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: MARCH 31 ------------------------------------------------------- Date of reporting period: MARCH 31, 2005 ------------------------------------------------------- ITEM 1. REPORTS TO STOCKHOLDERS. [front cover] American Century Investments ANNUAL REPORT [photo of man and woman] MARCH 31, 2005 Equity Income Fund Mid Cap Value Fund Small Cap Value Fund [American Century Investments logo and text logo] 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Top Five Industries . . . . . . . . . . . . . . . . . . . . . . . . . .13 Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . .13 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . .14 SMALL CAP VALUE Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Top Five Industries . . . . . . . . . . . . . . . . . . . . . . . . . .20 Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . .20 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . .21 Shareholder Fee Examples. . . . . . . . . . . . . . . . . . . . . . . . . .25 FINANCIAL STATEMENTS Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . .28 Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . .30 Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . .31 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . .33 Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . .42 Report of Independent Registered Public Accounting Firm . . . . . . . . . .54 OTHER INFORMATION Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . .58 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . .59 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60 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 annual report for the Equity Income, Mid Cap Value, and Small Cap Value funds for the year ended March 31, 2005. The report includes comparative performance figures, portfolio and market commentaries, 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 semiannual report dated September 30, 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 Equity Income - Performance TOTAL RETURNS AS OF MARCH 31, 2005 -------------------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 10.69% 12.62% 14.20% 14.34% 8/1/94 - -------------------------------------------------------------------------------- RUSSELL 3000 VALUE INDEX(1) 12.88% 5.89% 12.85% 12.69%(2) -- - -------------------------------------------------------------------------------- S&P 500 INDEX(1) 6.69% -3.16% 10.79% 11.21%(2) -- - -------------------------------------------------------------------------------- LIPPER EQUITY INCOME INDEX(1) 9.96% 3.97% 9.78% 9.77%(2) -- - -------------------------------------------------------------------------------- Institutional Class 10.91% 12.87% -- 10.33% 7/8/98 - -------------------------------------------------------------------------------- Advisor Class 10.41% 12.34% -- 11.81% 3/7/97 - -------------------------------------------------------------------------------- C Class 9.60% -- -- 8.35% 7/13/01 - -------------------------------------------------------------------------------- R Class 10.03%(3) -- -- 14.20% 8/29/03 - -------------------------------------------------------------------------------- (1) (c)2005 Reuters. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper Inc. - A Reuters Company and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. (2) Since 7/31/94, the date nearest the Investor Class's inception for which data are available. (3) Class return would have been lower if the class had not received partial reimbursements of distribution and service fees during the period. 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 March 31, 1995
ONE-YEAR RETURNS OVER 10 YEARS Periods ended March 31 - -------------------------------------------------------------------------------------------------- 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 - -------------------------------------------------------------------------------------------------- Investor Class 25.69% 16.23% 37.78% -0.44% 3.88% 20.85% 17.35% -12.09% 31.30% 10.69% - -------------------------------------------------------------------------------------------------- Russell 3000 Value Index 32.80% 17.83% 46.78% 2.51% 6.81% 1.48% 5.67% -22.79% 42.45% 12.88% - -------------------------------------------------------------------------------------------------- S&P 500 Index 32.10% 19.83% 48.00% 18.46% 17.94% -21.68% 0.24% -24.76% 35.12% 6.69% - -------------------------------------------------------------------------------------------------- Lipper Equity Income Index 25.95% 14.99% 37.71% 1.59% 3.25% 1.73% 3.91% -22.91% 35.57% 9.96% - -------------------------------------------------------------------------------------------------- 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 investment team] PORTFOLIO MANAGERS ON THE EQUITY INCOME INVESTMENT TEAM: PHIL DAVIDSON AND SCOTT MOORE. Equity Income gained 10.69%* for the year ended March 31, 2005, outperforming the Lipper Equity Income Index, which was up 9.96%. The S&P 500 Index, representative of the broad market, gained 6.69%. 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 return of 14.34%, significantly ahead of the 9.77%** figure posted by the Lipper Equity Income Index and the S&P 500's 11.21%** return. MARKET ENTHUSIASM WANES After moving sideways for much of last year, stocks rallied during the final two months of 2004, gaining strength from the resolution of the presidential election and a temporary decline in oil prices. But stock market optimism waned during the first quarter of 2005, as investors worried about the dampening effects of surging energy and commodity prices, and higher interest rates. Equity Income's primary objective is dividend income and the fund was rewarded for that stance. On an equally-weighted basis, dividend-paying companies in the S&P 500 Index were up an average of roughly 14% over the 12-month period, while non- dividend-payers were slightly negative. STRENGTH IN ENERGY In a portfolio that leaned toward integrated oil companies, Exxon Mobil Corp. was our top-contributing security, with Royal Dutch Petroleum Co., BP plc and Unocal Corp. also significant contributors. On the whole, they benefited from rapidly rising oil and gas prices, while higher utilization rates widened margins for refinery and chemical segments. As a result, each of these higher-quality companies delivered strong operating results and three of the four increased their dividend. Unocal further benefited from takeover speculation (in April 2005, the company announced a merger with ChevronTexaco). TOP TEN HOLDINGS AS OF MARCH 31, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Standard and Poor's 500 Depositary Receipt 3.5% 5.0% - -------------------------------------------------------------------------------- Commerce Bancshares, Inc. 3.4% 1.9% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 3.2% 3.5% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 2.8% 3.1% - -------------------------------------------------------------------------------- FPL Group, Inc., 8.00%, 2/16/06 2.7% 2.1% - -------------------------------------------------------------------------------- DST Systems Inc., 3.625%, 8/20/08 2.6% 1.0% - -------------------------------------------------------------------------------- Agilent Technologies Inc., 3.00%, 12/1/21 2.5% 0.4% - -------------------------------------------------------------------------------- International Paper Co., 3.70%, 6/20/21 2.2% -- - -------------------------------------------------------------------------------- Pitney Bowes, Inc. 2.2% -- - -------------------------------------------------------------------------------- Veritas Software Corp., 0.25%, 8/1/13 2.1% 0.2% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. **From 7/31/1994, the date nearest the fund's inception for which data are available. (continued) - ------ 4 Equity Income - Portfolio Commentary INDUSTRIALS CONTRIBUTE Our industrial stocks continued to generate strong absolute results. Aerospace and defense holdings were led by Honeywell International Inc., the leading maker of cockpit electronics. Honeywell's operating results improved over the period, leading to a 10% increase in its annual dividend. Elsewhere, electrical equipment makers Hubbell Inc. and Emerson Electric Co. continued to benefit from stronger demand from their worldwide customers. These higher-quality companies offer above-average dividend yields compared to the companies in the S&P 500 Index, which is consistent with Equity Income's charter. UTILITIES UP Utility stocks were another bright spot. On the electric side, FPL Group Inc. led our investments. This public utility holding company's main subsidiary is Florida Power & Light Co. The company increased its dividend twice in 2004, and once in 2005, for a total increase of 14.5%, a sign of its strong position--and of the importance of dividends to its total return. Our gas utilities were led by Charlotte-based Piedmont Natural Gas Co., Inc., which is benefiting from its successful integration of North Carolina Natural Gas. Piedmont's 7% dividend increase in the first quarter of 2005 marked the 27th consecutive year that the company has raised its dividend. MARSH DETRACTS Our largest detractor was Marsh & McLennan Cos., which fell during the fourth quarter when the company was accused of bid-rigging and steering work to a select group of insurers. Despite these setbacks, we do not think Marsh will cede its leadership position in the insurance brokerage industry. We continue to hold our position. LOOKING AHEAD We seek well-managed companies whose shares appear to be undervalued for transitory reasons, while pursuing a relatively high income stream. Along those lines, the move to higher dividend payouts by many companies should continue to be an advantage for Equity Income. TOP FIVE INDUSTRIES AS OF MARCH 31, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Oil & Gas 12.0% 12.4% - -------------------------------------------------------------------------------- Commercial Banks 10.1% 9.9% - -------------------------------------------------------------------------------- Electric Utilities 8.5% 7.7% - -------------------------------------------------------------------------------- Diversified Telecommunication Services 6.0% 1.7% - -------------------------------------------------------------------------------- Commercial Services & Supplies 4.8% 3.8% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Common Stocks, Options and Equity Futures 61.4% 76.0% - -------------------------------------------------------------------------------- Convertible Bonds 31.2% 11.1% - -------------------------------------------------------------------------------- Convertible Preferred Stocks 6.8% 12.0% - -------------------------------------------------------------------------------- Preferred Stocks -- 0.8% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 99.4% 99.9% - -------------------------------------------------------------------------------- Temporary Cash Investments 0.6% 0.1% - -------------------------------------------------------------------------------- - ------ 5 Equity Income - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS - 61.5% AEROSPACE & DEFENSE - 1.7% - -------------------------------------------------------------------------------- 1,984,157 Honeywell International Inc. $ 73,830,482 - -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS - 1.3% - -------------------------------------------------------------------------------- 801,800 United Parcel Service, Inc. Cl B 58,322,932 - -------------------------------------------------------------------------------- AUTO COMPONENTS - 0.9% - -------------------------------------------------------------------------------- 2,058,288 Cooper Tire & Rubber 37,790,168 - -------------------------------------------------------------------------------- AUTOMOBILES - 0.2% - -------------------------------------------------------------------------------- 300,000 General Motors Corp.(1) 8,817,000 - -------------------------------------------------------------------------------- BEVERAGES - 1.4% - -------------------------------------------------------------------------------- 709,500 Anheuser-Busch Companies, Inc. 33,623,205 - -------------------------------------------------------------------------------- 630,700 Coca-Cola Company (The) 26,281,269 - -------------------------------------------------------------------------------- 59,904,474 - -------------------------------------------------------------------------------- CHEMICALS - 1.5% - -------------------------------------------------------------------------------- 1,264,400 du Pont (E.I.) de Nemours & Co. 64,787,856 - -------------------------------------------------------------------------------- COMMERCIAL BANKS - 10.1% - -------------------------------------------------------------------------------- 993,700 Bank of America Corp. 43,822,170 - -------------------------------------------------------------------------------- 3,122,164 Commerce Bancshares, Inc.(2) 150,488,305 - -------------------------------------------------------------------------------- 486,200 Mercantile Bankshares Corporation 24,728,131 - -------------------------------------------------------------------------------- 1,677,100 SunTrust Banks, Inc. 120,868,597 - ------------------------------------------------------------------------------- 785,900 U.S. Bancorp 22,649,638 - ------------------------------------------------------------------------------- 475,587 UMB Financial Corp. 27,070,412 - ------------------------------------------------------------------------------- 1,219,953 Whitney Holding Corp. 54,300,108 - ------------------------------------------------------------------------------- 443,927,361 - ------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES - 4.8% - -------------------------------------------------------------------------------- 2,108,200 Pitney Bowes, Inc. 95,121,984 - -------------------------------------------------------------------------------- 2,453,243 Republic Services, Inc. Cl A 82,134,576 - -------------------------------------------------------------------------------- 1,117,400 Waste Management, Inc. 32,236,990 - -------------------------------------------------------------------------------- 209,493,550 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT - 0.2% - -------------------------------------------------------------------------------- 428,100 Nokia Oyj ADR 6,605,583 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS - 0.7% - -------------------------------------------------------------------------------- 339,600 International Business Machines Corp. 31,032,648 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING - 0.3% - -------------------------------------------------------------------------------- 432,000 Sonoco Products Co. 12,463,200 - -------------------------------------------------------------------------------- DIVERSIFIED - 3.5% - -------------------------------------------------------------------------------- 1,316,800 Standard and Poor's 500 Depositary Receipt 155,382,400 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 2.1% - -------------------------------------------------------------------------------- 2,260,300 BellSouth Corp. 59,423,287 - -------------------------------------------------------------------------------- 725,200 Iowa Telecommunications Services Inc. 14,141,400 - -------------------------------------------------------------------------------- 560,300 Verizon Communications 19,890,650 - -------------------------------------------------------------------------------- 93,455,337 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- ELECTRIC UTILITIES - 4.0% - -------------------------------------------------------------------------------- 1,858,278 IDACORP, Inc. $ 52,719,347 - -------------------------------------------------------------------------------- 3,487,500 Pepco Holdings, Inc. 73,202,625 - ------------------------------------------------------------------------------- 2,382,049 Westar Energy Inc. 51,547,540 - ------------------------------------------------------------------------------- 177,469,512 - ------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 1.4% - -------------------------------------------------------------------------------- 502,600 Emerson Electric Co. 32,633,818 - -------------------------------------------------------------------------------- 566,956 Hubbell Inc. Cl B 28,971,452 - -------------------------------------------------------------------------------- 61,605,270 - -------------------------------------------------------------------------------- FOOD PRODUCTS - 2.9% - -------------------------------------------------------------------------------- 410,000 ConAgra Foods, Inc. 11,078,200 - -------------------------------------------------------------------------------- 1,486,300 Kellogg Co. 64,312,201 - -------------------------------------------------------------------------------- 1,523,300 Kraft Foods Inc. Cl A 50,345,065 - --------------------------------------------------------------------------------- 125,735,466 - --------------------------------------------------------------------------------- GAS UTILITIES - 4.0% - -------------------------------------------------------------------------------- 552,326 AGL Resources Inc. 19,292,747 - -------------------------------------------------------------------------------- 558,691 Cascade Natural Gas Corp.(2) 11,151,472 - -------------------------------------------------------------------------------- 675,600 NICOR Inc. 25,058,004 - -------------------------------------------------------------------------------- 2,271,775 Piedmont Natural Gas Co., Inc. 52,341,696 - -------------------------------------------------------------------------------- 2,167,700 WGL Holdings Inc. 67,111,993 - -------------------------------------------------------------------------------- 174,955,912 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES - 1.1% - -------------------------------------------------------------------------------- 145,087 Hunter Douglas N.V. ORD 7,310,995 - -------------------------------------------------------------------------------- 658,477 Snap-on Incorporated 20,932,984 - -------------------------------------------------------------------------------- 289,107 Whirlpool Corp. 19,581,217 - -------------------------------------------------------------------------------- 47,825,196 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS - 0.7% - -------------------------------------------------------------------------------- 460,700 Kimberly-Clark Corp. 30,281,811 - -------------------------------------------------------------------------------- INSURANCE - 1.1% - -------------------------------------------------------------------------------- 1,135,379 CNA Surety Corp.(3) 15,441,154 - -------------------------------------------------------------------------------- 1,124,848 Marsh & McLennan Companies Inc. 34,217,877 - -------------------------------------------------------------------------------- 49,659,031 - -------------------------------------------------------------------------------- MACHINERY - 0.4% - -------------------------------------------------------------------------------- 409,700 Dover Corp. 15,482,563 - -------------------------------------------------------------------------------- MEDIA - 1.1% - -------------------------------------------------------------------------------- 642,500 New York Times Co. (The) Cl A 23,502,650 - -------------------------------------------------------------------------------- 604,600 Tribune Co. 24,105,402 - -------------------------------------------------------------------------------- 47,608,052 - -------------------------------------------------------------------------------- METALS & MINING - 0.5% - -------------------------------------------------------------------------------- 271,600 Barrick Gold Corp. 6,507,536 - -------------------------------------------------------------------------------- 377,400 Newmont Mining Corporation 15,945,150 - -------------------------------------------------------------------------------- 22,452,686 - -------------------------------------------------------------------------------- OIL & GAS - 9.2% - -------------------------------------------------------------------------------- 1,408,100 BP plc ADR 87,865,440 - -------------------------------------------------------------------------------- 2,362,700 Exxon Mobil Corp. 140,816,919 - -------------------------------------------------------------------------------- 1,445,692 Royal Dutch Petroleum Co. New York Shares 86,799,348 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 6 Equity Income - Schedule of Investments MARCH 31, 2005 Shares/Principal Value - -------------------------------------------------------------------------------- 1,414,955 Unocal Corp. $ 87,288,574 - -------------------------------------------------------------------------------- 402,770,281 - -------------------------------------------------------------------------------- PHARMACEUTICALS - 3.3% - -------------------------------------------------------------------------------- 1,266,000 Abbott Laboratories 59,020,920 - -------------------------------------------------------------------------------- 601,300 Bristol-Myers Squibb Co. 15,309,098 - -------------------------------------------------------------------------------- 664,200 Merck & Co., Inc. 21,500,154 - -------------------------------------------------------------------------------- 1,877,400 Pfizer, Inc. 49,319,298 - -------------------------------------------------------------------------------- 145,149,470 - -------------------------------------------------------------------------------- REAL ESTATE - 1.1% - -------------------------------------------------------------------------------- 997,622 Rayonier, Inc. 49,412,218 - -------------------------------------------------------------------------------- ROAD & RAIL - 0.7% - -------------------------------------------------------------------------------- 436,461 Union Pacific Corp. 30,421,332 - -------------------------------------------------------------------------------- SOFTWARE - 0.8% - -------------------------------------------------------------------------------- 1,387,600 Microsoft Corporation 33,538,292 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE - 0.5% - -------------------------------------------------------------------------------- 934,173 Washington Federal, Inc. 21,775,573 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $2,362,128,736) 2,691,955,656 - -------------------------------------------------------------------------------- PURCHASED PUT OPTIONS(4) CONTRACTS - -------------------------------------------------------------------------------- 3,000 General Motors Corp., strike at $35.00, expires 9/17/05 (Cost $744,000) 2,160,000 - -------------------------------------------------------------------------------- CONVERTIBLE BONDS - 31.2% AIRLINES - 0.2% - -------------------------------------------------------------------------------- $ 744,900 Citigroup Global Markets Holdings Inc., (convertible into Southwest Airlines Co.), 7.02%, 4/3/06(5) 10,524,618 - -------------------------------------------------------------------------------- BIOTECHNOLOGY - 0.3% - -------------------------------------------------------------------------------- 335,400 Goldman Sachs Group, Inc. (The), (convertible into Chiron Corp.), 5.00%, 11/21/05(5) 11,460,283 - -------------------------------------------------------------------------------- BUILDING PRODUCTS - 0.6% - -------------------------------------------------------------------------------- 51,500,000 Masco Corp., 2.81%, 7/20/31(6) 25,235,000 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS - 2.9% - -------------------------------------------------------------------------------- 526,900 Goldman Sachs Group, Inc. (The), (convertible into International Business Machines Corporation), 4.10%, 2/1/06(5) 48,240,856 - -------------------------------------------------------------------------------- 50,547,000 Hewlett-Packard Co., 4.35%, 10/14/17(6) 29,254,076 - -------------------------------------------------------------------------------- 564,700 Morgan Stanley, (convertible into International Business Machines Corporation), 5.58%, 8/17/05 (Acquired 8/10/04, Cost $47,779,267)(5)(7) 50,419,242 - -------------------------------------------------------------------------------- 127,914,174 - -------------------------------------------------------------------------------- Principal Value - -------------------------------------------------------------------------------- DEPARTMENT STORES - 1.6% - -------------------------------------------------------------------------------- 642,100 Citigroup Global Markets Holdings Inc., (convertible into Wal-Mart Stores, Inc.), 3.40%, 3/29/06(5) $ 32,666,838 - -------------------------------------------------------------------------------- 1,064,000 Citigroup Global Markets Holdings Inc., (convertible into Wal-Mart Stores, Inc.), 5.35%, 3/29/06(5) 15,428,000 - -------------------------------------------------------------------------------- 446,900 Goldman Sachs Group, Inc. (The), (convertible into Wal-Mart Stores, Inc.), 3.30%, 3/10/06(5) 22,454,490 - -------------------------------------------------------------------------------- 70,549,328 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 3.9% - -------------------------------------------------------------------------------- 206,600 Citigroup Global Markets Holdings Inc., (convertible into Commonwealth Telephone Enterprises, Inc.), VRN, 3.82%, 3/20/06(5) 9,820,462 - -------------------------------------------------------------------------------- 79,561,000 Commonwealth Telephone Enterprises Inc., 3.25%, 7/15/23 80,157,707 - -------------------------------------------------------------------------------- 101,500 Goldman Sachs Group, Inc. (The), (convertible into Commonwealth Telephone Enterprises, Inc.), 2.00%, 3/13/06(5) 4,772,936 - -------------------------------------------------------------------------------- 103,000 Merrill Lynch & Co., Inc., (convertible into Commonwealth Telephone Enterprises, Inc.), 2.50%, 3/14/06(5) 4,909,495 - -------------------------------------------------------------------------------- 113,335,000 Verizon Global Funding Corp., VRN, 0.18%, 5/15/21(8) 69,984,362 - -------------------------------------------------------------------------------- 169,644,962 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.7% - -------------------------------------------------------------------------------- 112,152,000 Agilent Technologies Inc., 3.00%, 12/1/21 110,750,100 - -------------------------------------------------------------------------------- 508,000 Goldman Sachs Group, Inc. (The), (convertible into AVX Corporation), 7.00%, 2/17/06(5) 6,060,440 - -------------------------------------------------------------------------------- 116,810,540 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES - 0.8% - -------------------------------------------------------------------------------- 34,656,000 Loews Corp., (convertible into Diamond Offshore Drilling, Inc.), 3.125%, 9/15/07(5) 35,089,200 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES - 0.3% - -------------------------------------------------------------------------------- 11,350,000 Apria Healthcare Group Inc., 3.375%, 9/1/33 12,570,125 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 0.6% - -------------------------------------------------------------------------------- 384,100 Goldman Sachs Group, Inc. (The), (convertible into Brinker International, Inc.), 7.00%, 9/2/05(5) 12,710,637 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 7 Equity Income - Schedule of Investments MARCH 31, 2005 Principal Value - -------------------------------------------------------------------------------- 289,600 Goldman Sachs Group, Inc. (The), (convertible into Outback Steakhouse, Inc.), 6.00%, 8/1/05(5) $ 12,532,729 - -------------------------------------------------------------------------------- 25,243,336 - -------------------------------------------------------------------------------- INSURANCE - 2.7% - -------------------------------------------------------------------------------- 73,000,000 American International Group Inc., 1.54%, 11/9/31(6) 48,545,000 - -------------------------------------------------------------------------------- 500,000 Goldman Sachs Group, Inc. (The), (convertible into Marsh & McLennan Companies, Inc.), 11.20%, 4/29/05(5) 15,053,500 - -------------------------------------------------------------------------------- 776,000 Goldman Sachs Group, Inc. (The), (convertible into Marsh & McLennan Companies, Inc.), 6.25%, 1/17/06(5) 23,785,952 - -------------------------------------------------------------------------------- 155,800 Merrill Lynch & Co. Inc., (convertible into American International Group, Inc.), 7.80%, 10/22/05(5) 8,745,054 - -------------------------------------------------------------------------------- 166,700 Merrill Lynch & Co., Inc., (convertible into American International Group, Inc.), 5.65%, 3/31/06(5) 8,960,959 - -------------------------------------------------------------------------------- 500,000 Morgan Stanley, (convertible into Marsh & McLennan Companies, Inc.), 10.15%, 7/26/05 (Acquired 10/26/04, Cost $14,125,000)(5)(7) 14,982,500 - -------------------------------------------------------------------------------- 120,072,965 - -------------------------------------------------------------------------------- IT SERVICES - 2.6% - -------------------------------------------------------------------------------- 102,319,000 DST Systems Inc., 3.625%, 8/20/08 114,980,976 - -------------------------------------------------------------------------------- MEDIA - 0.5% - -------------------------------------------------------------------------------- 175,000 Morgan Stanley, (convertible into Dow Jones & Company, Inc.), 4.65%, 2/10/06 (Acquired 1/25/05, Cost $7,082,250)(5)(7) 6,594,875 - -------------------------------------------------------------------------------- 22,332,000 Valassis Communications Inc., 3.06%, 6/6/21(6) 14,013,330 - -------------------------------------------------------------------------------- 20,608,205 - -------------------------------------------------------------------------------- MULTILINE RETAIL - 0.3% - -------------------------------------------------------------------------------- 260,000 Goldman Sachs Group, Inc. (The), (convertible into Dollar General Corp.), 6.375%, 12/9/05(5) 5,312,320 - -------------------------------------------------------------------------------- 423,700 Goldman Sachs Group, Inc. (The), (convertible into Dollar General Corp.), 6.625%, 9/2/05(5) 8,793,046 - -------------------------------------------------------------------------------- 14,105,366 - -------------------------------------------------------------------------------- OIL & GAS - 2.8% - -------------------------------------------------------------------------------- 32,745,000 Devon Energy Corporation, (convertible into ChevronTexaco Corp.), 4.90%, 8/15/08 37,738,613 - -------------------------------------------------------------------------------- Principal Value - -------------------------------------------------------------------------------- 46,970,000 Devon Energy Corporation, (convertible into ChevronTexaco Corp.), 4.95%, 8/15/08 $ 54,132,925 - -------------------------------------------------------------------------------- 175,000 Merrill Lynch & Co. Inc., (convertible into Unocal Corporation), 7.80%, 3/10/06(5) 10,806,250 - -------------------------------------------------------------------------------- 400,000 Morgan Stanley, (convertible into Unocal Corporation), 6.50%, 2/1/06 (Acquired 1/24/05, Cost $18,870,000)(5)(7) 20,638,000 - -------------------------------------------------------------------------------- 123,315,788 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS - 2.2% - -------------------------------------------------------------------------------- 172,097,000 International Paper Co., 3.70%, 6/20/21(6) 95,298,714 - -------------------------------------------------------------------------------- PHARMACEUTICALS - 0.7% - -------------------------------------------------------------------------------- 451,000 Goldman Sachs Group, Inc. (The), (convertible into Pfizer Inc.), 5.90%, 11/7/05(5) 11,344,454 - -------------------------------------------------------------------------------- 530,800 Morgan Stanley, (convertible into Merck & Co. Inc.), 8.45%, 2/10/06 (Acquired 1/28/05, Cost $14,814,628)(5)(7) 15,916,038 - -------------------------------------------------------------------------------- 5,441,000 Watson Pharmaceuticals, Inc., 1.75%, 3/15/23 5,196,155 - -------------------------------------------------------------------------------- 32,456,647 - -------------------------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.2% - -------------------------------------------------------------------------------- 460,500 Morgan Stanley, (convertible into Texas Instruments), 9.70%, 2/1/06 (Acquired 1/24/05, Cost $9,619,845)(5)(7) 10,455,652 - -------------------------------------------------------------------------------- SOFTWARE - 2.4% - -------------------------------------------------------------------------------- 13,950,000 Veritas Software Corp., 0.25%, 8/1/13 13,514,063 - -------------------------------------------------------------------------------- 93,501,000 Veritas Software Corp., 0.25%, 8/1/13 (Acquired 7/9/04-3/28/05, Cost $90,110,773)(7) 90,579,093 - -------------------------------------------------------------------------------- 104,093,156 - -------------------------------------------------------------------------------- SPECIALTY RETAIL - 1.2% - -------------------------------------------------------------------------------- 415,000 Goldman Sachs Group, Inc. (The), (convertible into Limited Brands, Inc.), 7.50%, 12/12/05(5) 10,267,515 - -------------------------------------------------------------------------------- 540,000 Goldman Sachs Group, Inc. (The), (convertible into The Gap, Inc.), 7.25%, 2/6/06(5) 11,978,820 - -------------------------------------------------------------------------------- 696,000 Merrill Lynch & Co., Inc., (convertible into The Gap, Inc.), 6.25%, 4/3/06(5) 15,141,480 - -------------------------------------------------------------------------------- 681,000 Morgan Stanley, (convertible into The Gap, Inc.), 6.25%, 3/5/06 (Acquired 2/25/05, Cost $14,529,816)(5)(7) 14,535,945 - -------------------------------------------------------------------------------- 51,923,760 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 8 Equity Income - Schedule of Investments MARCH 31, 2005 Principal/Shares Value - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS - 0.8% - -------------------------------------------------------------------------------- 37,450,000 Kellwood Co., 3.50%, 6/15/34, (Acquired 11/15/04-3/10/05, Cost $36,622,031)(7) $ 34,173,125 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE - 0.9% - -------------------------------------------------------------------------------- 327,300 Citigroup Global Markets Holdings Inc., (convertible into Fannie Mae), 5.75%, 2/27/06(5) 18,492,450 - -------------------------------------------------------------------------------- 342,900 Morgan Stanley, (convertible into Freddie Mac), 6.75%, 3/5/06 (Acquired 2/25/05, Cost $21,137,385)(5)(7) 21,216,938 - -------------------------------------------------------------------------------- 39,709,388 - -------------------------------------------------------------------------------- TOTAL CONVERTIBLE BONDS (Cost $1,358,683,638) 1,366,235,338 - -------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS - 6.8% AEROSPACE & DEFENSE - 1.2% - -------------------------------------------------------------------------------- 415,400 Northrop Grumman Corp., 7.00%, 4/4/21 54,002,000 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES - 4.5% - -------------------------------------------------------------------------------- 3,003,300 Ameren Corp., 9.75%, 5/15/05 80,548,506 - -------------------------------------------------------------------------------- 1,879,200 FPL Group, Inc., 8.00%, 2/16/06 116,529,191 - -------------------------------------------------------------------------------- 197,077,697 - -------------------------------------------------------------------------------- Principal/Shares Value - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES - 0.3% - -------------------------------------------------------------------------------- 321,700 Newell Financial Trust I, 5.25%, 12/1/27 $ 14,999,263 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE - 0.8% - -------------------------------------------------------------------------------- 93 Fannie Mae, 5.375%, 1/5/08 (Acquired 12/29/04-3/31/05, Cost $9,315,238)(7) 8,715,182 - -------------------------------------------------------------------------------- 464,500 Washington Mutual, Inc., 5.375%, 7/1/41 24,223,664 - -------------------------------------------------------------------------------- 32,938,846 - -------------------------------------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $288,788,759) 299,017,806 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS - 0.6% $27,300,000 FHLMC Discount Notes, 2.54%, 4/1/05(9) (Cost $27,300,000) 27,300,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 100.1% (Cost $4,037,645,133) 4,386,668,800 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES - (0.1)% (4,142,960) - -------------------------------------------------------------------------------- TOTAL NET ASSETS - 100.0% $4,382,525,840 ================================================================================ FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS* Contracts to Sell Settlement Date Value Unrealized Loss - ----------------------------------------------------------------------------------------- 17,930,618 Euro for USD 4/29/05 $ 23,251,020 $ (74,846) - ----------------------------------------------------------------------------------------- 33,862,181 Euro for USD 4/29/05 43,909,822 (172,417) - ----------------------------------------------------------------------------------------- 24,710,239 Euro for USD 4/29/05 32,042,301 (137,986) - ----------------------------------------------------------------------------------------- 24,711,983 GBP for USD 4/29/05 46,624,820 (355,684) - ----------------------------------------------------------------------------------------- 21,523,912 GBP for USD 4/29/05 40,609,793 (332,515) - ----------------------------------------------------------------------------------------- $ 186,437,756 $(1,073,448) ========================================= (Value on Settlement Date $185,364,308) *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. See Notes to Financial Statements. (continued) - ------ 9 Equity Income - Schedule of Investments MARCH 31, 2005 NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt FHLMC = Federal Home Loan Mortgage Corporation GBP = British Pound ORD = Foreign Ordinary Share USD = United States Dollar VRN = Variable Rate Note. Interest reset date is indicated, unless otherwise noted. Rate shown is effective March 31, 2005. (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) Category is less than 0.05% of net assets. (5) Equity-linked debt security. The aggregate value of these securities at March 31, 2005, was $530,111,974, which represented 12.1% of net assets. (6) Security is a zero-coupon bond. The rate indicated is the yield to maturity/put at purchase. Zero-coupon securities are issued at a substantial discount from their value at maturity. (7) Security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of restricted securities at March 31, 2005, was $288,226,590, which represented 6.6% of net assets. (8) Step-coupon security. Yield to maturity/put at purchase is indicated. These securities can become interest bearing at a predetermined rate and future date and are issued at a substantial discount from their value at maturity. (9) The rate indicated is the yield to maturity at purchase. See Notes to Financial Statements. - ------ 10 Mid Cap Value - Performance TOTAL RETURNS AS OF MARCH 31, 2005 -------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 16.63% 16.63% 3/31/04 - -------------------------------------------------------------------------------- RUSSELL MIDCAP VALUE INDEX(1) 18.34% 18.34% -- - -------------------------------------------------------------------------------- Institutional -- 15.82%(2) 8/2/04 - -------------------------------------------------------------------------------- Advisor -- 3.05%(2) 1/13/05 - -------------------------------------------------------------------------------- (1) (c)2005 Reuters. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper Inc. - A Reuters Company and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. (2) Returns for periods less than one year are not annualized. GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made March 31, 2004
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. - ------ 11 Mid Cap Value - Portfolio Commentary [photo of investment team] PORTFOLIO MANAGERS ON THE MID CAP VALUE INVESTMENT TEAM: MICHAEL LISS, PHIL DAVIDSON AND SCOTT MOORE. In its first full year of operation, Mid Cap Value posted a gain of 16.63%* for the 12 months ended March 31, 2005, compared to its benchmark, the Russell Midcap Value Index, which was up 18.34%. MARKET ENVIRONMENT The year was marked by modest gains for the broad stock market, with the Russell 3000 Index up 7.09% and the S&P 500 up 6.69%. Mid-sized companies fared better over the period, evidenced by the Russell Midcap Index's gain of 14.05%. During the period, economic data was dominated by record-high oil prices, relatively benign inflation levels, and modestly rising interest rates. Against this backdrop, the industrial, financial, health care and basic materials sectors contributed the most to absolute results. INDUSTRIALS LEAD PORTFOLIO Industrial stocks proved to be Mid Cap Value's largest contributors to absolute performance. Our investments were led by Republic Services, Inc., one of the country's leading solid waste management firms. The company posted strong 2004 numbers, exceeding its financial guidance for the year. In addition, during the period, Republic Services returned more cash to shareholders by doubling its dividend and increasing its share buyback program. 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. Elsewhere in the sector, our shares of Union Pacific Corp., the largest U.S. railroad, proved successful. The company is seeing good volumes, price increases and is solving operational difficulties. TOP TEN HOLDINGS AS OF MARCH 31, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Republic Services, Inc. Cl A 4.4% 2.7% - -------------------------------------------------------------------------------- Commonwealth Telephone Enterprise Inc. 4.0% 1.0% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 2.3% 2.5% - -------------------------------------------------------------------------------- Cooper Tire & Rubber 2.3% -- - -------------------------------------------------------------------------------- Marsh & McLennan Companies, Inc. 1.9% 2.0% - -------------------------------------------------------------------------------- IDACORP, Inc. 1.9% 1.1% - -------------------------------------------------------------------------------- Kimberly-Clark Corp. 1.9% 1.0% - -------------------------------------------------------------------------------- BancorpSouth Inc. 1.9% 0.8% - -------------------------------------------------------------------------------- Journal Communications Inc. 1.8% 1.3% - -------------------------------------------------------------------------------- Union Pacific Corp. 1.8% 3.3% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. (continued) - ------ 12 Mid Cap Value - Portfolio Commentary SUCCESS IN FINANCIALS Financials, Mid Cap Value's largest sector exposure on average, represented another bright spot, led by Zions Bancorporation. Zions' performance was helped by strong loan demand, driven by population and income growth in the communities it serves. In the insurance realm, Horace Mann Educators Corp., a multi-line insurance company that focuses on serving the nation's educators and their families, was a significant contributor as the company continued to improve overall underwriting in its core business. HEALTH CARE ADDS VALUE Health care holdings were strong performers for Mid Cap Value. Health care providers Universal Health Services, Inc. (UHS) and HCA Inc. entered the period amid concerns over rising bad debt expense. But both companies were able to improve their cost structures by better managing their bad debt expense, while also seeing admissions improve. Further, each carried out stock repurchases over the 12 months. HCA, for example, executed a Dutch auction tender for approximately 13% of its shares, while announcing a dividend increase of 15%. FEW DETRACTORS Only one sector, information technology, dampened absolute results. Our largest detractors included Synopsys Inc., whose software is used to design computer chips. Synopsys lost ground midway through the period after the company cut its forecast for orders. AVX Corp., an electronic equipment company that makes capacitors for various industries, was slowed by pricing pressure and subdued demand as suppliers worked through their inventories. We continue to hold both positions. In financials, insurance broker Marsh & McLennan Cos. fell sharply during the fourth quarter when the company was accused of bid-rigging and steering work to a select group of insurers. We believe the issues affecting this industry leader are manageable and have maintained our position. LOOKING AHEAD We will continue to adhere to our discipline of seeking well-managed companies that appear to be temporarily undervalued for reasons unrelated to the firms' fundamental or financial health. TOP FIVE INDUSTRIES AS OF MARCH 31, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Insurance 7.8% 10.1% - -------------------------------------------------------------------------------- Commercial Services & Supplies 6.7% 3.8% - -------------------------------------------------------------------------------- Commercial Banks 5.6% 5.2% - -------------------------------------------------------------------------------- Diversified Telecommunication Services 5.3% 1.0% - -------------------------------------------------------------------------------- Electric Utilities 5.2% 5.1% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Common Stocks 94.1% 97.2% - -------------------------------------------------------------------------------- Temporary Cash Investments* 5.9% 2.8% - -------------------------------------------------------------------------------- *A portion of Temporary Cash Investments is held for the pending settlement of security purchases. - ------ 13 Mid Cap Value - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS - 96.3% AEROSPACE & DEFENSE - 2.6% - -------------------------------------------------------------------------------- 16,493 Honeywell International Inc. $ 613,705 - -------------------------------------------------------------------------------- 13,170 Northrop Grumman Corp. 710,916 - -------------------------------------------------------------------------------- 1,324,621 - -------------------------------------------------------------------------------- AUTO COMPONENTS - 2.6% - -------------------------------------------------------------------------------- 63,270 Cooper Tire & Rubber 1,161,637 - -------------------------------------------------------------------------------- 9,277 TRW Automotive Holdings Corp.(1) 180,252 - --------------------------------------------------------------------------------- 1,341,889 - --------------------------------------------------------------------------------- AUTOMOBILES - 0.6% - -------------------------------------------------------------------------------- 9,300 Winnebago Industries 293,880 - -------------------------------------------------------------------------------- BEVERAGES - 2.4% - -------------------------------------------------------------------------------- 9,357 Anheuser-Busch Companies, Inc. 443,428 - -------------------------------------------------------------------------------- 19,900 Coca-Cola Enterprises 408,348 - -------------------------------------------------------------------------------- 12,660 Pepsi Bottling Group Inc. 352,581 - -------------------------------------------------------------------------------- 1,204,357 - -------------------------------------------------------------------------------- BUILDING PRODUCTS - 0.6% - -------------------------------------------------------------------------------- 8,490 Masco Corp. 294,348 - -------------------------------------------------------------------------------- CAPITAL MARKETS - 1.1% - -------------------------------------------------------------------------------- 9,540 Merrill Lynch & Co., Inc. 539,964 - -------------------------------------------------------------------------------- CHEMICALS - 2.7% - -------------------------------------------------------------------------------- 13,860 Ecolab Inc. 458,073 - --------------------------------------------------------------------------------- 32,673 Ferro Corp. 614,906 - --------------------------------------------------------------------------------- 4,366 Minerals Technologies Inc. 287,195 - --------------------------------------------------------------------------------- 1,360,174 - --------------------------------------------------------------------------------- COMMERCIAL BANKS - 5.6% - -------------------------------------------------------------------------------- 46,720 BancorpSouth Inc. 964,301 - --------------------------------------------------------------------------------- 16,600 Commerce Bancshares, Inc. 800,120 - --------------------------------------------------------------------------------- 16,360 SunTrust Banks, Inc. 1,179,066 - --------------------------------------------------------------------------------- 2,943,487 - --------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES - 6.7% - --------------------------------------------------------------------------------- 20,290 Aramark Corp. Cl B 533,221 - --------------------------------------------------------------------------------- 66,774 Republic Services, Inc. Cl A 2,235,594 - --------------------------------------------------------------------------------- 8,130 Waste Connections, Inc.(1) 282,518 - --------------------------------------------------------------------------------- 15,350 Waste Management, Inc. 442,848 - --------------------------------------------------------------------------------- 3,494,181 - --------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.9% - -------------------------------------------------------------------------------- 4,553 Martin Marietta Materials, Inc. 254,603 - ---------------------------------------------------------------------------------- 3,390 Vulcan Materials Co. 192,654 - ---------------------------------------------------------------------------------- 447,257 - ---------------------------------------------------------------------------------- CONTAINERS & PACKAGING - 1.9% - -------------------------------------------------------------------------------- 5,840 AptarGroup, Inc. 303,563 - -------------------------------------------------------------------------------- 21,450 Bemis Co. 667,524 - -------------------------------------------------------------------------------- 971,087 - -------------------------------------------------------------------------------- DIVERSIFIED - 1.7% - -------------------------------------------------------------------------------- 6,430 iShares S&P MidCap 400 Index Fund 845,416 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 5.3% - -------------------------------------------------------------------------------- 43,856 Commonwealth Telephone Enterprise Inc.(1) $ 2,067,372 - -------------------------------------------------------------------------------- 14,440 Iowa Telecommunications Services Inc. 281,580 - -------------------------------------------------------------------------------- 29,800 Valor Communications Group, Inc. 431,206 - -------------------------------------------------------------------------------- 2,780,158 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES - 5.2% - -------------------------------------------------------------------------------- 8,940 FPL Group, Inc. 358,941 - --------------------------------------------------------------------------------- 34,240 IDACORP, Inc. 971,389 - --------------------------------------------------------------------------------- 14,330 Northeast Utilities 276,139 - --------------------------------------------------------------------------------- 28,300 Westar Energy Inc. 612,412 - --------------------------------------------------------------------------------- 13,020 Wisconsin Energy Corp. 462,210 - --------------------------------------------------------------------------------- 2,681,091 - --------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 1.0% - -------------------------------------------------------------------------------- 7,840 Emerson Electric Co. 509,051 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.3% - -------------------------------------------------------------------------------- 28,684 AVX Corporation 351,379 - -------------------------------------------------------------------------------- 18,640 Littelfuse, Inc.(1) 534,036 - -------------------------------------------------------------------------------- 23,555 Vishay Intertechnology, Inc.(1) 292,789 - -------------------------------------------------------------------------------- 1,178,204 - -------------------------------------------------------------------------------- FOOD PRODUCTS - 4.9% - -------------------------------------------------------------------------------- 10,070 Campbell Soup Company 292,231 - --------------------------------------------------------------------------------- 14,748 H.J. Heinz Company 543,316 - --------------------------------------------------------------------------------- 9,340 Kellogg Co. 404,142 - --------------------------------------------------------------------------------- 21,960 Kraft Foods Inc. Cl A 725,778 - --------------------------------------------------------------------------------- 7,990 Unilever N.V. New York Shares 546,676 - --------------------------------------------------------------------------------- 2,512,143 - --------------------------------------------------------------------------------- GAS UTILITIES - 2.5% - --------------------------------------------------------------------------------- 28,350 Cascade Natural Gas Corp. 565,866 - --------------------------------------------------------------------------------- 22,588 WGL Holdings Inc. 699,324 - --------------------------------------------------------------------------------- 1,265,190 - --------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES - 2.1% - -------------------------------------------------------------------------------- 34,149 National Dentex Corp.(1) 672,735 - -------------------------------------------------------------------------------- 9,770 Steris Corp.(1) 246,693 - -------------------------------------------------------------------------------- 7,300 Symmetry Medical Inc.(1) 138,846 - -------------------------------------------------------------------------------- 1,058,274 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES - 1.6% - -------------------------------------------------------------------------------- 10,700 Apria Healthcare Group Inc.(1) 343,470 - -------------------------------------------------------------------------------- 8,610 Universal Health Services, Inc. Cl B 451,164 - -------------------------------------------------------------------------------- 794,634 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 3.1% - -------------------------------------------------------------------------------- 5,730 Bob Evans Farms, Inc. 134,369 - -------------------------------------------------------------------------------- 12,878 Brinker International, Inc.(1) 466,441 - -------------------------------------------------------------------------------- 5,751 Outback Steakhouse, Inc. 263,338 - -------------------------------------------------------------------------------- 19,809 Speedway Motorsports Inc. 707,181 - -------------------------------------------------------------------------------- 1,571,329 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 14 Mid Cap Value - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES - 2.8% - -------------------------------------------------------------------------------- 10,720 Hunter Douglas N.V. ORD $ 540,185 - -------------------------------------------------------------------------------- 8,940 Snap-on Incorporated 284,203 - -------------------------------------------------------------------------------- 8,877 Whirlpool Corp. 601,239 - -------------------------------------------------------------------------------- 1,425,627 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS - 1.9% - -------------------------------------------------------------------------------- 14,690 Kimberly-Clark Corp. 965,574 - -------------------------------------------------------------------------------- INSURANCE - 7.8% - -------------------------------------------------------------------------------- 15,977 Aspen Insurance Holdings Ltd. 402,780 - -------------------------------------------------------------------------------- 5,784 Chubb Corp. 458,498 - -------------------------------------------------------------------------------- 21,450 CNA Surety Corp.(1) 291,720 - -------------------------------------------------------------------------------- 4,110 Hartford Financial Services Group Inc. (The) 281,782 - -------------------------------------------------------------------------------- 16,100 Horace Mann Educators Corp. 285,614 - -------------------------------------------------------------------------------- 13,184 Jefferson-Pilot Corp. 646,675 - -------------------------------------------------------------------------------- 32,163 Marsh & McLennan Companies, Inc. 978,399 - -------------------------------------------------------------------------------- 7,490 MetLife, Inc. 292,859 - -------------------------------------------------------------------------------- 13,650 Platinum Underwriters Holdings 405,405 - -------------------------------------------------------------------------------- 4,043,732 - -------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL - 0.7% - -------------------------------------------------------------------------------- 28,170 FTD Group, Inc.(1) 341,420 - -------------------------------------------------------------------------------- IT SERVICES - 2.6% - -------------------------------------------------------------------------------- 22,000 Accenture Ltd. Cl A(1) 531,300 - -------------------------------------------------------------------------------- 17,090 DST Systems, Inc.(1) 789,216 - -------------------------------------------------------------------------------- 1,320,516 - -------------------------------------------------------------------------------- MACHINERY - 1.3% - -------------------------------------------------------------------------------- 17,370 Dover Corp. 656,412 - --------------------------------------------------------------------------------- MEDIA - 4.6% - -------------------------------------------------------------------------------- 7,618 Dow Jones & Co. Inc. 284,685 - -------------------------------------------------------------------------------- 57,068 Journal Communications Inc. 944,475 - -------------------------------------------------------------------------------- 23,300 New York Times Co. (The) Cl A 852,314 - -------------------------------------------------------------------------------- 14,080 Westwood One, Inc.(1) 286,528 - -------------------------------------------------------------------------------- 2,368,002 - -------------------------------------------------------------------------------- MULTILINE RETAIL - 0.3% - -------------------------------------------------------------------------------- 6,398 Dollar General Corp. 140,180 - -------------------------------------------------------------------------------- OIL & GAS - 2.8% - -------------------------------------------------------------------------------- 5,190 ConocoPhillips 559,690 - --------------------------------------------------------------------------------- 14,039 Unocal Corp. 866,066 - --------------------------------------------------------------------------------- 1,425,756 - --------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS - 1.0% - -------------------------------------------------------------------------------- 15,128 Neenah Paper Inc. 508,603 - -------------------------------------------------------------------------------- PHARMACEUTICALS - 1.8% - -------------------------------------------------------------------------------- 15,730 Schering-Plough Corp. 285,500 - -------------------------------------------------------------------------------- 21,370 Watson Pharmaceuticals, Inc.(1) 656,700 - -------------------------------------------------------------------------------- 942,200 - -------------------------------------------------------------------------------- REAL ESTATE - 1.9% - -------------------------------------------------------------------------------- 41,640 Education Realty Trust, Inc.(1) 692,473 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 8,190 Sun Communities, Inc. $ 293,202 - -------------------------------------------------------------------------------- 985,675 - -------------------------------------------------------------------------------- ROAD & RAIL - 1.8% - -------------------------------------------------------------------------------- 12,858 Union Pacific Corp. 896,203 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.3% - -------------------------------------------------------------------------------- 10,900 Teradyne, Inc.(1) 159,140 - -------------------------------------------------------------------------------- SOFTWARE - 1.8% - -------------------------------------------------------------------------------- 12,094 Reynolds & Reynolds Co. Cl A 327,264 - -------------------------------------------------------------------------------- 33,214 Synopsys, Inc.(1) 601,173 - -------------------------------------------------------------------------------- 928,437 - -------------------------------------------------------------------------------- SPECIALTY RETAIL - 0.8% - -------------------------------------------------------------------------------- 18,560 Gap, Inc. (The) 405,350 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS - 2.3% - -------------------------------------------------------------------------------- 15,380 Jones Apparel Group, Inc. 515,076 - --------------------------------------------------------------------------------- 23,010 Kellwood Co. 662,458 - --------------------------------------------------------------------------------- 1,177,534 - --------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE - 2.1% - -------------------------------------------------------------------------------- 10,240 Freddie Mac 647,168 - -------------------------------------------------------------------------------- 7,301 MGIC Investment Corp. 450,253 - -------------------------------------------------------------------------------- 1,097,421 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS - 0.3% - -------------------------------------------------------------------------------- 7,992 Interline Brands Inc.(1) 152,728 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $47,551,319) 49,351,245 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS - 6.1% Repurchase Agreement, Bank of America Securities, LLC, (collateralized by various U.S. Treasury obligations, 3.125% - 6.18%, 5/15/07 - 11/15/27, valued at $2,569,080), in a joint trading account at 2.57%, dated 3/31/05, due 4/1/05 (Delivery value $2,500,178) 2,500,000 - -------------------------------------------------------------------------------- Repurchase Agreement, Merrill Lynch & Co., Inc., (collateralized by various U.S. Treasury obligations, 1.875% - 11.25%, 11/30/05 - 2/15/15, valued at $612,084), in a joint trading account at 2.55%, dated 3/31/05, due 4/1/05 (Delivery value $600,043) 600,000 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $3,100,000) 3,100,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 102.4% (Cost $50,651,319) 52,451,245 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES - (2.4)% (1,253,656) - -------------------------------------------------------------------------------- TOTAL NET ASSETS - 100.0% $51,197,589 ================================================================================ See Notes to Financial Statements. (continued) - ------ 15 Mid Cap Value - Schedule of Investments MARCH 31, 2005 FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS* Contracts to Sell Settlement Date Value Unrealized Loss - ----------------------------------------------------------------------------------------- 176,244 Euro for USD 4/29/05 $ 228,539 $ (734) - ----------------------------------------------------------------------------------------- 268,355 Euro for USD 4/29/05 347,982 (1,331) - ----------------------------------------------------------------------------------------- 332,841 Euro for USD 4/29/05 431,602 (1,691) - ----------------------------------------------------------------------------------------- $1,008,123 $(3,756) ======================================= (Value on Settlement Date $1,004,367) *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 ORD = Foreign Ordinary Share USD = United States Dollar (1) Non-income producing. See Notes to Financial Statements. - ------ 16 Small Cap Value - Performance TOTAL RETURNS AS OF MARCH 31, 2005 ---------------------- AVERAGE ANNUAL RETURNS - ------------------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS INCEPTION DATE - ------------------------------------------------------------------------------------------- INVESTOR CLASS 14.00% 19.91% 16.16% 7/31/98 - ------------------------------------------------------------------------------------------- S&P SMALLCAP 600/BARRA VALUE INDEX(1) 12.82% 13.88% 10.80% -- - ------------------------------------------------------------------------------------------- Institutional Class 14.20% 20.14% 17.67% 10/26/98 - ------------------------------------------------------------------------------------------- Advisor Class 13.70% 19.63% 20.13% 12/31/99 - ------------------------------------------------------------------------------------------- C Class 12.85% -- 11.64% 6/1/01 - ------------------------------------------------------------------------------------------- (1) (c)2005 Reuters. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper Inc. - A Reuters Company and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. 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. Historically, small company stocks have been more volatile than the stock of larger, more-established companies. 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) - ------ 17 Small Cap Value - Performance GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made July 31, 1998
ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended March 31 - ------------------------------------------------------------------------------------- 1999* 2000 2001 2002 2003 2004 2005 - ------------------------------------------------------------------------------------- Investor Class -4.24% 14.37% 36.51% 33.97% -21.55% 51.53% 14.00% - ------------------------------------------------------------------------------------- S&P SmallCap 600/Barra Value Index -11.71% 17.14% 16.44% 25.86% -28.60% 62.26% 12.82% - ------------------------------------------------------------------------------------- * 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. Historically, small company stocks have been more volatile than the stock of larger, more-established companies. 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. - ------ 18 Small Cap Value - Portfolio Commentary [photo of investment team] PORTFOLIO MANAGERS ON THE SMALL CAP VALUE INVESTMENT TEAM: BEN GIELE AND KEVIN LAUB. For the 12 months ended March 31, 2005, Small Cap Value gained 14.00%*, outperforming the 12.82% 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 16.16%, far outpacing the 10.80% return posted by its benchmark for the same period. EQUITIES GAIN AMID CHALLENGES After languishing for much of last year, stocks rallied during the final stretch of 2004, gaining strength from the resolution of the presidential election and a temporary decline in oil prices. However, stock market optimism waned early in 2005 as concern grew about the effects of soaring commodity and oil prices and climbing interest rates on the economy and corporate profit growth. Though volatility prevailed, equities ultimately advanced during the period. In that environment, Small Cap Value outperformed its benchmark and received positive absolute contributions from every sector in which it was invested. INDUSTRIALS: THE STRONGEST FINISH Small Cap Value's stake in the industrials sector contributed the most to absolute results during the fiscal year. Aerospace and defense companies were the strongest performers, and effective selection yielded the portfolio's top contributor, United Defense Industries Inc., a leading producer of combat vehicles and munitions. The company reported a 58% increase in operating income in the fourth quarter of 2004 versus the same quarter in 2003 and record-level sales for 2004, news that helped support the stock's climb. We weren't alone in our appreciation of this company: BAE Systems announced in early March 2005 it would acquire United Defense at a premium, helping the stock achieve triple-digit gains for the period. ENERGY PROVIDES LIFT Continued strength in global demand combined with ramping oil prices, which reached a series of record highs TOP TEN HOLDINGS AS OF MARCH 31, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Sybase, Inc. 2.0% 2.5% - -------------------------------------------------------------------------------- iShares Russell 2000 Index Fund 2.0% 1.8% - -------------------------------------------------------------------------------- Bemis Co. 1.2% 1.3% - -------------------------------------------------------------------------------- Sensient Technologies Corp. 1.1% 1.2% - -------------------------------------------------------------------------------- Platinum Underwriters Holdings 1.1% 1.4% - -------------------------------------------------------------------------------- HCC Insurance Holdings, Inc. 1.1% 1.1% - -------------------------------------------------------------------------------- Helmerich & Payne, Inc. 1.0% 1.0% - -------------------------------------------------------------------------------- Smith (A.O.) Corp. 1.0% 1.2% - -------------------------------------------------------------------------------- IDACORP, Inc. 1.0% 1.0% - -------------------------------------------------------------------------------- Washington Federal, Inc. 1.0% 0.9% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. (continued) - ------ 19 Small Cap Value - Portfolio Commentary during the period, helped underpin gains for companies across the energy sector, and our investments significantly augmented returns. Energy equipment and services firms paced the advance, and effective selection produced two more top stocks. One was Cal Dive International Inc., a service provider to offshore rigs, which reported its third consecutive quarter of record earnings. Helmerich & Payne, a driller that works primarily in the United States and South America, was another standout. The stock prospered following reports of increased activity in its fleet of rigs and significantly higher operating income during the period. MINOR SETBACKS Though security selection was overwhelmingly positive, and our performance was solid on both absolute and relative bases, we encountered some disappointments in this otherwise upbeat environment. One holding that fell short was Superior Industries International Inc., a leading supplier of aluminum wheels. Despite announcing increased revenues during the period, the company also reported declines in net income, citing competitive pressure from low-cost producers in China and other emerging markets as the principal reason. Ferro Corp., a chemical company that makes materials used in a range of consumer and industrial products, was another that stumbled. During the period, Ferro encountered difficulty with accounting irregularities and ultimately restated earnings for 2003 and the first quarter of 2004, sending the stock sharply lower. Though the share price gradually recovered, reports late in the period of weaker demand once again restrained the stock. Despite these setbacks, we remain confident in the long-term prospects for both companies, and we have maintained our positions. OUR COMMITMENT We 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 MARCH 31, 2005* - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Commercial Banks 5.9% 5.6% - -------------------------------------------------------------------------------- Software 5.3% 7.4% - -------------------------------------------------------------------------------- Chemicals 4.5% 4.9% - -------------------------------------------------------------------------------- Insurance 4.4% 4.3% - -------------------------------------------------------------------------------- Specialty Retail 4.4% 4.3% - -------------------------------------------------------------------------------- * 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 FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Common Stocks 95.4% 93.9% - -------------------------------------------------------------------------------- Convertible Preferred Stocks 1.0% 1.0% - -------------------------------------------------------------------------------- Preferred Stocks 0.1% 0.3% - -------------------------------------------------------------------------------- Convertible Bonds -- 0.2% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 96.5% 95.4% - -------------------------------------------------------------------------------- Temporary Cash Investments 3.5% 4.6% - -------------------------------------------------------------------------------- - ------ 20 Small Cap Value - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS - 95.6% AEROSPACE & DEFENSE - 0.8% - --------------------------------------------------------------------------------- 125,000 Alliant Techsystems Inc.(1) $ 8,931,250 - --------------------------------------------------------------------------------- 10,477 Curtiss-Wright Corp. 597,189 - --------------------------------------------------------------------------------- 120,000 United Defense Industries, Inc. 8,810,400 - --------------------------------------------------------------------------------- 18,338,839 - --------------------------------------------------------------------------------- AIRLINES - 0.7% - -------------------------------------------------------------------------------- 780,000 SkyWest, Inc. 14,500,200 - --------------------------------------------------------------------------------- AUTO COMPONENTS - 1.4% - -------------------------------------------------------------------------------- 555,000 ArvinMeritor Inc. 8,585,850 - --------------------------------------------------------------------------------- 850,000 Cooper Tire & Rubber 15,606,000 - --------------------------------------------------------------------------------- 240,000 Superior Industries International, Inc. 6,338,400 - --------------------------------------------------------------------------------- 30,530,250 - --------------------------------------------------------------------------------- BUILDING PRODUCTS - 0.7% - -------------------------------------------------------------------------------- 715,000 Griffon Corp.(1) 15,308,150 - --------------------------------------------------------------------------------- CAPITAL MARKETS - 1.2% - -------------------------------------------------------------------------------- 145,000 optionsXpress Holdings, Inc.(1) 2,347,550 - -------------------------------------------------------------------------------- 305,000 Piper Jaffray Companies(1) 11,159,950 - -------------------------------------------------------------------------------- 140,000 Raymond James Financial, Inc. 4,242,000 - -------------------------------------------------------------------------------- 430,000 Waddell & Reed Financial Inc. 8,488,200 - -------------------------------------------------------------------------------- 26,237,700 - -------------------------------------------------------------------------------- CHEMICALS - 4.5% - -------------------------------------------------------------------------------- 305,000 Engelhard Corporation 9,159,150 - -------------------------------------------------------------------------------- 1,060,000 Ferro Corp. 19,949,200 - -------------------------------------------------------------------------------- 115,000 FMC Corp.(1) 6,146,750 - -------------------------------------------------------------------------------- 740,000 H.B. Fuller Company 21,460,000 - -------------------------------------------------------------------------------- 205,000 Minerals Technologies Inc. 13,484,900 - -------------------------------------------------------------------------------- 135,000 Olin Corp. 3,010,500 - -------------------------------------------------------------------------------- 1,160,000 Sensient Technologies Corp. 25,009,600 - -------------------------------------------------------------------------------- 98,220,100 - -------------------------------------------------------------------------------- COMMERCIAL BANKS - 5.8% - -------------------------------------------------------------------------------- 355,000 Associated Banc-Corp 11,086,650 - -------------------------------------------------------------------------------- 600,000 BancorpSouth Inc. 12,384,000 - -------------------------------------------------------------------------------- 215,000 Chemical Financial Corp. 6,988,575 - -------------------------------------------------------------------------------- 410,000 Chittenden Corp. 10,688,700 - -------------------------------------------------------------------------------- 140,000 Cullen/Frost Bankers, Inc. 6,321,000 - -------------------------------------------------------------------------------- 350,000 First Financial Bancorp 6,387,500 - -------------------------------------------------------------------------------- 220,000 Fulton Financial Corp. 4,793,800 - -------------------------------------------------------------------------------- 600,000 Sky Financial Group Inc. 16,092,000 - -------------------------------------------------------------------------------- 295,000 South Financial Group Inc. (The) 9,009,300 - -------------------------------------------------------------------------------- 690,000 Sterling Bancshares, Inc. 9,798,000 - -------------------------------------------------------------------------------- 550,000 Susquehanna Bancshares Inc. 13,409,000 - -------------------------------------------------------------------------------- 105,000 Whitney Holding Corp. 4,673,550 - -------------------------------------------------------------------------------- 475,000 Wilmington Trust Corporation 16,672,500 - -------------------------------------------------------------------------------- 128,304,575 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES - 3.6% - -------------------------------------------------------------------------------- 685,000 ABM Industries Inc. $ 13,172,550 - -------------------------------------------------------------------------------- 250,000 Asset Acceptance Capital Corp.(1) 4,770,000 - -------------------------------------------------------------------------------- 230,000 Banta Corp. 9,844,000 - ---------------------------------------------------------------------------------- 180,000 CDI Corp. 3,983,400 - ---------------------------------------------------------------------------------- 475,000 G&K Services Inc. Cl A 19,137,750 - ---------------------------------------------------------------------------------- 405,000 Kelly Services, Inc. Cl A 11,659,950 - ---------------------------------------------------------------------------------- 497,357 Tetra Tech, Inc.(1) 6,276,645 - ---------------------------------------------------------------------------------- 205,000 United Stationers Inc.(1) 9,276,250 - ---------------------------------------------------------------------------------- 78,120,545 - ---------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT - 0.2% - ---------------------------------------------------------------------------------- 330,000 Andrew Corporation(1) 3,864,300 - --------------------------------------------------------------------------------- 45,000 Avocent Corp.(1) 1,154,700 - --------------------------------------------------------------------------------- 5,019,000 - --------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS - 1.9% - -------------------------------------------------------------------------------- 990,000 Adaptec, Inc.(1) 4,742,100 - ---------------------------------------------------------------------------------- 1,245,000 Electronics for Imaging, Inc.(1) 22,210,800 - ---------------------------------------------------------------------------------- 455,000 Imation Corporation 15,811,250 - ---------------------------------------------------------------------------------- 42,764,150 - ---------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING - 0.9% - --------------------------------------------------------------------------------- 585,000 Granite Construction Inc. 15,367,950 - -------------------------------------------------------------------------------- 80,000 Jacobs Engineering Group Inc.(1) 4,153,600 - -------------------------------------------------------------------------------- 19,521,550 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.6% - -------------------------------------------------------------------------------- 220,000 Martin Marietta Materials, Inc. 12,302,400 - -------------------------------------------------------------------------------- CONSUMER FINANCE - 0.7% - -------------------------------------------------------------------------------- 865,000 MoneyGram International Inc. 16,339,850 - ------------------------------------------------------------------------------- CONTAINERS & PACKAGING - 2.5% - -------------------------------------------------------------------------------- 310,000 AptarGroup, Inc. 16,113,800 - -------------------------------------------------------------------------------- 815,000 Bemis Co. 25,362,800 - -------------------------------------------------------------------------------- 460,000 Sonoco Products Co. 13,271,000 - -------------------------------------------------------------------------------- 54,747,600 - -------------------------------------------------------------------------------- DIVERSIFIED - 5.0% - -------------------------------------------------------------------------------- 360,000 iShares Russell 2000 Index Fund 43,884,000 - -------------------------------------------------------------------------------- 120,000 iShares Russell 2000 Value Index Fund 22,032,000 - -------------------------------------------------------------------------------- 135,000 iShares S&P SmallCap 600 Index Fund 21,412,350 - -------------------------------------------------------------------------------- 185,000 iShares S&P SmallCap 600/BARRA Value Index Fund 21,824,450 - -------------------------------------------------------------------------------- 109,152,800 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES - 0.1% - -------------------------------------------------------------------------------- 350,000 Medallion Financial Corp. 3,199,000 - --------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.3% - -------------------------------------------------------------------------------- 138,574 Commonwealth Telephone Enterprise Inc.(1) 6,532,378 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 21 Small Cap Value - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- ELECTRIC UTILITIES - 2.2% - -------------------------------------------------------------------------------- 470,000 Empire District Electric Co. $ 10,932,200 - -------------------------------------------------------------------------------- 800,000 IDACORP, Inc. 22,696,000 - -------------------------------------------------------------------------------- 670,000 Westar Energy Inc. 14,498,800 - -------------------------------------------------------------------------------- 48,127,000 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 1.3% - -------------------------------------------------------------------------------- 200,000 Regal-Beloit Corp. 5,758,000 - --------------------------------------------------------------------------------- 790,000 Smith (A.O.) Corp. 22,807,300 - --------------------------------------------------------------------------------- 28,565,300 - --------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 3.3% - -------------------------------------------------------------------------------- 720,000 Aeroflex Inc.(1) 6,717,600 - -------------------------------------------------------------------------------- 305,000 Applied Films Corp.(1) 7,051,600 - -------------------------------------------------------------------------------- 595,000 Avnet Inc.(1) 10,959,900 - -------------------------------------------------------------------------------- 345,000 Benchmark Electronics Inc.(1) 10,981,350 - -------------------------------------------------------------------------------- 260,000 Coherent, Inc.(1) 8,777,600 - -------------------------------------------------------------------------------- 310,000 Littelfuse, Inc.(1) 8,881,500 - -------------------------------------------------------------------------------- 580,000 Methode Electronics, Inc. 7,023,800 - -------------------------------------------------------------------------------- 885,000 Vishay Intertechnology, Inc.(1) 11,000,550 - -------------------------------------------------------------------------------- 71,393,900 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES - 3.5% - -------------------------------------------------------------------------------- 315,000 Cal Dive International Inc.(1) 14,269,500 - -------------------------------------------------------------------------------- 80,000 Cooper Cameron Corp.(1) 4,576,800 - -------------------------------------------------------------------------------- 575,000 Helmerich & Payne, Inc. 22,821,750 - -------------------------------------------------------------------------------- 1,460,000 Key Energy Group, Inc.(1) 16,746,200 - -------------------------------------------------------------------------------- 300,000 Unit Corporation(1) 13,551,000 - -------------------------------------------------------------------------------- 225,000 W-H Energy Services Inc.(1) 5,384,250 - -------------------------------------------------------------------------------- 77,349,500 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING - 1.1% - -------------------------------------------------------------------------------- 920,000 Casey's General Stores, Inc. 16,532,400 - -------------------------------------------------------------------------------- 310,000 Performance Food Group Co.(1) 8,580,800 - -------------------------------------------------------------------------------- 25,113,200 - -------------------------------------------------------------------------------- FOOD PRODUCTS - 1.3% - -------------------------------------------------------------------------------- 240,000 American Italian Pasta Co. 6,576,000 - ------------------------------------------------------------------------------- 340,000 Corn Products International Inc. 8,836,600 - ------------------------------------------------------------------------------- 320,000 Lancaster Colony Corp. 13,616,000 - ------------------------------------------------------------------------------- 29,028,600 - ------------------------------------------------------------------------------- GAS UTILITIES - 2.6% - ------------------------------------------------------------------------------- 395,000 AGL Resources Inc. 13,797,350 - ------------------------------------------------------------------------------- 450,000 Northwest Natural Gas Co. 16,276,500 - ------------------------------------------------------------------------------- 370,000 Southwest Gas Corp. 8,939,200 - ------------------------------------------------------------------------------- 570,000 WGL Holdings Inc. 17,647,200 - ------------------------------------------------------------------------------- 56,660,250 - ------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES - 2.3% - ------------------------------------------------------------------------------- 250,000 Analogic Corporation 10,812,500 - ------------------------------------------------------------------------------- 215,000 Arrow International Inc. 7,385,250 - ------------------------------------------------------------------------------- 220,000 Dade Behring Holdings Inc.(1) 12,964,600 - ------------------------------------------------------------------------------- 225,000 Orthofix International N.V.(1) 8,808,750 - ------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 565,000 Osteotech Inc.(1) $ 2,147,000 - ------------------------------------------------------------------------------- 350,000 Steris Corp.(1) 8,837,500 - ------------------------------------------------------------------------------- 50,955,600 - ------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES - 3.1% - ------------------------------------------------------------------------------- 95,000 Accredo Health Inc.(1) 4,218,950 - ------------------------------------------------------------------------------- 350,000 Alliance Imaging Inc.(1) 3,342,500 - ------------------------------------------------------------------------------- 420,000 Owens & Minor Inc. 11,403,000 - ------------------------------------------------------------------------------- 375,000 Parexel International Corp.(1) 8,812,500 - ------------------------------------------------------------------------------- 550,000 Priority Healthcare Corp. Cl B(1) 11,896,500 - ------------------------------------------------------------------------------- 225,000 Renal Care Group Inc.(1) 8,536,500 - ------------------------------------------------------------------------------- 380,000 Universal Health Services, Inc. Cl B 19,912,000 - ------------------------------------------------------------------------------- 68,121,950 - ------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 2.1% - -------------------------------------------------------------------------------- 245,000 Brinker International, Inc.(1) 8,873,900 - -------------------------------------------------------------------------------- 245,000 CEC Entertainment Inc.(1) 8,967,000 - -------------------------------------------------------------------------------- 175,000 Jack in the Box Inc.(1) 6,492,500 - -------------------------------------------------------------------------------- 315,000 Outback Steakhouse, Inc. 14,423,850 - -------------------------------------------------------------------------------- 285,000 Ruby Tuesday Inc. 6,922,650 - -------------------------------------------------------------------------------- 45,679,900 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES - 2.5% - -------------------------------------------------------------------------------- 480,000 Ethan Allen Interiors Inc. 15,360,000 - -------------------------------------------------------------------------------- 305,000 Libbey Inc. 6,405,000 - -------------------------------------------------------------------------------- 555,000 Snap-on Incorporated 17,643,450 - -------------------------------------------------------------------------------- 90,000 Standard-Pacific Corporation 6,497,100 - -------------------------------------------------------------------------------- 280,000 WCI Communities Inc.(1) 8,422,400 - -------------------------------------------------------------------------------- 54,327,950 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS - 0.8% - -------------------------------------------------------------------------------- 250,000 Central Garden and Pet Co.(1) 10,965,000 - --------------------------------------------------------------------------------- 200,000 WD-40 Co. 6,498,000 - --------------------------------------------------------------------------------- 17,463,000 - --------------------------------------------------------------------------------- INSURANCE - 3.4% - -------------------------------------------------------------------------------- 330,000 Aspen Insurance Holdings Ltd. 8,319,300 - ------------------------------------------------------------------------------- 160,000 Delphi Financial Group, Inc. Cl A 6,880,000 - ------------------------------------------------------------------------------- 670,000 HCC Insurance Holdings, Inc. 24,227,200 - ------------------------------------------------------------------------------- 245,000 Horace Mann Educators Corp. 4,346,300 - ------------------------------------------------------------------------------- 820,000 Platinum Underwriters Holdings 24,354,000 - ------------------------------------------------------------------------------- 170,000 ProAssurance Corp.(1) 6,715,000 - ------------------------------------------------------------------------------- 74,841,800 - ------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES - 0.4% - ------------------------------------------------------------------------------- 760,000 Pec Solutions Inc.(1) 9,560,800 - ------------------------------------------------------------------------------- IT SERVICES - 1.2% - ------------------------------------------------------------------------------- 315,000 MAXIMUS, Inc. 10,549,350 - --------------------------------------------------------------------------------- 310,000 MedQuist Inc.(1) 4,154,000 - --------------------------------------------------------------------------------- 850,000 Perot Systems Corp. Cl A(1) 11,424,000 - --------------------------------------------------------------------------------- 26,127,350 - --------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS - 0.2% - -------------------------------------------------------------------------------- 325,000 Leapfrog Enterprises Inc.(1) 3,688,750 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 22 Small Cap Value - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- MACHINERY - 4.0% - -------------------------------------------------------------------------------- 215,000 Albany International Corp. $ 6,639,200 - -------------------------------------------------------------------------------- 475,000 Briggs & Stratton Corp. 17,294,750 - -------------------------------------------------------------------------------- 450,000 Crane Co. 12,955,500 - -------------------------------------------------------------------------------- 250,000 Kadant Inc.(1) 4,637,500 - -------------------------------------------------------------------------------- 695,000 Kaydon Corporation 21,823,000 - -------------------------------------------------------------------------------- 270,000 Kennametal Inc. 12,822,300 - -------------------------------------------------------------------------------- 110,000 Tecumseh Products Cl A 4,357,100 - -------------------------------------------------------------------------------- 255,000 Timken Co. 6,971,700 - -------------------------------------------------------------------------------- 87,501,050 - -------------------------------------------------------------------------------- MARINE - 0.4% - -------------------------------------------------------------------------------- 195,000 Alexander & Baldwin, Inc. 8,034,000 - -------------------------------------------------------------------------------- MEDIA - 2.8% - -------------------------------------------------------------------------------- 175,000 ADVO, Inc. 6,553,750 - --------------------------------------------------------------------------------- 520,000 Hearst-Argyle Television, Inc. 13,260,000 - --------------------------------------------------------------------------------- 825,000 Journal Communications Inc. 13,653,750 - --------------------------------------------------------------------------------- 385,000 Liberty Corp. (The) 15,611,750 - --------------------------------------------------------------------------------- 120,000 ProQuest Co.(1) 4,338,000 - --------------------------------------------------------------------------------- 230,000 Valassis Communications, Inc.(1) 8,040,800 - --------------------------------------------------------------------------------- 61,458,050 - --------------------------------------------------------------------------------- METALS & MINING - 1.4% - -------------------------------------------------------------------------------- 205,000 Quanex Corporation 10,930,600 - -------------------------------------------------------------------------------- 265,000 Reliance Steel & Aluminum Company 10,602,650 - -------------------------------------------------------------------------------- 455,000 Worthington Industries, Inc. 8,772,400 - -------------------------------------------------------------------------------- 30,305,650 - -------------------------------------------------------------------------------- MULTILINE RETAIL - 0.2% - -------------------------------------------------------------------------------- 265,000 Fred's, Inc. 4,550,050 - -------------------------------------------------------------------------------- OIL & GAS - 3.3% - -------------------------------------------------------------------------------- 530,000 Arlington Tankers Ltd. 12,455,000 - --------------------------------------------------------------------------------- 170,000 Cimarex Energy Co.(1) 6,630,000 - --------------------------------------------------------------------------------- 125,000 Denbury Resources Inc.(1) 4,403,750 - --------------------------------------------------------------------------------- 110,000 Encore Acquisition Co.(1) 4,543,000 - --------------------------------------------------------------------------------- 325,000 Spinnaker Exploration Company(1) 11,547,250 - --------------------------------------------------------------------------------- 615,000 W&T Offshore Inc.(1) 12,767,400 - --------------------------------------------------------------------------------- 385,000 Western Gas Resources Inc. 13,263,250 - --------------------------------------------------------------------------------- 165,000 Whiting Petroleum Corp.(1) 6,728,700 - --------------------------------------------------------------------------------- 72,338,350 - --------------------------------------------------------------------------------- PHARMACEUTICALS - 0.2% - -------------------------------------------------------------------------------- 355,000 Alpharma Inc. 4,373,600 - -------------------------------------------------------------------------------- REAL ESTATE - 3.2% - -------------------------------------------------------------------------------- 115,000 BRE Properties, Inc. 4,059,500 - -------------------------------------------------------------------------------- 490,000 Commercial Net Lease Realty 9,040,500 - -------------------------------------------------------------------------------- 520,000 Getty Realty Corp. 13,286,000 - -------------------------------------------------------------------------------- 250,000 Healthcare Realty Trust Inc. 9,110,000 - -------------------------------------------------------------------------------- 115,000 Liberty Property Trust 4,490,750 - -------------------------------------------------------------------------------- 155,000 Mack-Cali Realty Corp. 6,564,250 - -------------------------------------------------------------------------------- 745,000 Maguire Properties, Inc. 17,790,600 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 220,000 Realty Income Corp. $ 5,033,600 - -------------------------------------------------------------------------------- 69,375,200 - -------------------------------------------------------------------------------- ROAD & RAIL - 1.3% - -------------------------------------------------------------------------------- 545,000 Heartland Express, Inc. 10,436,750 - --------------------------------------------------------------------------------- 175,000 USF Corp. 8,445,500 - --------------------------------------------------------------------------------- 540,000 Werner Enterprises Inc. 10,492,200 - --------------------------------------------------------------------------------- 29,374,450 - --------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.5% - --------------------------------------------------------------------------------- 570,000 Integrated Device Technology Inc.(1) 6,857,100 - --------------------------------------------------------------------------------- 505,000 MEMC Electronic Materials Inc.(1) 6,792,250 - --------------------------------------------------------------------------------- 290,000 OmniVision Technologies, Inc.(1) 4,393,500 - --------------------------------------------------------------------------------- 479,137 Skyworks Solutions, Inc.(1) 3,042,520 - --------------------------------------------------------------------------------- 300,000 Varian Semiconductor Equipment Associates, Inc.(1) 11,403,000 - --------------------------------------------------------------------------------- 32,488,370 - --------------------------------------------------------------------------------- SOFTWARE - 5.3% - -------------------------------------------------------------------------------- 590,000 Compuware Corp.(1) 4,248,000 - --------------------------------------------------------------------------------- 375,000 Internet Security Systems(1) 6,862,500 - --------------------------------------------------------------------------------- 305,000 MRO Software Inc.(1) 4,279,150 - --------------------------------------------------------------------------------- 2,100,000 Parametric Technology Corp.(1) 11,739,000 - --------------------------------------------------------------------------------- 240,000 Reynolds & Reynolds Co. Cl A 6,494,400 - --------------------------------------------------------------------------------- 2,400,000 Sybase, Inc.(1) 44,304,000 - --------------------------------------------------------------------------------- 880,000 Synopsys, Inc.(1) 15,928,000 - --------------------------------------------------------------------------------- 155,000 THQ Inc.(1) 4,361,700 - --------------------------------------------------------------------------------- 900,000 TIBCO Software Inc.(1) 6,705,000 - --------------------------------------------------------------------------------- 1,230,000 Verity Inc.(1) 11,623,500 - --------------------------------------------------------------------------------- 116,545,250 - --------------------------------------------------------------------------------- SPECIALTY RETAIL - 4.4% - --------------------------------------------------------------------------------- 250,000 Borders Group Inc. 6,655,000 - --------------------------------------------------------------------------------- 205,000 Cato Corp. (The) 6,611,250 - --------------------------------------------------------------------------------- 570,000 Christopher & Banks Corporation 10,032,000 - --------------------------------------------------------------------------------- 195,000 Hot Topic, Inc.(1) 4,260,750 - --------------------------------------------------------------------------------- 860,000 Linens 'n Things, Inc.(1) 21,353,800 - ------------------------------------------------------------------------------- 840,000 Pier 1 Imports, Inc. 15,313,200 - ------------------------------------------------------------------------------- 490,000 Talbots Inc. 15,670,200 - ------------------------------------------------------------------------------- 525,000 Zale Corp.(1) 15,603,000 - ------------------------------------------------------------------------------- 95,499,200 - ------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS - 1.6% - -------------------------------------------------------------------------------- 155,000 Kellwood Co. 4,462,450 - --------------------------------------------------------------------------------- 626,362 Kenneth Cole Productions Inc. 18,252,189 - --------------------------------------------------------------------------------- 300,000 Reebok International Ltd. 13,290,000 - --------------------------------------------------------------------------------- 36,004,639 - --------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE - 2.7% - -------------------------------------------------------------------------------- 405,000 Commercial Federal Corp. 11,198,250 - --------------------------------------------------------------------------------- 570,000 Flagstar Bancorp Inc. 11,143,500 - --------------------------------------------------------------------------------- 160,000 MAF Bancorp Inc. 6,646,400 - --------------------------------------------------------------------------------- 230,000 PMI Group, Inc. (The) 8,742,300 - --------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 23 Small Cap Value - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- 970,000 Washington Federal, Inc. $ 22,610,700 - --------------------------------------------------------------------------------- 60,341,150 - --------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS - 1.1% - -------------------------------------------------------------------------------- 410,000 Hughes Supply, Inc. 12,197,498 - --------------------------------------------------------------------------------- 740,000 UAP Holding Corp.(1) 11,914,000 - --------------------------------------------------------------------------------- 24,111,498 - --------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $1,802,837,775) 2,098,444,444 - --------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS - 1.0% INSURANCE - 1.0% - -------------------------------------------------------------------------------- 160,000 Phoenix Companies Inc., 7.25%, 2/16/06 5,980,800 - -------------------------------------------------------------------------------- 398,000 United Fire & Casualty Co., Series A, 6.375%, 5/15/14 16,915,000 - -------------------------------------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $14,500,441) 22,895,800 - -------------------------------------------------------------------------------- PREFERRED STOCKS - 0.1% COMMERCIAL BANKS - 0.1% - -------------------------------------------------------------------------------- 54,000 MB Financial Capital Trust I, 8.60%, 9/30/32 1,436,400 - -------------------------------------------------------------------------------- REAL ESTATE(2) - -------------------------------------------------------------------------------- 50,000 Mills Corp. (The), Series B, 9.00%, 10/9/07 1,320,000 - -------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (Cost $2,600,000) 2,756,400 - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS - 3.5% Repurchase Agreement, Deutsche Bank, Inc., (collateralized by various U.S. Treasury obligations, 3.75%, 3/31/07, valued at $18,261,449), in a joint trading account at 2.50%, dated 3/31/05, due 4/1/05 (Delivery value $17,901,243) 17,900,000 - -------------------------------------------------------------------------------- Repurchase Agreement, Merrill Lynch & Co., Inc., (collateralized by various U.S. Treasury obligations, 1.875%-11.25%, 11/30/05-2/15/15, valued at $59,270,092), in a joint trading account at 2.55%, dated 3/31/05, due 4/1/05 (Delivery value $58,104,115) 58,100,000 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $76,000,000) 76,000,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 100.2% (Cost $1,895,938,216) 2,200,096,644 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES - (0.2)% (5,139,855) - -------------------------------------------------------------------------------- TOTAL NET ASSETS - 100.0% $2,194,956,789 ================================================================================ NOTES TO SCHEDULE OF INVESTMENTS (1) Non-income producing. (2) Industry is less than 0.05% of net assets. See Notes to Financial Statements. - ------ 24 Shareholder Fee Examples (Unaudited) 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 October 1, 2004 to March 31, 2005 (except as noted). 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. (continued) - ------ 25 Shareholder Fee Examples (Unaudited) To do so, compare this 5% hypothetical 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(1) ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 10/1/04 - EXPENSE 10/1/04 3/31/05 3/31/05 RATIO(1) EQUITY INCOME SHAREHOLDER FEE EXAMPLE - ------------------------------------------------------------------------------------------------- ACTUAL - ------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,066.50 $5.10 0.99% - ------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,067.50 $4.07 0.79% - ------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,063.80 $6.38 1.24% - ------------------------------------------------------------------------------------------------- C Class $1,000 $1,061.30 $10.23 1.99% - ------------------------------------------------------------------------------------------------- R Class (after reimbursement)(2) $1,000 $1,064.00 $7.41 1.44% - ------------------------------------------------------------------------------------------------- R Class (before reimbursement) $1,000 $1,064.00 $7.67 1.49% - ------------------------------------------------------------------------------------------------- HYPOTHETICAL - ------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,020.00 $4.99 0.99% - ------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,020.99 $3.98 0.79% - ------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,018.75 $6.24 1.24% - ------------------------------------------------------------------------------------------------- C Class $1,000 $1,015.01 $10.00 1.99% - ------------------------------------------------------------------------------------------------- R Class (after reimbursement)(2) $1,000 $1,017.75 $7.24 1.44% - ------------------------------------------------------------------------------------------------- R Class (before reimbursement) $1,000 $1,017.50 $7.49 1.49% - ------------------------------------------------------------------------------------------------- (1) Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. (2) During the year ended March 31, 2005, the class received a partial reimbursement of its distribution fee. Had fees not been reimbursed, the annualized ratio of operating expenses to average net assets would have been 1.49%. (continued) - ------ 26 Shareholder Fee Examples (Unaudited) EXPENSES PAID BEGINNING ENDING DURING PERIOD(1) ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 10/1/04 - EXPENSE 10/1/04 3/31/05 3/31/05 RATIO(1) MID CAP VALUE SHAREHOLDER FEE EXAMPLE - ------------------------------------------------------------------------------------------------- ACTUAL - ------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,134.60 $5.32 1.00% - ------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,136.70 $4.26 0.80% - ------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,030.50(2) $2.67(3) 1.25% - ------------------------------------------------------------------------------------------------- HYPOTHETICAL - ------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,019.95 $5.04 1.00% - ------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,020.94 $4.03 0.80% - ------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,018.70(4) $6.29(4) 1.25% - ------------------------------------------------------------------------------------------------- (1) Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. (2) Ending account values based on actual returns from January 13, 2005 (commencement of sale) for Advisor Class through March 31, 2005. (3) Expenses are equal to Advisor Class annualized expense ratio listed in the table above, mulitiplied by the average account value over the period, multiplied by 77, the number of days in the period from January 13, 2005 (commencement of sale) through March 31, 2005, divided by 365, to reflect the period ended. Had the class been available for the full period, the expenses paid during the period would have been higher. (4) Ending account value and expenses paid during period assumes the classes had been available throughout the entire period and are calculated using each class's annualized expense ratio listed in the table above. - ----------------------------------------------------------------------------------------------------- EXPENSES PAID BEGINNING ENDING DURING PERIOD* ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 10/1/04 - EXPENSE 10/1/04 3/31/05 3/31/05 RATIO* SMALL CAP VALUE SHAREHOLDER FEE EXAMPLE - ----------------------------------------------------------------------------------------------------- ACTUAL - ----------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,114.10 $6.59 1.25% - ----------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,114.40 $5.54 1.05% - ----------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,111.80 $7.90 1.50% - ----------------------------------------------------------------------------------------------------- C Class $1,000 $1,108.80 $11.83 2.25% - ----------------------------------------------------------------------------------------------------- HYPOTHETICAL - ----------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,018.70 $6.29 1.25% - ----------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,019.70 $5.29 1.05% - ----------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,017.45 $7.54 1.50% - ----------------------------------------------------------------------------------------------------- C Class $1,000 $1,013.71 $11.30 2.25% - ----------------------------------------------------------------------------------------------------- *Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. - ------ 27 Statement of Assets and Liabilities MARCH 31, 2005 - ---------------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE ASSETS Investment securities - unaffiliated, at value (cost of $3,892,484,688, $50,651,319 and $1,895,938,216, respectively) $4,225,029,023 $52,451,245 $2,200,096,644 - ------------------------------------------------ Investment securities - affiliated, at value (cost of $145,160,445, $- and $-, respectively) 161,639,777 -- -- - ---------------------------------------------------------------------------------------------------------- Total investment securities, at value (cost of $4,037,645,133, $50,651,319 and $1,895,938,216, respectively) 4,386,668,800 52,451,245 2,200,096,644 - ------------------------------------------------ Cash 8,829,315 89,430 -- - ------------------------------------------------ Receivable for investments sold 171,371,345 480,561 23,801,791 - ------------------------------------------------ Receivable for capital shares sold 5,484,233 159,500 13,923 - ------------------------------------------------ Dividends and interest receivable 11,257,812 63,019 3,853,001 - ---------------------------------------------------------------------------------------------------------- 4,583,611,505 53,243,755 2,227,765,359 - ---------------------------------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of demand deposit cash -- -- 9,100,540 - ------------------------------------------------ Payable for investments purchased 196,258,255 2,002,465 21,245,967 - ------------------------------------------------ Payable for forward foreign currency exchange contracts 1,073,448 3,756 -- - ------------------------------------------------ Accrued management fees 3,383,755 39,855 2,186,106 - ------------------------------------------------ Distribution fees payable 199,428 45 138,727 - ------------------------------------------------ Service fees (and distribution fees R Class) payable 170,779 45 137,230 - ---------------------------------------------------------------------------------------------------------- 201,085,665 2,046,166 32,808,570 - ---------------------------------------------------------------------------------------------------------- NET ASSETS $4,382,525,840 $51,197,589 $2,194,956,789 ========================================================================================================== See Notes to Financial Statements. (continued) - ------ 28 Statement of Assets and Liabilities MARCH 31, 2005 - ---------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $3,949,891,577 $47,297,383 $1,806,186,926 - ------------------------------------------ Accumulated undistributed net investment income (loss) (3,440,794) 8,200 339,467 - ------------------------------------------ Undistributed net realized gain on investment and foreign currency transactions 88,126,014 2,095,836 84,272,550 - ------------------------------------------ Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 347,949,043 1,796,170 304,157,846 - ---------------------------------------------------------------------------------------------------- $4,382,525,840 $51,197,589 $2,194,956,789 ==================================================================================================== INVESTOR CLASS, $0.01 PAR VALUE - ------------------------------------------ Net assets $3,290,442,183 $42,059,173 $1,252,153,150 - ------------------------------------------ Shares outstanding 408,542,666 3,714,294 124,338,353 - ------------------------------------------ Net asset value per share $8.05 $11.32 $10.07 - ---------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - ------------------------------------------ Net assets $257,194,602 $8,081,529 $314,700,330 - ------------------------------------------ Shares outstanding 31,927,153 713,535 31,213,390 - ------------------------------------------ Net asset value per share $8.06 $11.33 $10.08 - ---------------------------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - ------------------------------------------ Net assets $765,330,648 $1,056,887 $624,633,033 - ------------------------------------------ Shares outstanding 95,019,315 93,339 62,063,275 - ------------------------------------------ Net asset value per share $8.05 $11.32 $10.06 - ---------------------------------------------------------------------------------------------------- C CLASS, $0.01 PAR VALUE - ------------------------------------------ Net assets $63,512,239 N/A $3,470,276 - ------------------------------------------ Shares outstanding 7,884,085 N/A 353,147 - ------------------------------------------ Net asset value per share $8.06 N/A $9.83 - ---------------------------------------------------------------------------------------------------- R CLASS, $0.01 PAR VALUE - ------------------------------------------ Net assets $6,046,168 N/A N/A - ------------------------------------------ Shares outstanding 751,931 N/A N/A - ------------------------------------------ Net asset value per share $8.04 N/A N/A - ---------------------------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 29 Statement of Operations YEAR ENDED MARCH 31, 2005 - --------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE INVESTMENT INCOME - -------------------------------------- INCOME: - -------------------------------------- Dividends (including $1,983,234, $- and $- from affiliates, respectively, and net of foreign taxes withheld of $1,187,522, $3,014 and $-, respectively) $108,707,659 $ 490,777 $ 28,830,401 - -------------------------------------- Interest 16,216,089 25,231 1,490,675 - --------------------------------------------------------------------------------------------------- 124,923,748 516,008 30,321,076 - -------------------------------------------------------------------------------------------------- EXPENSES: - -------------------------------------- Management fees 32,736,171 272,297 22,221,894 - -------------------------------------- Distribution fees: - -------------------------------------- Advisor Class 1,502,470 91 1,345,396 - -------------------------------------- C Class 383,227 -- 27,435 - -------------------------------------- Service fees: - -------------------------------------- Advisor Class 1,502,470 91 1,345,396 - -------------------------------------- C Class 127,742 -- 9,145 - -------------------------------------- Service and distribution fees - R Class 10,466 -- -- - -------------------------------------- Directors' fees and expenses 67,364 348 42,399 - -------------------------------------- Other expenses 5,293 514 11,708 - --------------------------------------------------------------------------------------------------- 36,335,203 273,341 25,003,373 - --------------------------------------------------------------------------------------------------- Amount reimbursed (2,435) -- (269) - --------------------------------------------------------------------------------------------------- 36,332,768 273,341 25,003,104 - --------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 88,590,980 242,667 5,317,972 - --------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: - -------------------------------------- Investment transactions (including $143,493, $- and $- from affiliates, respectively) 226,441,242 2,874,171 227,943,321 - -------------------------------------- Foreign currency transactions (15,530,732) (38,268) -- - --------------------------------------------------------------------------------------------------- 210,910,510 2,835,903 227,943,321 - --------------------------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION ON: - -------------------------------------- Investments 54,550,509 1,796,160 24,305,291 - -------------------------------------- Translation of assets and liabilities in foreign currencies 1,596,688 (3,756) -- - --------------------------------------------------------------------------------------------------- 56,147,197 1,792,404 24,305,291 - --------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN 267,057,707 4,628,307 252,248,612 - --------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $355,648,687 $4,870,974 $257,566,584 =================================================================================================== See Notes to Financial Statements. - ------ 30 Statement of Changes in Net Assets YEARS ENDED MARCH 31, 2005 AND MARCH 31, 2004 (EXCEPT AS NOTED) - ----------------------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE - -------------------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS 2005 2004 2005 2004(1) OPERATIONS Net investment income $ 88,590,980 $ 66,522,502 $ 242,667 $ -- - --------------------------------- Net realized gain 210,910,510 178,255,345 2,835,903 -- - --------------------------------- Change in net unrealized appreciation 56,147,197 319,626,488 1,792,404 3,766 - ---------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 355,648,687 564,404,335 4,870,974 3,766 - ---------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income: - --------------------------------- Investor Class (61,904,760) (49,739,501) (130,746) -- - --------------------------------- Institutional Class (5,086,045) (3,881,824) (34,287) -- - --------------------------------- Advisor Class (12,359,454) (8,244,304) (73) -- - --------------------------------- C Class (665,086) (476,461) -- -- - --------------------------------- R Class (35,832) (1,670) -- -- - --------------------------------- From net realized gains: - --------------------------------- Investor Class (142,378,053) (29,995,592) (633,295) -- - --------------------------------- Institutional Class (11,131,604) (2,250,432) (176,133) -- - --------------------------------- Advisor Class (34,860,778) (5,738,165) -- -- - --------------------------------- C Class (2,736,854) (477,245) -- -- - --------------------------------- R Class (136,511) (40) -- -- - ---------------------------------------------------------------------------------------------------------- Decrease in net assets from distributions (271,294,977) (100,805,234) (974,534) -- - ---------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Net increase in net assets from capital share transactions 1,366,352,921 943,740,565 45,682,314 1,615,069 - ---------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS 1,450,706,631 1,407,339,666 49,578,754 1,618,835 NET ASSETS Beginning of period 2,931,819,209 1,524,479,543 1,618,835 -- - ---------------------------------------------------------------------------------------------------------- End of period $4,382,525,840 $2,931,819,209 $51,197,589 $1,618,835 ========================================================================================================== Accumulated undistributed net investment income (loss) $(3,440,794) $8,420,513 $8,200 $-- ========================================================================================================== (1) March 31, 2004 was the inception date for Mid Cap Value. See Notes to Financial Statements. (continued) - ------ 31 Statement of Changes in Net Assets YEARS ENDED MARCH 31, 2005 AND MARCH 31, 2004 - -------------------------------------------------------------------------------- SMALL CAP VALUE - -------------------------------------------------------------------------------- INCREASE IN NET ASSETS 2005 2004 OPERATIONS Net investment income $ 5,317,972 $ 7,305,287 - ----------------------------- Net realized gain 227,943,321 158,244,596 - ----------------------------- Change in net unrealized appreciation 24,305,291 338,540,071 - -------------------------------------------------------------------------------- Net increase in net assets resulting from operations 257,566,584 504,089,954 - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income: - ----------------------------- Investor Class (3,233,600) (4,736,989) - ----------------------------- Institutional Class (1,248,416) (974,045) - ----------------------------- Advisor Class (575,649) (863,071) - ----------------------------- From net realized gains: - ----------------------------- Investor Class (110,088,852) -- - ----------------------------- Institutional Class (23,343,195) -- - ----------------------------- Advisor Class (53,087,774) -- - ----------------------------- C Class (337,470) -- - -------------------------------------------------------------------------------- Decrease in net assets from distributions (191,914,956) (6,574,105) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Net increase in net assets from capital share transactions 472,049,303 233,438,241 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS 537,700,931 730,954,090 NET ASSETS Beginning of period 1,657,255,858 926,301,768 - -------------------------------------------------------------------------------- End of period $2,194,956,789 $1,657,255,858 ================================================================================ Undistributed net investment income $339,467 $50,247 ================================================================================ See Notes to Financial Statements. - ------ 32 Notes to Financial Statements MARCH 31, 2005 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. Mid Cap Value's Investor Class, Institutional Class and Advisor Class incepted on March 31, 2004, August 2, 2004 and January 13, 2005, respectively. 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 funds determine that the market price of a portfolio security is not readily available, or that the valuation methods mentioned above do not reflect the security's fair value, such security is valued at its fair value as determined by, or in accordance with procedures adopted by, the Board of Directors or its designee if such fair value determination would materially impact a fund's net asset value. Circumstances that may cause the funds to fair value a security include: 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; or trading in a security has been halted during the trading day. 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. FUTURES AND OPTIONS CONTRACTS -- The funds may enter into futures contracts and purchase put options in order to manage the funds' exposure to changes in market conditions. One of the risks of entering into futures contracts and options is the possibility that the change in value of the contract may not correlate with the changes in value of the underlying securities. Options purchased by the funds are accounted for in the same manner as marketable portfolio securities. The proceeds from securities sold through the exercise of put options are decreased by the premium paid to purchase the put options. (continued) - ------ 33 Notes to Financial Statements MARCH 31, 2005 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Upon entering into a futures contract, the funds are required to deposit either cash or securities in an amount equal to a certain percentage of the contract value (initial margin). Subsequent payments (variation margin) are made or received daily, in cash, by the funds. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. The funds recognize a realized gain or loss when the contract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of realized gain (loss) on investment transactions and unrealized appreciation (depreciation) on investments, respectively. EQUITY-LINKED DEBT AND LINKED-EQUITY SECURITIES -- The funds may invest in hybrid equity and debt 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 American Century Investment Management, Inc. (ACIM) (the investment advisor), 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. (continued) - ------ 34 Notes to Financial Statements MARCH 31, 2005 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INDEMNIFICATIONS -- Under the corporation organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the funds. In addition, in the normal course of business, the funds enter into contracts that provide general indemnifications. The funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. The risk of material loss from such claims is considered by management to be remote. USE OF ESTIMATES -- The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee (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 each 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 advisor's assets under management in each fund's investment strategy (strategy assets) to calculate the appropriate fee rate for each fund. The strategy assets include each fund's assets and the assets of other clients of the investment advisor that are not in the American Century family of 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 - ------------------------------------------------------------------------------- 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 for Mid Cap Value is 1.00%, 0.80% and 0.75% for the Investor Class, Institutional Class and the Advisor Class, respectively. The annual management fee schedule for each class of Small Cap Value is as follows: INVESTOR & C INSTITUTIONAL ADVISOR - -------------------------------------------------------------------------------- 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) - ------ 35 Notes to Financial Statements MARCH 31, 2005 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) The effective annual management fee for each class of the funds for the year ended March 31, 2005 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% 0.75% 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 year ended March 31, 2005, are detailed in the Statement of Operations. During the year ended March 31, 2005, classes in Equity Income that received reimbursements of distribution and service fees were as follows: - -------------------------------------------------------------------------------- ADVISOR C R - -------------------------------------------------------------------------------- Distribution Fee $621 $2 $1,811(1) - -------------------------------------------------------------------------------- Service Fee -- $1 -- - -------------------------------------------------------------------------------- (1) R Class is a distribution and service fee. During the year ended March 31, 2005, the Advisor Class in Small Cap Value received distribution fee reimbursements of $269. 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 advisor, ACIM, the distributor of the corporation, ACIS, and the corporation's transfer agent, American Century Services, LLC (formerly American Century Services Corporation). During the year ended March 31, 2005, the funds invested in a money market fund for temporary purposes, which was managed by J.P. Morgan Investment Management, Inc. (JPMIM). JPMIM is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The funds have a bank line of credit agreement with JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the funds and a wholly owned subsidiary of JPM. 3. INVESTMENT TRANSACTIONS Investment transactions, excluding short-term investments, for the year ended March 31, 2005, were as follows: - -------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - -------------------------------------------------------------------------------- Purchases $6,832,633,395 $96,005,141 $2,281,188,807 - -------------------------------------------------------------------------------- Proceeds from sales $5,867,926,133 $52,276,349 $2,001,243,135 - -------------------------------------------------------------------------------- (continued) - ------ 36 Notes to Financial Statements MARCH 31, 2005 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the funds were as follows: EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - -------------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 900,000,000 50,000,000 400,000,000 ==================================================================================================================== Sold 167,811,601 $1,347,317,399 4,702,558 $49,335,395 42,062,235 $418,877,485 - ------------------ Issued in reinvestment of distributions 23,599,775 187,336,280 68,605 737,185 11,139,507 109,369,084 - ------------------ Redeemed (69,458,357) (556,679,908) (1,218,376) (12,635,133) (37,020,416) (367,679,012) - -------------------------------------------------------------------------------------------------------------------- Net increase 121,953,019 $ 977,973,771 3,552,787 $37,437,447 16,181,326 $160,567,557 ==================================================================================================================== 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 - -------------------------------------------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005(2) SHARES AUTHORIZED 75,000,000 50,000,000 70,000,000 ==================================================================================================================== Sold 13,341,556 $107,567,577 975,767 $10,100,171 15,234,122 $152,797,121 - ------------------ Issued in reinvestment of distributions 1,882,525 14,942,521 19,490 210,420 2,294,384 22,588,098 - ------------------ Redeemed (6,662,914) (53,093,869) (281,722) (3,112,720) (3,882,368) (38,430,565) - -------------------------------------------------------------------------------------------------------------------- Net increase 8,561,167 $ 69,416,229 713,535 $ 7,197,871 13,646,138 $136,954,654 ==================================================================================================================== 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 sale) through March 31, 2005 for Mid Cap Value. (continued) - ------ 37 Notes to Financial Statements MARCH 31, 2005 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 - ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005(1) SHARES AUTHORIZED 250,000,000 50,000,000 160,000,000 ======================================================================================================================= Sold 54,037,706 $433,202,029 93,333 $1,046,923 26,480,384 $263,923,162 - -------------------- Issued in reinvestment of distributions 5,160,994 40,909,216 6 73 5,055,107 49,561,609 - -------------------- Redeemed (22,479,193) (180,448,114) -- -- (13,966,603) (138,596,170) - ----------------------------------------------------------------------------------------------------------------------- Net increase 36,719,507 $293,663,131 93,339 $1,046,996 17,568,888 $174,888,601 ======================================================================================================================= 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 - ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 20,000,000 N/A 10,000,000 ======================================================================================================================= Sold 3,293,153 $26,416,567 3,424 $ 32,698 - -------------------- Issued in reinvestment of distributions 388,010 3,066,479 27,772 266,060 - -------------------- Redeemed (1,223,202) (9,804,727) (65,900) (660,267) - ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) 2,457,961 $19,678,319 (34,704) $(361,509) ======================================================================================================================= 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) ======================================================================================================================= (1) January 13, 2005 (commencement of sale) through March 31, 2005 for Mid Cap Value. (continued) - ------ 38 Notes to Financial Statements MARCH 31, 2005 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - ---------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ---------------------------------------------------------------------------------------------------------- R CLASS - ---------------------------------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 10,000,000 N/A N/A ========================================================================================================== Sold 757,666 $6,074,487 - -------------------- Issued in reinvestment of distributions 21,653 171,323 - -------------------- Redeemed (77,391) (624,339) - ---------------------------------------------------------------------------------------------------------- Net increase 701,928 $5,621,471 ========================================================================================================== YEAR ENDED MARCH 31, 2004(1) SHARES AUTHORIZED 10,000,000 N/A N/A ========================================================================================================== Sold 53,482 $418,526 - -------------------- Issued in reinvestment of distributions 221 1,710 - -------------------- Redeemed (3,700) (29,426) - ---------------------------------------------------------------------------------------------------------- Net increase 50,003 $390,810 ========================================================================================================== (1) August 29, 2003 (commencement of sale) through March 31, 2004 for Equity Income. 5. AFFILIATED COMPANY TRANSACTIONS If a fund's holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the year ended March 31, 2005 follows: SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND MARCH 31, 2005 FUND/COMPANY 3/31/04 COST COST GAIN INCOME SHARE BALANCE MARKET VALUE - --------------------------------------------------------------------------------------------------------------------- EQUITY INCOME - --------------------------------------------------------------------------------------------------------------------- Cascade Natural Gas Corp. 492,691 $ 3,477,064 $2,125,576 $ 10,415 $ 547,431 558,691 $ 11,151,472 - ----------------- Commerce Bancshares, Inc. 665,252 117,553,989 4,984,961 133,078 1,435,803 3,122,164(1) 150,488,305 - --------------------------------------------------------------------------------------------------------------------- $121,031,053 $7,110,537 $143,493 $1,983,234 $161,639,777 ===================================================================================================================== (1) Includes adjustment for shares received from a stock dividend. 6. BANK LINE OF CREDIT The funds, along with certain other funds managed by ACIM, have a $575,000,000 unsecured bank line of credit agreement with JPMCB, which was renewed from $650,000,000 effective December 15, 2004. The funds may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The funds did not borrow from the line during the year ended March 31, 2005. 7. RISK FACTORS Small Cap Value generally invests in smaller companies which may be more volatile, and subject to greater short-term risk than those of larger companies (continued) - ------ 39 Notes to Financial Statements MARCH 31, 2005 8. FEDERAL TAX INFORMATION The tax character of distributions paid during the years ended March 31, 2005 and March 31, 2004 were as follows: EQUITY INCOME MID CAP VALUE - ------------------------------------------------------------------------------------------------------- 2005 2004 2005 2004 - ------------------------------------------------------------------------------------------------------- DISTRIBUTIONS PAID FROM - ------------------------------------------------------------------------------------------------------- Ordinary income $173,270,167 $92,565,875 $974,534 -- - ------------------------------------------------------------------------------------------------------- Long-term capital gains $98,024,810 $8,239,359 -- -- - ------------------------------------------------------------------------------------------------------- SMALL CAP VALUE - ------------------------------------------------------------------------------------------------------- 2005 2004 - ------------------------------------------------------------------------------------------------------- DISTRIBUTIONS PAID FROM - ------------------------------------------------------------------------------------------------------- Ordinary income $124,523,803 $6,574,105 - ------------------------------------------------------------------------------------------------------- Long-term capital gains $ 67,391,153 -- - ------------------------------------------------------------------------------------------------------- The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. As of March 31, 2005, the components of distributable earnings on a tax-basis and the federal tax cost of investments were as follows: EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - -------------------------------------------------------------------------------------------------- COMPONENTS OF DISTRIBUTABLE EARNINGS AND TAX COST - ------------------------------------------ Federal tax cost of investments $4,083,559,485 $51,331,988 $1,932,273,433 ================================================================================================== Gross tax appreciation of investments $358,680,469 $2,190,391 $308,636,577 - ------------------------------------------ Gross tax depreciation of investments (55,571,154) (1,071,134) (40,813,366) - -------------------------------------------------------------------------------------------------- Net tax appreciation of investments $303,109,315 $1,119,257 $267,823,211 ================================================================================================== Net tax appreciation on derivatives and translation of assets and liabilities in foreign currencies $1,574 -- -- - -------------------------------------------------------------------------------------------------- Net tax appreciation $303,110,889 $1,119,257 $267,823,211 ================================================================================================== Undistributed ordinary income $85,254,128 $2,787,709 $70,043,007 - ------------------------------------------ Accumulated long-term gains $52,772,956 $21,342 $50,903,645 - ------------------------------------------ Currency loss deferral $(8,503,709) $(28,102) -- - -------------------------------------------------------------------------------------------------- The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales and the realization for tax purposes of unrealized gains on certain forward foreign currency contracts and return of capital dividends. The currency loss deferrals represent net foreign currency losses incurred in the five-month period ended March 31, 2005. Equity Income and Mid Cap Value have elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. Notes to Financial Statements - ------ 40 MARCH 31, 2005 9. OTHER TAX INFORMATION (UNAUDITED) The following information is provided pursuant to provisions of the Internal Revenue Code. The funds hereby designate qualified dividend income for the fiscal year ended March 31, 2005, as follows: - ------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - ------------------------------------------------------------------------------------------- $80,104,782 $464,400 $40,301,148 - ------------------------------------------------------------------------------------------- The funds hereby designate capital gain dividends for the fiscal year ended March 31, 2005, as follows: - ------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - ------------------------------------------------------------------------------------------- $98,024,810 -- $67,391,153 - ------------------------------------------------------------------------------------------- For corporate taxpayers, the following ordinary income distributions paid during the fiscal year ended March 31, 2005, qualify for the corporate dividends received deduction: - ------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - ------------------------------------------------------------------------------------------- $53,214,224 $117,708 $31,583,997 - ------------------------------------------------------------------------------------------- - ------ 41 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 - --------------------------------------------------------------------------------------------------- INVESTOR CLASS - --------------------------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 PER-SHARE DATA Net Asset Value, Beginning of Period $7.84 $6.22 $7.36 $6.47 $5.50 - --------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------- Net Investment Income(1) 0.21 0.22 0.17 0.17 0.18 - ----------------------------------- Net Realized and Unrealized Gain (Loss) 0.61 1.71 (1.05) 0.93 0.96 - --------------------------------------------------------------------------------------------------- Total From Investment Operations 0.82 1.93 (0.88) 1.10 1.14 - --------------------------------------------------------------------------------------------------- Distributions - ----------------------------------- From Net Investment Income (0.19) (0.19) (0.16) (0.17) (0.17) - ----------------------------------- From Net Realized Gains (0.42) (0.12) (0.10) (0.04) -- - --------------------------------------------------------------------------------------------------- Total Distributions (0.61) (0.31) (0.26) (0.21) (0.17) - --------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.05 $7.84 $6.22 $7.36 $6.47 =================================================================================================== TOTAL RETURN(2) 10.69% 31.30% (12.09)% 17.35% 20.85% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.99% 1.00% 1.00% 1.00% 1.00% - ----------------------------------- Ratio of Net Investment Income to Average Net Assets 2.56% 2.95% 2.60% 2.49% 3.02% - ----------------------------------- Portfolio Turnover Rate 174% 91% 120% 139% 169% - ----------------------------------- Net Assets, End of Period (in thousands) $3,290,442 $2,248,158 $1,277,478 $1,025,143 $467,425 - --------------------------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 42 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 - ------------------------------------------------------------------------------------------------ INSTITUTIONAL CLASS - ------------------------------------------------------------------------------------------------ 2005 2004 2003 2002 2001 PER-SHARE DATA Net Asset Value, Beginning of Period $7.85 $6.23 $7.36 $6.47 $5.50 - ------------------------------------------------------------------------------------------------ Income From Investment Operations - ------------------------------ Net Investment Income(1) 0.22 0.24 0.19 0.19 0.20 - ------------------------------ Net Realized and Unrealized Gain (Loss) 0.61 1.71 (1.04) 0.92 0.95 - ------------------------------------------------------------------------------------------------ Total From Investment Operations 0.83 1.95 (0.85) 1.11 1.15 - ------------------------------------------------------------------------------------------------ Distributions - ------------------------------ From Net Investment Income (0.20) (0.21) (0.18) (0.18) (0.18) - ------------------------------ From Net Realized Gains (0.42) (0.12) (0.10) (0.04) .-- - ------------------------------------------------------------------------------------------------ Total Distributions (0.62) (0.33) (0.28) (0.22) (0.18) - ------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $8.06 $7.85 $6.23 $7.36 $6.47 ================================================================================================ TOTAL RETURN(2) 10.91% 31.51% (11.77)% 17.40% 21.26% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.79% 0.80% 0.80% 0.80% 0.80% - ------------------------------ Ratio of Net Investment Income to Average Net Assets 2.76% 3.15% 2.80% 2.69% 3.22% - ------------------------------ Portfolio Turnover Rate 174% 91% 120% 139% 169% - ------------------------------ Net Assets, End of Period (in thousands) $257,195 $183,330 $77,837 $65,738 $19,130 - ------------------------------------------------------------------------------------------------ (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 43 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 - ---------------------------------------------------------------------------------------------- ADVISOR CLASS - ---------------------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 PER-SHARE DATA Net Asset Value, Beginning of Period $7.84 $6.22 $7.36 $6.47 $5.50 - ---------------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------- Net Investment Income(1) 0.19 0.20 0.16 0.16 0.17 - ---------------------------- Net Realized and Unrealized Gain (Loss) 0.61 1.72 (1.05) 0.92 0.96 - ---------------------------------------------------------------------------------------------- Total From Investment Operations 0.80 1.92 (0.89) 1.08 1.13 - ---------------------------------------------------------------------------------------------- Distributions - ---------------------------- From Net Investment Income (0.17) (0.18) (0.15) (0.15) (0.16) - ---------------------------- From Net Realized Gains (0.42) (0.12) (0.10) (0.04) -- - ---------------------------------------------------------------------------------------------- Total Distributions (0.59) (0.30) (0.25) (0.19) (0.16) - ---------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.05 $7.84 $6.22 $7.36 $6.47 ============================================================================================== TOTAL RETURN(2) 10.41% 30.97% (12.30)% 17.05% 20.55% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.24% 1.25% 1.25% 1.25% 1.25% - ---------------------------- Ratio of Net Investment Income to Average Net Assets 2.31% 2.70% 2.35% 2.24% 2.77% - ---------------------------- Portfolio Turnover Rate 174% 91% 120% 139% 169% - ---------------------------- Net Assets, End of Period (in thousands) $765,331 $457,360 $156,911 $74,868 $27,887 - ------------------------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 44 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ---------------------------------------------------------------------------------------- C CLASS - ---------------------------------------------------------------------------------------- 2005 2004 2003 2002(1) PER-SHARE DATA Net Asset Value, Beginning of Period $7.85 $6.21 $7.36 $6.89 - ---------------------------------------------------------------------------------------- Income From Investment Operations - -------------------------------- Net Investment Income(2) 0.13 0.15 0.11 0.07 - -------------------------------- Net Realized and Unrealized Gain (Loss) 0.61 1.73 (1.06) 0.50 - ---------------------------------------------------------------------------------------- Total From Investment Operations 0.74 1.88 (0.95) 0.57 - ---------------------------------------------------------------------------------------- Distributions - -------------------------------- From Net Investment Income (0.11) (0.12) (0.10) (0.06) - -------------------------------- From Net Realized Gains (0.42) (0.12) (0.10) (0.04) - ---------------------------------------------------------------------------------------- Total Distributions (0.53) (0.24) (0.20) (0.10) - ---------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.06 $7.85 $6.21 $7.36 ======================================================================================== TOTAL RETURN(3) 9.60% 30.37% (13.08)% 8.45% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.99% 2.00% 2.00% 2.00%(4) - -------------------------------- Ratio of Net Investment Income to Average Net Assets 1.56% 1.95% 1.60% 1.36%(4) - -------------------------------- Portfolio Turnover Rate 174% 91% 120% 139%(5) - -------------------------------- Net Assets, End of Period (in thousands) $63,512 $42,579 $12,254 $3,960 - ---------------------------------------------------------------------------------------- (1) July 13, 2001 (commencement of sale) through March 31, 2002. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 45 Equity Income - Financial Highlights For a Share Outstanding Throughout the Year Ended March 31 (except as noted) - -------------------------------------------------------------------------------- R CLASS - -------------------------------------------------------------------------------- 2005 2004(1) PER-SHARE DATA Net Asset Value, Beginning of Period $7.84 $7.22 - -------------------------------------------------------------------------------- Income From Investment Operations - --------------------------------------------------------- Net Investment Income(2) 0.17 0.11 - --------------------------------------------------------- Net Realized and Unrealized Gain 0.60 0.76 - -------------------------------------------------------------------------------- Total From Investment Operations 0.77 0.87 - -------------------------------------------------------------------------------- Distributions - --------------------------------------------------------- From Net Investment Income (0.15) (0.13) - --------------------------------------------------------- From Net Realized Gains (0.42) (0.12) - -------------------------------------------------------------------------------- Total Distributions (0.57) (0.25) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $8.04 $7.84 ================================================================================ TOTAL RETURN(3) 10.03% 12.19% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.44%(4) 1.50%(5) - ---------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 2.11%(4) 2.44%(5) - ---------------------------------------------------------- Portfolio Turnover Rate 174% 91%(6) - ---------------------------------------------------------- Net Assets, End of Period (in thousands) $6,046 $392 - -------------------------------------------------------------------------------- (1) August 29, 2003 (commencement of sale) through March 31, 2004. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) During a portion of the year ended March 31, 2005, the class received a partial reimbursement of its distribution fee. Had fees not been reimbursed the annualized ratio of operating expenses to average net assets and annualized ratio of net investment income to average net assets would have been 1.49% and 2.06%, respectively. (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. - ------ 46 Mid Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- 2005 2004(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.02 $10.00 - -------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------- Net Investment Income(2) 0.09 --(3) - ----------------------------------------- Net Realized and Unrealized Gain 1.54 0.02 - -------------------------------------------------------------------------------- Total From Investment Operations 1.63 0.02 - -------------------------------------------------------------------------------- Distributions - ----------------------------------------- From Net Investment Income (0.06) -- - ----------------------------------------- From Net Realized Gains (0.27) -- - -------------------------------------------------------------------------------- Total Distributions (0.33) -- - -------------------------------------------------------------------------------- Net Asset Value, End of Period $11.32 $10.02 ================================================================================ TOTAL RETURN(4) 16.40% 0.20% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.00% 1.00%(5) - --------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 0.83% 0.00%(5) - --------------------------------------------------------- Portfolio Turnover Rate 192% 0% - -------------------------------------------------------- Net Assets, End of Period (in thousands) $42,059 $1,619 - -------------------------------------------------------------------------------- (1) For the one day period ended March 31, 2004 (inception date). (2) Computed using average shares outstanding throughout the period. (3) Per-share amount was less than $0.005. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. 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. (5) Annualized. See Notes to Financial Statements. - ------ 47 Mid Cap Value - Financial Highlights For a Share Outstanding Throughout the Period Indicated - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.07 - -------------------------------------------------------------------------------- Income From Investment Operations - -------------------------------------------------------------- Net Investment Income(2) 0.07 - -------------------------------------------------------------- Net Realized and Unrealized Gain 1.51 - -------------------------------------------------------------------------------- Total From Investment Operations 1.58 - -------------------------------------------------------------------------------- Distributions - -------------------------------------------------------------- From Net Investment Income (0.05) - -------------------------------------------------------------- From Net Realized Gains (0.27) - -------------------------------------------------------------------------------- Total Distributions (0.32) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $11.33 ================================================================================ TOTAL RETURN(3) 15.82% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.80%(4) - -------------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.00%(4) - -------------------------------------------------------------- Portfolio Turnover Rate 192%(5) - -------------------------------------------------------------- Net Assets, End of Period (in thousands) $8,082 - -------------------------------------------------------------------------------- (1) August 2, 2004 (commencement of sale) through March 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2005. See Notes to Financial Statements. - ------ 48 Mid Cap Value - Financial Highlights For a Share Outstanding Throughout the Period Indicated - -------------------------------------------------------------------------------- ADVISOR CLASS - -------------------------------------------------------------------------------- 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.99 - -------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------------------------------- Net Investment Income(2) 0.03 - ---------------------------------------------------------- Net Realized and Unrealized Gain 0.31 - -------------------------------------------------------------------------------- Total From Investment Operations 0.34 - -------------------------------------------------------------------------------- Distributions - ---------------------------------------------------------- From Net Investment Income (0.01) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $11.32 ================================================================================ TOTAL RETURN(3) 3.05% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.25%(4) - ---------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.34%(4) - ---------------------------------------------------------- Portfolio Turnover Rate 192%(5) - ---------------------------------------------------------- Net Assets, End of Period (in thousands) $1,057 - -------------------------------------------------------------------------------- (1) January 13, 2005 (commencement of sale) through March 31, 2005. (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 refelect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2005. See Notes to Financial Statements. - ------ 49 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 - -------------------------------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 PER-SHARE DATA Net Asset Value, Beginning of Period $9.71 $6.44 $8.62 $6.60 $5.04 - ------------------------------------------------------------------------------------------------------ Income From Investment Operations - ----------------------------------- Net Investment Income(1) 0.03 0.05 0.03 0.02 0.07 - ----------------------------------- Net Realized and Unrealized Gain (Loss) 1.31 3.26 (1.87) 2.20 1.74 - ------------------------------------------------------------------------------------------------------ Total From Investment Operations 1.34 3.31 (1.84) 2.22 1.81 - ------------------------------------------------------------------------------------------------------ Distributions - ----------------------------------- From Net Investment Income (0.03) (0.04) (0.02) (0.02) (0.05) - ----------------------------------- From Net Realized Gains (0.95) -- (0.32) (0.18) (0.20) - ------------------------------------------------------------------------------------------------------ Total Distributions (0.98) (0.04) (0.34) (0.20) (0.25) - ------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $10.07 $9.71 $6.44 $8.62 $6.60 ====================================================================================================== TOTAL RETURN(2) 14.00% 51.53% (21.55)% 33.97% 36.51% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.25% 1.26% 1.25% 1.25% 1.25% - ----------------------------------- Ratio of Net Investment Income to Average Net Assets 0.32% 0.59% 0.37% 0.27% 1.10% - ----------------------------------- Portfolio Turnover Rate 108% 110% 104% 73% 144% - ----------------------------------- Net Assets, End of Period (in thousands) $1,252,153 $1,050,500 $670,755 $1,305,952 $225,517 - ------------------------------------------------------------------------------------------------------ (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 50 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 - --------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - --------------------------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 PER-SHARE DATA Net Asset Value, Beginning of Period $9.72 $6.45 $8.63 $6.61 $5.04 - --------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------ Net Investment Income(1) 0.05 0.07 0.04 0.03 0.07 - ------------------------------------ Net Realized and Unrealized Gain (Loss) 1.31 3.26 (1.87) 2.20 1.76 - --------------------------------------------------------------------------------------------------- Total From Investment Operations 1.36 3.33 (1.83) 2.23 1.83 - --------------------------------------------------------------------------------------------------- Distributions - ------------------------------------ From Net Investment Income (0.05) (0.06) (0.03) (0.03) (0.06) - ------------------------------------ From Net Realized Gains (0.95) -- (0.32) (0.18) (0.20) - --------------------------------------------------------------------------------------------------- Total Distributions (1.00) (0.06) (0.35) (0.21) (0.26) - --------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.08 $9.72 $6.45 $8.63 $6.61 =================================================================================================== TOTAL RETURN(2) 14.20% 51.75% (21.38)% 34.11% 36.99% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.05% 1.06% 1.05% 1.05% 1.05% - ------------------------------------ Ratio of Net Investment Income to Average Net Assets 0.52% 0.79% 0.57% 0.47% 1.30% - ------------------------------------ Portfolio Turnover Rate 108% 110% 104% 73% 144% - ------------------------------------ Net Assets, End of Period (in thousands) $314,700 $170,784 $79,546 $83,712 $8,593 - --------------------------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 51 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 - ---------------------------------------------------------------------------------------------- ADVISOR CLASS - ---------------------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 PER-SHARE DATA Net Asset Value, Beginning of Period $9.71 $6.43 $8.62 $6.60 $5.04 - ---------------------------------------------------------------------------------------------- Income From Investment Operations - --------------------------------- Net Investment Income(1) 0.01 0.03 0.01 --(2) 0.05 - --------------------------------- Net Realized and Unrealized Gain (Loss) 1.30 3.27 (1.87) 2.21 1.75 - ---------------------------------------------------------------------------------------------- Total From Investment Operations 1.31 3.30 (1.86) 2.21 1.80 - ---------------------------------------------------------------------------------------------- Distributions - --------------------------------- From Net Investment Income (0.01) (0.02) (0.01) (0.01) (0.04) - --------------------------------- From Net Realized Gains (0.95) -- (0.32) (0.18) (0.20) - ---------------------------------------------------------------------------------------------- Total Distributions (0.96) (0.02) (0.33) (0.19) (0.24) - ---------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.06 $9.71 $6.43 $8.62 $6.60 ============================================================================================== TOTAL RETURN(3) 13.70% 51.38% (21.85)% 33.74% 36.18% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.50% 1.51% 1.50% 1.50% 1.50% - --------------------------------- Ratio of Net Investment Income to Average Net Assets 0.07% 0.34% 0.12% 0.02% 0.85% - --------------------------------- Portfolio Turnover Rate 108% 110% 104% 73% 144% - --------------------------------- Net Assets, End of Period (in thousands) $624,633 $432,261 $173,064 $182,986 $20,600 - ---------------------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Per-share amount is less than $0.005. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 52 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------------------------------ C CLASS - ------------------------------------------------------------------------------------------------------ 2005 2004 2003 2002(1) PER-SHARE DATA Net Asset Value, Beginning of Period $9.57 $6.35 $8.59 $7.57 - ------------------------------------------------------------------------------------------------------ Income From Investment Operations - -------------------------------------------- Net Investment Loss(2) (0.07) (0.03) (0.04) (0.05) - -------------------------------------------- Net Realized and Unrealized Gain (Loss) 1.28 3.25 (1.88) 1.23 - ------------------------------------------------------------------------------------------------------ Total From Investment Operations 1.21 3.22 (1.92) 1.18 - ------------------------------------------------------------------------------------------------------ Distributions - -------------------------------------------- From Net Investment Income -- -- -- --(3) - -------------------------------------------- From Net Realized Gains (0.95) -- (0.32) (0.16) - ------------------------------------------------------------------------------------------------------ Total Distributions (0.95) -- (0.32) (0.16) - ------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $9.83 $9.57 $6.35 $8.59 ====================================================================================================== TOTAL RETURN(4) 12.85% 50.71% (22.58)% 15.80% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 2.25% 2.26% 2.25% 2.25%(5) - -------------------------------------------- Ratio of Net Investment Loss to Average Net Assets (0.68)% (0.41)% (0.63)% (0.78)%(5) - -------------------------------------------- Portfolio Turnover Rate 108% 110% 104% 73%(6) - -------------------------------------------- Net Assets, End of Period (in thousands) $3,470 $3,711 $2,936 $3,997 - ------------------------------------------------------------------------------------------------------ (1) June 1, 2001 (commencement of sale) through March 31, 2002. (2) Computed using average shares outstanding throughout the period. (3) Per-share amount was less than $0.005. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. - ------ 53 See Notes to Financial Statements. Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders American Century Capital Portfolios, Inc.: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Equity Income Fund, Mid Cap Value Fund, and Small Cap Value Fund, (collectively, the "Funds"), three of the funds comprising American Century Capital Portfolios, Inc., as of March 31, 2005, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the periods presented in the two year period ended March 31, 2005, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of Equity Income Fund, Mid Cap Value Fund, and Small Cap Value Fund as of March 31, 2005, the results of their operations for the year then ended, the changes in their net assets for each of the periods presented in the two year period ended March 31, 2005, and their financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Kansas City, Missouri May 12, 2005 - ------ 54 Management The individuals listed below serve as directors or officers of the funds. Each director serves until his or her successor is duly elected and qualified or until he or she retires. Mandatory retirement age for independent directors is 72. Those listed as interested directors are "interested" primarily by virtue of their engagement as officers of American Century Companies, Inc. (ACC) or its wholly-owned, direct or indirect, subsidiaries, including the funds' investment advisor, American Century Investment Management, Inc. (ACIM); the funds' principal underwriter, American Century Investment Services, Inc. (ACIS); and the funds' transfer agent, American Century Services, LLC (ACS LLC). The other directors (more than three-fourths of the total number) are independent; that is, they have never been employees or officers of, and have no financial interest in, ACC or any of its wholly-owned subsidiaries, including ACIM, ACIS, and ACS LLC. The directors serve in this capacity for six registered investment companies in the American Century family of funds. All persons named as officers of the funds also serve in a similar capacity for the other 13 investment companies advised by ACIM or American Century Global Investment Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise noted. Only officers with policy-making functions are listed. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. INDEPENDENT DIRECTORS - -------------------------------------------------------------------------------- THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1940 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 24 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Formerly Chief Executive Officer/Treasurer, Associated Bearings Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1945 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 7 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, Midwest Research Institute NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- D.D. (DEL) HOCK, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1935 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 8 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Chairman, Public Service Company of Colorado NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Allied Motion Technologies, Inc. - -------------------------------------------------------------------------------- (continued) - ------ 55 Management INDEPENDENT DIRECTORS (CONTINUED) - -------------------------------------------------------------------------------- DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1937 POSITION(S) HELD WITH FUND: Director, Chairman of the Board LENGTH OF TIME SERVED (YEARS): 9 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Western Investments, Inc.; Retired Chairman of the Board, Butler Manufacturing Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Atlas-Copco, North America Inc. - -------------------------------------------------------------------------------- GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1943 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer, and Founder, Sayers 40, Inc., a technology products and service provider NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Triad Hospitals, Inc. - -------------------------------------------------------------------------------- M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1945 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 10 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President and Chief Integration Officer, Sprint Corporation (September 2003 to present); Senior Vice President-Financial Services, Sprint Corporation (January 2003 to September 2003); Senior Vice President-Finance, Global Markets Group, Sprint Corporation (November 1998 to January 2003) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director, Euronet Worldwide, Inc. - -------------------------------------------------------------------------------- TIMOTHY S. WEBSTER, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1961 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 3 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive Officer, American Italian Pasta Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, American Italian Pasta Company - -------------------------------------------------------------------------------- INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JAMES E. STOWERS, JR.,(1) 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1924 POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman LENGTH OF TIME SERVED (YEARS): 46 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Director, and Controlling Shareholder, ACC; Chairman, ACC (January 1995 to December 2004); Director, ACIM, ACGIM, ACS LLC and other ACC subsidiaries NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- JAMES E. STOWERS III,(1) 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1959 POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman LENGTH OF TIME SERVED (YEARS): 14 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, ACC (January 2005 to present), Co-Chairman, ACC (September 2000 to December 2004); Chief Executive Officer, ACC (June 1996 to September 2000); Chairman, ACS LLC and other ACC subsidiaries; Director, ACC, ACIM, ACGIM, ACS LLC and other ACC subsidiaries NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- (1) James E. Stowers, Jr. is the father of James E. Stowers III. (continued) - ------ 56 Management OFFICERS - -------------------------------------------------------------------------------- WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1955 POSITION(S) HELD WITH FUND: President LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC (September 2000 to present); President, ACC (June 1997 to present); Chief Operating Officer, ACC (June 1996 to September 2000); Also serves as: Chief Executive Officer and President, ACIS, ACGIM, ACIM and other ACC subsidiaries; Executive Vice President, ACS LLC; Director, ACC, ACIS, ACIM, ACGIM, ACS LLC and other ACC subsidiaries - -------------------------------------------------------------------------------- ROBERT T. JACKSON, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1946 POSITION(S) HELD WITH FUND: Executive Vice President LENGTH OF TIME SERVED (YEARS): 9 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Administrative Officer, ACC (August 1997 to present); Chief Financial Officer, ACC (May 1995 to October 2002); Executive Vice President, ACC (May 1995 to present); Also serves as: Chief Executive Officer, Chief Financial Officer and President, ACS LLC, Chief Financial Officer and Executive Vice President, ACGIM, ACIM, ACIS and other ACC subsidiaries; Treasurer, ACGIM, ACIM and other ACC subsidiaries; Director, ACC and other subsidiaries - -------------------------------------------------------------------------------- MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1956 POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer, and Chief Accounting Officer LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Assistant Treasurer, ACC (January 1995 to present); Also serves as Senior Vice President, ACS LLC; Assistant Treasurer, ACGIM, ACIM, ACIS, ACS LLC and other ACC subsidiaries - -------------------------------------------------------------------------------- DAVID C. TUCKER, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1958 POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (February 2001 to present); General Counsel, ACC (June 1998 to present); Also serves as: Senior Vice President and General Counsel, ACGIM, ACIM, ACIS, ACS LLC and other ACC subsidiaries - -------------------------------------------------------------------------------- CHARLES C.S. PARK, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1967 POSITION(S) HELD WITH FUND: Vice President and Chief Compliance Officer LENGTH OF TIME SERVED (YEARS): 4 and less than 1 year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACS LLC, ACIM and ACGIM (March 2005 to present); Vice President, ACS LLC (February 2000 to present); Assistant General Counsel, ACS LLC (January 1998 to March 2005) - -------------------------------------------------------------------------------- ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1966 POSITION(S) HELD WITH FUND: Controller LENGTH OF TIME SERVED (YEARS): 7 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS LLC (February 2000 to present); Controller-Fund Accounting, ACS LLC (June 1997 to present) - -------------------------------------------------------------------------------- JON ZINDEL, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1967 POSITION(S) HELD WITH FUND: Tax Officer LENGTH OF TIME SERVED (YEARS): 7 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (October 2001 to present); Vice President, Corporate Tax, ACS LLC (April 1998 to present); Also serves as: Vice President, ACGIM, ACIM, ACIS and other ACC subsidiaries - -------------------------------------------------------------------------------- The SAI has additional information about the funds' directors and is available without charge upon request by calling 1-800-345-2021. - ------ 57 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. Four classes of shares are authorized for sale by Small Cap Value: Investor Class, Institutional Class, Advisor Class, and C Class. The total expense ratio of Institutional Class shares is lower than that of Investor Class shares. The total expense ratios of Advisor, C, and R Class shares are higher than that of Investor Class shares. Small Cap Value is closed to new investors and new accounts. INVESTOR CLASS shares are available for 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. 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. - ------ 58 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 advisor, 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 advisor 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 advisor 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. The funds' Forms N-Q are 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 make their complete schedule of portfolio holdings for the most recent quarter of their fiscal year available on their Web site at americancentury.com and, upon request, by calling 1-800-345-2021. - ------ 59 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 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 500 INDEX is a market value-weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. The S&P SMALLCAP 600 INDEX, a capitalization-weighted index consisting of 600 domestic stocks, measures the small company segment of the U.S. market. The S&P SMALLCAP 600/BARRA VALUE INDEX is a capitalization-weighted index consisting of S&P SmallCap 600 stocks with lower price-to-book ratios that are slower growing or undervalued. - ------ 60 CONTACT US AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR SERVICES REPRESENTATIVE: 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 ADVISOR: 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 Proprietary Holdings, Inc. American Century Investment Services, Inc., Distributor (c)2005 American Century Proprietary Holdings, Inc. All rights reserved. 0505 SH-ANN-43387N
American Century Investments ANNUAL REPORT [photo of man and woman] MARCH 31, 2005 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 Examples. . . . . . . . . . . . . . . . . . . . . . . . . .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. . . . . . . . . . . . . . . . . . . . . . . . . . . .32 Report of Independent Registered Public Accounting Firm . . . . . . . . . .45 OTHER INFORMATION Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . .49 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . .51 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 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 annual report for the Value and Large Company Value funds for the year ended March 31, 2005. 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 semiannual report dated September 30, 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 AMERICAN CENTURY COMPANIES, INC. /s/James E. Stowers III James E. Stowers III CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. - ------ 1 Value - Performance TOTAL RETURNS AS OF MARCH 31, 2005 -------------------------------- AVERAGE ANNUAL RETURNS - ------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - ------------------------------------------------------------------------------- INVESTOR CLASS 9.95% 11.75% 12.71% 12.61% 9/1/93 - ------------------------------------------------------------------------------- RUSSELL 3000 VALUE INDEX(1) 12.88% 5.89% 12.85% 11.66%(2) -- - ------------------------------------------------------------------------------- S&P 500 INDEX(1) 6.69% -3.16% 10.79% 10.40%(2) -- - ------------------------------------------------------------------------------- LIPPER MULTI-CAP VALUE INDEX(1) 10.27% 6.63% 11.25% 10.58%(2) -- - ------------------------------------------------------------------------------- Institutional Class 10.30% 11.96% -- 8.70% 7/31/97 - ------------------------------------------------------------------------------- Advisor Class 9.67% 11.44% -- 10.66% 10/2/96 - ------------------------------------------------------------------------------- A Class 1/31/03 No sales charge* 9.67% -- -- 20.64% With sales charge* 3.37% -- -- 17.40% - ------------------------------------------------------------------------------- B Class 1/31/03 No sales charge* 8.93% -- -- 19.90% With sales charge* 4.93% -- -- 18.77% - ------------------------------------------------------------------------------- C Class 8.84% -- -- 6.65% 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) (c) 2005 Reuters. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper Inc. -- A Reuters Company and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. (2) 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 March 31, 1995
ONE-YEAR RETURNS OVER 10 YEARS Periods ended March 31 - ------------------------------------------------------------------------------------------------- 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 - ------------------------------------------------------------------------------------------------- Investor Class 27.94% 16.03% 39.94% -9.88% 1.42% 19.20% 17.96% -19.85% 40.66% 9.95% - ------------------------------------------------------------------------------------------------- Russell 3000 Value Index 32.80% 17.83% 46.78% 2.51% 6.81% 1.48% 5.67% -22.79% 42.45% 12.88% - ------------------------------------------------------------------------------------------------- S&P 500 Index 32.10% 19.83% 48.00% 18.46% 17.94% -21.68% 0.24% -24.76% 35.12% 6.69% - ------------------------------------------------------------------------------------------------- Lipper Multi-Cap Value Index 28.30% 16.28% 39.07% -3.71% 5.42% 6.54% 6.47% -22.91% 42.99% 10.27% - ------------------------------------------------------------------------------------------------- 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 investment team] PORTFOLIO MANAGERS ON THE VALUE INVESTMENT TEAM (LEFT TO RIGHT): MICHAEL LISS, PHIL DAVIDSON, AND SCOTT MOORE. Value gained 9.95%(1) for the year ended March 31, 2005, trailing the Lipper Multi-Cap Value Index, which was up 10.27%. The S&P 500 Index, representative of the broad market, gained 6.69%. Value's long-term performance has been strong. From the fund's inception on September 1, 1993, Value has produced an average annualized total return of 12.61%, significantly ahead of the 10.58% figure posted by the Lipper Multi-Cap Value Index and the S&P 500's 10.40%(2) return. MARKET ENTHUSIASM WANES After moving sideways for much of last year, stocks rallied during the final two months of 2004, gaining strength from the resolution of the presidential election and a temporary decline in oil prices. But stock market optimism waned during the first quarter of 2005, as investors worried about the dampening effects of surging energy and commodity prices, and higher interest rates. Nonetheless, against this backdrop of increasing market uncertainty, all but one of Value's sector stakes contributed to absolute results, with industrial shares leading the way. INDUSTRIALS LED PORTFOLIO Industrial stocks proved to be Value's largest contributors to absolute performance. Our shares of Union Pacific Corp., the largest U.S. railroad, proved successful due to increasing volumes, higher pricing and cost improvements. In commercial services and supplies, Republic Services Inc., one of the country's leading solid waste management firms, posted strong 2004 numbers, exceeding its financial guidance for the year. STRENGTH IN ENERGY Our energy exposure was weighted more heavily toward larger integrated oil companies during the period. Exxon Mobil Corp. was our top-contributing security, with Royal Dutch Petroleum TOP TEN HOLDINGS AS OF MARCH 31, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- American International Group, Inc. 4.5% 1.3% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 2.8% 2.8% - -------------------------------------------------------------------------------- Republic Services, Inc. Cl A 2.8% 2.4% - -------------------------------------------------------------------------------- Kraft Foods Inc. Cl A 2.5% 2.9% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 2.5% 2.0% - -------------------------------------------------------------------------------- Kimberly-Clark Corp. 2.3% 1.0% - -------------------------------------------------------------------------------- New York Times Co. (The) Cl A 2.2% 2.5% - -------------------------------------------------------------------------------- Unilever N.V. New York Shares 2.1% 2.2% - -------------------------------------------------------------------------------- Marsh & McLennan Companies Inc. 2.1% 2.6% - -------------------------------------------------------------------------------- Bank of America Corp. 2.1% 2.1% - -------------------------------------------------------------------------------- (1) All fund returns referenced in this commentary are for Investor Class shares. (2) From 8/31/93, the date nearest the fund's inception for which data are available. (continued) - ------ 4 Value - Portfolio Commentary Co., BP plc and ConocoPhillips also significant contributors. On the whole, they benefited from rapidly rising oil and gas prices, while higher utilization rates widened margins for refinery and chemical segments. As a result, each of these businesses delivered strong operating results and dividend increases. SUCCESS IN FINANCIALS, BUT ALSO DETRACTORS Financials, Value's largest sector exposure on average, represented another bright spot, led by Bank of America Corp. Bank of America's performance was helped by its successful integration of FleetBoston Financial Corp. The bank continued its commitment to returning capital to shareholders through dividends and share repurchases. Retail brokerage company A.G. Edwards Inc. and mortgage giant Freddie Mac also benefited the portfolio. At the same time, the sector also held two of the portfolio's largest detractors. Insurance broker Marsh & McLennan fell sharply during the fourth quarter when the company was accused of bid-rigging and steering work to a select group of insurers. In February, American International Group, the world's largest insurer, was hurt by investigations into whether the company used certain reinsurance policies to improperly smooth earnings. In both cases, we believe the issues affecting these industry leaders are manageable and we have maintained our positions. IT COMPANIES DETRACT Only one sector, information technology, dampened absolute results, and the effect was relatively modest. Synopsys, whose software is used to design computer chips, fell midway through the period after the company cut its forecast for orders. We continue to hold the position. OUR COMMITMENT We will continue to adhere to our discipline of seeking well-managed companies that appear to be temporarily undervalued for reasons unrelated to the firms' fundamental or financial health. TOP FIVE INDUSTRIES AS OF MARCH 31, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Insurance 11.0% 9.7% - -------------------------------------------------------------------------------- Oil & Gas 7.5% 6.0% - -------------------------------------------------------------------------------- Commercial Banks 7.1% 6.7% - -------------------------------------------------------------------------------- Food Products 6.6% 6.0% - -------------------------------------------------------------------------------- Pharmaceuticals 4.7% 5.5% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO* - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Common Stocks & Options 87.8% 97.8% - -------------------------------------------------------------------------------- Temporary Cash Investments 3.7% 1.7% - -------------------------------------------------------------------------------- Collateral Received for Securities Lending 8.5% 0.5% - -------------------------------------------------------------------------------- *See the Schedule of Investments for a presentation of the types of investments in the portfolio based on net assets. - ------ 5 Value - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 96.6% AEROSPACE & DEFENSE -- 2.9% - -------------------------------------------------------------------------------- 1,329,744 Honeywell International Inc. $ 49,479,775 - -------------------------------------------------------------------------------- 634,984 Northrop Grumman Corp. 34,276,436 - -------------------------------------------------------------------------------- 83,756,211 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 1.5% - -------------------------------------------------------------------------------- 1,248,656 Cooper Tire & Rubber(1) 22,925,324 - -------------------------------------------------------------------------------- 977,304 TRW Automotive Holdings Corp.(1)(2) 18,989,017 - -------------------------------------------------------------------------------- 41,914,341 - -------------------------------------------------------------------------------- AUTOMOBILES -- 1.3% - -------------------------------------------------------------------------------- 986,300 Toyota Motor Corp. ORD 36,715,371 - -------------------------------------------------------------------------------- BEVERAGES -- 3.9% - -------------------------------------------------------------------------------- 926,048 Anheuser-Busch Companies, Inc. 43,885,416 - -------------------------------------------------------------------------------- 546,008 Coca-Cola Company (The) 22,752,153 - -------------------------------------------------------------------------------- 1,011,752 Coca-Cola Enterprises 20,761,151 - -------------------------------------------------------------------------------- 439,216 PepsiCo, Inc. 23,291,624 - -------------------------------------------------------------------------------- 110,690,344 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.6% - -------------------------------------------------------------------------------- 504,256 Masco Corp. 17,482,556 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 1.7% - -------------------------------------------------------------------------------- 65,200 Edwards (A.G.), Inc. 2,920,960 - -------------------------------------------------------------------------------- 794,928 Merrill Lynch & Co., Inc. 44,992,925 - -------------------------------------------------------------------------------- 47,913,885 - -------------------------------------------------------------------------------- CHEMICALS -- 2.1% - -------------------------------------------------------------------------------- 386,656 du Pont (E.I.) de Nemours & Co. 19,812,253 - -------------------------------------------------------------------------------- 704,728 Ecolab Inc.(1) 23,291,261 - -------------------------------------------------------------------------------- 259,992 Minerals Technologies Inc.(1) 17,102,274 - -------------------------------------------------------------------------------- 60,205,788 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 7.1% - -------------------------------------------------------------------------------- 1,340,064 Bank of America Corp. 59,096,822 - -------------------------------------------------------------------------------- 288,416 BB&T Corporation(1) 11,271,297 - -------------------------------------------------------------------------------- 204,544 Marshall & Ilsley Corp. 8,539,712 - -------------------------------------------------------------------------------- 1,129,944 SunTrust Banks, Inc. 81,435,065 - -------------------------------------------------------------------------------- 1,395,240 U.S. Bancorp 40,210,817 - -------------------------------------------------------------------------------- 62,872 Zions Bancorporation 4,339,425 - -------------------------------------------------------------------------------- 204,893,138 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 4.5% - -------------------------------------------------------------------------------- 2,366,648 Republic Services, Inc. Cl A 79,235,375 - -------------------------------------------------------------------------------- 1,728,528 Waste Management, Inc.(1) 49,868,033 - -------------------------------------------------------------------------------- 129,103,408 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 0.3% - -------------------------------------------------------------------------------- 526,672 Nokia Oyj ADR 8,126,549 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 0.7% - -------------------------------------------------------------------------------- 218,464 International Business Machines Corp. $ 19,963,240 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 0.6% - -------------------------------------------------------------------------------- 325,304 Martin Marietta Materials, Inc. 18,191,000 - -------------------------------------------------------------------------------- DIVERSIFIED -- 1.9% - -------------------------------------------------------------------------------- 468,656 Standard and Poor's 500 Depositary Receipt(1) 55,301,408 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 1.9% - -------------------------------------------------------------------------------- 1,225,656 Citigroup Inc. 55,080,981 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.7% - -------------------------------------------------------------------------------- 665,536 Commonwealth Telephone Enterprise Inc.(1)(2) 31,373,367 - -------------------------------------------------------------------------------- 678,368 SBC Communications Inc. 16,070,538 - -------------------------------------------------------------------------------- 881,728 Verizon Communications 31,301,344 - -------------------------------------------------------------------------------- 78,745,249 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 2.0% - -------------------------------------------------------------------------------- 780,152 FPL Group, Inc. 31,323,102 - -------------------------------------------------------------------------------- 754,075 Wisconsin Energy Corp. 26,769,663 - -------------------------------------------------------------------------------- 58,092,765 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 1.2% - -------------------------------------------------------------------------------- 532,048 Emerson Electric Co. 34,545,877 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 1.3% - -------------------------------------------------------------------------------- 3,124,512 AVX Corp.(1) 38,275,272 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 0.7% - -------------------------------------------------------------------------------- 403,048 Wal-Mart Stores, Inc. 20,196,735 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 6.6% - -------------------------------------------------------------------------------- 799,360 Campbell Soup Company 23,197,427 - -------------------------------------------------------------------------------- 431,992 ConAgra Foods, Inc. 11,672,424 - -------------------------------------------------------------------------------- 524,328 Kellogg Co. 22,687,673 - -------------------------------------------------------------------------------- 2,138,976 Kraft Foods Inc. Cl A(1) 70,693,156 - -------------------------------------------------------------------------------- 893,504 Unilever N.V. New York Shares 61,133,544 - -------------------------------------------------------------------------------- 189,384,224 - -------------------------------------------------------------------------------- GAS UTILITIES -- 1.4% - -------------------------------------------------------------------------------- 311,232 AGL Resources Inc. 10,871,334 - -------------------------------------------------------------------------------- 939,128 WGL Holdings Inc.(1) 29,075,403 - -------------------------------------------------------------------------------- 39,946,737 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 1.1% - -------------------------------------------------------------------------------- 579,056 Universal Health Services, Inc. Cl B(1) 30,342,534 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 2.0% - -------------------------------------------------------------------------------- 714,408 Brinker International, Inc.(2) 25,875,858 - -------------------------------------------------------------------------------- 425,312 Outback Steakhouse, Inc.(1) 19,475,036 - -------------------------------------------------------------------------------- 307,536 Speedway Motorsports Inc.(1) 10,979,035 - -------------------------------------------------------------------------------- 56,329,929 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 6 Value - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 1.4% - -------------------------------------------------------------------------------- 383,080 Newell Rubbermaid Inc. $ 8,404,775 - -------------------------------------------------------------------------------- 453,248 Whirlpool Corp.(1) 30,698,487 - -------------------------------------------------------------------------------- 39,103,262 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 2.3% - -------------------------------------------------------------------------------- 1,003,936 Kimberly-Clark Corp. 65,988,713 - -------------------------------------------------------------------------------- INSURANCE -- 11.0% - -------------------------------------------------------------------------------- 2,346,384 American International Group, Inc. 130,013,137 - -------------------------------------------------------------------------------- 264 Berkshire Hathaway Inc. Cl A(2) 22,968,000 - -------------------------------------------------------------------------------- 368,960 Chubb Corp. 29,247,459 - -------------------------------------------------------------------------------- 814,560 Horace Mann Educators Corp.(1) 14,450,294 - -------------------------------------------------------------------------------- 715,016 Jefferson-Pilot Corp. 35,071,535 - -------------------------------------------------------------------------------- 1,983,968 Marsh & McLennan Companies Inc. 60,352,307 - -------------------------------------------------------------------------------- 579,656 MetLife, Inc. 22,664,550 - -------------------------------------------------------------------------------- 314,767,282 - -------------------------------------------------------------------------------- IT SERVICES -- 2.0% - -------------------------------------------------------------------------------- 1,080,856 Accenture Ltd. Cl A(2) 26,102,672 - -------------------------------------------------------------------------------- 659,136 DST Systems, Inc.(1)(2) 30,438,901 - -------------------------------------------------------------------------------- 56,541,573 - -------------------------------------------------------------------------------- MACHINERY -- 1.2% - -------------------------------------------------------------------------------- 886,712 Dover Corp. 33,508,846 - -------------------------------------------------------------------------------- MEDIA -- 4.1% - -------------------------------------------------------------------------------- 427,792 Dow Jones & Co. Inc. 15,986,587 - -------------------------------------------------------------------------------- 1,734,280 New York Times Co. (The) Cl A(1) 63,439,963 - -------------------------------------------------------------------------------- 774,392 Tribune Co.(1) 30,875,009 - -------------------------------------------------------------------------------- 198,920 Valassis Communications, Inc.(1)(2) 6,954,243 - -------------------------------------------------------------------------------- 117,255,802 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 0.3% - -------------------------------------------------------------------------------- 369,472 Dollar General Corp. 8,095,132 - -------------------------------------------------------------------------------- OIL & GAS -- 7.5% - -------------------------------------------------------------------------------- 877,288 BP plc ADR 54,742,771 - -------------------------------------------------------------------------------- 155,584 ConocoPhillips 16,778,179 - -------------------------------------------------------------------------------- 1,185,680 Exxon Mobil Corp. 70,666,528 - -------------------------------------------------------------------------------- 812,832 Royal Dutch Petroleum Co. New York Shares(1) 48,802,433 - -------------------------------------------------------------------------------- 410,440 Unocal Corp. 25,320,044 - -------------------------------------------------------------------------------- 216,309,955 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 4.7% - -------------------------------------------------------------------------------- 339,448 Abbott Laboratories $ 15,825,066 - -------------------------------------------------------------------------------- 1,218,548 Bristol-Myers Squibb Co.(3) 31,024,232 - -------------------------------------------------------------------------------- 155,568 Eli Lilly and Company 8,105,093 - -------------------------------------------------------------------------------- 794,912 Merck & Co., Inc. 25,731,301 - -------------------------------------------------------------------------------- 1,001,448 Pfizer, Inc. 26,308,039 - -------------------------------------------------------------------------------- 950,064 Watson Pharmaceuticals, Inc.(2) 29,195,467 - -------------------------------------------------------------------------------- 136,189,198 - -------------------------------------------------------------------------------- ROAD & RAIL -- 1.9% - -------------------------------------------------------------------------------- 797,712 Union Pacific Corp. 55,600,526 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.7% - -------------------------------------------------------------------------------- 857,376 Intel Corp. 19,916,844 - -------------------------------------------------------------------------------- SOFTWARE -- 2.9% - -------------------------------------------------------------------------------- 812,224 Microsoft Corporation 19,631,454 - -------------------------------------------------------------------------------- 1,206,472 Reynolds & Reynolds Co. Cl A(1) 32,647,132 - -------------------------------------------------------------------------------- 1,703,600 Synopsys, Inc.(2) 30,835,160 - -------------------------------------------------------------------------------- 83,113,746 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 1.7% - -------------------------------------------------------------------------------- 1,033,160 Gap, Inc. (The) 22,564,214 - -------------------------------------------------------------------------------- 286,888 Home Depot, Inc. 10,970,597 - -------------------------------------------------------------------------------- 359,120 Sherwin-Williams Co. 15,797,689 - -------------------------------------------------------------------------------- 49,332,500 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.4% - -------------------------------------------------------------------------------- 1,178,968 Jones Apparel Group, Inc. 39,483,638 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 3.5% - -------------------------------------------------------------------------------- 624,840 Fannie Mae 34,022,538 - -------------------------------------------------------------------------------- 806,152 Freddie Mac 50,948,806 - -------------------------------------------------------------------------------- 269,576 MGIC Investment Corp. 16,624,752 - -------------------------------------------------------------------------------- 101,596,096 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $2,513,321,398) 2,772,000,655 - -------------------------------------------------------------------------------- PURCHASED PUT OPTIONS(4) CONTRACTS - -------------------------------------------------------------------------------- 12,176 Bristol-Myers Squibb Co., strike at $22.50, expires 6/18/05 (Cost $1,765,176) 273,960 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 7 Value - Schedule of Investments MARCH 31, 2005 Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 4.0% Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 6.00%, 2/15/26, valued at $117,901,384), in a joint trading account at 2.45%, dated 3/31/05, due 4/1/05 (Delivery value $115,407,854) (Cost $115,400,000) $ 115,400,000 - -------------------------------------------------------------------------------- COLLATERAL RECEIVED FOR SECURITIES LENDING(5) -- 9.3% Repurchase Agreement, Barclays Bank plc, (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 2.85%, dated 3/31/05, due 4/1/05 (Delivery value $98,414,791) 98,407,000 - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- Repurchase Agreement, UBS AG, (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 2.875%, dated 3/31/05, due 4/1/05 (Delivery value $170,013,576) $ 170,000,000 - -------------------------------------------------------------------------------- TOTAL COLLATERAL RECEIVED FOR SECURITIES LENDING (Cost $268,407,000) 268,407,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 109.9% (Cost $2,898,893,574) 3,156,081,615 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- (9.9)% (284,529,844) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $2,871,551,771 ================================================================================ FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS* Contracts to Sell Settlement Date Value Unrealized Loss - -------------------------------------------------------------------------------- 2,743,140,400 JPY for USD 4/28/2005 $ 25,644,160 $ (69,239) - -------------------------------------------------------------------------------- 21,036,845 Euro for USD 4/29/2005 27,278,931 (87,850) - -------------------------------------------------------------------------------- 28,990,935 Euro for USD 4/29/2005 37,593,172 (161,978) - -------------------------------------------------------------------------------- 39,728,308 Euro for USD 4/29/2005 51,516,556 (202,384) - -------------------------------------------------------------------------------- 13,344,977 GBP for USD 4/29/2005 25,178,358 (202,782) - -------------------------------------------------------------------------------- 15,321,606 GBP for USD 4/29/2005 28,907,722 (217,255) - -------------------------------------------------------------------------------- $196,118,899 $(941,488) =================================== (Value on Settlement Date $195,177,411) *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 JPY = Japanese Yen GBP = British Pound ORD = Foreign Ordinary Share USD = United States Dollar (1) Security, or a portion thereof, was on loan as of March 31, 2005. (2) Non-income producing. (3) Security, or a portion thereof, is being held in connection with an open put option. (4) Category is less than 0.05% of total net assets. (5) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. (See Note 5 in Notes to Financial Statements.) See Notes to Financial Statements. - ------ 8 Large Company Value - Performance TOTAL RETURNS AS OF MARCH 31, 2005 ------------------------ AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 10.73% 8.53% 6.08% 7/30/99 - -------------------------------------------------------------------------------- RUSSELL 1000 VALUE INDEX(1) 13.17% 5.19% 4.28%(2) -- - -------------------------------------------------------------------------------- S&P 500 INDEX(1) 6.69% -3.16% -0.56%(2) -- - -------------------------------------------------------------------------------- Institutional Class 10.94% -- 6.46% 8/10/01 - -------------------------------------------------------------------------------- Advisor Class 10.45% -- 8.68% 10/26/00 - -------------------------------------------------------------------------------- A Class 1/31/03 No sales charge* 10.25% -- 19.94% With sales charge* 3.91% -- 16.72% - -------------------------------------------------------------------------------- B Class 1/31/03 No sales charge* 9.59% -- 19.23% With sales charge* 5.59% -- 18.09% - -------------------------------------------------------------------------------- C Class 9.62% -- 7.35% 11/7/01 - -------------------------------------------------------------------------------- R Class 10.17%(3) -- 15.85% 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) (c) 2005 Reuters. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper Inc. -- A Reuters Company and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. (2) Since 7/31/99, the date nearest the Investor Class's inception for which data are available. (3) Class return would have been lower if the class had not received partial reimbursements of distribution and service fees during the period. 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
ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended March 31 - -------------------------------------------------------------------------------- 2000* 2001 2002 2003 2004 2005 - -------------------------------------------------------------------------------- Investor Class -7.22% 12.38% 10.20% -21.19% 39.34% 10.73% - -------------------------------------------------------------------------------- Russell 1000 Value Index -1.56% 0.27% 4.38% -22.79% 40.82% 13.17% - -------------------------------------------------------------------------------- S&P 500 Index 13.73% -21.68% 0.24% -24.76% 35.12% 6.69% - -------------------------------------------------------------------------------- * 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 investment team] PORTFOLIO MANAGERS ON THE LARGE COMPANY VALUE INVESTMENT TEAM (LEFT TO RIGHT): BRENDAN HEALY, CHUCK RITTER, AND MARK MALLON. For the 12 months ended March 31, 2005, Large Company Value gained 10.73%(1), underperforming the 13.17% return posted by its benchmark, the Russell 1000 Value Index. For the same time period, the S&P 500 Index, considered representative of the broader market, gained 6.69%. 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 6.08%, outperforming both the 4.28%(2) return posted by the Russell 1000 Value Index and the 0.56%(2) decline of the S&P 500 for the same period. EQUITIES GAIN AMID CHALLENGES After languishing for much of last year, stocks rallied during the final stretch of 2004, gaining strength from the resolution of the presidential election and a temporary decline in oil prices. However, stock market optimism waned in the early months of 2005 as concern grew about the effects of soaring commodity and oil prices and climbing interest rates on the economy and corporate profit growth. Though volatility prevailed, equities ultimately booked gains for the period. Value stocks generally outpaced their growth counterparts, and Large Company Value received positive absolute contributions from every sector in which it was invested. ENERGY: THE BIGGEST CONTRIBUTOR Our position in the energy sector, comprised of major oil and gas companies, delivered the greatest contribution to performance during the fiscal year. Soaring oil prices, which reached a series of new record highs during the period, made this group the undisputed market leader, and all but one of our holdings contributed. Of those, Exxon Mobil and Royal Dutch Petroleum were the portfolio's top contributors. During the period, Exxon Mobil reported record-breaking 2004 performance, while Royal Dutch Petroleum, a holding that was not present in the index, registered TOP TEN HOLDINGS AS OF MARCH 31, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Citigroup Inc. 4.4% 4.5% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 4.3% 4.1% - -------------------------------------------------------------------------------- Freddie Mac 3.4% 3.7% - -------------------------------------------------------------------------------- Bank of America Corp. 3.2% 3.2% - -------------------------------------------------------------------------------- Royal Dutch Petroleum Co. New York Shares 2.6% 2.7% - -------------------------------------------------------------------------------- Hewlett-Packard Co. 2.1% 1.9% - -------------------------------------------------------------------------------- Wells Fargo & Co. 2.1% 2.1% - -------------------------------------------------------------------------------- J.P. Morgan Chase & Co. 2.0% 1.6% - -------------------------------------------------------------------------------- ChevronTexaco Corp. 1.8% 1.7% - -------------------------------------------------------------------------------- ConocoPhillips 1.7% 1.4% - -------------------------------------------------------------------------------- (1) All fund returns referenced in this commentary are for Investor Class shares. (2) From 7/31/99, the date nearest the Investor Class's inception for which data are available. (continued) - ------ 11 Large Company Value - Portfolio Commentary record-level 2004 net income--developments for which investors rewarded both stocks. Still, based on our value criteria, many companies in this area did not merit inclusion in the portfolio, and our underweight was the primary factor behind our overall shortfall versus the benchmark. HEALTH CARE AND INDUSTRIALS ADD VALUE Large Company Value's holdings in the health care sector significantly bolstered performance. Major pharmaceutical companies were the strongest performers, and the search for value led us to diversified health care firm Johnson & Johnson, a top-contributing stock and another that was not included in the index. Early in 2005, the company announced record fourth-quarter sales driven by strength in each of its business segments, with especially robust sales growth in the pharmaceutical division, news that helped support the stock's climb. Our interest in the industrials sector also provided ample contribution to returns, with aerospace and defense firms adding the most value. Higher defense spending helped underpin gains for Boeing Co., which reported a sharp increase in 2004 operating earnings generated by strength in its Integrated Defense Systems business segment. Honeywell International and Raytheon Co. also were standout performers. INDIVIDUAL SETBACKS Elsewhere in the portfolio, we suffered some individual setbacks in this otherwise positive environment. In October 2004, several companies in the financial sector came under legal and regulatory scrutiny. Allegations of bid rigging sent the stock of Marsh & McLennan sharply lower. Citigroup Inc. also stumbled, becoming the period's top detractor. Despite posting record 2004 fourth-quarter earnings, the stock declined following reports late in the period that the Federal Reserve had warned Citigroup to observe more careful regulatory compliance and to curtail major acquisition activity until those matters are resolved. OUR COMMITMENT The Large Company Value investment team will continue to follow its strategy 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 MARCH 31, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Oil & Gas 10.6% 9.9% - -------------------------------------------------------------------------------- Commercial Banks 9.7% 10.9% - -------------------------------------------------------------------------------- Diversified Financial Services 6.4% 6.0% - -------------------------------------------------------------------------------- Insurance 5.8% 6.3% - -------------------------------------------------------------------------------- Thrifts & Mortgage Finance 5.2% 5.6% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Common Stocks 94.8% 95.8% - -------------------------------------------------------------------------------- Temporary Cash Investments 5.2% 4.2% - -------------------------------------------------------------------------------- - ------ 12 Large Company Value - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 95.7% AEROSPACE & DEFENSE -- 0.7% - -------------------------------------------------------------------------------- 64,100 Boeing Co. $ 3,747,292 - -------------------------------------------------------------------------------- 139,400 Northrop Grumman Corp. 7,524,812 - -------------------------------------------------------------------------------- 11,272,104 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 0.6% - -------------------------------------------------------------------------------- 200,400 Lear Corporation 8,889,744 - -------------------------------------------------------------------------------- AUTOMOBILES -- 1.3% - -------------------------------------------------------------------------------- 264,600 General Motors Corp. 7,776,594 - -------------------------------------------------------------------------------- 160,400 Toyota Motor Corp. ADR 11,930,552 - -------------------------------------------------------------------------------- 19,707,146 - -------------------------------------------------------------------------------- BEVERAGES -- 2.3% - -------------------------------------------------------------------------------- 336,700 Coca-Cola Company (The) 14,030,289 - -------------------------------------------------------------------------------- 128,800 Molson Coors Brewing Co. 9,939,496 - -------------------------------------------------------------------------------- 380,800 Pepsi Bottling Group Inc. 10,605,280 - -------------------------------------------------------------------------------- 34,575,065 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 3.6% - -------------------------------------------------------------------------------- 398,600 Bank of New York Co., Inc. (The) 11,579,330 - -------------------------------------------------------------------------------- 366,300 Merrill Lynch & Co., Inc. 20,732,580 - -------------------------------------------------------------------------------- 378,100 Morgan Stanley 21,646,225 - -------------------------------------------------------------------------------- 53,958,135 - -------------------------------------------------------------------------------- CHEMICALS -- 1.2% - -------------------------------------------------------------------------------- 252,300 PPG Industries, Inc. 18,044,496 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 9.7% - -------------------------------------------------------------------------------- 1,102,800 Bank of America Corp. 48,633,480 - -------------------------------------------------------------------------------- 226,200 National City Corp. 7,577,700 - -------------------------------------------------------------------------------- 306,100 PNC Financial Services Group 15,758,028 - -------------------------------------------------------------------------------- 674,900 U.S. Bancorp 19,450,618 - -------------------------------------------------------------------------------- 445,000 Wachovia Corp. 22,654,950 - -------------------------------------------------------------------------------- 524,800 Wells Fargo & Co. 31,383,040 - -------------------------------------------------------------------------------- 145,457,816 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 1.3% - -------------------------------------------------------------------------------- 316,100 R.R. Donnelley & Sons Company 9,995,082 - -------------------------------------------------------------------------------- 349,600 Waste Management, Inc. 10,085,960 - -------------------------------------------------------------------------------- 20,081,042 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 3.2% - -------------------------------------------------------------------------------- 1,437,900 Hewlett-Packard Co. 31,547,526 - -------------------------------------------------------------------------------- 180,200 International Business Machines Corp. 16,466,676 - -------------------------------------------------------------------------------- 48,014,202 - -------------------------------------------------------------------------------- DIVERSIFIED -- 1.7% - -------------------------------------------------------------------------------- 219,300 Standard and Poor's 500 Depositary Receipt 25,877,400 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 6.4% - -------------------------------------------------------------------------------- 1,474,300 Citigroup Inc. $ 66,255,042 - -------------------------------------------------------------------------------- 871,900 J.P. Morgan Chase & Co. 30,167,740 - -------------------------------------------------------------------------------- 96,422,782 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 4.8% - -------------------------------------------------------------------------------- 215,300 ALLTEL Corp. 11,809,205 - -------------------------------------------------------------------------------- 185,300 AT&T Corp. 3,474,375 - -------------------------------------------------------------------------------- 613,600 BellSouth Corp. 16,131,544 - -------------------------------------------------------------------------------- 815,300 SBC Communications Inc. 19,314,457 - -------------------------------------------------------------------------------- 512,400 Sprint Corp. 11,657,100 - -------------------------------------------------------------------------------- 259,300 Verizon Communications 9,205,150 - -------------------------------------------------------------------------------- 71,591,831 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 2.6% - -------------------------------------------------------------------------------- 465,300 Exelon Corporation 21,352,617 - -------------------------------------------------------------------------------- 321,200 PPL Corporation 17,341,588 - -------------------------------------------------------------------------------- 38,694,205 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 1.6% - -------------------------------------------------------------------------------- 208,100 CVS Corp. 10,950,222 - -------------------------------------------------------------------------------- 776,800 Kroger Co. (The)(1) 12,452,104 - -------------------------------------------------------------------------------- 23,402,326 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 2.4% - -------------------------------------------------------------------------------- 339,400 H.J. Heinz Company 12,503,496 - -------------------------------------------------------------------------------- 452,600 Sara Lee Corp. 10,029,616 - -------------------------------------------------------------------------------- 206,800 Unilever N.V. New York Shares 14,149,256 - -------------------------------------------------------------------------------- 36,682,368 - -------------------------------------------------------------------------------- GAS UTILITIES -- 0.6% - -------------------------------------------------------------------------------- 404,100 NiSource Inc. 9,209,439 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.8% - -------------------------------------------------------------------------------- 367,400 Baxter International, Inc. 12,484,252 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 1.4% - -------------------------------------------------------------------------------- 103,600 CIGNA Corp. 9,251,480 - -------------------------------------------------------------------------------- 228,900 HCA Inc. 12,262,173 - -------------------------------------------------------------------------------- 21,513,653 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 1.4% - -------------------------------------------------------------------------------- 663,900 McDonald's Corporation 20,673,846 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 1.3% - -------------------------------------------------------------------------------- 468,900 Newell Rubbermaid Inc. 10,287,666 - -------------------------------------------------------------------------------- 136,900 Whirlpool Corp. 9,272,237 - -------------------------------------------------------------------------------- 19,559,903 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 13 Large Company Value - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 2.2% - -------------------------------------------------------------------------------- 502,400 General Electric Co. $ 18,116,544 - -------------------------------------------------------------------------------- 457,800 Tyco International Ltd. 15,473,640 - -------------------------------------------------------------------------------- 33,590,184 - -------------------------------------------------------------------------------- INSURANCE -- 5.8% - -------------------------------------------------------------------------------- 390,900 Allstate Corp. 21,132,054 - -------------------------------------------------------------------------------- 295,700 American International Group, Inc. 16,384,737 - -------------------------------------------------------------------------------- 253,200 Hartford Financial Services Group Inc. (The) 17,359,392 - -------------------------------------------------------------------------------- 244,700 Loews Corp. 17,995,238 - -------------------------------------------------------------------------------- 116,800 Marsh & McLennan Companies Inc. 3,553,056 - -------------------------------------------------------------------------------- 217,000 Torchmark Corp. 11,327,400 - -------------------------------------------------------------------------------- 87,751,877 - -------------------------------------------------------------------------------- IT SERVICES -- 1.4% - -------------------------------------------------------------------------------- 261,800 Computer Sciences Corp.(1) 12,003,530 - -------------------------------------------------------------------------------- 245,600 Fiserv, Inc.(1) 9,774,880 - -------------------------------------------------------------------------------- 21,778,410 - -------------------------------------------------------------------------------- MACHINERY -- 2.8% - -------------------------------------------------------------------------------- 123,800 Deere & Co. 8,310,694 - -------------------------------------------------------------------------------- 279,000 Dover Corp. 10,543,410 - -------------------------------------------------------------------------------- 163,100 Ingersoll-Rand Company 12,990,915 - -------------------------------------------------------------------------------- 158,100 Parker-Hannifin Corp. 9,631,452 - -------------------------------------------------------------------------------- 41,476,471 - -------------------------------------------------------------------------------- MEDIA -- 2.9% - -------------------------------------------------------------------------------- 230,100 Gannett Co., Inc. 18,196,308 - -------------------------------------------------------------------------------- 1,457,200 Time Warner Inc.(1) 25,573,860 - -------------------------------------------------------------------------------- 43,770,168 - -------------------------------------------------------------------------------- METALS & MINING -- 1.1% - -------------------------------------------------------------------------------- 376,700 Alcoa Inc. 11,447,913 - -------------------------------------------------------------------------------- 83,300 Nucor Corp. 4,794,748 - -------------------------------------------------------------------------------- 16,242,661 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 1.9% - -------------------------------------------------------------------------------- 423,600 Dollar General Corp. 9,281,076 - -------------------------------------------------------------------------------- 504,100 May Department Stores Co. (The) 18,661,782 - -------------------------------------------------------------------------------- 27,942,858 - -------------------------------------------------------------------------------- OFFICE ELECTRONICS -- 0.5% - -------------------------------------------------------------------------------- 491,400 Xerox Corp.(1) 7,444,710 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- OIL & GAS -- 10.6% - -------------------------------------------------------------------------------- 474,800 ChevronTexaco Corp. $ 27,685,588 - -------------------------------------------------------------------------------- 241,800 ConocoPhillips 26,075,712 - -------------------------------------------------------------------------------- 1,077,400 Exxon Mobil Corp. 64,213,040 - -------------------------------------------------------------------------------- 654,600 Royal Dutch Petroleum Co. New York Shares 39,302,184 - -------------------------------------------------------------------------------- 157,276,524 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 1.4% - -------------------------------------------------------------------------------- 311,700 Weyerhaeuser Co. 21,351,450 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 4.2% - -------------------------------------------------------------------------------- 385,700 Abbott Laboratories 17,981,334 - -------------------------------------------------------------------------------- 418,600 Bristol-Myers Squibb Co. 10,657,556 - -------------------------------------------------------------------------------- 265,000 Johnson & Johnson 17,797,400 - -------------------------------------------------------------------------------- 193,200 Merck & Co., Inc. 6,253,884 - -------------------------------------------------------------------------------- 234,900 Wyeth 9,908,082 - -------------------------------------------------------------------------------- 62,598,256 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.7% - -------------------------------------------------------------------------------- 444,400 Intel Corp. 10,323,412 - -------------------------------------------------------------------------------- SOFTWARE -- 1.6% - -------------------------------------------------------------------------------- 998,900 Microsoft Corporation 24,143,413 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 1.1% - -------------------------------------------------------------------------------- 171,800 Advance Auto Parts, Inc.(1) 8,667,310 - -------------------------------------------------------------------------------- 366,100 Gap, Inc. (The) 7,995,624 - -------------------------------------------------------------------------------- 16,662,934 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.9% - -------------------------------------------------------------------------------- 238,800 Liz Claiborne, Inc. 9,583,044 - -------------------------------------------------------------------------------- 198,000 Reebok International Ltd. 8,771,400 - -------------------------------------------------------------------------------- 179,500 VF Corp. 10,615,630 - -------------------------------------------------------------------------------- 28,970,074 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 5.2% - -------------------------------------------------------------------------------- 806,900 Freddie Mac 50,996,080 - -------------------------------------------------------------------------------- 131,700 MGIC Investment Corp. 8,121,939 - -------------------------------------------------------------------------------- 497,100 Washington Mutual, Inc. 19,635,450 - -------------------------------------------------------------------------------- 78,753,469 - -------------------------------------------------------------------------------- TOBACCO -- 1.5% - -------------------------------------------------------------------------------- 334,100 Altria Group Inc. 21,846,799 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $1,299,053,338) 1,438,035,425 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 14 Large Company Value - Schedule of Investments MARCH 31, 2005 Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 5.2% Repurchase Agreement, Bank of America Securities, LLC, (collateralized by various U.S. Treasury obligations, 3.125%-6.18%, 5/15/07-11/15/27, valued at $76,558,596), in a joint trading account at 2.57%, dated 3/31/05, due 4/1/05 (Delivery value $74,505,318) 74,500,000 - -------------------------------------------------------------------------------- Repurchase Agreement, Merrill Lynch & Co., Inc., (collateralized by various U.S. Treasury obligations, 1.875%-11.25%, 11/30/05-2/15/15, valued at $4,182,571), in a joint trading account at 2.55%, dated 3/31/05, due 4/1/05 (Delivery value $4,100,290) 4,100,000 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $78,600,000) 78,600,000 - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.9% (Cost $1,377,653,338) $1,516,635,425 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- (0.9)% (12,872,693) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $1,503,762,732 ================================================================================ NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt (1) Non-income producing. See Notes to Financial Statements. - ------ 15 Shareholder Fee Examples (Unaudited) 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 October 1, 2004 to March 31, 2005. 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) - ------ 16 Shareholder Fee Examples (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(1) ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 10/1/04 -- EXPENSE 10/1/04 3/31/05 3/31/05 RATIO(1) - --------------------------------------------------------------------------------------------- VALUE SHAREHOLDER FEE EXAMPLE - --------------------------------------------------------------------------------------------- ACTUAL - --------------------------------------------------------------------------------------------- Investor Class $1,000 $1,077.70 $5.13 0.99% - --------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,078.70 $4.09 0.79% - --------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,076.40 $6.42 1.24% - --------------------------------------------------------------------------------------------- A Class $1,000 $1,074.90 $6.41 1.24% - --------------------------------------------------------------------------------------------- B Class $1,000 $1,071.70 $10.28 1.99% - --------------------------------------------------------------------------------------------- C Class $1,000 $1,072.10 $10.28 1.99% - --------------------------------------------------------------------------------------------- HYPOTHETICAL - --------------------------------------------------------------------------------------------- Investor Class $1,000 $1,020.00 $4.99 0.99% - --------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,020.99 $3.98 0.79% - --------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,018.75 $6.24 1.24% - --------------------------------------------------------------------------------------------- A Class $1,000 $1,018.75 $6.24 1.24% - --------------------------------------------------------------------------------------------- B Class $1,000 $1,015.01 $10.00 1.99% - --------------------------------------------------------------------------------------------- C Class $1,000 $1,015.01 $10.00 1.99% - --------------------------------------------------------------------------------------------- (1) Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, 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 Examples (Unaudited) - --------------------------------------------------------------------------------------------- EXPENSES PAID BEGINNING ENDING DURING PERIOD(1) ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 10/1/04 - EXPENSE 10/1/04 3/31/05 3/31/05 RATIO(1) - --------------------------------------------------------------------------------------------- LARGE COMPANY VALUE SHAREHOLDER FEE EXAMPLE - --------------------------------------------------------------------------------------------- ACTUAL - --------------------------------------------------------------------------------------------- Investor Class $1,000 $1,083.50 $4.47 0.86% - --------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,084.50 $3.43 0.66% - --------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,082.10 $5.76 1.11% - --------------------------------------------------------------------------------------------- A Class $1,000 $1,082.00 $5.76 1.11% - --------------------------------------------------------------------------------------------- B Class $1,000 $1,079.50 $9.64 1.86% - --------------------------------------------------------------------------------------------- C Class $1,000 $1,077.90 $9.64 1.86% - --------------------------------------------------------------------------------------------- R Class (after reimbursement)(2) $1,000 $1,080.70 $6.69 1.29% - --------------------------------------------------------------------------------------------- R Class (before reimbursement) $1,000 $1,080.70 $7.05 1.36% - --------------------------------------------------------------------------------------------- HYPOTHETICAL - --------------------------------------------------------------------------------------------- Investor Class $1,000 $1,020.64 $4.33 0.86% - --------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,021.64 $3.33 0.66% - --------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,019.40 $5.59 1.11% - --------------------------------------------------------------------------------------------- A Class $1,000 $1,019.40 $5.59 1.11% - --------------------------------------------------------------------------------------------- B Class $1,000 $1,015.66 $9.35 1.86% - --------------------------------------------------------------------------------------------- C Class $1,000 $1,015.66 $9.35 1.86% - --------------------------------------------------------------------------------------------- R Class (after reimbursement)(2) $1,000 $1,018.50 $6.49 1.29% - --------------------------------------------------------------------------------------------- R Class (before reimbursement) $1,000 $1,018.15 $6.84 1.36% - --------------------------------------------------------------------------------------------- (1) Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. (2) During the year ended March 31, 2005, the class received a partial reimbursement of its distribution and service fee. Had fees not been reimbursed, the annualized ratio of operating expenses to average net assets would have been 1.36%. - ------ 18 Statement of Assets and Liabilities MARCH 31, 2005 - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investment securities, at value (cost of $2,630,486,574 and $1,377,653,338, respectively) -- including $265,165,373 and $- of securities on loan, respectively $2,887,674,615 $1,516,635,425 - ------------------------------------------- Investments made with cash collateral received for securities on loan, at value (cost of $268,407,000 and $-, respectively) 268,407,000 -- - -------------------------------------------------------------------------------- Total investment securities, at value (cost of $2,898,893,574 and $1,377,653,338, respectively) 3,156,081,615 1,516,635,425 - ------------------------------------------- Cash -- 9,910,121 - ------------------------------------------- Receivable for investments sold 23,831,332 3,192,625 - ------------------------------------------- Receivable for capital shares sold 1,042,724 1,928,304 - ------------------------------------------- Dividends and interest receivable 3,714,776 1,950,035 - -------------------------------------------------------------------------------- 3,184,670,447 1,533,616,510 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Payable for collateral received for securities on loan 268,407,000 -- - ------------------------------------------- Disbursements in excess of demand deposit cash 11,413,636 -- - ------------------------------------------- Payable for investments purchased 29,878,886 28,711,432 - ------------------------------------------- Payable for forward foreign currency exchange contracts 941,488 -- - ------------------------------------------- Payable for capital shares redeemed -- 35,524 - ------------------------------------------- Accrued management fees 2,350,264 968,303 - ------------------------------------------- Distribution fees payable 62,631 55,127 - ------------------------------------------- Service fees (and distribution fees -- A and R Class) payable 64,771 83,392 - -------------------------------------------------------------------------------- 313,118,676 29,853,778 - -------------------------------------------------------------------------------- NET ASSETS $2,871,551,771 $1,503,762,732 ================================================================================ See Notes to Financial Statements. (continued) - ------ 19 Statement of Assets and Liabilities MARCH 31, 2005 - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- NET ASSETS CONSIST OF: - -------------------------------------------------------------------------------- Capital (par value and paid-in surplus) $2,600,017,077 $1,354,451,587 - ------------------------------------------- Accumulated undistributed net investment income (loss) (6,494,475) 235,849 - ------------------------------------------- Undistributed net realized gain on investment and foreign currency transactions 21,783,636 10,093,209 - ------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 256,245,533 138,982,087 - -------------------------------------------------------------------------------- $2,871,551,771 $1,503,762,732 ================================================================================ INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $2,315,506,799 $659,277,273 - ------------------------------------------- Shares outstanding 316,797,383 103,173,466 - ------------------------------------------- Net asset value per share $7.31 $6.39 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $251,811,904 $438,518,029 - ------------------------------------------- Shares outstanding 34,416,797 68,630,476 - ------------------------------------------- Net asset value per share $7.32 $6.39 - -------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $236,959,776 $104,611,512 - ------------------------------------------- Shares outstanding 32,427,597 16,372,865 - ------------------------------------------- Net asset value per share $7.31 $6.39 - -------------------------------------------------------------------------------- A CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $48,329,892 $245,416,113 - ------------------------------------------- Shares outstanding 6,608,100 38,377,793 - ------------------------------------------- Net asset value per share $7.31 $6.39 - ------------------------------------------- Maximum offering price (net asset value divided by 0.9425) $7.76 $6.78 - -------------------------------------------------------------------------------- B CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $5,058,860 $13,008,606 - ------------------------------------------- Shares outstanding 692,172 2,030,653 - ------------------------------------------- Net asset value per share $7.31 $6.41 - -------------------------------------------------------------------------------- C CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $13,884,540 $40,788,690 - ------------------------------------------- Shares outstanding 1,909,818 6,384,464 - ------------------------------------------- Net asset value per share $7.27 $6.39 - -------------------------------------------------------------------------------- R CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets N/A $2,142,509 - ------------------------------------------- Shares outstanding N/A 335,225 - ------------------------------------------- Net asset value per share N/A $6.39 - -------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 20 Statement of Operations YEAR ENDED MARCH 31, 2005 - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- INVESTMENT INCOME - -------------------------------------------------------------------------------- INCOME: - ------------------------------------------- Dividends (net of foreign taxes withheld of $1,009,513 and $282,449, respectively) $ 57,289,901 $ 26,557,276 - ------------------------------------------- Interest 1,378,960 857,484 - ------------------------------------------- Securities lending 170,174 -- - -------------------------------------------------------------------------------- 58,839,035 27,414,760 - -------------------------------------------------------------------------------- EXPENSES: - ------------------------------------------- Management fees 26,177,471 7,913,649 - ------------------------------------------- Distribution fees: - ------------------------------------------- Advisor Class 563,617 147,084 - ------------------------------------------- B Class 28,036 70,529 - ------------------------------------------- C Class 68,200 158,880 - ------------------------------------------- Service fees: - ------------------------------------------- Advisor Class 563,617 147,084 - ------------------------------------------- B Class 9,345 23,510 - ------------------------------------------- C Class 22,733 52,960 - ------------------------------------------- Service and distribution fees: - ------------------------------------------- A Class 78,777 399,386 - ------------------------------------------- R Class - 6,916 - ------------------------------------------- Directors' fees and expenses 47,394 17,471 - ------------------------------------------- Other expenses 23,931 4,981 - -------------------------------------------------------------------------------- 27,583,121 8,942,450 - -------------------------------------------------------------------------------- Amount reimbursed (237) (1,728) - -------------------------------------------------------------------------------- 27,582,884 8,940,722 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 31,256,151 18,474,038 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS) ON: - ------------------------------------------- Investment transactions 292,338,341 16,666,492 - ------------------------------------------- Foreign currency transactions (10,131,089) -- - -------------------------------------------------------------------------------- 282,207,252 16,666,492 - -------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION ON: - ------------------------------------------- Investments (54,534,070) 68,357,515 - ------------------------------------------- Translation of assets and liabilities in foreign currencies 2,017,111 -- - -------------------------------------------------------------------------------- (52,516,959) 68,357,515 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN 229,690,293 85,024,007 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $260,946,444 $103,498,045 ================================================================================ See Notes to Financial Statements. - ------ 21 Statement of Changes in Net Assets YEARS ENDED MARCH 31, 2005 AND MARCH 31, 2004 - -------------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - -------------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS 2005 2004 2005 2004 - -------------------------------------------------------------------------------------------------- OPERATIONS - -------------------------------------------------------------------------------------------------- Net investment income $ 31,256,151 $ 29,652,644 $ 18,474,038 $ 5,460,086 - ----------------------------- Net realized gain 282,207,252 317,262,251 16,666,492 1,035,451 - ----------------------------- Change in net unrealized appreciation (52,516,959) 437,704,926 68,357,515 88,771,151 - -------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 260,946,444 784,619,821 103,498,045 95,266,688 - -------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - -------------------------------------------------------------------------------------------------- From net investment income: - ----------------------------- Investor Class (25,832,210) (21,186,539) (8,417,141) (3,836,516) - ----------------------------- Institutional Class (3,092,567) (2,637,672) (6,012,315) (958,366) - ----------------------------- Advisor Class (1,784,966) (2,721,990) (1,000,392) (71,321) - ----------------------------- A Class (266,658) (38,958) (2,613,870) (492,681) - ----------------------------- B Class (10,572) (1,219) (75,779) (13,635) - ----------------------------- C Class (25,282) (5,704) (179,959) (26,833) - ----------------------------- R Class -- -- (20,798) (235) - ----------------------------- From net realized gains: - ----------------------------- Investor Class (293,840,570) (21,347,159) (1,622,873) -- - ----------------------------- Institutional Class (26,249,192) (2,057,045) (1,122,315) -- - ----------------------------- Advisor Class (29,182,366) (3,792,591) (244,061) -- - ----------------------------- A Class (5,061,858) (67,783) (626,207) -- - ----------------------------- B Class (546,505) (19,684) (35,557) -- - ----------------------------- C Class (1,292,940) (57,575) (76,781) -- - ----------------------------- R Class -- -- (5,230) -- - -------------------------------------------------------------------------------------------------- Decrease in net assets from distributions (387,185,686) (53,933,919) (22,053,278) (5,399,587) - -------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - -------------------------------------------------------------------------------------------------- Net increase in net assets from capital share transactions 194,734,618 126,621,592 791,902,809 360,724,856 - -------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS 68,495,376 857,307,494 873,347,576 450,591,957 NET ASSETS - -------------------------------------------------------------------------------------------------- Beginning of period 2,803,056,395 1,945,748,901 630,415,156 179,823,199 - -------------------------------------------------------------------------------------------------- End of period $2,871,551,771 $2,803,056,395 $1,503,762,732 $630,415,156 ================================================================================================== Accumulated undistributed net investment income (loss) $(6,494,475) $7,050,237 $235,849 $82,065 ================================================================================================== See Notes to Financial Statements. - ------ 22 Notes to Financial Statements MARCH 31, 2005 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Value Fund (Value) and Large Company Value Fund (Large Company Value) (collectively, the funds) are two funds in a series issued by the corporation. The funds are diversified under the 1940 Act. The funds' investment objectives are long-term capital growth. The production of income is a secondary objective. The funds seek to achieve their investment objective by investing in stocks of companies that management believes to be undervalued at the time of purchase. Value invests in companies with small, medium, and large market capitalization and Large Company Value invests in companies with larger market capitalization. The following is a summary of the funds' significant accounting policies. MULTIPLE CLASS-- Value is authorized to issue the Investor Class, the Institutional Class, the Advisor Class, the A Class, the B Class and the C Class. Large Company Value is authorized to issue the Investor Class, the Institutional Class, the Advisor Class, the A Class, the B Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and shareholder servicing and distribution expenses and arrangements. All shares of each fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the funds are allocated to each class of shares based on their relative net assets. The Investor Class is no longer available to new self-directed retail investors. Sale of Large Company Value's R Class commenced on August 29, 2003. SECURITY VALUATIONS -- Securities traded primarily on a principal securities exchange are valued at the last reported sales price, or at the mean of the latest bid and asked prices where no last sales price is available. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official close price. Debt securities not traded on a principal securities exchange are valued through a commercial pricing service or at the mean of the most recent bid and asked prices. Discount notes may be valued through a commercial pricing service or at amortized cost, which approximates fair value. If the funds determine that the market price of a portfolio security is not readily available, or that the valuation methods mentioned above do not reflect the security's fair value, such security is valued at its fair value as determined by, or in accordance with procedures adopted by, the Board of Directors or its designee if such fair value determination would materially impact a fund's net asset value. Circumstances that may cause the funds to fair value a security include: 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; or trading in a security has been halted during the trading day. 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 its 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. OPTIONS CONTRACTS -- The funds may purchase put options in order to manage the funds' exposure to changes in market conditions. One of the risks of entering into 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. The proceeds from securities sold through the exercise of put options are decreased by the premium paid to purchase the put options. 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. (continued) - ------ 23 Notes to Financial Statements MARCH 31, 2005 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 American Century Investment Management, Inc. (ACIM) (the investment advisor) 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. INDEMNIFICATIONS -- Under the corporation's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the funds. In addition, in the normal course of business, the funds enter into contracts that provide general indemnifications. The funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. The risk of material loss from such claims is considered by management to be remote. 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 MARCH 31, 2005 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 each 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 advisor's assets under management in each fund's investment strategy (strategy assets) to calculate the appropriate fee rate for each fund. The strategy assets include each fund's assets and the assets of other clients of the investment advisor that are not in the American Century family of 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 year ended March 31, 2005, the effective annual management fee for each class of each fund was as follows: - -------------------------------------------------------------------------------- INVESTOR, A, B & C INSTITUTIONAL ADVISOR R - -------------------------------------------------------------------------------- Value 0.99% 0.79% 0.74% N/A - -------------------------------------------------------------------------------- Large Company Value 0.87% 0.67% 0.62% 0.87% - -------------------------------------------------------------------------------- (continued) - ------ 25 Notes to Financial Statements MARCH 31, 2005 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% - -------------------------------------------------------------------------------- Service Fee 0.25% 0.25% - -------------------------------------------------------------------------------- The plans provide that the A Class and the R Class will pay ACIS an annual distribution and service fee of 0.25% and 0.50%, respectively. The fees are computed 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 Class, B Class, C Class and R Class shares. During the year ended March 31, 2005, classes in each fund that received reimbursements of distribution and service fees were as follows: - -------------------------------------------------------------------------------- ADVISOR A C R - -------------------------------------------------------------------------------- Value $21 $163 $53 N/A - -------------------------------------------------------------------------------- Large Company Value $1,084 $61 -- $583 - -------------------------------------------------------------------------------- The reimbursements for the Advisor Class, A Class and C Class had no impact on the ratio of operating expenses and the ratio of net investment income to average net assets. Fees incurred under the plans during the year ended March 31, 2005, 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 advisor, ACIM, the distributor of the corporation, ACIS, and the corporation's transfer agent, American Century Services, LLC (formerly American Century Services Corporation). During the year ended March 31, 2005, 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 funds and a wholly owned subsidiary of JPM. 3. INVESTMENT TRANSACTIONS Investment transactions, excluding short-term investments, for the year ended March 31, 2005, were as follows: - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- Purchases $3,474,759,913 $921,223,004 - -------------------------------------------------------------------------------- Proceeds from sales $3,707,404,420 $172,223,779 - -------------------------------------------------------------------------------- (continued) - ------ 26 Notes to Financial Statements MARCH 31, 2005 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the funds were as follows: - ------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - ------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------- INVESTOR CLASS - ------------------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 900,000,000 225,000,000 =========================================================================================== Sold 54,137,079 $ 413,341,905 57,321,994 $356,142,315 - --------------------------- Issued in reinvestment of distributions 43,471,448 311,757,276 1,161,249 7,305,324 - --------------------------- Redeemed (59,706,385) (458,369,768) (14,773,794) (90,395,543) - ------------------------------------------------------------------------------------------- Net increase 37,902,142 $ 266,729,413 43,709,449 $273,052,096 =========================================================================================== 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 - ------------------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 100,000,000 150,000,000 =========================================================================================== Sold 13,241,759 $ 99,555,877 50,249,305 $307,944,753 - --------------------------- Issued in reinvestment of distributions 4,026,704 28,975,346 1,080,815 6,811,517 - --------------------------- Redeemed (11,760,861) (91,132,852) (8,425,071) (52,473,492) - ------------------------------------------------------------------------------------------- Net increase 5,507,602 $ 37,398,371 42,905,049 $262,282,778 =========================================================================================== 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 - ------------------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 150,000,000 50,000,000 =========================================================================================== Sold 17,999,184 $ 138,240,317 14,856,722 $ 91,116,353 - --------------------------- Issued in reinvestment of distributions 4,252,150 30,453,455 152,991 968,407 - --------------------------- Redeemed (42,086,922) (324,135,711) (1,905,518) (11,849,450) - ------------------------------------------------------------------------------------------- Net increase (decrease) (19,835,588) $(155,441,939) 13,104,195 $ 80,235,310 =========================================================================================== 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 MARCH 31, 2005 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - ------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - ------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------- A CLASS - ------------------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 50,000,000 100,000,000 =========================================================================================== Sold 4,931,624 $37,824,307 26,778,812 $164,683,249 - --------------------------- Issued in reinvestment of distributions 721,822 5,166,206 500,422 3,159,614 - --------------------------- Redeemed (991,741) (7,378,593) (4,528,289) (28,040,263) - ------------------------------------------------------------------------------------------- Net increase 4,661,705 $35,611,920 22,750,945 $139,802,600 =========================================================================================== 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 - ------------------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 10,000,000 10,000,000 =========================================================================================== Sold 305,161 $2,320,112 1,158,139 $7,071,961 - --------------------------- Issued in reinvestment of distributions 71,921 513,678 15,674 98,984 - --------------------------- Redeemed (28,415) (209,838) (97,985) (611,379) - ------------------------------------------------------------------------------------------- Net increase 348,667 $2,623,952 1,075,828 $6,559,566 =========================================================================================== 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 - ------------------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 20,000,000 15,000,000 =========================================================================================== Sold 1,036,747 $ 7,771,690 4,899,475 $30,517,204 - --------------------------- Issued in reinvestment of distributions 166,121 1,179,861 22,275 140,307 - --------------------------- Redeemed (152,244) (1,138,650) (408,986) (2,529,253) - ------------------------------------------------------------------------------------------- Net increase 1,050,624 $ 7,812,901 4,512,764 $28,128,258 =========================================================================================== 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 MARCH 31, 2005 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - ------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - ------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------- R CLASS - ------------------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED N/A 10,000,000 =========================================================================================== Sold 323,617 $1,949,168 - --------------------------- Issued in reinvestment of distributions 4,149 26,028 - --------------------------- Redeemed (21,103) (132,995) - ------------------------------------------------------------------------------------------- Net increase 306,663 $1,842,201 =========================================================================================== 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 March 31, 2005, securities in Value valued at $265,165,373 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 $268,407,000. 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 $575,000,000 unsecured bank line of credit agreement with JPMCB, which was renewed from $650,000,000 effective December 15, 2004. The funds may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The funds did not borrow from the line during the year ended March 31, 2005. (continued) - ------ 29 Notes to Financial Statements MARCH 31, 2005 7. FEDERAL TAX INFORMATION The tax character of distributions paid during the years ended March 31, 2005 and March 31, 2004 were as follows: - ------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - ------------------------------------------------------------------------------------- 2005 2004 2005 2004 - ------------------------------------------------------------------------------------- DISTRIBUTIONS PAID FROM - ------------------------------------------------------------------------------------- Ordinary income $210,162,524 $26,592,109 $19,004,026 $5,399,587 - ------------------------------------------------------------------------------------- Long-term capital gains $177,023,162 $27,341,810 $3,049,252 -- - ------------------------------------------------------------------------------------- The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. As of March 31, 2005, the components of distributable earnings on a tax-basis and the federal tax cost of investments were as follows: - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- COMPONENTS OF DISTRIBUTABLE EARNINGS AND TAX COST - -------------------------------------------------------------------------------- Federal tax cost of investments $2,975,297,765 $1,379,927,942 ================================================================================ Gross tax appreciation of investments $262,325,019 $152,341,598 - ------------------------------------------- Gross tax depreciation of investments (81,541,169) (15,634,115) - -------------------------------------------------------------------------------- Net tax appreciation of investments $180,783,850 $136,707,483 ================================================================================ Net tax depreciation on derivatives and translation of assets and liabilities in foreign currencies $ (438) -- - -------------------------------------------------------------------------------- Net tax appreciation $180,783,412 $136,707,483 ================================================================================ Undistributed ordinary income $64,799,210 $4,781,853 - ------------------------------------------- Accumulated long-term gains $32,447,130 $7,821,809 - ------------------------------------------- Currency loss deferral $(6,495,058) -- - -------------------------------------------------------------------------------- The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales and the realization for tax purposes of unrealized gains on certain forward foreign currency contracts. The currency loss deferrals represent net foreign currency losses incurred in the five-month period ended March 31, 2005. Value has elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. (continued) - ------ 30 Notes to Financial Statements MARCH 31, 2005 8. OTHER TAX INFORMATION (UNAUDITED) The following information is provided pursuant to provisions of the Internal Revenue Code. The funds hereby designate capital gain dividends for the fiscal year ended March 31, 2005, as follows: - -------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - -------------------------------------------------------------------------------- $177,023,162 $3,049,252 - -------------------------------------------------------------------------------- For corporate taxpayers, the following ordinary income distributions paid during the fiscal year ended March 31, 2005, qualify for the corporate dividends received deduction: - -------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - -------------------------------------------------------------------------------- $68,649,061 $19,004,026 - -------------------------------------------------------------------------------- The funds hereby designate qualified dividend income for the fiscal year ended March 31, 2005, as follows: - -------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - -------------------------------------------------------------------------------- $75,427,300 $19,004,026 - -------------------------------------------------------------------------------- - ------ 31 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 - ---------------------------------------------------------------------------------------- INVESTOR CLASS - ---------------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 - ---------------------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.72 $5.61 $7.19 $6.27 $5.35 - ---------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------- Net Investment Income(1) 0.09 0.09 0.07 0.08 0.10 - ---------------------- Net Realized and Unrealized Gain (Loss) 0.64 2.18 (1.48) 1.03 0.92 - ---------------------------------------------------------------------------------------- Total From Investment Operations 0.73 2.27 (1.41) 1.11 1.02 - ---------------------------------------------------------------------------------------- Distributions - ---------------------- From Net Investment Income (0.09) (0.08) (0.07) (0.08) (0.10) - ---------------------- From Net Realized Gains (1.05) (0.08) (0.10) (0.11) -- - ---------------------------------------------------------------------------------------- Total Distributions (1.14) (0.16) (0.17) (0.19) (0.10) - ---------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.31 $7.72 $5.61 $7.19 $6.27 ======================================================================================== TOTAL RETURN(2) 9.95% 40.66% (19.85)% 17.96% 19.20% - ---------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.99% 1.00% 1.00% 1.00% 1.00% - ---------------------- Ratio of Net Investment Income to Average Net Assets 1.16% 1.26% 1.19% 1.11% 1.71% - ---------------------- Portfolio Turnover Rate 130% 122% 102% 151% 150% - ---------------------- Net Assets, End of Period (in thousands) $2,315,507 $2,152,265 $1,552,632 $2,068,901 $1,532,113 - ---------------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 32 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 - ---------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ---------------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 - ---------------------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.72 $5.61 $7.20 $6.27 $5.36 - ---------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------- Net Investment Income(1) 0.10 0.10 0.09 0.09 0.11 - ---------------------- Net Realized and Unrealized Gain (Loss) 0.65 2.18 (1.50) 1.04 0.91 - ---------------------------------------------------------------------------------------- Total From Investment Operations 0.75 2.28 (1.41) 1.13 1.02 - ---------------------------------------------------------------------------------------- Distributions - ---------------------- From Net Investment Income (0.10) (0.09) (0.08) (0.09) (0.11) - ---------------------- From Net Realized Gains (1.05) (0.08) (0.10) (0.11) -- - ---------------------------------------------------------------------------------------- Total Distributions (1.15) (0.17) (0.18) (0.20) (0.11) - ---------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.32 $7.72 $5.61 $7.20 $6.27 ======================================================================================== TOTAL RETURN(2) 10.30% 40.93% (19.70)% 18.19% 19.24% - ---------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.79% 0.80% 0.80% 0.80% 0.80% - ---------------------- Ratio of Net Investment Income to Average Net Assets 1.36% 1.46% 1.38% 1.31% 1.91% - ---------------------- Portfolio Turnover Rate 130% 122% 102% 151% 150% - ---------------------- Net Assets, End of Period (in thousands) $251,812 $223,282 $179,196 $226,681 $186,987 - ---------------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 33 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 - ---------------------------------------------------------------------------------------- ADVISOR CLASS - ---------------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 - ---------------------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.72 $5.60 $7.19 $6.27 $5.36 - ---------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------- Net Investment Income(1) 0.07 0.07 0.06 0.06 0.08 - ---------------------- Net Realized and Unrealized Gain (Loss) 0.64 2.19 (1.49) 1.03 0.92 - ---------------------------------------------------------------------------------------- Total From Investment Operations 0.71 2.26 (1.43) 1.09 1.00 - ---------------------------------------------------------------------------------------- Distributions - ---------------------- From Net Investment Income (0.07) (0.06) (0.06) (0.06) (0.09) - ---------------------- From Net Realized Gains (1.05) (0.08) (0.10) (0.11) -- - ---------------------------------------------------------------------------------------- Total Distributions (1.12) (0.14) (0.16) (0.17) (0.09) - ---------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.31 $7.72 $5.60 $7.19 $6.27 ======================================================================================== TOTAL RETURN(2) 9.67% 40.56% (20.07)% 17.51% 18.72% - ---------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.24% 1.25% 1.25% 1.25% 1.25% - ---------------------- Ratio of Net Investment Income to Average Net Assets 0.91% 1.01% 0.94% 0.86% 1.46% - ---------------------- Portfolio Turnover Rate 130% 122% 102% 151% 150% - ---------------------- Net Assets, End of Period (in thousands) $236,960 $403,212 $210,984 $208,311 $102,357 - ---------------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 34 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- 2005 2004 2003(1) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.72 $5.60 $5.77 - -------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------------------- Net Investment Income(2) 0.07 0.07 0.01 - ---------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.64 2.19 (0.16) - -------------------------------------------------------------------------------- Total From Investment Operations 0.71 2.26 (0.15) - -------------------------------------------------------------------------------- Distributions - ---------------------------------------------- From Net Investment Income (0.07) (0.06) (0.02) - ---------------------------------------------- From Net Realized Gains (1.05) (0.08) -- - -------------------------------------------------------------------------------- Total Distributions (1.12) (0.14) (0.02) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $7.31 $7.72 $5.60 ================================================================================ TOTAL RETURN(3) 9.67% 40.55% (2.67)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.24% 1.25% 1.25%(4) - ---------------------------------------------- Ratio of Net Investment Income to Average Net Assets 0.91% 1.01% 0.62%(4) - ---------------------------------------------- Portfolio Turnover Rate 130% 122% 102%(5) - ---------------------------------------------- Net Assets, End of Period (in thousands) $48,330 $15,029 $385 - -------------------------------------------------------------------------------- (1) January 31, 2003 (commencement of sale) through March 31, 2003. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ------ 35 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- B CLASS - -------------------------------------------------------------------------------- 2005 2004 2003(1) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.73 $5.61 $5.77 - -------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------------------- Net Investment Income(2) 0.01 0.01 --(3) - ---------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.65 2.20 (0.15) - -------------------------------------------------------------------------------- Total From Investment Operations 0.66 2.21 (0.15) - -------------------------------------------------------------------------------- Distributions - ---------------------------------------------- From Net Investment Income (0.03) (0.01) (0.01) - ---------------------------------------------- From Net Realized Gains (1.05) (0.08) -- - -------------------------------------------------------------------------------- Total Distributions (1.08) (0.09) (0.01) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $7.31 $7.73 $5.61 ================================================================================ TOTAL RETURN(4) 8.93% 39.51% (2.59)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.99% 2.00% 1.98%(5)(6) - ---------------------------------------------- Ratio of Net Investment Income to Average Net Assets 0.16% 0.26% (0.17)%(5)(6) - ---------------------------------------------- Portfolio Turnover Rate 130% 122% 102%(7) - ---------------------------------------------- Net Assets, End of Period (in thousands) $5,059 $2,656 $91 - -------------------------------------------------------------------------------- (1) January 31, 2003 (commencement of sale) through March 31, 2003. (2) Computed using average shares outstanding throughout the period. (3) Per-share amount was less than $0.005. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) During the period ended March 31, 2003, the distributor voluntarily waived a portion of the distribution and service fees. Had fees not been waived, the annualized ratio of operating expenses to average net assets and annualized ratio of net investment loss to average net assets would have been 2.00% and (0.19)%, respectively. (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. - ------ 36 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- 2005 2004 2003 2002(1) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.70 $5.58 $7.18 $6.90 - -------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------- Net Investment Income (Loss)(2) 0.01 0.02 0.01 --(3) - ----------------------------------- Net Realized and Unrealized Gain (Loss) 0.64 2.19 (1.50) 0.42 - -------------------------------------------------------------------------------- Total From Investment Operations 0.65 2.21 (1.49) 0.42 - -------------------------------------------------------------------------------- Distributions - ----------------------------------- From Net Investment Income (0.03) (0.01) (0.01) (0.03) - ----------------------------------- From Net Realized Gains (1.05) (0.08) (0.10) (0.11) - -------------------------------------------------------------------------------- Total Distributions (1.08) (0.09) (0.11) (0.14) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $7.27 $7.70 $5.58 $7.18 ================================================================================ TOTAL RETURN(4) 8.84% 39.73% (20.90)% 6.33% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.99% 2.00% 2.00% 2.00%(5) - ----------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.16% 0.26% 0.19% (0.06)%(5) - ----------------------------------- Portfolio Turnover Rate 130% 122% 102% 151%(6) - ----------------------------------- Net Assets, End of Period (in thousands) $13,885 $6,613 $2,461 $1,866 - -------------------------------------------------------------------------------- (1) June 4, 2001 (commencement of sale) through March 31, 2002. (2) Computed using average shares outstanding throughout the period. (3) Per-share amount was less than $0.005. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 37 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 - ---------------------------------------------------------------------------------------- INVESTOR CLASS - ---------------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 - ---------------------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.89 $4.29 $5.53 $5.08 $4.59 - ---------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------- Net Investment Income(1) 0.12 0.09 0.08 0.07 0.08 - ---------------------- Net Realized and Unrealized Gain (Loss) 0.51 1.59 (1.25) 0.45 0.48 - ---------------------------------------------------------------------------------------- Total From Investment Operations 0.63 1.68 (1.17) 0.52 0.56 - ---------------------------------------------------------------------------------------- Distributions - ---------------------- From Net Investment Income (0.11) (0.08) (0.07) (0.07) (0.07) - ---------------------- From Net Realized Gains (0.02) -- -- -- -- - ---------------------------------------------------------------------------------------- Total Distributions (0.13) (0.08) (0.07) (0.07) (0.07) - ---------------------------------------------------------------------------------------- Net Asset Value, End of Period $6.39 $5.89 $4.29 $5.53 $5.08 ======================================================================================== TOTAL RETURN(2) 10.73% 39.34% (21.19)% 10.20% 12.38% - ---------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.87% 0.90% 0.90% 0.90% 0.90% - ---------------------- Ratio of Net Investment Income to Average Net Assets 1.90% 1.58% 1.75% 1.34% 1.62% - ---------------------- Portfolio Turnover Rate 18% 14% 30% 34% 55% - ---------------------- Net Assets, End of Period (in thousands) $659,277 $350,516 $152,641 $69,961 $19,348 - ---------------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 38 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- 2005 2004 2003 2002(1) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.89 $4.29 $5.53 $5.44 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------- Net Investment Income(2) 0.13 0.10 0.09 0.06 - ------------------------------- Net Realized and Unrealized Gain (Loss) 0.51 1.59 (1.25) 0.08 - -------------------------------------------------------------------------------- Total From Investment Operations 0.64 1.69 (1.16) 0.14 - -------------------------------------------------------------------------------- Distributions - ------------------------------- From Net Investment Income (0.12) (0.09) (0.08) (0.05) - ------------------------------- From Net Realized Gains (0.02) -- -- -- - -------------------------------------------------------------------------------- Total Distributions (0.14) (0.09) (0.08) (0.05) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $6.39 $5.89 $4.29 $5.53 ================================================================================ TOTAL RETURN(3) 10.94% 39.61% (21.03)% 2.69% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.67% 0.70% 0.70% 0.70%(4) - ------------------------------- Ratio of Net Investment Income to Average Net Assets 2.10% 1.78% 1.95% 1.74%(4) - ------------------------------- Portfolio Turnover Rate 18% 14% 30% 34%(5) - ------------------------------- Net Assets, End of Period (in thousands) $438,518 $151,622 $21,110 $2,632 - -------------------------------------------------------------------------------- (1) August 10, 2001 (commencement of sale) through March 31, 2002. (2) Computed using the average shares throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31,2002. See Notes to Financial Statements. - ------ 39 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ---------------------------------------------------------------------------------------- ADVISOR CLASS - ---------------------------------------------------------------------------------------- 2005 2004 2003 2002 2001(1) - ---------------------------------------------------------------------------------------- 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(2) 0.10 0.07 0.07 0.06 0.03 - ---------------------- Net Realized and Unrealized Gain (Loss) 0.51 1.60 (1.25) 0.44 0.39 - ---------------------------------------------------------------------------------------- Total From Investment Operations 0.61 1.67 (1.18) 0.50 0.42 - ---------------------------------------------------------------------------------------- Distributions - ---------------------- From Net Investment Income (0.09) (0.07) (0.06) (0.05) (0.03) - ---------------------- From Net Realized Gains (0.02) -- -- -- -- - ---------------------------------------------------------------------------------------- Total Distributions (0.11) (0.07) (0.06) (0.05) (0.03) - ---------------------------------------------------------------------------------------- Net Asset Value, End of Period $6.39 $5.89 $4.29 $5.53 $5.08 ======================================================================================== TOTAL RETURN(3) 10.45% 38.99% (21.38)% 9.93% 8.94% - ---------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.12% 1.15% 1.15% 1.15% 1.15%(4) - ---------------------- Ratio of Net Investment Income to Average Net Assets 1.65% 1.33% 1.50% 1.09% 1.53%(4) - ---------------------- Portfolio Turnover Rate 18% 14% 30% 34% 55%(5) - ---------------------- Net Assets, End of Period (in thousands) $104,612 $19,265 $1,090 $6 $121 - ---------------------------------------------------------------------------------------- (1) October 26, 2000 (commencement of sale) through March 31, 2001. (2) Computed using the average shares throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2001. See Notes to Financial Statements. - ------ 40 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- 2005 2004 2003(1) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.90 $4.29 $4.46 - -------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------- Net Investment Income(2) 0.10 0.07 0.01 - ----------------------------------------- Net Realized and Unrealized Gain (Loss) 0.50 1.61 (0.17) - -------------------------------------------------------------------------------- Total From Investment Operations 0.60 1.68 (0.16) - -------------------------------------------------------------------------------- Distributions - ----------------------------------------- From Net Investment Income (0.09) (0.07) (0.01) - ----------------------------------------- From Net Realized Gains (0.02) -- -- - -------------------------------------------------------------------------------- Total Distributions (0.11) (0.07) (0.01) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $6.39 $5.90 $4.29 ================================================================================ TOTAL RETURN(3) 10.25% 39.22% (3.49)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.12% 1.15% 1.15%(4) - ----------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.65% 1.33% 1.79%(4) - ----------------------------------------- Portfolio Turnover Rate 18% 14% 30%(5) - ----------------------------------------- Net Assets, End of Period (in thousands) $245,416 $92,171 $3,733 - -------------------------------------------------------------------------------- (1) January 31, 2003 (commencement of sale) through March 31, 2003. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ------ 41 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- B CLASS - -------------------------------------------------------------------------------- 2005 2004 2003(1) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.91 $4.29 $4.46 - -------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------- Net Investment Income(2) 0.05 0.03 0.01 - ----------------------------------------- Net Realized and Unrealized Gain (Loss) 0.52 1.62 (0.17) - -------------------------------------------------------------------------------- Total From Investment Operations 0.57 1.65 (0.16) - -------------------------------------------------------------------------------- Distributions - ----------------------------------------- From Net Investment Income (0.05) (0.03) (0.01) - ----------------------------------------- From Net Realized Gains (0.02) -- -- - -------------------------------------------------------------------------------- Total Distributions (0.07) (0.03) (0.01) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $6.41 $5.91 $4.29 ================================================================================ TOTAL RETURN(3) 9.59% 38.41% (3.58)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.87% 1.90% 1.88%(4)(5) - ----------------------------------------- Ratio of Net Investment Income to Average Net Assets 0.90% 0.58% 0.74%(4)(5) - ----------------------------------------- Portfolio Turnover Rate 18% 14% 30%(6) - ----------------------------------------- Net Assets, End of Period (in thousands) $13,009 $5,642 $88 - -------------------------------------------------------------------------------- (1) January 31, 2003 (commencement of sale) through March 31, 2003. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) During the period ended March 31, 2003, the distributor voluntarily waived a portion of the distribution and service fees. Had fees not been waived, the annualized ratio of operating expenses to average net assets and annualized ratio of net investment income to average net assets would have been 1.90% and 0.72%, respectively. (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. - ------ 42 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- 2005 2004 2003 2002(1) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.89 $4.28 $5.53 $5.14 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------- Net Investment Income(2) 0.05 0.03 0.03 0.01 - ------------------------------- Net Realized and Unrealized Gain (Loss) 0.52 1.61 (1.25) 0.39 - -------------------------------------------------------------------------------- Total From Investment Operations 0.57 1.64 (1.22) 0.40 - -------------------------------------------------------------------------------- Distributions - ------------------------------- From Net Investment Income (0.05) (0.03) (0.03) (0.01) - ------------------------------- From Net Realized Gains (0.02) -- -- -- - -------------------------------------------------------------------------------- Total Distributions (0.07) (0.03) (0.03) (0.01) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $6.39 $5.89 $4.28 $5.53 ================================================================================ TOTAL RETURN(3) 9.62% 38.27% (22.13)% 7.78% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.87% 1.90% 1.90% 1.90%(4) - ------------------------------- Ratio of Net Investment Income to Average Net Assets 0.90% 0.58% 0.75% 0.33%(4) - ------------------------------- Portfolio Turnover Rate 18% 14% 30% 34%(5) - ------------------------------- Net Assets, End of Period (in thousands) $40,789 $11,030 $1,163 $257 - -------------------------------------------------------------------------------- (1) November 7, 2001 (commencement of sale) through March 31, 2002. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 43 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- R CLASS - -------------------------------------------------------------------------------- 2005 2004(1) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.89 $5.18 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------------------ Net Investment Income(2) 0.09 0.03 - ------------------------------------------------------ Net Realized and Unrealized Gain 0.51 0.72 - -------------------------------------------------------------------------------- Total From Investment Operations 0.60 0.75 - -------------------------------------------------------------------------------- Distributions - ------------------------------------------------------ From Net Investment Income (0.08) (0.04) - ------------------------------------------------------ From Net Realized Gains (0.02) -- - -------------------------------------------------------------------------------- Total Distributions (0.10) (0.04) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $6.39 $5.89 ================================================================================ TOTAL RETURN(3) 10.17% 14.63% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.33%(4) 1.40%(5) - ------------------------------------------------------ Ratio of Net Investment Income to Average Net Assets 1.44%(4) 0.77%(5) - ------------------------------------------------------ Portfolio Turnover Rate 18% 14%(6) - ------------------------------------------------------ Net Assets, End of Period (in thousands) $2,143 $168 - -------------------------------------------------------------------------------- (1) August 29, 2003 (commencement of sale) through March 31, 2004. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) During the year ended March 31, 2005, the class received a partial reimbursement of its distribution and service fee. Had fees not been reimbursed, the ratio of operating expenses to average net assets and the ratio of net investment income to average net assets would have been 1.37% and 1.40%, respectively. (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. - ------ 44 Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders American Century Capital Portfolios, Inc.: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Value Fund and Large Company Value Fund, (collectively, the "Funds"), two of the funds comprising American Century Capital Portfolios, Inc., as of March 31, 2005, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of Value Fund and Large Company Value Fund as of March 31, 2005, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Kansas City, Missouri May 12, 2005 - ------ 45 Management The individuals listed below serve as directors or officers of the funds. Each director serves until his or her successor is duly elected and qualified or until he or she retires. Mandatory retirement age for independent directors is 72. Those listed as interested directors are "interested" primarily by virtue of their engagement as officers of American Century Companies, Inc. (ACC) or its wholly-owned, direct or indirect, subsidiaries, including the funds' investment advisor, American Century Investment Management, Inc. (ACIM); the funds' principal underwriter, American Century Investment Services, Inc. (ACIS); and the funds' transfer agent, American Century Services, LLC (ACS LLC). The other directors (more than three-fourths of the total number) are independent; that is, they have never been employees or officers of, and have no financial interest in, ACC or any of its wholly-owned subsidiaries, including ACIM, ACIS, and ACS LLC. The directors serve in this capacity for six registered investment companies in the American Century family of funds. All persons named as officers of the funds also serve in a similar capacity for the other 13 investment companies advised by ACIM or American Century Global Investment Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise noted. Only officers with policy-making functions are listed. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. INDEPENDENT DIRECTORS - -------------------------------------------------------------------------------- THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1940 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 24 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Formerly Chief Executive Officer/Treasurer, Associated Bearings Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1945 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 7 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, Midwest Research Institute NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- D.D. (DEL) HOCK, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1935 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 8 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Chairman, Public Service Company of Colorado NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Allied Motion Technologies, Inc. - -------------------------------------------------------------------------------- (continued) - ------ 46 Management INDEPENDENT DIRECTORS - -------------------------------------------------------------------------------- DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1937 POSITION(S) HELD WITH FUND: Director, Chairman of the Board LENGTH OF TIME SERVED (YEARS): 9 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Western Investments, Inc.; Retired Chairman of the Board, Butler Manufacturing Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Atlas-Copco, North America Inc. - -------------------------------------------------------------------------------- GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1943 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer, and Founder, Sayers 40, Inc., a technology products and service provider NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Triad Hospitals, Inc. - -------------------------------------------------------------------------------- M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1945 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 10 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President and Chief Integration Officer, Sprint Corporation (September 2003 to present); Senior Vice President-Financial Services, Sprint Corporation (January 2003 to September 2003); Senior Vice President-Finance, Global Markets Group, Sprint Corporation (November 1998 to January 2003) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director, Euronet Worldwide, Inc. - -------------------------------------------------------------------------------- TIMOTHY S. WEBSTER, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1961 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 3 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive Officer, American Italian Pasta Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, American Italian Pasta Company - -------------------------------------------------------------------------------- INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JAMES E. STOWERS, JR.(1), 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1924 POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman LENGTH OF TIME SERVED (YEARS): 46 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Director, and Controlling Shareholder, ACC; Chairman, ACC (January 1995 to December 2004); Director, ACIM, ACGIM, ACS LLC and other ACC subsidiaries NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- JAMES E. STOWERS III(1), 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1959 POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman LENGTH OF TIME SERVED (YEARS): 14 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, ACC (January 2005 to present), Co-Chairman, ACC (September 2000 to December 2004); Chief Executive Officer, ACC (June 1996 to September 2000); Chairman, ACS LLC and other ACC subsidiaries; Director, ACC, ACIM, ACGIM, ACS LLC and other ACC subsidiaries NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- (1) James E. Stowers, Jr. is the father of James E. Stowers III. (continued) - ------ 47 Management OFFICERS - -------------------------------------------------------------------------------- WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1955 POSITION(S) HELD WITH FUND: President LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC (September 2000 to present); President, ACC (June 1997 to present); Chief Operating Officer, ACC (June 1996 to September 2000); Also serves as: Chief Executive Officer and President, ACIS, ACGIM, ACIM and other ACC subsidiaries; Executive Vice President, ACS LLC; Director, ACC, ACIS, ACIM, ACGIM, ACS LLC and other ACC subsidiaries - -------------------------------------------------------------------------------- ROBERT T. JACKSON, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1946 POSITION(S) HELD WITH FUND: Executive Vice President LENGTH OF TIME SERVED (YEARS): 9 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Administrative Officer, ACC (August 1997 to present); Chief Financial Officer, ACC (May 1995 to October 2002); Executive Vice President, ACC (May 1995 to present); Also serves as: Chief Executive Officer, Chief Financial Officer and President, ACS LLC, Chief Financial Officer and Executive Vice President, ACGIM, ACIM, ACIS and other ACC subsidiaries; Treasurer, ACGIM, ACIM and other ACC subsidiaries; Director, ACC and other subsidiaries - -------------------------------------------------------------------------------- MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1956 POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer, and Chief Accounting Officer LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Assistant Treasurer, ACC (January 1995 to present); Also serves as Senior Vice President, ACS LLC; Assistant Treasurer, ACGIM, ACIM, ACIS, ACS LLC and other ACC subsidiaries - -------------------------------------------------------------------------------- DAVID C. TUCKER, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1958 POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (February 2001 to present); General Counsel, ACC (June 1998 to present); Also serves as: Senior Vice President and General Counsel, ACGIM, ACIM, ACIS, ACS LLC and other ACC subsidiaries - -------------------------------------------------------------------------------- CHARLES C.S. PARK, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1967 POSITION(S) HELD WITH FUND: Vice President and Chief Compliance Officer LENGTH OF TIME SERVED (YEARS): 4 and less than 1 year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACS LLC, ACIM and ACGIM (March 2005 to present); Vice President, ACS LLC (February 2000 to present); Assistant General Counsel, ACS LLC (January 1998 to March 2005) - -------------------------------------------------------------------------------- ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1966 POSITION(S) HELD WITH FUND: Controller LENGTH OF TIME SERVED (YEARS): 7 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS LLC (February 2000 to present); Controller-Fund Accounting, ACS LLC (June 1997 to present) - -------------------------------------------------------------------------------- JON ZINDEL, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1967 POSITION(S) HELD WITH FUND: Tax Officer LENGTH OF TIME SERVED (YEARS): 7 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (October 2001 to present); Vice President, Corporate Tax, ACS LLC (April 1998 to present); Also serves as: Vice President, ACGIM, ACIM, ACIS and other ACC subsidiaries - -------------------------------------------------------------------------------- The SAI has additional information about the funds' directors and is available without charge upon request by calling 1-800-345-2021. - ------ 48 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 total expense ratio of Institutional Class shares is lower than that of Investor Class shares. The expense ratios of Advisor, A, B, C and R Class shares are higher that that of Investor Class shares. ON JANUARY 30, 2003, INVESTOR CLASS SHARES BECAME UNAVAILABLE TO NEW SELF-DIRECTED RETAIL INVESTORS. INVESTOR CLASS shares are available for purchase in two ways: 1) by existing shareholders, 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) - ------ 49 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. - ------ 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 advisor, 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 advisor 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 advisor 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. The funds' Forms N-Q are 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 make their complete schedule of portfolio holdings for the most recent quarter of their fiscal year available on their Web site at americancentury.com and, upon request, by calling 1-800-345-2021. - ------ 51 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 RUSSELL 1000 VALUE INDEX measures the performance of those Russell 1000 companies (the 1,000 largest of the 3,000 largest publicly traded U.S. companies, based on total market capitalization) with lower price-to-book ratios and lower forecasted growth rates. The 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 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. - ------ 52 CONTACT US AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR SERVICES REPRESENTATIVE: 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 ADVISOR: 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 Proprietary Holdings, Inc. 0505 SH-ANN-43386S American Century Investment Services, Inc., Distributor (c)2005 American Century Proprietary Holdings, Inc. All rights reserved.
American Century Investments ANNUAL REPORT [photo of man and woman] MARCH 31, 2005 Equity Index Fund {american century investments logo and text logo] Table of Contents Our Message to You 1 EQUITY INDEX Performance 2 Portfolio Commentary 3 Top Ten Holdings 3 Top Five Industries 4 Types of Investments in Portfolio 4 Shareholder Fee Example 5 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 Report of Independent Registered Public Accounting Firm 24 OTHER INFORMATION Management 25 Share Class Information 28 Additional Information 29 Index Definition 30 The opinions expressed in the Portfolio Commentary reflect those of the portfolio management team as of the date of the report, and do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] JAMES E. STOWERS III WITH JAMES E. STOWERS, JR. We are pleased to provide you with the annual report for the Equity Index fund for the year ended March 31, 2005. 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 semiannual report dated September 30, 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 AMERICAN CENTURY COMPANIES, INC. /s/James E. Stowers III James E. Stowers III CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. - ------ 1 Equity Index - Performance TOTAL RETURNS AS OF MARCH 31, 2005 ---------------------- AVERAGE ANNUAL RETURNS - ---------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS INCEPTION DATE - ---------------------------------------------------------------------------- INVESTOR CLASS 6.04% -3.64% 0.21% 2/26/99 - ---------------------------------------------------------------------------- S&P 500 INDEX(1) 6.69% -3.16% 0.72%(2) -- - ---------------------------------------------------------------------------- Institutional Class 6.47% -3.40% 0.44% 2/26/99 - ---------------------------------------------------------------------------- (1) (c) 2005 Reuters. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper Inc. - A Reuters Company and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. (2) Since 2/28/99, the date nearest the Investor Class's inception for which data are available. GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made February 26, 1999
ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended March 31, 2005 - -------------------------------------------------------------------------------- 1999* 2000 2001 2002 2003 2004 2005 - -------------------------------------------------------------------------------- Investor Class 4.00% 17.17% -22.04% -0.16% -25.02% 34.27% 6.04% - -------------------------------------------------------------------------------- S&P 500 Index 4.00% 17.94% -21.68% 0.24% -24.76% 35.12% 6.69% - -------------------------------------------------------------------------------- * From 2/26/99, the Investor Class's inception date. Index data from 2/28/99, the date nearest the Investor Class's inception for which data are available. Not annualized. 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 Equity Index - Portfolio Commentary BARCLAYS GLOBAL FUND ADVISORS: THE SUBADVISOR FOR THE EQUITY INDEX FUND. PERFORMANCE SUMMARY For the fiscal year ended March 31, 2005, Equity Index returned 6.04%,* compared with the 6.69% return of the benchmark it tracks, the S&P 500 Index. The portfolio's results reflect expenses that reduce returns, whereas the index return does not. STOCK MARKET REVIEW After a sluggish start, U.S. stocks gained ground during the fiscal year. The market was choppy during the first half of the period, edging slightly lower. Despite evidence of healthy corporate profit growth, investors fretted about the potential negative impact of soaring oil prices and higher interest rates on the economy. However, stocks rebounded sharply in the last three months of 2004 as oil prices fell from record high levels and the presidential election ended decisively. Most of the major stock indexes posted double-digit gains in the fourth quarter of 2004. The market grew choppy again in the first three months of 2005, and stocks gave up some of their gains, but they remained in positive territory for the full year. For the fiscal year, the broad S&P 500 Index returned 6.69%. The positive performance extended across all market capitalizations. Value stocks continued to perform well, generally outpacing growth-oriented issues by a wide margin during the fiscal year--the S&P 500/BARRA Value Index returned 9.24%, while the S&P 500/BARRA Growth Index returned 4.13%. ECONOMICALLY SENSITIVE SECTORS LED THE ADVANCE Nearly all of the major sectors in the portfolio posted positive results during the fiscal year. The top performers were the most cyclical sectors of the market--including energy, industrials, and utilities--that tend to benefit most from a healthy economy. Energy stocks, which returned 47% as a group, were far and away the best performers as oil prices surged by nearly 55% over the one-year period. Three of the top six contributors to portfolio performance were energy companies--Exxon Mobil, ChevronTexaco, and ConocoPhillips. The portfolio's industrial stocks were led by conglomerate General Electric, the portfolio's second-best performance contributor, which benefited from strong growth in nearly all of its businesses. Aerospace and defense stocks also performed well; the top contributor in this industry was aircraft manufacturer TOP TEN HOLDINGS AS OF MARCH 31, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- General Electric Co. 3.5% 3.3% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 3.5% 3.0% - -------------------------------------------------------------------------------- Microsoft Corporation 2.2% 2.8% - -------------------------------------------------------------------------------- Citigroup Inc. 2.1% 2.2% - -------------------------------------------------------------------------------- Johnson & Johnson 1.8% 1.6% - -------------------------------------------------------------------------------- Pfizer, Inc. 1.8% 2.2% - -------------------------------------------------------------------------------- Bank of America Corp. 1.6% 1.7% - -------------------------------------------------------------------------------- Wal-Mart Stores, Inc. 1.5% 2.1% - -------------------------------------------------------------------------------- International Business Machines Corp. 1.4% 1.4% - -------------------------------------------------------------------------------- Intel Corp. 1.3% 1.2% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. (continued) - ------ 3 Equity Index - Portfolio Commentary Boeing, which boosted 2004 earnings projections thanks in part to strength in its defense and commercial airplane units. In the utilities sector, the best performer was Texas-based electric utility TXU, which returned 185% during the one-year period. TXU boosted shareholder value by selling some of its unprofitable businesses, reducing debt, and increasing its dividend. MATERIALS, CONSUMER DISCRETIONARY STOCKS RALLY Other economically sensitive sectors that performed well during the one-year period were materials and consumer discretionary. Chemical companies posted the best results in the materials sector, led by Dow Chemical, DuPont, and Monsanto. Among consumer discretionary stocks, retailers contributed the most to the sector's positive performance. Coffee chain Starbucks, hotel operator Marriott International, and discount retailer Target were among the best contributors. Selected media companies also performed well, including cable operator Comcast and entertainment conglomerate Walt Disney. TECHNOLOGY AND FINANCIALS SLID Financials and information technology, the two largest sectors in the portfolio, were also the only two sectors to post negative returns during the fiscal year. Five of the ten biggest detractors from performance came from these two sectors. In the financial sector, the most significant detractor was American International Group, which fell in the wake of an investigation into several improper insurance transactions and the departures of the company's CEO and CFO. Other decliners included diversified financial services provider Citigroup and government-sponsored mortgage lender Fannie Mae. The decline in technology stocks was led by semiconductor and communications equipment stocks, both of which declined by more than 15% as a group. The two biggest detractors were chipmaker Intel and network equipment manufacturer Cisco Systems. PORTFOLIO STRATEGY Going forward, the fund will continue to focus on matching, as closely as possible, the performance of the S&P 500. TOP FIVE INDUSTRIES AS OF MARCH 31, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Oil & Gas 7.5% 6.4% - -------------------------------------------------------------------------------- Pharmaceuticals 6.9% 7.3% - -------------------------------------------------------------------------------- Commerical Banks 5.7% 6.0% - -------------------------------------------------------------------------------- Industrial Conglomerates 4.8% 4.7% - -------------------------------------------------------------------------------- Insurance 4.1% 4.6% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 3/31/05 9/30/04 - -------------------------------------------------------------------------------- Common Stocks & Futures 99.9% 99.8% - -------------------------------------------------------------------------------- Temporary Cash Investments 0.1% 0.2% - -------------------------------------------------------------------------------- - ------ 4 Shareholder Fee Example (Unaudited) 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 October 1, 2004 to March 31, 2005. 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) - ------ 5 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 10/1/04 - EXPENSE 10/1/04 3/31/05 3/31/05 RATIO* - --------------------------------------------------------------------------------------------------- EQUITY INDEX SHAREHOLDER FEE EXAMPLE - --------------------------------------------------------------------------------------------------- ACTUAL - --------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,066.10 $2.52 0.49% - --------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,067.00 $1.49 0.29% - --------------------------------------------------------------------------------------------------- HYPOTHETICAL - --------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,022.49 $2.47 0.49% - --------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,023.49 $1.46 0.29% - --------------------------------------------------------------------------------------------------- *Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. - ------ 6 Equity Index - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 98.2% AEROSPACE & DEFENSE -- 2.1% - -------------------------------------------------------------------------------- 79,988 Boeing Co. $ 4,676,098 - -------------------------------------------------------------------------------- 19,223 General Dynamics Corp. 2,057,822 - -------------------------------------------------------------------------------- 11,502 Goodrich Corporation 440,412 - -------------------------------------------------------------------------------- 81,635 Honeywell International Inc. 3,037,638 - -------------------------------------------------------------------------------- 11,009 L-3 Communications Holdings, Inc. 781,859 - -------------------------------------------------------------------------------- 38,761 Lockheed Martin Corp. 2,366,747 - -------------------------------------------------------------------------------- 34,820 Northrop Grumman Corp. 1,879,584 - -------------------------------------------------------------------------------- 43,513 Raytheon Company 1,683,953 - -------------------------------------------------------------------------------- 17,115 Rockwell Collins 814,503 - -------------------------------------------------------------------------------- 49,217 United Technologies Corp. 5,003,400 - -------------------------------------------------------------------------------- 22,742,016 - -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS -- 1.0% - -------------------------------------------------------------------------------- 28,947 FedEx Corporation 2,719,571 - -------------------------------------------------------------------------------- 6,032 Ryder System, Inc. 251,534 - -------------------------------------------------------------------------------- 107,562 United Parcel Service, Inc. Cl B 7,824,060 - -------------------------------------------------------------------------------- 10,795,165 - -------------------------------------------------------------------------------- AIRLINES -- 0.1% - -------------------------------------------------------------------------------- 12,455 Delta Air Lines Inc.(1) 50,443 - -------------------------------------------------------------------------------- 71,546 Southwest Airlines Co. 1,018,815 - -------------------------------------------------------------------------------- 1,069,258 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 0.2% - -------------------------------------------------------------------------------- 7,014 Cooper Tire & Rubber 128,777 - -------------------------------------------------------------------------------- 14,324 Dana Corp. 183,204 - -------------------------------------------------------------------------------- 53,018 Delphi Corp. 237,521 - -------------------------------------------------------------------------------- 16,559 Goodyear Tire & Rubber Co. (The)(1) 221,063 - -------------------------------------------------------------------------------- 18,349 Johnson Controls, Inc. 1,023,140 - -------------------------------------------------------------------------------- 12,019 Visteon Corp. 68,628 - -------------------------------------------------------------------------------- 1,862,333 - -------------------------------------------------------------------------------- AUTOMOBILES -- 0.5% - -------------------------------------------------------------------------------- 175,859 Ford Motor Company 1,992,483 - -------------------------------------------------------------------------------- 54,242 General Motors Corp. 1,594,172 - -------------------------------------------------------------------------------- 27,971 Harley-Davidson, Inc. 1,615,605 - -------------------------------------------------------------------------------- 5,202,260 - -------------------------------------------------------------------------------- BEVERAGES -- 2.2% - -------------------------------------------------------------------------------- 74,772 Anheuser-Busch Companies, Inc. 3,543,445 - -------------------------------------------------------------------------------- 8,858 Brown-Forman Corp. 484,976 - -------------------------------------------------------------------------------- 218,013 Coca-Cola Company (The) 9,084,602 - -------------------------------------------------------------------------------- 34,401 Coca-Cola Enterprises 705,909 - -------------------------------------------------------------------------------- 7,707 Molson Coors Brewing Co. 594,749 - -------------------------------------------------------------------------------- 19,379 Pepsi Bottling Group Inc. 539,705 - -------------------------------------------------------------------------------- 161,281 PepsiCo, Inc. 8,552,731 - -------------------------------------------------------------------------------- 23,506,117 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- BIOTECHNOLOGY -- 1.2% - -------------------------------------------------------------------------------- 120,309 Amgen Inc.(1) $ 7,003,187 - -------------------------------------------------------------------------------- 18,595 Applera Corporation-Applied Biosystems Group 367,065 - -------------------------------------------------------------------------------- 32,022 Biogen Idec Inc.(1) 1,105,079 - -------------------------------------------------------------------------------- 14,478 Chiron Corp.(1) 507,599 - -------------------------------------------------------------------------------- 23,799 Genzyme Corp.(1) 1,362,255 - -------------------------------------------------------------------------------- 41,570 Gilead Sciences, Inc.(1) 1,488,206 - -------------------------------------------------------------------------------- 23,845 MedImmune, Inc.(1) 567,749 - -------------------------------------------------------------------------------- 12,401,140 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.2% - -------------------------------------------------------------------------------- 17,539 American Standard Companies Inc. 815,213 - -------------------------------------------------------------------------------- 43,018 Masco Corp. 1,491,434 - -------------------------------------------------------------------------------- 2,306,647 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 2.8% - -------------------------------------------------------------------------------- 74,774 Bank of New York Co., Inc. (The) 2,172,185 - -------------------------------------------------------------------------------- 10,875 Bear Stearns Companies Inc. (The) 1,086,413 - -------------------------------------------------------------------------------- 35,427 E*TRADE Group Inc.(1) 425,124 - -------------------------------------------------------------------------------- 9,503 Federated Investors Inc. 269,030 - -------------------------------------------------------------------------------- 19,158 Franklin Resources, Inc. 1,315,197 - -------------------------------------------------------------------------------- 43,135 Goldman Sachs Group, Inc. (The) 4,744,419 - -------------------------------------------------------------------------------- 22,435 Janus Capital Group Inc. 312,968 - -------------------------------------------------------------------------------- 26,517 Lehman Brothers Holdings Inc. 2,496,841 - -------------------------------------------------------------------------------- 40,511 Mellon Financial Corp. 1,156,184 - -------------------------------------------------------------------------------- 89,447 Merrill Lynch & Co., Inc. 5,062,699 - -------------------------------------------------------------------------------- 106,932 Morgan Stanley 6,121,856 - -------------------------------------------------------------------------------- 19,794 Northern Trust Corp. 859,851 - -------------------------------------------------------------------------------- 111,351 Schwab (Charles) Corp. 1,170,299 - -------------------------------------------------------------------------------- 32,026 State Street Corp. 1,400,177 - -------------------------------------------------------------------------------- 11,931 T. Rowe Price Group Inc. 708,463 - -------------------------------------------------------------------------------- 29,301,706 - -------------------------------------------------------------------------------- CHEMICALS -- 1.8% - -------------------------------------------------------------------------------- 21,854 Air Products & Chemicals, Inc. 1,383,140 - -------------------------------------------------------------------------------- 91,630 Dow Chemical Co. 4,567,756 - -------------------------------------------------------------------------------- 95,805 du Pont (E.I.) de Nemours & Co. 4,909,047 - -------------------------------------------------------------------------------- 7,392 Eastman Chemical Company 436,128 - -------------------------------------------------------------------------------- 21,546 Ecolab Inc. 712,095 - -------------------------------------------------------------------------------- 11,701 Engelhard Corporation 351,381 - -------------------------------------------------------------------------------- 4,817 Great Lakes Chemical Corp. 154,722 - -------------------------------------------------------------------------------- 10,655 Hercules Inc.(1) 154,284 - -------------------------------------------------------------------------------- 8,753 International Flavors & Fragrances Inc. 345,744 - -------------------------------------------------------------------------------- 25,570 Monsanto Co. 1,649,265 - -------------------------------------------------------------------------------- 16,628 PPG Industries, Inc. 1,189,235 - -------------------------------------------------------------------------------- 30,919 Praxair, Inc. 1,479,783 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 7 Equity Index - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- 18,904 Rohm and Haas Co. $ 907,392 - -------------------------------------------------------------------------------- 6,547 Sigma-Aldrich Corp. 401,004 - -------------------------------------------------------------------------------- 18,640,976 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 5.7% - -------------------------------------------------------------------------------- 33,944 AmSouth Bancorporation 880,847 - -------------------------------------------------------------------------------- 389,611 Bank of America Corp. 17,181,845 - -------------------------------------------------------------------------------- 52,558 BB&T Corporation 2,053,967 - -------------------------------------------------------------------------------- 16,278 Comerica Inc. 896,592 - -------------------------------------------------------------------------------- 11,779 Compass Bancshares Inc. 534,767 - -------------------------------------------------------------------------------- 50,236 Fifth Third Bancorp 2,159,143 - -------------------------------------------------------------------------------- 11,799 First Horizon National Corp. 481,281 - -------------------------------------------------------------------------------- 22,221 Huntington Bancshares Inc. 531,082 - -------------------------------------------------------------------------------- 38,859 KeyCorp 1,260,975 - -------------------------------------------------------------------------------- 9,557 M&T Bank Corp. 975,387 - -------------------------------------------------------------------------------- 20,225 Marshall & Ilsley Corp. 844,394 - -------------------------------------------------------------------------------- 57,427 National City Corp. 1,923,805 - -------------------------------------------------------------------------------- 45,187 North Fork Bancorporation, Inc. 1,253,487 - -------------------------------------------------------------------------------- 27,139 PNC Financial Services Group 1,397,116 - -------------------------------------------------------------------------------- 44,612 Regions Financial Corp. 1,445,429 - -------------------------------------------------------------------------------- 32,747 SunTrust Banks, Inc. 2,360,076 - -------------------------------------------------------------------------------- 29,825 Synovus Financial Corp. 830,925 - -------------------------------------------------------------------------------- 178,098 U.S. Bancorp 5,132,784 - -------------------------------------------------------------------------------- 152,373 Wachovia Corp. 7,757,309 - -------------------------------------------------------------------------------- 162,975 Wells Fargo & Co. 9,745,905 - -------------------------------------------------------------------------------- 8,615 Zions Bancorporation 594,607 - -------------------------------------------------------------------------------- 60,241,723 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 0.9% - -------------------------------------------------------------------------------- 27,362 Allied Waste Industries Inc.(1) 200,016 - -------------------------------------------------------------------------------- 16,067 Apollo Group Inc. Cl A(1) 1,189,922 - -------------------------------------------------------------------------------- 9,936 Avery Dennison Corp. 615,336 - -------------------------------------------------------------------------------- 15,782 Block (H & R), Inc. 798,254 - -------------------------------------------------------------------------------- 101,353 Cendant Corporation 2,081,790 - -------------------------------------------------------------------------------- 14,611 Cintas Corp. 603,580 - -------------------------------------------------------------------------------- 12,936 Equifax Inc. 397,006 - -------------------------------------------------------------------------------- 11,440 Monster Worldwide Inc.(1) 320,892 - -------------------------------------------------------------------------------- 22,155 Pitney Bowes, Inc. 999,634 - -------------------------------------------------------------------------------- 20,536 R.R. Donnelley & Sons Company 649,348 - -------------------------------------------------------------------------------- 15,783 Robert Half International Inc. 425,510 - -------------------------------------------------------------------------------- 54,463 Waste Management, Inc. 1,571,258 - -------------------------------------------------------------------------------- 9,852,546 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 2.4% - -------------------------------------------------------------------------------- 76,042 ADC Telecommunications Inc.(1) 151,324 - -------------------------------------------------------------------------------- 15,049 Andrew Corporation(1) 176,224 - -------------------------------------------------------------------------------- 46,013 Avaya Inc.(1) 537,432 - -------------------------------------------------------------------------------- 53,243 CIENA Corporation(1) 91,578 - -------------------------------------------------------------------------------- 621,906 Cisco Systems Inc.(1) 11,125,897 - -------------------------------------------------------------------------------- 18,861 Comverse Technology, Inc.(1) 475,674 - -------------------------------------------------------------------------------- 135,367 Corning Inc.(1) 1,506,635 - -------------------------------------------------------------------------------- 136,291 JDS Uniphase Corp.(1) 227,606 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 425,376 Lucent Technologies Inc. $ 1,169,784 - -------------------------------------------------------------------------------- 235,572 Motorola, Inc. 3,526,513 - -------------------------------------------------------------------------------- 158,155 QUALCOMM Inc. 5,796,381 - -------------------------------------------------------------------------------- 14,421 Scientific-Atlanta, Inc. 406,961 - -------------------------------------------------------------------------------- 43,749 Tellabs, Inc.(1) 319,368 - -------------------------------------------------------------------------------- 25,511,377 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 3.8% - -------------------------------------------------------------------------------- 78,514 Apple Computer, Inc.(1) 3,271,678 - -------------------------------------------------------------------------------- 236,326 Dell Inc.(1) 9,079,645 - -------------------------------------------------------------------------------- 231,103 EMC Corp.(1) 2,847,189 - -------------------------------------------------------------------------------- 30,554 Gateway, Inc.(1) 123,133 - -------------------------------------------------------------------------------- 278,844 Hewlett-Packard Co. 6,117,837 - -------------------------------------------------------------------------------- 157,048 International Business Machines Corp. 14,351,047 - -------------------------------------------------------------------------------- 12,252 Lexmark International, Inc.(1) 979,792 - -------------------------------------------------------------------------------- 17,861 NCR Corp.(1) 602,630 - -------------------------------------------------------------------------------- 35,139 Network Appliance, Inc.(1) 971,945 - -------------------------------------------------------------------------------- 8,784 QLogic Corp.(1) 355,752 - -------------------------------------------------------------------------------- 324,329 Sun Microsystems, Inc.(1) 1,310,289 - -------------------------------------------------------------------------------- 40,010,937 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING(2) - -------------------------------------------------------------------------------- 8,197 Fluor Corp. 454,360 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 0.1% - -------------------------------------------------------------------------------- 9,866 Vulcan Materials Co. 560,685 - -------------------------------------------------------------------------------- CONSUMER FINANCE -- 1.2% - -------------------------------------------------------------------------------- 112,962 American Express Co. 5,802,858 - -------------------------------------------------------------------------------- 23,740 Capital One Financial Corp. 1,775,040 - -------------------------------------------------------------------------------- 122,752 MBNA Corporation 3,013,562 - -------------------------------------------------------------------------------- 28,089 Providian Financial Corp.(1) 482,007 - -------------------------------------------------------------------------------- 41,286 SLM Corporation 2,057,694 - -------------------------------------------------------------------------------- 13,131,161 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 0.2% - -------------------------------------------------------------------------------- 10,535 Ball Corp. 436,991 - -------------------------------------------------------------------------------- 10,092 Bemis Co. 314,063 - -------------------------------------------------------------------------------- 14,017 Pactiv Corp.(1) 327,297 - -------------------------------------------------------------------------------- 8,003 Sealed Air Corp.(1) 415,676 - -------------------------------------------------------------------------------- 5,481 Temple-Inland Inc. 397,647 - -------------------------------------------------------------------------------- 1,891,674 - -------------------------------------------------------------------------------- DISTRIBUTORS -- 0.1% - -------------------------------------------------------------------------------- 16,759 Genuine Parts Company 728,849 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 3.7% - -------------------------------------------------------------------------------- 20,130 CIT Group Inc. 764,940 - -------------------------------------------------------------------------------- 502,240 Citigroup Inc. 22,570,665 - -------------------------------------------------------------------------------- 341,547 J.P. Morgan Chase & Co. 11,817,526 - -------------------------------------------------------------------------------- 18,290 McGraw-Hill Companies, Inc. (The) 1,595,803 - -------------------------------------------------------------------------------- 13,310 Moody's Corp. 1,076,247 - -------------------------------------------------------------------------------- 29,028 Principal Financial Group 1,117,288 - -------------------------------------------------------------------------------- 38,942,469 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 8 Equity Index - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.8% - -------------------------------------------------------------------------------- 29,053 ALLTEL Corp. $ 1,593,557 - -------------------------------------------------------------------------------- 76,850 AT&T Corp. 1,440,938 - -------------------------------------------------------------------------------- 175,993 BellSouth Corp. 4,626,856 - -------------------------------------------------------------------------------- 12,785 CenturyTel Inc. 419,859 - -------------------------------------------------------------------------------- 32,017 Citizens Communications Company 414,300 - -------------------------------------------------------------------------------- 163,356 Qwest Communications International Inc.(1) 604,417 - -------------------------------------------------------------------------------- 317,469 SBC Communications Inc. 7,520,841 - -------------------------------------------------------------------------------- 142,004 Sprint Corp. 3,230,591 - -------------------------------------------------------------------------------- 266,212 Verizon Communications 9,450,526 - -------------------------------------------------------------------------------- 29,301,885 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 2.1% - -------------------------------------------------------------------------------- 13,252 Allegheny Energy, Inc.(1) 273,786 - -------------------------------------------------------------------------------- 18,743 Ameren Corp. 918,594 - -------------------------------------------------------------------------------- 37,121 American Electric Power 1,264,341 - -------------------------------------------------------------------------------- 28,620 CenterPoint Energy, Inc. 344,299 - -------------------------------------------------------------------------------- 18,268 Cinergy Corp. 740,219 - -------------------------------------------------------------------------------- 23,174 Consolidated Edison, Inc. 977,479 - -------------------------------------------------------------------------------- 16,629 DTE Energy Company 756,287 - -------------------------------------------------------------------------------- 31,152 Edison International 1,081,597 - -------------------------------------------------------------------------------- 20,636 Entergy Corp. 1,458,140 - -------------------------------------------------------------------------------- 63,870 Exelon Corporation 2,930,995 - -------------------------------------------------------------------------------- 31,668 FirstEnergy Corp. 1,328,473 - -------------------------------------------------------------------------------- 37,564 FPL Group, Inc. 1,508,195 - -------------------------------------------------------------------------------- 34,694 PG&E Corp. 1,183,065 - -------------------------------------------------------------------------------- 8,682 Pinnacle West Capital Corp. 369,072 - -------------------------------------------------------------------------------- 18,078 PPL Corporation 976,031 - -------------------------------------------------------------------------------- 23,616 Progress Energy Inc. 990,691 - -------------------------------------------------------------------------------- 71,355 Southern Co. 2,271,230 - -------------------------------------------------------------------------------- 19,757 TECO Energy, Inc. 309,790 - -------------------------------------------------------------------------------- 23,072 TXU Corp. 1,837,223 - -------------------------------------------------------------------------------- 38,448 XCEL Energy Inc. 660,537 - -------------------------------------------------------------------------------- 22,180,044 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 0.4% - -------------------------------------------------------------------------------- 17,487 American Power Conversion Corp. 456,586 - -------------------------------------------------------------------------------- 8,830 Cooper Industries, Ltd. 631,522 - -------------------------------------------------------------------------------- 40,284 Emerson Electric Co. 2,615,639 - -------------------------------------------------------------------------------- 16,987 Rockwell Automation Inc. 962,144 - -------------------------------------------------------------------------------- 4,665,891 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.3% - -------------------------------------------------------------------------------- 42,008 Agilent Technologies, Inc.(1) 932,577 - -------------------------------------------------------------------------------- 17,990 Jabil Circuit, Inc.(1) 513,075 - -------------------------------------------------------------------------------- 16,517 Molex Inc. 435,388 - -------------------------------------------------------------------------------- 49,344 Sanmina-SCI Corp.(1) 257,576 - -------------------------------------------------------------------------------- 93,011 Solectron Corp.(1) 322,748 - -------------------------------------------------------------------------------- 23,038 Symbol Technologies, Inc. 333,821 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 8,415 Tektronix, Inc. $ 206,420 - -------------------------------------------------------------------------------- 3,001,605 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES -- 1.2% - -------------------------------------------------------------------------------- 32,473 Baker Hughes Inc. 1,444,724 - -------------------------------------------------------------------------------- 15,585 BJ Services Co. 808,550 - -------------------------------------------------------------------------------- 48,455 Halliburton Co. 2,095,679 - -------------------------------------------------------------------------------- 13,764 Nabors Industries Ltd.(1) 814,003 - -------------------------------------------------------------------------------- 16,010 National-Oilwell, Inc.(1) 747,667 - -------------------------------------------------------------------------------- 12,953 Noble Corp. 728,088 - -------------------------------------------------------------------------------- 10,257 Rowan Companies, Inc. 306,992 - -------------------------------------------------------------------------------- 56,652 Schlumberger Ltd. 3,992,832 - -------------------------------------------------------------------------------- 30,841 Transocean Inc.(1) 1,587,078 - -------------------------------------------------------------------------------- 12,525,613 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 2.8% - -------------------------------------------------------------------------------- 35,168 Albertson's Inc. 726,219 - -------------------------------------------------------------------------------- 45,369 Costco Wholesale Corporation 2,004,402 - -------------------------------------------------------------------------------- 38,426 CVS Corp. 2,021,976 - -------------------------------------------------------------------------------- 70,282 Kroger Co. (The)(1) 1,126,620 - -------------------------------------------------------------------------------- 42,770 Safeway Inc.(1) 792,528 - -------------------------------------------------------------------------------- 12,798 Supervalu Inc. 426,813 - -------------------------------------------------------------------------------- 61,175 Sysco Corp. 2,190,065 - -------------------------------------------------------------------------------- 325,855 Wal-Mart Stores, Inc. 16,328,595 - -------------------------------------------------------------------------------- 98,144 Walgreen Co. 4,359,557 - -------------------------------------------------------------------------------- 29,976,775 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 1.2% - -------------------------------------------------------------------------------- 60,336 Archer-Daniels-Midland Co. 1,483,059 - -------------------------------------------------------------------------------- 31,664 Campbell Soup Company 918,889 - -------------------------------------------------------------------------------- 49,495 ConAgra Foods, Inc. 1,337,355 - -------------------------------------------------------------------------------- 35,063 General Mills, Inc. 1,723,346 - -------------------------------------------------------------------------------- 33,607 H.J. Heinz Company 1,238,082 - -------------------------------------------------------------------------------- 21,199 Hershey Foods Corp. 1,281,692 - -------------------------------------------------------------------------------- 33,978 Kellogg Co. 1,470,228 - -------------------------------------------------------------------------------- 12,944 McCormick & Company, Inc. 445,662 - -------------------------------------------------------------------------------- 75,802 Sara Lee Corp. 1,679,772 - -------------------------------------------------------------------------------- 18,960 Wrigley (Wm.) Jr. Company 1,243,207 - -------------------------------------------------------------------------------- 12,821,292 - -------------------------------------------------------------------------------- GAS UTILITIES -- 0.1% - -------------------------------------------------------------------------------- 15,420 KeySpan Corporation 600,918 - -------------------------------------------------------------------------------- 4,048 NICOR Inc. 150,140 - -------------------------------------------------------------------------------- 26,006 NiSource Inc. 592,677 - -------------------------------------------------------------------------------- 3,532 People's Energy Corp. 148,061 - -------------------------------------------------------------------------------- 1,491,796 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 2.2% - -------------------------------------------------------------------------------- 10,045 Bard (C.R.), Inc. 683,864 - -------------------------------------------------------------------------------- 5,136 Bausch & Lomb Inc. Cl A 376,469 - -------------------------------------------------------------------------------- 59,523 Baxter International, Inc. 2,022,592 - -------------------------------------------------------------------------------- 24,285 Becton Dickinson & Co. 1,418,730 - -------------------------------------------------------------------------------- 24,251 Biomet Inc. 880,311 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 9 Equity Index - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- 73,410 Boston Scientific Corp.(1) $ 2,150,179 - -------------------------------------------------------------------------------- 11,248 Fisher Scientific International(1) 640,236 - -------------------------------------------------------------------------------- 30,989 Guidant Corp. 2,290,086 - -------------------------------------------------------------------------------- 14,806 Hospira Inc.(1) 477,790 - -------------------------------------------------------------------------------- 116,233 Medtronic, Inc. 5,922,070 - -------------------------------------------------------------------------------- 4,660 Millipore Corp.(1) 202,244 - -------------------------------------------------------------------------------- 12,154 PerkinElmer, Inc. 250,737 - -------------------------------------------------------------------------------- 34,650 St. Jude Medical, Inc.(1) 1,247,400 - -------------------------------------------------------------------------------- 36,236 Stryker Corp. 1,616,488 - -------------------------------------------------------------------------------- 15,154 Thermo Electron Corp.(1) 383,245 - -------------------------------------------------------------------------------- 11,583 Waters Corp.(1) 414,556 - -------------------------------------------------------------------------------- 23,694 Zimmer Holdings Inc.(1) 1,843,630 - -------------------------------------------------------------------------------- 22,820,627 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 2.5% - -------------------------------------------------------------------------------- 28,275 Aetna Inc. 2,119,211 - -------------------------------------------------------------------------------- 10,596 AmerisourceBergen Corp. 607,045 - -------------------------------------------------------------------------------- 41,652 Cardinal Health, Inc. 2,324,182 - -------------------------------------------------------------------------------- 43,887 Caremark Rx Inc.(1) 1,745,825 - -------------------------------------------------------------------------------- 12,744 CIGNA Corp. 1,138,039 - -------------------------------------------------------------------------------- 7,295 Express Scripts, Inc. Cl A(1) 636,051 - -------------------------------------------------------------------------------- 39,749 HCA Inc. 2,129,354 - -------------------------------------------------------------------------------- 23,188 Health Management Associates, Inc. Cl A 607,062 - -------------------------------------------------------------------------------- 15,288 Humana Inc.(1) 488,299 - -------------------------------------------------------------------------------- 22,101 IMS Health Inc. 539,043 - -------------------------------------------------------------------------------- 13,004 Laboratory Corporation of America Holdings(1) 626,793 - -------------------------------------------------------------------------------- 8,104 Manor Care, Inc. 294,661 - -------------------------------------------------------------------------------- 28,335 McKesson Corp. 1,069,646 - -------------------------------------------------------------------------------- 26,435 Medco Health Solutions Inc.(1) 1,310,383 - -------------------------------------------------------------------------------- 8,877 Quest Diagnostics Inc. 933,239 - -------------------------------------------------------------------------------- 44,873 Tenet Healthcare Corp.(1) 517,386 - -------------------------------------------------------------------------------- 61,744 UnitedHealth Group Incorporated 5,889,143 - -------------------------------------------------------------------------------- 29,303 WellPoint Inc.(1) 3,673,131 - -------------------------------------------------------------------------------- 26,648,493 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 1.5% - -------------------------------------------------------------------------------- 50,843 Carnival Corporation 2,634,176 - -------------------------------------------------------------------------------- 14,523 Darden Restaurants, Inc. 445,566 - -------------------------------------------------------------------------------- 10,918 Harrah's Entertainment, Inc. 705,084 - -------------------------------------------------------------------------------- 36,710 Hilton Hotels Corporation 820,469 - -------------------------------------------------------------------------------- 32,967 International Game Technology 878,900 - -------------------------------------------------------------------------------- 19,474 Marriott International, Inc. 1,302,032 - -------------------------------------------------------------------------------- 122,231 McDonald's Corporation 3,806,272 - -------------------------------------------------------------------------------- 38,385 Starbucks Corporation(1) 1,982,969 - -------------------------------------------------------------------------------- 20,397 Starwood Hotels & Resorts Worldwide, Inc. 1,224,432 - -------------------------------------------------------------------------------- 10,814 Wendy's International, Inc. 422,179 - -------------------------------------------------------------------------------- 27,907 Yum! Brands, Inc. 1,445,862 - -------------------------------------------------------------------------------- 15,667,941 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.6% - -------------------------------------------------------------------------------- 7,637 Black & Decker Corporation $ 603,247 - -------------------------------------------------------------------------------- 12,139 Centex Corp. 695,201 - -------------------------------------------------------------------------------- 13,908 Fortune Brands, Inc. 1,121,402 - -------------------------------------------------------------------------------- 4,093 KB Home 480,764 - -------------------------------------------------------------------------------- 18,156 Leggett & Platt, Inc. 524,345 - -------------------------------------------------------------------------------- 7,220 Maytag Corporation 100,863 - -------------------------------------------------------------------------------- 26,343 Newell Rubbermaid Inc. 577,965 - -------------------------------------------------------------------------------- 11,533 Pulte Homes Inc. 849,175 - -------------------------------------------------------------------------------- 5,521 Snap-on Incorporated 175,513 - -------------------------------------------------------------------------------- 7,375 Stanley Works (The) 333,866 - -------------------------------------------------------------------------------- 6,141 Whirlpool Corp. 415,930 - -------------------------------------------------------------------------------- 5,878,271 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 1.8% - -------------------------------------------------------------------------------- 14,719 Clorox Company 927,150 - -------------------------------------------------------------------------------- 50,393 Colgate-Palmolive Co. 2,629,003 - -------------------------------------------------------------------------------- 46,172 Kimberly-Clark Corp. 3,034,886 - -------------------------------------------------------------------------------- 242,448 Procter & Gamble Co. (The) 12,849,743 - -------------------------------------------------------------------------------- 19,440,782 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 4.8% - -------------------------------------------------------------------------------- 74,229 3M Co. 6,360,683 - -------------------------------------------------------------------------------- 1,018,775 General Electric Co. 36,737,026 - -------------------------------------------------------------------------------- 13,058 Textron Inc. 974,388 - -------------------------------------------------------------------------------- 193,471 Tyco International Ltd. 6,539,320 - -------------------------------------------------------------------------------- 50,611,417 - -------------------------------------------------------------------------------- INSURANCE -- 4.1% - -------------------------------------------------------------------------------- 27,283 Ace, Ltd. 1,125,969 - -------------------------------------------------------------------------------- 48,107 Aflac Inc. 1,792,467 - -------------------------------------------------------------------------------- 65,258 Allstate Corp. 3,527,846 - -------------------------------------------------------------------------------- 10,386 Ambac Financial Group, Inc. 776,354 - -------------------------------------------------------------------------------- 250,331 American International Group, Inc. 13,870,840 - -------------------------------------------------------------------------------- 30,246 AON Corp. 690,819 - -------------------------------------------------------------------------------- 18,394 Chubb Corp. 1,458,092 - -------------------------------------------------------------------------------- 15,402 Cincinnati Financial Corp. 671,681 - -------------------------------------------------------------------------------- 28,403 Hartford Financial Services Group Inc. (The) 1,947,310 - -------------------------------------------------------------------------------- 13,091 Jefferson-Pilot Corp. 642,114 - -------------------------------------------------------------------------------- 16,726 Lincoln National Corp. 755,012 - -------------------------------------------------------------------------------- 15,491 Loews Corp. 1,139,208 - -------------------------------------------------------------------------------- 50,792 Marsh & McLennan Companies Inc. 1,545,093 - -------------------------------------------------------------------------------- 13,450 MBIA Inc. 703,166 - -------------------------------------------------------------------------------- 70,470 MetLife, Inc. 2,755,377 - -------------------------------------------------------------------------------- 19,227 Progressive Corp. 1,764,270 - -------------------------------------------------------------------------------- 50,343 Prudential Financial Inc. 2,889,688 - -------------------------------------------------------------------------------- 12,141 Safeco Corp. 591,388 - -------------------------------------------------------------------------------- 64,309 St. Paul Travelers Companies, Inc. (The) 2,362,070 - -------------------------------------------------------------------------------- 10,363 Torchmark Corp. 540,949 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 10 Equity Index - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- 28,518 UnumProvident Corp. $ 485,376 - -------------------------------------------------------------------------------- 13,343 XL Capital Ltd. Cl A 965,633 - -------------------------------------------------------------------------------- 43,000,722 - -------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL -- 0.4% - -------------------------------------------------------------------------------- 116,627 eBay Inc.(1) 4,345,522 - -------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES -- 0.4% - -------------------------------------------------------------------------------- 125,667 Yahoo! Inc.(1) 4,260,111 - -------------------------------------------------------------------------------- IT SERVICES -- 1.1% - -------------------------------------------------------------------------------- 12,063 Affiliated Computer Services Inc(1) 642,234 - -------------------------------------------------------------------------------- 56,015 Automatic Data Processing, Inc. 2,517,874 - -------------------------------------------------------------------------------- 18,336 Computer Sciences Corp.(1) 840,706 - -------------------------------------------------------------------------------- 13,390 Convergys Corp.(1) 199,913 - -------------------------------------------------------------------------------- 49,685 Electronic Data Systems Corp. 1,026,989 - -------------------------------------------------------------------------------- 77,336 First Data Corp. 3,040,077 - -------------------------------------------------------------------------------- 18,594 Fiserv, Inc.(1) 740,041 - -------------------------------------------------------------------------------- 34,519 Paychex, Inc. 1,132,914 - -------------------------------------------------------------------------------- 12,428 Sabre Holdings Corp. 271,925 - -------------------------------------------------------------------------------- 27,604 SunGard Data Systems Inc.(1) 952,338 - -------------------------------------------------------------------------------- 31,704 Unisys Corp.(1) 223,830 - -------------------------------------------------------------------------------- 11,588,841 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 0.2% - -------------------------------------------------------------------------------- 9,202 Brunswick Corp. 431,114 - -------------------------------------------------------------------------------- 27,407 Eastman Kodak Co. 892,097 - -------------------------------------------------------------------------------- 16,273 Hasbro, Inc. 332,783 - -------------------------------------------------------------------------------- 39,979 Mattel, Inc. 853,552 - -------------------------------------------------------------------------------- 2,509,546 - -------------------------------------------------------------------------------- MACHINERY -- 1.4% - -------------------------------------------------------------------------------- 32,948 Caterpillar Inc. 3,012,764 - -------------------------------------------------------------------------------- 4,177 Cummins Inc. 293,852 - -------------------------------------------------------------------------------- 26,643 Danaher Corp. 1,423,003 - -------------------------------------------------------------------------------- 23,640 Deere & Co. 1,586,953 - -------------------------------------------------------------------------------- 19,460 Dover Corp. 735,393 - -------------------------------------------------------------------------------- 14,675 Eaton Corp. 959,745 - -------------------------------------------------------------------------------- 26,520 Illinois Tool Works Inc. 2,374,336 - -------------------------------------------------------------------------------- 16,642 Ingersoll-Rand Company 1,325,535 - -------------------------------------------------------------------------------- 8,854 ITT Industries, Inc. 798,985 - -------------------------------------------------------------------------------- 6,414 Navistar International Corp.(1) 233,470 - -------------------------------------------------------------------------------- 16,609 Paccar Inc. 1,202,326 - -------------------------------------------------------------------------------- 11,863 Pall Corp. 321,725 - -------------------------------------------------------------------------------- 11,464 Parker-Hannifin Corp. 698,387 - -------------------------------------------------------------------------------- 14,966,474 - -------------------------------------------------------------------------------- MEDIA -- 3.8% - -------------------------------------------------------------------------------- 50,972 Clear Channel Communications, Inc. 1,757,005 - -------------------------------------------------------------------------------- 212,585 Comcast Corporation(1) 7,181,121 - -------------------------------------------------------------------------------- 196,745 Disney (Walt) Co. 5,652,484 - -------------------------------------------------------------------------------- 7,063 Dow Jones & Co. Inc. 263,944 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 24,182 Gannett Co., Inc. $ 1,912,313 - -------------------------------------------------------------------------------- 40,269 Interpublic Group of Companies, Inc.(1) 494,503 - -------------------------------------------------------------------------------- 7,220 Knight-Ridder, Inc. 485,545 - -------------------------------------------------------------------------------- 4,496 Meredith Corp. 210,188 - -------------------------------------------------------------------------------- 13,970 New York Times Co. (The) Cl A 511,023 - -------------------------------------------------------------------------------- 277,010 News Corp. 4,687,009 - -------------------------------------------------------------------------------- 17,893 Omnicom Group Inc. 1,583,888 - -------------------------------------------------------------------------------- 441,684 Time Warner Inc.(1) 7,751,555 - -------------------------------------------------------------------------------- 28,935 Tribune Co. 1,153,638 - -------------------------------------------------------------------------------- 28,432 Univision Communications Inc. Cl A(1) 787,282 - -------------------------------------------------------------------------------- 163,850 Viacom, Inc. Cl B 5,706,896 - -------------------------------------------------------------------------------- 40,138,394 - -------------------------------------------------------------------------------- METALS & MINING -- 0.7% - -------------------------------------------------------------------------------- 83,725 Alcoa Inc. 2,544,403 - -------------------------------------------------------------------------------- 8,585 Allegheny Technologies Inc. 206,984 - -------------------------------------------------------------------------------- 17,044 Freeport-McMoRan Copper & Gold, Inc. Cl B 675,113 - -------------------------------------------------------------------------------- 42,635 Newmont Mining Corporation 1,801,329 - -------------------------------------------------------------------------------- 15,259 Nucor Corp. 878,308 - -------------------------------------------------------------------------------- 9,277 Phelps Dodge Corp. 943,749 - -------------------------------------------------------------------------------- 10,860 United States Steel Corp. 552,231 - -------------------------------------------------------------------------------- 7,602,117 - -------------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER -- 0.9% - -------------------------------------------------------------------------------- 62,277 AES Corporation (The)(1) 1,020,097 - -------------------------------------------------------------------------------- 49,879 Calpine Corporation(1) 139,661 - -------------------------------------------------------------------------------- 18,620 CMS Energy Corp.(1) 242,805 - -------------------------------------------------------------------------------- 16,884 Constellation Energy Group Inc. 872,903 - -------------------------------------------------------------------------------- 32,718 Dominion Resources Inc. 2,435,201 - -------------------------------------------------------------------------------- 90,474 Duke Energy Corp. 2,534,177 - -------------------------------------------------------------------------------- 33,674 Dynegy Inc. Cl A(1) 131,665 - -------------------------------------------------------------------------------- 22,883 Public Service Enterprise Group Inc. 1,244,606 - -------------------------------------------------------------------------------- 22,840 Sempra Energy 909,946 - -------------------------------------------------------------------------------- 9,531,061 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 1.2% - -------------------------------------------------------------------------------- 10,746 Big Lots Inc.(1) 129,167 - -------------------------------------------------------------------------------- 7,126 Dillard's Inc. 191,689 - -------------------------------------------------------------------------------- 29,461 Dollar General Corp. 645,491 - -------------------------------------------------------------------------------- 15,982 Family Dollar Stores, Inc. 485,214 - -------------------------------------------------------------------------------- 16,240 Federated Department Stores, Inc. 1,033,514 - -------------------------------------------------------------------------------- 27,420 J.C. Penney Co. Inc. Holding Company 1,423,646 - -------------------------------------------------------------------------------- 31,536 Kohl's Corp.(1) 1,628,204 - -------------------------------------------------------------------------------- 27,924 May Department Stores Co. (The) 1,033,746 - -------------------------------------------------------------------------------- 12,317 Nordstrom, Inc. 682,115 - -------------------------------------------------------------------------------- 9,226 Sears Holdings Corp.(1) 1,228,626 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 11 Equity Index - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- 86,040 Target Corporation $ 4,303,721 - -------------------------------------------------------------------------------- 12,785,133 - -------------------------------------------------------------------------------- OFFICE ELECTRONICS -- 0.1% - -------------------------------------------------------------------------------- 91,920 Xerox Corp.(1) 1,392,588 - -------------------------------------------------------------------------------- OIL & GAS -- 7.5% - -------------------------------------------------------------------------------- 8,301 Amerada Hess Corp. 798,639 - -------------------------------------------------------------------------------- 22,902 Anadarko Petroleum Corp. 1,742,842 - -------------------------------------------------------------------------------- 31,357 Apache Corp. 1,919,989 - -------------------------------------------------------------------------------- 6,523 Ashland Inc. 440,107 - -------------------------------------------------------------------------------- 37,113 Burlington Resources, Inc. 1,858,248 - -------------------------------------------------------------------------------- 202,258 ChevronTexaco Corp. 11,793,664 - -------------------------------------------------------------------------------- 66,869 ConocoPhillips 7,211,153 - -------------------------------------------------------------------------------- 46,059 Devon Energy Corporation 2,199,317 - -------------------------------------------------------------------------------- 61,346 El Paso Corp. 649,041 - -------------------------------------------------------------------------------- 22,940 EOG Resources Inc. 1,118,096 - -------------------------------------------------------------------------------- 613,750 Exxon Mobil Corp. 36,579,500 - -------------------------------------------------------------------------------- 15,671 Kerr-McGee Corp. 1,227,509 - -------------------------------------------------------------------------------- 10,692 Kinder Morgan, Inc. 809,384 - -------------------------------------------------------------------------------- 33,324 Marathon Oil Corp. 1,563,562 - -------------------------------------------------------------------------------- 38,162 Occidental Petroleum Corp. 2,715,990 - -------------------------------------------------------------------------------- 6,723 Sunoco, Inc. 695,965 - -------------------------------------------------------------------------------- 25,984 Unocal Corp. 1,602,953 - -------------------------------------------------------------------------------- 24,647 Valero Energy Corp. 1,805,886 - -------------------------------------------------------------------------------- 54,730 Williams Companies, Inc. (The) 1,029,471 - -------------------------------------------------------------------------------- 33,347 XTO Energy Inc. 1,095,115 - -------------------------------------------------------------------------------- 78,856,431 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 0.5% - -------------------------------------------------------------------------------- 24,935 Georgia-Pacific Corp. 884,943 - -------------------------------------------------------------------------------- 47,092 International Paper Company 1,732,515 - -------------------------------------------------------------------------------- 10,506 Louisiana-Pacific Corp. 264,121 - -------------------------------------------------------------------------------- 19,433 MeadWestvaco Corp. 618,358 - -------------------------------------------------------------------------------- 23,310 Weyerhaeuser Co. 1,596,735 - -------------------------------------------------------------------------------- 5,096,672 - -------------------------------------------------------------------------------- PERSONAL PRODUCTS -- 0.7% - -------------------------------------------------------------------------------- 8,338 Alberto-Culver Company Cl B 399,057 - -------------------------------------------------------------------------------- 45,289 Avon Products, Inc. 1,944,710 - -------------------------------------------------------------------------------- 95,258 Gillette Company 4,808,623 - -------------------------------------------------------------------------------- 7,152,390 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 6.9% - -------------------------------------------------------------------------------- 149,814 Abbott Laboratories 6,984,329 - -------------------------------------------------------------------------------- 12,570 Allergan, Inc. 873,238 - -------------------------------------------------------------------------------- 187,769 Bristol-Myers Squibb Co. 4,780,599 - -------------------------------------------------------------------------------- 108,851 Eli Lilly and Company 5,671,137 - -------------------------------------------------------------------------------- 34,057 Forest Laboratories, Inc. Cl A(1) 1,258,406 - -------------------------------------------------------------------------------- 285,813 Johnson & Johnson 19,195,201 - -------------------------------------------------------------------------------- 23,051 King Pharmaceuticals, Inc.(1) 191,554 - -------------------------------------------------------------------------------- 212,195 Merck & Co., Inc. 6,868,752 - -------------------------------------------------------------------------------- 25,795 Mylan Laboratories Inc. 457,087 - -------------------------------------------------------------------------------- 717,075 Pfizer, Inc. 18,837,560 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 141,692 Schering-Plough Corp. $ 2,571,710 - -------------------------------------------------------------------------------- 10,336 Watson Pharmaceuticals, Inc.(1) 317,625 - -------------------------------------------------------------------------------- 128,386 Wyeth 5,415,321 - -------------------------------------------------------------------------------- 73,422,519 - -------------------------------------------------------------------------------- REAL ESTATE -- 0.5% - -------------------------------------------------------------------------------- 9,038 Apartment Investment and Management Co. 336,214 - -------------------------------------------------------------------------------- 19,160 Archstone-Smith Trust 653,548 - -------------------------------------------------------------------------------- 38,557 Equity Office Properties Trust 1,161,722 - -------------------------------------------------------------------------------- 27,133 Equity Residential 873,954 - -------------------------------------------------------------------------------- 17,626 Plum Creek Timber Co. Inc. 629,248 - -------------------------------------------------------------------------------- 17,637 Prologis 654,333 - -------------------------------------------------------------------------------- 21,235 Simon Property Group, Inc. 1,286,416 - -------------------------------------------------------------------------------- 5,595,435 - -------------------------------------------------------------------------------- ROAD & RAIL -- 0.6% - -------------------------------------------------------------------------------- 36,342 Burlington Northern Santa Fe Corp. 1,959,923 - -------------------------------------------------------------------------------- 20,592 CSX Corporation 857,657 - -------------------------------------------------------------------------------- 38,436 Norfolk Southern Corp. 1,424,054 - -------------------------------------------------------------------------------- 25,065 Union Pacific Corp. 1,747,031 - -------------------------------------------------------------------------------- 5,988,665 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.0% - -------------------------------------------------------------------------------- 37,771 Advanced Micro Devices, Inc.(1) 608,869 - -------------------------------------------------------------------------------- 35,481 Altera Corp.(1) 701,814 - -------------------------------------------------------------------------------- 35,644 Analog Devices, Inc. 1,288,174 - -------------------------------------------------------------------------------- 160,790 Applied Materials, Inc.(1) 2,612,838 - -------------------------------------------------------------------------------- 28,221 Applied Micro Circuits Corp.(1) 92,847 - -------------------------------------------------------------------------------- 28,308 Broadcom Corp.(1) 846,975 - -------------------------------------------------------------------------------- 38,513 Freescale Semiconductor Inc.(1) 664,349 - -------------------------------------------------------------------------------- 598,335 Intel Corp. 13,899,322 - -------------------------------------------------------------------------------- 18,759 KLA-Tencor Corp.(1) 863,102 - -------------------------------------------------------------------------------- 29,359 Linear Technology Corp. 1,124,743 - -------------------------------------------------------------------------------- 36,253 LSI Logic Corp.(1) 202,654 - -------------------------------------------------------------------------------- 31,368 Maxim Integrated Products, Inc. 1,282,010 - -------------------------------------------------------------------------------- 58,596 Micron Technology, Inc.(1) 605,883 - -------------------------------------------------------------------------------- 33,885 National Semiconductor Corp. 698,370 - -------------------------------------------------------------------------------- 13,381 Novellus Systems, Inc.(1) 357,674 - -------------------------------------------------------------------------------- 15,916 NVIDIA Corp.(1) 378,164 - -------------------------------------------------------------------------------- 16,765 PMC-Sierra, Inc.(1) 147,532 - -------------------------------------------------------------------------------- 18,303 Teradyne, Inc.(1) 267,224 - -------------------------------------------------------------------------------- 165,397 Texas Instruments Inc. 4,215,970 - -------------------------------------------------------------------------------- 33,315 Xilinx, Inc. 973,797 - -------------------------------------------------------------------------------- 31,832,311 - -------------------------------------------------------------------------------- SOFTWARE -- 3.7% - -------------------------------------------------------------------------------- 23,367 Adobe Systems Inc. 1,569,561 - -------------------------------------------------------------------------------- 22,008 Autodesk, Inc. 654,958 - -------------------------------------------------------------------------------- 21,041 BMC Software Inc.(1) 315,615 - -------------------------------------------------------------------------------- 16,187 Citrix Systems, Inc.(1) 385,574 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 12 Equity Index - Schedule of Investments MARCH 31, 2005 Shares Value - -------------------------------------------------------------------------------- 51,534 Computer Associates International, Inc. $ 1,396,571 - -------------------------------------------------------------------------------- 36,461 Compuware Corp.(1) 262,519 - -------------------------------------------------------------------------------- 29,577 Electronic Arts Inc.(1) 1,531,497 - -------------------------------------------------------------------------------- 17,702 Intuit Inc.(1) 774,817 - -------------------------------------------------------------------------------- 8,002 Mercury Interactive Corp.(1) 379,135 - -------------------------------------------------------------------------------- 973,053 Microsoft Corporation 23,518,691 - -------------------------------------------------------------------------------- 35,627 Novell, Inc.(1) 212,337 - -------------------------------------------------------------------------------- 432,738 Oracle Corp.(1) 5,400,570 - -------------------------------------------------------------------------------- 25,245 Parametric Technology Corp.(1) 141,120 - -------------------------------------------------------------------------------- 48,818 Siebel Systems, Inc.(1) 445,708 - -------------------------------------------------------------------------------- 68,129 Symantec Corp.(1) 1,453,192 - -------------------------------------------------------------------------------- 40,344 Veritas Software Corp.(1) 936,788 - -------------------------------------------------------------------------------- 39,378,653 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 2.3% - -------------------------------------------------------------------------------- 22,265 AutoNation, Inc.(1) 421,699 - -------------------------------------------------------------------------------- 6,627 Autozone Inc.(1) 567,934 - -------------------------------------------------------------------------------- 29,045 Bed Bath & Beyond Inc.(1) 1,061,304 - -------------------------------------------------------------------------------- 28,900 Best Buy Co., Inc. 1,560,889 - -------------------------------------------------------------------------------- 18,220 Circuit City Stores-Circuit City Group 292,431 - -------------------------------------------------------------------------------- 71,278 Gap, Inc. (The) 1,556,712 - -------------------------------------------------------------------------------- 211,040 Home Depot, Inc. 8,070,169 - -------------------------------------------------------------------------------- 37,154 Limited Brands 902,842 - -------------------------------------------------------------------------------- 74,253 Lowe's Companies, Inc. 4,239,103 - -------------------------------------------------------------------------------- 29,999 Office Depot, Inc.(1) 665,378 - -------------------------------------------------------------------------------- 8,968 OfficeMax Inc. 300,428 - -------------------------------------------------------------------------------- 15,103 RadioShack Corp. 370,024 - -------------------------------------------------------------------------------- 12,399 Sherwin-Williams Co. 545,432 - -------------------------------------------------------------------------------- 47,431 Staples, Inc. 1,490,756 - -------------------------------------------------------------------------------- 13,826 Tiffany & Co. 477,274 - -------------------------------------------------------------------------------- 46,074 TJX Companies, Inc. (The) 1,134,803 - -------------------------------------------------------------------------------- 20,614 Toys 'R' Us, Inc.(1) 531,017 - -------------------------------------------------------------------------------- 24,188,195 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.4% - -------------------------------------------------------------------------------- 18,351 Coach Inc.(1) 1,039,217 - -------------------------------------------------------------------------------- 11,720 Jones Apparel Group, Inc. 392,503 - -------------------------------------------------------------------------------- 10,316 Liz Claiborne, Inc. 413,981 - -------------------------------------------------------------------------------- 22,206 NIKE, Inc. Cl B 1,849,981 - -------------------------------------------------------------------------------- 5,529 Reebok International Ltd. 244,935 - -------------------------------------------------------------------------------- 9,790 VF Corp. 578,981 - -------------------------------------------------------------------------------- 4,519,598 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 1.6% - -------------------------------------------------------------------------------- 55,745 Countrywide Financial Corporation 1,809,483 - -------------------------------------------------------------------------------- 93,010 Fannie Mae 5,064,394 - -------------------------------------------------------------------------------- Shares/Principal Amount Value - -------------------------------------------------------------------------------- 66,109 Freddie Mac $ 4,178,088 - -------------------------------------------------------------------------------- 27,319 Golden West Financial Corp. 1,652,800 - -------------------------------------------------------------------------------- 9,225 MGIC Investment Corp. 568,906 - -------------------------------------------------------------------------------- 35,772 Sovereign Bancorp Inc. 792,709 - -------------------------------------------------------------------------------- 83,901 Washington Mutual, Inc. 3,314,089 - -------------------------------------------------------------------------------- 17,380,469 - -------------------------------------------------------------------------------- TOBACCO -- 1.4% - -------------------------------------------------------------------------------- 198,816 Altria Group Inc. 13,000,579 - -------------------------------------------------------------------------------- 11,326 Reynolds American Inc. 912,762 - -------------------------------------------------------------------------------- 15,862 UST Inc. 820,065 - -------------------------------------------------------------------------------- 14,733,406 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS(2) - -------------------------------------------------------------------------------- 8,180 Grainger (W.W.), Inc. 509,369 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.3% - -------------------------------------------------------------------------------- 108,251 Nextel Communications, Inc.(1) 3,076,493 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $903,139,367) 1,040,036,946 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS SEGREGATED FOR FUTURES* -- 1.5% Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 7.125% - 8.875%, 2/15/19 - 2/15/23, valued at $16,954,669), in a joint trading account at 2.62%, dated 3/31/05, due 4/1/05 (Delivery value $15,860,054)(3) (Cost $15,858,900) 15,858,900 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 0.2% Repurchase Agreement, Credit Suisse First Boston, Inc., (collateralized by various U.S. Treasury obligations, 7.125% - 8.875%, 2/15/19 - 2/15/23, valued at $686,231), in a joint trading account at 2.62%, dated 3/31/05, due 4/1/05 (Delivery value $641,147) 641,100 - -------------------------------------------------------------------------------- $900,000 U.S. Treasury Bills, 2.77%, 6/23/05(4) 894,434 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $1,535,352) 1,535,534 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 99.9% (Cost $920,533,620) 1,057,431,380 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- 0.1% 908,465 - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $1,058,339,845 ================================================================================ See Notes to Financial Statements. (continued) - ------ 13 Equity Index - Schedule of Investments MARCH 31, 2005 FUTURES CONTRACTS* Underlying Face Contracts Purchased Expiration Date Amount at Value Unrealized Loss - -------------------------------------------------------------------------------- 268 S&P 500 E-Mini Futures June 2005 $15,858,900 $(452,578) =================================== *FUTURES CONTRACTS typically are based on an index or specific securities and tend to track the performance of the index or specific securities while remaining very liquid (easy to buy and sell). By investing its cash assets in futures, the fund has increased exposure while maintaining easy access to cash. NOTES TO SCHEDULE OF INVESTMENTS (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 MARCH 31, 2005 - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investment securities, at value (cost of $920,533,620) $1,057,431,380 - -------------------------------------------------------- Receivable for investments sold 107,459 - -------------------------------------------------------- Dividends and interest receivable 1,376,279 - -------------------------------------------------------------------------------- 1,058,915,118 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Disbursements in excess of demand deposit cash 259,663 - -------------------------------------------------------- Payable for investments purchased 2,299 - -------------------------------------------------------- Payable for variation margin on futures contracts 25,415 - -------------------------------------------------------- Accrued management fees 287,896 - -------------------------------------------------------------------------------- 575,273 - -------------------------------------------------------------------------------- NET ASSETS $1,058,339,845 ================================================================================ NET ASSETS CONSIST OF: - -------------------------------------------------------------------------------- Capital (par value and paid-in surplus) $1,052,475,755 - -------------------------------------------------------- Undistributed net investment income 381,217 - -------------------------------------------------------- Accumulated net realized loss on investment transactions (130,962,309) - -------------------------------------------------------- Net unrealized appreciation on investments 136,445,182 - -------------------------------------------------------------------------------- $1,058,339,845 ================================================================================ INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $150,453,588 - -------------------------------------------------------- Shares outstanding 31,994,918 - -------------------------------------------------------- Net asset value per share $4.70 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $907,886,257 - -------------------------------------------------------- Shares outstanding 192,877,733 - -------------------------------------------------------- Net asset value per share $4.71 - -------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 15 Statement of Operations YEAR ENDED MARCH 31, 2005 - -------------------------------------------------------------------------------- INVESTMENT INCOME - -------------------------------------------------------------------------------- INCOME: - -------------------------------------------------------- Dividends $20,768,347 - -------------------------------------------------------- Interest 344,509 - -------------------------------------------------------------------------------- 21,112,856 - -------------------------------------------------------------------------------- EXPENSES: - -------------------------------------------------------- Management fees 3,225,669 - -------------------------------------------------------- Directors' fees and expenses 14,642 - -------------------------------------------------------- Other expenses 5,693 - -------------------------------------------------------------------------------- 3,246,004 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 17,866,852 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------------- Net realized loss on investment transactions (1,953,984) - -------------------------------------------------------- Change in net unrealized appreciation on investments 46,094,055 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN 44,140,071 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $62,006,923 ================================================================================ See Notes to Financial Statements. - ------ 16 Statement of Changes in Net Assets YEARS ENDED MARCH 31, 2005 AND MARCH 31, 2004 - ------------------------------------------------------------------------------- INCREASE IN NET ASSETS 2005 2004 - ------------------------------------------------------------------------------- OPERATIONS - ------------------------------------------------------------------------------- Net investment income $ 17,866,852 $ 10,744,225 - --------------------------------------------- Net realized loss (1,953,984) (20,901,861) - --------------------------------------------- Change in net unrealized appreciation 46,094,055 204,487,313 - ------------------------------------------------------------------------------- Net increase in net assets resulting from operations 62,006,923 194,329,677 - ------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - ------------------------------------------------------------------------------- From net investment income: - --------------------------------------------- Investor Class (2,272,345) (1,549,115) - --------------------------------------------- Institutional Class (15,298,033) (8,965,901) - ------------------------------------------------------------------------------- Decrease in net assets from distributions (17,570,378) (10,515,016) - ------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - ------------------------------------------------------------------------------- Net increase in net assets from capital share transactions 29,310,350 359,870,681 - ------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS 73,746,895 543,685,342 - ------------------------------------------------------------------------------- NET ASSETS - ------------------------------------------------------------------------------- Beginning of period 984,592,950 440,907,608 - ------------------------------------------------------------------------------- End of period $1,058,339,845 $984,592,950 =============================================================================== Undistributed net investment income $381,217 $196,465 =============================================================================== See Notes to Financial Statements. - ------ 17 Notes to Financial Statements MARCH 31, 2005 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 S&P 500 Composite Price Index (S&P 500 Index). The following is a summary of the fund's significant accounting policies. MULTIPLE CLASS -- The fund is authorized to issue the Investor Class and the Institutional Class. The share classes differ principally in their respective shareholder servicing and distribution expenses and arrangements. All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets. SECURITY VALUATIONS -- Securities traded primarily on a principal securities exchange are valued at the last reported sales price, or at the mean of the latest bid and asked prices where no last sales price is available. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official close price. Discount notes may be valued through a commercial pricing service or at amoritized cost, which approximates fair value. If the fund determines that the market price of a portfolio security is not readily available, or that the valuation methods mentioned above do not reflect the security's fair value, such security is valued at its fair value as determined by, or in accordance with procedures adopted by, the Board of Directors or its designee if such fair value determination would materially impact a fund's net asset value. Circumstances that may cause the fund to fair value a security include: 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; or trading in a security has been halted during the trading day. 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 American Century Investment Management, Inc. (ACIM) (the investment advisor) 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 MARCH 31, 2005 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. INDEMNIFICATIONS -- Under the corporation organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the fund. The risk of material loss from such claims is considered by management to be remote. 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 advisor'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 advisor that are not in the American Century family of 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 year ended March 31, 2005 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 (continued) - ------ 19 Notes to Financial Statements MARCH 31, 2005 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) parent of the corporation investment advisor, ACIM, the distributor of the corporation, ACIS, and the corporation's transfer agent, American Century Services, LLC (formerly American Century Services Corporation). During the year ended March 31, 2005, 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. 3. INVESTMENT TRANSACTIONS Purchases and sales of investment securities, excluding short-term investments, for the year ended March 31, 2005, were $64,938,763 and $37,830,347, respectively. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the fund were as follows: - -------------------------------------------------------------------------------- SHARES AMOUNT - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 100,000,000 ================================================================================ Sold 7,784,039 $35,591,587 - ------------------------------------------- Issued in reinvestment of distributions 469,320 2,203,475 - ------------------------------------------- Redeemed (7,909,176) (36,048,575) - -------------------------------------------------------------------------------- Net increase 344,183 $ 1,746,487 ================================================================================ 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 - -------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 550,000,000 ================================================================================ Sold 46,883,023 $216,938,331 - ------------------------------------------- Issued in reinvestment of distributions 3,256,513 15,298,033 - ------------------------------------------- Redeemed (44,361,828) (204,672,501) - -------------------------------------------------------------------------------- Net increase 5,777,708 $ 27,563,863 ================================================================================ 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 ================================================================================ (continued) - ------ 20 Notes to Financial Statements MARCH 31, 2005 5. BANK LINE OF CREDIT The fund, along with certain other funds managed by ACIM, has a $575,000,000 unsecured bank line of credit agreement with JPMCB, which was renewed from $650,000,000 effective December 15, 2004. The fund may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund did not borrow from the line during the year ended March 31, 2005. 6. FEDERAL TAX INFORMATION The tax character of distributions paid during the years ended March 31, 2005 and March 31, 2004 were as follows: 2005 2004 - -------------------------------------------------------------------------- DISTRIBUTIONS PAID FROM - -------------------------------------------------------------------------- Oridinary income $17,570,378 $10,515,016 - -------------------------------------------------------------------------- Long-term capital gains -- -- - -------------------------------------------------------------------------- The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. As of March 31, 2005, the components of distributable earnings on a tax-basis and the federal tax cost of investments were as follows: - -------------------------------------------------------------------------------- Federal tax cost of investments $ 984,014,543 ================================================================================ Gross tax appreciation of investments $ 184,876,765 - ------------------------------------------------------------ Gross tax depreciation of investments $(111,459,928) - -------------------------------------------------------------------------------- Net tax appreciation of investments $ 73,416,837 ================================================================================ Net tax depreciation on derivatives $ -- - -------------------------------------------------------------------------------- Net tax appreciation $ 73,416,837 ================================================================================ Undistributed ordinary income $ 383,521 - ------------------------------------------------------------ Accumulated capital losses $ (66,588,425) - ------------------------------------------------------------ Capital loss deferral $ (1,347,843) - -------------------------------------------------------------------------------- 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, 2005, the fund had net capital losses of $2,917,398, $10,639,477, $49,081,783, $1,957,751, and $1,992,016 expiring in 2009, 2010, 2011, 2012, and 2013, respectively, that may be used to offset future realized capital gains for federal income tax purposes. The capital loss deferrals represent net capital losses incurred in the five-month period ended March 31, 2005. The fund has elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. 7. OTHER TAX INFORMATION The following information is provided pursuant to provisions of the Internal Revenue Code. The fund hereby designates $17,570,378 of qualified dividend income for the fiscal year ended March 31, 2005. For corporate taxpayers, ordinary income distributions paid during the fiscal year ended March 31, 2005, of $17,570,378 qualify for the corporate dividends received deduction. - ------ 21 Equity Index - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $4.50 $3.39 $4.58 $4.63 $5.99 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------ Net Investment Income(1) 0.07 0.05 0.05 0.04 0.05 - ------------------------ Net Realized and Unrealized Gain (Loss) 0.20 1.11 (1.19) (0.05) (1.36) - -------------------------------------------------------------------------------- Total From Investment Operations 0.27 1.16 (1.14) (0.01) (1.31) - -------------------------------------------------------------------------------- Distributions - ------------------------ From Net Investment Income (0.07) (0.05) (0.05) (0.04) (0.05) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $4.70 $4.50 $3.39 $4.58 $4.63 ================================================================================ TOTAL RETURN(2) 6.04% 34.27% (25.02)% (0.16)% (22.04)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.49% 0.49% 0.49% 0.49% 0.49% - ------------------------ Ratio of Net Investment Income to Average Net Assets 1.59% 1.23% 1.24% 0.91% 0.83% - ------------------------ Portfolio Turnover Rate 4% 16% 21% 4% 10% - ------------------------ Net Assets, End of Period (in thousands) $150,454 $142,324 $90,093 $108,760 $71,415 - -------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. Equity Index - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $4.50 $3.39 $4.58 $4.64 $5.99 - -------------------------------------------------------------------------------- Income From Investment Operations - ---------------------- Net Investment Income(1) 0.08 0.06 0.05 0.05 0.06 - ---------------------- Net Realized and Unrealized Gain (Loss) 0.21 1.11 (1.19) (0.06) (1.35) - -------------------------------------------------------------------------------- Total From Investment Operations 0.29 1.17 (1.14) (0.01) (1.29) - -------------------------------------------------------------------------------- Distributions - ---------------------- From Net Investment Income (0.08) (0.06) (0.05) (0.05) (0.06) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $4.71 $4.50 $3.39 $4.58 $4.64 ================================================================================ TOTAL RETURN(2) 6.47% 34.53% (24.87)% (0.17)% (21.72)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.29% 0.29% 0.29% 0.29% 0.29% - ------------------------- Ratio of Net Investment Income to Average Net Assets 1.79% 1.43% 1.44% 1.11% 1.03% - ------------------------- Portfolio Turnover Rate 4% 16% 21% 4% 10% - ------------------------- Net Assets, End of Period (in thousands) $907,886 $842,269 $350,815 $449,591 $441,959 - -------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 23 Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders American Century Capital Portfolios, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Equity Index Fund, (the "Fund"), one of the funds comprising American Century Capital Portfolios, Inc., as of March 31, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Equity Index Fund as of March 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Kansas City, Missouri May 12, 2005 - ------ 24 Management The individuals listed below serve as directors or officers of the fund. Each director serves until his or her successor is duly elected and qualified or until he or she retires. Mandatory retirement age for independent directors is 72. Those listed as interested directors are "interested" primarily by virtue of their engagement as officers of American Century Companies, Inc. (ACC) or its wholly-owned, direct or indirect, subsidiaries, including the fund's investment advisor, American Century Investment Management, Inc. (ACIM); the fund's principal underwriter, American Century Investment Services, Inc. (ACIS); and the fund's transfer agent, American Century Services, LLC (ACS LLC). The other directors (more than three-fourths of the total number) are independent; that is, they have never been employees or officers of, and have no financial interest in, ACC or any of its wholly-owned subsidiaries, including ACIM, ACIS, and ACS LLC. The directors serve in this capacity for six registered investment companies in the American Century family of funds. All persons named as officers of the fund also serve in a similar capacity for the other 13 investment companies advised by ACIM or American Century Global Investment Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise noted. Only officers with policy-making functions are listed. No officer is compensated for his or her service as an officer of the fund. The listed officers are interested persons of the fund and are appointed or re-appointed on an annual basis. INDEPENDENT DIRECTORS - -------------------------------------------------------------------------------- THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1940 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 24 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Formerly Chief Executive Officer/Treasurer, Associated Bearings Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1945 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 7 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, Midwest Research Institute NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- D.D. (DEL) HOCK, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1935 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 8 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Chairman, Public Service Company of Colorado NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Allied Motion Technologies, Inc. - -------------------------------------------------------------------------------- (continued) - ------ 25 Management - -------------------------------------------------------------------------------- DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1937 POSITION(S) HELD WITH FUND: Director, Chairman of the Board LENGTH OF TIME SERVED (YEARS): 9 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Western Investments, Inc.; Retired Chairman of the Board, Butler Manufacturing Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Atlas-Copco, North America Inc. - -------------------------------------------------------------------------------- GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1943 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer, and Founder, Sayers 40, Inc., a technology products and service provider NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Triad Hospitals, Inc. - -------------------------------------------------------------------------------- M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1945 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 10 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President and Chief Integration Officer, Sprint Corporation (September 2003 to present); Senior Vice President-Financial Services, Sprint Corporation (January 2003 to September 2003); Senior Vice President-Finance, Global Markets Group, Sprint Corporation (November 1998 to January 2003) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director, Euronet Worldwide, Inc. - -------------------------------------------------------------------------------- TIMOTHY S. WEBSTER, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1961 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 3 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive Officer, American Italian Pasta Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, American Italian Pasta Company - -------------------------------------------------------------------------------- INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JAMES E. STOWERS, JR.(1), 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1924 POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman LENGTH OF TIME SERVED (YEARS): 46 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Director, and Controlling Shareholder, ACC; Chairman, ACC (January 1995 to December 2004); Director, ACIM, ACGIM, ACS LLC and other ACC subsidiaries NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- JAMES E. STOWERS III(1), 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1959 POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman LENGTH OF TIME SERVED (YEARS): 14 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, ACC (January 2005 to present), Co-Chairman, ACC (September 2000 to December 2004); Chief Executive Officer, ACC (June 1996 to September 2000); Chairman, ACS LLC and other ACC subsidiaries; Director, ACC, ACIM, ACGIM, ACS LLC and other ACC subsidiaries NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- (1) James E. Stowers, Jr. is the father of James E. Stowers III. (continued) - ------ 26 Management - -------------------------------------------------------------------------------- OFFICERS - -------------------------------------------------------------------------------- WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1955 POSITION(S) HELD WITH FUND: President LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC (September 2000 to present); President, ACC (June 1997 to present); Chief Operating Officer, ACC (June 1996 to September 2000); Also serves as: Chief Executive Officer and President, ACIS, ACGIM, ACIM and other ACC subsidiaries; Executive Vice President, ACS LLC; Director, ACC, ACIS, ACIM, ACGIM, ACS LLC and other ACC subsidiaries - -------------------------------------------------------------------------------- ROBERT T. JACKSON, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1946 POSITION(S) HELD WITH FUND: Executive Vice President LENGTH OF TIME SERVED (YEARS): 9 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Administrative Officer, ACC (August 1997 to present); Chief Financial Officer, ACC (May 1995 to October 2002); Executive Vice President, ACC (May 1995 to present); Also serves as: Chief Executive Officer, Chief Financial Officer and President, ACS LLC, Chief Financial Officer and Executive Vice President, ACGIM, ACIM, ACIS and other ACC subsidiaries; Treasurer, ACGIM, ACIM and other ACC subsidiaries; Director, ACC and other subsidiaries - -------------------------------------------------------------------------------- MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1956 POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer, and Chief Accounting Officer LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Assistant Treasurer, ACC (January 1995 to present); Also serves as Senior Vice President, ACS LLC; Assistant Treasurer, ACGIM, ACIM, ACIS, ACS LLC and other ACC subsidiaries - -------------------------------------------------------------------------------- DAVID C. TUCKER, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1958 POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (February 2001 to present); General Counsel, ACC (June 1998 to present); Also serves as: Senior Vice President and General Counsel, ACGIM, ACIM, ACIS, ACS LLC and other ACC subsidiaries - -------------------------------------------------------------------------------- CHARLES C.S. PARK, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1967 POSITION(S) HELD WITH FUND: Vice President and Chief Compliance Officer LENGTH OF TIME SERVED (YEARS): 4 and less than 1 year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACS LLC, ACIM and ACGIM (March 2005 to present); Vice President, ACS LLC (February 2000 to present); Assistant General Counsel, ACS LLC (January 1998 to March 2005) - -------------------------------------------------------------------------------- ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1966 POSITION(S) HELD WITH FUND: Controller LENGTH OF TIME SERVED (YEARS): 7 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS LLC (February 2000 to present); Controller-Fund Accounting, ACS LLC (June 1997 to present) - -------------------------------------------------------------------------------- JON ZINDEL, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1967 POSITION(S) HELD WITH FUND: Tax Officer LENGTH OF TIME SERVED (YEARS): 7 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (October 2001 to present); Vice President, Corporate Tax, ACS LLC (April 1998 to present); Also serves as: Vice President, ACGIM, ACIM, ACIS and other ACC subsidiaries - -------------------------------------------------------------------------------- The SAI has additional information about the fund's directors and is available without charge upon request by calling 1-800-345-2021. - ------ 27 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. - ------ 28 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 advisor, 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 advisor 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 advisor 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. 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. - ------ 29 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. The S&P 500/BARRA VALUE AND GROWTH INDICES are market value-weighted indices consisting of stocks in the S&P 500 Index. S&P 500/BARRA VALUE consists of those stocks with lower price-to-book ratios that are slower growing or undervalued, and S&P 500/BARRA GROWTH consists of those stocks with higher price-to-book ratios that are faster growing. - ------ 30 Notes - ------ 31 Notes - ------ 32 CONTACT US AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR SERVICES REPRESENTATIVE: 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 ADVISOR: 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 Proprietary Holdings, Inc. American Century Investment Services, Inc., Distributor (c)2005 American Century Proprietary Holdings, Inc. All rights reserved. 0505 SH-ANN-43384N
[front cover] American Century Investments ANNUAL REPORT [photo of man and woman] MARCH 31, 2005 Real Estate Fund [american century investments logo and text logo] Table of Contents Our Message to You. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 REAL ESTATE Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Industry Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . . 5 Shareholder Fee Example . . . . . . . . . . . . . . . . . . . . . . . . . . 6 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. . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Report of Independent Registered Public Accounting Firm . . . . . . . . . .22 OTHER INFORMATION Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . .26 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . .27 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 The opinions expressed in the Portfolio Commentary reflect those of the portfolio management team as of the date of the report, and do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] James E. Stowers III WITH James E. Stowers, Jr. We are pleased to provide you with the annual report for the Real Estate fund for the year ended March 31, 2005. 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 semiannual report dated September 30, 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 AMERICAN CENTURY COMPANIES, INC. /s/James E. Stowers III James E. Stowers III CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. - ------ 1 Real Estate - Performance TOTAL RETURNS AS OF MARCH 31, 2005 ---------------------- AVERAGE ANNUAL RETURNS - ---------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS INCEPTION DATE - ---------------------------------------------------------------------- INVESTOR CLASS 9.53% 20.11% 14.83% 9/21/95(1) - ---------------------------------------------------------------------- MSCI REIT INDEX 8.62% 19.18% 13.37%(2) -- - ---------------------------------------------------------------------- Institutional Class 9.74% 20.33% 11.99% 6/16/97 - ---------------------------------------------------------------------- Advisor Class 9.30% 19.83% 15.83% 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 Real Estate 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
ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended March 31 - ------------------------------------------------------------------------------------------------------ 1996* 1997 1998 1999 2000 2001 2002 2003 2004 2005 - ------------------------------------------------------------------------------------------------------ Investor Class 8.83% 40.77% 20.03% -21.04% 2.87% 24.57% 20.23% 0.93% 50.97% 9.53% - ------------------------------------------------------------------------------------------------------ MSCI REIT Index 6.51% 33.51% 17.47% -20.32% 2.94% 22.93% 22.79% -3.28% 51.60% 8.62% - ------------------------------------------------------------------------------------------------------ * 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 Real Estate - Portfolio Commentary [photo of investment team] PORTFOLIO MANAGER ON THE REAL ESTATE INVESTMENT TEAM: SCOTT BLASDELL PERFORMANCE SUMMARY For the fiscal year ended March 31, 2005, the Real Estate fund posted a total return of 9.53%*, outperforming both the 8.62% return of its benchmark, the Morgan Stanley Capital International (MSCI) REIT Index, and the 6.69% return of the S&P 500 Index, a broad stock market measure. The fund's longer-term returns also fared well against the two indexes. MARKET REVIEW The major U.S. stock indexes posted positive results during the past year. Stocks traded in a fairly narrow range during the first half of the fiscal year, declining slightly as strong corporate earnings growth was offset by concerns about soaring oil prices and higher interest rates. However, the market rallied sharply in the final quarter of 2004 as oil prices fell from their record high levels and the presidential election ended decisively. Although stocks slid back somewhat in the first three months of 2005, they remained in positive territory overall; the broad S&P 500 Index returned 6.69% for the one-year period. Real estate investment trusts (REITs) followed a different path but outpaced the broader market. REITs plunged by 18% in the first six weeks of the period in response to an anticipated rise in long-term interest rates, which attracted investors away from the relatively high dividend yields of REITs. By mid-May, however, the REIT sector began a rebound that lasted through the end of 2004; from its bottom on May 10 to its peak at the end of December, the MSCI REIT Index gained 43%. The index gave up some of its gains in the first quarter of 2005 but finished the period with a return of 8.62%. Apartment and hotel REITs, which tend to respond quickly to a strengthening economy, were among the best performers in the REIT market over the past year. Health care REITs were the only major segment of the REIT sector to decline during the period. TOP TEN HOLDINGS AS OF MARCH 31, 2005 - ------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 3/31/05 9/30/04 - ------------------------------------------------------------------------------- Simon Property Group, Inc. 6.7% 6.7% - ------------------------------------------------------------------------------- Prologis 6.5% 4.7% - ------------------------------------------------------------------------------- Kimco Realty Corporation 5.2% 5.2% - ------------------------------------------------------------------------------- Host Marriott Corp. 5.0% 0.6% - ------------------------------------------------------------------------------- Camden Property Trust 4.4% 3.4% - ------------------------------------------------------------------------------- Mack-Cali Realty Corp. 4.4% 3.9% - ------------------------------------------------------------------------------- General Growth Properties, Inc. 3.9% 2.9% - ------------------------------------------------------------------------------- Mid-America Apartment Communities Inc. 3.6% 0.6% - ------------------------------------------------------------------------------- Arden Realty Inc. 3.4% 0.7% - ------------------------------------------------------------------------------- CarrAmerica Realty Corp. 2.9% 3.5% - ------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. (continued) - ------ 4 Real Estate - Portfolio Commentary PORTFOLIO OVERVIEW The Real Estate fund outperformed the MSCI REIT Index in part because of an overweight in the hotel segment and an underweight in health care REITs. On average, hotel companies comprised approximately 9% of the portfolio during the fiscal year, compared with about 5% for the index. The top contributor in this group was extended-stay hotel owner Innkeepers USA, which benefited from strong revenue per available room growth and increased occupancy. Non-REIT hotel holdings such as Hilton Group and InterContinental Hotels also boosted results. In the health care sector, the fund held an average position of less than 1% during the fiscal year and had just one small holding--Universal Health Realty--as of March 31, 2005. In contrast, health care REITs made up 5.5% of the benchmark on average. This underweight proved valuable as health care REITs posted negative returns over the past year. On an absolute basis, the best contributors in the portfolio were apartment and retail REITs, though each detracted slightly from results relative to the benchmark. The portfolio's top individual performance contributor, on both an absolute and relative basis, was retail REIT Kimco Realty. Kimco, a fund overweight, reported improved occupancy and raised earnings projections. Office REITs detracted the most from performance relative to the benchmark. The fund's average weighting in office REITs was comparable to that of the benchmark, so stock selection was the main reason for the underperformance of this segment. Underweights in Boston Properties and SL Green Realty, both of which posted double-digit gains, and overweights in Duke Realty and Brandywine Realty, which declined during the year, hampered relative results. OUR COMMITMENT 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 3/31/05 9/30/04 - ------------------------------------------------------------------------------- Office Management 26.9% 24.8% - ------------------------------------------------------------------------------- Multi-Family Residential 17.7% 14.4% - ------------------------------------------------------------------------------- Regional Malls 13.7% 16.3% - ------------------------------------------------------------------------------- Neighborhood & Community Shopping Centers 10.6% 8.7% - ------------------------------------------------------------------------------- Industrials 9.0% 7.6% - ------------------------------------------------------------------------------- Hotels, Restaurants & Leisure 8.7% 6.0% - ------------------------------------------------------------------------------- Diversified Companies 7.0% 10.4% - ------------------------------------------------------------------------------- Storage 3.3% 3.9% - ------------------------------------------------------------------------------- Other 0.7% 3.3% - ------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 3/31/05 9/30/04 - ------------------------------------------------------------------------------- Common Stocks 98.1% 97.4% - ------------------------------------------------------------------------------- Temporary Cash Investments 1.9% 2.6% - ------------------------------------------------------------------------------- - ------ 5 Shareholder Fee Example (Unaudited) 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 October 1, 2004 to March 31, 2005. 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) - ------ 6 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 10/1/04 - EXPENSE 10/1/04 3/31/05 3/31/05 RATIO* - ------------------------------------------------------------------------------------------------- REAL ESTATE SHAREHOLDER FEE EXAMPLE - ------------------------------------------------------------------------------------------------- ACTUAL - ------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,062.00 $5.96 1.16% - ------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,063.00 $4.94 0.96% - ------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,060.70 $7.24 1.41% - ------------------------------------------------------------------------------------------------- HYPOTHETICAL - ------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,019.15 $5.84 1.16% - ------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,020.14 $4.84 0.96% - ------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,017.90 $7.09 1.41% - ------------------------------------------------------------------------------------------------- *Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. - ------ 7 Real Estate - Schedule of Investments MARCH 31, 2005 Shares Value - ------------------------------------------------------------------------------- COMMON STOCKS - 97.6% DIVERSIFIED COMPANIES - 7.0% - ------------------------------------------------------------------------------- 503,415 Capital Automotive REIT $ 16,673,105 - ------------------------------------------------------------------------------- 445,800 Colonial Properties Trust 17,123,178 - ------------------------------------------------------------------------------- 90,400 Cousins Properties Inc. 2,338,648 - ------------------------------------------------------------------------------- 625,200 Henderson Land Development Co. Ltd. ORD 2,781,570 - ------------------------------------------------------------------------------- 123 NTT Urban Development ORD 568,039 - ------------------------------------------------------------------------------- 52,900 Trustreet Properties, Inc. 814,131 - ------------------------------------------------------------------------------- 114,400 Vornado Realty Trust 7,924,488 - ------------------------------------------------------------------------------- 332,800 Washington REIT 9,568,000 - ------------------------------------------------------------------------------- 57,791,159 - ------------------------------------------------------------------------------- HEALTH CARE - 0.1% - ------------------------------------------------------------------------------- 33,900 Universal Health Realty Income Trust 957,675 - ------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 8.7% - ------------------------------------------------------------------------------- 62,000 Boykin Lodging Co.(1) 590,860 - ------------------------------------------------------------------------------- 259,600 Eagle Hospitality Properties Trust Inc. 2,328,612 - ------------------------------------------------------------------------------- 2,491,000 Host Marriott Corp. 41,250,960 - ------------------------------------------------------------------------------- 1,162,600 Innkeepers USA Trust 15,009,166 - ------------------------------------------------------------------------------- 573,303 InterContinental Hotels Group plc ORD 6,688,221 - ------------------------------------------------------------------------------- 438,400 Strategic Hotel Capital Inc. 6,444,480 - ------------------------------------------------------------------------------- 72,312,299 - ------------------------------------------------------------------------------- INDUSTRIALS - 9.0% - ------------------------------------------------------------------------------- 511,000 Centerpoint Properties Corp. 20,951,000 - ------------------------------------------------------------------------------- 1,443,910 Prologis 53,569,061 - ------------------------------------------------------------------------------- 74,520,061 - ------------------------------------------------------------------------------- MULTI-FAMILY RESIDENTIAL - 17.7% - ------------------------------------------------------------------------------- 86,200 AMLI Residential Properties Trust 2,361,018 - ------------------------------------------------------------------------------- 260,500 Apartment Investment and Management Co. 9,690,600 - ------------------------------------------------------------------------------- 614,500 Archstone-Smith Trust 20,960,595 - ------------------------------------------------------------------------------- 122,800 AvalonBay Communities Inc. 8,214,092 - ------------------------------------------------------------------------------- 767,000 Camden Property Trust 36,072,010 - ------------------------------------------------------------------------------- 143,600 Essex Property Trust, Inc. 9,899,784 - ------------------------------------------------------------------------------- 444,500 Gables Residential Trust 14,801,850 - ------------------------------------------------------------------------------- 378,900 GMH Communities Trust 4,436,919 - ------------------------------------------------------------------------------- 805,900 Mid-America Apartment Communities Inc. 29,415,350 - ------------------------------------------------------------------------------- 65,600 Post Properties, Inc. 2,036,224 - ------------------------------------------------------------------------------- 322,500 Town & Country Trust (The) 8,530,125 - ------------------------------------------------------------------------------- 146,418,567 - ------------------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------------------- NEIGHBORHOOD & COMMUNITY SHOPPING CENTERS - 10.6% - ------------------------------------------------------------------------------- 14,600 Cedar Shopping Centers, Inc. $ 207,904 - ------------------------------------------------------------------------------- 136,500 Equity One, Inc. 2,810,535 - ------------------------------------------------------------------------------- 340,800 Federal Realty Investors Trust 16,477,680 - ------------------------------------------------------------------------------- 701,200 Heritage Property Investment Trust 20,811,616 - ------------------------------------------------------------------------------- 797,200 Kimco Realty Corporation 42,969,080 - ------------------------------------------------------------------------------- 88,200 Regency Centers Corp. 4,200,966 - ------------------------------------------------------------------------------- 87,477,781 - ------------------------------------------------------------------------------- OFFICE MANAGEMENT - 26.9% - ------------------------------------------------------------------------------- 30,400 Alexandria Real Estate Equities Inc. 1,957,152 - ------------------------------------------------------------------------------- 819,300 Arden Realty Inc. 27,733,305 - ------------------------------------------------------------------------------- 136,700 Boston Properties Inc. 8,233,441 - ------------------------------------------------------------------------------- 580,700 Brandywine Realty Trust 16,491,880 - ------------------------------------------------------------------------------- 763,300 CarrAmerica Realty Corp. 24,082,115 - ------------------------------------------------------------------------------- 768,824 Duke Realty Corporation 22,949,396 - ------------------------------------------------------------------------------- 527,948 Equity Office Properties Trust 15,907,073 - ------------------------------------------------------------------------------- 382,100 Kilroy Realty Corp. 15,631,711 - ------------------------------------------------------------------------------- 422,500 Liberty Property Trust 16,498,625 - ------------------------------------------------------------------------------- 850,100 Mack-Cali Realty Corp. 36,001,735 - ------------------------------------------------------------------------------- 456,200 Maguire Properties, Inc. 10,894,056 - ------------------------------------------------------------------------------- 551,100 Prentiss Properties Trust 18,825,576 - ------------------------------------------------------------------------------- 136,800 SL Green Realty Corp. 7,690,896 - ------------------------------------------------------------------------------- 222,896,961 - ------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS - 0.6% - ------------------------------------------------------------------------------- 100,400 Rayonier, Inc. 4,972,812 - ------------------------------------------------------------------------------- REGIONAL MALLS - 13.7% - ------------------------------------------------------------------------------- 934,810 General Growth Properties, Inc. 31,877,021 - ------------------------------------------------------------------------------- 488,176 Pennsylvania REIT 19,683,256 - ------------------------------------------------------------------------------- 908,600 Simon Property Group, Inc. 55,042,988 - ------------------------------------------------------------------------------- 228,800 Taubman Centers Inc. 6,346,912 - ------------------------------------------------------------------------------- 112,950,177 - ------------------------------------------------------------------------------- STORAGE - 3.3% - ------------------------------------------------------------------------------- 252,810 Extra Space Storage Inc. 3,412,935 - ------------------------------------------------------------------------------- 322,600 Public Storage Inc. 18,368,844 - ------------------------------------------------------------------------------- 313,600 U-Store-It Trust 5,456,640 - ------------------------------------------------------------------------------- 27,238,419 - ------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $740,303,312) 807,535,911 - ------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 8 Real Estate - Schedule of Investments MARCH 31, 2005 Value - ------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS - 1.9% Repurchase Agreement, Bank of America Securities, LLC, (collateralized by various U.S. Treasury obligations, 3.125% -6.18%, 5/15/07-11/15/27, valued at $15,825,535), in a joint trading account at 2.57%, dated 3/31/05, due 4/1/05 (Delivery value $15,401,099) (Cost $15,400,000) $ 15,400,000 - ------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 99.5% (Cost $755,703,312) 822,935,911 - ------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES - 0.5% 4,513,865 - ------------------------------------------------------------------------------- TOTAL NET ASSETS - 100.0% $827,449,776 =============================================================================== 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 MARCH 31, 2005 - ------------------------------------------------------------------------------- ASSETS - ------------------------------------------------------------------------------- Investment securities, at value (cost of $755,703,312) $822,935,911 - --------------------------------------------------------------- Receivable for investments sold 12,262,324 - --------------------------------------------------------------- Receivable for capital shares sold 273,985 - --------------------------------------------------------------- Dividends and interest receivable 3,358,639 - ------------------------------------------------------------------------------- 838,830,859 - ------------------------------------------------------------------------------- LIABILITIES - ------------------------------------------------------------------------------- Disbursements in excess of demand deposit cash 667,879 - --------------------------------------------------------------- Payable for investments purchased 9,877,272 - --------------------------------------------------------------- Accrued management fees 766,846 - --------------------------------------------------------------- Distribution fees payable 34,543 - --------------------------------------------------------------- Service fees payable 34,543 - ------------------------------------------------------------------------------- 11,381,083 - ------------------------------------------------------------------------------- NET ASSETS $827,449,776 =============================================================================== NET ASSETS CONSIST OF: - ------------------------------------------------------------------------------- Capital (par value and paid-in surplus) $732,148,139 - --------------------------------------------------------------- Undistributed net realized gain on investment transactions 28,068,510 - --------------------------------------------------------------- Net unrealized appreciation on investments 67,233,127 - ------------------------------------------------------------------------------- $827,449,776 =============================================================================== INVESTOR CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------- Net assets $522,675,715 - --------------------------------------------------------------- Shares outstanding 22,492,940 - --------------------------------------------------------------- Net asset value per share $23.24 - ------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------- Net assets $143,182,558 - --------------------------------------------------------------- Shares outstanding 6,158,289 - --------------------------------------------------------------- Net asset value per share $23.25 - ------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------- Net assets $161,591,503 - --------------------------------------------------------------- Shares outstanding 6,947,323 - --------------------------------------------------------------- Net asset value per share $23.26 - ------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 10 Statement of Operations YEAR ENDED MARCH 31, 2005 - ------------------------------------------------------------------------------- INVESTMENT INCOME - ------------------------------------------------------------------------------- INCOME: - --------------------------------------------------------------- Dividends $ 19,350,001 - --------------------------------------------------------------- Interest 450,248 - ------------------------------------------------------------------------------- 19,800,249 - ------------------------------------------------------------------------------- EXPENSES: - --------------------------------------------------------------- Management fees 7,025,450 - --------------------------------------------------------------- Distribution fees - Advisor Class 295,577 - --------------------------------------------------------------- Service fees - Advisor Class 295,577 - --------------------------------------------------------------- Directors' fees and expenses 12,208 - --------------------------------------------------------------- Other expenses 4,954 - ------------------------------------------------------------------------------- 7,633,766 - ------------------------------------------------------------------------------- Amount reimbursed (405) - ------------------------------------------------------------------------------- 7,633,361 - ------------------------------------------------------------------------------- NET INVESTMENT INCOME 12,166,888 - ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - ------------------------------------------------------------------------------- Net realized gain on investment transactions 62,324,964 - --------------------------------------------------------------- Change in net unrealized appreciation on investments (23,159,699) - ------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN 39,165,265 - ------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 51,332,153 =============================================================================== See Notes to Financial Statements. - ------ 11 Statement of Changes in Net Assets YEARS ENDED MARCH 31, 2005 AND MARCH 31, 2004 - ------------------------------------------------------------------------------- INCREASE IN NET ASSETS 2005 2004 - ------------------------------------------------------------------------------- OPERATIONS - ------------------------------------------------------------------------------- Net investment income $ 12,166,888 $ 7,343,729 - --------------------------------------------- Net realized gain 62,324,964 42,799,68 - --------------------------------------------- Change in net unrealized appreciation (23,159,699) 79,332,958 - ------------------------------------------------------------------------------- Net increase in net assets resulting from operations 51,332,153 129,476,375 - ------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - ------------------------------------------------------------------------------- From net investment income: - --------------------------------------------- Investor Class (9,161,435) (6,654,103) - --------------------------------------------- Institutional Class (2,444,048) (1,351,811) - --------------------------------------------- Advisor Class (2,229,836) (1,115,975) - --------------------------------------------- From net realized gains: - --------------------------------------------- Investor Class (32,154,057) (1,939,003) - --------------------------------------------- Institutional Class (8,421,830) (368,420) - --------------------------------------------- Advisor Class (9,230,800) (351,604) - ------------------------------------------------------------------------------- Decrease in net assets from distributions (63,642,006) (11,780,916) - ------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - ------------------------------------------------------------------------------- Net increase in net assets from capital share transactions 281,197,182 263,319,823 - ------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS 268,887,329 381,015,282 NET ASSETS - -------------------------------------------------------------------------------- Beginning of period 558,562,447 177,547,165 - -------------------------------------------------------------------------------- End of period $827,449,776 $558,562,447 ================================================================================ See Notes to Financial Statements. - ------ 12 Notes to Financial Statements MARCH 31, 2005 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 fund determines that the market price of a portfolio security is not readily available, or that the valuation methods mentioned above do not reflect the security's fair value, such security is valued at its fair value as determined by, or in accordance with procedures adopted by, the Board of Directors or its designee if such fair value determination would materially impact a fund's net asset value. Circumstances that may cause the fund to fair value a security include: 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; or trading in a security has been halted during the trading day. 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. 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 fund records the foreign tax expense, if any, as a reduction to the net realized gain (loss) on foreign currency transactions. REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with institutions that American Century Investment Management, Inc. (ACIM) (the investment advisor) 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 (continued) - ------ 13 Notes to Financial Statements MARCH 31, 2005 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 in Net Assets and Financial Highlights of prior years have been reclassified to conform to the current year presentation. INDEMNIFICATIONS -- Under the corporation's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the fund. The risk of material loss from such claims is considered by management to be remote. 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 advisor'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 advisor that are not in the American Century family of funds, but that have the same investment team and investment strategy. (continued) - ------ 14 Notes to Financial Statements MARCH 31, 2005 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) The annual management fee schedule for each class of the fund is as follows: INVESTOR INSTITUTIONAL ADVISOR - -------------------------------------------------------------------------------- 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 year ended March 31, 2005 was 1.16%, 0.96%, and 0.91% for the Investor Class, Institutional Class and Advisor Class, 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 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. During the year ended March 31, 2005, the Advisor Class received distribution fee reimbursements of $405. The reimbursements had no impact on the ratio of operating expenses and the ratio of net investment income to average net assets. Fees incurred under the plan during the year ended March 31, 2005, 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 advisor, ACIM, the distributor of the corporation, ACIS, and the corporation's transfer agent, American Century Services, LLC (formerly American Century Services Corporation). ACIM has entered into a Subadvisory Agreement with J.P. Morgan Investment Management, Inc. (JPMIM) on behalf of the fund. The subadvisor makes investment decisions for the fund in accordance with the fund's investment objectives, policies, and restrictions under the supervision of ACIM and the Board of Directors. ACIM pays all costs associated with retaining JPMIM as the subadvisor of the fund. JPMIM is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. During the year ended March 31, 2005, 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 sells of investment securities, excluding short-term investments, for the year ended March 31, 2005, were $1,312,792,649 and $1,072,144,038, respectively. (continued) - ------ 15 Notes to Financial Statements MARCH 31, 2005 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the fund were as follows: - -------------------------------------------------------------------------------- SHARES AMOUNT - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 60,000,000 ================================================================================ Sold 14,386,470 $ 336,831,952 - -------------------------------------------- Issued in reinvestment of distributions 1,590,210 38,518,53 - -------------------------------------------- Redeemed (10,532,821) (238,141,936) - -------------------------------------------------------------------------------- Net increase 5,443,859 $ 137,208,552 ================================================================================ YEAR ENDED MARCH 31, 2004 SHARES AUTHORIZED 30,000,000 ================================================================================ Sold 5,731,167 $ 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 - -------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 20,000,000 ================================================================================ Sold 4,316,766 $ 102,211,672 - -------------------------------------------- Issued in reinvestment of distributions 427,538 10,368,377 - -------------------------------------------- Redeemed (2,157,437) (48,305,160) - -------------------------------------------------------------------------------- Net increase 2,586,867 $ 64,274,889 ================================================================================ 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 - -------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 2005 SHARES AUTHORIZED 20,000,000 ================================================================================ Sold 4,829,792 $ 112,373,294 - -------------------------------------------- Issued in reinvestment of distributions 461,765 11,207,628 - -------------------------------------------- Redeemed (1,913,596) (43,867,181) - -------------------------------------------------------------------------------- Net increase 3,377,961 $ 79,713,741 ================================================================================ 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) - ------ 16 Notes to Financial Statements MARCH 31, 2005 5. BANK LINE OF CREDIT The fund, along with certain other funds managed by ACIM, has a $575,000,000 unsecured bank line of credit agreement with JPMCB, which was renewed from $650,000,000 effective December 15, 2004. The fund may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund did not borrow from the line during the year ended March 31, 2005. 6. RISK FACTORS The fund concentrates its investments in a narrow segment of the total market. Because of this, the fund is subject to certain additional risks as compared to investing in a more diversified portfolio of investments. The fund may be subject to certain risks similar to those associated with direct investment in real estate including but not limited to: local or regional economic conditions, changes in zoning laws, changes in property values, property tax increases, overbuilding, increased competition, environmental contamination, natural disasters, and interest rate risk. 7. FEDERAL TAX INFORMATION The tax character of distributions paid during the years ended March 31, 2005 and March 31, 2004 were as follows: - -------------------------------------------------------------------------------- 2005 2004 - -------------------------------------------------------------------------------- DISTRIBUTIONS PAID FROM - -------------------------------------------------------------------------------- Ordinary income $33,137,764 $9,121,889 - -------------------------------------------------------------------------------- Long-term capital gains $30,504,242 $2,659,027 - -------------------------------------------------------------------------------- The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. As of March 31, 2005, the components of distributable earnings on a tax-basis and the federal tax cost of investments were as follows: - -------------------------------------------------------------------------------- COMPONENTS OF DISTRIBUTABLE EARNINGS AND TAX COST - -------------------------------------------------------------------------------- Federal tax cost of investments $759,160,051 ================================================================================ Gross tax appreciation of investments $69,378,526 - -------------------------------------------------------------------------------- Gross tax depreciation of investments (5,602,666) - -------------------------------------------------------------------------------- Net tax appreciation of investments $63,775,860 ================================================================================ Net tax appreciation on translation of assets and liabilities in foreign currencies $ 528 - -------------------------------------------------------------------------------- Net tax appreciation $63,776,388 ================================================================================ Undistributed ordinary income $15,461,475 - -------------------------------------------------------------------------------- Accumulated long-term gains $16,063,774 - -------------------------------------------------------------------------------- The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales and return of capital dividends received. (continued) - ------ 17 Notes to Financial Statements MARCH 31, 2005 8. OTHER TAX INFORMATION (UNAUDITED) The following information is provided pursuant to provisions of the Internal Revenue Code. The fund hereby designates $1,500,152 of qualified dividend income for the fiscal year ended March 31, 2005. During the fiscal year ended March 31, 2005, the fund distributed $30,504,242, which was designated as capital gains dividends. For corporate taxpayers, ordinary income distributions paid during the fiscal year ended March 31, 2005, of $76,066 qualify for the corporate dividends received deduction. - ------ 18 Real Estate - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 - ------------------------------------------------------------------------------------------------------- INVESTOR CLASS - ------------------------------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------- PER-SHARE DATA - ------------------------------------------ Net Asset Value, Beginning of Period $23.09 $15.83 $16.22 $14.00 $11.74 - ------------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income(1) 0.46 0.46 0.59 0.57 0.58 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 1.79 7.49 (0.44) 2.21 2.27 - ------------------------------------------------------------------------------------------------------- Total From Investment Operations 2.25 7.95 0.15 2.78 2.85 - ------------------------------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.46) (0.54) (0.54) (0.56) (0.59) - ------------------------------------------ From Net Realized Gains (1.64) (0.15) -- -- -- - ------------------------------------------------------------------------------------------------------- Total Distributions (2.10) (0.69) (0.54) (0.56) (0.59) - ------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $23.24 $23.09 $15.83 $16.22 $14.00 ======================================================================================================= TOTAL RETURN(2) 9.53% 50.97% 0.93% 20.23% 24.57% - ------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.16% 1.17% 1.18% 1.20% 1.19% - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 1.88% 2.28% 3.74% 3.83% 4.35% - ------------------------------------------ Portfolio Turnover Rate 171% 158% 162% 156% 242% - ------------------------------------------ Net Assets, End of Period (in thousands) $522,676 $393,604 $134,898 $107,599 $74,776 - ------------------------------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 19 Real Estate - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 - -------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 - -------------------------------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $23.10 $15.85 $16.23 $14.01 $11.75 - -------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------- Net Investment Income(1) 0.44 0.51 0.63 0.59 0.60 - ----------------------------------------- Net Realized and Unrealized Gain (Loss) 1.86 7.47 (0.44) 2.22 2.28 - -------------------------------------------------------------------------------------------------------- Total From Investment Operations 2.30 7.98 0.19 2.81 2.88 - -------------------------------------------------------------------------------------------------------- Distributions - ----------------------------------------- From Net Investment Income (0.51) (0.58) (0.57) (0.59) (0.62) - ----------------------------------------- From Net Realized Gains (1.64) (0.15) -- -- -- - -------------------------------------------------------------------------------------------------------- Total Distributions (2.15) (0.73) (0.57) (0.59) (0.62) - -------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $23.25 $23.10 $15.85 $16.23 $14.01 ======================================================================================================== TOTAL RETURN(2) 9.74% 51.14% 1.19% 20.45% 24.80% - -------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.96% 0.97% 0.98% 1.00% 0.99% - ----------------------------------------- Ratio of Net Investment Income to Average Net Assets 2.08% 2.48% 3.94% 4.03% 4.55% - ----------------------------------------- Portfolio Turnover Rate 171% 158% 162% 156% 242% - ----------------------------------------- Net Assets, End of Period (in thousands) $143,183 $82,488 $23,371 $16,305 $12,390 - -------------------------------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 20 Real Estate - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 - -------------------------------------------------------------------------------------------------------- ADVISOR CLASS - -------------------------------------------------------------------------------------------------------- 2005 2004 2003 2002 2001 - -------------------------------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $23.11 $15.83 $16.22 $14.00 $11.74 - -------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------- Net Investment Income(1) 0.35 0.42 0.55 0.53 0.55 - ----------------------------------------- Net Realized and Unrealized Gain (Loss) 1.84 7.50 (0.44) 2.21 2.27 - -------------------------------------------------------------------------------------------------------- Total From Investment Operations 2.19 7.92 0.11 2.74 2.82 - -------------------------------------------------------------------------------------------------------- Distributions - ----------------------------------------- From Net Investment Income (0.40) (0.49) (0.50) (0.52) (0.56) - ----------------------------------------- From Net Realized Gains (1.64) (0.15) -- -- -- - -------------------------------------------------------------------------------------------------------- Total Distributions (2.04) (0.64) (0.50) (0.52) (0.56) - -------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $23.26 $23.11 $15.83 $16.22 $14.00 ======================================================================================================== TOTAL RETURN(2) 9.30% 50.66% 0.69% 19.93% 24.28% - -------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.41% 1.42% 1.43% 1.45% 1.44% - ----------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.63% 2.03% 3.49% 3.58% 4.10% - ----------------------------------------- Portfolio Turnover Rate 171% 158% 162% 156% 242% - ----------------------------------------- Net Assets, End of Period (in thousands) $161,592 $82,471 $19,278 $16,759 $9,046 - -------------------------------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total return assumes reinvestment of net investment income and capital gains distributions, if any. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. See Notes to Financial Statements. - ------ 21 Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders American Century Capital Portfolios, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Real Estate Fund (the "Fund"), one of the funds comprising American Century Capital Portfolios, Inc., as of March 31, 2005, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Real Estate Fund as of March 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Kansas City, Missouri May 12, 2005 - ------ 22 Management The individuals listed below serve as directors or officers of the fund. Each director serves until his or her successor is duly elected and qualified or until he or she retires. Mandatory retirement age for independent directors is 72. Those listed as interested directors are "interested" primarily by virtue of their engagement as officers of American Century Companies, Inc. (ACC) or its wholly-owned, direct or indirect, subsidiaries, including the fund's investment advisor, American Century Investment Management, Inc. (ACIM); the fund's principal underwriter, American Century Investment Services, Inc. (ACIS); and the fund's transfer agent, American Century Services, LLC (ACS LLC). The other directors (more than three-fourths of the total number) are independent; that is, they have never been employees or officers of, and have no financial interest in, ACC or any of its wholly-owned subsidiaries, including ACIM, ACIS, and ACS LLC. The directors serve in this capacity for six registered investment companies in the American Century family of funds. All persons named as officers of the fund also serve in a similar capacity for the other 13 investment companies advised by ACIM or American Century Global Investment Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise noted. Only officers with policy-making functions are listed. No officer is compensated for his or her service as an officer of the fund. The listed officers are interested persons of the fund and are appointed or re-appointed on an annual basis. INDEPENDENT DIRECTORS - -------------------------------------------------------------------------------- THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1940 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 24 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Formerly Chief Executive Officer/Treasurer, Associated Bearings Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1945 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 7 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, Midwest Research Institute NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- D.D. (DEL) HOCK, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1935 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 8 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Chairman, Public Service Company of Colorado NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Allied Motion Technologies, Inc. - -------------------------------------------------------------------------------- (continued) - ------ 23 Management INDEPENDENT DIRECTORS (CONTINUED) - -------------------------------------------------------------------------------- DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1937 POSITION(S) HELD WITH FUND: Director, Chairman of the Board LENGTH OF TIME SERVED (YEARS): 9 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Western Investments, Inc.; Retired Chairman of the Board, Butler Manufacturing Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Atlas-Copco, North America Inc. - -------------------------------------------------------------------------------- GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1943 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer, and Founder, Sayers 40, Inc., a technology products and service provider NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Triad Hospitals, Inc. - -------------------------------------------------------------------------------- M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1945 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 10 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President and Chief Integration Officer, Sprint Corporation (September 2003 to present); Senior Vice President-Financial Services, Sprint Corporation (January 2003 to September 2003); Senior Vice President-Finance, Global Markets Group, Sprint Corporation (November 1998 to January 2003) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director, Euronet Worldwide, Inc. - -------------------------------------------------------------------------------- TIMOTHY S. WEBSTER, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1961 POSITION(S) HELD WITH FUND: Director LENGTH OF TIME SERVED (YEARS): 3 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive Officer, American Italian Pasta Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, American Italian Pasta Company - -------------------------------------------------------------------------------- INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JAMES E. STOWERS, JR.(1), 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1924 POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman LENGTH OF TIME SERVED (YEARS): 46 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Director, and Controlling Shareholder, ACC; Chairman, ACC (January 1995 to December 2004); Director, ACIM, ACGIM, ACS LLC and other ACC subsidiaries NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- JAMES E. STOWERS III(1), 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1959 POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman LENGTH OF TIME SERVED (YEARS): 14 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, ACC (January 2005 to present), Co-Chairman, ACC (September 2000 to December 2004); Chief Executive Officer, ACC (June 1996 to September 2000); Chairman, ACS LLC and other ACC subsidiaries; Director, ACC, ACIM, ACGIM, ACS LLC and other ACC subsidiaries NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 54 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - -------------------------------------------------------------------------------- (1) James E. Stowers, Jr. is the father of James E. Stowers III. (continued) - ------ 24 Management OFFICERS - -------------------------------------------------------------------------------- WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1955 POSITION(S) HELD WITH FUND: President LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC (September 2000 to present); President, ACC (June 1997 to present); Chief Operating Officer, ACC (June 1996 to September 2000); Also serves as: Chief Executive Officer and President, ACIS, ACGIM, ACIM and other ACC subsidiaries; Executive Vice President, ACS LLC; Director, ACC, ACIS, ACIM, ACGIM, ACS LLC and other ACC subsidiaries - -------------------------------------------------------------------------------- ROBERT T. JACKSON, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1946 POSITION(S) HELD WITH FUND: Executive Vice President LENGTH OF TIME SERVED (YEARS): 9 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Administrative Officer, ACC (August 1997 to present); Chief Financial Officer, ACC (May 1995 to October 2002); Executive Vice President, ACC (May 1995 to present); Also serves as: Chief Executive Officer, Chief Financial Officer and President, ACS LLC, Chief Financial Officer and Executive Vice President, ACGIM, ACIM, ACIS and other ACC subsidiaries; Treasurer, ACGIM, ACIM and other ACC subsidiaries; Director, ACC and other subsidiaries - -------------------------------------------------------------------------------- MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1956 POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer, and Chief Accounting Officer LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Assistant Treasurer, ACC (January 1995 to present); Also serves as Senior Vice President, ACS LLC; Assistant Treasurer, ACGIM, ACIM, ACIS, ACS LLC and other ACC subsidiaries - -------------------------------------------------------------------------------- DAVID C. TUCKER, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1958 POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel LENGTH OF TIME SERVED (YEARS): 4 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (February 2001 to present); General Counsel, ACC (June 1998 to present); Also serves as: Senior Vice President and General Counsel, ACGIM, ACIM, ACIS, ACS LLC and other ACC subsidiaries - -------------------------------------------------------------------------------- CHARLES C.S. PARK, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1967 POSITION(S) HELD WITH FUND: Vice President and Chief Compliance Officer LENGTH OF TIME SERVED (YEARS): 4 and less than 1 year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACS LLC, ACIM and ACGIM (March 2005 to present); Vice President, ACS LLC (February 2000 to present); Assistant General Counsel, ACS LLC (January 1998 to March 2005) - -------------------------------------------------------------------------------- ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1966 POSITION(S) HELD WITH FUND: Controller LENGTH OF TIME SERVED (YEARS): 7 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS LLC (February 2000 to present); Controller-Fund Accounting, ACS LLC (June 1997 to present) - -------------------------------------------------------------------------------- JON ZINDEL, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1967 POSITION(S) HELD WITH FUND: Tax Officer LENGTH OF TIME SERVED (YEARS): 7 PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (October 2001 to present); Vice President, Corporate Tax, ACS LLC (April 1998 to present); Also serves as: Vice President, ACGIM, ACIM, ACIS and other ACC subsidiaries - -------------------------------------------------------------------------------- The SAI has additional information about the fund's directors and is available without charge upon request by calling 1-800-345-2021. - ------ 25 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 Institutional Class shares is lower than that of Investor Class shares. The total expense ratio of Advisor Class shares is higher 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. All classes of shares represent a pro rata interest in the fund and generally have the same rights and preferences. - ------ 26 Additional Information RETIREMENT ACCOUNT INFORMATION As required by law, any distributions you receive from an IRA or certain 403(b), 457 and qualified plans [those not eligible for rollover to an IRA or to another qualified plan] are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld. If you don't want us to withhold on this amount, you must notify us to not withhold the federal income tax. Even if you plan to roll over the amount you withdraw to another tax-deferred account, the withholding rate still applies to the withdrawn amount unless we have received notice not to withhold federal income tax prior to the withdrawal. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election. Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don't have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules. PROXY VOTING GUIDELINES American Century Investment Management, Inc., the fund's investment advisor, 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 advisor 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 advisor 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) - ------ 27 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. 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. - ------ 28 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. - ------ 29 Notes - ------ 30 Notes - ------ 31 Notes - ------ 32 CONTACT US AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR SERVICES REPRESENTATIVE: 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 ADVISOR: 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 Proprietary Holdings, Inc. American Century Investment Services, Inc., Distributor (c)2005 American Century Proprietary Holdings, Inc. All rights reserved. 0505 SH-ANN-43385N
ITEM 2. CODE OF ETHICS. a. The registrant has adopted a Code of Ethics for Senior Financial Officers that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions. b. No response required. c. None. d. None. e. Not applicable. f. The registrant's Code of Ethics for Senior Financial Officers was filed as Exhibit 10(a) to American Century Mutual Fund, Inc.'s Annual Certified Shareholder Report on Form N-CSR, File No. 811-0816, on December 23, 2003, and is incorporated herein by reference. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The registrant's board has determined that the registrant has at least one audit committee financial expert serving on its audit committee. (a)(2) D. D. (Del) Hock, Donald H. Pratt and Timothy Webster are the registrant's designated audit committee financial experts. They are "independent" as defined in Item 3 of Form N-CSR. (a)(3) Not applicable. (b) No response required. (c) No response required. (d) No response required. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees. The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were as follows: FY 2004: $92,327 FY 2005: $115,236 (b) Audit-Related Fees. The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item were as follows: For services rendered to the registrant: FY 2004: $0 FY 2005: $0 Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X (relating to certain engagements for non-audit services with the registrant's investment adviser and its affiliates): FY 2004: $0 FY 2005: $0 (c) Tax Fees. The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were as follows: For services rendered to the registrant: FY 2004: $10,714 FY 2005: $14,395 These services included review of federal and state income tax forms and federal excise tax forms. Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X (relating to certain engagements for non-audit services with the registrant's investment adviser and its affiliates): FY 2004: $0 FY 2005: $0 (d) All Other Fees. The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were as follows: For services rendered to the registrant: FY 2004: $0 FY 2005: $0 Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X (relating to certain engagements for non-audit services with the registrant's investment adviser and its affiliates): FY 2004: $0 FY 2005: $0 (e)(1) In accordance with paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation S-X, before the accountant is engaged by the registrant to render audit or non-audit services, the engagement is approved by the registrant's audit committee. Pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, the registrant's audit committee also pre-approves its accountant's engagements for non-audit services with the registrant's investment adviser, its parent company, and any entity controlled by, or under common control with the investment adviser that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant. (e)(2) All services described in each of paragraphs (b) through (d) of this Item were pre-approved before the engagement by the registrant's audit committee pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation S-X. Consequently, none of such services were required to be approved by the audit committee pursuant to paragraph (c)(7)(i)(C). (f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than 50%. (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant were as follows: FY 2004: $640,669 FY 2005: $176,286 (h) The registrant's investment adviser and accountant have notified the registrant's audit committee of all non-audit services that were rendered by the registrant's accountant to the registrant's investment adviser, its parent company, and any entity controlled by, or under common control with the investment adviser that provides services to the registrant, which services were not required to be pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The notification provided to the registrant's audit committee included sufficient details regarding such services to allow the registrant's audit committee to consider the continuing independence of its principal accountant. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. 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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The registrant's board has adopted procedures by which shareholders may recommend nominees to the board. The Governance Committee of the board is responsible for identifying, evaluating and recommending qualified candidates for election to the board. While the Governance Committee largely considers nominees from searches that it conducts, the Committee will consider candidates submitted by shareholders. Any shareholder wishing to submit a candidate for consideration should send the following information to the Corporate Secretary, American Century Funds, P. O. Box 41041, Kansas City, Missouri 64141: Shareholder's name, the fund name and number of fund shares owned and length of period held; Name, age and address of the candidate; A detailed resume describing among other things the candidate's educational background, occupation, employment history, financial knowledge and expertise and material outside commitments (e.g., memberships on other boards and committees, charitable foundations, etc.); Any other information relating to the candidate that is required to be disclosed in solicitations of proxies for election of directors in an election contest pursuant to Regulation 14A under the Securities Exchange Act of 1934; Number of fund shares owned by the candidate and length of time held; A supporting statement which (i) describes the candidate's reasons for seeking election to the Board of Directors and (ii) documents his/her ability to satisfy the director qualifications described in the board's policy; A signed statement from the candidate confirming his/her willingness to serve on the Board of Directors. The Corporate Secretary will promptly forward such materials to the Governance Committee chairman. The Corporate Secretary also will maintain copies of such materials for future reference by the Governance Committee when filling board positions. Shareholders may submit potential director candidates at any time pursuant to these procedures. The Governance Committee will consider such candidates if a vacancy arises or if the board decides to expand its membership, and at such other times as the Governance Committee deems necessary or appropriate. ITEM 11. 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 second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Registrant's Code of Ethics for Senior Financial Officers, which is the subject of the disclosure required by Item 2 of Form N-CSR, was filed as Exhibit 10(a) to American Century Mutual Fund, Inc.'s Certified Shareholder Report on Form N-CSR, File No. 811-3706, on December 23, 2003. (a)(2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are filed and attached hereto as Exhibit 99.302CERT. (a)(3) Not applicable. (b) A certification by the registrant's chief executive officer and chief financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is furnished and attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. By: /s/ William M. Lyons ------------------------------------------- Name: William M. Lyons Title: President Date: May 27, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ William M. Lyons ------------------------------------------- Name: William M. Lyons Title: President (principal executive officer) Date: May 27, 2005 By: /s/ Maryanne L. Roepke ------------------------------------------- Name: Maryanne L. Roepke Title: Sr. Vice President, Treasurer, and Chief Accounting Officer (principal financial officer) Date: May 27, 2005