UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-7820
---------------------------------------------
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
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(Exact name of registrant as specified in charter)
4500 MAIN STREET, KANSAS CITY, MISSOURI 64111
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(Address of principal executive offices) (Zip code)
DAVID C. TUCKER, ESQ., 4500 MAIN STREET, 9TH FLOOR, KANSAS CITY, MISSOURI 64111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 816-531-5575
-----------------------------
Date of fiscal year end: MARCH 31
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Date of reporting period: MARCH 31, 2006
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ITEM 1. REPORTS TO STOCKHOLDERS.
American Century Investments
ANNUAL REPORT
[photo of boy]
MARCH 31, 2006
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
Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
One-Year Total Returns . . . . . . . . . . . . . . . . . . . . . . . . . 2
EQUITY INCOME
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Top Five Industries. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Types of Investments in Portfolio. . . . . . . . . . . . . . . . . . . . 6
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 7
MID CAP VALUE
Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Top Ten Holdings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Top Five Industries . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . . 14
Schedule of Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 15
SMALL CAP VALUE
Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Top Ten Holdings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Top Five Industries . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . . 21
Schedule of Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Shareholder Fee Examples . . . . . . . . . . . . . . . . . . . . . . . . . 26
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Report of Independent Registered Public Accounting Firm. . . . . . . . . . 56
OTHER INFORMATION
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Share Class Information. . . . . . . . . . . . . . . . . . . . . . . . . . 60
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Index Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
The opinions expressed in the Market Perspective and each of the Portfolio
Commentaries reflect those of the portfolio management team as of the date of
the report, and do not necessarily represent the opinions of American Century or
any other person in the American Century organization. Any such opinions are
subject to change at any time based upon market or other conditions and American
Century disclaims any responsibility to update such opinions. These opinions may
not be relied upon as investment advice and, because investment decisions made
by American Century funds are based on numerous factors, may not be relied upon
as an indication of trading intent on behalf of any American Century fund.
Security examples are used for representational purposes only and are not
intended as recommendations to purchase or sell securities. Performance
information for comparative indices and securities is provided to American
Century by third party vendors. To the best of American Century's knowledge,
such information is accurate at the time of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
JAMES E. STOWERS III WITH JAMES E. STOWERS, JR.
We are pleased to provide you with the annual report for the American Century
Equity Income, Mid Cap Value, and Small Cap Value funds for the 12 months ended
March 31, 2006. We hope you find this information helpful in monitoring your
investment. Another useful resource we offer is our Web site,
americancentury.com, where we post quarterly portfolio commentaries, the views
of our senior investment officers, and other communications about investments,
portfolio strategy, and the markets.
Our Web site currently highlights American Century's recently-announced
strategic collaboration with Lance Armstrong and the Lance Armstrong Foundation
(LAF). Our new campaign, featuring Lance, is designed to encourage investors to
take a more active role in planning their financial futures and make every
investment decision count.
American Century's collaboration with Lance Armstrong and the LAF is a perfect
fit. Like members of our family, Lance is a cancer survivor, and shares our
values of optimism, focus, and determination. In addition, Lance and our family
have dedicated our success to improving lives, through the LAF and the Stowers
Institute for Medical Research, respectively. To learn more about American
Century's collaboration with Lance Armstrong and the LAF, please visit
www.lanceface.com on the Web and click on the links to related sites.
Besides the exciting new collaboration, we've enjoyed other good news -- in
January, American Century was named, for the seventh consecutive year, one of
FORTUNE magazine's 100 Best Companies to Work For in America. Fostering a
positive work environment can benefit fund investors as well as our company --
it helps us continue to attract and retain talented people.
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.
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1
Market Perspective
[photo of Phil Davidson]
BY PHIL DAVIDSON, CHIEF INVESTMENT OFFICER, U.S. VALUE EQUITIES
Despite persistently high oil prices, investor uneasiness about inflation and
rising interest rates -- factors that typically weigh on equities -- stocks
advanced strongly during the 12 months ended March 31, 2006. Helped by a 4% gain
during the first quarter of this year, the S&P 500 Index, representative of the
broad market, was up almost 12% for the same period.
In the value realm, small- and mid-sized companies had the highest returns for
the 12 month period, as evidenced by the Russell 2000 Value Index's gain of
almost 24%. Larger value companies, tracked by the Russell 1000 Value Index,
were up a little over 13%. On the whole, growth shares performed better than
value at the small end of the capitalization range; value stocks had a slight
edge among larger businesses.
All that said, for many investors, stocks still have a way to go. The S&P 500
closed the period still 15% off its March 2000 record high; the Nasdaq Composite
is still 54% behind its 2000 zenith.
YEAR OF ENERGY
With oil prices increasing 20% over the period, reaching nearly $70 a barrel,
energy companies contributed most to the S&P 500's return. Financials followed,
as an active stock market and burgeoning merger and acquisition activity lifted
capital markets companies and low interest rates fueled real estate stocks.
The high-priced energy situation cut both ways, though, as it pressured the
earnings of large users of energy, either in their products or their production,
as well as companies caught in the ripple effect of higher prices at the pump.
Affected businesses ranged from automakers and chemical companies, to food
products companies and restaurants, to retailers that operate giant fleets of
trucks.
NARROW MARKET, LOW QUALITY
Many managers of diversified value portfolios faced two additional headwinds: a
narrow market dominated by energy stocks for much of the period, and a
continuing rally in lower-quality shares as investors rewarded stocks rated B or
lower (Standard & Poor's defines high-quality stocks as B+ or higher). A+
shares, representing many of the market's strongest and most stable companies,
actually had the lowest returns for the period. Historically, market cycles led
by lower-quality stocks have tended to dampen the returns of American Century's
value funds, which generally seek higher-quality value stocks.
ONE-YEAR TOTAL RETURNS
AS OF MARCH 31, 2006
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S&P 500 Index 11.73%
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Dow Jones Industrial Average 8.27%
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Nasdaq Composite Index 18.02%
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2
Equity Income - Performance
TOTAL RETURNS AS OF MARCH 31, 2006
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AVERAGE ANNUAL RETURNS
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SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
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INVESTOR CLASS 7.21% 9.95% 12.39% 13.70% 8/1/94
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RUSSELL 3000 VALUE INDEX(1) 14.20% 8.42% 11.16% 12.82%(2) --
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S&P 500 INDEX(1) 11.73% 3.97% 8.95% 11.25%(2) --
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LIPPER EQUITY INCOME INDEX(1) 11.49% 5.89% 8.45% 9.91%(2) --
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Lipper Equity Income Ranking(1) 201 of 223 12 of 126 1 of 74 1 of 53(2) --
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Morningstar Large Value Ranking(3) 1019 of 1328 41 of 739 7 of 355 10 of 259(2) --
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Institutional Class 7.29% 10.13% -- 9.92% 7/8/98
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Advisor Class 6.94% 9.68% -- 11.26% 3/7/97
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C Class 6.02% -- -- 7.85% 7/13/01
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R Class 6.56% -- -- 11.18% 8/29/03
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(1) Data provided by Lipper Inc. - A Reuters Company. (c) 2006 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.
Lipper Rankings - Rankings are based only on the universe shown and are
based on average annual returns. This listing might not represent the
complete universe of funds tracked by Lipper Inc.
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 and may be incomplete. No offer or solicitations to buy or sell any
of the securities herein is being made by Lipper.
(2) Since 7/31/94, the date nearest the Investor Class's inception for which
data are available.
(3) (c) 2006 Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar and/or its content providers:
(2) may not be copied or distributed; and (3) is not warranted to be
accurate, complete or timely. Neither Morningstar nor its content providers
are responsible for any damages or losses arising from any use of this
information. Morningstar Rankings are based on risk adjusted returns.
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 and ranking 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)
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3
Equity Income - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made March 31, 1996
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended March 31
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1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
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Investor Class 16.23% 37.78% -0.44% 3.88% 20.85% 17.35% -12.09% 31.30% 10.69% 7.21%
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Russell 3000
Value Index 17.83% 46.78% 2.51% 6.81% 1.48% 5.67% -22.79% 42.45% 12.88% 14.20%
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S&P 500 Index 19.83% 48.00% 18.46% 17.94% -21.68% 0.24% -24.76% 35.12% 6.69% 11.73%
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Lipper Equity
Income Index 14.99% 37.71% 1.59% 3.25% 1.73% 3.91% -22.91% 35.57% 9.96% 11.49%
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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.
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4
Equity Income - Portfolio Commentary
PORTFOLIO MANAGERS: PHIL DAVIDSON, SCOTT MOORE AND KEVIN TONEY
Equity Income gained 7.21%* for the 12 months ended March 31, 2006, trailing the
Lipper Equity Income Index, which was up 11.49%. The Russell 3000 Value Index,
indicative of the value side of the stock market, advanced 14.20%. The S&P 500
Index, representative of the broad market, gained 11.73%.
The portfolio's latest annual results reflect an equities market in which
investors generally preferred lower-quality, higher-beta, momentum-driven
stocks. In contrast, Equity Income steers toward higher-quality businesses with
strong market positions and attractive dividend yields. In addition, among value
stocks, returns on larger-capitalization issues trailed those of small-cap
stocks.
The portfolio's long-term performance has been strong. Equity Income's ten-year
average annualized return of 12.39% ranks the fund #1 against 74 competitors in
its Lipper peer group and in the top 3% of its Morningstar Large Value Category.
Additionally, from the fund's inception on August 1, 1994, Equity Income has
produced an average annualized return of 13.70%, significantly ahead of the
9.91%** return posted by the Lipper Equity Income Index and the Russell 3000
Value Index's 12.82%** figure. The S&P 500 has an 11.25%** average annualized
return for the same period.
FINANCIALS LEAD PORTFOLIO
Financial stocks proved to be the portfolio's largest contributors to our
absolute results, led by shares of commercial banks and selected investments in
real estate investment trusts (REITs). On the bank side, performance was paced
by two of our largest holdings, Commerce Bancshares and Bank of America Corp.
Commerce Bancshares operates mainly in Missouri, Kansas and Illinois. This
regional bank has one of the strongest balance sheets in the industry, is
conservative in its risk management, and earns very good returns. The result is
high levels of excess capital, which the bank is applying toward a significant
share buyback program and continued dividend growth.
Many commercial banks were slowed during the period by rising short term
interest rates (a rising cost for capital). While Bank of America was not immune
to the earnings-slowing effects of a "flat yield curve," we are attracted to its
leading market share in domestic deposits and the stock's 4.4% yield.
In real estate, Rayonier, Inc. was a top contributor. Based in Florida, the
company owns and manages timberland
TOP TEN HOLDINGS
AS OF MARCH 31, 2006
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% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
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Exxon Mobil Corp. 4.7% 3.5%
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American International Group, Inc.,
1.52%, 11/9/31 4.4% 2.1%
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International Paper Co.,
3.74%, 6/20/21 3.8% 3.1%
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Bank of America Corp. 3.6% 4.7%
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Verizon Global Funding
Corp., 0.11%, 5/15/21 3.6% 3.1%
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General Electric Co. 2.5% --
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BP plc ADR 2.5% 2.1%
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Commerce
Bancshares, Inc. 2.4% 2.9%
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Kraft Foods Inc. Cl A 2.3% 2.9%
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Ameren Corp. 2.3% 1.6%
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* All fund returns and rankings referenced in this commentary
are for Investor Class shares.
** Since 7/31/94, the date nearest the Investor Class's
inception for which data are available. (continued)
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5
Equity Income - Portfolio Commentary
in the U.S. and New Zealand. Rayonier is benefiting from rising timber prices
and strong real estate markets, and is returning money to investors. In
September, the company announced a 14% increase in its dividend.
INDUSTRIALS ADD VALUE
In industrials, we were rewarded for taking positions in commercial services
companies, particularly in the waste management field. Among our standouts was
Waste Management Inc., the largest solid waste management concern in the world.
The company is benefiting from continued operational improvements, which have
led to a 10% dividend increase and a repurchase of 4.5% of its stock over the
last year. Long-time holding Republic Services Inc., another leading waste
management firm, reported record earnings for 2005. In addition to raising its
dividend 17% during the period, Republic Services announced plans to repurchase
nearly 10% of its stock during 2006.
SOME DISAPPOINTMENTS
Despite these successes, we suffered setbacks that contributed to our
underperformance. In materials, E.I. du Pont de Nemours & Co. was our
top-detracting stock. High energy and raw materials costs have dampened earnings
of chemical companies like Du Pont, which has also been hurt by slowing growth
in key end markets like autos. We think the issues affecting Du Pont are
manageable, and continue to own the stock.
In media, our investment in Tribune Company, which publishes several major
newspapers, declined as the industry faced poor circulation trends and a weak
advertising environment. We have confidence in Tribune's longer-term risk-reward
profile.
LOOKING AHEAD
The portfolio can be a core investment for investors who want to take a "toned
down" approach to the stock market, or can also act as an effective diversifier
for more aggressive equity portfolios. 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 over time.
TYPES OF INVESTMENTS IN PORTFOLIO
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% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
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Common Stocks
and Options 67.1% 68.8%
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Convertible Bonds 27.9% 26.4%
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Convertible
Preferred Stocks 3.3% 4.4%
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TOTAL EQUITY EXPOSURE 98.3% 99.6%
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Temporary Cash
Investments 0.8% 1.4%
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Other Assets
and Liabilities 0.9% (1.0)%
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TOP FIVE INDUSTRIES
AS OF MARCH 31, 2006
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% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
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Oil, Gas &
Consumable Fuels 10.8% 8.6%
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Commercial Banks 9.3% 11.4%
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Diversified Telecommunication
Services 8.0% 8.1%
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Insurance 7.6% 5.3%
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Pharmaceuticals 6.3% 4.2%
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6
Equity Income - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 67.1%
AEROSPACE & DEFENSE -- 0.8%
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983,445 Honeywell International Inc. $ 42,061,943
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS -- 1.0%
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628,000 United Parcel
Service, Inc. Cl B 49,850,640
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BEVERAGES -- 1.5%
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1,017,600 Anheuser-Busch
Companies, Inc. 43,522,752
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794,300 Coca-Cola Company (The) 33,257,341
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76,780,093
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BUILDING PRODUCTS -- 1.0%
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1,570,700 Masco Corp. 51,032,043
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CHEMICALS -- 2.4%
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243,700 Air Products &
Chemicals, Inc. 16,374,203
- --------------------------------------------------------------------------------
1,353,600 du Pont (E.I.)
de Nemours & Co. 57,135,456
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356,600 Ferro Corp. 7,132,000
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1,259,400 International Flavors
& Fragrances Inc. 43,222,608
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123,864,267
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COMMERCIAL BANKS -- 9.3%
- --------------------------------------------------------------------------------
4,088,800 Bank of America Corp. 186,203,951
- --------------------------------------------------------------------------------
2,350,490 Commerce Bancshares, Inc. 121,449,818
- --------------------------------------------------------------------------------
1,089,217 Fifth Third Bancorp 42,871,581
- --------------------------------------------------------------------------------
686,050 Mercantile Bankshares
Corporation 26,378,623
- --------------------------------------------------------------------------------
1,369,900 SunTrust Banks, Inc. 99,673,924
- --------------------------------------------------------------------------------
476,577,897
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 3.8%
- --------------------------------------------------------------------------------
2,089,200 Pitney Bowes, Inc. 89,689,356
- --------------------------------------------------------------------------------
1,179,824 Republic Services, Inc. Cl A 50,154,318
- --------------------------------------------------------------------------------
1,617,045 Waste Management, Inc. 57,081,689
- --------------------------------------------------------------------------------
196,925,363
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------
217,100 Nokia Oyj ADR 4,498,312
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 0.3%
- --------------------------------------------------------------------------------
361,931 Diebold, Inc. 14,875,364
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.6%
- --------------------------------------------------------------------------------
1,031,900 Bemis Co., Inc. 32,587,402
- --------------------------------------------------------------------------------
DISTRIBUTORS -- 1.0%
- --------------------------------------------------------------------------------
1,173,400 Genuine Parts Company 51,430,122
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.4%
- --------------------------------------------------------------------------------
1,684,600 BellSouth Corp. $ 58,371,390
- --------------------------------------------------------------------------------
599,944 Commonwealth Telephone
Enterprises, Inc. 20,668,071
- --------------------------------------------------------------------------------
279,780 Iowa Telecommunications
Services Inc. 5,338,202
- --------------------------------------------------------------------------------
1,098,800 Verizon Communications 37,425,128
- --------------------------------------------------------------------------------
121,802,791
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 4.4%
- --------------------------------------------------------------------------------
1,714,764 FPL Group, Inc. 68,830,626
- --------------------------------------------------------------------------------
1,842,978 IDACORP, Inc. 59,933,645
- --------------------------------------------------------------------------------
1,223,800 Pepco Holdings, Inc. 27,890,402
- --------------------------------------------------------------------------------
3,297,649 Westar Energy Inc. 68,624,076
- --------------------------------------------------------------------------------
225,278,749
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.9%
- --------------------------------------------------------------------------------
921,612 Hubbell Inc. Cl B 47,241,831
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 0.4%
- --------------------------------------------------------------------------------
457,900 Wal-Mart Stores, Inc. 21,631,196
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 4.0%
- --------------------------------------------------------------------------------
2,232,100 H.J. Heinz Company 84,641,232
- --------------------------------------------------------------------------------
3,945,229 Kraft Foods Inc. Cl A 119,579,891
- --------------------------------------------------------------------------------
204,221,123
- --------------------------------------------------------------------------------
GAS UTILITIES -- 3.3%
- --------------------------------------------------------------------------------
522,391 Cascade Natural Gas Corp.(1) 10,291,103
- --------------------------------------------------------------------------------
852,500 NICOR Inc. 33,724,900
- --------------------------------------------------------------------------------
2,055,476 Piedmont Natural Gas Co., Inc. 49,310,869
- --------------------------------------------------------------------------------
2,425,900 WGL Holdings Inc.(1) 73,795,878
- --------------------------------------------------------------------------------
167,122,750
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 0.3%
- --------------------------------------------------------------------------------
389,800 HCA Inc. 17,848,942
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.2%
- --------------------------------------------------------------------------------
622,000 Colgate-Palmolive Co. 35,516,200
- --------------------------------------------------------------------------------
1,295,600 Kimberly-Clark Corp. 74,885,680
- --------------------------------------------------------------------------------
110,401,880
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 2.5%
- --------------------------------------------------------------------------------
3,681,600 General Electric Co. 128,046,048
- --------------------------------------------------------------------------------
INSURANCE -- 2.1%
- --------------------------------------------------------------------------------
1,043,800 Allstate Corp. 54,392,418
- --------------------------------------------------------------------------------
293,304 Genworth Financial Inc. Cl A 9,805,153
- --------------------------------------------------------------------------------
1,508,836 Marsh & McLennan
Companies, Inc. 44,299,425
- --------------------------------------------------------------------------------
108,496,996
- --------------------------------------------------------------------------------
MEDIA -- 0.9%
- --------------------------------------------------------------------------------
64,900 Dow Jones & Co., Inc. 2,550,570
- --------------------------------------------------------------------------------
1,598,400 Tribune Co. 43,844,112
- --------------------------------------------------------------------------------
46,394,682
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
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7
Equity Income - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
METALS & MINING -- 0.6%
- --------------------------------------------------------------------------------
1,163,900 Compass Minerals
International Inc. $ 29,085,861
- --------------------------------------------------------------------------------
MULTI-UTILITIES -- 4.4%
- --------------------------------------------------------------------------------
2,349,174 Ameren Corp. 117,035,849
- --------------------------------------------------------------------------------
1,767,300 Consolidated Edison, Inc. 76,877,550
- --------------------------------------------------------------------------------
292,100 Puget Energy Inc. 6,186,678
- --------------------------------------------------------------------------------
1,286,500 XCEL Energy Inc. 23,349,975
- --------------------------------------------------------------------------------
223,450,052
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS -- 9.3%
- --------------------------------------------------------------------------------
1,838,300 BP plc ADR 126,732,402
- --------------------------------------------------------------------------------
653,080 Chevron Corp. 37,859,048
- --------------------------------------------------------------------------------
3,998,391 Exxon Mobil Corp. 243,341,871
- --------------------------------------------------------------------------------
1,094,492 Royal Dutch Shell plc ADR 68,143,072
- --------------------------------------------------------------------------------
476,076,393
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------
105,883 Weyerhaeuser Co. 7,669,106
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 4.7%
- --------------------------------------------------------------------------------
1,954,700 Abbott Laboratories 83,016,110
- --------------------------------------------------------------------------------
409,500 Bristol-Myers Squibb Co. 10,077,795
- --------------------------------------------------------------------------------
923,400 Eli Lilly and Company 51,064,020
- --------------------------------------------------------------------------------
1,348,941 Merck & Co., Inc. 47,523,191
- --------------------------------------------------------------------------------
1,931,796 Pfizer Inc. 48,140,356
- --------------------------------------------------------------------------------
239,821,472
- --------------------------------------------------------------------------------
REAL ESTATE -- 0.3%
- --------------------------------------------------------------------------------
326,083 Rayonier, Inc. 14,866,124
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.6%
- --------------------------------------------------------------------------------
1,589,200 Intel Corp. 30,751,020
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 0.2%
- --------------------------------------------------------------------------------
603,800 Gap, Inc. (The) 11,278,984
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 1.4%
- --------------------------------------------------------------------------------
707,600 Freddie Mac 43,163,600
- --------------------------------------------------------------------------------
1,188,873 Washington Federal, Inc. 28,770,727
- --------------------------------------------------------------------------------
71,934,327
- --------------------------------------------------------------------------------
TOBACCO -- 0.3%
- --------------------------------------------------------------------------------
381,900 UST Inc. 15,887,040
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $3,072,201,491) 3,439,790,813
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 27.9%
BUILDING PRODUCTS -- 0.7%
- --------------------------------------------------------------------------------
$ 80,460,000 Masco Corp.,
2.95%, 7/20/31(2) $ 37,413,900
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 0.1%
- --------------------------------------------------------------------------------
124,400 Merrill Lynch & Co., Inc.,
(convertible into Nuveen Investments),
6.75%, 10/15/07 (Acquired 4/12/05-5/4/05,
Cost $4,209,581)(3)(4) 5,311,134
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 0.6%
- --------------------------------------------------------------------------------
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)(3)(4) 10,803,324
- --------------------------------------------------------------------------------
835,600 Morgan Stanley, (convertible
into Cisco Systems, Inc.),
5.90%, 5/12/06 (Acquired 5/5/05,
Cost $14,986,486)(3)(4) 16,365,226
- --------------------------------------------------------------------------------
27,168,550
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 0.2%
- --------------------------------------------------------------------------------
341,800 Morgan Stanley, (convertible
into Dell Inc.), 7.10%, 5/8/06
(Acquired 11/1/05,
Cost $9,980,560)(3)(4) 10,351,413
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 5.6%
- --------------------------------------------------------------------------------
103,261,000 Commonwealth Telephone Enterprises, Inc.,
3.25%, 7/15/23 102,357,466
- --------------------------------------------------------------------------------
288,005,000 Verizon Global Funding Corp.,
0.11%, 5/15/21 183,963,194
- --------------------------------------------------------------------------------
286,320,660
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.1%
- --------------------------------------------------------------------------------
458,000 Goldman Sachs Group, Inc. (The),
(convertible into AVX Corporation),
6.50%, 5/4/06 (Acquired 4/26/05,
Cost $4,978,460)(3)(4) 5,653,094
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.9%
- --------------------------------------------------------------------------------
1,799,200 Lehman Brothers Holdings Inc.,
(convertible into General
Mills, Inc.), 6.25%, 10/15/07(3) 47,678,800
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.2%
- --------------------------------------------------------------------------------
184,200 Credit Suisse Securities USA LLC,
(convertible into Beckman Coulter, Inc.),
9.13%, 9/7/06(3) 10,063,767
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
8
Equity Income - Schedule of Investments
MARCH 31, 2006
Principal Amount Value
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 0.3%
- --------------------------------------------------------------------------------
$ 413,200 Citigroup Funding Inc.,
(convertible into Outback Steakhouse, Inc.),
9.05%, 8/24/06(3) $ 17,792,227
- --------------------------------------------------------------------------------
INSURANCE -- 5.1%
- --------------------------------------------------------------------------------
327,092,000 American International
Group, Inc., 1.52%, 11/9/31(2) 224,466,884
- --------------------------------------------------------------------------------
175,000 Morgan Stanley, (convertible
into American International Group, Inc.),
5.60%, 4/6/06 (Acquired 6/29/05,
Cost $10,144,750)(3)(4) 11,137,875
- --------------------------------------------------------------------------------
129,300 Morgan Stanley, (convertible into
American International Group, Inc.),
6.45%, 4/7/06 (Acquired 4/1/05,
Cost $6,607,230)(3)(4) 7,537,544
- --------------------------------------------------------------------------------
307,900 Morgan Stanley, (convertible into
American International Group, Inc.),
7.05%, 6/7/06 (Acquired 5/31/05,
Cost $17,164,409)(3)(4) 18,752,650
- --------------------------------------------------------------------------------
261,894,953
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS -- 2.1%
- --------------------------------------------------------------------------------
102,138,000 Hasbro Inc., 2.75%, 12/1/21 107,117,228
- --------------------------------------------------------------------------------
MEDIA -- 0.8%
- --------------------------------------------------------------------------------
570,000 Lehman Brothers Holdings Inc.,
(convertible into Time Warner,
Inc.), 5.50%, 8/28/06(3) 9,764,100
- --------------------------------------------------------------------------------
22,332,000 Valassis Communications Inc.,
3.06%, 6/6/21(2) 14,180,820
- --------------------------------------------------------------------------------
17,500,000 Walt Disney Co.,
2.125%, 4/15/23 18,878,125
- --------------------------------------------------------------------------------
42,823,045
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 0.7%
- --------------------------------------------------------------------------------
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)(3)(4) 18,032,524
- --------------------------------------------------------------------------------
852,300 Credit Suisse Securities
USA LLC, (convertible into
Dollar General Corp.), 6.69%,
9/26/06(3) 15,115,540
- --------------------------------------------------------------------------------
33,148,064
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS -- 1.5%
- --------------------------------------------------------------------------------
32,558,000 Devon Energy Corporation,
(convertible into Chevron Corp.),
4.90%, 8/15/08 37,930,070
- --------------------------------------------------------------------------------
32,557,000 Devon Energy Corporation,
(convertible into Chevron Corp.),
4.95%, 8/15/08 37,928,905
- --------------------------------------------------------------------------------
75,858,975
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 3.8%
- --------------------------------------------------------------------------------
$342,601,000 International Paper Co.,
3.74%, 6/20/21(2) $ 195,282,570
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 0.9%
- --------------------------------------------------------------------------------
48,118,000 Watson Pharmaceuticals, Inc.,
1.75%, 3/15/23 44,509,150
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.0%
- --------------------------------------------------------------------------------
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)(3)(4) 10,874,442
- --------------------------------------------------------------------------------
17,500,000 Intel Corp., 2.95%, 12/15/35
(Acquired 3/7/06-3/29/06,
Cost $15,378,308)(3)(4) 15,093,750
- --------------------------------------------------------------------------------
715,000 Lehman Brothers Holdings Inc.
(convertible into Applied Materials
Inc.), 6.30%, 5/15/06(3) 12,718,778
- --------------------------------------------------------------------------------
671,000 Morgan Stanley, (convertible
into Applied Materials, Inc.), 8.20%,
4/30/06 (Acquired 4/18/05,
Cost $10,037,892)(3)(4) 10,920,525
- --------------------------------------------------------------------------------
49,607,495
- --------------------------------------------------------------------------------
SOFTWARE -- 2.5%
- --------------------------------------------------------------------------------
23,310,000 Veritas Software Corp.,
0.25%, 8/13/13 22,960,350
- --------------------------------------------------------------------------------
108,501,000 Veritas Software Corp., 0.25%,
8/13/13 (Acquired 7/9/04-5/18/05,
Cost $104,245,926)(3)(4) 106,873,485
- --------------------------------------------------------------------------------
129,833,835
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 0.7%
- --------------------------------------------------------------------------------
763,400 Lehman Brothers Holdings Inc.,
(convertible into The Gap, Inc.),
5.85%, 5/26/06
(Acquired 8/19/05,
Cost $15,115,320)(3)(4) 13,754,106
- --------------------------------------------------------------------------------
480,000 Lehman Brothers Holdings Inc.,
(convertible into The Gap, Inc.),
7.00%, 4/14/06 (Acquired 7/7/05,
Cost $10,167,312)(3)(4) 8,823,211
- --------------------------------------------------------------------------------
696,000 Merrill Lynch & Co., Inc.,
(convertible into The Gap, Inc.),
6.25%, 4/3/06 (Acquired 3/28/05,
Cost $15,012,720)(3)(4) 12,486,240
- --------------------------------------------------------------------------------
35,063,557
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.1%
- --------------------------------------------------------------------------------
200,000 Morgan Stanley, (convertible into
Jones Apparel Group, Inc.), 6.00%,
5/15/06 (Acquired 4/29/05,
Cost $6,077,220)(3)(4) 6,535,000
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(Cost $1,421,182,636) 1,429,427,417
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
9
Equity Income - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 3.3%
AEROSPACE & DEFENSE -- 1.3%
- --------------------------------------------------------------------------------
484,800 Northrop Grumman Corp.,
7.00%, 4/4/21 $ 65,326,800
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.1%
- --------------------------------------------------------------------------------
183,200 Newell Financial Trust I,
5.25%, 12/1/27 7,900,500
- --------------------------------------------------------------------------------
INSURANCE -- 0.4%
- --------------------------------------------------------------------------------
206,900 Aspen Insurance Holdings
Limited, 5.625%, 12/31/49 10,738,110
- --------------------------------------------------------------------------------
183,000 Genworth Financial, Inc.,
6.00%, 5/16/07 6,708,780
- --------------------------------------------------------------------------------
17,446,890
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 0.7%
- --------------------------------------------------------------------------------
757,400 Schering-Plough Corp.,
6.00%, 9/14/07 38,460,772
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 0.8%
- --------------------------------------------------------------------------------
399 Fannie Mae, 5.375%, 1/5/08
(Acquired 12/29/04-3/29/06,
Cost $38,325,403)(4) 38,331,032
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $163,748,818) 167,465,994
- --------------------------------------------------------------------------------
Value
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 0.8%
Repurchase Agreement, Bank of America
Securities, LLC, (collateralized by
various U.S. Treasury obligations, 3.50% - 10.625%,
5/31/07 - 8/15/15, valued at $41,189,683),
in a joint trading account at 4.46%, dated 3/31/06,
due 4/3/06 (Delivery value $40,415,015)
(Cost $40,400,000) $ 40,400,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.1%
(Cost $4,697,532,945) 5,077,084,224
- --------------------------------------------------------------------------------
OTHER ASSETS AND
LIABILITIES -- 0.9% 46,702,898
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $5,123,787,122
================================================================================
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS*
Contracts to Sell Settlement Date Value Unrealized Gain (Loss)
- ---------------------------------------------------------------------------------------
22,581,585 Euro for USD 4/28/06 $ 27,417,441 $(251,568)
- ---------------------------------------------------------------------------------------
14,035,737 Euro for USD 4/28/06 17,041,496 (197,453)
- ---------------------------------------------------------------------------------------
43,712,951 GBP for USD 4/28/06 75,922,699 (152,418)
- ---------------------------------------------------------------------------------------
$120,381,636 $(601,439)
===========================================
(Value on Settlement Date $119,780,197)
*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) 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.)
(2) 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.
(3) Equity-linked debt security. The aggregate value of these securities at
March 31, 2006, was $402,438,755, which represented 7.9% of total net
assets.
(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 March 31, 2006, was
$327,636,575, which represented 6.4% of total net assets.
See Notes to Financial Statements.
- ------
10
Mid Cap Value - Performance
TOTAL RETURNS AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
----------------
AVERAGE ANNUAL
RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 17.62% 17.12% 3/31/04
- --------------------------------------------------------------------------------
RUSSELL MIDCAP VALUE INDEX(1) 20.30% 19.31% --
- --------------------------------------------------------------------------------
Lipper Multi-Cap Value Ranking(1) 47 of 477 19 of 420 --
- --------------------------------------------------------------------------------
Morningstar Mid-Cap
Value Ranking(2) 98 of 346 56 of 293 --
- --------------------------------------------------------------------------------
Institutional Class 17.74% 20.55% 8/2/04
- --------------------------------------------------------------------------------
Advisor Class 17.32% 16.97% 1/13/05
- --------------------------------------------------------------------------------
R Class -- 7.56%(3) 7/29/05
- --------------------------------------------------------------------------------
(1) Data provided by Lipper Inc. - A Reuters Company. (c) 2006 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.
Lipper Rankings - Rankings are based only on the universe shown and are
based on average annual returns. This listing might not represent the
complete universe of funds tracked by Lipper Inc.
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 and may be incomplete. No offer or solicitations to buy or sell any
of the securities herein is being made by Lipper.
(2) (c) 2006 Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar and/or its content providers:
(2) may not be copied or distributed; and (3) is not warranted to be
accurate, complete or timely. Neither Morningstar nor its content providers
are responsible for any damages or losses arising from any use of this
information. Morningstar Rankings are based on risk adjusted returns.
(3) Returns for periods less than one year are not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance and ranking 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)
- ------
11
Mid Cap Value - Performance
GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made March 31, 2004
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended March 31
- --------------------------------------------------------------------------------
2005 2006
- --------------------------------------------------------------------------------
Investor Class 16.63% 17.62%
- --------------------------------------------------------------------------------
Russell Midcap Value Index 18.34% 20.30%
- --------------------------------------------------------------------------------
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.
- ------
12
Mid Cap Value - Portfolio Commentary
PORTFOLIO MANAGERS: MICHAEL LISS, PHIL DAVIDSON AND SCOTT MOORE
Mid Cap Value posted a gain of 17.62%* for the 12 months ended March 31, 2006,
trailing its benchmark, the Russell Midcap Value Index, which was up 20.30%. The
portfolio's return placed it in the top 10% of its Lipper Multi-Cap Value peer
group and in the top 34% of its Morningstar's Mid-Cap Value Category.
Since its inception on March 31, 2004, Mid Cap Value has produced an average
annualized return of 17.12%, versus a 19.31% figure for its benchmark. That
performance is well ahead of the 14.32% average for Mid Cap Value's
Morningstar** peers for the two years.
LOWER-QUALITY STOCKS RALLIED
Even in the face of rising short-term interest rates and record energy prices,
the broad market advanced strongly, as evidenced by the Russell 3000 Index's
14.28% gain for the 12 months. While strong, the portfolio's latest annual
results reflect an equities market in which investors generally preferred
lower-quality, higher-beta, momentum-driven stocks. In contrast, Mid Cap Value
steers toward higher-quality businesses with strong market positions and sound
balance sheets.
INDUSTRIALS LEAD THE PORTFOLIO
Industrial stocks proved to be Mid Cap Value's largest contributors to absolute
performance. Within the space, we were well-rewarded for taking positions in
commercial services companies, particularly in the waste management industry.
Republic Services Inc., a leading waste management firm, reported record
earnings for 2005. In addition to raising its dividend 17% during the period,
the company announced plans to repurchase nearly 10% of its stock during 2006.
Another standout was Waste Management Inc., the largest solid waste management
concern in the world, which was fueled by expanding margins and continued cost
control. Both of these companies are emblematic of the types of companies we
want to own: industry leaders with strong cash flows and balance sheets.
Elsewhere in the sector, the portfolio was lifted by American Railcar Industries
Inc., a maker of covered hopper and tank railcars. American Railcar has a
backlog of nearly two years (almost twice the industry average), driven by
cyclical demand for railcars that carry coal and gasoline.
FINANCIALS ADD VALUE
In financials, the portfolio was carried by insurance companies and commercial
banks. On the insurance side,
TOP TEN HOLDINGS
AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
International Flavors
& Fragrances Inc. 4.4% 2.9%
- --------------------------------------------------------------------------------
Kimberly-Clark Corp. 3.6% 1.9%
- --------------------------------------------------------------------------------
SunTrust Banks, Inc. 3.3% 3.4%
- --------------------------------------------------------------------------------
XCEL Energy Inc. 3.1% 1.4%
- --------------------------------------------------------------------------------
Equitable Resources Inc. 2.7% 1.9%
- --------------------------------------------------------------------------------
Northeast Utilities 2.4% --
- --------------------------------------------------------------------------------
Commonwealth Telephone
Enterprises, Inc. 2.4% --
- --------------------------------------------------------------------------------
Dollar General Corp. 2.2% 1.1%
- --------------------------------------------------------------------------------
Minerals Technologies Inc. 2.1% 1.6%
- --------------------------------------------------------------------------------
Speedway
Motorsports Inc. 1.9% 1.6%
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary
are for Investor Class shares.
**The Morningstar Mid-Cap Value Category returned 15.84%
for the 1-year ended March 31, 2006. (continued)
- ------
13
Mid Cap Value - Portfolio Commentary
Ambac Financial Group was a strong contributor. Ambac is a financial guarantor
that insures issuers of municipal bonds that has benefited from record issuance
in municipal debt in 2005. Our investments in commercial banks were paced by two
regional banks, BancorpSouth Inc. and SunTrust Banks. Based in Mississippi,
BancorpSouth operates across six southern states and has benefited from solid
loan growth-partly associated with rebuilding in the wake of Hurricane Katrina.
The bank has raised its dividend in each of the last 27 years. SunTrust Banks,
the seventh-largest U.S. bank, operates throughout 11 Southeastern states, which
represent one of the highest population growth footprints in banking.
INFORMATION TECHNOLOGY ANOTHER PLUS
Littelfuse Inc., one of our top-contributing securities, led our investments in
the information technology sector. The company is the world's foremost supplier
of circuit protection components used in electronic products such as computers,
telecom equipment and consumer electronics. Nine of every ten cars in the world
rely on Littelfuse circuitry protection devices.
SOME DISAPPOINTMENTS
While we provided strong performance, we experienced some difficulties along the
way. Our largest detractor was Westwood One Inc., the nation's largest radio
network and the leading distributor of national radio programs. The company has
been slowed by a difficult advertising market and increased spending for content
and programming.
In health care, Apria Healthcare Group Inc., the nation's largest provider of
home medical equipment (such as oxygen systems and intravenous medication
devices), performed below expectations. Apria has wrestled with several
company-specific issues, including rising costs and a difficult Medicare
reimbursement environment.
Maidenform Brands Inc., a global intimate apparel company with a portfolio of
established brands, declined significantly amid end-of-year markdowns by
retailers and a decision by Target Corp. to increase its focus on its private
intimate apparel brands. We sold our shares in early March.
LOOKING AHEAD
Mid Cap Value seeks to help investors achieve long-term capital growth by
investing in medium-sized companies. We will continue to adhere to our
discipline of identifying well-managed companies that appear to be undervalued
for reasons unrelated to their fundamental or financial health.
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Common Stocks 97.8% 98.2%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 5.2% 0.7%
- --------------------------------------------------------------------------------
Other Assets
and Liabilities (3.0)% 1.1%
- --------------------------------------------------------------------------------
TOP FIVE INDUSTRIES
AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Food Products 9.6% 8.5%
- --------------------------------------------------------------------------------
Chemicals 8.1% 7.9%
- --------------------------------------------------------------------------------
Commercial Banks 7.2% 5.9%
- --------------------------------------------------------------------------------
Multi-Utilities 6.7% 2.9%
- --------------------------------------------------------------------------------
Insurance 4.9% 6.2%
- --------------------------------------------------------------------------------
- ------
14
Mid Cap Value - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.8%
AEROSPACE & DEFENSE -- 0.8%
- --------------------------------------------------------------------------------
15,954 Honeywell International Inc. $ 682,353
- --------------------------------------------------------------------------------
23,500 K & F Industries
Holdings Inc.(1) 390,100
- --------------------------------------------------------------------------------
1,072,453
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 0.8%
- --------------------------------------------------------------------------------
73,989 Cooper Tire & Rubber Co. 1,061,003
- --------------------------------------------------------------------------------
AUTOMOBILES -- 0.4%
- --------------------------------------------------------------------------------
19,580 Winnebago Industries 594,057
- --------------------------------------------------------------------------------
BEVERAGES -- 3.2%
- --------------------------------------------------------------------------------
40,689 Anheuser-Busch Companies, Inc. 1,740,269
- --------------------------------------------------------------------------------
93,106 Coca-Cola Enterprises Inc. 1,893,776
- --------------------------------------------------------------------------------
23,080 Pepsi Bottling Group Inc. 701,401
- --------------------------------------------------------------------------------
4,335,446
- --------------------------------------------------------------------------------
BUILDING PRODUCTS -- 1.3%
- --------------------------------------------------------------------------------
53,444 Masco Corp. 1,736,396
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 0.4%
- --------------------------------------------------------------------------------
11,470 Edwards (A.G.), Inc. 571,894
- --------------------------------------------------------------------------------
CHEMICALS -- 8.1%
- --------------------------------------------------------------------------------
20,763 du Pont (E.I.)
de Nemours & Co. 876,406
- --------------------------------------------------------------------------------
19,973 Ferro Corp. 399,460
- --------------------------------------------------------------------------------
170,924 International Flavors
& Fragrances Inc. 5,866,112
- --------------------------------------------------------------------------------
47,979 Minerals Technologies Inc. 2,802,453
- --------------------------------------------------------------------------------
54,120 Nalco Holding Co.(1) 957,924
- --------------------------------------------------------------------------------
10,902,355
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 7.2%
- --------------------------------------------------------------------------------
10,539 BancorpSouth Inc. 253,041
- --------------------------------------------------------------------------------
19,240 BB&T Corporation 754,208
- --------------------------------------------------------------------------------
12,440 Chemical Financial Corp. 401,936
- --------------------------------------------------------------------------------
58,180 Fifth Third Bancorp 2,289,965
- --------------------------------------------------------------------------------
17,140 Marshall & Ilsley Corp. 746,961
- --------------------------------------------------------------------------------
28,960 South Financial Group Inc. (The) 757,304
- --------------------------------------------------------------------------------
60,516 SunTrust Banks, Inc. 4,403,145
- --------------------------------------------------------------------------------
9,606,560
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 2.5%
- --------------------------------------------------------------------------------
31,771 Aramark Corp. Cl B 938,515
- --------------------------------------------------------------------------------
27,736 Republic Services, Inc. Cl A 1,179,058
- --------------------------------------------------------------------------------
33,171 Waste Management, Inc. 1,170,936
- --------------------------------------------------------------------------------
3,288,509
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 1.2%
- --------------------------------------------------------------------------------
9,930 AptarGroup, Inc. 548,633
- --------------------------------------------------------------------------------
31,750 Bemis Co., Inc. 1,002,665
- --------------------------------------------------------------------------------
1,551,298
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
DIVERSIFIED -- 1.8%
- --------------------------------------------------------------------------------
30,250 iShares S&P MidCap 400
Index Fund $ 2,398,523
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.4%
- --------------------------------------------------------------------------------
92,704 Commonwealth Telephone
Enterprises, Inc. 3,193,653
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 4.1%
- --------------------------------------------------------------------------------
47,450 Empire District Electric Co. 1,054,339
- --------------------------------------------------------------------------------
164,120 Northeast Utilities 3,205,264
- --------------------------------------------------------------------------------
58,252 Westar Energy Inc. 1,212,224
- --------------------------------------------------------------------------------
5,471,827
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.2%
- --------------------------------------------------------------------------------
17,360 American Power
Conversion Corp. 401,190
- --------------------------------------------------------------------------------
53,440 Hubbell Inc. Cl A 2,511,680
- --------------------------------------------------------------------------------
2,912,870
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.2%
- --------------------------------------------------------------------------------
21,160 Vishay Intertechnology, Inc.(1) 301,318
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 9.6%
- --------------------------------------------------------------------------------
9,240 Campbell Soup Company 299,376
- --------------------------------------------------------------------------------
88,310 ConAgra Foods, Inc. 1,895,133
- --------------------------------------------------------------------------------
73,719 Diamond Foods Inc. 1,265,755
- --------------------------------------------------------------------------------
28,670 General Mills, Inc. 1,452,996
- --------------------------------------------------------------------------------
62,898 H.J. Heinz Company 2,385,092
- --------------------------------------------------------------------------------
17,295 Kellogg Co. 761,672
- --------------------------------------------------------------------------------
80,929 Kraft Foods Inc. Cl A 2,452,957
- --------------------------------------------------------------------------------
19,900 Ralcorp Holdings, Inc.(1) 757,195
- --------------------------------------------------------------------------------
55,230 Tyson Foods, Inc. Cl A 758,860
- --------------------------------------------------------------------------------
11,070 Unilever N.V. New York Shares 766,265
- --------------------------------------------------------------------------------
12,795,301
- --------------------------------------------------------------------------------
GAS UTILITIES -- 1.4%
- --------------------------------------------------------------------------------
47,003 Cascade Natural Gas Corp. 925,959
- --------------------------------------------------------------------------------
33,755 WGL Holdings Inc. 1,026,827
- --------------------------------------------------------------------------------
1,952,786
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 3.3%
- --------------------------------------------------------------------------------
43,820 Beckman Coulter, Inc. 2,391,258
- --------------------------------------------------------------------------------
77,267 National Dentex Corp.(1) 1,794,912
- --------------------------------------------------------------------------------
13,510 Symmetry Medical Inc.(1) 286,547
- --------------------------------------------------------------------------------
4,472,717
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 3.9%
- --------------------------------------------------------------------------------
33,610 Apria Healthcare Group Inc.(1) 772,358
- --------------------------------------------------------------------------------
32,080 HCA Inc. 1,468,943
- --------------------------------------------------------------------------------
25,690 LifePoint Hospitals Inc.(1) 798,959
- --------------------------------------------------------------------------------
22,790 PRA International(1) 564,964
- --------------------------------------------------------------------------------
32,700 Universal Health
Services, Inc. Cl B 1,660,833
- --------------------------------------------------------------------------------
5,266,057
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
15
Mid Cap Value - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 4.6%
- --------------------------------------------------------------------------------
25,290 CEC Entertainment Inc.(1) $ 850,250
- --------------------------------------------------------------------------------
39,467 International Speedway Corp. 2,008,870
- --------------------------------------------------------------------------------
16,121 Outback Steakhouse, Inc. 709,324
- --------------------------------------------------------------------------------
67,156 Speedway Motorsports Inc. 2,566,031
- --------------------------------------------------------------------------------
6,134,475
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.4%
- --------------------------------------------------------------------------------
7,260 Hunter Douglas N.V. ORD 482,351
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 3.6%
- --------------------------------------------------------------------------------
82,770 Kimberly-Clark Corp. 4,784,106
- --------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS &
ENERGY TRADERS -- 0.2%
- --------------------------------------------------------------------------------
5,390 Constellation Energy Group Inc. 294,887
- --------------------------------------------------------------------------------
INSURANCE -- 4.9%
- --------------------------------------------------------------------------------
19,100 Ambac Financial Group, Inc. 1,520,360
- --------------------------------------------------------------------------------
50,690 Aspen Insurance Holdings Ltd. 1,250,015
- --------------------------------------------------------------------------------
22,944 Genworth Financial Inc. Cl A 767,018
- --------------------------------------------------------------------------------
9,100 Hartford Financial Services
Group Inc. (The) 733,005
- --------------------------------------------------------------------------------
28,430 Horace Mann Educators Corp. 534,484
- --------------------------------------------------------------------------------
59,749 Marsh & McLennan
Companies, Inc. 1,754,231
- --------------------------------------------------------------------------------
6,559,113
- --------------------------------------------------------------------------------
IT SERVICES -- 0.4%
- --------------------------------------------------------------------------------
2,350 DST Systems, Inc.(1) 136,159
- --------------------------------------------------------------------------------
28,630 NCI Inc. Cl A(1) 400,820
- --------------------------------------------------------------------------------
536,979
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS -- 0.8%
- --------------------------------------------------------------------------------
50,730 Hasbro, Inc. 1,070,403
- --------------------------------------------------------------------------------
MEDIA -- 1.6%
- --------------------------------------------------------------------------------
12,360 ADVO, Inc. 395,520
- --------------------------------------------------------------------------------
41,550 Valassis Communications, Inc.(1) 1,220,323
- --------------------------------------------------------------------------------
42,320 Westwood One, Inc. 467,213
- --------------------------------------------------------------------------------
2,083,056
- --------------------------------------------------------------------------------
METALS & MINING -- 1.2%
- --------------------------------------------------------------------------------
65,109 Compass Minerals
International Inc. 1,627,074
- --------------------------------------------------------------------------------
MULTI-UTILITIES -- 6.7%
- --------------------------------------------------------------------------------
33,380 Dominion Resources Inc. 2,304,221
- --------------------------------------------------------------------------------
45,800 Puget Energy Inc. 970,044
- --------------------------------------------------------------------------------
39,970 Wisconsin Energy Corp. 1,598,400
- --------------------------------------------------------------------------------
228,900 XCEL Energy Inc. 4,154,536
- --------------------------------------------------------------------------------
9,027,201
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 2.9%
- --------------------------------------------------------------------------------
167,390 Dollar General Corp. $ 2,957,781
- --------------------------------------------------------------------------------
32,828 Family Dollar Stores, Inc. 873,225
- --------------------------------------------------------------------------------
3,831,006
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS -- 4.2%
- --------------------------------------------------------------------------------
97,910 Equitable Resources Inc. 3,574,694
- --------------------------------------------------------------------------------
41,540 Murphy Oil Corp. 2,069,523
- --------------------------------------------------------------------------------
5,644,217
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 1.2%
- --------------------------------------------------------------------------------
60,943 MeadWestvaco Corp. 1,664,353
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 1.7%
- --------------------------------------------------------------------------------
22,060 Bristol-Myers Squibb Co. 542,897
- --------------------------------------------------------------------------------
13,190 Schering-Plough Corp. 250,478
- --------------------------------------------------------------------------------
51,290 Watson Pharmaceuticals, Inc.(1) 1,474,074
- --------------------------------------------------------------------------------
2,267,449
- --------------------------------------------------------------------------------
REAL ESTATE -- 1.8%
- --------------------------------------------------------------------------------
33,710 Annaly Mortgage
Management Inc. 409,239
- --------------------------------------------------------------------------------
130,260 Education Realty Trust, Inc. 1,992,978
- --------------------------------------------------------------------------------
2,402,217
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.4%
- --------------------------------------------------------------------------------
23,320 Applied Materials, Inc. 408,333
- --------------------------------------------------------------------------------
9,570 Teradyne, Inc.(1) 148,431
- --------------------------------------------------------------------------------
556,764
- --------------------------------------------------------------------------------
SOFTWARE -- 0.8%
- --------------------------------------------------------------------------------
27,814 Reynolds & Reynolds Co. Cl A 789,918
- --------------------------------------------------------------------------------
11,884 Synopsys, Inc.(1) 265,607
- --------------------------------------------------------------------------------
1,055,525
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 1.6%
- --------------------------------------------------------------------------------
42,590 Foot Locker, Inc. 1,017,049
- --------------------------------------------------------------------------------
57,580 Gap, Inc. (The) 1,075,595
- --------------------------------------------------------------------------------
2,092,644
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.4%
- --------------------------------------------------------------------------------
14,610 Jones Apparel Group, Inc. 516,756
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 3.6%
- --------------------------------------------------------------------------------
20,190 Fannie Mae 1,037,766
- --------------------------------------------------------------------------------
39,066 Freddie Mac 2,383,026
- --------------------------------------------------------------------------------
21,561 MGIC Investment Corp. 1,436,609
- --------------------------------------------------------------------------------
4,857,401
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $125,493,348) 130,973,000
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
16
Mid Cap Value - Schedule of Investments
MARCH 31, 2006
Value
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 5.2%
Repurchase Agreement, Deutsche Bank
Securities, Inc., (collateralized by various
U.S. Treasury obligations, 4.50%, 2/15/16,
valued at $4,384,133), in a
joint trading account at 4.45%,
dated 3/31/06, due 4/3/06
(Delivery value $4,301,595) $ 4,300,000
- --------------------------------------------------------------------------------
Repurchase Agreement, Morgan Stanley
Group, Inc., (collateralized by various
U.S. Treasury obligations, 6.00%, 2/15/26,
valued at $2,753,850), in a joint
trading account at 4.45%,
dated 3/31/06, due 4/3/06
(Delivery value $2,701,001) 2,700,000
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $7,000,000) 7,000,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 103.0%
(Cost $132,493,348) $137,973,000
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (3.0)% (3,997,858)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $133,975,142
================================================================================
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS*
Contracts to Sell Settlement Date Value Unrealized Gain (Loss)
- --------------------------------------------------------------------------------
328,581 Euro for USD 4/28/06 $398,947 $(3,821)
- --------------------------------------------------------------------------------
437,756 Euro for USD 4/28/06 531,502 (4,877)
- --------------------------------------------------------------------------------
$930,449 $(8,698)
======================================
(Value on Settlement Date $921,751)
*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.
- ------
17
Small Cap Value - Performance
TOTAL RETURNS AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------------------
------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------------------
INVESTOR CLASS 18.67% 16.58% 16.47% 7/31/98
- --------------------------------------------------------------------------------------------
RUSSELL 2000 VALUE INDEX(1)(2) 23.77% 16.24% 12.81% --
- --------------------------------------------------------------------------------------------
Lipper Small-Cap Value Ranking(1) 153 of 256 56 of 146 6 of 92 --
- --------------------------------------------------------------------------------------------
Morningstar Small Value Ranking(3) 183 of 364 68 of 202 8 of 126 --
- --------------------------------------------------------------------------------------------
Institutional Class 18.98% 16.79% 17.84% 10/26/98
- --------------------------------------------------------------------------------------------
Advisor Class 18.51% 16.34% 19.85% 12/31/99
- --------------------------------------------------------------------------------------------
C Class 17.48% -- 12.82% 6/1/01
- --------------------------------------------------------------------------------------------
(1) Data provided by Lipper Inc. - A Reuters Company. (c) 2006 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.
Lipper Rankings - Rankings are based only on the universe shown and are
based on average annual returns. This listing might not represent the
complete universe of funds tracked by Lipper Inc.
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 and may be incomplete. No offer or solicitations to buy or sell any
of the securities herein is being made by Lipper.
(2) Effective January 1, 2006, the S&P SmallCap 600/BARRA Value Index ceased to
exist, the benchmark was changed to the Russell 2000 Value Index.
(3) (c) 2006 Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar and/or its content providers:
(2) may not be copied or distributed; and (3) is not warranted to be
accurate, complete or timely. Neither Morningstar nor its content providers
are responsible for any damages or losses arising from any use of this
information.Morningstar Rankings are based on risk adjusted returns.
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 and ranking 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)
- ------
18
Small Cap Value - Performance
GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made July 31, 1998
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended March 31
- --------------------------------------------------------------------------------------------
1999* 2000 2001 2002 2003 2004 2005 2006
- --------------------------------------------------------------------------------------------
Investor Class -4.24% 14.37% 36.51% 33.97% -21.55% 51.53% 14.00% 18.67%
- --------------------------------------------------------------------------------------------
Russell 2000 Value Index -12.23% 13.26% 19.45% 23.74% -23.27% 64.49% 9.79% 23.77%
- --------------------------------------------------------------------------------------------
* From 7/31/98, the Investor Class's inception date. Not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the index
are provided for comparison. The fund's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not.
- ------
19
Small Cap Value - Portfolio Commentary
PORTFOLIO MANAGERS: BEN GIELE AND KEVIN LAUB
American Century Small Cap Value advanced 18.67%* for the 12 months ended March
31, 2006, trailing the 23.77% return of its benchmark, the Russell 2000 Value
Index. Virtually all of the portfolio's relative underperformance occurred in
the last quarter of the period.
Within the small-cap space as a whole, returns on value stocks failed to match
returns on growth stocks in the 12-month period, as the Russell 2000 Growth
Index's 27.84% return surpassed the Russell 2000 Value's performance.
At the same time, Small Cap Value typically invests the majority of its
portfolio in classic value companies -- in other words, high-quality companies
that exhibit strong fundamental financial features but nonetheless appear
undervalued. However, the recent rally in small-cap value stocks centered mostly
on low-quality issues that Small Cap Value tends to avoid.
Looking longer term, Small Cap Value's annual return in the past five years has
averaged 16.58%, outpacing its benchmark's average of 16.24% and ranking in the
top 39% of its Morningstar peer group.
Since its July 31, 1998, inception, the fund's performance ranks in the top 7%
of that same peer group. Also since its inception, the portfolio's risk-adjusted
return -- a measure reflecting the portfolio's limited volatility and
below-average Morningstar risk rating -- ranks in the top 3% of small-cap value
funds tracked by Morningstar.
That risk-adjusted performance is a direct byproduct of the portfolio's
consistent focus on high-quality stocks, regardless of the type of short-term
outperformance by lower-quality issues that occurred late in the recent 12-month
reporting time frame.
NAVIGATING ENERGY WELL
Small Cap Value found plenty of opportunity in the volatile energy sector during
the 12-month period, maintaining an advantageous overweight position,
particularly among providers of energy equipment and services. Security
selection in the sector further contributed to both relative and absolute gains
for the portfolio.
In fact, energy accounted for four of the portfolio's top 10 individual relative
performers. Contract oil and gas driller Helmerich & Payne ranked No. 1 among
all portfolio holdings on both a relative and absolute basis, as the company's
stock followed a rallying
TOP TEN HOLDINGS
AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
iShares Russell 2000
Value Index Fund 2.3% 2.5%
- --------------------------------------------------------------------------------
Sybase, Inc. 2.0% 2.0%
- --------------------------------------------------------------------------------
iShares S&P SmallCap
600 Value Index Fund 1.5% --
- --------------------------------------------------------------------------------
iShares Russell 2000
Index Fund 1.5% 1.4%
- --------------------------------------------------------------------------------
HCC Insurance
Holdings, Inc. 1.1% 1.1%
- --------------------------------------------------------------------------------
Washington Federal, Inc. 1.1% 1.0%
- --------------------------------------------------------------------------------
Platinum Underwriters
Holdings 1.0% 1.0%
- --------------------------------------------------------------------------------
Perot Systems Corp. Cl A 1.0% 0.8%
- --------------------------------------------------------------------------------
Cimarex Energy Co. 1.0% 0.7%
- --------------------------------------------------------------------------------
Briggs & Stratton Corp. 1.0% 1.1%
- --------------------------------------------------------------------------------
*All fund returns and rankings referenced in this
commentary are for Investor Class shares. (continued)
- ------
20
Small Cap Value - Portfolio Commentary
in crude oil prices during the period. Shares in the Tulsa, Oklahoma-based
company soared 77%.
INSURANCE HOLDINGS AID PERFORMANCE
Meanwhile, outside of energy, no other industry contributed to the portfolio's
absolute return more than insurance. Houston-based HCC Insurance Holdings, a
property and casualty insurer and one of the portfolio's five largest individual
stakes, withstood a considerable impact from hurricane claims late last summer
and still recorded a 20% increase in net profit for calendar year 2005. In the
12-month period ended March 31, 2006, its stock rose 46%, ranking among the
portfolio's top five performers on both an absolute and relative basis.
SELECTION CRIMPS RELATIVE RETURN
Small Cap Value realized solid absolute contributions from a variety of sectors
- -- industrials, financials, information technology and materials. But individual
security selection, which is effected by the quality bias inherent in our
portfolio's investment process, trimmed relative performance in each of those
sectors.
Security selection proved most detrimental in the consumer discretionary sector,
primarily from losses in the specialty retail industry. That industry suffered
from rising interest rates and gasoline costs that cut into consumers'
pocketbooks as the period progressed. Pier 1 Imports and clothier Talbot's led
relative detractors in specialty retail, which stripped more from the
portfolio's total return than any other industry.
Sensient Technologies, a maker of specialty fragrances and flavorings that
ranked among the portfolio's 10 heaviest individual stakes, tied Pier 1 as its
biggest relative detractor. The company's shares fell 14% as it reported a
series of quarterly earnings disappointments amid a costly restructuring effort.
INVESTMENT PHILOSOPHY
The Small Cap Value investment management team remains committed to its strategy
of finding fundamentally sound businesses trading at attractive prices that
offer the potential for long-term investment success.
TOP FIVE INDUSTRIES
AS OF MARCH 31, 2006(1)
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Insurance 7.1% 6.0%
- --------------------------------------------------------------------------------
Commercial Banks 6.0% 5.8%
- --------------------------------------------------------------------------------
Machinery 5.3% 4.5%
- --------------------------------------------------------------------------------
Software 4.9% 5.2%
- --------------------------------------------------------------------------------
Real Estate 4.5% 4.1%
- --------------------------------------------------------------------------------
(1) 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
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Common Stocks 96.3% 94.9%
- --------------------------------------------------------------------------------
Convertible
Preferred Stocks -- 0.3%
- --------------------------------------------------------------------------------
Preferred Stocks -- 0.1%
- --------------------------------------------------------------------------------
TOTAL EQUITY EXPOSURE 96.3% 95.3%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 3.2% 4.7%
- --------------------------------------------------------------------------------
Other Assets
and Liabilities 0.5% --(2)
- --------------------------------------------------------------------------------
(2) Category is less than 0.05% of net assets.
- ------
21
Small Cap Value - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 96.3%
AEROSPACE & DEFENSE -- 1.0%
- --------------------------------------------------------------------------------
150,000 Alliant Techsystems Inc.(1) $ 11,575,500
- --------------------------------------------------------------------------------
170,000 Curtiss-Wright Corp. 11,254,000
- --------------------------------------------------------------------------------
22,829,500
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS -- 0.3%
- --------------------------------------------------------------------------------
145,000 Ryder System, Inc. 6,493,100
- --------------------------------------------------------------------------------
AIRLINES -- 0.1%
- --------------------------------------------------------------------------------
115,000 SkyWest, Inc. 3,366,050
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 1.1%
- --------------------------------------------------------------------------------
585,000 ArvinMeritor Inc. 8,722,350
- --------------------------------------------------------------------------------
450,000 Cooper Tire & Rubber Co. 6,453,000
- --------------------------------------------------------------------------------
355,000 Lear Corporation 6,294,150
- --------------------------------------------------------------------------------
205,000 Superior Industries
International, Inc. 3,968,800
- --------------------------------------------------------------------------------
25,438,300
- --------------------------------------------------------------------------------
BUILDING PRODUCTS -- 0.9%
- --------------------------------------------------------------------------------
585,000 Griffon Corp.(1) 14,531,400
- --------------------------------------------------------------------------------
210,000 Trex Co. Inc.(1) 6,657,000
- --------------------------------------------------------------------------------
21,188,400
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 1.5%
- --------------------------------------------------------------------------------
150,000 Lazard Ltd. Cl A 6,637,500
- --------------------------------------------------------------------------------
675,000 Patriot Capital
Funding, Inc.(2) 8,437,500
- --------------------------------------------------------------------------------
105,000 Piper Jaffray Companies(1) 5,775,000
- --------------------------------------------------------------------------------
615,000 Waddell & Reed Financial Inc. 14,206,500
- --------------------------------------------------------------------------------
35,056,500
- --------------------------------------------------------------------------------
CHEMICALS -- 2.7%
- --------------------------------------------------------------------------------
545,000 Ferro Corp. 10,900,000
- --------------------------------------------------------------------------------
90,000 FMC Corp. 5,578,200
- --------------------------------------------------------------------------------
310,000 Minerals Technologies Inc. 18,107,100
- --------------------------------------------------------------------------------
420,000 Olin Corp. 9,017,400
- --------------------------------------------------------------------------------
945,000 Sensient Technologies Corp. 17,057,250
- --------------------------------------------------------------------------------
60,659,950
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 6.0%
- --------------------------------------------------------------------------------
103,789 BancorpSouth Inc. 2,491,974
- --------------------------------------------------------------------------------
125,000 Central Pacific Financial Corp. 4,590,000
- --------------------------------------------------------------------------------
310,000 Chemical Financial Corp. 10,016,100
- --------------------------------------------------------------------------------
87,670 Chittenden Corp. 2,539,800
- --------------------------------------------------------------------------------
165,000 Cullen/Frost Bankers, Inc. 8,868,750
- --------------------------------------------------------------------------------
250,000 First Midwest Bancorp, Inc. 9,142,500
- --------------------------------------------------------------------------------
265,000 Fulton Financial Corp. 4,558,000
- --------------------------------------------------------------------------------
407,728 Greater Bay Bancorp 11,310,375
- --------------------------------------------------------------------------------
135,000 Pacific Capital Bancorp 4,568,400
- --------------------------------------------------------------------------------
150,000 Provident Bankshares Corp. 5,467,500
- --------------------------------------------------------------------------------
335,000 Sky Financial Group Inc. 8,877,500
- --------------------------------------------------------------------------------
690,000 South Financial Group Inc. (The) 18,043,500
- --------------------------------------------------------------------------------
380,000 Sterling Bancshares, Inc. 6,859,000
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
520,000 Susquehanna Bancshares Inc. $ 13,400,400
- --------------------------------------------------------------------------------
600,000 TCF Financial Corp. 15,450,000
- --------------------------------------------------------------------------------
250,000 Wilmington Trust Corporation 10,837,500
- --------------------------------------------------------------------------------
137,021,299
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 3.9%
- --------------------------------------------------------------------------------
240,000 ABM Industries Inc. 4,600,800
- --------------------------------------------------------------------------------
225,000 American Ecology Corp. 4,585,500
- --------------------------------------------------------------------------------
155,000 Corrections Corp. of America(1) 7,006,000
- --------------------------------------------------------------------------------
450,000 Ennis Inc. 8,775,000
- --------------------------------------------------------------------------------
460,000 G&K Services Inc. Cl A 19,568,400
- --------------------------------------------------------------------------------
290,000 Herman Miller Inc. 9,398,900
- --------------------------------------------------------------------------------
120,000 IHS Inc. Cl A(1) 3,282,000
- --------------------------------------------------------------------------------
285,000 Kelly Services, Inc. Cl A 7,743,450
- --------------------------------------------------------------------------------
375,000 Tetra Tech, Inc.(1) 7,158,750
- --------------------------------------------------------------------------------
175,000 United Stationers Inc.(1) 9,292,500
- --------------------------------------------------------------------------------
215,000 Watson Wyatt Worldwide Inc. 7,004,700
- --------------------------------------------------------------------------------
88,416,000
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 0.9%
- --------------------------------------------------------------------------------
535,000 Andrew Corporation(1) 6,569,800
- --------------------------------------------------------------------------------
255,000 Belden CDT Inc. 6,943,650
- --------------------------------------------------------------------------------
575,000 EFJ Inc.(1) 6,204,250
- --------------------------------------------------------------------------------
19,717,700
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 0.5%
- --------------------------------------------------------------------------------
180,000 Adaptec, Inc.(1) 995,400
- --------------------------------------------------------------------------------
205,000 Electronics for Imaging, Inc.(1) 5,733,850
- --------------------------------------------------------------------------------
130,000 Imation Corporation 5,578,300
- --------------------------------------------------------------------------------
12,307,550
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING -- 1.6%
- --------------------------------------------------------------------------------
65,000 EMCOR Group Inc.(1) 3,227,900
- --------------------------------------------------------------------------------
260,000 Granite Construction Inc. 12,656,800
- --------------------------------------------------------------------------------
440,000 Shaw Group Inc. (The)(1) 13,376,000
- --------------------------------------------------------------------------------
120,000 Washington Group
International, Inc.(1) 6,886,800
- --------------------------------------------------------------------------------
36,147,500
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 0.3%
- --------------------------------------------------------------------------------
110,000 Texas Industries Inc. 6,653,900
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 0.3%
- --------------------------------------------------------------------------------
485,000 Advance America, Cash
Advance Centers, Inc. 6,974,300
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 1.5%
- --------------------------------------------------------------------------------
165,000 AptarGroup, Inc. 9,116,250
- --------------------------------------------------------------------------------
530,000 Bemis Co., Inc. 16,737,400
- --------------------------------------------------------------------------------
270,000 Sonoco Products Co. 9,144,900
- --------------------------------------------------------------------------------
34,998,550
- --------------------------------------------------------------------------------
DIVERSIFIED -- 5.3%
- --------------------------------------------------------------------------------
450,000 iShares Russell 2000
Index Fund 34,155,000
- --------------------------------------------------------------------------------
705,000 iShares Russell 2000
Value Index Fund 52,628,250
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
22
Small Cap Value - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
530,000 iShares S&P SmallCap 600
Value Index Fund $ 34,545,400
- --------------------------------------------------------------------------------
121,328,650
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 0.5%
- --------------------------------------------------------------------------------
410,000 Asset Acceptance Capital Corp.(1) 7,982,700
- --------------------------------------------------------------------------------
145,000 Medallion Financial Corp. 1,964,750
- --------------------------------------------------------------------------------
9,947,450
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4%
- --------------------------------------------------------------------------------
285,000 Commonwealth Telephone
Enterprises, Inc. 9,818,250
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 1.6%
- --------------------------------------------------------------------------------
500,000 Empire District Electric Co. 11,110,000
- --------------------------------------------------------------------------------
420,000 IDACORP, Inc. 13,658,400
- --------------------------------------------------------------------------------
525,000 Westar Energy Inc. 10,925,250
- --------------------------------------------------------------------------------
35,693,650
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.9%
- --------------------------------------------------------------------------------
110,000 Acuity Brands Inc. 4,400,000
- --------------------------------------------------------------------------------
295,000 LSI Industries Inc. 5,026,800
- --------------------------------------------------------------------------------
165,000 Regal-Beloit Corp. 6,974,550
- --------------------------------------------------------------------------------
85,000 Smith (A.O.) Corp. 4,488,000
- --------------------------------------------------------------------------------
20,889,350
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 3.1%
- --------------------------------------------------------------------------------
360,000 Aeroflex Inc.(1) 4,942,800
- --------------------------------------------------------------------------------
235,000 Applied Films Corp.(1) 4,566,050
- --------------------------------------------------------------------------------
365,000 Avnet Inc.(1) 9,263,700
- --------------------------------------------------------------------------------
295,000 Benchmark Electronics Inc.(1) 11,313,250
- --------------------------------------------------------------------------------
195,000 Coherent, Inc.(1) 6,846,450
- --------------------------------------------------------------------------------
190,000 Littelfuse, Inc.(1) 6,484,700
- --------------------------------------------------------------------------------
410,000 Methode Electronics, Inc. 4,464,900
- --------------------------------------------------------------------------------
705,000 Paxar Corp.(1) 13,796,850
- --------------------------------------------------------------------------------
575,000 Vishay Intertechnology, Inc.(1) 8,188,000
- --------------------------------------------------------------------------------
69,866,700
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 3.1%
- --------------------------------------------------------------------------------
800,000 Global Industries Ltd.(1) 11,592,000
- --------------------------------------------------------------------------------
180,000 Helix Energy Solutions
Group, Inc.(1) 6,822,000
- --------------------------------------------------------------------------------
225,000 Helmerich & Payne, Inc. 15,709,500
- --------------------------------------------------------------------------------
160,000 Hornbeck Offshore Services Inc.(1) 5,771,200
- --------------------------------------------------------------------------------
975,000 Key Energy Group, Inc.(1) 14,868,750
- --------------------------------------------------------------------------------
160,000 Lone Star Technologies, Inc.(1) 8,865,600
- --------------------------------------------------------------------------------
60,000 Unit Corporation(1) 3,345,000
- --------------------------------------------------------------------------------
75,000 W-H Energy Services Inc.(1) 3,336,750
- --------------------------------------------------------------------------------
70,310,800
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 0.6%
- --------------------------------------------------------------------------------
145,000 BJ's Wholesale Club Inc(.(1)) 4,568,950
- --------------------------------------------------------------------------------
95,000 Casey's General Stores, Inc. 2,172,650
- --------------------------------------------------------------------------------
220,000 Performance Food Group Co.(1) 6,861,800
- --------------------------------------------------------------------------------
13,603,400
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.4%
- --------------------------------------------------------------------------------
340,000 Corn Products
International Inc. $ 10,053,800
- --------------------------------------------------------------------------------
320,000 Lancaster Colony Corp. 13,440,000
- --------------------------------------------------------------------------------
115,000 Ralcorp Holdings, Inc.(1) 4,375,750
- --------------------------------------------------------------------------------
190,000 Reddy Ice Holdings Inc. 4,219,900
- --------------------------------------------------------------------------------
32,089,450
- --------------------------------------------------------------------------------
GAS UTILITIES -- 1.7%
- --------------------------------------------------------------------------------
250,000 Atmos Energy Corp. 6,582,500
- --------------------------------------------------------------------------------
195,000 Northwest Natural Gas Co. 6,920,550
- --------------------------------------------------------------------------------
120,000 Southwest Gas Corp. 3,354,000
- --------------------------------------------------------------------------------
685,000 WGL Holdings Inc. 20,837,700
- --------------------------------------------------------------------------------
37,694,750
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 2.3%
- --------------------------------------------------------------------------------
140,000 Arrow International Inc. 4,573,800
- --------------------------------------------------------------------------------
135,000 Biosite Inc.(1) 7,010,550
- --------------------------------------------------------------------------------
450,000 Dade Behring Holdings Inc. 16,069,500
- --------------------------------------------------------------------------------
295,000 Orthofix International N.V.(1) 11,746,900
- --------------------------------------------------------------------------------
265,000 Steris Corp. 6,540,200
- --------------------------------------------------------------------------------
130,000 Vital Signs Inc. 7,140,900
- --------------------------------------------------------------------------------
53,081,850
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 1.9%
- --------------------------------------------------------------------------------
640,000 Alliance Imaging Inc.(1) 4,121,600
- --------------------------------------------------------------------------------
300,000 Amsurg Corp.(1) 6,807,000
- --------------------------------------------------------------------------------
200,000 Apria Healthcare Group Inc.(1) 4,596,000
- --------------------------------------------------------------------------------
180,000 Community Health Systems Inc.(1) 6,507,000
- --------------------------------------------------------------------------------
225,000 LifePoint Hospitals Inc.(1) 6,997,500
- --------------------------------------------------------------------------------
70,000 Owens & Minor Inc. 2,293,900
- --------------------------------------------------------------------------------
45,000 Pediatrix Medical Group, Inc.(1) 4,618,800
- --------------------------------------------------------------------------------
135,000 Universal Health
Services, Inc. Cl B 6,856,650
- --------------------------------------------------------------------------------
42,798,450
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 2.1%
- --------------------------------------------------------------------------------
115,000 Bob Evans Farms, Inc. 3,416,650
- --------------------------------------------------------------------------------
550,000 CEC Entertainment Inc.(1) 18,491,000
- --------------------------------------------------------------------------------
180,000 International Speedway Corp. 9,162,000
- --------------------------------------------------------------------------------
255,000 Outback Steakhouse, Inc. 11,220,000
- --------------------------------------------------------------------------------
210,000 Ruby Tuesday Inc. 6,736,800
- --------------------------------------------------------------------------------
49,026,450
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 1.2%
- --------------------------------------------------------------------------------
105,000 Beazer Homes USA, Inc. 6,898,500
- --------------------------------------------------------------------------------
210,000 Ethan Allen Interiors Inc. 8,824,200
- --------------------------------------------------------------------------------
110,000 Snap-on Incorporated 4,193,200
- --------------------------------------------------------------------------------
235,000 WCI Communities Inc.(1) 6,537,700
- --------------------------------------------------------------------------------
26,453,600
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.4%
- --------------------------------------------------------------------------------
85,000 Central Garden and Pet Co.(1) 4,516,900
- --------------------------------------------------------------------------------
145,000 WD-40 Co. 4,473,250
- --------------------------------------------------------------------------------
8,990,150
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
23
Small Cap Value - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
INSURANCE -- 7.1%
- --------------------------------------------------------------------------------
415,000 American Equity Investment
Life Holding Co. $ 5,951,100
- --------------------------------------------------------------------------------
190,000 AmerUs Group Co. 11,445,600
- --------------------------------------------------------------------------------
850,000 Aspen Insurance Holdings Ltd. 20,961,000
- --------------------------------------------------------------------------------
175,000 Delphi Financial Group, Inc. Cl A 9,035,250
- --------------------------------------------------------------------------------
275,000 Direct General Corp. 4,677,750
- --------------------------------------------------------------------------------
735,000 HCC Insurance Holdings, Inc. 25,578,000
- --------------------------------------------------------------------------------
275,000 Hilb Rogal & Hobbs Co. 11,335,500
- --------------------------------------------------------------------------------
180,000 Horace Mann Educators Corp. 3,384,000
- --------------------------------------------------------------------------------
665,000 National Atlantic Holdings
Corp. Cl A(1)(2) 6,749,750
- --------------------------------------------------------------------------------
445,000 Phoenix Companies Inc. 7,253,500
- --------------------------------------------------------------------------------
785,000 Platinum Underwriters
Holdings 22,843,500
- --------------------------------------------------------------------------------
85,000 ProAssurance Corp.(1) 4,420,000
- --------------------------------------------------------------------------------
230,000 Protective Life Corporation 11,440,200
- --------------------------------------------------------------------------------
420,000 Scottish Re Group Ltd. 10,420,200
- --------------------------------------------------------------------------------
210,000 United Fire & Casualty Co. 6,909,000
- --------------------------------------------------------------------------------
162,404,350
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 0.2%
- --------------------------------------------------------------------------------
190,000 J Jill Group Inc. (The)(1) 4,542,900
- --------------------------------------------------------------------------------
IT SERVICES -- 2.6%
- --------------------------------------------------------------------------------
420,000 Covansys Corp.(1) 7,219,800
- --------------------------------------------------------------------------------
195,000 Gevity HR, Inc. 4,769,700
- --------------------------------------------------------------------------------
325,000 MAXIMUS, Inc. 11,693,500
- --------------------------------------------------------------------------------
440,000 MoneyGram International Inc. 13,516,800
- --------------------------------------------------------------------------------
1,450,000 Perot Systems Corp. Cl A(1) 22,562,000
- --------------------------------------------------------------------------------
59,761,800
- --------------------------------------------------------------------------------
MACHINERY -- 5.3%
- --------------------------------------------------------------------------------
685,000 AGCO Corp.(1) 14,206,900
- --------------------------------------------------------------------------------
110,000 Albany International Corp. 4,189,900
- --------------------------------------------------------------------------------
625,000 Briggs & Stratton Corp. 22,106,250
- --------------------------------------------------------------------------------
275,000 Crane Co. 11,277,750
- --------------------------------------------------------------------------------
285,000 Kadant Inc.(1) 6,469,500
- --------------------------------------------------------------------------------
470,000 Kaydon Corporation 18,969,200
- --------------------------------------------------------------------------------
260,000 Kennametal Inc. 15,896,400
- --------------------------------------------------------------------------------
230,000 Mueller Industries Inc. 8,208,700
- --------------------------------------------------------------------------------
110,000 Pentair, Inc. 4,482,500
- --------------------------------------------------------------------------------
455,000 Timken Co. 14,682,850
- --------------------------------------------------------------------------------
120,489,950
- --------------------------------------------------------------------------------
MARINE -- 0.3%
- --------------------------------------------------------------------------------
165,000 Alexander & Baldwin, Inc. 7,867,200
- --------------------------------------------------------------------------------
MEDIA -- 1.7%
- --------------------------------------------------------------------------------
145,000 ADVO, Inc. 4,640,000
- --------------------------------------------------------------------------------
490,000 Hearst-Argyle Television, Inc. 11,446,400
- --------------------------------------------------------------------------------
950,000 Journal Communications Inc. 11,780,000
- --------------------------------------------------------------------------------
395,000 Valassis Communications, Inc.(1) 11,601,150
- --------------------------------------------------------------------------------
39,467,550
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
METALS & MINING -- 1.8%
- --------------------------------------------------------------------------------
140,000 Compass Minerals
International Inc. $ 3,498,600
- --------------------------------------------------------------------------------
245,000 Gibraltar Industries Inc. 7,217,700
- --------------------------------------------------------------------------------
50,000 Quanex Corporation 3,331,500
- --------------------------------------------------------------------------------
40,000 Reliance Steel &
Aluminum Company 3,756,800
- --------------------------------------------------------------------------------
215,000 Schnitzer Steel
Industries, Inc. Cl A 9,212,750
- --------------------------------------------------------------------------------
190,000 Steel Technologies Inc. 4,617,000
- --------------------------------------------------------------------------------
470,000 Worthington Industries, Inc. 9,428,200
- --------------------------------------------------------------------------------
41,062,550
- --------------------------------------------------------------------------------
MULTI-FAMILY RESIDENTIAL -- 0.2%
- --------------------------------------------------------------------------------
80,000 BRE Properties, Inc. 4,480,000
- --------------------------------------------------------------------------------
MULTI-UTILITIES -- 0.5%
- --------------------------------------------------------------------------------
535,000 Puget Energy Inc. 11,331,300
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 0.8%
- --------------------------------------------------------------------------------
695,000 Fred's, Inc. 9,215,700
- --------------------------------------------------------------------------------
395,000 Tuesday Morning Corp. 9,120,550
- --------------------------------------------------------------------------------
18,336,250
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS -- 4.3%
- --------------------------------------------------------------------------------
505,000 Alpha Natural Resources, Inc.(1) 11,685,700
- --------------------------------------------------------------------------------
498,142 Arlington Tankers Ltd. 11,457,264
- --------------------------------------------------------------------------------
515,000 Cimarex Energy Co. 22,278,900
- --------------------------------------------------------------------------------
1,015,000 Double Hull Tankers Inc. 13,448,750
- --------------------------------------------------------------------------------
145,000 Encore Acquisition Co.(1) 4,495,000
- --------------------------------------------------------------------------------
125,000 Forest Oil Corporation(1) 4,647,500
- --------------------------------------------------------------------------------
120,000 Plains Exploration &
Production Co.(1) 4,636,800
- --------------------------------------------------------------------------------
215,000 Remington Oil & Gas Corp.(1) 9,292,300
- --------------------------------------------------------------------------------
275,000 St. Mary Land & Exploration Co. 11,228,250
- --------------------------------------------------------------------------------
100,000 Stone Energy Corp.(1) 4,413,000
- --------------------------------------------------------------------------------
97,583,464
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.7%
- --------------------------------------------------------------------------------
385,000 Glatfelter 7,057,050
- --------------------------------------------------------------------------------
240,000 Neenah Paper Inc. 7,860,000
- --------------------------------------------------------------------------------
14,917,050
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 1.3%
- --------------------------------------------------------------------------------
265,000 Kos Pharmaceuticals, Inc.(1) 12,659,050
- --------------------------------------------------------------------------------
250,000 Par Pharmaceutical
Companies Inc.(1) 7,045,000
- --------------------------------------------------------------------------------
575,000 Perrigo Co. 9,378,250
- --------------------------------------------------------------------------------
29,082,300
- --------------------------------------------------------------------------------
REAL ESTATE -- 4.5%
- --------------------------------------------------------------------------------
765,000 American Financial
Realty Trust 8,912,250
- --------------------------------------------------------------------------------
375,000 Annaly Mortgage
Management Inc. 4,552,500
- --------------------------------------------------------------------------------
490,000 Commercial Net Lease Realty 11,417,000
- --------------------------------------------------------------------------------
655,000 Getty Realty Corp. 19,060,500
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
24
Small Cap Value - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
340,000 Healthcare Realty Trust Inc. $ 12,709,200
- --------------------------------------------------------------------------------
695,000 Highland Hospitality Corp. 8,833,450
- --------------------------------------------------------------------------------
385,000 Lexington Corporate
Properties Trust 8,027,250
- --------------------------------------------------------------------------------
245,000 Liberty Property Trust 11,554,200
- --------------------------------------------------------------------------------
145,000 Mack-Cali Realty Corp. 6,960,000
- --------------------------------------------------------------------------------
470,000 Realty Income Corp. 11,378,700
- --------------------------------------------------------------------------------
103,405,050
- --------------------------------------------------------------------------------
ROAD & RAIL -- 1.2%
- --------------------------------------------------------------------------------
170,000 Arkansas Best Corporation 6,650,400
- --------------------------------------------------------------------------------
315,000 Heartland Express, Inc. 6,863,850
- --------------------------------------------------------------------------------
770,000 Werner Enterprises Inc. 14,144,900
- --------------------------------------------------------------------------------
27,659,150
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.0%
- --------------------------------------------------------------------------------
680,000 Mattson Technology Inc.(1) 8,160,000
- --------------------------------------------------------------------------------
645,000 ON Semiconductor Corp.(1) 4,682,700
- --------------------------------------------------------------------------------
270,000 Rudolph Technologies Inc.(1) 4,603,500
- --------------------------------------------------------------------------------
17,061 Silicon Image, Inc.(1) 175,899
- --------------------------------------------------------------------------------
675,000 Skyworks Solutions, Inc.(1) 4,583,250
- --------------------------------------------------------------------------------
415,000 Varian Semiconductor
Equipment Associates, Inc.(1) 11,653,200
- --------------------------------------------------------------------------------
510,000 Veeco Instruments Inc.(1) 11,908,500
- --------------------------------------------------------------------------------
45,767,049
- --------------------------------------------------------------------------------
SOFTWARE -- 4.9%
- --------------------------------------------------------------------------------
1,005,000 Dendrite International, Inc.(1) 13,718,250
- --------------------------------------------------------------------------------
310,000 Jack Henry & Associates Inc. 7,089,700
- --------------------------------------------------------------------------------
1,280,000 Parametric Technology Corp.(1) 20,902,400
- --------------------------------------------------------------------------------
2,125,000 Sybase, Inc.(1) 44,880,000
- --------------------------------------------------------------------------------
315,000 Synopsys, Inc.(1) 7,040,250
- --------------------------------------------------------------------------------
770,000 TIBCO Software Inc.(1) 6,437,200
- --------------------------------------------------------------------------------
1,100,000 Ulticom, Inc.(1) 11,825,000
- --------------------------------------------------------------------------------
111,892,800
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 3.4%
- --------------------------------------------------------------------------------
535,000 Borders Group Inc. 13,503,400
- --------------------------------------------------------------------------------
75,000 Burlington Coat Factory
Warehouse Corp. 3,408,750
- --------------------------------------------------------------------------------
280,000 Christopher & Banks
Corporation 6,498,800
- --------------------------------------------------------------------------------
625,000 Hot Topic, Inc.(1) 9,062,500
- --------------------------------------------------------------------------------
205,000 Pacific Sunwear of California(1) 4,542,800
- --------------------------------------------------------------------------------
285,000 PETCO Animal Supplies Inc.(1) 6,717,450
- --------------------------------------------------------------------------------
560,000 Pier 1 Imports, Inc. 6,501,600
- --------------------------------------------------------------------------------
500,000 Talbots Inc. 13,435,000
- --------------------------------------------------------------------------------
475,000 Zale Corp.(1) 13,314,250
- --------------------------------------------------------------------------------
76,984,550
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 1.6%
- --------------------------------------------------------------------------------
125,000 Columbia Sportswear Co.(1) $ 6,666,250
- --------------------------------------------------------------------------------
115,000 Kellwood Co. 3,609,850
- --------------------------------------------------------------------------------
480,000 Kenneth Cole Productions Inc. 13,296,000
- --------------------------------------------------------------------------------
635,000 Wolverine World Wide, Inc. 14,052,550
- --------------------------------------------------------------------------------
37,624,650
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 2.6%
- --------------------------------------------------------------------------------
450,000 Flagstar Bancorp Inc. 6,795,000
- --------------------------------------------------------------------------------
155,000 MAF Bancorp Inc. 6,784,350
- --------------------------------------------------------------------------------
125,000 PMI Group, Inc. (The) 5,740,000
- --------------------------------------------------------------------------------
245,000 Triad Guaranty Inc.(1) 11,490,500
- --------------------------------------------------------------------------------
993,456 Washington Federal, Inc. 24,041,635
- --------------------------------------------------------------------------------
95,000 Webster Financial Corp. 4,603,700
- --------------------------------------------------------------------------------
59,455,185
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS -- 0.2%
- --------------------------------------------------------------------------------
210,000 UAP Holding Corp. 4,515,000
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $1,838,550,347) 2,197,491,647
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 3.2%
Repurchase Agreement, Credit Suisse
First Boston, Inc., (collateralized by
various U.S. Treasury obligations, 6.50%,
11/15/26, valued at $2,444,528),
in a joint trading account at 4.45%,
dated 3/31/06, due 4/3/06
(Delivery value $2,400,890) 2,400,000
- --------------------------------------------------------------------------------
Repurchase Agreement, Deutsche Bank
Securities, Inc., (collateralized by
various U.S. Treasury obligations,
4.50%, 2/15/16, valued at $73,204,831),
in a joint trading account
at 4.45%, dated 3/31/06, due 4/3/06
(Delivery value $71,826,626) 71,800,000
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $74,200,000) 74,200,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.5%
(Cost $1,912,750,347) 2,271,691,647
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 0.5% 12,337,531
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $2,284,029,178
================================================================================
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.)
See Notes to Financial Statements.
- ------
25
Shareholder Fee Examples (Unaudited)
Fund shareholders may incur two types of costs: (1) transaction costs, including
sales charges (loads) on purchase payments and redemption/exchange fees; and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in your fund and to compare these costs
with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2005 to March 31, 2006.
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
(continued)
- ------
26
Shareholder Fee Examples (Unaudited)
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* ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 10/1/05 - EXPENSE
10/1/05 3/31/06 3/31/06 RATIO*
- --------------------------------------------------------------------------------
EQUITY INCOME SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL:
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,051.00 $5.01 0.98%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,052.00 $3.99 0.78%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,049.70 $6.29 1.23%
- --------------------------------------------------------------------------------
C Class $1,000 $1,045.80 $10.10 1.98%
- --------------------------------------------------------------------------------
R Class $1,000 $1,047.20 $7.55 1.48%
- --------------------------------------------------------------------------------
HYPOTHETICAL:
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,020.04 $4.94 0.98%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,021.04 $3.93 0.78%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,018.80 $6.19 1.23%
- --------------------------------------------------------------------------------
C Class $1,000 $1,015.06 $9.95 1.98%
- --------------------------------------------------------------------------------
R Class $1,000 $1,017.55 $7.44 1.48%
- --------------------------------------------------------------------------------
*Expenses are equal to the class's annualized expense ratio listed in the table
above, multiplied by the average account value over the period, multiplied by
182, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
(continued)
- ------
27
Shareholder Fee Examples (Unaudited)
- --------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD* ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 10/1/05 - EXPENSE
10/1/05 3/31/06 3/31/06 RATIO*
- --------------------------------------------------------------------------------
MID CAP VALUE SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL:
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,107.70 $5.25 1.00%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,108.70 $4.21 0.80%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,106.30 $6.56 1.25%
- --------------------------------------------------------------------------------
R Class $1,000 $1,104.10 $7.87 1.50%
- --------------------------------------------------------------------------------
HYPOTHETICAL:
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,019.95 $5.04 1.00%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,020.94 $4.03 0.80%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,018.70 $6.29 1.25%
- --------------------------------------------------------------------------------
R Class $1,000 $1,017.45 $7.54 1.50%
- --------------------------------------------------------------------------------
SMALL CAP VALUE SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL:
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,099.90 $6.54 1.25%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,100.80 $5.50 1.05%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,098.80 $7.85 1.50%
- --------------------------------------------------------------------------------
C Class $1,000 $1,094.60 $11.75 2.25%
- --------------------------------------------------------------------------------
HYPOTHETICAL:
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,018.70 $6.29 1.25%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,019.70 $5.29 1.05%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,017.45 $7.54 1.50%
- --------------------------------------------------------------------------------
C Class $1,000 $1,013.71 $11.30 2.25%
- --------------------------------------------------------------------------------
*Expenses are equal to the class's annualized expense ratio listed in the table
above, multiplied by the average account value over the period, multiplied by
182, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
- ------
28
Statement of Assets and Liabilities
MARCH 31, 2006
- ----------------------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- ----------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------
Investment securities -- unaffiliated,
at value (cost of $4,620,090,594,
$132,493,348 and $1,895,886,941,
respectively) $4,992,997,243 $137,973,000 $2,256,504,397
- ------------------------------------------
Investment securities -- affiliated,
at value (cost of $77,442,351,
$-- and $16,863,406, respectively) 84,086,981 -- 15,187,250
- ----------------------------------------------------------------------------------------------
Total investment securities,
at value (cost of $4,697,532,945,
$132,493,348 and $1,912,750,347,
respectively) 5,077,084,224 137,973,000 2,271,691,647
- ------------------------------------------
Cash -- 279,731 --
- ------------------------------------------
Receivable for investments sold 74,592,190 2,368,760 33,407,364
- ------------------------------------------
Receivable for capital shares sold 1,616,664 44,581 407,421
- ------------------------------------------
Dividends and interest receivable 14,118,399 204,014 2,053,090
- ----------------------------------------------------------------------------------------------
5,167,411,477 140,870,086 2,307,559,522
- ----------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------
Disbursements in excess of
demand deposit cash 5,941,921 -- 2,000,046
- ------------------------------------------
Payable for investments purchased 32,476,013 6,776,790 19,119,380
- ------------------------------------------
Payable for forward foreign
currency exchange contracts 601,439 8,698 --
- ------------------------------------------
Payable for capital shares redeemed 125,091 -- --
- ------------------------------------------
Accrued management fees 4,000,283 106,215 2,219,770
- ------------------------------------------
Distribution fees payable 266,000 1,626 96,354
- ------------------------------------------
Service fees (and distribution
fees R Class) payable 213,608 1,615 94,794
- ----------------------------------------------------------------------------------------------
43,624,355 6,894,944 23,530,344
- ----------------------------------------------------------------------------------------------
NET ASSETS $5,123,787,122 $133,975,142 $2,284,029,178
==============================================================================================
See Notes to Financial Statements. (continued)
- ------
29
Statement of Assets and Liabilities
MARCH 31, 2006
- ---------------------------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- ---------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $4,659,895,114 $124,319,529 $1,832,938,164
- -------------------------------------------------
Accumulated undistributed
net investment income (loss) 4,737,808 119,392 11,806
- -------------------------------------------------
Undistributed net realized gain
on investment and foreign
currency transactions 80,204,360 4,065,267 92,137,908
- -------------------------------------------------
Net unrealized appreciation on
investments and translation
of assets and liabilities
in foreign currencies 378,949,840 5,470,954 358,941,300
- ---------------------------------------------------------------------------------------------------
$5,123,787,122 $133,975,142 $2,284,029,178
===================================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- ---------------------------------------------------------------------------------------------------
Net assets $3,715,366,260 $115,262,421 $1,390,023,819
- -------------------------------------------------
Shares outstanding 458,379,292 9,529,268 132,970,144
- -------------------------------------------------
Net asset value per share $8.11 $12.10 $10.45
- ---------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- ---------------------------------------------------------------------------------------------------
Net assets $382,908,549 $10,510,409 $435,326,589
- -------------------------------------------------
Shares outstanding 47,228,040 868,722 41,583,625
- -------------------------------------------------
Net asset value per share $8.11 $12.10 $10.47
- ---------------------------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE
- ---------------------------------------------------------------------------------------------------
Net assets $902,749,013 $8,175,414 $455,000,804
- -------------------------------------------------
Shares outstanding 111,366,942 675,876 43,559,711
- -------------------------------------------------
Net asset value per share $8.11 $12.10 $10.45
- ---------------------------------------------------------------------------------------------------
C CLASS, $0.01 PAR VALUE
- ---------------------------------------------------------------------------------------------------
Net assets $98,480,506 N/A $3,677,966
- -------------------------------------------------
Shares outstanding 12,147,632 N/A 363,406
- -------------------------------------------------
Net asset value per share $8.11 N/A $10.12
- ---------------------------------------------------------------------------------------------------
R CLASS, $0.01 PAR VALUE
- ---------------------------------------------------------------------------------------------------
Net assets $24,282,794 $26,898 --
- -------------------------------------------------
Shares outstanding 3,000,891 2,224 --
- -------------------------------------------------
Net asset value per share $8.09 $12.09 --
- ---------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
30
Statement of Operations
YEAR ENDED MARCH 31, 2006
- -------------------------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- -------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------
INCOME:
- ---------------------------------------------
Dividends (including $8,762,473, $--,
and $1,682,117 from affiliates,
respectively, and net of foreign taxes
withheld of $509,849, $3,115 and
$--, respectively) $150,115,289 $ 2,487,870 $ 35,120,595
- ---------------------------------------------
Interest 28,136,508 128,895 3,475,675
- -------------------------------------------------------------------------------------------------
178,251,797 2,616,765 38,596,270
- -------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------
Management fees 46,351,964 917,499 24,513,482
- ---------------------------------------------
Distribution fees:
- ---------------------------------------------
Advisor Class 2,273,471 8,371 1,015,640
- ---------------------------------------------
C Class 666,274 -- 26,465
- ---------------------------------------------
Service fees:
- ---------------------------------------------
Advisor Class 2,273,471 8,371 1,015,640
- ---------------------------------------------
C Class 222,091 -- 8,822
- ---------------------------------------------
Service and distribution fees -- R Class 73,524 83 --
- ---------------------------------------------
Directors' fees and expenses 108,973 1,453 45,807
- ---------------------------------------------
Other expenses 62,044 330 11,153
- -------------------------------------------------------------------------------------------------
52,031,812 936,107 26,637,009
- -------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 126,219,985 1,680,658 11,959,261
- -------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
- ---------------------------------------------
Investment transactions (including
$5,490,660, $--, and $(323,295)
from affiliates, respectively) 182,186,984 10,180,001 286,362,584
- ---------------------------------------------
Foreign currency transactions 13,671,087 120,972 --
- -------------------------------------------------------------------------------------------------
195,858,071 10,300,973 286,362,584
- -------------------------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED
APPRECIATION (DEPRECIATION) ON:
- ---------------------------------------------
Investments 30,528,237 3,679,726 54,783,454
- ---------------------------------------------
Translation of assets and liabilities
in foreign currencies 472,560 (4,942) --
- -------------------------------------------------------------------------------------------------
31,000,797 3,674,784 54,783,454
- -------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) 226,858,868 13,975,757 341,146,038
- -------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $353,078,853 $15,656,415 $353,105,299
=================================================================================================
See Notes to Financial Statements.
- ------
31
Statement of Changes in Net Assets
YEARS ENDED MARCH 31, 2006 AND MARCH 31, 2005
- ------------------------------------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE
- ------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2006 2005 2006 2005
- ------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------
Net investment income $ 126,219,985 $ 88,590,980 $ 1,680,658 $ 242,667
- ---------------------------------------
Net realized gain (loss) 195,858,071 210,910,510 10,300,973 2,835,903
- ---------------------------------------
Change in net unrealized
appreciation (depreciation) 31,000,797 56,147,197 3,674,784 1,792,404
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 353,078,853 355,648,687 15,656,415 4,870,974
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------
From net investment income:
- ---------------------------------------
Investor Class (83,854,848) (61,904,760) (1,370,720) (130,746)
- ---------------------------------------
Institutional Class (8,768,725) (5,086,045) (193,911) (34,287)
- ---------------------------------------
Advisor Class (18,424,499) (12,359,454) (46,170) (73)
- ---------------------------------------
C Class (1,157,833) (665,086) -- --
- ---------------------------------------
R Class (295,018) (35,832) (130) --
- ---------------------------------------
From net realized gains:
- ---------------------------------------
Investor Class (152,170,341) (142,378,053) (7,182,643) (633,295)
- ---------------------------------------
Institutional Class (14,179,871) (11,131,604) (791,767) (176,133)
- ---------------------------------------
Advisor Class (38,341,620) (34,860,778) (313,785) --
- ---------------------------------------
C Class (3,889,372) (2,736,854) -- --
- ---------------------------------------
R Class (738,981) (136,511) (1,882) --
- ------------------------------------------------------------------------------------------------------------
Decrease in net assets
from distributions (321,821,108) (271,294,977) (9,901,008) (974,534)
- ------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from capital
share transactions 710,003,537 1,366,352,921 77,022,146 45,682,314
- ------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 741,261,282 1,450,706,631 82,777,553 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 $5,123,787,122 $4,382,525,840 $133,975,142 $51,197,589
============================================================================================================
Accumulated undistributed
net investment income (loss) $4,737,808 $(3,440,794) $119,392 $8,200
============================================================================================================
See Notes to Financial Statements. (continued)
- ------
32
Statement of Changes in Net Assets
YEARS ENDED MARCH 31, 2006 AND MARCH 31, 2005
- --------------------------------------------------------------------------------
SMALL CAP VALUE
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2006 2005
- --------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 11,959,261 $ 5,317,972
- ----------------------------------------
Net realized gain (loss) 286,362,584 227,943,321
- ----------------------------------------
Change in net unrealized
appreciation (depreciation) 54,783,454 24,305,291
- --------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations 353,105,299 257,566,584
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
- ----------------------------------------
Investor Class (8,075,787) (3,233,600)
- ----------------------------------------
Institutional Class (3,220,003) (1,248,416)
- ----------------------------------------
Advisor Class (1,441,212) (575,649)
- ----------------------------------------
From net realized gains:
- ----------------------------------------
Investor Class (162,609,222) (110,088,852)
- ----------------------------------------
Institutional Class (49,001,133) (23,343,195)
- ----------------------------------------
Advisor Class (50,500,601) (53,087,774)
- ----------------------------------------
C Class (448,869) (337,470)
- --------------------------------------------------------------------------------
Decrease in net assets
from distributions (275,296,827) (191,914,956)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Net increase (decrease) in
net assets from capital
share transactions 11,263,917 472,049,303
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 89,072,389 537,700,931
================================================================================
NET ASSETS
Beginning of period 2,194,956,789 1,657,255,858
- --------------------------------------------------------------------------------
End of period $2,284,029,178 $2,194,956,789
================================================================================
Accumulated undistributed
net investment income (loss) $11,806 $339,467
================================================================================
See Notes to Financial Statements.
- ------
33
Notes to Financial Statements
MARCH 31, 2006
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 notaxable 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
MARCH 31, 2006
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
MARCH 31, 2006
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
MARCH 31, 2006
2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
The effective annual management fee for each class of the funds for the year
ended March 31, 2006 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 year ended March 31, 2006, 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 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 year ended
March 31, 2006, were as follows:
- --------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- --------------------------------------------------------------------------------
Purchases $7,366,119,919 $276,678,443 $2,236,757,557
- --------------------------------------------------------------------------------
Proceeds from sales $7,127,944,593 $208,810,046 $2,501,660,113
- --------------------------------------------------------------------------------
For the year ended March 31, 2006, 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
MARCH 31, 2006
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows:
- -----------------------------------------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- -----------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- -----------------------------------------------------------------------------------------------------------------
YEAR ENDED
MARCH 31, 2006
SHARES AUTHORIZED 1,360,000,000 30,000,000 300,000,000
=================================================================================================================
Sold 171,802,491 $1,384,554,594 7,635,132 $89,923,030 28,393,541 $292,128,590
- -----------------------
Issued in reinvestment
of distributions 26,822,073 213,652,683 718,807 8,210,140 16,823,218 165,149,361
- -----------------------
Redeemed (148,787,938) (1,196,318,671) (2,538,965) (29,737,761) (36,584,968) (376,353,337)
- -----------------------------------------------------------------------------------------------------------------
Net increase
(decrease) 49,836,626 $ 401,888,606 5,814,974 $68,395,409 8,631,791 $ 80,924,614
=================================================================================================================
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
- -----------------------------------------------------------------------------------------------------------------
YEAR ENDED
MARCH 31, 2006
SHARES AUTHORIZED 125,000,000 5,000,000 100,000,000
=================================================================================================================
Sold 23,507,114 $189,034,516 330,484 $3,868,491 15,705,266 $159,937,043
- -----------------------
Issued in reinvestment
of distributions 2,725,316 21,731,112 86,159 985,678 4,338,137 42,704,993
- -----------------------
Redeemed (10,931,543) (88,139,550) (261,456) (3,081,043) (9,673,168) (99,793,090)
- -----------------------------------------------------------------------------------------------------------------
Net increase
(decrease) 15,300,887 $122,626,078 155,187 $1,773,126 10,370,235 $102,848,946
=================================================================================================================
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
MARCH 31, 2006
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- -------------------------------------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- -------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED
MARCH 31, 2006
SHARES AUTHORIZED 300,000,000 5,000,000 125,000,000
=============================================================================================================
Sold 59,463,948 $479,566,149 603,260 $7,082,159 13,958,079 $ 143,931,966
- ------------------------
Issued in reinvestment
of distributions 6,827,093 54,336,930 31,535 359,904 5,291,461 51,834,734
- ------------------------
Redeemed (49,943,414) (400,923,868) (52,258) (615,466) (37,753,104) (368,360,957)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) 16,347,627 $132,979,211 582,537 $6,826,597 (18,503,564) $(172,594,257)
=============================================================================================================
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
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED
MARCH 31, 2006
SHARES AUTHORIZED 30,000,000 N/A 5,000,000
=============================================================================================================
Sold 6,144,981 $49,571,104 947 $ 10,069
- ------------------------
Issued in reinvestment
of distributions 578,541 4,591,659 38,391 363,949
- ------------------------
Redeemed (2,459,975) (19,733,294) (29,079) (289,404)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) 4,263,547 $34,429,469 10,259 $ 84,614
=============================================================================================================
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
MARCH 31, 2006
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- -----------------------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- -----------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
R CLASS
- -----------------------------------------------------------------------------------------------
YEAR ENDED
MARCH 31, 2006(1)
SHARES AUTHORIZED 10,000,000 5,000,000 N/A
===============================================================================================
Sold 2,621,357 $21,084,093 2,047 $25,002
- ------------------------
Issued in reinvestment
of distributions 128,311 1,017,717 177 2,012
- ------------------------
Redeemed (500,708) (4,021,637) -- --
- -----------------------------------------------------------------------------------------------
Net increase (decrease) 2,248,960 $18,080,173 2,224 $27,014
===============================================================================================
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, 2006 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 year
ended March 31, 2006 follows:
- --------------------------------------------------------------------------------------------------------------------
SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND MARCH 31, 2006
FUND/COMPANY 3/31/05 COST COST GAIN INCOME SHARE BALANCE MARKET VALUE
- --------------------------------------------------------------------------------------------------------------------
EQUITY INCOME
- --------------------------------------------------------------------------------------------------------------------
Cascade Natural
Gas Corp. 558,691 $ 1,103,663 $ 1,921,110 $ 3,935 $ 501,615 522,391 $ 10,291,103
- --------------------
Commerce
Bancshares, Inc.(1) 3,122,164 25,717,385 68,381,609 5,349,162 2,696,453 2,350,490 121,449,818
- --------------------
IDACORP, Inc.(1) 1,858,278 7,128,409 8,190,944 173,580 2,451,274 1,842,978 59,933,645
- --------------------
WGL Holdings Inc. 2,167,700 11,083,922 2,500,219 (36,017) 3,113,131 2,425,900 73,795,878
- --------------------------------------------------------------------------------------------------------------------
$45,033,379 $80,993,882 $5,490,660 $8,762,473 $265,470,444
====================================================================================================================
SMALL CAP VALUE
- --------------------------------------------------------------------------------------------------------------------
Arlington
Tankers Ltd.(1) 530,000 $ 8,367,089 $9,599,188 $(321,943) $1,285,067 498,142 $11,457,264
- --------------------
National Atlantic
Holdings
Corp. Cl A(2) -- 7,821,003 89,284 (1,352) -- 665,000 6,749,750
- --------------------
Patriot Capital
Funding, Inc. -- 9,131,687 -- -- 397,050 675,000 8,437,500
- --------------------------------------------------------------------------------------------------------------------
$25,319,779 $9,688,472 $(323,295) $1,682,117 $26,644,514
====================================================================================================================
(1) Company was not an affiliate at March 31, 2006.
(2) Non-income producing.
(continued)
- ------
40
Notes to Financial Statements
MARCH 31, 2006
6. BANK LINE OF CREDIT
The funds, along with certain other funds managed by ACIM or ACGIM, have a
$500,000,000 unsecured bank line of credit agreement with JPMCB, which was
renewed from $575,000,000 effective December 14, 2005. The funds may borrow
money for temporary or emergency purposes to fund shareholder redemptions.
Borrowings under the agreement bear interest at the Federal Funds rate plus
0.50%. The funds did not borrow from the line during the year ended March 31,
2006.
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 tax character of distributions paid during the years ended March 31, 2006
and March 31, 2005 were as follows:
- --------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE
- --------------------------------------------------------------------------------
2006 2005 2006 2005
- --------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
- --------------------------------------------------------------------------------
Ordinary income $210,127,493 $173,270,167 $9,442,153 $974,534
- --------------------------------------------------------------------------------
Long-term capital gains $111,693,615 $98,024,810 $458,855 --
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SMALL CAP VALUE
- --------------------------------------------------------------------------------
2006 2005
- --------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
- --------------------------------------------------------------------------------
Ordinary income $134,913,061 $124,523,803
- --------------------------------------------------------------------------------
Long-term capital gains $140,383,766 $67,391,153
- --------------------------------------------------------------------------------
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect the
differing character of certain income items and net realized gains and losses
for financial statement and tax purposes, and may result in reclassification
among certain capital accounts on the financial statements.
(continued)
- ------
41
Notes to Financial Statements
MARCH 31, 2006
8. FEDERAL TAX INFORMATION (CONTINUED)
As of March 31, 2006, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
- ------------------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- ------------------------------------------------------------------------------------------
Federal tax cost of investments $4,749,951,354 $134,618,898 $1,951,494,101
==========================================================================================
Gross tax appreciation of investments $395,042,677 $5,563,250 $357,980,700
- ---------------------------------------
Gross tax depreciation of investments (67,909,807) (2,209,148) (37,783,154)
- ------------------------------------------------------------------------------------------
Net tax appreciation
(depreciation) of investments $327,132,870 $3,354,102 $320,197,546
==========================================================================================
Net tax appreciation (depreciation)
on derivatives and translation
of assets and liabilities
in foreign currencies -- -- (39)
- ------------------------------------------------------------------------------------------
Net tax appreciation (depreciation) $327,132,870 $3,354,102 $320,197,507
==========================================================================================
Undistributed ordinary income $75,050,225 $5,862,773 $57,600,215
- ---------------------------------------
Accumulated long-term gains $61,708,913 $440,022 $73,293,292
- ---------------------------------------
Currency loss deferral -- $(1,284) --
- ------------------------------------------------------------------------------------------
The difference between book-basis and tax-basis cost and unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales, the realization for tax purposes of unrealized gains on certain forward
foreign currency contracts and return of capital dividends.
The currency loss deferrals represent net foreign currency losses incurred in
the five-month period ended March 31, 2006. The funds have elected to treat such
losses as having been incurred in the following fiscal year for federal income
tax purposes.
9. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The funds hereby designate qualified dividend income for the fiscal year ended
March 31, 2006, as follows:
- --------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- --------------------------------------------------------------------------------
$110,594,419 $2,333,276 $30,896,485
- --------------------------------------------------------------------------------
The funds hereby designate capital gain distributions for the fiscal year ended
March 31, 2006, as follows:
- --------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- --------------------------------------------------------------------------------
$111,693,615 $458,855 $140,383,766
- --------------------------------------------------------------------------------
For corporate taxpayers, the following ordinary income distributions paid during
the fiscal year ended March 31, 2006, qualify for the corporate dividends
received deduction.
- --------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- --------------------------------------------------------------------------------
$154,065,175 $2,683,400 $41,616,795
- --------------------------------------------------------------------------------
The funds hereby designate qualified short-term capital gains distributions for
purposes of Internal Revenue Code Section 871 for the fiscal year ended March
31, 2006, as follows:
- --------------------------------------------------------------------------------
EQUITY INCOME MID CAP VALUE SMALL CAP VALUE
- --------------------------------------------------------------------------------
$97,626,570 $7,831,222 $122,176,059
- --------------------------------------------------------------------------------
- ------
42
Equity Income - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ----------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ----------------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ----------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $8.05 $7.84 $6.22 $7.36 $6.47
- ----------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------
Net Investment Income(1) 0.20 0.21 0.22 0.17 0.17
- --------------------------------------
Net Realized and
Unrealized Gain (Loss) 0.36 0.61 1.71 (1.05) 0.93
- ----------------------------------------------------------------------------------------------------
Total From Investment Operations 0.56 0.82 1.93 (0.88) 1.10
- ----------------------------------------------------------------------------------------------------
Distributions
- --------------------------------------
From Net Investment Income (0.18) (0.19) (0.19) (0.16) (0.17)
- --------------------------------------
From Net Realized Gains (0.32) (0.42) (0.12) (0.10) (0.04)
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.61) (0.31) (0.26) (0.21)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $8.11 $8.05 $7.84 $6.22 $7.36
====================================================================================================
TOTAL RETURN(2) 7.21% 10.69% 31.30% (12.09)% 17.35%
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.98% 0.99% 1.00% 1.00% 1.00%
- --------------------------------------
Ratio of Net Investment Income
to Average Net Assets 2.53% 2.56% 2.95% 2.60% 2.49%
- --------------------------------------
Portfolio Turnover Rate 150% 174% 91% 120% 139%
- --------------------------------------
Net Assets, End of Period
(in thousands) $3,715,366 $3,290,442 $2,248,158 $1,277,478 $1,025,143
- ----------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
43
Equity Income - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $8.06 $7.85 $6.23 $7.36 $6.47
- --------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------
Net Investment Income(1) 0.22 0.22 0.24 0.19 0.19
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.35 0.61 1.71 (1.04) 0.92
- --------------------------------------------------------------------------------------------
Total From Investment Operations 0.57 0.83 1.95 (0.85) 1.11
- --------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.20) (0.20) (0.21) (0.18) (0.18)
- ------------------------------------------
From Net Realized Gains (0.32) (0.42) (0.12) (0.10) (0.04)
- --------------------------------------------------------------------------------------------
Total Distributions (0.52) (0.62) (0.33) (0.28) (0.22)
- --------------------------------------------------------------------------------------------
Net Asset Value, End of Period $8.11 $8.06 $7.85 $6.23 $7.36
============================================================================================
TOTAL RETURN(2) 7.29% 10.91% 31.51% (11.77)% 17.40%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.78% 0.79% 0.80% 0.80% 0.80%
- ------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 2.73% 2.76% 3.15% 2.80% 2.69%
- ------------------------------------------
Portfolio Turnover Rate 150% 174% 91% 120% 139%
- ------------------------------------------
Net Assets, End of Period (in thousands) $382,909 $257,195 $183,330 $77,837 $65,738
- --------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
44
Equity Income - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ---------------------------------------------------------------------------------------------
ADVISOR CLASS
- ---------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $8.05 $7.84 $6.22 $7.36 $6.47
- ---------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------
Net Investment Income(1) 0.18 0.19 0.20 0.16 0.16
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.36 0.61 1.72 (1.05) 0.92
- ---------------------------------------------------------------------------------------------
Total From Investment Operations 0.54 0.80 1.92 (0.89) 1.08
- ---------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.16) (0.17) (0.18) (0.15) (0.15)
- ------------------------------------------
From Net Realized Gains (0.32) (0.42) (0.12) (0.10) (0.04)
- ---------------------------------------------------------------------------------------------
Total Distributions (0.48) (0.59) (0.30) (0.25) (0.19)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Period $8.11 $8.05 $7.84 $6.22 $7.36
=============================================================================================
TOTAL RETURN(2) 6.94% 10.41% 30.97% (12.30)% 17.05%
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.23% 1.24% 1.25% 1.25% 1.25%
- ------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 2.28% 2.31% 2.70% 2.35% 2.24%
- ------------------------------------------
Portfolio Turnover Rate 150% 174% 91% 120% 139%
- ------------------------------------------
Net Assets, End of Period (in thousands) $902,749 $765,331 $457,360 $156,911 $74,868
- ---------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
45
Equity Income - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- -------------------------------------------------------------------------------------------
C CLASS
- -------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002(1)
- -------------------------------------------------------------------------------------------
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(2) 0.13 0.13 0.15 0.11 0.07
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.34 0.61 1.73 (1.06) 0.50
- -------------------------------------------------------------------------------------------
Total From Investment Operations 0.47 0.74 1.88 (0.95) 0.57
- -------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.10) (0.11) (0.12) (0.10) (0.06)
- ------------------------------------------
From Net Realized Gains (0.32) (0.42) (0.12) (0.10) (0.04)
- -------------------------------------------------------------------------------------------
Total Distributions (0.42) (0.53) (0.24) (0.20) (0.10)
- -------------------------------------------------------------------------------------------
Net Asset Value, End of Period $8.11 $8.06 $7.85 $6.21 $7.36
===========================================================================================
TOTAL RETURN(3) 6.02% 9.60% 30.37% (13.08)% 8.45%
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.98% 1.99% 2.00% 2.00% 2.00%(4)
- ------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 1.53% 1.56% 1.95% 1.60% 1.36%(4)
- ------------------------------------------
Portfolio Turnover Rate 150% 174% 91% 120% 139%(5)
- ------------------------------------------
Net Assets, End of Period (in thousands) $98,481 $63,512 $42,579 $12,254 $3,960
- -------------------------------------------------------------------------------------------
(1) July 13, 2001 (commencement of sale) through March 31, 2002.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to
two decimal places. If net asset values were calculated to three decimal
places, the total return differences would more closely reflect the class
expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2002.
See Notes to Financial Statements.
- ------
46
Equity Income - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
R CLASS
- --------------------------------------------------------------------------------
2006 2005 2004(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $8.04 $7.84 $7.22
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Income(2) 0.17 0.17 0.11
- -------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.34 0.60 0.76
- --------------------------------------------------------------------------------
Total From Investment Operations 0.51 0.77 0.87
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------
From Net Investment Income (0.14) (0.15) (0.13)
- -------------------------------------------
From Net Realized Gains (0.32) (0.42) (0.12)
- --------------------------------------------------------------------------------
Total Distributions (0.46) (0.57) (0.25)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $8.09 $8.04 $7.84
================================================================================
TOTAL RETURN(3) 6.56% 10.03% 12.19%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.48% 1.44%(4) 1.50%(5)
- -------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 2.03% 2.11%(4) 2.44%(5)
- -------------------------------------------
Portfolio Turnover Rate 150% 174% 91%(6)
- -------------------------------------------
Net Assets, End of Period (in thousands) $24,283 $6,046 $392
- --------------------------------------------------------------------------------
(1) August 29, 2003 (commencement of sale) through March 31, 2004.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
(4) During a portion of the year ended March 31, 2005, the class received a
partial reimbursement of its distribution and service fees. Had fees not
been reimbursed the annualized ratio of operating expenses to average
net assets and annualized ratio of net investment income to average net
assets would have been 1.49% and 2.06%, respectively.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2004.
See Notes to Financial Statements.
- ------
47
Mid Cap Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
2006 2005 2004(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $11.32 $10.02 $10.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------
Net Investment Income(2) 0.21 0.09 --(3)
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.70 1.54 0.02
- --------------------------------------------------------------------------------
Total From Investment Operations 1.91 1.63 0.02
- --------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.21) (0.06) --
- ------------------------------------------
From Net Realized Gains (0.92) (0.27) --
- --------------------------------------------------------------------------------
Total Distributions (1.13) (0.33) --
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $12.10 $11.32 $10.02
================================================================================
TOTAL RETURN(4) 17.62% 16.40% 0.20%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.00% 1.00% 1.00%(5)
- ------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 1.77% 0.83% 0.00%(5)
- ------------------------------------------
Portfolio Turnover Rate 228% 192% 0%
- ------------------------------------------
Net Assets, End of Period (in thousands) $115,262 $42,059 $1,619
- --------------------------------------------------------------------------------
(1) For the one day period ended March 31, 2004 (inception date).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. 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.
- ------
48
Mid Cap Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
2006 2005(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value, Beginning of Period $11.33 $10.07
- --------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------
Net Investment Income(2) 0.24 0.07
- -----------------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.69 1.51
- --------------------------------------------------------------------------------
Total From Investment Operations 1.93 1.58
- --------------------------------------------------------------------------------
Distributions
- -----------------------------------------------------
From Net Investment Income (0.24) (0.05)
- -----------------------------------------------------
From Net Realized Gains (0.92) (0.27)
- --------------------------------------------------------------------------------
Total Distributions (1.16) (0.32)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $12.10 $11.33
================================================================================
TOTAL RETURN(3) 17.74% 15.82%
================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.80% 0.80%(4)
- -----------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 1.97% 1.00%(4)
- -----------------------------------------------------
Portfolio Turnover Rate 228% 192%(5)
- -----------------------------------------------------
Net Assets, End of Period (in thousands) $10,510 $8,082
- --------------------------------------------------------------------------------
(1) August 2, 2004 (commencement of sale) through March 31, 2005.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC
guidelines and does not result in any gain or loss of value between one
class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2005.
See Notes to Financial Statements.
- ------
49
Mid Cap Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
2006 2005(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $11.32 $10.99
- --------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------
Net Investment Income(2) 0.16 0.03
- ------------------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.72 0.31
- --------------------------------------------------------------------------------
Total From Investment Operations 1.88 0.34
- --------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------
From Net Investment Income (0.18) (0.01)
- ------------------------------------------------------
From Net Realized Gains (0.92) --
- --------------------------------------------------------------------------------
Total Distributions (1.10) (0.01)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $12.10 $11.32
================================================================================
TOTAL RETURN(3) 17.32% 3.05%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.25% 1.25%(4)
- ------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 1.52% 1.34%(4)
- ------------------------------------------------------
Portfolio Turnover Rate 228% 192%(5)
- ------------------------------------------------------
Net Assets, End of Period (in thousands) $8,175 $1,057
- --------------------------------------------------------------------------------
(1) January 13, 2005 (commencement of sale) through March 31, 2005.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of
net asset values to two decimal places is made in accordance with SEC
guidelines and does not result in any gain or loss of value between
one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2005.
See Notes to Financial Statements.
- ------
50
Mid Cap Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
- --------------------------------------------------------------------------------
R CLASS
- --------------------------------------------------------------------------------
2006(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $12.21
- --------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------
Net Investment Income(2) 0.07
- ----------------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.79
- --------------------------------------------------------------------------------
Total From Investment Operations 0.86
- --------------------------------------------------------------------------------
Distributions
- ----------------------------------------------------
From Net Investment Income (0.06)
- ----------------------------------------------------
From Net Realized Gains (0.92)
- --------------------------------------------------------------------------------
Total Distributions (0.98)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $12.09
================================================================================
TOTAL RETURN(3) 7.56%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.50%(4)
- ----------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 0.97%(4)
- ----------------------------------------------------
Portfolio Turnover Rate 228%(5)
- ----------------------------------------------------
Net Assets, End of Period (in thousands) $27
- --------------------------------------------------------------------------------
(1) July 29, 2005 (commencement of sale) through March 31, 2006.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of
net asset values to two decimal places is made in accordance with SEC
guidelines and does not result in any gain or loss of value between
one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2006.
See Notes to Financial Statements.
- ------
51
Small Cap Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.07 $9.71 $6.44 $8.62 $6.60
- --------------------------------------------------------------------------------------------------
Income From Investment Operations
- ---------------------------------------
Net Investment Income(1) 0.06 0.03 0.05 0.03 0.02
- ---------------------------------------
Net Realized and Unrealized
Gain (Loss) 1.72 1.31 3.26 (1.87) 2.20
- --------------------------------------------------------------------------------------------------
Total From Investment Operations 1.78 1.34 3.31 (1.84) 2.22
- --------------------------------------------------------------------------------------------------
Distributions
- ---------------------------------------
From Net Investment Income (0.06) (0.03) (0.04) (0.02) (0.02)
- ---------------------------------------
From Net Realized Gains (1.34) (0.95) -- (0.32) (0.18)
- --------------------------------------------------------------------------------------------------
Total Distributions (1.40) (0.98) (0.04) (0.34) (0.20)
- --------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.45 $10.07 $9.71 $6.44 $8.62
==================================================================================================
TOTAL RETURN(2) 18.67% 14.00% 51.53% (21.55)% 33.97%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.25% 1.25% 1.26% 1.25% 1.25%
- ---------------------------------------
Ratio of Net Investment Income
to Average Net Assets 0.58% 0.32% 0.59% 0.37% 0.27%
- ---------------------------------------
Portfolio Turnover Rate 111% 108% 110% 104% 73%
- ---------------------------------------
Net Assets, End of Period
(in thousands) $1,390,024 $1,252,153 $1,050,500 $670,755 $1,305,952
- --------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
52
Small Cap Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- ---------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ---------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.08 $9.72 $6.45 $8.63 $6.61
- ---------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------
Net Investment Income(1) 0.08 0.05 0.07 0.04 0.03
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.73 1.31 3.26 (1.87) 2.20
- ---------------------------------------------------------------------------------------------
Total From Investment Operations 1.81 1.36 3.33 (1.83) 2.23
- ---------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.08) (0.05) (0.06) (0.03) (0.03)
- ------------------------------------------
From Net Realized Gains (1.34) (0.95) -- (0.32) (0.18)
- ---------------------------------------------------------------------------------------------
Total Distributions (1.42) (1.00) (0.06) (0.35) (0.21)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.47 $10.08 $9.72 $6.45 $8.63
=============================================================================================
TOTAL RETURN(2) 18.98% 14.20% 51.75% (21.38)% 34.11%
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.05% 1.05% 1.06% 1.05% 1.05%
- ------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 0.78% 0.52% 0.79% 0.57% 0.47%
- ------------------------------------------
Portfolio Turnover Rate 111% 108% 110% 104% 73%
- ------------------------------------------
Net Assets, End of Period
(in thousands) $435,327 $314,700 $170,784 $79,546 $83,712
- ---------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
53
Small Cap Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.06 $9.71 $6.43 $8.62 $6.60
- --------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------
Net Investment Income(1) 0.03 0.01 0.03 0.01 --(2)
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.74 1.30 3.27 (1.87) 2.21
- --------------------------------------------------------------------------------------------
Total From Investment Operations 1.77 1.31 3.30 (1.86) 2.21
- --------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.04) (0.01) (0.02) (0.01) (0.01)
- ------------------------------------------
From Net Realized Gains (1.34) (0.95) -- (0.32) (0.18)
- --------------------------------------------------------------------------------------------
Total Distributions (1.38) (0.96) (0.02) (0.33) (0.19)
- --------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.45 $10.06 $9.71 $6.43 $8.62
============================================================================================
TOTAL RETURN(3) 18.51% 13.70% 51.38% (21.85)% 33.74%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.50% 1.50% 1.51% 1.50% 1.50%
- ------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 0.33% 0.07% 0.34% 0.12% 0.02%
- ------------------------------------------
Portfolio Turnover Rate 111% 108% 110% 104% 73%
- ------------------------------------------
Net Assets, End of Period
(in thousands) $455,001 $624,633 $432,261 $173,064 $182,986
- --------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Per-share amount was less than $0.005.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
54
Small Cap Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- ---------------------------------------------------------------------------------------------
C CLASS
- ---------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002(1)
- ---------------------------------------------------------------------------------------------
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(2) (0.04) (0.07) (0.03) (0.04) (0.05)
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.67 1.28 3.25 (1.88) 1.23
- ---------------------------------------------------------------------------------------------
Total From Investment Operations 1.63 1.21 3.22 (1.92) 1.18
- ---------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income -- -- -- -- --(3)
- ------------------------------------------
From Net Realized Gains (1.34) (0.95) -- (0.32) (0.16)
- ---------------------------------------------------------------------------------------------
Total Distributions (1.34) (0.95) -- (0.32) (0.16)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.12 $9.83 $9.57 $6.35 $8.59
=============================================================================================
TOTAL RETURN(4) 17.48% 12.85% 50.71% (22.58)% 15.80%
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 2.25% 2.25% 2.26% 2.25% 2.25%(5)
- ------------------------------------------
Ratio of Net Investment Loss
to Average Net Assets (0.42)% (0.68)% (0.41)% (0.63)% (0.78)%(5)
- ------------------------------------------
Portfolio Turnover Rate 111% 108% 110% 104% 73%(6)
- ------------------------------------------
Net Assets, End of Period
(in thousands) $3,678 $3,470 $3,711 $2,936 $3,997
- ---------------------------------------------------------------------------------------------
(1) June 1, 2001 (commencement of sale) through March 31, 2002.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to
two decimal places. If net asset values were calculated to three decimal
places, the total return differences would more closely reflect the class
expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in
any gain or loss of value between one class and another.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2002.
See Notes to Financial Statements.
- ------
55
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders,
American Century Capital Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Equity Income Fund, Mid Cap Value Fund, and
Small Cap Value Fund (the "Funds"), three of the mutual funds comprising
American Century Capital Portfolios, Inc., as of March 31, 2006, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Funds
are not required to have, nor were we engaged to perform, an audit of their
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Funds' internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of March 31, 2006, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of
Equity Income Fund, Mid Cap Value Fund, and Small Cap Value Fund as of March 31,
2006, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and the
financial highlights for the periods presented, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 12, 2006
- ------
56
Management
The individuals listed below serve as directors or officers of the funds. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
72. Those listed as interested directors are "interested" primarily by virtue of
their engagement as officers of American Century Companies, Inc. (ACC) or its
wholly owned, direct or indirect, subsidiaries, including the funds' investment
advisor, American Century Investment Management, Inc. (ACIM); the funds'
principal underwriter, American Century Investment Services, Inc. (ACIS); and
the funds' transfer agent, American Century Services, LLC (ACS).
The other directors (more than three-fourths of the total number) are
independent; that is, they have never been employees or officers of, and have no
financial interest in, ACC or any of its wholly owned subsidiaries, including
ACIM, ACIS, and ACS. The directors serve in this capacity for seven registered
investment companies in the American Century family of funds.
All persons named as officers of the funds also serve in a similar capacity for
the other 14 investment companies advised by ACIM or American Century Global
Investment Management, Inc. (ACGIM), unless otherwise noted. Only officers with
policy-making functions are listed. No officer is compensated for his or her
service as an officer of the funds. The listed officers are interested persons
of the funds and are appointed or re-appointed on an annual basis.
INDEPENDENT DIRECTORS
- --------------------------------------------------------------------------------
THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1940
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1980
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Formerly Chief Executive
Officer/Treasurer, Associated Bearings Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1997
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, Midwest
Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
D.D. (DEL) HOCK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1935
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1996
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Chairman, Public
Service Company of Colorado
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Allied Motion Technologies, Inc.
- --------------------------------------------------------------------------------
(continued)
- ------
57
Management
- --------------------------------------------------------------------------------
JAMES A. OLSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1942
POSITION(S) HELD WITH FUND: Advisory Board Member
FIRST YEAR OF SERVICE: 2006
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Principal and Chief Financial
Officer, Plaza Belmont LLC
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, SCS Transportation, Inc. and
Entertainment Properties Trust
- --------------------------------------------------------------------------------
DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Director, Chairman of the Board
FIRST YEAR OF SERVICE: 1995
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Western Investments,
Inc.; Retired Chairman of the Board, Butler Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1943
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer
and Founder, Sayers40, Inc., a technology products and service provider
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Triad Hospitals, Inc.
- --------------------------------------------------------------------------------
M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1994
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Senior Vice
President, Sprint Corporation
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide, Inc.
- --------------------------------------------------------------------------------
TIMOTHY S. WEBSTER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1961
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 2001
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, American Italian Pasta Company (1992 to December 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JAMES E. STOWERS, JR.(1), 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1924
POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman
FIRST YEAR OF SERVICE: 1958
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Director and Controlling
Shareholder, ACC; Chairman, ACC (January 1995 to December 2004); Director, ACIM,
ACGIM, ACS, ACIS and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
JAMES E. STOWERS III(1), 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1959
POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman
FIRST YEAR OF SERVICE: 1990
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, ACC (January 2005 to
present); Co-Chairman, ACC (September 2000 to December 2004); Chairman, ACS and
other ACC subsidiaries; Director, ACC, ACIM, ACGIM, ACS, ACIS and other ACC
subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
(1) James E. Stowers, Jr. is the father of James E. Stowers III.
(continued)
- ------
58
Management
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: President
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC
(September 2000 to present); President, ACC (June 1997 to present); Also serves
as: Chief Executive Officer and President, ACIM, ACGIM, ACIS and other ACC
subsidiaries; Executive Vice President, ACS; Director, ACC, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
JONATHAN THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUND: Executive Vice President
FIRST YEAR OF SERVICE: 2005
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Executive Vice President, ACC
(November 2005 to present); Chief Administrative Officer, ACC (February 2006 to
present); Also serves as: President, ACS; Chief Executive Officer, Chief
Financial Officer and Chief Accounting Officer, ACIM, ACGIM, ACS, ACIS and other
ACC subsidiaries; Managing Director, Morgan Stanley (March 2000 to November
2005)
- --------------------------------------------------------------------------------
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer, and Chief
Financial Officer
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Assistant Treasurer, ACC (January
1995 to present); Also serves as: Senior Vice President, ACS; Assistant
Treasurer, ACIM, ACGIM, ACS, ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
DAVID C. TUCKER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1958
POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (February 2001
to present); General Counsel, ACC (June 1998 to present); Also serves as: Senior
Vice President and General Counsel, ACIM, ACGIM, ACS, ACIS and other ACC
subsidiaries
- --------------------------------------------------------------------------------
CHARLES C.S. PARK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Vice President and Chief Compliance Officer
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (March 2005 to present); Vice President, ACS (February 2000 to
present); Assistant General Counsel, ACS (January 1998 to March 2005)
- --------------------------------------------------------------------------------
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Controller
FIRST YEAR OF SERVICE: 1997
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February 2000
to present); Controller-Fund Accounting, ACS (June 1997 to present)
- --------------------------------------------------------------------------------
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer
FIRST YEAR OF SERVICE: 1997
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (October 2001
to present); Vice President, Corporate Tax, ACS (April 1998 to present); Also
serves as: Vice President, ACIM, ACGIM, ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
The SAI has additional information about the funds' directors and is available
without charge, upon request, by calling 1-800-345-2021.
- ------
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 Class, C Class,
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 contingent deferred sales charge (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 willbe 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 DOW JONES INDUSTRIAL AVERAGE (DJIA) is a price-weighted average of 30
actively traded blue chip stocks, primarily industrials but including
service-oriented firms. Prepared and published by Dow Jones & Co., it is the
oldest and most widely quoted of all the market indicators.
The LIPPER EQUITY INCOME INDEX is an equally-weighted index of, typically, the
30 largest equity income mutual funds that purchase securities of companies of
all market capitalizations.
The NASDAQ COMPOSITE INDEX is a market value-weighted index of all domestic and
international common stocks listed on the Nasdaq stock market.
The RUSSELL 1000(reg.tm) INDEX is a market-capitalization weighted, large-cap
index created by Frank Russell Company to measure the performance of the 1,000
largest companies in the Russell 3000 Index (the 3,000 largest publicly traded
U.S. companies, based on total market capitalization).The RUSSELL 1000(reg.tm)
VALUE INDEX measures the performance of those Russell 1000 Index 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 2000(reg.tm) INDEX is a market-capitalization weighted index created
by Frank Russell Company to measure the performance of the 2,000 smallest of the
3,000 largest publicly traded U.S. companies, based on total market
capitalization. The RUSSELL 2000(reg.tm) GROWTH INDEX measures the performance
of those Russell 2000 Index companies (the 2,000 smallest of the 3,000 largest
publicly traded U.S. companies, based on total market capitalization) with
higher price-to-book ratios and higher forecasted growth rates. THE RUSSELL
2000(reg.tm) VALUE INDEX measures the performance of those Russell 2000 Index
companies (the 2,000 smallest 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) 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.
(continued)
- ------
63
Index Definitions
The RUSSELL MIDCAP INDEX measures the performance of the 800 smallest of the
1,000 largest publicly traded U.S. companies, based on total market
capitalization. THE RUSSELL MIDCAP VALUE INDEX measures the performance of those
Russell Midcap companies with lower price-to-book ratios and lower forecasted
growth values.
The S&P 500 INDEX is a market value-weighted index of the stocks of 500 publicly
traded U.S. companies chosen for market size, liquidity, and industry group
representation that are considered to be leading firms in dominant industries.
Each stock's weight in the index is proportionate to its market value. Created
by Standard & Poor's, it is considered to be a broad measure of U.S. stock
market performance.
The S&P SMALLCAP 600 INDEX, a capitalization-weighted index consisting of 600
domestic stocks, measures the small company segment of the U.S. market. The S&P
SMALLCAP 600/BARRA VALUE INDEX is a capitalization-weighted index consisting of
S&P SmallCap 600 stocks with lower price-to-book ratios that are slower growing
or undervalued.
- ------
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 PROFESSIONALS, 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
0605 (c)2006 American Century Proprietary
SH-ANN-48880S Holdings, Inc. All rights reserved.
American Century Investments
ANNUAL REPORT
[photo of boy]
MARCH 31, 2006
Value Fund
Large Company Value Fund
[american century investments logo and text logo]
Table of Contents
Our Message to You. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
VALUE
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Top Five Industries . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . . 6
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 7
LARGE COMPANY VALUE
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Top Five Industries . . . . . . . . . . . . . . . . . . . . . . . . . .13
Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . .13
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . .14
Shareholder Fee Examples. . . . . . . . . . . . . . . . . . . . . . . . . .16
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . .19
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . .21
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . .22
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . .23
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Report of Independent Registered Public Accounting Firm . . . . . . . . . .46
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . .50
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . .52
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
The opinions expressed in the Market Perspective and each of the Portfolio
Commentaries reflect those of the portfolio management team as of the date of
the report, and do not necessarily represent the opinions of American Century or
any other person in the American Century organization. Any such opinions are
subject to change at any time based upon market or other conditions and American
Century disclaims any responsibility to update such opinions. These opinions may
not be relied upon as investment advice and, because investment decisions made
by American Century funds are based on numerous factors, may not be relied upon
as an indication of trading intent on behalf of any American Century fund.
Security examples are used for representational purposes only and are not
intended as recommendations to purchase or sell securities. Performance
information for comparative indices and securities is provided to American
Century by third party vendors. To the best of American Century's knowledge,
such information is accurate at the time of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
JAMES E. STOWERS III WITH JAMES E. STOWERS, JR.
We are pleased to provide you with the annual report for the American Century
Value and Large Company Value funds for the 12 months ended March 31, 2006. We
hope you find this information helpful in monitoring your investment. Another
useful resource we offer is our Web site, americancentury.com, where we post
quarterly portfolio commentaries, the views of our senior investment officers,
and other communications about investments, portfolio strategy, and the
markets.
Our Web site currently highlights American Century's recently-announced
strategic collaboration with Lance Armstrong and the Lance Armstrong Foundation
(LAF). Our new campaign, featuring Lance, is designed to encourage investors to
take a more active role in planning their financial futures and make every
investment decision count.
American Century's collaboration with Lance Armstrong and the LAF is a perfect
fit. Like members of our family, Lance is a cancer survivor, and shares our
values of optimism, focus, and determination. In addition, Lance and our family
have dedicated our success to improving lives, through the LAF and the Stowers
Institute for Medical Research, respectively. To learn more about American
Century's collaboration with Lance Armstrong and the LAF, please visit
www.lanceface.com on the Web and click on the links to related sites.
Besides the exciting new collaboration, we've enjoyed other good news -- in
January, American Century was named, for the seventh consecutive year, one of
FORTUNE magazine's 100 Best Companies to Work For in America. Fostering a
positive work environment can benefit fund investors as well as our company --
it helps us continue to attract and retain talented people.
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
Market Perspective
[photo of chief investment officer]
BY PHIL DAVIDSON, CHIEF INVESTMENT OFFICER, U.S. VALUE EQUITY
Despite persistently high oil prices, investor uneasiness about inflation and
rising interest rates--factors that typically weigh on equities--stocks advanced
strongly during the 12 months ended March 31, 2006. Helped by a 4% gain during
the first quarter of this year, the S&P 500 Index, representative of the broad
market, was up almost 12% for the same period.
In the value realm, small- and mid-sized companies had the highest returns for
the 12-month period, as evidenced by the Russell 2000 Value Index's gain of
almost 24%. Larger value companies, tracked by the Russell 1000 Value Index,
were up a little over 13%. On the whole, growth shares performed better than
value at the small end of the capitalization range; value stocks had a slight
edge among larger businesses.
All that said, for many investors, stocks still have a way to go. The S&P 500
closed the period still 15% off its March 2000 record high; the Nasdaq Composite
is still 54% behind its 2000 zenith.
YEAR OF ENERGY
With oil prices increasing 20% over the period, reaching nearly $70 a barrel,
energy companies contributed most to the S&P 500's return. Financials followed,
as an active stock market and burgeoning merger and acquisition activity lifted
capital markets companies and low interest rates fueled real estate stocks.
The high-priced energy situation cut both ways, though, as it pressured the
earnings of large users of energy, either in their products or their production,
as well as companies caught in the ripple effect of higher prices at the pump.
Affected businesses ranged from automakers and chemical companies, to food
products companies and restaurants, to retailers that operate giant fleets of
trucks.
NARROW MARKET, LOW QUALITY
Many managers of diversified value portfolios faced two additional headwinds: a
narrow market dominated by energy stocks for much of the period, and a
continuing rally in lower-quality shares as investors rewarded stocks rated B or
lower (Standard & Poor's defines high-quality stocks as B+ or higher). A+
shares, representing many of the market's strongest and most stable companies,
actually had the lowest returns for the period. Historically, market cycles led
by lower-quality stocks have tended to dampen the returns of American Century's
value funds, which generally seek higher-quality value stocks.
ONE-YEAR TOTAL RETURNS
AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
S&P 500 Index 11.73%
- --------------------------------------------------------------------------------
Dow Jones Industrial Average 8.27%
- --------------------------------------------------------------------------------
Nasdaq Composite Index 18.02%
- --------------------------------------------------------------------------------
- ------
2
Value - Performance
TOTAL RETURNS AS OF MARCH 31, 2006
--------------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------------------
INVESTOR CLASS 9.89% 9.94% 11.00% 12.39% 9/1/93
- --------------------------------------------------------------------------------------------
RUSSELL 3000 VALUE INDEX(1) 14.20% 8.42% 11.16% 11.86%(2) --
- --------------------------------------------------------------------------------------------
S&P 500 INDEX(1) 11.73% 3.97% 8.95% 10.51%(2) --
- --------------------------------------------------------------------------------------------
LIPPER MULTI-CAP
VALUE INDEX(1) 12.97% 7.89% 9.84% 10.77%(2) --
- --------------------------------------------------------------------------------------------
Lipper Multi-Cap
Value Ranking(1) 383 of 477 37 of 248 23 of 100 12 of 63(2) --
- --------------------------------------------------------------------------------------------
Morningstar Large
Value Ranking(3) 746 of 1328 42 of 739 37 of 355 16 of 213(2) --
- --------------------------------------------------------------------------------------------
Institutional Class 10.10% 10.18% -- 8.85% 7/31/97
- --------------------------------------------------------------------------------------------
Advisor Class 9.61% 9.67% -- 10.54% 10/2/96
- --------------------------------------------------------------------------------------------
A Class No sales charge* 9.75% -- -- 17.07%(4) 1/31/03
With sales charge* 3.39% -- -- 14.91%(4)
- --------------------------------------------------------------------------------------------
B Class No sales charge* 8.81% -- -- 16.27%(4) 1/31/03
With sales charge* 4.81% -- -- 15.58%(4)
- --------------------------------------------------------------------------------------------
C Class 8.87% -- -- 7.10% 6/4/01
- --------------------------------------------------------------------------------------------
R Class -- -- -- 4.99%(5) 7/29/05
- --------------------------------------------------------------------------------------------
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a maximum 5.75% initial
sales charge for equity funds and may be subject to a maximum CDSC of 1.00%. B
Class shares redeemed within six years of purchase are subject to a CDSC that
declines from 5.00% during the first year after purchase to 0.00% the sixth
year after purchase. C Class shares redeemed within 12 months of purchase are
subject to a maximum CDSC of 1.00%. Please see the Share Class Information
pages for more about the applicable sales charges for each share class. The
SEC requires that mutual funds provide performance information net of maximum
sales charges in all cases where charges could be applied.
(1) Data provided by Lipper Inc. -- A Reuters Company. (c) 2006 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.
Lipper Rankings -- Rankings are based only on the universe shown and are
based on average annual total returns. This listing might not represent the
complete universe of funds tracked by Lipper.
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 and may be incomplete. No offer or solicitations to buy or sell any
of the securities herein is being made by Lipper.
(2) Since 8/31/93, the date nearest the Investor Class's inception for which
data are available.
(3) (c) 2006 Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar and/or its content providers; (2)
may not be copied or distributed; and (3) is not warranted to be accurate,
complete or timely. Neither Morningstar nor its content providers are
responsible for any damages or losses arising from any use of this
information. Morningstar Rankings are based on risk adjusted returns.
(4) Class return would have been lower if the class had not received partial
reimbursements or waivers of its distribution and service fees.
(5) Total returns for periods less than one year are not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the performance
shown. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. To obtain performance data current
to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance and ranking 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)
- ------
3
Value - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made March 31, 1996
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended March 31
- -----------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
- -----------------------------------------------------------------------------------------------------
Investor Class 15.92% 39.94% -9.88% 1.42% 19.20% 17.96% -19.85% 40.66% 9.95% 9.89%
- -----------------------------------------------------------------------------------------------------
Russell 3000
Value Index 17.83% 46.78% 2.51% 6.81% 1.48% 5.67% -22.79% 42.45% 12.88% 14.20%
- -----------------------------------------------------------------------------------------------------
S&P 500 Index 19.83% 48.00% 18.46% 17.94% -21.68% 0.24% -24.76% 35.12% 6.69% 11.73%
- -----------------------------------------------------------------------------------------------------
Lipper Multi-Cap
Value Index 16.28% 39.07% -3.71% 5.42% 6.54% 6.47% -22.91% 42.99% 10.27% 12.97%
- -----------------------------------------------------------------------------------------------------
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 and ranking 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.
- ------
4
Value - Portfolio Commentary
PORTFOLIO MANAGERS: PHIL DAVIDSON, MICHAEL LISS, AND SCOTT MOORE.
Value gained 9.89%* for the 12 months ended March 31, 2006, trailing the Lipper
Multi-Cap Value Index, which was up 12.97%. The Russell 3000 Value Index,
indicative of the value side of the market, was up 14.20%. The S&P 500 Index,
representative of the broad market, gained 11.73%.
The portfolio's latest annual results reflect an equities market in which
investors generally preferred lower-quality, higher-beta, momentum-driven
stocks. In contrast, Value steers toward higher-quality businesses with strong
cash flows and sound balance sheets. In addition, among value stocks, returns on
larger-capitalization issues trailed those of small-cap stocks.
The portfolio's long-term performance has been strong. As of March 31, Value's
ten-year average annualized return of 11.00% places it in the top 23% of its
Lipper Multi-Cap Value peer group and in the top 13% of Morningstar's Large
Value Category. Additionally, from the fund's inception on September 1, 1993,
Value has produced an average annual return of 12.39%, significantly ahead of
the 10.77%** return posted by the Lipper Multi-Cap Value Index and the Russell
3000 Value Index's 11.86%** return. The S&P 500 has a 10.51%** average
annualized return for the same period.
FINANCIALS LEAD PORTFOLIO
Financial stocks proved to be the portfolio's largest contributors to our
absolute results, led by shares of insurance companies and commercial banks. On
the insurance side, performance was paced by American International Group Inc.
(AIG). The world's largest insurer, AIG has put regulatory investigations behind
it and is benefiting from improved pricing in the wake of the 2005 hurricanes
and its strong presence in foreign life insurance markets.
Profits for commercial banks were squeezed during the period by rising
short-term interest rates (a rising cost for capital). Nonetheless, two of our
largest holdings in the industry, Bank of America Corp. and SunTrust Banks Inc.,
were among our top contributors. While Bank of America was not immune to the
earnings-slowing effects of a "flat yield curve," it appears to be successfully
integrating credit card giant MBNA, which it acquired last year. SunTrust Banks,
the seventh-largest
TOP TEN HOLDINGS AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Bank of America Corp. 4.8% 4.4%
- --------------------------------------------------------------------------------
Kraft Foods Inc. Cl A 4.5% 4.0%
- --------------------------------------------------------------------------------
International Flavors
& Fragrances Inc. 3.8% 2.1%
- --------------------------------------------------------------------------------
Kimberly-Clark Corp. 3.6% 2.4%
- --------------------------------------------------------------------------------
SunTrust Banks, Inc. 3.2% 2.8%
- --------------------------------------------------------------------------------
Chevron Corp. 2.3% --
- --------------------------------------------------------------------------------
Anheuser-Busch
Companies, Inc. 2.1% 1.7%
- --------------------------------------------------------------------------------
Berkshire
Hathaway Inc. Cl A 2.1% 2.1%
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 2.0% 3.1%
- --------------------------------------------------------------------------------
XCEL Energy Inc. 2.0% 0.1%
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary are for Investor Class shares.
**Since 8/31/1993, the date nearest the Investor Class's inception
for which data are available. (continued)
- ------
5
Value - Portfolio Commentary
U.S. bank, operates throughout 11 Southeastern states, which represent one of
the highest population growth footprints in banking.
INDUSTRIALS ADD VALUE
In industrials, we were rewarded for taking positions in commercial services
companies, particularly in the waste management industry. Republic Services
Inc., a leading waste management firm, reported record earnings for 2005. In
addition to raising its dividend 17% during the period, Republic Services
announced plans to repurchase nearly 10% of its stock during 2006, a
continuation of a multi-year trend. Another standout was Waste Management Inc.,
the largest solid waste management concern in the world. Fueled by expanding
margins due to better pricing and continued cost control, Waste Management
continues to improve its operating performance.
SOME DISAPPOINTMENTS
Despite these successes, we suffered setbacks that contributed to our
underperformance. Three of our largest detractors were media companies. They
included The New York Times Co. and Tribune Co. (which publishes several major
newspapers including the Los Angeles Times), and Westwood One, Inc., the
nation's largest radio network and the leading distributor of national radio
programs. All three have been slowed by a weak advertising environment. Westwood
One is also contending with rising operating expenses as it invests in new
programming and technology.
In consumer staples, Kimberly-Clark Corp., the world's top maker of
personal-care paper products, was hampered by rising pulp prices and increased
competition from private-label brands in the disposable diaper market, which has
led to margin pressure. We believe the issues affecting this industry leader are
manageable and increased our position during the period.
LOOKING AHEAD
Value can be a core investment for investors seeking long-term capital growth.
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. This strategy has been in place since
the fund's inception and has delivered attractive, risk-adjusted results over
time.
TOP FIVE INDUSTRIES AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Commercial Banks 10.1% 9.3%
- --------------------------------------------------------------------------------
Food Products 7.9% 7.5%
- --------------------------------------------------------------------------------
Chemicals 7.9% 7.1%
- --------------------------------------------------------------------------------
Oil, Gas &
Consumable Fuels 7.0% 5.4%
- --------------------------------------------------------------------------------
Insurance 6.4% 9.9%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Common Stocks 95.9% 98.0%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 4.5% 0.7%
- --------------------------------------------------------------------------------
Other Assets
and Liabilities* (0.4)% 1.3%
- --------------------------------------------------------------------------------
*Includes collateral received for securities lending and other assets and
liabilities.
- ------
6
Value - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 95.9%
AEROSPACE & DEFENSE -- 0.7%
- --------------------------------------------------------------------------------
453,304 Honeywell International Inc. $ 19,387,812
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 0.7%
- --------------------------------------------------------------------------------
1,309,112 Cooper Tire & Rubber Co.(1) 18,772,666
- --------------------------------------------------------------------------------
BEVERAGES -- 3.5%
- --------------------------------------------------------------------------------
1,382,240 Anheuser-Busch
Companies, Inc. 59,118,405
- --------------------------------------------------------------------------------
135,632 Coca-Cola Company (The) 5,678,912
- --------------------------------------------------------------------------------
1,769,048 Coca-Cola Enterprises Inc. 35,982,436
- --------------------------------------------------------------------------------
100,779,753
- --------------------------------------------------------------------------------
BUILDING PRODUCTS -- 1.3%
- --------------------------------------------------------------------------------
1,136,056 Masco Corp. 36,910,459
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 0.2%
- --------------------------------------------------------------------------------
66,696 Merrill Lynch & Co., Inc. 5,252,977
- --------------------------------------------------------------------------------
CHEMICALS -- 7.9%
- --------------------------------------------------------------------------------
65,664 Air Products & Chemicals, Inc. 4,411,964
- --------------------------------------------------------------------------------
1,127,232 du Pont (E.I.)
de Nemours & Co. 47,580,463
- --------------------------------------------------------------------------------
3,170,640 International Flavors
& Fragrances Inc.(1) 108,816,365
- --------------------------------------------------------------------------------
960,936 Minerals Technologies Inc.(1)(2) 56,128,272
- --------------------------------------------------------------------------------
486,192 Nalco Holding Co.(3) 8,605,598
- --------------------------------------------------------------------------------
225,542,662
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 10.1%
- --------------------------------------------------------------------------------
3,030,136 Bank of America Corp. 137,992,394
- --------------------------------------------------------------------------------
1,234,784 Fifth Third Bancorp(1) 48,601,098
- --------------------------------------------------------------------------------
1,263,816 SunTrust Banks, Inc. 91,955,253
- --------------------------------------------------------------------------------
352,368 U.S. Bancorp 10,747,224
- --------------------------------------------------------------------------------
289,295,969
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 2.4%
- --------------------------------------------------------------------------------
637,400 Aramark Corp. Cl B 18,828,796
- --------------------------------------------------------------------------------
593,368 Republic Services, Inc. Cl A 25,224,074
- --------------------------------------------------------------------------------
710,928 Waste Management, Inc. 25,095,758
- --------------------------------------------------------------------------------
69,148,628
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 0.4%
- --------------------------------------------------------------------------------
375,592 Dell Inc.(3) 11,177,618
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.9%
- --------------------------------------------------------------------------------
840,037 Bemis Co., Inc. 26,528,368
- --------------------------------------------------------------------------------
DIVERSIFIED -- 1.8%
- --------------------------------------------------------------------------------
397,456 Standard and Poor's 500
Depositary Receipt(1) 51,601,712
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 1.8%
- --------------------------------------------------------------------------------
1,079,632 Citigroup Inc. 51,001,816
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.4%
- --------------------------------------------------------------------------------
582,872 BellSouth Corp. $ 20,196,515
- --------------------------------------------------------------------------------
525,288 Commonwealth Telephone
Enterprises, Inc.(1) 18,096,172
- --------------------------------------------------------------------------------
892,592 Verizon Communications 30,401,683
- --------------------------------------------------------------------------------
68,694,370
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 1.3%
- --------------------------------------------------------------------------------
160,760 IDACORP, Inc.(1) 5,227,915
- --------------------------------------------------------------------------------
1,589,624 Northeast Utilities(1) 31,045,357
- --------------------------------------------------------------------------------
36,273,272
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.4%
- --------------------------------------------------------------------------------
219,608 Hubbell Inc. Cl B 11,257,106
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 2.0%
- --------------------------------------------------------------------------------
1,239,640 Wal-Mart Stores, Inc. 58,560,594
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 7.9%
- --------------------------------------------------------------------------------
1,184,872 ConAgra Foods, Inc. 25,427,353
- --------------------------------------------------------------------------------
507,672 General Mills, Inc. 25,728,817
- --------------------------------------------------------------------------------
614,944 H.J. Heinz Company 23,318,676
- --------------------------------------------------------------------------------
118,560 Kellogg Co. 5,221,382
- --------------------------------------------------------------------------------
4,233,744 Kraft Foods Inc. Cl A(1) 128,324,781
- --------------------------------------------------------------------------------
316,432 Tyson Foods, Inc. Cl A(1) 4,347,776
- --------------------------------------------------------------------------------
211,928 Unilever N.V. New York Shares 14,669,656
- --------------------------------------------------------------------------------
227,038,441
- --------------------------------------------------------------------------------
GAS UTILITIES -- 0.7%
- --------------------------------------------------------------------------------
686,824 WGL Holdings Inc.(1) 20,893,186
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 1.3%
- --------------------------------------------------------------------------------
706,072 Beckman Coulter, Inc. 38,530,349
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 1.7%
- --------------------------------------------------------------------------------
551,200 HCA Inc. 25,239,448
- --------------------------------------------------------------------------------
450,160 Universal Health
Services, Inc. Cl B(1) 22,863,626
- --------------------------------------------------------------------------------
48,103,074
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 2.3%
- --------------------------------------------------------------------------------
305,344 International Speedway Corp. 15,542,010
- --------------------------------------------------------------------------------
366,640 Outback Steakhouse, Inc.(1) 16,132,160
- --------------------------------------------------------------------------------
872,000 Speedway Motorsports Inc.(1) 33,319,120
- --------------------------------------------------------------------------------
64,993,290
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 3.6%
- --------------------------------------------------------------------------------
1,764,272 Kimberly-Clark Corp. 101,974,922
- --------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS
& ENERGY TRADERS -- 0.4%
- --------------------------------------------------------------------------------
199,672 Constellation Energy Group Inc. 10,924,055
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 0.3%
- --------------------------------------------------------------------------------
253,704 General Electric Co. 8,823,825
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
7
Value - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
INSURANCE -- 6.4%
- --------------------------------------------------------------------------------
226,928 Allstate Corp. $ 11,825,218
- --------------------------------------------------------------------------------
264,576 Ambac Financial Group, Inc. 21,060,250
- --------------------------------------------------------------------------------
744,784 American International
Group, Inc. 49,222,775
- --------------------------------------------------------------------------------
649 Berkshire Hathaway Inc. Cl A(3) 58,637,150
- --------------------------------------------------------------------------------
105,808 Hartford Financial Services
Group Inc. (The) 8,522,834
- --------------------------------------------------------------------------------
1,165,576 Marsh & McLennan
Companies, Inc.(1) 34,221,311
- --------------------------------------------------------------------------------
183,489,538
- --------------------------------------------------------------------------------
IT SERVICES -- 1.1%
- --------------------------------------------------------------------------------
371,536 International Business
Machines Corp. 30,640,574
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS -- 0.6%
- --------------------------------------------------------------------------------
782,304 Hasbro, Inc. 16,506,614
- --------------------------------------------------------------------------------
MEDIA -- 1.4%
- --------------------------------------------------------------------------------
322,848 New York Times
Co. (The) Cl A(1) 8,171,283
- --------------------------------------------------------------------------------
882,176 Time Warner Inc. 14,811,735
- --------------------------------------------------------------------------------
46,504 Tribune Co. 1,275,605
- --------------------------------------------------------------------------------
1,433,720 Westwood One, Inc. 15,828,268
- --------------------------------------------------------------------------------
40,086,891
- --------------------------------------------------------------------------------
MULTI-UTILITIES -- 4.8%
- --------------------------------------------------------------------------------
161,416 Ameren Corp.(1) 8,041,745
- --------------------------------------------------------------------------------
580,096 Dominion Resources Inc. 40,044,027
- --------------------------------------------------------------------------------
783,960 Wisconsin Energy Corp.(1) 31,350,560
- --------------------------------------------------------------------------------
3,102,216 XCEL Energy Inc.(1) 56,305,221
- --------------------------------------------------------------------------------
135,741,553
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 2.5%
- --------------------------------------------------------------------------------
2,795,888 Dollar General Corp. 49,403,341
- --------------------------------------------------------------------------------
816,576 Family Dollar Stores, Inc.(1) 21,720,922
- --------------------------------------------------------------------------------
71,124,263
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS -- 7.0%
- --------------------------------------------------------------------------------
82,280 BP plc ADR 5,672,383
- --------------------------------------------------------------------------------
1,133,384 Chevron Corp. 65,702,273
- --------------------------------------------------------------------------------
1,028,136 Equitable Resources Inc. 37,537,245
- --------------------------------------------------------------------------------
878,608 Exxon Mobil Corp. 53,472,083
- --------------------------------------------------------------------------------
446,160 Murphy Oil Corp. 22,227,691
- --------------------------------------------------------------------------------
244,456 Royal Dutch Shell plc ADR 15,219,831
- --------------------------------------------------------------------------------
199,831,506
- --------------------------------------------------------------------------------
Shares/Principal Amount Value
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 1.1%
- --------------------------------------------------------------------------------
853,392 MeadWestvaco Corp. $ 23,306,135
- --------------------------------------------------------------------------------
106,088 Weyerhaeuser Co. 7,683,954
- --------------------------------------------------------------------------------
30,990,089
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 5.3%
- --------------------------------------------------------------------------------
1,137,224 Abbott Laboratories 48,297,904
- --------------------------------------------------------------------------------
979,368 Bristol-Myers Squibb Co. 24,102,246
- --------------------------------------------------------------------------------
260,304 Eli Lilly and Company 14,394,811
- --------------------------------------------------------------------------------
433,952 Merck & Co., Inc. 15,288,129
- --------------------------------------------------------------------------------
1,211,920 Pfizer Inc. 30,201,046
- --------------------------------------------------------------------------------
694,904 Watson Pharmaceuticals, Inc.(3) 19,971,541
- --------------------------------------------------------------------------------
152,255,677
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.8%
- --------------------------------------------------------------------------------
246,968 Applied Materials, Inc. 4,324,410
- --------------------------------------------------------------------------------
2,471,512 Intel Corp. 47,823,757
- --------------------------------------------------------------------------------
52,148,167
- --------------------------------------------------------------------------------
SOFTWARE -- 1.5%
- --------------------------------------------------------------------------------
1,261,080 Microsoft Corporation 34,313,987
- --------------------------------------------------------------------------------
294,088 Reynolds & Reynolds Co. Cl A 8,352,099
- --------------------------------------------------------------------------------
42,666,086
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 2.5%
- --------------------------------------------------------------------------------
771,016 Foot Locker, Inc. 18,411,862
- --------------------------------------------------------------------------------
1,170,136 Gap, Inc. (The) 21,858,140
- --------------------------------------------------------------------------------
727,312 Home Depot, Inc. (The) 30,765,298
- --------------------------------------------------------------------------------
71,035,300
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.1%
- --------------------------------------------------------------------------------
70,128 Liz Claiborne, Inc. 2,873,845
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 3.8%
- --------------------------------------------------------------------------------
774,392 Fannie Mae 39,803,749
- --------------------------------------------------------------------------------
838,392 Freddie Mac 51,141,912
- --------------------------------------------------------------------------------
265,576 MGIC Investment Corp. 17,695,329
- --------------------------------------------------------------------------------
108,640,990
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $2,562,279,145) 2,739,498,017
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 4.5%
$128,800,000 FNMA Discount Notes,
4.61%, 4/3/06(4)
(Cost $128,767,013) 128,800,000
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
8
Value - Schedule of Investments
MARCH 31, 2006
Value
- --------------------------------------------------------------------------------
COLLATERAL RECEIVED
FOR SECURITIES LENDING(5) -- 12.9%
REPURCHASE AGREEMENTS -- 12.9%
- --------------------------------------------------------------------------------
Repurchase Agreement, Barclays Bank plc,
(collateralized by various U.S. Government
Agency obligations in a pooled account
at the lending agent), 4.89%,
dated 3/31/06, due 4/3/06
(Delivery value $100,040,750) $ 100,000,000
- --------------------------------------------------------------------------------
Repurchase Agreement, BNP Paribas,
(collateralized by various U.S. Government
Agency obligations in a pooled account
at the lending agent), 4.82%,
dated 3/31/06, due 4/3/06
(Delivery value $100,040,167) 100,000,000
- --------------------------------------------------------------------------------
Repurchase Agreement, Deutsche Bank AG,
(collateralized by various U.S. Government
Agency obligations in a pooled account
at the lending agent), 4.82%,
dated 3/31/06, due 4/3/06
(Delivery value $150,060,250) 150,000,000
- --------------------------------------------------------------------------------
Value
- --------------------------------------------------------------------------------
Repurchase Agreement, UBS AG,
(collateralized by various U.S. Government
Agency obligations in a pooled account
at the lending agent), 4.88%,
dated 3/31/06, due 4/3/06
(Delivery value $19,861,331) $ 19,853,257
- --------------------------------------------------------------------------------
TOTAL COLLATERAL RECEIVED
FOR SECURITIES LENDING
(Cost $369,853,257) 369,853,257
- --------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 113.3%
(Cost $3,060,899,415) 3,238,151,274
- --------------------------------------------------------------------------------
OTHER ASSETS AND
LIABILITIES -- (13.3)% (380,174,751)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $2,857,976,523
================================================================================
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS*
Unrealized
Contracts to Sell Settlement Date Value Gain (Loss)
- --------------------------------------------------------------------------------
5,408,381 Euro for USD 4/28/2006 $ 6,566,588 $(115,478)
- --------------------------------------------------------------------------------
13,171,759 Euro for USD 4/28/2006 15,992,497 (146,739)
- --------------------------------------------------------------------------------
2,464,939 GBP for USD 4/28/2006 4,281,219 (13,711)
- --------------------------------------------------------------------------------
$26,840,304 $(275,928)
==================================
(Value on Settlement Date $26,564,376)
*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
FNMA = Federal National Mortgage Association
GBP = British Pound
USD = United States Dollar
(1) Security, or a portion thereof, was on loan as of March 31, 2006.
(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) The rate indicated is the yield to maturity at purchase.
(5) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions. (See Note 6 in
Notes to Financial Statements.)
See Notes to Financial Statements.
- ------
9
Large Company Value - Performance
TOTAL RETURNS AS OF MARCH 31, 2006
--------------------------
AVERAGE ANNUAL RETURNS
- -----------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
- -----------------------------------------------------------------------------------------
INVESTOR CLASS 9.44% 7.95% 6.57% 7/30/99
- -----------------------------------------------------------------------------------------
RUSSELL 1000 VALUE INDEX(1) 13.31% 7.79% 5.58% --
- -----------------------------------------------------------------------------------------
S&P 500 INDEX(1) 11.73% 3.97% 1.19% --
- -----------------------------------------------------------------------------------------
Lipper Large-Cap Value Ranking(1) 342 of 495 21 of 281 27 of 211 --
- -----------------------------------------------------------------------------------------
Morningstar Large Value Ranking(2) 807 of 1328 108 of 739 105 of 573 --
- -----------------------------------------------------------------------------------------
Institutional Class 9.65% -- 7.14% 8/10/01
- -----------------------------------------------------------------------------------------
Advisor Class 9.17% 7.69% 8.76% 10/26/00
- -----------------------------------------------------------------------------------------
A Class No sales charge* 9.16% -- 16.41%(3) 1/31/03
With sales charge* 2.88% -- 14.26%(3)
- -----------------------------------------------------------------------------------------
B Class No sales charge* 8.33% -- 15.66%(3) 1/31/03
With sales charge* 4.33% -- 14.96%(3)
- -----------------------------------------------------------------------------------------
C Class 8.35% -- 7.57% 11/7/01
- -----------------------------------------------------------------------------------------
R Class 8.90% -- 13.10%(3) 8/29/03
- -----------------------------------------------------------------------------------------
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. A Class shares have a maximum 5.75% initial
sales charge for equity funds and may be subject to a maximum CDSC of 1.00%. B
Class shares redeemed within six years of purchase are subject to a CDSC that
declines from 5.00% during the first year after purchase to 0.00% the sixth
year after purchase. C Class shares redeemed within 12 months of purchase are
subject to a maximum CDSC of 1.00%. Please see the Share Class Information
pages for more about the applicable sales charges for each share class. The SEC
requires that mutual funds provide performance information net of maximum sales
charges in all cases where charges could be applied.
(1) Data provided by Lipper Inc. -- A Reuters Company. (c) 2006 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.
Lipper Rankings -- Rankings are based only on the universe shown and are
based on average annual total returns. This listing might not represent the
complete universe of funds tracked by Lipper.
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 and may be incomplete. No offer or solicitations to buy or sell any
of the securities herein is being made by Lipper.
(2) (c) 2006 Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar and/or its content providers; (2)
may not be copied or distributed; and (3) is not warranted to be accurate,
complete or timely. Neither Morningstar nor its content providers are
responsible for any damages or losses arising from any use of this
information. Morningstar Rankings are based on risk adjusted returns.
(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 and ranking 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)
- ------
10
Large Company Value - Performance
GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made July 30, 1999
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended March 31
- --------------------------------------------------------------------------------
2000* 2001 2002 2003 2004 2005 2006
- --------------------------------------------------------------------------------
Investor Class -7.22% 12.38% 10.20% -21.19% 39.34% 10.73% 9.44%
- --------------------------------------------------------------------------------
Russell 1000
Value Index -1.56% 0.27% 4.38% -22.79% 40.82% 13.17% 13.31%
- --------------------------------------------------------------------------------
S&P 500 Index 13.73% -21.68% 0.24% -24.76% 35.12% 6.69% 11.73%
- --------------------------------------------------------------------------------
* 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 and ranking 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.
- ------
11
Large Company Value - Portfolio Commentary
PORTFOLIO MANAGERS: MARK MALLON, CHUCK RITTER, AND BRENDAN HEALY.
American Century Large Company Value advanced 9.44%* during the fiscal year
ended March 31, 2006, trailing the 13.31% return of its benchmark, the Russell
1000 Value Index, and the 11.73% gain of the S&P 500 Index, which measures the
broader market.
Large Company Value has proved its worth over the longer term. On a 5-year
basis, its average annual return has outperformed its benchmark by a margin of
7.95% to 7.79%. In that time, the fund ranks in the leading 8% of its Lipper
Large-Cap Value peer group and the top 18% of its Morningstar Large Value
peers.
OPPORTUNITIES IN BROADLY DIVERSIFIED, MEGA-CAP STOCKS
The fund's investment process looks for stocks that appear attractively priced
given their current fundamentals and business prospects. A sector or market
group that underperforms the market will get increasing attention in the
portfolio. These moves to lagging areas can hurt the fund's performance in the
short-term, but we make them with the belief that long-term performance will
benefit from investments in areas of the market we perceive as cheap.
One area of the market that certainly has gotten cheaper during the last few
years is that of the mega-cap value stocks. During the last five years, returns
of the biggest large-cap value stocks, so-called mega-cap value stocks, have
trailed other large-cap value stocks.
In our view, that underperformance has gradually made many giants of American
business more attractively priced than other large-cap stocks. Typically, these
companies feature broadly diversified business models, generally leading to more
stable fundamentals. Reacting to their attractive prices, the fund has increased
its exposure to mega-cap stocks over the last few years and generally preferred
more diversified business models rather than niche plays.
SOLID RETURNS IN ENERGY
In the 12-month period, the fund had a modest underweight in energy stocks, the
broad market's best-performing sector since 2004. The fund's exposure generally
consisted of multi-national integrated oil companies, such as Exxon Mobil and
Chevron.
While such energy stocks performed well on an absolute basis, they trailed more
specialized energy stocks focused on refining, exploration or oil field
TOP TEN HOLDINGS AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Citigroup Inc. 4.7% 4.6%
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 4.5% 4.5%
- --------------------------------------------------------------------------------
Bank of America Corp. 3.3% 3.2%
- --------------------------------------------------------------------------------
Freddie Mac 2.9% 3.1%
- --------------------------------------------------------------------------------
Royal Dutch
Shell plc ADR 2.7% 2.8%
- --------------------------------------------------------------------------------
J.P. Morgan Chase & Co. 2.5% 2.2%
- --------------------------------------------------------------------------------
Chevron Corp. 2.3% 2.2%
- --------------------------------------------------------------------------------
ConocoPhillips 2.3% 2.2%
- --------------------------------------------------------------------------------
Wells Fargo & Co. 2.2% 2.0%
- --------------------------------------------------------------------------------
Microsoft Corporation 1.8% 1.7%
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary are for Investor Class shares.
(continued)
- ------
12
Large Company Value - Portfolio Commentary
services. While narrowly focused energy stocks may offer more operational
leverage amid the sector's current favorable trends, we believe the benefits of
diversification will become more apparent if the energy environment turns
hostile.
ABSOLUTE BOOST FROM FINANCIALS
Large Company Value derived almost half its absolute return in the period from
financial stocks, with commercial banks and financial services providers leading
the way. The sector also accounted for the portfolio's second-leading relative
portfolio holding, property and casualty insurer Loews Corp., whose shares
surged 39%.
However, the fund's emphasis on diversified business models also hurt
performance in the capital markets industry. Two holdings in that industry,
Merrill Lynch and Morgan Stanley, advanced nicely during the period but still
trailed more specialized capital market stocks.
Moreover, an underweight position in booming real estate stocks trimmed relative
returns in the financials sector. An underweight position in real estate
investment trusts reflected concern about the valuation of stocks in the
industry, mostly because the group has ranked as a standout performer since the
market's peak in the spring of 2000.
INVESTMENT PHILOSOPHY
The Large Company Value investment management team remains committed to its
strategy of finding large, fundamentally sound businesses trading at price
levels it deems below fair market value. By keeping the portfolio positioned in
attractively priced stocks regardless of short-term market movements, we believe
we can deliver long-term investment rewards.
TOP FIVE INDUSTRIES AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Oil, Gas &
Consumable Fuels 12.3% 11.6%
- --------------------------------------------------------------------------------
Commercial Banks 9.8% 9.4%
- --------------------------------------------------------------------------------
Diversified
Financial Services 7.1% 6.8%
- --------------------------------------------------------------------------------
Pharmaceuticals 6.5% 5.4%
- --------------------------------------------------------------------------------
Insurance 6.0% 6.2%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Common Stocks 96.2% 96.0%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 4.0% 2.5%
- --------------------------------------------------------------------------------
Other Assets
and Liabilities (0.2)% 1.5%
- --------------------------------------------------------------------------------
- ------
13
Large Company Value - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 96.2%
AEROSPACE & DEFENSE -- 0.7%
- --------------------------------------------------------------------------------
231,600 Northrop Grumman Corp. $ 15,815,964
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 0.2%
- --------------------------------------------------------------------------------
247,100 Lear Corporation 4,381,083
- --------------------------------------------------------------------------------
BEVERAGES -- 1.8%
- --------------------------------------------------------------------------------
478,300 Coca-Cola Company (The) 20,026,421
- --------------------------------------------------------------------------------
31,600 Molson Coors Brewing Co. 2,168,392
- --------------------------------------------------------------------------------
578,500 Pepsi Bottling Group Inc. 17,580,615
- --------------------------------------------------------------------------------
39,775,428
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 4.0%
- --------------------------------------------------------------------------------
583,800 Bank of New York
Co., Inc. (The) 21,040,152
- --------------------------------------------------------------------------------
414,900 Merrill Lynch & Co., Inc. 32,677,524
- --------------------------------------------------------------------------------
526,000 Morgan Stanley 33,043,320
- --------------------------------------------------------------------------------
86,760,996
- --------------------------------------------------------------------------------
CHEMICALS -- 2.0%
- --------------------------------------------------------------------------------
417,500 du Pont (E.I.)
de Nemours & Co. 17,622,675
- --------------------------------------------------------------------------------
384,800 PPG Industries, Inc. 24,377,080
- --------------------------------------------------------------------------------
41,999,755
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 9.8%
- --------------------------------------------------------------------------------
1,571,800 Bank of America Corp. 71,579,772
- --------------------------------------------------------------------------------
269,100 National City Corp. 9,391,590
- --------------------------------------------------------------------------------
226,600 PNC Financial Services Group 15,252,446
- --------------------------------------------------------------------------------
981,400 U.S. Bancorp 29,932,700
- --------------------------------------------------------------------------------
663,100 Wachovia Corp. 37,166,755
- --------------------------------------------------------------------------------
738,800 Wells Fargo & Co. 47,187,156
- --------------------------------------------------------------------------------
210,510,419
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 1.3%
- --------------------------------------------------------------------------------
392,400 R.R. Donnelley
& Sons Company 12,839,328
- --------------------------------------------------------------------------------
419,300 Waste Management, Inc. 14,801,290
- --------------------------------------------------------------------------------
27,640,618
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 0.3%
- --------------------------------------------------------------------------------
525,600 Avaya Inc.(1) 5,939,280
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 1.7%
- --------------------------------------------------------------------------------
1,119,600 Hewlett-Packard Co. 36,834,840
- --------------------------------------------------------------------------------
DIVERSIFIED -- 1.3%
- --------------------------------------------------------------------------------
219,300 Standard and Poor's 500
Depositary Receipt 28,471,719
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 7.1%
- --------------------------------------------------------------------------------
2,126,400 Citigroup Inc. 100,451,136
- --------------------------------------------------------------------------------
1,277,400 J.P. Morgan Chase & Co. 53,190,936
- --------------------------------------------------------------------------------
153,642,072
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 4.1%
- --------------------------------------------------------------------------------
1,343,400 AT&T Inc. $ 36,325,536
- --------------------------------------------------------------------------------
708,600 BellSouth Corp. 24,552,990
- --------------------------------------------------------------------------------
828,400 Verizon Communications 28,215,304
- --------------------------------------------------------------------------------
89,093,830
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 2.7%
- --------------------------------------------------------------------------------
611,600 Exelon Corporation 32,353,640
- --------------------------------------------------------------------------------
867,100 PPL Corporation 25,492,740
- --------------------------------------------------------------------------------
57,846,380
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 1.8%
- --------------------------------------------------------------------------------
1,028,800 Kroger Co. (The)(1) 20,946,368
- --------------------------------------------------------------------------------
380,500 Wal-Mart Stores, Inc. 17,974,820
- --------------------------------------------------------------------------------
38,921,188
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 2.2%
- --------------------------------------------------------------------------------
427,700 H.J. Heinz Company 16,218,384
- --------------------------------------------------------------------------------
640,500 Sara Lee Corp. 11,452,140
- --------------------------------------------------------------------------------
269,900 Unilever N.V.
New York Shares 18,682,478
- --------------------------------------------------------------------------------
46,353,002
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 0.5%
- --------------------------------------------------------------------------------
237,300 HCA Inc. 10,865,967
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 1.2%
- --------------------------------------------------------------------------------
731,000 McDonald's Corporation 25,117,160
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.7%
- --------------------------------------------------------------------------------
567,500 Newell Rubbermaid Inc. 14,295,325
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 2.4%
- --------------------------------------------------------------------------------
779,600 General Electric Co. 27,114,488
- --------------------------------------------------------------------------------
888,400 Tyco International Ltd. 23,880,192
- --------------------------------------------------------------------------------
50,994,680
- --------------------------------------------------------------------------------
INSURANCE -- 6.0%
- --------------------------------------------------------------------------------
503,700 Allstate Corp. 26,247,807
- --------------------------------------------------------------------------------
494,300 American International
Group, Inc. 32,668,287
- --------------------------------------------------------------------------------
295,000 Hartford Financial Services
Group Inc. (The) 23,762,250
- --------------------------------------------------------------------------------
170,000 Loews Corp. 17,204,000
- --------------------------------------------------------------------------------
419,400 Marsh & McLennan
Companies, Inc. 12,313,584
- --------------------------------------------------------------------------------
290,700 Torchmark Corp. 16,598,970
- --------------------------------------------------------------------------------
128,794,898
- --------------------------------------------------------------------------------
IT SERVICES -- 2.7%
- --------------------------------------------------------------------------------
215,300 Computer Sciences Corp.(1) 11,959,915
- --------------------------------------------------------------------------------
338,500 Fiserv, Inc.(1) 14,403,175
- --------------------------------------------------------------------------------
378,300 International Business
Machines Corp. 31,198,401
- --------------------------------------------------------------------------------
57,561,491
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
14
Large Company Value - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
MACHINERY -- 3.1%
- --------------------------------------------------------------------------------
219,900 Deere & Co. $ 17,383,095
- --------------------------------------------------------------------------------
312,800 Dover Corp. 15,189,568
- --------------------------------------------------------------------------------
465,900 Ingersoll-Rand Company Cl A 19,469,961
- --------------------------------------------------------------------------------
188,100 Parker-Hannifin Corp. 15,162,741
- --------------------------------------------------------------------------------
67,205,365
- --------------------------------------------------------------------------------
MEDIA -- 3.4%
- --------------------------------------------------------------------------------
218,500 CBS Corp. Cl B 5,239,630
- --------------------------------------------------------------------------------
396,500 Gannett Co., Inc. 23,758,280
- --------------------------------------------------------------------------------
2,078,300 Time Warner Inc. 34,894,657
- --------------------------------------------------------------------------------
239,100 Viacom Inc. Cl B 9,277,080
- --------------------------------------------------------------------------------
73,169,647
- --------------------------------------------------------------------------------
METALS & MINING -- 0.5%
- --------------------------------------------------------------------------------
110,500 Nucor Corp. 11,579,295
- --------------------------------------------------------------------------------
MULTI-UTILITIES -- 0.6%
- --------------------------------------------------------------------------------
635,700 NiSource Inc. 12,853,854
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 0.6%
- --------------------------------------------------------------------------------
737,900 Dollar General Corp. 13,038,693
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS -- 0.7%
- --------------------------------------------------------------------------------
1,022,800 Xerox Corp.(1) 15,546,560
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS -- 12.3%
- --------------------------------------------------------------------------------
56,500 Anadarko Petroleum Corp. 5,707,065
- --------------------------------------------------------------------------------
845,100 Chevron Corp. 48,990,447
- --------------------------------------------------------------------------------
773,200 ConocoPhillips 48,827,580
- --------------------------------------------------------------------------------
96,900 Devon Energy Corporation 5,927,373
- --------------------------------------------------------------------------------
1,589,100 Exxon Mobil Corp. 96,712,626
- --------------------------------------------------------------------------------
924,400 Royal Dutch Shell plc ADR 57,553,150
- --------------------------------------------------------------------------------
263,718,241
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 1.4%
- --------------------------------------------------------------------------------
427,300 Weyerhaeuser Co. 30,949,339
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 6.5%
- --------------------------------------------------------------------------------
698,300 Abbott Laboratories 29,656,801
- --------------------------------------------------------------------------------
504,100 Johnson & Johnson 29,852,802
- --------------------------------------------------------------------------------
380,200 Merck & Co., Inc. 13,394,446
- --------------------------------------------------------------------------------
1,476,200 Pfizer Inc. 36,786,904
- --------------------------------------------------------------------------------
597,600 Wyeth 28,995,552
- --------------------------------------------------------------------------------
138,686,505
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.7%
- --------------------------------------------------------------------------------
817,800 Intel Corp. 15,824,430
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
SOFTWARE -- 2.4%
- --------------------------------------------------------------------------------
1,413,300 Microsoft Corporation $ 38,455,893
- --------------------------------------------------------------------------------
991,100 Oracle Corp.(1) 13,568,159
- --------------------------------------------------------------------------------
52,024,052
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 1.0%
- --------------------------------------------------------------------------------
689,200 Gap, Inc. (The) 12,874,256
- --------------------------------------------------------------------------------
190,100 Home Depot, Inc. (The) 8,041,230
- --------------------------------------------------------------------------------
20,915,486
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 1.3%
- --------------------------------------------------------------------------------
374,000 Liz Claiborne, Inc. 15,326,520
- --------------------------------------------------------------------------------
240,500 VF Corp. 13,684,450
- --------------------------------------------------------------------------------
29,010,970
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 4.8%
- --------------------------------------------------------------------------------
1,034,100 Freddie Mac 63,080,100
- --------------------------------------------------------------------------------
159,500 MGIC Investment Corp. 10,627,485
- --------------------------------------------------------------------------------
666,600 Washington Mutual, Inc. 28,410,492
- --------------------------------------------------------------------------------
102,118,077
- --------------------------------------------------------------------------------
TOBACCO -- 1.4%
- --------------------------------------------------------------------------------
416,800 Altria Group Inc. 29,534,448
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION
SERVICES -- 1.0%
- --------------------------------------------------------------------------------
798,500 Sprint Nextel Corp. 20,633,240
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $1,837,225,295) 2,068,424,297
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 4.0%
Repurchase Agreement, Morgan Stanley
Group, Inc., (collateralized by various
U.S. Treasury obligations, 6.00%, 2/15/26,
valued at $86,797,258), in a joint trading
account at 4.45%, dated 3/31/06,
due 4/3/06 (Delivery value $85,131,558)
(Cost $85,100,000) 85,100,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 100.2%
(Cost $1,922,325,295) 2,153,524,297
- --------------------------------------------------------------------------------
OTHER ASSETS
AND LIABILITIES -- (0.2)% (4,022,956)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $2,149,501,341
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
See Notes to Financial Statements.
- ------
15
Shareholder Fee Examples (Unaudited)
Fund shareholders may incur two types of costs: (1) transaction costs, including
sales charges (loads) on purchase payments and redemption/exchange fees; and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in your fund and to compare these costs
with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2005 to March 31, 2006.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or Institutional
Class shares of the American Century Diversified Bond Fund, in an American
Century account (i.e., not a financial intermediary or retirement plan account),
American Century may charge you a $12.50 semiannual account maintenance fee if
the value of those shares is less than $10,000. We will redeem shares
automatically in one of your accounts to pay the $12.50 fee. In determining your
total eligible investment amount, we will include your investments in all
PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered
under your Social Security number. PERSONAL ACCOUNTS include individual
accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell
Education Savings Accounts and IRAs (including traditional, Roth, Rollover,
SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you
have only business, business retirement, employer-sponsored or American Century
Brokerage accounts, you are currently not subject to this fee. We will not
charge the fee as long as you choose to manage your accounts exclusively online.
If you are subject to the Account Maintenance Fee, your account value could be
reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is not
the actual return of a fund's share class. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
(continued)
- ------
16
Shareholder Fee Examples (Unaudited)
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
- --------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD* ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 10/1/05 - EXPENSE
10/1/05 3/31/06 3/31/06 RATIO*
- --------------------------------------------------------------------------------
VALUE SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,077.00 $5.18 1.00%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,078.00 $4.14 0.80%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,075.70 $6.47 1.25%
- --------------------------------------------------------------------------------
A Class $1,000 $1,077.00 $6.47 1.25%
- --------------------------------------------------------------------------------
B Class $1,000 $1,071.80 $10.33 2.00%
- --------------------------------------------------------------------------------
C Class $1,000 $1,072.20 $10.33 2.00%
- --------------------------------------------------------------------------------
R Class $1,000 $1,074.30 $7.76 1.50%
- --------------------------------------------------------------------------------
HYPOTHETICAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,019.95 $5.04 1.00%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,020.94 $4.03 0.80%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,018.70 $6.29 1.25%
- --------------------------------------------------------------------------------
A Class $1,000 $1,018.70 $6.29 1.25%
- --------------------------------------------------------------------------------
B Class $1,000 $1,014.96 $10.05 2.00%
- --------------------------------------------------------------------------------
C Class $1,000 $1,014.96 $10.05 2.00%
- --------------------------------------------------------------------------------
R Class $1,000 $1,017.45 $7.54 1.50%
- --------------------------------------------------------------------------------
*Expenses are equal to the class's annualized expense ratio listed in the table
above, multiplied by the average account value over the period, multiplied by
182, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
(continued)
- ------
17
Shareholder Fee Examples (Unaudited)
- --------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD* ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 10/1/05 - EXPENSE
10/1/05 3/31/06 3/31/06 RATIO*
- --------------------------------------------------------------------------------
LARGE COMPANY VALUE SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,055.00 $4.25 0.83%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,056.10 $3.23 0.63%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,053.70 $5.53 1.08%
- --------------------------------------------------------------------------------
A Class $1,000 $1,053.70 $5.53 1.08%
- --------------------------------------------------------------------------------
B Class $1,000 $1,051.30 $9.36 1.83%
- --------------------------------------------------------------------------------
C Class $1,000 $1,051.40 $9.36 1.83%
- --------------------------------------------------------------------------------
R Class $1,000 $1,052.50 $6.81 1.33%
- --------------------------------------------------------------------------------
HYPOTHETICAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,020.79 $4.18 0.83%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,021.79 $3.18 0.63%
- --------------------------------------------------------------------------------
Advisor Class $1,000 $1,019.55 $5.44 1.08%
- --------------------------------------------------------------------------------
A Class $1,000 $1,019.55 $5.44 1.08%
- --------------------------------------------------------------------------------
B Class $1,000 $1,015.81 $9.20 1.83%
- --------------------------------------------------------------------------------
C Class $1,000 $1,015.81 $9.20 1.83%
- --------------------------------------------------------------------------------
R Class $1,000 $1,018.30 $6.69 1.33%
- --------------------------------------------------------------------------------
*Expenses are equal to the class's annualized expense ratio listed in the table
above, multiplied by the average account value over the period, multiplied by
182, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
- ------
18
Statement of Assets and Liabilities
MARCH 31, 2006
- --------------------------------------------------------------------------------
LARGE
VALUE COMPANY VALUE
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities -- unaffiliated,
at value (cost of $2,636,331,970 and
$1,922,325,295, respectively) --
including $324,798,828 and
$- of securities on loan, respectively $2,812,169,745 $2,153,524,297
- ------------------------------------------
Investment securities -- affiliated,
at value (cost of $54,714,188
and $-, respectively) --
including $39,362,496 and
$- of securities on loan, respectively 56,128,272 --
- ------------------------------------------
Investments made with cash collateral
received for securities on loan,
at value (cost of $369,853,257
and $-, respectively) 369,853,257 --
- --------------------------------------------------------------------------------
Total investment securities, at value
(cost of $3,060,899,415
and $1,922,325,295, respectively) 3,238,151,274 2,153,524,297
- ------------------------------------------
Receivable for investments sold 39,314,949 3,652,936
- ------------------------------------------
Receivable for capital shares sold 146,227 1,042,705
- ------------------------------------------
Dividends and interest receivable 5,003,426 2,659,105
- --------------------------------------------------------------------------------
3,282,615,876 2,160,879,043
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for collateral received
for securities on loan 369,853,257 --
- ------------------------------------------
Disbursements in excess
of demand deposit cash 8,096,010 3,275,473
- ------------------------------------------
Payable for investments purchased 43,893,409 1,626,910
- ------------------------------------------
Payable for forward foreign
currency exchange contracts 275,928 --
- ------------------------------------------
Payable for capital shares redeemed 50,292 4,870,999
- ------------------------------------------
Accrued management fees 2,343,102 1,402,542
- ------------------------------------------
Distribution fees payable 62,185 92,868
- ------------------------------------------
Service fees (and distribution fees --
A and R Class) payable 65,170 108,910
- --------------------------------------------------------------------------------
424,639,353 11,377,702
- --------------------------------------------------------------------------------
NET ASSETS $2,857,976,523 $2,149,501,341
================================================================================
See Notes to Financial Statements. (continued)
- ------
19
Statement of Assets and Liabilities
MARCH 31, 2006
- --------------------------------------------------------------------------------
LARGE
VALUE COMPANY VALUE
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $2,622,421,930 $1,908,829,270
- ------------------------------------------
Undistributed net investment income 1,425,373 193,725
- ------------------------------------------
Undistributed net realized gain
on investment and foreign
currency transactions 57,153,289 9,279,344
- ------------------------------------------
Net unrealized appreciation
on investments and translation
of assets and liabilities
in foreign currencies 176,975,931 231,199,002
- --------------------------------------------------------------------------------
$2,857,976,523 $2,149,501,341
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $2,296,152,561 $1,112,857,585
- ------------------------------------------
Shares outstanding 319,674,520 165,613,689
- ------------------------------------------
Net asset value per share $7.18 $6.72
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $254,777,880 $527,109,110
- ------------------------------------------
Shares outstanding 35,431,590 78,448,729
- ------------------------------------------
Net asset value per share $7.19 $6.72
- --------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $214,834,502 $184,601,038
- ------------------------------------------
Shares outstanding 29,916,687 27,475,406
- ------------------------------------------
Net asset value per share $7.18 $6.72
- --------------------------------------------------------------------------------
A CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $65,780,450 $236,313,079
- ------------------------------------------
Shares outstanding 9,150,841 35,141,051
- ------------------------------------------
Net asset value per share $7.19 $6.72
- ------------------------------------------
Maximum offering price
(net asset value divided by 0.9425) $7.63 $7.13
- --------------------------------------------------------------------------------
B CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $7,128,689 $15,954,175
- ------------------------------------------
Shares outstanding 992,663 2,368,209
- ------------------------------------------
Net asset value per share $7.18 $6.74
- --------------------------------------------------------------------------------
C CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $19,259,321 $61,682,406
- ------------------------------------------
Shares outstanding 2,697,600 9,181,432
- ------------------------------------------
Net asset value per share $7.14 $6.72
- --------------------------------------------------------------------------------
R CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $43,120 $10,983,948
- ------------------------------------------
Shares outstanding 6,004 1,634,359
- ------------------------------------------
Net asset value per share $7.18 $6.72
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
20
Statement of Operations
YEAR ENDED MARCH 31, 2006
- --------------------------------------------------------------------------------
LARGE
VALUE COMPANY VALUE
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- ------------------------------------------
Dividends (including $130,566
from affiliates in Value and net
of foreign taxes withheld of $513,716
and $355,565, respectively) $ 74,832,151 $ 44,539,112
- ------------------------------------------
Interest 2,970,697 3,087,384
- ------------------------------------------
Securities lending 389,494 --
- --------------------------------------------------------------------------------
78,192,342 47,626,496
- --------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------
Management fees 27,601,592 14,026,998
- ------------------------------------------
Distribution fees:
- ------------------------------------------
Advisor Class 592,879 377,365
- ------------------------------------------
B Class 46,133 111,941
- ------------------------------------------
C Class 127,474 402,028
- ------------------------------------------
Service fees:
- ------------------------------------------
Advisor Class 592,879 377,365
- ------------------------------------------
B Class 15,378 37,314
- ------------------------------------------
C Class 42,491 134,009
- ------------------------------------------
Service and distribution fees:
- ------------------------------------------
A Class 149,873 664,302
- ------------------------------------------
R Class 95 36,651
- ------------------------------------------
Directors' fees and expenses 54,311 38,589
- ------------------------------------------
Other expenses 15,231 8,560
- --------------------------------------------------------------------------------
29,238,336 16,215,122
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 48,954,006 31,411,374
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
- ------------------------------------------
Investment transactions (including
$41,101 from affiliates in Value) 292,917,110 43,968,820
- ------------------------------------------
Foreign currency transactions 11,802,230 --
- --------------------------------------------------------------------------------
304,719,340 43,968,820
- --------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED
APPRECIATION (DEPRECIATION) ON:
- ------------------------------------------
Investments (79,936,181) 92,216,915
- ------------------------------------------
Translation of assets and liabilities
in foreign currencies 666,579 --
- --------------------------------------------------------------------------------
(79,269,602) 92,216,915
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) 225,449,738 136,185,735
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $274,403,744 $167,597,109
================================================================================
See Notes to Financial Statements.
- ------
21
Statement of Changes in Net Assets
YEARS ENDED MARCH 31, 2006 AND MARCH 31, 2005
- --------------------------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- --------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2006 2005 2006 2005
- --------------------------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income $ 48,954,006 $ 31,256,151 $ 31,411,374 $ 18,474,038
- -----------------------------
Net realized gain (loss) 304,719,340 282,207,252 43,968,820 16,666,492
- -----------------------------
Change in net unrealized
appreciation (depreciation) (79,269,602) (52,516,959) 92,216,915 68,357,515
- --------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from operations 274,403,744 260,946,444 167,597,109 103,498,045
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------
From net investment income:
- -----------------------------
Investor Class (32,771,884) (25,832,210) (15,442,795) (8,417,141)
- -----------------------------
Institutional Class (4,697,967) (3,092,567) (9,298,838) (6,012,315)
- -----------------------------
Advisor Class (2,745,701) (1,784,966) (2,311,143) (1,000,392)
- -----------------------------
A Class (724,249) (266,658) (3,803,337) (2,613,870)
- -----------------------------
B Class (27,342) (10,572) (104,661) (75,779)
- -----------------------------
C Class (76,052) (25,282) (387,804) (179,959)
- -----------------------------
R Class (236) -- (104,920) (20,798)
- -----------------------------
From net realized gains:
- -----------------------------
Investor Class (216,094,034) (293,840,570) (21,453,038) (1,622,873)
- -----------------------------
Institutional Class (28,509,415) (26,249,192) (11,140,239) (1,122,315)
- -----------------------------
Advisor Class (23,330,512) (29,182,366) (4,046,684) (244,061)
- -----------------------------
A Class (5,863,978) (5,061,858) (6,211,637) (626,207)
- -----------------------------
B Class (623,983) (546,505) (358,813) (35,557)
- -----------------------------
C Class (1,709,591) (1,292,940) (1,328,403) (76,781)
- -----------------------------
R Class (2,371) -- (243,871) (5,230)
- --------------------------------------------------------------------------------------------------
Decrease in net assets
from distributions (317,177,315) (387,185,686) (76,236,183) (22,053,278)
- --------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
from capital
share transactions 29,198,323 194,734,618 554,377,683 791,902,809
- --------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS (13,575,248) 68,495,376 645,738,609 873,347,576
NET ASSETS
- --------------------------------------------------------------------------------------------------
Beginning of period 2,871,551,771 2,803,056,395 1,503,762,732 630,415,156
- --------------------------------------------------------------------------------------------------
End of period $2,857,976,523 $2,871,551,771 $2,149,501,341 $1,503,762,732
==================================================================================================
Accumulated undistributed
net investment income (loss) $1,425,373 $(6,494,475) $193,725 $235,849
==================================================================================================
See Notes to Financial Statements.
- ------
22
Notes to Financial Statements
MARCH 31, 2006
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Value Fund (Value) and Large Company
Value Fund (Large Company Value) (collectively, the funds) are two funds in a
series issued by the corporation. The funds are diversified under the 1940 Act.
The funds' investment objectives are long-term capital growth. The production of
income is a secondary objective. The funds seek to achieve their investment
objective by investing in stocks of companies that management believes to be
undervalued at the time of purchase. Value invests in companies of all sizes and
Large Company Value invests primarily in larger companies. The following is a
summary of the funds' significant accounting policies.
MULTIPLE CLASS -- 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 records any interest earned or dividends declared.
OPTIONS CONTRACTS -- The funds may purchase put options in order to manage the
funds' exposure to changes in market conditions. One of the risks of entering
into options contracts is the possibility that the change in value of the
contract may not correlate with the changes in value of the underlying
securities. The proceeds from securities sold through the exercise of put
options are decreased by the premium paid to purchase the put options.
FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed
in foreign currencies are translated into U.S. dollars at prevailing exchange
rates at period end. Purchases and sales of investment securities, dividend and
interest income, and certain expenses are translated at the rates of exchange
prevailing on the respective dates of such transactions. For assets and
liabilities, other than investments in securities, net realized and unrealized
gains and losses from foreign currency translations arise from changes in
currency exchange rates.
Net realized and unrealized foreign currency exchange gains or losses occurring
during the holding period of investment securities are a
(continued)
- ------
23
Notes to Financial Statements
MARCH 31, 2006
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)
- ------
24
Notes to Financial Statements
MARCH 31, 2006
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 year ended March 31, 2006, 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)
- ------
25
Notes to Financial Statements
MARCH 31, 2006
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% for the A Class and 0.50% for the R Class.
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 year ended
March 31, 2006, 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 year ended
March 31, 2006, were as follows:
- --------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- --------------------------------------------------------------------------------
Purchases $3,772,633,570 $767,707,812
- --------------------------------------------------------------------------------
Proceeds from sales $4,018,188,752 $273,504,520
- --------------------------------------------------------------------------------
(continued)
- ------
26
Notes to Financial Statements
MARCH 31, 2006
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows:
- ------------------------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- ------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2006
SHARES AUTHORIZED 700,000,000 350,000,000
================================================================================================
Sold 43,119,632 $ 314,371,865 91,117,766 $ 598,037,082
- ----------------------------
Issued in reinvestment
of distributions 33,557,402 235,393,984 4,263,621 28,169,196
- ----------------------------
Redeemed (73,799,897) (537,333,741) (32,941,164) (214,740,236)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) 2,877,137 $ 12,432,108 62,440,223 $ 411,466,042
================================================================================================
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
- ------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2006
SHARES AUTHORIZED 100,000,000 200,000,000
================================================================================================
Sold 11,548,124 $ 84,938,821 20,730,996 $135,536,783
- ----------------------------
Issued in reinvestment
of distributions 4,514,603 31,717,605 2,692,717 17,772,012
- ----------------------------
Redeemed (15,047,934) (108,537,853) (13,605,460) (89,433,410)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) 1,014,793 $ 8,118,573 9,818,253 $ 63,875,385
================================================================================================
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
- ------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2006
SHARES AUTHORIZED 100,000,000 75,000,000
================================================================================================
Sold 13,059,362 $ 95,475,383 18,230,841 $119,571,240
- ----------------------------
Issued in reinvestment
of distributions 3,705,239 25,960,487 783,697 5,171,434
- ----------------------------
Redeemed (19,275,511) (139,099,076) (7,911,997) (51,980,902)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) (2,510,910) $ (17,663,206) 11,102,541 $ 72,761,772
================================================================================================
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)
- ------
27
Notes to Financial Statements
MARCH 31, 2006
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- ------------------------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- ------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
A CLASS
- ------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2006
SHARES AUTHORIZED 30,000,000 150,000,000
================================================================================================
Sold 5,161,842 $ 37,818,901 13,583,744 $ 88,538,780
- ----------------------------
Issued in reinvestment
of distributions 914,066 6,413,949 1,458,382 9,630,963
- ----------------------------
Redeemed (3,533,167) (25,776,750) (18,278,868) (120,693,935)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) 2,542,741 $ 18,456,100 (3,236,742) $ (22,524,192)
================================================================================================
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
- ------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2006
SHARES AUTHORIZED 10,000,000 10,000,000
================================================================================================
Sold 310,422 $2,262,823 508,475 $ 3,307,847
- ----------------------------
Issued in reinvestment
of distributions 81,717 570,374 59,148 391,161
- ----------------------------
Redeemed (91,648) (663,355) (230,067) (1,510,396)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) 300,491 $2,169,842 337,556 $ 2,188,612
================================================================================================
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
- ------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2006
SHARES AUTHORIZED 10,000,000 20,000,000
================================================================================================
Sold 1,037,300 $ 7,488,814 3,927,851 $25,566,260
- ----------------------------
Issued in reinvestment
of distributions 202,237 1,403,553 98,202 648,301
- ----------------------------
Redeemed (451,755) (3,251,576) (1,229,085) (8,077,706)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) 787,782 $ 5,640,791 2,796,968 $18,136,855
================================================================================================
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)
- ------
28
Notes to Financial Statements
MARCH 31, 2006
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- ------------------------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- ------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
R CLASS
- ------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2006(1)
SHARES AUTHORIZED 5,000,000 10,000,000
================================================================================================
Sold 5,632 $41,508 1,464,596 $ 9,553,434
- ----------------------------
Issued in reinvestment
of distributions 372 2,607 52,802 348,791
- ----------------------------
Redeemed -- -- (218,264) (1,429,016)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) 6,004 $44,115 1,299,134 $ 8,473,209
================================================================================================
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 March 31, 2006 for 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 year
ended March 31, 2006 follows:
- ----------------------------------------------------------------------------------------------------------
3/31/06
SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND SHARE MARKET
03/31/05 COST COST GAIN (LOSS) INCOME BALANCE VALUE
- ----------------------------------------------------------------------------------------------------------
Minerals
Technologies Inc.(1) 259,992 $45,845,766 $5,446,027 $41,101 $130,566 960,936 $56,128,272
==========================================================================================================
(1) Security, or a portion thereof, was on loan as of March 31, 2006.
(continued)
- ------
29
Notes to Financial Statements
MARCH 31, 2006
6. SECURITIES LENDING
As of March 31, 2006, securities in Value valued at $364,161,324, 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
$369,853,257. Value's risks in securities lending are that the borrower may not
provide additional collateral when required or return the securities when due.
If the borrower defaults, receipt of the collateral by Value may be delayed or
limited.
7. BANK LINE OF CREDIT
The funds, along with certain other funds managed by ACIM or ACGIM, have a
$500,000,000 unsecured bank line of credit agreement with JPMCB, which was
renewed from $575,000,000 effective December 14, 2005. The funds may borrow
money for temporary or emergency purposes to fund shareholder redemptions.
Borrowings under the agreement bear interest at the Federal Funds rate plus
0.50%. The funds did not borrow from the line during the year ended March 31,
2006.
8. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2006
and March 31, 2005 were as follows:
- ------------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- ------------------------------------------------------------------------------------
2006 2005 2006 2005
- ------------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
- ------------------------------------------------------------------------------------
Ordinary income $181,298,865 $210,162,524 $51,706,096 $19,004,026
- ------------------------------------------------------------------------------------
Long-term capital gains $135,878,450 $177,023,162 $24,530,087 $ 3,049,252
- ------------------------------------------------------------------------------------
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect the
differing character of certain income items and net realized gains and losses
for financial statement and tax purposes, and may result in reclassification
among certain capital accounts on the financial statements.
(continued)
- ------
30
Notes to Financial Statements
MARCH 31, 2006
8. FEDERAL TAX INFORMATION (CONTINUED)
As of March 31, 2006, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
- --------------------------------------------------------------------------------
LARGE
VALUE COMPANY VALUE
- --------------------------------------------------------------------------------
Federal tax cost of investments $3,121,379,320 $1,924,007,575
================================================================================
Gross tax appreciation of investments $175,641,540 $257,103,684
- ---------------------------------------------
Gross tax depreciation of investments (58,869,586) (27,586,962)
- --------------------------------------------------------------------------------
Net tax appreciation (depreciation)
of investments $116,771,954 $229,516,722
================================================================================
Undistributed ordinary income $51,461,758 $7,027,638
- ---------------------------------------------
Accumulated long-term gains $67,320,881 $4,127,711
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis cost and unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales and the realization for tax purposes of unrealized gains on certain
forward foreign currency contracts.
9. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The funds hereby designate capital gain dividends for the fiscal year ended
March 31, 2006, as follows:
- --------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- --------------------------------------------------------------------------------
$135,878,450 $24,530,087
- --------------------------------------------------------------------------------
For corporate taxpayers, the following ordinary income distributions paid during
the fiscal year ended March 31, 2006, qualify for the corporate dividends
received deduction.
- --------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- --------------------------------------------------------------------------------
$86,313,967 $47,047,819
- --------------------------------------------------------------------------------
The funds hereby designate qualified dividend income for the fiscal year ended
March 31, 2006, as follows:
- --------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- --------------------------------------------------------------------------------
$49,090,464 $49,603,700
- --------------------------------------------------------------------------------
The funds hereby designate qualified short-term capital gain distributions for
the purpose of Internal Revenue Code Section 871 for the fiscal year ended March
31, 2006, as follows:
- --------------------------------------------------------------------------------
VALUE LARGE COMPANY VALUE
- --------------------------------------------------------------------------------
$140,255,434 $20,252,598
- --------------------------------------------------------------------------------
- ------
31
Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $7.31 $7.72 $5.61 $7.19 $6.27
- --------------------------------------------------------------------------------------
Income From
Investment
Operations
- ---------------------
Net Investment
Income (Loss)(1) 0.12 0.09 0.09 0.07 0.08
- ---------------------
Net Realized
and Unrealized
Gain (Loss) 0.57 0.64 2.18 (1.48) 1.03
- --------------------------------------------------------------------------------------
Total From
Investment
Operations 0.69 0.73 2.27 (1.41) 1.11
- --------------------------------------------------------------------------------------
Distributions
- ---------------------
From Net
Investment
Income (0.10) (0.09) (0.08) (0.07) (0.08)
- ---------------------
From Net
Realized Gains (0.72) (1.05) (0.08) (0.10) (0.11)
- --------------------------------------------------------------------------------------
Total
Distributions (0.82) (1.14) (0.16) (0.17) (0.19)
- --------------------------------------------------------------------------------------
Net Asset Value,
End of Period $7.18 $7.31 $7.72 $5.61 $7.19
======================================================================================
TOTAL RETURN(2) 9.89% 9.95% 40.66% (19.85)% 17.96%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.99% 0.99% 1.00% 1.00% 1.00%
- ---------------------
Ratio of Net
Investment Income
(Loss) to Average
Net Assets 1.71% 1.16% 1.26% 1.19% 1.11%
- ---------------------
Portfolio
Turnover Rate 134% 130% 122% 102% 151%
- ---------------------
Net Assets,
End of Period
(in thousands) $2,296,153 $2,315,507 $2,152,265 $1,552,632 $2,068,901
- --------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
32
Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $7.32 $7.72 $5.61 $7.20 $6.27
- --------------------------------------------------------------------------------
Income From
Investment
Operations
- ---------------------
Net Investment
Income (Loss)(1) 0.14 0.10 0.10 0.09 0.09
- ---------------------
Net Realized
and Unrealized
Gain (Loss) 0.57 0.65 2.18 (1.50) 1.04
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.71 0.75 2.28 (1.41) 1.13
- --------------------------------------------------------------------------------
Distributions
- ---------------------
From Net
Investment
Income (0.12) (0.10) (0.09) (0.08) (0.09)
- ---------------------
From Net
Realized Gains (0.72) (1.05) (0.08) (0.10) (0.11)
- --------------------------------------------------------------------------------
Total
Distributions (0.84) (1.15) (0.17) (0.18) (0.20)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $7.19 $7.32 $7.72 $5.61 $7.20
================================================================================
TOTAL RETURN(2) 10.10% 10.30% 40.93% (19.70)% 18.19%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.79% 0.79% 0.80% 0.80% 0.80%
- ---------------------
Ratio of Net
Investment Income
(Loss) to Average
Net Assets 1.91% 1.36% 1.46% 1.38% 1.31%
- ---------------------
Portfolio
Turnover Rate 134% 130% 122% 102% 151%
- ---------------------
Net Assets,
End of Period
(in thousands) $254,778 $251,812 $223,282 $179,196 $226,681
- --------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
33
Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $7.31 $7.72 $5.60 $7.19 $6.27
- --------------------------------------------------------------------------------
Income From
Investment
Operations
- ---------------------
Net Investment
Income (Loss)(1) 0.10 0.07 0.07 0.06 0.06
- ---------------------
Net Realized
and Unrealized
Gain (Loss) 0.57 0.64 2.19 (1.49) 1.03
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.67 0.71 2.26 (1.43) 1.09
- --------------------------------------------------------------------------------
Distributions
- ---------------------
From Net
Investment
Income (0.08) (0.07) (0.06) (0.06) (0.06)
- ---------------------
From Net
Realized Gains (0.72) (1.05) (0.08) (0.10) (0.11)
- --------------------------------------------------------------------------------
Total
Distributions (0.80) (1.12) (0.14) (0.16) (0.17)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $7.18 $7.31 $7.72 $5.60 $7.19
================================================================================
TOTAL RETURN(2) 9.61% 9.67% 40.56% (20.07)% 17.51%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.24% 1.24% 1.25% 1.25% 1.25%
- ---------------------
Ratio of Net
Investment Income
(Loss) to Average
Net Assets 1.46% 0.91% 1.01% 0.94% 0.86%
- ---------------------
Portfolio
Turnover Rate 134% 130% 122% 102% 151%
- ---------------------
Net Assets,
End of Period
(in thousands) $214,835 $236,960 $403,212 $210,984 $208,311
- --------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
34
Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2006 2005 2004 2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $7.31 $7.72 $5.60 $5.77
- --------------------------------------------------------------------------------
Income From Investment
Operations
- -------------------------------
Net Investment
Income (Loss)(2) 0.11 0.07 0.07 0.01
- -------------------------------
Net Realized
and Unrealized
Gain (Loss) 0.57 0.64 2.19 (0.16)
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.68 0.71 2.26 (0.15)
- --------------------------------------------------------------------------------
Distributions
- -------------------------------
From Net
Investment Income (0.08) (0.07) (0.06) (0.02)
- -------------------------------
From Net
Realized Gains (0.72) (1.05) (0.08) --
- --------------------------------------------------------------------------------
Total Distributions (0.80) (1.12) (0.14) (0.02)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $7.19 $7.31 $7.72 $5.60
================================================================================
TOTAL RETURN(3) 9.75% 9.67% 40.55% (2.67)%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.24% 1.24% 1.25% 1.25%(4)
- -------------------------------
Ratio of Net Investment
Income (Loss) to Average
Net Assets 1.46% 0.91% 1.01% 0.62%(4)
- -------------------------------
Portfolio Turnover Rate 134% 130% 122% 102%(5)
- -------------------------------
Net Assets, End of Period
(in thousands) $65,780 $48,330 $15,029 $385
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through March 31, 2003.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2003.
See Notes to Financial Statements.
- ------
35
Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2006 2005 2004 2003(1)
- --------------------------------------------------------------------------------
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)(2) 0.05 0.01 0.01 --(3)
- -----------------------------
Net Realized
and Unrealized
Gain (Loss) 0.57 0.65 2.20 (0.15)
- --------------------------------------------------------------------------------
Total From
Investment Operations 0.62 0.66 2.21 (0.15)
- --------------------------------------------------------------------------------
Distributions
- -----------------------------
From Net
Investment Income (0.03) (0.03) (0.01) (0.01)
- -----------------------------
From Net
Realized Gains (0.72) (1.05) (0.08) --
- --------------------------------------------------------------------------------
Total Distributions (0.75) (1.08) (0.09) (0.01)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $7.18 $7.31 $7.73 $5.61
================================================================================
TOTAL RETURN(4) 8.81% 8.93% 39.51% (2.59)%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.99% 1.99% 2.00% 1.98%(5)(6)
- -----------------------------
Ratio of Net Investment
Income (Loss) to Average
Net Assets 0.71% 0.16% 0.26% (0.17)%(5)(6)
- -----------------------------
Portfolio Turnover Rate 134% 130% 122% 102%(7)
- -----------------------------
Net Assets, End of Period
(in thousands) $7,129 $5,059 $2,656 $91
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through March 31, 2003.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(5) Annualized.
(6) During the period ended March 31, 2003, the distributor voluntarily waived
a portion of the distribution and service fees. Had fees not been waived, the
annualized ratio of operating expenses to average net assets and annualized
ratio of net investment loss to average net assets would have been 2.00% and
(0.19)%, respectively.
(7) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2003.
See Notes to Financial Statements.
- ------
36
Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2006 2005 2004 2003 2002(1)
- --------------------------------------------------------------------------------
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)(2) 0.05 0.01 0.02 0.01 --(3)
- -----------------------
Net Realized
and Unrealized
Gain (Loss) 0.57 0.64 2.19 (1.50) 0.42
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.62 0.65 2.21 (1.49) 0.42
- --------------------------------------------------------------------------------
Distributions
- -----------------------
From Net
Investment Income (0.03) (0.03) (0.01) (0.01) (0.03)
- -----------------------
From Net
Realized Gains (0.72) (1.05) (0.08) (0.10) (0.11)
- --------------------------------------------------------------------------------
Total
Distributions (0.75) (1.08) (0.09) (0.11) (0.14)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $7.14 $7.27 $7.70 $5.58 $7.18
================================================================================
TOTAL RETURN(4) 8.87% 8.84% 39.73% (20.90)% 6.33%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.99% 1.99% 2.00% 2.00% 2.00%(5)
- -----------------------
Ratio of Net
Investment Income
(Loss) to Average
Net Assets 0.71% 0.16% 0.26% 0.19% (0.06)%(5)
- -----------------------
Portfolio
Turnover Rate 134% 130% 122% 102% 151%(6)
- -----------------------
Net Assets,
End of Period
(in thousands) $19,259 $13,885 $6,613 $2,461 $1,866
- --------------------------------------------------------------------------------
(1) June 4, 2001 (commencement of sale) through March 31, 2002.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2002.
See Notes to Financial Statements.
- ------
37
Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
- --------------------------------------------------------------------------------
R CLASS
- --------------------------------------------------------------------------------
2006(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $7.60
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------------------
Net Investment Income (Loss)(2) 0.06
- -------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.29
- --------------------------------------------------------------------------------
Total From Investment Operations 0.35
- --------------------------------------------------------------------------------
Distributions
- -------------------------------------------------------------------
From Net Investment Income (0.05)
- -------------------------------------------------------------------
From Net Realized Gains (0.72)
- --------------------------------------------------------------------------------
Total Distributions (0.77)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $7.18
================================================================================
TOTAL RETURN(3) 4.99%
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 134%(5)
- -------------------------------------------------------------------
Net Assets, End of Period (in thousands) $43
- --------------------------------------------------------------------------------
(1) July 29, 2005 (commencement of sale) through March 31, 2006.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2006.
See Notes to Financial Statements.
- ------
38
Large Company Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.39 $5.89 $4.29 $5.53 $5.08
- --------------------------------------------------------------------------------
Income From
Investment
Operations
- ---------------------
Net Investment
Income (Loss)(1) 0.12 0.12 0.09 0.08 0.07
- ---------------------
Net Realized
and Unrealized
Gain (Loss) 0.47 0.51 1.59 (1.25) 0.45
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.59 0.63 1.68 (1.17) 0.52
- --------------------------------------------------------------------------------
Distributions
- ---------------------
From Net
Investment
Income (0.11) (0.11) (0.08) (0.07) (0.07)
- ---------------------
From Net
Realized Gains (0.15) (0.02) -- -- --
- --------------------------------------------------------------------------------
Total
Distributions (0.26) (0.13) (0.08) (0.07) (0.07)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.72 $6.39 $5.89 $4.29 $5.53
================================================================================
TOTAL RETURN(2) 9.44% 10.73% 39.34% (21.19)% 10.20%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.84% 0.87% 0.90% 0.90% 0.90%
- ---------------------
Ratio of Net
- ---------------------
Investment Income
(Loss) to Average
Net Assets 1.75% 1.90% 1.58% 1.75% 1.34%
- ---------------------
Portfolio
Turnover Rate 16% 18% 14% 30% 34%
- ---------------------
Net Assets,
End of Period
(in thousands) $1,112,858 $659,277 $350,516 $152,641 $69,961
- --------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
39
Large Company Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
2006 2005 2004 2003 2002(1)
- --------------------------------------------------------------------------------
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 (Loss)(2) 0.13 0.13 0.10 0.09 0.06
- ---------------------
Net Realized
and Unrealized
Gain (Loss) 0.47 0.51 1.59 (1.25) 0.08
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.60 0.64 1.69 (1.16) 0.14
- --------------------------------------------------------------------------------
Distributions
- ---------------------
From Net
Investment
Income (0.12) (0.12) (0.09) (0.08) (0.05)
- ---------------------
From Net
Realized Gains (0.15) (0.02) -- -- --
- --------------------------------------------------------------------------------
Total
Distributions (0.27) (0.14) (0.09) (0.08) (0.05)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.72 $6.39 $5.89 $4.29 $5.53
================================================================================
TOTAL RETURN(3) 9.65% 10.94% 39.61% (21.03)% 2.69%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.64% 0.67% 0.70% 0.70% 0.70%(4)
- ---------------------
Ratio of Net
Investment Income
(Loss) to Average
Net Assets 1.95% 2.10% 1.78% 1.95% 1.74%(4)
- ---------------------
Portfolio
Turnover Rate 16% 18% 14% 30% 34%(5)
- ---------------------
Net Assets,
End of Period
(in thousands) $527,109 $438,518 $151,622 $21,110 $2,632
- --------------------------------------------------------------------------------
(1) August 10, 2001 (commencement of sale) through March 31, 2002.
(2) Computed using the average shares throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2002.
See Notes to Financial Statements.
- ------
40
Large Company Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.39 $5.89 $4.29 $5.53 $5.08
- --------------------------------------------------------------------------------
Income From
Investment
Operations
- ---------------------
Net Investment
Income (Loss)(1) 0.10 0.10 0.07 0.07 0.06
- ---------------------
Net Realized
and Unrealized
Gain (Loss) 0.47 0.51 1.60 (1.25) 0.44
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.57 0.61 1.67 (1.18) 0.50
- --------------------------------------------------------------------------------
Distributions
- ---------------------
From Net
Investment
Income (0.09) (0.09) (0.07) (0.06) (0.05)
- ---------------------
From Net
Realized Gains (0.15) (0.02) -- -- --
- --------------------------------------------------------------------------------
Total
Distributions (0.24) (0.11) (0.07) (0.06) (0.05)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.72 $6.39 $5.89 $4.29 $5.53
================================================================================
TOTAL RETURN(2) 9.17% 10.45% 38.99% (21.38)% 9.93%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.09% 1.12% 1.15% 1.15% 1.15%
- ---------------------
Ratio of Net
Investment Income
(Loss) to Average
Net Assets 1.50% 1.65% 1.33% 1.50% 1.09%
- ---------------------
Portfolio
Turnover Rate 16% 18% 14% 30% 34%
- ---------------------
Net Assets,
End of Period
(in thousands) $184,601 $104,612 $19,265 $1,090 $6
- --------------------------------------------------------------------------------
(1) Computed using the average shares throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
41
Large Company Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2006 2005 2004 2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.39 $5.90 $4.29 $4.46
- --------------------------------------------------------------------------------
Income From
Investment Operations
- -----------------------------
Net Investment
Income (Loss)(2) 0.10 0.10 0.07 0.01
- -----------------------------
Net Realized
and Unrealized
Gain (Loss) 0.47 0.50 1.61 (0.17)
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.57 0.60 1.68 (0.16)
- --------------------------------------------------------------------------------
Distributions
- -----------------------------
From Net
Investment
Income (0.09) (0.09) (0.07) (0.01)
- -----------------------------
From Net
Realized Gains (0.15) (0.02) -- --
- --------------------------------------------------------------------------------
Total
Distributions (0.24) (0.11) (0.07) (0.01)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.72 $6.39 $5.90 $4.29
================================================================================
TOTAL RETURN(3) 9.16% 10.25% 39.22% (3.49)%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.09% 1.12% 1.15% 1.15%(4)
- -----------------------------
Ratio of Net
Investment Income
(Loss) to Average
Net Assets 1.50% 1.65% 1.33% 1.79%(4)
- -----------------------------
Portfolio Turnover Rate 16% 18% 14% 30%(5)
- -----------------------------
Net Assets, End of Period
(in thousands) $236,313 $245,416 $92,171 $3,733
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through March 31, 2003.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2003.
See Notes to Financial Statements.
- ------
42
Large Company Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2006 2005 2004 2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.41 $5.91 $4.29 $4.46
- --------------------------------------------------------------------------------
Income From
Investment Operations
- -----------------------------
Net Investment
Income (Loss)(2) 0.05 0.05 0.03 0.01
- -----------------------------
Net Realized
and Unrealized
Gain (Loss) 0.47 0.52 1.62 (0.17)
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.52 0.57 1.65 (0.16)
- --------------------------------------------------------------------------------
Distributions
- -----------------------------
From Net
Investment
Income (0.04) (0.05) (0.03) (0.01)
- -----------------------------
From Net
Realized Gains (0.15) (0.02) -- --
- --------------------------------------------------------------------------------
Total
Distributions (0.19) (0.07) (0.03) (0.01)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.74 $6.41 $5.91 $4.29
================================================================================
TOTAL RETURN(3) 8.33% 9.59% 38.41% (3.58)%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.84% 1.87% 1.90% 1.88%(4)(5)
- -----------------------------
Ratio of Net
Investment Income
(Loss) to Average
Net Assets 0.75% 0.90% 0.58% 0.74%(4)(5)
- -----------------------------
Portfolio Turnover Rate 16% 18% 14% 30%(6)
- -----------------------------
Net Assets, End of Period
(in thousands) $15,954 $13,009 $5,642 $88
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through March 31, 2003.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) During the period ended March 31, 2003, the distributor voluntarily waived
a portion of the distribution and service fees. Had fees not been waived, the
annualized ratio of operating expenses to average net assets and annualized
ratio of net investment income to average net assets would have been 1.90%
and 0.72%, respectively.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2003.
See Notes to Financial Statements.
- ------
43
Large Company Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2006 2005 2004 2003 2002(1)
- --------------------------------------------------------------------------------
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 (Loss)(2) 0.05 0.05 0.03 0.03 0.01
- ---------------------
Net Realized
and Unrealized
Gain (Loss) 0.47 0.52 1.61 (1.25) 0.39
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.52 0.57 1.64 (1.22) 0.40
- --------------------------------------------------------------------------------
Distributions
- ---------------------
From Net
Investment
Income (0.04) (0.05) (0.03) (0.03) (0.01)
- ---------------------
From Net
Realized Gains (0.15) (0.02) -- -- --
- --------------------------------------------------------------------------------
Total
Distributions (0.19) (0.07) (0.03) (0.03) (0.01)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $6.72 $6.39 $5.89 $4.28 $5.53
================================================================================
TOTAL RETURN(3) 8.35% 9.62% 38.27% (22.13)% 7.78%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.84% 1.87% 1.90% 1.90% 1.90%(4)
- ---------------------
Ratio of Net
Investment Income
(Loss) to Average
Net Assets 0.75% 0.90% 0.58% 0.75% 0.33%(4)
- ---------------------
Portfolio
Turnover Rate 16% 18% 14% 30% 34%(5)
- ---------------------
Net Assets,
End of Period
(in thousands) $61,682 $40,789 $11,030 $1,163 $257
- --------------------------------------------------------------------------------
(1) November 7, 2001 (commencement of sale) through March 31, 2002.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2002.
See Notes to Financial Statements.
- ------
44
Large Company Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
R CLASS
- --------------------------------------------------------------------------------
2006 2005 2004(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- ----------------------------------------
Net Asset Value, Beginning of Period $6.39 $5.89 $5.18
- --------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------
Net Investment Income (Loss)(2) 0.09 0.09 0.03
- ----------------------------------------
Net Realized and
Unrealized Gain (Loss) 0.47 0.51 0.72
- --------------------------------------------------------------------------------
Total From
Investment Operations 0.56 0.60 0.75
- --------------------------------------------------------------------------------
Distributions
- ----------------------------------------
From Net Investment Income (0.08) (0.08) (0.04)
- ----------------------------------------
From Net Realized Gains (0.15) (0.02) --
- --------------------------------------------------------------------------------
Total Distributions (0.23) (0.10) (0.04)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.72 $6.39 $5.89
================================================================================
TOTAL RETURN(3) 8.90% 10.17% 14.63%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.34% 1.33%(4) 1.40%(5)
- ----------------------------------------
Ratio of Net Investment
Income (Loss) to Average
Net Assets 1.25% 1.44%(4) 0.77%(5)
- ----------------------------------------
Portfolio Turnover Rate 16% 18% 14%(6)
- ----------------------------------------
Net Assets, End of Period
(in thousands) $10,984 $2,143 $168
- --------------------------------------------------------------------------------
(1) August 29, 2003 (commencement of sale) through March 31, 2004.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) During the year ended March 31, 2005, the class received a partial
reimbursement of its distribution and service fee. Had fees not been
reimbursed, the ratio of operating expenses to average net assets and ratio
of net investment income to average net assets would have been 1.37% and
1.40%, respectively.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2004.
See Notes to Financial Statements.
- ------
45
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders,
American Century Capital Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Value Fund and Large Company Value Fund (the
"Funds"), two of the mutual funds comprising American Century Capital
Portfolios, Inc., as of March 31, 2006, and the related statements of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for the periods
presented. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Funds
are not required to have, nor were we engaged to perform, an audit of their
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Funds' internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of March 31, 2006, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of Value
Fund and Large Company Value Fund as of March 31, 2006, the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and the financial highlights for the
periods presented, in conformity with accounting principles generally accepted
in the United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 12, 2006
- ------
46
Management
The individuals listed below serve as directors or officers of the funds. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
72. Those listed as interested directors are "interested" primarily by virtue of
their engagement as officers of American Century Companies, Inc. (ACC) or its
wholly owned, direct or indirect, subsidiaries, including the funds' investment
advisor, American Century Investment Management, Inc. (ACIM); the funds'
principal underwriter, American Century Investment Services, Inc. (ACIS); and
the funds' transfer agent, American Century Services, LLC (ACS).
The other directors (more than three-fourths of the total number) are
independent; that is, they have never been employees or officers of, and have no
financial interest in, ACC or any of its wholly owned subsidiaries, including
ACIM, ACIS, and ACS. The directors serve in this capacity for seven registered
investment companies in the American Century family of funds.
All persons named as officers of the funds also serve in a similar capacity for
the other 14 investment companies advised by ACIM or American Century Global
Investment Management, Inc. (ACGIM), unless otherwise noted. Only officers with
policy-making functions are listed. No officer is compensated for his or her
service as an officer of the funds. The listed officers are interested persons
of the funds and are appointed or re-appointed on an annual basis.
INDEPENDENT DIRECTORS
- --------------------------------------------------------------------------------
THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1940
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1980
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Formerly Chief Executive
Officer/Treasurer, Associated Bearings Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1997
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, Midwest
Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
D.D. (DEL) HOCK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1935
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1996
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Chairman, Public
Service Company of Colorado
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Allied Motion Technologies,
Inc.
- --------------------------------------------------------------------------------
(continued)
- ------
47
Management
INDEPENDENT DIRECTORS (CONTINUED)
- --------------------------------------------------------------------------------
JAMES A. OLSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1942
POSITION(S) HELD WITH FUND: Advisory Board Member
FIRST YEAR OF SERVICE: 2006
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Principal and Chief Financial
Officer, Plaza Belmont LLC
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, SCS Transportation, Inc. and
Entertainment Properties Trust
- --------------------------------------------------------------------------------
DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Director, Chairman of the Board
FIRST YEAR OF SERVICE: 1995
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Western Investments,
Inc.; Retired Chairman of the Board, Butler Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1943
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer
and Founder, Sayers40, Inc., a technology products and service provider
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Triad Hospitals, Inc.
- --------------------------------------------------------------------------------
M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1994
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Senior Vice
President, Sprint Corporation
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide, Inc.
- --------------------------------------------------------------------------------
TIMOTHY S. WEBSTER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1961
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 2001
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, American Italian Pasta Company (1992 to December 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JAMES E. STOWERS, JR.(1), 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1924
POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman
FIRST YEAR OF SERVICE: 1958
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Director and Controlling
Shareholder, ACC; Chairman, ACC (January 1995 to December 2004); Director, ACIM,
ACGIM, ACS, ACIS and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
JAMES E. STOWERS III(1), 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1959
POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman
FIRST YEAR OF SERVICE: 1990
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, ACC (January 2005 to
present); Co-Chairman, ACC (September 2000 to December 2004); Chairman, ACS and
other ACC subsidiaries; Director, ACC, ACIM, ACGIM, ACS, ACIS and other ACC
subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
(1) James E. Stowers, Jr. is the father of James E. Stowers III.
(continued)
- ------
48
Management
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: President
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC
(September 2000 to present); President, ACC (June 1997 to present); Also serves
as: Chief Executive Officer and President, ACIM, ACGIM, ACIS and other ACC
subsidiaries; Executive Vice President, ACS; Director, ACC, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
JONATHAN THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUND: Executive Vice President
FIRST YEAR OF SERVICE: 2005
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Executive Vice President, ACC
(November 2005 to present); Chief Administrative Officer, ACC (February 2006 to
present); Also serves as: President, ACS; Chief Executive Officer, Chief
Financial Officer and Chief Accounting Officer, ACIM, ACGIM, ACS, ACIS and other
ACC subsidiaries; Managing Director, Morgan Stanley (March 2000 to November
2005)
- --------------------------------------------------------------------------------
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer, and Chief
Financial Officer
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Assistant Treasurer, ACC (January
1995 to present); Also serves as: Senior Vice President, ACS; Assistant
Treasurer, ACIM, ACGIM, ACS, ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
DAVID C. TUCKER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1958
POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (February 2001
to present); General Counsel, ACC (June 1998 to present); Also serves as: Senior
Vice President and General Counsel, ACIM, ACGIM, ACS, ACIS and other ACC
subsidiaries
- --------------------------------------------------------------------------------
CHARLES C.S. PARK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Vice President and Chief Compliance Officer
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (March 2005 to present); Vice President, ACS (February 2000 to
present); Assistant General Counsel, ACS (January 1998 to March 2005)
- --------------------------------------------------------------------------------
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Controller
FIRST YEAR OF SERVICE: 1997
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February 2000
to present); Controller-Fund Accounting, ACS (June 1997 to present)
- --------------------------------------------------------------------------------
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer
FIRST YEAR OF SERVICE: 1997
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (October 2001
to present); Vice President, Corporate Tax, ACS (April 1998 to present); Also
serves as: Vice President, ACIM, ACGIM, ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
The SAI has additional information about the funds' directors and is available
without charge, upon request, by calling 1-800-345-2021.
- ------
49
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 total expense ratios of Advisor, A, B, C and R Class shares
are higher that that of Investor Class shares. The funds are available for
purchase only through financial intermediaries by investors who seek advice from
them. The fund is closed to other investors, but those with open accounts may
make additional investments and reinvest dividends and capital gains
distributions as long as such accounts are 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 the first year after purchase
to 0.00%
(continued)
- ------
50
Share Class Information
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.
- ------
51
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.
- ------
52
Index Definitions
The following indices are used to illustrate investment market, sector, or style
performance or to serve as fund performance comparisons. They are not investment
products available for purchase.
The DOW JONES INDUSTRIAL AVERAGE (DJIA) is a price-weighted average of 30
actively traded blue chip stocks, primarily industrials but including
service-oriented firms. Prepared and published by Dow Jones & Co., it is the
oldest and most widely quoted of all the market indicators.
The 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 NASDAQ COMPOSITE INDEX is a market value-weighted index of all domestic and
international common stocks listed on the Nasdaq stock market.
The RUSSELL 1000(reg.tm) VALUE INDEX measures the performance of those Russell
1000 Index 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 2000(reg.tm) VALUE INDEX measures the performance of those Russell
2000 Index companies (the 2,000 smallest of the 3,000 largest publicly traded
U.S. companies, based on total market capitalization) with lower price-to-book
ratios and lower forecasted growth rates.
The RUSSELL 3000(reg.tm) VALUE INDEX measures the performance of those Russell
3000 Index companies (the 3,000 largest U.S. companies based on total market
capitalization) with lower price-to-book ratios and lower forecasted growth
values.
The S&P 500 INDEX is a market value-weighted index of the stocks of 500 publicly
traded U.S. companies chosen for market size, liquidity, and industry group
representation that are considered to be leading firms in dominant industries.
Each stock's weight in the index is proportionate to its market value. Created
by Standard & Poor's, it is considered to be a broad measure of U.S. stock
market performance.
- ------
53
Notes
- ------
54
Notes
- ------
55
Notes
- ------
56
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 PROFESSIONALS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
INVESTMENT ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
COMPANIES
The American Century Investments logo, American Century
and American Century Investments are service marks
of American Century Proprietary Holdings, Inc.
American Century Investment Services, Inc., Distributor
(c)2006 American Century Proprietary Holdings, Inc. All rights reserved.
0605
SH-ANN-48881S
[front cover]
American Century Investments
ANNUAL REPORT
[photo of boy and airplane]
MARCH 31, 2006
Real Estate Fund
[american century investments logo and text logo]
Table of Contents
Our Message to You. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
One-Year Total Returns. . . . . . . . . . . . . . . . . . . . . . . . . .2
REAL ESTATE
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Industry Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . . 6
Shareholder Fee Example . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . .11
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . .12
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . .13
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . .14
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Report of Independent Registered Public Accounting Firm . . . . . . . . . .23
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . .27
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . .28
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
The opinions expressed in the Market Perspective and the Portfolio Commentary
reflect those of the portfolio management team as of the date of the report, and
do not necessarily represent the opinions of American Century or any other
person in the American Century organization. Any such opinions are subject to
change at any time based upon market or other conditions and American Century
disclaims any responsibility to update such opinions. These opinions may not be
relied upon as investment advice and, because investment decisions made by
American Century funds are based on numerous factors, may not be relied upon as
an indication of trading intent on behalf of any American Century fund. Security
examples are used for representational purposes only and are not intended as
recommendations to purchase or sell securities. Performance information for
comparative indices and securities is provided to American Century by third
party vendors. To the best of American Century's knowledge, such information is
accurate at the time of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
JAMES E. STOWERS III WITH JAMES E. STOWERS, JR.
We are pleased to provide you with the annual report for the American Century
Real Estate Fund for the 12 months ended March 31, 2006. We hope you find this
information helpful in monitoring your investment. Another useful resource we
offer is our Web site, americancentury.com, where we post quarterly portfolio
commentaries, the views of our senior investment officers, and other
communications about investments, portfolio strategy, and the markets.
Our Web site currently highlights American Century's recently-announced
strategic collaboration with Lance Armstrong and the Lance Armstrong Foundation
(LAF). Our new campaign, featuring Lance, is designed to encourage investors to
take a more active role in planning their financial futures and make every
investment decision count.
American Century's collaboration with Lance Armstrong and the LAF is a perfect
fit. Like members of our family, Lance is a cancer survivor, and shares our
values of optimism, focus, and determination. In addition, Lance and our family
have dedicated our success to improving lives, through the LAF and the Stowers
Institute for Medical Research, respectively. To learn more about American
Century's collaboration with Lance Armstrong and the LAF, please visit
www.lanceface.com on the Web and click on the links to related sites.
Besides the exciting new collaboration, we've enjoyed other good news -- in
January, American Century was named, for the seventh consecutive year, one of
Fortune magazine's 100 Best Companies to Work For in America. Fostering a
positive work environment can benefit fund investors as well as our company --
it helps us continue to attract and retain talented people.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
FOUNDER CHAIRMAN OF THE BOARD
AMERICAN CENTURY COMPANIES, INC. AMERICAN CENTURY COMPANIES,
INC.
- ------
1
Market Perspective
[photo of Phil Davidson]
BY PHIL DAVIDSON, CHIEF INVESTMENT OFFICER, U.S. VALUE EQUITY
STOCKS GAINED GROUND
Stocks advanced strongly during the 12 months ended March 31, 2006. The S&P 500
Index, representative of the broad market, was up almost 12% for the period.
The stock market overcame persistently high oil prices, investor uneasiness
about inflation, and rising interest rates--factors that typically weigh on
equities. The destructive Gulf Coast hurricanes in September 2005 also had a
negative impact on investor confidence.
However, stocks were buoyed by the resiliency of the U.S. economy, which
rebounded with surprising strength in the first quarter of 2006 after a
post-hurricane slowdown. In addition, corporate profits continued to expand at a
higher-than-expected rate, confounding many market watchers who anticipated a
slowdown in earnings growth.
SMALLER WAS BETTER
Most of the major stock indexes enjoyed returns in excess of 10% for the
12-month period. Small- and mid-sized companies had the highest returns, as
evidenced by the Russell 2000 Index's gain of almost 26%. Value and growth
stocks were mixed--growth shares performed better than value at the small end of
the capitalization range, while value stocks had a slight edge among larger
businesses.
All that said, for many investors, stocks still have a way to go. The S&P 500
closed the period 15% below its March 2000 record high, while the Nasdaq
Composite is 54% behind its 2000 zenith.
YEAR OF ENERGY
With oil prices increasing 20% over the period, reaching nearly $70 a barrel,
energy companies contributed the most to the S&P 500's return. Financial stocks
also performed well as an active stock market and burgeoning merger and
acquisition activity lifted capital markets companies. Real estate investment
trusts were also among the best performers in the financial sector (see page 5
for more details).
The high price of energy cut both ways, though, as it crimped the earnings of
large energy users, either in products or production processes, as well as
companies caught in the ripple effect of higher prices at the pump. Affected
businesses included automakers and chemical companies, food products companies
and restaurants, and retailers that operate giant fleets of trucks.
ONE-YEAR TOTAL RETURNS AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
S&P 500 Index 11.73%
- --------------------------------------------------------------------------------
Nasdaq Composite Index 18.02%
- --------------------------------------------------------------------------------
Russell 2000 Index 25.85%
- --------------------------------------------------------------------------------
- ------
2
Real Estate - Performance
TOTAL RETURNS AS OF MARCH 31, 2006
--------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 40.65% 23.05% 17.03% 17.05% 9/21/95(1)
- --------------------------------------------------------------------------------
MSCI US REIT INDEX(2) 39.50% 22.23% 15.74% 15.63%(3) --
- --------------------------------------------------------------------------------
Institutional Class 40.99% 23.29% -- 14.96% 6/16/97
- --------------------------------------------------------------------------------
Advisor Class 40.37% 22.77% -- 18.83% 10/6/98
- --------------------------------------------------------------------------------
(1) The inception date for RREEF Real Estate Securities Fund, Real Estate's
predecessor. That fund merged with Real Estate on 6/13/97 and Real Estate
was first offered to the public on 6/16/97.
(2) 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.
(3) 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)
- ------
3
Real Estate - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made March 31, 1996
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended March 31
- -------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
- -------------------------------------------------------------------------------------------------
Investor Class 40.77% 20.03% -21.04% 2.87% 24.57% 20.23% 0.93% 50.97% 9.53% 40.65%
- -------------------------------------------------------------------------------------------------
MSCI US REIT Index 33.51% 17.47% -20.32% 2.94% 22.93% 22.79% -3.28% 51.60% 8.62% 39.50%
- -------------------------------------------------------------------------------------------------
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.
- ------
4
Real Estate - Portfolio Commentary
PORTFOLIO MANAGER: SCOTT BLASDELL
PERFORMANCE SUMMARY
For the fiscal year ended March 31, 2006, the Real Estate fund posted a total
return of 40.65%,* outpacing the 39.50% return of its benchmark, the Morgan
Stanley Capital International (MSCI) US REIT Index, and the 11.73% return of the
S&P 500 Index, a broad stock market measure.
REITS PRODUCED STRONG RETURNS
Real estate investment trusts (REITs) posted stunning results over the past
year, surging by 40% and extending a REIT rally that began in early 2000. One
factor supporting the strong gains in the REIT sector was the strength of the
economy, which helped reduce vacancy rates and boost rents across the board.
Commercial property values also continued to increase over the past year.
The biggest positive influence, however, was a significant increase in merger
and acquisition activity. In particular, buyouts from private equity firms
increased sharply, providing a healthy lift to REIT valuations. Between January
2004 and March 2006, 14 publicly traded REITs were taken private.
Every sector of the REIT market returned more than 25% during the one-year
period. Apartment REITs posted the best results as the housing market cooled off
and rising mortgage rates led to greater rental demand. Self-storage and
industrial REITs were also top performers, while office and retail REITs
performed in line with the overall REIT sector. Hotel and health care REITs
produced the lowest returns.
APARTMENT AND OFFICE REITS KEY TO OUTPERFORMANCE
The Real Estate fund's outperformance of the MSCI US REIT Index resulted
primarily from favorable stock selection in the office and apartment sectors.
Two of the top contributors to relative performance were office REITs Kilroy
Realty and Arden Realty. Kilroy, one of the largest owners of office and
industrial properties in San Diego and Los Angeles, gained nearly 100% during
the fiscal year thanks to rising occupancy and healthy demand for office space.
Arden, also based in southern California, was acquired at a premium by the real
estate arm of General Electric.
Among apartment REITs, the best contributors included BRE Properties, which gets
more than half of its rental income from the strong southern California market,
and Mid-America Apartment
TOP TEN HOLDINGS AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Simon Property
Group, Inc. 8.0% 5.3%
- --------------------------------------------------------------------------------
Host Marriott Corp. 5.5% 4.8%
- --------------------------------------------------------------------------------
ProLogis 5.2% 6.2%
- --------------------------------------------------------------------------------
Apartment Investment
and Management Co. Cl A 5.1% --
- --------------------------------------------------------------------------------
Vornado Realty Trust 4.8% --
- --------------------------------------------------------------------------------
Kilroy Realty Corp. 4.4% 3.6%
- --------------------------------------------------------------------------------
Trizec Properties Inc. 4.3% --
- --------------------------------------------------------------------------------
Archstone-Smith Trust 4.2% 3.5%
- --------------------------------------------------------------------------------
General Growth
Properties, Inc. 3.7% 3.7%
- --------------------------------------------------------------------------------
Pennsylvania Real Estate
Investment Trust 3.4% 3.5%
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary
are for Investor Class shares. (continued)
- ------
5
Real Estate - Portfolio Commentary
Communities, which improved on already excellent occupancy levels in its
portfolio of apartment properties in Texas and the Southeast.
SECTOR WEIGHTINGS FAVORABLE
Sector weightings also contributed positively to performance relative to the
benchmark index. The fund was underweight in the lagging health care sector,
which comprised 2.5% of the portfolio on average over the past year, compared
with a position of more than 8% in the index. An overweight in industrial REITs,
which outperformed during the fiscal year, also helped.
HOTELS, RETAIL HINDERED RELATIVE PERFORMANCE
On the downside, an overweight in hotel companies detracted from relative
performance. The fund held a larger position in hotel REITs than the benchmark
index, and it also owned several non-REIT hotel companies. These stocks
generally underperformed the broader REIT market during the past year, hurting
fund performance relative to the index.
In addition, stock selection among retail REITs weighed on relative results. The
biggest detractor from relative performance was Pennsylvania Real Estate
Investment Trust, which struggled with declining occupancy rates and
higher-than-expected costs.
CAUTION AHEAD
For the six years ended March 31, 2006, the MSCI US REIT Index produced a
cumulative total return of 235.37%, compared with the S&P 500's cumulative
return of -4.86%. As a result of this outperformance, REIT valuations are higher
than the overall stock market. In addition, the dividend yield on REITs recently
dipped below the yield on the 10-year Treasury bond, which hasn't happened in
nearly 10 years.
Consequently, REITs may be facing some headwinds as 2006 progresses.
Nonetheless, real estate remains an important component of a diversified
portfolio because of its relatively high dividend yield and low correlation with
the broader stock market.
INDUSTRY ALLOCATION
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Office Management 22.5% 22.5%
- --------------------------------------------------------------------------------
Multi-Family Residential 18.5% 17.9%
- --------------------------------------------------------------------------------
Regional Malls 15.6% 19.1%
- --------------------------------------------------------------------------------
Hotels, Restaurants
& Leisure 14.4% 12.0%
- --------------------------------------------------------------------------------
Diversified 8.7% 5.1%
- --------------------------------------------------------------------------------
Industrials 8.7% 12.1%
- --------------------------------------------------------------------------------
Storage 3.8% 1.8%
- --------------------------------------------------------------------------------
Neighborhood & Community
Shopping Centers 3.0% 5.8%
- --------------------------------------------------------------------------------
Health Care 1.1% --
- --------------------------------------------------------------------------------
Cash and Equivalents(1) 3.7% 3.7%
- --------------------------------------------------------------------------------
(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
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Domestic Common Stocks 86.2% 92.8%
- --------------------------------------------------------------------------------
Foreign Common Stocks 10.1% 3.5%
- --------------------------------------------------------------------------------
TOTAL EQUITY EXPOSURE 96.3% 96.3%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 4.3% 4.0%
- --------------------------------------------------------------------------------
Other Assets
and Liabilities (0.6)% (0.3)%
- --------------------------------------------------------------------------------
- ------
6
Shareholder Fee Example (Unaudited)
Fund shareholders may incur two types of costs: (1) transaction costs, including
sales charges (loads) on purchase payments and redemption/exchange fees; and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in your fund and to compare these costs
with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2005 to March 31, 2006.
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)
- ------
7
Shareholder Fee Example (Unaudited)
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
- -------------------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD* ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 10/1/05 - EXPENSE
10/1/05 3/31/06 3/31/06 RATIO*
- -------------------------------------------------------------------------------------------
REAL ESTATE SHAREHOLDER FEE EXAMPLE
- -------------------------------------------------------------------------------------------
ACTUAL
- -------------------------------------------------------------------------------------------
Investor Class $1,000 $1,186.60 $6.27 1.15%
- -------------------------------------------------------------------------------------------
Institutional Class $1,000 $1,188.00 $5.18 0.95%
- -------------------------------------------------------------------------------------------
Advisor Class $1,000 $1,185.50 $7.63 1.40%
- -------------------------------------------------------------------------------------------
HYPOTHETICAL
- -------------------------------------------------------------------------------------------
Investor Class $1,000 $1,019.20 $5.79 1.15%
- -------------------------------------------------------------------------------------------
Institutional Class $1,000 $1,020.19 $4.78 0.95%
- -------------------------------------------------------------------------------------------
Advisor Class $1,000 $1,017.95 $7.04 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
182, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
- ------
8
Real Estate - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 96.3%
DIVERSIFIED -- 8.7%
- --------------------------------------------------------------------------------
251,300 Colonial Properties Trust $ 12,597,669
- --------------------------------------------------------------------------------
2,264,800 Huntingdon Real Estate
Investment Trust 5,041,076
- --------------------------------------------------------------------------------
597,624 Lexington Corporate
Properties Trust 12,460,460
- --------------------------------------------------------------------------------
750,000 Sun Hung Kai
Properties Ltd. ADR 7,612,500
- --------------------------------------------------------------------------------
1,283,500 Swire Pacific Ltd. Cl A ORD 12,562,900
- --------------------------------------------------------------------------------
779,300 Vornado Realty Trust 74,812,801
- --------------------------------------------------------------------------------
299,800 Washington Real
Estate Investment Trust 10,888,736
- --------------------------------------------------------------------------------
135,976,142
- --------------------------------------------------------------------------------
HEALTH CARE -- 1.1%
- --------------------------------------------------------------------------------
437,000 Cogdell Spencer Inc.(1) 9,316,840
- --------------------------------------------------------------------------------
366,100 Nationwide Health
Properties Inc. 7,871,150
- --------------------------------------------------------------------------------
17,187,990
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS
& LEISURE -- 14.4%
- --------------------------------------------------------------------------------
263,800 DiamondRock Hospitality Co. 3,643,078
- --------------------------------------------------------------------------------
268,300 Equity Lifestyle
Properties, Inc. 13,347,925
- --------------------------------------------------------------------------------
170,800 Hospitality Properties Trust 7,458,836
- --------------------------------------------------------------------------------
4,043,430 Host Marriott Corp. 86,529,402
- --------------------------------------------------------------------------------
1,625,200 Innkeepers USA Trust 27,547,140
- --------------------------------------------------------------------------------
1,053,459 InterContinental Hotels
Group plc ADR 17,297,797
- --------------------------------------------------------------------------------
1,846,875 InterContinental Hotels
Group plc ORD 30,193,962
- --------------------------------------------------------------------------------
142,200 LaSalle Hotel Properties 5,830,200
- --------------------------------------------------------------------------------
228,700 Starwood Hotels & Resorts
Worldwide, Inc. 15,489,851
- --------------------------------------------------------------------------------
3,280,000 Wharf Holdings Ltd. ORD 12,047,168
- --------------------------------------------------------------------------------
406,226 Winston Hotels Inc. 4,618,790
- --------------------------------------------------------------------------------
224,004,149
- --------------------------------------------------------------------------------
INDUSTRIALS -- 8.7%
- --------------------------------------------------------------------------------
430,700 AMB Property Corp. 23,374,089
- --------------------------------------------------------------------------------
173,200 Eastgroup Properties 8,216,608
- --------------------------------------------------------------------------------
789,800 First Potomac Realty Trust 22,311,850
- --------------------------------------------------------------------------------
1,524,810 ProLogis 81,577,335
- --------------------------------------------------------------------------------
135,479,882
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MULTI-FAMILY RESIDENTIAL -- 18.5%
- --------------------------------------------------------------------------------
29,200 American Land Lease, Inc. $ 798,620
- --------------------------------------------------------------------------------
1,681,200 Apartment Investment and
Management Co. Cl A 78,848,280
- --------------------------------------------------------------------------------
1,329,500 Archstone-Smith Trust 64,839,715
- --------------------------------------------------------------------------------
255,000 Boardwalk Real Estate
Investment Trust 4,970,764
- --------------------------------------------------------------------------------
552,340 BRE Properties, Inc. 30,931,040
- --------------------------------------------------------------------------------
142,600 Essex Property Trust, Inc. 15,504,898
- --------------------------------------------------------------------------------
733,000 GMH Communities Trust 8,532,120
- --------------------------------------------------------------------------------
103,342 Mid-America Apartment
Communities Inc. 5,657,975
- --------------------------------------------------------------------------------
892,900 Post Properties, Inc. 39,734,050
- --------------------------------------------------------------------------------
1,347,700 United Dominion
Realty Trust Inc. 38,463,358
- --------------------------------------------------------------------------------
288,280,820
- --------------------------------------------------------------------------------
NEIGHBORHOOD & COMMUNITY
SHOPPING CENTERS -- 3.0%
- --------------------------------------------------------------------------------
103,100 Cedar Shopping Centers, Inc. 1,633,104
- --------------------------------------------------------------------------------
531,300 Equity One, Inc. 13,048,728
- --------------------------------------------------------------------------------
741,500 New Plan Excel Realty Trust 19,234,510
- --------------------------------------------------------------------------------
178,900 Pan Pacific Retail
Properties, Inc. 12,684,010
- --------------------------------------------------------------------------------
46,600,352
- --------------------------------------------------------------------------------
OFFICE MANAGEMENT -- 22.5%
- --------------------------------------------------------------------------------
163,000 Alexandria Real Estate
Equities Inc. 15,538,790
- --------------------------------------------------------------------------------
319,800 Boston Properties Inc. 29,821,350
- --------------------------------------------------------------------------------
1,355,084 Brandywine Realty Trust 43,037,468
- --------------------------------------------------------------------------------
411,400 Columbia Equity Trust, Inc. 7,232,412
- --------------------------------------------------------------------------------
331,300 Equity Office Properties Trust 11,125,054
- --------------------------------------------------------------------------------
897,600 Kilroy Realty Corp. 69,348,575
- --------------------------------------------------------------------------------
675,800 Liberty Property Trust 31,870,728
- --------------------------------------------------------------------------------
771,100 Mack-Cali Realty Corp. 37,012,800
- --------------------------------------------------------------------------------
598,600 Mission West Properties 7,033,550
- --------------------------------------------------------------------------------
321,470 SL Green Realty Corp. 32,629,205
- --------------------------------------------------------------------------------
2,602,748 Trizec Properties Inc. 66,968,706
- --------------------------------------------------------------------------------
351,618,638
- --------------------------------------------------------------------------------
REGIONAL MALLS -- 15.6%
- --------------------------------------------------------------------------------
1,188,710 General Growth
Properties, Inc. 58,092,258
- --------------------------------------------------------------------------------
1,202,676 Pennsylvania Real Estate
Investment Trust 52,917,744
- --------------------------------------------------------------------------------
1,492,288 Simon Property Group, Inc. 125,561,112
- --------------------------------------------------------------------------------
172,968 Taubman Centers Inc. 7,207,577
- --------------------------------------------------------------------------------
243,778,691
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
9
Real Estate - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
STORAGE -- 3.8%
- --------------------------------------------------------------------------------
1,561,128 Extra Space Storage Inc. $ 26,835,791
- --------------------------------------------------------------------------------
185,710 Public Storage Inc. 15,085,223
- --------------------------------------------------------------------------------
859,800 U-Store-It Trust 17,324,970
- --------------------------------------------------------------------------------
59,245,984
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $1,240,129,115) 1,502,172,648
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 4.3%
Repurchase Agreement, Deutsche
Bank Securities, Inc., (collateralized
by various U.S. Treasury obligations,
4.50%, 2/15/16, valued at $68,718,741),
in a joint trading account at 4.45%,
dated 3/31/06, due 4/3/06
(Delivery value $67,424,994)
(Cost $67,400,000) 67,400,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.6%
(Cost $1,307,529,115) 1,569,572,648
- --------------------------------------------------------------------------------
OTHER ASSETS
AND LIABILITIES -- (0.6)% (8,973,198)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $ 1,560,599,450
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
ORD = Foreign Ordinary Share
(1) 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.)
See Notes to Financial Statements.
- ------
10
Statement of Assets and Liabilities
MARCH 31, 2006
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities -- unaffiliated,
at value (cost of $1,300,020,835) $1,560,255,808
- -------------------------------------------------------------
Investment securities -- affiliated,
at value (cost of $7,508,280) 9,316,840
- --------------------------------------------------------------------------------
Total investment securities,
at value (cost of $1,307,529,115) 1,569,572,648
- -------------------------------------------------------------
Cash 837,764
- -------------------------------------------------------------
Foreign currency holdings, at value (cost of $6,078) 5,943
- -------------------------------------------------------------
Receivable for investments sold 20,395,634
- -------------------------------------------------------------
Receivable for capital shares sold 957,019
- -------------------------------------------------------------
Dividends and interest receivable 4,708,368
- --------------------------------------------------------------------------------
1,596,477,376
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for investments purchased 34,417,082
- -------------------------------------------------------------
Accrued management fees 1,326,332
- -------------------------------------------------------------
Distribution fees payable 67,256
- -------------------------------------------------------------
Service fees payable 67,256
- --------------------------------------------------------------------------------
35,877,926
- --------------------------------------------------------------------------------
NET ASSETS $1,560,599,450
================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $1,220,698,711
- -------------------------------------------------------------
Undistributed net investment income 958,360
- -------------------------------------------------------------
Undistributed net realized gain on investment
and foreign currency transactions 76,898,409
- -------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 262,043,970
- --------------------------------------------------------------------------------
$1,560,599,450
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $986,526,215
- -------------------------------------------------------------
Shares outstanding 34,014,106
- -------------------------------------------------------------
Net asset value per share $29.00
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $242,744,640
- -------------------------------------------------------------
Shares outstanding 8,362,218
- -------------------------------------------------------------
Net asset value per share $29.03
- --------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $331,328,595
- -------------------------------------------------------------
Shares outstanding 11,411,123
- -------------------------------------------------------------
Net asset value per share $29.04
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
11
Statement of Operations
YEAR ENDED MARCH 31, 2006
- --------------------------------------------------------------------------------
INVESTMENT INCOME (LOSS)
- --------------------------------------------------------------------------------
INCOME:
- ---------------------------------------------------------------
Dividends (including $1,796,984 from affiliates
and net of foreign taxes withheld of $55,947) $ 34,265,935
- ---------------------------------------------------------------
Interest 1,669,605
- --------------------------------------------------------------------------------
35,935,540
- --------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------
Management fees 12,118,199
- ---------------------------------------------------------------
Distribution fees -- Advisor Class 583,120
- ---------------------------------------------------------------
Service fees -- Advisor Class 583,120
- ---------------------------------------------------------------
Directors' fees and expenses 23,824
- ---------------------------------------------------------------
Other expenses 13,323
- --------------------------------------------------------------------------------
13,321,586
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 22,613,954
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss) on investment and foreign
currency transactions (including $7,760,800 from affiliates) 164,923,243
- ---------------------------------------------------------------
Change in net unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities in foreign currencies 194,810,843
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) 359,734,086
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $382,348,040
================================================================================
See Notes to Financial Statements.
- ------
12
Statement of Changes in Net Assets
YEARS ENDED MARCH 31, 2006 AND MARCH 31, 2005
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2006 2005
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment income (loss) $ 22,613,954 $ 12,166,888
- ----------------------------------------------
Net realized gain (loss) 164,923,243 62,324,964
- ----------------------------------------------
Change in net unrealized
appreciation (depreciation) 194,810,843 (23,159,699)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 382,348,040 51,332,153
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
From net investment income:
- ----------------------------------------------
Investor Class (13,511,266) (9,161,435)
- ----------------------------------------------
Institutional Class (4,087,565) (2,444,048)
- ----------------------------------------------
Advisor Class (3,806,606) (2,229,836)
- ----------------------------------------------
From net realized gains:
- ----------------------------------------------
Investor Class (73,133,691) (32,154,057)
- ----------------------------------------------
Institutional Class (18,989,741) (8,421,830)
- ----------------------------------------------
Advisor Class (24,220,069) (9,230,800)
- --------------------------------------------------------------------------------
Decrease in net assets from distributions (137,748,938) (63,642,006)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions 488,550,572 281,197,182
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 733,149,674 268,887,329
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 827,449,776 558,562,447
- --------------------------------------------------------------------------------
End of period $1,560,599,450 $827,449,776
================================================================================
Undistributed net investment income $958,360 --
================================================================================
See Notes to Financial Statements.
- ------
13
Notes to Financial Statements
MARCH 31, 2006
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 to seek long-term capital
appreciation. Income is a secondary objective. The fund pursues 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)
- ------
14
Notes to Financial Statements
MARCH 31, 2006
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)
- ------
15
Notes to Financial Statements
MARCH 31, 2006
2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
The annual management fee schedule for each class of the fund is as follows:
- --------------------------------------------------------------------------------
INVESTOR INSTITUTIONAL ADVISOR
- --------------------------------------------------------------------------------
STRATEGY ASSETS
- --------------------------------------------------------------------------------
First $100 million 1.20% 1.00% 0.95%
- --------------------------------------------------------------------------------
Next $900 million 1.15% 0.95% 0.90%
- --------------------------------------------------------------------------------
Next $1 billion 1.10% 0.90% 0.85%
- --------------------------------------------------------------------------------
Over $2 billion 1.05% 0.85% 0.80%
- --------------------------------------------------------------------------------
The effective annual management fee for the year ended March 31, 2006 was 1.15%,
0.95%, and 0.90% for the Investor Class, Institutional Class and Advisor Class,
respectively.
DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master
Distribution and Shareholder Services Plan (the plan) for the Advisor Class,
pursuant to Rule 12b-1 of the 1940 Act. The plan provides that the Advisor Class
will pay American Century Investment Services, Inc. (ACIS) an annual
distribution fee equal to 0.25% and an annual service fee equal to 0.25%. The
fees are computed and accrued daily based on the Advisor Class's daily net
assets and paid monthly in arrears. The distribution fee provides compensation
for expenses incurred by financial intermediaries in connection with
distributing shares of the Advisor Class including, but not limited to, payments
to brokers, dealers, and financial institutions that have entered into sales
agreements with respect to shares of the fund. The service fee provides
compensation for shareholder and administrative services rendered by ACIS, its
affiliates or independent third party providers. Fees incurred under the plan
during the year ended March 31, 2006, 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 year ended March 31, 2006, were as follows:
- --------------------------------------------------------------------------------
Purchases $2,304,194,529
- --------------------------------------------------------------------------------
Proceeds from sales $1,946,491,672
- --------------------------------------------------------------------------------
(continued)
- ------
16
Notes to Financial Statements
MARCH 31, 2006
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows:
- --------------------------------------------------------------------------------
SHARES AMOUNT
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2006
SHARES AUTHORIZED 70,000,000
================================================================================
Sold 18,115,901 $ 486,639,821
- ---------------------------------------------
Issued in reinvestment of distributions 3,085,929 79,217,673
- ---------------------------------------------
Redeemed (9,680,664) (255,068,241)
- --------------------------------------------------------------------------------
Net increase (decrease) 11,521,166 $ 310,789,253
================================================================================
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
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2006
SHARES AUTHORIZED 20,000,000
================================================================================
Sold 4,017,584 $107,260,219
- ---------------------------------------------
Issued in reinvestment of distributions 872,775 22,451,251
- ---------------------------------------------
Redeemed (2,686,430) (71,305,893)
- --------------------------------------------------------------------------------
Net increase (decrease) 2,203,929 $ 58,405,577
================================================================================
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
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2006
SHARES AUTHORIZED 30,000,000
================================================================================
Sold 6,097,282 $163,460,914
- ---------------------------------------------
Issued in reinvestment of distributions 1,068,750 27,420,947
- ---------------------------------------------
Redeemed (2,702,232) (71,526,119)
- --------------------------------------------------------------------------------
Net increase (decrease) 4,463,800 $119,355,742
================================================================================
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)
- ------
17
Notes to Financial Statements
MARCH 31, 2006
5. AFFILIATED COMPANY TRANSACTIONS
If a fund's holding represents ownership of 5% or more of the voting securities
of a company, the company is affiliated as defined in the 1940 Act. A summary of
transactions for each company which is or was an affiliate at or during the year
ended March 31, 2006 follows:
- ----------------------------------------------------------------------------------------------------------------------
SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND MARCH 31, 2006
ISSUER 3/31/05 COST COST GAIN (LOSS) INCOME SHARE BALANCE MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------
REAL ESTATE
- ----------------------------------------------------------------------------------------------------------------------
Cogdell Spencer Inc. -- $ 8,262,107 $ 753,827 $ 64,179 $ 249,106 437,000 $ 9,316,840
- ----------------------
Mid-America Apartment
Communities Inc.(1) 805,900 14,136,579 41,827,393 7,696,621 1,547,878 103,342 5,657,975
- ----------------------------------------------------------------------------------------------------------------------
$22,398,686 $42,581,220 $7,760,800 $1,796,984 $14,974,815
======================================================================================================================
(1) Company was not an affiliate at March 31, 2006.
6. BANK LINE OF CREDIT
The fund, along with certain other funds managed by ACIM or ACGIM, has a
$500,000,000 unsecured bank line of credit agreement with JPMCB, which was
renewed from $575,000,000 effective December 14, 2005. The fund may borrow money
for temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund
did not borrow from the line during the year ended March 31, 2006.
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.
(continued)
- ------
18
Notes to Financial Statements
MARCH 31, 2006
8. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2006
and March 31, 2005 were as follows:
- --------------------------------------------------------------------------------
2006 2005
- --------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
- --------------------------------------------------------------------------------
Ordinary income $88,461,272 $33,137,764
- --------------------------------------------------------------------------------
Long-term capital gains $49,287,666 $30,504,242
- --------------------------------------------------------------------------------
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect the
differing character of certain income items and net realized gains and losses
for financial statement and tax purposes, and may result in reclassification
among certain capital accounts on the financial statements.
As of March 31, 2006, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
- --------------------------------------------------------------------------------
COMPONENTS OF DISTRIBUTABLE EARNINGS AND TAX COST
- --------------------------------------------------------------------------------
Federal tax cost of investments $1,312,815,352
================================================================================
Gross tax appreciation of investments $260,140,448
- -------------------------------------------------------
Gross tax depreciation of investments (3,383,152)
- --------------------------------------------------------------------------------
Net tax appreciation (depreciation) of investments $256,757,296
================================================================================
Net tax appreciation (depreciation) on translation
of assets and liabilities in foreign currencies 437
- --------------------------------------------------------------------------------
Net tax appreciation (depreciation) $256,757,733
================================================================================
Undistributed ordinary income $48,978,380
- -------------------------------------------------------
Accumulated long-term gains $34,165,628
- -------------------------------------------------------
Currency loss deferral $(1,002)
- --------------------------------------------------------------------------------
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, return of capital dividends received, and the realization for tax
purposes of unrealized gains on investments in passive foreign investment
companies.
The currency loss deferrals represent net foreign currency losses incurred in
the five-month period ended March 31, 2006. The fund has elected to treat such
losses as having been incurred in the following fiscal year for federal income
tax purposes.
9. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The fund hereby designates $11,693,495 of qualified dividend income for the
fiscal year ended March 31, 2006.
The fund hereby designates $49,287,666 of capital gain distributions for the
fiscal year ended March 31, 2006.
For corporate taxpayers, ordinary income distributions paid during the fiscal
year ended March 31, 2006, of $459,004 qualify for the corporate dividends
received deduction.
The fund designates $67,055,835 of distributions as qualified short-term capital
gains for purposes of Internal Revenue Code Section 871.
- ------
19
Real Estate - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31
- ------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $23.24 $23.09 $15.83 $16.22 $14.00
- ------------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------
Net Investment Income (Loss)(1) 0.53 0.46 0.46 0.59 0.57
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 8.44 1.79 7.49 (0.44) 2.21
- ------------------------------------------------------------------------------------------------
Total From Investment Operations 8.97 2.25 7.95 0.15 2.78
- ------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.49) (0.46) (0.54) (0.54) (0.56)
- ------------------------------------------
From Net Realized Gains (2.72) (1.64) (0.15) -- --
- ------------------------------------------------------------------------------------------------
Total Distributions (3.21) (2.10) (0.69) (0.54) (0.56)
- ------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $29.00 $23.24 $23.09 $15.83 $16.22
================================================================================================
TOTAL RETURN(2) 40.65% 9.53% 50.97% 0.93% 20.23%
- ------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.15% 1.16% 1.17% 1.18% 1.20%
- ------------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets 2.00% 1.88% 2.28% 3.74% 3.83%
- ------------------------------------------
Portfolio Turnover Rate 177% 171% 158% 162% 156%
- ------------------------------------------
Net Assets, End of Period (in thousands) $986,526 $522,676 $393,604 $134,898 $107,599
- ------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
20
Real Estate - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31
- ---------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ---------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $23.25 $23.10 $15.85 $16.23 $14.01
- ---------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------
Net Investment Income (Loss)(1) 0.59 0.44 0.51 0.63 0.59
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 8.45 1.86 7.47 (0.44) 2.22
- ---------------------------------------------------------------------------------------------
Total From Investment Operations 9.04 2.30 7.98 0.19 2.81
- ---------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.54) (0.51) (0.58) (0.57) (0.59)
- ------------------------------------------
From Net Realized Gains (2.72) (1.64) (0.15) -- --
- ---------------------------------------------------------------------------------------------
Total Distributions (3.26) (2.15) (0.73) (0.57) (0.59)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Period $29.03 $23.25 $23.10 $15.85 $16.23
=============================================================================================
TOTAL RETURN(2) 40.99% 9.74% 51.14% 1.19% 20.45%
- ---------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.95% 0.96% 0.97% 0.98% 1.00%
- ------------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets 2.20% 2.08% 2.48% 3.94% 4.03%
- ------------------------------------------
Portfolio Turnover Rate 177% 171% 158% 162% 156%
- ------------------------------------------
Net Assets, End of Period (in thousands) $242,745 $143,183 $82,488 $23,371 $16,305
- ---------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
21
Real Estate - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31
- ---------------------------------------------------------------------------------------------
ADVISOR CLASS
- ---------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $23.26 $23.11 $15.83 $16.22 $14.00
- ---------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------
Net Investment Income (Loss)(1) 0.46 0.35 0.42 0.55 0.53
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 8.46 1.84 7.50 (0.44) 2.21
- ---------------------------------------------------------------------------------------------
Total From Investment Operations 8.92 2.19 7.92 0.11 2.74
- ---------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.42) (0.40) (0.49) (0.50) (0.52)
- ------------------------------------------
From Net Realized Gains (2.72) (1.64) (0.15) -- --
- ---------------------------------------------------------------------------------------------
Total Distributions (3.14) (2.04) (0.64) (0.50) (0.52)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Period $29.04 $23.26 $23.11 $15.83 $16.22
=============================================================================================
TOTAL RETURN(2) 40.37% 9.30% 50.66% 0.69% 19.93%
- ---------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.40% 1.41% 1.42% 1.43% 1.45%
- ------------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets 1.75% 1.63% 2.03% 3.49% 3.58%
- ------------------------------------------
Portfolio Turnover Rate 177% 171% 158% 162% 156%
- ------------------------------------------
Net Assets, End of Period (in thousands) $331,329 $161,592 $82,471 $19,278 $16,759
- ---------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not
precisely reflect the class expense differences because of the impact of
calculating the net asset values to two decimal places. If net asset values
were calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
See Notes to Financial Statements.
- ------
22
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders,
American Century Capital Portfolios, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Real Estate Fund (the "Fund"), one of the mutual
funds comprising American Century Capital Portfolios, Inc., as of March 31,
2006, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of March 31, 2006, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Real
Estate Fund as of March 31, 2006, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for the periods presented, in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Kansas City, Missouri
May 12, 2006
- ------
23
Management
The individuals listed below serve as directors or officers of the fund. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
72. Those listed as interested directors are "interested" primarily by virtue of
their engagement as officers of American Century Companies, Inc. (ACC) or its
wholly owned, direct or indirect, subsidiaries, including the fund's investment
advisor, American Century Investment Management, Inc. (ACIM); the fund's
principal underwriter, American Century Investment Services, Inc. (ACIS); and
the fund's transfer agent, American Century Services, LLC (ACS).
The other directors (more than three-fourths of the total number) are
independent; that is, they have never been employees or officers of, and have no
financial interest in, ACC or any of its wholly owned subsidiaries, including
ACIM, ACIS, and ACS. The directors serve in this capacity for seven registered
investment companies in the American Century family of funds.
All persons named as officers of the fund also serve in a similar capacity for
the other 14 investment companies advised by ACIM or American Century Global
Investment Management, Inc. (ACGIM), unless otherwise noted. Only officers with
policy-making functions are listed. No officer is compensated for his or her
service as an officer of the funds. The listed officers are interested persons
of the fund and are appointed or re-appointed on an annual basis.
INDEPENDENT DIRECTORS
- --------------------------------------------------------------------------------
THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1940
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1980
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Formerly Chief Executive
Officer/Treasurer, Associated Bearings Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1997
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, Midwest
Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
D.D. (DEL) HOCK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1935
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1996
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Chairman, Public
Service Company of Colorado
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Allied Motion Technologies, Inc.
- --------------------------------------------------------------------------------
(continued)
- ------
24
Management
INDEPENDENT DIRECTORS (CONTINUED)
- --------------------------------------------------------------------------------
JAMES A. OLSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1942
POSITION(S) HELD WITH FUND: Advisory Board Member
FIRST YEAR OF SERVICE: 2006
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Principal and Chief Financial
Officer, Plaza Belmont LLC
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, SCS Transportation, Inc. and
Entertainment Properties Trust
- --------------------------------------------------------------------------------
DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Director, Chairman of the Board
FIRST YEAR OF SERVICE: 1995
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Western Investments,
Inc.; Retired Chairman of the Board, Butler Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1943
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer
and Founder, Sayers40, Inc., a technology products and service provider
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Triad Hospitals, Inc.
- --------------------------------------------------------------------------------
M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1994
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Senior Vice
President, Sprint Corporation
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide, Inc.
- --------------------------------------------------------------------------------
TIMOTHY S. WEBSTER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1961
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 2001
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, American Italian Pasta Company (1992 to December 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JAMES E. STOWERS, JR.(1), 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1924
POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman
FIRST YEAR OF SERVICE: 1958
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Director and Controlling
Shareholder, ACC; Chairman, ACC (January 1995 to December 2004); Director, ACIM,
ACGIM, ACS, ACIS and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
JAMES E. STOWERS III(1), 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1959
POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman
FIRST YEAR OF SERVICE: 1990
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, ACC (January 2005 to
present); Co-Chairman, ACC (September 2000 to December 2004); Chairman, ACS and
other ACC subsidiaries; Director, ACC, ACIM, ACGIM, ACS, ACIS and other ACC
subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
(1) James E. Stowers, Jr. is the father of James E. Stowers III.
(continued)
- ------
25
Management
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: President
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC
(September 2000 to present); President, ACC (June 1997 to present); Also serves
as: Chief Executive Officer and President, ACIM, ACGIM, ACIS and other ACC
subsidiaries; Executive Vice President, ACS; Director, ACC, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
JONATHAN THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUND: Executive Vice President
FIRST YEAR OF SERVICE: 2005
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Executive Vice President, ACC
(November 2005 to present); Chief Administrative Officer, ACC (February 2006 to
present); Also serves as: President, ACS; Chief Executive Officer, Chief
Financial Officer and Chief Accounting Officer, ACIM, ACGIM, ACS, ACIS and other
ACC subsidiaries; Managing Director, Morgan Stanley (March 2000 to November
2005)
- --------------------------------------------------------------------------------
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer, and Chief
Financial Officer
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Assistant Treasurer, ACC (January
1995 to present); Also serves as: Senior Vice President, ACS; Assistant
Treasurer, ACIM, ACGIM, ACS, ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
DAVID C. TUCKER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1958
POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (February 2001
to present); General Counsel, ACC (June 1998 to present); Also serves as: Senior
Vice President and General Counsel, ACIM, ACGIM, ACS, ACIS and other ACC
subsidiaries
- --------------------------------------------------------------------------------
CHARLES C.S. PARK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Vice President and Chief Compliance Officer
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (March 2005 to present); Vice President, ACS (February 2000 to
present); Assistant General Counsel, ACS (January 1998 to March 2005)
- --------------------------------------------------------------------------------
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Controller
FIRST YEAR OF SERVICE: 1997
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February 2000
to present); Controller-Fund Accounting, ACS (June 1997 to present)
- --------------------------------------------------------------------------------
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer
FIRST YEAR OF SERVICE: 1997
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (October 2001
to present); Vice President, Corporate Tax, ACS (April 1998 to present); Also
serves as: Vice President, ACIM, ACGIM, ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
The SAI has additional information about the fund's directors and is available
without charge, upon request, by calling 1-800-345-2021.
- ------
26
Share Class Information
Three classes of shares are authorized for sale by the fund: 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.
- ------
27
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable for
paying income tax on the taxable portion of your withdrawal. If you elect not to
have income tax withheld or you don't have enough income tax withheld, you may
be responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's investment advisor, is
responsible for exercising the voting rights associated with the securities
purchased and/or held by the fund. A description of the policies and procedures
the advisor uses in fulfilling this responsibility is available without charge,
upon request, by calling 1-800-345-2021. It is also available on American
Century's Web site at americancentury.com and on the Securities and Exchange
Commission's Web site at sec.gov. Information regarding how the investment
advisor voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available on the "About Us" page at
americancentury.com. It is also available at sec.gov.
(continued)
- ------
28
Additional Information
QUARTERLY PORTFOLIO DISCLOSURE
The fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. The fund's Form N-Q is available on the SEC's Web site at
sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of
portfolio holdings for the most recent quarter of its fiscal year available on
its Web site at americancentury.com and, upon request, by calling
1-800-345-2021.
- ------
29
Index Definitions
The following indices are used to illustrate investment market, sector, or style
performance or to serve as fund performance comparisons. They are not investment
products available for purchase.
The MORGAN STANLEY CAPITAL INTERNATIONAL 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 NASDAQ COMPOSITE INDEX is a market value-weighted index of all domestic and
international common stocks listed on the Nasdaq stock market.
The RUSSELL 2000(reg.sm) INDEX is a market-capitalization weighted index created
by Frank Russell Company to measure the performance of the 2,000 smallest of the
3,000 largest publicly traded U.S. companies, based on total market
capitalization.
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.
- ------
30
Notes
- ------
31
Notes
- ------
32
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE:
1-800-345-2021 or 816-531-5575
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL PROFESSIONALS, 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.
0605
SH-ANN-48884N
American Century Investment Services, Inc., Distributor
(c)2006 American Century Proprietary Holdings, Inc. All rights reserved.
American Century Investments
ANNUAL REPORT
MARCH 31, 2006
[photo of boy with plane]
Equity Index Fund
[american century investments logo and text logo]
Table of Contents
Our Message to You. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
EQUITY INDEX
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Top Five Industries. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Types of Investments in Portfolio. . . . . . . . . . . . . . . . . . . . 6
Shareholder Fee Example . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . .17
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . .18
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . .19
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . .20
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Report of Independent Registered Public Accounting Firm . . . . . . . . . .27
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . .31
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . .32
Index Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
The opinions expressed in the Market Perspective and the Portfolio Commentary
reflect those of the portfolio management team as of the date of the report, and
do not necessarily represent the opinions of American Century or any other
person in the American Century organization. Any such opinions are subject to
change at any time based upon market or other conditions and American Century
disclaims any responsibility to update such opinions. These opinions may not be
relied upon as investment advice and, because investment decisions made by
American Century funds are based on numerous factors, may not be relied upon as
an indication of trading intent on behalf of any American Century fund. Security
examples are used for representational purposes only and are not intended as
recommendations to purchase or sell securities. Performance information for
comparative indices and securities is provided to American Century by third
party vendors. To the best of American Century's knowledge, such information is
accurate at the time of printing.
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
JAMES E. STOWERS III WITH JAMES E. STOWERS, JR.
We are pleased to provide you with the annual report for the American Century
Equity Index fund for the 12 months ended March 31, 2006. We hope you find this
information helpful in monitoring your investment. Another useful resource we
offer is our Web site, americancentury.com, where we post quarterly portfolio
commentaries, the views of our senior investment officers, and other
communications about investments, portfolio strategy, and the markets.
Our Web site currently highlights American Century's recently-announced
strategic collaboration with Lance Armstrong and the Lance Armstrong Foundation
(LAF). Our new campaign, featuring Lance, is designed to encourage investors to
take a more active role in planning their financial futures and make every
investment decision count.
American Century's collaboration with Lance Armstrong and the LAF is a perfect
fit. Like members of our family, Lance is a cancer survivor, and shares our
values of optimism, focus, and determination. In addition, Lance and our family
have dedicated our success to improving lives, through the LAF and the Stowers
Institute for Medical Research, respectively. To learn more about American
Century's collaboration with Lance Armstrong and the LAF, please visit
www.lanceface.com on the Web and click on the links to related sites.
Besides the exciting new collaboration, we've enjoyed other good news -- in
January, American Century was named, for the seventh consecutive year, one of
FORTUNE magazine's 100 Best Companies to Work For in America. Fostering a
positive work environment can benefit fund investors as well as our company --
it helps us continue to attract and retain talented people.
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
Market Perspective
[photo of Phil Davidson]
BY PHIL DAVIDSON, CHIEF INVESTMENT OFFICER, U.S. VALUE EQUITY
STOCKS GAINED GROUND
Stocks advanced strongly during the 12 months ended March 31, 2006. The S&P 500
Index, representative of the broad market, was up almost 12% for the period.
The stock market overcame persistently high oil prices, investor uneasiness
about inflation, and rising interest rates--factors that typically weigh on
equities. The destructive Gulf Coast hurricanes in September 2005 also had a
negative impact on investor confidence.
However, stocks were buoyed by the resiliency of the U.S. economy, which
rebounded with surprising strength in the first quarter of 2006 after a
post-hurricane slowdown. In addition, corporate profits continued to expand at a
higher-than-expected rate--the S&P 500 enjoyed its 15th consecutive quarter of
double-digit earnings growth.
SMALLER WAS BETTER
Most of the major stock indexes enjoyed returns in excess of 10% for the
12-month period. Small- and mid-sized companies had the highest returns, as
evidenced by the S&P SmallCap 600 Index's gain of 24%. Value and growth stocks
were mixed--growth shares performed better than value at the small end of the
capitalization range, while value stocks had a slight edge among larger
businesses.
For many investors, however, stocks still have a way to go. Despite a cumulative
total return of 61% over the past three years, the S&P 500 closed the period 15%
below its March 2000 record high. The Nasdaq Composite is 54% behind its 2000
zenith.
YEAR OF ENERGY
With oil prices increasing 20% over the period, reaching nearly $70 a barrel,
energy companies posted the best returns in the S&P 500. Financial stocks also
performed well as an active stock market and burgeoning merger and acquisition
activity lifted capital markets companies.
The high price of energy cut both ways, though, as it crimped the earnings of
large energy users, either in products or production processes, as well as
companies caught in the ripple effect of higher prices at the pump. Affected
businesses included automakers and chemical companies, food products companies
and restaurants, and retailers that operate giant fleets of trucks.
ONE-YEAR RETURNS AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
S&P 500 Index 11.73%
- --------------------------------------------------------------------------------
S&P MidCap 400 Index 21.62%
- --------------------------------------------------------------------------------
S&P SmallCap 600 Index 24.07%
- --------------------------------------------------------------------------------
- ------
2
Equity Index - Performance
TOTAL RETURNS AS OF MARCH 31, 2006
----------------------
AVERAGE ANNUAL RETURNS
- ------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
- ------------------------------------------------------------------------------
INVESTOR CLASS 11.36% 3.49% 1.71% 2/26/99
- ------------------------------------------------------------------------------
S&P 500 INDEX(1) 11.73% 3.97% 2.20% --
- ------------------------------------------------------------------------------
Institutional Class 11.35% 3.65% 1.91% 2/26/99
- ------------------------------------------------------------------------------
(1) Data provided by Lipper Inc. -- A Reuters Company. (c) 2006 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 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)
- ------
3
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 March 31
- --------------------------------------------------------------------------------------
1999* 2000 2001 2002 2003 2004 2005 2006
- --------------------------------------------------------------------------------------
Investor Class 4.00% 17.17% -22.04% -0.16% -25.02% 34.27% 6.04% 11.36%
- --------------------------------------------------------------------------------------
S&P 500 Index 4.00% 17.94% -21.68% 0.24% -24.76% 35.12% 6.69% 11.73%
- --------------------------------------------------------------------------------------
* 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.
- ------
4
Equity Index - Portfolio Commentary
SUBADVISOR: BARCLAYS GLOBAL FUND ADVISORS
PERFORMANCE SUMMARY
For the fiscal year ended March 31, 2006, Equity Index returned 11.36%,*
compared with the 11.73% return of the benchmark it tracks, the S&P 500 Index.
The portfolio's results reflect operating expenses whereas the index return does
not.
FINANCIALS LED THE WAY
Every sector of the Equity Index portfolio posted positive returns during the
fiscal year. Financial stocks, which comprise the largest sector weighting in
the portfolio, contributed the most to the fund's return. Capital markets firms
produced the best results, benefiting from the rising stock market and heavy
merger-and-acquisition activity. The top contributors among capital markets
stocks included Merrill Lynch, Goldman Sachs, and Lehman Brothers, each of which
returned more than 40% during the period.
Insurance stocks were also strong performers. The best individual performance
contributor in the financial sector was insurance giant American International
Group, which rebounded after an accounting scandal and the loss of its top
executives.
Real estate investment trusts (REITs) posted healthy returns, buoyed by the
strong economy and rising commercial property values. Diversified financial
services companies also performed well; JP Morgan Chase and Citigroup were among
the top ten individual contributors to fund performance.
TECHNOLOGY SECTOR REBOUNDED
Thanks to the robust economy, a modest recovery in capital spending provided a
lift to the information technology sector. Six of the fund's top ten individual
performance contributors were technology stocks. Communications equipment
companies were the best performers, led by fiber optics manufacturer Corning,
which gained more than 140% thanks to the remarkable growth of its liquid
crystal display glass business. Other communications equipment stocks among the
top ten included network equipment manufacturer Cisco Systems, cell phone maker
Motorola, and wireless technology company QUALCOMM.
Another top-ten performer was hardware maker Hewlett-Packard, where a new CEO
revitalized the business by restoring profitability to the company's PC and
server segments.
The best and worst individual performance contributors in the portfolio were
information technology stocks. The top
TOP TEN HOLDINGS
AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 3.1% 3.6%
- --------------------------------------------------------------------------------
General Electric Co. 3.1% 3.2%
- --------------------------------------------------------------------------------
Microsoft Corporation 2.0% 2.1%
- --------------------------------------------------------------------------------
Citigroup Inc. 2.0% 2.1%
- --------------------------------------------------------------------------------
Bank of America Corp. 1.8% 1.5%
- --------------------------------------------------------------------------------
Procter & Gamble Co. (The) 1.6% 1.4%
- --------------------------------------------------------------------------------
Pfizer Inc. 1.6% 1.6%
- --------------------------------------------------------------------------------
Johnson & Johnson 1.5% 1.7%
- --------------------------------------------------------------------------------
American International
Group, Inc. 1.5% 1.4%
- --------------------------------------------------------------------------------
Altria Group Inc. 1.3% 1.4%
- --------------------------------------------------------------------------------
* All fund returns referenced in this commentary
are for Investor Class shares. (continued)
- ------
5
Equity Index - Portfolio Commentary
contributor was the portfolio's third-largest holding, software titan Microsoft,
while the bottom contributor was electronics maker Dell, which reported
disappointing earnings amid increased competition in its PC business.
RISING PRICES BOOSTED ENERGY
As a group, energy stocks posted the best absolute returns in the portfolio as
the price of oil reached a record high of more than $70 a barrel. Energy
equipment and services companies outperformed over the past year, benefiting
from increased drilling and production activity. The leading performer was
oilfield services company Schlumberger, which gained 80% as the company
benefited from its global reach and expanding profit margins.
CONSUMER STOCKS LAGGED
The higher energy prices that helped energy stocks weighed on the two
consumer-oriented sectors of the portfolio, consumer staples and consumer
discretionary, which produced the weakest returns. The auto industry suffered
the largest declines--automakers General Motors and Ford Motor both fell by more
than 20%, while auto parts manufacturers Dana and Delphi filed for bankruptcy.
Rising energy costs also hurt discount retailers such as Wal-Mart, which was one
of the biggest detractors from fund performance. Higher prices at the gas pump
had the biggest impact on low- to middle-income consumers--Wal-Mart's primary
customer base--and also increased delivery and shipping costs for the company.
Media stocks struggled amid weak advertising revenues and increasing
competition. Cable operator Comcast reported lower-than-expected profits in two
consecutive quarters as subscriber growth, especially for its Internet phone
service, proved disappointing.
A CORE HOLDING
Although the economy and stock market are off to a good start so far in 2006,
many market analysts anticipate a slowdown in corporate earnings growth as the
year progresses, which could create more headwinds for stocks. But regardless of
where the market is headed in the short term, a broad index fund should remain a
long-term core holding within a diversified portfolio.
TOP FIVE INDUSTRIES
AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Oil, Gas &
Consumable Fuels 7.7% 8.6%
- --------------------------------------------------------------------------------
Pharmaceuticals 6.4% 6.6%
- --------------------------------------------------------------------------------
Commerical Banks 5.8% 5.4%
- --------------------------------------------------------------------------------
Insurance 4.7% 4.5%
- --------------------------------------------------------------------------------
Industrial Conglomerates 4.1% 4.3%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
% OF % OF
NET ASSETS NET ASSETS
AS OF AS OF
3/31/06 9/30/05
- --------------------------------------------------------------------------------
Common Stocks
& Futures 100.8% 100.8%
- --------------------------------------------------------------------------------
Temporary Cash
Investments -- 0.1%
- --------------------------------------------------------------------------------
Other Assets
and Liabilities (0.8)% (0.9)%
- --------------------------------------------------------------------------------
- ------
6
Shareholder Fee Example (Unaudited)
Fund shareholders may incur two types of costs: (1) transaction costs, including
sales charges (loads) on purchase payments and redemption/exchange fees; and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in your fund and to compare these costs
with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2005 to March 31, 2006.
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)
- ------
7
Shareholder Fee Example (Unaudited)
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
- --------------------------------------------------------------------------------
EXPENSES PAID
BEGINNING ENDING DURING PERIOD* ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE 10/1/05 - EXPENSE
10/1/05 3/31/06 3/31/06 RATIO*
- --------------------------------------------------------------------------------
EQUITY INDEX SHAREHOLDER FEE EXAMPLE
- --------------------------------------------------------------------------------
ACTUAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,061.30 $2.52 0.49%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,062.40 $1.49 0.29%
- --------------------------------------------------------------------------------
HYPOTHETICAL
- --------------------------------------------------------------------------------
Investor Class $1,000 $1,022.49 $2.47 0.49%
- --------------------------------------------------------------------------------
Institutional Class $1,000 $1,023.49 $1.46 0.29%
- --------------------------------------------------------------------------------
*Expenses are equal to the class's annualized expense ratio listed in the table
above, multiplied by the average account value over the period, multiplied by
182, the number of days in the most recent fiscal half-year, divided by 365, to
reflect the one-half year period.
- ------
8
Equity Index - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 99.7%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 2.4%
- --------------------------------------------------------------------------------
55,222 Boeing Co. $ 4,303,456
- --------------------------------------------------------------------------------
27,606 General Dynamics Corp. 1,766,232
- --------------------------------------------------------------------------------
8,533 Goodrich Corporation 372,124
- --------------------------------------------------------------------------------
57,307 Honeywell International Inc. 2,451,020
- --------------------------------------------------------------------------------
8,373 L-3 Communications
Holdings, Inc. 718,320
- --------------------------------------------------------------------------------
24,709 Lockheed Martin Corp. 1,856,387
- --------------------------------------------------------------------------------
24,196 Northrop Grumman Corp. 1,652,345
- --------------------------------------------------------------------------------
30,797 Raytheon Company 1,411,734
- --------------------------------------------------------------------------------
11,901 Rockwell Collins 670,621
- --------------------------------------------------------------------------------
70,074 United Technologies Corp. 4,062,190
- --------------------------------------------------------------------------------
19,264,429
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS -- 1.0%
- --------------------------------------------------------------------------------
20,960 FedEx Corporation 2,367,222
- --------------------------------------------------------------------------------
4,195 Ryder System, Inc. 187,852
- --------------------------------------------------------------------------------
75,351 United Parcel Service, Inc. Cl B 5,981,363
- --------------------------------------------------------------------------------
8,536,437
- --------------------------------------------------------------------------------
AIRLINES -- 0.1%
- --------------------------------------------------------------------------------
48,810 Southwest Airlines Co. 878,092
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 0.2%
- --------------------------------------------------------------------------------
4,261 Cooper Tire & Rubber Co. 61,103
- --------------------------------------------------------------------------------
12,223 Goodyear Tire & Rubber
Co. (The)(1) 176,989
- --------------------------------------------------------------------------------
13,393 Johnson Controls, Inc. 1,016,930
- --------------------------------------------------------------------------------
1,255,022
- --------------------------------------------------------------------------------
AUTOMOBILES -- 0.3%
- --------------------------------------------------------------------------------
128,720 Ford Motor Company 1,024,611
- --------------------------------------------------------------------------------
39,055 General Motors Corp. 830,700
- --------------------------------------------------------------------------------
18,787 Harley-Davidson, Inc. 974,670
- --------------------------------------------------------------------------------
2,829,981
- --------------------------------------------------------------------------------
BEVERAGES -- 2.0%
- --------------------------------------------------------------------------------
53,559 Anheuser-Busch Companies, Inc. 2,290,718
- --------------------------------------------------------------------------------
5,747 Brown-Forman Corp. Cl B 442,347
- --------------------------------------------------------------------------------
142,116 Coca-Cola Company (The) 5,950,397
- --------------------------------------------------------------------------------
20,974 Coca-Cola Enterprises Inc. 426,611
- --------------------------------------------------------------------------------
13,632 Constellation Brands Inc. Cl A(1) 341,482
- --------------------------------------------------------------------------------
3,971 Molson Coors Brewing Co. 272,490
- --------------------------------------------------------------------------------
9,303 Pepsi Bottling Group Inc. 282,718
- --------------------------------------------------------------------------------
114,297 PepsiCo, Inc. 6,605,224
- --------------------------------------------------------------------------------
16,611,987
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.4%
- --------------------------------------------------------------------------------
80,630 Amgen Inc.(1) 5,865,833
- --------------------------------------------------------------------------------
12,616 Applera Corporation-Applied
Biosystems Group 342,398
- --------------------------------------------------------------------------------
23,725 Biogen Idec Inc.(1) 1,117,448
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
7,564 Chiron Corp.(1) $ 346,507
- --------------------------------------------------------------------------------
17,913 Genzyme Corp.(1) 1,204,112
- --------------------------------------------------------------------------------
31,883 Gilead Sciences, Inc.(1) 1,983,760
- --------------------------------------------------------------------------------
17,604 MedImmune, Inc.(1) 643,954
- --------------------------------------------------------------------------------
11,504,012
- --------------------------------------------------------------------------------
BUILDING PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------
12,279 American Standard
Companies Inc. 526,278
- --------------------------------------------------------------------------------
28,720 Masco Corp. 933,113
- --------------------------------------------------------------------------------
1,459,391
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 3.5%
- --------------------------------------------------------------------------------
17,276 Ameriprise Financial Inc. 778,457
- --------------------------------------------------------------------------------
53,196 Bank of New York Co.,
Inc. (The) 1,917,184
- --------------------------------------------------------------------------------
8,241 Bear Stearns Companies
Inc. (The) 1,143,027
- --------------------------------------------------------------------------------
28,803 E*TRADE Financial Corp.(1) 777,105
- --------------------------------------------------------------------------------
5,790 Federated Investors Inc. Cl B 226,100
- --------------------------------------------------------------------------------
10,522 Franklin Resources, Inc. 991,593
- --------------------------------------------------------------------------------
30,081 Goldman Sachs Group,
Inc. (The) 4,721,513
- --------------------------------------------------------------------------------
14,782 Janus Capital Group Inc. 342,499
- --------------------------------------------------------------------------------
18,652 Lehman Brothers Holdings Inc. 2,695,774
- --------------------------------------------------------------------------------
28,567 Mellon Financial Corp. 1,016,985
- --------------------------------------------------------------------------------
63,350 Merrill Lynch & Co., Inc. 4,989,445
- --------------------------------------------------------------------------------
74,100 Morgan Stanley 4,654,962
- --------------------------------------------------------------------------------
12,796 Northern Trust Corp. 671,790
- --------------------------------------------------------------------------------
71,241 Schwab (Charles) Corp. 1,226,058
- --------------------------------------------------------------------------------
22,963 State Street Corp. 1,387,654
- --------------------------------------------------------------------------------
9,111 T. Rowe Price Group Inc. 712,571
- --------------------------------------------------------------------------------
28,252,717
- --------------------------------------------------------------------------------
CHEMICALS -- 1.5%
- --------------------------------------------------------------------------------
15,372 Air Products & Chemicals, Inc. 1,032,845
- --------------------------------------------------------------------------------
4,905 Ashland Inc. 348,647
- --------------------------------------------------------------------------------
66,730 Dow Chemical Co. 2,709,237
- --------------------------------------------------------------------------------
63,456 du Pont (E.I.) de
Nemours & Co. 2,678,477
- --------------------------------------------------------------------------------
5,644 Eastman Chemical Company 288,860
- --------------------------------------------------------------------------------
12,558 Ecolab Inc. 479,716
- --------------------------------------------------------------------------------
8,559 Engelhard Corporation 339,022
- --------------------------------------------------------------------------------
7,825 Hercules Inc.(1) 107,985
- --------------------------------------------------------------------------------
5,424 International Flavors
& Fragrances Inc. 186,152
- --------------------------------------------------------------------------------
18,577 Monsanto Co. 1,574,401
- --------------------------------------------------------------------------------
11,394 PPG Industries, Inc. 721,810
- --------------------------------------------------------------------------------
22,284 Praxair, Inc. 1,228,963
- --------------------------------------------------------------------------------
9,952 Rohm and Haas Co. 486,354
- --------------------------------------------------------------------------------
4,601 Sigma-Aldrich Corp. 302,700
- --------------------------------------------------------------------------------
13 Tronox Inc. Cl B(1) 221
- --------------------------------------------------------------------------------
12,485,390
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
9
Equity Index - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 5.8%
- --------------------------------------------------------------------------------
23,814 AmSouth Bancorporation $ 644,169
- --------------------------------------------------------------------------------
320,451 Bank of America Corp. 14,593,338
- --------------------------------------------------------------------------------
36,940 BB&T Corporation 1,448,048
- --------------------------------------------------------------------------------
11,217 Comerica Inc. 650,249
- --------------------------------------------------------------------------------
8,523 Compass Bancshares Inc. 431,349
- --------------------------------------------------------------------------------
38,356 Fifth Third Bancorp 1,509,692
- --------------------------------------------------------------------------------
8,713 First Horizon National Corp. 362,896
- --------------------------------------------------------------------------------
17,127 Huntington Bancshares Inc. 413,275
- --------------------------------------------------------------------------------
27,932 KeyCorp 1,027,898
- --------------------------------------------------------------------------------
5,478 M&T Bank Corp. 625,259
- --------------------------------------------------------------------------------
14,498 Marshall & Ilsley Corp. 631,823
- --------------------------------------------------------------------------------
37,745 National City Corp. 1,317,301
- --------------------------------------------------------------------------------
32,847 North Fork Bancorporation, Inc. 946,979
- --------------------------------------------------------------------------------
20,174 PNC Financial Services Group 1,357,912
- --------------------------------------------------------------------------------
31,508 Regions Financial Corp. 1,108,136
- --------------------------------------------------------------------------------
25,571 SunTrust Banks, Inc. 1,860,546
- --------------------------------------------------------------------------------
21,642 Synovus Financial Corp. 586,282
- --------------------------------------------------------------------------------
124,250 U.S. Bancorp 3,789,625
- --------------------------------------------------------------------------------
111,935 Wachovia Corp. 6,273,957
- --------------------------------------------------------------------------------
115,617 Wells Fargo & Co. 7,384,458
- --------------------------------------------------------------------------------
7,210 Zions Bancorporation 596,483
- --------------------------------------------------------------------------------
47,559,675
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 0.7%
- --------------------------------------------------------------------------------
15,132 Allied Waste Industries Inc.(1) 185,216
- --------------------------------------------------------------------------------
7,634 Avery Dennison Corp. 446,436
- --------------------------------------------------------------------------------
69,556 Cendant Corporation 1,206,797
- --------------------------------------------------------------------------------
9,524 Cintas Corp. 405,913
- --------------------------------------------------------------------------------
8,908 Equifax Inc. 331,734
- --------------------------------------------------------------------------------
8,708 Monster Worldwide Inc.(1) 434,181
- --------------------------------------------------------------------------------
15,674 Pitney Bowes, Inc. 672,885
- --------------------------------------------------------------------------------
14,895 R.R. Donnelley & Sons Company 487,364
- --------------------------------------------------------------------------------
11,853 Robert Half International Inc. 457,644
- --------------------------------------------------------------------------------
38,129 Waste Management, Inc. 1,345,954
- --------------------------------------------------------------------------------
5,974,124
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 3.1%
- --------------------------------------------------------------------------------
8,072 ADC Telecommunications, Inc.(1) 206,562
- --------------------------------------------------------------------------------
10,931 Andrew Corporation(1) 134,233
- --------------------------------------------------------------------------------
28,705 Avaya Inc.(1) 324,367
- --------------------------------------------------------------------------------
40,059 CIENA Corporation(1) 208,707
- --------------------------------------------------------------------------------
424,325 Cisco Systems Inc.(1) 9,195,122
- --------------------------------------------------------------------------------
13,969 Comverse Technology, Inc.(1) 328,691
- --------------------------------------------------------------------------------
106,637 Corning Inc.(1) 2,869,602
- --------------------------------------------------------------------------------
115,451 JDS Uniphase Corp.(1) 481,431
- --------------------------------------------------------------------------------
308,628 Lucent Technologies Inc.(1) 941,315
- --------------------------------------------------------------------------------
172,426 Motorola, Inc. 3,950,280
- --------------------------------------------------------------------------------
114,261 QUALCOMM Inc. 5,782,749
- --------------------------------------------------------------------------------
31,131 Tellabs, Inc.(1) 494,983
- --------------------------------------------------------------------------------
24,918,042
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 2.5%
- --------------------------------------------------------------------------------
58,750 Apple Computer, Inc.(1) $ 3,684,800
- --------------------------------------------------------------------------------
162,356 Dell Inc.(1) 4,831,714
- --------------------------------------------------------------------------------
163,928 EMC Corp.(1) 2,234,339
- --------------------------------------------------------------------------------
18,430 Gateway, Inc.(1) 40,362
- --------------------------------------------------------------------------------
195,147 Hewlett-Packard Co. 6,420,335
- --------------------------------------------------------------------------------
7,470 Lexmark International,
Inc. Cl A(1) 338,989
- --------------------------------------------------------------------------------
12,537 NCR Corp.(1) 523,921
- --------------------------------------------------------------------------------
25,839 Network Appliance, Inc.(1) 930,979
- --------------------------------------------------------------------------------
11,150 QLogic Corp.(1) 215,753
- --------------------------------------------------------------------------------
238,627 Sun Microsystems, Inc.(1) 1,224,157
- --------------------------------------------------------------------------------
20,445,349
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING -- 0.1%
- --------------------------------------------------------------------------------
6,000 Fluor Corp. 514,800
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 0.1%
- --------------------------------------------------------------------------------
6,917 Vulcan Materials Co. 599,358
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 0.9%
- --------------------------------------------------------------------------------
85,408 American Express Co. 4,488,190
- --------------------------------------------------------------------------------
20,766 Capital One Financial Corp. 1,672,078
- --------------------------------------------------------------------------------
28,807 SLM Corporation 1,496,236
- --------------------------------------------------------------------------------
7,656,504
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.2%
- --------------------------------------------------------------------------------
7,206 Ball Corp. 315,839
- --------------------------------------------------------------------------------
7,239 Bemis Co., Inc. 228,608
- --------------------------------------------------------------------------------
9,852 Pactiv Corp.(1) 241,768
- --------------------------------------------------------------------------------
5,602 Sealed Air Corp. 324,188
- --------------------------------------------------------------------------------
7,630 Temple-Inland Inc. 339,916
- --------------------------------------------------------------------------------
1,450,319
- --------------------------------------------------------------------------------
DISTRIBUTORS -- 0.1%
- --------------------------------------------------------------------------------
11,948 Genuine Parts Company 523,681
- --------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES -- 0.1%
- --------------------------------------------------------------------------------
9,700 Apollo Group Inc. Cl A(1) 509,347
- --------------------------------------------------------------------------------
22,644 Block (H & R), Inc. 490,243
- --------------------------------------------------------------------------------
999,590
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 3.6%
- --------------------------------------------------------------------------------
13,798 CIT Group Inc. 738,469
- --------------------------------------------------------------------------------
344,377 Citigroup Inc. 16,268,370
- --------------------------------------------------------------------------------
240,507 J.P. Morgan Chase & Co. 10,014,712
- --------------------------------------------------------------------------------
25,333 McGraw-Hill Companies,
Inc. (The) 1,459,687
- --------------------------------------------------------------------------------
16,783 Moody's Corp. 1,199,313
- --------------------------------------------------------------------------------
29,680,551
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.4%
- --------------------------------------------------------------------------------
267,684 AT&T Inc. 7,238,175
- --------------------------------------------------------------------------------
124,039 BellSouth Corp. 4,297,951
- --------------------------------------------------------------------------------
9,016 CenturyTel Inc. 352,706
- --------------------------------------------------------------------------------
22,602 Citizens Communications
Company 299,929
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
10
Equity Index - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
107,148 Qwest Communications
International Inc.(1) $ 728,606
- --------------------------------------------------------------------------------
201,915 Verizon Communications 6,877,225
- --------------------------------------------------------------------------------
19,794,592
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 1.5%
- --------------------------------------------------------------------------------
11,281 Allegheny Energy, Inc.(1) 381,862
- --------------------------------------------------------------------------------
27,187 American Electric Power 924,902
- --------------------------------------------------------------------------------
13,778 Cinergy Corp. 625,659
- --------------------------------------------------------------------------------
22,498 Edison International 926,468
- --------------------------------------------------------------------------------
14,351 Entergy Corp. 989,358
- --------------------------------------------------------------------------------
46,022 Exelon Corporation 2,434,563
- --------------------------------------------------------------------------------
22,773 FirstEnergy Corp. 1,113,600
- --------------------------------------------------------------------------------
27,824 FPL Group, Inc. 1,116,855
- --------------------------------------------------------------------------------
6,857 Pinnacle West Capital Corp. 268,109
- --------------------------------------------------------------------------------
26,260 PPL Corporation 772,044
- --------------------------------------------------------------------------------
17,425 Progress Energy Inc. 766,352
- --------------------------------------------------------------------------------
51,200 Southern Co. 1,677,823
- --------------------------------------------------------------------------------
11,997,595
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.5%
- --------------------------------------------------------------------------------
11,820 American Power
Conversion Corp. 273,160
- --------------------------------------------------------------------------------
6,343 Cooper Industries, Ltd. Cl A 551,207
- --------------------------------------------------------------------------------
28,376 Emerson Electric Co. 2,373,085
- --------------------------------------------------------------------------------
12,217 Rockwell Automation Inc. 878,524
- --------------------------------------------------------------------------------
4,075,976
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.3%
- --------------------------------------------------------------------------------
29,562 Agilent Technologies, Inc.(1) 1,110,054
- --------------------------------------------------------------------------------
12,067 Jabil Circuit, Inc.(1) 517,192
- --------------------------------------------------------------------------------
9,806 Molex Inc. 325,559
- --------------------------------------------------------------------------------
36,923 Sanmina-SCI Corp.(1) 151,384
- --------------------------------------------------------------------------------
63,286 Solectron Corp.(1) 253,144
- --------------------------------------------------------------------------------
17,387 Symbol Technologies, Inc. 183,954
- --------------------------------------------------------------------------------
5,606 Tektronix, Inc. 200,190
- --------------------------------------------------------------------------------
2,741,477
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 1.9%
- --------------------------------------------------------------------------------
23,626 Baker Hughes Inc. 1,616,018
- --------------------------------------------------------------------------------
22,390 BJ Services Co. 774,694
- --------------------------------------------------------------------------------
35,607 Halliburton Co. 2,600,023
- --------------------------------------------------------------------------------
10,914 Nabors Industries Ltd.(1) 781,224
- --------------------------------------------------------------------------------
12,068 National Oilwell Varco, Inc.(1) 773,800
- --------------------------------------------------------------------------------
9,473 Noble Corp. 768,260
- --------------------------------------------------------------------------------
7,523 Rowan Companies, Inc. 330,711
- --------------------------------------------------------------------------------
40,761 Schlumberger Ltd. 5,159,121
- --------------------------------------------------------------------------------
22,489 Transocean Inc.(1) 1,805,867
- --------------------------------------------------------------------------------
24,084 Weatherford International Ltd.(1) 1,101,843
- --------------------------------------------------------------------------------
15,711,561
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 2.4%
- --------------------------------------------------------------------------------
25,476 Albertson's Inc. 653,969
- --------------------------------------------------------------------------------
32,632 Costco Wholesale Corporation 1,767,349
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
56,371 CVS Corp. $ 1,683,802
- --------------------------------------------------------------------------------
50,094 Kroger Co. (The)(1) 1,019,914
- --------------------------------------------------------------------------------
31,059 Safeway Inc. 780,202
- --------------------------------------------------------------------------------
9,371 Supervalu Inc. 288,814
- --------------------------------------------------------------------------------
42,756 Sysco Corp. 1,370,330
- --------------------------------------------------------------------------------
172,340 Wal-Mart Stores, Inc. 8,141,341
- --------------------------------------------------------------------------------
69,812 Walgreen Co. 3,010,992
- --------------------------------------------------------------------------------
9,598 Whole Foods Market, Inc. 637,691
- --------------------------------------------------------------------------------
19,354,404
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.1%
- --------------------------------------------------------------------------------
45,133 Archer-Daniels-Midland Co. 1,518,726
- --------------------------------------------------------------------------------
12,726 Campbell Soup Company 412,322
- --------------------------------------------------------------------------------
35,866 ConAgra Foods, Inc. 769,684
- --------------------------------------------------------------------------------
11,191 Dean Foods Co.(1) 434,547
- --------------------------------------------------------------------------------
24,591 General Mills, Inc. 1,246,272
- --------------------------------------------------------------------------------
23,135 H.J. Heinz Company 877,279
- --------------------------------------------------------------------------------
12,350 Hershey Company (The) 645,041
- --------------------------------------------------------------------------------
17,343 Kellogg Co. 763,786
- --------------------------------------------------------------------------------
9,126 McCormick & Company, Inc. 309,006
- --------------------------------------------------------------------------------
52,491 Sara Lee Corp. 938,539
- --------------------------------------------------------------------------------
17,434 Tyson Foods, Inc. Cl A 239,543
- --------------------------------------------------------------------------------
12,232 Wrigley (Wm.) Jr. Company 782,848
- --------------------------------------------------------------------------------
8,937,593
- --------------------------------------------------------------------------------
GAS UTILITIES(2)
- --------------------------------------------------------------------------------
3,030 NICOR Inc. 119,867
- --------------------------------------------------------------------------------
2,646 People's Energy Corp. 94,303
- --------------------------------------------------------------------------------
214,170
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 2.0%
- --------------------------------------------------------------------------------
7,184 Bard (C.R.), Inc. 487,147
- --------------------------------------------------------------------------------
3,697 Bausch & Lomb Inc. 235,499
- --------------------------------------------------------------------------------
44,741 Baxter International, Inc. 1,736,398
- --------------------------------------------------------------------------------
17,064 Becton Dickinson & Co. 1,050,801
- --------------------------------------------------------------------------------
17,056 Biomet Inc. 605,829
- --------------------------------------------------------------------------------
40,848 Boston Scientific Corp.(1) 941,546
- --------------------------------------------------------------------------------
8,525 Fisher Scientific International(1) 580,126
- --------------------------------------------------------------------------------
23,370 Guidant Corp. 1,824,262
- --------------------------------------------------------------------------------
11,117 Hospira Inc.(1) 438,677
- --------------------------------------------------------------------------------
83,275 Medtronic, Inc. 4,226,207
- --------------------------------------------------------------------------------
3,581 Millipore Corp.(1) 261,628
- --------------------------------------------------------------------------------
8,990 PerkinElmer, Inc. 210,995
- --------------------------------------------------------------------------------
25,310 St. Jude Medical, Inc.(1) 1,037,710
- --------------------------------------------------------------------------------
20,177 Stryker Corp. 894,648
- --------------------------------------------------------------------------------
11,211 Thermo Electron Corp.(1) 415,816
- --------------------------------------------------------------------------------
7,210 Waters Corp.(1) 311,112
- --------------------------------------------------------------------------------
17,106 Zimmer Holdings Inc.(1) 1,156,366
- --------------------------------------------------------------------------------
16,414,767
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 3.0%
- --------------------------------------------------------------------------------
39,112 Aetna Inc. 1,921,964
- --------------------------------------------------------------------------------
14,438 AmerisourceBergen Corp. 696,922
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
11
Equity Index - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
29,112 Cardinal Health, Inc. $ 2,169,426
- --------------------------------------------------------------------------------
30,970 Caremark Rx Inc.(1) 1,523,105
- --------------------------------------------------------------------------------
8,353 CIGNA Corp. 1,091,069
- --------------------------------------------------------------------------------
11,047 Coventry Health Care Inc.(1) 596,317
- --------------------------------------------------------------------------------
10,107 Express Scripts, Inc.(1) 888,405
- --------------------------------------------------------------------------------
28,144 HCA Inc. 1,288,714
- --------------------------------------------------------------------------------
16,565 Health Management
Associates, Inc. Cl A 357,307
- --------------------------------------------------------------------------------
11,296 Humana Inc.(1) 594,734
- --------------------------------------------------------------------------------
13,744 IMS Health Inc. 354,183
- --------------------------------------------------------------------------------
8,643 Laboratory Corporation
of America Holdings(1) 505,443
- --------------------------------------------------------------------------------
5,437 Manor Care, Inc. 241,131
- --------------------------------------------------------------------------------
21,106 McKesson Corp. 1,100,256
- --------------------------------------------------------------------------------
20,989 Medco Health Solutions Inc.(1) 1,200,991
- --------------------------------------------------------------------------------
9,588 Patterson Companies, Inc.(1) 337,498
- --------------------------------------------------------------------------------
11,209 Quest Diagnostics Inc. 575,022
- --------------------------------------------------------------------------------
32,517 Tenet Healthcare Corp.(1) 239,975
- --------------------------------------------------------------------------------
93,564 UnitedHealth Group
Incorporated 5,226,484
- --------------------------------------------------------------------------------
45,527 WellPoint Inc.(1) 3,525,155
- --------------------------------------------------------------------------------
24,434,101
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 1.5%
- --------------------------------------------------------------------------------
29,959 Carnival Corporation 1,419,158
- --------------------------------------------------------------------------------
9,093 Darden Restaurants, Inc. 373,086
- --------------------------------------------------------------------------------
12,712 Harrah's Entertainment, Inc. 991,028
- --------------------------------------------------------------------------------
22,772 Hilton Hotels Corporation 579,775
- --------------------------------------------------------------------------------
23,287 International Game Technology 820,168
- --------------------------------------------------------------------------------
11,181 Marriott International, Inc. Cl A 767,017
- --------------------------------------------------------------------------------
86,726 McDonald's Corporation 2,979,904
- --------------------------------------------------------------------------------
52,647 Starbucks Corporation(1) 1,981,632
- --------------------------------------------------------------------------------
14,890 Starwood Hotels &
Resorts Worldwide, Inc. 1,008,500
- --------------------------------------------------------------------------------
7,875 Wendy's International, Inc. 488,723
- --------------------------------------------------------------------------------
19,030 Yum! Brands, Inc. 929,806
- --------------------------------------------------------------------------------
12,338,797
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.8%
- --------------------------------------------------------------------------------
5,330 Black & Decker Corporation 463,124
- --------------------------------------------------------------------------------
8,470 Centex Corp. 525,055
- --------------------------------------------------------------------------------
18,777 D.R. Horton, Inc. 623,772
- --------------------------------------------------------------------------------
10,107 Fortune Brands, Inc. 814,928
- --------------------------------------------------------------------------------
4,536 Harman International
Industries Inc. 504,086
- --------------------------------------------------------------------------------
5,290 KB Home 343,744
- --------------------------------------------------------------------------------
12,550 Leggett & Platt, Inc. 305,844
- --------------------------------------------------------------------------------
9,471 Lennar Corp. 571,859
- --------------------------------------------------------------------------------
5,562 Maytag Corporation 118,637
- --------------------------------------------------------------------------------
18,970 Newell Rubbermaid Inc. 477,854
- --------------------------------------------------------------------------------
14,783 Pulte Homes Inc. 567,963
- --------------------------------------------------------------------------------
4,015 Snap-on Incorporated 153,052
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
4,982 Stanley Works (The) $ 252,388
- --------------------------------------------------------------------------------
4,703 Whirlpool Corp. 430,183
- --------------------------------------------------------------------------------
6,152,489
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.2%
- --------------------------------------------------------------------------------
10,349 Clorox Company 619,388
- --------------------------------------------------------------------------------
35,543 Colgate-Palmolive Co. 2,029,505
- --------------------------------------------------------------------------------
31,795 Kimberly-Clark Corp. 1,837,751
- --------------------------------------------------------------------------------
226,933 Procter & Gamble Co. (The) 13,075,879
- --------------------------------------------------------------------------------
17,562,523
- --------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS
& ENERGY TRADERS -- 0.6%
- --------------------------------------------------------------------------------
45,307 AES Corporation (The)(1) 772,937
- --------------------------------------------------------------------------------
12,299 Constellation Energy Group Inc. 672,878
- --------------------------------------------------------------------------------
64,061 Duke Energy Corp. 1,867,378
- --------------------------------------------------------------------------------
20,895 Dynegy Inc. Cl A(1) 100,296
- --------------------------------------------------------------------------------
31,927 TXU Corp. 1,429,053
- --------------------------------------------------------------------------------
4,842,542
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 4.1%
- --------------------------------------------------------------------------------
52,080 3M Co. 3,941,935
- --------------------------------------------------------------------------------
719,169 General Electric Co. 25,012,698
- --------------------------------------------------------------------------------
9,141 Textron Inc. 853,678
- --------------------------------------------------------------------------------
139,023 Tyco International Ltd. 3,736,938
- --------------------------------------------------------------------------------
33,545,249
- --------------------------------------------------------------------------------
INSURANCE -- 4.7%
- --------------------------------------------------------------------------------
22,253 Ace, Ltd. 1,157,379
- --------------------------------------------------------------------------------
34,373 Aflac Inc. 1,551,253
- --------------------------------------------------------------------------------
44,486 Allstate Corp. 2,318,165
- --------------------------------------------------------------------------------
7,290 Ambac Financial Group, Inc. 580,284
- --------------------------------------------------------------------------------
179,074 American International
Group, Inc. 11,835,000
- --------------------------------------------------------------------------------
22,231 AON Corp. 922,809
- --------------------------------------------------------------------------------
13,801 Chubb Corp. 1,317,167
- --------------------------------------------------------------------------------
12,030 Cincinnati Financial Corp. 506,102
- --------------------------------------------------------------------------------
26,019 Genworth Financial Inc. Cl A 869,815
- --------------------------------------------------------------------------------
20,859 Hartford Financial
Services Group Inc. (The) 1,680,192
- --------------------------------------------------------------------------------
9,196 Jefferson-Pilot Corp. 514,608
- --------------------------------------------------------------------------------
11,967 Lincoln National Corp. 653,279
- --------------------------------------------------------------------------------
9,370 Loews Corp. 948,244
- --------------------------------------------------------------------------------
37,755 Marsh & McLennan
Companies, Inc. 1,108,487
- --------------------------------------------------------------------------------
9,259 MBIA Inc. 556,744
- --------------------------------------------------------------------------------
52,280 MetLife, Inc. 2,528,784
- --------------------------------------------------------------------------------
19,300 Principal Financial Group 941,840
- --------------------------------------------------------------------------------
13,580 Progressive Corp. (The) 1,415,851
- --------------------------------------------------------------------------------
34,152 Prudential Financial, Inc. 2,589,063
- --------------------------------------------------------------------------------
8,520 Safeco Corp. 427,789
- --------------------------------------------------------------------------------
47,997 St. Paul Travelers
Companies, Inc. (The) 2,005,795
- --------------------------------------------------------------------------------
7,159 Torchmark Corp. 408,779
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
12
Equity Index - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
20,643 UnumProvident Corp. $ 422,769
- --------------------------------------------------------------------------------
12,046 XL Capital Ltd. Cl A 772,269
- --------------------------------------------------------------------------------
38,032,467
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 0.1%
- --------------------------------------------------------------------------------
21,308 Amazon.com, Inc.(1) 777,955
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 1.6%
- --------------------------------------------------------------------------------
79,567 eBay Inc.(1) 3,107,887
- --------------------------------------------------------------------------------
16,670 Google Inc. Cl A(1) 6,501,300
- --------------------------------------------------------------------------------
16,871 VeriSign, Inc.(1) 404,735
- --------------------------------------------------------------------------------
87,062 Yahoo! Inc.(1) 2,808,620
- --------------------------------------------------------------------------------
12,822,542
- --------------------------------------------------------------------------------
IT SERVICES -- 2.1%
- --------------------------------------------------------------------------------
8,630 Affiliated Computer
Services Inc. Cl A(1) 514,866
- --------------------------------------------------------------------------------
39,971 Automatic Data Processing, Inc. 1,825,875
- --------------------------------------------------------------------------------
12,881 Computer Sciences Corp.(1) 715,540
- --------------------------------------------------------------------------------
9,603 Convergys Corp.(1) 174,871
- --------------------------------------------------------------------------------
35,470 Electronic Data Systems Corp. 951,660
- --------------------------------------------------------------------------------
52,911 First Data Corp. 2,477,293
- --------------------------------------------------------------------------------
12,748 Fiserv, Inc.(1) 542,427
- --------------------------------------------------------------------------------
108,137 International Business
Machines Corp. 8,918,059
- --------------------------------------------------------------------------------
23,067 Paychex, Inc. 960,971
- --------------------------------------------------------------------------------
9,091 Sabre Holdings Corp. Cl A 213,911
- --------------------------------------------------------------------------------
23,654 Unisys Corp.(1) 162,976
- --------------------------------------------------------------------------------
17,458,449
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------
6,535 Brunswick Corp. 253,950
- --------------------------------------------------------------------------------
19,844 Eastman Kodak Co. 564,364
- --------------------------------------------------------------------------------
12,242 Hasbro, Inc. 258,306
- --------------------------------------------------------------------------------
26,817 Mattel, Inc. 486,192
- --------------------------------------------------------------------------------
1,562,812
- --------------------------------------------------------------------------------
MACHINERY -- 1.5%
- --------------------------------------------------------------------------------
46,286 Caterpillar Inc. 3,323,797
- --------------------------------------------------------------------------------
3,212 Cummins Inc. 337,581
- --------------------------------------------------------------------------------
16,381 Danaher Corp. 1,041,013
- --------------------------------------------------------------------------------
16,344 Deere & Co. 1,291,993
- --------------------------------------------------------------------------------
14,044 Dover Corp. 681,977
- --------------------------------------------------------------------------------
10,284 Eaton Corp. 750,423
- --------------------------------------------------------------------------------
14,157 Illinois Tool Works Inc. 1,363,461
- --------------------------------------------------------------------------------
22,575 Ingersoll-Rand Company Cl A 943,409
- --------------------------------------------------------------------------------
12,759 ITT Industries, Inc. 717,311
- --------------------------------------------------------------------------------
4,279 Navistar International Corp.(1) 118,015
- --------------------------------------------------------------------------------
11,691 Paccar Inc. 823,982
- --------------------------------------------------------------------------------
8,630 Pall Corp. 269,170
- --------------------------------------------------------------------------------
8,270 Parker-Hannifin Corp. 666,645
- --------------------------------------------------------------------------------
12,328,777
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MEDIA -- 3.0%
- --------------------------------------------------------------------------------
53,347 CBS Corp. Cl B $ 1,279,261
- --------------------------------------------------------------------------------
35,657 Clear Channel
Communications, Inc. 1,034,410
- --------------------------------------------------------------------------------
147,553 Comcast Corporation Cl A(1) 3,859,986
- --------------------------------------------------------------------------------
132,847 Disney (Walt) Co. 3,705,103
- --------------------------------------------------------------------------------
4,089 Dow Jones & Co., Inc. 160,698
- --------------------------------------------------------------------------------
5,852 EW Scripps Co. Cl A 261,643
- --------------------------------------------------------------------------------
16,413 Gannett Co., Inc. 983,467
- --------------------------------------------------------------------------------
29,626 Interpublic Group
of Companies, Inc.(1) 283,225
- --------------------------------------------------------------------------------
4,621 Knight-Ridder, Inc. 292,093
- --------------------------------------------------------------------------------
2,874 Meredith Corp. 160,340
- --------------------------------------------------------------------------------
9,987 New York Times Co.
(The) Cl A 252,771
- --------------------------------------------------------------------------------
165,618 News Corp. Cl A 2,750,915
- --------------------------------------------------------------------------------
12,326 Omnicom Group Inc. 1,026,140
- --------------------------------------------------------------------------------
310,842 Time Warner Inc. 5,219,036
- --------------------------------------------------------------------------------
18,090 Tribune Co. 496,209
- --------------------------------------------------------------------------------
15,450 Univision Communications
Inc. Cl A(1) 532,562
- --------------------------------------------------------------------------------
53,338 Viacom Inc. Cl B 2,069,514
- --------------------------------------------------------------------------------
24,367,373
- --------------------------------------------------------------------------------
METALS & MINING -- 0.9%
- --------------------------------------------------------------------------------
60,125 Alcoa Inc. 1,837,421
- --------------------------------------------------------------------------------
5,979 Allegheny Technologies Inc. 365,795
- --------------------------------------------------------------------------------
12,713 Freeport-McMoRan
Copper & Gold, Inc. Cl B 759,856
- --------------------------------------------------------------------------------
30,842 Newmont Mining Corporation 1,600,392
- --------------------------------------------------------------------------------
10,731 Nucor Corp. 1,124,501
- --------------------------------------------------------------------------------
14,053 Phelps Dodge Corp. 1,131,688
- --------------------------------------------------------------------------------
7,508 United States Steel Corp. 455,585
- --------------------------------------------------------------------------------
7,275,238
- --------------------------------------------------------------------------------
MULTI-UTILITIES -- 1.0%
- --------------------------------------------------------------------------------
14,142 Ameren Corp. 704,554
- --------------------------------------------------------------------------------
21,333 CenterPoint Energy, Inc. 254,503
- --------------------------------------------------------------------------------
15,248 CMS Energy Corp.(1) 197,462
- --------------------------------------------------------------------------------
16,952 Consolidated Edison, Inc. 737,412
- --------------------------------------------------------------------------------
23,985 Dominion Resources Inc. 1,655,684
- --------------------------------------------------------------------------------
12,287 DTE Energy Company 492,586
- --------------------------------------------------------------------------------
12,064 KeySpan Corporation 493,056
- --------------------------------------------------------------------------------
18,850 NiSource Inc. 381,147
- --------------------------------------------------------------------------------
23,821 PG&E Corp. 926,637
- --------------------------------------------------------------------------------
17,308 Public Service
Enterprise Group Inc. 1,108,404
- --------------------------------------------------------------------------------
17,846 Sempra Energy 829,125
- --------------------------------------------------------------------------------
14,415 TECO Energy, Inc. 232,370
- --------------------------------------------------------------------------------
27,905 XCEL Energy Inc. 506,476
- --------------------------------------------------------------------------------
8,519,416
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
13
Equity Index - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 1.1%
- --------------------------------------------------------------------------------
7,904 Big Lots Inc.(1) $ 110,340
- --------------------------------------------------------------------------------
4,273 Dillard's Inc. Cl A 111,269
- --------------------------------------------------------------------------------
21,891 Dollar General Corp. 386,814
- --------------------------------------------------------------------------------
10,682 Family Dollar Stores, Inc. 284,141
- --------------------------------------------------------------------------------
18,792 Federated Department
Stores, Inc. 1,371,816
- --------------------------------------------------------------------------------
16,036 J.C. Penney Co. Inc. 968,735
- --------------------------------------------------------------------------------
23,801 Kohl's Corp.(1) 1,261,691
- --------------------------------------------------------------------------------
15,102 Nordstrom, Inc. 591,696
- --------------------------------------------------------------------------------
6,892 Sears Holdings Corp.(1) 911,398
- --------------------------------------------------------------------------------
60,645 Target Corporation 3,154,147
- --------------------------------------------------------------------------------
9,152,047
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS -- 0.1%
- --------------------------------------------------------------------------------
64,251 Xerox Corp.(1) 976,615
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS -- 7.7%
- --------------------------------------------------------------------------------
5,527 Amerada Hess Corp. 787,045
- --------------------------------------------------------------------------------
15,899 Anadarko Petroleum Corp. 1,605,958
- --------------------------------------------------------------------------------
22,778 Apache Corp. 1,492,187
- --------------------------------------------------------------------------------
25,925 Burlington Resources, Inc. 2,382,767
- --------------------------------------------------------------------------------
25,753 Chesapeake Energy Corp. 808,902
- --------------------------------------------------------------------------------
153,594 Chevron Corp. 8,903,843
- --------------------------------------------------------------------------------
95,111 ConocoPhillips 6,006,260
- --------------------------------------------------------------------------------
30,473 Devon Energy Corporation 1,864,033
- --------------------------------------------------------------------------------
45,550 El Paso Corp. 548,878
- --------------------------------------------------------------------------------
16,740 EOG Resources Inc. 1,205,280
- --------------------------------------------------------------------------------
421,309 Exxon Mobil Corp. 25,640,865
- --------------------------------------------------------------------------------
8,011 Kerr-McGee Corp. 764,890
- --------------------------------------------------------------------------------
7,269 Kinder Morgan, Inc. 668,675
- --------------------------------------------------------------------------------
25,310 Marathon Oil Corp. 1,927,863
- --------------------------------------------------------------------------------
11,409 Murphy Oil Corp. 568,396
- --------------------------------------------------------------------------------
29,713 Occidental Petroleum Corp. 2,752,909
- --------------------------------------------------------------------------------
9,187 Sunoco, Inc. 712,636
- --------------------------------------------------------------------------------
42,891 Valero Energy Corp. 2,564,024
- --------------------------------------------------------------------------------
40,989 Williams Companies, Inc. (The) 876,755
- --------------------------------------------------------------------------------
25,078 XTO Energy Inc. 1,092,648
- --------------------------------------------------------------------------------
63,174,814
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.4%
- --------------------------------------------------------------------------------
33,976 International Paper Company 1,174,550
- --------------------------------------------------------------------------------
7,286 Louisiana-Pacific Corp. 198,179
- --------------------------------------------------------------------------------
12,550 MeadWestvaco Corp. 342,741
- --------------------------------------------------------------------------------
16,794 Weyerhaeuser Co. 1,216,389
- --------------------------------------------------------------------------------
2,931,859
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------
5,194 Alberto-Culver Company 229,731
- --------------------------------------------------------------------------------
31,080 Avon Products, Inc. 968,763
- --------------------------------------------------------------------------------
8,200 Estee Lauder
Companies, Inc. Cl A 304,958
- --------------------------------------------------------------------------------
1,503,452
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 6.4%
- --------------------------------------------------------------------------------
106,157 Abbott Laboratories $ 4,508,488
- --------------------------------------------------------------------------------
10,457 Allergan, Inc. 1,134,585
- --------------------------------------------------------------------------------
7,284 Barr Pharmaceuticals Inc.(1) 458,746
- --------------------------------------------------------------------------------
135,133 Bristol-Myers Squibb Co. 3,325,623
- --------------------------------------------------------------------------------
77,950 Eli Lilly and Company 4,310,635
- --------------------------------------------------------------------------------
22,483 Forest Laboratories, Inc.(1) 1,003,416
- --------------------------------------------------------------------------------
205,323 Johnson & Johnson 12,159,228
- --------------------------------------------------------------------------------
16,660 King Pharmaceuticals, Inc.(1) 287,385
- --------------------------------------------------------------------------------
150,874 Merck & Co., Inc. 5,315,291
- --------------------------------------------------------------------------------
15,116 Mylan Laboratories Inc. 353,714
- --------------------------------------------------------------------------------
507,636 Pfizer Inc. 12,650,290
- --------------------------------------------------------------------------------
102,066 Schering-Plough Corp. 1,938,233
- --------------------------------------------------------------------------------
7,025 Watson Pharmaceuticals, Inc.(1) 201,899
- --------------------------------------------------------------------------------
92,720 Wyeth 4,498,774
- --------------------------------------------------------------------------------
52,146,307
- --------------------------------------------------------------------------------
REAL ESTATE -- 1.0%
- --------------------------------------------------------------------------------
6,680 Apartment Investment
and Management Co. Cl A 313,292
- --------------------------------------------------------------------------------
14,734 Archstone-Smith Trust 718,577
- --------------------------------------------------------------------------------
7,400 Boston Properties Inc. 690,050
- --------------------------------------------------------------------------------
28,047 Equity Office Properties Trust 941,818
- --------------------------------------------------------------------------------
20,021 Equity Residential 936,783
- --------------------------------------------------------------------------------
16,563 Kimco Realty Corporation 673,120
- --------------------------------------------------------------------------------
12,739 Plum Creek Timber Co. Inc. 470,451
- --------------------------------------------------------------------------------
16,814 ProLogis 899,549
- --------------------------------------------------------------------------------
5,714 Public Storage Inc. 464,148
- --------------------------------------------------------------------------------
12,620 Simon Property Group, Inc. 1,061,848
- --------------------------------------------------------------------------------
8,195 Vornado Realty Trust 786,720
- --------------------------------------------------------------------------------
7,956,356
- --------------------------------------------------------------------------------
ROAD & RAIL -- 0.8%
- --------------------------------------------------------------------------------
25,742 Burlington Northern
Santa Fe Corp. 2,145,080
- --------------------------------------------------------------------------------
15,127 CSX Corporation 904,595
- --------------------------------------------------------------------------------
28,428 Norfolk Southern Corp. 1,537,102
- --------------------------------------------------------------------------------
18,288 Union Pacific Corp. 1,707,185
- --------------------------------------------------------------------------------
6,293,962
- --------------------------------------------------------------------------------
SEMICONDUCTORS &
SEMICONDUCTOR EQUIPMENT -- 2.9%
- --------------------------------------------------------------------------------
33,157 Advanced Micro Devices, Inc.(1) 1,099,486
- --------------------------------------------------------------------------------
24,750 Altera Corp.(1) 510,840
- --------------------------------------------------------------------------------
25,283 Analog Devices, Inc. 968,086
- --------------------------------------------------------------------------------
109,463 Applied Materials, Inc. 1,916,697
- --------------------------------------------------------------------------------
20,111 Applied Micro Circuits Corp.(1) 81,852
- --------------------------------------------------------------------------------
30,375 Broadcom Corp. Cl A(1) 1,310,985
- --------------------------------------------------------------------------------
28,345 Freescale
Semiconductor Inc. Cl B(1) 787,141
- --------------------------------------------------------------------------------
405,898 Intel Corp. 7,854,125
- --------------------------------------------------------------------------------
13,761 KLA-Tencor Corp. 665,482
- --------------------------------------------------------------------------------
21,114 Linear Technology Corp. 740,679
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
14
Equity Index - Schedule of Investments
MARCH 31, 2006
Shares Value
- --------------------------------------------------------------------------------
26,951 LSI Logic Corp.(1) $ 311,554
- --------------------------------------------------------------------------------
22,118 Maxim Integrated Products, Inc. 821,684
- --------------------------------------------------------------------------------
42,748 Micron Technology, Inc.(1) 629,251
- --------------------------------------------------------------------------------
23,257 National Semiconductor Corp. 647,475
- --------------------------------------------------------------------------------
9,170 Novellus Systems, Inc.(1) 220,080
- --------------------------------------------------------------------------------
11,826 NVIDIA Corp.(1) 677,157
- --------------------------------------------------------------------------------
12,885 PMC-Sierra, Inc.(1) 158,357
- --------------------------------------------------------------------------------
13,640 Teradyne, Inc.(1) 211,556
- --------------------------------------------------------------------------------
110,414 Texas Instruments Inc. 3,585,142
- --------------------------------------------------------------------------------
23,756 Xilinx, Inc. 604,828
- --------------------------------------------------------------------------------
23,802,457
- --------------------------------------------------------------------------------
SOFTWARE -- 3.4%
- --------------------------------------------------------------------------------
41,406 Adobe Systems Inc.(1) 1,445,898
- --------------------------------------------------------------------------------
15,944 Autodesk, Inc.(1) 614,163
- --------------------------------------------------------------------------------
14,648 BMC Software Inc.(1) 317,276
- --------------------------------------------------------------------------------
31,451 CA, Inc. 855,782
- --------------------------------------------------------------------------------
12,337 Citrix Systems, Inc.(1) 467,572
- --------------------------------------------------------------------------------
26,310 Compuware Corp.(1) 206,007
- --------------------------------------------------------------------------------
20,946 Electronic Arts Inc.(1) 1,146,165
- --------------------------------------------------------------------------------
12,223 Intuit Inc.(1) 650,141
- --------------------------------------------------------------------------------
613,141 Microsoft Corporation 16,683,566
- --------------------------------------------------------------------------------
26,982 Novell, Inc.(1) 207,222
- --------------------------------------------------------------------------------
259,934 Oracle Corp.(1) 3,558,496
- --------------------------------------------------------------------------------
7,715 Parametric Technology Corp.(1) 125,986
- --------------------------------------------------------------------------------
71,979 Symantec Corp.(1) 1,211,407
- --------------------------------------------------------------------------------
27,489,681
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 2.2%
- --------------------------------------------------------------------------------
12,461 AutoNation, Inc.(1) 268,535
- --------------------------------------------------------------------------------
3,819 AutoZone, Inc.(1) 380,716
- --------------------------------------------------------------------------------
19,371 Bed Bath & Beyond Inc.(1) 743,846
- --------------------------------------------------------------------------------
28,042 Best Buy Co., Inc. 1,568,389
- --------------------------------------------------------------------------------
10,472 Circuit City Stores Inc. 256,355
- --------------------------------------------------------------------------------
39,644 Gap, Inc. (The) 740,550
- --------------------------------------------------------------------------------
146,548 Home Depot, Inc. (The) 6,198,980
- --------------------------------------------------------------------------------
24,060 Limited Brands, Inc. 588,508
- --------------------------------------------------------------------------------
53,938 Lowe's Companies, Inc. 3,475,765
- --------------------------------------------------------------------------------
20,399 Office Depot, Inc.(1) 759,659
- --------------------------------------------------------------------------------
4,908 OfficeMax Inc. 148,074
- --------------------------------------------------------------------------------
9,327 RadioShack Corp. 179,358
- --------------------------------------------------------------------------------
7,663 Sherwin-Williams Co. 378,859
- --------------------------------------------------------------------------------
50,245 Staples, Inc. 1,282,252
- --------------------------------------------------------------------------------
9,835 Tiffany & Co. 369,206
- --------------------------------------------------------------------------------
31,817 TJX Companies, Inc. (The) 789,698
- --------------------------------------------------------------------------------
18,128,750
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.4%
- --------------------------------------------------------------------------------
26,429 Coach Inc.(1) 913,915
- --------------------------------------------------------------------------------
7,853 Jones Apparel Group, Inc. 277,761
- --------------------------------------------------------------------------------
7,232 Liz Claiborne, Inc. 296,367
- --------------------------------------------------------------------------------
Shares/Principal Amount Value
- --------------------------------------------------------------------------------
13,060 NIKE, Inc. Cl B $ 1,111,406
- --------------------------------------------------------------------------------
6,067 VF Corp. 345,212
- --------------------------------------------------------------------------------
2,944,661
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 1.6%
- --------------------------------------------------------------------------------
41,582 Countrywide Financial
Corporation 1,526,059
- --------------------------------------------------------------------------------
66,767 Fannie Mae 3,431,824
- --------------------------------------------------------------------------------
47,664 Freddie Mac 2,907,504
- --------------------------------------------------------------------------------
17,656 Golden West Financial Corp. 1,198,842
- --------------------------------------------------------------------------------
6,035 MGIC Investment Corp. 402,112
- --------------------------------------------------------------------------------
24,679 Sovereign Bancorp Inc. 540,717
- --------------------------------------------------------------------------------
68,396 Washington Mutual, Inc. 2,915,038
- --------------------------------------------------------------------------------
12,922,096
- --------------------------------------------------------------------------------
TOBACCO -- 1.4%
- --------------------------------------------------------------------------------
143,980 Altria Group Inc.(3) 10,202,422
- --------------------------------------------------------------------------------
5,909 Reynolds American Inc. 623,400
- --------------------------------------------------------------------------------
11,305 UST Inc. 470,288
- --------------------------------------------------------------------------------
11,296,110
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS(2)
- --------------------------------------------------------------------------------
5,286 Grainger (W.W.), Inc. 398,300
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.9%
- --------------------------------------------------------------------------------
26,757 ALLTEL Corp. 1,732,516
- --------------------------------------------------------------------------------
204,698 Sprint Nextel Corp. 5,289,396
- --------------------------------------------------------------------------------
7,021,912
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $644,721,474) 812,801,695
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS SEGREGATED
FOR FUTURES CONTRACTS(3) -- 1.1%
- --------------------------------------------------------------------------------
Repurchase Agreement, Bank of America
Securities, LLC, (collateralized by various
U.S. Treasury obligations, 3.50% - 10.625%,
5/31/07 - 8/15/15 valued at $8,462,237),
in a joint trading account at 4.46%,
dated 3/31/06, due 4/3/06
(Delivery value $8,303,085) 8,300,000
- --------------------------------------------------------------------------------
$600,000 U.S. Treasury Bills,
4.56%, 6/22/06(4) 594,062
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
SEGREGATED FOR FUTURES CONTRACTS
(Cost $8,893,768) 8,894,062
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.8%
(Cost $653,615,242) 821,695,757
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.8)% (6,137,251)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $815,558,506
================================================================================
See Notes to Financial Statements. (continued)
- ------
15
Equity Index - Schedule of Investments
MARCH 31, 2006
FUTURES CONTRACTS PURCHASED*
Underlying Face Unrealized
Contracts Purchased Expiration Date Amount at Value Gain (Loss)
- --------------------------------------------------------------------------------
243 S&P 500 E-Mini Futures June 2006 $15,886,125 $83,896
=================================
*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.
- ------
16
Statement of Assets and Liabilities
MARCH 31, 2006
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities,
at value (cost of $653,615,242) $821,695,757
- -------------------------------------------
Cash 1,280,811
- -------------------------------------------
Receivable for investments sold 28,380
- -------------------------------------------
Receivable for variation margin
on futures contracts 1,927
- -------------------------------------------
Dividends and interest receivable 1,078,176
- --------------------------------------------------------------------------------
824,085,051
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for investments purchased 8,299,924
- -------------------------------------------
Accrued management fees 226,621
- --------------------------------------------------------------------------------
8,526,545
- --------------------------------------------------------------------------------
NET ASSETS $815,558,506
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $755,887,061
- -------------------------------------------
Undistributed net investment income 128,823
- -------------------------------------------
Accumulated net realized loss
on investment transactions (108,621,789)
- -------------------------------------------
Net unrealized appreciation
on investments 168,164,411
- --------------------------------------------------------------------------------
$815,558,506
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $152,799,311
- -------------------------------------------
Shares outstanding 29,630,540
- -------------------------------------------
Net asset value per share $5.16
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $662,759,195
- -------------------------------------------
Shares outstanding 128,391,138
- -------------------------------------------
Net asset value per share $5.16
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
17
Statement of Operations
YEAR ENDED MARCH 31, 2006
INVESTMENT INCOME (LOSS)
- --------------------------------------------------------------------------------
INCOME:
- -------------------------------------------
Dividends $15,867,249
- -------------------------------------------
Interest 532,469
- --------------------------------------------------------------------------------
16,399,718
- --------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------
Management fees 2,783,794
- -------------------------------------------
Directors' fees and expenses 14,780
- -------------------------------------------
Other expenses 5,254
- --------------------------------------------------------------------------------
2,803,828
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 13,595,890
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss) on
investment transactions 43,873,431
- -------------------------------------------
Change in net unrealized appreciation
(depreciation) on investments 31,719,229
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) 75,592,660
- --------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Resulting from Operations $89,188,550
================================================================================
See Notes to Financial Statements.
- ------
18
Statement of Changes in Net Assets
YEARS ENDED MARCH 31, 2006 AND MARCH 31, 2005
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2006 2005
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment income $ 13,595,890 $17,866,852
- -------------------------------------------
Net realized gain (loss) 43,873,431 (1,953,984)
- -------------------------------------------
Change in net unrealized
appreciation (depreciation) 31,719,229 46,094,055
- --------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from operations 89,188,550 62,006,923
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
From net investment income:
- -------------------------------------------
Investor Class (2,174,614) (2,272,345)
- -------------------------------------------
Institutional Class (11,543,721) (15,298,033)
- --------------------------------------------------------------------------------
Decrease in net assets from distributions (13,718,335) (17,570,378)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions (318,251,554) 29,310,350
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (242,781,339) 73,746,895
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 1,058,339,845 984,592,950
- --------------------------------------------------------------------------------
End of period $815,558,506 $1,058,339,845
================================================================================
Undistributed net investment income $128,823 $381,217
================================================================================
See Notes to Financial Statements.
- ------
19
Notes to Financial Statements
MARCH 31, 2006
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Equity Index Fund (the fund) is one fund
in a series issued by the corporation. The fund is non-diversified under the
1940 Act. The fund's investment objective is long-term capital growth. The fund
seeks to achieve this objective by matching, as closely as possible, the
investment characteristics and results of the 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. 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. 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),
(continued)
Notes to Financial Statements
- ------
20
MARCH 31, 2006
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
The annual management fee schedule for each class of the fund is as follows:
INVESTOR INSTITUTIONAL
CLASS CLASS
- --------------------------------------------------------------------------------
STRATEGY ASSETS
- --------------------------------------------------------------------------------
First $1 billion 0.490% 0.290%
- --------------------------------------------------------------------------------
Next $1 billion 0.470% 0.270%
- --------------------------------------------------------------------------------
Next $1 billion 0.455% 0.255%
- --------------------------------------------------------------------------------
Next $1 billion 0.445% 0.245%
- --------------------------------------------------------------------------------
Next $1 billion 0.435% 0.235%
- --------------------------------------------------------------------------------
Over $5 billion 0.430% 0.230%
- --------------------------------------------------------------------------------
The effective annual management fee for the year ended March 31, 2006 was 0.49%
and 0.29% for the Investor and Institutional Classes, respectively.
ACIM has entered into a Subadvisory Agreement with Barclays Global Fund Advisors
(BGFA) on behalf of the fund. The subadvisor makes investment decisions for the
fund in accordance with the fund's investment objectives, policies and
restrictions under the supervision of ACIM and the Board of Directors. ACIM pays
all costs associated with retaining BGFA as the subadvisor of the fund.
RELATED PARTIES -- Certain officers and directors of the corporation are also
officers and/or directors, and, as a group, controlling stockholders of
(continued)
- ------
21
Notes to Financial Statements
MARCH 31, 2006
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, American Century
Investment Services, Inc., 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 year ended March 31, 2006, were $145,479,526 and $449,023,293,
respectively.
For the year ended March 31, 2006, the fund incurred net realized gains of
$57,243,345 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
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2006
SHARES AUTHORIZED 100,000,000
================================================================================
Sold 5,568,548 $ 27,275,951
- ------------------------------------------
Issued in reinvestment of distributions 422,472 2,100,521
- ------------------------------------------
Redeemed (8,355,398) (41,196,861)
- --------------------------------------------------------------------------------
Net increase (decrease) (2,364,378) $(11,820,389)
================================================================================
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
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2006
SHARES AUTHORIZED 400,000,000
================================================================================
Sold 43,688,833 $ 218,244,263
- ------------------------------------------
Issued in reinvestment of distributions 2,327,351 11,543,721
- ------------------------------------------
Redeemed (110,502,779) (536,219,149)
- --------------------------------------------------------------------------------
Net increase (decrease) (64,486,595) $(306,431,165)
================================================================================
YEAR ENDED MARCH 31, 2005
SHARES AUTHORIZED 500,000,000
================================================================================
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)
- ------
22
Notes to Financial Statements
MARCH 31, 2006
5. BANK LINE OF CREDIT
The fund, along with certain other funds managed by ACIM or ACGIM, has a
$500,000,000 unsecured bank line of credit agreement with JPMCB, which was
renewed from $575,000,000 effective December 14, 2005. The fund may borrow money
for temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund
did not borrow from the line during the year ended March 31, 2006.
6. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2006
and March 31, 2005 were as follows:
- --------------------------------------------------------------------------------
2006 2005
- --------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM
- --------------------------------------------------------------------------------
Ordinary income $13,718,335 $17,570,378
- -------------------------------------------
Long-term capital gains -- --
- --------------------------------------------------------------------------------
The book-basis 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. Reclassification of
$21,662,860 between capital and net realized gain (loss) relates primarily to
the difference in character of realized gains on redemptions in kind.
As of March 31, 2006, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
- --------------------------------------------------------------------------------
Federal tax cost of investments $684,913,877
================================================================================
Gross tax appreciation of investments $185,922,084
- ----------------------------------------------------
Gross tax depreciation of investments $(49,140,204)
- --------------------------------------------------------------------------------
Net tax appreciation (depreciation) of investments $136,781,880
================================================================================
Net tax appreciation (depreciation) on derivatives $ --
- --------------------------------------------------------------------------------
Net tax appreciation (depreciation) $136,781,880
================================================================================
Undistributed ordinary income $ 131,128
- ----------------------------------------------------
Accumulated long-term gains $ --
- ----------------------------------------------------
Accumulated capital losses $(71,859,380)
- ----------------------------------------------------
Capital loss deferral $ (5,382,183)
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis cost and unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales, the realization for tax purposes of unrealized gains on certain futures
contracts, and return of capital dividends.
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:
- --------------------------------------------------------------------------------------
2008 2009 2010 2011 2012 2013
- --------------------------------------------------------------------------------------
$(2,917,398) $(10,639,477) $(49,081,784) $(1,957,751) $(1,992,016) $(5,270,954)
- --------------------------------------------------------------------------------------
The capital loss deferral listed above represents net capital losses incurred in
the five-month period ended March 31, 2006. The fund has elected to treat such
losses as having been incurred in the following fiscal year for federal income
tax purposes.
(continued)
- ------
23
Notes to Financial Statements
MARCH 31, 2006
7. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The fund hereby designates $13,718,335 of qualified dividend income for the
fiscal year ended March 31, 2006.
For corporate taxpayers, ordinary income distributions paid during the fiscal
year ended March 31, 2006, of $13,718,335 qualify for the corporate dividends
received deduction.
8. SUBSEQUENT EVENTS
On December 14, 2005, the Board of Directors of Mason Street Index 500 Stock
Fund (Index 500), a fund in a series issued by Mason Street Funds, Inc.,
approved a plan of reorganization (the reorganization) pursuant to which Equity
Index will acquire all of the assets of Index 500 in exchange for shares of
equal value of Equity Index and the assumption by Equity Index of all
liabilities of Index 500. Equity Index is one fund in a series issued by
American Century Capital Portfolios, Inc. The financial statements and
performance history of Equity Index will be carried over in the
post-reorganization. The reorganization was approved by shareholders of Index
500 on March 15, 2006. The reorganization was effective at the close of business
on March 31, 2006. New shares in connection with the reorganization were issued
by Equity Index on April 3, 2006.
The acquisition was accomplished by a tax-free exchange of 33,257,723 shares of
Equity Index for 11,207,846 shares of Index 500, outstanding on March 31, 2006.
The net assets of Index 500 and Equity Index immediately before the acquisition
were $171,655,240 and $815,558,506, respectively. Index 500's unrealized
appreciation of $33,002,713 was combined with that of Equity Index. Immediately
after the acquisition, the combined net assets were $987,213,746.
- ------
24
Equity Index - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $4.70 $4.50 $3.39 $4.58 $4.63
- --------------------------------------------------------------------------------
Income From
Investment
Operations
- --------------------------
Net Investment
Income (Loss)(1) 0.07 0.07 0.05 0.05 0.04
- --------------------------
Net Realized and
Unrealized Gain (Loss) 0.46 0.20 1.11 (1.19) (0.05)
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.53 0.27 1.16 (1.14) (0.01)
- --------------------------------------------------------------------------------
Distributions
- --------------------------
From Net
Investment Income (0.07) (0.07) (0.05) (0.05) (0.04)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $5.16 $4.70 $4.50 $3.39 $4.58
================================================================================
TOTAL RETURN(2) 11.36% 6.04% 34.27% (25.02)% (0.16)%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.49% 0.49% 0.49% 0.49% 0.49%
- --------------------------
Ratio of Net
Investment
Income (Loss)
to Average
Net Assets 1.43% 1.59% 1.23% 1.24% 0.91%
- --------------------------
Portfolio
Turnover Rate 17% 4% 16% 21% 4%
- --------------------------
Net Assets,
End of Period
(in thousands) $152,799 $150,454 $142,324 $90,093 $108,760
- --------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another
See Notes to Financial Statements.
- ------
25
Equity Index - Financial Highlights
For a Share Outstanding Throughout the Years Ended March 31
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $4.71 $4.50 $3.39 $4.58 $4.64
- --------------------------------------------------------------------------------
Income From
Investment
Operations
- -----------------------------
Net Investment
Income (Loss)(1) 0.08 0.08 0.06 0.05 0.05
- -----------------------------
Net Realized
and Unrealized
Gain (Loss) 0.45 0.21 1.11 (1.19) (0.06)
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.53 0.29 1.17 (1.14) (0.01)
- --------------------------------------------------------------------------------
Distributions
- -----------------------------
From Net
Investment
Income (0.08) (0.08) (0.06) (0.05) (0.05)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $5.16 $4.71 $4.50 $3.39 $4.58
================================================================================
TOTAL RETURN(2) 11.35% 6.47% 34.53% (24.87)% (0.17)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.29% 0.29% 0.29% 0.29% 0.29%
- -----------------------------
Ratio of Net
Investment
Income (Loss)
to Average
Net Assets 1.63% 1.79% 1.43% 1.44% 1.11%
- -----------------------------
Portfolio
Turnover Rate 17% 4% 16% 21% 4%
- -----------------------------
Net Assets,
End of Period
(in thousands) $662,759 $907,886 $842,269 $350,815 $449,591
- --------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
26
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders,
American Century Capital Portfolios, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Equity Index Fund (the "Fund"), one of the
mutual funds comprising American Century Capital Portfolios, Inc., as of March
31, 2006, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of March 31, 2006, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Equity
Index Fund as of March 31, 2006, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for the periods presented, in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Kansas City, Missouri
May 12, 2006
- ------
27
Management
The individuals listed below serve as directors or officers of the funds. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
72. Those listed as interested directors are "interested" primarily by virtue of
their engagement as officers of American Century Companies, Inc. (ACC) or its
wholly owned, direct or indirect, subsidiaries, including the funds' investment
advisor, American Century Investment Management, Inc. (ACIM); the funds'
principal underwriter, American Century Investment Services, Inc. (ACIS); and
the funds' transfer agent, American Century Services, LLC (ACS).
The other directors (more than three-fourths of the total number) are
independent; that is, they have never been employees or officers of, and have no
financial interest in, ACC or any of its wholly owned subsidiaries, including
ACIM, ACIS, and ACS. The directors serve in this capacity for seven registered
investment companies in the American Century family of funds.
All persons named as officers of the funds also serve in a similar capacity for
the other 14 investment companies advised by ACIM or American Century Global
Investment Management, Inc. (ACGIM), unless otherwise noted. Only officers with
policy-making functions are listed. No officer is compensated for his or her
service as an officer of the funds. The listed officers are interested persons
of the funds and are appointed or re-appointed on an annual basis.
INDEPENDENT DIRECTORS
- --------------------------------------------------------------------------------
THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1940
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1980
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Formerly Chief Executive
Officer/Treasurer, Associated Bearings Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1997
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Senior Vice President, Midwest
Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
D.D. (DEL) HOCK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1935
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1996
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Chairman, Public
Service Company of Colorado
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Allied Motion Technologies, Inc.
- --------------------------------------------------------------------------------
(continued)
- ------
28
Management
- --------------------------------------------------------------------------------
JAMES A. OLSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1942
POSITION(S) HELD WITH FUND: Advisory Board Member
FIRST YEAR OF SERVICE: 2006
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Principal and Chief Financial
Officer, Plaza Belmont LLC
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, SCS Transportation, Inc. and
Entertainment Properties Trust
- --------------------------------------------------------------------------------
DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Director, Chairman of the Board
FIRST YEAR OF SERVICE: 1995
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, Western Investments,
Inc.; Retired Chairman of the Board, Butler Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1943
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer
and Founder, Sayers40, Inc., a technology products and service provider
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Triad Hospitals, Inc.
- --------------------------------------------------------------------------------
M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 1994
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Senior Vice
President, Sprint Corporation
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide, Inc.
- --------------------------------------------------------------------------------
TIMOTHY S. WEBSTER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1961
POSITION(S) HELD WITH FUND: Director
FIRST YEAR OF SERVICE: 2001
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, American Italian Pasta Company (1992 to December 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JAMES E. STOWERS, JR.(1), 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1924
POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman
FIRST YEAR OF SERVICE: 1958
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Director and Controlling
Shareholder, ACC; Chairman, ACC (January 1995 to December 2004); Director, ACIM,
ACGIM, ACS, ACIS and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
JAMES E. STOWERS III(1), 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1959
POSITION(S) HELD WITH FUND: Director, Co-Vice Chairman
FIRST YEAR OF SERVICE: 1990
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, ACC (January 2005 to
present); Co-Chairman, ACC (September 2000 to December 2004); Chairman, ACS and
other ACC subsidiaries; Director, ACC, ACIM, ACGIM, ACS, ACIS and other ACC
subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 57
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- --------------------------------------------------------------------------------
(1) James E. Stowers, Jr. is the father of James E. Stowers III.
(continued)
- ------
29
Management
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM M. LYONS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: President
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Executive Officer, ACC
(September 2000 to present); President, ACC (June 1997 to present); Also serves
as: Chief Executive Officer and President, ACIM, ACGIM, ACIS and other ACC
subsidiaries; Executive Vice President, ACS; Director, ACC, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
JONATHAN THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUND: Executive Vice President
FIRST YEAR OF SERVICE: 2005
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Executive Vice President, ACC
(November 2005 to present); Chief Administrative Officer, ACC (February 2006 to
present); Also serves as: President, ACS; Chief Executive Officer, Chief
Financial Officer and Chief Accounting Officer, ACIM, ACGIM, ACS, ACIS and other
ACC subsidiaries; Managing Director, Morgan Stanley (March 2000 to November
2005)
- --------------------------------------------------------------------------------
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Senior Vice President, Treasurer, and Chief
Financial Officer
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Assistant Treasurer, ACC (January
1995 to present); Also serves as: Senior Vice President, ACS; Assistant
Treasurer, ACIM, ACGIM, ACS, ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
DAVID C. TUCKER, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1958
POSITION(S) HELD WITH FUND: Senior Vice President and General Counsel
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (February 2001
to present); General Counsel, ACC (June 1998 to present); Also serves as: Senior
Vice President and General Counsel, ACIM, ACGIM, ACS, ACIS and other ACC
subsidiaries
- --------------------------------------------------------------------------------
CHARLES C.S. PARK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Vice President and Chief Compliance Officer
FIRST YEAR OF SERVICE: 2000
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (March 2005 to present); Vice President, ACS (February 2000 to
present); Assistant General Counsel, ACS (January 1998 to March 2005)
- --------------------------------------------------------------------------------
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Controller
FIRST YEAR OF SERVICE: 1997
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February 2000
to present); Controller-Fund Accounting, ACS (June 1997 to present)
- --------------------------------------------------------------------------------
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer
FIRST YEAR OF SERVICE: 1997
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (October 2001
to present); Vice President, Corporate Tax, ACS (April 1998 to present); Also
serves as: Vice President, ACIM, ACGIM, ACIS and other ACC subsidiaries
- --------------------------------------------------------------------------------
The SAI has additional information about the funds' directors and is available
without charge, upon request, by calling 1-800-345-2021.
- ------
30
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.
- ------
31
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.
- ------
32
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 MIDCAP 400 INDEX, a capitalization-weighted index consisting of 400
domestic stocks, measures the performance of the mid-size company segment of the
U.S. market.
The S&P 500 INDEX is a market value-weighted index of the stocks of 500 publicly
traded U.S. companies chosen for market size, liquidity, and industry group
representation that are considered to be leading firms in dominant industries.
Each stock's weight in the index is proportionate to its market value. Created
by Standard & Poor's, it is considered to be a broad measure of U.S. stock
market performance.
The S&P SMALLCAP 600 INDEX, a capitalization-weighted index consisting of 600
domestic stocks, measures the small company segment of the U.S. market.
- ------
33
Notes
- ------
34
Notes
- ------
35
Notes
- ------
36
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 PROFESSIONALS, 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 American Century Investment
Holdings, Inc. Services, Inc., Distributor
0605 (c)2006 American Century Proprietary
SH-ANN-48879N Holdings, Inc. All rights reserved.
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a Code of Ethics for Senior Financial
Officers that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer, and persons
performing similar functions.
(b) No response required.
(c) None.
(d) None.
(e) Not applicable.
(f) The registrant's Code of Ethics for Senior Financial Officers was
filed as Exhibit 12 (a)(1) to American Century Asset Allocation
Portfolios, Inc.'s Annual Certified Shareholder Report on Form N-CSR,
File No. 811-21591, on September 29, 2005, and is incorporated herein
by reference.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant's board has determined that the registrant has at least
one audit committee financial expert serving on its audit committee.
(a)(2) D.D. (Del) Hock, Donald H. Pratt and Timothy Webster are the
registrant's designated audit committee financial experts. They are
"independent" as defined in Item 3 of Form N-CSR.
(a)(3) Not applicable.
(b) No response required.
(c) No response required.
(d) No response required.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees.
The aggregate fees billed for each of the last two fiscal years for professional
services rendered by the principal accountant for the audit of the registrant's
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for those fiscal years were as follows:
FY 2005: $115,236
FY 2006: $114,418
(b) Audit-Related Fees.
The aggregate fees billed in each of the last two fiscal years for assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item were as follows:
For services rendered to the registrant:
FY 2005: $0
FY 2006: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit
services with the registrant's investment adviser and its affiliates):
FY 2005: $0
FY 2006: $0
(c) Tax Fees.
The aggregate fees billed in each of the last two fiscal years for professional
services rendered by the principal accountant for tax compliance, tax advice,
and tax planning were as follows:
For services rendered to the registrant:
FY 2005: $14,395
FY 2006: $12,996
These services included review of federal and state income tax forms
and federal excise tax forms.
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit
services with the registrant's investment adviser and its affiliates):
FY 2005: $0
FY 2006: $0
(d) All Other Fees.
The aggregate fees billed in each of the last two fiscal years for products and
services provided by the principal accountant, other than the services reported
in paragraphs (a) through (c) of this Item were as follows:
For services rendered to the registrant:
FY 2005: $0
FY 2006: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit
services with the registrant's investment adviser and its affiliates):
FY 2005: $0
FY 2006: $0
(e)(1) In accordance with paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation
S-X, before the accountant is engaged by the registrant to render
audit or non-audit services, the engagement is approved by the
registrant's audit committee. Pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X, the registrant's audit committee also
pre-approves its accountant's engagements for non-audit services with
the registrant's investment adviser, its parent company, and any
entity controlled by, or under common control with the investment
adviser that provides ongoing services to the registrant, if the
engagement relates directly to the operations and financial reporting
of the registrant.
(e)(2) All services described in each of paragraphs (b) through (d) of this
Item were pre-approved before the engagement by the registrant's audit
committee pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of
Regulation S-X. Consequently, none of such services were required to
be approved by the audit committee pursuant to paragraph (c)(7)(i)(C).
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was less than 50%.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen
by another investment adviser), and any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant for each of the last two fiscal years of
the registrant were as follows:
FY 2005: $168,793
FY 2006: $195,075
(h) The registrant's investment adviser and accountant have notified the
registrant's audit committee of all non-audit services that were
rendered by the registrant's accountant to the registrant's investment
adviser, its parent company, and any entity controlled by, or under
common control with the investment adviser that provides services to
the registrant, which services were not required to be pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The
notification provided to the registrant's audit committee included
sufficient details regarding such services to allow the registrant's
audit committee to consider the continuing independence of its
principal accountant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedule of investments is included as part of the report to stockholders
filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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) Registrant's Code of Ethics for Senior Financial Officers, which is
the subject of the disclosure required by Item 2 of Form N-CSR, was
filed as Exhibit 12(a)(1) to American Century Asset Allocation
Portfolios, Inc.'s Certified Shareholder Report on Form N-CSR, File
No. 811-21591, on September 29, 2005.
(a)(2) Separate certifications by the registrant's principal executive
officer and principal financial officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment
Company Act of 1940, are filed and attached hereto as Exhibit
99.302CERT.
(a)(3) Not applicable.
(b) A certification by the registrant's chief executive officer and chief
financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, is furnished and attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
By: /s/ William M. Lyons
----------------------------------------
Name: William M. Lyons
Title: President
Date: May 25, 2006
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
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Name: William M. Lyons
Title: President
(principal executive officer)
Date: May 25, 2006
By: /s/ Maryanne L. Roepke
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Name: Maryanne L. Roepke
Title: Sr. Vice President, Treasurer, and
Chief Financial Officer
(principal financial officer)
Date: May 25, 2006