UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-7820 --------------------------------------------- AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) DAVID C. TUCKER, ESQ., 4500 MAIN STREET, 9TH FLOOR, KANSAS CITY, MISSOURI 64111 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 816-531-5575 ---------------------------- Date of fiscal year end: 03-31 ------------------------------------------------------ Date of reporting period: 09-30-2005 ------------------------------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS American Century Investments SEMIANNUAL REPORT [photo of man and woman] SEPTEMBER 30, 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. . . . . . . . . . . . . . . . . . . . 29 Statement of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . 31 Statement of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . 32 Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 34 Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 OTHER INFORMATION Approval of Management Agreements for Equity Income and Small Cap Value. . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Share Class Information. . . . . . . . . . . . . . . . . . . . . . . . . . 60 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Index Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 The opinions expressed in each of the Portfolio Commentaries reflect those of the portfolio management team as of the date of the report, and do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] JAMES E. STOWERS III WITH JAMES E. STOWERS, JR. We are pleased to provide you with the semiannual report for the Equity Income, Mid Cap Value, and Small Cap Value funds for the six months ended September 30, 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 annual report dated March 31, 2006, 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 Income - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2005 -------------------------------- AVERAGE ANNUAL RETURNS - ------------------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - ------------------------------------------------------------------------------------------- INVESTOR CLASS 2.01% 8.79% 11.01% 13.17% 13.85% 8/1/94 - ------------------------------------------------------------------------------------------- RUSSELL 3000 VALUE INDEX(2) 5.85% 16.78% 6.42% 11.59% 12.66%(3) -- - ------------------------------------------------------------------------------------------- S&P 500 INDEX(2) 5.02% 12.25% -1.49% 9.49% 11.17%(3) -- - ------------------------------------------------------------------------------------------- LIPPER EQUITY INCOME INDEX(2) 4.81% 13.52% 3.98% 8.79% 9.77%(3) -- - ------------------------------------------------------------------------------------------- Institutional Class 1.98% 8.87% 11.19% -- 9.87% 7/8/98 - ------------------------------------------------------------------------------------------- Advisor Class 1.88% 8.38% 10.74% -- 11.32% 3/7/97 - ------------------------------------------------------------------------------------------- C Class 7/13/01 No sales charge* 1.38% 7.59% -- -- 7.67% With sales charge* 0.38% 7.59% -- -- 7.67% - ------------------------------------------------------------------------------------------- R Class 1.76%(4) 8.27%(4) -- -- 11.53%(4) 8/29/03 - ------------------------------------------------------------------------------------------- * Sales charges include contingent deferred sales charges (CDSCs), as applicable. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. Please see the Share Class Information page 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) Total returns for periods less than one year are not annualized. (2) (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. (3) Since 7/31/94, the date nearest the Investor Class's inception for which data are available. (4) 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 September 30, 1995
ONE-YEAR RETURNS OVER 10 YEARS Periods ended September 30 - ----------------------------------------------------------------------------------------------- 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 - ----------------------------------------------------------------------------------------------- Investor Class 20.89% 34.35% 1.67% 15.98% 6.80% 14.30% -3.72% 20.17% 17.22% 8.79% - ----------------------------------------------------------------------------------------------- Russell 3000 Value Index 17.48% 42.33% 1.96% 17.64% 9.35% -7.98% -15.89% 24.89% 20.89% 16.78% - ----------------------------------------------------------------------------------------------- S&P 500 Index 20.33% 40.45% 9.05% 27.80% 13.28% -26.62% -20.49% 24.40% 13.87% 12.25% - ----------------------------------------------------------------------------------------------- Lipper Equity Income Index 15.51% 33.25% 1.29% 13.36% 8.10% -8.82% -16.74% 20.48% 17.09% 13.52% - ----------------------------------------------------------------------------------------------- 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 2.01%* for the six months ended September 30, 2005, trailing the Lipper Equity Income Index, which was up 4.81%. 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 13.85%, significantly ahead of the 9.77%** figure posted by the Lipper Equity Income Index and the S&P 500 Index's 11.17%** return. MARKET ENVIRONMENT Equity investors faced substantial challenges during the period covered by this report, including rising short-term interest rates, record energy prices, an abrupt drop in consumer confidence and one of the worst natural catastrophes in the nation's history. Nonetheless, the period was marked by gains for the broad stock market, as the S&P 500 gained 5.02%. Growth stocks generally performed better than value shares and investors continued their preference for lower-quality stocks, both of which presented challenges for Equity Income, which generally invests in higher-quality value stocks. UTILITIES LEAD PORTFOLIO Utility stocks proved to be the portfolio's largest contributors to absolute performance. On the electric side, FPL Group, Inc. emerged as the portfolio's top contributor. This public utility holding company's main subsidiary is Florida Power & Light Co., one of the best-managed, lowest-cost utilities in the sector. FPL Group has a strong balance sheet and has consistently grown its dividend over the last several years. Our gas utilities were led by Charlotte-based Piedmont Natural Gas Co., Inc., which serves customers in the Carolinas and Tennessee. This year marked the 27th consecutive year that Piedmont has raised its dividend. STRENGTH IN ENERGY In energy, our portfolio included integrated oil companies Exxon Mobil Corp. and BP Plc, as well as Unocal Corp. on the exploration and production side. Each of these companies delivered TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Bank of America Corp. 4.7% 1.0% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 3.5% 3.2% - -------------------------------------------------------------------------------- International Paper Co., 3.73%, 6/20/21 3.1% 2.2% - -------------------------------------------------------------------------------- Verizon Global Funding Corp., 0.11%, 5/15/21 3.1% 1.6% - -------------------------------------------------------------------------------- Kraft Foods Inc. Cl A 2.9% 1.1% - -------------------------------------------------------------------------------- Commerce Bancshares, Inc. 2.9% 3.4% - -------------------------------------------------------------------------------- FPL Group, Inc., 8.00%, 2/16/06 2.4% 2.7% - -------------------------------------------------------------------------------- du Pont (E.I.) de Nemours & Co. 2.3% 1.5% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 2.2% 2.8% - -------------------------------------------------------------------------------- BP plc ADR 2.1% 2.0% - -------------------------------------------------------------------------------- * All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. ** Since 7/31/1994, the date nearest the Investor Class's inception for which data are available. (continued) - ------ 4 Equity Income - Portfolio Commentary exceptionally strong results for the second quarter as they generally benefited from rapidly rising oil and gas prices, and widened margins for refinery and chemical segments. Unocal also received takeover proposals from Chevron Corp. and CNOOC Limited, an affiliate of China National Offshore Oil Co. The company was purchased by Chevron in August. FINANCIALS ADD VALUE Equity Income's financial stocks provided mixed results. In real estate, Rayonier, Inc. was a top contributor. Based in Florida, the company owns and manages timberland in the U.S. and New Zealand. Having benefited from rising log prices and strong real estate markets, the company is returning money to investors. In September, Rayonier announced a 14% increase in its dividend--on top of an 11% dividend increase in the first quarter. The sector also held one of our largest detractors, Bank of America Corp. Profits for commercial banks have been squeezed by rising short-term rates on one side (a rising cost for capital) and relatively flat longer-term rates at which they can lend on the other. In addition, investors are closely watching Bank of America's planned integration of credit card giant MBNA, which it agreed to purchase in June. We continue to own this high-quality company. MATERIALS COMPANIES DETRACT The materials sector slowed the portfolio the most during the period as high energy and raw material prices dampened the results of chemical companies like E.I. du Pont de Nemours & Co., our largest detractor, and container companies such as Bemis Co., Inc., a major producer of flexible packaging for the food industry. We continue to hold both positions. LOOKING AHEAD Equity income seeks to provide current income, with capital appreciation as a secondary objective. We will continue to look for securities with a favorable income-paying history, as well as securities of companies that appear to be undervalued and have the potential to increase in price. This strategy has been in place since the fund's inception and has delivered attractive risk-adjusted returns. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Commercial Banks 11.4% 10.1% - -------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 8.6% 12.3% - -------------------------------------------------------------------------------- Diversified Telecommunication Services 8.1% 6.0% - -------------------------------------------------------------------------------- Food Products 5.8% 2.9% - -------------------------------------------------------------------------------- Electric Utilities 5.7% 8.5% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Common Stocks and Options 68.8% 61.5% - -------------------------------------------------------------------------------- Convertible Bonds 26.4% 31.2% - -------------------------------------------------------------------------------- Convertible Preferred Stocks 4.4% 6.8% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 99.6% 99.5% - -------------------------------------------------------------------------------- Temporary Cash Investments 1.4% 0.6% - -------------------------------------------------------------------------------- Other Assets and Liabilities (1.0)% (0.1)% - -------------------------------------------------------------------------------- - ------ 5 Equity Income - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 68.7% AEROSPACE & DEFENSE -- 1.0% - -------------------------------------------------------------------------------- 1,419,557 Honeywell International Inc. $ 53,233,388 - -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS -- 0.3% - -------------------------------------------------------------------------------- 191,400 United Parcel Service, Inc. Cl B 13,231,482 - -------------------------------------------------------------------------------- AUTOMOBILES -- 0.3% - -------------------------------------------------------------------------------- 542,000 General Motors Corp.(1) 16,590,620 - -------------------------------------------------------------------------------- BEVERAGES -- 0.8% - -------------------------------------------------------------------------------- 629,600 Anheuser-Busch Companies, Inc. 27,097,984 - -------------------------------------------------------------------------------- 297,100 Coca-Cola Company (The) 12,831,749 - -------------------------------------------------------------------------------- 39,929,733 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.3% - -------------------------------------------------------------------------------- 430,100 Masco Corp. 13,195,468 - -------------------------------------------------------------------------------- CHEMICALS -- 3.7% - -------------------------------------------------------------------------------- 603,300 Air Products & Chemicals, Inc. 33,265,962 - -------------------------------------------------------------------------------- 3,028,300 du Pont (E.I.) de Nemours & Co. 118,618,511 - -------------------------------------------------------------------------------- 933,300 International Flavors & Fragrances Inc. 33,262,812 - -------------------------------------------------------------------------------- 544,700 Olin Corp. 10,343,853 - -------------------------------------------------------------------------------- 195,491,138 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 11.4% - -------------------------------------------------------------------------------- 5,917,900 Bank of America Corp. 249,143,589 - -------------------------------------------------------------------------------- 682,900 BB&T Corporation 26,667,245 - -------------------------------------------------------------------------------- 2,912,064 Commerce Bancshares, Inc. 149,913,055 - -------------------------------------------------------------------------------- 545,900 Fifth Third Bancorp 20,050,907 - -------------------------------------------------------------------------------- 602,500 Mercantile Bankshares Corporation 32,462,700 - -------------------------------------------------------------------------------- 1,659,300 SunTrust Banks, Inc. 115,238,385 - -------------------------------------------------------------------------------- 214,579 Whitney Holding Corp. 5,802,216 - -------------------------------------------------------------------------------- 599,278,097 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 5.2% - -------------------------------------------------------------------------------- 2,403,500 Pitney Bowes, Inc. 100,322,091 - -------------------------------------------------------------------------------- 2,325,043 Republic Services, Inc. Cl A 82,050,767 - -------------------------------------------------------------------------------- 3,192,045 Waste Management, Inc. 91,324,407 - -------------------------------------------------------------------------------- 273,697,265 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 0.3% - -------------------------------------------------------------------------------- 1,068,000 Nokia Oyj ADR 18,059,880 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 0.7% - -------------------------------------------------------------------------------- 1,039,000 Diebold, Inc. 35,803,940 - -------------------------------------------------------------------------------- 32,600 International Business Machines Corp. 2,615,172 - -------------------------------------------------------------------------------- 38,419,112 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 0.8% - -------------------------------------------------------------------------------- 1,663,100 Bemis Co., Inc. $ 41,078,570 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.8% - -------------------------------------------------------------------------------- 3,257,500 BellSouth Corp. 85,672,250 - -------------------------------------------------------------------------------- 120,200 Commonwealth Telephone Enterprises, Inc. 4,531,540 - -------------------------------------------------------------------------------- 535,080 Iowa Telecommunications Services Inc. 9,000,046 - -------------------------------------------------------------------------------- 1,393,800 Verizon Communications 45,563,322 - -------------------------------------------------------------------------------- 144,767,158 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 3.3% - -------------------------------------------------------------------------------- 2,064,878 IDACORP, Inc.(2) 62,214,774 - -------------------------------------------------------------------------------- 1,840,300 Pepco Holdings, Inc. 42,823,781 - -------------------------------------------------------------------------------- 2,904,249 Westar Energy Inc. 70,079,529 - -------------------------------------------------------------------------------- 175,118,084 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 2.8% - -------------------------------------------------------------------------------- 1,093,700 Emerson Electric Co. 78,527,660 - -------------------------------------------------------------------------------- 1,433,356 Hubbell Inc. Cl B 67,267,397 - -------------------------------------------------------------------------------- 145,795,057 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 0.5% - -------------------------------------------------------------------------------- 938,500 Albertson's Inc. 24,072,525 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 5.4% - -------------------------------------------------------------------------------- 22,200 ConAgra Foods, Inc. 549,450 - -------------------------------------------------------------------------------- 769,500 General Mills, Inc. 37,089,900 - -------------------------------------------------------------------------------- 2,496,500 H.J. Heinz Company 91,222,110 - -------------------------------------------------------------------------------- 5,044,329 Kraft Foods Inc. Cl A 154,306,024 - -------------------------------------------------------------------------------- 283,167,484 - -------------------------------------------------------------------------------- GAS UTILITIES -- 3.3% - -------------------------------------------------------------------------------- 501,791 Cascade Natural Gas Corp. 10,923,990 - -------------------------------------------------------------------------------- 733,400 NICOR Inc. 30,824,802 - -------------------------------------------------------------------------------- 2,090,714 Piedmont Natural Gas Co., Inc. 52,623,271 - -------------------------------------------------------------------------------- 2,424,700 WGL Holdings Inc.(2) 77,905,611 - -------------------------------------------------------------------------------- 172,277,674 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.3% - -------------------------------------------------------------------------------- 483,577 Snap-on Incorporated 17,466,801 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 2.6% - -------------------------------------------------------------------------------- 486,200 Clorox Company 27,003,548 - -------------------------------------------------------------------------------- 1,179,100 Colgate-Palmolive Co. 62,244,689 - -------------------------------------------------------------------------------- 788,600 Kimberly-Clark Corp. 46,945,358 - -------------------------------------------------------------------------------- 136,193,595 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 6 Equity Income - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- INSURANCE -- 2.2% - -------------------------------------------------------------------------------- 336,900 Allstate Corp. $ 18,627,201 - -------------------------------------------------------------------------------- 432,100 American International Group, Inc. 26,772,916 - -------------------------------------------------------------------------------- 805,723 CNA Surety Corp.(3) 11,457,381 - -------------------------------------------------------------------------------- 1,912,836 Marsh & McLennan Companies, Inc. 58,131,086 - -------------------------------------------------------------------------------- 114,988,584 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 0.2% - -------------------------------------------------------------------------------- 528,800 Mattel, Inc. 8,820,384 - -------------------------------------------------------------------------------- MEDIA -- 0.9% - -------------------------------------------------------------------------------- 848,100 Dow Jones & Co. Inc. 32,388,939 - -------------------------------------------------------------------------------- 458,000 Tribune Co. 15,521,620 - -------------------------------------------------------------------------------- 47,910,559 - -------------------------------------------------------------------------------- METALS & MINING -- 0.6% - -------------------------------------------------------------------------------- 1,109,400 Alcoa Inc. 27,091,548 - -------------------------------------------------------------------------------- 273,300 Compass Minerals International Inc. 6,285,900 - -------------------------------------------------------------------------------- 33,377,448 - -------------------------------------------------------------------------------- MULTI-UTILITIES -- 3.4% - -------------------------------------------------------------------------------- 1,567,774 Ameren Corp. 83,860,231 - -------------------------------------------------------------------------------- 1,625,700 Consolidated Edison, Inc. 78,927,735 - -------------------------------------------------------------------------------- 790,100 XCEL Energy Inc. 15,493,861 - -------------------------------------------------------------------------------- 178,281,827 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 7.6% - -------------------------------------------------------------------------------- 1,592,300 BP plc ADR 112,814,455 - -------------------------------------------------------------------------------- 2,906,691 Exxon Mobil Corp. 184,691,146 - -------------------------------------------------------------------------------- 1,548,792 Royal Dutch Shell plc ADR 101,662,707 - -------------------------------------------------------------------------------- 399,168,308 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 0.8% - -------------------------------------------------------------------------------- 580,583 Weyerhaeuser Co. 39,915,081 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 3.7% - -------------------------------------------------------------------------------- 1,904,500 Abbott Laboratories 80,750,800 - -------------------------------------------------------------------------------- 896,300 Bristol-Myers Squibb Co. 21,564,978 - -------------------------------------------------------------------------------- 2,519,500 Merck & Co., Inc. 68,555,595 - -------------------------------------------------------------------------------- 1,043,200 Pfizer, Inc. 26,048,704 - -------------------------------------------------------------------------------- 196,920,077 - -------------------------------------------------------------------------------- REAL ESTATE -- 0.8% - -------------------------------------------------------------------------------- 751,922 Rayonier, Inc. 43,325,746 - -------------------------------------------------------------------------------- ROAD & RAIL -- 0.2% - -------------------------------------------------------------------------------- 150,261 Union Pacific Corp. 10,773,714 - -------------------------------------------------------------------------------- SOFTWARE -- 1.0% - -------------------------------------------------------------------------------- 1,995,600 Microsoft Corporation 51,346,788 - -------------------------------------------------------------------------------- Shares/Principal Amount Value - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 1.5% - -------------------------------------------------------------------------------- 908,500 Freddie Mac $ 51,293,910 - -------------------------------------------------------------------------------- 1,196,073 Washington Federal, Inc. 26,983,407 - -------------------------------------------------------------------------------- 78,277,317 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $3,312,997,349) 3,604,168,964 - -------------------------------------------------------------------------------- PURCHASED PUT OPTIONS -- 0.1% CONTRACTS -- 0.1% - -------------------------------------------------------------------------------- 5,420 General Motors Corp., strike at $35.00, expires 12/17/05 (Cost $2,230,698) 2,872,600 - -------------------------------------------------------------------------------- CONVERTIBLE BONDS -- 26.4% BIOTECHNOLOGY -- 0.4% - -------------------------------------------------------------------------------- $ 335,400 Goldman Sachs Group, Inc. (The), (convertible into Chiron Corp.), 5.00%, 11/21/05 (Acquired 11/12/04, Cost $10,722,738)(4)(5) 12,811,944 - -------------------------------------------------------------------------------- 155,000 Merrill Lynch & Co., Inc., (convertible into Chiron Corp.), 7.54%, 5/9/06 (Acquired 5/4/05, Cost $5,456,806)(4)(5) 5,940,375 - -------------------------------------------------------------------------------- 18,752,319 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.8% - -------------------------------------------------------------------------------- 92,910,000 Masco Corp., 2.92%, 7/20/31(6) 43,087,013 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 0.3% - -------------------------------------------------------------------------------- 433,500 Merrill Lynch & Co., Inc., (convertible into Nuveen Investments), 6.75%, 10/15/07 (Acquired 4/6/05-5/4/05, Cost $14,718,555)(4)(5) 16,364,625 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 0.5% - -------------------------------------------------------------------------------- 532,000 Goldman Sachs Group, Inc. (The), (convertible into Cisco Systems, Inc.), 5.60%, 5/22/06 (Acquired 5/12/05, Cost $9,994,258)(4)(5) 9,755,284 - -------------------------------------------------------------------------------- 835,600 Morgan Stanley, (convertible into Cisco Systems, Inc.), 5.90%, 5/12/06 (Acquired 5/5/05, Cost $14,986,486)(4)(5) 15,003,198 - -------------------------------------------------------------------------------- 24,758,482 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 0.8% - -------------------------------------------------------------------------------- 245,000 Goldman Sachs Group, Inc., (convertible into Lexmark International Group), 6.60%, 5/3/06 (Acquired 7/27/05, Cost $15,582,000)(4)(5) 15,047,655 - -------------------------------------------------------------------------------- 46,218,000 Hewlett-Packard Co., 4.36%, 10/14/17(6) 27,441,937 - -------------------------------------------------------------------------------- 42,489,592 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 7 Equity Income - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 5.3% - -------------------------------------------------------------------------------- $ 206,600 Citigroup Global Markets Holdings Inc., (convertible into Commonwealth Telephone Enterprises, Inc.), 3.82%, 3/20/06 (Acquired 3/10/05, Cost $9,999,440)(4)(5) $ 10,023,509 - -------------------------------------------------------------------------------- 95,861,000 Commonwealth Telephone Enterprises, Inc., 3.25%, 7/15/23 99,815,266 - -------------------------------------------------------------------------------- 101,500 Goldman Sachs Group, Inc. (The), (convertible into Commonwealth Telephone Enterprises, Inc.), 2.00%, 3/13/06 (Acquired 3/4/05, Cost $4,998,875)(4)(5) 4,967,613 - -------------------------------------------------------------------------------- 103,000 Merrill Lynch & Co., Inc., (convertible into Commonwealth Telephone Enterprises, Inc.), 2.50%, 3/14/06 (Acquired 3/8/05, Cost $4,995,500)(4)(5) 4,910,010 - -------------------------------------------------------------------------------- 255,005,000 Verizon Global Funding Corp., CI 0.11%, 5/15/21(6) 160,334,393 - -------------------------------------------------------------------------------- 280,050,791 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.6% - -------------------------------------------------------------------------------- 604,000 Citigroup Global Markets Holdings Inc., (convertible into Agilent Technologies), 4.81%, 3/20/06 (Acquired 9/13/05, Cost $20,004,480)(4)(5) 19,871,540 - -------------------------------------------------------------------------------- 458,000 Goldman Sachs Group, Inc. (The), (convertible into AVX Corporation), 6.50%, 5/4/06 (Acquired 4/26/05, Cost $4,978,460)(4)(5) 5,348,982 - -------------------------------------------------------------------------------- 508,000 Goldman Sachs Group, Inc. (The), (convertible into AVX Corporation), 7.00%, 2/17/06 (Acquired 1/6/05, Cost $6,040,120)(4)(5) 6,325,616 - -------------------------------------------------------------------------------- 31,546,138 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES -- 0.4% - -------------------------------------------------------------------------------- 400,000 Morgan Stanley, (convertible into Unocal Corporation), 6.50%, 2/1/06 (Acquired 1/24/05, Cost $18,870,000)(4)(5) 20,814,000 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 0.4% - -------------------------------------------------------------------------------- 467,500 Citigroup Global Markets Holdings Inc., (convertible into Wal-Mart Stores, Inc.), 3.40%, 3/29/06 (Acquired 3/18/05, Cost $24,364,838)(4)(5) 20,523,250 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 0.4% - -------------------------------------------------------------------------------- 30,322,000 General Mills, Inc., 2.01%, 10/28/22(6) 21,718,133 - -------------------------------------------------------------------------------- 69,900 Lehman Brothers Holdings Inc., (convertible into General Mills, Inc.), 6.25%, 10/15/07(5) 1,821,594 - -------------------------------------------------------------------------------- 23,539,727 - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.2% - -------------------------------------------------------------------------------- $ 183,100 Morgan Stanley, (convertible into Beckman Coulter, Inc.), 6.20%, 1/30/06 (Acquired 7/22/05, Cost $9,997,260)(4)(5) $ 9,879,161 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 0.4% - -------------------------------------------------------------------------------- 18,524,000 Apria Healthcare Group Inc., 3.375%, 9/1/33 19,264,960 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 0.6% - -------------------------------------------------------------------------------- 34,702,000 3M Co., 0.48%, 11/21/32(6) 30,364,250 - -------------------------------------------------------------------------------- INSURANCE -- 3.1% - -------------------------------------------------------------------------------- 160,142,000 American International Group, Inc., 1.53%, 11/9/31(6) 108,696,382 - -------------------------------------------------------------------------------- 776,000 Goldman Sachs Group, Inc. (The), (convertible into Marsh & McLennan Companies, Inc.), 6.25%, 1/17/06 (Acquired 1/6/05, Cost $25,002,720)(4)(5) 24,218,959 - -------------------------------------------------------------------------------- 175,000 Morgan Stanley, (convertible into American International Group, Inc.), 5.60%, 4/6/06 (Acquired 6/29/05, Cost $10,144,750)(4)(5) 10,465,875 - -------------------------------------------------------------------------------- 129,300 Morgan Stanley, (convertible into American International Group, Inc.), 6.45%, 4/7/06 (Acquired 4/1/05, Cost $6,607,230)(4)(5) 7,368,161 - -------------------------------------------------------------------------------- 307,900 Morgan Stanley, (convertible into American International Group, Inc.), 7.05%, 6/7/06 (Acquired 5/31/05, Cost $17,164,409)(4)(5) 18,022,926 - -------------------------------------------------------------------------------- 168,772,303 - -------------------------------------------------------------------------------- IT SERVICES -- 1.0% - -------------------------------------------------------------------------------- 44,159,000 DST Systems Inc., 3.625%, 8/20/08 53,597,986 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 1.1% - -------------------------------------------------------------------------------- 52,188,000 Hasbro Inc., 2.75%, 12/1/21 55,971,630 - -------------------------------------------------------------------------------- MEDIA -- 0.4% - -------------------------------------------------------------------------------- 175,000 Morgan Stanley, (convertible into Dow Jones & Co. Inc.), 4.65%, 2/10/06 (Acquired 1/25/05, Cost $7,082,250)(4)(5) 6,582,625 - -------------------------------------------------------------------------------- 22,332,000 Valassis Communications Inc., 3.06%, 6/6/21(6) 14,487,885 - -------------------------------------------------------------------------------- 21,070,510 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 0.4% - -------------------------------------------------------------------------------- 1,012,000 Citigroup Global Markets Holdings Inc., (convertible into Dollar General Corp.), 4.57%, 6/5/06 (Acquired 5/26/05, Cost $19,784,499)(4)(5) 18,661,281 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 8 Equity Income - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 1.0% - -------------------------------------------------------------------------------- $ 21,227,000 Devon Energy Corporation, (convertible into Chevron Corp.), 4.90%, 8/15/08 $ 26,215,345 - -------------------------------------------------------------------------------- 21,227,000 Devon Energy Corporation, (convertible into Chevron Corp.), 4.95%, 8/15/08 26,215,345 - -------------------------------------------------------------------------------- 52,430,690 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 3.1% - -------------------------------------------------------------------------------- 293,721,000 International Paper Co., 3.73%, 6/20/21(6) 164,483,760 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 0.5% - -------------------------------------------------------------------------------- 451,000 Goldman Sachs Group, Inc. (The), (convertible into Pfizer, Inc.), 5.90%, 11/7/05 (Acquired 1/31/05, Cost $10,842,040)(4)(5) 11,259,666 - -------------------------------------------------------------------------------- 530,800 Morgan Stanley, (convertible into Merck & Co., Inc.), 8.45%, 2/10/06 (Acquired 1/28/05, Cost $14,814,628)(4)(5) 14,716,430 - -------------------------------------------------------------------------------- 25,976,096 - -------------------------------------------------------------------------------- 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)(4)(5) 10,713,532 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.4% - -------------------------------------------------------------------------------- 678,000 Goldman Sachs Group, Inc. (The), (convertible into Applied Materials, Inc.), 8.30%, 5/8/06 (Acquired 4/29/05, Cost $10,020,840)(4)(5) 10,604,598 - -------------------------------------------------------------------------------- 671,000 Morgan Stanley, (convertible into Applied Materials, Inc.), 8.20%, 4/30/06 (Acquired 4/18/05, Cost $10,037,892)(4)(5) 10,585,025 - -------------------------------------------------------------------------------- 21,189,623 - -------------------------------------------------------------------------------- SOFTWARE -- 2.4% - -------------------------------------------------------------------------------- 108,501,000 Veritas Software Corp., 0.25%, 8/1/13 (Acquired 7/9/04-5/18/05, Cost $104,245,926)(4) 104,974,718 - -------------------------------------------------------------------------------- 19,310,000 Veritas Software Corp., 0.25%, 8/1/13 18,682,425 - -------------------------------------------------------------------------------- 123,657,143 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 1.3% - -------------------------------------------------------------------------------- 415,000 Goldman Sachs Group, Inc. (The), (convertible into Limited Brands, Inc.), 7.50%, 12/12/05 (Acquired 12/2/04, Cost $9,989,050)(4)(5) 9,245,785 - -------------------------------------------------------------------------------- 540,000 Goldman Sachs Group, Inc. (The), (convertible into The Gap, Inc.), 7.25%, 2/6/06 (Acquired 1/27/05, Cost $12,031,200)(4)(5) 9,541,800 - -------------------------------------------------------------------------------- Principal Amount/Shares Value - -------------------------------------------------------------------------------- $ 763,400 Lehman Brothers Holdings Inc., (convertible into The Gap, Inc.), 5.85%, 5/26/06 (Acquired 8/19/05, Cost $15,115,320)(4)(5) $ 13,412,937 - -------------------------------------------------------------------------------- 480,000 Lehman Brothers Holdings Inc., (convertible into The Gap, Inc.), 7.00%, 4/14/06 (Acquired 7/7/05, Cost $10,167,312)(4)(5) 8,534,400 - -------------------------------------------------------------------------------- 696,000 Merrill Lynch & Co., Inc., (convertible into The Gap, Inc.), 7.80%, 3/10/06 (Acquired 3/28/05, Cost $15,012,720)(4)(5) 12,465,360 - -------------------------------------------------------------------------------- 200,000 Morgan Stanley, (convertible into Jones Apparel Group, Inc.), 6.00%, 5/15/06 (Acquired 4/29/05, Cost $6,077,220)(4)(5) 5,779,000 - -------------------------------------------------------------------------------- 681,000 Morgan Stanley, (convertible into The Gap, Inc.), 6.25%, 3/5/06 (Acquired 2/25/05, Cost $14,529,816)(4)(5) 12,138,826 - -------------------------------------------------------------------------------- 71,118,108 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 0.4% - -------------------------------------------------------------------------------- 334,300 Morgan Stanley, (convertible into Freddie Mac), 6.75%, 3/5/06 (Acquired 2/25/05, Cost $20,607,255)(4)(5) 19,177,120 - -------------------------------------------------------------------------------- TOTAL CONVERTIBLE BONDS (Cost $1,384,567,195) 1,388,254,090 - -------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS -- 4.4% AEROSPACE & DEFENSE -- 1.1% - -------------------------------------------------------------------------------- 461,400 Northrop Grumman Corp., 7.00%, 4/4/21 55,829,400 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 2.4% - -------------------------------------------------------------------------------- 1,804,900 FPL Group, Inc., 8.00%, 2/16/06 128,418,635 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.1% - -------------------------------------------------------------------------------- 93,800 Newell Financial Trust I, 5.25%, 12/1/27 4,138,925 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 0.8% - -------------------------------------------------------------------------------- 318 Fannie Mae, 5.375%, 1/5/08 (Acquired 12/29/04-9/30/05, Cost $30,713,238)(4) 29,208,262 - -------------------------------------------------------------------------------- 248,500 Washington Mutual, Inc. 12,984,125 - -------------------------------------------------------------------------------- 42,192,387 - -------------------------------------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $208,404,564) 230,579,347 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 9 Equity Income - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 1.4% Repurchase Agreement, Credit Suisse First Boston Corp., (collateralized by various U.S. Treasury obligations, 3.80%, 3/30/06, valued at $74,013,494), in a joint trading account at 3.30%, dated 9/30/05, due 10/3/05 (Delivery value $72,619,965) $ 72,600,000 - -------------------------------------------------------------------------------- Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 6.875%, 8/15/25, valued at $1,326,758), in a joint trading account at 3.22%, dated 9/30/05, due 10/3/05 (Delivery value $1,300,349) 1,300,000 - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $73,900,000) $ 73,900,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 101.0% (Cost $4,982,099,806) 5,299,775,001 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES - (1.0)% (50,748,998) - -------------------------------------------------------------------------------- TOTAL NET ASSETS - 100.0% $5,249,026,003 ================================================================================ FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS* Contracts to Sell Settlement Date Value Unrealized Gain - -------------------------------------------------------------------------------- 36,138,474 Euro for USD 10/31/05 $ 43,470,927 $23,172 - -------------------------------------------------------------------------------- 20,045,014 Euro for USD 10/31/05 24,112,124 8,844 - -------------------------------------------------------------------------------- 17,752,237 Euro for USD 10/31/05 21,354,144 16,921 - -------------------------------------------------------------------------------- 26,206,237 GBP for USD 10/31/05 46,154,424 24,372 - -------------------------------------------------------------------------------- 21,830,497 GBP for USD 10/31/05 38,447,872 7,204 - -------------------------------------------------------------------------------- $173,539,491 $80,513 =================================== (Value on Settlement Date $173,620,004) * 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 CI = Contingent Interest. The rate indicated is the stated coupon rate. The issuers may defer paying any or all of an installment of contingent interest under certain circumstances as described in their Registration Statement. GBP = British Pound USD = United States Dollar (1) Security, or a portion thereof, is being held in connection with an open put option. (2) Affiliated Company: the fund's holding represents ownership of 5% or more of the voting securities of the company; therefore, the company is affiliated as defined in the Investment Company Act of 1940. (See Note 5 in Notes to Financial Statements.) (3) Non-income producing. (4) Security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of restricted securities at September 30, 2005, was $545,264,048, which represented 10.4% of total net assets. None of the restricted securities considered illiquid. (5) Equity-linked debt security. The aggregate value of these securities at September 30, 2005, was $412,902,662, which represented 7.9% of total net assets. (6) Security is a zero-coupon bond. The rate indicated is the yield to maturity at purchase. Zero-coupon securities are issued at a substantial discount from their value at maturity. See Notes to Financial Statements. - ------ 10 Mid Cap Value - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2005 -------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 6.19% 20.48% 15.31% 3/31/04 - -------------------------------------------------------------------------------- RUSSELL MIDCAP VALUE INDEX(2) 10.31% 26.13% 19.44% -- - -------------------------------------------------------------------------------- Institutional 6.20% 20.72% 19.51% 8/2/04 - -------------------------------------------------------------------------------- Advisor 6.05% -- 9.29%(1) 1/13/05 - -------------------------------------------------------------------------------- R Class -- -- -2.58%(1) 7/29/05 - -------------------------------------------------------------------------------- (1) Total returns for periods less than one year are not annualized. (2) (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. GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made March 31, 2004
* From 3/31/04, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. - ------ 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. Mid Cap Value posted a gain of 6.19%* for the six months ended September 30, 2005, trailing its benchmark, the Russell Midcap Value Index, which was up 10.31%. Mid Cap Value has gained 15.31% since its inception on March 31, 2004, versus a 19.44% increase for its benchmark. MARKET ENVIRONMENT Equity investors faced substantial challenges during the period covered by this report, including rising short-term interest rates, record energy prices, an abrupt drop in consumer confidence and one of the worst natural catastrophes in the nation's history. Nonetheless, the period was marked by gains for the broad stock market, with the Russell 3000 Index up 6.35%. Mid-sized companies fared well over the six months, as evidenced by the Russell Mid Cap Index's gain of 10.35%. Against this backdrop, the energy, industrials and utilities sectors provided strong performance. Lagging sectors for the period included consumer discretionary and materials. ENERGY LEADS THE PORTFOLIO Energy stocks proved to be Mid Cap Value's largest contributors to absolute performance, led by Burlington Resources Inc. and Unocal Corp. Houston-based Burlington Resources, which holds a leading position in North American natural gas reserves and production, rewarded investors with strong operating results, diligent cost-containment, and an 18% increase in its second-quarter dividend. Unocal, which reported record second-quarter earnings, also received takeover proposals from Chevron Corp. and CNOOC Limited, an affiliate of China National Offshore Oil Co. The company was purchased by Chevron in August. SUCCESS IN INDUSTRIALS Industrials represented another bright spot. Our investments included Republic Services, Inc., one of the country's leading solid waste management firms. Despite higher fuel costs the company posted strong second-quarter TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Bemis Co., Inc. 4.2% 1.3% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 3.4% 2.3% - -------------------------------------------------------------------------------- International Flavors & Fragrances Inc. 2.9% -- - -------------------------------------------------------------------------------- Beckman Coulter Inc. 2.3% -- - -------------------------------------------------------------------------------- Republic Services, Inc. Cl A 2.1% 4.4% - -------------------------------------------------------------------------------- General Mills, Inc. 2.1% -- - -------------------------------------------------------------------------------- Family Dollar Stores, Inc. 1.9% -- - -------------------------------------------------------------------------------- Kraft Foods Inc. Cl A 1.9% 1.4% - -------------------------------------------------------------------------------- Kimberly-Clark Corp. 1.9% 1.9% - -------------------------------------------------------------------------------- Equitable Resources Inc. 1.9% -- - -------------------------------------------------------------------------------- * All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. (continued) - ------ 12 Mid Cap Value - Portfolio Commentary numbers and raised its financial guidance for the year. In addition, Republic Services continued to return more cash to shareholders by announcing a 17% increase in its dividend and continuing a strong share buyback program. In the electrical equipment space, Emerson Electric Co. was an important contributor. The company, which makes a variety of electrical products for industrial customers, saw orders increase strongly in August. UTILITIES ADD VALUE Utility shares also benefited our performance. On the electric side, IDACORP, Inc. led our investments. This utility holding company operates Idaho Power, which serves southern Idaho and eastern Oregon. The outlook has improved for the utility's hydro-electric business, which had been slowed by low reservoir levels due to drought. Our gas utilities were led by WGL Holdings Inc., the parent company of Washington Gas Light Co., which serves metropolitan Washington, D.C. and surrounding regions in Virginia and Maryland. CONSUMER DISCRETIONARY, MATERIALS STOCKS DETRACT Consumer discretionary businesses dampened our absolute results the most. Within retailers, one of our largest detractors was Family Dollar Stores, Inc. The national discount store chain was hurt by high gasoline prices, which exact a toll on lower-income consumers, and initiatives in urban areas that have failed to meet expectations. Specialty retailers Foot Locker, Inc., and The Gap, Inc. were also down for the period. Our largest detractor was Bemis Co., Inc., a major producer of flexible packaging, much of it for the food industry. Higher energy prices greatly increased the cost of resin, Bemis' key raw material, while lower-then-expected demand limited the company's ability to pass through the higher expenses to customers. In all of these cases, we believe the issues affecting these companies are manageable and have maintained our positions. 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 their fundamental or financial health. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Food Products 8.5% 4.9% - -------------------------------------------------------------------------------- Chemicals 7.9% 2.7% - -------------------------------------------------------------------------------- Insurance 6.2% 7.8% - -------------------------------------------------------------------------------- Commercial Services & Supplies 6.0% 6.7% - -------------------------------------------------------------------------------- Commercial Banks 5.9% 5.6% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Common Stocks 98.2% 96.3% - -------------------------------------------------------------------------------- Temporary Cash Investments 0.7% 6.1% - -------------------------------------------------------------------------------- Other Assets and Liabilities 1.1% (2.4)% - -------------------------------------------------------------------------------- - ------ 13 Mid Cap Value - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 98.2% AEROSPACE & DEFENSE -- 2.0% - -------------------------------------------------------------------------------- 29,313 Honeywell International Inc. $ 1,099,238 - -------------------------------------------------------------------------------- 11,787 K & F Industries Holdings Inc.(1) 197,197 - -------------------------------------------------------------------------------- 13,140 Northrop Grumman Corp. 714,159 - -------------------------------------------------------------------------------- 2,010,594 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 1.0% - -------------------------------------------------------------------------------- 69,479 Cooper Tire & Rubber 1,060,944 - -------------------------------------------------------------------------------- AUTOMOBILES -- 0.8% - -------------------------------------------------------------------------------- 28,630 Winnebago Industries 829,411 - -------------------------------------------------------------------------------- BEVERAGES -- 2.9% - -------------------------------------------------------------------------------- 24,607 Anheuser-Busch Companies, Inc. 1,059,085 - -------------------------------------------------------------------------------- 62,700 Coca-Cola Enterprises 1,222,650 - -------------------------------------------------------------------------------- 21,460 Pepsi Bottling Group Inc. 612,683 - -------------------------------------------------------------------------------- 2,894,418 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 1.1% - -------------------------------------------------------------------------------- 36,680 Masco Corp. 1,125,342 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 1.0% - -------------------------------------------------------------------------------- 17,080 Merrill Lynch & Co., Inc. 1,047,858 - -------------------------------------------------------------------------------- CHEMICALS -- 7.9% - -------------------------------------------------------------------------------- 10,120 Air Products & Chemicals, Inc. 558,017 - -------------------------------------------------------------------------------- 18,990 du Pont (E.I.) de Nemours & Co. 743,838 - -------------------------------------------------------------------------------- 44,784 Ecolab Inc. 1,429,953 - -------------------------------------------------------------------------------- 22,913 Ferro Corp. 419,766 - -------------------------------------------------------------------------------- 81,878 International Flavors & Fragrances Inc. 2,918,133 - -------------------------------------------------------------------------------- 27,426 Minerals Technologies Inc. 1,569,041 - -------------------------------------------------------------------------------- 19,561 Nalco Holding Co.(1) 329,994 - -------------------------------------------------------------------------------- 7,968,742 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 5.9% - -------------------------------------------------------------------------------- 12,539 BancorpSouth Inc. 286,516 - -------------------------------------------------------------------------------- 14,460 BB&T Corporation 564,663 - -------------------------------------------------------------------------------- 7,710 Commerce Bancshares, Inc. 396,911 - -------------------------------------------------------------------------------- 35,440 Fifth Third Bancorp 1,301,711 - -------------------------------------------------------------------------------- 49,696 SunTrust Banks, Inc. 3,451,387 - -------------------------------------------------------------------------------- 6,001,188 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 6.0% - -------------------------------------------------------------------------------- 33,950 Aramark Corp. Cl B 906,805 - -------------------------------------------------------------------------------- 13,460 Avery Dennison Corp. 705,169 - -------------------------------------------------------------------------------- 60,426 Republic Services, Inc. Cl A 2,132,434 - -------------------------------------------------------------------------------- 17,230 Waste Connections, Inc.(1) 604,428 - -------------------------------------------------------------------------------- 58,930 Waste Management, Inc. 1,685,987 - -------------------------------------------------------------------------------- 6,034,823 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 2.4% - -------------------------------------------------------------------------------- 55,012 Diebold, Inc. 1,895,713 - -------------------------------------------------------------------------------- 9,390 Lexmark International, Inc.(1) 573,260 - -------------------------------------------------------------------------------- 2,468,973 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 5.6% - -------------------------------------------------------------------------------- 28,192 AptarGroup, Inc. $ 1,404,244 - -------------------------------------------------------------------------------- 171,500 Bemis Co., Inc. 4,236,050 - -------------------------------------------------------------------------------- 5,640,294 - -------------------------------------------------------------------------------- DIVERSIFIED -- 1.5% - -------------------------------------------------------------------------------- 21,830 iShares S&P MidCap 400 Index Fund 1,566,303 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.2% - -------------------------------------------------------------------------------- 72,460 Iowa Telecommunications Services Inc. 1,218,777 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 1.9% - -------------------------------------------------------------------------------- 52,870 Empire District Electric Co. 1,209,137 - -------------------------------------------------------------------------------- 17,779 IDACORP, Inc. 535,681 - -------------------------------------------------------------------------------- 7,092 Westar Energy Inc. 171,130 - -------------------------------------------------------------------------------- 1,915,948 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 1.4% - -------------------------------------------------------------------------------- 9,430 Emerson Electric Co. 677,074 - -------------------------------------------------------------------------------- 15,180 Hubbell Inc. Cl B 712,397 - -------------------------------------------------------------------------------- 1,389,471 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 1.4% - -------------------------------------------------------------------------------- 11,844 AVX Corporation 150,893 - -------------------------------------------------------------------------------- 35,230 Littelfuse, Inc.(1) 991,019 - -------------------------------------------------------------------------------- 24,825 Vishay Intertechnology, Inc.(1) 296,659 - -------------------------------------------------------------------------------- 1,438,571 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 8.5% - -------------------------------------------------------------------------------- 9,980 Campbell Soup Company 296,905 - -------------------------------------------------------------------------------- 36,490 ConAgra Foods, Inc. 903,128 - -------------------------------------------------------------------------------- 49,420 Diamond Foods Inc.(1) 845,082 - -------------------------------------------------------------------------------- 43,280 General Mills, Inc. 2,086,095 - -------------------------------------------------------------------------------- 38,718 H.J. Heinz Company 1,414,756 - -------------------------------------------------------------------------------- 12,180 Kellogg Co. 561,863 - -------------------------------------------------------------------------------- 63,030 Kraft Foods Inc. Cl A 1,928,087 - -------------------------------------------------------------------------------- 8,030 Unilever N.V. New York Shares 573,744 - -------------------------------------------------------------------------------- 8,609,660 - -------------------------------------------------------------------------------- GAS UTILITIES -- 0.7% - -------------------------------------------------------------------------------- 21,914 WGL Holdings Inc. 704,097 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 3.7% - -------------------------------------------------------------------------------- 43,240 Beckman Coulter, Inc. 2,334,096 - -------------------------------------------------------------------------------- 67,434 National Dentex Corp.(1) 1,389,140 - -------------------------------------------------------------------------------- 3,723,236 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 1.8% - -------------------------------------------------------------------------------- 22,300 Apria Healthcare Group Inc.(1) 711,593 - -------------------------------------------------------------------------------- 22,850 Universal Health Services, Inc. Cl B 1,088,346 - -------------------------------------------------------------------------------- 1,799,939 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 14 Mid Cap Value - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 3.5% - -------------------------------------------------------------------------------- 7,788 Brinker International, Inc.(1) $ 292,517 - -------------------------------------------------------------------------------- 10,130 CEC Entertainment Inc.(1) 321,729 - -------------------------------------------------------------------------------- 36,371 Outback Steakhouse, Inc. 1,331,179 - -------------------------------------------------------------------------------- 43,931 Speedway Motorsports Inc. 1,596,013 - -------------------------------------------------------------------------------- 3,541,438 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.9% - -------------------------------------------------------------------------------- 18,750 Hunter Douglas N.V. ORD 892,416 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 2.3% - -------------------------------------------------------------------------------- 7,200 Clorox Company 399,888 - -------------------------------------------------------------------------------- 32,330 Kimberly-Clark Corp. 1,924,605 - -------------------------------------------------------------------------------- 2,324,493 - -------------------------------------------------------------------------------- INSURANCE -- 6.2% - -------------------------------------------------------------------------------- 24,910 Ambac Financial Group, Inc. 1,795,014 - -------------------------------------------------------------------------------- 2,040 Chubb Corp. 182,682 - -------------------------------------------------------------------------------- 25,875 CNA Surety Corp.(1) 367,943 - -------------------------------------------------------------------------------- 33,634 Jefferson-Pilot Corp. 1,721,052 - -------------------------------------------------------------------------------- 56,469 Marsh & McLennan Companies, Inc. 1,716,093 - -------------------------------------------------------------------------------- 17,690 Platinum Underwriters Holdings 528,754 - -------------------------------------------------------------------------------- 6,311,538 - -------------------------------------------------------------------------------- IT SERVICES -- 0.8% - -------------------------------------------------------------------------------- 26,240 Accenture Ltd. Cl A(1) 668,071 - -------------------------------------------------------------------------------- 2,780 DST Systems, Inc.(1) 152,427 - -------------------------------------------------------------------------------- 820,498 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 1.4% - -------------------------------------------------------------------------------- 40,627 Arctic Cat Inc. 834,479 - -------------------------------------------------------------------------------- 15,720 Hasbro, Inc. 308,898 - -------------------------------------------------------------------------------- 17,780 Mattel, Inc. 296,570 - -------------------------------------------------------------------------------- 1,439,947 - -------------------------------------------------------------------------------- MACHINERY -- 0.1% - -------------------------------------------------------------------------------- 2,710 Dover Corp. 110,541 - -------------------------------------------------------------------------------- MEDIA -- 2.1% - -------------------------------------------------------------------------------- 22,850 ADVO, Inc. 714,977 - -------------------------------------------------------------------------------- 9,610 McClatchy Co. Cl A 626,860 - -------------------------------------------------------------------------------- 37,080 Westwood One, Inc. 737,521 - -------------------------------------------------------------------------------- 2,079,358 - -------------------------------------------------------------------------------- METALS & MINING -- 0.6% - -------------------------------------------------------------------------------- 24,600 Compass Minerals International Inc. 565,800 - -------------------------------------------------------------------------------- MULTI-UTILITIES -- 2.9% - -------------------------------------------------------------------------------- 8,140 Dominion Resources Inc. 701,180 - -------------------------------------------------------------------------------- 20,600 Wisconsin Energy Corp. 822,352 - -------------------------------------------------------------------------------- 73,770 XCEL Energy Inc. 1,446,629 - -------------------------------------------------------------------------------- 2,970,161 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 3.0% - -------------------------------------------------------------------------------- 59,360 Dollar General Corp. 1,088,662 - -------------------------------------------------------------------------------- 98,800 Family Dollar Stores, Inc. 1,963,156 - -------------------------------------------------------------------------------- 3,051,818 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 3.7% - -------------------------------------------------------------------------------- 49,030 Equitable Resources Inc. $ 1,915,112 - -------------------------------------------------------------------------------- 36,910 Murphy Oil Corp. 1,840,702 - -------------------------------------------------------------------------------- 3,755,814 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 1.2% - -------------------------------------------------------------------------------- 28,839 MeadWestvaco Corp. 796,534 - -------------------------------------------------------------------------------- 13,778 Neenah Paper Inc. 403,695 - -------------------------------------------------------------------------------- 1,200,229 - -------------------------------------------------------------------------------- PERSONAL PRODUCTS -- 0.4% - -------------------------------------------------------------------------------- 11,560 Estee Lauder Companies, Inc. Cl A 402,635 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 0.7% - -------------------------------------------------------------------------------- 19,010 Schering-Plough Corp. 400,160 - -------------------------------------------------------------------------------- 7,490 Watson Pharmaceuticals, Inc.(1) 274,209 - -------------------------------------------------------------------------------- 674,369 - -------------------------------------------------------------------------------- REAL ESTATE -- 1.8% - -------------------------------------------------------------------------------- 74,140 Education Realty Trust, Inc. 1,238,138 - -------------------------------------------------------------------------------- 17,590 Sun Communities, Inc. 576,248 - -------------------------------------------------------------------------------- 1,814,386 - -------------------------------------------------------------------------------- ROAD & RAIL -- 0.7% - -------------------------------------------------------------------------------- 9,255 Union Pacific Corp. 663,584 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.4% - -------------------------------------------------------------------------------- 24,390 Applied Materials, Inc. 413,654 - -------------------------------------------------------------------------------- SOFTWARE -- 1.0% - -------------------------------------------------------------------------------- 10,864 Reynolds & Reynolds Co. Cl A 297,782 - -------------------------------------------------------------------------------- 37,204 Synopsys, Inc.(1) 703,156 - -------------------------------------------------------------------------------- 1,000,938 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 2.4% - -------------------------------------------------------------------------------- 50,020 Foot Locker, Inc. 1,097,438 - -------------------------------------------------------------------------------- 41,030 Gap, Inc. (The) 715,153 - -------------------------------------------------------------------------------- 14,010 Sherwin-Williams Co. 617,421 - -------------------------------------------------------------------------------- 2,430,012 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.6% - -------------------------------------------------------------------------------- 20,350 Jones Apparel Group, Inc. 579,975 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 2.6% - -------------------------------------------------------------------------------- 30,430 Freddie Mac 1,718,078 - -------------------------------------------------------------------------------- 14,211 MGIC Investment Corp. 912,346 - -------------------------------------------------------------------------------- 2,630,424 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS -- 0.2% - -------------------------------------------------------------------------------- 2,942 Grainger (W.W.), Inc. 185,111 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $99,598,140) 99,307,728 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 15 Mid Cap Value - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 0.7% Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 6.875%, 8/15/25, valued at $714,408), in a joint trading account at 3.22%, dated 9/30/05, due 10/3/05 (Delivery value $700,188) (Cost $700,000) $ 700,000 - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 98.9% (Cost $100,298,140) $100,007,728 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES - 1.1% 1,153,432 - -------------------------------------------------------------------------------- TOTAL NET ASSETS - 100.0% $101,161,160 ================================================================================ FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS* Contracts to Sell Settlement Date Value Unrealized Gain - -------------------------------------------------------------------------------- 448,638 Euro for USD 10/31/05 $ 539,666 $288 - -------------------------------------------------------------------------------- 248,846 Euro for USD 10/31/05 299,337 110 - -------------------------------------------------------------------------------- 220,384 Euro for USD 10/31/05 265,099 210 - -------------------------------------------------------------------------------- $1,104,102 $608 ===================================== (Value on Settlement Date $1,104,710) * 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 SEPTEMBER 30, 2005 ---------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 7.89% 20.19% 18.67% 16.16% 7/31/98 - -------------------------------------------------------------------------------- S&P SMALLCAP 600/BARRA VALUE INDEX(2) 8.44% 18.61% 13.61% 11.26% -- - -------------------------------------------------------------------------------- Institutional Class 8.09% 20.45% 18.92% 17.59% 10/26/98 - -------------------------------------------------------------------------------- Advisor Class 7.85% 19.91% 18.41% 19.77% 12/31/99 - -------------------------------------------------------------------------------- C Class 6/1/01 No sales charge* 7.32% 19.01% -- 12.03% With sales charge* 6.32% 19.01% -- 12.03% - -------------------------------------------------------------------------------- * Sales charges include contingent deferred sales charges (CDSCs), as applicable. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. Please see the Share Class Information page 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) Total returns for periods less than one year are not annualized. (2) (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 stocks 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 September 30 - ------------------------------------------------------------------------------------ 1998* 1999 2000 2001 2002 2003 2004 2005 - ------------------------------------------------------------------------------------ Investor Class -9.80% 13.25% 21.76% 27.06% -1.21% 25.63% 24.21% 20.19% - ------------------------------------------------------------------------------------ S&P SmallCap 600/ BARRA Value Index -13.69% 13.56% 15.81% 0.03% -1.05% 25.73% 28.23% 18.61% - ------------------------------------------------------------------------------------ * 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 stocks 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 six months ended September 30, 2005, Small Cap Value gained 7.89%*, slightly underperforming the 8.44% 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 11.26% return posted by its benchmark for the same period. EQUITIES HOLD FIRM Equity investors faced substantial challenges during the six months covered by this report, a period largely defined by rising short-term interest rates and the resurgent price of oil, which peaked at a new record above $70 a barrel amid concern about supply disruption following Hurricane Katrina. Speculation about the impact of higher interest rates and energy prices on economic vitality and corporate profits frequently pressured the market. Nevertheless, a host of strong earnings reports and merger announcements helped stocks remain aloft. Ultimately, the equities market demonstrated considerable resilience, rebounding from troughs to secure gains. ENERGY: THE TOP CONTRIBUTOR Small Cap Value's investments in the energy sector delivered the greatest contributions to performance as companies across the sector advanced alongside prices for crude. Nearly all of our holdings averaged powerful, double-digit gains, and only a few of these were present in the benchmark. One standout performer was driller Helmerich & Payne, Inc., a top contributor that was exclusive to the portfolio. During the period, the company reported that higher prices both for oil and for its land rigs contributed to substantially increased income. News that one of its platform rigs in the Gulf Coast sustained major damage from Hurricane Katrina did little to arrest the stock's advance. TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- iShares Russell 2000 Value Index Fund 2.5% 1.0% - -------------------------------------------------------------------------------- Sybase, Inc. 2.0% 2.0% - -------------------------------------------------------------------------------- iShares Russell 2000 Index Fund 1.4% 2.0% - -------------------------------------------------------------------------------- iShares S&P SmallCap 600/BARRA Value Index Fund 1.1% 1.0% - -------------------------------------------------------------------------------- HCC Insurance Holdings, Inc. 1.1% 1.1% - -------------------------------------------------------------------------------- Sensient Technologies Corp. 1.1% 1.1% - -------------------------------------------------------------------------------- Bemis Co. 1.1% 1.2% - -------------------------------------------------------------------------------- Briggs & Stratton Corp. 1.1% 0.8% - -------------------------------------------------------------------------------- Washington Federal, Inc. 1.0% 1.0% - -------------------------------------------------------------------------------- Platinum Underwriters Holdings 1.0% 1.1% - -------------------------------------------------------------------------------- * All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. (continued) - ------ 19 Small Cap Value - Portfolio Commentary SUCCESS IN TECHNOLOGY, FINANCIALS The information technology sector also significantly augmented results, with positions in the software industry registering particularly strong performances. We held several advancing names, including long-time holding Sybase, Inc., which finished as the top-contributing stock. Sybase, an enterprise software company, announced better-than-expected second-quarter earnings, driven by robust licensing revenue in its database business and growth in its wireless business -- its new mobile-content service debuted on the Blackberry wireless device -- developments for which investors rewarded the stock. Financials, on average our largest sector stake, represented another source of strength. Insurance companies paced gains in the group, while security selection among real estate investment trusts -- REITs -- proved rewarding. Maguire Properties, which owns and operates office space, announced improved quarterly figures twice during the period. Although the share price suffered a sharp decline in August, the stock quickly recovered to finish with strong gains. CONSUMER STOCKS SLOW PERFORMANCE Despite those successes, we nevertheless experienced some difficulties along the way. Investments in the consumer discretionary sector dampened returns the most, and specialty retailer Pier 1 Imports was the top-detracting stock. Despite aggressive pricing and advertising campaigns, the company reported disappointing sales, eventually recording losses amid tepid consumer response to new merchandising initiatives. Consumer staples stocks also slowed performance slightly. Although we maintained limited exposure in this area, some holdings still struggled. Company-specific developments took down American Italian Pasta Co., which announced in early August that it would delay reporting its quarterly results pending the outcome of an internal assessment of its accounting procedures. 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 SEPTEMBER 30, 2005* - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Insurance 6.0% 4.4% - -------------------------------------------------------------------------------- Commercial Banks 5.8% 5.9% - -------------------------------------------------------------------------------- Software 5.2% 5.3% - -------------------------------------------------------------------------------- Energy Equipment & Services 5.0% 3.5% - -------------------------------------------------------------------------------- Machinery 4.5% 4.0% - -------------------------------------------------------------------------------- * Excludes securities in the Diversified category. These securities represent investments in diversified pools of underlying securities in multiple industry categories. TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Common Stocks 94.9% 95.6% - -------------------------------------------------------------------------------- Convertible Preferred Stocks 0.3% 1.0% - -------------------------------------------------------------------------------- Preferred Stocks 0.1% 0.1% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 95.3% 96.7% - -------------------------------------------------------------------------------- Temporary Cash Investments 4.7% 3.5% - -------------------------------------------------------------------------------- Other Assets and Liabilities --* (0.2)% - -------------------------------------------------------------------------------- * Category is less than 0.05% of net assets. - ------ 20 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 94.9% AEROSPACE & DEFENSE -- 1.0% - -------------------------------------------------------------------------------- 145,000 Alliant Techsystems Inc.(1) $ 10,824,250 - -------------------------------------------------------------------------------- 175,000 Curtiss-Wright Corp. 10,799,250 - -------------------------------------------------------------------------------- 21,623,500 - -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS -- 0.2% - -------------------------------------------------------------------------------- 130,000 Ryder System, Inc. 4,448,600 - -------------------------------------------------------------------------------- AIRLINES -- 0.3% - -------------------------------------------------------------------------------- 225,000 SkyWest, Inc. 6,034,500 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 1.2% - -------------------------------------------------------------------------------- 380,000 ArvinMeritor Inc. 6,353,600 - -------------------------------------------------------------------------------- 645,000 Cooper Tire & Rubber 9,849,150 - -------------------------------------------------------------------------------- 125,000 Lear Corporation 4,246,250 - -------------------------------------------------------------------------------- 207,600 Superior Industries International, Inc. 4,467,552 - -------------------------------------------------------------------------------- 24,916,552 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.9% - -------------------------------------------------------------------------------- 575,000 Griffon Corp.(1) 14,145,000 - -------------------------------------------------------------------------------- 180,000 Trex Co. Inc.(1) 4,320,000 - -------------------------------------------------------------------------------- 18,465,000 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 2.0% - -------------------------------------------------------------------------------- 130,000 Investors Financial Services Corporation 4,277,000 - -------------------------------------------------------------------------------- 610,000 Lazard Ltd. Cl A 15,433,000 - -------------------------------------------------------------------------------- 430,000 Piper Jaffray Companies(1) 12,839,800 - -------------------------------------------------------------------------------- 450,000 Waddell & Reed Financial Inc. 8,712,000 - -------------------------------------------------------------------------------- 41,261,800 - -------------------------------------------------------------------------------- CHEMICALS -- 3.7% - -------------------------------------------------------------------------------- 370,000 Engelhard Corporation 10,326,700 - -------------------------------------------------------------------------------- 725,000 Ferro Corp. 13,282,000 - -------------------------------------------------------------------------------- 115,000 FMC Corp.(1) 6,580,300 - -------------------------------------------------------------------------------- 145,000 H.B. Fuller Company 4,506,600 - -------------------------------------------------------------------------------- 150,000 Minerals Technologies Inc. 8,581,500 - -------------------------------------------------------------------------------- 595,000 Olin Corp. 11,299,050 - -------------------------------------------------------------------------------- 1,245,000 Sensient Technologies Corp. 23,592,750 - -------------------------------------------------------------------------------- 78,168,900 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 5.7% - -------------------------------------------------------------------------------- 275,000 BancorpSouth Inc. 6,283,750 - -------------------------------------------------------------------------------- 264,086 Chemical Financial Corp. 8,582,795 - -------------------------------------------------------------------------------- 405,000 Chittenden Corp. 10,736,550 - -------------------------------------------------------------------------------- 175,000 Cullen/Frost Bankers, Inc. 8,634,500 - -------------------------------------------------------------------------------- 170,000 First Financial Bancorp 3,162,000 - -------------------------------------------------------------------------------- 252,891 Fulton Financial Corp. 4,235,924 - -------------------------------------------------------------------------------- 140,000 Pacific Capital Bancorp 4,660,600 - -------------------------------------------------------------------------------- 125,000 Provident Bankshares Corp. 4,347,500 - -------------------------------------------------------------------------------- 380,000 Sky Financial Group Inc. 10,681,800 - -------------------------------------------------------------------------------- 510,000 South Financial Group Inc. (The) 13,688,400 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 440,000 Sterling Bancshares, Inc. $ 6,472,400 - -------------------------------------------------------------------------------- 575,000 Susquehanna Bancshares Inc. 13,823,000 - -------------------------------------------------------------------------------- 520,000 TCF Financial Corp. 13,910,000 - -------------------------------------------------------------------------------- 355,000 Wilmington Trust Corporation 12,939,750 - -------------------------------------------------------------------------------- 122,158,969 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 3.4% - -------------------------------------------------------------------------------- 410,000 ABM Industries Inc. 8,532,100 - -------------------------------------------------------------------------------- 172,600 Banta Corp. 8,783,614 - -------------------------------------------------------------------------------- 175,000 Brink's Co. (The) 7,185,500 - -------------------------------------------------------------------------------- 255,000 Ennis Inc. 4,284,000 - -------------------------------------------------------------------------------- 330,000 G&K Services Inc. Cl A 12,998,700 - -------------------------------------------------------------------------------- 355,000 Kelly Services, Inc. Cl A 10,884,300 - -------------------------------------------------------------------------------- 420,000 Tetra Tech, Inc.(1) 7,064,400 - -------------------------------------------------------------------------------- 135,000 United Stationers Inc.(1) 6,461,100 - -------------------------------------------------------------------------------- 235,000 Watson Wyatt & Co. Holdings 6,333,250 - -------------------------------------------------------------------------------- 72,526,964 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 0.6% - -------------------------------------------------------------------------------- 385,000 Andrew Corporation(1) 4,292,750 - -------------------------------------------------------------------------------- 220,000 Belden CDT Inc. 4,274,600 - -------------------------------------------------------------------------------- 480,000 EFJ Inc.(1) 4,939,200 - -------------------------------------------------------------------------------- 13,506,550 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 1.1% - -------------------------------------------------------------------------------- 760,000 Adaptec, Inc.(1) 2,910,800 - -------------------------------------------------------------------------------- 265,000 Electronics for Imaging, Inc.(1) 6,079,100 - -------------------------------------------------------------------------------- 250,000 Imation Corporation 10,717,500 - -------------------------------------------------------------------------------- 130,000 QLogic Corp.(1) 4,446,000 - -------------------------------------------------------------------------------- 24,153,400 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING -- 0.8% - -------------------------------------------------------------------------------- 80,000 EMCOR Group Inc.(1) 4,744,000 - -------------------------------------------------------------------------------- 335,000 Granite Construction Inc. 12,810,400 - -------------------------------------------------------------------------------- 17,554,400 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 2.4% - -------------------------------------------------------------------------------- 305,000 AptarGroup, Inc. 15,192,050 - -------------------------------------------------------------------------------- 940,000 Bemis Co. 23,218,000 - -------------------------------------------------------------------------------- 465,000 Sonoco Products Co. 12,699,150 - -------------------------------------------------------------------------------- 51,109,200 - -------------------------------------------------------------------------------- DIVERSIFIED -- 5.1% - -------------------------------------------------------------------------------- 460,000 iShares Russell 2000 Index Fund 30,516,400 - -------------------------------------------------------------------------------- 790,000 iShares Russell 2000 Value Index Fund 52,084,700 - -------------------------------------------------------------------------------- 380,000 iShares S&P SmallCap 600/BARRA Value Index Fund 24,323,800 - -------------------------------------------------------------------------------- 106,924,900 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 0.6% - -------------------------------------------------------------------------------- 100,000 Asset Acceptance Capital Corp.(1) 2,997,000 - -------------------------------------------------------------------------------- 220,000 Medallion Financial Corp. 2,180,200 - -------------------------------------------------------------------------------- 470,000 Patriot Capital Funding, Inc. 6,457,800 - -------------------------------------------------------------------------------- 11,635,000 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 21 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.3% - -------------------------------------------------------------------------------- 165,000 Commonwealth Telephone Enterprise Inc. $ 6,220,500 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 2.0% - -------------------------------------------------------------------------------- 465,000 Empire District Electric Co. 10,634,550 - -------------------------------------------------------------------------------- 635,000 IDACORP, Inc. 19,132,550 - -------------------------------------------------------------------------------- 535,000 Westar Energy Inc. 12,909,550 - -------------------------------------------------------------------------------- 42,676,650 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 1.0% - -------------------------------------------------------------------------------- 210,000 Regal-Beloit Corp. 6,812,400 - -------------------------------------------------------------------------------- 490,000 Smith (A.O.) Corp. 13,965,000 - -------------------------------------------------------------------------------- 20,777,400 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 2.8% - -------------------------------------------------------------------------------- 735,000 Aeroflex Inc.(1) 6,879,600 - -------------------------------------------------------------------------------- 200,000 Applied Films Corp.(1) 4,200,000 - -------------------------------------------------------------------------------- 85,000 Avnet Inc.(1) 2,078,250 - -------------------------------------------------------------------------------- 345,000 Benchmark Electronics Inc.(1) 10,391,400 - -------------------------------------------------------------------------------- 65,000 Coherent, Inc.(1) 1,903,200 - -------------------------------------------------------------------------------- 320,000 Littelfuse, Inc.(1) 9,001,600 - -------------------------------------------------------------------------------- 360,000 Methode Electronics, Inc. 4,147,200 - -------------------------------------------------------------------------------- 745,000 Paxar Corp.(1) 12,553,250 - -------------------------------------------------------------------------------- 710,000 Vishay Intertechnology, Inc.(1) 8,484,500 - -------------------------------------------------------------------------------- 59,639,000 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES -- 5.0% - -------------------------------------------------------------------------------- 165,000 Cal Dive International Inc.(1) 10,462,650 - -------------------------------------------------------------------------------- 170,000 Cooper Cameron Corp.(1) 12,568,100 - -------------------------------------------------------------------------------- 500,000 Global Industries Ltd.(1) 7,370,000 - -------------------------------------------------------------------------------- 315,000 Helmerich & Payne, Inc. 19,022,850 - -------------------------------------------------------------------------------- 115,000 Hornbeck Offshore Services Inc.(1) 4,212,450 - -------------------------------------------------------------------------------- 1,415,000 Key Energy Group, Inc.(1) 20,871,250 - -------------------------------------------------------------------------------- 95,000 Lone Star Technologies, Inc.(1) 5,281,050 - -------------------------------------------------------------------------------- 145,000 Tidewater Inc. 7,057,150 - -------------------------------------------------------------------------------- 285,000 Unit Corporation(1) 15,754,800 - -------------------------------------------------------------------------------- 130,000 W-H Energy Services Inc.(1) 4,214,600 - -------------------------------------------------------------------------------- 106,814,900 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 0.6% - -------------------------------------------------------------------------------- 270,000 Casey's General Stores, Inc. 6,264,000 - -------------------------------------------------------------------------------- 205,000 Performance Food Group Co.(1) 6,469,800 - -------------------------------------------------------------------------------- 12,733,800 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 1.6% - -------------------------------------------------------------------------------- 315,000 American Italian Pasta Co. 3,357,900 - -------------------------------------------------------------------------------- 555,000 Corn Products International Inc. 11,194,350 - -------------------------------------------------------------------------------- 270,000 Lancaster Colony Corp. 11,610,000 - -------------------------------------------------------------------------------- 100,000 Ralcorp Holdings, Inc. 4,192,000 - -------------------------------------------------------------------------------- 200,000 Reddy Ice Holdings Inc. 4,102,000 - -------------------------------------------------------------------------------- 34,456,250 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- GAS UTILITIES -- 1.8% - -------------------------------------------------------------------------------- 145,000 AGL Resources Inc. $ 5,380,950 - -------------------------------------------------------------------------------- 145,000 Northwest Natural Gas Co. 5,396,900 - -------------------------------------------------------------------------------- 315,000 Southwest Gas Corp. 8,627,850 - -------------------------------------------------------------------------------- 585,000 WGL Holdings Inc. 18,796,050 - -------------------------------------------------------------------------------- 38,201,750 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 1.4% - -------------------------------------------------------------------------------- 140,000 Arrow International Inc. 3,948,000 - -------------------------------------------------------------------------------- 295,000 Dade Behring Holdings Inc. 10,814,700 - -------------------------------------------------------------------------------- 170,000 Orthofix International N.V.(1) 7,412,000 - -------------------------------------------------------------------------------- 205,000 Osteotech Inc.(1) 1,174,650 - -------------------------------------------------------------------------------- 265,000 Steris Corp. 6,304,350 - -------------------------------------------------------------------------------- 29,653,700 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 2.9% - -------------------------------------------------------------------------------- 495,000 Alliance Imaging Inc.(1) 4,232,250 - -------------------------------------------------------------------------------- 195,000 Apria Healthcare Group Inc.(1) 6,222,450 - -------------------------------------------------------------------------------- 235,000 Community Health Systems Inc.(1) 9,120,350 - -------------------------------------------------------------------------------- 210,000 Molina Healthcare Inc.(1) 5,247,900 - -------------------------------------------------------------------------------- 220,000 Owens & Minor Inc. 6,457,000 - -------------------------------------------------------------------------------- 755,000 Parexel International Corp.(1) 15,167,950 - -------------------------------------------------------------------------------- 60,000 Pediatrix Medical Group, Inc.(1) 4,609,200 - -------------------------------------------------------------------------------- 220,000 Universal Health Services, Inc. Cl B 10,478,600 - -------------------------------------------------------------------------------- 61,535,700 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 2.1% - -------------------------------------------------------------------------------- 175,000 Bob Evans Farms, Inc. 3,974,250 - -------------------------------------------------------------------------------- 120,000 CBRL Group Inc. 4,039,200 - -------------------------------------------------------------------------------- 470,000 CEC Entertainment Inc.(1) 14,927,200 - -------------------------------------------------------------------------------- 525,000 La Quinta Corp.(1) 4,562,250 - -------------------------------------------------------------------------------- 355,000 Outback Steakhouse, Inc. 12,993,000 - -------------------------------------------------------------------------------- 135,000 Ruby Tuesday Inc. 2,937,600 - -------------------------------------------------------------------------------- 43,433,500 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 2.1% - -------------------------------------------------------------------------------- 75,000 Beazer Homes USA, Inc. 4,400,250 - -------------------------------------------------------------------------------- 500,000 Ethan Allen Interiors Inc. 15,675,000 - -------------------------------------------------------------------------------- 255,000 Libbey Inc. 3,876,000 - -------------------------------------------------------------------------------- 295,000 Snap-on Incorporated 10,655,400 - -------------------------------------------------------------------------------- 80,000 Standard Pacific Corp. 3,320,800 - -------------------------------------------------------------------------------- 230,000 WCI Communities Inc.(1) 6,525,100 - -------------------------------------------------------------------------------- 44,452,550 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 0.4% - -------------------------------------------------------------------------------- 85,000 Central Garden and Pet Co.(1) 3,846,250 - -------------------------------------------------------------------------------- 160,000 WD-40 Co. 4,241,600 - -------------------------------------------------------------------------------- 8,087,850 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 22 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- INSURANCE -- 5.7% - -------------------------------------------------------------------------------- 115,000 AmerUs Group Co. $ 6,597,550 - -------------------------------------------------------------------------------- 285,000 Aspen Insurance Holdings Ltd. 8,421,750 - -------------------------------------------------------------------------------- 190,000 Delphi Financial Group, Inc. Cl A 8,892,000 - -------------------------------------------------------------------------------- 850,000 HCC Insurance Holdings, Inc. 24,250,500 - -------------------------------------------------------------------------------- 170,000 Hilb Rogal & Hobbs Co. 6,344,400 - -------------------------------------------------------------------------------- 190,000 Horace Mann Educators Corp. 3,758,200 - -------------------------------------------------------------------------------- 590,000 National Atlantic Holdings Corp. Cl A(1)(2) 6,844,000 - -------------------------------------------------------------------------------- 700,000 Platinum Underwriters Holdings 20,923,000 - -------------------------------------------------------------------------------- 145,000 ProAssurance Corp.(1) 6,767,150 - -------------------------------------------------------------------------------- 160,000 Protective Life Corporation 6,588,800 - -------------------------------------------------------------------------------- 270,000 Scottish Re Group Ltd. 6,436,800 - -------------------------------------------------------------------------------- 110,000 Triad Guaranty Inc.(1) 4,314,200 - -------------------------------------------------------------------------------- 210,000 United Fire & Casualty Co. 9,473,100 - -------------------------------------------------------------------------------- 119,611,450 - -------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL -- 0.2% - -------------------------------------------------------------------------------- 280,000 J Jill Group Inc. (The)(1) 4,429,600 - -------------------------------------------------------------------------------- IT SERVICES -- 2.1% - -------------------------------------------------------------------------------- 290,000 MAXIMUS, Inc. 10,367,500 - -------------------------------------------------------------------------------- 100,000 MedQuist Inc.(1) 1,255,000 - -------------------------------------------------------------------------------- 685,000 MoneyGram International Inc. 14,871,350 - -------------------------------------------------------------------------------- 1,220,000 Perot Systems Corp. Cl A(1) 17,263,000 - -------------------------------------------------------------------------------- 43,756,850 - -------------------------------------------------------------------------------- MACHINERY -- 4.5% - -------------------------------------------------------------------------------- 235,000 Albany International Corp. 8,664,450 - -------------------------------------------------------------------------------- 670,000 Briggs & Stratton Corp. 23,175,300 - -------------------------------------------------------------------------------- 365,000 Crane Co. 10,855,100 - -------------------------------------------------------------------------------- 220,000 Kadant Inc.(1) 4,413,200 - -------------------------------------------------------------------------------- 690,000 Kaydon Corporation 19,602,900 - -------------------------------------------------------------------------------- 280,000 Kennametal Inc. 13,731,200 - -------------------------------------------------------------------------------- 190,000 Nordson Corp. 7,225,700 - -------------------------------------------------------------------------------- 85,000 Tecumseh Products Cl A 1,829,200 - -------------------------------------------------------------------------------- 225,000 Timken Co. 6,666,750 - -------------------------------------------------------------------------------- 96,163,800 - -------------------------------------------------------------------------------- MARINE -- 0.4% - -------------------------------------------------------------------------------- 160,000 Alexander & Baldwin, Inc. 8,518,400 - -------------------------------------------------------------------------------- MEDIA -- 2.1% - -------------------------------------------------------------------------------- 135,000 ADVO, Inc. 4,224,150 - -------------------------------------------------------------------------------- 415,000 Hearst-Argyle Television, Inc. 10,661,350 - -------------------------------------------------------------------------------- 850,000 Journal Communications Inc. 12,665,000 - -------------------------------------------------------------------------------- 125,000 Liberty Corp. (The) 5,861,250 - -------------------------------------------------------------------------------- 90,000 ProQuest Co.(1) 3,258,000 - -------------------------------------------------------------------------------- 217,000 Valassis Communications, Inc.(1) 8,458,660 - -------------------------------------------------------------------------------- 45,128,410 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- METALS & MINING -- 1.3% - -------------------------------------------------------------------------------- 185,000 Compass Minerals International Inc. $ 4,255,000 - -------------------------------------------------------------------------------- 70,000 Quanex Corporation 4,635,400 - -------------------------------------------------------------------------------- 195,000 Reliance Steel & Aluminum Company 10,321,350 - -------------------------------------------------------------------------------- 415,000 Worthington Industries, Inc. 8,727,450 - -------------------------------------------------------------------------------- 27,939,200 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 0.4% - -------------------------------------------------------------------------------- 700,000 Fred's, In 8,757,000 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 3.7% - -------------------------------------------------------------------------------- 280,000 Alpha Natural Resources, Inc.(1) 8,411,200 - -------------------------------------------------------------------------------- 620,000 Arlington Tankers Ltd. 14,526,600 - -------------------------------------------------------------------------------- 320,000 Cimarex Energy Co.(1) 14,505,600 - -------------------------------------------------------------------------------- 110,000 Encore Acquisition Co.(1) 4,273,500 - -------------------------------------------------------------------------------- 150,000 Forest Oil Corporation(1) 7,815,000 - -------------------------------------------------------------------------------- 100,000 Plains Exploration & Production Co.(1) 4,282,000 - -------------------------------------------------------------------------------- 80,000 Spinnaker Exploration Company(1) 5,175,200 - -------------------------------------------------------------------------------- 134,515 St. Mary Land & Exploration Co. 4,923,249 - -------------------------------------------------------------------------------- 250,000 W&T Offshore Inc. 8,107,500 - -------------------------------------------------------------------------------- 120,000 Western Gas Resources Inc. 6,147,600 - -------------------------------------------------------------------------------- 78,167,449 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 0.4% - -------------------------------------------------------------------------------- 185,000 Par Pharmaceutical Companies Inc.(1) 4,924,700 - -------------------------------------------------------------------------------- 310,000 Perrigo Co. 4,436,100 - -------------------------------------------------------------------------------- 9,360,800 - -------------------------------------------------------------------------------- REAL ESTATE -- 4.1% - -------------------------------------------------------------------------------- 455,000 American Financial Realty Trust 6,461,000 - -------------------------------------------------------------------------------- 145,000 BRE Properties 6,452,500 - -------------------------------------------------------------------------------- 560,000 Commercial Net Lease Realty 11,200,000 - -------------------------------------------------------------------------------- 530,000 Getty Realty Corp. 15,253,400 - -------------------------------------------------------------------------------- 280,000 Healthcare Realty Trust Inc. 11,239,200 - -------------------------------------------------------------------------------- 415,000 Highland Hospitality Corp. 4,257,900 - -------------------------------------------------------------------------------- 255,000 Liberty Property Trust 10,847,700 - -------------------------------------------------------------------------------- 145,000 Mack-Cali Realty Corp. 6,516,300 - -------------------------------------------------------------------------------- 226,056 Maguire Properties, Inc. 6,792,983 - -------------------------------------------------------------------------------- 285,000 Realty Income Corp. 6,814,350 - -------------------------------------------------------------------------------- 85,835,333 - -------------------------------------------------------------------------------- ROAD & RAIL -- 1.6% - -------------------------------------------------------------------------------- 260,000 Arkansas Best Corporation 9,066,200 - -------------------------------------------------------------------------------- 540,000 Heartland Express, Inc. 10,983,600 - -------------------------------------------------------------------------------- 770,000 Werner Enterprises Inc. 13,313,300 - -------------------------------------------------------------------------------- 33,363,100 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 23 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.0% - -------------------------------------------------------------------------------- 710,000 Mattson Technology Inc.(1) $ 5,332,100 - -------------------------------------------------------------------------------- 305,000 Rudolph Technologies Inc.(1) 4,108,350 - -------------------------------------------------------------------------------- 400,000 Skyworks Solutions, Inc.(1) 2,808,000 - -------------------------------------------------------------------------------- 195,000 Varian Semiconductor Equipment Associates, Inc.(1) 8,262,150 - -------------------------------------------------------------------------------- 20,510,600 - -------------------------------------------------------------------------------- SOFTWARE -- 5.2% - -------------------------------------------------------------------------------- 435,000 Compuware Corp.(1) 4,132,500 - -------------------------------------------------------------------------------- 410,000 Dendrite International, Inc.(1) 8,236,900 - -------------------------------------------------------------------------------- 170,000 Internet Security Systems(1) 4,081,700 - -------------------------------------------------------------------------------- 180,000 MRO Software Inc.(1) 3,031,200 - -------------------------------------------------------------------------------- 2,050,000 Parametric Technology Corp.(1) 14,288,500 - -------------------------------------------------------------------------------- 110,000 Reynolds & Reynolds Co. Cl A 3,015,100 - -------------------------------------------------------------------------------- 1,825,000 Sybase, Inc.(1) 42,741,500 - -------------------------------------------------------------------------------- 470,000 Synopsys, Inc.(1) 8,883,000 - -------------------------------------------------------------------------------- 1,090,000 TIBCO Software Inc.(1) 9,112,400 - -------------------------------------------------------------------------------- 390,000 Ulticom, Inc.(1) 4,301,700 - -------------------------------------------------------------------------------- 780,000 Verity Inc.(1) 8,283,600 - -------------------------------------------------------------------------------- 110,108,100 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 4.2% - -------------------------------------------------------------------------------- 590,000 Borders Group Inc. 13,080,300 - -------------------------------------------------------------------------------- 130,000 Cato Corp. (The) 2,590,900 - -------------------------------------------------------------------------------- 600,000 Christopher & Banks Corporation 8,322,000 - -------------------------------------------------------------------------------- 560,000 Hot Topic, Inc.(1) 8,601,600 - -------------------------------------------------------------------------------- 630,000 Linens 'n Things, Inc.(1) 16,821,000 - -------------------------------------------------------------------------------- 1,010,000 Pier 1 Imports, Inc. 11,382,700 - -------------------------------------------------------------------------------- 450,000 Talbots Inc. 13,464,000 - -------------------------------------------------------------------------------- 545,000 Zale Corp.(1) 14,813,100 - -------------------------------------------------------------------------------- 89,075,600 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.9% - -------------------------------------------------------------------------------- 145,000 Columbia Sportswear Co.(1) 6,728,000 - -------------------------------------------------------------------------------- 215,000 Kellwood Co. 5,557,750 - -------------------------------------------------------------------------------- 550,000 Kenneth Cole Productions Inc. 15,009,500 - -------------------------------------------------------------------------------- 240,000 Reebok International Ltd. 13,576,800 - -------------------------------------------------------------------------------- 40,872,050 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 2.2% - -------------------------------------------------------------------------------- 640,000 Flagstar Bancorp Inc. 10,304,000 - -------------------------------------------------------------------------------- 155,000 MAF Bancorp Inc. 6,355,000 - -------------------------------------------------------------------------------- 110,000 PMI Group, Inc. (The) 4,385,700 - -------------------------------------------------------------------------------- 935,000 Washington Federal, Inc. 21,093,600 - -------------------------------------------------------------------------------- 95,000 Webster Financial Corp. 4,271,200 - -------------------------------------------------------------------------------- 46,409,500 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS -- 0.9% - -------------------------------------------------------------------------------- 330,000 Hughes Supply, Inc. 10,758,000 - -------------------------------------------------------------------------------- 400,000 UAP Holding Corp. 7,240,000 - -------------------------------------------------------------------------------- 17,998,000 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $1,725,990,470) 2,009,177,027 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS -- 0.3% INSURANCE -- 0.3% - -------------------------------------------------------------------------------- 152,300 Phoenix Companies Inc., 7.25%, 2/16/06 (Cost $3,914,955) $ 5,409,696 - -------------------------------------------------------------------------------- PREFERRED STOCKS -- 0.1% COMMERCIAL BANKS -- 0.1% - -------------------------------------------------------------------------------- 29,000 MB Financial Capital Trust I, 8.60%, 9/30/32 751,100 - -------------------------------------------------------------------------------- REAL ESTATE(3) - -------------------------------------------------------------------------------- 28,000 Mills Corp. (The), Series B, 9.00%, 10/9/07 732,200 - -------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (Cost $1,425,000) 1,483,300 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 4.7% Repurchase Agreement, Deutsche Bank Securities, Inc., (collateralized by various U.S. Treasury obligations, 4.75%, 5/15/14, valued at $76,437,547), in a joint trading account at 3.20%, dated 9/30/05, due 10/3/05 (Delivery value $74,919,973) 74,900,000 - -------------------------------------------------------------------------------- Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 6.875%, 8/15/25, valued at $25,514,581), in a joint trading account at 3.22%, dated 9/30/05, due 10/3/05 (Delivery value $25,006,708) 25,000,000 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $99,900,000) 99,900,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.0% (Cost $1,831,230,425) 2,115,970,023 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES(3) (520,817) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $2,115,449,206 ================================================================================ NOTES TO SCHEDULE OF INVESTMENTS (1) Non-income producing. (2) Affiliated Company: the fund's holding represents ownership of 5% or more of the voting securities of the company; therefore, the company is affiliated as defined in the Investment Company Act of 1940. (See Note 5 in Notes to Financial Statements.) (3) Category 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 April 1, 2005 to September 30, 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 infor- (continued) - ------ 24 Shareholder Fee Examples (Unaudited) mation 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. 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 4/1/05 - EXPENSE 4/1/05 9/30/05 9/30/05 RATIO(1) - -------------------------------------------------------------------------------------------------- EQUITY INCOME SHAREHOLDER FEE EXAMPLE - -------------------------------------------------------------------------------------------------- ACTUAL - -------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,020.10 $4.96 0.98% - -------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,019.80 $3.95 0.78% - -------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,018.80 $6.22 1.23% - -------------------------------------------------------------------------------------------------- C Class $1,000 $1,013.80 $10.00 1.98% - -------------------------------------------------------------------------------------------------- R Class (after reimbursements)(2) $1,000 $1,017.60 $7.43 1.47% - -------------------------------------------------------------------------------------------------- R Class (before reimbursements) $1,000 $1,017.60(3) $7.49 1.48% - -------------------------------------------------------------------------------------------------- HYPOTHETICAL - -------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,020.16 $4.96 0.98% - -------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,021.16 $3.95 0.78% - -------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,018.90 $6.23 1.23% - -------------------------------------------------------------------------------------------------- C Class $1,000 $1,015.14 $10.00 1.98% - -------------------------------------------------------------------------------------------------- R Class (after reimbursements)(2) $1,000 $1,017.70 $7.44 1.47% - -------------------------------------------------------------------------------------------------- R Class (before reimbursements) $1,000 $1,017.65 $7.49 1.48% - -------------------------------------------------------------------------------------------------- (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 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. (2) During the six months ended September 30, 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 1.48%. (3) Ending account value assumes the return earned after reimbursement. The return would have been lower had fees not been reimbursed and may have resulted in a lower ending account value. (continued) - ------ 26 Shareholder Fee Examples (Unaudited) EXPENSES PAID BEGINNING ENDING DURING PERIOD(1) ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 4/1/05 - EXPENSE 4/1/05 9/30/05 9/30/05 RATIO(1) - -------------------------------------------------------------------------------- MID CAP VALUE SHAREHOLDER FEE EXAMPLE - -------------------------------------------------------------------------------- ACTUAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,061.90 $5.17 1.00% - -------------------------------------------------------------------------------- Institutional Class $1,000 $1,062.00 $4.14 0.80% - -------------------------------------------------------------------------------- Advisor Class $1,000 $1,060.50 $6.46 1.25% - -------------------------------------------------------------------------------- R Class $1,000 $974.20(2) $2.56(3) 1.50% - -------------------------------------------------------------------------------- HYPOTHETICAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,020.05 $5.06 1.00% - -------------------------------------------------------------------------------- Institutional Class $1,000 $1,021.06 $4.05 0.80% - -------------------------------------------------------------------------------- Advisor Class $1,000 $1,018.80 $6.33 1.25% - -------------------------------------------------------------------------------- R Class $1,000 $1,017.55(4) $7.59(4) 1.50% - -------------------------------------------------------------------------------- (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 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. (2) Ending account value based on actual returns from July 29, 2005 (commencement of sale) for R Class through September 30, 2005. (3) Expenses are equal to the R Class annualized expense ratio listed in the table above, mulitiplied by the average account value over the period, multiplied by 63, the number of days in the period from July 29, 2005 (commencement of sale) through September 30, 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. (continued) - ------ 27 Shareholder Fee Examples (Unaudited) EXPENSES PAID BEGINNING ENDING DURING PERIOD(1) ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 4/1/05 - EXPENSE 4/1/05 9/30/05 9/30/05 RATIO(1) - ------------------------------------------------------------------------------------------- SMALL CAP VALUE SHAREHOLDER FEE EXAMPLE - ------------------------------------------------------------------------------------------- ACTUAL - ------------------------------------------------------------------------------------------- Investor Class $1,000 $1,078.90 $6.51 1.25% - ------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,080.90 $5.48 1.05% - ------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,078.50 $7.82 1.50% - ------------------------------------------------------------------------------------------- C Class (after reimbursement)(2) $1,000 $1,073.20 $11.64 2.24% - ------------------------------------------------------------------------------------------- C Class (before reimbursement) $1,000 $1,073.20(3) $11.69 2.25% - ------------------------------------------------------------------------------------------- HYPOTHETICAL - ------------------------------------------------------------------------------------------- Investor Class $1,000 $1,018.80 $6.33 1.25% - ------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,019.80 $5.32 1.05% - ------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,017.55 $7.59 1.50% - ------------------------------------------------------------------------------------------- C Class (after reimbursement)(2) $1,000 $1,013.84 $11.31 2.24% - ------------------------------------------------------------------------------------------- C Class (before reimbursement) $1,000 $1,013.79 $11.36 2.25% - ------------------------------------------------------------------------------------------- (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 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. (2) During the six months ended September 30, 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 2.25%. (3) Ending account value assumes the return earned after reimbursement. The return would have been lower had fees not been reimbursed and may have resulted in a lower ending account value. - ------ 28 Statement of Assets and Liabilities SEPTEMBER 30, 2005 (UNAUDITED) - --------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - --------------------------------------------------------------------------------------------- ASSETS - --------------------------------------------------------------------------------------------- Investment securities -- unaffiliated, at value (cost of $4,858,017,925, $100,298,140 and $1,824,313,482, respectively) $5,159,654,616 $100,007,728 $2,109,126,023 - --------------------------------------- Investment securities -- affiliated, at value (cost of $124,081,881, $-- and $6,916,943, respectively) 140,120,385 -- 6,844,000 - --------------------------------------------------------------------------------------------- Total investment securities, at value (cost of $4,982,099,806, $100,298,140 and $1,831,230,425, respectively) 5,299,775,001 100,007,728 2,115,970,023 - --------------------------------------- Cash -- 157,601 1,275,502 - --------------------------------------- Receivable for investments sold 49,426,722 3,262,811 13,505,029 - --------------------------------------- Receivable for forward foreign currency exchange contracts 80,513 608 -- - --------------------------------------- Receivable for capital shares sold 3,522,410 52,900 54,871 - --------------------------------------- Dividends and interest receivable 11,505,099 150,252 1,769,430 - --------------------------------------------------------------------------------------------- 5,364,309,745 103,631,900 2,132,574,855 - --------------------------------------------------------------------------------------------- LIABILITIES - --------------------------------------------------------------------------------------------- Disbursements in excess of demand deposit cash 463,643 -- -- - --------------------------------------- Payable for investments purchased 59,614,214 2,389,456 14,942,632 - --------------------------------------- Payable for capital shares redeemed 50,763,437 -- -- - --------------------------------------- Accrued management fees 3,956,902 80,252 2,018,644 - --------------------------------------- Distribution fees payable 264,590 521 82,920 - --------------------------------------- Service fees (and distribution fees R Class) payable 220,956 511 81,453 - --------------------------------------------------------------------------------------------- 115,283,742 2,470,740 17,125,649 - --------------------------------------------------------------------------------------------- NET ASSETS $5,249,026,003 $101,161,160 $2,115,449,206 ============================================================================================= See Notes to Financial Statements. (continued) - ------ 29 Statement of Assets and Liabilities SEPTEMBER 30, 2005 (UNAUDITED) - ----------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - ----------------------------------------------------------------------------------------------- NET ASSETS CONSIST OF: - ----------------------------------------------------------------------------------------------- Capital (par value and paid-in surplus) $4,768,197,448 $94,501,656 $1,590,913,450 - ------------------------------------------ Undistributed net investment income 5,995,406 92,267 801,252 - ------------------------------------------ Undistributed net realized gain on investment and foreign currency transactions 156,545,447 6,849,358 237,761,538 - ------------------------------------------ Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies 318,287,702 (282,121) 285,972,966 - ----------------------------------------------------------------------------------------------- $5,249,026,003 $101,161,160 $2,115,449,206 =============================================================================================== INVESTOR CLASS, $0.01 PAR VALUE - ----------------------------------------------------------------------------------------------- Net assets $3,839,786,472 $88,535,332 $1,318,439,175 - ------------------------------------------ Shares outstanding 472,188,377 7,454,636 121,692,928 - ------------------------------------------ Net asset value per share $8.13 $11.88 $10.83 - ----------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - ----------------------------------------------------------------------------------------------- Net assets $358,796,914 $9,745,280 $396,005,953 - ------------------------------------------ Shares outstanding 44,113,365 820,397 36,508,970 - ------------------------------------------ Net asset value per share $8.13 $11.88 $10.85 - ----------------------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - ----------------------------------------------------------------------------------------------- Net assets $942,097,542 $2,856,202 $397,431,871 - ------------------------------------------ Shares outstanding 115,842,186 240,494 36,706,228 - ------------------------------------------ Net asset value per share $8.13 $11.88 $10.83 - ----------------------------------------------------------------------------------------------- C CLASS, $0.01 PAR VALUE - ----------------------------------------------------------------------------------------------- Net assets $94,310,931 N/A $3,572,207 - ------------------------------------------ Shares outstanding 11,595,550 N/A 338,495 - ------------------------------------------ Net asset value per share $8.13 N/A $10.55 - ----------------------------------------------------------------------------------------------- R CLASS, $0.01 PAR VALUE - ----------------------------------------------------------------------------------------------- Net assets $14,034,144 $24,346 N/A - ------------------------------------------ Shares outstanding 1,728,639 2,050 N/A - ------------------------------------------ Net asset value per share $8.12 $11.88 N/A - ----------------------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 30 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED) - -------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - -------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: - ------------------------------------------------ Dividends (including $4,485,809, $--, and $711,342, respectively, from affiliates and net of foreign taxes withheld of $225,290, $2,133 and $--, respectively) $70,581,349 $1,255,899 $ 17,238,188 - ------------------------------------------------ Interest 13,861,398 52,558 1,430,041 - -------------------------------------------------------------------------------------------------- 84,442,747 1,308,457 18,668,229 - -------------------------------------------------------------------------------------------------- EXPENSES: - --------------------------------------------- Management fees 22,621,004 365,114 11,915,866 - --------------------------------------------- Distribution fees: - --------------------------------------------- Advisor Class 1,105,526 2,048 495,638 - --------------------------------------------- C Class 300,668 -- 13,080 - --------------------------------------------- Service fees: - --------------------------------------------- Advisor Class 1,105,526 2,048 495,638 - --------------------------------------------- C Class 100,222 -- 4,360 - --------------------------------------------- Service and distribution fees -- R Class 25,302 20 -- - --------------------------------------------- Directors' fees and expenses 56,404 611 24,539 - --------------------------------------------- Other expenses 31,526 97 5,930 - ------------------------------------------------------------------------------------------------- 25,346,178 369,938 12,955,051 - ------------------------------------------------------------------------------------------------- Amount reimbursed (873) -- (220) - ------------------------------------------------------------------------------------------------- 25,345,305 369,938 12,954,831 - ------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 59,097,442 938,519 5,713,398 - ------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - ------------------------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS) ON: - --------------------------------------------- Investment transactions (including $1,441,235, $--, and $(281,731) from affiliates, respectively) 57,034,718 4,657,471 154,782,506 - --------------------------------------------- Foreign currency transactions 11,659,729 96,051 -- - ------------------------------------------------------------------------------------------------- 68,694,447 4,753,522 154,782,506 - ------------------------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: - --------------------------------------------- Investments (30,815,853) (2,082,655) (18,184,880) - --------------------------------------------- Translation of assets and liabilities in foreign currencies 1,154,512 4,364 -- - ------------------------------------------------------------------------------------------------- (29,661,341) (2,078,291) (18,184,880) - ------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) 39,033,106 2,675,231 136,597,626 - ------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $98,130,548 $3,613,750 $142,311,024 ================================================================================================= See Notes to Financial Statements. - ------ 31 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED) AND YEAR ENDED MARCH 31, 2005 - --------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE - --------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2005 MARCH 31, 2005 SEPT. 30, 2005 MARCH 31, 2005 - --------------------------------------------------------------------------------------------------- OPERATIONS - --------------------------------------------------------------------------------------------------- Net investment income $ 59,097,442 $ 88,590,980 $ 938,519 $ 242,667 - --------------------------------- Net realized gain (loss) 68,694,447 210,910,510 4,753,522 2,835,903 - --------------------------------- Change in net unrealized appreciation (depreciation) (29,661,341) 56,147,197 (2,078,291) 1,792,404 - --------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 98,130,548 355,648,687 3,613,750 4,870,974 - --------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - --------------------------------------------------------------------------------------------------- From net investment income: - --------------------------------- Investor Class (37,467,454) (61,904,760) (720,400) (130,746) - --------------------------------- Institutional Class (3,823,780) (5,086,045) (117,925) (34,287) - --------------------------------- Advisor Class (8,116,131) (12,359,454) (16,095) (73) - --------------------------------- C Class (441,458) (665,086) -- -- - --------------------------------- R Class (87,433) (35,832) (32) -- - --------------------------------- From net realized gains: - --------------------------------- Investor Class -- (142,378,053) -- (633,295) - --------------------------------- Institutional Class -- (11,131,604) -- (176,133) - --------------------------------- Advisor Class -- (34,860,778) -- -- - --------------------------------- C Class -- (2,736,854) -- -- - --------------------------------- R Class -- (136,511) -- -- - --------------------------------------------------------------------------------------------------- Decrease in net assets from distributions (49,936,256) (271,294,977) (854,452) (974,534) - --------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - --------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions 818,305,871 1,366,352,921 47,204,273 45,682,314 - --------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 866,500,163 1,450,706,631 49,963,571 49,578,754 =================================================================================================== NET ASSETS - --------------------------------------------------------------------------------------------------- Beginning of period 4,382,525,840 2,931,819,209 51,197,589 1,618,835 - --------------------------------------------------------------------------------------------------- End of period $5,249,026,003 $4,382,525,840 $101,161,160 $51,197,589 =================================================================================================== Accumulated undistributed net investment income (loss) $5,995,406 $(3,440,794) $92,267 $8,200 =================================================================================================== See Notes to Financial Statements. (continued) - ------ 32 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED) AND YEAR ENDED MARCH 31, 2005 - -------------------------------------------------------------------------------- SMALL CAP VALUE - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2005 MARCH 31, 2005 - -------------------------------------------------------------------------------- OPERATIONS - -------------------------------------------------------------------------------- Net investment income $ 5,713,398 $ 5,317,972 - ------------------------------------------- Net realized gain (loss) 154,782,506 227,943,321 - ------------------------------------------- Change in net unrealized appreciation (depreciation) (18,184,880) 24,305,291 - -------------------------------------------------------------------------------- Net increase in net assets resulting from operations 142,311,024 257,566,584 - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - -------------------------------------------------------------------------------- From net investment income: - ------------------------------------------- Investor Class (4,172,466) (3,233,600) - ------------------------------------------- Institutional Class (1,639,088) (1,248,416) - ------------------------------------------- Advisor Class (733,577) (575,649) - ------------------------------------------- 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 (6,545,131) (191,914,956) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - -------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions (215,273,476) 472,049,303 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (79,507,583) 537,700,931 ================================================================================ NET ASSETS - -------------------------------------------------------------------------------- Beginning of period 2,194,956,789 1,657,255,858 - -------------------------------------------------------------------------------- End of period $2,115,449,206 $2,194,956,789 ================================================================================ Undistributed net investment income $801,252 $339,467 ================================================================================ See Notes to Financial Statements. - ------ 33 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Equity Income Fund (Equity Income), Mid Cap Value Fund (Mid Cap Value) and Small Cap Value Fund (Small Cap Value) (collectively, the funds) are three funds in a series issued by the corporation. The funds are diversified under the 1940 Act. Equity Income's investment objective is the production of current income; capital appreciation is a secondary objective. Equity Income pursues its investment objective by investing in securities of companies with a favorable income-paying history that have prospects for income payments to continue or increase. 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, the Advisor Class, and the R Class. Small Cap Value is authorized to issue the Investor Class, the Institutional Class, the Advisor Class, and the C Class. The C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and shareholder servicing and distribution expenses and arrangements. All shares of each fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the funds are allocated to each class of shares based on their relative net assets. Sale of Mid Cap Value's Institutional Class, Advisor Class, and R Class commenced on August 2, 2004, January 13, 2005, and July 29, 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 and capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The funds estimate 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) - ------ 34 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 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 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. EXCHANGE TRADED FUNDS -- The funds may invest in exchange traded funds (ETFs). ETFs are a type of index fund bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities designed to track the performance and dividend yield of a particular domestic or foreign market index. A fund may purchase an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although the lack of liquidity on an ETF could result in it being more volatile. Additionally, ETFs have management fees, which increase their cost. 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 or American Century Global Investment Management, Inc. (ACGIM), 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) - ------ 35 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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 schedule for each class of Mid Cap Value is 1.00%, 0.80%, 0.75% and 1.00% for the Investor Class, Institutional Class, Advisor Class and R 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% - -------------------------------------------------------------------------------- Over $2.5 billion 1.00% 0.80% 0.75% - -------------------------------------------------------------------------------- (continued) - ------ 36 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) The effective annual management fee for each class of the funds for the six months ended September 30, 2005, was as follows: - -------------------------------------------------------------------------------- EQUITY MID CAP SMALL CAP INCOME VALUE VALUE - -------------------------------------------------------------------------------- Investor 0.98% 1.00% 1.25% - -------------------------------------------------------------------------------- Institutional 0.78% 0.80% 1.05% - -------------------------------------------------------------------------------- Advisor 0.73% 0.75% 1.00% - -------------------------------------------------------------------------------- C 0.98% N/A 1.25% - -------------------------------------------------------------------------------- R 0.98% 1.00% N/A - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master Distribution and Shareholder Services Plan for the Advisor Class (the Advisor Class plan) and a separate Master Distribution and Individual Shareholder Services Plan for each of the C Class and R Class (collectively with the Advisor Class Plan, the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the Advisor Class and C Class will pay American Century Investment Services, Inc. (ACIS) the following annual distribution and service fees: - -------------------------------------------------------------------------------- ADVISOR C - -------------------------------------------------------------------------------- Distribution Fee 0.25% 0.75% - -------------------------------------------------------------------------------- Service Fee 0.25% 0.25% - -------------------------------------------------------------------------------- The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The distribution fee provides compensation for expenses incurred in connection with distributing shares of the classes including, but not limited to, payments to brokers, dealers, and financial institutions that have entered into sales agreements with respect to shares of the funds. The service fee provides compensation for shareholder and administrative services rendered by ACIS, its affiliates or independent third party providers for Advisor Class shares and for individual shareholder services rendered by broker/dealers or other independent financial intermediaries for C Class and R Class shares. Fees incurred under the plans during the six months ended September 30, 2005, are detailed in the Statement of Operations. During the six months ended September 30, 2005, classes in Equity Income that received reimbursements of distribution and service fees were as follows: - -------------------------------------------------------------------------------- ADVISOR C R - -------------------------------------------------------------------------------- Distribution Fee $332 $172 $318(1) - -------------------------------------------------------------------------------- Service Fee -- $51 -- - -------------------------------------------------------------------------------- (1) R Class is a distribution and service fee. During the six months ended September 30, 2005, the C Class in Small Cap Value received reimbursements of its distribution fees and service fees of $173 and $47, respectively. 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. 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 J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. 3. INVESTMENT TRANSACTIONS Investment transactions, excluding short-term investments, for the six months ended September 30, 2005, were as follows: - -------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - -------------------------------------------------------------------------------- Purchases $4,759,214,936 $138,523,627 $1,091,622,762 - -------------------------------------------------------------------------------- Proceeds from sales $4,114,043,005 $91,129,996 $1,333,767,004 - -------------------------------------------------------------------------------- For the six months ended September 30, 2005, Small Cap Value incurred net realized gains of $22,556,553 from redemptions in kind. A redemption in kind occurs when a fund delivers securities from its portfolio in lieu of cash as payment to a redeeming shareholder. (continued) - ------ 37 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the funds were as follows: - ------------------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - ------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------------- INVESTOR CLASS - ------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 1,000,000,000 40,000,000 400,000,000 ============================================================================================================= Sold 111,864,746 $904,568,776 4,605,910 $54,393,167 12,582,840 $130,952,446 - ------------------- Issued in reinvestment of distributions 4,144,586 33,976,737 59,123 693,627 370,284 4,024,989 - ------------------- Redeemed (52,363,621) (424,967,118) (924,691) (10,871,174) (15,598,549) (161,833,005) - ------------------------------------------------------------------------------------------------------------- Net increase (decrease) 63,645,711 $513,578,395 3,740,342 $44,215,620 (2,645,425) $(26,855,570) ============================================================================================================= 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 (decrease) 121,953,019 $ 977,973,771 3,552,787 $37,437,447 16,181,326 $160,567,557 ============================================================================================================= INSTITUTIONAL CLASS - ------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 100,000,000 40,000,000 100,000,000 ============================================================================================================= Sold 15,462,709 $124,771,223 164,294 $1,911,333 10,928,287 $111,204,936 - ------------------- Issued in reinvestment of distributions 416,621 3,415,854 10,061 117,925 121,976 1,328,320 - ------------------- Redeemed (3,693,118) (30,011,161) (67,493) (801,390) (5,754,683) (59,683,157) - ------------------------------------------------------------------------------------------------------------- Net increase (decrease) 12,186,212 $ 98,175,916 106,862 $1,227,868 5,295,580 $ 52,850,099 ============================================================================================================= YEAR ENDED MARCH 31, 2005(1) 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 (decrease) 8,561,167 $ 69,416,229 713,535 $ 7,197,871 13,646,138 $136,954,654 ============================================================================================================= (1) August 2, 2004 (commencement of sale) through March 31, 2005 for Mid Cap Value. (continued) - ------ 38 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - ---------------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - ---------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ---------------------------------------------------------------------------------------------------------- ADVISOR CLASS - ---------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 250,000,000 40,000,000 160,000,000 ========================================================================================================== Sold 38,724,136 $313,534,564 158,719 $1,872,908 7,254,153 $ 75,243,489 - ------------------- Issued in reinvestment of distributions 901,658 7,396,000 1,374 16,095 67,417 732,817 - ------------------- Redeemed (18,802,923) (152,325,354) (12,938) (153,253) (32,678,617) (317,100,513) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) 20,822,871 $168,605,210 147,155 $1,735,750 (25,357,047) $(241,124,207) ========================================================================================================== 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 (decrease) 36,719,507 $293,663,131 93,339 $1,046,996 17,568,888 $174,888,601 ========================================================================================================== C CLASS - ---------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 30,000,000 N/A 10,000,000 ========================================================================================================== Sold 4,334,416 $35,098,783 946 $ 10,051 - ------------------- Issued in reinvestment of distributions 47,563 390,890 -- -- - ------------------- Redeemed (670,514) (5,423,809) (15,598) (153,849) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) 3,711,465 $30,065,864 (14,652) $(143,798) ========================================================================================================== 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) ========================================================================================================== (1) January 13, 2005 (commencement of sale) through March 31, 2005 for Mid Cap Value. (continued) - ------ 39 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - ------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - ------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------- R CLASS - ------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005(1) SHARES AUTHORIZED 10,000,000 40,000,000 N/A =========================================================================================== Sold 1,091,083 $8,807,398 2,047 $25,003 - ---------------------- Issued in reinvestment of distributions 10,562 86,513 3 32 - ---------------------- Redeemed (124,937) (1,013,425) -- -- - ------------------------------------------------------------------------------------------- Net increase (decrease) 976,708 $7,880,486 2,050 $25,035 =========================================================================================== 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 (decrease) 701,928 $5,621,471 =========================================================================================== (1) July 29, 2005 (commencement of sale) through March 31, 2005 for Mid Cap Value. 5. AFFILIATED COMPANY TRANSACTIONS If a fund's holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2005 follows: - --------------------------------------------------------------------------------------------------- SHARE SEPTEMBER 30, 2005 BALANCE PURCHASE SALES REALIZED DIVIDEND SHARE MARKET FUND/COMPANY 3/31/05 COST COST GAIN INCOME BALANCE VALUE - --------------------------------------------------------------------------------------------------- EQUITY INCOME - --------------------------------------------------------------------------------------------------- Cascade Natural Gas Corp.(1) 558,691 $ -- $ 1,196,227 $ 13,222 $ 265,532 501,791 $ 10,923,990 - -------------- Commerce Bancshares, Inc.(1) 3,122,164 21,161,033 31,168,215 1,455,277 1,461,415 2,912,064 149,913,055 - -------------- IDACORP, Inc. 1,858,278 7,128,409 1,514,742 (31,143) 1,258,157 2,064,878 62,214,774 - -------------- WGL Holdings Inc. 2,167,700 10,615,661 2,014,199 3,879 1,500,705 2,424,700 77,905,611 - --------------------------------------------------------------------------------------------------- $38,905,103 $35,893,383 $1,441,235 $4,485,809 $300,957,430 =================================================================================================== SMALL CAP VALUE - --------------------------------------------------------------------------------------------------- Arlington Tankers Ltd.(1) 530,000 $ 6,538,59 $4,938,874 $(280,379) $711,342 620,000 $14,526,600 - -------------- National Atlantic Holdings Corp. Cl A(2) -- 7,006,226 89,284 (1,352) -- 590,000 6,844,000 - --------------------------------------------------------------------------------------------------- $13,544,816 $5,028,158 $(281,731) $711,342 $21,370,600 =================================================================================================== (1) Company was not an affiliate at September 30, 2005. (2) Non-income producing. (continued) - ------ 40 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 6. BANK LINE OF CREDIT The funds, along with certain other funds managed by ACIM or ACGIM, have a $575,000,000 unsecured bank line of credit agreement with JPMCB. The funds may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The funds did not borrow from the line during the six months ended September 30, 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. 8. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. As of September 30, 2005, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - -------------------------------------------------------------------------------- Federal tax cost of investments $5,039,980,892 $101,491,422 $1,867,941,331 ================================================================================ Gross tax appreciation of investments $378,576,273 $ 2,389,274 $312,190,566 - ------------------------- Gross tax depreciation of investments (118,782,164) (3,872,968) (64,161,874) - -------------------------------------------------------------------------------- Net tax appreciation (depreciation) of investments $259,794,109 $(1,483,694) $248,028,692 ================================================================================ 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. Equity Income and Mid Cap Value had $8,503,709 and $28,102, respectively, of currency loss deferrals incurred in the five-month period ended March 31, 2005. The funds have elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. (continued) - ------ 41 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - --------------------------------------------------------------------------------------------------- INVESTOR CLASS - --------------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - --------------------------------------------------------------------------------------------------- PER-SHARE DATA - --------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $8.05 $7.84 $6.22 $7.36 $6.47 $5.50 - --------------------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------- Net Investment Income(2) 0.10 0.21 0.22 0.17 0.17 0.18 - ---------------------------- Net Realized and Unrealized Gain (Loss) 0.06 0.61 1.71 (1.05) 0.93 0.96 - --------------------------------------------------------------------------------------------------- Total From Investment Operations 0.16 0.82 1.93 (0.88) 1.10 1.14 - --------------------------------------------------------------------------------------------------- Distributions - ---------------------------- From Net Investment Income (0.08) (0.19) (0.19) (0.16) (0.17) (0.17) - ---------------------------- From Net Realized Gains -- (0.42) (0.12) (0.10) (0.04) -- - --------------------------------------------------------------------------------------------------- Total Distributions (0.08) (0.61) (0.31) (0.26) (0.21) (0.17) - --------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.13 $8.05 $7.84 $6.22 $7.36 $6.47 =================================================================================================== TOTAL RETURN(3) 2.01% 10.69% 31.30% (12.09)% 17.35% 20.85% RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.98%(4) 0.99% 1.00% 1.00% 1.00% 1.00% - ---------------------------- Ratio of Net Investment Income to Average Net Assets 2.44%(4) 2.56% 2.95% 2.60% 2.49% 3.02% - ---------------------------- Portfolio Turnover Rate 88% 174% 91% 120% 139% 169% - ---------------------------- Net Assets, End of Period (in thousands) $3,839,786 $3,290,442 $2,248,158 $1,277,478 $1,025,143 $467,425 - --------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 42 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - -------------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $8.06 $7.85 $6.23 $7.36 $6.47 $5.50 - -------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------- Net Investment Income(2) 0.11 0.22 0.24 0.19 0.19 0.20 - ---------------------------- Net Realized and Unrealized Gain (Loss) 0.05 0.61 1.71 (1.04) 0.92 0.95 - -------------------------------------------------------------------------------------- Total From Investment Operations 0.16 0.83 1.95 (0.85) 1.11 1.15 - -------------------------------------------------------------------------------------- Distributions - ---------------------------- From Net Investment Income (0.09) (0.20) (0.21) (0.18) (0.18) (0.18) - ---------------------------- From Net Realized Gains -- (0.42) (0.12) (0.10) (0.04) -- - -------------------------------------------------------------------------------------- Total Distributions (0.09) (0.62) (0.33) (0.28) (0.22) (0.18) - -------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.13 $8.06 $7.85 $6.23 $7.36 $6.47 ====================================================================================== TOTAL RETURN(3) 1.98% 10.91% 31.51% (11.77)% 17.40% 21.26% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.78%(4) 0.79% 0.80% 0.80% 0.80% 0.80% - ---------------------------- Ratio of Net Investment Income to Average Net Assets 2.64%(4) 2.76% 3.15% 2.80% 2.69% 3.22% - ---------------------------- Portfolio Turnover Rate 88% 174% 91% 120% 139% 169% - ---------------------------- Net Assets, End of Period (in thousands) $358,797 $257,195 $183,330 $77,837 $65,738 $19,130 - -------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 43 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------------------- ADVISOR CLASS - ------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------- PER-SHARE DATA - ------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $8.05 $7.84 $6.22 $7.36 $6.47 $5.50 - ------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Income(2) 0.09 0.19 0.20 0.16 0.16 0.17 - ----------------------------- Net Realized and Unrealized Gain (Loss) 0.06 0.61 1.72 (1.05) 0.92 0.96 - ------------------------------------------------------------------------------------------- Total From Investment Operations 0.15 0.80 1.92 (0.89) 1.08 1.13 - ------------------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income (0.07) (0.17) (0.18) (0.15) (0.15) (0.16) - ----------------------------- From Net Realized Gains -- (0.42) (0.12) (0.10) (0.04) -- - ------------------------------------------------------------------------------------------- Total Distributions (0.07) (0.59) (0.30) (0.25) (0.19) (0.16) - ------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.13 $8.05 $7.84 $6.22 $7.36 $6.47 =========================================================================================== TOTAL RETURN(3) 1.88% 10.41% 30.97% (12.30)% 17.05% 20.55% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.23%(4) 1.24% 1.25% 1.25% 1.25% 1.25% - ----------------------------- Ratio of Net Investment Income to Average Net Assets 2.19%(4) 2.31% 2.70% 2.35% 2.24% 2.77% - ----------------------------- Portfolio Turnover Rate 88% 174% 91% 120% 139% 169% - ----------------------------- Net Assets, End of Period (in thousands) $942,098 $765,331 $457,360 $156,911 $74,868 $27,887 - ------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 44 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $8.06 $7.85 $6.21 $7.36 $6.89 - -------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------- Net Investment Income(3) 0.06 0.13 0.15 0.11 0.07 - ----------------------------- Net Realized and Unrealized Gain (Loss) 0.05 0.61 1.73 (1.06) 0.50 - -------------------------------------------------------------------------------- Total From Investment Operations 0.11 0.74 1.88 (0.95) 0.57 - -------------------------------------------------------------------------------- Distributions - ----------------------------- From Net Investment Income (0.04) (0.11) (0.12) (0.10) (0.06) - ----------------------------- From Net Realized Gains -- (0.42) (0.12) (0.10) (0.04) - -------------------------------------------------------------------------------- Total Distributions (0.04) (0.53) (0.24) (0.20) (0.10) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $8.13 $8.06 $7.85 $6.21 $7.36 ================================================================================ TOTAL RETURN(4) 1.38% 9.60% 30.37% (13.08)% 8.45% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.98%(5) 1.99% 2.00% 2.00% 2.00%(5) - ----------------------------- Ratio of Net Investment Income to Average Net Assets 1.44%(5) 1.56% 1.95% 1.60% 1.36%(5) - ----------------------------- Portfolio Turnover Rate 88% 174% 91% 120% 139%(6) - ----------------------------- Net Assets, End of Period (in thousands) $94,311 $63,512 $42,579 $12,254 $3,960 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) July 13, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 45 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------- R CLASS - ------------------------------------------------------------------------------- 2005(1) 2005 2004(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $8.04 $7.84 $7.22 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------- Net Investment Income(3) 0.08 0.17 0.11 - ------------------------------------- Net Realized and Unrealized Gain (Loss) 0.06 0.60 0.76 - -------------------------------------------------------------------------------- Total From Investment Operations 0.14 0.77 0.87 - -------------------------------------------------------------------------------- Distributions - ------------------------------------- From Net Investment Income (0.06) (0.15) (0.13) - ------------------------------------- From Net Realized Gains -- (0.42) (0.12) - -------------------------------------------------------------------------------- Total Distributions (0.06) (0.57) (0.25) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $8.12 $8.04 $7.84 ================================================================================ TOTAL RETURN(4) 1.76% 10.03% 12.19% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets (before reimbursement) 1.48%(5)(6) 1.49%(6) 1.50%(5) - ------------------------------------- Ratio of Operating Expenses to Average Net Assets (after reimbursement) 1.47%(5)(6) 1.44%(6) 1.50%(5) - ------------------------------------- Ratio of Net Investment Income to Average Net Assets (before reimbursement) 1.94%(5)(6) 2.06%(6) 2.44%(5) - ------------------------------------- Ratio of Net Investment Income to Average Net Assets (after reimbursement) 1.95%(5)(6) 2.11%(6) 2.44%(5) - ------------------------------------- Portfolio Turnover Rate 88% 174% 91%(7) - ------------------------------------- Net Assets, End of Period (in thousands) $14,034 $6,046 $392 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) August 29, 2003 (commencement of sale) through March 31, 2004. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) During the six months ended September 30, 2005, and the year ended March 31, 2005, the class received partial reimbursements of its distribution and service fees. (7) 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(1) 2005 2004(2) - ------------------------------------------------------------------------------- PER-SHARE DATA - ------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $11.32 $10.02 $10.00 - ------------------------------------------------------------------------------- Income From Investment Operations - -------------------------------------- Net Investment Income(3) 0.15 0.09 --(4) - -------------------------------------- Net Realized and Unrealized Gain (Loss) 0.55 1.54 0.02 - ------------------------------------------------------------------------------- Total From Investment Operations 0.70 1.63 0.02 - ------------------------------------------------------------------------------- Distributions - -------------------------------------- From Net Investment Income (0.14) (0.06) -- - -------------------------------------- From Net Realized Gains -- (0.27) -- - ------------------------------------------------------------------------------- Total Distributions (0.14) (0.33) -- - ------------------------------------------------------------------------------- Net Asset Value, End of Period $11.88 $11.32 $10.02 =============================================================================== TOTAL RETURN(5) 6.19% 16.40% 0.20% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.00%(6) 1.00% 1.00%(6) - -------------------------------------- Ratio of Net Investment Income to Average Net Assets 2.48%(6) 0.83% 0.00%(6) - -------------------------------------- Portfolio Turnover Rate 126% 192% 0% - -------------------------------------- Net Assets, End of Period (in thousands) $88,535 $42,059 $1,619 - ------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) For the one day period ended March 31, 2004 (inception date). (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. See Notes to Financial Statements. - ------ 47 Mid Cap Value - Financial Highlights For a Share Outstanding Throughout the Periods Indicated - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- 2005(1) 2005(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $11.33 $10.07 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------- Net Investment Income(3) 0.17 0.07 - ------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.53 1.51 - -------------------------------------------------------------------------------- Total From Investment Operations 0.70 1.58 - -------------------------------------------------------------------------------- Distributions - ------------------------------------------- From Net Investment Income (0.15) (0.05) - ------------------------------------------- From Net Realized Gains -- (0.27) - -------------------------------------------------------------------------------- Total Distributions (0.15) (0.32) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $11.88 $11.33 ================================================================================ TOTAL RETURN(4) 6.20% 15.82% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.80%(5) 0.80%(5) - ------------------------------------------- Ratio of Net Investment Income to Average Net Assets 2.68%(5) 1.00%(5) - ------------------------------------------- Portfolio Turnover Rate 126% 192%(6) - ------------------------------------------- Net Assets, End of Period (in thousands) $9,745 $8,082 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) August 2, 2004 (commencement of sale) through March 31, 2005. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2005. See Notes to Financial Statements. - ------ 48 Mid Cap Value - Financial Highlights For a Share Outstanding Throughout the Periods Indicated - -------------------------------------------------------------------------------- ADVISOR CLASS - -------------------------------------------------------------------------------- 2005(1) 2005(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $11.32 $10.99 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income(3) 0.13 0.03 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 0.55 0.31 - -------------------------------------------------------------------------------- Total From Investment Operations 0.68 0.34 - -------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.12) (0.01) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $11.88 $11.32 ================================================================================ TOTAL RETURN(4) 6.05% 3.05% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.25%(5) 1.25%(5) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 2.23%(5) 1.34%(5) - ------------------------------------------ Portfolio Turnover Rate 126% 192%(6) - ------------------------------------------ Net Assets, End of Period (in thousands) $2,856 $1,057 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) January 13, 2005 (commencement of sale) through March 31, 2005. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2005. See Notes to Financial Statements. - ------ 49 Mid Cap Value - Financial Highlights For a Share Outstanding Throughout the Period Indicated - -------------------------------------------------------------------------------- R CLASS - -------------------------------------------------------------------------------- 2005(1) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $12.21 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------------------- Net Investment Income(2) 0.02 - ------------------------------------------------------- Net Realized and Unrealized Gain (Loss) (0.33) - -------------------------------------------------------------------------------- Total From Investment Operations (0.31) - -------------------------------------------------------------------------------- Distributions - ------------------------------------------------------- From Net Investment Income (0.02) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $11.88 ================================================================================ TOTAL RETURN(3) (2.58)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.50%(4) - ------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.05%(4) - ------------------------------------------------------- Portfolio Turnover Rate 126%(5) - ------------------------------------------------------- Net Assets, End of Period $24,346 - -------------------------------------------------------------------------------- (1) July 29, 2005 (commencement of sale) through September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended September 30, 2005. See Notes to Financial Statements. - ------ 50 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------------------------- INVESTOR CLASS - ------------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------- PER-SHARE DATA - ------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.07 $9.71 $6.44 $8.62 $6.60 $5.04 - ------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------ Net Investment Income(2) 0.04 0.03 0.05 0.03 0.02 0.07 - ------------------------------ Net Realized and Unrealized Gain (Loss) 0.75 1.31 3.26 (1.87) 2.20 1.74 - ------------------------------------------------------------------------------------------------- Total From Investment Operations 0.79 1.34 3.31 (1.84) 2.22 1.81 - ------------------------------------------------------------------------------------------------- Distributions - ------------------------------ From Net Investment Income (0.03) (0.03) (0.04) (0.02) (0.02) (0.05) - ------------------------------ From Net Realized Gains -- (0.95) -- (0.32) (0.18) (0.20) - ------------------------------------------------------------------------------------------------- Total Distributions (0.03) (0.98) (0.04) (0.34) (0.20) (0.25) - ------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.83 $10.07 $9.71 $6.44 $8.62 $6.60 ================================================================================================= TOTAL RETURN(3) 7.89% 14.00% 51.53% (21.55)% 33.97% 36.51% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.25%(4) 1.25% 1.26% 1.25% 1.25% 1.25% - ------------------------------ Ratio of Net Investment Income to Average Net Assets 0.58%(4) 0.32% 0.59% 0.37% 0.27% 1.10% - ------------------------------ Portfolio Turnover Rate 56% 108% 110% 104% 73% 144% - ------------------------------ Net Assets, End of Period (in thousands) $1,318,439 $1,252,153 $1,050,500 $670,755 $1,305,952 $225,517 - ------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 51 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ------------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------- PER-SHARE DATA - ------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.08 $9.72 $6.45 $8.63 $6.61 $5.04 - ------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------- Net Investment Income(2) 0.05 0.05 0.07 0.04 0.03 0.07 - ----------------------------------- Net Realized and Unrealized Gain (Loss) 0.77 1.31 3.26 (1.87) 2.20 1.76 - ------------------------------------------------------------------------------------------------- Total From Investment Operations 0.82 1.36 3.33 (1.83) 2.23 1.83 - ------------------------------------------------------------------------------------------------- Distributions - ----------------------------------- From Net Investment Income (0.05) (0.05) (0.06) (0.03) (0.03) (0.06) - ----------------------------------- From Net Realized Gains -- (0.95) -- (0.32) (0.18) (0.20) - ------------------------------------------------------------------------------------------------- Total Distributions (0.05) (1.00) (0.06) (0.35) (0.21) (0.26) - ------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.85 $10.08 $9.72 $6.45 $8.63 $6.61 ================================================================================================= TOTAL RETURN(3) 8.09% 14.20% 51.75% (21.38)% 34.11% 36.99% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.05%(4) 1.05% 1.06% 1.05% 1.05% 1.05% - ----------------------------------- Ratio of Net Investment Income to Average Net Assets 0.78%(4) 0.52% 0.79% 0.57% 0.47% 1.30% - ----------------------------------- Portfolio Turnover Rate 56% 108% 110% 104% 73% 144% - ----------------------------------- Net Assets, End of Period (in thousands) $396,006 $314,700 $170,784 $79,546 $83,712 $8,593 - ------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 52 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------------------- ADVISOR CLASS - -------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - -------------------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.06 $9.71 $6.43 $8.62 $6.60 $5.04 - -------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------ Net Investment Income(2) 0.02 0.01 0.03 0.01 --(3) 0.05 - ------------------------------ Net Realized and Unrealized Gain (Loss) 0.77 1.30 3.27 (1.87) 2.21 1.75 - -------------------------------------------------------------------------------------------- Total From Investment Operations 0.79 1.31 3.30 (1.86) 2.21 1.80 - -------------------------------------------------------------------------------------------- Distributions - ------------------------------ From Net Investment Income (0.02) (0.01) (0.02) (0.01) (0.01) (0.04) - ------------------------------ From Net Realized Gains -- (0.95) -- (0.32) (0.18) (0.20) - -------------------------------------------------------------------------------------------- Total Distributions (0.02) (0.96) (0.02) (0.33) (0.19) (0.24) - -------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.83 $10.06 $9.71 $6.43 $8.62 $6.60 ============================================================================================ TOTAL RETURN(4) 7.85% 13.70% 51.38% (21.85)% 33.74% 36.18% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.50%(5) 1.50% 1.51% 1.50% 1.50% 1.50% - ------------------------------ Ratio of Net Investment Income to Average Net Assets 0.33%(5) 0.07% 0.34% 0.12% 0.02% 0.85% - ------------------------------ Portfolio Turnover Rate 56% 108% 110% 104% 73% 144% - ------------------------------ Net Assets, End of Period (in thousands) $397,432 $624,633 $432,261 $173,064 $182,986 $20,600 - -------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Per-share amount was less than $0.005. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. See Notes to Financial Statements. - ------ 53 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ---------------------------------------------------------------------------------------- C CLASS - ---------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002(2) - ---------------------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $9.83 $9.57 $6.35 $8.59 $7.57 - ---------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------ Net Investment Loss(3) (0.01) (0.07) (0.03) (0.04) (0.05) - ------------------------------ Net Realized and Unrealized Gain (Loss) 0.73 1.28 3.25 (1.88) 1.23 - ---------------------------------------------------------------------------------------- Total From Investment Operations 0.72 1.21 3.22 (1.92) 1.18 - ---------------------------------------------------------------------------------------- Distributions - ------------------------------ From Net Investment Income -- -- -- -- --(4) - ------------------------------ From Net Realized Gains -- (0.95) -- (0.32) (0.16) - ---------------------------------------------------------------------------------------- Total Distributions -- (0.95) -- (0.32) (0.16) - ---------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.55 $9.83 $9.57 $6.35 $8.59 ======================================================================================== TOTAL RETURN(5) 7.32% 12.85% 50.71% (22.58)% 15.80% RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 2.24%(6)(7) 2.25% 2.26% 2.25% 2.25%(6) - ------------------------------ Ratio of Net Investment Income to Average Net Assets (0.41)%(6)(7) (0.68)% (0.41)% (0.63)% (0.78)%(6) - ------------------------------ Portfolio Turnover Rate 56% 108% 110% 104% 73%(8) - ------------------------------ Net Assets, End of Period (in thousands) $3,572 $3,470 $3,711 $2,936 $3,997 - ---------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) June 1, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) During the six months ended September 30, 2005, the class received partial reimbursements of its distribution and service fees. Had fees not been reimbursed the annualized ratio of operating expenses to average net assets and the annualized ratio of net investment income to average net assets would have been 2.25% and (0.42)%, respectively. (8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 54 Approval of Management Agreements for Equity Income and Small Cap Value Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund's independent directors (the "Directors") each year. At American Century, this process -- referred to as the "15(c) Process" -- involves at least two board meetings spanning a 30 to 60 day period each year. In addition to this annual review, the board of directors and its committees oversee and evaluate at quarterly meetings the nature and quality of significant services the advisor performs on behalf of the fund. At these meetings the board reviews fund performance, shareholder services and feedback, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. The board, or committees of the board, also hold special meetings, as needed. Under a new Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for its board's approval or renewal of any advisory agreements within the fund's most recently completed fiscal half-year period. ANNUAL CONTRACT REVIEW PROCESS As part of the annual 15(c) Process undertaken during the most recent fiscal half-year, the Directors requested and received extensive data and information compiled by the advisor and certain independent providers of evaluative data (the "Independent 15(c) Providers") concerning Equity Income and Small Cap Value (collectively, the "funds") and the services provided to the funds under the management agreement. The information included, but was not limited to: * the nature, extent and quality of investment management, shareholder services and other services provided to the funds under the management agreement; * reports on the advisor's activities relating to the wide range of programs and services the advisor provides to the funds and its shareholders on a routine and non-routine basis; * data comparing the cost of owning the funds to the cost of owning similar funds; * data comparing the funds' performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; * financial data showing the profitability of the funds to the advisor and the overall profitability of the advisor; and * data comparing services provided and charges to other investment management clients of the advisor. In keeping with its practice, the funds' board of directors held two regularly scheduled meetings and two special meetings to review and discuss the information provided by the advisor and the Independent 15(c) Providers and to complete its negotiations with the advisor regarding the renewal of the management agreement, including the setting of the applicable advisory fee. In addition, the independent directors met on several occasions in (continued) - ------ 55 Approval of Management Agreements for Equity Income and Small Cap Value private session to review and discuss the information provided and evaluate the advisor's performance as manager of the funds. FACTORS CONSIDERED The Directors considered all of the information provided by the advisor, the Independent 15(c) Providers, and its independent counsel and evaluated such information for each fund for which the board has responsibility. The Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the agreement under the terms ultimately determined by the board to be appropriate, the Directors' decision was based on the following factors. NATURE, EXTENT AND QUALITY OF SERVICES -- GENERALLY. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the funds. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including, but not limited to: * fund construction and design * portfolio security selection * initial capitalization/funding * securities trading * custody of fund assets * daily valuation of the funds' portfolios * shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping and communications * legal services * regulatory and portfolio compliance * financial reporting * marketing and distribution The Directors noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings. INVESTMENT MANAGEMENT SERVICES. The nature of the investment management services provided is quite complex and allows fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes, and liquidity. In evaluating investment performance, the board expects the advisor to manage the funds in accordance with its investment objective and approved strategies. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. At each quarterly meeting the Directors review investment performance information for the funds, together with comparative information for appropriate benchmarks and a peer group of funds (continued) - ------ 56 Approval of Management Agreements for Equity Income and Small Cap Value managed similarly to the funds. If performance concerns are identified, the Directors discuss with the advisor and its portfolio managers the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Annually, the Directors review detailed performance information, as provided by the Independent 15(c) Providers, comparing the funds' performance with that of similar funds not managed by the advisor. Equity Income's and Small Cap Value's performance was above the median of its peer group for the one year period. For the three year period, Equity Income's performance was above the median of its peer group and Small Cap Value's performance was below the median. The Directors discussed Small Cap Value's performance with the advisor and was satisfied with the efforts being undertaken by the advisor. The Directors will continue to monitor those efforts and the performance of the funds. SHAREHOLDER AND OTHER SERVICES. The advisor provides the funds with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at its regular quarterly meetings, including the annual meeting concerning contract review. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor. COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor provides detailed information concerning its cost of providing various services to the funds, its profitability in managing the funds, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor's financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. ETHICS OF THE ADVISOR. The Directors generally considered the advisor's commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor's practices generally meet or exceed industry best practices and that the advisor was not implicated in the industry scandals of 2003 and 2004. ECONOMIES OF SCALE. The Directors review reports provided by the advisor on economies of scale for the complex as a whole and the year-over-year changes in revenue, costs, and profitability. The Directors concluded that (continued) - ------ 57 Approval of Management Agreements for Equity Income and Small Cap Value economies of scale are difficult to measure with precision, particularly on a fund-by-fund basis. This analysis is further complicated by the fact that the advisor is required to make a continuing reinvestment in the business to provide additional content and services for fund shareholders. Accordingly, the Directors also seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the funds specifically, the expenses incurred by the advisor in providing various services to the funds, and the breakpoint fees of competitive funds not managed by the advisor. The Directors believe the advisor is appropriately sharing any economies of scale through a competitive fee structure, through breakpoints that reduce fees as the fund increases in size, and through reinvestment in its business to provide shareholders additional content and services. COMPARISON TO OTHER FUNDS' FEES. The funds pay the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the funds, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the funds' independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other fund groups are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other fund groups may be increased without shareholder approval. The board believes the unified fee structure is a benefit to fund shareholders because it clearly discloses to shareholders the cost of owning fund shares, and, since the unified fee cannot be increased without a vote of fund shareholders, it shifts to the advisor the increased costs of operating the funds and the risk of administrative inefficiencies. Part of the Directors' analysis of fee levels involves comparing the funds' unified fee to the total expense ratio of other funds in the funds' peer group. The unified fee charged to shareholders of Equity Income and Small Cap Value were below the median of the total expense ratios of their peer groups. COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the funds. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the funds. The Directors analyzed this information and concluded that the fees charged and services provided to the funds were reasonable by comparison. (continued) - ------ 58 Approval of Management Agreements for Equity Income and Small Cap Value COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information from the advisor concerning collateral benefits it receives as a result of its relationship with the funds. They concluded that the advisor's primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is able to provide investment management services to clients other than the funds, at least in part, due to its existing infrastructure built to serve the fund complex. The Directors concluded, however, that the assets of those other clients are modest in comparison to the funds and that, in any event, the addition of such other assets to the assets of the funds that use substantially the same investment management team and strategy to determine whether breakpoints have been achieved captures for the shareholders a portion of any benefit that exists by accelerating fee reductions as breakpoints are reached at lower fund asset levels. CONCLUSIONS OF THE DIRECTORS As a result of this process, the Directors, assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor and the Independent 15(c) Providers: (i) concluded that the investment management agreement between Equity Income and the advisor is fair and reasonable in light of the services provided and should be renewed; and (ii) negotiated changes to the breakpoint schedule used to calculate the management fee of Small Cap Value. These changes were proposed by the Directors based on their review of the competitive changes in the mutual fund marketplace and their review of financial information provided by the advisor. The new schedule, effective July 29, 2005, will accelerate management fee reductions at lower asset levels than under the existing structure. Following these negotiations with the advisor, the Directors concluded that the investment management agreement between Small Cap Value and the advisor, amended as described above, is fair and reasonable in light of the services provided and should be renewed. - ------ 59 Share Class Information Five classes of shares are authorized for sale by Equity Income: Investor Class, Institutional Class, Advisor Class, C Class, and R Class. Four classes of shares are authorized for sale by Mid Cap Value: Investor Class, Institutional Class, Advisor Class, and R Class. Four classes of shares are authorized for sale by Small Cap Value: Investor Class, Institutional Class, Advisor Class, and C Class. The total expense 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 INVESTMENTS, EXCEPT THOSE FROM EXISTING INVESTORS AND THOSE MADE THROUGH A SMALL NUMBER OF FINANCIAL INTERMEDIARIES SELECTED BY AMERICAN CENTURY. INVESTOR CLASS shares are available for purchase in two ways: 1) directly from American Century without any commissions or other fees; or 2) through certain financial intermediaries (such as banks, broker-dealers, insurance companies and investment advisors), which may require payment of a transaction fee to the financial intermediary. 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 unified management fee of Institutional Class shares is 0.20% less than the unified management fee of Investor Class shares. ADVISOR CLASS shares are sold primarily through institutions such as investment advisors, banks, broker-dealers, insurance companies, and financial advisors. Advisor Class shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee. The total expense ratio of Advisor Class shares is 0.25% higher than the total expense ratio of Investor Class shares. C CLASS shares are sold primarily through employer-sponsored retirement plans and through institutions such as investment advisors, banks, broker-dealers, and insurance companies. C Class shares redeemed within 12 months of purchase are subject to a CDSC of 1.00%. There is no CDSC on shares acquired through reinvestment of dividends or capital gains. The unified management fee for C Class shares is the same as for Investor Class shares. 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. The unified management fee for R Class shares is the same as for Investor Class shares. 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. - ------ 60 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. (continued) - ------ 61 Additional Information QUARTERLY PORTFOLIO DISCLOSURE The funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. 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. - ------ 62 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(reg.tm) 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(reg.tm) 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. - ------ 63 Notes - ------ 64 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. AMERICAN CENTURY INVESTMENTS P. O. BOX 419200 KANSAS CITY, MO 64141-6200 PRSRT STD U.S. POSTAGE PAID AMERICAN CENTURY COMPANIES 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. 0510 SH-SAN-45970S
American Century Investments SEMIANNUAL REPORT [photo of man and woman] SEPTEMBER 30, 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. . . . . . . . . . . . . . . . . . . . . . . . . .15 FINANCIAL STATEMENTS Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . .18 Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . .20 Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . .21 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . .22 Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . .30 OTHER INFORMATION Approval of Management Agreements for Value and Large Company Value . . . .44 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 semiannual report for the Value and Large Company Value funds for the six months ended September 30, 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 annual report dated March 31, 2006, 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 SEPTEMBER 30, 2005 ------------------------------- AVERAGE ANNUAL RETURNS - ----------------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - ----------------------------------------------------------------------------------------- INVESTOR CLASS 2.03% 9.96% 10.69% 11.73% 12.24% 9/1/93 - ----------------------------------------------------------------------------------------- RUSSELL 3000 VALUE INDEX(2) 5.85% 16.78% 6.42% 11.59% 11.68%(3) -- - ----------------------------------------------------------------------------------------- S&P 500 INDEX(2) 5.02% 12.25% -1.49% 9.49% 10.40%(3) -- - ----------------------------------------------------------------------------------------- LIPPER MULTI-CAP VALUE INDEX(2) 5.56% 15.42% 6.81% 10.15% 10.62%(3) -- - ----------------------------------------------------------------------------------------- Institutional Class 2.14% 10.17% 10.89% -- 8.42% 7/31/97 - ----------------------------------------------------------------------------------------- Advisor Class 1.90% 9.68% 10.42% -- 10.26% 10/2/96 - ----------------------------------------------------------------------------------------- A Class 1/31/03 No sales charge* 1.90% 9.54% -- -- 17.27%(4) With sales charge* -4.01% 3.20% -- -- 14.72%(4) - ----------------------------------------------------------------------------------------- B Class 1/31/03 No sales charge* 1.52% 8.80% -- -- 16.52%(4) With sales charge* -3.48% 4.80% -- -- 15.65%(4) - ----------------------------------------------------------------------------------------- C Class 6/4/01 No sales charge* 1.53% 8.85% -- -- 6.23% With sales charge* 0.53% 8.85% -- -- 6.23% - ----------------------------------------------------------------------------------------- R Class -- -- -- -- -2.27%(1) 7/29/05 - ----------------------------------------------------------------------------------------- * Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a maximum of 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) Total returns for periods less than one year are not annualized. (2) (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. (3) Since 8/31/93, the date nearest the Investor Class's inception for which data are available. (4) Class return would have been lower if the class had not received partial reimbursements or waivers of its distribution and service fees. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. (continued) - ------ 2 Value - Performance GROWTH OF $10,000 OVER 10 YEARS $10,000 investment made September 30, 1995
ONE-YEAR RETURNS OVER 10 YEARS Periods ended September 30 - ---------------------------------------------------------------------------------------------------- 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 - ---------------------------------------------------------------------------------------------------- Investor Class 22.15% 37.80% -5.98% 12.04% 2.95% 12.36% -8.55% 23.02% 19.56% 9.96% - ---------------------------------------------------------------------------------------------------- Russell 3000 Value Index 17.48% 42.33% 1.96% 17.64% 9.35% -7.98% -15.89% 24.89% 20.89% 16.78% - ---------------------------------------------------------------------------------------------------- S&P 500 Index 20.33% 40.45% 9.05% 27.80% 13.28% -26.62% -20.49% 24.40% 13.87% 12.25% - ---------------------------------------------------------------------------------------------------- Lipper Multi-Cap Value Index 16.13% 37.54% -7.19% 15.36% 10.61% -6.04% -14.25% 27.08% 17.61% 15.42% - ---------------------------------------------------------------------------------------------------- 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 2.03%(1) for the six months ended September 30, 2005, trailing the Lipper Multi-Cap Value Index, which was up 5.56%. The S&P 500 Index, representative of the broad market, gained 5.02%. The Russell 3000 Value Index, indicative of the value side of the stock market, was up 5.85%. 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 12.24%, significantly ahead of the 10.62%(2) figure posted by the Lipper Multi-Cap Value Index, the S&P 500's 10.40%(2) return and the Russell 3000 Value Index's 11.68%(2) figure. MARKET ENVIRONMENT Equity investors faced substantial challenges during the period covered by this report, including rising short-term interest rates, record energy prices, an abrupt drop in consumer confidence and one of the worst natural catastrophes in the nation's history. Growth stocks generally performed better than value shares and investors continued their preference for lower-quality stocks, both of which presented challenges for Value, which generally invests in higher-quality value stocks. SUCCESS IN INDUSTRIALS Industrial stocks proved to be Value's largest contributors to absolute performance. Our investments included Republic Services, Inc., one of the country's leading solid waste management firms. Despite higher fuel costs, the company posted strong second-quarter numbers, and raised its financial guidance for the year. In addition, Republic Services continued to return more cash to shareholders by announcing a 17% increase in its dividend and continuing a strong share buyback program. In the electrical equipment space, Emerson Electric Co. was an important contributor. The company, which makes a TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Bank of America Corp. 4.4% 2.1% - -------------------------------------------------------------------------------- American International Group, Inc. 4.1% 4.5% - -------------------------------------------------------------------------------- Kraft Foods Inc. Cl A 4.0% 2.5% - -------------------------------------------------------------------------------- Wal-Mart Stores, Inc. 3.1% 0.7% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 2.8% 2.8% - -------------------------------------------------------------------------------- Kimberly-Clark Corp. 2.4% 2.3% - -------------------------------------------------------------------------------- du Pont (E.I.) de Nemours & Co. 2.1% 0.7% - -------------------------------------------------------------------------------- International Flavors & Fragrances Inc. 2.1% -- - -------------------------------------------------------------------------------- Berkshire Hathaway Inc. Cl A 2.1% 0.8% - -------------------------------------------------------------------------------- Beckman Coulter Inc. 2.0% -- - -------------------------------------------------------------------------------- (1) All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. (2) Since 8/31/93, the date nearest the Investor Class's inception for which data are available. (continued) - ------ 4 Value - Portfolio Commentary variety of electrical products for industrial customers, saw orders increase strongly in August. STRENGTH IN ENERGY Value's energy sector holdings leaned toward integrated oil companies, and BP plc, Unocal Corp. and Exxon Mobil were significant contributors. Each of these companies delivered exceptionally strong results as they generally benefited from rapidly rising oil and gas prices, and widened margins for refinery and chemical segments. Unocal also received takeover proposals from Chevron Corp. and CNOOC Limited, an affiliate of China National Offshore Oil Co. The company was purchased by Chevron in August. FINANCIALS ADD VALUE Value's financial stocks were paced by the insurance industry. American International Group, Inc. (AIG) was our top contributor for the period. AIG, the world's largest insurer, continues to rebound after falling sharply amid regulatory and accounting investigations earlier in the year. CONSUMER DISCRETIONARY, MATERIALS STOCKS DETRACT Consumer discretionary businesses dampened our absolute results the most. Within multiline retailers, one of our largest detractors was Family Dollar Stores, Inc. The national discount chain was hurt by high gasoline prices, which exact a toll on lower-income consumers, and initiatives in urban areas that have failed to meet expectations. Elsewhere in retailing, Wal-Mart Stores, Inc., which also serves a low-income customer base, was similarly affected. In media, The New York Times Co. saw ad sales decline as national advertisers shifted their spending to other media. In materials, high energy and raw material prices dampened the results of chemical companies like E.I. du Pont de Nemours & Co., one of our largest detractors, and container companies such as Bemis Co., Inc., a major producer of flexible packaging for the food industry. In all of these cases, we believe the issues affecting these companies are manageable and have maintained our positions. LOOKING AHEAD We will continue to adhere to our discipline of seeking seasoned, well-managed companies whose shares appear to be undervalued for reasons unrelated to the firms' fundamental or financial health. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Insurance 9.9% 11.0% - -------------------------------------------------------------------------------- Commercial Banks 9.3% 7.1% - -------------------------------------------------------------------------------- Food Products 7.5% 6.6% - -------------------------------------------------------------------------------- Chemicals 7.1% 2.1% - -------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 5.4% 7.5% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Common Stocks & Options 98.0% 96.6% - -------------------------------------------------------------------------------- Temporary Cash Investments 0.7% 4.0% - -------------------------------------------------------------------------------- Other Assets and Liabilities* 1.3% (0.6)% - -------------------------------------------------------------------------------- * Includes collateral received for securities lending and other assets and liabilities. - ------ 5 Value - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 98.0% AEROSPACE & DEFENSE -- 2.3% - -------------------------------------------------------------------------------- 1,241,536 Honeywell International Inc. $ 46,557,600 - -------------------------------------------------------------------------------- 364,032 Northrop Grumman Corp. 19,785,139 - -------------------------------------------------------------------------------- 66,342,739 - -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS -- 1.1% - -------------------------------------------------------------------------------- 468,816 United Parcel Service, Inc. Cl B 32,409,250 - -------------------------------------------------------------------------------- AIRLINES -- 0.1% - -------------------------------------------------------------------------------- 196,088 Southwest Airlines Co. 2,911,907 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 0.7% - -------------------------------------------------------------------------------- 1,285,392 Cooper Tire & Rubber(1) 19,627,936 - -------------------------------------------------------------------------------- BEVERAGES -- 2.8% - -------------------------------------------------------------------------------- 1,159,224 Anheuser-Busch Companies, Inc. 49,893,001 - -------------------------------------------------------------------------------- 1,576,704 Coca-Cola Enterprises 30,745,728 - -------------------------------------------------------------------------------- 80,638,729 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.8% - -------------------------------------------------------------------------------- 768,792 Masco Corp.(1) 23,586,539 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 1.6% - -------------------------------------------------------------------------------- 469,944 Merrill Lynch & Co., Inc. 28,831,065 - -------------------------------------------------------------------------------- 320,448 Morgan Stanley 17,284,965 - -------------------------------------------------------------------------------- 46,116,030 - -------------------------------------------------------------------------------- CHEMICALS -- 7.1% - -------------------------------------------------------------------------------- 148,992 Air Products & Chemicals, Inc. 8,215,419 - -------------------------------------------------------------------------------- 1,584,632 du Pont (E.I.) de Nemours & Co. 62,070,035 - -------------------------------------------------------------------------------- 1,092,600 Ecolab Inc. 34,886,718 - -------------------------------------------------------------------------------- 1,712,304 International Flavors & Fragrances Inc. 61,026,515 - -------------------------------------------------------------------------------- 648,224 Minerals Technologies Inc.(1) 37,084,895 - -------------------------------------------------------------------------------- 207,623 Nalco Holding Co.(2) 3,502,600 - -------------------------------------------------------------------------------- 206,786,182 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 9.3% - -------------------------------------------------------------------------------- 3,022,048 Bank of America Corp. 127,228,220 - -------------------------------------------------------------------------------- 401,456 BB&T Corporation(1) 15,676,857 - -------------------------------------------------------------------------------- 1,044,092 Fifth Third Bancorp 38,349,499 - -------------------------------------------------------------------------------- 1,155,416 SunTrust Banks, Inc. 80,243,641 - -------------------------------------------------------------------------------- 280,616 U.S. Bancorp 7,879,697 - -------------------------------------------------------------------------------- 269,377,914 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 4.6% - -------------------------------------------------------------------------------- 389,344 Avery Dennison Corp. 20,397,732 - -------------------------------------------------------------------------------- 1,589,632 Republic Services, Inc. Cl A 56,098,113 - -------------------------------------------------------------------------------- 1,980,152 Waste Management, Inc.(1) 56,652,149 - -------------------------------------------------------------------------------- 133,147,994 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 0.4% - -------------------------------------------------------------------------------- 651,192 Nokia Oyj ADR $ 11,011,657 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 2.9% - -------------------------------------------------------------------------------- 882,768 Diebold, Inc.(1) 30,420,185 - -------------------------------------------------------------------------------- 479,768 International Business Machines Corp. 38,486,989 - -------------------------------------------------------------------------------- 262,792 Lexmark International, Inc.(2) 16,043,452 - -------------------------------------------------------------------------------- 84,950,626 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 1.9% - -------------------------------------------------------------------------------- 2,199,632 Bemis Co., Inc. 54,330,910 - -------------------------------------------------------------------------------- DIVERSIFIED -- 1.4% - -------------------------------------------------------------------------------- 323,896 Standard and Poor's 500 Depositary Receipt(1) 39,800,340 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 1.4% - -------------------------------------------------------------------------------- 882,936 Citigroup Inc. 40,191,247 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.2% - -------------------------------------------------------------------------------- 425,552 Commonwealth Telephone Enterprise Inc.(1) 16,043,310 - -------------------------------------------------------------------------------- 671,488 SBC Communications Inc.(1) 16,095,567 - -------------------------------------------------------------------------------- 956,504 Verizon Communications 31,268,117 - -------------------------------------------------------------------------------- 63,406,994 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 0.3% - -------------------------------------------------------------------------------- 270,536 IDACORP, Inc.(1) 8,151,250 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 0.7% - -------------------------------------------------------------------------------- 302,400 Emerson Electric Co. 21,712,320 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.4% - -------------------------------------------------------------------------------- 861,496 AVX Corporation(1) 10,975,459 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 3.1% - -------------------------------------------------------------------------------- 2,042,512 Wal-Mart Stores, Inc. 89,502,876 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 7.5% - -------------------------------------------------------------------------------- 880,016 ConAgra Foods, Inc. 21,780,396 - -------------------------------------------------------------------------------- 835,624 General Mills, Inc.(1) 40,277,077 - -------------------------------------------------------------------------------- 342,456 Kellogg Co. 15,797,495 - -------------------------------------------------------------------------------- 3,767,168 Kraft Foods Inc. Cl A(1) 115,237,669 - -------------------------------------------------------------------------------- 326,504 Unilever N.V. New York Shares 23,328,711 - -------------------------------------------------------------------------------- 216,421,348 - -------------------------------------------------------------------------------- GAS UTILITIES -- 0.7% - -------------------------------------------------------------------------------- 679,496 WGL Holdings Inc.(1) 21,832,206 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 2.0% - -------------------------------------------------------------------------------- 1,111,104 Beckman Coulter Inc. 59,977,394 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 6 Value - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 1.1% - -------------------------------------------------------------------------------- 173,600 HCA Inc. $ 8,318,912 - -------------------------------------------------------------------------------- 479,240 Universal Health Services, Inc. Cl B(1) 22,826,201 - -------------------------------------------------------------------------------- 31,145,113 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 1.9% - -------------------------------------------------------------------------------- 204,392 Brinker International, Inc.(1)(2) 7,676,964 - -------------------------------------------------------------------------------- 708,248 Outback Steakhouse, Inc.(1) 25,921,876 - -------------------------------------------------------------------------------- 610,064 Speedway Motorsports Inc.(1) 22,163,625 - -------------------------------------------------------------------------------- 55,762,465 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 2.4% - -------------------------------------------------------------------------------- 1,170,458 Kimberly-Clark Corp. 69,677,365 - -------------------------------------------------------------------------------- INSURANCE -- 9.9% - -------------------------------------------------------------------------------- 398,304 Ambac Financial Group, Inc. 28,701,786 - -------------------------------------------------------------------------------- 1,914,672 American International Group, Inc. 118,633,076 - -------------------------------------------------------------------------------- 744 Berkshire Hathaway Inc. Cl A(2) 61,008,000 - -------------------------------------------------------------------------------- 520,880 Jefferson-Pilot Corp. 26,653,430 - -------------------------------------------------------------------------------- 1,689,040 Marsh & McLennan Companies, Inc. 51,329,926 - -------------------------------------------------------------------------------- 286,326,218 - -------------------------------------------------------------------------------- IT SERVICES -- 0.6% - -------------------------------------------------------------------------------- 612,504 Accenture Ltd. Cl A(2) 15,594,352 - -------------------------------------------------------------------------------- 26,280 DST Systems, Inc.(1)(2) 1,440,932 - -------------------------------------------------------------------------------- 17,035,284 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 0.3% - -------------------------------------------------------------------------------- 489,424 Mattel, Inc. 8,163,592 - -------------------------------------------------------------------------------- MEDIA -- 0.6% - -------------------------------------------------------------------------------- 364,768 New York Times Co. (The) Cl A(1) 10,851,848 - -------------------------------------------------------------------------------- 243,200 Tribune Co.(1) 8,242,048 - -------------------------------------------------------------------------------- 19,093,896 - -------------------------------------------------------------------------------- METALS & MINING -- 0.5% - -------------------------------------------------------------------------------- 657,672 Alcoa Inc. 16,060,350 - -------------------------------------------------------------------------------- MULTI-UTILITIES -- 1.4% - -------------------------------------------------------------------------------- 226,432 Dominion Resources Inc. 19,504,852 - -------------------------------------------------------------------------------- 498,160 Wisconsin Energy Corp. 19,886,548 - -------------------------------------------------------------------------------- 148,664 XCEL Energy Inc. 2,915,301 - -------------------------------------------------------------------------------- 42,306,701 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 2.8% - -------------------------------------------------------------------------------- 1,887,664 Dollar General Corp. 34,619,758 - -------------------------------------------------------------------------------- 2,312,208 Family Dollar Stores, Inc. 45,943,573 - -------------------------------------------------------------------------------- 80,563,331 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 5.4% - -------------------------------------------------------------------------------- 660,992 BP plc ADR $ 46,831,283 - -------------------------------------------------------------------------------- 732,312 Exxon Mobil Corp. 46,531,105 - -------------------------------------------------------------------------------- 457,472 Murphy Oil Corp. 22,814,129 - -------------------------------------------------------------------------------- 611,928 Royal Dutch Shell plc ADR 40,166,954 - -------------------------------------------------------------------------------- 156,343,471 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 0.7% - -------------------------------------------------------------------------------- 286,864 Weyerhaeuser Co. 19,721,900 - -------------------------------------------------------------------------------- PERSONAL PRODUCTS -- 0.4% - -------------------------------------------------------------------------------- 321,720 Estee Lauder Companies, Inc. Cl A 11,205,508 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 4.3% - -------------------------------------------------------------------------------- 745,888 Abbott Laboratories 31,625,652 - -------------------------------------------------------------------------------- 924,488 Bristol-Myers Squibb Co.(1) 22,243,181 - -------------------------------------------------------------------------------- 299,616 Eli Lilly and Company 16,035,448 - -------------------------------------------------------------------------------- 688,688 Merck & Co., Inc. 18,739,200 - -------------------------------------------------------------------------------- 1,021,664 Pfizer, Inc. 25,510,951 - -------------------------------------------------------------------------------- 299,520 Watson Pharmaceuticals, Inc.(1)(2) 10,965,427 - -------------------------------------------------------------------------------- 125,119,859 - -------------------------------------------------------------------------------- ROAD & RAIL -- 0.6% - -------------------------------------------------------------------------------- 252,848 Union Pacific Corp. 18,129,202 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.4% - -------------------------------------------------------------------------------- 493,984 Intel Corp. 12,176,706 - -------------------------------------------------------------------------------- SOFTWARE -- 2.0% - -------------------------------------------------------------------------------- 1,292,288 Microsoft Corporation 33,250,570 - -------------------------------------------------------------------------------- 300,120 Reynolds & Reynolds Co. Cl A 8,226,289 - -------------------------------------------------------------------------------- 836,624 Synopsys, Inc.(2) 15,812,194 - -------------------------------------------------------------------------------- 57,289,053 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 3.3% - -------------------------------------------------------------------------------- 1,078,816 Foot Locker, Inc. 23,669,223 - -------------------------------------------------------------------------------- 1,160,568 Gap, Inc. (The) 20,228,700 - -------------------------------------------------------------------------------- 912,664 Home Depot, Inc. 34,809,006 - -------------------------------------------------------------------------------- 394,904 Sherwin-Williams Co.(1) 17,403,419 - -------------------------------------------------------------------------------- 96,110,348 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.6% - -------------------------------------------------------------------------------- 582,440 Jones Apparel Group, Inc. 16,599,540 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 3.5% - -------------------------------------------------------------------------------- 711,624 Fannie Mae 31,894,988 - -------------------------------------------------------------------------------- 982,416 Freddie Mac 55,467,207 - -------------------------------------------------------------------------------- 252,992 MGIC Investment Corp. 16,242,086 - -------------------------------------------------------------------------------- 103,604,281 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $2,729,238,782) 2,845,644,030 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 7 Value - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 0.7% Repurchase Agreement, Bank of America Securities, LLC, (collateralized by various U.S. Treasury obligations, 3.625%, 1/15/10, valued at $8,366,203), in a joint trading account at 3.15%, dated 9/30/05, due 10/3/05 (Delivery value $8,202,153) $ 8,200,000 - -------------------------------------------------------------------------------- Repurchase Agreement, Merrill Lynch & Co., Inc., (collateralized by various U.S. Treasury obligations, 6.25%, 8/15/23, valued at $12,054,873), in a joint trading account at 3.10%, dated 9/30/05, due 10/3/05 (Delivery value $11,803,048) 11,800,000 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $20,000,000) 20,000,000 - -------------------------------------------------------------------------------- COLLATERAL RECEIVED FOR SECURITIES LENDING(3) -- 7.9% REPURCHASE AGREEMENTS -- 7.9% - -------------------------------------------------------------------------------- Repurchase Agreement, Merrill Lynch & Co., Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 3.88%, dated 9/30/05, due 10/3/05 (Delivery value $9,483,611) $ 9,480,546 - -------------------------------------------------------------------------------- Repurchase Agreement, UBS AG, (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 3.94%, dated 9/30/05, due 10/3/05 (Delivery value $220,072,233) 220,000,000 - -------------------------------------------------------------------------------- TOTAL COLLATERAL RECEIVED FOR SECURITIES LENDING (Cost $229,480,546) 229,480,546 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 106.6% (Cost $2,978,719,328) 3,095,124,576 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- (6.6)% (191,153,472) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $2,903,971,104 ================================================================================ FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS* Contracts to Sell Settlement Date Value Unrealized Gain (Loss) - ------------------------------------------------------------------------------------- 22,858,625 Euro for USD 10/31/05 $27,496,613 $14,657 - ------------------------------------------------------------------------------------- 12,679,045 Euro for USD 10/31/05 15,251,608 5,594 - ------------------------------------------------------------------------------------- 11,228,798 Euro for USD 10/31/05 13,507,108 10,703 - ------------------------------------------------------------------------------------- 11,089,207 GBP for USD 10/31/05 19,530,311 10,313 - ------------------------------------------------------------------------------------- 9,237,605 GBP for USD 10/31/05 16,269,270 3,048 - ------------------------------------------------------------------------------------- $92,054,910 $44,315 ======================================= (Value on Settlement Date $92,099,225) * FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS are designed to protect the fund's foreign investments against declines in foreign currencies (also known as hedging). The contracts are called "forward" because they allow the fund to exchange a foreign currency for U.S. dollars on a specific date in the future -- and at a prearranged exchange rate. NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt GBP = British Pound USD = United States Dollar (1) Security, or a portion thereof, was on loan as of September 30, 2005. (2) Non-income producing. (3) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. (See Note 5 in Notes to Financial Statements.) See Notes to Financial Statements. - ------ 8 Large Company Value - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2005 ------------------------ AVERAGE ANNUAL RETURNS - ----------------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS INCEPTION DATE - ----------------------------------------------------------------------------------------- INVESTOR CLASS 3.73% 12.38% 8.44% 6.19% 7/30/99 - ----------------------------------------------------------------------------------------- RUSSELL 1000 VALUE INDEX(2) 5.62% 16.69% 5.76% 4.85% -- - ----------------------------------------------------------------------------------------- S&P 500 INDEX(2) 5.02% 12.25% -1.49% 0.28% -- - ----------------------------------------------------------------------------------------- Institutional Class 3.83% 12.60% -- 6.62% 8/10/01 - ----------------------------------------------------------------------------------------- Advisor Class 3.60% 12.10% -- 8.53% 10/26/00 - ----------------------------------------------------------------------------------------- A Class 1/31/03 No sales charge* 3.60% 12.10% -- 17.44%(3) With sales charge* -2.36% 5.72% -- 14.89%(3) - ----------------------------------------------------------------------------------------- B Class 1/31/03 No sales charge* 3.04% 11.24% -- 16.64%(3) With sales charge* -1.96% 7.23% -- 15.77%(3) - ----------------------------------------------------------------------------------------- C Class 11/7/01 No sales charge* 3.05% 11.09% -- 7.19% With sales charge* 2.05% 11.09% -- 7.19% - ----------------------------------------------------------------------------------------- R Class 3.47% 11.82%(3) -- 13.65%(3) 8/29/03 - ----------------------------------------------------------------------------------------- * Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a maximum of 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) Total returns for periods less than one year are not annualized. (2) (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. (3) Class return would have been lower if the class had not received partial reimbursements or waivers of its distribution and service fees. 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 September 30 - -------------------------------------------------------------------------------- 1999* 2000 2001 2002 2003 2004 2005 - -------------------------------------------------------------------------------- Investor Class -8.56% 5.67% 4.99% -13.70% 23.93% 18.84% 12.38% - -------------------------------------------------------------------------------- Russell 1000 Value Index -7.08% 8.91% -8.91% -16.95% 24.37% 20.52% 16.69% - -------------------------------------------------------------------------------- S&P 500 Index -3.22% 13.28% -26.62% -20.49% 24.40% 13.87% 12.25% - -------------------------------------------------------------------------------- * From 7/30/99, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the 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 six months ended September 30, 2005, Large Company Value gained 3.73%(1), underperforming the 5.62% return of its benchmark, the Russell 1000 Value Index, and the 5.02% return of the S&P 500 Index, the broad-market proxy. Large Company Value's long-term performance against its benchmark has been solid. Since the portfolio's July 30, 1999, inception, it has posted an average annual return of 6.19%, outperforming both the Russell 1000 Value Index and the S&P 500, which returned 4.85% and 0.28%, respectively. EQUITIES HOLD FIRM Equity investors faced substantial challenges during the six months covered by this report, a period largely defined by rising short-term interest rates and the resurgent price of oil, which peaked at a new record above $70 a barrel amid concern about supply disruption following Hurricane Katrina. Speculation about the impact of higher interest rates and energy prices on economic vitality and corporate profits frequently pressured the market. Still, a host of strong earnings reports and merger announcements helped Stocks remain aloft. Ultimately, the equities market demonstrated considerable resilience, rebounding from troughs to secure gains. In that environment, Large Company Value produced overall gains in all but two of the sectors in which it was invested. ENERGY: THE TOP ABSOLUTE CONTRIBUTOR Large Company Value's interest in the energy sector, a position devoted entirely to the oil and gas industry, contributed the most to performance during the period. Soaring oil prices underpinned gains for numerous firms across the industry, and each of our holdings advanced. Major, integrated energy companies ConocoPhillips, Exxon Mobil Corp., Chevron Corp., and Royal Dutch Shell plc all ranked among the portfolio's top contributors. Nevertheless, many of the strongest performers in the sector did not meet our value criteria. For example, energy TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Citigroup Inc. 4.6% 4.4% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 4.5% 4.3% - -------------------------------------------------------------------------------- Bank of America Corp. 3.2% 3.2% - -------------------------------------------------------------------------------- Freddie Mac 3.1% 3.4% - -------------------------------------------------------------------------------- Royal Dutch Shell plc ADR 2.8% 2.6% - -------------------------------------------------------------------------------- ConocoPhillips 2.2% 1.7% - -------------------------------------------------------------------------------- Chevron Corp. 2.2% 1.8% - -------------------------------------------------------------------------------- J.P. Morgan Chase & Co. 2.2% 2.0% - -------------------------------------------------------------------------------- Hewlett-Packard Co. 2.1% 2.1% - -------------------------------------------------------------------------------- Wells Fargo & Co. 2.0% 2.1% - -------------------------------------------------------------------------------- (1) All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. (continued) - ------ 11 Large Company Value - Portfolio Commentary equipment and services companies recorded powerful gains, but were too richly valued by our standards to merit inclusion in the portfolio. Consequently, our relatively smaller exposure to the energy sector as a whole contributed to our overall underperformance versus our benchmark. TECHNOLOGY, FINANCIALS LEND SUPPORT Investments in the information technology sector generated a lift for the portfolio. During the period, Hewlett-Packard, a top-contributing stock, announced two consecutive quarters of increased revenues, with particularly strong growth in its software and enterprise storage and servers business segments. After each announcement, investors rewarded the stock, which steadily trended higher over the course of the six months. We also found success in the financials sector, on average our largest single stake. Insurance companies paced gains in the group, producing two more top contributors in Loews Corp. and Hartford Financial Services. In April, Hartford recorded its most profitable quarter ever driven by strength in its property and casualty insurance segment, where innovative technologies helped the firm maintain competitive pricing. SOME DISAPPOINTMENTS Despite those successes, we suffered some setbacks, one of which emerged from the financials sector. Freddie Mac, the top-detracting stock, continued to struggle amid proposals for legislation to increase regulation of government-sponsored enterprises, or GSEs. We also encountered some difficulty in the materials group, the top sector-level detractor in absolute terms. Diversified chemicals company PPG Industries, Inc. declined, despite announcements from the company that it had booked record-setting sales in its first and second quarters. Still, we have conviction in both firms' long-term prospects and have maintained our positions. 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 SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 11.6% 10.6% - -------------------------------------------------------------------------------- Commercial Banks 9.4% 9.7% - -------------------------------------------------------------------------------- Diversified Financial Services 6.8% 6.4% - -------------------------------------------------------------------------------- Insurance 6.2% 5.8% - -------------------------------------------------------------------------------- Pharmaceuticals 5.4% 4.2% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Common Stocks 96.0% 95.7% - -------------------------------------------------------------------------------- Temporary Cash Investments 2.5% 5.2% - -------------------------------------------------------------------------------- Other Assets and Liabilities 1.5% (0.9)% - -------------------------------------------------------------------------------- - ------ 12 Large Company Value - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 96.0% AEROSPACE & DEFENSE -- 0.6% - -------------------------------------------------------------------------------- 201,100 Northrop Grumman Corp. $ 10,929,785 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 0.4% - -------------------------------------------------------------------------------- 235,800 Lear Corporation 8,010,126 - -------------------------------------------------------------------------------- AUTOMOBILES -- 1.4% - -------------------------------------------------------------------------------- 277,500 General Motors Corp. 8,494,275 - -------------------------------------------------------------------------------- 184,100 Toyota Motor Corp. ADR 17,005,317 - -------------------------------------------------------------------------------- 25,499,592 - -------------------------------------------------------------------------------- BEVERAGES -- 2.4% - -------------------------------------------------------------------------------- 402,200 Coca-Cola Company (The) 17,371,018 - -------------------------------------------------------------------------------- 186,300 Molson Coors Brewing Co. 11,925,063 - -------------------------------------------------------------------------------- 522,500 Pepsi Bottling Group Inc. 14,917,375 - -------------------------------------------------------------------------------- 44,213,456 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 3.8% - -------------------------------------------------------------------------------- 521,200 Bank of New York Co., Inc. (The) 15,328,492 - -------------------------------------------------------------------------------- 445,700 Merrill Lynch & Co., Inc. 27,343,695 - -------------------------------------------------------------------------------- 510,100 Morgan Stanley 27,514,794 - -------------------------------------------------------------------------------- 70,186,981 - -------------------------------------------------------------------------------- CHEMICALS -- 1.8% - -------------------------------------------------------------------------------- 355,900 du Pont (E.I.) de Nemours & Co. 13,940,603 - -------------------------------------------------------------------------------- 333,700 PPG Industries, Inc. 19,751,703 - -------------------------------------------------------------------------------- 33,692,306 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 9.4% - -------------------------------------------------------------------------------- 1,417,600 Bank of America Corp. 59,680,960 - -------------------------------------------------------------------------------- 261,000 National City Corp. 8,727,840 - -------------------------------------------------------------------------------- 309,100 PNC Financial Services Group 17,933,982 - -------------------------------------------------------------------------------- 859,700 U.S. Bancorp 24,140,376 - -------------------------------------------------------------------------------- 578,500 Wachovia Corp. 27,530,815 - -------------------------------------------------------------------------------- 641,200 Wells Fargo & Co. 37,555,084 - -------------------------------------------------------------------------------- 175,569,057 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 1.4% - -------------------------------------------------------------------------------- 344,400 R.R. Donnelley & Sons Company 12,766,908 - -------------------------------------------------------------------------------- 464,000 Waste Management, Inc. 13,275,040 - -------------------------------------------------------------------------------- 26,041,948 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 0.3% - -------------------------------------------------------------------------------- 520,800 Avaya Inc.(1) 5,364,240 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 3.4% - -------------------------------------------------------------------------------- 1,313,800 Hewlett-Packard Co. 38,362,960 - -------------------------------------------------------------------------------- 309,100 International Business Machines Corp. 24,796,002 - -------------------------------------------------------------------------------- 63,158,962 - -------------------------------------------------------------------------------- DIVERSIFIED -- 1.5% - -------------------------------------------------------------------------------- 219,300 Standard and Poor's 500 Depositary Receipt 26,947,584 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 6.8% - -------------------------------------------------------------------------------- 1,874,500 Citigroup Inc. $ 85,327,246 - -------------------------------------------------------------------------------- 1,197,800 J.P. Morgan Chase & Co. 40,641,354 - -------------------------------------------------------------------------------- 125,968,600 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.3% - -------------------------------------------------------------------------------- 233,400 AT&T Corp. 4,621,320 - -------------------------------------------------------------------------------- 744,900 BellSouth Corp. 19,590,870 - -------------------------------------------------------------------------------- 961,300 SBC Communications Inc. 23,042,361 - -------------------------------------------------------------------------------- 424,100 Verizon Communications 13,863,829 - -------------------------------------------------------------------------------- 61,118,380 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 2.8% - -------------------------------------------------------------------------------- 526,600 Exelon Corporation 28,141,504 - -------------------------------------------------------------------------------- 737,000 PPL Corporation 23,827,210 - -------------------------------------------------------------------------------- 51,968,714 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 1.6% - -------------------------------------------------------------------------------- 881,000 Kroger Co. (The)(1) 18,139,790 - -------------------------------------------------------------------------------- 244,300 Wal-Mart Stores, Inc. 10,705,226 - -------------------------------------------------------------------------------- 28,845,016 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 2.3% - -------------------------------------------------------------------------------- 416,900 H.J. Heinz Company 15,233,526 - -------------------------------------------------------------------------------- 529,900 Sara Lee Corp. 10,041,605 - -------------------------------------------------------------------------------- 251,600 Unilever N.V. New York Shares 17,976,820 - -------------------------------------------------------------------------------- 43,251,951 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.3% - -------------------------------------------------------------------------------- 147,200 Baxter International, Inc. 5,868,864 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 0.5% - -------------------------------------------------------------------------------- 201,400 HCA Inc. 9,651,088 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 1.4% - -------------------------------------------------------------------------------- 785,400 McDonald's Corporation 26,303,046 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.8% - -------------------------------------------------------------------------------- 523,200 Newell Rubbermaid Inc. 11,850,480 - -------------------------------------------------------------------------------- 45,900 Whirlpool Corp. 3,477,843 - -------------------------------------------------------------------------------- 15,328,323 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 2.3% - -------------------------------------------------------------------------------- 650,800 General Electric Co. 21,912,436 - -------------------------------------------------------------------------------- 718,900 Tyco International Ltd. 20,021,365 - -------------------------------------------------------------------------------- 41,933,801 - -------------------------------------------------------------------------------- INSURANCE -- 6.2% - -------------------------------------------------------------------------------- 448,900 Allstate Corp. 24,819,681 - -------------------------------------------------------------------------------- 403,500 American International Group, Inc. 25,000,860 - -------------------------------------------------------------------------------- 288,300 Hartford Financial Services Group Inc. (The) 22,248,111 - -------------------------------------------------------------------------------- 206,500 Loews Corp. 19,082,665 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 13 Large Company Value - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 315,300 Marsh & McLennan Companies, Inc. $ 9,581,967 - -------------------------------------------------------------------------------- 261,800 Torchmark Corp. 13,830,894 - -------------------------------------------------------------------------------- 114,564,178 - -------------------------------------------------------------------------------- IT SERVICES -- 1.5% - -------------------------------------------------------------------------------- 316,200 Computer Sciences Corp.(1) 14,959,422 - -------------------------------------------------------------------------------- 301,900 Fiserv, Inc.(1) 13,848,153 - -------------------------------------------------------------------------------- 28,807,575 - -------------------------------------------------------------------------------- MACHINERY -- 2.9% - -------------------------------------------------------------------------------- 194,400 Deere & Co. 11,897,280 - -------------------------------------------------------------------------------- 330,400 Dover Corp. 13,477,016 - -------------------------------------------------------------------------------- 407,400 Ingersoll-Rand Company 15,574,902 - -------------------------------------------------------------------------------- 191,600 Parker-Hannifin Corp. 12,321,796 - -------------------------------------------------------------------------------- 53,270,994 - -------------------------------------------------------------------------------- MEDIA -- 3.3% - -------------------------------------------------------------------------------- 309,300 Gannett Co., Inc. 21,289,119 - -------------------------------------------------------------------------------- 1,729,100 Time Warner Inc. 31,314,001 - -------------------------------------------------------------------------------- 274,900 Viacom, Inc. Cl B 9,074,449 - -------------------------------------------------------------------------------- 61,677,569 - -------------------------------------------------------------------------------- METALS & MINING -- 1.0% - -------------------------------------------------------------------------------- 506,400 Alcoa Inc. 12,366,288 - -------------------------------------------------------------------------------- 106,400 Nucor Corp. 6,276,536 - -------------------------------------------------------------------------------- 18,642,824 - -------------------------------------------------------------------------------- MULTI-UTILITIES -- 0.7% - -------------------------------------------------------------------------------- 523,200 NiSource Inc. 12,687,600 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 0.5% - -------------------------------------------------------------------------------- 525,100 Dollar General Corp. 9,630,334 - -------------------------------------------------------------------------------- OFFICE ELECTRONICS -- 0.7% - -------------------------------------------------------------------------------- 957,800 Xerox Corp.(1) 13,073,970 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 11.6% - -------------------------------------------------------------------------------- 627,900 Chevron Corp. 40,643,967 - -------------------------------------------------------------------------------- 582,800 ConocoPhillips 40,743,548 - -------------------------------------------------------------------------------- 1,322,000 Exxon Mobil Corp. 83,999,880 - -------------------------------------------------------------------------------- 783,000 Royal Dutch Shell plc ADR 51,396,120 - -------------------------------------------------------------------------------- 216,783,515 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 1.4% - -------------------------------------------------------------------------------- 372,100 Weyerhaeuser Co. 25,581,875 - -------------------------------------------------------------------------------- PERSONAL PRODUCTS -- 0.2% - -------------------------------------------------------------------------------- 170,900 Avon Products, Inc. 4,614,300 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 5.4% - -------------------------------------------------------------------------------- 484,600 Abbott Laboratories 20,547,040 - -------------------------------------------------------------------------------- 493,400 Bristol-Myers Squibb Co. 11,871,204 - -------------------------------------------------------------------------------- 341,400 Johnson & Johnson 21,603,792 - -------------------------------------------------------------------------------- 272,900 Merck & Co., Inc. 7,425,609 - -------------------------------------------------------------------------------- 770,200 Pfizer, Inc. 19,231,894 - -------------------------------------------------------------------------------- 440,000 Wyeth 20,358,800 - -------------------------------------------------------------------------------- 101,038,339 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- ROAD & RAIL -- 0.6% - -------------------------------------------------------------------------------- 291,400 Norfolk Southern Corp. $ 11,819,184 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.8% - -------------------------------------------------------------------------------- 582,300 Intel Corp. 14,353,695 - -------------------------------------------------------------------------------- SOFTWARE -- 1.7% - -------------------------------------------------------------------------------- 1,192,900 Microsoft Corporation 30,693,317 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 0.5% - -------------------------------------------------------------------------------- 584,600 Gap, Inc. (The) 10,189,578 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.3% - -------------------------------------------------------------------------------- 297,300 Liz Claiborne, Inc. 11,689,836 - -------------------------------------------------------------------------------- 213,900 VF Corp. 12,399,783 - -------------------------------------------------------------------------------- 24,089,619 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 4.9% - -------------------------------------------------------------------------------- 1,006,300 Freddie Mac 56,815,698 - -------------------------------------------------------------------------------- 154,700 MGIC Investment Corp. 9,931,740 - -------------------------------------------------------------------------------- 599,300 Washington Mutual, Inc. 23,504,546 - -------------------------------------------------------------------------------- 90,251,984 - -------------------------------------------------------------------------------- TOBACCO -- 1.5% - -------------------------------------------------------------------------------- 390,500 Altria Group Inc. 28,783,755 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.8% - -------------------------------------------------------------------------------- 625,800 Sprint Nextel Corp. 14,881,524 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $1,630,399,695) 1,785,287,549 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 2.5% Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 6.875%, 8/15/25, valued at $48,069,471), in a joint trading account at 3.22%, dated 9/30/05, due 10/3/05 (Delivery value $47,112,638) (Cost $47,100,000) 47,100,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 98.5% (Cost $1,677,499,695) 1,832,387,549 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- 1.5% 28,821,972 - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $1,861,209,521 ================================================================================ NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt (1) Non-income producing. See Notes to Financial Statements. - ------ 14 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 April 1, 2005 to September 30, 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. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. (continued) - ------ 15 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 4/1/05 - EXPENSE 4/1/05 9/30/05 9/30/05 RATIO(1) - -------------------------------------------------------------------------------- VALUE SHAREHOLDER FEE EXAMPLE - -------------------------------------------------------------------------------- ACTUAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,020.30 $5.01 0.99% - -------------------------------------------------------------------------------- Institutional Class $1,000 $1,021.40 $4.00 0.79% - -------------------------------------------------------------------------------- Advisor Class $1,000 $1,019.00 $6.28 1.24% - -------------------------------------------------------------------------------- A Class $1,000 $1,019.00 $6.28 1.24% - -------------------------------------------------------------------------------- B Class $1,000 $1,015.20 $10.05 1.99% - -------------------------------------------------------------------------------- C Class $1,000 $1,015.30 $10.05 1.99% - -------------------------------------------------------------------------------- R Class $1,000 $ 977.30(2) $2.54(3) 1.49% - -------------------------------------------------------------------------------- HYPOTHETICAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,020.10 $5.01 0.99% - -------------------------------------------------------------------------------- Institutional Class $1,000 $1,021.11 $4.00 0.79% - -------------------------------------------------------------------------------- Advisor Class $1,000 $1,018.85 $6.28 1.24% - -------------------------------------------------------------------------------- A Class $1,000 $1,018.85 $6.28 1.24% - -------------------------------------------------------------------------------- B Class $1,000 $1,015.09 $10.05 1.99% - -------------------------------------------------------------------------------- C Class $1,000 $1,015.09 $10.05 1.99% - -------------------------------------------------------------------------------- R Class $1,000 $1,017.60(4) $7.54(4) 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 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. (2) Ending account value based on actual return from July 29, 2005 (commencement of sale) through September 30, 2005. (3) 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 63, the number of days in the period from July 29, 2005 (commencement of sale) through September 30, 2005, divided by 365, to reflect the period. 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 the period assume the class had been available throughout the entire period and are calculated using the class's annualized expense ratio listed in the table above. (continued) - ------ 16 Shareholder Fee Examples (Unaudited) - -------------------------------------------------------------------------------- EXPENSES PAID BEGINNING ENDING DURING PERIOD(1) ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 4/1/05 - EXPENSE 4/1/05 9/30/05 9/30/05 RATIO(1) - -------------------------------------------------------------------------------- LARGE COMPANY VALUE SHAREHOLDER FEE EXAMPLE - -------------------------------------------------------------------------------- ACTUAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,037.30 $4.29 0.84% - -------------------------------------------------------------------------------- Institutional Class $1,000 $1,038.30 $3.27 0.64% - -------------------------------------------------------------------------------- Advisor Class $1,000 $1,036.00 $5.56 1.09% - -------------------------------------------------------------------------------- A Class $1,000 $1,036.00 $5.56 1.09% - -------------------------------------------------------------------------------- B Class $1,000 $1,030.40 $9.37 1.84% - --------------------------------------------------------------------------------- C Class $1,000 $1,030.50 $9.37 1.84% - -------------------------------------------------------------------------------- R Class $1,000 $1,034.70 $6.83 1.34% - -------------------------------------------------------------------------------- HYPOTHETICAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,020.86 $4.26 0.84% - -------------------------------------------------------------------------------- Institutional Class $1,000 $1,021.86 $3.24 0.64% - -------------------------------------------------------------------------------- Advisor Class $1,000 $1,019.60 $5.52 1.09% - -------------------------------------------------------------------------------- A Class $1,000 $1,019.60 $5.52 1.09% - -------------------------------------------------------------------------------- B Class $1,000 $1,015.84 $9.30 1.84% - -------------------------------------------------------------------------------- C Class $1,000 $1,015.84 $9.30 1.84% - -------------------------------------------------------------------------------- R Class $1,000 $1,018.35 $6.78 1.34% - -------------------------------------------------------------------------------- (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 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. - ------ 17 Statement of Assets and Liabilities SEPTEMBER 30, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investment securities, at value (cost of $2,749,238,782 and $1,677,499,695, respectively) -- including $226,934,474 and $- of securities on loan, respectively $2,865,644,030 $1,832,387,549 - -------------------------------------------------------------------------------- Investments made with cash collateral received for securities on loan, at value (cost of $229,480,546 and $-, respectively) 229,480,546 -- - --------------------------------------------- Total investment securities, at value (cost of $2,978,719,328 and $1,677,499,695, respectively) 3,095,124,576 1,832,387,549 - --------------------------------------------- Cash 15,129,546 22,631,600 - --------------------------------------------- Receivable for investments sold 74,269,414 4,583,566 - --------------------------------------------- Receivable for forward foreign currency exchange contracts 44,315 -- - --------------------------------------------- Receivable for capital shares sold 273,478 818,435 - --------------------------------------------- Dividends and interest receivable 3,297,952 2,211,940 - -------------------------------------------------------------------------------- 3,188,139,281 1,862,633,090 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Payable for collateral received for securities on loan 229,480,546 -- - --------------------------------------------- Payable for investments purchased 52,278,651 -- - --------------------------------------------- Payable for capital shares redeemed 75 87,471 - --------------------------------------------- Accrued management fees 2,277,265 1,158,077 - --------------------------------------------- Distribution fees payable 64,136 76,977 - --------------------------------------------- Service fees (and distribution fees -- A and R Class) payable 67,504 101,044 - -------------------------------------------------------------------------------- 284,168,177 1,423,569 - -------------------------------------------------------------------------------- NET ASSETS $2,903,971,104 $1,861,209,521 ================================================================================ See Notes to Financial Statements. (continued) - ------ 18 Statement of Assets and Liabilities SEPTEMBER 30, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- NET ASSETS CONSIST OF: - -------------------------------------------------------------------------------- Capital (par value and paid-in surplus) $2,593,596,929 $1,665,230,459 - -------------------------------------- Undistributed net investment income 786,136 1,116,587 - -------------------------------------- Undistributed net realized gain on investment and foreign currency transactions 193,138,476 39,974,621 - -------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 116,449,563 154,887,854 - -------------------------------------------------------------------------------- $2,903,971,104 $1,861,209,521 ================================================================================ INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $2,284,047,876 $881,855,331 - -------------------------------------- Shares outstanding 308,270,117 134,101,287 - -------------------------------------- Net asset value per share $7.41 $6.58 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $293,161,804 $472,276,145 - -------------------------------------- Shares outstanding 39,528,470 71,822,385 - -------------------------------------- Net asset value per share $7.42 $6.58 - -------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $239,982,355 $154,256,988 - -------------------------------------- Shares outstanding 32,396,609 23,460,163 - -------------------------------------- Net asset value per share $7.41 $6.58 - -------------------------------------------------------------------------------- A CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $63,589,049 $273,694,711 - -------------------------------------- Shares outstanding 8,576,665 41,589,514 - -------------------------------------- Net asset value per share $7.41 $6.58 - -------------------------------------- Maximum offering price (net asset value divided by 0.9425) $7.86 $6.98 - -------------------------------------------------------------------------------- B CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $6,215,707 $15,188,921 - -------------------------------------- Shares outstanding 838,947 2,303,904 - -------------------------------------- Net asset value per share $7.41 $6.59 - -------------------------------------------------------------------------------- C CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $16,949,885 $54,199,805 - -------------------------------------- Shares outstanding 2,299,902 8,243,548 - -------------------------------------- Net asset value per share $7.37 $6.57 - -------------------------------------------------------------------------------- R CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $24,428 $9,737,620 - -------------------------------------- Shares outstanding 3,297 1,480,441 - -------------------------------------- Net asset value per share $7.41 $6.58 - -------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 19 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- INVESTMENT INCOME - ---------------------------------------- INCOME: - ---------------------------------------- Dividends (net of foreign taxes withheld of $363,151 and $183,888, respectively) $ 39,429,020 $19,337,214 - ---------------------------------------- Interest 1,191,467 1,267,964 - ---------------------------------------- Securities lending 215,673 -- - -------------------------------------------------------------------------------- 40,836,160 20,605,178 - -------------------------------------------------------------------------------- EXPENSES: - ---------------------------------------- Management fees 13,832,209 6,415,954 - ---------------------------------------- Distribution fees: - ---------------------------------------- Advisor Class 299,699 162,174 - ---------------------------------------- B Class 21,264 53,393 - ---------------------------------------- C Class 59,415 183,519 - ---------------------------------------- Service fees: - ---------------------------------------- Advisor Class 299,699 162,174 - ---------------------------------------- B Class 7,088 17,798 - ---------------------------------------- C Class 19,805 61,173 - ---------------------------------------- Service and distribution fees: - ---------------------------------------- A Class 71,030 335,018 - ---------------------------------------- R Class 20 10,396 - ---------------------------------------- Directors' fees and expenses 29,302 19,228 - ---------------------------------------- Other expenses 6,083 2,706 - -------------------------------------------------------------------------------- 14,645,614 7,423,533 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 26,190,546 13,181,645 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: - -------------------------------------------------------------------------------- Investment transactions 160,194,140 29,881,412 - ---------------------------------------- Foreign currency transactions 11,160,700 -- - -------------------------------------------------------------------------------- 171,354,840 29,881,412 - -------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: - ---------------------------------------- Investments (140,782,792) 15,905,767 - ---------------------------------------- Translation of assets and liabilities in foreign currencies 986,822 -- - -------------------------------------------------------------------------------- (139,795,970) 15,905,767 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) 31,558,870 45,787,179 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 57,749,416 $58,968,824 ================================================================================ See Notes to Financial Statements. - ------ 20 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED) AND YEAR ENDED MARCH 31, 2005 - ---------------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - ---------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2005 MARCH 31, 2005 SEPT. 30, 2005 MARCH 31, 2005 - ---------------------------------------------------------------------------------------------------- OPERATIONS - ---------------------------------------------------------------------------------------------------- Net investment income $ 26,190,546 $ 31,256,151 $ 13,181,645 $ 18,474,038 - ---------------------------------- Net realized gain (loss) 171,354,840 282,207,252 29,881,412 16,666,492 - ---------------------------------- Change in net unrealized appreciation (depreciation) (139,795,970) (52,516,959) 15,905,767 68,357,515 - ---------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 57,749,416 260,946,444 58,968,824 103,498,045 - ---------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - ---------------------------------------------------------------------------------------------------- From net investment income: - ---------------------------------- Investor Class (15,192,106) (25,832,210) (5,685,569) (8,417,141) - ---------------------------------- Institutional Class (2,112,310) (3,092,567) (3,970,038) (6,012,315) - ---------------------------------- Advisor Class (1,261,985) (1,784,966) (821,745) (1,000,392) - ---------------------------------- A Class (309,746) (266,658) (1,645,518) (2,613,870) - ---------------------------------- B Class (8,762) (10,572) (33,162) (75,779) - ---------------------------------- C Class (24,968) (25,282) (115,838) (179,959) - ---------------------------------- R Class (58) -- (29,037) (20,798) - ---------------------------------- From net realized gains: - ---------------------------------- Investor Class -- (293,840,570) -- (1,622,873) - ---------------------------------- Institutional Class -- (26,249,192) -- (1,122,315) - ---------------------------------- Advisor Class -- (29,182,366) -- (244,061) - ---------------------------------- A Class -- (5,061,858) -- (626,207) - ---------------------------------- B Class -- (546,505) -- (35,557) - ---------------------------------- C Class -- (1,292,940) -- (76,781) - ---------------------------------- R Class -- -- -- (5,230) - ---------------------------------------------------------------------------------------------------- Decrease in net assets from distributions (18,909,935) (387,185,686) (12,300,907) (22,053,278) - ---------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - ---------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions (6,420,148) 194,734,618 310,778,872 791,902,809 - ---------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 32,419,333 68,495,376 357,446,789 873,347,576 - ---------------------------------------------------------------------------------------------------- NET ASSETS - ---------------------------------------------------------------------------------------------------- Beginning of period 2,871,551,771 2,803,056,395 1,503,762,732 630,415,156 - ---------------------------------------------------------------------------------------------------- End of period $2,903,971,104 $2,871,551,771 $1,861,209,521 $1,503,762,732 ==================================================================================================== Accumulated undistributed net investment income (loss) $786,136 ($6,494,475) $1,116,587 $235,849 ==================================================================================================== See Notes to Financial Statements. - ------ 21 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Value Fund (Value) and Large Company Value Fund (Large Company Value) (collectively, the funds) are two funds in a series issued by the corporation. The funds are diversified under the 1940 Act. The funds' investment objectives are long-term capital growth. The production of income is a secondary objective. The funds seek to achieve their investment objective by investing in stocks of companies that management believes to be undervalued at the time of purchase. Value invests in companies with small, medium, and large market capitalization and Large Company Value invests in companies with larger market capitalization. The following is a summary of the funds' significant accounting policies. MULTIPLE CLASS -- The funds are authorized to issue the Investor Class, the Institutional Class, the Advisor Class, the A Class, the B Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and shareholder servicing and distribution expenses and arrangements. All shares of each fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the funds are allocated to each class of shares based on their relative net assets. Sale of Value's R Class commenced on July 29, 2005. 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 record 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. Net realized and unrealized foreign currency exchange gains or losses occurring during the holding period of investment securities are a (continued) - ------ 22 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 or American Century Global Investment Management, Inc. (ACGIM), 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) - ------ 23 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The Agreement provides that all expenses of the funds, except brokerage commissions, taxes, interest, fees and expenses of those directors who are not considered "interested persons" as defined in the 1940 Act (including counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on the daily net assets of 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 & 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 $2.5 billion 0.90% 0.70% 0.65% - -------------------------------------------------------------------------------- Over $7.5 billion 0.85% 0.65% 0.60% - -------------------------------------------------------------------------------- The annual management fee schedule for each class of Large Company Value is as follows: - -------------------------------------------------------------------------------- INVESTOR, A, B, C & R INSTITUTIONAL ADVISOR - -------------------------------------------------------------------------------- STRATEGY ASSETS - -------------------------------------------------------------------------------- First $1 billion 0.90% 0.70% 0.65% - -------------------------------------------------------------------------------- Next $4 billion 0.80% 0.60% 0.55% - -------------------------------------------------------------------------------- Over $5 billion 0.70% 0.50% 0.45% - -------------------------------------------------------------------------------- For the six months ended September 30, 2005, the effective annual management fee for each class of each fund was as follows: - -------------------------------------------------------------------------------- INVESTOR, A, B, C & R INSTITUTIONAL ADVISOR - -------------------------------------------------------------------------------- Value 0.99% 0.79% 0.74% - -------------------------------------------------------------------------------- Large Company Value 0.84% 0.64% 0.59% - -------------------------------------------------------------------------------- (continued) - ------ 24 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master Distribution and Shareholder Services Plan for the Advisor Class (the Advisor Class plan) and a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, B Class, C Class and R Class (collectively with the Advisor Class Plan, the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the Advisor Class, B Class and C Class will pay American Century Investment Services, Inc. (ACIS) the following annual distribution and service fees: - -------------------------------------------------------------------------------- ADVISOR B & C - -------------------------------------------------------------------------------- Distribution Fee 0.25% 0.75% - -------------------------------------------------------------------------------- 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, B, C and R Class shares. Fees incurred under the plans during the six months ended September 30, 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. 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 J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. 3. INVESTMENT TRANSACTIONS Investment transactions, excluding short-term investments, for the six months ended September 30, 2005, were as follows: - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- Purchases $2,094,200,432 $422,724,421 - -------------------------------------------------------------------------------- Proceeds from sales $2,040,178,333 $121,259,477 - -------------------------------------------------------------------------------- (continued) - ------ 25 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the funds were as follows: - ----------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - ----------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - ----------------------------------------------------------------------------------------------- INVESTOR CLASS - ----------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 900,000,000 300,000,000 =============================================================================================== Sold 23,395,680 $ 173,151,023 47,236,932 $ 307,986,327 - ----------------------------------- Issued in reinvestment of distributions 1,970,419 14,684,825 655,307 4,278,705 - ----------------------------------- Redeemed (33,893,365) (250,722,294) (16,964,418) (109,090,284) - ----------------------------------------------------------------------------------------------- Net increase (decrease) (8,527,266) $ (62,886,446) 30,927,821 $ 203,174,748 =============================================================================================== 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 (decrease) 37,902,142 $ 266,729,413 43,709,449 $273,052,096 =============================================================================================== INSTITUTIONAL CLASS - ----------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 100,000,000 200,000,000 =============================================================================================== Sold 7,511,479 $ 55,748,138 10,149,264 $ 65,413,473 - ----------------------------------- Issued in reinvestment of distributions 273,400 2,039,383 534,166 3,484,479 - ----------------------------------- Redeemed (2,673,206) (19,801,503) (7,491,521) (48,837,075) - ----------------------------------------------------------------------------------------------- Net increase (decrease) 5,111,673 $ 37,986,018 3,191,909 $ 20,060,877 =============================================================================================== 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 (decrease) 5,507,602 $ 37,398,371 42,905,049 $262,282,778 =============================================================================================== ADVISOR CLASS - ----------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 150,000,000 50,000,000 =============================================================================================== Sold 6,428,730 $ 47,631,540 9,216,349 $ 59,923,773 - ----------------------------------- Issued in reinvestment of distributions 168,667 1,256,139 101,728 663,959 - ----------------------------------- Redeemed (6,628,385) (48,895,620) (2,230,779) (14,553,305) - ----------------------------------------------------------------------------------------------- Net increase (decrease) (30,988) $ (7,941) 7,087,298 $ 46,034,427 =============================================================================================== 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 =============================================================================================== (continued) - ------ 26 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - -------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - -------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 50,000,000 100,000,000 ============================================================================================ Sold 3,014,544 $22,379,241 8,937,941 $ 57,825,730 - ------------------------------------ Issued in reinvestment of distributions 40,304 300,614 243,405 1,589,574 - ------------------------------------ Redeemed (1,086,283) (8,146,692) (5,969,625) (39,103,712) - -------------------------------------------------------------------------------------------- Net increase (decrease) 1,968,565 $14,533,163 3,211,721 $ 20,311,592 ============================================================================================ 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 (decrease) 4,661,705 $35,611,920 22,750,945 $139,802,600 ============================================================================================ B CLASS - -------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 10,000,000 10,000,000 ============================================================================================ Sold 172,685 $1,274,161 373,466 $2,416,719 - ------------------------------------ Issued in reinvestment of distributions 1,022 7,609 4,264 27,866 - ------------------------------------ Redeemed (26,932) (199,817) (104,479) (675,970) - -------------------------------------------------------------------------------------------- Net increase (decrease) 146,775 $1,081,953 273,251 $1,768,615 ============================================================================================ 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 (decrease) 348,667 $2,623,952 1,075,828 $6,559,566 ============================================================================================ C CLASS - -------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 20,000,000 20,000,000 ============================================================================================ Sold 539,142 $ 3,947,628 2,369,908 $15,273,242 - ------------------------------------ Issued in reinvestment of distributions 2,728 20,205 6,611 43,086 - ------------------------------------ Redeemed (151,786) (1,119,773) (517,435) (3,348,548) - -------------------------------------------------------------------------------------------- Net increase (decrease) 390,084 $ 2,848,060 1,859,084 $11,967,780 ============================================================================================ 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 (decrease) 1,050,624 $ 7,812,901 4,512,764 $28,128,258 ============================================================================================ (continued) - ------ 27 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - --------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - --------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - --------------------------------------------------------------------------------------- R CLASS - --------------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2005(1) SHARES AUTHORIZED 50,000,000 10,000,000 ======================================================================================= Sold 3,289 $24,987 1,231,537 $8,021,508 - ------------------------------------ Issued in reinvestment of distributions 8 58 4,424 29,037 - ------------------------------------ Redeemed -- -- (90,745) (589,712) - --------------------------------------------------------------------------------------- Net increase (decrease) 3,297 $25,045 1,145,216 $7,460,833 ======================================================================================= 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 (decrease) 306,663 $1,842,201 ======================================================================================= (1) July 29, 2005 (commencement of sale) through September 30, 2005 for Value. 5. SECURITIES LENDING As of September 30, 2005, securities in Value valued at $226,934,474 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 $229,480,546. 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 or ACGIM, have a $575,000,000 unsecured bank line of credit agreement with JPMCB. The funds may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The funds did not borrow from the line during the six months ended September 30, 2005. (continued) - ------ 28 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 7. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. As of September 30, 2005, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- Federal tax cost of investments $3,043,959,975 $1,679,800,714 ================================================================================ Gross tax appreciation of investments $ 166,523,349 $189,463,556 - -------------------------------------- Gross tax depreciation of investments (115,358,748) (36,876,721) - -------------------------------------------------------------------------------- Net tax appreciation (depreciation) of investments $ 51,164,601 $152,586,835 ================================================================================ 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, Value had currency loss deferrals of $6,495,058, which 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. - ------ 29 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - -------------------------------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.31 $7.72 $5.61 $7.19 $6.27 $5.35 - -------------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------- Net Investment Income(2) 0.07 0.09 0.09 0.07 0.08 0.10 - ------------------------------- Net Realized and Unrealized Gain (Loss) 0.08 0.64 2.18 (1.48) 1.03 0.92 - -------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.15 0.73 2.27 (1.41) 1.11 1.02 - -------------------------------------------------------------------------------------------------------- Distributions - ------------------------------- From Net Investment Income (0.05) (0.09) (0.08) (0.07) (0.08) (0.10) - ------------------------------- From Net Realized Gains -- (1.05) (0.08) (0.10) (0.11) -- - -------------------------------------------------------------------------------------------------------- Total Distributions (0.05) (1.14) (0.16) (0.17) (0.19) (0.10) - -------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.41 $7.31 $7.72 $5.61 $7.19 $6.27 ======================================================================================================== TOTAL RETURN(3) 2.03% 9.95% 40.66% (19.85)% 17.96% 19.20% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.99%(4) 0.99% 1.00% 1.00% 1.00% 1.00% - ------------------------------- Ratio of Net Investment Income to Average Net Assets 1.82%(4) 1.16% 1.26% 1.19% 1.11% 1.71% - ------------------------------- Portfolio Turnover Rate 72% 130% 122% 102% 151% 150% - ------------------------------- Net Assets, End of Period (in thousands) $2,284,048 $2,315,507 $2,152,265 $1,552,632 $2,068,901 $1,532,113 - -------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 30 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ----------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ----------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - ----------------------------------------------------------------------------------------------- PER-SHARE DATA - ----------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.32 $7.72 $5.61 $7.20 $6.27 $5.36 - ----------------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------- Net Investment Income(2) 0.07 0.10 0.10 0.09 0.09 0.11 - ---------------------------------- Net Realized and Unrealized Gain (Loss) 0.09 0.65 2.18 (1.50) 1.04 0.91 - ----------------------------------------------------------------------------------------------- Total From Investment Operations 0.16 0.75 2.28 (1.41) 1.13 1.02 - ----------------------------------------------------------------------------------------------- Distributions - ---------------------------------- From Net Investment Income (0.06) (0.10) (0.09) (0.08) (0.09) (0.11) - ---------------------------------- From Net Realized Gains -- (1.05) (0.08) (0.10) (0.11) -- - ----------------------------------------------------------------------------------------------- Total Distributions (0.06) (1.15) (0.17) (0.18) (0.20) (0.11) - ----------------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.42 $7.32 $7.72 $5.61 $7.20 $6.27 =============================================================================================== TOTAL RETURN(3) 2.14% 10.30% 40.93% (19.70)% 18.19% 19.24% RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.79%(4) 0.79% 0.80% 0.80% 0.80% 0.80% - ---------------------------------- Ratio of Net Investment Income to Average Net Assets 2.02%(4) 1.36% 1.46% 1.38% 1.31% 1.91% - ---------------------------------- Portfolio Turnover Rate 72% 130% 122% 102% 151% 150% - ---------------------------------- Net Assets, End of Period (in thousands) $293,162 $251,812 $223,282 $179,196 $226,681 $186,987 - ----------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 31 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - --------------------------------------------------------------------------------------------------- ADVISOR CLASS - --------------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - --------------------------------------------------------------------------------------------------- PER-SHARE DATA - --------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.31 $7.72 $5.60 $7.19 $6.27 $5.36 - --------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------ Net Investment Income(2) 0.06 0.07 0.07 0.06 0.06 0.08 - ------------------------------------ Net Realized and Unrealized Gain (Loss) 0.08 0.64 2.19 (1.49) 1.03 0.92 - --------------------------------------------------------------------------------------------------- Total From Investment Operations 0.14 0.71 2.26 (1.43) 1.09 1.00 - --------------------------------------------------------------------------------------------------- Distributions - ------------------------------------ From Net Investment Income (0.04) (0.07) (0.06) (0.06) (0.06) (0.09) - ------------------------------------ From Net Realized Gains -- (1.05) (0.08) (0.10) (0.11) -- - --------------------------------------------------------------------------------------------------- Total Distributions (0.04) (1.12) (0.14) (0.16) (0.17) (0.09) - --------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.41 $7.31 $7.72 $5.60 $7.19 $6.27 =================================================================================================== TOTAL RETURN(3) 1.90% 9.67% 40.56% (20.07)% 17.51% 18.72% RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.24%(4) 1.24% 1.25% 1.25% 1.25% 1.25% - ------------------------------------ Ratio of Net Investment Income to Average Net Assets 1.57%(4) 0.91% 1.01% 0.94% 0.86% 1.46% - ------------------------------------ Portfolio Turnover Rate 72% 130% 122% 102% 151% 150% - ------------------------------------ Net Assets, End of Period (in thousands) $239,982 $236,960 $403,212 $210,984 $208,311 $102,357 - --------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 32 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004 2003(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.31 $7.72 $5.60 $5.77 - -------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------- Net Investment Income(3) 0.06 0.07 0.07 0.01 - ----------------------------------------- Net Realized and Unrealized Gain (Loss) 0.08 0.64 2.19 (0.16) - -------------------------------------------------------------------------------- Total From Investment Operations 0.14 0.71 2.26 (0.15) - -------------------------------------------------------------------------------- Distributions - ----------------------------------------- From Net Investment Income (0.04) (0.07) (0.06) (0.02) - ----------------------------------------- From Net Realized Gains -- (1.05) (0.08) -- - -------------------------------------------------------------------------------- Total Distributions (0.04) (1.12) (0.14) (0.02) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $7.41 $7.31 $7.72 $5.60 ================================================================================ TOTAL RETURN(4) 1.90% 9.67% 40.55% (2.67)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.24%(5) 1.24% 1.25% 1.25%(5) - ----------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.57%(5) 0.91% 1.01% 0.62%(5) - ----------------------------------------- Portfolio Turnover Rate 72% 130% 122% 102%(6) - ----------------------------------------- Net Assets, End of Period (in thousands) $63,589 $48,330 $15,029 $385 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ------ 33 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR ENDED MARCH 31 (EXCEPT AS NOTED) - --------------------------------------------------------------------------------------- B CLASS - --------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003(2) - --------------------------------------------------------------------------------------- PER-SHARE DATA - --------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.31 $7.73 $5.61 $5.77 - --------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income (Loss)(3) 0.03 0.01 0.01 --(4) - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 0.08 0.65 2.20 (0.15) - --------------------------------------------------------------------------------------- Total From Investment Operations 0.11 0.66 2.21 (0.15) - --------------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.01) (0.03) (0.01) (0.01) - ------------------------------------------ From Net Realized Gains -- (1.05) (0.08) -- - --------------------------------------------------------------------------------------- Total Distributions (0.01) (1.08) (0.09) (0.01) - --------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.41 $7.31 $7.73 $5.61 ======================================================================================= TOTAL RETURN(5) 1.52% 8.93% 39.51% (2.59)% RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.99%(6) 1.99% 2.00% 1.98%(6)(7) - ------------------------------------------ Ratio of Net Investment Income (Loss) to Average Net Assets 0.82%(6) 0.16% 0.26% (0.17)%(6)(7) - ------------------------------------------ Portfolio Turnover Rate 72% 130% 122% 102%(8) - ------------------------------------------ Net Assets, End of Period (in thousands) $6,216 $5,059 $2,656 $91 - --------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) During the period ended March 31, 2003, the distributor voluntarily waived a portion of the distribution and service fees. 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. (8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ------ 34 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------ C CLASS - ------------------------------------------------------------------------------------------------ 2005(1) 2005 2004 2003 2002(2) - ------------------------------------------------------------------------------------------------ PER-SHARE DATA - ------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $7.27 $7.70 $5.58 $7.18 $6.90 - ------------------------------------------------------------------------------------------------ Income From Investment Operations - ------------------------------------------ Net Investment Income (Loss)(3) 0.03 0.01 0.02 0.01 --(4) - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 0.08 0.64 2.19 (1.50) 0.42 - ------------------------------------------------------------------------------------------------ Total From Investment Operations 0.11 0.65 2.21 (1.49) 0.42 - ------------------------------------------------------------------------------------------------ Distributions - ------------------------------------------ From Net Investment Income (0.01) (0.03) (0.01) (0.01) (0.03) - ------------------------------------------ From Net Realized Gains -- (1.05) (0.08) (0.10) (0.11) - ------------------------------------------------------------------------------------------------ Total Distributions (0.01) (1.08) (0.09) (0.11) (0.14) - ------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $7.37 $7.27 $7.70 $5.58 $7.18 ================================================================================================ TOTAL RETURN(5) 1.53% 8.84% 39.73% (20.90)% 6.33% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------ Ratio of Operating Expenses to Average Net Assets 1.99%(6) 1.99% 2.00% 2.00% 2.00%(6) - ------------------------------------------ Ratio of Net Investment Income (Loss) to Average Net Assets 0.82%(6) 0.16% 0.26% 0.19% (0.06)%(6) - ------------------------------------------ Portfolio Turnover Rate 72% 130% 122% 102% 151%(7) - ------------------------------------------ Net Assets, End of Period (in thousands) $16,950 $13,885 $6,613 $2,461 $1,866 - ------------------------------------------------------------------------------------------------ (1) Six months ended September 30, 2005 (unaudited). (2) June 4, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 35 Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED - -------------------------------------------------------------------------------- R CLASS - -------------------------------------------------------------------------------- 2005(1) PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.60 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------------------------ Net Investment Income(2) 0.01 - ------------------------------------------------------------ Net Realized and Unrealized Gain (Loss) (0.18) - -------------------------------------------------------------------------------- Total From Investment Operations (0.17) - -------------------------------------------------------------------------------- Distributions - ------------------------------------------------------------ From Net Investment Income (0.02) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $7.41 ================================================================================ TOTAL RETURN(3) (2.27)% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.49%(4) - ------------------------------------------------------------ Ratio of Net Investment Income (Loss) to Average Net Assets 1.17%(4) - ------------------------------------------------------------ Portfolio Turnover Rate 72%(5) - ------------------------------------------------------------ Net Assets, End of Period (in thousands) $24 - -------------------------------------------------------------------------------- (1) July 29, 2005 (commencement of sale) through September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended September 30, 2005. See Notes to Financial Statements. - ------ 36 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------ INVESTOR CLASS - ------------------------------------------------------------------------------------------------ 2005(1) 2005 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------ PER-SHARE DATA - ------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $6.39 $5.89 $4.29 $5.53 $5.08 $4.59 - ------------------------------------------------------------------------------------------------ Income From Investment Operations - ------------------------------------ Net Investment Income(2) 0.05 0.12 0.09 0.08 0.07 0.08 - ------------------------------------ Net Realized and Unrealized Gain (Loss) 0.19 0.51 1.59 (1.25) 0.45 0.48 - ------------------------------------------------------------------------------------------------ Total From Investment Operations 0.24 0.63 1.68 (1.17) 0.52 0.56 - ------------------------------------------------------------------------------------------------ Distributions - ------------------------------------ From Net Investment Income (0.05) (0.11) (0.08) (0.07) (0.07) (0.07) - ------------------------------------ From Net Realized Gains -- (0.02) -- -- -- -- - ------------------------------------------------------------------------------------------------ Total Distributions (0.05) (0.13) (0.08) (0.07) (0.07) (0.07) - ------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $6.58 $6.39 $5.89 $4.29 $5.53 $5.08 ================================================================================================ TOTAL RETURN(3) 3.73% 10.73% 39.34% (21.19)% 10.20% 12.38% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------ Ratio of Operating Expenses to Average Net Assets 0.84%(4) 0.87% 0.90% 0.90% 0.90% 0.90% - ------------------------------------ Ratio of Net Investment Income to Average Net Assets 1.61%(4) 1.90% 1.58% 1.75% 1.34% 1.62% - ------------------------------------ Portfolio Turnover Rate 8% 18% 14% 30% 34% 55% - ------------------------------------ Net Assets, End of Period (in thousands) $881,855 $659,277 $350,516 $152,641 $69,961 $19,348 - ------------------------------------------------------------------------------------------------ (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 37 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ---------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ---------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002(2) - ---------------------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $6.39 $5.89 $4.29 $5.53 $5.44 - ---------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------- Net Investment Income(3) 0.06 0.13 0.10 0.09 0.06 - ------------------------------------- Net Realized and Unrealized Gain (Loss) 0.18 0.51 1.59 (1.25) 0.08 - ---------------------------------------------------------------------------------------- Total From Investment Operations 0.24 0.64 1.69 (1.16) 0.14 - ---------------------------------------------------------------------------------------- Distributions - ------------------------------------- From Net Investment Income (0.05) (0.12) (0.09) (0.08) (0.05) - ------------------------------------- From Net Realized Gains -- (0.02) -- -- -- - ---------------------------------------------------------------------------------------- Total Distributions (0.05) (0.14) (0.09) (0.08) (0.05) - ---------------------------------------------------------------------------------------- Net Asset Value, End of Period $6.58 $6.39 $5.89 $4.29 $5.53 ======================================================================================== TOTAL RETURN(4) 3.83% 10.94% 39.61% (21.03)% 2.69% RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.64%(5) 0.67% 0.70% 0.70% 0.70%(5) - ------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.81%(5) 2.10% 1.78% 1.95% 1.74%(5) - ------------------------------------- Portfolio Turnover Rate 8% 18% 14% 30% 34%(6) - ------------------------------------- Net Assets, End of Period (in thousands) $472,276 $438,518 $151,622 $21,110 $2,632 - ---------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) August 10, 2001 (commencement of sale) through March 31, 2002. (3) Computed using the average shares throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 38 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - --------------------------------------------------------------------------------------------- ADVISOR CLASS - --------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001(2) - --------------------------------------------------------------------------------------------- PER-SHARE DATA - --------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $6.39 $5.89 $4.29 $5.53 $5.08 $4.69 - --------------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------- Net Investment Income(3) 0.04 0.10 0.07 0.07 0.06 0.03 - ---------------------------------- Net Realized and Unrealized Gain (Loss) 0.19 0.51 1.60 (1.25) 0.44 0.39 - --------------------------------------------------------------------------------------------- Total From Investment Operations 0.23 0.61 1.67 (1.18) 0.50 0.42 - --------------------------------------------------------------------------------------------- Distributions - ---------------------------------- From Net Investment Income (0.04) (0.09) (0.07) (0.06) (0.05) (0.03) - ---------------------------------- From Net Realized Gains -- (0.02) -- -- -- -- - --------------------------------------------------------------------------------------------- Total Distributions (0.04) (0.11) (0.07) (0.06) (0.05) (0.03) - --------------------------------------------------------------------------------------------- Net Asset Value, End of Period $6.58 $6.39 $5.89 $4.29 $5.53 $5.08 ============================================================================================= TOTAL RETURN(4) 3.60% 10.45% 38.99% (21.38)% 9.93% 8.94% RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.09%(5) 1.12% 1.15% 1.15% 1.15% 1.15%(5) - ---------------------------------- Ratio of Net Investment Income to Average Net Assets 1.36%(5) 1.65% 1.33% 1.50% 1.09% 1.53%(5) - ---------------------------------- Portfolio Turnover Rate 8% 18% 14% 30% 34% 55%(6) - ---------------------------------- Net Assets, End of Period (in thousands) $154,257 $104,612 $19,265 $1,090 $6 $121 - --------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) October 26, 2000 (commencement of sale) through March 31, 2001. (3) Computed using the average shares throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2001. See Notes to Financial Statements. - ------ 39 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ----------------------------------------------------------------------------------- A CLASS - ----------------------------------------------------------------------------------- 2005(1) 2005 2004 2003(2) - ----------------------------------------------------------------------------------- PER-SHARE DATA - ----------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $6.39 $5.90 $4.29 $4.46 - ----------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income(3) 0.04 0.10 0.07 0.01 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 0.19 0.50 1.61 (0.17) - ----------------------------------------------------------------------------------- Total From Investment Operations 0.23 0.60 1.68 (0.16) - ----------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.04) (0.09) (0.07) (0.01) - ------------------------------------------ From Net Realized Gains -- (0.02) -- -- - ----------------------------------------------------------------------------------- Total Distributions (0.04) (0.11) (0.07) (0.01) - ----------------------------------------------------------------------------------- Net Asset Value, End of Period $6.58 $6.39 $5.90 $4.29 =================================================================================== TOTAL RETURN(4) 3.60% 10.25% 39.22% (3.49)% RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.09%(5) 1.12% 1.15% 1.15%(5) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 1.36%(5) 1.65% 1.33% 1.79%(5) - ------------------------------------------ Portfolio Turnover Rate 8% 18% 14% 30%(6) - ------------------------------------------ Net Assets, End of Period (in thousands) $273,695 $245,416 $92,171 $3,733 - ----------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ------ 40 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------- B CLASS - ------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003(2) - ------------------------------------------------------------------------------------------- PER-SHARE DATA - ------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $6.41 $5.91 $4.29 $4.46 - ------------------------------------------------------------------------------------------- Income From Investment Operations - -------------------------------------------- Net Investment Income(3) 0.02 0.05 0.03 0.01 - ------------------------------------------------------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.17 0.52 1.62 (0.17) - ------------------------------------------------------------------------------------------- Total From Investment Operations 0.19 0.57 1.65 (0.16) - ------------------------------------------------------------------------------------------- Distributions - ------------------------------------------------------------------------------------------- From Net Investment Income (0.01) (0.05) (0.03) (0.01) - ------------------------------------------------------------------------------------------- From Net Realized Gains -- (0.02) -- -- - ------------------------------------------------------------------------------------------- Total Distributions (0.01) (0.07) (0.03) (0.01) - ------------------------------------------------------------------------------------------- Net Asset Value, End of Period $6.59 $6.41 $5.91 $4.29 =========================================================================================== TOTAL RETURN(4) 3.04% 9.59% 38.41% (3.58)% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.84%(5) 1.87% 1.90% 1.88%(5)(6) - -------------------------------------------- Ratio of Net Investment Income to Average Net Assets 0.61%(5) 0.90% 0.58% 0.74%(5)(6) - -------------------------------------------- Portfolio Turnover Rate 8% 18% 14% 30%(7) - -------------------------------------------- Net Assets, End of Period (in thousands) $15,189 $13,009 $5,642 $88 - ------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) During the period ended March 31, 2003, the distributor voluntarily waived a portion of the distribution and service fees. 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. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ------ 41 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002(2) - -------------------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $6.39 $5.89 $4.28 $5.53 $5.14 - -------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income(3) 0.02 0.05 0.03 0.03 0.01 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 0.17 0.52 1.61 (1.25) 0.39 - -------------------------------------------------------------------------------------------- Total From Investment Operations 0.19 0.57 1.64 (1.22) 0.40 - -------------------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.01) (0.05) (0.03) (0.03) (0.01) - ------------------------------------------ From Net Realized Gains -- (0.02) -- -- -- - -------------------------------------------------------------------------------------------- Total Distributions (0.01) (0.07) (0.03) (0.03) (0.01) - -------------------------------------------------------------------------------------------- Net Asset Value, End of Period $6.57 $6.39 $5.89 $4.28 $5.53 ============================================================================================ TOTAL RETURN(4) 3.05% 9.62% 38.27% (22.13)% 7.78% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.84%(5) 1.87% 1.90% 1.90% 1.90%(5) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 0.61%(5) 0.90% 0.58% 0.75% 0.33%(5) - ------------------------------------------ Portfolio Turnover Rate 8% 18% 14% 30% 34%(6) - ------------------------------------------ Net Assets, End of Period (in thousands) $54,200 $40,789 $11,030 $1,163 $257 - -------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) November 7, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 42 Large Company Value - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- R CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $6.39 $5.89 $5.18 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income(3) 0.04 0.09 0.03 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 0.18 0.51 0.72 - -------------------------------------------------------------------------------- Total From Investment Operations 0.22 0.60 0.75 - -------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.03) (0.08) (0.04) - ------------------------------------------ From Net Realized Gains -- (0.02) -- - -------------------------------------------------------------------------------- Total Distributions (0.03) (0.10) (0.04) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $6.58 $6.39 $5.89 ================================================================================ TOTAL RETURN(4) 3.47% 10.17% 14.63% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.34%(5) 1.33%(6) 1.40%(5) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 1.11%(5) 1.44%(6) 0.77%(5) - ------------------------------------------ Portfolio Turnover Rate 8% 18% 14%(7) - ------------------------------------------ Net Assets, End of Period (in thousands) $9,738 $2,143 $168 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) August 29, 2003 (commencement of sale) through March 31, 2004. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) 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 ratio of net investment income to average net assets would have been 1.37% and 1.40%, respectively. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2004. See Notes to Financial Statements. - ------ 43 Approval of Management Agreements for Value and Large Company Value Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund's independent directors (the "Directors") each year. At American Century, this process -- referred to as the "15(c) Process" -- involves at least two board meetings spanning a 30 to 60 day period each year. In addition to this annual review, the board of directors and its committees oversee and evaluate at quarterly meetings the nature and quality of significant services the advisor performs on behalf of the fund. At these meetings the board reviews fund performance, shareholder services and feedback, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. The board, or committees of the board, also hold special meetings, as needed. Under a new Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for its board's approval or renewal of any advisory agreements within the fund's most recently completed fiscal half-year period. ANNUAL CONTRACT REVIEW PROCESS As part of the annual 15(c) Process undertaken during the most recent fiscal half-year, the Directors requested and received extensive data and information compiled by the advisor and certain independent providers of evaluative data (the "Independent 15(c) Providers") concerning Value and Large Company Value (collectively, the "funds") and the services provided to the funds under the management agreement. The information included, but was not limited to: * the nature, extent and quality of investment management, shareholder services and other services provided to the funds under the management agreement; * reports on the advisor's activities relating to the wide range of programs and services the advisor provides to the funds and its shareholders on a routine and non-routine basis; * data comparing the cost of owning the funds to the cost of owning similar funds; * data comparing the funds' performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; * financial data showing the profitability of the funds to the advisor and the overall profitability of the advisor; and * data comparing services provided and charges to other investment management clients of the advisor. In keeping with its practice, the funds' board of directors held two regularly scheduled meetings and two special meetings to review and discuss the information provided by the advisor and the Independent 15(c) Providers and to complete its negotiations with the advisor regarding the renewal of the management agreement, including the setting of the applicable advisory fee. In addition, the independent directors met on several occasions in private session to review and discuss the information provided and evaluate the advisor's performance as manager of the funds. (continued) - ------ 44 Approval of Management Agreements for Value and Large Company Value FACTORS CONSIDERED The Directors considered all of the information provided by the advisor, the Independent 15(c) Providers, and its independent counsel and evaluated such information for each fund for which the board has responsibility. The Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the agreement under the terms ultimately determined by the board to be appropriate, the Directors' decision was based on the following factors. NATURE, EXTENT AND QUALITY OF SERVICES -- GENERALLY. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the funds. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including, but not limited to: * fund construction and design * portfolio security selection * initial capitalization/funding * securities trading * custody of fund assets * daily valuation of the funds' portfolios * shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping and communications * legal services * regulatory and portfolio compliance * financial reporting * marketing and distribution The Directors noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings. INVESTMENT MANAGEMENT SERVICES. The nature of the investment management services provided is quite complex and allows fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes, and liquidity. In evaluating investment performance, the board expects the advisor to manage the funds in accordance with its investment objective and approved strategies. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. At each quarterly meeting the Directors review investment performance information for the funds, together with comparative information for appropriate benchmarks and a peer group of funds managed similarly to the funds. If performance concerns are identified, the Directors discuss with the advisor and its portfolio managers the reasons for such results (e.g., market conditions, security selection) and any efforts (continued) - ------ 45 Approval of Management Agreements for Value and Large Company Value being undertaken to improve performance. Annually, the Directors review detailed performance information, as provided by the Independent 15(c) Providers, comparing the funds' performance with that of similar funds not managed by the advisor. During the past year, Value's performance was near the median of its peer group and Large Company Value's performance was above the median. For the three year period, both Value's and Large Company Value's performance was above the median of their peer groups. SHAREHOLDER AND OTHER SERVICES. The advisor provides the funds with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at its regular quarterly meetings, including the annual meeting concerning contract review. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor. COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor provides detailed information concerning its cost of providing various services to the funds, its profitability in managing the funds, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor's financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. ETHICS OF THE ADVISOR. The Directors generally considered the advisor's commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor's practices generally meet or exceed industry best practices and that the advisor was not implicated in the industry scandals of 2003 and 2004. ECONOMIES OF SCALE. The Directors review reports provided by the advisor on economies of scale for the complex as a whole and the year-over-year changes in revenue, costs, and profitability. The Directors concluded that economies of scale are difficult to measure with precision, particularly on a fund-by-fund basis. This analysis is further complicated by the fact that the advisor is required to make a continuing reinvestment in the business to provide additional content and services for fund shareholders. Accordingly, the Directors also seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the funds specifically, the expenses incurred by the advisor in providing (continued) - ------ 46 Approval of Management Agreements for Value and Large Company Value various services to the funds, and the breakpoint fees of competitive funds not managed by the advisor. The Directors believe the advisor is appropriately sharing any economies of scale through a competitive fee structure, through breakpoints that reduce fees as the fund increases in size, and through reinvestment in its business to provide shareholders additional content and services. COMPARISON TO OTHER FUNDS' FEES. The funds pay the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the funds, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the funds' independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other fund groups are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other fund groups may be increased without shareholder approval. The board believes the unified fee structure is a benefit to fund shareholders because it clearly discloses to shareholders the cost of owning fund shares, and, since the unified fee cannot be increased without a vote of fund shareholders, it shifts to the advisor the increased costs of operating the funds and the risk of administrative inefficiencies. Part of the Directors' analysis of fee levels involves comparing the funds' unified fee to the total expense ratio of other funds in the funds' peer group. The unified fee charged to shareholders of each fund was below the median of the total expense ratios of its peer group. COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the funds. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the funds. The Directors analyzed this information and concluded that the fees charged and services provided to the funds were reasonable by comparison. COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information from the advisor concerning collateral benefits it receives as a result of its relationship with the funds. They concluded that the advisor's primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also (continued) - ------ 47 Approval of Management Agreements for Value and Large Company Value determined that the advisor is able to provide investment management services to clients other than the funds, at least in part, due to its existing infrastructure built to serve the fund complex. The Directors concluded, however, that the assets of those other clients are modest in comparison to the funds and that, in any event, the addition of such other assets to the assets of the funds that use substantially the same investment management team and strategy to determine whether breakpoints have been achieved captures for the shareholders a portion of any benefit that exists by accelerating fee reductions as breakpoints are reached at lower fund asset levels. CONCLUSIONS OF THE DIRECTORS As a result of this process, the Directors, assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor and the Independent 15(c) Providers: (i) concluded that the investment management agreement between Large Company Value and the advisor is fair and reasonable in light of the services provided and should be renewed; and (ii) negotiated changes to the breakpoint schedule used to calculate the management fee of Value. These changes were proposed by the Directors based on their review of the competitive changes in the mutual fund marketplace and their review of financial information provided by the advisor. The new schedule, effective July 29, 2005, will accelerate management fee reductions at lower asset levels than under the existing structure. Following these negotiations with the advisor, the Directors concluded that the investment management agreement between Value and the advisor, amended as described above, is fair and reasonable in light of the services provided and should be renewed. - ------ 48 Share Class Information Seven classes of shares are authorized for sale by the funds: 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. THE FUNDS ARE CLOSED TO NEW SELF-DIRECTED RETAIL INVESTORS BUT ARE AVAILABLE THROUGH FINANCIAL INTERMEDIARIES. SELF-DIRECTED RETAIL INVESTORS WITH OPEN ACCOUNTS MAY MAKE ADDITIONAL INVESTMENTS AND REINVEST DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AS LONG AS SUCH ACCOUNTS REMAIN OPEN. INVESTOR CLASS shares are available for purchase in two ways: 1) directly from American Century without any commissions or other fees; or 2) through certain financial intermediaries (such as banks, broker-dealers, insurance companies and investment advisors), which may require payment of a transaction fee to the financial intermediary. 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 unified management fee of Institutional Class shares is 0.20% less than the unified management fee 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. The unified management fee for A Class shares is the same as for Investor 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 (continued) - ------ 49 Share Class Information the first year after purchase to 0.00% after the sixth year. There is no CDSC on shares acquired through reinvestment of dividends or capital gains. The unified management fee for B Class shares is the same as for Investor Class shares. 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. 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. The unified management fee for C Class shares is the same as for Investor Class shares. 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. The unified management fee for R Class shares is the same as for Investor Class shares. 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(reg.tm) 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(reg.tm) 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 American Century Investment Holdings, Inc. Services, Inc., Distributor 0511 (c)2005 American Century Proprietary SH-SAN-45972S Holdings, Inc. All rights reserved.
American Century Investments SEMIANNUAL REPORT [photo of man and woman] SEPTEMBER 30, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Top Five Industries . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . . 5 Shareholder Fee Example . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 8 FINANCIAL STATEMENTS Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . 16 Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 17 Statement of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . 18 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . 19 Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 OTHER INFORMATION Approval of Management Agreement for Equity Index Fund . . . . . . . . . . 25 Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . 30 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 The opinions expressed in the Portfolio Commentary reflect those of the portfolio management team as of the date of the report, and do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] JAMES E. STOWERS III WITH JAMES E. STOWERS, JR. We are pleased to provide you with the semiannual report for the Equity Index Fund for the six months ended September 30, 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 annual report dated March 31, 2006, available in approximately six months. As always, we deeply appreciate your investment with American Century Investments. Sincerely, 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 SEPTEMBER 30, 2005 ---------------------- AVERAGE ANNUAL RETURNS - ------------------------------------------------------------------------------ SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS INCEPTION DATE - ------------------------------------------------------------------------------- INVESTOR CLASS 4.93% 11.87% -1.92% 0.92% 2/26/99 - ------------------------------------------------------------------------------- S&P 500 INDEX(2) 5.02% 12.25% -1.49% 1.42% -- - ------------------------------------------------------------------------------- Institutional Class 4.81% 11.84% -1.76% 1.12% 2/26/99 - ------------------------------------------------------------------------------- (1) Total returns for periods less than one year are not annualized. (2) (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. 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 Equity Index - Performance GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made February 26, 1999
ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - ------------------------------------------------------------------------------- 1999* 2000 2001 2002 2003 2004 2005 - ------------------------------------------------------------------------------- Investor Class 4.02% 12.54% -26.89% -20.61% 23.56% 13.14% 11.87% - ------------------------------------------------------------------------------- S&P 500 Index 4.38% 13.28% -26.62% -20.49% 24.40% 13.87% 12.25% - ------------------------------------------------------------------------------- * From 2/26/99, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. - ------ 3 Equity Index - Portfolio Commentary BARCLAYS GLOBAL FUND ADVISORS: THE SUBADVISOR FOR THE EQUITY INDEX FUND. PERFORMANCE SUMMARY For the six months ended September 30, 2005, Equity Index returned 4.93%*, compared with the 5.02% return of the benchmark it tracks, the S&P 500 Index. The portfolio's results reflect operating expenses, whereas the index return does not. STOCK MARKET REVIEW U.S. stocks posted positive results during the six-month period despite a series of challenges. Obstacles facing the market included soaring oil prices, which rose to a record high of more than $70 a barrel; four short-term interest rate hikes by the Federal Reserve, which boosted short-term rates to their highest level in more than four years; and two destructive hurricanes that wreaked havoc along the Gulf Coast. On the positive side, many public companies reported profit growth that exceeded expectations, extending the S&P 500's streak of double-digit earnings growth to 12 consecutive quarters. In addition, the economy continued to grow at a solid 3-4% annual rate, and merger activity increased markedly. For the six months, the large-cap S&P 500 returned 5.02%, while the small- and mid-cap market benchmarks posted even better results. Value stocks generally maintained their dominance over growth during the period--the S&P 500/ BARRA Value Index returned 6.11%, while the S&P 500/BARRA Growth Index returned 3.92%. ENERGY AND UTILITIES SOARED Continuing a trend that began in early 2004, the energy and utilities sectors posted the highest total returns. Seven of the top 20 contributors to fund performance were energy stocks, which gained more than 20% as a group during the six-month period. The top individual contributors included Exxon Mobil, the portfolio's largest holding, and ConocoPhillips, which returned 31%. In the utilities sector, electric utility TXU remained the top performer, gaining 44%. After hiring a new CEO in early 2004, TXU has restructured its operations by selling off underperforming assets, paying down debt, and raising its dividend. The end result has been a 400% return over the past two years. TECHNOLOGY AND FINANCIALS GAINED Other sectors that performed well during the six-month period were two TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Exxon Mobil Corp. 3.6% 3.5% - -------------------------------------------------------------------------------- General Electric Co. 3.2% 3.5% - -------------------------------------------------------------------------------- Microsoft Corporation 2.1% 2.2% - -------------------------------------------------------------------------------- Citigroup Inc. 2.1% 2.1% - -------------------------------------------------------------------------------- Johnson & Johnson 1.7% 1.8% - -------------------------------------------------------------------------------- Pfizer, Inc. 1.6% 1.8% - -------------------------------------------------------------------------------- Bank of America Corp. 1.5% 1.6% - -------------------------------------------------------------------------------- American International Group, Inc. 1.4% 1.3% - -------------------------------------------------------------------------------- Altria Group Inc. 1.4% 1.2% - -------------------------------------------------------------------------------- Procter & Gamble Co. (The) 1.4% 1.2% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. (continued) - ------ 4 Equity Index - Portfolio Commentary previously underperforming sectors--information technology and financials. The advance in technology stocks was led by communications equipment companies, including cell phone maker Motorola, wireless technology company QUALCOMM, and fiber optics manufacturer Corning. The best individual performance contributor in the technology sector was Hewlett-Packard, which reported better-than-expected earnings thanks to renewed profitability in the company's PC and server businesses. In the financial sector, insurance companies performed best as hurricane damage costs were offset by strong balance sheets and the likelihood of higher premiums. American International Group was the top contributor as the company's main business emerged largely unscathed from an accounting investigation that forced out the company's top executives in late 2004. The fund's top individual contributor to performance was biotechnology firm Amgen. The company reported earnings that exceeded expectations by a wide margin and raised full-year profit guidance as sales of its flagship drugs rose sharply. ECONOMICALLY SENSITIVE SECTORS DECLINED Only three sectors of the portfolio produced negative returns for the period--materials, consumer discretionary, and industrials. The materials sector posted the sharpest declines, largely because of chemicals stocks. DuPont and Dow Chemical were among the biggest detractors from fund performance; both companies sustained costly hurricane damage to manufacturing plants along the Gulf Coast. In the consumer discretionary sector, media stocks detracted the most from performance, led by entertainment purveyor Walt Disney and cable operator Comcast. Discount retailers in the consumer discretionary and consumer staples sectors--such as Family Dollar and Dollar General, as well as the portfolio's biggest detractor, Wal-Mart--also declined as higher gas prices adversely impacted their customer base. The major industrial conglomerates, including General Electric and Tyco, led the decline in the industrial sector. PORTFOLIO STRATEGY Going forward, the fund will continue to focus on matching, as closely as possible, the investment characteristics and performance of the S&P 500. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 8.6% 7.5% - -------------------------------------------------------------------------------- Pharmaceuticals 6.6% 6.9% - -------------------------------------------------------------------------------- Commerical Banks 5.4% 5.7% - -------------------------------------------------------------------------------- Insurance 4.5% 4.1% - -------------------------------------------------------------------------------- Industrial Conglomerates 4.3% 4.8% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Common Stocks & Futures 100.8% 99.7% - -------------------------------------------------------------------------------- Temporary Cash Investments 0.1% 0.2% - -------------------------------------------------------------------------------- Other Assets and Liabilities (0.9)% 0.1% - -------------------------------------------------------------------------------- - ------ 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 April 1, 2005 to September 30, 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 4/1/05 - EXPENSE 4/1/05 9/30/05 9/30/05 RATIO* - -------------------------------------------------------------------------------- EQUITY INDEX SHAREHOLDER FEE EXAMPLE - -------------------------------------------------------------------------------- ACTUAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,049.30 $2.52 0.49% - -------------------------------------------------------------------------------- Institutional Class $1,000 $1,048.10 $1.49 0.29% - -------------------------------------------------------------------------------- HYPOTHETICAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,022.61 $2.48 0.49% - -------------------------------------------------------------------------------- Institutional Class $1,000 $1,023.61 $1.47 0.29% - -------------------------------------------------------------------------------- *Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. - ------ 7 Equity Index - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 99.3% AEROSPACE & DEFENSE -- 2.2% - -------------------------------------------------------------------------------- 57,612 Boeing Co. $ 3,914,734 - -------------------------------------------------------------------------------- 14,105 General Dynamics Corp. 1,686,253 - -------------------------------------------------------------------------------- 8,502 Goodrich Corporation 376,979 - -------------------------------------------------------------------------------- 60,021 Honeywell International Inc. 2,250,788 - -------------------------------------------------------------------------------- 8,315 L-3 Communications Holdings, Inc. 657,467 - -------------------------------------------------------------------------------- 25,684 Lockheed Martin Corp. 1,567,751 - -------------------------------------------------------------------------------- 25,051 Northrop Grumman Corp. 1,361,522 - -------------------------------------------------------------------------------- 31,657 Raytheon Company 1,203,599 - -------------------------------------------------------------------------------- 12,271 Rockwell Collins 592,935 - -------------------------------------------------------------------------------- 71,945 United Technologies Corp. 3,729,629 - -------------------------------------------------------------------------------- 17,341,657 - -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS -- 0.9% - -------------------------------------------------------------------------------- 21,249 FedEx Corporation 1,851,425 - -------------------------------------------------------------------------------- 4,459 Ryder System, Inc. 152,587 - -------------------------------------------------------------------------------- 77,748 United Parcel Service, Inc. Cl B 5,374,720 - -------------------------------------------------------------------------------- 7,378,732 - -------------------------------------------------------------------------------- AIRLINES -- 0.1% - -------------------------------------------------------------------------------- 49,231 Southwest Airlines Co. 731,080 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 0.2% - -------------------------------------------------------------------------------- 4,415 Cooper Tire & Rubber 67,417 - -------------------------------------------------------------------------------- 10,588 Dana Corp. 99,633 - -------------------------------------------------------------------------------- 39,188 Delphi Corp. 108,159 - -------------------------------------------------------------------------------- 12,239 Goodyear Tire & Rubber Co. (The)(1) 190,806 - -------------------------------------------------------------------------------- 13,496 Johnson Controls, Inc. 837,426 - -------------------------------------------------------------------------------- 8,884 Visteon Corp. 86,886 - -------------------------------------------------------------------------------- 1,390,327 - -------------------------------------------------------------------------------- AUTOMOBILES -- 0.4% - -------------------------------------------------------------------------------- 129,986 Ford Motor Company 1,281,662 - -------------------------------------------------------------------------------- 39,668 General Motors Corp. 1,214,237 - -------------------------------------------------------------------------------- 19,425 Harley-Davidson, Inc. 940,947 - -------------------------------------------------------------------------------- 3,436,846 - -------------------------------------------------------------------------------- BEVERAGES -- 2.2% - -------------------------------------------------------------------------------- 54,523 Anheuser-Busch Companies, Inc. 2,346,670 - -------------------------------------------------------------------------------- 5,958 Brown-Forman Corp. 354,739 - -------------------------------------------------------------------------------- 146,021 Coca-Cola Company (The) 6,306,647 - -------------------------------------------------------------------------------- 21,570 Coca-Cola Enterprises 420,615 - -------------------------------------------------------------------------------- 13,821 Constellation Brands Inc.(1) 359,346 - -------------------------------------------------------------------------------- 4,134 Molson Coors Brewing Co. 264,617 - -------------------------------------------------------------------------------- 10,027 Pepsi Bottling Group Inc. 286,271 - -------------------------------------------------------------------------------- 117,256 PepsiCo, Inc. 6,649,588 - -------------------------------------------------------------------------------- 16,988,493 - -------------------------------------------------------------------------------- BIOTECHNOLOGY -- 1.5% - -------------------------------------------------------------------------------- 86,641 Amgen Inc.(1) 6,902,688 - -------------------------------------------------------------------------------- 13,744 Applera Corporation-Applied Biosystems Group 319,411 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 23,755 Biogen Idec Inc.(1) $ 937,847 - -------------------------------------------------------------------------------- 7,830 Chiron Corp.(1) 341,545 - -------------------------------------------------------------------------------- 18,005 Genzyme Corp.(1) 1,289,878 - -------------------------------------------------------------------------------- 31,986 Gilead Sciences, Inc.(1) 1,559,637 - -------------------------------------------------------------------------------- 17,061 MedImmune, Inc.(1) 574,103 - -------------------------------------------------------------------------------- 11,925,109 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.2% - -------------------------------------------------------------------------------- 12,846 American Standard Companies Inc. 597,981 - -------------------------------------------------------------------------------- 30,221 Masco Corp. 927,181 - -------------------------------------------------------------------------------- 1,525,162 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 2.9% - -------------------------------------------------------------------------------- 54,619 Bank of New York Co., Inc. (The) 1,606,345 - -------------------------------------------------------------------------------- 7,833 Bear Stearns Companies Inc. (The) 859,672 - -------------------------------------------------------------------------------- 25,963 E*TRADE Group Inc.(1) 456,949 - -------------------------------------------------------------------------------- 6,190 Federated Investors Inc. 205,694 - -------------------------------------------------------------------------------- 10,523 Franklin Resources, Inc. 883,511 - -------------------------------------------------------------------------------- 32,646 Goldman Sachs Group, Inc. (The) 3,969,101 - -------------------------------------------------------------------------------- 15,578 Janus Capital Group Inc. 225,102 - -------------------------------------------------------------------------------- 19,076 Lehman Brothers Holdings Inc. 2,221,972 - -------------------------------------------------------------------------------- 29,170 Mellon Financial Corp. 932,565 - -------------------------------------------------------------------------------- 65,048 Merrill Lynch & Co., Inc. 3,990,694 - -------------------------------------------------------------------------------- 76,255 Morgan Stanley 4,113,194 - -------------------------------------------------------------------------------- 13,196 Northern Trust Corp. 667,058 - -------------------------------------------------------------------------------- 73,532 Schwab (Charles) Corp. 1,061,067 - -------------------------------------------------------------------------------- 23,206 State Street Corp. 1,135,238 - -------------------------------------------------------------------------------- 9,089 T. Rowe Price Group Inc. 593,512 - -------------------------------------------------------------------------------- 22,921,674 - -------------------------------------------------------------------------------- CHEMICALS -- 1.5% - -------------------------------------------------------------------------------- 15,624 Air Products & Chemicals, Inc. 861,507 - -------------------------------------------------------------------------------- 5,183 Ashland Inc. 286,309 - -------------------------------------------------------------------------------- 67,713 Dow Chemical Co. 2,821,600 - -------------------------------------------------------------------------------- 69,829 du Pont (E.I.) de Nemours & Co. 2,735,202 - -------------------------------------------------------------------------------- 5,674 Eastman Chemical Company 266,508 - -------------------------------------------------------------------------------- 13,172 Ecolab Inc. 420,582 - -------------------------------------------------------------------------------- 8,285 Engelhard Corporation 231,234 - -------------------------------------------------------------------------------- 7,875 Hercules Inc.(1) 96,233 - -------------------------------------------------------------------------------- 5,791 International Flavors & Fragrances Inc. 206,391 - -------------------------------------------------------------------------------- 18,842 Monsanto Co. 1,182,336 - -------------------------------------------------------------------------------- 11,828 PPG Industries, Inc. 700,099 - -------------------------------------------------------------------------------- 22,674 Praxair, Inc. 1,086,765 - -------------------------------------------------------------------------------- 10,397 Rohm and Haas Co. 427,629 - -------------------------------------------------------------------------------- 4,839 Sigma-Aldrich Corp. 309,986 - -------------------------------------------------------------------------------- 11,632,381 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 8 Equity Index - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 5.4% - -------------------------------------------------------------------------------- 24,697 AmSouth Bancorporation $ 623,846 - -------------------------------------------------------------------------------- 282,175 Bank of America Corp. 11,879,567 - -------------------------------------------------------------------------------- 38,415 BB&T Corporation 1,500,106 - -------------------------------------------------------------------------------- 11,630 Comerica Inc. 685,007 - -------------------------------------------------------------------------------- 8,707 Compass Bancshares Inc. 399,042 - -------------------------------------------------------------------------------- 39,020 Fifth Third Bancorp 1,433,205 - -------------------------------------------------------------------------------- 8,721 First Horizon National Corp. 317,008 - -------------------------------------------------------------------------------- 15,984 Huntington Bancshares Inc. 359,160 - -------------------------------------------------------------------------------- 28,698 KeyCorp 925,511 - -------------------------------------------------------------------------------- 5,748 M&T Bank Corp. 607,621 - -------------------------------------------------------------------------------- 14,668 Marshall & Ilsley Corp. 638,205 - -------------------------------------------------------------------------------- 40,163 National City Corp. 1,343,051 - -------------------------------------------------------------------------------- 33,538 North Fork Bancorporation, Inc. 855,219 - -------------------------------------------------------------------------------- 20,393 PNC Financial Services Group 1,183,202 - -------------------------------------------------------------------------------- 32,292 Regions Financial Corp. 1,004,927 - -------------------------------------------------------------------------------- 25,440 SunTrust Banks, Inc. 1,766,808 - -------------------------------------------------------------------------------- 21,838 Synovus Financial Corp. 605,349 - -------------------------------------------------------------------------------- 128,315 U.S. Bancorp 3,603,085 - -------------------------------------------------------------------------------- 110,756 Wachovia Corp. 5,270,878 - -------------------------------------------------------------------------------- 118,537 Wells Fargo & Co. 6,942,712 - -------------------------------------------------------------------------------- 6,315 Zions Bancorporation 449,691 - -------------------------------------------------------------------------------- 42,393,200 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 0.7% - -------------------------------------------------------------------------------- 16,252 Allied Waste Industries Inc.(1) 137,329 - -------------------------------------------------------------------------------- 7,727 Avery Dennison Corp. 404,818 - -------------------------------------------------------------------------------- 73,409 Cendant Corporation 1,515,162 - -------------------------------------------------------------------------------- 9,891 Cintas Corp. 406,026 - -------------------------------------------------------------------------------- 9,131 Equifax Inc. 319,037 - -------------------------------------------------------------------------------- 8,456 Monster Worldwide Inc.(1) 259,684 - -------------------------------------------------------------------------------- 16,080 Pitney Bowes, Inc. 671,179 - -------------------------------------------------------------------------------- 15,035 R.R. Donnelley & Sons Company 557,347 - -------------------------------------------------------------------------------- 11,844 Robert Half International Inc. 421,528 - -------------------------------------------------------------------------------- 39,515 Waste Management, Inc. 1,130,524 - -------------------------------------------------------------------------------- 5,822,634 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 2.8% - -------------------------------------------------------------------------------- 8,029 ADC Telecommunications, Inc.(1) 183,543 - -------------------------------------------------------------------------------- 11,124 Andrew Corporation(1) 124,033 - -------------------------------------------------------------------------------- 30,546 Avaya Inc.(1) 314,624 - -------------------------------------------------------------------------------- 39,355 CIENA Corporation(1) 103,897 - -------------------------------------------------------------------------------- 448,779 Cisco Systems Inc.(1) 8,046,606 - -------------------------------------------------------------------------------- 14,151 Comverse Technology, Inc.(1) 371,747 - -------------------------------------------------------------------------------- 103,314 Corning Inc.(1) 1,997,060 - -------------------------------------------------------------------------------- 114,803 JDS Uniphase Corp.(1) 254,863 - -------------------------------------------------------------------------------- 311,660 Lucent Technologies Inc. 1,012,895 - -------------------------------------------------------------------------------- 173,352 Motorola, Inc. 3,829,346 - -------------------------------------------------------------------------------- 114,478 QUALCOMM Inc. 5,122,890 - -------------------------------------------------------------------------------- 10,744 Scientific-Atlanta, Inc. 403,007 - -------------------------------------------------------------------------------- 30,811 Tellabs, Inc.(1) 324,132 - -------------------------------------------------------------------------------- 22,088,643 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 3.7% - -------------------------------------------------------------------------------- 58,252 Apple Computer, Inc.(1) $ 3,122,890 - -------------------------------------------------------------------------------- 168,344 Dell Inc.(1) 5,757,365 - -------------------------------------------------------------------------------- 169,188 EMC Corp.(1) 2,189,293 - -------------------------------------------------------------------------------- 18,722 Gateway, Inc.(1) 50,549 - -------------------------------------------------------------------------------- 201,172 Hewlett-Packard Co. 5,874,222 - -------------------------------------------------------------------------------- 112,066 International Business Machines Corp. 8,989,934 - -------------------------------------------------------------------------------- 8,332 Lexmark International, Inc.(1) 508,669 - -------------------------------------------------------------------------------- 12,858 NCR Corp.(1) 410,299 - -------------------------------------------------------------------------------- 25,769 Network Appliance, Inc.(1) 611,756 - -------------------------------------------------------------------------------- 6,492 QLogic Corp.(1) 222,026 - -------------------------------------------------------------------------------- 239,101 Sun Microsystems, Inc.(1) 937,276 - -------------------------------------------------------------------------------- 28,674,279 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING -- 0.1% - -------------------------------------------------------------------------------- 6,121 Fluor Corp. 394,070 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 0.1% - -------------------------------------------------------------------------------- 7,175 Vulcan Materials Co. 532,457 - -------------------------------------------------------------------------------- CONSUMER FINANCE -- 1.4% - -------------------------------------------------------------------------------- 87,130 American Express Co. 5,004,747 - -------------------------------------------------------------------------------- 20,256 Capital One Financial Corp. 1,610,757 - -------------------------------------------------------------------------------- 88,281 MBNA Corporation 2,175,244 - -------------------------------------------------------------------------------- 20,762 Providian Financial Corp.(1) 367,072 - -------------------------------------------------------------------------------- 29,295 SLM Corporation 1,571,384 - -------------------------------------------------------------------------------- 10,729,204 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 0.2% - -------------------------------------------------------------------------------- 7,787 Ball Corp. 286,094 - -------------------------------------------------------------------------------- 7,460 Bemis Co. 184,262 - -------------------------------------------------------------------------------- 10,361 Pactiv Corp.(1) 181,525 - -------------------------------------------------------------------------------- 5,915 Sealed Air Corp.(1) 280,726 - -------------------------------------------------------------------------------- 7,768 Temple-Inland Inc. 317,323 - -------------------------------------------------------------------------------- 1,249,930 - -------------------------------------------------------------------------------- DISTRIBUTORS -- 0.1% - -------------------------------------------------------------------------------- 12,235 Genuine Parts Company 524,882 - -------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES -- 0.2% - -------------------------------------------------------------------------------- 10,375 Apollo Group Inc. Cl A(1) 688,796 - -------------------------------------------------------------------------------- 22,767 Block (H & R), Inc. 545,953 - -------------------------------------------------------------------------------- 1,234,749 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 3.7% - -------------------------------------------------------------------------------- 14,282 CIT Group Inc. 645,261 - -------------------------------------------------------------------------------- 363,103 Citigroup Inc. 16,528,448 - -------------------------------------------------------------------------------- 246,689 J.P. Morgan Chase & Co. 8,370,158 - -------------------------------------------------------------------------------- 26,220 McGraw-Hill Companies, Inc. (The) 1,259,609 - -------------------------------------------------------------------------------- 17,903 Moody's Corp. 914,485 - -------------------------------------------------------------------------------- 19,810 Principal Financial Group 938,400 - -------------------------------------------------------------------------------- 28,656,361 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 10 Equity Index - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.2% - -------------------------------------------------------------------------------- 56,245 AT&T Corp. $ 1,113,651 - -------------------------------------------------------------------------------- 128,637 BellSouth Corp. 3,383,153 - -------------------------------------------------------------------------------- 9,029 CenturyTel Inc. 315,834 - -------------------------------------------------------------------------------- 24,044 Citizens Communications Company 325,796 - -------------------------------------------------------------------------------- 109,162 Qwest Communications International Inc.(1) 447,564 - -------------------------------------------------------------------------------- 231,992 SBC Communications Inc. 5,560,848 - -------------------------------------------------------------------------------- 194,172 Verizon Communications 6,347,484 - -------------------------------------------------------------------------------- 17,494,330 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 1.7% - -------------------------------------------------------------------------------- 11,180 Allegheny Energy, Inc.(1) 343,450 - -------------------------------------------------------------------------------- 27,572 American Electric Power 1,094,608 - -------------------------------------------------------------------------------- 13,931 Cinergy Corp. 618,676 - -------------------------------------------------------------------------------- 22,848 Edison International 1,080,253 - -------------------------------------------------------------------------------- 14,614 Entergy Corp. 1,086,112 - -------------------------------------------------------------------------------- 47,068 Exelon Corporation 2,515,315 - -------------------------------------------------------------------------------- 23,135 FirstEnergy Corp. 1,205,796 - -------------------------------------------------------------------------------- 27,638 FPL Group, Inc. 1,315,569 - -------------------------------------------------------------------------------- 6,883 Pinnacle West Capital Corp. 303,403 - -------------------------------------------------------------------------------- 26,603 PPL Corporation 860,075 - -------------------------------------------------------------------------------- 17,607 Progress Energy Inc. 787,913 - -------------------------------------------------------------------------------- 52,407 Southern Co. 1,874,074 - -------------------------------------------------------------------------------- 13,085,244 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 0.4% - -------------------------------------------------------------------------------- 12,086 American Power Conversion Corp. 313,027 - -------------------------------------------------------------------------------- 6,527 Cooper Industries, Ltd. 451,277 - -------------------------------------------------------------------------------- 28,990 Emerson Electric Co. 2,081,482 - -------------------------------------------------------------------------------- 12,724 Rockwell Automation Inc. 673,100 - -------------------------------------------------------------------------------- 3,518,886 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.3% - -------------------------------------------------------------------------------- 34,658 Agilent Technologies, Inc.(1) 1,135,049 - -------------------------------------------------------------------------------- 12,344 Jabil Circuit, Inc.(1) 381,676 - -------------------------------------------------------------------------------- 10,485 Molex Inc. 279,740 - -------------------------------------------------------------------------------- 36,472 Sanmina-SCI Corp.(1) 156,465 - -------------------------------------------------------------------------------- 68,749 Solectron Corp.(1) 268,809 - -------------------------------------------------------------------------------- 17,757 Symbol Technologies, Inc. 171,888 - -------------------------------------------------------------------------------- 6,220 Tektronix, Inc. 156,931 - -------------------------------------------------------------------------------- 2,550,558 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES -- 1.6% - -------------------------------------------------------------------------------- 23,900 Baker Hughes Inc. 1,426,352 - -------------------------------------------------------------------------------- 22,625 BJ Services Co. 814,274 - -------------------------------------------------------------------------------- 35,676 Halliburton Co. 2,444,520 - -------------------------------------------------------------------------------- 11,035 Nabors Industries Ltd.(1) 792,644 - -------------------------------------------------------------------------------- 12,153 National Oilwell Varco, Inc.(1) 799,667 - -------------------------------------------------------------------------------- 9,578 Noble Corp. 655,710 - -------------------------------------------------------------------------------- 7,581 Rowan Companies, Inc. 269,050 - -------------------------------------------------------------------------------- 41,301 Schlumberger Ltd. 3,484,978 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 23,064 Transocean Inc.(1) $ 1,414,054 - -------------------------------------------------------------------------------- 9,835 Weatherford International Ltd.(1) 675,271 - -------------------------------------------------------------------------------- 12,776,520 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 2.3% - -------------------------------------------------------------------------------- 25,807 Albertson's Inc. 661,950 - -------------------------------------------------------------------------------- 33,619 Costco Wholesale Corporation 1,448,643 - -------------------------------------------------------------------------------- 57,039 CVS Corp. 1,654,701 - -------------------------------------------------------------------------------- 50,769 Kroger Co. (The)(1) 1,045,334 - -------------------------------------------------------------------------------- 31,448 Safeway Inc. 805,069 - -------------------------------------------------------------------------------- 9,606 Supervalu Inc. 298,939 - -------------------------------------------------------------------------------- 44,412 Sysco Corp. 1,393,204 - -------------------------------------------------------------------------------- 175,603 Wal-Mart Stores, Inc. 7,694,923 - -------------------------------------------------------------------------------- 71,774 Walgreen Co. 3,118,580 - -------------------------------------------------------------------------------- 18,121,343 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 1.1% - -------------------------------------------------------------------------------- 45,618 Archer-Daniels-Midland Co. 1,124,940 - -------------------------------------------------------------------------------- 13,247 Campbell Soup Company 394,098 - -------------------------------------------------------------------------------- 36,301 ConAgra Foods, Inc. 898,450 - -------------------------------------------------------------------------------- 25,703 General Mills, Inc. 1,238,885 - -------------------------------------------------------------------------------- 24,126 H.J. Heinz Company 881,564 - -------------------------------------------------------------------------------- 18,164 Kellogg Co. 837,905 - -------------------------------------------------------------------------------- 9,567 McCormick & Company, Inc. 312,171 - -------------------------------------------------------------------------------- 55,016 Sara Lee Corp. 1,042,553 - -------------------------------------------------------------------------------- 13,028 The Hershey Company 733,607 - -------------------------------------------------------------------------------- 17,764 Tyson Foods, Inc. Cl A 320,640 - -------------------------------------------------------------------------------- 12,740 Wrigley (Wm.) Jr. Company 915,751 - -------------------------------------------------------------------------------- 8,700,564 - -------------------------------------------------------------------------------- GAS UTILITIES(2) - -------------------------------------------------------------------------------- 2,992 NICOR Inc. 125,754 - -------------------------------------------------------------------------------- 2,610 People's Energy Corp. 102,782 - -------------------------------------------------------------------------------- 228,536 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 2.1% - -------------------------------------------------------------------------------- 7,388 Bard (C.R.), Inc. 487,830 - -------------------------------------------------------------------------------- 3,797 Bausch & Lomb Inc. Cl A 306,342 - -------------------------------------------------------------------------------- 43,682 Baxter International, Inc. 1,741,601 - -------------------------------------------------------------------------------- 17,590 Becton Dickinson & Co. 922,244 - -------------------------------------------------------------------------------- 17,350 Biomet Inc. 602,219 - -------------------------------------------------------------------------------- 41,789 Boston Scientific Corp.(1) 976,609 - -------------------------------------------------------------------------------- 8,537 Fisher Scientific International(1) 529,721 - -------------------------------------------------------------------------------- 23,157 Guidant Corp. 1,595,286 - -------------------------------------------------------------------------------- 11,188 Hospira Inc.(1) 458,372 - -------------------------------------------------------------------------------- 85,034 Medtronic, Inc. 4,559,522 - -------------------------------------------------------------------------------- 3,602 Millipore Corp.(1) 226,530 - -------------------------------------------------------------------------------- 8,983 PerkinElmer, Inc. 182,984 - -------------------------------------------------------------------------------- 25,573 St. Jude Medical, Inc.(1) 1,196,816 - -------------------------------------------------------------------------------- 20,559 Stryker Corp. 1,016,231 - -------------------------------------------------------------------------------- 11,375 Thermo Electron Corp.(1) 351,488 - -------------------------------------------------------------------------------- 8,254 Waters Corp.(1) 343,366 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 10 Equity Index - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 17,350 Zimmer Holdings Inc.(1) $ 1,195,242 - -------------------------------------------------------------------------------- 16,692,403 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 3.0% - -------------------------------------------------------------------------------- 20,345 Aetna Inc. 1,752,518 - -------------------------------------------------------------------------------- 7,259 AmerisourceBergen Corp. 561,121 - -------------------------------------------------------------------------------- 29,952 Cardinal Health, Inc. 1,900,155 - -------------------------------------------------------------------------------- 31,572 Caremark Rx Inc.(1) 1,576,390 - -------------------------------------------------------------------------------- 9,022 CIGNA Corp. 1,063,333 - -------------------------------------------------------------------------------- 7,521 Coventry Health Care Inc.(1) 646,956 - -------------------------------------------------------------------------------- 10,411 Express Scripts, Inc. Cl A(1) 647,564 - -------------------------------------------------------------------------------- 31,711 HCA Inc. 1,519,591 - -------------------------------------------------------------------------------- 17,397 Health Management Associates, Inc. Cl A 408,308 - -------------------------------------------------------------------------------- 11,373 Humana Inc.(1) 544,539 - -------------------------------------------------------------------------------- 15,596 IMS Health Inc. 392,551 - -------------------------------------------------------------------------------- 9,473 Laboratory Corporation of America Holdings(1) 461,430 - -------------------------------------------------------------------------------- 5,430 Manor Care, Inc. 208,566 - -------------------------------------------------------------------------------- 21,621 McKesson Corp. 1,025,916 - -------------------------------------------------------------------------------- 21,348 Medco Health Solutions Inc.(1) 1,170,511 - -------------------------------------------------------------------------------- 11,843 Quest Diagnostics Inc. 598,545 - -------------------------------------------------------------------------------- 32,244 Tenet Healthcare Corp.(1) 362,100 - -------------------------------------------------------------------------------- 88,689 UnitedHealth Group Incorporated 4,984,323 - -------------------------------------------------------------------------------- 43,077 WellPoint Inc.(1) 3,266,098 - -------------------------------------------------------------------------------- 23,090,515 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 1.4% - -------------------------------------------------------------------------------- 30,471 Carnival Corporation 1,522,941 - -------------------------------------------------------------------------------- 9,694 Darden Restaurants, Inc. 294,407 - -------------------------------------------------------------------------------- 12,872 Harrah's Entertainment, Inc. 839,126 - -------------------------------------------------------------------------------- 23,354 Hilton Hotels Corporation 521,261 - -------------------------------------------------------------------------------- 23,683 International Game Technology 639,441 - -------------------------------------------------------------------------------- 12,149 Marriott International, Inc. 765,387 - -------------------------------------------------------------------------------- 87,750 McDonald's Corporation 2,938,747 - -------------------------------------------------------------------------------- 26,875 Starbucks Corporation(1) 1,346,438 - -------------------------------------------------------------------------------- 15,261 Starwood Hotels & Resorts Worldwide, Inc. 872,471 - -------------------------------------------------------------------------------- 8,121 Wendy's International, Inc. 366,663 - -------------------------------------------------------------------------------- 19,971 Yum! Brands, Inc. 966,796 - -------------------------------------------------------------------------------- 11,073,678 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.7% - -------------------------------------------------------------------------------- 5,631 Black & Decker Corporation 462,249 - -------------------------------------------------------------------------------- 8,989 Centex Corp. 580,510 - -------------------------------------------------------------------------------- 19,075 D.R. Horton, Inc. 690,896 - -------------------------------------------------------------------------------- 10,234 Fortune Brands, Inc. 832,330 - -------------------------------------------------------------------------------- 5,549 KB Home 406,187 - -------------------------------------------------------------------------------- 13,420 Leggett & Platt, Inc. 271,084 - -------------------------------------------------------------------------------- 5,337 Maytag Corporation 97,454 - -------------------------------------------------------------------------------- 19,390 Newell Rubbermaid Inc. 439,184 - -------------------------------------------------------------------------------- 15,238 Pulte Homes Inc. 654,014 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 4,081 Snap-on Incorporated $ 147,406 - -------------------------------------------------------------------------------- 5,175 Stanley Works (The) 241,569 - -------------------------------------------------------------------------------- 4,723 Whirlpool Corp. 357,862 - -------------------------------------------------------------------------------- 5,180,745 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 1.9% - -------------------------------------------------------------------------------- 10,618 Clorox Company 589,724 - -------------------------------------------------------------------------------- 36,452 Colgate-Palmolive Co. 1,924,301 - -------------------------------------------------------------------------------- 33,426 Kimberly-Clark Corp. 1,989,850 - -------------------------------------------------------------------------------- 179,451 Procter & Gamble Co. (The) 10,670,156 - -------------------------------------------------------------------------------- 15,174,031 - -------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.7% - -------------------------------------------------------------------------------- 45,767 AES Corporation (The)(1) 751,952 - -------------------------------------------------------------------------------- 39,899 Calpine Corporation(1) 103,338 - -------------------------------------------------------------------------------- 12,398 Constellation Energy Group Inc. 763,717 - -------------------------------------------------------------------------------- 65,010 Duke Energy Corp. 1,896,342 - -------------------------------------------------------------------------------- 21,762 Dynegy Inc. Cl A(1) 102,499 - -------------------------------------------------------------------------------- 16,845 TXU Corp. 1,901,463 - -------------------------------------------------------------------------------- 5,519,311 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 4.3% - -------------------------------------------------------------------------------- 53,715 3M Co. 3,940,532 - -------------------------------------------------------------------------------- 744,540 General Electric Co. 25,068,662 - -------------------------------------------------------------------------------- 9,297 Textron Inc. 666,781 - -------------------------------------------------------------------------------- 142,096 Tyco International Ltd. 3,957,374 - -------------------------------------------------------------------------------- 33,633,349 - -------------------------------------------------------------------------------- INSURANCE -- 4.5% - -------------------------------------------------------------------------------- 20,217 Ace, Ltd. 951,614 - -------------------------------------------------------------------------------- 35,201 Aflac Inc. 1,594,605 - -------------------------------------------------------------------------------- 46,093 Allstate Corp. 2,548,482 - -------------------------------------------------------------------------------- 7,457 Ambac Financial Group, Inc. 537,351 - -------------------------------------------------------------------------------- 182,248 American International Group, Inc. 11,292,087 - -------------------------------------------------------------------------------- 22,320 AON Corp. 716,026 - -------------------------------------------------------------------------------- 13,912 Chubb Corp. 1,245,820 - -------------------------------------------------------------------------------- 12,236 Cincinnati Financial Corp. 512,566 - -------------------------------------------------------------------------------- 21,012 Hartford Financial Services Group Inc. (The) 1,621,496 - -------------------------------------------------------------------------------- 9,358 Jefferson-Pilot Corp. 478,849 - -------------------------------------------------------------------------------- 11,964 Lincoln National Corp. 622,367 - -------------------------------------------------------------------------------- 9,606 Loews Corp. 887,690 - -------------------------------------------------------------------------------- 37,538 Marsh & McLennan Companies, Inc. 1,140,780 - -------------------------------------------------------------------------------- 9,325 MBIA Inc. 565,282 - -------------------------------------------------------------------------------- 53,100 MetLife, Inc. 2,645,973 - -------------------------------------------------------------------------------- 13,834 Progressive Corp. 1,449,388 - -------------------------------------------------------------------------------- 36,004 Prudential Financial Inc. 2,432,430 - -------------------------------------------------------------------------------- 8,776 Safeco Corp. 468,463 - -------------------------------------------------------------------------------- 47,405 St. Paul Travelers Companies, Inc. (The) 2,127,062 - -------------------------------------------------------------------------------- 7,331 Torchmark Corp. 387,297 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 11 Equity Index - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 21,002 UnumProvident Corp. $ 430,541 - -------------------------------------------------------------------------------- 9,837 XL Capital Ltd. Cl A 669,211 - -------------------------------------------------------------------------------- 35,325,380 - -------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL -- 0.4% - -------------------------------------------------------------------------------- 77,919 eBay Inc.(1) 3,210,263 - -------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES -- 0.4% - -------------------------------------------------------------------------------- 88,307 Yahoo! Inc.(1) 2,988,309 - -------------------------------------------------------------------------------- IT SERVICES -- 1.0% - -------------------------------------------------------------------------------- 8,705 Affiliated Computer Services Inc(1) 475,293 - -------------------------------------------------------------------------------- 40,712 Automatic Data Processing, Inc. 1,752,244 - -------------------------------------------------------------------------------- 12,941 Computer Sciences Corp.(1) 612,239 - -------------------------------------------------------------------------------- 9,897 Convergys Corp.(1) 142,220 - -------------------------------------------------------------------------------- 36,375 Electronic Data Systems Corp. 816,255 - -------------------------------------------------------------------------------- 54,153 First Data Corp. 2,166,120 - -------------------------------------------------------------------------------- 13,176 Fiserv, Inc.(1) 604,383 - -------------------------------------------------------------------------------- 23,623 Paychex, Inc. 875,941 - -------------------------------------------------------------------------------- 9,187 Sabre Holdings Corp. 186,312 - -------------------------------------------------------------------------------- 23,434 Unisys Corp.(1) 155,602 - -------------------------------------------------------------------------------- 7,786,609 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 0.2% - -------------------------------------------------------------------------------- 6,801 Brunswick Corp. 256,602 - -------------------------------------------------------------------------------- 20,162 Eastman Kodak Co. 490,541 - -------------------------------------------------------------------------------- 12,494 Hasbro, Inc. 245,507 - -------------------------------------------------------------------------------- 28,344 Mattel, Inc. 472,778 - -------------------------------------------------------------------------------- 1,465,428 - -------------------------------------------------------------------------------- MACHINERY -- 1.4% - -------------------------------------------------------------------------------- 47,507 Caterpillar Inc. 2,791,035 - -------------------------------------------------------------------------------- 3,246 Cummins Inc. 285,616 - -------------------------------------------------------------------------------- 16,834 Danaher Corp. 906,174 - -------------------------------------------------------------------------------- 16,993 Deere & Co. 1,039,972 - -------------------------------------------------------------------------------- 14,277 Dover Corp. 582,359 - -------------------------------------------------------------------------------- 10,382 Eaton Corp. 659,776 - -------------------------------------------------------------------------------- 14,757 Illinois Tool Works Inc. 1,214,944 - -------------------------------------------------------------------------------- 23,650 Ingersoll-Rand Company 904,140 - -------------------------------------------------------------------------------- 6,497 ITT Industries, Inc. 738,059 - -------------------------------------------------------------------------------- 4,451 Navistar International Corp.(1) 144,346 - -------------------------------------------------------------------------------- 11,981 Paccar Inc. 813,390 - -------------------------------------------------------------------------------- 8,768 Pall Corp. 241,120 - -------------------------------------------------------------------------------- 8,427 Parker-Hannifin Corp. 541,940 - -------------------------------------------------------------------------------- 10,862,871 - -------------------------------------------------------------------------------- MEDIA -- 3.3% - -------------------------------------------------------------------------------- 38,063 Clear Channel Communications, Inc. 1,251,892 - -------------------------------------------------------------------------------- 154,186 Comcast Corporation(1) 4,529,984 - -------------------------------------------------------------------------------- 141,233 Disney (Walt) Co. 3,407,952 - -------------------------------------------------------------------------------- 4,324 Dow Jones & Co. Inc. 165,134 - -------------------------------------------------------------------------------- 17,124 Gannett Co., Inc. 1,178,645 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 29,765 Interpublic Group of Companies, Inc.(1) $ 346,465 - -------------------------------------------------------------------------------- 4,772 Knight-Ridder, Inc. 280,021 - -------------------------------------------------------------------------------- 3,079 Meredith Corp. 153,611 - -------------------------------------------------------------------------------- 10,009 New York Times Co. (The) Cl A 297,768 - -------------------------------------------------------------------------------- 172,552 News Corp. 2,690,086 - -------------------------------------------------------------------------------- 12,770 Omnicom Group Inc. 1,067,955 - -------------------------------------------------------------------------------- 329,618 Time Warner Inc. 5,969,381 - -------------------------------------------------------------------------------- 18,831 Tribune Co. 638,183 - -------------------------------------------------------------------------------- 16,473 Univision Communications Inc. Cl A(1) 437,029 - -------------------------------------------------------------------------------- 111,225 Viacom, Inc. Cl B 3,671,537 - -------------------------------------------------------------------------------- 26,085,643 - -------------------------------------------------------------------------------- METALS & MINING -- 0.7% - -------------------------------------------------------------------------------- 61,213 Alcoa Inc. 1,494,822 - -------------------------------------------------------------------------------- 5,997 Allegheny Technologies Inc. 185,787 - -------------------------------------------------------------------------------- 12,373 Freeport-McMoRan Copper & Gold, Inc. Cl B 601,204 - -------------------------------------------------------------------------------- 31,302 Newmont Mining Corporation 1,476,515 - -------------------------------------------------------------------------------- 11,035 Nucor Corp. 650,955 - -------------------------------------------------------------------------------- 6,795 Phelps Dodge Corp. 882,874 - -------------------------------------------------------------------------------- 8,027 United States Steel Corp. 339,943 - -------------------------------------------------------------------------------- 5,632,100 - -------------------------------------------------------------------------------- MULTI-UTILITIES -- 1.2% - -------------------------------------------------------------------------------- 14,282 Ameren Corp. 763,944 - -------------------------------------------------------------------------------- 21,629 CenterPoint Energy, Inc. 321,623 - -------------------------------------------------------------------------------- 15,309 CMS Energy Corp.(1) 251,833 - -------------------------------------------------------------------------------- 17,128 Consolidated Edison, Inc. 831,564 - -------------------------------------------------------------------------------- 23,916 Dominion Resources Inc. 2,060,125 - -------------------------------------------------------------------------------- 12,455 DTE Energy Company 571,186 - -------------------------------------------------------------------------------- 12,196 KeySpan Corporation 448,569 - -------------------------------------------------------------------------------- 19,129 NiSource Inc. 463,878 - -------------------------------------------------------------------------------- 26,158 PG&E Corp. 1,026,702 - -------------------------------------------------------------------------------- 16,763 Public Service Enterprise Group Inc. 1,078,867 - -------------------------------------------------------------------------------- 17,954 Sempra Energy 844,915 - -------------------------------------------------------------------------------- 14,603 TECO Energy, Inc. 263,146 - -------------------------------------------------------------------------------- 28,214 XCEL Energy Inc. 553,277 - -------------------------------------------------------------------------------- 9,479,629 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 1.1% - -------------------------------------------------------------------------------- 7,943 Big Lots Inc.(1) 87,294 - -------------------------------------------------------------------------------- 4,824 Dillard's Inc. 100,725 - -------------------------------------------------------------------------------- 22,456 Dollar General Corp. 411,843 - -------------------------------------------------------------------------------- 11,814 Family Dollar Stores, Inc. 234,744 - -------------------------------------------------------------------------------- 18,598 Federated Department Stores, Inc. 1,243,648 - -------------------------------------------------------------------------------- 17,748 J.C. Penney Co. Inc. Holding Company 841,610 - -------------------------------------------------------------------------------- 24,176 Kohl's Corp.(1) 1,213,152 - -------------------------------------------------------------------------------- 15,764 Nordstrom, Inc. 541,020 - -------------------------------------------------------------------------------- 7,166 Sears Holdings Corp.(1) 891,594 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 12 Equity Index - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 62,106 Target Corporation $ 3,225,165 - -------------------------------------------------------------------------------- 8,790,795 - -------------------------------------------------------------------------------- OFFICE ELECTRONICS -- 0.1% - -------------------------------------------------------------------------------- 67,270 Xerox Corp.(1) 918,236 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 8.6% - -------------------------------------------------------------------------------- 5,667 Amerada Hess Corp. 779,213 - -------------------------------------------------------------------------------- 16,582 Anadarko Petroleum Corp. 1,587,727 - -------------------------------------------------------------------------------- 23,074 Apache Corp. 1,735,626 - -------------------------------------------------------------------------------- 26,742 Burlington Resources, Inc. 2,174,659 - -------------------------------------------------------------------------------- 158,146 Chevron Corp. 10,236,790 - -------------------------------------------------------------------------------- 97,745 ConocoPhillips 6,833,352 - -------------------------------------------------------------------------------- 31,957 Devon Energy Corporation 2,193,528 - -------------------------------------------------------------------------------- 46,175 El Paso Corp. 641,833 - -------------------------------------------------------------------------------- 16,840 EOG Resources Inc. 1,261,316 - -------------------------------------------------------------------------------- 442,839 Exxon Mobil Corp. 28,137,989 - -------------------------------------------------------------------------------- 8,026 Kerr-McGee Corp. 779,405 - -------------------------------------------------------------------------------- 6,791 Kinder Morgan, Inc. 653,023 - -------------------------------------------------------------------------------- 25,683 Marathon Oil Corp. 1,770,329 - -------------------------------------------------------------------------------- 11,506 Murphy Oil Corp. 573,804 - -------------------------------------------------------------------------------- 28,062 Occidental Petroleum Corp. 2,397,337 - -------------------------------------------------------------------------------- 9,618 Sunoco, Inc. 752,128 - -------------------------------------------------------------------------------- 21,450 Valero Energy Corp. 2,425,137 - -------------------------------------------------------------------------------- 40,116 Williams Companies, Inc. (The) 1,004,906 - -------------------------------------------------------------------------------- 25,333 XTO Energy Inc. 1,148,092 - -------------------------------------------------------------------------------- 67,086,194 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 0.4% - -------------------------------------------------------------------------------- 18,226 Georgia-Pacific Corp. 620,778 - -------------------------------------------------------------------------------- 34,398 International Paper Company 1,025,060 - -------------------------------------------------------------------------------- 7,766 Louisiana-Pacific Corp. 215,041 - -------------------------------------------------------------------------------- 13,120 MeadWestvaco Corp. 362,374 - -------------------------------------------------------------------------------- 17,181 Weyerhaeuser Co. 1,181,194 - -------------------------------------------------------------------------------- 3,404,447 - -------------------------------------------------------------------------------- PERSONAL PRODUCTS -- 0.6% - -------------------------------------------------------------------------------- 5,472 Alberto-Culver Company Cl B 244,872 - -------------------------------------------------------------------------------- 33,014 Avon Products, Inc. 891,378 - -------------------------------------------------------------------------------- 63,303 Gillette Company 3,684,235 - -------------------------------------------------------------------------------- 4,820,485 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 6.6% - -------------------------------------------------------------------------------- 109,142 Abbott Laboratories 4,627,621 - -------------------------------------------------------------------------------- 9,168 Allergan, Inc. 839,972 - -------------------------------------------------------------------------------- 137,309 Bristol-Myers Squibb Co. 3,303,655 - -------------------------------------------------------------------------------- 79,607 Eli Lilly and Company 4,260,567 - -------------------------------------------------------------------------------- 23,836 Forest Laboratories, Inc. Cl A(1) 928,889 - -------------------------------------------------------------------------------- 208,913 Johnson & Johnson 13,220,014 - -------------------------------------------------------------------------------- 17,038 King Pharmaceuticals, Inc.(1) 262,044 - -------------------------------------------------------------------------------- 154,156 Merck & Co., Inc. 4,194,585 - -------------------------------------------------------------------------------- 15,438 Mylan Laboratories Inc. 297,336 - -------------------------------------------------------------------------------- 517,631 Pfizer, Inc. 12,925,245 - -------------------------------------------------------------------------------- 103,620 Schering-Plough Corp. 2,181,201 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 7,161 Watson Pharmaceuticals, Inc.(1) $ 262,164 - -------------------------------------------------------------------------------- 94,165 Wyeth 4,357,015 - -------------------------------------------------------------------------------- 51,660,308 - -------------------------------------------------------------------------------- REAL ESTATE -- 0.7% - -------------------------------------------------------------------------------- 6,680 Apartment Investment and Management Co. 259,050 - -------------------------------------------------------------------------------- 14,830 Archstone-Smith Trust 591,272 - -------------------------------------------------------------------------------- 28,787 Equity Office Properties Trust 941,623 - -------------------------------------------------------------------------------- 20,125 Equity Residential 761,731 - -------------------------------------------------------------------------------- 12,925 Plum Creek Timber Co. Inc. 489,987 - -------------------------------------------------------------------------------- 17,284 Prologis 765,854 - -------------------------------------------------------------------------------- 5,919 Public Storage Inc. 396,573 - -------------------------------------------------------------------------------- 12,962 Simon Property Group, Inc. 960,744 - -------------------------------------------------------------------------------- 8,261 Vornado Realty Trust 715,568 - -------------------------------------------------------------------------------- 5,882,402 - -------------------------------------------------------------------------------- ROAD & RAIL -- 0.6% - -------------------------------------------------------------------------------- 26,199 Burlington Northern Santa Fe Corp. 1,566,700 - -------------------------------------------------------------------------------- 15,200 CSX Corporation 706,496 - -------------------------------------------------------------------------------- 28,367 Norfolk Southern Corp. 1,150,566 - -------------------------------------------------------------------------------- 18,502 Union Pacific Corp. 1,326,593 - -------------------------------------------------------------------------------- 4,750,355 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.3% - -------------------------------------------------------------------------------- 27,908 Advanced Micro Devices, Inc.(1) 703,282 - -------------------------------------------------------------------------------- 26,106 Altera Corp.(1) 498,886 - -------------------------------------------------------------------------------- 26,113 Analog Devices, Inc. 969,837 - -------------------------------------------------------------------------------- 113,943 Applied Materials, Inc. 1,932,473 - -------------------------------------------------------------------------------- 20,859 Applied Micro Circuits Corp.(1) 62,577 - -------------------------------------------------------------------------------- 19,951 Broadcom Corp.(1) 935,901 - -------------------------------------------------------------------------------- 28,384 Freescale Semiconductor Inc.(1) 669,295 - -------------------------------------------------------------------------------- 427,896 Intel Corp. 10,547,637 - -------------------------------------------------------------------------------- 13,844 KLA-Tencor Corp. 675,033 - -------------------------------------------------------------------------------- 21,504 Linear Technology Corp. 808,335 - -------------------------------------------------------------------------------- 26,797 LSI Logic Corp.(1) 263,950 - -------------------------------------------------------------------------------- 22,992 Maxim Integrated Products, Inc. 980,609 - -------------------------------------------------------------------------------- 43,148 Micron Technology, Inc.(1) 573,868 - -------------------------------------------------------------------------------- 24,045 National Semiconductor Corp. 632,384 - -------------------------------------------------------------------------------- 9,490 Novellus Systems, Inc.(1) 238,009 - -------------------------------------------------------------------------------- 11,929 NVIDIA Corp.(1) 408,926 - -------------------------------------------------------------------------------- 12,392 PMC-Sierra, Inc.(1) 109,174 - -------------------------------------------------------------------------------- 13,528 Teradyne, Inc.(1) 223,212 - -------------------------------------------------------------------------------- 114,230 Texas Instruments Inc. 3,872,397 - -------------------------------------------------------------------------------- 24,533 Xilinx, Inc. 683,244 - -------------------------------------------------------------------------------- 25,789,029 - -------------------------------------------------------------------------------- SOFTWARE -- 3.6% - -------------------------------------------------------------------------------- 34,466 Adobe Systems Inc. 1,028,810 - -------------------------------------------------------------------------------- 16,003 Autodesk, Inc. 743,179 - -------------------------------------------------------------------------------- 15,552 BMC Software Inc.(1) 328,147 - -------------------------------------------------------------------------------- 11,964 Citrix Systems, Inc.(1) 300,775 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 13 Equity Index - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 32,820 Computer Associates International, Inc. $ 912,724 - -------------------------------------------------------------------------------- 26,950 Compuware Corp.(1) 256,025 - -------------------------------------------------------------------------------- 21,297 Electronic Arts Inc.(1) 1,211,586 - -------------------------------------------------------------------------------- 12,771 Intuit Inc.(1) 572,269 - -------------------------------------------------------------------------------- 6,097 Mercury Interactive Corp.(1) 241,441 - -------------------------------------------------------------------------------- 647,401 Microsoft Corporation 16,657,628 - -------------------------------------------------------------------------------- 26,334 Novell, Inc.(1) 196,188 - -------------------------------------------------------------------------------- 265,471 Oracle Corp.(1) 3,289,186 - -------------------------------------------------------------------------------- 18,660 Parametric Technology Corp.(1) 130,060 - -------------------------------------------------------------------------------- 36,084 Siebel Systems, Inc. 372,748 - -------------------------------------------------------------------------------- 84,056 Symantec Corp.(1) 1,904,709 - -------------------------------------------------------------------------------- 28,145,475 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 2.2% - -------------------------------------------------------------------------------- 13,040 AutoNation, Inc.(1) 260,409 - -------------------------------------------------------------------------------- 3,989 Autozone Inc.(1) 332,084 - -------------------------------------------------------------------------------- 20,730 Bed Bath & Beyond Inc.(1) 832,931 - -------------------------------------------------------------------------------- 28,606 Best Buy Co., Inc. 1,245,219 - -------------------------------------------------------------------------------- 12,036 Circuit City Stores-Circuit City Group 206,538 - -------------------------------------------------------------------------------- 41,122 Gap, Inc. (The) 716,756 - -------------------------------------------------------------------------------- 150,292 Home Depot, Inc. 5,732,137 - -------------------------------------------------------------------------------- 24,900 Limited Brands 508,707 - -------------------------------------------------------------------------------- 54,737 Lowe's Companies, Inc. 3,525,063 - -------------------------------------------------------------------------------- 22,164 Office Depot, Inc.(1) 658,271 - -------------------------------------------------------------------------------- 4,972 OfficeMax Inc. 157,463 - -------------------------------------------------------------------------------- 9,318 RadioShack Corp. 231,086 - -------------------------------------------------------------------------------- 8,166 Sherwin-Williams Co. 359,876 - -------------------------------------------------------------------------------- 51,537 Staples, Inc. 1,098,769 - -------------------------------------------------------------------------------- 9,886 Tiffany & Co. 393,166 - -------------------------------------------------------------------------------- 32,410 TJX Companies, Inc. (The) 663,757 - -------------------------------------------------------------------------------- 16,922,232 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.4% - -------------------------------------------------------------------------------- 26,647 Coach Inc.(1) 835,650 - -------------------------------------------------------------------------------- 8,285 Jones Apparel Group, Inc. 236,123 - -------------------------------------------------------------------------------- 7,625 Liz Claiborne, Inc. 299,815 - -------------------------------------------------------------------------------- 13,515 NIKE, Inc. Cl B 1,103,905 - -------------------------------------------------------------------------------- 3,674 Reebok International Ltd. 207,838 - -------------------------------------------------------------------------------- 6,403 VF Corp. 371,182 - -------------------------------------------------------------------------------- 3,054,513 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 1.5% - -------------------------------------------------------------------------------- 41,716 Countrywide Financial Corporation 1,375,794 - -------------------------------------------------------------------------------- 67,949 Fannie Mae 3,045,474 - -------------------------------------------------------------------------------- 48,507 Freddie Mac 2,738,705 - -------------------------------------------------------------------------------- 18,073 Golden West Financial Corp. 1,073,355 - -------------------------------------------------------------------------------- 6,648 MGIC Investment Corp. 426,802 - -------------------------------------------------------------------------------- 25,118 Sovereign Bancorp Inc. 553,601 - -------------------------------------------------------------------------------- 70,053 Washington Mutual, Inc. 2,747,479 - -------------------------------------------------------------------------------- 11,961,210 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- TOBACCO -- 1.5% - -------------------------------------------------------------------------------- 145,751 Altria Group Inc. $ 10,743,306 - -------------------------------------------------------------------------------- 6,099 Reynolds American Inc. 506,339 - -------------------------------------------------------------------------------- 11,382 UST Inc. 476,451 - -------------------------------------------------------------------------------- 11,726,096 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS(2) - -------------------------------------------------------------------------------- 5,439 Grainger (W.W.), Inc. 342,222 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.8% - -------------------------------------------------------------------------------- 26,790 ALLTEL Corp. 1,744,297 - -------------------------------------------------------------------------------- 205,945 Sprint Nextel Corp. 4,897,372 - -------------------------------------------------------------------------------- 6,641,669 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $641,695,618) 779,143,783 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS SEGREGATED FOR FUTURES* -- 1.5% Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 6.875%, 8/15/25, valued at $11,663,608), in a joint trading account at 3.22%, dated 9/30/05, due 10/3/05 (Delivery value $11,431,442)(3) (Cost $11,428,375) 11,428,375 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 0.1% Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 6.875%, 8/15/25, valued at $73,099), in a joint trading account at 3.22%, dated 9/30/05, due 10/3/05 (Delivery value $71,644) 71,625 - -------------------------------------------------------------------------------- $800,000 U.S. Treasury Bills, 3.37%, 12/22/05(4) 793,991 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $865,486) 865,616 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.9% (Cost $653,989,479) 791,437,774 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- (0.9)% (6,762,913) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $784,674,861 ================================================================================ See Notes to Financial Statements. (continued) - ------ 14 Equity Index - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) FUTURES CONTRACTS* Underlying Face Unrealized Contracts Purchased Expiration Date Amount at Value Gain (Loss) - -------------------------------------------------------------------------------- 185 S&P 500 E-Mini Futures December 2005 $11,428,375 $(63,722) ================================= *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 to certain markets while maintaining easy access to cash. NOTES TO SCHEDULE OF INVESTMENTS (1) Non-income producing. (2) Industry is less than 0.05% of total 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. - ------ 15 Statement of Assets and Liabilities SEPTEMBER 30, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investment securities, at value (cost of $653,989,479) $791,437,774 - --------------------------------------------- Receivable for variation margin on futures contracts 35,930 - --------------------------------------------- Dividends and interest receivable 869,167 - -------------------------------------------------------------------------------- 792,342,871 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Disbursements in excess of demand deposit cash 6,555,045 - --------------------------------------------- Payable for investments purchased 899,596 - --------------------------------------------- Accrued management fees 213,369 - -------------------------------------------------------------------------------- 7,668,010 - -------------------------------------------------------------------------------- NET ASSETS $784,674,861 ================================================================================ NET ASSETS CONSIST OF: - -------------------------------------------------------------------------------- Capital (par value and paid-in surplus) $744,000,236 - --------------------------------------------- Undistributed net investment income 571,153 - --------------------------------------------- Accumulated net realized loss on investment tansactions (97,281,101) - --------------------------------------------- Net unrealized appreciation on investments 137,384,573 - -------------------------------------------------------------------------------- $784,674,861 ================================================================================ INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $152,413,811 - --------------------------------------------- Shares outstanding 31,136,685 - --------------------------------------------- Net asset value per share $4.89 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $632,261,050 - --------------------------------------------- Shares outstanding 129,035,102 - --------------------------------------------- Net asset value per share $4.90 - -------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 16 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (LOSS) - -------------------------------------------------------------------------------- INCOME: - ------------------------------------------- Dividends $ 8,269,278 - ------------------------------------------- Interest 202,808 - -------------------------------------------------------------------------------- 8,472,086 - -------------------------------------------------------------------------------- EXPENSES: - ------------------------------------------- Management fees 1,498,876 - ------------------------------------------- Directors' fees and expenses 8,135 - ------------------------------------------- Other expenses 2,235 - -------------------------------------------------------------------------------- 1,509,246 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) 6,962,840 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------------------------------------- Net realized gain (loss) on investment transactions 33,681,208 - ------------------------------------------- Change in net unrealized appreciation (depreciation) on investments 939,391 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) 34,620,599 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $41,583,439 ================================================================================ See Notes to Financial Statements. - ------ 17 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED) AND YEAR ENDED MARCH 31, 2005 - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2005 MARCH 31, 2005 - -------------------------------------------------------------------------------- OPERATIONS - -------------------------------------------------------------------------------- Net investment income (loss) $ 6,962,840 $ 17,866,852 - ---------------------------------------- Net realized gain (loss) 33,681,208 (1,953,984) - ---------------------------------------- Change in net unrealized appreciation (depreciation) 939,391 46,094,055 - -------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 41,583,439 62,006,923 - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - -------------------------------------------------------------------------------- From net investment income: - ---------------------------------------- Investor Class (982,645) (2,272,345) - ---------------------------------------- Institutional Class (5,790,259) (15,298,033) - -------------------------------------------------------------------------------- Decrease in net assets from distributions (6,772,904) (17,570,378) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - -------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions (308,475,519) 29,310,350 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (273,664,984) 73,746,895 - -------------------------------------------------------------------------------- NET ASSETS - -------------------------------------------------------------------------------- Beginning of period 1,058,339,845 984,592,950 - -------------------------------------------------------------------------------- End of period $784,674,861 $1,058,339,845 ================================================================================ Undistributed net investment income $571,153 $381,217 ================================================================================ See Notes to Financial Statements. - ------ 18 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. American Century Equity Index Fund (the fund) is one fund in a series issued by the corporation. The fund is non-diversified under the 1940 Act. The fund's investment objective is long-term capital growth. The fund seeks to achieve this objective by matching, as closely as possible, the investment characteristics and results of the 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 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. 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 or American Century Global Investment Management, Inc. (ACGIM), 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) - ------ 19 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INCOME TAX STATUS -- It is the fund's policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for federal or state income taxes. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on the ex-dividend date. Distributions from net investment income are declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually. 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. The annual management fee schedule for each class of the fund is as follows: INVESTOR INSTITUTIONAL CLASS CLASS - ------------------------------------------------------------------------------- STRATEGY ASSETS - ------------------------------------------------------------------------------- First $1 billion 0.490% 0.290% - ------------------------------------------------------------------------------- Next $1 billion 0.470% 0.270% - ------------------------------------------------------------------------------- Next $1 billion 0.455% 0.255% - ------------------------------------------------------------------------------- Next $1 billion 0.445% 0.245% - ------------------------------------------------------------------------------- Next $1 billion 0.435% 0.235% - ------------------------------------------------------------------------------- Over $5 billion 0.430% 0.230% - ------------------------------------------------------------------------------- The effective annual management fee for the six months ended September 30, 2005 was 0.49% and 0.29% for the Investor Class and Institutional Class, 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 (continued) - ------ 20 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) 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. 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 J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. 3. INVESTMENT TRANSACTIONS Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2005, were $21,651,175 and $316,425,911, repectively. For the six months ended September 30, 2005, the fund incurred net realized gains of $39,001,676 from redemptions in kind. A redemption in kind occurs when a fund delivers securities from its portfolio in lieu of cash as payment to a redeeming shareholder. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the fund were as follows: - -------------------------------------------------------------------------------- SHARES AMOUNT - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 100,000,000 ================================================================================ Sold 2,427,586 $ 11,627,910 - ----------------------------------------- Issued in reinvestment of distributions 196,305 951,227 - ----------------------------------------- Redeemed (3,482,124) (16,666,938) - -------------------------------------------------------------------------------- Net increase (decrease) (858,233) $ (4,087,801) ================================================================================ 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 (decrease) 344,183 $ 1,746,487 ================================================================================ INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 550,000,000 ================================================================================ Sold 12,985,779 $ 62,177,332 - ----------------------------------------- Issued in reinvestment of distributions 1,194,979 5,790,259 - ----------------------------------------- Redeemed (78,023,389) (372,355,309) - -------------------------------------------------------------------------------- Net increase (decrease) (63,842,631) $(304,387,718) ================================================================================ 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 (decrease) 5,777,708 $ 27,563,863 ================================================================================ (continued) - ------ 21 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 5. BANK LINE OF CREDIT The fund, along with certain other funds managed by ACIM or ACGIM, has a $575,000,000 unsecured bank line of credit agreement with JPMCB. The fund may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund did not borrow from the line during the six months ended September 30, 2005. 6. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. As of September 30, 2005, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- Federal tax cost of investments $690,674,425 ================================================================================ Gross tax appreciation of investments $167,538,361 - -------------------------------------------------------------- Gross tax depreciation of investments (66,775,012) - -------------------------------------------------------------------------------- Net tax appreciation (depreciation) of investments $100,763,349 ================================================================================ The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales. Following are the capital loss carryovers and capital loss deferral amounts as of March 31, 2005: - ------------------------------------------------------------------------------- Accumulated capital losses $(66,588,425) - ----------------------------------------------------------- Capital loss deferral $ (1,347,843) - ------------------------------------------------------------------------------- The accumulated capital losses listed above represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers expire as follows: - -------------------------------------------------------------------------------- 2009 2010 2011 2012 2013 - -------------------------------------------------------------------------------- $(2,917,398) $(10,639,477) $(49,081,783) $(1,957,751) $(1,992,016) - -------------------------------------------------------------------------------- The capital loss deferral represents 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. - ------ 22 Equity Index - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $4.70 $4.50 $3.39 $4.58 $4.63 $5.99 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------ Net Investment Income (Loss)(2) 0.03 0.07 0.05 0.05 0.04 0.05 - ------------------ Net Realized and Unrealized Gain (Loss) 0.19 0.20 1.11 (1.19) (0.05) (1.36) - -------------------------------------------------------------------------------- Total From Investment Operations 0.22 0.27 1.16 (1.14) (0.01) (1.31) - -------------------------------------------------------------------------------- Distributions - ------------------ From Net Investment Income (0.03) (0.07) (0.05) (0.05) (0.04) (0.05) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $4.89 $4.70 $4.50 $3.39 $4.58 $4.63 ================================================================================ TOTAL RETURN(3) 4.93% 6.04% 34.27% (25.02)% (0.16)% (22.04)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.49%(4) 0.49% 0.49% 0.49% 0.49% 0.49% - ------------------ Ratio of Net Investment Income (Loss) to Average Net Assets 1.32%(4) 1.59% 1.23% 1.24% 0.91% 0.83% - ------------------ Portfolio Turnover Rate 2% 4% 16% 21% 4% 10% - ------------------ Net Assets, End of Period (in thousands) $152,414 $150,454 $142,324 $90,093 $108,760 $71,415 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 23 Equity Index - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $4.71 $4.50 $3.39 $4.58 $4.64 $5.99 - -------------------------------------------------------------------------------- Income From Investment Operations - --------------------- Net Investment Income (Loss)(2) 0.04 0.08 0.06 0.05 0.05 0.06 - ---------------------- Net Realized and Unrealized Gain (Loss) 0.19 0.21 1.11 (1.19) (0.06) (1.35) - -------------------------------------------------------------------------------- Total From Investment Operations 0.23 0.29 1.17 (1.14) (0.01) (1.29) - -------------------------------------------------------------------------------- Distributions - --------------------- From Net Investment Income (0.04) (0.08) (0.06) (0.05) (0.05) (0.06) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $4.90 $4.71 $4.50 $3.39 $4.58 $4.64 ================================================================================ TOTAL RETURN(3) 4.81% 6.47% 34.53% (24.87)% (0.17)% (21.72)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.29%(4) 0.29% 0.29% 0.29% 0.29% 0.29% - ------------------------------------------ Ratio of Net Investment Income (Loss) to Average Net Assets 1.52%(4) 1.79% 1.43% 1.44% 1.11% 1.03% - ------------------------------------------ Portfolio Turnover Rate 2% 4% 16% 21% 4% 10% - ------------------------------------------ Net Assets, End of Period (in thousands) $632,261 $907,886 $842,269 $350,815 $449,591 $441,959 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 24 Approval of Management Agreement for Equity Index Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund's independent directors (the "Directors") each year. At American Century, this process -- referred to as the "15(c) Process" -- involves at least two board meetings spanning a 30 to 60 day period each year. In addition to this annual review, the board of directors and its committees oversee and evaluate at quarterly meetings the nature and quality of significant services the advisor performs on behalf of the fund. At these meetings the board reviews fund performance, shareholder services and feedback, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. The board, or committees of the board, also hold special meetings, as needed. Under a new Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for its board's approval or renewal of any advisory agreements within the fund's most recently completed fiscal half-year period. ANNUAL CONTRACT REVIEW PROCESS As part of the annual 15(c) Process undertaken during the most recent fiscal half-year, the Directors requested and received extensive data and information compiled by the advisor and certain independent providers of evaluative data (the "Independent 15(c) Providers") concerning Equity Index (the "fund") and the services provided to the fund under the management agreement. The information included, but was not limited to: * the nature, extent and quality of investment management, shareholder services and other services provided to the fund under the management agreement; * reports on the advisor's activities relating to the wide range of programs and services the advisor provides to the fund and its shareholders on a routine and non-routine basis; * data comparing the cost of owning the fund to the cost of owning similar funds; * data comparing the fund's performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; * financial data showing the profitability of the fund to the advisor and the overall profitability of the advisor; and * data comparing services provided and charges to other investment management clients of the advisor. In keeping with its practice, the fund's board of directors held two regularly scheduled meetings and two special meetings to review and discuss the information provided by the advisor and the Independent 15(c) Providers and to complete its negotiations with the advisor regarding the renewal of the management agreement, including the setting of the applicable advisory fee. In addition, the independent directors met on several occasions in private session to review and discuss the information provided and evaluate the advisor's performance as manager of the fund. (continued) - ------ 25 Approval of Management Agreement for Equity Index FACTORS CONSIDERED The Directors considered all of the information provided by the advisor, the Independent 15(c) Providers, and its independent counsel and evaluated such information for each fund for which the board has responsibility. The Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the agreement under the terms ultimately determined by the board to be appropriate, the Directors' decision was based on the following factors. NATURE, EXTENT AND QUALITY OF SERVICES -- GENERALLY. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the fund. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including, but not limited to: * fund construction and design * portfolio security selection * initial capitalization/funding * securities trading * custody of fund assets * daily valuation of the fund's portfolio * shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping and communications * legal services * regulatory and portfolio compliance * financial reporting * marketing and distribution The Directors noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings. INVESTMENT MANAGEMENT SERVICES. The nature of the investment management services provided is quite complex and allows fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes, and liquidity. In evaluating investment performance, the board expects the advisor to manage the fund in accordance with its investment objective and approved strategies. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. At each quarterly meeting the Directors review investment performance information for the fund, together with comparative information for appropriate benchmarks and a peer group of funds managed similarly to the fund. Further, the Portfolio Committee reports its assessment to the board. If performance concerns are identified, the Directors discuss with the advisor and its portfolio managers the reasons for such results (e.g., (continued) - ------ 26 Approval of Management Agreement for Equity Index market conditions, security selection) and any efforts being undertaken to improve performance. Equity Index's performance fell below its benchmark for both one and three year periods during the past year. The board discussed Equity Index's performance with the advisor and was satisfied with the efforts being undertaken by the advisor SHAREHOLDER AND OTHER SERVICES. The advisor provides the fund with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at its regular quarterly meetings, including the annual meeting concerning contract review. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor. COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor provides detailed information concerning its cost of providing various services to the fund, its profitability in managing the fund, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor's financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. ETHICS OF THE ADVISOR. The Directors generally considered the advisor's commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor's practices generally meet or exceed industry best practices and that the advisor was not implicated in the industry scandals of 2003 and 2004. ECONOMIES OF SCALE. The Directors review reports provided by the advisor on economies of scale for the complex as a whole and the year-over-year changes in revenue, costs, and profitability. The Directors concluded that economies of scale are difficult to measure with precision, particularly on a fund-by-fund basis. This analysis is further complicated by the fact that the advisor is required to make a continuing reinvestment in the business to provide additional content and services for fund shareholders. Accordingly, the Directors also seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the fund specifically, the expenses incurred by the advisor in providing various services to the fund, and the breakpoint fees of competitive funds not managed by the advisor. The Directors believe the advisor is appropriately (continued) - ------ 27 Approval of Management Agreement for Equity Index sharing any economies of scale through a competitive fee structure, through breakpoints that reduce fees as the fund increases in size, and through reinvestment in its business to provide shareholders additional content and services. COMPARISON TO OTHER FUNDS' FEES. The fund pays the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the fund's independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other fund groups are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other fund groups may be increased without shareholder approval. The board believes the unified fee structure is a benefit to fund shareholders because it clearly discloses to shareholders the cost of owning fund shares, and, since the unified fee cannot be increased without a vote of fund shareholders, it shifts to the advisor the increased costs of operating the funds and the risk of administrative inefficiencies. Part of the Directors' analysis of fee levels involves comparing the fund's unified fee to the total expense ratio of other funds in the benchmark. The unified fee charged to shareholders of the fund was above the median of the total expense ratios of its peer group. COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the fund. The Directors analyzed this information and concluded that the fees charged and services provided to the fund were reasonable by comparison. COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information from the advisor concerning collateral benefits it receives as a result of its relationship with the fund. They concluded that the advisor's primary business is managing mutual funds and it generally does not use the fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is able to provide investment management services to clients other than the fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Directors concluded, (continued) - ------ 28 Approval of Management Agreement for Equity Index however, that the assets of those other clients are modest in comparison to the funds and that, in any event, the addition of such other assets to the assets of the funds that use substantially the same investment management team and strategy to determine whether breakpoints have been achieved captures for the shareholders a portion of any benefit that exists by accelerating fee reductions as breakpoints are reached at lower fund asset levels. CONCLUSIONS OF THE DIRECTORS As a result of this process, the independent directors, assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor and the Independent 15(c) Providers, concluded that the investment management agreement between the fund and the advisor is fair and reasonable in light of the services provided and should be renewed. - ------ 29 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 certain financial intermediaries (such as banks, broker-dealers, insurance companies and investment advisors), which may require payment of a transaction fee to the financial intermediary. 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 unified management fee of Institutional Class shares is 0.20% less than the unified management fee of Investor Class shares. All classes of shares represent a pro rata interest in the fund and generally have the same rights and preferences. - ------ 30 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. - ------ 31 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 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. The S&P 500/BARRA VALUE INDEX consists of those stocks with lower price-to-book ratios that are slower growing or undervalued, and S&P 500/BARRA GROWTH INDEX consists of those stocks with higher price-to-book ratios that are faster growing. - ------ 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. 0511 SH-SAN-45971N
[front cover] American Century Investments SEMIANNUAL REPORT [photo of man and woman] SEPTEMBER 30, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 OTHER INFORMATION Approval of Management Agreement for Real Estate . . . . . . . . . . . . . 21 Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . .26 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 The opinions expressed in the Portfolio Commentary reflect those of the portfolio management team as of the date of the report, and do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] JAMES E. STOWERS III WITH JAMES E. STOWERS, JR. We are pleased to provide you with the semiannual report for the Real Estate fund for the six months ended September 30, 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 annual report dated March 31, 2006, available in approximately six months. As always, we deeply appreciate your investment with American Century Investments. /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 SEPTEMBER 30, 2005 -------------------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - -------------------------------------------------------------------------------------------- INVESTOR CLASS 18.52% 25.88% 19.79% 16.01% 15.98% 9/21/95(2) - -------------------------------------------------------------------------------------------- MSCI US REIT INDEX(3) 19.07% 27.10% 19.19% 14.64% 14.64%(4) -- - -------------------------------------------------------------------------------------------- Institutional Class 18.68% 26.16% 20.04% -- 13.54% 6/16/97 - -------------------------------------------------------------------------------------------- Advisor Class 18.41% 25.59% 19.54% -- 17.41% 10/6/98 - -------------------------------------------------------------------------------------------- (1) Total returns for periods less than one year are not annualized. (2) 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. (3) In June 2005, the Morgan Stanley Capital International Real Estate Investment Trust Index became known as the Morgan Stanley Capital International US Real Estate Investment Trust Index. (4) 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 10 YEARS $10,000 investment made September 30, 1995
ONE-YEAR RETURNS OVER 10 YEARS Periods ended September 30 - -------------------------------------------------------------------------------------------------- 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 - -------------------------------------------------------------------------------------------------- Investor Class 23.16% 49.58% -17.62% -2.94% 21.61% 10.96% 9.78% 28.35% 25.40% 25.88% - -------------------------------------------------------------------------------------------------- MSCI US REIT Index 18.27% 40.88% -14.26% -5.88% 21.25% 11.62% 8.56% 25.11% 24.85% 27.10% - -------------------------------------------------------------------------------------------------- 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 six months ended September 30, 2005, the Real Estate fund posted a total return of 18.52%,* trailing the 19.07% return of its benchmark, the Morgan Stanley Capital International (MSCI) US REIT Index, but outpacing the 5.02% return of the S&P 500 Index, a broad stock market measure. MARKET REVIEW U.S. stocks posted positive results during the six-month period despite a series of challenges that included soaring oil prices, higher short-term interest rates, and two destructive hurricanes that wreaked havoc along the Gulf Coast. In their favor, many public companies reported profit growth that exceeded expectations, extending the S&P 500's streak of double-digit earnings growth to 12 consecutive quarters. In addition, the economy continued to grow at a solid 3-4% annual rate, and merger activity increased markedly. For the six months, the broad S&P 500 returned 5.02%. Real estate investment trusts (REITs) outperformed the broader market by a wide margin, gaining nearly 20% during the six-month period. Several factors contributed to the outperformance of the REIT sector: (1) REIT dividend yields, which are among the highest in the stock market, grew more attractive as long-term interest rates declined; (2) commercial property values continued to rise; and (3) merger activity picked up, including several private acquisitions of public REITs at premium prices. REITs have posted remarkable gains over the past five years. As of September 30, 2005, the five-year cumulative total return of the MSCI US REIT Index was 140.57%, compared with the -7.22% cumulative total return of the S&P 500 over the same period. Every sector of the REIT market posted double-digit gains during the six-month period. Self-storage REITs were the best performers, and office REITs also performed well. The laggards included hotel and health care REITs. TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- ProLogis 6.2% 6.5% - -------------------------------------------------------------------------------- Simon Property Group, Inc. 5.3% 6.7% - -------------------------------------------------------------------------------- Host Marriott Corp. 4.8% 5.0% - -------------------------------------------------------------------------------- Arden Realty Inc. 4.8% 3.4% - -------------------------------------------------------------------------------- BRE Properties 3.8% -- - -------------------------------------------------------------------------------- Mack-Cali Realty Corp. 3.7% 4.4% - -------------------------------------------------------------------------------- General Growth Properties, Inc. 3.7% 3.9% - -------------------------------------------------------------------------------- Macerich Co. (The) 3.6% -- - -------------------------------------------------------------------------------- Kilroy Realty Corp. 3.6% 1.9% - -------------------------------------------------------------------------------- Pennsylvania Real Estate Investment Trust 3.5% 2.4% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. (continued) - ------ 4 Real Estate - Portfolio Commentary PORTFOLIO OVERVIEW The Real Estate fund's hotel holdings contributed positively to absolute performance, but several detracted from relative results. Hotel companies, including both REITs and non-REITs, comprised more than 10% of the portfolio on average during the period, nearly twice that of the index. The most significant detractors from performance were non-REIT hotel stocks such as Hilton Hotels and Starwood Hotels & Resorts, both of which had exposure to hurricane-ravaged New Orleans and the Gulf Coast. An overweight position in Host Marriott also weighed on relative results. Other individual holdings that contributed to the fund's underperformance of the MSCI US REIT Index included an overweight in retail property owner Pennsylvania Real Estate Investment Trust and an underweight in apartment REIT AvalonBay Communities. Lower occupancy rates and dislocation caused by redevelopment activity led to a disappointing earnings report from Penn REIT, while AvalonBay rose by 30% thanks to its focus on the booming housing markets in California and the Northeast, where the need to rent is higher. Despite the missed opportunity in AvalonBay, many of the fund's apartment holdings contributed positively to performance relative to the benchmark. The top contributors included Mid-America Apartment Communities, which revised 2005 earnings forecasts upward, and Gables Residential, which was acquired by private real estate fund ING Clarion Partners at a 14% premium. In the office segment, Arden Realty and Kilroy Realty, two of the largest overweights in the portfolio, were among the top contributors to portfolio performance. Both companies, based in Southern California, maintained high occupancy rates. Arden also benefited from speculation about a possible private buyout of the company. PORTFOLIO STRATEGY Going forward, we intend to maintain our focus on maximizing total return in the real estate and REIT sectors through superior stock selection and risk management. INDUSTRY ALLOCATION - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Office Management 22.5% 26.9% - -------------------------------------------------------------------------------- Regional Malls 19.1% 13.7% - -------------------------------------------------------------------------------- Multi-Family Residential 17.9% 17.7% - -------------------------------------------------------------------------------- Industrials 12.1% 9.0% - -------------------------------------------------------------------------------- Hotels, Restaurants & Leisure 12.0% 8.7% - -------------------------------------------------------------------------------- Neighborhood & Community Shopping Centers 5.8% 10.6% - -------------------------------------------------------------------------------- Diversified 5.1% 7.0% - -------------------------------------------------------------------------------- Storage 1.8% 3.3% - -------------------------------------------------------------------------------- Other -- 0.7% - -------------------------------------------------------------------------------- Cash and Equivalents(1) 3.7% 2.4% - -------------------------------------------------------------------------------- (1) Includes temporary cash investments and other assets and liabilities. TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/05 3/31/05 - -------------------------------------------------------------------------------- Common Stocks 96.3% 97.6% - -------------------------------------------------------------------------------- Temporary Cash Investments 4.0% 1.9% - -------------------------------------------------------------------------------- Other Assets and Liabilities (0.3)% 0.5% - -------------------------------------------------------------------------------- - ------ 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 April 1, 2005 to September 30, 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 4/1/05 - EXPENSE 4/1/05 9/30/05 9/30/05 RATIO* - ------------------------------------------------------------------------------------------------- REAL ESTATE SHAREHOLDER FEE EXAMPLE - ------------------------------------------------------------------------------------------------- ACTUAL - ------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,185.20 $6.30 1.15% - ------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,186.80 $5.21 0.95% - ------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,184.10 $7.67 1.40% - ------------------------------------------------------------------------------------------------- HYPOTHETICAL - ------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,019.30 $5.82 1.15% - ------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,020.31 $4.81 0.95% - ------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,018.05 $7.08 1.40% - ------------------------------------------------------------------------------------------------- *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 183, 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 SEPTEMBER 30, 2005 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 96.3% DIVERSIFIED -- 5.1% - -------------------------------------------------------------------------------- 771,300 Colonial Properties Trust $ 34,307,423 - -------------------------------------------------------------------------------- 625,200 Henderson Land Development Co. Ltd. ORD 3,122,978 - -------------------------------------------------------------------------------- 873,400 Lexington Corporate Properties Trust 20,568,570 - -------------------------------------------------------------------------------- 123 NTT Urban Development ORD 630,048 - -------------------------------------------------------------------------------- 58,629,019 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 12.0% - -------------------------------------------------------------------------------- 500,080 Eagle Hospitality Properties Trust Inc. 4,990,798 - -------------------------------------------------------------------------------- 22,200 Four Seasons Hotels Inc. 1,274,280 - -------------------------------------------------------------------------------- 756,000 Hilton Hotels Corporation 16,873,920 - -------------------------------------------------------------------------------- 3,307,630 Host Marriott Corp. 55,898,948 - -------------------------------------------------------------------------------- 1,252,500 Innkeepers USA Trust 19,351,125 - -------------------------------------------------------------------------------- 1,632,475 InterContinental Hotels Group plc ORD 20,625,109 - -------------------------------------------------------------------------------- 859,959 InterContinental Hotels Group plc ADR 10,938,678 - -------------------------------------------------------------------------------- 229,900 Sunstone Hotel Investors, Inc. 5,607,261 - -------------------------------------------------------------------------------- 228,700 Winston Hotels Inc. 2,287,000 - -------------------------------------------------------------------------------- 137,847,119 - -------------------------------------------------------------------------------- INDUSTRIALS -- 12.1% - -------------------------------------------------------------------------------- 616,400 AMB Property Corp. 27,676,360 - -------------------------------------------------------------------------------- 496,500 CenterPoint Properties Corp. ProLogis 22,243,200 - -------------------------------------------------------------------------------- 734,500 First Potomac Realty Trust 18,876,650 - -------------------------------------------------------------------------------- 1,605,310 ProLogis 71,131,286 - -------------------------------------------------------------------------------- 139,927,496 - -------------------------------------------------------------------------------- MULTI-FAMILY RESIDENTIAL -- 17.9% - -------------------------------------------------------------------------------- 1,011,000 Archstone-Smith Trust 40,308,570 - -------------------------------------------------------------------------------- 246,600 Boardwalk Real Estate Investment Trust ORD 4,541,515 - -------------------------------------------------------------------------------- 988,940 BRE Properties 44,007,830 - -------------------------------------------------------------------------------- 99,530 Camden Property Trust 5,548,798 - -------------------------------------------------------------------------------- 39,849 Education Realty Trust, Inc. 665,478 - -------------------------------------------------------------------------------- 1,055,200 Equity Residential 39,939,320 - -------------------------------------------------------------------------------- 49,400 Essex Property Trust, Inc. 4,446,000 - -------------------------------------------------------------------------------- 301,100 GMH Communities Trust 4,417,137 - -------------------------------------------------------------------------------- 112,600 Home Properties, Inc. 4,419,550 - -------------------------------------------------------------------------------- 717,542 Mid-America Apartment Communities Inc. 33,372,878 - -------------------------------------------------------------------------------- 516,300 Post Properties, Inc. 19,232,175 - -------------------------------------------------------------------------------- 201,000 Town & Country Trust (The) 5,833,020 - -------------------------------------------------------------------------------- 206,732,271 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- NEIGHBORHOOD & COMMUNITY SHOPPING CENTERS -- 5.8% - -------------------------------------------------------------------------------- 80,697 Commercial Net Lease Realty $ 1,613,940 - -------------------------------------------------------------------------------- 360,520 Federal Realty Investors Trust 21,966,484 - -------------------------------------------------------------------------------- 461,000 Heritage Property Investment Trust 16,135,000 - -------------------------------------------------------------------------------- 319,800 Kimco Realty Corporation 10,048,116 - -------------------------------------------------------------------------------- 132,000 Regency Centers Corp. 7,583,400 - -------------------------------------------------------------------------------- 259,300 Weingarten Realty Investors 9,814,505 - -------------------------------------------------------------------------------- 67,161,445 - -------------------------------------------------------------------------------- OFFICE MANAGEMENT -- 22.5% - -------------------------------------------------------------------------------- 1,349,400 Arden Realty Inc. 55,554,797 - -------------------------------------------------------------------------------- 152,200 Boston Properties Inc. 10,790,980 - -------------------------------------------------------------------------------- 542,580 CarrAmerica Realty Corp. 19,505,751 - -------------------------------------------------------------------------------- 224,700 Columbia Equity Trust, Inc. 3,280,620 - -------------------------------------------------------------------------------- 600,040 Cousins Properties Inc. 18,133,209 - -------------------------------------------------------------------------------- 726,600 Crescent Real Estate Equities Co. 14,902,566 - -------------------------------------------------------------------------------- 746,200 Kilroy Realty Corp. 41,809,586 - -------------------------------------------------------------------------------- 825,000 Liberty Property Trust 35,095,500 - -------------------------------------------------------------------------------- 961,100 Mack-Cali Realty Corp. 43,191,834 - -------------------------------------------------------------------------------- 285,700 Mission West Properties 2,868,428 - -------------------------------------------------------------------------------- 212,270 SL Green Realty Corp. 14,472,569 - -------------------------------------------------------------------------------- 259,605,840 - -------------------------------------------------------------------------------- REGIONAL MALLS -- 19.1% - -------------------------------------------------------------------------------- 952,010 General Growth Properties, Inc. 42,773,809 - -------------------------------------------------------------------------------- 647,600 Macerich Co. (The) 42,055,144 - -------------------------------------------------------------------------------- 188,500 Mills Corp. (The) 10,382,580 - -------------------------------------------------------------------------------- 969,376 Pennsylvania Real Estate Investment Trust 40,888,280 - -------------------------------------------------------------------------------- 825,688 Simon Property Group, Inc. 61,199,994 - -------------------------------------------------------------------------------- 724,768 Taubman Centers Inc. 22,975,146 - -------------------------------------------------------------------------------- 220,274,953 - -------------------------------------------------------------------------------- STORAGE -- 1.8% - -------------------------------------------------------------------------------- 257,805 Extra Space Storage Inc. 3,965,041 - -------------------------------------------------------------------------------- 247,810 Public Storage Inc. 16,603,271 - -------------------------------------------------------------------------------- 20,568,312 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $981,883,997) 1,110,746,455 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 8 Real Estate - Schedule of Investments SEPTEMBER 30, 2005 (UNAUDITED) Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 4.0% Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 6.875%, 8/15/25, valued at $47,457,121), in a joint trading account at 3.22%, dated 9/30/05, due 10/3/05 (Delivery value $46,512,477) (Cost $46,500,000) $ 46,500,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.3% (Cost $1,028,383,997) 1,157,246,455 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- (0.3)% (3,233,517) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $ 1,154,012,938 ================================================================================ NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt ORD = Foreign Ordinary Share REIT = Real Estate Investment Trust See Notes to Financial Statements. - ------ 9 Statement of Assets and Liabilities SEPTEMBER 30, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investment securities, at value (cost of $1,028,383,997) $1,157,246,455 - ------------------------------------------------------------- Cash 195,152 - ------------------------------------------------------------- Foreign currency holdings, at value (cost of $6,078) 6,031 - ------------------------------------------------------------- Receivable for investments sold 18,386,367 - ------------------------------------------------------------- Receivable for capital shares sold 559,263 - ------------------------------------------------------------- Dividends and interest receivable 4,456,665 - -------------------------------------------------------------------------------- 1,180,849,933 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Payable for investments purchased 25,740,991 - ------------------------------------------------------------- Accrued management fees 1,000,930 - ------------------------------------------------------------- Distribution fees payable 47,537 - ------------------------------------------------------------- Service fees payable 47,537 - -------------------------------------------------------------------------------- 26,836,995 - -------------------------------------------------------------------------------- NET ASSETS $1,154,012,938 ================================================================================ NET ASSETS CONSIST OF: - -------------------------------------------------------------------------------- Capital (par value and paid-in surplus) $ 911,044,984 - ------------------------------------------------------------- Undistributed net investment income 1,563,103 - ------------------------------------------------------------- Undistributed net realized gain on investment and foreign currency transactions 112,545,878 - ------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 128,858,973 - -------------------------------------------------------------------------------- $1,154,012,938 ================================================================================ INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $709,987,623 - ------------------------------------------------------------- Shares outstanding 26,033,590 - ------------------------------------------------------------- Net asset value per share $27.27 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $207,886,326 - ------------------------------------------------------------- Shares outstanding 7,618,292 - ------------------------------------------------------------- Net asset value per share $27.29 - -------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $236,138,989 - ------------------------------------------------------------- Shares outstanding 8,650,484 - ------------------------------------------------------------- Net asset value per share $27.30 - -------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 10 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED) - ---------------------------------------------------------------------------------- INVESTMENT INCOME - ---------------------------------------------------------------------------------- INCOME: - ----------------------------------------------------------------- Dividends (including $913,694 from affiliates and net of foreign taxes withheld of $1,316) $ 18,109,163 - ----------------------------------------------------------------- Interest 571,713 - ---------------------------------------------------------------------------------- 18,680,876 - ---------------------------------------------------------------------------------- EXPENSES: - ----------------------------------------------------------------- Management fees 5,439,982 - ----------------------------------------------------------------- Distribution fees - Advisor Class 252,475 - ----------------------------------------------------------------- Service fees - Advisor Class 252,475 - ----------------------------------------------------------------- Directors' fees and expenses 11,584 - ----------------------------------------------------------------- Other expenses 1,234 - ---------------------------------------------------------------------------------- 5,957,750 - ---------------------------------------------------------------------------------- NET INVESTMENT INCOME 12,723,126 - ---------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - ---------------------------------------------------------------------------------- Net realized gain (loss) on investment and foreign currency transactions (including $1,545,847 from affiliates) 84,477,368 - ----------------------------------------------------------------- Change in net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies 61,625,846 - ---------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) 146,103,214 - ---------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 158,826,340 ================================================================================== See Notes to Financial Statements. - ------ 11 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED) AND YEAR ENDED MARCH 31, 2005 - --------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2005 MARCH 31, 2005 - --------------------------------------------------------------------------------------- OPERATIONS - --------------------------------------------------------------------------------------- Net investment income $ 12,723,126 $ 12,166,888 - ----------------------------------------------------- Net realized gain (loss) 84,477,368 62,324,964 - ----------------------------------------------------- Change in net unrealized appreciation (depreciation) 61,625,846 (23,159,699) - --------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 158,826,340 51,332,153 - --------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - --------------------------------------------------------------------------------------- From net investment income: - ----------------------------------------------------- Investor Class (6,954,887) (9,161,435) - ----------------------------------------------------- Institutional Class (2,219,182) (2,444,048) - ----------------------------------------------------- Advisor Class (1,985,954) (2,229,836) - ----------------------------------------------------- From net realized gains: - ----------------------------------------------------- Investor Class -- (32,154,057) - ----------------------------------------------------- Institutional Class -- (8,421,830) - ----------------------------------------------------- Advisor Class -- (9,230,800) - --------------------------------------------------------------------------------------- Decrease in net assets from distributions (11,160,023) (63,642,006) - --------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - --------------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions 178,896,845 281,197,182 - --------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 326,563,162 268,887,329 NET ASSETS - --------------------------------------------------------------------------------------- Beginning of period 827,449,776 558,562,447 - --------------------------------------------------------------------------------------- End of period $ 1,154,012,938 $ 827,449,776 ======================================================================================= Undistributed net investment income $1,563,103 -- ======================================================================================= See Notes to Financial Statements. - ------ 12 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Real Estate Fund (the fund) is one fund in a series issued by the corporation. The fund is non-diversified under the 1940 Act. The fund's investment objective is long-term capital appreciation. Income is a secondary objective. The fund seeks to achieve its objective by investing primarily in securities issued by real estate investment trusts and in the securities of companies which are principally engaged in the real estate industry. The following is a summary of the fund's significant accounting policies. MULTIPLE CLASS -- The fund is authorized to issue the Investor Class, the Institutional Class and the Advisor Class. The share classes differ principally in their respective shareholder servicing and distribution expenses and arrangements. All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets. SECURITY VALUATIONS -- Securities traded primarily on a principal securities exchange are valued at the last reported sales price, or at the mean of the latest bid and asked prices where no last sales price is available. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official close price. Debt securities not traded on a principal securities exchange are valued through a commercial pricing service or at the mean of the most recent bid and asked prices. Discount notes may be valued through a commercial pricing service or at amortized cost, which approximates fair value. If the 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 the value, including accrued interest, of (continued) - ------ 13 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 or American Century Global Investment Management, Inc. (ACGIM), 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. 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 SEPTEMBER 30, 2005 (UNAUDITED) 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 six months ended September 30, 2005 was 1.15%, 0.95%, and 0.90% for the Investor, Institutional and Advisor Classes, respectively. DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master Distribution and Shareholder Services Plan (the plan) for the Advisor Class, pursuant to Rule 12b-1 of the 1940 Act. The plan provides that the Advisor Class will pay American Century Investment Services, Inc. (ACIS) an annual distribution fee equal to 0.25% and an annual service fee equal to 0.25%. The fees are computed and accrued daily based on the Advisor Class's daily net assets and paid monthly in arrears. The distribution fee provides compensation for expenses incurred by financial intermediaries in connection with distributing shares of the Advisor Class including, but not limited to, payments to brokers, dealers, and financial institutions that have entered into sales agreements with respect to shares of the fund. The service fee provides compensation for shareholder and administrative services rendered by ACIS, its affiliates or independent third party providers. Fees incurred under the plan during the six months ended September 30, 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. 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. The fund has a bank line of credit agreement with JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the fund and a wholly owned subsidiary of JPM. 3. INVESTMENT TRANSACTIONS Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2005, were as follows: - -------------------------------------------------------------------------------- Purchases $1,102,378,117 - -------------------------------------------------------------------------------- Proceeds from sales $ 935,389,340 - -------------------------------------------------------------------------------- (continued) - ------ 15 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the fund were as follows: - -------------------------------------------------------------------------------- SHARES AMOUNT - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 70,000,000 ================================================================================ Sold 8,148,389 $ 214,313,321 - ---------------------------------------------- Issued in reinvestment of distributions 237,811 6,439,172 - ---------------------------------------------- Redeemed (4,845,550) (125,801,856) - -------------------------------------------------------------------------------- Net increase (decrease) 3,540,650 $ 94,950,637 ================================================================================ 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 38,518,536 - ---------------------------------------------- Redeemed (10,532,821) (238,141,936) - -------------------------------------------------------------------------------- Net increase (decrease) 5,443,859 $ 137,208,552 ================================================================================ INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 20,000,000 ================================================================================ Sold 2,618,827 $ 68,895,409 - ---------------------------------------------- Issued in reinvestment of distributions 77,887 2,108,750 - ---------------------------------------------- Redeemed (1,236,711) (32,162,560) - -------------------------------------------------------------------------------- Net increase (decrease) 1,460,003 $ 38,841,599 ================================================================================ 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 (decrease) 2,586,867 $ 64,274,889 ================================================================================ ADVISOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2005 SHARES AUTHORIZED 20,000,000 ================================================================================ Sold 2,842,169 $ 74,593,978 - ---------------------------------------------- Issued in reinvestment of distributions 71,620 1,944,378 - ---------------------------------------------- Redeemed (1,210,628) (31,433,747) - -------------------------------------------------------------------------------- Net increase (decrease) 1,703,161 $ 45,104,609 ================================================================================ 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 (decrease) 3,377,961 $ 79,713,741 ================================================================================ (continued) - ------ 16 Notes to Financial Statements SEPTEMBER 30, 2005 (UNAUDITED) 5. AFFILIATED COMPANY TRANSACTIONS If a fund's holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2005 follows: - ------------------------------------------------------------------------------------------------------------------ SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND SEPTEMBER 30, 2005 FUND/COMPANY 3/31/05 COST COST GAIN INCOME SHARE BALANCE MARKET VALUE - ------------------------------------------------------------------------------------------------------------------ REAL ESTATE - ------------------------------------------------------------------------------------------------------------------ Mid-America Apartment Communities Inc.(1) 805,900 $13,834,559 $17,455,476 $1,545,847 $913,694 717,542 $33,372,878 ================================================================================================================== (1) Company was not an affiliate at September 30, 2005. 6. BANK LINE OF CREDIT The fund, along with certain other funds managed by ACIM or ACGIM, has a $575,000,000 unsecured bank line of credit agreement with JPMCB. The fund may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund did not borrow from the line during the six months ended September 30, 2005. 7. 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. 8. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. As of September 30, 2005, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- COMPONENTS OF DISTRIBUTABLE EARNINGS AND TAX COST - -------------------------------------------------------------------------------- Federal tax cost of investments $1,031,547,111 ================================================================================ Gross tax appreciation of investments $133,616,930 - -------------------------------------------------------------- Gross tax depreciation of investments (7,917,586) - -------------------------------------------------------------------------------- Net tax appreciation (depreciation) of investments $125,699,344 ================================================================================ 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. - ------ 17 Real Estate - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------------ INVESTOR CLASS - ------------------------------------------------------------------------------------------------------ 2005(1) 2005 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------ PER-SHARE DATA - ------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $23.24 $23.09 $15.83 $16.22 $14.00 $11.74 - ------------------------------------------------------------------------------------------------------ Income From Investment Operations - ------------------------------------ Net Investment Income(2) 0.33 0.46 0.46 0.59 0.57 0.58 - ------------------------------------ Net Realized and Unrealized Gain (Loss) 3.97 1.79 7.49 (0.44) 2.21 2.27 - ------------------------------------------------------------------------------------------------------ Total From Investment Operations 4.30 2.25 7.95 0.15 2.78 2.85 - ------------------------------------------------------------------------------------------------------ Distributions - ------------------------------------ From Net Investment Income (0.27) (0.46) (0.54) (0.54) (0.56) (0.59) - ------------------------------------ From Net Realized Gains -- (1.64) (0.15) -- -- -- - ------------------------------------------------------------------------------------------------------ Total Distributions (0.27) (2.10) (0.69) (0.54) (0.56) (0.59) - ------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $27.27 $23.24 $23.09 $15.83 $16.22 $14.00 ====================================================================================================== TOTAL RETURN(3) 18.52% 9.53% 50.97% 0.93% 20.23% 24.57% - ------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------ Ratio of Operating Expenses to Average Net Assets 1.15%(4) 1.16% 1.17% 1.18% 1.20% 1.19% - ------------------------------------ Ratio of Net Investment Income to Average Net Assets 2.51%(4) 1.88% 2.28% 3.74% 3.83% 4.35% - ------------------------------------ Portfolio Turnover Rate 95% 171% 158% 162% 156% 242% - ------------------------------------ Net Assets, End of Period (in thousands) $709,988 $522,676 $393,604 $134,898 $107,599 $74,776 - ------------------------------------------------------------------------------------------------------ (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 18 Real Estate - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - --------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - --------------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - --------------------------------------------------------------------------------------------------- PER-SHARE DATA - --------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $23.25 $23.10 $15.85 $16.23 $14.01 $11.75 - --------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------ Net Investment Income(2) 0.35 0.44 0.51 0.63 0.59 0.60 - ------------------------------------ Net Realized and Unrealized Gain (Loss) 3.99 1.86 7.47 (0.44) 2.22 2.28 - --------------------------------------------------------------------------------------------------- Total From Investment Operations 4.34 2.30 7.98 0.19 2.81 2.88 - --------------------------------------------------------------------------------------------------- Distributions - ------------------------------------ From Net Investment Income (0.30) (0.51) (0.58) (0.57) (0.59) (0.62) - ------------------------------------ From Net Realized Gains -- (1.64) (0.15) -- -- -- - --------------------------------------------------------------------------------------------------- Total Distributions (0.30) (2.15) (0.73) (0.57) (0.59) (0.62) - --------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $27.29 $23.25 $23.10 $15.85 $16.23 $14.01 =================================================================================================== TOTAL RETURN(3) 18.68% 9.74% 51.14% 1.19% 20.45% 24.80% - --------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.95%(4) 0.96% 0.97% 0.98% 1.00% 0.99% - ------------------------------------ Ratio of Net Investment Income to Average Net Assets 2.71%(4) 2.08% 2.48% 3.94% 4.03% 4.55% - ------------------------------------ Portfolio Turnover Rate 95% 171% 158% 162% 156% 242% - ------------------------------------ Net Assets, End of Period (in thousands) $207,886 $143,183 $82,488 $23,371 $16,305 $12,390 - --------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 19 Real Estate - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED) - --------------------------------------------------------------------------------------------------- ADVISOR CLASS - --------------------------------------------------------------------------------------------------- 2005(1) 2005 2004 2003 2002 2001 - --------------------------------------------------------------------------------------------------- PER-SHARE DATA - --------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $23.26 $23.11 $15.83 $16.22 $14.00 $11.74 - --------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------ Net Investment Income(2) 0.30 0.35 0.42 0.55 0.53 0.55 - ------------------------------------ Net Realized and Unrealized Gain (Loss) 3.98 1.84 7.50 (0.44) 2.21 2.27 - --------------------------------------------------------------------------------------------------- Total From Investment Operations 4.28 2.19 7.92 0.11 2.74 2.82 - --------------------------------------------------------------------------------------------------- Distributions - ------------------------------------ From Net Investment Income (0.24) (0.40) (0.49) (0.50) (0.52) (0.56) - ------------------------------------ From Net Realized Gains -- (1.64) (0.15) -- -- -- - --------------------------------------------------------------------------------------------------- Total Distributions (0.24) (2.04) (0.64) (0.50) (0.52) (0.56) - --------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $27.30 $23.26 $23.11 $15.83 $16.22 $14.00 =================================================================================================== TOTAL RETURN(3) 18.41% 9.30% 50.66% 0.69% 19.93% 24.28% - --------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.40%(4) 1.41% 1.42% 1.43% 1.45% 1.44% - ------------------------------------ Ratio of Net Investment Income to Average Net Assets 2.26%(4) 1.63% 2.03% 3.49% 3.58% 4.10% - ------------------------------------ Portfolio Turnover Rate 95% 171% 158% 162% 156% 242% - ------------------------------------ Net Assets, End of Period (in thousands) $236,139 $161,592 $82,471 $19,278 $16,759 $9,046 - --------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2005 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 20 Approval of Management Agreement for Real Estate Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund's independent directors (the "Directors") each year. At American Century, this process -- referred to as the "15(c) Process" -- involves at least two board meetings spanning a 30 to 60 day period each year. In addition to this annual review, the board of directors and its committees oversee and evaluate at quarterly meetings the nature and quality of significant services the advisor performs on behalf of the fund. At these meetings the board reviews fund performance, shareholder services and feedback, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. The board, or committees of the board, also hold special meetings, as needed. Under a new Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for its board's approval or renewal of any advisory agreements within the fund's most recently completed fiscal half-year period. ANNUAL CONTRACT REVIEW PROCESS As part of the annual 15(c) Process undertaken during the most recent fiscal half-year, the Directors requested and received extensive data and information compiled by the advisor and certain independent providers of evaluative data (the "Independent 15(c) Providers") concerning Real Estate (the "fund") and the services provided to the fund under the management agreement. The information included, but was not limited to: * the nature, extent and quality of investment management, shareholder services and other services provided to the fund under the management agreement; * reports on the advisor's activities relating to the wide range of programs and services the advisor provides to the fund and its shareholders on a routine and non-routine basis; * data comparing the cost of owning the fund to the cost of owning similar funds; * data comparing the fund's performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; * financial data showing the profitability of the fund to the advisor and the overall profitability of the advisor; and * data comparing services provided and charges to other investment management clients of the advisor. In keeping with its practice, the fund's board of directors held two regularly scheduled meetings and two special meetings to review and discuss the information provided by the advisor and the Independent 15(c) Providers and to complete its negotiations with the advisor regarding the renewal of the management agreement, including the setting of the applicable advisory fee. In addition, the independent directors met on several occasions in private session to review and discuss the information provided and evaluate the advisor's performance as manager of the fund. (continued) - ------ 21 Approval of Management Agreement for Real Estate FACTORS CONSIDERED The Directors considered all of the information provided by the advisor, the Independent 15(c) Providers, and its independent counsel and evaluated such information for each fund for which the board has responsibility. The Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the agreement under the terms ultimately determined by the board to be appropriate, the Directors' decision was based on the following factors. NATURE, EXTENT AND QUALITY OF SERVICES -- GENERALLY. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the fund. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including, but not limited to: * fund construction and design * portfolio security selection * initial capitalization/funding * securities trading * custody of fund assets * daily valuation of the fund's portfolio * shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping and communications * legal services * regulatory and portfolio compliance * financial reporting * marketing and distribution The Directors noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings. INVESTMENT MANAGEMENT SERVICES. The nature of the investment management services provided is quite complex and allows fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes, and liquidity. In evaluating investment performance, the board expects the advisor to manage the fund in accordance with its investment objective and approved strategies. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. At each quarterly meeting the Directors review investment performance information for the fund, together with comparative information for appropriate benchmarks and a peer group of funds managed similarly to the fund. If performance concerns are identified, the Directors discuss with the advisor and its portfolio managers the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Annually, the Directors review (continued) - ------ 22 Approval of Management Agreement for Real Estate detailed performance information, as provided by the Independent 15(c) Providers, comparing the fund's performance with that of similar funds not managed by the advisor. During the past year, the fund's performance was below the median of its peer group. The fund's performance was above the median for the three year period. The Directors discussed the fund's performance with the advisor and was satisfied with the efforts being undertaken by the advisor. The Directors will continue to monitor those efforts and the performance of the fund. SHAREHOLDER AND OTHER SERVICES. The advisor provides the fund with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at its regular quarterly meetings, including the annual meeting concerning contract review. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor. COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor provides detailed information concerning its cost of providing various services to the fund, its profitability in managing the fund, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor's financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. ETHICS OF THE ADVISOR. The Directors generally considered the advisor's commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor's practices generally meet or exceed industry best practices and that the advisor was not implicated in the industry scandals of 2003 and 2004. ECONOMIES OF SCALE. The Directors review reports provided by the advisor on economies of scale for the complex as a whole and the year-over-year changes in revenue, costs, and profitability. The Directors concluded that economies of scale are difficult to measure with precision, particularly on a fund-by-fund basis. This analysis is further complicated by the fact that the advisor is required to make a continuing reinvestment in the business to provide additional content and services for fund shareholders. Accordingly, the Directors also seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the (continued) - ------ 23 Approval of Management Agreement for Real Estate advisor generally, the profitability of its management of the fund specifically, the expenses incurred by the advisor in providing various services to the fund, and the breakpoint fees of competitive funds not managed by the advisor. The Directors believe the advisor is appropriately sharing any economies of scale through a competitive fee structure, through breakpoints that reduce fees as the fund increases in size, and through reinvestment in its business to provide shareholders additional content and services. COMPARISON TO OTHER FUNDS' FEES. The fund pays the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the fund's independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other fund groups are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other fund groups may be increased without shareholder approval. The board believes the unified fee structure is a benefit to fund shareholders because it clearly discloses to shareholders the cost of owning fund shares, and, since the unified fee cannot be increased without a vote of fund shareholders, it shifts to the advisor the increased costs of operating the funds and the risk of administrative inefficiencies. Part of the Directors' analysis of fee levels involves comparing the fund's unified fee to the total expense ratio of other funds in the fund's peer group. The unified fee charged to shareholders of the fund was below the median of the total expense ratios of its peer group. COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the fund. The Directors analyzed this information and concluded that the fees charged and services provided to the fund were reasonable by comparison. COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information from the advisor concerning collateral benefits it receives as a result of its relationship with the fund. They concluded that the advisor's primary business is managing mutual funds and it generally does not use the fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is (continued) - ------ 24 Approval of Management Agreement for Real Estate able to provide investment management services to clients other than the fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Directors concluded, however, that the assets of those other clients are modest in comparison to the funds and that, in any event, the addition of such other assets to the assets of the funds that use substantially the same investment management team and strategy to determine whether breakpoints have been achieved captures for the shareholders a portion of any benefit that exists by accelerating fee reductions as breakpoints are reached at lower fund asset levels. CONCLUSIONS OF THE DIRECTORS As a result of this process, the independent directors, assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor and the Independent 15(c) Providers, concluded that the investment management agreement between the fund and the advisor is fair and reasonable in light of the services provided and should be renewed. - ------ 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 certain financial intermediaries (such as banks, broker-dealers, insurance companies and investment advisors), which may require payment of a transaction fee to the financial intermediary. 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 unified management fee of Institutional Class shares is 0.20% less than the unified management fee 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. 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. - ------ 27 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 an investment products available for purchase. The MORGAN STANLEY CAPITAL INTERNATIONAL US REAL ESTATE INVESTMENT TRUST (MSCI US 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. - ------ 28 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. 0511 SH-SAN-45973N American Century Investment Services, Inc., Distributor (c)2005 American Century Proprietary Holdings, Inc. All rights reserved.
ITEM 2. CODE OF ETHICS. Not applicable for semiannual report filings. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for semiannual report filings. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable for semiannual report filings. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. The schedule of investments is included as part of the report to stockholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. 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. During the reporting period, there were no material changes to the procedures by which shareholders may recommend nominees to the registrant's board. 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) Not applicable for semiannual report filings. (a)(2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are filed and attached hereto as Exhibit 99.302CERT. (a)(3) Not applicable. (b) A certification by the registrant's chief executive officer and chief financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is furnished and attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. By: /s/ William M. Lyons -------------------------------------------- Name: William M. Lyons Title: President Date: November 29, 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: November 29, 2005 By: /s/ Maryanne L. Roepke -------------------------------------------- Name: Maryanne L. Roepke Title: Sr. Vice President, Treasurer, and Chief Accounting Officer (principal financial officer) Date: November 29, 2005