------------------------------------------------------------- 2,201 MGIC Investment Corp. 146,477 - --------------------------------------------------------------------------------- 330,454 - --------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $25,688,147) 25,813,714 - --------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 2.8% $750,000 FHLB Discount Notes, 1.65%, 10/1/04(2) (Cost $750,000) 750,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 99.6% (Cost $26,438,147) 26,563,714 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- 0.4% 105,455 - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $26,669,169 ================================================================================ See Notes to Financial Statements. (continued) - ------ 14 Mid Cap Value - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS* Contracts to Sell Settlement Date Value Unrealized Loss - -------------------------------------------------------------------------------- 257,134 Euro for USD 10/29/04 $319,581 $(3,253) - -------------------------------------------------------------------------------- 145,575 Euro for USD 10/29/04 180,930 (1,912) - -------------------------------------------------------------------------------- 165,428 Euro for USD 10/29/04 205,605 (2,142) - -------------------------------------------------------------------------------- $706,116 $(7,307) ==================================== (Value on Settlement Date $698,809) *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 FHLB = Federal Home Loan Bank ORD = Foreign Ordinary Share USD = United States Dollar (1) Non-income producing. (2) The rate indicated is the yield to maturity at purchase. See Notes to Financial Statements. - ------ 15 Small Cap Value - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2004 ---------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 24.21% 18.99% 15.54% 7/31/98 - -------------------------------------------------------------------------------- S&P SMALLCAP 600/BARRA VALUE INDEX 28.23% 13.07% 10.11% -- - -------------------------------------------------------------------------------- Institutional Class 24.55% 19.25% 17.14% 10/26/98 - -------------------------------------------------------------------------------- Advisor Class 24.05% -- 19.76% 12/31/99 - -------------------------------------------------------------------------------- C Class 23.45% -- 10.03% 6/1/01 - -------------------------------------------------------------------------------- Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. (continued) - ------ 16 Small Cap Value - Performance GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made July 31, 1998
![](https://capedge.com/proxy/N-CSRS/0000908186-04-000023/growthsmallcapvalue0409.gif)
ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - -------------------------------------------------------------------------------- 1998* 1999 2000 2001 - -------------------------------------------------------------------------------- Investor Class -9.80% 13.25% 21.76% 27.06% - -------------------------------------------------------------------------------- S&P SmallCap 600/BARRA Value Index -13.69% 13.56% 15.81% 0.03% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2002 2003 2004 - -------------------------------------------------------------------------------- Investor Class -1.21% 25.63% 24.21% - -------------------------------------------------------------------------------- S&P SmallCap 600/BARRA Value Index -1.05% 25.73% 28.23% - -------------------------------------------------------------------------------- * From 7/31/98, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. - ------ 17 Small Cap Value - Portfolio Commentary [photo of BEN GIELE AND KEVIN LAUB] PORTFOLIO MANAGERS ON THE SMALL CAP VALUE INVESTMENT TEAM: BEN GIELE AND KEVIN LAUB. For the six months ended September 30, 2004, Small Cap Value gained 2.33%*, underperforming the 3.15% return posted by its benchmark, the S&P SmallCap 600/BARRA Value Index. 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 15.54%, far outdistancing the 10.11% return posted by its benchmark for the same period. STOCKS FACE HEADWINDS Stocks contended with a number of headwinds during the period. Chief among them were the continuing violence in Iraq, surging energy prices, three interest-rate increases by the Federal Reserve, and concerns about the slowing rate of growth of corporate earnings. In this climate of uncertainty, both large and small value stocks provided relatively better returns versus the broad market. ENERGY: THE LARGEST CONTRIBUTOR Our stake in the energy sector made the greatest contribution to performance as rising oil prices set a beneficial backdrop. All of our holdings in this area contributed, and energy equipment and services firms were the best performers. Cal Dive International Inc., which provides services for offshore rigs, announced a 25% revenue increase in the second quarter of 2004 versus the same quarter in 2003, a gain driven by higher oil and gas production and ramping commodity prices. Its stock was one of the portfolio's top contributors. Oil and gas companies also fared well, and in that group, Tom Brown Inc. was a notable name. MATERIALS, INDUSTRIALS LEND STRENGTH Holdings in the materials sector represented additional sources of strength. Effective stock selection in the chemicals industry yielded several contributors, including Olin Corp. and Sensient Technologies Corp. Sensient makes flavors, colors and scents for use in the food, cosmetics and pharmaceutical industries, and higher overall sales volumes in each generated enhanced cash flow and revenues. - -------------------------------------------------------------------------------- TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2004 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Sybase, Inc. 2.5% 1.3% - -------------------------------------------------------------------------------- iShares Russell 2000 Index Fund 1.8% 1.0% - -------------------------------------------------------------------------------- Snap-on Incorporated 1.5% 1.8% - -------------------------------------------------------------------------------- Platinum Underwriters Holdings 1.4% 1.3% - -------------------------------------------------------------------------------- Imation Corporation 1.3% 1.3% - -------------------------------------------------------------------------------- Olin Corp. 1.3% 1.2% - -------------------------------------------------------------------------------- Bemis Co. 1.3% 1.7% - -------------------------------------------------------------------------------- Universal Health Services, Inc. Cl B 1.3% 1.3% - -------------------------------------------------------------------------------- Sensient Technologies Corp. 1.2% 1.0% - -------------------------------------------------------------------------------- Smith (A.O.) Corp. 1.2% 1.0% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. (continued) - ------ 18 Small Cap Value - Portfolio Commentary We found ample opportunity in the industrials sector, which significantly augmented performance. One success, from the road and rail industry, was Arkansas Best Corp. The company enjoyed top-line gains during the period on the strength of improved pricing power and increased shipments. FINANCIALS DELIVER SUCCESS Investments in the financials sector, our largest single stake on average, also provided considerable lift. Much of our position was devoted to commercial banks, which produced a top contributor in TCF Financial Corp. TECHNOLOGY AND CONSUMER STOCKS SLOW PERFORMANCE The information technology and consumer discretionary sectors detracted nearly equally from performance. Despite pockets of strength in each sector -- we sidestepped broader damage and held many well-performing names -- it was not enough to mitigate damage elsewhere. In information technology, exposure to software companies was the greatest liability and produced the portfolio's top-detracting stock. During the period, Sybase Inc. struggled against weak capital spending for new software, and several pending contracts remained open. However, we continued to have confidence in this firm's long-term prospects and so maintained our position. Rising consumer prices, flagging confidence and an unsteady labor market held our stake in the consumer discretionary sector to a lower finish. Household durables firms, which produce items meant to last three or more years, paced declines. Libbey Inc. and Snap-On Inc. were two notable detractors. Snap-On, which makes the popular brand of hand and power tools, reduced its earnings outlook for a number of reasons, including higher raw-materials costs and lackluster European sales. THE MONTHS AHEAD We will remain committed to our discipline of seeking fundamentally sound, attractively priced companies that we believe offer investors the potential for long-term reward. - -------------------------------------------------------------------------------- TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2004* - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Software 7.4% 3.7% - -------------------------------------------------------------------------------- Commercial Banks 5.6% 7.3% - -------------------------------------------------------------------------------- Chemicals 4.9% 4.6% - -------------------------------------------------------------------------------- Insurance 4.3% 3.1% - -------------------------------------------------------------------------------- Specialty Retail 4.3% 2.8% - -------------------------------------------------------------------------------- *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 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Common Stocks 93.2% 93.5% - -------------------------------------------------------------------------------- Convertible Preferred Stocks 1.0% 1.3% - -------------------------------------------------------------------------------- Preferred Stocks 0.3% 0.3% - -------------------------------------------------------------------------------- Convertible Bonds 0.2% 0.9% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 94.7% 96.0% - -------------------------------------------------------------------------------- Temporary Cash Investments 4.6% 4.2% - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES 99.3% 100.2% - -------------------------------------------------------------------------------- Other Assets and Liabilities 0.7% (0.2)% - -------------------------------------------------------------------------------- - ------ 19 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 93.2% AEROSPACE & DEFENSE -- 1.1% - -------------------------------------------------------------------------------- 510,000 United Defense Industries, Inc.(1) $ 20,394,900 - -------------------------------------------------------------------------------- AIRLINES -- 1.0% - -------------------------------------------------------------------------------- 1,275,000 SkyWest, Inc. 19,188,750 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 1.5% - -------------------------------------------------------------------------------- 500,000 Cooper Tire & Rubber 10,085,000 - -------------------------------------------------------------------------------- 615,000 Superior Industries International, Inc. 18,419,250 - -------------------------------------------------------------------------------- 28,504,250 - -------------------------------------------------------------------------------- BIOTECHNOLOGY -- 0.5% - -------------------------------------------------------------------------------- 175,000 Invitrogen Corp.(1) 9,623,250 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.8% - -------------------------------------------------------------------------------- 720,000 Griffon Corp.(1) 15,192,000 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 1.2% - -------------------------------------------------------------------------------- 590,000 Raymond James Financial, Inc. 14,230,800 - -------------------------------------------------------------------------------- 380,000 Waddell & Reed Financial Inc. 8,360,000 - -------------------------------------------------------------------------------- 22,590,800 - -------------------------------------------------------------------------------- CHEMICALS -- 4.9% - -------------------------------------------------------------------------------- 520,000 Ferro Corp. 11,341,200 - -------------------------------------------------------------------------------- 110,000 FMC Corp.(1) 5,342,700 - -------------------------------------------------------------------------------- 585,000 H.B. Fuller Company 16,029,000 - -------------------------------------------------------------------------------- 195,000 Minerals Technologies Inc. 11,477,700 - -------------------------------------------------------------------------------- 1,214,418 Olin Corp. 24,288,360 - -------------------------------------------------------------------------------- 1,010,000 Sensient Technologies Corp. 21,856,400 - -------------------------------------------------------------------------------- 90,335,360 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 5.4% - -------------------------------------------------------------------------------- 320,000 Associated Banc-Corp. 10,262,400 - -------------------------------------------------------------------------------- 445,000 BancorpSouth Inc. 10,230,550 - -------------------------------------------------------------------------------- 55,000 Chemical Financial Corp. 2,008,600 - -------------------------------------------------------------------------------- 255,000 Chittenden Corp. 6,948,750 - -------------------------------------------------------------------------------- 155,000 Cullen/Frost Bankers, Inc. 7,202,850 - -------------------------------------------------------------------------------- 380,000 First Financial Bancorp 6,490,400 - -------------------------------------------------------------------------------- 455,000 Hibernia Corp. Cl A 12,016,550 - -------------------------------------------------------------------------------- 95,000 Mercantile Bankshares Corporation 4,556,200 - -------------------------------------------------------------------------------- 415,000 Sky Financial Group Inc. 10,375,000 - -------------------------------------------------------------------------------- 1,020,000 Sterling Bancshares, Inc. 13,719,000 - -------------------------------------------------------------------------------- 100,000 Whitney Holding Corp. 4,200,000 - -------------------------------------------------------------------------------- 315,000 Wilmington Trust Corporation 11,406,150 - -------------------------------------------------------------------------------- 99,416,450 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 2.8% - -------------------------------------------------------------------------------- 600,000 ABM Industries Inc. 12,090,000 - -------------------------------------------------------------------------------- 380,000 Asset Acceptance Capital Corp.(1) 6,448,600 - -------------------------------------------------------------------------------- 195,000 Banta Corp. 7,751,250 - -------------------------------------------------------------------------------- 400,000 G&K Services Inc. Cl A 15,896,000 Shares Value - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 350,000 Kelly Services, Inc. Cl A $ 9,348,500 - --------------------------------------------------------------------------------- 51,534,350 - --------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 0.4% - -------------------------------------------------------------------------------- 455,000 Andrew Corporation(1) 5,569,200 - --------------------------------------------------------------------------------- 45,000 Black Box Corporation 1,662,750 - --------------------------------------------------------------------------------- 7,231,950 - --------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 2.2% - -------------------------------------------------------------------------------- 1,030,000 Electronics for Imaging, Inc.(1) 16,727,200 - --------------------------------------------------------------------------------- 690,000 Imation Corporation 24,557,100 - --------------------------------------------------------------------------------- 41,284,300 - --------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING -- 1.3% - -------------------------------------------------------------------------------- 440,000 Granite Construction Inc. 10,516,000 - --------------------------------------------------------------------------------- 285,000 Insituform Technologies, Inc. Cl A(1) 5,320,950 - --------------------------------------------------------------------------------- 225,000 Jacobs Engineering Group Inc.(1) 8,615,250 - --------------------------------------------------------------------------------- 24,452,200 - --------------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 0.9% - -------------------------------------------------------------------------------- 385,000 Martin Marietta Materials, Inc. 17,428,950 - --------------------------------------------------------------------------------- CONSUMER FINANCE -- 0.9% - -------------------------------------------------------------------------------- 975,000 MoneyGram International Inc. 16,653,000 - --------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 2.6% - -------------------------------------------------------------------------------- 365,000 AptarGroup, Inc. 16,049,050 - --------------------------------------------------------------------------------- 905,000 Bemis Co. 24,054,900 - --------------------------------------------------------------------------------- 320,000 Sonoco Products Co. 8,460,800 - --------------------------------------------------------------------------------- 48,564,750 - --------------------------------------------------------------------------------- DIVERSIFIED -- 4.8% - -------------------------------------------------------------------------------- 300,000 iShares Russell 2000 Index Fund 34,206,000 - -------------------------------------------------------------------------------- 125,000 iShares Russell 2000 Value Index Fund 21,387,500 - -------------------------------------------------------------------------------- 75,000 iShares S&P SmallCap 600 Index Fund 10,818,000 - -------------------------------------------------------------------------------- 195,000 iShares S&P SmallCap 600/BARRA Value Index Fund 21,327,150 - -------------------------------------------------------------------------------- 87,738,650 - --------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 0.2% - -------------------------------------------------------------------------------- 420,000 Medallion Financial Corp. 3,801,000 - --------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 2.1% - -------------------------------------------------------------------------------- 475,000 Empire District Electric Co. 9,761,250 - --------------------------------------------------------------------------------- 610,000 IDACORP, Inc. 17,726,600 - --------------------------------------------------------------------------------- 600,000 Westar Energy Inc. 12,120,000 - --------------------------------------------------------------------------------- 39,607,850 - --------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 1.5% - -------------------------------------------------------------------------------- 305,000 Regal-Beloit Corp. 7,377,950 - --------------------------------------------------------------------------------- 880,000 Smith (A.O.) Corp. 21,428,000 - --------------------------------------------------------------------------------- 28,805,950 - --------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 20 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 2.0% - -------------------------------------------------------------------------------- 370,000 Benchmark Electronics Inc.(1) $ 11,026,000 - -------------------------------------------------------------------------------- 470,000 Coherent, Inc.(1) 12,191,800 - -------------------------------------------------------------------------------- 700,000 Methode Electronics, Inc. 8,953,000 - -------------------------------------------------------------------------------- 245,000 Paxar Corp.(1) 5,556,600 - -------------------------------------------------------------------------------- 37,727,400 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES -- 4.0% - -------------------------------------------------------------------------------- 395,000 Cal Dive International Inc.(1) 14,069,900 - -------------------------------------------------------------------------------- 650,000 Helmerich & Payne, Inc. 18,648,500 - -------------------------------------------------------------------------------- 75,000 Hydril Co.(1) 3,221,250 - -------------------------------------------------------------------------------- 1,475,000 Key Energy Group, Inc.(1) 16,298,750 - -------------------------------------------------------------------------------- 345,000 Unit Corporation(1) 12,102,600 - -------------------------------------------------------------------------------- 465,000 W-H Energy Services Inc.(1) 9,648,750 - -------------------------------------------------------------------------------- 73,989,750 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 1.1% - -------------------------------------------------------------------------------- 770,000 Casey's General Stores, Inc. 14,314,300 - -------------------------------------------------------------------------------- 275,000 Performance Food Group Co.(1) 6,517,500 - -------------------------------------------------------------------------------- 20,831,800 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 1.4% - -------------------------------------------------------------------------------- 215,000 Corn Products International Inc. 9,911,500 - -------------------------------------------------------------------------------- 210,000 Hormel Foods Corp. 5,623,800 - -------------------------------------------------------------------------------- 270,000 Lancaster Colony Corp. 11,384,550 - -------------------------------------------------------------------------------- 26,919,850 - -------------------------------------------------------------------------------- GAS UTILITIES -- 2.4% - -------------------------------------------------------------------------------- 410,000 AGL Resources Inc. 12,615,700 - -------------------------------------------------------------------------------- 550,000 Northwest Natural Gas Co. 17,451,500 - -------------------------------------------------------------------------------- 536,000 WGL Holdings Inc. 15,147,360 - -------------------------------------------------------------------------------- 45,214,560 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 3.1% - -------------------------------------------------------------------------------- 290,000 Analogic Corporation 12,090,100 - -------------------------------------------------------------------------------- 265,000 Arrow International Inc. 7,923,500 - -------------------------------------------------------------------------------- 115,000 Beckman Coulter Inc. 6,453,800 - -------------------------------------------------------------------------------- 235,000 Dade Behring Holdings Inc.(1) 13,093,730 - -------------------------------------------------------------------------------- 190,000 Orthofix International N.V.(1) 6,526,500 - -------------------------------------------------------------------------------- 640,000 Osteotech Inc.(1) 2,521,600 - -------------------------------------------------------------------------------- 415,000 Steris Corp.(1) 9,105,100 - -------------------------------------------------------------------------------- 57,714,330 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 3.1% - -------------------------------------------------------------------------------- 285,000 Accredo Health Inc.(1) 6,717,450 - -------------------------------------------------------------------------------- 770,000 Alliance Imaging Inc.(1) 5,751,900 - -------------------------------------------------------------------------------- 440,000 Owens & Minor Inc. 11,176,000 - -------------------------------------------------------------------------------- 137,926 Priority Healthcare Corp. Cl B(1) 2,779,209 - -------------------------------------------------------------------------------- 260,000 Renal Care Group Inc.(1) 8,379,800 - -------------------------------------------------------------------------------- 540,000 Universal Health Services, Inc. Cl B 23,490,000 - -------------------------------------------------------------------------------- 58,294,359 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 2.6% - -------------------------------------------------------------------------------- 220,000 Brinker International, Inc.(1) $ 6,853,000 - --------------------------------------------------------------------------------- 435,000 CEC Entertainment Inc.(1) 15,986,250 - --------------------------------------------------------------------------------- 245,000 Jack in the Box Inc.(1) 7,773,850 - --------------------------------------------------------------------------------- 415,000 Outback Steakhouse, Inc. 17,234,950 - --------------------------------------------------------------------------------- 47,848,050 - --------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 2.6% - -------------------------------------------------------------------------------- 465,000 Libbey Inc. 8,695,500 - --------------------------------------------------------------------------------- 1,010,000 Snap-on Incorporated 27,835,600 - --------------------------------------------------------------------------------- 480,000 WCI Communities Inc.(1) 11,184,000 - --------------------------------------------------------------------------------- 47,715,100 - --------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 0.4% - -------------------------------------------------------------------------------- 70,000 Rayovac Corporation(1) 1,844,500 - --------------------------------------------------------------------------------- 195,000 WD-40 Co. 5,577,000 - --------------------------------------------------------------------------------- 7,421,500 - --------------------------------------------------------------------------------- INSURANCE -- 3.3% - -------------------------------------------------------------------------------- 195,000 Aspen Insurance Holdings Ltd. 4,486,950 - --------------------------------------------------------------------------------- 55,000 Erie Indemnity Company 2,806,100 - --------------------------------------------------------------------------------- 670,000 HCC Insurance Holdings, Inc. 20,200,500 - --------------------------------------------------------------------------------- 275,000 Horace Mann Educators Corp. 4,834,500 - --------------------------------------------------------------------------------- 865,000 Platinum Underwriters Holdings 25,327,200 - --------------------------------------------------------------------------------- 135,000 ProAssurance Corp.(1) 4,727,700 - --------------------------------------------------------------------------------- 62,382,950 - --------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES -- 0.4% - -------------------------------------------------------------------------------- 670,000 Pec Solutions Inc.(1) 7,852,400 - --------------------------------------------------------------------------------- IT SERVICES -- 1.3% - -------------------------------------------------------------------------------- 295,000 Mantech International Corporation Cl A(1) 5,522,400 - -------------------------------------------------------------------------------- 415,000 MAXIMUS, Inc.(1) 11,956,150 - --------------------------------------------------------------------------------- 540,000 MedQuist Inc.(1) 7,047,000 - --------------------------------------------------------------------------------- 24,525,550 - --------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 0.6% - -------------------------------------------------------------------------------- 135,000 Jakks Pacific Inc.(1) 3,105,000 - --------------------------------------------------------------------------------- 365,000 Leapfrog Enterprises Inc.(1) 7,391,250 - --------------------------------------------------------------------------------- 10,496,250 - --------------------------------------------------------------------------------- MACHINERY -- 2.8% - -------------------------------------------------------------------------------- 365,000 Crane Co. 10,555,800 - --------------------------------------------------------------------------------- 250,000 Kadant Inc.(1) 4,590,000 - --------------------------------------------------------------------------------- 680,000 Kaydon Corporation 19,563,600 - --------------------------------------------------------------------------------- 270,000 Kennametal Inc. 12,190,500 - --------------------------------------------------------------------------------- 110,000 Tecumseh Products Cl A 4,605,700 - --------------------------------------------------------------------------------- 51,505,600 - --------------------------------------------------------------------------------- MARINE -- 0.5% - -------------------------------------------------------------------------------- 295,000 Alexander & Baldwin, Inc. 10,012,300 - --------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 21 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- MEDIA -- 3.4% - -------------------------------------------------------------------------------- 190,000 ADVO, Inc. $ 5,878,600 - -------------------------------------------------------------------------------- 420,000 Hearst-Argyle Television, Inc. 10,269,000 - -------------------------------------------------------------------------------- 680,000 Journal Communications Inc. 11,927,200 - -------------------------------------------------------------------------------- 420,000 Liberty Corp. (The) 16,690,800 - -------------------------------------------------------------------------------- 295,000 ProQuest Co.(1) 7,581,500 - -------------------------------------------------------------------------------- 400,000 Valassis Communications, Inc.(1) 11,832,000 - -------------------------------------------------------------------------------- 64,179,100 - -------------------------------------------------------------------------------- OIL & GAS -- 2.0% - -------------------------------------------------------------------------------- 185,000 Cimarex Energy Co.(1) 6,463,900 - -------------------------------------------------------------------------------- 185,000 Denbury Resources Inc.(1) 4,699,000 - -------------------------------------------------------------------------------- 225,000 Encore Acquisition Co.(1) 7,762,500 - -------------------------------------------------------------------------------- 245,000 Spinnaker Exploration Company(1) 8,584,800 - -------------------------------------------------------------------------------- 305,000 Whiting Petroleum Corp.(1) 9,272,000 - -------------------------------------------------------------------------------- 36,782,200 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 0.1% - -------------------------------------------------------------------------------- 115,000 Wausau-Mosinee Paper Corp. 1,914,750 - -------------------------------------------------------------------------------- REAL ESTATE -- 1.7% - -------------------------------------------------------------------------------- 190,000 BRE Properties 7,286,500 - -------------------------------------------------------------------------------- 515,000 Getty Realty Corp. 13,503,300 - -------------------------------------------------------------------------------- 425,000 Maguire Properties, Inc. 10,331,750 - -------------------------------------------------------------------------------- 31,121,550 - -------------------------------------------------------------------------------- ROAD & RAIL -- 2.1% - -------------------------------------------------------------------------------- 790,000 Heartland Express, Inc. 14,575,500 - -------------------------------------------------------------------------------- 420,000 USF Corp. 15,073,800 - -------------------------------------------------------------------------------- 530,000 Werner Enterprises Inc. 10,234,300 - -------------------------------------------------------------------------------- 39,883,600 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.5% - -------------------------------------------------------------------------------- 255,000 DuPont Photomasks, Inc.(1) 4,345,200 - -------------------------------------------------------------------------------- 400,000 OmniVision Technologies, Inc.(1) 5,660,000 - -------------------------------------------------------------------------------- 10,005,200 - -------------------------------------------------------------------------------- SOFTWARE -- 7.4% - -------------------------------------------------------------------------------- 415,000 Activision, Inc.(1) 5,756,050 - -------------------------------------------------------------------------------- 1,420,000 Compuware Corp.(1) 7,313,000 - -------------------------------------------------------------------------------- 343,369 Internet Security Systems(1) 5,837,273 - -------------------------------------------------------------------------------- 490,000 MRO Software Inc.(1) 4,900,000 - -------------------------------------------------------------------------------- 1,800,000 Parametric Technology Corp.(1) 9,504,000 - -------------------------------------------------------------------------------- 640,000 Reynolds & Reynolds Co. Cl A 15,788,800 - -------------------------------------------------------------------------------- 3,400,000 Sybase, Inc.(1) 46,886,000 - -------------------------------------------------------------------------------- 890,000 Synopsys, Inc.(1) 14,088,700 - -------------------------------------------------------------------------------- 935,000 THQ Inc.(1) 18,195,100 - -------------------------------------------------------------------------------- 585,000 Verity Inc.(1) 7,534,800 - -------------------------------------------------------------------------------- 135,803,723 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 4.3% - -------------------------------------------------------------------------------- 345,000 Burlington Coat Factory Warehouse Corp. $ 7,324,350 - -------------------------------------------------------------------------------- 530,000 Cato Corp. (The) 11,792,500 - --------------------------------------------------------------------------------- 350,000 Christopher & Banks Corporation 5,603,500 - --------------------------------------------------------------------------------- 275,000 Hot Topic, Inc.(1) 4,686,000 - --------------------------------------------------------------------------------- 445,000 Linens 'n Things, Inc.(1) 10,310,650 - --------------------------------------------------------------------------------- 770,000 Pier 1 Imports, Inc. 13,921,600 - --------------------------------------------------------------------------------- 635,000 Talbots Inc. 15,741,650 - --------------------------------------------------------------------------------- 375,000 Zale Corp.(1) 10,537,500 - --------------------------------------------------------------------------------- 79,917,750 - --------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.9% - -------------------------------------------------------------------------------- 265,000 Kenneth Cole Productions Inc. 7,457,100 - --------------------------------------------------------------------------------- 100,000 Polo Ralph Lauren Corp. 3,637,000 - --------------------------------------------------------------------------------- 320,000 Reebok International Ltd. 11,750,400 - --------------------------------------------------------------------------------- 470,000 Wolverine World Wide, Inc. 11,844,000 - --------------------------------------------------------------------------------- 34,688,500 - --------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 2.1% - -------------------------------------------------------------------------------- 395,000 Commercial Federal Corp. 10,657,100 - --------------------------------------------------------------------------------- 265,000 PMI Group, Inc. (The) 10,753,700 - --------------------------------------------------------------------------------- 701,244 Washington Federal, Inc. 17,636,287 - --------------------------------------------------------------------------------- 39,047,087 - --------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $1,512,902,280) 1,736,143,919 - --------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS -- 1.0% INSURANCE -- 1.0% - -------------------------------------------------------------------------------- 170,000 Phoenix Companies Inc., 7.25%, 2/16/06 5,531,800 - -------------------------------------------------------------------------------- 370,000 United Fire & Casualty Co., Series A, 6.375%, 5/15/14 13,394,000 - -------------------------------------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $13,666,462) 18,925,800 - -------------------------------------------------------------------------------- PREFERRED STOCKS -- 0.3% COMMERCIAL BANKS -- 0.2% - -------------------------------------------------------------------------------- 68,000 MB Financial Capital Trust I, 8.60%, 9/30/32 1,871,700 - -------------------------------------------------------------------------------- 18,500 Sterling Bancshares Capital Trust III, 8.30%, 9/26/32 492,100 - -------------------------------------------------------------------------------- 2,363,800 - --------------------------------------------------------------------------------- REAL ESTATE -- 0.1% - -------------------------------------------------------------------------------- 23,000 Hospitality Properties, Series B, 8.875%, 12/10/07 627,900 - -------------------------------------------------------------------------------- 62,000 Mills Corp. (The), Series B, 9.00%, 10/9/07 1,685,160 - -------------------------------------------------------------------------------- 2,313,060 - --------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (Cost $4,287,500) 4,676,860 - --------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 22 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- CONVERTIBLE BONDS -- 0.2% HEALTH CARE PROVIDERS & SERVICES -- 0.2% - -------------------------------------------------------------------------------- $4,194,000 LifePoint Hospitals Holdings Inc., 4.50%, 6/1/09 (Cost $4,097,432) $ 4,173,029 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 4.6% Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 5.25%, 11/15/28, valued at $87,188,978), in a joint trading account at 1.68%, dated 9/30/04, due 10/1/04 (Delivery value $85,503,990) (Cost $85,500,000) 85,500,000 - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 99.3% (Cost $1,620,453,674) $1,849,419,608 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- 0.7% 13,282,897 - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $1,862,702,505 ================================================================================ NOTES TO SCHEDULE OF INVESTMENTS (1) Non-income producing. See Notes to Financial Statements. - ------ 23 Shareholder Fee Example (Unaudited) SHAREHOLDER FEE EXAMPLE Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2004 to September 30, 2004. ACTUAL EXPENSES The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If you hold Investor Class shares of any American Century fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century account (i.e., not a financial intermediary or retirement plan account), American Century may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered under your Social Security number. PERSONAL ACCOUNTS include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund's share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. (continued) - ------ 24 Shareholder Fee Example (Unaudited) Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. EXPENSES PAID BEGINNING ENDING DURING PERIOD* ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 4/1/04 - EXPENSE 4/1/04 9/30/04 9/30/04 RATIO* - ------------------------------------------------------------------------------------------------------------- EQUITY INCOME SHAREHOLDER FEE EXAMPLE - ------------------------------------------------------------------------------------------------------------- ACTUAL - ------------------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,037.90 $5.06 0.99% - ------------------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,038.90 $4.04 0.79% - ------------------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,037.90 $6.33 1.24% - ------------------------------------------------------------------------------------------------------------- C Class $1,000 $1,032.70 $10.14 1.99% - ------------------------------------------------------------------------------------------------------------- R Class $1,000 $1,034.10 $7.60 1.49% - ------------------------------------------------------------------------------------------------------------- HYPOTHETICAL - -------------------------------------------------------------- Investor Class $1,000 $1,020.10 $5.01 0.99% - ------------------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,021.11 $4.00 0.79% - ------------------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,018.85 $6.28 1.24% - ------------------------------------------------------------------------------------------------------------- C Class $1,000 $1,015.09 $10.05 1.99% - ------------------------------------------------------------------------------------------------------------- R Class $1,000 $1,017.60 $7.54 1.49% - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- MID CAP VALUE SHAREHOLDER FEE EXAMPLE - ------------------------------------------------------------------------------------------------------------- ACTUAL - ------------------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,025.90 $5.08 1.00% - ------------------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,019.00 $4.05 0.80% - ------------------------------------------------------------------------------------------------------------- HYPOTHETICAL - ------------------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,020.05 $5.06 1.00% - ------------------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,021.06 $4.05 0.80% - ------------------------------------------------------------------------------------------------------------- *Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365 to reflect the one-half year period. (continued) - ------ 25 Shareholder Fee Example (Unaudited) EXPENSES PAID BEGINNING ENDING DURING PERIOD* ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 4/1/04 - EXPENSE 4/1/04 9/30/04 9/30/04 RATIO* - ------------------------------------------------------------------------------------------------------------- SMALL CAP VALUE SHAREHOLDER FEE EXAMPLE - ------------------------------------------------------------------------------------------------------------- ACTUAL - ------------------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,023.30 $6.34 1.25% - ------------------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,024.80 $5.33 1.05% - ------------------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,022.70 $7.61 1.50% - ------------------------------------------------------------------------------------------------------------- C Class $1,000 $1,017.80 $11.38 2.25% - ------------------------------------------------------------------------------------------------------------- HYPOTHETICAL - ------------------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,018.80 $6.33 1.25% - ------------------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,019.80 $5.32 1.05% - ------------------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,017.55 $7.59 1.50% - ------------------------------------------------------------------------------------------------------------- C Class $1,000 $1,013.79 $11.36 2.25% - ------------------------------------------------------------------------------------------------------------- *Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365 to reflect the one-half year period. - ------ 26 Statement of Assets and Liabilities SEPTEMBER 30, 2004 (UNAUDITED) - --------------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - --------------------------------------------------------------------------------------------------------- ASSETS - --------------------------------------------------------------------------------------------------------- Investment securities -- unaffiliated, at value (cost of $3,177,498,038, $26,438,147 and $1,620,453,674, respectively) $3,432,106,378 $26,563,714 $1,849,419,608 - ------------------------------------------------ Investment securities -- affiliated, at value (cost of $10,959,776, $ - and $ -, respectively) 11,861,010 -- -- - --------------------------------------------------------------------------------------------------------- Total investment securities, at value (cost of $3,188,457,814, $26,438,147 and $1,620,453,674, respectively) 3,443,967,388 26,563,714 1,849,419,608 - ------------------------------------------------ Cash 27,923,070 37,706 7,242,659 - ------------------------------------------------ Receivable for investments sold 57,115,213 612,011 31,751,077 - ------------------------------------------------ Receivable for capital shares sold 3,221,314 -- 32,034 - ------------------------------------------------ Dividends and interest receivable 8,169,719 30,665 1,618,199 - --------------------------------------------------------------------------------------------------------- 3,540,396,704 27,244,096 1,890,063,577 - --------------------------------------------------------------------------------------------------------- LIABILITIES - --------------------------------------------------------------------------------------------------------- Payable for investments purchased 51,172,618 547,610 25,409,636 - ------------------------------------------------ Payable for forward foreign currency exchange contracts 1,588,329 7,307 -- - ------------------------------------------------ Payable for capital shares redeemed 23,287 -- -- - ------------------------------------------------ Payable for variation margin on futures contracts 72,552 -- -- - ------------------------------------------------ Accrued management fees 2,605,113 20,010 1,740,574 - ------------------------------------------------ Distribution fees payable 150,954 -- 106,179 - ------------------------------------------------ Service fees (and distribution fees R Class) payable 129,684 -- 104,683 - --------------------------------------------------------------------------------------------------------- 55,742,537 574,927 27,361,072 - --------------------------------------------------------------------------------------------------------- NET ASSETS $3,484,654,167 $26,669,169 $1,862,702,505 ========================================================================================================= See Notes to Financial Statements. (continued) - ------ 27 Statement of Assets and Liabilities SEPTEMBER 30, 2004 (UNAUDITED) - --------------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - --------------------------------------------------------------------------------------------------------- NET ASSETS CONSIST OF: - --------------------------------------------------------------------------------------------------------- Capital (par value and paid-in surplus) $3,064,771,094 $26,063,175 $1,499,598,463 - ------------------------------------------ Undistributed net investment income 3,106,867 9,825 1,222,309 - ------------------------------------------ Undistributed net realized gain on investment and foreign currency transactions 163,200,501 477,910 132,915,799 - ------------------------------------------ Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 253,575,705 118,259 228,965,934 - --------------------------------------------------------------------------------------------------------- $3,484,654,167 $26,669,169 $1,862,702,505 ========================================================================================================= INVESTOR CLASS, $0.01 PAR VALUE - --------------------------------------------------------------------------------------------------------- Net assets $2,621,503,080 $19,584,507 $1,129,170,620 - ------------------------------------------ Shares outstanding 326,673,622 1,912,568 113,667,314 - ------------------------------------------ Net asset value per share $8.02 $10.24 $9.93 - --------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - --------------------------------------------------------------------------------------------------------- Net assets $189,858,119 $7,084,662 $214,007,063 - ------------------------------------------ Shares outstanding 23,654,223 691,806 21,511,932 - ------------------------------------------ Net asset value per share $8.03 $10.24 $9.95 - --------------------------------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - --------------------------------------------------------------------------------------------------------- Net assets $620,790,932 N/A $515,846,814 - ------------------------------------------ Shares outstanding 77,352,759 N/A 51,948,590 - ------------------------------------------ Net asset value per share $8.03 N/A $9.93 - --------------------------------------------------------------------------------------------------------- C CLASS, $0.01 PAR VALUE - --------------------------------------------------------------------------------------------------------- Net assets $50,919,792 N/A $3,678,008 - ------------------------------------------ Shares outstanding 6,343,354 N/A 377,511 - ------------------------------------------ Net asset value per share $8.03 N/A $9.74 - --------------------------------------------------------------------------------------------------------- R CLASS, $0.01 PAR VALUE - --------------------------------------------------------------------------------------------------------- Net assets $1,582,244 N/A N/A - ------------------------------------------ Shares outstanding 197,557 N/A N/A - ------------------------------------------ Net asset value per share $8.01 N/A N/A - --------------------------------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 28 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED) - --------------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - --------------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: - --------------------------------------------- Dividends (including $279,260, $ - and $ -, from affiliates respectively, and net of foreign taxes withheld of $775,488, $2,236 and $ -, respectively) $ 50,430,485 $186,813 $12,927,476 - --------------------------------------------- Interest 6,507,031 4,629 586,007 - --------------------------------------------------------------------------------------------------------- 56,937,516 191,442 13,513,483 - --------------------------------------------------------------------------------------------------------- EXPENSES: - --------------------------------------------- Management fees 14,820,359 91,810 10,157,476 - --------------------------------------------- Distribution fees: - --------------------------------------------- Advisor Class 649,666 -- 597,333 - --------------------------------------------- C Class 174,626 -- 13,645 - --------------------------------------------- Service fees: - --------------------------------------------- Advisor Class 649,666 -- 597,333 - --------------------------------------------- C Class 58,209 -- 4,548 - --------------------------------------------- Service and distribution fees - R Class 1,803 -- -- - --------------------------------------------- Directors' fees and expenses 32,474 121 20,603 - --------------------------------------------- Other expenses 7,020 23 5,659 - --------------------------------------------------------------------------------------------------------- 16,393,823 91,954 11,396,597 - --------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 40,543,693 99,488 2,116,886 - --------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: - --------------------------------------------- Investment transactions (including $10,415, $ - and $ - from affiliates, respectively) 119,014,410 494,788 89,700,366 - --------------------------------------------- Foreign currency transactions (3,871,477) (16,878) -- - --------------------------------------------------------------------------------------------------------- 115,142,933 477,910 89,700,366 - --------------------------------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION ON: - --------------------------------------------- Investments (39,309,124) 121,800 (50,886,621) - --------------------------------------------- Translation of assets and liabilities in foreign currencies 1,082,357 (7,307) -- - --------------------------------------------------------------------------------------------------------- (38,226,767) 114,493 (50,886,621) - --------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN 76,916,166 592,403 38,813,745 - --------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $117,459,859 $691,891 $40,930,631 ======================================================================================================== See Notes to Financial Statements. - ------ 29 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED) AND YEAR ENDED MARCH 31, 2004 (EXCEPT AS NOTED) - --------------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE - --------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS SEPT. 30, 2004 MARCH 31, 2004 SEPT. 30, 2004 MARCH 31, 2004(1) - --------------------------------------------------------------------------------------------------------- OPERATIONS - --------------------------------------------------------------------------------------------------------- Net investment income $ 40,543,693 $ 66,522,502 $ 99,488 $ -- - ------------------------------ Net realized gain 115,142,933 178,255,345 477,910 -- - ------------------------------ Change in net unrealized appreciation (38,226,767) 319,626,488 114,493 3,766 - --------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 117,459,859 564,404,335 691,891 3,766 - --------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - --------------------------------------------------------------------------------------------------------- From net investment income: - ------------------------------ Investor Class (35,576,610) (49,739,501) (75,507) -- - ------------------------------ Institutional Class (2,794,786) (3,881,824) (14,156) -- - ------------------------------ Advisor Class (7,023,819) (8,244,304) -- -- - ------------------------------ C Class (451,128) (476,461) -- -- - ------------------------------ R Class (10,996) (1,670) -- -- - ------------------------------ From net realized gains: - ------------------------------ Investor Class -- (29,995,592) -- -- - ------------------------------ Institutional Class -- (2,250,432) -- -- - ------------------------------ Advisor Class -- (5,738,165) -- -- - ------------------------------ C Class -- (477,245) -- -- - ------------------------------ R Class -- (40) -- -- - --------------------------------------------------------------------------------------------------------- Decrease in net assets from distributions (45,857,339) (100,805,234) (89,663) -- - --------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - --------------------------------------------------------------------------------------------------------- Net increase in net assets from capital share transactions 481,232,438 943,740,565 24,448,106 1,615,069 - --------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS 552,834,958 1,407,339,666 25,050,334 1,618,835 - --------------------------------------------------------------------------------------------------------- NET ASSETS - --------------------------------------------------------------------------------------------------------- Beginning of period 2,931,819,209 1,524,479,543 1,618,835 -- - --------------------------------------------------------------------------------------------------------- End of period $3,484,654,167 $2,931,819,209 $26,669,169 $1,618,835 ========================================================================================================= Undistributed net investment income $3,106,867 $8,420,513 $9,825 $-- ========================================================================================================= (1) March 31, 2004 was the inception date for Mid Cap Value. See Notes to Financial Statements. (continued) - ------ 30 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED) AND YEAR ENDED MARCH 31, 2004 - -------------------------------------------------------------------------------- SMALL CAP VALUE - -------------------------------------------------------------------------------- INCREASE IN NET ASSETS SEPT. 30, 2004 MARCH 31, 2004 - -------------------------------------------------------------------------------- OPERATIONS - -------------------------------------------------------------------------------- Net investment income $ 2,116,886 $ 7,305,287 - ---------------------------------------------- Net realized gain 89,700,366 158,244,596 - ---------------------------------------------- Change in net unrealized appreciation (50,886,621) 338,540,071 - -------------------------------------------------------------------------------- Net increase in net assets resulting from operations 40,930,631 504,089,954 - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - -------------------------------------------------------------------------------- From net investment income: - ----------------------------------------------- Investor Class (710,489) (4,736,989) - ----------------------------------------------- Institutional Class (214,641) (974,045) - ----------------------------------------------- Advisor Class (19,694) (863,071) - ------------------------------------------------------------------------------- Decrease in net assets from distributions (944,824) (6,574,105) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - -------------------------------------------------------------------------------- Net increase in net assets from capital share transactions 165,460,840 233,438,241 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS 205,446,647 730,954,090 - -------------------------------------------------------------------------------- NET ASSETS - -------------------------------------------------------------------------------- Beginning of period 1,657,255,858 926,301,768 - -------------------------------------------------------------------------------- End of period $1,862,702,505 $1,657,255,858 ================================================================================ Undistributed net investment income $1,222,309 $50,247 ================================================================================ See Notes to Financial Statements. - ------ 31 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Equity Income Fund (Equity Income), 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. Equity Income 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, the Institutional Class and the Advisor 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. Sale of Mid Cap Value's Investor Class commenced on March 31, 2004. Sale of Mid Cap Value's Institutional Class commenced on August 2, 2004. Sale of Mid Cap Value's Advisor Class had not commenced as of September 30, 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. If the investment manager, American Century Investment Management, Inc. (ACIM), determines that the current market price of a security owned by a non-money market fund is not readily available, the investment manager may determine its fair value in accordance with procedures adopted by the Board of Directors if such fair value determination would materially impact a fund's net asset value. Valuations may not be readily available if, for example: an event occurred after the close of the exchange on which a portfolio security principally trades (but before the close of the New York Stock Exchange) that was likely to have changed the value of the security; a security has been declared in default; trading in a security has been halted during the trading day; or the demand for the security (as reflected by its trading volume) is insufficient for quoted prices to be reliable. 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 and options contracts 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 pay (continued) - ------ 32 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ments (variation margin) are made or received daily, in cash, by the funds. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. The funds recognize a realized gain or loss when the contract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of realized gain (loss) on investment transactions and unrealized appreciation (depreciation) on investments, respectively. EQUITY-LINKED DEBT 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 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) - ------ 33 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee (the 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 and accrued daily based on the daily net assets of the specific class of shares of each fund and paid monthly in arrears. For funds with a stepped fee schedule, the rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account all of the investment manager's assets under management in the fund's investment strategy (strategy assets) to calculate the appropriate fee rate for the fund. The strategy assets include the fund's assets and the assets of other clients of the investment manager that are not in the American Century family of mutual funds but that have the same investment team and investment strategy. The annual management fee schedule for each class of Equity Income is as follows: INVESTOR, C & R INSTITUTIONAL ADVISOR CLASSES CLASS CLASS - -------------------------------------------------------------------------------- STRATEGY ASSETS - -------------------------------------------------------------------------------- First $2.5 billion 1.00% 0.80% 0.75% - -------------------------------------------------------------------------------- Next $2.5 billion 0.95% 0.75% 0.70% - -------------------------------------------------------------------------------- Next $5 billion 0.90% 0.70% 0.65% - -------------------------------------------------------------------------------- Next $5 billion 0.85% 0.65% 0.60% - -------------------------------------------------------------------------------- Over $15 billion 0.80% 0.60% 0.55% - -------------------------------------------------------------------------------- The annual management fee schedule for each class of Mid Cap Value is 1.00%, 0.80% and 0.75% for the Investor, Institutional and the Advisor Classes, respectively. The annual management fee schedule for each class of Small Cap Value is as follows: INVESTOR & C INSTITUTIONAL ADVISOR CLASSES CLASS CLASS - -------------------------------------------------------------------------------- STRATEGY ASSETS - -------------------------------------------------------------------------------- First $2.5 billion 1.25% 1.05% 1.00% - -------------------------------------------------------------------------------- Next $2.5 billion 1.20% 1.00% 0.95% - -------------------------------------------------------------------------------- Over $5 billion 1.15% 0.95% 0.90% - -------------------------------------------------------------------------------- (continued) - ------ 34 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) The effective annual management fee for each class of the funds for the six months ended September 30, 2004 was as follows: - -------------------------------------------------------------------------------- EQUITY MID CAP SMALL CAP INCOME VALUE VALUE - -------------------------------------------------------------------------------- Investor 0.99% 1.00% 1.25% - -------------------------------------------------------------------------------- Institutional 0.79% 0.80% 1.05% - -------------------------------------------------------------------------------- Advisor 0.74% N/A 1.00% - -------------------------------------------------------------------------------- C 0.99% N/A 1.25% - -------------------------------------------------------------------------------- R 0.99% 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 and accrued daily based on each class's daily net assets and paid monthly in arrears. The distribution fee provides compensation for expenses incurred in connection with distributing shares of the classes including, but not limited to, payments to brokers, dealers, and financial institutions that have entered into sales agreements with respect to shares of the funds. The service fee provides compensation for shareholder and administrative services rendered by ACIS, its affiliates or independent third party providers for Advisor Class shares and for individual shareholder services rendered by broker/dealers or other independent financial intermediaries for C Class and R Class shares. Fees incurred under the plans during the six months ended September 30, 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. During the six months ended September 30, 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 custodian of the fund and is a wholly owned subsidiary of JPM. 3. INVESTMENT TRANSACTIONS Investment transactions, excluding short-term investments, for the six months ended September 30, 2004, were as follows: - -------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - -------------------------------------------------------------------------------- Purchases $2,650,809,294 $39,351,312 $1,090,437,088 - -------------------------------------------------------------------------------- Proceeds from sales $2,366,874,868 $15,116,092 $ 958,570,349 - -------------------------------------------------------------------------------- (continued) - ------ 35 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 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 - ---------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 850,000,000 50,000,000 400,000,000 ====================================================================================================================== Sold 64,028,844 $ 507,707,120 2,576,264 $25,783,493 19,832,725 $192,857,074 - ----------------------------- Issued in reinvestment of distributions 4,073,736 32,402,698 7,281 73,928 69,923 681,328 - ----------------------------- Redeemed (28,018,605) (221,239,348) (832,484) (8,382,195) (14,392,361) (138,938,272) - ---------------------------------------------------------------------------------------------------------------------- Net increase 40,083,975 $ 318,870,470 1,751,061 $17,475,226 5,510,287 $ 54,600,130 ====================================================================================================================== 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 ====================================================================================================================== INSTITUTIONAL CLASS - ---------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004(2) SHARES AUTHORIZED 75,000,000 50,000,000 60,000,000 ====================================================================================================================== Sold 4,105,289 $ 32,512,309 690,428 $6,958,724 5,813,468 $56,369,783 - ----------------------------- Issued in reinvestment of distributions 290,552 2,311,381 1,378 14,156 18,816 184,092 - ----------------------------- Redeemed (4,107,604) (32,442,403) -- -- (1,887,604) (18,322,609) - ---------------------------------------------------------------------------------------------------------------------- Net increase 288,237 $ 2,381,287 691,806 $6,972,880 3,944,680 $38,231,266 ====================================================================================================================== 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 ====================================================================================================================== (1) March 31, 2004 was the inception date for Mid Cap Value. (2) August 2, 2004 (commencement of sales) through September 30, 2004 for Mid Cap Value. (continued) - ------ 36 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 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 - ---------------------------------------------------------------------------------------------------------------------- ADVISOR CLASS - ---------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 200,000,000 50,000,000 150,000,000 ====================================================================================================================== Sold 25,631,951 $203,515,128 -- -- 13,238,448 $128,666,584 - ----------------------------- Issued in reinvestment of distributions 811,979 6,457,625 -- -- 1,846 18,015 - ----------------------------- Redeemed (7,390,979) (58,425,311) -- -- (5,786,091) (55,955,838) - ---------------------------------------------------------------------------------------------------------------------- Net increase 19,052,951 $151,547,442 -- -- 7,454,203 $ 72,728,761 ====================================================================================================================== 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 ====================================================================================================================== C CLASS - ---------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 20,000,000 N/A 10,000,000 ====================================================================================================================== Sold 1,292,443 $10,222,486 -- $ -- - ----------------------------- Issued in reinvestment of distributions 48,892 388,407 -- -- - ----------------------------- Redeemed (424,105) (3,350,330) (10,340) (99,317) - ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) 917,230 $ 7,260,563 (10,340) $(99,317) ====================================================================================================================== 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) ====================================================================================================================== R CLASS - ------------------------------------------------------------------ SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 10,000,000 N/A N/A ====================================================================================================================== Sold 157,519 $1,251,785 - ----------------------------- Issued in reinvestment of distributions 1,285 10,274 - ----------------------------- Redeemed (11,250) (89,383) - ---------------------------------------------------------------------------------------------------------------------- Net increase 147,554 $1,172,676 ====================================================================================================================== 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 September 30, 2003 for Equity Income. (continued) - ------ 37 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 5. AFFILIATED COMPANY TRANSACTIONS If a fund's holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2004 follows: SHARE BALANCE PURCHASE SALES ISSUER 3/31/04 COST COST - ------------------------------------------------------------------------------ EQUITY INCOME - ------------------------------------------------------------------------------ Cascade Natural Gas Corp. 492,691 $3,477,064 $2,125,576 ============================================================================== REALIZED DIVIDEND SEPTEMBER 30, 2004 ISSUER GAIN INCOME SHARE BALANCE MARKET VALUE - ------------------------------------------------------------------------------ EQUITY INCOME - ------------------------------------------------------------------------------ Cascade Natural Gas Corp. $10,415 $279,260 558,691 $11,861,010 ============================================================================== 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. 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 six months ended September 30, 2004. 7. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. As of September 30, 2004, the components of investments for federal income tax purposes were as follows: EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - -------------------------------------------------------------------------------- Federal tax cost of investments $3,215,782,832 $26,438,147 $1,647,084,314 ================================================================================ Gross tax appreciation of investments $264,824,158 $762,094 $239,499,148 - ---------------------- Gross tax depreciation of investments (36,639,602) (636,527) (37,163,854) - -------------------------------------------------------------------------------- Net tax appreciation of investments $228,184,556 $125,567 $202,335,294 ================================================================================ 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. - ------ 38 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - --------------------------------------------------------------------------------------------------------------------- INVESTOR CLASS - --------------------------------------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $7.84 $6.22 $7.36 $6.47 $5.50 $5.95 - --------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Income(2) 0.10 0.22 0.17 0.17 0.18 0.21 - ----------------------------- Net Realized and Unrealized Gain (Loss) 0.20 1.71 (1.05) 0.93 0.96 0.03 - --------------------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.30 1.93 (0.88) 1.10 1.14 0.24 - --------------------------------------------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income (0.12) (0.19) (0.16) (0.17) (0.17) (0.21) - ----------------------------- From Net Realized Gains -- (0.12) (0.10) (0.04) -- (0.48) - --------------------------------------------------------------------------------------------------------------------- Total Distributions (0.12) (0.31) (0.26) (0.21) (0.17) (0.69) - --------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.02 $7.84 $6.22 $7.36 $6.47 $5.50 ===================================================================================================================== TOTAL RETURN(3) 3.79% 31.30% (12.09)% 17.35% 20.85% 3.88% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.99%(4) 1.00% 1.00% 1.00% 1.00% 1.00% - ----------------------------- Ratio of Net Investment Income to Average Net Assets 2.62%(4) 2.95% 2.60% 2.49% 3.02% 3.41% - ----------------------------- Portfolio Turnover Rate 77% 91% 120% 139% 169% 141% - ----------------------------- Net Assets, End of Period (in thousands) $2,621,503 $2,248,158 $1,277,478 $1,025,143 $467,425 $282,692 - --------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 39 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - --------------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - --------------------------------------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $7.85 $6.23 $7.36 $6.47 $5.50 $5.95 - --------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Income(2) 0.11 0.24 0.19 0.19 0.20 0.22 - ----------------------------- Net Realized and Unrealized Gain (Loss) 0.19 1.71 (1.04) 0.92 0.95 0.03 - --------------------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.30 1.95 (0.85) 1.11 1.15 0.25 - --------------------------------------------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income (0.12) (0.21) (0.18) (0.18) (0.18) (0.22) - ----------------------------- From Net Realized Gains -- (0.12) (0.10) (0.04) -- (0.48) - --------------------------------------------------------------------------------------------------------------------- Total Distributions (0.12) (0.33) (0.28) (0.22) (0.18) (0.70) - --------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.03 $7.85 $6.23 $7.36 $6.47 $5.50 ===================================================================================================================== TOTAL RETURN(3) 3.89% 31.51% (11.77)% 17.40% 21.26% 4.09% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.79%(4) 0.80% 0.80% 0.80% 0.80% 0.80% - ----------------------------- Ratio of Net Investment Income to Average Net Assets 2.82%(4) 3.15% 2.80% 2.69% 3.22% 3.61% - ----------------------------- Portfolio Turnover Rate 77% 91% 120% 139% 169% 141% - ----------------------------- Net Assets, End of Period (in thousands) $189,858 $183,330 $77,837 $65,738 $19,130 $13,716 - --------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 40 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - --------------------------------------------------------------------------------------------------------------------- ADVISOR CLASS - --------------------------------------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $7.84 $6.22 $7.36 $6.47 $5.50 $5.95 - --------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Income(2) 0.09 0.20 0.16 0.16 0.17 0.20 - ----------------------------- Net Realized and Unrealized Gain (Loss) 0.21 1.72 (1.05) 0.92 0.96 0.02 - --------------------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.30 1.92 (0.89) 1.08 1.13 0.22 - --------------------------------------------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income (0.11) (0.18) (0.15) (0.15) (0.16) (0.19) - ----------------------------- From Net Realized Gains -- (0.12) (0.10) (0.04) -- (0.48) - --------------------------------------------------------------------------------------------------------------------- Total Distributions (0.11) (0.30) (0.25) (0.19) (0.16) (0.67) - --------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.03 $7.84 $6.22 $7.36 $6.47 $5.50 ===================================================================================================================== TOTAL RETURN(3) 3.79% 30.97% (12.30)% 17.05% 20.55% 3.61% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.24%(4) 2.50% 1.25% 1.25% 1.25% 1.25% - ----------------------------- Ratio of Net Investment Income to Average Net Assets 2.37%(4) 5.41% 2.35% 2.24% 2.77% 3.16% - ----------------------------- Portfolio Turnover Rate 77% 91% 120% 139% 169% 141% - ----------------------------- Net Assets, End of Period (in thousands) $620,791 $457,360 $156,911 $74,868 $27,887 $20,281 - --------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 41 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ----------------------------------------------------------------------------------------- C CLASS - ----------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002(2) - ----------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $7.85 $6.21 $7.36 $6.89 - ----------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Income(3) 0.06 0.15 0.11 0.07 - ----------------------------- Net Realized and Unrealized Gain (Loss) 0.20 1.73 (1.06) 0.50 - ----------------------------------------------------------------------------------------- Total From Investment Operations 0.26 1.88 (0.95) 0.57 - ----------------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income (0.08) (0.12) (0.10) (0.06) - ----------------------------- From Net Realized Gains -- (0.12) (0.10) (0.04) - ----------------------------------------------------------------------------------------- Total Distributions (0.08) (0.24) (0.20) (0.10) - ----------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.03 $7.85 $6.21 $7.36 ========================================================================================= TOTAL RETURN(4) 3.27% 30.37% (13.08)% 8.45% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.99%(5) 4.00% 2.00% 2.00%(5) - ----------------------------- Ratio of Net Investment Income to Average Net Assets 1.62%(5) 3.91% 1.60% 1.36%(5) - ----------------------------- Portfolio Turnover Rate 77% 91% 120% 139%(6) - ----------------------------- Net Assets, End of Period (in thousands) $50,920 $42,579 $12,254 $3,960 - ----------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) July 13, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and 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. - ------ 42 Equity Income - Financial Highlights For a Share Outstanding Throughout the Periods Indicated - ------------------------------------------------------------------------------- R CLASS - ------------------------------------------------------------------------------- 2004(1) 2004(2) - ------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $7.84 $7.22 - ------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Income(3) 0.08 0.11 - ----------------------------- Net Realized and Unrealized Gain 0.19 0.76 - ------------------------------------------------------------------------------- Total From Investment Operations 0.27 0.87 - ------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income (0.10) (0.13) - ----------------------------- From Net Realized Gains -- (0.12) - ------------------------------------------------------------------------------- Total Distributions (0.10) (0.25) - ------------------------------------------------------------------------------- Net Asset Value, End of Period $8.01 $7.84 =============================================================================== TOTAL RETURN(4) 3.41% 12.19% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.49%(5) 1.50%(5) - ----------------------------- Ratio of Net Investment Income to Average Net Assets 2.12%(5) 2.44%(5) - ----------------------------- Portfolio Turnover Rate 77% 91%(6) - ----------------------------- Net Assets, End of Period (in thousands) $1,582 $392 - ------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) August 29, 2003 (commencement of sale) through March 31, 2004. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2004. See Notes to Financial Statements. - ------ 43 Mid Cap Value - Financial Highlights For a Share Outstanding Throughout the Periods Indicated - ------------------------------------------------------------------------------- INVESTOR CLASS - ------------------------------------------------------------------------------- 2004(1) 2004(2) - ------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $10.02 $10.00 - ------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Income(3) 0.05 --(4) - ----------------------------- Net Realized and Unrealized Gain 0.21 0.02 - ------------------------------------------------------------------------------- Total From Investment Operations 0.26 0.02 - ------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income (0.04) -- - ------------------------------------------------------------------------------- Net Asset Value, End of Period $10.24 $10.02 =============================================================================== TOTAL RETURN(5) 2.59% 0.20% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.00%(6) 1.00%(6) - ----------------------------- Ratio of Net Investment Income to Average Net Assets 1.03%(6) 0.00%(6) - ----------------------------- Portfolio Turnover Rate 83% 0% - ----------------------------- Net Assets, End of Period (in thousands) $19,585 $1,619 - ------------------------------------------------------------------------------- (1) For the six months ended September 30, 2004 (unaudited). (2) For the one day period ended March 31, 2004 (inception date). (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. See Notes to Financial Statements. - ------ 44 Mid Cap Value - Financial Highlights For a Share Outstanding Throughout the Period Indicated - ------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ------------------------------------------------------------------------------- 2004(1) - ------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $10.02 - ------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Income(2) 0.02 - ----------------------------- Net Realized and Unrealized Gain 0.22 - ------------------------------------------------------------------------------- Total From Investment Operations 0.24 - ------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income (0.02) - ------------------------------------------------------------------------------- Net Asset Value, End of Period $10.24 =============================================================================== TOTAL RETURN(3) 1.90% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.80%(4) - ----------------------------- Ratio of Net Investment Income to Average Net Assets 1.23%(4) - ----------------------------- Portfolio Turnover Rate 83%(5) - ----------------------------- Net Assets, End of Period (in thousands) $7,085 - ------------------------------------------------------------------------------- (1) August 2, 2004 (commencement of sale) through September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended September 30, 2004. See Notes to Financial Statements. - ------ 45 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - --------------------------------------------------------------------------------------------------------------------- INVESTOR CLASS - --------------------------------------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $9.71 $6.44 $8.62 $6.60 $5.04 $4.73 - --------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Income(2) 0.01 0.05 0.03 0.02 0.07 0.05 - ----------------------------- Net Realized and Unrealized Gain (Loss) 0.22 3.26 (1.87) 2.20 1.74 0.60 - --------------------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.23 3.31 (1.84) 2.22 1.81 0.65 - --------------------------------------------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income (0.01) (0.04) (0.02) (0.02) (0.05) (0.06) - ----------------------------- From Net Realized Gains -- -- (0.32) (0.18) (0.20) (0.28) - --------------------------------------------------------------------------------------------------------------------- Total Distributions (0.01) (0.04) (0.34) (0.20) (0.25) (0.34) - --------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $9.93 $9.71 $6.44 $8.62 $6.60 $5.04 ===================================================================================================================== TOTAL RETURN(3) 2.33% 51.53% (21.55)% 33.97% 36.51% 14.37% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.25%(4) 1.26% 1.25% 1.25% 1.25% 1.25% - ----------------------------- Ratio of Net Investment Income to Average Net Assets 0.29%(4) 0.59% 0.37% 0.27% 1.10% 1.04% - ----------------------------- Portfolio Turnover Rate 57% 110% 104% 73% 144% 178% - ----------------------------- Net Assets, End of Period (in thousands) $1,129,171 $1,050,500 $670,755 $1,305,952 $225,517 $17,690 - --------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 46 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - --------------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - --------------------------------------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $9.72 $6.45 $8.63 $6.61 $5.04 $4.74 - --------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Income(2) 0.02 0.07 0.04 0.03 0.07 0.07 - ----------------------------- Net Realized and Unrealized Gain (Loss) 0.22 3.26 (1.87) 2.20 1.76 0.58 - --------------------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.24 3.33 (1.83) 2.23 1.83 0.65 - --------------------------------------------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income (0.01) (0.06) (0.03) (0.03) (0.06) (0.07) - ----------------------------- From Net Realized Gains -- -- (0.32) (0.18) (0.20) (0.28) - --------------------------------------------------------------------------------------------------------------------- Total Distributions (0.01) (0.06) (0.35) (0.21) (0.26) (0.35) - --------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $9.95 $9.72 $6.45 $8.63 $6.61 $5.04 ===================================================================================================================== TOTAL RETURN(3) 2.48% 51.75% (21.38)% 34.11% 36.99% 14.39% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.05%(4) 1.06% 1.05% 1.05% 1.05% 1.05% - ----------------------------- Ratio of Net Investment Income to Average Net Assets 0.49%(4) 0.79% 0.57% 0.47% 1.30% 1.24% - ----------------------------- Portfolio Turnover Rate 57% 110% 104% 73% 144% 178% - ----------------------------- Net Assets, End of Period (in thousands) $214,007 $170,784 $79,546 $83,712 $8,593 $2,359 - --------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 47 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - --------------------------------------------------------------------------------------------------------------------- ADVISOR CLASS - --------------------------------------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000(2) - --------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $9.71 $6.43 $8.62 $6.60 $5.04 $4.73 - --------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Income(3) -- 0.03 0.01 --(4) 0.05 0.03 - ----------------------------- Net Realized and Unrealized Gain (Loss) 0.22 3.27 (1.87) 2.21 1.75 0.29 - --------------------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.22 3.30 (1.86) 2.21 1.80 0.32 - --------------------------------------------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income --(4) (0.02) (0.01) (0.01) (0.04) (0.01) - ----------------------------- From Net Realized Gains -- -- (0.32) (0.18) (0.20) -- - --------------------------------------------------------------------------------------------------------------------- Total Distributions --(4) (0.02) (0.33) (0.19) (0.24) (0.01) - --------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $9.93 $9.71 $6.43 $8.62 $6.60 $5.04 ===================================================================================================================== TOTAL RETURN(5) 2.27% 51.38% (21.85)% 33.74% 36.18% 6.86% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.50%(6) 1.51% 1.50% 1.50% 1.50% 1.50%(6) - ----------------------------- Ratio of Net Investment Income to Average Net Assets 0.04%(6) 0.34% 0.12% 0.02% 0.85% 2.21%(6) - ----------------------------- Portfolio Turnover Rate 57% 110% 104% 73% 144% 178%(7) - ----------------------------- Net Assets, End of Period (in thousands) $515,847 $432,261 $173,064 $182,986 $20,600 $91 - --------------------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) December 31, 1999 (commencement of sale) through March 31, 2000. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount is less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2000. See Notes to Financial Statements. - ------ 48 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ----------------------------------------------------------------------------------------- C CLASS - ----------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002(2) - ----------------------------------------------------------------------------------------- PER-SHARE DATA Net Asset Value, Beginning of Period $9.57 $6.35 $8.59 $7.57 - ----------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Loss(3) (0.03) (0.03) (0.04) (0.05) - ----------------------------- Net Realized and Unrealized Gain (Loss) 0.20 3.25 (1.88) 1.23 - ----------------------------------------------------------------------------------------- Total From Investment Operations 0.17 3.22 (1.92) 1.18 - ----------------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income -- -- -- --(4) - ----------------------------- From Net Realized Gains -- -- (0.32) (0.16) - ----------------------------------------------------------------------------------------- Total Distributions -- -- (0.32) (0.16) - ----------------------------------------------------------------------------------------- Net Asset Value, End of Period $9.74 $9.57 $6.35 $8.59 ========================================================================================= TOTAL RETURN(5) 1.78% 50.71% (22.58)% 15.80% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 2.25%(6) 2.26% 2.25% 2.25%(6) - ----------------------------- Ratio of Net Investment Loss to Average Net Assets (0.71)%(6) (0.41)% (0.63)% (0.78)%(6) - ----------------------------- Portfolio Turnover Rate 57% 110% 104% 73%(7) - ----------------------------- Net Assets, End of Period (in thousands) $3,678 $3,711 $2,936 $3,997 - ----------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) June 1, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and 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. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 49 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. Three classes of shares are authorized for sale by Mid Cap Value: Investor Class, Institutional Class and Advisor Class. Advisor Class had not commenced sale as of September 30, 2004. Four classes of shares are authorized for sale by Small Cap Value: Investor Class, Institutional Class, Advisor Class, and C Class. The total expense ratios 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 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. 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. - ------ 50 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' investment 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. Information regarding how the investment manager voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov. (continued) - ------ 51 Additional Information QUARTERLY PORTFOLIO DISCLOSURE The funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q for periods ending on or after July 9, 2004. The funds' Form N-Q is available on the SEC's Web site at sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The funds also makes their complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its Web site at americancentury.com and, upon request, by calling 1-800-345-2021. - ------ 52 Index Definitions The following indices are used to illustrate investment market, sector, or style performance or to serve as fund performance comparisons. They are not investment products available for purchase. The LIPPER EQUITY INCOME INDEX is an equally-weighted index of, typically, the 30 largest equity income mutual funds that purchase securities of companies of all market capitalizations. The S&P 500 INDEX is a market value-weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. The RUSSELL 3000(reg.tm) INDEX measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. As of the latest reconstitution, the average market capitalization was approximately $4 billion; the median market capitalization was approximately $700 million. The index had a total market capitalization range of approximately $309 billion to $128 million. The RUSSELL 3000(reg.tm) VALUE INDEX measures the performance of those Russell 3000 Index companies (the 3,000 largest U.S. companies based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values. 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 RUSSELL MIDCAP VALUE INDEX measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. 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. - ------ 53 Notes - ------ 54 Notes - ------ 55 Notes - ------ 56 [inside back cover - blank page] 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. American Century Investments PRSRT STD P.O. Box 419200 U.S. POSTAGE PAID Kansas City, MO 64141-6200 AMERICAN CENTURY COMPANIES The American Century Investments logo, American Century and American Century Investments are service marks of American Century Services Corporation. 0411 American Century Investment Services, Inc. SH-SAN-40409S (c)2004 American Century Services Corporation
[front cover] SEPTEMBER 30, 2004 American Century Investments Semiannual Report [graphic of market line chart] [graphic of starfish] [graphic of side-by-side steel bridges] Value Fund Large Company Value Fund [american century investments 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 Shareholder Fee Example.................................................. 16 FINANCIAL STATEMENTS Statement of Assets and Liabilities...................................... 19 Statement of Operations.................................................. 21 Statement of Changes in Net Assets....................................... 22 Notes to Financial Statements............................................ 23 Financial Highlights..................................................... 31 OTHER INFORMATION Share Class Information.................................................. 44 Additional Information................................................... 46 Index Definitions........................................................ 47 The opinions expressed in each of the Portfolio Commentaries reflect those of the portfolio management team as of the date of the report, and do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] JAMES E. STOWERS III WITH JAMES E. STOWERS, JR. We are pleased to provide you with the semiannual report for the Value and Large Company Value funds for the six months ended September 30, 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. 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 annual report dated March 31, 2005, 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 SEPTEMBER 30, 2004 -------------------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 19.56% 9.25% 13.08% 12.45% 9/1/93 - -------------------------------------------------------------------------------- RUSSELL 3000 VALUE INDEX 20.89% 5.03% 12.50% 11.23%(1) -- - -------------------------------------------------------------------------------- S&P 500 INDEX 13.87% -1.31% 11.08% 10.23%(1) -- - -------------------------------------------------------------------------------- LIPPER MULTI-CAP VALUE INDEX 17.61% 5.90% 10.90% 10.19%(1) -- - -------------------------------------------------------------------------------- Institutional Class 19.77% 9.49% -- 8.18% 7/31/97 - -------------------------------------------------------------------------------- Advisor Class 19.27% 8.99% -- 10.34% 10/2/96 - -------------------------------------------------------------------------------- A Class 1/31/03 No sales charge* 19.41% -- -- 22.20% With sales charge* 12.51% -- -- 17.95% - -------------------------------------------------------------------------------- B Class 1/31/03 No sales charge* 18.74% -- -- 21.44% With sales charge* 14.74% -- -- 19.32% - -------------------------------------------------------------------------------- C Class 18.68% -- -- 5.46% 6/4/01 - -------------------------------------------------------------------------------- *Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a maximum 5.75% initial sales charge for equity funds and may be subject to a maximum CDSC of 1.00%. 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. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. 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. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. (continued) - ------ 2 Value - Performance GROWTH OF $10,000 OVER 10 YEARS $10,000 investment made September 30, 1994
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ONE-YEAR RETURNS OVER 10 YEARS Periods ended September 30 - ---------------------------------------------------------------------------------------------------- 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 - ---------------------------------------------------------------------------------------------------- Investor Class 23.88% 22.15% 37.80% -5.98% 12.04% 2.95% 12.36% -8.55% 23.02% 19.56% - ---------------------------------------------------------------------------------------------------- Russell 3000 Value Index 26.72% 17.48% 42.33% 1.96% 17.64% 9.35% -7.98% -15.89% 24.89% 20.89% - ---------------------------------------------------------------------------------------------------- S&P 500 Index 29.75% 20.33% 40.45% 9.05% 27.80% 13.28% -26.62% -20.49% 24.40% 13.87% - ---------------------------------------------------------------------------------------------------- Lipper Multi-Cap Value Index 23.51% 16.13% 37.54% -7.19% 15.36% 10.61% -6.04% -14.25% 27.08% 17.61% - ---------------------------------------------------------------------------------------------------- Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. - ------ 3 Value - Portfolio Commentary [photo of Michael Liss, Phil Davidson, and Scott Moore] PORTFOLIO MANAGERS ON THE VALUE INVESTMENT TEAM (LEFT TO RIGHT): MICHAEL LISS, PHIL DAVIDSON, AND SCOTT MOORE. Value gained 2.02%* for the six months ended September 30, 2004, outperforming the Lipper Multi-Cap Value Index, which was up 0.85%. The S&P 500 Index, representative of the broad market, was down 0.18% for the period. Value's long-term performance against its benchmark has been strong. From the fund's inception on September 1, 1993, Value has produced an average annualized total return of 12.45%, significantly ahead of the 10.19% figure posted by the Lipper Multi-Cap Value Index**. The S&P 500 Index has registered a 10.23% average annualized return during Value's lifetime**. CLIMATE OF UNCERTAINTY Common stock investors contended with a number of issues during the period. Chief among them were the continuing violence in Iraq, surging energy prices, three interest-rate increases by the Federal Reserve, and concerns about the slowing rate of growth of corporate earnings. In this climate of uncertainty, value stocks led their growth counterparts across the capitalization range, with both large and small value companies providing better returns. STRENGTH AMONG INDUSTRIALS Industrials proved to be Value's biggest contributor to absolute performance. Investments in aerospace and defense businesses were led by Raytheon Co. and Lockheed Martin Corp. Both reported strong defense system sales due to increased defense spending and the military activity in Iraq. Raytheon was further aided by operational improvements during the period. Electrical equipment makers Thomas & Betts Corp. and Emerson Electric Co. were also positive contributors. Thomas & Betts saw the positive effects of changes made in its structure, processes, and operations during the past few years while enjoying higher sales volumes. TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2004 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Union Pacific Corp. 3.6% 3.0% - -------------------------------------------------------------------------------- Kraft Foods Inc. 2.9% 2.1% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 2.8% 4.0% - -------------------------------------------------------------------------------- Martin Marietta Materials, Inc. 2.8% 2.3% - -------------------------------------------------------------------------------- Marsh & McLennan Companies Inc. 2.6% 1.8% - -------------------------------------------------------------------------------- New York Times Co. (The) Cl A 2.5% 1.0% - -------------------------------------------------------------------------------- Republic Services, Inc. Cl A 2.4% -- - -------------------------------------------------------------------------------- Edwards (A.G.), Inc. 2.2% 1.7% - -------------------------------------------------------------------------------- Unilever N.V. New York Shares 2.2% 0.9% - -------------------------------------------------------------------------------- Royal Dutch Petroleum Co. New York Shares 2.2% 3.5% - -------------------------------------------------------------------------------- * All fund returns referenced in this commentary are for Investor Class shares. **From 8/31/1993, the date nearest the Investor Class's inception for which data are available. (continued) - ------ 4 Value - Portfolio Commentary Emerson also benefited from stronger demand and maintains a strong financial position. Lastly, our process led us to high-quality industrial supplier, W.W. Grainger Inc., which further added to performance. ENERGY A PLUS Value's investments in major oil and gas producers generated good results. Exxon Mobil Corp. and Royal Dutch Petroleum were both top contributors, as they benefited from rising demand for energy worldwide and concern that violence in Iraq could disrupt Middle Eastern oil shipments. SUCCESS WITH FINANCIALS Value's stake in financials, on average its largest sector exposure, also benefited the fund. Commercial banks were a strong source of performance, led by Bank of America, the nation's third-largest bank by assets. Bank of America strengthened its competitive position by acquiring FleetBoston Financial Corp. in April. Our investments in the insurance market also proved beneficial. Two important names were Genworth Financial Inc. (formerly part of GE Financial) and MetLife Inc. TECHNOLOGY HAMPERS RESULTS Technology holdings detracted the most from absolute performance during the period. Synopsys Inc., which provides software for semiconductor manufacturers, was the portfolio's largest detractor in absolute terms. Its shares declined after Synopsys announced that lower bookings would cause its fiscal year results to fall far short of expectations. Our second-largest detractor was electrical equipment maker AVX Corp. We continue to own both positions. CONSUMER DISCRETIONARY COMPANIES DETRACT In the consumer discretionary sector, Value was slowed by media companies. The fund's shares of The New York Times Co. fell during the period, reflecting a pull-back in movie, real estate, and technology advertising. The auto components industry also detracted, with both Superior Industries International Inc. and TRW Automotive Holdings Corp. losing ground. Looking ahead, we will continue to adhere to our discipline of buying fundamentally sound businesses that we believe have transitory issues affecting the price of their stock. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2004 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Insurance 9.7% 10.0% - -------------------------------------------------------------------------------- Commercial Banks 6.7% 7.9% - -------------------------------------------------------------------------------- Oil & Gas 6.0% 9.3% - -------------------------------------------------------------------------------- Food Products 6.0% 4.5% - -------------------------------------------------------------------------------- Media 5.9% 2.1% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Common Stocks 98.2% 98.7% - -------------------------------------------------------------------------------- Temporary Cash Investments 1.7% 1.3% - -------------------------------------------------------------------------------- Collateral Received for Securities Lending 0.5% 1.3% - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES 100.4% 101.3% - -------------------------------------------------------------------------------- Other Assets and Liabilities (0.4)% (1.3)% - -------------------------------------------------------------------------------- - ------ 5 Value - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 98.2% AEROSPACE & DEFENSE -- 1.0% - -------------------------------------------------------------------------------- 339,764 Honeywell International Inc. $ 12,183,937 - -------------------------------------------------------------------------------- 151,600 Northrop Grumman Corp. 8,084,828 - -------------------------------------------------------------------------------- 194,436 Raytheon Company 7,384,679 - -------------------------------------------------------------------------------- 27,653,444 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 1.4% - -------------------------------------------------------------------------------- 613,117 Superior Industries International, Inc.(1) 18,362,854 - -------------------------------------------------------------------------------- 1,099,415 TRW Automotive Holdings Corp.(2) 20,723,973 - -------------------------------------------------------------------------------- 39,086,827 - -------------------------------------------------------------------------------- BEVERAGES -- 2.7% - -------------------------------------------------------------------------------- 478,379 Anheuser-Busch Companies, Inc. 23,895,031 - -------------------------------------------------------------------------------- 259,200 Coca-Cola Company (The) 10,380,960 - -------------------------------------------------------------------------------- 1,149,800 Coca-Cola Enterprises 21,731,220 - -------------------------------------------------------------------------------- 379,800 PepsiCo, Inc. 18,477,270 - -------------------------------------------------------------------------------- 74,484,481 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 4.7% - -------------------------------------------------------------------------------- 1,756,961 Edwards (A.G.), Inc. 60,825,990 - -------------------------------------------------------------------------------- 752,200 Merrill Lynch & Co., Inc. 37,399,384 - -------------------------------------------------------------------------------- 578,731 Morgan Stanley 28,531,438 - -------------------------------------------------------------------------------- 126,756,812 - -------------------------------------------------------------------------------- CHEMICALS -- 1.7% - -------------------------------------------------------------------------------- 173,100 du Pont (E.I.) de Nemours & Co. 7,408,680 - -------------------------------------------------------------------------------- 171,799 Ecolab Inc. 5,401,361 - -------------------------------------------------------------------------------- 382,883 Minerals Technologies Inc. 22,536,493 - -------------------------------------------------------------------------------- 235,000 Rohm and Haas Co. 10,097,950 - -------------------------------------------------------------------------------- 45,444,484 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 6.7% - -------------------------------------------------------------------------------- 1,300,036 Bank of America Corp. 56,330,561 - -------------------------------------------------------------------------------- 364,164 BB&T Corporation 14,453,669 - -------------------------------------------------------------------------------- 193,058 Marshall & Ilsley Corp. 7,780,237 - -------------------------------------------------------------------------------- 1,076,696 SunTrust Banks, Inc. 75,810,166 - -------------------------------------------------------------------------------- 483,111 Zions Bancorporation 29,489,095 - -------------------------------------------------------------------------------- 183,863,728 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 3.8% - -------------------------------------------------------------------------------- 2,167,973 Republic Services, Inc. Cl A 64,518,877 - -------------------------------------------------------------------------------- 1,410,930 Waste Management, Inc.(1) 38,574,826 - -------------------------------------------------------------------------------- 103,093,703 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 0.9% - -------------------------------------------------------------------------------- 1,745,458 Nokia Oyj ADR 23,947,684 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 1.4% - -------------------------------------------------------------------------------- 221,700 International Business Machines Corp. 19,008,558 - -------------------------------------------------------------------------------- 1,354,110 Seagate Technology 18,307,567 - -------------------------------------------------------------------------------- 37,316,125 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 2.8% - -------------------------------------------------------------------------------- 1,670,462 Martin Marietta Materials, Inc. $ 75,621,815 - -------------------------------------------------------------------------------- DIVERSIFIED -- 1.0% - -------------------------------------------------------------------------------- 247,553 Standard and Poor's 500 Depositary Receipt 27,671,474 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 1.3% - -------------------------------------------------------------------------------- 786,400 Citigroup Inc. 34,695,968 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.7% - -------------------------------------------------------------------------------- 377,359 Commonwealth Telephone Enterprise Inc.(1)(2) 16,433,984 - -------------------------------------------------------------------------------- 261,190 SBC Communications Inc. 6,777,881 - -------------------------------------------------------------------------------- 603,411 Verizon Communications 23,762,325 - -------------------------------------------------------------------------------- 46,974,190 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 2.2% - -------------------------------------------------------------------------------- 161,988 Ameren Corp. 7,475,746 - -------------------------------------------------------------------------------- 441,858 FPL Group, Inc. 30,187,738 - -------------------------------------------------------------------------------- 653,275 Wisconsin Energy Corp. 20,839,473 - -------------------------------------------------------------------------------- 58,502,957 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 2.4% - -------------------------------------------------------------------------------- 1,136,800 American Power Conversion Corp. 19,768,952 - -------------------------------------------------------------------------------- 756,932 Emerson Electric Co. 46,846,521 - -------------------------------------------------------------------------------- 66,615,473 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 1.6% - -------------------------------------------------------------------------------- 3,709,965 AVX Corp.(1) 43,963,085 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 6.0% - -------------------------------------------------------------------------------- 1,045,626 Campbell Soup Company 27,489,508 - -------------------------------------------------------------------------------- 2,456,941 Kraft Foods Inc. 77,934,168 - -------------------------------------------------------------------------------- 1,034,090 Unilever N.V. New York Shares 59,770,402 - -------------------------------------------------------------------------------- 165,194,078 - -------------------------------------------------------------------------------- GAS UTILITIES -- 2.3% - -------------------------------------------------------------------------------- 1,021,906 AGL Resources Inc. 31,444,047 - -------------------------------------------------------------------------------- 1,080,795 WGL Holdings Inc.(1) 30,543,267 - -------------------------------------------------------------------------------- 61,987,314 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.5% - -------------------------------------------------------------------------------- 228,600 Beckman Coulter Inc. 12,829,032 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 2.9% - -------------------------------------------------------------------------------- 929,051 HCA Inc. 35,443,296 - -------------------------------------------------------------------------------- 1,002,476 Universal Health Services, Inc. Cl B 43,607,706 - -------------------------------------------------------------------------------- 79,051,002 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 6 Value - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 4.0% - -------------------------------------------------------------------------------- 1,557,542 Brinker International, Inc.(2) $ 48,517,433 - -------------------------------------------------------------------------------- 996,700 Outback Steakhouse, Inc. 41,392,951 - -------------------------------------------------------------------------------- 255,294 Speedway Motorsports Inc.(1) 8,508,949 - -------------------------------------------------------------------------------- 284,900 Wendy's International, Inc. 9,572,640 - -------------------------------------------------------------------------------- 107,991,973 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 1.7% - -------------------------------------------------------------------------------- 752,332 Newell Rubbermaid Inc. 15,076,733 - -------------------------------------------------------------------------------- 526,950 Whirlpool Corp. 31,664,426 - -------------------------------------------------------------------------------- 46,741,159 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 1.3% - -------------------------------------------------------------------------------- 134,090 Clorox Company 7,146,997 - -------------------------------------------------------------------------------- 424,657 Kimberly-Clark Corp. 27,428,596 - -------------------------------------------------------------------------------- 34,575,593 - -------------------------------------------------------------------------------- INSURANCE -- 9.7% - -------------------------------------------------------------------------------- 518,796 American International Group, Inc. 35,272,940 - -------------------------------------------------------------------------------- 245 Berkshire Hathaway Inc. Cl A(2) 21,229,250 - -------------------------------------------------------------------------------- 690,151 Chubb Corp. 48,503,813 - -------------------------------------------------------------------------------- 1,175,202 Horace Mann Educators Corp. 20,660,051 - -------------------------------------------------------------------------------- 582,846 Jefferson-Pilot Corp. 28,944,132 - -------------------------------------------------------------------------------- 1,527,174 Marsh & McLennan Companies Inc. 69,883,483 - -------------------------------------------------------------------------------- 1,086,883 MetLife, Inc. 42,008,028 - -------------------------------------------------------------------------------- 266,501,697 - -------------------------------------------------------------------------------- IT SERVICES -- 1.1% - -------------------------------------------------------------------------------- 645,737 DST Systems, Inc.(2) 28,715,924 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 0.3% - -------------------------------------------------------------------------------- 417,871 Mattel, Inc. 7,576,001 - -------------------------------------------------------------------------------- MACHINERY -- 1.0% - -------------------------------------------------------------------------------- 686,947 Dover Corp. 26,701,630 - -------------------------------------------------------------------------------- MEDIA -- 5.9% - -------------------------------------------------------------------------------- 475,381 ADVO, Inc. 14,708,288 - -------------------------------------------------------------------------------- 862,500 Dow Jones & Co. Inc. 35,026,125 - -------------------------------------------------------------------------------- 1,769,966 New York Times Co. (The) Cl A 69,205,670 - -------------------------------------------------------------------------------- 448,418 Tribune Co. 18,452,401 - -------------------------------------------------------------------------------- 768,879 Valassis Communications, Inc.(2) 22,743,441 - -------------------------------------------------------------------------------- 160,135,925 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 0.5% - -------------------------------------------------------------------------------- 714,400 Dollar General Corp. 14,395,160 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- OIL & GAS -- 6.0% - -------------------------------------------------------------------------------- 539,281 BP plc ADR $ 31,024,836 - -------------------------------------------------------------------------------- 252,400 ConocoPhillips 20,911,340 - -------------------------------------------------------------------------------- 1,143,928 Exxon Mobil Corp. 55,286,040 - -------------------------------------------------------------------------------- 1,143,966 Royal Dutch Petroleum Co. New York Shares 59,028,646 - -------------------------------------------------------------------------------- 166,250,862 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 5.5% - -------------------------------------------------------------------------------- 747,034 Abbott Laboratories 31,644,360 - -------------------------------------------------------------------------------- 2,020,148 Bristol-Myers Squibb Co. 47,816,903 - -------------------------------------------------------------------------------- 840,987 Merck & Co., Inc. 27,752,571 - -------------------------------------------------------------------------------- 385,065 Schering-Plough Corp. 7,339,339 - -------------------------------------------------------------------------------- 1,161,400 Watson Pharmaceuticals, Inc.(2) 34,214,844 - -------------------------------------------------------------------------------- 148,768,017 - -------------------------------------------------------------------------------- ROAD & RAIL -- 3.6% - -------------------------------------------------------------------------------- 1,657,325 Union Pacific Corp. 97,119,245 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.4% - -------------------------------------------------------------------------------- 1,422,411 Intel Corp. 28,533,565 - -------------------------------------------------------------------------------- 769,753 Teradyne, Inc.(2) 10,314,690 - -------------------------------------------------------------------------------- 38,848,255 - -------------------------------------------------------------------------------- SOFTWARE -- 3.4% - -------------------------------------------------------------------------------- 393,246 Microsoft Corporation 10,873,252 - -------------------------------------------------------------------------------- 1,085,638 Reynolds & Reynolds Co. Cl A 26,782,689 - -------------------------------------------------------------------------------- 3,461,502 Synopsys, Inc.(2) 54,795,577 - -------------------------------------------------------------------------------- 92,451,518 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 0.4% - -------------------------------------------------------------------------------- 238,900 Sherwin-Williams Co. 10,502,044 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.3% - -------------------------------------------------------------------------------- 466,747 Jones Apparel Group, Inc. 16,709,543 - -------------------------------------------------------------------------------- 459,799 Liz Claiborne, Inc. 17,343,618 - -------------------------------------------------------------------------------- 34,053,161 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 2.1% - -------------------------------------------------------------------------------- 714,087 Freddie Mac 46,587,037 - -------------------------------------------------------------------------------- 138,457 MGIC Investment Corp. 9,214,313 - -------------------------------------------------------------------------------- 55,801,350 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $2,519,906,941) 2,671,883,190 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 7 Value - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 1.7% - -------------------------------------------------------------------------------- Repurchase Agreement, Bank of America Securities, LLC, (collateralized by various U.S. Treasury obligations, 8.125%-8.875%, 2/15/19-5/15/21, valued at $47,237,396), in a joint trading account at 1.63%, dated 9/30/04, due 10/1/04 (Delivery value $46,002,083) (Cost $46,000,000) $ 46,000,000 - -------------------------------------------------------------------------------- COLLATERAL RECEIVED FOR SECURITIES LENDING(3) -- 0.5% REPURCHASE AGREEMENTS - -------------------------------------------------------------------------------- Repurchase Agreement, UBS Securities LLC, (collateralized by U.S. Government Agency obligations), 1.875%, dated 9/30/04, due 10/1/04 (delivery value $7,508,325) 7,507,934 - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- SHORT-TERM DEBT - -------------------------------------------------------------------------------- $5,002,395 Allstate Financial Global Funding, VRN, 2.10%, 10/1/04, resets daily off the Federal Funds rate plus 0.34% with no caps (Acquired 9/30/04, Cost $5,008,318)(4) $ 5,008,318 - -------------------------------------------------------------------------------- TOTAL COLLATERAL RECEIVED FOR SECURITIES LENDING (Cost $12,516,252) 12,516,252 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.4% (Cost $2,578,423,193) 2,730,399,442 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- (0.4)% (10,330,932) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $2,720,068,510 ================================================================================ FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS* Contracts to Sell Settlement Date Value Unrealized Loss - -------------------------------------------------------------------------------- 52,199,821 Euro for USD 10/29/04 $ 64,877,206 $ (660,463) - -------------------------------------------------------------------------------- 29,552,476 Euro for USD 10/29/04 36,729,667 (388,101) - -------------------------------------------------------------------------------- 33,582,361 Euro for USD 10/29/04 41,738,260 (434,811) - -------------------------------------------------------------------------------- 10,238,596 GBP for USD 10/29/04 18,510,827 (5,569) - -------------------------------------------------------------------------------- 6,944,583 GBP for USD 10/29/04 12,555,430 (3,568) - -------------------------------------------------------------------------------- $174,411,390 $(1,492,512) =================================== (Value on Settlement Date $172,918,878) *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 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. USD = United States Dollar VRN = Variable Rate Note. Interest reset date is indicated, unless otherwise noted. Rate shown is effective September 30, 2004. (1) Security, or a portion thereof, was on loan as of September 30, 2004. (2) Non-income producing. (3) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. (See Note 5 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 September 30, 2004, was $5,008,318, which represented 0.2% of net assets. See Notes to Financial Statements. - ------ 8 Large Company Value - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2004 ------------------------ AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 18.84% 7.12% 5.04% 7/30/99 - -------------------------------------------------------------------------------- RUSSELL 1000 VALUE INDEX 20.52% 4.31% 2.70%(1) -- - -------------------------------------------------------------------------------- S&P 500 INDEX 13.87% -1.31% -1.89%(1) -- - -------------------------------------------------------------------------------- Institutional Class 19.07% -- 4.79% 8/10/01 - -------------------------------------------------------------------------------- Advisor Class 18.54% -- 7.65% 10/26/00 - -------------------------------------------------------------------------------- A Class 1/31/03 No sales charge* 18.54% -- 20.80% With sales charge* 11.75% -- 16.60% - -------------------------------------------------------------------------------- B Class 1/31/03 No sales charge* 17.86% -- 20.04% With sales charge* 13.86% -- 17.89% - -------------------------------------------------------------------------------- C Class 17.89% -- 5.88% 11/7/01 - -------------------------------------------------------------------------------- R Class 18.24% -- 15.40% 8/29/03 - -------------------------------------------------------------------------------- *Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a maximum 5.75% initial sales charge for equity funds and may be subject to a maximum CDSC of 1.00%. 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. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. 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. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. (continued) - ------ 9 Large Company Value - Performance GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made July 30, 1999
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ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - ----------------------------------------------------------------------------------- 1999* 2000 2001 2002 2003 2004 - ----------------------------------------------------------------------------------- Investor Class -8.56% 5.67% 4.99% -13.70% 23.93% 18.84% - ----------------------------------------------------------------------------------- Russell 1000 Value Index -7.08% 8.91% -8.91% -16.95% 24.37% 20.52% - ----------------------------------------------------------------------------------- S&P 500 Index -3.22% 13.28% -26.62% -20.49% 24.40% 13.87% - ----------------------------------------------------------------------------------- *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. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. - ------ 10 Large Company Value - Portfolio Commentary [photo of Brendan Healy, Chuck Ritter, and Mark Mallon] PORTFOLIO MANAGERS ON THE LARGE COMPANY VALUE INVESTMENT TEAM (LEFT TO RIGHT): BRENDAN HEALY, CHUCK RITTER, AND MARK MALLON. For the six months ended September 30, 2004, Large Company Value gained 2.20%*, underperforming the 2.44% return posted by its benchmark, the Russell 1000 Value Index. For the same time period, the S&P 500, considered representative of the broader market, declined 0.18%. Large Company Value's long-term performance against its benchmark has been strong. Since the portfolio's July 30, 1999 inception, it has posted an average annual return of 5.04%, outperforming both the 2.70% return posted by the Russell 1000 Value Index and the 1.89% retreat of the S&P 500 for the same period**. STOCKS FACE HEADWINDS Stocks contended with a number of headwinds during the period. Chief among them were the continuing violence in Iraq, surging energy prices, three interest-rate increases by the Federal Reserve, and concerns about the slowing rate of growth of corporate earnings. In this climate of uncertainty, both large and small value stocks provided relatively better returns versus the broad market. ENERGY: THE STRONGEST FINISH Investments in the energy sector provided the best contribution to absolute performance during the period. While global demand increased, continued conflict in Iraq alongside political turbulence in Nigeria, Africa's top oil exporter, generated anxiety about tightening oil supply. These factors were powerful catalysts that sent oil prices to record highs and underpinned gains for major oil and gas companies. Nearly all of our holdings posted gains, and Exxon Mobil Corp. ranked among the portfolio's top contributors. ChevronTexaco Corp. and Royal Dutch Petroleum Co. also significantly contributed to returns. INDUSTRIALS PROVIDE LIFT Industrials provided substantial lift, with aerospace and defense firms leading the way. Increased activity in its Integrated Defense Systems business TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2004 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Citigroup Inc. 4.5% 4.5% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 4.1% 3.8% - -------------------------------------------------------------------------------- Freddie Mac 3.7% 3.7% - -------------------------------------------------------------------------------- Bank of America Corp. 3.2% 2.3% - -------------------------------------------------------------------------------- Royal Dutch Petroleum Co. New York Shares 2.7% 2.5% - -------------------------------------------------------------------------------- Standard and Poor's 500 Depositary Receipt 2.4% 3.2% - -------------------------------------------------------------------------------- Wells Fargo & Co. 2.1% 2.1% - -------------------------------------------------------------------------------- Hewlett-Packard Co. 1.9% 1.9% - -------------------------------------------------------------------------------- ChevronTexaco Corp. 1.7% 1.4% - -------------------------------------------------------------------------------- J.P. Morgan Chase & Co. 1.6% -- - -------------------------------------------------------------------------------- * All fund returns referenced in this commentary are for Investor Class shares. **From 7/31/1999, the date nearest the Investor Class's inception for which data are available. (continued) - ------ 11 Large Company Value - Portfolio Commentary segment contributed to top- and bottom-line growth for Boeing Co. Honeywell International and Raytheon Co. were other noteworthy names. During the period, Raytheon settled class-action litigation and announced strong sales of its defense systems. We sold Honeywell and Raytheon when they no longer met our valuation criteria. MATERIALS: ANOTHER BRIGHT SPOT Large Company Value's interest in the materials sector also delivered a significant contribution to performance as climbing commodity prices supported earnings strength in the group. Steel producer Nucor Corp., from the metals and mining industry, was one standout. Nucor booked powerful gains during the period because of record production and shipment levels that drove an 82% increase in second-quarter sales compared to second quarter 2003. The stock jumped nearly 50% during the six-month period. CONSUMER STOCKS DAMPEN RETURNS On the downside, general uncertainty about the economy, a lackluster job market and rising consumer and gasoline prices prompted consumers to rein in spending. Consequently, companies in the consumer discretionary sector came under pressure, and our position in this troubled area hindered performance. While we avoided broader damage in the sector, many of our holdings were nonetheless swept lower in the downdraft. Our stake in major multi-line retailers paced declines in the group and yielded a top detractor. May Department Stores Co., which recently completed its acquisition of Marshall Field's stores, struggled against slowing overall sales, and its stock fell sharply during the period. At the same time, consumer staples firms--companies that produce goods that are always in demand--slipped lower, and our interest in this group also detracted from performance. Tobacco firm Altria Group Inc. and consumer products giant Unilever, whose brands include Lipton and Pond's, were two top detractors. LOOKING AHEAD Large Company Value will continue to follow its investment discipline of searching for large, fundamentally sound businesses that, because of transitory issues, are selling at prices we believe are below fair market value. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2004 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Commercial Banks 10.9% 12.1% - -------------------------------------------------------------------------------- Oil & Gas 9.9% 9.9% - -------------------------------------------------------------------------------- Insurance 6.3% 6.2% - -------------------------------------------------------------------------------- Diversified Financial Services 6.0% 4.5% - -------------------------------------------------------------------------------- Thrifts & Mortgage Finance 5.6% 5.7% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Common Stocks 96.4% 95.8% - -------------------------------------------------------------------------------- Temporary Cash Investments 4.2% 4.6% - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES 100.6% 100.4% - -------------------------------------------------------------------------------- Other Assets and Liabilities (0.6)% (0.4)% - -------------------------------------------------------------------------------- - ------ 12 Large Company Value - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 96.4% AEROSPACE & DEFENSE -- 0.7% - -------------------------------------------------------------------------------- 123,600 Boeing Co. $ 6,380,232 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 0.6% - -------------------------------------------------------------------------------- 100,400 Lear Corporation 5,466,780 - -------------------------------------------------------------------------------- AUTOMOBILES -- 1.1% - -------------------------------------------------------------------------------- 112,100 General Motors Corp. 4,762,008 - -------------------------------------------------------------------------------- 64,200 Toyota Motor Corp. ADR 4,903,596 - -------------------------------------------------------------------------------- 9,665,604 - -------------------------------------------------------------------------------- BEVERAGES -- 1.7% - -------------------------------------------------------------------------------- 66,800 Adolph Coors Company Cl B 4,537,056 - -------------------------------------------------------------------------------- 119,500 Coca-Cola Company (The) 4,785,975 - -------------------------------------------------------------------------------- 214,500 Pepsi Bottling Group Inc. 5,823,675 - -------------------------------------------------------------------------------- 15,146,706 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 2.6% - -------------------------------------------------------------------------------- 236,400 Merrill Lynch & Co., Inc. 11,753,808 - -------------------------------------------------------------------------------- 238,700 Morgan Stanley 11,767,910 - -------------------------------------------------------------------------------- 23,521,718 - -------------------------------------------------------------------------------- CHEMICALS -- 1.2% - -------------------------------------------------------------------------------- 172,900 PPG Industries, Inc. 10,595,312 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 10.9% - -------------------------------------------------------------------------------- 664,000 Bank of America Corp. 28,771,120 - -------------------------------------------------------------------------------- 219,900 KeyCorp 6,948,840 - -------------------------------------------------------------------------------- 264,700 National City Corp. 10,222,714 - -------------------------------------------------------------------------------- 188,100 PNC Financial Services Group 10,176,210 - -------------------------------------------------------------------------------- 426,600 U.S. Bancorp 12,328,740 - -------------------------------------------------------------------------------- 261,100 Wachovia Corp. 12,258,645 - -------------------------------------------------------------------------------- 321,400 Wells Fargo & Co. 19,165,082 - -------------------------------------------------------------------------------- 99,871,351 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 1.3% - -------------------------------------------------------------------------------- 187,700 R.R. Donnelley & Sons Company 5,878,764 - -------------------------------------------------------------------------------- 227,500 Waste Management, Inc. 6,219,850 - -------------------------------------------------------------------------------- 12,098,614 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 2.8% - -------------------------------------------------------------------------------- 935,000 Hewlett-Packard Co. 17,531,250 - -------------------------------------------------------------------------------- 87,900 International Business Machines Corp. 7,536,546 - -------------------------------------------------------------------------------- 25,067,796 - -------------------------------------------------------------------------------- DIVERSIFIED -- 2.4% - -------------------------------------------------------------------------------- 194,400 Standard and Poor's 500 Depositary Receipt 21,730,032 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 6.0% - -------------------------------------------------------------------------------- 916,000 Citigroup Inc. 40,413,920 - -------------------------------------------------------------------------------- 358,700 J.P. Morgan Chase & Co. 14,251,151 - -------------------------------------------------------------------------------- 54,665,071 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 5.3% - -------------------------------------------------------------------------------- 138,000 ALLTEL Corp. $ 7,577,580 - -------------------------------------------------------------------------------- 268,500 AT&T Corp. 3,844,920 - -------------------------------------------------------------------------------- 348,100 BellSouth Corp. 9,440,472 - -------------------------------------------------------------------------------- 477,500 SBC Communications Inc. 12,391,125 - -------------------------------------------------------------------------------- 427,000 Sprint Corp. 8,595,510 - -------------------------------------------------------------------------------- 156,300 Verizon Communications 6,155,094 - -------------------------------------------------------------------------------- 48,004,701 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 2.4% - -------------------------------------------------------------------------------- 342,300 Exelon Corporation 12,558,987 - -------------------------------------------------------------------------------- 201,200 PPL Corporation 9,492,616 - -------------------------------------------------------------------------------- 22,051,603 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 1.3% - -------------------------------------------------------------------------------- 140,700 CVS Corp. 5,927,691 - -------------------------------------------------------------------------------- 405,800 Kroger Co. (The)(1) 6,298,016 - -------------------------------------------------------------------------------- 12,225,707 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 2.3% - -------------------------------------------------------------------------------- 200,500 H.J. Heinz Company 7,222,010 - -------------------------------------------------------------------------------- 263,800 Sara Lee Corp. 6,030,468 - -------------------------------------------------------------------------------- 125,000 Unilever N.V. New York Shares 7,225,000 - -------------------------------------------------------------------------------- 20,477,478 - -------------------------------------------------------------------------------- GAS UTILITIES -- 0.6% - -------------------------------------------------------------------------------- 252,400 NiSource Inc. 5,302,924 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 1.3% - -------------------------------------------------------------------------------- 250,500 Baxter International, Inc. 8,056,080 - -------------------------------------------------------------------------------- 68,000 Becton Dickinson & Co. 3,515,600 - -------------------------------------------------------------------------------- 11,571,680 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 2.0% - -------------------------------------------------------------------------------- 111,500 AmerisourceBergen Corp. 5,988,665 - -------------------------------------------------------------------------------- 86,400 CIGNA Corp. 6,016,032 - -------------------------------------------------------------------------------- 160,000 HCA Inc. 6,104,000 - -------------------------------------------------------------------------------- 18,108,697 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 2.0% - -------------------------------------------------------------------------------- 101,100 Harrah's Entertainment, Inc. 5,356,278 - -------------------------------------------------------------------------------- 458,400 McDonald's Corporation 12,848,952 - -------------------------------------------------------------------------------- 18,205,230 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 2.0% - -------------------------------------------------------------------------------- 61,100 Black & Decker Corporation 4,731,584 - -------------------------------------------------------------------------------- 316,200 Newell Rubbermaid Inc. 6,336,648 - -------------------------------------------------------------------------------- 85,800 Snap-on Incorporated 2,364,648 - -------------------------------------------------------------------------------- 72,300 Whirlpool Corp. 4,344,507 - -------------------------------------------------------------------------------- 17,777,387 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 13 Large Company Value - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 2.1% - -------------------------------------------------------------------------------- 308,800 General Electric Co. $ 10,369,504 - -------------------------------------------------------------------------------- 283,700 Tyco International Ltd. 8,698,242 - -------------------------------------------------------------------------------- 19,067,746 - -------------------------------------------------------------------------------- INSURANCE -- 6.3% - -------------------------------------------------------------------------------- 252,000 Allstate Corp. 12,093,480 - -------------------------------------------------------------------------------- 145,600 American International Group, Inc. 9,899,344 - -------------------------------------------------------------------------------- 165,400 Hartford Financial Services Group Inc. (The) 10,243,222 - -------------------------------------------------------------------------------- 165,400 Loews Corp. 9,675,900 - -------------------------------------------------------------------------------- 171,000 Marsh & McLennan Companies Inc. 7,824,960 - -------------------------------------------------------------------------------- 132,800 Torchmark Corp. 7,062,304 - -------------------------------------------------------------------------------- 56,799,210 - -------------------------------------------------------------------------------- IT SERVICES -- 2.1% - -------------------------------------------------------------------------------- 166,600 Computer Sciences Corp.(1) 7,846,860 - -------------------------------------------------------------------------------- 271,100 Electronic Data Systems Corp. 5,256,629 - -------------------------------------------------------------------------------- 161,300 Fiserv, Inc.(1) 5,622,918 - -------------------------------------------------------------------------------- 18,726,407 - -------------------------------------------------------------------------------- MACHINERY -- 2.2% - -------------------------------------------------------------------------------- 149,600 Dover Corp. 5,814,952 - -------------------------------------------------------------------------------- 123,800 Ingersoll-Rand Company 8,414,686 - -------------------------------------------------------------------------------- 99,300 Parker-Hannifin Corp. 5,844,798 - -------------------------------------------------------------------------------- 20,074,436 - -------------------------------------------------------------------------------- MEDIA -- 2.6% - -------------------------------------------------------------------------------- 111,000 Gannett Co., Inc. 9,297,360 - -------------------------------------------------------------------------------- 731,700 Time Warner Inc.(1) 11,809,638 - -------------------------------------------------------------------------------- 65,300 Viacom, Inc. Cl B 2,191,468 - -------------------------------------------------------------------------------- 23,298,466 - -------------------------------------------------------------------------------- METALS & MINING -- 1.6% - -------------------------------------------------------------------------------- 241,900 Alcoa Inc. 8,125,421 - -------------------------------------------------------------------------------- 74,500 Nucor Corp. 6,807,065 - -------------------------------------------------------------------------------- 14,932,486 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 1.7% - -------------------------------------------------------------------------------- 390,200 May Department Stores Co. (The) 10,000,826 - -------------------------------------------------------------------------------- 129,500 Sears, Roebuck & Co. 5,160,575 - -------------------------------------------------------------------------------- 15,161,401 - -------------------------------------------------------------------------------- OIL & GAS -- 9.9% - -------------------------------------------------------------------------------- 291,400 ChevronTexaco Corp. 15,630,696 - -------------------------------------------------------------------------------- 156,900 ConocoPhillips 12,999,165 - -------------------------------------------------------------------------------- 773,100 Exxon Mobil Corp. 37,363,923 - -------------------------------------------------------------------------------- 465,800 Royal Dutch Petroleum Co. New York Shares 24,035,280 - -------------------------------------------------------------------------------- 90,029,064 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 1.2% - -------------------------------------------------------------------------------- 161,000 Weyerhaeuser Co. $ 10,703,280 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 3.8% - -------------------------------------------------------------------------------- 246,200 Abbott Laboratories 10,429,032 - -------------------------------------------------------------------------------- 323,800 Bristol-Myers Squibb Co. 7,664,346 - -------------------------------------------------------------------------------- 171,200 Johnson & Johnson 9,643,696 - -------------------------------------------------------------------------------- 190,900 Merck & Co., Inc. 6,299,700 - -------------------------------------------------------------------------------- 34,036,774 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.5% - -------------------------------------------------------------------------------- 239,400 Intel Corp. 4,802,364 - -------------------------------------------------------------------------------- SOFTWARE -- 1.8% - -------------------------------------------------------------------------------- 182,000 Computer Associates International, Inc. 4,786,600 - -------------------------------------------------------------------------------- 424,600 Microsoft Corporation 11,740,190 - -------------------------------------------------------------------------------- 16,526,790 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 0.8% - -------------------------------------------------------------------------------- 221,400 Blockbuster Inc. 1,680,426 - -------------------------------------------------------------------------------- 246,200 Limited Brands 5,487,798 - -------------------------------------------------------------------------------- 7,168,224 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.7% - -------------------------------------------------------------------------------- 151,900 Liz Claiborne, Inc. 5,729,668 - -------------------------------------------------------------------------------- 106,700 Reebok International Ltd. 3,918,024 - -------------------------------------------------------------------------------- 111,700 VF Corp. 5,523,565 - -------------------------------------------------------------------------------- 15,171,257 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 5.6% - -------------------------------------------------------------------------------- 514,100 Freddie Mac 33,539,890 - -------------------------------------------------------------------------------- 81,900 MGIC Investment Corp. 5,450,445 - -------------------------------------------------------------------------------- 311,200 Washington Mutual, Inc. 12,161,696 - -------------------------------------------------------------------------------- 51,152,031 - -------------------------------------------------------------------------------- TOBACCO -- 1.3% - -------------------------------------------------------------------------------- 255,600 Altria Group Inc. 12,023,424 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.7% - -------------------------------------------------------------------------------- 246,500 Vodafone Group plc ADR 5,943,115 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $798,589,234) 873,551,098 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------- 14 Large Company Value - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Value - -------------------------------------------------------------------------------- Temporary Cash Investments -- 4.2% - -------------------------------------------------------------------------------- Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 6.25%, 5/15/30, valued at $15,015,531), in a joint trading account at 1.70%, dated 9/30/04, due 10/1/04 (Delivery value $14,600,689) $ 14,600,000 - -------------------------------------------------------------------------------- Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 5.25%, 11/15/28, valued at $23,760,271), in a joint trading account at 1.68%, dated 9/30/04, due 10/1/04 (Delivery value $23,301,087) 23,300,000 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $37,900,000) 37,900,000 - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.6% (Cost $836,489,234) $911,451,098 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- (0.6)% (5,043,281) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $906,407,817 ================================================================================ Notes to Schedule of Investments ADR = American Depositary Receipt (1) Non-income producing. See Notes to Financial Statements. - ------ 15 Shareholder Fee Example (Unaudited) SHAREHOLDER FEE EXAMPLE Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2004 to September 30, 2004. ACTUAL EXPENSES The table provides information about actual account values and actual expenses for each class. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If you hold Investor Class shares of any American Century fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century account (i.e., not a financial intermediary or retirement plan account), American Century may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered under your Social Security number. PERSONAL ACCOUNTS include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of the funds and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund's share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. (continued) - ------ 16 Shareholder Fee Example (Unaudited) Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - ------------------------------------------------------------------------------------------ EXPENSES PAID BEGINNING ENDING DURING PERIOD* ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 4/1/04 - EXPENSE 4/1/04 9/30/04 9/30/04 RATIO* - ------------------------------------------------------------------------------------------ VALUE SHAREHOLDER FEE EXAMPLE - ------------------------------------------------------------------------------------------ ACTUAL: - ------------------------------------------------------------------------------------------ Investor Class $1,000 $1,020.20 $5.06 1.00% - ------------------------------------------------------------------------------------------ Institutional Class $1,000 $1,022.50 $4.06 0.80% - ------------------------------------------------------------------------------------------ Advisor Class $1,000 $1,018.90 $6.33 1.25% - ------------------------------------------------------------------------------------------ A Class $1,000 $1,020.20 $6.33 1.25% - ------------------------------------------------------------------------------------------ B Class $1,000 $1,016.40 $10.11 2.00% - ------------------------------------------------------------------------------------------ C Class $1,000 $1,015.20 $10.10 2.00% - ------------------------------------------------------------------------------------------ HYPOTHETICAL: - ------------------------------------------------------------------------------------------ Investor Class $1,000 $1,020.05 $5.06 1.00% - ------------------------------------------------------------------------------------------ Institutional Class $1,000 $1,021.06 $4.05 0.80% - ------------------------------------------------------------------------------------------ Advisor Class $1,000 $1,018.80 $6.33 1.25% - ------------------------------------------------------------------------------------------ A Class $1,000 $1,018.80 $6.33 1.25% - ------------------------------------------------------------------------------------------ B Class $1,000 $1,015.04 $10.10 2.00% - ------------------------------------------------------------------------------------------ C Class $1,000 $1,015.04 $10.10 2.00% - ------------------------------------------------------------------------------------------ *Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year divided by 365, to reflect the one-half year period. (continued) - ------ 17 Shareholder Fee Example (Unaudited) - ------------------------------------------------------------------------------------------ EXPENSES PAID BEGINNING ENDING DURING PERIOD* ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 4/1/04 - EXPENSE 4/1/04 9/30/04 9/30/04 RATIO* - ------------------------------------------------------------------------------------------ LARGE COMPANY VALUE SHAREHOLDER FEE EXAMPLE - ------------------------------------------------------------------------------------------ ACTUAL: - ------------------------------------------------------------------------------------------ Investor Class $1,000 $1,022.00 $4.56 0.90% - ------------------------------------------------------------------------------------------ Institutional Class $1,000 $1,023.00 $3.55 0.70% - ------------------------------------------------------------------------------------------ Advisor Class $1,000 $1,020.70 $5.83 1.15% - ------------------------------------------------------------------------------------------ A Class $1,000 $1,019.00 $5.82 1.15% - ------------------------------------------------------------------------------------------ B Class $1,000 $1,015.20 $9.60 1.90% - ------------------------------------------------------------------------------------------ C Class $1,000 $1,016.90 $9.61 1.90% - ------------------------------------------------------------------------------------------ R Class $1,000 $1,019.40 $7.09 1.40% - ------------------------------------------------------------------------------------------ HYPOTHETICAL: - ------------------------------------------------------------------------------------------ Investor Class $1,000 $1,020.56 $4.56 0.90% - ------------------------------------------------------------------------------------------ Institutional Class $1,000 $1,021.56 $3.55 0.70% - ------------------------------------------------------------------------------------------ Advisor Class $1,000 $1,019.30 $5.82 1.15% - ------------------------------------------------------------------------------------------ A Class $1,000 $1,019.30 $5.82 1.15% - ------------------------------------------------------------------------------------------ B Class $1,000 $1,015.54 $9.60 1.90% - ------------------------------------------------------------------------------------------ C Class $1,000 $1,015.54 $9.60 1.90% - ------------------------------------------------------------------------------------------ R Class $1,000 $1,018.05 $7.08 1.40% - ------------------------------------------------------------------------------------------ *Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year divided by 365, to reflect the one-half year period. - ------ 18 Statement of Assets and Liabilities SEPTEMBER 30, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investment securities, at value (cost of $2,565,906,941 and $836,489,234, respectively) -- including $12,427,348 and $- of securities loaned, respectively $2,717,883,190 $911,451,098 - ---------------------------------------------- Investments made with cash collateral received for securities on loan, at value (cost of $12,516,252 and $-, respectively) 12,516,252 -- - -------------------------------------------------------------------------------- Total investment securities, at value (cost of $2,578,423,193 and $836,489,234, respectively) 2,730,399,442 911,451,098 - ---------------------------------------------- Cash -- 3,036,420 - ---------------------------------------------- Receivable for investments sold 47,731,496 -- - ---------------------------------------------- Receivable for capital shares sold 149,626 1,430,850 - ---------------------------------------------- Dividends and interest receivable 3,240,415 1,180,542 - -------------------------------------------------------------------------------- 2,781,520,979 917,098,910 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Payable for collateral received on securities loaned 12,516,252 -- - ---------------------------------------------- Disbursements in excess of demand deposit cash 12,123,965 -- - ---------------------------------------------- Payable for investments purchased 33,060,432 10,022,781 - ---------------------------------------------- Payable for forward foreign currency exchange contracts 1,492,512 -- - ---------------------------------------------- Payable for capital shares redeemed 1,710 4,761 - ---------------------------------------------- Accrued management fees 2,151,504 592,217 - ---------------------------------------------- Distribution fees payable 52,315 27,105 - ---------------------------------------------- Service fees payable 53,779 44,229 - -------------------------------------------------------------------------------- 61,452,469 10,691,093 - -------------------------------------------------------------------------------- NET ASSETS $2,720,068,510 $906,407,817 ================================================================================ See Notes to Financial Statements. (continued) - ------ 19 Statement of Assets and Liabilities SEPTEMBER 30, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- NET ASSETS CONSIST OF: - -------------------------------------------------------------------------------- Capital (par value and paid-in surplus) $2,269,891,122 $828,476,591 - ---------------------------------------------- Undistributed net investment income 523,912 299,961 - ---------------------------------------------- Undistributed net realized gain on investment and foreign currency transactions 299,169,739 2,669,401 - ---------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 150,483,737 74,961,864 - -------------------------------------------------------------------------------- $2,720,068,510 $906,407,817 ================================================================================ INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $2,226,140,750 $414,273,584 - ---------------------------------------------- Shares outstanding 284,995,332 69,389,057 - ---------------------------------------------- Net asset value per share $7.81 $5.97 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $233,136,701 $265,096,126 - ---------------------------------------------- Shares outstanding 29,821,405 44,406,720 - ---------------------------------------------- Net asset value per share $7.82 $5.97 - -------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $217,281,264 $51,395,514 - ---------------------------------------------- Shares outstanding 27,824,049 8,609,798 - ---------------------------------------------- Net asset value per share $7.81 $5.97 - -------------------------------------------------------------------------------- A CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $31,497,743 $146,209,876 - ---------------------------------------------- Shares outstanding 4,030,212 24,475,020 - ---------------------------------------------- Net asset value per share $7.82 $5.97 - ---------------------------------------------- Maximum offering price (net asset value divided by 0.9425) $8.30 $6.33 - -------------------------------------------------------------------------------- B CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $3,678,125 $9,306,289 - ---------------------------------------------- Shares outstanding 470,006 1,554,977 - ---------------------------------------------- Net asset value per share $7.83 $5.98 - -------------------------------------------------------------------------------- C CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $8,333,927 $18,568,189 - ---------------------------------------------- Shares outstanding 1,069,832 3,111,005 - ---------------------------------------------- Net asset value per share $7.79 $5.97 - -------------------------------------------------------------------------------- R CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets N/A $1,558,239 - ---------------------------------------------- Shares outstanding N/A 261,038 - ---------------------------------------------- Net asset value per share N/A $5.97 - -------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 20 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- INVESTMENT INCOME - -------------------------------------------------------------------------------- INCOME: - ---------------------------------------------- Dividends (net of foreign taxes withheld of $658,093 and $131,593, respectively) $ 28,693,436 $ 9,951,646 - ---------------------------------------------- Interest 734,588 190,612 - ---------------------------------------------- Securities lending 22,207 -- - -------------------------------------------------------------------------------- 29,450,231 10,142,258 - -------------------------------------------------------------------------------- EXPENSES: - ---------------------------------------------- Management fees 12,826,473 3,073,638 - ---------------------------------------------- Distribution fees: - ---------------------------------------------- Advisor Class 278,888 45,165 - ---------------------------------------------- B Class 11,823 27,602 - ---------------------------------------------- C Class 27,512 56,019 - ---------------------------------------------- Service fees: - ---------------------------------------------- Advisor Class 278,888 45,165 - ---------------------------------------------- B Class 3,941 9,201 - ---------------------------------------------- C Class 9,171 18,673 - ---------------------------------------------- Service and distribution fees: - ---------------------------------------------- A Class 29,589 145,101 - ---------------------------------------------- R Class -- 2,580 - ---------------------------------------------- Directors' fees and expenses 24,896 7,123 - ---------------------------------------------- Other expenses 11,963 2,002 - -------------------------------------------------------------------------------- 13,503,144 3,432,269 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 15,947,087 6,709,989 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS) ON: - ---------------------------------------------- Investment transactions 199,555,213 5,509,660 - ---------------------------------------------- Foreign currency transactions (2,416,711) -- - -------------------------------------------------------------------------------- 197,138,502 5,509,660 - -------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION ON: - ---------------------------------------------- Investments (159,745,861) 4,337,292 - ---------------------------------------------- Translation of assets and liabilities in foreign currencies 1,467,106 -- - -------------------------------------------------------------------------------- (158,278,755) 4,337,292 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN 38,859,747 9,846,952 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 54,806,834 $16,556,941 ================================================================================ See Notes to Financial Statements. - ------ 21 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED) AND YEAR ENDED MARCH 31, 2004 - ---------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - ---------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2004 MARCH 31, 2004 SEPT. 30, 2004 MARCH 31, 2004 - ---------------------------------------------------------------------------------------------- OPERATIONS - ---------------------------------------------------------------------------------------------- Net investment income $ 15,947,087 $ 29,652,644 $ 6,709,989 $ 5,460,086 - ------------------------- Net realized gain 197,138,502 317,262,251 5,509,660 1,035,451 - ------------------------- Change in net unrealized appreciation (158,278,755) 437,704,926 4,337,292 88,771,151 - ---------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 54,806,834 784,619,821 16,556,941 95,266,688 - ---------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - ---------------------------------------------------------------------------------------------- From net investment income: - ------------------------- Investor Class (18,728,412) (21,186,539) (3,151,420) (3,836,516) - ------------------------- Institutional Class (2,159,514) (2,637,672) (2,064,136) (958,366) - ------------------------- Advisor Class (1,362,641) (2,721,990) (291,525) (71,321) - ------------------------- A Class (186,991) (38,958) (893,552) (492,681) - ------------------------- B Class (10,572) (1,219) (27,240) (13,635) - ------------------------- C Class (25,282) (5,704) (55,444) (26,833) - ------------------------- R Class -- -- (8,776) (235) - ------------------------- From net realized gains: - ------------------------- Investor Class -- (21,347,159) -- -- - ------------------------- Institutional Class -- (2,057,045) -- -- - ------------------------- Advisor Class -- (3,792,591) -- -- - ------------------------- A Class -- (67,783) -- -- - ------------------------- B Class -- (19,684) -- -- - ------------------------- C Class -- (57,575) -- -- - ---------------------------------------------------------------------------------------------- Decrease in net assets from distributions (22,473,412) (53,933,919) (6,492,093) (5,399,587) - ---------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions (115,321,307) 126,621,592 265,927,813 360,724,856 - ---------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (82,987,885) 857,307,494 275,992,661 450,591,957 - ---------------------------------------------------------------------------------------------- NET ASSETS - ---------------------------------------------------------------------------------------------- Beginning of period 2,803,056,395 1,945,748,901 630,415,156 179,823,199 - ---------------------------------------------------------------------------------------------- End of period $2,720,068,510 $2,803,056,395 $906,407,817 $630,415,156 ============================================================================================== Undistributed net investment income $523,912 $7,050,237 $299,961 $82,065 ============================================================================================== See Notes to Financial Statements. - ------ 22 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Value Fund (Value) and Large Company Value Fund (Large Company Value) (collectively, the funds) are two funds in a series issued by the corporation. The funds are diversified under the 1940 Act. The funds' investment objectives are long-term capital growth. The production of income is a secondary objective. The funds seek to achieve their investment objective by investing in stocks of companies that management believes to be undervalued at the time of purchase. Value invests in companies of all sizes and Large Company Value invests primarily in larger companies. 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 Investor Class is unavailable to new investors. 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. 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. If the investment manager, American Century Investment Management, Inc. (ACIM), determines that the current market price of a security owned by a non-money market fund is not readily available, the investment manager may determine its fair value in accordance with procedures adopted by the Board of Directors if such fair value determination would materially impact a fund's net asset value. Valuations may not be readily available if, for example: an event occurred after the close of the exchange on which a portfolio security principally trades (but before the close of the New York Stock Exchange) that was likely to have changed the value of the security; a security has been declared in default; trading in a security has been halted during the trading day; or the demand for the security (as reflected by its trading volume) is insufficient for quoted prices to be reliable. 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. 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) - ------ 23 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. For assets and liabilities, other than investments in securities, net realized and unrealized gains and losses from foreign currency translations arise from changes in currency exchange rates. Net realized and unrealized foreign currency exchange gains or losses occurring during the holding period of investment securities are a component of realized gain (loss) on investment transactions and unrealized appreciation (depreciation) on investments, respectively. Certain countries may impose taxes on the contract amount of purchases and sales of foreign currency contracts in their currency. The funds record the foreign tax expense, if any, as a reduction to the net realized gain (loss) on foreign currency transactions. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The funds may enter into forward foreign currency exchange contracts to facilitate transactions of securities denominated in a foreign currency or to hedge the funds' exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the funds and the resulting unrealized appreciation or depreciation are determined daily using prevailing exchange rates. The funds bear the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses may arise if the counterparties do not perform under the contract terms. REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with institutions that 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) - ------ 24 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee (the 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 and accrued daily based on the daily net assets of the specific class of shares of each fund and paid monthly in arrears. For funds with a stepped fee schedule, the rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account all of the investment manager's assets under management in the fund's investment strategy (strategy assets) to calculate the appropriate fee rate for the fund. The strategy assets include the fund's assets and the assets of other clients of the investment manager that are not in the American Century family of mutual funds but that have the same investment team and investment strategy. The annual management fee schedule for each class of Value is as follows: INVESTOR, A, B & C INSTITUTIONAL ADVISOR - -------------------------------------------------------------------- STRATEGY ASSETS - -------------------------------------------------------------------- First $2.5 billion 1.00% 0.80% 0.75% - -------------------------------------------------------------------- Next $2.5 billion 0.95% 0.75% 0.70% - -------------------------------------------------------------------- Next $5 billion 0.90% 0.70% 0.65% - -------------------------------------------------------------------- Over $10 billion 0.85% 0.65% 0.60% - -------------------------------------------------------------------- The annual management fee schedule for each class of Large Company Value is as follows: - -------------------------------------------------------------------- INVESTOR, A, B, C & R INSTITUTIONAL ADVISOR - -------------------------------------------------------------------- STRATEGY ASSETS - -------------------------------------------------------------------- First $1 billion 0.90% 0.70% 0.65% - -------------------------------------------------------------------- Next $4 billion 0.80% 0.60% 0.55% - -------------------------------------------------------------------- Over $5 billion 0.70% 0.50% 0.45% - -------------------------------------------------------------------- For the six months ended September 30, 2004, the effective annual management fee for each class of each fund was as follows: - -------------------------------------------------------------------------------- INVESTOR, A, B & C INSTITUTIONAL ADVISOR R - -------------------------------------------------------------------------------- Value 1.00% 0.80% 0.75% N/A - -------------------------------------------------------------------------------- Large Company Value 0.90% 0.70% 0.65% 0.90% - -------------------------------------------------------------------------------- (continued) - ------ 25 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) 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 R Class will pay ACIS an annual distribution and service fee of 0.25% and 0.50%, respectively. The fees are computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The distribution fee provides compensation for expenses incurred in connection with distributing shares of the classes including, but not limited to, payments to brokers, dealers, and financial institutions that have entered into sales agreements with respect to shares of the funds. The service fee provides compensation for shareholder and administrative services rendered by ACIS, its affiliates or independent third party providers for Advisor Class shares and for individual shareholder services rendered by broker/dealers or other independent financial intermediaries for A, B, C and R Class shares. Fees incurred under the plans during the six months ended September 30, 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. During the six months ended September 30, 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 custodian of the fund and wholly owned subsidiary of JPM. 3. INVESTMENT TRANSACTIONS Investment transactions, excluding short-term investments, for the six months ended September 30, 2004, were as follows: - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- Purchases $1,839,114,729 $312,085,814 - -------------------------------------------------------------------------------- Proceeds from sales $1,972,880,829 $ 52,402,957 - -------------------------------------------------------------------------------- (continued) - ------ 26 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the funds were as follows: - --------------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - --------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - --------------------------------------------------------------------------------------------------- INVESTOR CLASS - --------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 900,000,000 200,000,000 =================================================================================================== Sold 25,370,403 $ 197,083,514 16,654,008 $ 98,880,594 - -------------------------- Issued in reinvestment of distributions 2,213,211 17,349,348 385,560 2,309,588 - -------------------------- Redeemed (21,483,523) (167,194,360) (7,114,528) (41,892,336) - --------------------------------------------------------------------------------------------------- Net increase 6,100,091 $ 47,238,502 9,925,040 $ 59,297,846 =================================================================================================== 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 =================================================================================================== INSTITUTIONAL CLASS - --------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 100,000,000 100,000,000 =================================================================================================== Sold 2,834,120 $ 22,014,594 21,035,318 $124,509,878 - -------------------------- Issued in reinvestment of distributions 274,624 2,154,280 343,874 2,062,228 - -------------------------- Redeemed (2,196,534) (16,987,640) (2,697,899) (15,956,403) - --------------------------------------------------------------------------------------------------- Net increase 912,210 $ 7,181,234 18,681,293 $110,615,703 =================================================================================================== 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 =================================================================================================== ADVISOR CLASS - --------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 150,000,000 15,000,000 =================================================================================================== Sold 11,152,778 $ 86,784,662 5,881,094 $34,700,996 - -------------------------- Issued in reinvestment of distributions 170,505 1,336,802 37,428 224,525 - -------------------------- Redeemed (35,762,419) (276,731,380) (577,394) (3,395,585) - --------------------------------------------------------------------------------------------------- Net increase (decrease) (24,439,136) $(188,609,916) 5,341,128 $31,529,936 =================================================================================================== 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 =================================================================================================== (continued) - ------ 27 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - --------------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - --------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - --------------------------------------------------------------------------------------------------- A CLASS - --------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 10,000,000 50,000,000 =================================================================================================== Sold 2,241,791 $17,482,224 10,286,282 $60,719,072 - -------------------------- Issued in reinvestment of distributions 23,561 184,796 144,995 868,984 - -------------------------- Redeemed (181,535) (1,409,823) (1,583,105) (9,314,637) - --------------------------------------------------------------------------------------------------- Net increase 2,083,817 $16,257,197 8,848,172 $52,273,419 =================================================================================================== 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 =================================================================================================== B CLASS - --------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 10,000,000 10,000,000 =================================================================================================== Sold 130,157 $1,010,051 610,373 $3,607,427 - -------------------------- Issued in reinvestment of distributions 1,248 9,776 4,034 24,255 - -------------------------- Redeemed (4,904) (37,898) (14,255) (83,109) - --------------------------------------------------------------------------------------------------- Net increase 126,501 $ 981,929 600,152 $3,548,573 =================================================================================================== 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 =================================================================================================== C CLASS - --------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 20,000,000 10,000,000 =================================================================================================== Sold 248,067 $1,919,584 1,360,690 $8,011,914 - -------------------------- Issued in reinvestment of distributions 2,929 22,829 5,675 34,036 - -------------------------- Redeemed (40,358) (312,666) (127,060) (749,924) - --------------------------------------------------------------------------------------------------- Net increase 210,638 $1,629,747 1,239,305 $7,296,026 =================================================================================================== 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 =================================================================================================== (continued) - ------ 28 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - --------------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - --------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - --------------------------------------------------------------------------------------------------- R CLASS - --------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED N/A 10,000,000 =================================================================================================== Sold 233,227 $1,370,660 - -------------------------- Issued in reinvestment of distributions 1,465 8,776 - -------------------------- Redeemed (2,216) (13,126) - --------------------------------------------------------------------------------------------------- Net increase 232,476 $1,366,310 =================================================================================================== PERIOD ENDED MARCH 31, 2004(1) 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) August 29, 2003 (commencement of sale) through March 31, 2004 for Large Company Value. 5. SECURITIES LENDING As of September 30, 2004, securities in Value valued at $12,427,348 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 $12,516,252. 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. 6. 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. The funds may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The funds did not borrow from the line during the six months ended September 30, 2004. (continued) - ------ 29 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 7. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. As of September 30, 2004, the components of investments for federal income tax purposes were as follows: LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- Federal tax cost of investments $2,632,698,883 $839,248,056 ================================================================================ Gross tax appreciation of investments $182,481,267 $ 84,643,702 - --------------------------------------- Gross tax depreciation of investments (84,780,708) (12,440,660) - -------------------------------------------------------------------------------- Net tax appreciation of investments $ 97,700,559 $ 72,203,042 ================================================================================ 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. As of March 31, 2004, Value and Large Company Value had capital loss carryovers of $- and $81,436, respectively, which may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers expire in 2011. - ------ 30 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------------- INVESTOR CLASS - ------------------------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------- PER-SHARE DATA - ------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.72 $5.61 $7.19 $6.27 $5.35 $5.77 - ------------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------- Net Investment Income(2) 0.05 0.09 0.07 0.08 0.10 0.09 - ------------------------- Net Realized and Unrealized Gain (Loss) 0.11 2.18 (1.48) 1.03 0.92 (0.01) - ------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.16 2.27 (1.41) 1.11 1.02 0.08 - ------------------------------------------------------------------------------------------------------- Distributions - ------------------------- From Net Investment Income (0.07) (0.08) (0.07) (0.08) (0.10) (0.09) - ------------------------- From Net Realized Gains -- (0.08) (0.10) (0.11) -- (0.41) - ------------------------------------------------------------------------------------------------------- Total Distributions (0.07) (0.16) (0.17) (0.19) (0.10) (0.50) - ------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.81 $7.72 $5.61 $7.19 $6.27 $5.35 ======================================================================================================= TOTAL RETURN(3) 2.02% 40.66% (19.85)% 17.96% 19.20% 1.42% - ------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.00%(4) 1.00% 1.00% 1.00% 1.00% 1.00% - ------------------------- Ratio of Net Investment Income to Average Net Assets 1.19%(4) 1.26% 1.19% 1.11% 1.71% 1.48% - ------------------------- Portfolio Turnover Rate 70% 122% 102% 151% 150% 115% - ------------------------- Net Assets, End of Period (in thousands) $2,226,141 $2,152,265 $1,552,632 $2,068,901 $1,532,113 $1,388,646 - ------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 31 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------ INSTITUTIONAL CLASS - ------------------------------------------------------------------------------------------------ 2004(1) 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------ PER-SHARE DATA - ------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $7.72 $5.61 $7.20 $6.27 $5.36 $5.78 - ------------------------------------------------------------------------------------------------ Income From Investment Operations - -------------------------- Net Investment Income(2) 0.05 0.10 0.09 0.09 0.11 0.10 - -------------------------- Net Realized and Unrealized Gain (Loss) 0.12 2.18 (1.50) 1.04 0.91 (0.01) - ------------------------------------------------------------------------------------------------ Total From Investment Operations 0.17 2.28 (1.41) 1.13 1.02 0.09 - ------------------------------------------------------------------------------------------------ Distributions - -------------------------- From Net Investment Income (0.07) (0.09) (0.08) (0.09) (0.11) (0.10) - -------------------------- From Net Realized Gains -- (0.08) (0.10) (0.11) -- (0.41) - ------------------------------------------------------------------------------------------------ Total Distributions (0.07) (0.17) (0.18) (0.20) (0.11) (0.51) - ------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $7.82 $7.72 $5.61 $7.20 $6.27 $5.36 ================================================================================================ TOTAL RETURN(3) 2.25% 40.93% (19.70)% 18.19% 19.24% 1.65% - ------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------ Ratio of Operating Expenses to Average Net Assets 0.80%(4) 0.80% 0.80% 0.80% 0.80% 0.80% - -------------------------- Ratio of Net Investment Income to Average Net Assets 1.39%(4) 1.46% 1.38% 1.31% 1.91% 1.68% - -------------------------- Portfolio Turnover Rate 70% 122% 102% 151% 150% 115% - -------------------------- Net Assets, End of Period (in thousands) $233,137 $223,282 $179,196 $226,681 $186,987 $95,202 - ------------------------------------------------------------------------------------------------ (1) Six months ended September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 32 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------------------- ADVISOR CLASS - -------------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.72 $5.60 $7.19 $6.27 $5.36 $5.77 - -------------------------------------------------------------------------------------------- Income From Investment Operations - -------------------------- Net Investment Income(2) 0.04 0.07 0.06 0.06 0.08 0.07 - -------------------------- Net Realized and Unrealized Gain (Loss) 0.11 2.19 (1.49) 1.03 0.92 0.01 - -------------------------------------------------------------------------------------------- Total From Investment Operations 0.15 2.26 (1.43) 1.09 1.00 0.08 - -------------------------------------------------------------------------------------------- Distributions - -------------------------- From Net Investment Income (0.06) (0.06) (0.06) (0.06) (0.09) (0.08) - -------------------------- From Net Realized Gains -- (0.08) (0.10) (0.11) -- (0.41) - -------------------------------------------------------------------------------------------- Total Distributions (0.06) (0.14) (0.16) (0.17) (0.09) (0.49) - -------------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.81 $7.72 $5.60 $7.19 $6.27 $5.36 ============================================================================================ TOTAL RETURN(3) 1.89% 40.56% (20.07)% 17.51% 18.72% 1.36% - -------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.25%(4) 1.25% 1.25% 1.25% 1.25% 1.25% - -------------------------- Ratio of Net Investment Income to Average Net Assets 0.94%(4) 1.01% 0.94% 0.86% 1.46% 1.23% - -------------------------- Portfolio Turnover Rate 70% 122% 102% 151% 150% 115% - -------------------------- Net Assets, End of Period (in thousands) $217,281 $403,212 $210,984 $208,311 $102,357 $61,323 - -------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 33 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- 2004(1) 2004 2003(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.72 $5.60 $5.77 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------ Net Investment Income(3) 0.03 0.07 0.01 - ------------------------------------ Net Realized and Unrealized Gain (Loss) 0.13 2.19 (0.16) - -------------------------------------------------------------------------------- Total From Investment Operations 0.16 2.26 (0.15) - -------------------------------------------------------------------------------- Distributions - ------------------------------------ From Net Investment Income (0.06) (0.06) (0.02) - ------------------------------------ From Net Realized Gains -- (0.08) -- - -------------------------------------------------------------------------------- Total Distributions (0.06) (0.14) (0.02) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $7.82 $7.72 $5.60 ================================================================================ TOTAL RETURN(4) 2.02% 40.55% (2.67)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.25%(5) 1.25% 1.25%(5) - ------------------------------------ Ratio of Net Investment Income to Average Net Assets 0.94%(5) 1.01% 0.62%(5) - ------------------------------------ Portfolio Turnover Rate 70% 122% 102%(6) - ------------------------------------ Net Assets, End of Period (in thousands) $31,498 $15,029 $385 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ------ 34 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- B CLASS - -------------------------------------------------------------------------------- 2004(1) 2004 2003(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.73 $5.61 $5.77 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------ Net Investment Income(3) 0.01 0.01 --(4) - ------------------------------------ Net Realized and Unrealized Gain (Loss) 0.12 2.20 (0.15) - -------------------------------------------------------------------------------- Total From Investment Operations 0.13 2.21 (0.15) - -------------------------------------------------------------------------------- Distributions - ------------------------------------ From Net Investment Income (0.03) (0.01) (0.01) - ------------------------------------ From Net Realized Gains -- (0.08) -- - -------------------------------------------------------------------------------- Total Distributions (0.03) (0.09) (0.01) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $7.83 $7.73 $5.61 ================================================================================ TOTAL RETURN(5) 1.64% 39.51% (2.59)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 2.00%(6) 2.00% 1.98%(6) - ------------------------------------ Ratio of Operating Expenses to Average Net Assets (Before Expense Waiver) 2.00%(6) 2.00% 2.00%(6)(7) - ------------------------------------ Ratio of Net Investment Income (Loss) to Average Net Assets 0.19%(6) 0.26% (0.17)%(6) - ------------------------------------ Ratio of Net Investment Income (Loss) to Average Net Assets (Before Expense Waiver) 0.19%(6) 0.26% (0.19)%(6)(7) - ------------------------------------ Portfolio Turnover Rate 70% 122% 102%(8) - ------------------------------------ Net Assets, End of Period (in thousands) $3,678 $2,656 $91 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) During the period ended March 31, 2003, the distributor voluntarily waived a portion of the distribution and service fees. (8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ------ 35 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- 2004(1) 2004 2003 2002(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.70 $5.58 $7.18 $6.90 - -------------------------------------------------------------------------------- Income From Investment Operations - --------------------------- Net Investment Income(3) 0.01 0.02 0.01 --(4) - --------------------------- Net Realized and Unrealized Gain (Loss) 0.11 2.19 (1.50) 0.42 - -------------------------------------------------------------------------------- Total From Investment Operations 0.12 2.21 (1.49) 0.42 - -------------------------------------------------------------------------------- Distributions - --------------------------- From Net Investment Income (0.03) (0.01) (0.01) (0.03) - --------------------------- From Net Realized Gains -- (0.08) (0.10) (0.11) - -------------------------------------------------------------------------------- Total Distributions (0.03) (0.09) (0.11) (0.14) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $7.79 $7.70 $5.58 $7.18 ================================================================================ TOTAL RETURN(5) 1.52% 39.73% (20.90)% 6.33% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 2.00%(6) 2.00% 2.00% 2.00%(6) - --------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.19%(6) 0.26% 0.19% (0.06)%(6) - --------------------------- Portfolio Turnover Rate 70% 122% 102% 151%(7) - --------------------------- Net Assets, End of Period (in thousands) $8,334 $6,613 $2,461 $1,866 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) June 4, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 36 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ----------------------------------------------------------------------------------------------- INVESTOR CLASS - ----------------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000(2) - ----------------------------------------------------------------------------------------------- PER-SHARE DATA - ----------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.89 $4.29 $5.53 $5.08 $4.59 $5.00 - ----------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------ Net Investment Income(3) 0.05 0.09 0.08 0.07 0.08 0.05 - ------------------------ Net Realized and Unrealized Gain (Loss) 0.08 1.59 (1.25) 0.45 0.48 (0.41) - ----------------------------------------------------------------------------------------------- Total From Investment Operations 0.13 1.68 (1.17) 0.52 0.56 (0.36) - ----------------------------------------------------------------------------------------------- Distributions - ------------------------ From Net Investment Income (0.05) (0.08) (0.07) (0.07) (0.07) (0.05) - ----------------------------------------------------------------------------------------------- Net Asset Value, End of Period $5.97 $5.89 $4.29 $5.53 $5.08 $4.59 =============================================================================================== TOTAL RETURN(4) 2.20% 39.34% (21.19)% 10.20% 12.38% (7.22)% - ----------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.90%(5) 0.90% 0.90% 0.90% 0.90% 0.90%(5) - ------------------------ Ratio of Net Investment Income to Average Net Assets 1.84%(5) 1.58% 1.75% 1.34% 1.62% 1.72%(5) - ------------------------ Portfolio Turnover Rate 7% 14% 30% 34% 55% 51% - ------------------------ Net Assets, End of Period (in thousands) $414,274 $350,516 $152,641 $69,961 $19,348 $12,671 - ----------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) July 30, 1999 (inception) through March 31, 2000. (3) Computed using the average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. See Notes to Financial Statements. - ------ 37 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- 2004(1) 2004 2003 2002(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.89 $4.29 $5.53 $5.44 - -------------------------------------------------------------------------------- Income From Investment Operations - --------------------------- Net Investment Income(3) 0.06 0.10 0.09 0.06 - --------------------------- Net Realized and Unrealized Gain (Loss) 0.08 1.59 (1.25) 0.08 - -------------------------------------------------------------------------------- Total From Investment Operations 0.14 1.69 (1.16) 0.14 - -------------------------------------------------------------------------------- Distributions - --------------------------- From Net Investment Income (0.06) (0.09) (0.08) (0.05) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $5.97 $5.89 $4.29 $5.53 ================================================================================ TOTAL RETURN(4) 2.30% 39.61% (21.03)% 2.69% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.70%(5) 0.70% 0.70% 0.70%(5) - --------------------------- Ratio of Net Investment Income to Average Net Assets 2.04%(5) 1.78% 1.95% 1.74%(5) - --------------------------- Portfolio Turnover Rate 7% 14% 30% 34%(6) - --------------------------- Net Assets, End of Period (in thousands) $265,096 $151,622 $21,110 $2,632 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) August 10, 2001 (commencement of sale) through March 31, 2002. (3) Computed using the average shares throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class 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. - ------ 38 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- ADVISOR CLASS - -------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.89 $4.29 $5.53 $5.08 $4.69 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------- Net Investment Income(3) 0.05 0.07 0.07 0.06 0.03 - ------------------------- Net Realized and Unrealized Gain (Loss) 0.07 1.60 (1.25) 0.44 0.39 - -------------------------------------------------------------------------------- Total From Investment Operations 0.12 1.67 (1.18) 0.50 0.42 - -------------------------------------------------------------------------------- Distributions - ------------------------- From Net Investment Income (0.04) (0.07) (0.06) (0.05) (0.03) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $5.97 $5.89 $4.29 $5.53 $5.08 ================================================================================ TOTAL RETURN(4) 2.07% 38.99% (21.38)% 9.93% 8.94% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.15%(5) 1.15% 1.15% 1.15% 1.15%(5) - ------------------------- Ratio of Net Investment Income to Average Net Assets 1.59%(5) 1.33% 1.50% 1.09% 1.53%(5) - ------------------------- Portfolio Turnover Rate 7% 14% 30% 34% 55%(6) - ------------------------- Net Assets, End of Period (in thousands) $51,396 $19,265 $1,090 $6 $121 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) October 26, 2000 (commencement of sale) through March 31, 2001. (3) Computed using the average shares throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2001. See Notes to Financial Statements. - ------ 39 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- 2004(1) 2004 2003(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.90 $4.29 $4.46 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income(3) 0.05 0.07 0.01 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 0.06 1.61 (0.17) - -------------------------------------------------------------------------------- Total From Investment Operations 0.11 1.68 (0.16) - -------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.04) (0.07) (0.01) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $5.97 $5.90 $4.29 ================================================================================ TOTAL RETURN(4) 1.90% 39.22% (3.49)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ------------------------------------------ Ratio of Operating Expenses to Average Net Assets 1.15%(5) 1.15% 1.15%(5) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 1.59%(5) 1.33% 1.79%(5) - ------------------------------------------ Portfolio Turnover Rate 7% 14% 30%(6) - ------------------------------------------ Net Assets, End of Period (in thousands) $146,210 $92,171 $3,733 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ------ 40 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- B CLASS - -------------------------------------------------------------------------------- 2004(1) 2004 2003(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.91 $4.29 $4.46 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income(3) 0.02 0.03 0.01 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 0.07 1.62 (0.17) - -------------------------------------------------------------------------------- Total From Investment Operations 0.09 1.65 (0.16) - -------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.02) (0.03) (0.01) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $5.98 $5.91 $4.29 ================================================================================ TOTAL RETURN(4) 1.52% 38.41% (3.58)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.90%(5) 1.90% 1.88%(5) - ------------------------------------------ Ratio of Operating Expenses to Average Net Assets (Before Expense Waiver) 1.90%(5) 1.90% 1.90%(5)(6) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 0.84%(5) 0.58% 0.74%(5) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets (Before Expense Waiver) 0.84%(5) 0.58% 0.72%(5)(6) - ------------------------------------------ Portfolio Turnover Rate 7% 14% 30%(7) - -------------------------------------------------------------------------------- Net Assets, End of Period (in thousands) $9,306 $5,642 $88 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class 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. - ------ 41 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- 2004(1) 2004 2003 2002(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.89 $4.28 $5.53 $5.14 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------- Net Investment Income(3) 0.03 0.03 0.03 0.01 - ------------------------------- Net Realized and Unrealized Gain (Loss) 0.07 1.61 (1.25) 0.39 - -------------------------------------------------------------------------------- Total From Investment Operations 0.10 1.64 (1.22) 0.40 - -------------------------------------------------------------------------------- Distributions - ------------------------------- From Net Investment Income (0.02) (0.03) (0.03) (0.01) - --------------------------------------------------------------------------------- Net Asset Value, End of Period $5.97 $5.89 $4.28 $5.53 ================================================================================= TOTAL RETURN(4) 1.69% 38.27% (22.13)% 7.78% - --------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.90%(5) 1.90% 1.90% 1.90%(5) - ------------------------------- Ratio of Net Investment Income to Average Net Assets 0.84%(5) 0.58% 0.75% 0.33%(5) - ------------------------------- Portfolio Turnover Rate 7% 14% 30% 34%(6) - ------------------------------- Net Assets, End of Period (in thousands) $18,568 $11,030 $1,163 $257 - --------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) November 7, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not include applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class 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. - ------ 42 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED - -------------------------------------------------------------------------------- R CLASS - -------------------------------------------------------------------------------- 2004(1) 2004(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.89 $5.18 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------------------ Net Investment Income(3) 0.04 0.03 - ------------------------------------------------------ Net Realized and Unrealized Gain 0.07 0.72 - -------------------------------------------------------------------------------- Total From Investment Operations 0.11 0.75 - -------------------------------------------------------------------------------- Distributions - ------------------------------------------------------ From Net Investment Income (0.03) (0.04) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $5.97 $5.89 ================================================================================ TOTAL RETURN(4) 1.94% 14.63% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.40%(5) 1.40%(5) - ------------------------------------------------------ Ratio of Net Investment Income to Average Net Assets 1.34%(5) 0.77%(5) - ------------------------------------------------------ Portfolio Turnover Rate 7% 14%(6) - ------------------------------------------------------ Net Assets, End of Period (in thousands) $1,558 $168 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) August 29, 2003 (commencement of sale) through March 31, 2004. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2004. See Notes to Financial Statements. - ------ 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 than that of Investor Class. 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 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 funds' investment 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. Information regarding how the investment manager voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov. QUARTERLY PORTFOLIO DISCLOSURE The funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q for periods ending on or after July 9, 2004. The funds' Form N-Q is available on the SEC's Web site at sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The funds also makes their complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its Web site at americancentury.com and, upon request, by calling 1-800-345-2021. - ------ 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 3000(reg.tm) VALUE INDEX measures the performance of those Russell 3000 Index companies (the 3,000 largest U.S. companies based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values. 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. - ------ 47 Notes - ------ 48 American Century Investments PRSRT STD P.O. Box 419200 U.S. POSTAGE PAID Kansas City, MO 64141-6200 AMERICAN CENTURY COMPANIES The American Century Investments logo, American Century and American Century Investments are service marks of American Century Services Corporation. 0411 American Century Investment Services, Inc. SH-SAN-40408S (c)2004 American Century Services Corporation 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.
SEPTEMBER 30, 2004 American Century Investments Semiannual Report [graphic of market line chart] [graphic of starfish] [graphic of side-by-side bridges] Equity Index Fund [american century investments logo and text logo] Table of Contents Our Message to You....................................................... 1 EQUITY INDEX Performance.............................................................. 2 Shareholder Fee Example.................................................. 3 Portfolio Commentary..................................................... 5 Top Ten Holdings...................................................... 5 Top Five Industries................................................... 6 Types of Investments in Portfolio..................................... 6 Schedule of Investments.................................................. 7 FINANCIAL STATEMENTS Statement of Assets and Liabilities...................................... 15 Statement of Operations.................................................. 16 Statement of Changes in Net Assets....................................... 17 Notes to Financial Statements............................................ 18 Financial Highlights..................................................... 22 OTHER INFORMATION Share Class Information.................................................. 24 Additional Information................................................... 25 Index Definition......................................................... 26 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 in the Portfolio Commentary reflect those of the portfolio management team as of the date of the report, and party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. The opinions expressed do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. Our Message to You [photo of James E. Stowers III and James E. Stowers, JR.] JAMES E. STOWERS III WITH JAMES E. STOWERS, JR. We are pleased to provide you with the semiannual report for the Equity Index fund for the six months ended September 30, 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. 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 annual report dated March 31, 2005, 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 Equity Index - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2004 ---------------------- AVERAGE ANNUAL RETURNS - ------------------------------------------------------------------------ SINCE INCEPTION 1 YEAR 5 YEARS INCEPTION DATE - ------------------------------------------------------------------------------ INVESTOR CLASS 13.14% -1.80% -0.92% 2/26/99 - ------------------------------------------------------------------------------ S&P 500 INDEX 13.87% -1.31% -0.41% -- - ------------------------------------------------------------------------------ Institutional Class 13.61% -1.56% -0.68% 2/26/99 - ------------------------------------------------------------------------------ GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made February 26, 1999
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ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - ------------------------------------------------------------------------------ 1999* 2000 2001 2002 2003 2004 - ------------------------------------------------------------------------------ Investor Class 4.02% 12.54% -26.89% -20.61% 23.56% 13.14% - ------------------------------------------------------------------------------ S&P 500 Index 4.38% 13.28% -26.62% -20.49% 24.40% 13.87% - ------------------------------------------------------------------------------ * From 2/26/99, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. - ------ 2 Shareholder Fee Example (Unaudited) SHAREHOLDER FEE EXAMPLE Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2004 to September 30, 2004. ACTUAL EXPENSES The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If you hold Investor Class shares of any American Century fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century account (i.e., not a financial intermediary or retirement plan account), American Century may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund's share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. (continued) - ------ 3 Shareholder Fee Example (Unaudited) Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - ------------------------------------------------------------------------------------------------ EXPENSES PAID BEGINNING ENDING DURING PERIOD* ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 4/1/04 - EXPENSE 4/1/04 9/30/04 9/30/04 RATIO* - ------------------------------------------------------------------------------------------------ EQUITY INDEX SHAREHOLDER FEE EXAMPLE - ------------------------------------------------------------------------------------------------ ACTUAL: - ------------------------------------------------------------------------------------------------ Investor Class $1,000 $994.60 $2.45 0.49% - ------------------------------------------------------------------------------------------------ Institutional Class $1,000 $997.80 $1.45 0.29% - ------------------------------------------------------------------------------------------------ HYPOTHETICAL: - ------------------------------------------------------------------------------------------------ Investor Class $1,000 $1,022.61 $2.48 0.49% - ------------------------------------------------------------------------------------------------ Institutional Class $1,000 $1,023.61 $1.47 0.29% - ------------------------------------------------------------------------------------------------ *Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. - ------ 4 Equity Index - Portfolio Commentary BARCLAYS GLOBAL FUND ADVISORS: THE SUBADVISOR FOR THE EQUITY INDEX FUND. PERFORMANCE SUMMARY For the six months ended September 30, 2004, Equity Index returned -0.54%*, slightly behind the -0.18% return of the benchmark it tracks, the S&P 500. The portfolio's results reflect its operating expenses that reduce returns, whereas the index return does not. STOCK MARKET REVIEW The U.S. stock market declined modestly during the six-month period. Buffeted by conflicting influences, the S&P 500 traded in a narrow range between 1060 and 1150. On the positive side, corporate profits remained strong; the earnings of S&P 500 companies soared by 25% in the second quarter of 2004--the fourth consecutive quarter of earnings growth above 20% for the S&P 500--and third-quarter earnings were projected to grow by 15%. However, the favorable news on earnings was offset by concerns about soaring oil prices, evidence of moderating economic growth, and the threat of terrorism. In addition, the Federal Reserve raised short-term interest rates three times--its first rate hikes in more than four years--boosting the federal funds rate target from 1% to a two-year high of 1.75%. Though modest, the decline in stocks during the period was broad-based, generally extending across all market capitalizations. The uncertain market environment boosted value stocks at the expense of growth--the value component of the S&P 500 outdistanced the growth portion of the index by a wide margin. RISING COMMODITY PRICES LIFT TOP SECTORS The major sectors in the fund were fairly evenly divided between contributors and detractors. The best-performing sectors included energy, industrials, and materials. Increasing demand and record-high oil prices contributed to the strong gains in energy stocks, which returned about 19% as a group. Two oil companies--Exxon Mobil and ChevronTexaco--were among the top five individual contributors to results. Materials stocks also fared well. Specialty chemicals companies Praxair and Dow Chemical posted double-digit gains as a result of higher sales volumes. In the industrials sector, aerospace and freight companies were among the best contributors. Aircraft manufacturer Boeing was one of the better performers in the industrials sector, raising its TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2004 - ------------------------------------------------------------------------------ % OF NET % OF NET ASSETS ASSETS AS OF AS OF 9/30/04 3/31/04 - ------------------------------------------------------------------------------ General Electric Co. 3.3% 2.9% - ------------------------------------------------------------------------------ Exxon Mobil Corp. 3.0% 2.6% - ------------------------------------------------------------------------------ Microsoft Corporation 2.8% 2.5% - ------------------------------------------------------------------------------ Pfizer, Inc. 2.2% 2.5% - ------------------------------------------------------------------------------ Citigroup Inc. 2.2% 2.5% - ------------------------------------------------------------------------------ Wal-Mart Stores, Inc. 2.1% 2.4% - ------------------------------------------------------------------------------ Bank of America Corp. 1.7% 1.1% - ------------------------------------------------------------------------------ American International Group, Inc. 1.7% 1.8% - ------------------------------------------------------------------------------ Johnson & Johnson 1.6% 1.4% - ------------------------------------------------------------------------------ International Business Machines Corp. 1.4% 1.5% - ------------------------------------------------------------------------------ *All fund returns referenced in this commentary are for Investor Class shares. (continued) - ------ 5 Equity Index - Portfolio Commentary earnings outlook thanks in part to increased commercial airplane deliveries. An increase in orders for plastics and engine parts boosted another top contributor, industrial conglomerate General Electric. The two largest shipping companies, FedEx and United Parcel Service, produced strong returns as freight volumes increased. UTILITIES, TELECOM ALSO SHINE Companies providing electricity and telephone services also fared well during the period. The top contributor in the utilities sector was TXU, the largest electricity supplier in Texas. TXU rose sharply as a new management team worked to reduce debt and increase earnings through restructuring and cost-cutting measures. Verizon and SBC Communications, which together made up half of the average weighting in the fund's telecommunication services sector, rose as growth in their wireless, broadband, and long-distance offerings helped overcome weakness in their local phone business. TECHNOLOGY AND FINANCIALS DECLINE The two largest sectors in the portfolio, financials and information technology, declined during the six-month period. Technology stocks suffered the most substantial losses as a number of bellwether companies lowered earnings and revenue expectations or reported disappointing earnings. Examples included chipmaker Intel, network equipment manufacturer Cisco Systems, and hardware company Hewlett-Packard; all of these companies were among the biggest performance detractors in the fund. The financial sector fell, pulled down by the lagging results of investment banks and brokerage firms. Capital markets companies Merrill Lynch and Morgan Stanley reported disappointing profits amid reduced trading in the financial markets, while diversified financial services conglomerate Citigroup took a nearly $5 billion charge related to its role in the Enron and WorldCom scandals. The remaining sectors--consumer staples, consumer discretionary, and health care--also posted negative returns. The most significant detractors in these sectors included discount retailer Wal-Mart, beverage company Coca-Cola Company, and pharmaceutical giant Pfizer. The fund will continue to focus on matching, as closely as possible, the performance of the S&P 500. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2004 - -------------------------------------------------------------------------------- % OF NET % OF NET ASSETS ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Pharmaceuticals 7.3% 7.7% - -------------------------------------------------------------------------------- Oil & Gas 6.4% 5.0% - -------------------------------------------------------------------------------- Commerical Banks 6.0% 6.2% - -------------------------------------------------------------------------------- Industrial Conglomerates 4.7% 4.1% - -------------------------------------------------------------------------------- Insurance 4.6% 4.7% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF NET % OF NET ASSETS ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Common Stocks & Futures 99.6% 99.8% - -------------------------------------------------------------------------------- Temporary Cash Investments 0.2% 0.1% - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES 99.8% 99.9% - -------------------------------------------------------------------------------- Other Assets and Liabilities 0.2% 0.1% - -------------------------------------------------------------------------------- - ------ 6 Equity Index - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 98.3% AEROSPACE & DEFENSE -- 2.0% - -------------------------------------------------------------------------------- 77,938 Boeing Co. $ 4,023,160 - -------------------------------------------------------------------------------- 18,581 General Dynamics Corp. 1,897,120 - -------------------------------------------------------------------------------- 10,969 Goodrich Corporation 343,988 - -------------------------------------------------------------------------------- 79,708 Honeywell International Inc. 2,858,329 - -------------------------------------------------------------------------------- 41,297 Lockheed Martin Corp. 2,303,547 - -------------------------------------------------------------------------------- 33,069 Northrop Grumman Corp. 1,763,570 - -------------------------------------------------------------------------------- 41,850 Raytheon Company 1,589,463 - -------------------------------------------------------------------------------- 16,426 Rockwell Collins 610,062 - -------------------------------------------------------------------------------- 47,464 United Technologies Corp. 4,432,187 - -------------------------------------------------------------------------------- 19,821,426 - -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS -- 1.1% - -------------------------------------------------------------------------------- 27,878 FedEx Corporation 2,388,866 - -------------------------------------------------------------------------------- 6,032 Ryder System, Inc. 283,745 - -------------------------------------------------------------------------------- 104,175 United Parcel Service, Inc. Cl B 7,908,966 - -------------------------------------------------------------------------------- 10,581,577 - -------------------------------------------------------------------------------- AIRLINES -- 0.1% - -------------------------------------------------------------------------------- 11,351 Delta Air Lines Inc.(1) 37,345 - -------------------------------------------------------------------------------- 72,946 Southwest Airlines Co. 993,524 - -------------------------------------------------------------------------------- 1,030,869 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 0.2% - -------------------------------------------------------------------------------- 7,014 Cooper Tire & Rubber 141,472 - -------------------------------------------------------------------------------- 13,897 Dana Corp. 245,838 - -------------------------------------------------------------------------------- 51,931 Delphi Corp. 482,439 - -------------------------------------------------------------------------------- 16,118 Goodyear Tire & Rubber Co. (The)(1) 173,107 - -------------------------------------------------------------------------------- 17,501 Johnson Controls, Inc. 994,232 - -------------------------------------------------------------------------------- 12,019 Visteon Corp. 96,032 - -------------------------------------------------------------------------------- 2,133,120 - -------------------------------------------------------------------------------- AUTOMOBILES -- 0.6% - -------------------------------------------------------------------------------- 169,658 Ford Motor Company 2,383,695 - -------------------------------------------------------------------------------- 52,159 General Motors Corp. 2,215,714 - -------------------------------------------------------------------------------- 27,474 Harley-Davidson, Inc. 1,633,055 - -------------------------------------------------------------------------------- 6,232,464 - -------------------------------------------------------------------------------- BEVERAGES -- 2.3% - -------------------------------------------------------------------------------- 3,346 Adolph Coors Company Cl B 227,260 - -------------------------------------------------------------------------------- 74,220 Anheuser-Busch Companies, Inc. 3,707,289 - -------------------------------------------------------------------------------- 11,264 Brown-Forman Corp. 515,891 - -------------------------------------------------------------------------------- 225,131 Coca-Cola Company (The) 9,016,496 - -------------------------------------------------------------------------------- 43,341 Coca-Cola Enterprises 819,145 - -------------------------------------------------------------------------------- 23,418 Pepsi Bottling Group Inc. 635,799 - -------------------------------------------------------------------------------- 157,232 PepsiCo, Inc. 7,649,337 - -------------------------------------------------------------------------------- 22,571,217 - -------------------------------------------------------------------------------- BIOTECHNOLOGY -- 1.3% - -------------------------------------------------------------------------------- 117,526 Amgen Inc.(1) 6,661,374 - -------------------------------------------------------------------------------- 19,117 Applera Corporation-Applied Biosystems Group 360,738 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 31,367 Biogen Idec Inc.(1) $ 1,918,719 - -------------------------------------------------------------------------------- 17,392 Chiron Corp.(1) 768,726 - -------------------------------------------------------------------------------- 21,119 Genzyme Corp.(1) 1,149,085 - -------------------------------------------------------------------------------- 40,159 Gilead Sciences, Inc.(1) 1,501,143 - -------------------------------------------------------------------------------- 22,978 MedImmune, Inc.(1) 544,579 - -------------------------------------------------------------------------------- 12,904,364 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.2% - -------------------------------------------------------------------------------- 19,574 American Standard Companies Inc.(1) 761,624 - -------------------------------------------------------------------------------- 40,275 Masco Corp. 1,390,696 - -------------------------------------------------------------------------------- 2,152,320 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 2.6% - -------------------------------------------------------------------------------- 72,330 Bank of New York Co., Inc. (The) 2,109,866 - -------------------------------------------------------------------------------- 9,608 Bear Stearns Companies Inc. (The) 924,001 - -------------------------------------------------------------------------------- 33,883 E*TRADE Group Inc.(1) 386,944 - -------------------------------------------------------------------------------- 10,148 Federated Investors Inc. 288,609 - -------------------------------------------------------------------------------- 23,238 Franklin Resources, Inc. 1,295,751 - -------------------------------------------------------------------------------- 44,995 Goldman Sachs Group, Inc. (The) 4,195,334 - -------------------------------------------------------------------------------- 22,435 Janus Capital Group Inc. 305,340 - -------------------------------------------------------------------------------- 25,278 Lehman Brothers Holdings Inc. 2,015,162 - -------------------------------------------------------------------------------- 39,623 Mellon Financial Corp. 1,097,161 - -------------------------------------------------------------------------------- 87,276 Merrill Lynch & Co., Inc. 4,339,363 - -------------------------------------------------------------------------------- 101,645 Morgan Stanley 5,011,098 - -------------------------------------------------------------------------------- 20,409 Northern Trust Corp. 832,687 - -------------------------------------------------------------------------------- 125,688 Schwab (Charles) Corp. 1,155,073 - -------------------------------------------------------------------------------- 31,386 State Street Corp. 1,340,496 - -------------------------------------------------------------------------------- 11,939 T. Rowe Price Group Inc. 608,173 - -------------------------------------------------------------------------------- 25,905,058 - -------------------------------------------------------------------------------- CHEMICALS -- 1.6% - -------------------------------------------------------------------------------- 21,051 Air Products & Chemicals, Inc. 1,144,753 - -------------------------------------------------------------------------------- 87,001 Dow Chemical Co. 3,930,705 - -------------------------------------------------------------------------------- 92,469 du Pont (E.I.) de Nemours & Co. 3,957,673 - -------------------------------------------------------------------------------- 7,239 Eastman Chemical Company 344,214 - -------------------------------------------------------------------------------- 23,869 Ecolab Inc. 750,441 - -------------------------------------------------------------------------------- 11,700 Engelhard Corporation 331,695 - -------------------------------------------------------------------------------- 4,701 Great Lakes Chemical Corp. 120,346 - -------------------------------------------------------------------------------- 10,197 Hercules Inc.(1) 145,307 - -------------------------------------------------------------------------------- 8,753 International Flavors & Fragrances Inc. 334,365 - -------------------------------------------------------------------------------- 24,962 Monsanto Co. 909,116 - -------------------------------------------------------------------------------- 16,077 PPG Industries, Inc. 985,199 - -------------------------------------------------------------------------------- 30,121 Praxair, Inc. 1,287,372 - -------------------------------------------------------------------------------- 20,608 Rohm and Haas Co. 885,526 - -------------------------------------------------------------------------------- 6,461 Sigma-Aldrich Corp. 374,738 - -------------------------------------------------------------------------------- 15,501,450 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 6.0% - -------------------------------------------------------------------------------- 32,517 AmSouth Bancorporation 793,415 - -------------------------------------------------------------------------------- 377,167 Bank of America Corp. 16,342,645 - -------------------------------------------------------------------------------- 51,303 BB&T Corporation 2,036,216 - -------------------------------------------------------------------------------- 15,830 Comerica Inc. 939,511 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 7 Equity Index - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 52,735 Fifth Third Bancorp $ 2,595,617 - -------------------------------------------------------------------------------- 11,653 First Horizon National Corp. 505,274 - -------------------------------------------------------------------------------- 21,269 Huntington Bancshares Inc. 529,811 - -------------------------------------------------------------------------------- 37,669 KeyCorp 1,190,340 - -------------------------------------------------------------------------------- 10,843 M&T Bank Corp. 1,037,675 - -------------------------------------------------------------------------------- 20,808 Marshall & Ilsley Corp. 838,562 - -------------------------------------------------------------------------------- 61,688 National City Corp. 2,382,391 - -------------------------------------------------------------------------------- 28,883 North Fork Bancorporation, Inc. 1,283,849 - -------------------------------------------------------------------------------- 26,016 PNC Financial Services Group 1,407,466 - -------------------------------------------------------------------------------- 42,880 Regions Financial Corp. 1,417,613 - -------------------------------------------------------------------------------- 30,726 SouthTrust Corp. 1,280,045 - -------------------------------------------------------------------------------- 33,188 SunTrust Banks, Inc. 2,336,767 - -------------------------------------------------------------------------------- 28,722 Synovus Financial Corp. 751,080 - -------------------------------------------------------------------------------- 174,544 U.S. Bancorp 5,044,322 - -------------------------------------------------------------------------------- 121,436 Wachovia Corp. 5,701,420 - -------------------------------------------------------------------------------- 156,692 Wells Fargo & Co. 9,343,544 - -------------------------------------------------------------------------------- 8,344 Zions Bancorporation 509,318 - -------------------------------------------------------------------------------- 58,266,881 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 1.0% - -------------------------------------------------------------------------------- 29,795 Allied Waste Industries Inc.(1) 263,686 - -------------------------------------------------------------------------------- 17,971 Apollo Group Inc. Cl A(1) 1,318,532 - -------------------------------------------------------------------------------- 10,241 Avery Dennison Corp. 673,653 - -------------------------------------------------------------------------------- 15,488 Block (H&R), Inc. 765,417 - -------------------------------------------------------------------------------- 97,643 Cendant Corporation 2,109,089 - -------------------------------------------------------------------------------- 15,807 Cintas Corp. 664,526 - -------------------------------------------------------------------------------- 4,646 Deluxe Corp. 190,579 - -------------------------------------------------------------------------------- 12,991 Equifax Inc. 342,443 - -------------------------------------------------------------------------------- 10,661 Monster Worldwide Inc.(1) 262,687 - -------------------------------------------------------------------------------- 21,528 Pitney Bowes, Inc. 949,385 - -------------------------------------------------------------------------------- 15,931 Robert Half International Inc. 410,542 - -------------------------------------------------------------------------------- 20,482 R.R. Donnelley & Sons Company 641,496 - -------------------------------------------------------------------------------- 53,745 Waste Management, Inc. 1,469,388 - -------------------------------------------------------------------------------- 10,061,423 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 2.7% - -------------------------------------------------------------------------------- 73,987 ADC Telecommunications Inc.(1) 133,916 - -------------------------------------------------------------------------------- 14,401 Andrew Corporation(1) 176,268 - -------------------------------------------------------------------------------- 42,287 Avaya Inc.(1) 589,481 - -------------------------------------------------------------------------------- 53,243 CIENA Corporation(1) 105,421 - -------------------------------------------------------------------------------- 627,220 Cisco Systems Inc.(1) 11,352,683 - -------------------------------------------------------------------------------- 17,991 Comverse Technology, Inc.(1) 338,771 - -------------------------------------------------------------------------------- 128,748 Corning Inc.(1) 1,426,528 - -------------------------------------------------------------------------------- 133,006 JDS Uniphase Corp.(1) 448,230 - -------------------------------------------------------------------------------- 401,355 Lucent Technologies Inc.(1) 1,272,295 - -------------------------------------------------------------------------------- 218,712 Motorola, Inc. 3,945,564 - -------------------------------------------------------------------------------- 150,775 QUALCOMM Inc. 5,886,257 - -------------------------------------------------------------------------------- 14,110 Scientific-Atlanta, Inc. 365,731 - -------------------------------------------------------------------------------- 38,854 Tellabs, Inc.(1) 357,068 - -------------------------------------------------------------------------------- 26,398,213 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 3.5% - -------------------------------------------------------------------------------- 35,823 Apple Computer, Inc.(1) $ 1,388,141 - -------------------------------------------------------------------------------- 231,710 Dell Inc.(1) 8,248,877 - -------------------------------------------------------------------------------- 223,815 EMC Corp.(1) 2,582,825 - -------------------------------------------------------------------------------- 33,254 Gateway, Inc.(1) 164,607 - -------------------------------------------------------------------------------- 280,475 Hewlett-Packard Co. 5,258,906 - -------------------------------------------------------------------------------- 155,402 International Business Machines Corp. 13,324,168 - -------------------------------------------------------------------------------- 11,976 Lexmark International, Inc.(1) 1,006,104 - -------------------------------------------------------------------------------- 8,821 NCR Corp.(1) 437,433 - -------------------------------------------------------------------------------- 32,938 Network Appliance, Inc.(1) 757,574 - -------------------------------------------------------------------------------- 8,784 QLogic Corp.(1) 260,094 - -------------------------------------------------------------------------------- 306,712 Sun Microsystems, Inc.(1) 1,239,116 - -------------------------------------------------------------------------------- 34,667,845 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING(2) - -------------------------------------------------------------------------------- 7,668 Fluor Corp. 341,379 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS(2) - -------------------------------------------------------------------------------- 9,450 Vulcan Materials Co. 481,478 - -------------------------------------------------------------------------------- CONSUMER FINANCE -- 1.3% - -------------------------------------------------------------------------------- 117,715 American Express Co. 6,057,613 - -------------------------------------------------------------------------------- 22,400 Capital One Financial Corp. 1,655,360 - -------------------------------------------------------------------------------- 118,369 MBNA Corporation 2,982,899 - -------------------------------------------------------------------------------- 27,107 Providian Financial Corp.(1) 421,243 - -------------------------------------------------------------------------------- 40,386 SLM Corporation 1,801,216 - -------------------------------------------------------------------------------- 12,918,331 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 0.2% - -------------------------------------------------------------------------------- 10,362 Ball Corp. 387,850 - -------------------------------------------------------------------------------- 9,767 Bemis Co. 259,607 - -------------------------------------------------------------------------------- 13,629 Pactiv Corp.(1) 316,874 - -------------------------------------------------------------------------------- 7,906 Sealed Air Corp.(1) 366,443 - -------------------------------------------------------------------------------- 5,071 Temple-Inland Inc. 340,518 - -------------------------------------------------------------------------------- 1,671,292 - -------------------------------------------------------------------------------- DISTRIBUTORS -- 0.1% - -------------------------------------------------------------------------------- 16,144 Genuine Parts Company 619,607 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 3.7% - -------------------------------------------------------------------------------- 480,108 Citigroup Inc. 21,182,365 - -------------------------------------------------------------------------------- 330,076 J.P. Morgan Chase & Co. 13,113,919 - -------------------------------------------------------------------------------- 13,792 Moody's Corp. 1,010,264 - -------------------------------------------------------------------------------- 29,213 Principal Financial Group 1,050,792 - -------------------------------------------------------------------------------- 36,357,340 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.0% - -------------------------------------------------------------------------------- 28,716 ALLTEL Corp. 1,576,796 - -------------------------------------------------------------------------------- 73,174 AT&T Corp. 1,047,852 - -------------------------------------------------------------------------------- 169,962 BellSouth Corp. 4,609,369 - -------------------------------------------------------------------------------- 12,584 CenturyTel Inc. 430,876 - -------------------------------------------------------------------------------- 30,359 Citizens Communications Company 406,507 - -------------------------------------------------------------------------------- 170,009 Qwest Communications International Inc.(1) 566,130 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 8 Equity Index - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 307,320 SBC Communications Inc. $ 7,974,954 - -------------------------------------------------------------------------------- 134,408 Sprint Corp. 2,705,633 - -------------------------------------------------------------------------------- 256,768 Verizon Communications 10,111,524 - -------------------------------------------------------------------------------- 29,429,641 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 1.9% - -------------------------------------------------------------------------------- 11,674 Allegheny Energy, Inc.(1) 186,317 - -------------------------------------------------------------------------------- 17,828 Ameren Corp. 822,762 - -------------------------------------------------------------------------------- 36,598 American Electric Power 1,169,672 - -------------------------------------------------------------------------------- 28,620 CenterPoint Energy, Inc. 296,503 - -------------------------------------------------------------------------------- 16,499 Cinergy Corp. 653,360 - -------------------------------------------------------------------------------- 22,225 Consolidated Edison, Inc. 934,339 - -------------------------------------------------------------------------------- 15,937 DTE Energy Company 672,382 - -------------------------------------------------------------------------------- 30,175 Edison International 799,939 - -------------------------------------------------------------------------------- 20,876 Entergy Corp. 1,265,294 - -------------------------------------------------------------------------------- 61,032 Exelon Corporation 2,239,265 - -------------------------------------------------------------------------------- 30,560 FirstEnergy Corp. 1,255,405 - -------------------------------------------------------------------------------- 17,043 FPL Group, Inc. 1,164,378 - -------------------------------------------------------------------------------- 37,490 PG&E Corp.(1) 1,139,696 - -------------------------------------------------------------------------------- 8,517 Pinnacle West Capital Corp. 353,456 - -------------------------------------------------------------------------------- 17,408 PPL Corporation 821,309 - -------------------------------------------------------------------------------- 22,693 Progress Energy Inc. 960,822 - -------------------------------------------------------------------------------- 68,752 Southern Co. 2,061,185 - -------------------------------------------------------------------------------- 18,782 TECO Energy, Inc. 254,120 - -------------------------------------------------------------------------------- 27,676 TXU Corp. 1,326,234 - -------------------------------------------------------------------------------- 36,951 XCEL Energy Inc. 639,991 - -------------------------------------------------------------------------------- 19,016,429 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 0.4% - -------------------------------------------------------------------------------- 18,449 American Power Conversion Corp. 320,828 - -------------------------------------------------------------------------------- 8,668 Cooper Industries, Ltd. 511,412 - -------------------------------------------------------------------------------- 38,983 Emerson Electric Co. 2,412,658 - -------------------------------------------------------------------------------- 7,656 Power-One Inc.(1) 49,611 - -------------------------------------------------------------------------------- 17,274 Rockwell Automation Inc. 668,504 - -------------------------------------------------------------------------------- 3,963,013 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.3% - -------------------------------------------------------------------------------- 45,275 Agilent Technologies, Inc.(1) 976,581 - -------------------------------------------------------------------------------- 18,523 Jabil Circuit, Inc.(1) 426,029 - -------------------------------------------------------------------------------- 17,647 Molex Inc. 526,234 - -------------------------------------------------------------------------------- 47,916 Sanmina-SCI Corp.(1) 337,808 - -------------------------------------------------------------------------------- 88,811 Solectron Corp.(1) 439,614 - -------------------------------------------------------------------------------- 21,465 Symbol Technologies, Inc. 271,318 - -------------------------------------------------------------------------------- 7,772 Tektronix, Inc. 258,419 - -------------------------------------------------------------------------------- 3,236,003 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES -- 1.0% - -------------------------------------------------------------------------------- 31,004 Baker Hughes Inc. 1,355,495 - -------------------------------------------------------------------------------- 15,084 BJ Services Co. 790,552 - -------------------------------------------------------------------------------- 41,221 Halliburton Co. 1,388,736 - -------------------------------------------------------------------------------- 13,592 Nabors Industries Ltd.(1) 643,581 - -------------------------------------------------------------------------------- 12,434 Noble Corp.(1) 558,908 - -------------------------------------------------------------------------------- 9,595 Rowan Companies, Inc.(1) 253,308 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 54,704 Schlumberger Ltd. $ 3,682,127 - -------------------------------------------------------------------------------- 29,607 Transocean Inc.(1) 1,059,338 - -------------------------------------------------------------------------------- 9,732,045 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 3.3% - -------------------------------------------------------------------------------- 33,977 Albertson's Inc. 813,070 - -------------------------------------------------------------------------------- 42,901 Costco Wholesale Corporation 1,782,966 - -------------------------------------------------------------------------------- 37,079 CVS Corp. 1,562,138 - -------------------------------------------------------------------------------- 68,986 Kroger Co. (The)(1) 1,070,663 - -------------------------------------------------------------------------------- 40,975 Safeway Inc.(1) 791,227 - -------------------------------------------------------------------------------- 12,500 Supervalu Inc. 344,375 - -------------------------------------------------------------------------------- 59,437 Sysco Corp. 1,778,355 - -------------------------------------------------------------------------------- 393,465 Wal-Mart Stores, Inc. 20,932,337 - -------------------------------------------------------------------------------- 94,978 Walgreen Co. 3,403,062 - -------------------------------------------------------------------------------- 13,020 Winn-Dixie Stores, Inc. 40,232 - -------------------------------------------------------------------------------- 32,518,425 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 1.2% - -------------------------------------------------------------------------------- 59,926 Archer-Daniels-Midland Co. 1,017,543 - -------------------------------------------------------------------------------- 38,012 Campbell Soup Company 999,335 - -------------------------------------------------------------------------------- 49,258 ConAgra Foods, Inc. 1,266,423 - -------------------------------------------------------------------------------- 35,304 General Mills, Inc. 1,585,150 - -------------------------------------------------------------------------------- 32,580 H.J. Heinz Company 1,173,532 - -------------------------------------------------------------------------------- 23,028 Hershey Foods Corp. 1,075,638 - -------------------------------------------------------------------------------- 38,458 Kellogg Co. 1,640,618 - -------------------------------------------------------------------------------- 12,930 McCormick & Company, Inc. 444,016 - -------------------------------------------------------------------------------- 73,185 Sara Lee Corp. 1,673,010 - -------------------------------------------------------------------------------- 20,813 Wrigley (Wm.) Jr. Company 1,317,671 - -------------------------------------------------------------------------------- 12,192,936 - -------------------------------------------------------------------------------- GAS UTILITIES -- 0.1% - -------------------------------------------------------------------------------- 14,759 KeySpan Corporation 578,552 - ------------------------------------------------------------------------------- 4,048 NICOR Inc. 148,562 - ------------------------------------------------------------------------------- 24,355 NiSource Inc. 511,699 - ------------------------------------------------------------------------------- 3,383 People's Energy Corp. 141,003 - ------------------------------------------------------------------------------- 1,379,816 - ------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 2.4% - -------------------------------------------------------------------------------- 9,652 Bard (C.R.), Inc. 546,593 - -------------------------------------------------------------------------------- 4,914 Bausch & Lomb Inc. Cl A 326,535 - -------------------------------------------------------------------------------- 57,163 Baxter International, Inc. 1,838,362 - -------------------------------------------------------------------------------- 23,131 Becton Dickinson & Co. 1,195,873 - -------------------------------------------------------------------------------- 23,663 Biomet Inc. 1,109,321 - -------------------------------------------------------------------------------- 77,944 Boston Scientific Corp.(1) 3,096,715 - -------------------------------------------------------------------------------- 10,555 Fisher Scientific International(1) 615,673 - -------------------------------------------------------------------------------- 29,263 Guidant Corp. 1,932,529 - -------------------------------------------------------------------------------- 14,483 Hospira Inc.(1) 443,180 - -------------------------------------------------------------------------------- 112,287 Medtronic, Inc. 5,827,696 - -------------------------------------------------------------------------------- 4,486 Millipore Corp.(1) 214,655 - -------------------------------------------------------------------------------- 11,661 PerkinElmer, Inc. 200,802 - -------------------------------------------------------------------------------- 16,523 St. Jude Medical, Inc.(1) 1,243,686 - -------------------------------------------------------------------------------- 37,375 Stryker Corp. 1,796,990 - -------------------------------------------------------------------------------- 15,154 Thermo Electron Corp.(1) 409,461 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 9 Equity Index - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 10,743 Waters Corp.(1) $ 473,766 - -------------------------------------------------------------------------------- 22,795 Zimmer Holdings Inc.(1) 1,801,717 - -------------------------------------------------------------------------------- 23,073,554 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 2.0% - -------------------------------------------------------------------------------- 14,336 Aetna Inc. 1,432,596 - -------------------------------------------------------------------------------- 10,377 AmerisourceBergen Corp. 557,349 - -------------------------------------------------------------------------------- 13,040 Anthem, Inc.(1) 1,137,740 - -------------------------------------------------------------------------------- 39,975 Cardinal Health, Inc. 1,749,706 - -------------------------------------------------------------------------------- 43,033 Caremark Rx Inc.(1) 1,380,068 - -------------------------------------------------------------------------------- 12,712 CIGNA Corp. 885,137 - -------------------------------------------------------------------------------- 7,296 Express Scripts, Inc. Cl A(1) 476,721 - -------------------------------------------------------------------------------- 44,675 HCA Inc. 1,704,351 - -------------------------------------------------------------------------------- 22,249 Health Management Associates, Inc. Cl A 454,547 - -------------------------------------------------------------------------------- 15,035 Humana Inc.(1) 300,399 - -------------------------------------------------------------------------------- 22,003 IMS Health Inc. 526,312 - -------------------------------------------------------------------------------- 8,346 Manor Care, Inc. 250,046 - -------------------------------------------------------------------------------- 26,987 McKesson Corp. 692,217 - -------------------------------------------------------------------------------- 25,013 Medco Health Solutions Inc.(1) 772,902 - -------------------------------------------------------------------------------- 9,383 Quest Diagnostics Inc. 827,768 - -------------------------------------------------------------------------------- 43,017 Tenet Healthcare Corp.(1) 464,153 - -------------------------------------------------------------------------------- 61,487 UnitedHealth Group Incorporated 4,534,051 - -------------------------------------------------------------------------------- 14,555 Wellpoint Health Networks Inc.(1) 1,529,585 - -------------------------------------------------------------------------------- 19,675,648 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 1.4% - -------------------------------------------------------------------------------- 58,791 Carnival Corporation 2,780,226 - -------------------------------------------------------------------------------- 14,210 Darden Restaurants, Inc. 331,377 - -------------------------------------------------------------------------------- 10,354 Harrah's Entertainment, Inc. 548,555 - -------------------------------------------------------------------------------- 35,167 Hilton Hotels Corporation 662,546 - -------------------------------------------------------------------------------- 32,050 International Game Technology 1,152,198 - -------------------------------------------------------------------------------- 21,129 Marriott International, Inc. 1,097,863 - -------------------------------------------------------------------------------- 116,165 McDonald's Corporation 3,256,106 - -------------------------------------------------------------------------------- 36,916 Starbucks Corporation(1) 1,678,201 - -------------------------------------------------------------------------------- 19,498 Starwood Hotels & Resorts Worldwide, Inc. 905,097 - -------------------------------------------------------------------------------- 10,602 Wendy's International, Inc. 356,227 - -------------------------------------------------------------------------------- 27,044 Yum! Brands, Inc. 1,099,609 - -------------------------------------------------------------------------------- 13,868,005 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.5% - -------------------------------------------------------------------------------- 7,515 Black & Decker Corporation 581,962 - -------------------------------------------------------------------------------- 11,528 Centex Corp. 581,703 - -------------------------------------------------------------------------------- 13,242 Fortune Brands, Inc. 981,100 - -------------------------------------------------------------------------------- 4,336 KB HOME 366,349 - -------------------------------------------------------------------------------- 17,873 Leggett & Platt, Inc. 502,231 - -------------------------------------------------------------------------------- 7,220 Maytag Corporation 132,631 - -------------------------------------------------------------------------------- 25,435 Newell Rubbermaid Inc. 509,717 - -------------------------------------------------------------------------------- 11,641 Pulte Homes Inc. 714,408 - -------------------------------------------------------------------------------- 5,356 Snap-on Incorporated 147,611 - -------------------------------------------------------------------------------- 7,579 Stanley Works (The) 322,335 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 6,141 Whirlpool Corp. $ 369,013 - -------------------------------------------------------------------------------- 5,209,060 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 1.9% - -------------------------------------------------------------------------------- 19,919 Clorox Company 1,061,683 - -------------------------------------------------------------------------------- 49,052 Colgate-Palmolive Co. 2,216,169 - -------------------------------------------------------------------------------- 45,986 Kimberly-Clark Corp. 2,970,236 - -------------------------------------------------------------------------------- 235,835 Procter & Gamble Co. (The) 12,763,390 - -------------------------------------------------------------------------------- 19,011,478 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 4.7% - -------------------------------------------------------------------------------- 72,500 3M Co. 5,797,825 - -------------------------------------------------------------------------------- 978,608 General Electric Co.(3) 32,861,656 - -------------------------------------------------------------------------------- 12,907 Textron Inc. 829,533 - -------------------------------------------------------------------------------- 186,119 Tyco International Ltd. 5,706,409 - -------------------------------------------------------------------------------- 45,195,423 - -------------------------------------------------------------------------------- INSURANCE -- 4.6% - -------------------------------------------------------------------------------- 26,095 Ace, Ltd. 1,045,366 - -------------------------------------------------------------------------------- 46,811 Aflac Inc. 1,835,459 - -------------------------------------------------------------------------------- 64,443 Allstate Corp. 3,092,620 - -------------------------------------------------------------------------------- 9,966 Ambac Financial Group, Inc. 796,782 - -------------------------------------------------------------------------------- 241,530 American International Group, Inc. 16,421,624 - -------------------------------------------------------------------------------- 29,034 AON Corp. 834,437 - -------------------------------------------------------------------------------- 17,774 Chubb Corp. 1,249,157 - -------------------------------------------------------------------------------- 15,607 Cincinnati Financial Corp. 643,321 - -------------------------------------------------------------------------------- 27,278 Hartford Financial Services Group Inc. (The) 1,689,327 - -------------------------------------------------------------------------------- 12,658 Jefferson-Pilot Corp. 628,596 - -------------------------------------------------------------------------------- 16,480 Lincoln National Corp. 774,560 - -------------------------------------------------------------------------------- 17,182 Loews Corp. 1,005,147 - -------------------------------------------------------------------------------- 48,215 Marsh & McLennan Companies Inc. 2,206,318 - -------------------------------------------------------------------------------- 13,345 MBIA Inc. 776,812 - -------------------------------------------------------------------------------- 69,702 MetLife, Inc. 2,693,982 - -------------------------------------------------------------------------------- 20,011 Progressive Corp. 1,695,932 - -------------------------------------------------------------------------------- 48,314 Prudential Financial Inc. 2,272,691 - -------------------------------------------------------------------------------- 12,859 Safeco Corp. 587,013 - -------------------------------------------------------------------------------- 62,215 St. Paul Travelers Companies, Inc. (The) 2,056,828 - -------------------------------------------------------------------------------- 10,032 Torchmark Corp. 533,502 - -------------------------------------------------------------------------------- 27,533 UnumProvident Corp. 431,993 - -------------------------------------------------------------------------------- 12,712 XL Capital Ltd. Cl A 940,561 - -------------------------------------------------------------------------------- 44,212,028 - -------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL -- 0.6% - -------------------------------------------------------------------------------- 61,225 eBay Inc.(1) 5,629,027 - -------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES -- 0.4% - -------------------------------------------------------------------------------- 125,978 Yahoo! Inc.(1) 4,271,914 - -------------------------------------------------------------------------------- IT SERVICES -- 1.1% - -------------------------------------------------------------------------------- 12,036 Affiliated Computer Services Inc(1) 670,044 - -------------------------------------------------------------------------------- 54,378 Automatic Data Processing, Inc. 2,246,899 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 10 Equity Index - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 17,352 Computer Sciences Corp.(1) $ 817,279 - -------------------------------------------------------------------------------- 13,150 Convergys Corp.(1) 176,605 - -------------------------------------------------------------------------------- 47,415 Electronic Data Systems Corp. 919,377 - -------------------------------------------------------------------------------- 79,708 First Data Corp. 3,467,298 - -------------------------------------------------------------------------------- 17,943 Fiserv, Inc.(1) 625,493 - -------------------------------------------------------------------------------- 34,929 Paychex, Inc. 1,053,109 - -------------------------------------------------------------------------------- 12,374 Sabre Holdings Corp. 303,534 - -------------------------------------------------------------------------------- 26,613 SunGard Data Systems Inc.(1) 632,591 - -------------------------------------------------------------------------------- 30,703 Unisys Corp.(1) 316,855 - -------------------------------------------------------------------------------- 11,229,084 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 0.2% - -------------------------------------------------------------------------------- 9,048 Brunswick Corp. 414,036 - -------------------------------------------------------------------------------- 26,533 Eastman Kodak Co. 854,894 - -------------------------------------------------------------------------------- 16,273 Hasbro, Inc. 305,932 - -------------------------------------------------------------------------------- 38,381 Mattel, Inc. 695,848 - -------------------------------------------------------------------------------- 2,270,710 - -------------------------------------------------------------------------------- MACHINERY -- 1.5% - -------------------------------------------------------------------------------- 31,775 Caterpillar Inc. 2,556,299 - -------------------------------------------------------------------------------- 5,462 Crane Co. 157,961 - -------------------------------------------------------------------------------- 4,177 Cummins Inc. 308,639 - -------------------------------------------------------------------------------- 28,452 Danaher Corp. 1,459,019 - -------------------------------------------------------------------------------- 22,971 Deere & Co. 1,482,778 - -------------------------------------------------------------------------------- 18,750 Dover Corp. 728,813 - -------------------------------------------------------------------------------- 14,078 Eaton Corp. 892,686 - -------------------------------------------------------------------------------- 28,129 Illinois Tool Works Inc. 2,620,778 - -------------------------------------------------------------------------------- 16,136 Ingersoll-Rand Company 1,096,764 - -------------------------------------------------------------------------------- 8,551 ITT Industries, Inc. 683,994 - -------------------------------------------------------------------------------- 6,414 Navistar International Corp.(1) 238,537 - -------------------------------------------------------------------------------- 16,199 Paccar Inc. 1,119,675 - -------------------------------------------------------------------------------- 11,676 Pall Corp. 285,828 - -------------------------------------------------------------------------------- 10,983 Parker-Hannifin Corp. 646,459 - -------------------------------------------------------------------------------- 14,278,230 - -------------------------------------------------------------------------------- MEDIA -- 3.4% - -------------------------------------------------------------------------------- 54,989 Clear Channel Communications, Inc. 1,714,007 - -------------------------------------------------------------------------------- 207,158 Comcast Corporation(1) 5,850,142 - -------------------------------------------------------------------------------- 190,617 Disney (Walt) Co. 4,298,413 - -------------------------------------------------------------------------------- 7,596 Dow Jones & Co. Inc. 308,474 - -------------------------------------------------------------------------------- 24,781 Gannett Co., Inc. 2,075,657 - -------------------------------------------------------------------------------- 38,416 Interpublic Group of Companies, Inc.(1) 406,825 - -------------------------------------------------------------------------------- 7,095 Knight-Ridder, Inc. 464,368 - -------------------------------------------------------------------------------- 17,487 McGraw-Hill Companies, Inc. (The) 1,393,539 - -------------------------------------------------------------------------------- 4,612 Meredith Corp. 236,965 - -------------------------------------------------------------------------------- 13,797 New York Times Co. (The) Cl A 539,463 - -------------------------------------------------------------------------------- 17,315 Omnicom Group Inc. 1,265,034 - -------------------------------------------------------------------------------- 423,577 Time Warner Inc.(1) 6,836,532 - -------------------------------------------------------------------------------- 29,745 Tribune Co. 1,224,007 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 29,869 Univision Communications Inc. Cl A(1) $ 944,159 - -------------------------------------------------------------------------------- 160,620 Viacom, Inc. Cl B 5,390,407 - -------------------------------------------------------------------------------- 32,947,992 - -------------------------------------------------------------------------------- METALS & MINING -- 0.8% - -------------------------------------------------------------------------------- 80,370 Alcoa Inc. 2,699,628 - -------------------------------------------------------------------------------- 8,585 Allegheny Technologies Inc. 156,676 - -------------------------------------------------------------------------------- 16,238 Freeport-McMoRan Copper & Gold, Inc. Cl B 657,639 - -------------------------------------------------------------------------------- 40,883 Newmont Mining Corporation 1,861,403 - -------------------------------------------------------------------------------- 7,289 Nucor Corp. 665,996 - -------------------------------------------------------------------------------- 8,822 Phelps Dodge Corp. 811,889 - -------------------------------------------------------------------------------- 10,287 United States Steel Corp. 386,997 - -------------------------------------------------------------------------------- 7,915 Worthington Industries, Inc. 168,985 - -------------------------------------------------------------------------------- 7,409,213 - -------------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER -- 0.8% - -------------------------------------------------------------------------------- 60,489 AES Corporation (The)(1) 604,285 - -------------------------------------------------------------------------------- 43,385 Calpine Corporation(1) 125,817 - -------------------------------------------------------------------------------- 14,813 CMS Energy Corp.(1) 141,020 - -------------------------------------------------------------------------------- 16,144 Constellation Energy Group Inc. 643,177 - -------------------------------------------------------------------------------- 30,538 Dominion Resources Inc. 1,992,605 - -------------------------------------------------------------------------------- 86,713 Duke Energy Corp. 1,984,861 - -------------------------------------------------------------------------------- 34,658 Dynegy Inc. Cl A(1) 172,943 - -------------------------------------------------------------------------------- 21,774 Public Service Enterprise Group Inc. 927,572 - -------------------------------------------------------------------------------- 21,681 Sempra Energy 784,635 - -------------------------------------------------------------------------------- 7,376,915 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 1.0% - -------------------------------------------------------------------------------- 10,746 Big Lots Inc.(1) 131,424 - -------------------------------------------------------------------------------- 7,658 Dillard's Inc. 151,169 - -------------------------------------------------------------------------------- 29,963 Dollar General Corp. 603,754 - -------------------------------------------------------------------------------- 15,272 Family Dollar Stores, Inc. 413,871 - -------------------------------------------------------------------------------- 16,742 Federated Department Stores, Inc. 760,589 - -------------------------------------------------------------------------------- 26,586 J.C. Penney Co. Inc. Holding Company 937,954 - -------------------------------------------------------------------------------- 31,496 Kohl's Corp.(1) 1,517,792 - -------------------------------------------------------------------------------- 26,714 May Department Stores Co. (The) 684,680 - -------------------------------------------------------------------------------- 13,261 Nordstrom, Inc. 507,101 - -------------------------------------------------------------------------------- 19,446 Sears, Roebuck & Co. 774,923 - -------------------------------------------------------------------------------- 83,951 Target Corporation 3,798,783 - -------------------------------------------------------------------------------- 10,282,040 - -------------------------------------------------------------------------------- OFFICE ELECTRONICS -- 0.1% - -------------------------------------------------------------------------------- 77,437 Xerox Corp.(1) 1,090,313 - -------------------------------------------------------------------------------- OIL & GAS -- 6.4% - -------------------------------------------------------------------------------- 8,350 Amerada Hess Corp. 743,150 - -------------------------------------------------------------------------------- 23,236 Anadarko Petroleum Corp. 1,541,941 - -------------------------------------------------------------------------------- 30,428 Apache Corp. 1,524,747 - -------------------------------------------------------------------------------- 6,417 Ashland Inc. 359,865 - -------------------------------------------------------------------------------- 36,800 Burlington Resources, Inc. 1,501,440 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 11 Equity Index - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 197,655 ChevronTexaco Corp. $ 10,602,214 - -------------------------------------------------------------------------------- 63,785 ConocoPhillips 5,284,587 - -------------------------------------------------------------------------------- 22,412 Devon Energy Corporation 1,591,476 - -------------------------------------------------------------------------------- 58,249 El Paso Corp. 535,308 - -------------------------------------------------------------------------------- 11,008 EOG Resources Inc. 724,877 - -------------------------------------------------------------------------------- 603,266 Exxon Mobil Corp. 29,155,845 - -------------------------------------------------------------------------------- 13,843 Kerr-McGee Corp. 792,512 - -------------------------------------------------------------------------------- 11,412 Kinder Morgan, Inc. 716,902 - -------------------------------------------------------------------------------- 31,838 Marathon Oil Corp. 1,314,273 - -------------------------------------------------------------------------------- 36,480 Occidental Petroleum Corp. 2,040,326 - -------------------------------------------------------------------------------- 7,111 Sunoco, Inc. 526,072 - -------------------------------------------------------------------------------- 24,773 Unocal Corp. 1,065,239 - -------------------------------------------------------------------------------- 11,774 Valero Energy Corp. 944,393 - -------------------------------------------------------------------------------- 48,095 Williams Companies, Inc. (The) 581,950 - -------------------------------------------------------------------------------- 61,547,117 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 0.5% - -------------------------------------------------------------------------------- 24,101 Georgia-Pacific Corp. 866,431 - -------------------------------------------------------------------------------- 45,319 International Paper Company 1,831,340 - -------------------------------------------------------------------------------- 10,506 Louisiana-Pacific Corp. 272,631 - -------------------------------------------------------------------------------- 18,608 MeadWestvaco Corp. 593,595 - -------------------------------------------------------------------------------- 22,241 Weyerhaeuser Co. 1,478,582 - -------------------------------------------------------------------------------- 5,042,579 - -------------------------------------------------------------------------------- PERSONAL PRODUCTS -- 0.6% - -------------------------------------------------------------------------------- 8,228 Alberto-Culver Company Cl B 357,753 - -------------------------------------------------------------------------------- 43,804 Avon Products, Inc. 1,913,359 - -------------------------------------------------------------------------------- 93,098 Gillette Company 3,885,911 - -------------------------------------------------------------------------------- 6,157,023 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 7.3% - -------------------------------------------------------------------------------- 144,578 Abbott Laboratories 6,124,324 - -------------------------------------------------------------------------------- 12,082 Allergan, Inc. 876,549 - -------------------------------------------------------------------------------- 180,511 Bristol-Myers Squibb Co. 4,272,695 - -------------------------------------------------------------------------------- 104,771 Eli Lilly and Company 6,291,499 - -------------------------------------------------------------------------------- 34,156 Forest Laboratories, Inc. Cl A(1) 1,536,337 - -------------------------------------------------------------------------------- 275,268 Johnson & Johnson 15,505,846 - -------------------------------------------------------------------------------- 22,471 King Pharmaceuticals, Inc.(1) 268,304 - -------------------------------------------------------------------------------- 205,863 Merck & Co., Inc. 6,793,479 - -------------------------------------------------------------------------------- 24,819 Mylan Laboratories Inc. 446,742 - -------------------------------------------------------------------------------- 700,263 Pfizer, Inc. 21,428,047 - -------------------------------------------------------------------------------- 136,147 Schering-Plough Corp. 2,594,962 - -------------------------------------------------------------------------------- 10,031 Watson Pharmaceuticals, Inc.(1) 295,513 - -------------------------------------------------------------------------------- 123,399 Wyeth 4,615,123 - -------------------------------------------------------------------------------- 71,049,420 - -------------------------------------------------------------------------------- REAL ESTATE -- 0.4% - -------------------------------------------------------------------------------- 8,806 Apartment Investment and Management Co. 306,273 - -------------------------------------------------------------------------------- 37,016 Equity Office Properties Trust 1,008,686 - -------------------------------------------------------------------------------- 25,772 Equity Residential 798,932 - -------------------------------------------------------------------------------- 16,990 Plum Creek Timber Co. Inc. 595,160 - -------------------------------------------------------------------------------- 16,698 Prologis 588,438 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 19,169 Simon Property Group, Inc. $ 1,028,032 - -------------------------------------------------------------------------------- 4,325,521 - -------------------------------------------------------------------------------- ROAD & RAIL -- 0.5% - -------------------------------------------------------------------------------- 34,374 Burlington Northern Santa Fe Corp. 1,316,868 - -------------------------------------------------------------------------------- 19,818 CSX Corporation 657,958 - -------------------------------------------------------------------------------- 36,833 Norfolk Southern Corp. 1,095,413 - -------------------------------------------------------------------------------- 24,185 Union Pacific Corp. 1,417,241 - -------------------------------------------------------------------------------- 4,487,480 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.8% - -------------------------------------------------------------------------------- 32,371 Advanced Micro Devices, Inc.(1) 420,823 - -------------------------------------------------------------------------------- 34,021 Altera Corp.(1) 665,791 - -------------------------------------------------------------------------------- 35,236 Analog Devices, Inc. 1,366,452 - -------------------------------------------------------------------------------- 157,138 Applied Materials, Inc.(1) 2,591,206 - -------------------------------------------------------------------------------- 28,221 Applied Micro Circuits Corp.(1) 88,332 - -------------------------------------------------------------------------------- 29,686 Broadcom Corp.(1) 810,131 - -------------------------------------------------------------------------------- 595,146 Intel Corp. 11,938,628 - -------------------------------------------------------------------------------- 18,031 KLA-Tencor Corp.(1) 747,926 - -------------------------------------------------------------------------------- 28,240 Linear Technology Corp. 1,023,418 - -------------------------------------------------------------------------------- 35,323 LSI Logic Corp.(1) 152,242 - -------------------------------------------------------------------------------- 30,018 Maxim Integrated Products, Inc. 1,269,461 - -------------------------------------------------------------------------------- 56,526 Micron Technology, Inc.(1) 680,008 - -------------------------------------------------------------------------------- 33,436 National Semiconductor Corp.(1) 517,924 - -------------------------------------------------------------------------------- 13,184 Novellus Systems, Inc.(1) 350,563 - -------------------------------------------------------------------------------- 15,114 NVIDIA Corp.(1) 219,455 - -------------------------------------------------------------------------------- 16,121 PMC-Sierra, Inc.(1) 142,026 - -------------------------------------------------------------------------------- 17,776 Teradyne, Inc.(1) 238,198 - -------------------------------------------------------------------------------- 160,348 Texas Instruments Inc. 3,412,205 - -------------------------------------------------------------------------------- 31,992 Xilinx, Inc. 863,784 - -------------------------------------------------------------------------------- 27,498,573 - -------------------------------------------------------------------------------- SOFTWARE -- 4.4% - -------------------------------------------------------------------------------- 22,414 Adobe Systems Inc. 1,108,821 - -------------------------------------------------------------------------------- 10,683 Autodesk, Inc. 519,514 - -------------------------------------------------------------------------------- 21,041 BMC Software Inc.(1) 332,658 - -------------------------------------------------------------------------------- 15,329 Citrix Systems, Inc.(1) 268,564 - -------------------------------------------------------------------------------- 53,955 Computer Associates International, Inc. 1,419,017 - -------------------------------------------------------------------------------- 35,307 Compuware Corp.(1) 181,831 - -------------------------------------------------------------------------------- 28,348 Electronic Arts Inc.(1) 1,303,725 - -------------------------------------------------------------------------------- 17,969 Intuit Inc.(1) 815,793 - -------------------------------------------------------------------------------- 8,377 Mercury Interactive Corp.(1) 292,190 - -------------------------------------------------------------------------------- 1,007,724 Microsoft Corporation 27,863,568 - -------------------------------------------------------------------------------- 34,757 Novell, Inc.(1) 219,317 - -------------------------------------------------------------------------------- 479,900 Oracle Corp.(1) 5,413,271 - -------------------------------------------------------------------------------- 24,439 Parametric Technology Corp.(1) 129,038 - -------------------------------------------------------------------------------- 34,219 PeopleSoft, Inc.(1) 679,247 - -------------------------------------------------------------------------------- 45,910 Siebel Systems, Inc.(1) 346,161 - -------------------------------------------------------------------------------- 29,119 Symantec Corp.(1) 1,598,051 - -------------------------------------------------------------------------------- 39,805 Veritas Software Corp.(1) 708,529 - -------------------------------------------------------------------------------- 43,199,295 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 12 Equity Index - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 2.4% - -------------------------------------------------------------------------------- 25,272 AutoNation, Inc.(1) $ 431,646 - -------------------------------------------------------------------------------- 7,804 Autozone Inc.(1) 602,859 - -------------------------------------------------------------------------------- 27,687 Bed Bath & Beyond Inc.(1) 1,027,465 - -------------------------------------------------------------------------------- 29,987 Best Buy Co., Inc. 1,626,495 - -------------------------------------------------------------------------------- 7,949 Boise Cascade Corp. 264,543 - -------------------------------------------------------------------------------- 18,861 Circuit City Stores-Circuit City Group 289,328 - -------------------------------------------------------------------------------- 83,999 Gap, Inc. (The) 1,570,781 - -------------------------------------------------------------------------------- 203,770 Home Depot, Inc. 7,987,785 - -------------------------------------------------------------------------------- 43,374 Limited Brands 966,806 - -------------------------------------------------------------------------------- 72,455 Lowe's Companies, Inc. 3,937,929 - -------------------------------------------------------------------------------- 29,099 Office Depot, Inc.(1) 437,358 - -------------------------------------------------------------------------------- 15,082 RadioShack Corp. 431,948 - -------------------------------------------------------------------------------- 13,416 Sherwin-Williams Co. 589,767 - -------------------------------------------------------------------------------- 45,874 Staples, Inc. 1,367,963 - -------------------------------------------------------------------------------- 13,606 Tiffany & Co. 418,248 - -------------------------------------------------------------------------------- 45,299 TJX Companies, Inc. (The) 998,390 - -------------------------------------------------------------------------------- 19,987 Toys 'R' Us, Inc.(1) 354,569 - -------------------------------------------------------------------------------- 23,303,880 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.4% - -------------------------------------------------------------------------------- 17,420 Coach Inc.(1) 738,956 - -------------------------------------------------------------------------------- 11,753 Jones Apparel Group, Inc. 420,757 - -------------------------------------------------------------------------------- 10,169 Liz Claiborne, Inc. 383,575 - -------------------------------------------------------------------------------- 24,314 NIKE, Inc. Cl B 1,915,943 - -------------------------------------------------------------------------------- 5,540 Reebok International Ltd. 203,429 - -------------------------------------------------------------------------------- 10,050 VF Corp. 496,973 - -------------------------------------------------------------------------------- 4,159,633 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 1.8% - -------------------------------------------------------------------------------- 52,115 Countrywide Financial Corporation 2,052,810 - -------------------------------------------------------------------------------- 89,830 Fannie Mae 5,695,223 - -------------------------------------------------------------------------------- 63,543 Freddie Mac 4,145,545 - -------------------------------------------------------------------------------- 14,078 Golden West Financial Corp. 1,561,954 - -------------------------------------------------------------------------------- 9,122 MGIC Investment Corp. 607,069 - -------------------------------------------------------------------------------- 31,759 Sovereign Bancorp Inc. 692,981 - -------------------------------------------------------------------------------- 80,790 Washington Mutual, Inc. 3,157,273 - -------------------------------------------------------------------------------- 17,912,855 - -------------------------------------------------------------------------------- Shares/Principal Amount Value - -------------------------------------------------------------------------------- TOBACCO -- 1.1% - -------------------------------------------------------------------------------- 190,117 Altria Group Inc. $ 8,943,104 - -------------------------------------------------------------------------------- 13,606 Reynolds American Inc. 925,752 - -------------------------------------------------------------------------------- 15,387 UST Inc. 619,481 - -------------------------------------------------------------------------------- 10,488,337 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS(2) - -------------------------------------------------------------------------------- 8,498 Grainger (W.W.), Inc. 489,910 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.6% - -------------------------------------------------------------------------------- 253,244 AT&T Wireless Services Inc.(1) 3,742,946 - -------------------------------------------------------------------------------- 103,358 Nextel Communications, Inc.(1) 2,464,055 - -------------------------------------------------------------------------------- 6,207,001 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $884,455,464) 964,985,220 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS SEGREGATED FOR FUTURES* -- 1.3% $12,372,675 FHLB Discount Notes, 1.65%, 10/1/04(4) (Cost $12,372,675) 12,372,675 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 0.2% 727,325 FHLB Discount Notes, 1.65%, 10/1/04(4) 727,325 - -------------------------------------------------------------------------------- 850,000 U.S. Treasury Bills, 1.66%, 12/23/04(4) 846,773 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $1,574,068) 1,574,098 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 99.8% (Cost $898,402,207) 978,931,993 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- 0.2% 2,529,654 - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $981,461,647 ================================================================================ See Notes to Financial Statements. (continued) - ------ 13 Equity Index - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) EQUITY FUTURES CONTRACTS* Underlying Face Purchased Expiration Date Amount at Value Unrealized Loss - -------------------------------------------------------------------------------- 28 S&P 500 Futures December 2004 $ 7,802,200 $(65,941) - -------------------------------------------------------------------------------- 82 S&P 500 E-Mini Futures December 2004 4,570,475 (18,220) - -------------------------------------------------------------------------------- $12,372,675 $(84,161) ================================== *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 FHLB = Federal Home Loan Bank (1) Non-income producing. (2) Industry is less than 0.05% of net assets. (3) Security, or a portion thereof, has been segregated at the custodian bank or with the broker as initial margin on futures contracts. (4) The rate indicated is the yield to maturity at purchase. See Notes to Financial Statements. - ------ 14 Statement of Assets and Liabilities SEPTEMBER 30, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investment securities, at value (cost of $898,402,207) $978,931,993 - --------------------------------------------------------------- Cash 2,799,664 - --------------------------------------------------------------- Dividends and interest receivable 1,106,145 - -------------------------------------------------------------------------------- 982,837,802 - -------------------------------------------------------------------------------- LIABILITIES - --------------------------------------------------------------- Payable for investments purchased 1,112,976 - --------------------------------------------------------------- Payable for variation margin on futures contracts 7,143 - --------------------------------------------------------------- Accrued management fees 256,036 - -------------------------------------------------------------------------------- 1,376,155 - -------------------------------------------------------------------------------- NET ASSETS $981,461,647 ================================================================================ NET ASSETS CONSIST OF: - --------------------------------------------------------------- Capital (par value and paid-in surplus) $1,030,958,459 - --------------------------------------------------------------- Undistributed net investment income 453,326 - --------------------------------------------------------------- Accumulated net realized loss on investment transactions (130,395,763) - --------------------------------------------------------------- Net unrealized appreciation on investments 80,445,625 - -------------------------------------------------------------------------------- $ 981,461,647 ================================================================================ INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $141,384,111 - --------------------------------------------------------------- Shares outstanding 31,761,879 - --------------------------------------------------------------- Net asset value per share $4.45 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $840,077,536 - --------------------------------------------------------------- Shares outstanding 188,535,055 - --------------------------------------------------------------- Net asset value per share $4.46 - -------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 15 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME - -------------------------------------------------------------------------------- INCOME: - --------------------------------------------------------------- Dividends $ 8,296,158 - --------------------------------------------------------------- Interest 123,886 - -------------------------------------------------------------------------------- 8,420,044 - -------------------------------------------------------------------------------- EXPENSES: - --------------------------------------------------------------- Management fees 1,566,925 - --------------------------------------------------------------- Directors' fees and expenses 7,587 - --------------------------------------------------------------- Other expenses 2,459 - -------------------------------------------------------------------------------- 1,576,971 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 6,843,073 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED LOSS - --------------------------------------------------------------- Net realized loss on investment transactions (1,275,716) - --------------------------------------------------------------- Change in net unrealized appreciation on investments (9,905,502) - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED LOSS (11,181,218) - -------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(4,338,145) ================================================================================ See Notes to Financial Statements. - ------ 16 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED) AND YEAR ENDED MARCH 31, 2004 - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2004 MARCH 31, 2004 - -------------------------------------------------------------------------------- OPERATIONS - ------------------------------------------ Net investment income $ 6,843,073 $ 10,744,225 - ------------------------------------------ Net realized loss (1,275,716) (20,901,861) - ------------------------------------------ Change in net unrealized appreciation (9,905,502) 204,487,313 - -------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (4,338,145) 194,329,677 - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - ------------------------------------------ From net investment income: - ------------------------------------------ Investor Class (830,494) (1,549,115) - ------------------------------------------ Institutional Class (5,755,718) (8,965,901) - -------------------------------------------------------------------------------- Decrease in net assets from distributions (6,586,212) (10,515,016) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - ------------------------------------------------------------------------------- Net increase in net assets from capital share transactions 7,793,054 359,870,681 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (3,131,303) 543,685,342 - -------------------------------------------------------------------------------- NET ASSETS - ------------------------------------------ Beginning of period 984,592,950 440,907,608 - -------------------------------------------------------------------------------- End of period $981,461,647 $984,592,950 ================================================================================ Undistributed net investment income $453,326 $196,465 ================================================================================ See Notes to Financial Statements. - ------ 17 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. American Century Equity Index Fund (the fund) is one fund in a series issued by the corporation. The fund is non-diversified under the 1940 Act. The fund's investment objective is long-term capital growth. The fund seeks to achieve this objective by matching, as closely as possible, the investment characteristics and results of the Standard & Poor's 500 Composite Price Index. The following is a summary of the fund's significant accounting policies. MULTIPLE CLASS -- The fund is authorized to issue the Investor Class and the Institutional Class. The share classes differ principally in their respective shareholder servicing and distribution expenses and arrangements. All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets. SECURITY VALUATIONS -- Securities traded primarily on a principal securities exchange are valued at the last reported sales price, or at the mean of the latest bid and asked prices where no last sales price is available. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official close price. Debt securities not traded on a principal securities exchange are valued through a commercial pricing service or at the mean of the most recent bid and asked prices. Discount notes may be valued through a commercial pricing service or at amortized cost, which approximates fair value. If the investment manager, American Century Investment Management, Inc. (ACIM), determines that the current market price of a security owned by a non-money market fund is not readily available, the investment manager may determine its fair value in accordance with procedures adopted by the Board of Directors if such fair value determination would materially impact a fund's net asset value. Valuations may not be readily available if, for example: an event occurred after the close of the exchange on which a portfolio security principally trades (but before the close of the New York Stock Exchange) that was likely to have changed the value of the security; a security has been declared in default; trading in a security has been halted during the trading day; or the demand for the security (as reflected by its trading volume) is insufficient for quoted prices to be reliable. 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 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. (continued) - ------ 18 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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 (the 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 and accrued daily based on the daily net assets of the specific class of shares of the fund and paid monthly in arrears. For funds with a stepped fee schedule, the rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account all of the investment manager's assets under management in the fund's investment strategy (strategy assets) to calculate the appropriate fee rate for the fund. The strategy assets include the fund's assets and the assets of other clients of the investment manager that are not in the American Century family of mutual funds but that have the same investment team and investment strategy. The annual management fee schedule for each class of the fund is as follows: INVESTOR INSTITUTIONAL CLASS CLASS - ------------------------------------------------------------------------------ STRATEGY ASSETS - ------------------------------------------------------------------------------ First $1 billion 0.490% 0.290% - ------------------------------------------------------------------------------ Next $1 billion 0.470% 0.270% - ------------------------------------------------------------------------------ Next $1 billion 0.455% 0.255% - ------------------------------------------------------------------------------ Next $1 billion 0.445% 0.245% - ------------------------------------------------------------------------------ Next $1 billion 0.435% 0.235% - ------------------------------------------------------------------------------ Over $5 billion 0.430% 0.230% - ------------------------------------------------------------------------------ The effective annual management fee for the six months ended September 30, 2004 was 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, ACIS, and the corporation's transfer agent, American Century Services Corporation During the six months ended September 30, 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 custodian of the fund and a wholly owned subsidiary of JPM. (continued) - ------ 19 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 3. INVESTMENT TRANSACTIONS Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2004, were $14,260,253 and $8,320,309, respectively. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the fund were as follows: SHARES AMOUNT - ------------------------------------------------------------------------------ INVESTOR CLASS - ------------------------------------------------------------------------------ SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 100,000,000 ============================================================================== Sold 3,745,269 $16,733,351 - --------------------------------------------- Issued in reinvestment of distributions 178,861 806,503 - --------------------------------------------- Redeemed (3,812,986) (16,892,887) - ------------------------------------------------------------------------------ Net increase 111,144 $ 646,967 ============================================================================== 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 ============================================================================== INSTITUTIONAL CLASS - ------------------------------------------------------------------------------ SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 500,000,000 ============================================================================== Sold 19,884,410 $89,041,914 - --------------------------------------------- Issued in reinvestment of distributions 1,274,904 5,755,718 - --------------------------------------------- Redeemed (19,724,284) (87,651,545) - ------------------------------------------------------------------------------ Net increase 1,435,030 $ 7,146,087 ============================================================================== 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 ============================================================================== 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. The fund may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund did not borrow from the line during the six months ended September 30, 2004. (continued) - ------ 20 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 6. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. As of September 30, 2004, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- Federal tax cost of investments $963,070,866 ================================================================================ Gross tax appreciation of investments $125,201,437 - ------------------------------------------------------------- Gross tax depreciation of investments (109,340,310) - -------------------------------------------------------------------------------- Net tax appreciation of investments $ 15,861,127 ================================================================================ 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. As of March 31, 2004, the fund had net capital losses of $2,917,398, $10,639,477, $49,081,781 and $1,957,751 expiring in 2009, 2010, 2011 and 2012, respectively, that may be used to offset future realized capital gains for federal income tax purposes. - ------ 21 Equity Index - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $4.50 $3.39 $4.58 $4.63 $5.99 $5.20 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------- Net Investment Income(2) 0.03 0.05 0.05 0.04 0.05 0.05 - ------------------------- Net Realized and Unrealized Gain (Loss) (0.05) 1.11 (1.19) (0.05) (1.36) 0.83 - -------------------------------------------------------------------------------- Total From Investment Operations (0.02) 1.16 (1.14) (0.01) (1.31) 0.88 - -------------------------------------------------------------------------------- Distributions - ------------------------- From Net Investment Income (0.03) (0.05) (0.05) (0.04) (0.05) (0.05) - ------------------------- From Net Realized Gains -- -- -- -- -- (0.04) - -------------------------------------------------------------------------------- Total Distributions (0.03) (0.05) (0.05) (0.04) (0.05) (0.09) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $4.45 $4.50 $3.39 $4.58 $4.63 $5.99 ================================================================================ TOTAL RETURN(3) (0.54)% 34.27% 25.02)% (0.16)% (22.04)% 17.17% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.49%(4) 0.49% 0.49% 0.49% 0.49% 0.49% - ------------------------- Ratio of Net Investment Income to Average Net Assets 1.22%(4) 1.23% 1.24% 0.91% 0.83% 0.94% - ------------------------- Portfolio Turnover Rate 1% 16% 21% 4% 10% 13% - ------------------------- Net Assets, End of Period (in thousands) $141,384 $142,324 $90,093 $108,760 $71,415 $68,905 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ----- 22 Equity Index - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $4.50 $3.39 $4.58 $4.64 $5.99 $5.20 - -------------------------------------------------------------------------------- Income From Investment Operations - --------------------- Net Investment Income(2) 0.03 0.06 0.05 0.05 0.06 0.06 - --------------------- Net Realized and Unrealized Gain (Loss) (0.04) 1.11 (1.19) (0.06) (1.35) 0.84 - -------------------------------------------------------------------------------- Total From Investment Operations (0.01) 1.17 (1.14) (0.01) (1.29) 0.90 - -------------------------------------------------------------------------------- Distributions - --------------------- From Net Investment Income (0.03) (0.06) (0.05) (0.05) (0.06) (0.07) - --------------------- From Net Realized Gains -- -- -- -- -- (0.04) - -------------------------------------------------------------------------------- Total Distributions (0.03) (0.06) (0.05) (0.05) (0.06) (0.11) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $4.46 $4.50 $3.39 $4.58 $4.64 $5.99 ================================================================================ TOTAL RETURN(3) (0.22)% 34.53% (24.87)% (0.17)% (21.72)% 17.43% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.29%(4) 0.29% 0.29% 0.29% 0.29% 0.29% - --------------------- Ratio of Net Investment Income to Average Net Assets 1.42%(4) 1.43% 1.44% 1.11% 1.03% 1.14% - --------------------- Portfolio Turnover Rate 1% 16% 21% 4% 10% 13% - --------------------- Net Assets, End of Period (in thousands) $840,078 $842,269 $350,815 $449,591 $441,959 $398,560 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 23 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. - ------ 24 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 investment 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. Information regarding how the investment manager voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov. QUARTERLY PORTFOLIO DISCLOSURE The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q for periods ending on or after July 9, 2004. The fund's Form N-Q is available on the SEC's Web site at sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its Web site at americancentury.com and, upon request, by calling 1-800-345-2021. - ------ 25 Index Definition The following index is used to illustrate investment market, sector, or style performance or to serve as a fund performance comparison. 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. - ------ 26 Notes - ------ 27 Notes - ------ 28 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 Investments logo, American Century and American Century Investments are service marks of American Century Services Corporation. 0411 American Century Investment Services, Inc. SH-SAN-40406N (c)2004 American Century Services Corporation
[front cover] SEPTEMBER 30, 2004 [graphic of chart] American Century Investments Semiannual Report [graphic of starfish on beach] [graphic of two bridges] Real Estate Fund [american century investments logo and text logo] Table of Contents Our Message to You...................................................... 1 REAL ESTATE Performance............................................................. 2 Shareholder Fee Example................................................. 4 Portfolio Commentary.................................................... 6 Top Ten Holdings..................................................... 6 Industry Allocation.................................................. 7 Types of Investments in Portfolio.................................... 7 Schedule of Investments................................................. 8 FINANCIAL STATEMENTS Statement of Assets and Liabilities..................................... 10 Statement of Operations................................................. 11 Statement of Changes in Net Assets...................................... 12 Notes to Financial Statements........................................... 13 Financial Highlights.................................................... 17 OTHER INFORMATION Share Class Information................................................. 20 Additional Information.................................................. 21 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 with James E. Stowers, Jr.] JAMES E. STOWERS III WITH JAMES E. STOWERS, JR. We are pleased to provide you with the semiannual report for the Real Estate fund for the six months ended September 30, 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. 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 annual report dated March 31, 2005, 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 SEPTEMBER 30, 2004 ---------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 25.40% 18.98% 14.95% 9/21/95(1) - -------------------------------------------------------------------------------- MSCI REIT INDEX 24.85% 18.07% 13.34%(2) -- - -------------------------------------------------------------------------------- Institutional Class 25.56% 19.23% 11.92% 6/16/97 - -------------------------------------------------------------------------------- Advisor Class 25.19% 18.71% 16.11% 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. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. 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. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. (continued) - ------ 2 Real Estate - Performance GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made September 21, 1995
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ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - -------------------------------------------------------------------------------- 1996* 1997 1998 1999 - -------------------------------------------------------------------------------- Investor Class 23.28% 49.58% -17.62% -2.94% - -------------------------------------------------------------------------------- MSCI REIT Index 18.27% 40.88% -14.26% -5.88% - -------------------------------------------------------------------------------- 2000 2001 2002 2003 2004 - -------------------------------------------------------------------------------- Investor Class 21.61% 10.96% 9.78% 28.35% 25.40% - -------------------------------------------------------------------------------- MSCI REIT Index 21.25% 11.62% 8.56% 25.11% 24.85% * 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. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. 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. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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. - ------ 3 Shareholder Fee Example (Unaudited) SHAREHOLDER FEE EXAMPLE Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2004 to September 30, 2004. ACTUAL EXPENSES The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If you hold Investor Class shares of any American Century fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century account (i.e., not a financial intermediary or retirement plan account), American Century may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered under your Social Security number. PERSONAL ACCOUNTS include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund's share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical (continued) - ------ 4 Shareholder Fee Example (Unaudited) example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. EXPENSES PAID BEGINNING ENDING DURING PERIOD* ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 4/1/04 - EXPENSE 4/1/04 9/30/04 9/30/04 RATIO* REAL ESTATE SHAREHOLDER FEE EXAMPLE - ----------------------------------------------------------------------------------------------------- ACTUAL - ----------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,031.30 $5.91 1.16% - ----------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,032.30 $4.89 0.96% - ----------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,030.50 $7.18 1.41% - ----------------------------------------------------------------------------------------------------- HYPOTHETICAL - ----------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,019.25 $5.87 1.16% - ----------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,020.26 $4.86 0.96% - ----------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,018.00 $7.13 1.41% - ----------------------------------------------------------------------------------------------------- *Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365 to reflect the one-half year period. - ------ 5 Real Estate - Portfolio Commentary [photo of Scott Blasdell] PORTFOLIO MANAGER ON THE REAL ESTATE INVESTMENT TEAM: SCOTT BLASDELL PERFORMANCE SUMMARY For the six months ended September 30, 2004, the Real Estate fund posted a total return of 3.13%*, outpacing the 1.76% return of its benchmark, the Morgan Stanley Capital International (MSCI) REIT Index, and the -0.18% return of the S& P 500, a broad stock market measure. (See the pages 2 & 3 for additional performance details.) MARKET REVIEW The U.S. stock market declined modestly during the six-month period, buffeted by conflicting influences. On the positive side, corporate profits remained strong--the second quarter of 2004 marked the fourth consecutive quarter of earnings growth greater than 20% for the companies in the S&P 500. However, the favorable news on earnings was offset by concerns about soaring oil prices, evidence of moderating economic growth, the threat of terrorism, and three interest-rate hikes by the Federal Reserve. As a result, most of the major stock indices all declined by 1-2%. Real estate investment trusts (REITs) bucked the broader market; the MSCI REIT Index gained nearly 2% during the six-month period despite a rough start. In April, the index fell by nearly 15% after a strong employment report suggested that long-term interest rates--which compete with REIT dividend yields for investor attention--may rise sharply. REITs bounced back during the remainder of the period thanks in part to declining long-term rates and significant merger activity. Apartment and hotel REITs, which held up the best during the April sell-off, were among the best performers in the REIT market during the period. Health care REITs, the top performers in 2003, declined. HOTEL AND APARTMENT REITS BOOST RESULTS One reason for the Real Estate fund's outperformance of the MSCI REIT Index during the six-month period was an overweight in the hotel segment. On average, hotel companies made up about 9% of the portfolio during the period, compared with around 5% for TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2004 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Simon Property Group, Inc. 6.7% 3.8% - -------------------------------------------------------------------------------- Equity Office Properties Trust 6.4% 6.2% - -------------------------------------------------------------------------------- Kimco Realty Corporation 5.2% 2.5% - -------------------------------------------------------------------------------- Prologis 4.7% 6.1% - -------------------------------------------------------------------------------- Rouse Company 3.9% 4.9% - -------------------------------------------------------------------------------- Mack-Cali Realty Corp. 3.9% 3.9% - -------------------------------------------------------------------------------- Duke Realty Corporation 3.6% 4.4% - -------------------------------------------------------------------------------- CarrAmerica Realty Corp. 3.5% 3.2% - -------------------------------------------------------------------------------- Camden Property Trust 3.4% 1.3% - -------------------------------------------------------------------------------- Lexington Corporate Properties Trust 3.4% 2.2% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. (continued) - ------ 6 Real Estate - Portfolio Commentary the index. Although we cut back on our hotel holdings during the period--mainly by selling most of the non-REIT hotel companies in the portfolio--the fund's 6% position as of September 30, 2004, was still higher than the average index weighting. The best contributor in the portfolio's hotel segment was Innkeepers USA, a REIT that owns and operates extended-stay hotels. A fund overweight on average during the six-month period, Innkeepers rose sharply as increased occupancy led the company to boost revenue growth projections. InterContinental Hotels was one of the top contributors among the fund's non-REIT hotel holdings. The portfolio's apartment REITs also contributed favorably to overall results, though the fund held a modest underweight in this segment. The fund benefited from overweights in Apartment Investment & Management and AvalonBay Communities, which were among top five contributors to portfolio performance. The top individual contributor to absolute performance was Centerpoint Properties, a Chicago-based industrial REIT. The company raised earnings guidance for the second half of 2004 as a result of higher occupancy rates and asset sales. RETAIL AND OFFICE REITS DECLINE The two largest segments in the portfolio, retail and office, detracted the most from absolute performance. In particular, the retail REITs in the portfolio declined as a group, while the retail segment of the benchmark index gained slightly. Among the biggest detractors in these two areas were regional mall REIT Macerich and Mills, as well as office/industrial developer Duke Realty. Another significant detractor was Capital Automotive, which leases properties to auto dealers and repair shops. The company, which was the largest individual overweight in the portfolio during the period, lowered earnings expectations after restructuring its balance sheet. Going forward, we intend to maintain our focus on long-term capital appreciation in the REIT sector through superior stock selection and risk management. INDUSTRY ALLOCATION - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Office Management 24.8% 25.5% - -------------------------------------------------------------------------------- Regional Malls 16.3% 22.7% - -------------------------------------------------------------------------------- Multi-Family Residential 14.4% 13.4% - -------------------------------------------------------------------------------- Diversified Companies 10.4% 10.4% - -------------------------------------------------------------------------------- Neighborhood & Community Shopping Centers 8.7% 7.2% - -------------------------------------------------------------------------------- Industrials 7.6% 8.6% - -------------------------------------------------------------------------------- Hotels, Restaurants & Leisure 6.0% 7.9% - -------------------------------------------------------------------------------- Storage 3.9% -- - -------------------------------------------------------------------------------- Other 3.3% 1.5% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/04 3/31/04 - -------------------------------------------------------------------------------- Common Stocks 95.4% 97.2% - -------------------------------------------------------------------------------- Temporary Cash Investments 2.5% 4.3% - ------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES 97.9% 101.5% - -------------------------------------------------------------------------------- Other Assets & Liabilities 2.1% (1.5)% - -------------------------------------------------------------------------------- - ------ 7 Real Estate - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS - 95.4% DIVERSIFIED COMPANIES- 10.4% - -------------------------------------------------------------------------------- 178,400 American Campus Communities Inc.(1) $ 3,311,104 - -------------------------------------------------------------------------------- 659,615 Capital Automotive REIT 20,626,161 - -------------------------------------------------------------------------------- 529,700 Cousins Properties Inc. 18,174,007 - -------------------------------------------------------------------------------- 66,200 Global Signal Inc. 1,515,980 - -------------------------------------------------------------------------------- 982,100 Lexington Corporate Properties Trust 21,321,391 - -------------------------------------------------------------------------------- 64,948,643 - -------------------------------------------------------------------------------- HEALTH CARE - 1.1% - -------------------------------------------------------------------------------- 332,000 Nationwide Health Properties Inc. 6,889,000 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 6.0% - -------------------------------------------------------------------------------- 290,600 Ashford Hospitality Trust Inc. 2,731,640 - -------------------------------------------------------------------------------- 355,300 Equity Inns Inc. 3,510,364 - -------------------------------------------------------------------------------- 271,000 Host Marriott Corp.(1) 3,802,130 - -------------------------------------------------------------------------------- 918,500 Innkeepers USA Trust 11,426,140 - -------------------------------------------------------------------------------- 642,100 InterContinental Hotels Group plc ORD 7,311,294 - -------------------------------------------------------------------------------- 187,900 Strategic Hotel Capital Inc. 2,540,408 - -------------------------------------------------------------------------------- 594,100 Winston Hotels Inc. 6,356,870 - -------------------------------------------------------------------------------- 37,678,846 - -------------------------------------------------------------------------------- INDUSTRIALS - 7.6% - -------------------------------------------------------------------------------- 312,700 Centerpoint Properties Corp. 13,627,466 - -------------------------------------------------------------------------------- 234,800 First Potomac Realty Trust 4,850,968 - -------------------------------------------------------------------------------- 829,310 Prologis 29,224,884 - -------------------------------------------------------------------------------- 47,703,318 - -------------------------------------------------------------------------------- MULTI-FAMILY RESIDENTIAL - 14.4% - -------------------------------------------------------------------------------- 435,000 Apartment Investment and Management Co. 15,129,300 - -------------------------------------------------------------------------------- 171,500 AvalonBay Communities Inc. 10,327,730 - -------------------------------------------------------------------------------- 464,000 Camden Property Trust 21,436,800 - -------------------------------------------------------------------------------- 260,000 Equity Residential 8,060,000 - -------------------------------------------------------------------------------- 578,500 Gables Residential Trust 19,755,775 - -------------------------------------------------------------------------------- 81,000 Home Properties, Inc. 3,204,360 - -------------------------------------------------------------------------------- 46,100 Manufactured Home Communities, Inc. 1,532,364 - -------------------------------------------------------------------------------- 101,400 Mid-America Apartment Communities Inc. 3,949,530 - -------------------------------------------------------------------------------- 28,400 Town & Country Trust (The) 722,780 - -------------------------------------------------------------------------------- 295,900 United Dominion Realty Trust, Inc. 5,867,697 - -------------------------------------------------------------------------------- 89,986,336 - -------------------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------------------- NEIGHBORHOOD & COMMUNITY SHOPPING CENTERS - 8.7% - -------------------------------------------------------------------------------- 208,100 Cedar Shopping Centers Inc. $ 2,902,995 - -------------------------------------------------------------------------------- 254,300 Federal Realty Investors Trust 11,189,200 - -------------------------------------------------------------------------------- 273,900 Heritage Property Investment Trust 7,989,663 - -------------------------------------------------------------------------------- 633,800 Kimco Realty Corporation 32,513,940 - -------------------------------------------------------------------------------- 54,595,798 - -------------------------------------------------------------------------------- OFFICE MANAGEMENT - 24.8% - -------------------------------------------------------------------------------- 140,200 Arden Realty Inc. 4,567,716 - -------------------------------------------------------------------------------- 304,700 Brandywine Realty Trust 8,677,856 - -------------------------------------------------------------------------------- 669,500 CarrAmerica Realty Corp. 21,892,650 - -------------------------------------------------------------------------------- 672,924 Duke Realty Corporation 22,341,077 - -------------------------------------------------------------------------------- 1,472,448 Equity Office Properties Trust 40,124,208 - -------------------------------------------------------------------------------- 62,800 Highwoods Properties, Inc. 1,545,508 - -------------------------------------------------------------------------------- 442,200 Liberty Property Trust 17,617,248 - -------------------------------------------------------------------------------- 545,300 Mack-Cali Realty Corp. 24,156,790 - -------------------------------------------------------------------------------- 187,700 Prentiss Properties Trust 6,757,200 - -------------------------------------------------------------------------------- 457,800 Trizec Properties Inc. 7,311,066 - -------------------------------------------------------------------------------- 154,991,319 - -------------------------------------------------------------------------------- PROPERTY MANAGEMENT - 1.3% - -------------------------------------------------------------------------------- 17,700 CB Richard Ellis Group Inc. Cl A(1) 408,870 - -------------------------------------------------------------------------------- 193,100 Sun Communities, Inc. 7,567,589 - -------------------------------------------------------------------------------- 7,976,459 - -------------------------------------------------------------------------------- REGIONAL MALLS - 16.3% - -------------------------------------------------------------------------------- 592,500 General Growth Properties, Inc. 18,367,500 - -------------------------------------------------------------------------------- 229,076 Pennsylvania Real Estate Investment Trust 8,856,078 - -------------------------------------------------------------------------------- 362,400 Rouse Company 24,237,312 - -------------------------------------------------------------------------------- 787,300 Simon Property Group, Inc. 42,222,899 - -------------------------------------------------------------------------------- 325,700 Taubman Centers Inc. 8,412,831 - -------------------------------------------------------------------------------- 102,096,620 - -------------------------------------------------------------------------------- STORAGE - 3.9% - -------------------------------------------------------------------------------- 339,510 Extra Space Storage Inc. 4,328,753 - -------------------------------------------------------------------------------- 410,900 Public Storage Inc. 20,360,095 - -------------------------------------------------------------------------------- 24,688,848 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE - 0.6% - -------------------------------------------------------------------------------- 45,100 Fannie Mae 2,859,340 - -------------------------------------------------------------------------------- 54,000 Gramercy Capital Corp.(1) 842,400 - -------------------------------------------------------------------------------- 3,701,740 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES - 0.3% - -------------------------------------------------------------------------------- 124,500 Crown Castle International Corp.(1) 1,852,560 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $513,737,523) 597,109,487 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 8 Real Estate - Schedule of Investments SEPTEMBER 30, 2004 (UNAUDITED) Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS - 2.5% Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 5.25%, 11/15/28, valued at $16,010,140), in a joint trading account at 1.68%, dated 9/30/04, due 10/1/04 (Delivery value $15,700,733) (Cost $15,700,000) $ 15,700,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 97.9% (Cost $529,437,523) 612,809,487 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES - 2.1% 13,191,820 - -------------------------------------------------------------------------------- TOTAL NET ASSETS - 100.0% $626,001,307 ================================================================================ NOTES TO SCHEDULE OF INVESTMENTS ORD = Foreign Ordinary Share REIT = Real Estate Investment Trust (1) Non-income producing. See Notes to Financial Statements. - ------ 9 Statement of Assets and Liabilities SEPTEMBER 30, 2004 (UNAUDITED) ASSETS Investment securities, at value (cost of $529,437,523) $612,809,487 - --------------------------------------------------------------- Cash 1,718,622 - --------------------------------------------------------------- Receivable for investments sold 15,699,645 - --------------------------------------------------------------- Receivable for capital shares sold 803,009 - --------------------------------------------------------------- Dividends and interest receivable 2,661,620 - -------------------------------------------------------------------------------- 633,692,383 - -------------------------------------------------------------------------------- LIABILITIES Payable for investments purchased 7,102,899 - --------------------------------------------------------------- Accrued management fees 542,591 - --------------------------------------------------------------- Distribution fees payable 22,793 - --------------------------------------------------------------- Service fees payable 22,793 - -------------------------------------------------------------------------------- 7,691,076 - -------------------------------------------------------------------------------- NET ASSETS $626,001,307 ================================================================================ NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $507,398,785 - --------------------------------------------------------------- Undistributed net investment income 1,547,950 - --------------------------------------------------------------- Accumulated net realized gain on investment transactions 33,680,388 - --------------------------------------------------------------- Net unrealized appreciation on investments 83,374,184 - -------------------------------------------------------------------------------- $626,001,307 ================================================================================ INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $417,474,991 - --------------------------------------------------------------- Shares outstanding 17,674,165 - --------------------------------------------------------------- Net asset value per share $23.62 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $93,346,789 - --------------------------------------------------------------- Shares outstanding 3,949,952 - --------------------------------------------------------------- Net asset value per share $23.63 - -------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $115,179,527 - --------------------------------------------------------------- Shares outstanding 4,871,788 - --------------------------------------------------------------- Net asset value per share $23.64 - -------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 10 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED) INVESTMENT INCOME INCOME: - --------------------------------------------------------------- Dividends $ 8,959,372 - --------------------------------------------------------------- Interest 114,270 - -------------------------------------------------------------------------------- 9,073,642 - -------------------------------------------------------------------------------- EXPENSES: - --------------------------------------------------------------- Management fees 2,823,256 - --------------------------------------------------------------- Distribution fees - Advisor Class 112,975 - --------------------------------------------------------------- Service fees - Advisor Class 112,975 - --------------------------------------------------------------- Directors' fees and expenses 5,301 - --------------------------------------------------------------- Other expenses 2,396 - -------------------------------------------------------------------------------- 3,056,903 - -------------------------------------------------------------------------------- Net investment income 6,016,739 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - --------------------------------------------------------------- Net realized gain on investment transactions 16,461,724 - --------------------------------------------------------------- Change in net unrealized appreciation on investments (7,018,642) - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN 9,443,082 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $15,459,821 ================================================================================ See Notes to Financial Statements. - ------ 11 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED) AND YEAR ENDED MARCH 31, 2004 - -------------------------------------------------------------------------------- INCREASE IN NET ASSETS SEPT. 30, 2004 MARCH 31, 2004 OPERATIONS Net investment income $ 6,016,739 $ 7,343,729 - ----------------------------------------- Net realized gain 16,461,724 42,799,688 - ----------------------------------------- Change in net unrealized appreciation (7,018,642) 79,332,958 - -------------------------------------------------------------------------------- Net increase in net assets resulting from operations 15,459,821 129,476,375 - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income: - ----------------------------------------- Investor Class (3,065,948) (6,654,103) - ----------------------------------------- Institutional Class (728,622) (1,351,811) - ----------------------------------------- Advisor Class (674,219) (1,115,975) - ----------------------------------------- From net realized gains: - ----------------------------------------- Investor Class -- (1,939,003) - ----------------------------------------- Institutional Class -- (368,420) - ----------------------------------------- Advisor Class -- (351,604) - -------------------------------------------------------------------------------- Decrease in net assets from distributions (4,468,789) (11,780,916) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Net increase in net assets from capital share transactions 56,447,828 263,319,823 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS 67,438,860 381,015,282 NET ASSETS Beginning of period 558,562,447 177,547,165 - -------------------------------------------------------------------------------- End of period $626,001,307 $558,562,447 ================================================================================ Undistributed net investment income $1,547,950 -- ================================================================================ See Notes to Financial Statements. - ------ 12 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Real Estate Fund (the fund) is one fund in a series issued by the corporation. The fund is non-diversified under the 1940 Act. The fund's investment objective is long-term capital appreciation. Income is 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. If the investment manager, American Century Investment Management, Inc. (ACIM), determines that the current market price of a security owned by a non-money market fund is not readily available, the investment manager may determine its fair value in accordance with procedures adopted by the Board of Directors if such fair value determination would materially impact a fund's net asset value. Valuations may not be readily available if, for example: an event occurred after the close of the exchange on which a portfolio security principally trades (but before the close of the New York Stock Exchange) that was likely to have changed the value of the security; a security has been declared in default; trading in a security has been halted during the trading day; or the demand for the security (as reflected by its trading volume) is insufficient for quoted prices to be reliable. 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund estimates the components of distributions received that may be considered nontaxable distributions or capital gain distributions for income tax purposes. 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 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. Reclassification -- Certain amounts in the Statement of Changes and Financial Highlights of prior years have been reclassed to conform to current year presentation. 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) - ------ 13 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the 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 and accrued daily based on each class's pro rata share of the fund's daily net assets and paid monthly in arrears. For funds with a stepped fee schedule, the rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account all of the investment manager's assets under management in the fund's investment strategy (strategy assets) to calculate the appropriate fee rate for the fund. The strategy assets include the fund's assets and the assets of other clients of the investment manager that are not in the American Century family of mutual funds but that have the same investment team and investment strategy. The annual management fee schedule for each class of the fund is as follows: INVESTOR INSTITUTIONAL ADVISOR CLASS CLASS CLASS - ---------------------------------------------------------------------------------- STRATEGY ASSETS - ---------------------------------------------------------------------------------- First $100 million 1.20% 1.00% 0.95% - ---------------------------------------------------------------------------------- Next $900 million 1.15% 0.95% 0.90% - ---------------------------------------------------------------------------------- Next $1 billion 1.10% 0.90% 0.85% - ---------------------------------------------------------------------------------- Over $2 billion 1.05% 0.85% 0.80% - ---------------------------------------------------------------------------------- The effective annual management fee for the six months ended September 30, 2004 was 1.16%, 0.96%, and 0.91% for the Investor, Institutional and Advisor Classes, respectively. 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 and accrued daily based on the Advisor Class's daily closing net assets and paid monthly in arrears. The distribution fee provides compensation for expenses incurred by financial intermediaries in connection with distributing shares of the Advisor Class including, but not limited to, payments to brokers, dealers, and financial institutions that have entered into sales agreements with respect to shares of the fund. The service fee provides compensation for shareholder and administrative services rendered by ACIS, its affiliates or independent third party providers. Fees incurred under the plan during the six months ended September 30, 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 six months ended September 30, 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 custodian of the fund and a wholly owned subsidiary of JPM. 3. INVESTMENT TRANSACTIONS Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2004, were $504,332,220 and $455,736,133, respectively. (continued) - ------ 14 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the fund were as follows: SHARES AMOUNT - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 50,000,000 ================================================================================ Sold 6,008,652 $131,905,667 - --------------------------------------------- Issued in reinvestment of distributions 126,571 2,837,942 - --------------------------------------------- Redeemed (5,510,139) (117,022,370) - -------------------------------------------------------------------------------- Net increase 625,084 $ 17,721,239 ================================================================================ 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 ================================================================================ INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 20,000,000 ================================================================================ Sold 1,519,313 $33,623,821 - --------------------------------------------- Issued in reinvestment of distributions 30,985 695,493 - --------------------------------------------- Redeemed (1,171,768) (24,673,626) - -------------------------------------------------------------------------------- Net increase 378,530 $ 9,645,688 ================================================================================ 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 ================================================================================ ADVISOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2004 SHARES AUTHORIZED 20,000,000 ================================================================================ Sold 2,119,807 $46,582,626 - --------------------------------------------- Issued in reinvestment of distributions 29,358 660,644 - --------------------------------------------- Redeemed (846,739) (18,162,369) - -------------------------------------------------------------------------------- Net increase 1,302,426 $29,080,901 ================================================================================ 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 ================================================================================ (continued) - ------ 15 Notes to Financial Statements SEPTEMBER 30, 2004 (UNAUDITED) 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. The fund may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund did not borrow from the line during the six months ended September 30, 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 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 September 30, 2004, the components of investments for federal income tax purposes were as follows: Federal tax cost of investments $531,200,763 ================================================================================ Gross tax appreciation of investments $81,821,409 - -------------------------------------------------------------- Gross tax depreciation of investments (212,685) - -------------------------------------------------------------------------------- Net tax appreciation of investments $81,608,724 ================================================================================ 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. - ------ 16 Real Estate - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000 PER-SHARE DATA Net Asset Value, Beginning of Period $23.09 $15.83 $16.22 $14.00 $11.74 $12.10 - -------------------------------------------------------------------------------------------------------- Income From Investment Operations - -------------------------------- Net Investment Income(2) 0.25 0.46 0.59 0.57 0.58 0.61 - -------------------------------- Net Realized and Unrealized Gain (Loss) 0.46 7.49 (0.44) 2.21 2.27 (0.28) - -------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.71 7.95 0.15 2.78 2.85 0.33 - -------------------------------------------------------------------------------------------------------- Distributions - -------------------------------- From Net Investment Income (0.18) (0.54) (0.54) (0.56) (0.59) (0.69) - -------------------------------- From Net Realized Gains -- (0.15) -- -- -- -- - -------------------------------------------------------------------------------------------------------- Total Distributions (0.18) (0.69) (0.54) (0.56) (0.59) (0.69) - -------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $23.62 $23.09 $15.83 $16.22 $14.00 $11.74 ======================================================================================================== TOTAL RETURN(3) 3.13% 50.97% 0.93% 20.23% 24.57% 2.87% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.16%(4) 1.17% 1.18% 1.20% 1.19% 1.20% - -------------------------------- Ratio of Net Investment Income to Average Net Assets 2.32%(4) 2.28% 3.74% 3.83% 4.35% 4.89% - -------------------------------- Portfolio Turnover Rate 91% 158% 162% 156% 242% 102% - -------------------------------- Net Assets, End of Period (in thousands) $417,475 $393,604 $134,898 $107,599 $74,776 $73,812 - -------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 17 Real Estate - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - --------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - --------------------------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000 PER-SHARE DATA Net Asset Value, Beginning of Period $23.10 $15.85 $16.23 $14.01 $11.75 $12.11 - ---------------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------- Net Investment Income(2) 0.27 0.51 0.63 0.59 0.60 0.62 - ------------------------------- Net Realized and Unrealized Gain (Loss) 0.46 7.47 (0.44) 2.22 2.28 (0.25) - ---------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.73 7.98 0.19 2.81 2.88 0.37 - ---------------------------------------------------------------------------------------------------------- Distributions - ------------------------------- From Net Investment Income (0.20) (0.58) (0.57) (0.59) (0.62) (0.73) - ------------------------------- From Net Realized Gains -- (0.15) -- -- -- -- - ---------------------------------------------------------------------------------------------------------- Total Distributions (0.20) (0.73) (0.57) (0.59) (0.62) (0.73) - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $23.63 $23.10 $15.85 $16.23 $14.01 $11.75 ========================================================================================================== TOTAL RETURN(3) 3.23% 51.14% 1.19% 20.45% 24.80% 3.18% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.96%(4) 0.97% 0.98% 1.00% 0.99% 1.00% - ------------------------------- Ratio of Net Investment Income to Average Net Assets 2.52%(4) 2.48% 3.94% 4.03% 4.55% 5.09% - ------------------------------- Portfolio Turnover Rate 91% 158% 162% 156% 242% 102% - ------------------------------- Net Assets, End of Period (in thousands) $93,347 $82,488 $23,371 $16,305 $12,390 $15,457 - ---------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 18 Real Estate - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - --------------------------------------------------------------------------------------------------------- ADVISOR CLASS - --------------------------------------------------------------------------------------------------------- 2004(1) 2004 2003 2002 2001 2000 PER-SHARE DATA Net Asset Value, Beginning of Period $23.11 $15.83 $16.22 $14.00 $11.74 $12.10 - --------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Income(2) 0.23 0.42 0.55 0.53 0.55 0.62 - ----------------------------- Net Realized and Unrealized Gain (Loss) 0.46 7.50 (0.44) 2.21 2.27 (0.32) - --------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.69 7.92 0.11 2.74 2.82 0.30 - --------------------------------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income (0.16) (0.49) (0.50) (0.52) (0.56) (0.66) - ----------------------------- From Net Realized Gains -- (0.15) -- -- -- -- - --------------------------------------------------------------------------------------------------------- Total Distributions (0.16) (0.64) (0.50) (0.52) (0.56) (0.66) - --------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $23.64 $23.11 $15.83 $16.22 $14.00 $11.74 ========================================================================================================= TOTAL RETURN(3) 3.05% 50.66% 0.69% 19.93% 24.28% 2.62% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.41%(4) 1.42% 1.43% 1.45% 1.44% 1.45% - ----------------------------- Ratio of Net Investment Income to Average Net Assets 2.07%(4) 2.03% 3.49% 3.58% 4.10% 4.64% - ----------------------------- Portfolio Turnover Rate 91% 158% 162% 156% 242% 102% - ----------------------------- Net Assets, End of Period (in thousands) $115,180 $82,471 $19,278 $16,759 $9,046 $5,353 - --------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2004 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 19 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. - ------ 20 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 investment 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. Information regarding how the investment manager voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov. (continued) - ------ 21 Additional Information QUARTERLY PORTFOLIO DISCLOSURE The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q for periods ending on or after July 9, 2004. The fund's Form N-Q is available on the SEC's Web site at sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its Web site at americancentury.com and, upon request, by calling 1-800-345-2021. - ------ 22 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 price 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. - ------ 23 Notes - ------ 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 Investments logo, American Century and American Century Investments are service marks of American Century Services Corporation. 0411 American Century Investment Services, Inc. SH-SAN-40407N (c)2004 American Century Services Corporation
ITEM 2. CODE OF ETHICS. Not applicable for semiannual report filings. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for semiannual report filings. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable for semiannual report filings. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. The schedule of investments is included as part of the report to stockholders filed under Item 1 of this Form. 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) Not applicable for semiannual report filings. (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: December 3, 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: December 3, 2004 By: /s/ Maryanne L. Roepke -------------------------------------------- Name: Maryanne L. Roepke Title: Sr. Vice President, Treasurer, and Chief Accounting Officer (principal financial officer) Date: December 3, 2004