UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-7820 ------------------------------------------- AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) WILLIAM M. LYONS, 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 816-531-5575 ---------------------------- Date of fiscal year end: 03-31 ------------------------------------------------------- Date of reporting period: 09-30-2006 -------------------------------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS. AMERICAN CENTURY INVESTMENTS Semiannual Report September 30, 2006 Equity Income Fund Mid Cap Value Fund Small Cap Value Fund [american century investments logo and text logo] Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] /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. We are pleased to provide you with the semiannual report for the American Century Equity Income, Mid Cap Value, and Small Cap Value funds for the six months ended September 30, 2006. We hope you find this information helpful in monitoring your investment. Another useful resource we offer is our website, americancentury.com, where we post quarterly portfolio commentaries, the views of senior investment officers and analysts, and other communications about investments, portfolio strategy, personal finance, and the markets. In its most recent rankings, Dalbar -- which issues customer satisfaction ratings and rankings based on website functionality -- ranked americancentury.com fourth out of the sites provided by the top 25 fund companies that it believes lead the industry in web-based technology. Our website earned an "Excellent" rating, Dalbar's highest designation. For most of 2006, our website has linked visitors to information explaining our strategic collaboration with Lance Armstrong and the Lance Armstrong Foundation (LAF). This 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. To learn more about the collaboration and the LAF, please visit americancentury.com or www.lanceface.com on the Web and click on the links to related sites. With the approach of year end and the 2006 tax season, you can also find out more about December fund distributions and tax information via a link from our website. We've posted December distribution estimates for over 50 funds, answers to frequent distribution questions, and online descriptions of all of the tax information we provide to investors. If you haven't visited americancentury.com yet, we encourage you to do so... it's there to serve you. And so are we. As always, we deeply appreciate your commitment to American Century Investments. Table of Contents Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Six-Month 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. . . . . . . . . . . . . . . . . . . . . . . . . . . .42 OTHER INFORMATION Approval of Management Agreements for Equity Income, Mid Cap Value and Small Cap Value . . . . . . . . . . . . . . . . . . . . .55 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. Market Perspective [photo of Phil Davidson] BY PHIL DAVIDSON, CHIEF INVESTMENT OFFICER, U.S. VALUE EQUITIES MODEST RALLY FOR STOCKS Cooling energy prices and a pause in Federal Reserve interest rate hikes enabled U.S. stocks to post positive results for the six months ended September 30, 2006. In fact, during the final week of the period, the Dow Jones Industrial Average briefly surpassed its all-time closing high, only to fall back and close below the record. As a result of this late summer rally, the Dow Industrials and the S&P 500 Index overcame second-quarter losses (based on earlier fears about inflation and economic growth) to post gains. However, the technology-heavy Nasdaq Composite, which suffered a steep second-quarter decline, remained down for the period. PLAYING DEFENSE After enduring a difficult spring -- the S&P 500 fell 4.15% during the last three weeks of May alone -- many stock investors played defense during the summer. Seeking companies with more predictable earnings and dividend payouts, they shifted money into utilities and telecommunication service providers, as well as retailers of everyday consumer products. Meanwhile, falling oil prices drove money out of energy stocks, and with the economy slowing, investors were lukewarm to information technology businesses and cyclical groups like industrials and materials. SIZE AND QUALITY MATTERED Within the value realm, large companies had the highest returns for the six months, as evidenced by the Russell 1000 Value Index's 6.85% gain. At the other end of the spectrum, the Russell 2000 Value Index, a measure of small-cap companies, was basically flat for the period. Medium-sized value companies performed in between as the Russell Midcap Value Index gained 2.95%. On the whole, value shares performed better than growth stocks across the capitalization range. In addition to size, quality mattered. Merrill Lynch data indicated that a multi-year rally in lower-quality issues reversed course during the period as companies rated B+ or higher by Standard & Poor's significantly outperformed lower-rated businesses, particularly during the third quarter. Historically, market cycles led by sound companies with strong balance sheets have tended to elevate returns of American Century's value funds, which generally seek higher-quality stocks. While value shares paced the market, few clear value themes emerged. That put the onus on stock-picking ability -- finding attractive value investments, one by one. As "bottom-up" value investors who rely on a disciplined, repeatable process, we're confident that this situation plays to our strength. SIX-MONTH TOTAL RETURNS* AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- Dow Jones Industrial Average 6.34% - -------------------------------------------------------------------------------- S&P 500 Index 4.14% - -------------------------------------------------------------------------------- Nasdaq Composite -3.15% - -------------------------------------------------------------------------------- *Total returns for periods less than one year are not annualized. - ------ 2 Equity Income - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2006 --------------------------------- AVERAGE ANNUAL RETURNS - ----------------------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - ----------------------------------------------------------------------------------------------- INVESTOR CLASS 7.96% 13.47% 10.85% 12.46% 13.82% 8/1/94 - ----------------------------------------------------------------------------------------------- RUSSELL 3000 VALUE INDEX(2) 6.18% 14.55% 11.18% 11.31% 12.81%(3) -- - ----------------------------------------------------------------------------------------------- S&P 500 INDEX(2) 4.14% 10.79% 6.97% 8.59% 11.14%(3) -- - ----------------------------------------------------------------------------------------------- LIPPER EQUITY INCOME INDEX(2) 5.37% 12.09% 8.37% 8.47% 9.96%(3) -- - ----------------------------------------------------------------------------------------------- Institutional Class 8.06% 13.69% 11.07% -- 10.32% 7/8/98 - ----------------------------------------------------------------------------------------------- Advisor Class 7.83% 13.19% 10.58% -- 11.51% 3/7/97 - ----------------------------------------------------------------------------------------------- C Class 7/13/01 No sales charge* 7.42% 12.34% 9.76% -- 8.55% With sales charge* 6.42% 12.34% 9.76% -- 8.55% - ----------------------------------------------------------------------------------------------- R Class 7.71% 12.79% -- -- 11.94%(4) 8/29/03 - ----------------------------------------------------------------------------------------------- *Sales charges include contingent deferred sales charges (CDSCs), as applicable. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. Please see the Share Class Information page for more about the applicable sales charges for each share class. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied. (1) Total returns for periods less than one year are not annualized. (2) 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. (3) Since 7/31/94, the date nearest the Investor Class's inception for which data are available. (4) Class returns would have been lower if American Century had not voluntarily waived a portion of its service and distribution fees. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. (continued) - ------ 3 Equity Income - Performance GROWTH OF $10,000 OVER 10 YEARS $10,000 investment made September 30, 1996
![](https://capedge.com/proxy/N-CSRS/0000908186-06-000070/growthequityincome0611.gif)
ONE-YEAR RETURNS OVER 10 YEARS Periods ended September 30 - ------------------------------------------------------------------------------------------------ 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 - ------------------------------------------------------------------------------------------------ Investor Class 34.35% 1.67% 15.98% 6.80% 14.30% -3.72% 20.17% 17.22% 8.79% 13.47% - ------------------------------------------------------------------------------------------------ Russell 3000 Value Index 42.33% 1.96% 17.64% 9.35% -7.98% -15.89% 24.89% 20.89% 16.78% 14.55% - ------------------------------------------------------------------------------------------------ S&P 500 Index 40.45% 9.05% 27.80% 13.28% -26.62% -20.49% 24.40% 13.87% 12.25% 10.79% - ------------------------------------------------------------------------------------------------ Lipper Equity Income Index 33.25% 1.29% 13.36% 8.10% -8.82% -16.74% 20.48% 17.09% 13.52% 12.09% - ------------------------------------------------------------------------------------------------ Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. - ------ 4 Equity Income - Portfolio Commentary PORTFOLIO MANAGERS: PHIL DAVIDSON, SCOTT MOORE, AND KEVIN TONEY PERFORMANCE SUMMARY Equity Income gained 7.96%* for the six months ended September 30, 2006, outperforming the Lipper Equity Income Index, which was up 5.37%. The Russell 3000 Value Index, indicative of the larger capitalization, value side of the market, gained 6.18%. The median return for Morningstar's Large Cap Value category was 5.29%**. Looking more broadly, the S&P 500 Index gained 4.14%. These six-month results reflected an equities market in which investors generally preferred the more stable returns and dividend yields associated with large, established companies. That preference benefited Equity Income, which seeks larger, higher-quality businesses, while emphasizing dividend income. As a result, the portfolio received positive contributions from all ten sectors in which it was invested. Our disciplined investment approach has provided solid long-term results. Since Equity Income's inception on August 1, 1994, the portfolio has produced an average annualized return of 13.82%, versus a 9.96%*** average return for the Lipper Equity Income Index and the Russell 3000 Value Index's 12.81%***. The S&P 500 had an 11.14%*** average annualized return for the same period. The median return for Morningstar's Large Cap Value category was 10.24%. TOP CONTRIBUTOR: EXXON MOBIL A number of oil and gas companies lost ground as oil prices declined 5.6% during the six months. One company that gained ground, however, was one of our largest positions and top contributor, Exxon Mobil Corp., which was up more than 11% for the six months. CONSUMER STAPLES LED PORTFOLIO Amid signs that the economy was beginning to slow, we benefited from investments in providers of everyday consumer products. UST Inc. was among our top-contributing securities. The leading producer of smokeless tobacco products, UST has profited from higher product volume growth. We also received solid performance from Kraft Foods Inc., Kimberly-Clark Corp., and Unilever plc. Kraft has been increasing investments in brand-building and new product innovations. TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- General Electric Co. 4.8% 2.5% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 4.8% 4.7% - -------------------------------------------------------------------------------- American International Group, Inc., 1.51%, 11/9/31 (Conv. Bond) 4.6% 4.4% - -------------------------------------------------------------------------------- Bank of America Corp. 3.3% 3.6% - -------------------------------------------------------------------------------- AT&T Inc. 3.0% -- - -------------------------------------------------------------------------------- Ameren Corp. 2.3% 2.3% - -------------------------------------------------------------------------------- H.J. Heinz Co. 2.2% 1.7% - -------------------------------------------------------------------------------- Commerce Bancshares, Inc. 2.2% 2.4% - -------------------------------------------------------------------------------- Fannie Mae, 5.375%, 1/5/08 (Conv. Pref.) 2.2% 0.7% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 2.1% 1.9% - -------------------------------------------------------------------------------- * All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. ** The median returns for Morningstar's Large Cap Value category were 12.36%, 8.51% and 8.80% for the 1-, 5- and 10-year periods ended September 30, 2006, respectively. *** Since 7/31/94, the date nearest the Investor Class's inception for which data are available. (continued) - ------ 5 Equity Income - Portfolio Commentary Kimberly-Clark, one of the largest makers of personal-care paper products, is benefiting from price increases and the stabilization of key commodity prices. Unilever, a global supplier of food and personal care products, is executing a turnaround strategy to improve sales and margins. FINANCIALS ADDED VALUE Financial stocks were another source of positive performance, led by diversified financial services companies. Of note was Bank of America Corp. The second-largest bank in the U.S., Bank of America posted a double-digit return for the six months, benefiting from synergies stemming from its acquisition of credit card giant MBNA Corp. in January. Freddie Mac was another contributor -- as well as a good example of our willingness to be patient while a company works through what we believe are transitory problems. This mortgage industry stock rebounded after being beset by a delay in reporting its 2005 results and the prospect of increased regulation. UTILITIES A PLUS With dividend income a priority for many investors, we owned a number of utilities. One was Westar Energy Inc., a Kansas-based electric utility that reported strong second-quarter earnings on a new rate structure, while increasing its dividend 8.7% earlier this year. Multi-utility Ameren Corp. also added to our results. Ameren distributes electricity and natural gas to markets in Missouri and Illinois. Investors were drawn to the fact that the company generates the great majority of its earnings from stable and regulated operations. ONLY SLIGHT DETRACTORS As a result of strong stock selection, few investments performed below our expectations for the six months, and none detracted materially from our results. PORTFOLIO OBJECTIVES Equity Income is designed for investors seeking a conservative equity fund with quarterly income. It can serve as a solid core holding and as a way to complement more aggressive and volatile growth investments. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 9.2% 10.8% - -------------------------------------------------------------------------------- Insurance 8.4% 7.6% - -------------------------------------------------------------------------------- Commercial Banks 6.3% 9.3% - -------------------------------------------------------------------------------- Diversified Telecommunication Services 6.3% 8.0% - -------------------------------------------------------------------------------- Pharmaceuticals 5.0% 6.3% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Common Stocks and Options 70.5% 67.1% - -------------------------------------------------------------------------------- Convertible Bonds 23.4% 27.9% - -------------------------------------------------------------------------------- Convertible Preferred Stocks 4.6% 3.3% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 98.5% 98.3% - -------------------------------------------------------------------------------- Temporary Cash Investments 3.0% 0.8% - -------------------------------------------------------------------------------- Other Assets and Liabilities (1.5)% 0.9% - -------------------------------------------------------------------------------- - ------ 6 Equity Income - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 70.5% AEROSPACE & DEFENSE -- 1.3% - -------------------------------------------------------------------------------- 1,829,345 Honeywell International Inc. $ 74,820,211 - -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS -- 1.5% - -------------------------------------------------------------------------------- 1,144,606 United Parcel Service, Inc. Cl B 82,342,956 - -------------------------------------------------------------------------------- BEVERAGES -- 1.2% - -------------------------------------------------------------------------------- 463,100 Anheuser-Busch Companies, Inc. 22,001,881 - -------------------------------------------------------------------------------- 946,600 Coca-Cola Company (The) 42,294,088 - -------------------------------------------------------------------------------- 64,295,969 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.3% - -------------------------------------------------------------------------------- 603,300 Masco Corp. 16,542,486 - -------------------------------------------------------------------------------- CHEMICALS -- 2.2% - -------------------------------------------------------------------------------- 646,600 Air Products & Chemicals, Inc. 42,914,842 - -------------------------------------------------------------------------------- 790,100 du Pont (E.I.) de Nemours & Co. 33,847,884 - -------------------------------------------------------------------------------- 122,000 Ferro Corp. 2,169,160 - -------------------------------------------------------------------------------- 711,000 International Flavors & Fragrances Inc. 28,112,940 - -------------------------------------------------------------------------------- 920,300 Olin Corp. 14,135,808 - -------------------------------------------------------------------------------- 121,180,634 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 6.3% - -------------------------------------------------------------------------------- 2,397,690 Commerce Bancshares, Inc. 121,251,184 - -------------------------------------------------------------------------------- 1,816,117 Fifth Third Bancorp 69,157,735 - -------------------------------------------------------------------------------- 1,178,750 Mercantile Bankshares Corporation 42,753,263 - -------------------------------------------------------------------------------- 1,508,500 SunTrust Banks, Inc. 116,576,880 - -------------------------------------------------------------------------------- 349,739,062 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 3.1% - -------------------------------------------------------------------------------- 1,853,800 Pitney Bowes, Inc. 82,253,105 - -------------------------------------------------------------------------------- 1,755,874 Republic Services, Inc. Cl A 70,603,694 - -------------------------------------------------------------------------------- 537,945 Waste Management, Inc. 19,731,823 - -------------------------------------------------------------------------------- 172,588,622 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 0.2% - -------------------------------------------------------------------------------- 223,131 Diebold, Inc. 9,712,892 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 0.5% - -------------------------------------------------------------------------------- 903,500 Bemis Co., Inc. 29,689,010 - -------------------------------------------------------------------------------- DISTRIBUTORS -- 1.6% - -------------------------------------------------------------------------------- 2,062,600 Genuine Parts Company 88,959,938 - -------------------------------------------------------------------------------- DIVERSIFIED -- 2.0% - -------------------------------------------------------------------------------- 828,500 Standard and Poor's 500 Depositary Receipt 110,629,605 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 3.3% - -------------------------------------------------------------------------------- 3,382,400 Bank of America Corp. 181,195,168 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 4.2% - -------------------------------------------------------------------------------- 5,195,300 AT&T Inc. $169,158,968 - -------------------------------------------------------------------------------- 437,151 Commonwealth Telephone Enterprises, Inc. 18,023,736 - -------------------------------------------------------------------------------- 702,080 Iowa Telecommunications Services Inc. 13,894,163 - -------------------------------------------------------------------------------- 871,600 Verizon Communications Inc. 32,362,508 - -------------------------------------------------------------------------------- 233,439,375 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 4.3% - -------------------------------------------------------------------------------- 160,264 FPL Group, Inc. 7,211,880 - -------------------------------------------------------------------------------- 727,178 IDACORP, Inc. 27,494,600 - -------------------------------------------------------------------------------- 3,126,600 Southern Co. 107,742,636 - -------------------------------------------------------------------------------- 4,160,749 Westar Energy Inc.(1) 97,819,209 - -------------------------------------------------------------------------------- 240,268,325 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 1.1% - -------------------------------------------------------------------------------- 1,238,212 Hubbell Inc. Cl B 59,310,355 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 1.2% - -------------------------------------------------------------------------------- 1,395,275 Wal-Mart Stores, Inc. 68,814,963 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 3.6% - -------------------------------------------------------------------------------- 2,975,500 H.J. Heinz Co. 124,762,715 - -------------------------------------------------------------------------------- 1,407,030 Kraft Foods Inc. Cl A 50,174,690 - -------------------------------------------------------------------------------- 1,134,200 Unilever plc ORD 27,954,623 - -------------------------------------------------------------------------------- 202,892,028 - -------------------------------------------------------------------------------- GAS UTILITIES -- 2.9% - -------------------------------------------------------------------------------- 447,391 Cascade Natural Gas Corp. 11,672,431 - -------------------------------------------------------------------------------- 1,185,800 NICOR Inc. 50,704,808 - -------------------------------------------------------------------------------- 866,243 Piedmont Natural Gas Co., Inc. 21,924,610 - -------------------------------------------------------------------------------- 2,427,900 WGL Holdings Inc.(1) 76,090,387 - -------------------------------------------------------------------------------- 160,392,236 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE(2) - -------------------------------------------------------------------------------- 34,900 OSI Restaurant Partners, Inc. 1,106,679 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 1.5% - -------------------------------------------------------------------------------- 1,282,100 Kimberly-Clark Corp. 83,798,056 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 4.8% - -------------------------------------------------------------------------------- 7,503,600 General Electric Co. 264,877,080 - -------------------------------------------------------------------------------- INSURANCE -- 2.5% - -------------------------------------------------------------------------------- 772,500 Allstate Corp. 48,458,925 - -------------------------------------------------------------------------------- 1,138,700 Gallagher (Arthur J.) & Co. 30,369,129 - -------------------------------------------------------------------------------- 159,588 Hartford Financial Services Group Inc. (The) 13,844,259 - -------------------------------------------------------------------------------- 1,659,136 Marsh & McLennan Companies, Inc. 46,704,678 - -------------------------------------------------------------------------------- 139,376,991 - -------------------------------------------------------------------------------- IT SERVICES -- 0.1% - -------------------------------------------------------------------------------- 98,200 International Business Machines Corp. 8,046,508 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 7 Equity Income - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- MEDIA -- 0.2% - -------------------------------------------------------------------------------- 388,600 Dow Jones & Co., Inc. $ 13,033,644 - -------------------------------------------------------------------------------- METALS & MINING -- 0.9% - -------------------------------------------------------------------------------- 317,700 Alcoa Inc. 8,908,308 - -------------------------------------------------------------------------------- 915,400 Compass Minerals International Inc. 25,914,974 - -------------------------------------------------------------------------------- 325,100 Newmont Mining Corporation 13,898,025 - -------------------------------------------------------------------------------- 48,721,307 - -------------------------------------------------------------------------------- MULTI-UTILITIES -- 4.8% - -------------------------------------------------------------------------------- 2,394,395 Ameren Corp. 126,400,112 - -------------------------------------------------------------------------------- 2,405,400 Consolidated Edison, Inc. 111,129,480 - -------------------------------------------------------------------------------- 1,525,800 XCEL Energy Inc. 31,507,770 - -------------------------------------------------------------------------------- 269,037,362 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 0.2% - -------------------------------------------------------------------------------- 1,059,300 Dollar General Corp. 14,438,259 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 7.4% - -------------------------------------------------------------------------------- 1,397,400 BP plc ADR 91,641,492 - -------------------------------------------------------------------------------- 1,258,700 BP plc ORD 13,709,558 - -------------------------------------------------------------------------------- 643,180 Chevron Corp. 41,716,655 - -------------------------------------------------------------------------------- 3,945,479 Exxon Mobil Corp. 264,741,641 - -------------------------------------------------------------------------------- 411,809,346 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 0.3% - -------------------------------------------------------------------------------- 270,100 Weyerhaeuser Co. 16,619,253 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 1.9% - -------------------------------------------------------------------------------- 1,034,700 Abbott Laboratories 50,245,031 - -------------------------------------------------------------------------------- 356,100 Eli Lilly and Company 20,297,700 - -------------------------------------------------------------------------------- 201,900 Johnson & Johnson 13,111,386 - -------------------------------------------------------------------------------- 238,141 Merck & Co., Inc. 9,978,108 - -------------------------------------------------------------------------------- 440,196 Pfizer Inc. 12,483,959 - -------------------------------------------------------------------------------- 106,116,184 - -------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS -- 0.8% - -------------------------------------------------------------------------------- 1,122,883 Rayonier, Inc. 42,444,977 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 2.1% - -------------------------------------------------------------------------------- 1,342,000 Freddie Mac 89,014,860 - -------------------------------------------------------------------------------- 1,309,773 Washington Federal, Inc. 29,391,306 - -------------------------------------------------------------------------------- 118,406,166 - -------------------------------------------------------------------------------- TOBACCO -- 2.2% - -------------------------------------------------------------------------------- 515,000 Altria Group Inc.(3) 39,423,250 - -------------------------------------------------------------------------------- 1,523,900 UST Inc. 83,555,437 - -------------------------------------------------------------------------------- 122,978,687 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $3,463,226,262) 3,927,624,334 - -------------------------------------------------------------------------------- Shares/Principal Amount Value - -------------------------------------------------------------------------------- PURCHASED PUT OPTIONS(2) CONTRACTS(2) - -------------------------------------------------------------------------------- 5,150 Altria Group Inc., strike at $75.00, expires 3/16/07 (Cost $2,100,550) $ 1,828,249 - -------------------------------------------------------------------------------- CONVERTIBLE BONDS -- 23.4% BIOTECHNOLOGY -- 0.5% - -------------------------------------------------------------------------------- $40,700,000 Amgen Inc., 1.17%, 3/31/32(4) 30,575,875 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 1.1% - -------------------------------------------------------------------------------- 131,170,000 Masco Corp., 3.02%, 7/20/31(4) 61,649,900 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 0.1% - -------------------------------------------------------------------------------- 87,500 Merrill Lynch & Co., Inc., (convertible into Nuveen Investments), 6.75%, 10/15/07(5) 3,920,875 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 0.3% - -------------------------------------------------------------------------------- 17,118,000 Waste Connections Inc., 3.75%, 4/1/26 17,203,590 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.1% - -------------------------------------------------------------------------------- 107,511,000 Commonwealth Telephone Enterprises, Inc., 3.25%, 7/15/23 115,574,325 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES -- 0.8% - -------------------------------------------------------------------------------- 238,000 Allegro Investment Corp. SA, (convertible into Schlumberger Ltd.), 9.92%, 4/4/07 (Acquired 9/28/06, Cost $14,413,280)(5)(6) 14,601,300 - -------------------------------------------------------------------------------- 160,800 Morgan Stanley, (convertible into Schlumberger Ltd.), 13.02%, 3/8/07 (Acquired 8/31/06, Cost $10,045,176)(5)(6) 9,946,284 - -------------------------------------------------------------------------------- 154,700 Morgan Stanley, (convertible into Schlumberger Ltd.), 13.05%, 3/2/07 (Acquired 8/21/06, Cost $10,023,013)(5)(6) 9,481,563 - -------------------------------------------------------------------------------- 158,000 Morgan Stanley, (convertible into Schlumberger Ltd.), 13.15%, 1/31/07 (Acquired 7/24/06, Cost $10,088,300)(5)(6) 10,030,630 - -------------------------------------------------------------------------------- 44,059,777 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 0.5% - -------------------------------------------------------------------------------- 326,000 Allegro Investment Corp. SA, (convertible into Wal-Mart Stores, Inc.), 6.05%, 1/18/07 (Acquired 7/11/06, Cost $15,038,380)(5)(6) 15,778,204 - -------------------------------------------------------------------------------- 226,800 Goldman Sachs Group, Inc. (The), (convertible into Wal-Mart Stores, Inc.), 4.20%, 2/28/07 (Acquired 8/21/06, Cost $10,001,653)(5)(6) 10,606,756 - -------------------------------------------------------------------------------- 26,384,960 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 8 Equity Income - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 0.9% - -------------------------------------------------------------------------------- $ 1,901,600 Lehman Brothers Holdings Inc., (convertible into General Mills, Inc.), 6.25%, 10/15/07(5) $ 51,913,680 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.3% - -------------------------------------------------------------------------------- 333,900 Credit Suisse New York, (convertible into Beckman Coulter, Inc.), 7.65%, 3/19/07(5) 18,872,028 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 1.7% - -------------------------------------------------------------------------------- 97,402,000 Lincare Holdings Inc., 3.00%, 6/15/33 93,018,910 - -------------------------------------------------------------------------------- INSURANCE -- 5.8% - -------------------------------------------------------------------------------- 367,142,000 American International Group, Inc., 1.51%, 11/9/31(4) 258,835,109 - -------------------------------------------------------------------------------- 785,000 Credit Suisse USA Inc., (convertible into American International Group, Inc.), 4.04%, 3/12/07(5) 51,488,150 - -------------------------------------------------------------------------------- 440,000 Morgan Stanley, (convertible into Marsh & McLennan Companies, Inc.), 7.40%, 2/9/07 (Acquired 8/3/06, Cost $11,154,000)(5)(6) 11,754,600 - -------------------------------------------------------------------------------- 322,077,859 - -------------------------------------------------------------------------------- IT SERVICES -- 0.3% - -------------------------------------------------------------------------------- 184,300 Allegro Investment Corp. SA, (convertible into International Business Machines Corp.), 4.40%, 3/6/07 (Acquired 8/30/06, Cost $15,038,880)(5)(6) 14,893,246 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 1.9% - -------------------------------------------------------------------------------- 92,738,000 Hasbro Inc., 2.75%, 12/1/21 104,098,405 - -------------------------------------------------------------------------------- METALS & MINING -- 0.3% - -------------------------------------------------------------------------------- 235,000 Goldman Sachs Group, Inc. (The), (convertible into Newmont Mining Corp.), 9.25%, 4/4/07(5) 9,954,364 - -------------------------------------------------------------------------------- 196,500 Morgan Stanley, (convertible into Newmont Mining Corporation), 14.12%, 2/4/07 (Acquired 7/28/06, Cost $10,033,290)(5)(6) 8,707,898 - -------------------------------------------------------------------------------- 18,662,262 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 1.8% - -------------------------------------------------------------------------------- 40,058,000 Devon Energy Corporation, (convertible into Chevron Corp.), 4.90%, 8/15/08(5) 50,523,153 - -------------------------------------------------------------------------------- 40,057,000 Devon Energy Corporation, (convertible into Chevron Corp.), 4.95%, 8/15/08(5) 50,521,891 - -------------------------------------------------------------------------------- 101,045,044 - -------------------------------------------------------------------------------- Principal Amount/Shares Value - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 2.5% - -------------------------------------------------------------------------------- $ 495,200 Credit Suisse New York, (convertible into Bristol-Myers Squibb Co.), 8.14, 2/15/07(5) $ 10,978,584 - -------------------------------------------------------------------------------- 478,900 IXIS Financial Products Inc., (convertible into Bristol-Myers Squibb Co.), 7.65%, 2/28/07 (Acquired 8/22/06, Cost $10,416,075)(5)(6) 11,108,229 - -------------------------------------------------------------------------------- 627,800 IXIS Financial Products Inc., (convertible into Bristol-Myers Squibb Co.), 9.50%, 2/15/07 (Acquired 8/8/06, Cost $13,378,418)(5)(6) 14,510,624 - -------------------------------------------------------------------------------- 236,100 Lehman Brothers Holdings Inc. (convertible into Bristol-Myers Squibb Co.), 9.55%, 2/10/07(5) 5,411,294 - -------------------------------------------------------------------------------- 105,717,000 Watson Pharmaceuticals, Inc., 1.75%, 3/15/23 97,259,640 - -------------------------------------------------------------------------------- 139,268,371 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.3% - -------------------------------------------------------------------------------- 61,266,000 Intel Corp., 2.95%, 12/15/35 55,062,818 - -------------------------------------------------------------------------------- 933,000 IXIS Financial Products Inc., (convertible into Applied Materials, Inc.), 6.75%, 11/24/06 (Acquired 6/27/06, Cost $15,926,310)(5)(6) 16,722,532 - -------------------------------------------------------------------------------- 71,785,350 - -------------------------------------------------------------------------------- SOFTWARE -- 0.9% - -------------------------------------------------------------------------------- 1,938,000 Morgan Stanley, (convertible into Microsoft Corporation), 6.20%, 3/2/07 (Acquired 8/23/06, Cost $49,942,260)(5)(6) 50,959,710 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 0.3% - -------------------------------------------------------------------------------- 453,800 Goldman Sachs Group, Inc. (The), (convertible into Home Depot, Inc. (The)), 6.25%, 2/5/07 (Acquired 7/27/06, Cost $15,624,334)(5)(6) 16,149,381 - -------------------------------------------------------------------------------- TOTAL CONVERTIBLE BONDS (Cost $1,259,601,241) 1,302,113,548 - -------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS -- 4.6% AEROSPACE & DEFENSE -- 1.3% - -------------------------------------------------------------------------------- 556,300 Northrop Grumman Corp., 7.00%, 4/4/21 73,987,900 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.4% - -------------------------------------------------------------------------------- 443,700 Newell Financial Trust I, 5.25%, 12/1/27 20,410,200 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 9 Equity Income - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- INSURANCE -- 0.1% - -------------------------------------------------------------------------------- 94,100 Aspen Insurance Holdings Ltd., 5.625%, 12/31/49 $ 4,898,846 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 0.6% - -------------------------------------------------------------------------------- 633,200 Schering-Plough Corp., 6.00%, 9/14/07 35,199,588 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 2.2% - -------------------------------------------------------------------------------- 1,256 Fannie Mae, 5.375%, 1/5/08 121,232,260 - -------------------------------------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $246,663,793) 255,728,794 - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 3.0% Repurchase Agreement, Goldman Sachs & Co., (collateralized by various U.S. Treasury obligations, 5.25% -- 6.00%, 2/15/26 -- 2/15/29, valued at $169,761,090), in a joint trading account at 4.90%, dated 9/29/06, due 10/2/06 (Delivery value $166,567,988) (Cost $166,500,000) $166,500,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 101.5% (Cost $5,138,091,846) 5,653,794,925 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- (1.5)% (85,833,985) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $5,567,960,940 ================================================================================ FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS Contracts Settlement Unrealized to Sell Date Value Gain (Loss) - -------------------------------------------------------------------------------- 41,409,854 GBP for USD 10/31/06 $77,526,191 $615,860 ==================================== (Value on Settlement Date $78,142,051) NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt GBP = British Pound ORD = Foreign Ordinary Share 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) Category is less than 0.05% of total net assets. (3) Security, or a portion thereof, is being held in connection with an open put option. (4) Security is a zero-coupon bond. The rate indicated is the yield to maturity at purchase. Zero-coupon securities are issued at a substantial discount from their value at maturity. (5) Equity-linked debt security. The aggregate value of these securities at September 30, 2006, was $468,834,976, which represented 8.4% of total net assets. (6) This equity-linked debt security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of restricted securities at September 30, 2006, was $215,250,957, which represented 3.9% of net assets. See Notes to Financial Statements. - ------ 10 Mid Cap Value - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2006 -------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 4.02% 15.22% 15.27% 3/31/04 - -------------------------------------------------------------------------------- RUSSELL MIDCAP VALUE INDEX(2) 2.95% 12.28% 16.52% -- - -------------------------------------------------------------------------------- Institutional Class 4.21% 15.53% 17.65% 8/2/04 - -------------------------------------------------------------------------------- Advisor Class 3.89% 14.93% 14.24% 1/13/05 - -------------------------------------------------------------------------------- R Class 3.84% 14.65% 9.89% 7/29/05 - -------------------------------------------------------------------------------- (1) Total returns for periods less than one year are not annualized. (2) 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) - ------ 11 Mid Cap Value - Performance GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made March 31, 2004
![](https://capedge.com/proxy/N-CSRS/0000908186-06-000070/growthmidcapval0611.gif)
ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - -------------------------------------------------------------------------------- 2004* 2005 2006 - -------------------------------------------------------------------------------- Investor Class 2.80% 20.48% 15.22% - -------------------------------------------------------------------------------- Russell Midcap Value Index 3.50% 26.13% 12.28% - -------------------------------------------------------------------------------- *From 3/31/04, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. - ------ 12 Mid Cap Value - Portfolio Commentary PORTFOLIO MANAGERS: PHIL DAVIDSON, MICHAEL LISS, AND SCOTT MOORE PERFORMANCE SUMMARY Although market returns favored large-cap stocks, Mid Cap Value was still up solidly for the six months ended September 30, 2006, gaining 4.02%*. Its benchmark, the Russell Midcap Value Index, gained 2.95%. The median return for Morningstar's Mid Cap Value category was 0.92%**. Looking at the broad mid-cap universe, the Russell Midcap Index was down 0.52%***. Mid Cap Value has provided strong performance since its inception on March 31, 2004. The portfolio's average annualized return of 15.27% was well ahead of the 11.70% median return for Morningstar's Mid Cap Value category. The Russell Midcap Value Index was up 16.52% for the same period. CONSUMER STAPLES LED PORTFOLIO Investments in providers of everyday consumer products contributed the most to our results, led by Kimberly-Clark Corp. and H. J. Heinz Co. Kimberly-Clark, one of the largest makers of personal-care paper products, benefited from price increases, cost structure rationalization, and the stabilization of key commodity prices. Heinz's shares were driven higher by the shareholder activist activities of investor Nelson Peltz. Peltz's push to gain several seats on the food company's board of directors forced management to respond with a plan to cut costs and invest behind the company's portfolio of brands. UTILITIES ADDED VALUE Utility stocks were another source of performance, as stock selection across the industry worked to our favor. Our investments were led by multi-utility XCEL Energy Inc., an electricity and natural gas energy company that operates in eight Western and Midwestern states. XCEL posted strong second-quarter results, enhanced by rate increases and sales growth. We were also rewarded for owning Northeast Utilities, which provides electricity and natural gas to customers in Connecticut, Massachusetts and New Hampshire. Northeast is in the midst of a large upgrade of transmission plant and equipment, which should increase its earnings power. FINANCIALS A PLUS Financial stocks also were among our largest contributors. Profits for TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Equitable Resources Inc. 3.8% 2.7% - -------------------------------------------------------------------------------- Kimberly-Clark Corp. 3.4% 3.6% - -------------------------------------------------------------------------------- Beckman Coulter, Inc. 2.6% 1.8% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 2.4% 3.3% - -------------------------------------------------------------------------------- H.J. Heinz Co. 2.3% 1.8% - -------------------------------------------------------------------------------- Symmetry Medical Inc. 2.3% 0.2% - -------------------------------------------------------------------------------- Fifth Third Bancorp 2.2% 1.7% - -------------------------------------------------------------------------------- HCA Inc. 2.1% 1.1% - -------------------------------------------------------------------------------- Dollar General Corp. 2.0% 2.2% - -------------------------------------------------------------------------------- AptarGroup, Inc. 2.0% 0.4% - -------------------------------------------------------------------------------- * All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. ** The median return for Morningstar's Mid Cap Value category was 9.39% for the 1-year period ended September 30, 2006. *** The Russell Midcap Index returned 9.57% for the 1-year period ended September 30, 2006. (continued) - ------ 13 Mid Cap Value - Portfolio Commentary commercial banks were squeezed during part of the period by rising short-term interest rates (a rising cost for capital). Nonetheless, SunTrust Banks Inc. was one of our top contributors. SunTrust, the seventh-largest U.S. bank, operates throughout 11 Southeastern states, which represent one of the highest population growth footprints in banking. Freddie Mac was another strong contributor -- as well as a good example of our willingness to be patient while a company works through what we believe are transitory problems. The mortgage industry stock rebounded after being beset by a delay in reporting its 2005 results and the prospect of increased regulation of government-sponsored enterprises. CONSUMER DISCRETIONARY STOCKS DETRACTED Consumer discretionary stocks detracted from our results. In retailing, discounter Dollar General Corp. found its profits squeezed by markdowns, higher shrink (losses from theft) and gasoline prices that both raised transportation costs and slowed spending by consumers. We continue to hold the position. Our position in Valassis Communications Inc. also performed below our expectations. Valassis is a marketing services company that produces advertising inserts for newspapers. In July, Valassis sought to acquire ADVO Inc., a major direct mail services company. After reviewing the terms of the transaction, it was our opinion that the acquisition would have a dilutive effect on Valassis' shares. We eliminated the holding. PORTFOLIO OBJECTIVES Mid Cap Value is designed for investors seeking long-term capital growth with potential for income. It can serve a supporting role in a portfolio that also contains more volatile growth investments. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Food Products 6.5% 9.6% - -------------------------------------------------------------------------------- Commercial Banks 6.3% 7.2% - -------------------------------------------------------------------------------- Chemicals 6.0% 8.1% - -------------------------------------------------------------------------------- Health Care Equipment & Supplies 5.9% 3.3% - -------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 5.3% 4.2% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Common Stocks 94.7% 97.8% - -------------------------------------------------------------------------------- Temporary Cash Investments 5.5% 5.2% - -------------------------------------------------------------------------------- Other Assets and Liabilities (0.2)% (3.0)% - -------------------------------------------------------------------------------- - ------ 14 Mid Cap Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 94.7% AEROSPACE & DEFENSE -- 1.2% - -------------------------------------------------------------------------------- 46,408 Honeywell International Inc. $ 1,898,088 - -------------------------------------------------------------------------------- 12,241 Northrop Grumman Corp. 833,245 - -------------------------------------------------------------------------------- 2,731,333 - -------------------------------------------------------------------------------- AUTOMOBILES -- 0.2% - -------------------------------------------------------------------------------- 11,519 Winnebago Industries 361,466 - -------------------------------------------------------------------------------- BEVERAGES -- 2.4% - -------------------------------------------------------------------------------- 55,201 Anheuser-Busch Companies, Inc. 2,622,600 - -------------------------------------------------------------------------------- 132,089 Coca-Cola Enterprises Inc. 2,751,413 - -------------------------------------------------------------------------------- 5,374,013 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.9% - -------------------------------------------------------------------------------- 74,129 Masco Corp. 2,032,617 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 0.1% - -------------------------------------------------------------------------------- 4,239 Nuveen Investments Inc. Cl A 217,164 - -------------------------------------------------------------------------------- CHEMICALS -- 6.0% - -------------------------------------------------------------------------------- 14,105 Air Products & Chemicals, Inc. 936,149 - -------------------------------------------------------------------------------- 44,980 du Pont (E.I.) de Nemours & Co. 1,926,943 - -------------------------------------------------------------------------------- 20,792 Ferro Corp. 369,682 - -------------------------------------------------------------------------------- 104,016 International Flavors & Fragrances Inc. 4,112,793 - -------------------------------------------------------------------------------- 76,986 Minerals Technologies Inc. 4,111,052 - -------------------------------------------------------------------------------- 44,641 Nalco Holding Co.(1) 826,751 - -------------------------------------------------------------------------------- 53,386 Olin Corp. 820,009 - -------------------------------------------------------------------------------- 13,103,379 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 6.3% - -------------------------------------------------------------------------------- 43,731 BB&T Corporation 1,914,543 - -------------------------------------------------------------------------------- 128,964 Fifth Third Bancorp 4,910,949 - -------------------------------------------------------------------------------- 32,052 South Financial Group Inc. (The) 834,314 - -------------------------------------------------------------------------------- 69,717 SunTrust Banks, Inc. 5,387,730 - -------------------------------------------------------------------------------- 10,384 Zions Bancorporation 828,747 - -------------------------------------------------------------------------------- 13,876,283 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 3.8% - -------------------------------------------------------------------------------- 111,179 ARAMARK Corp. Cl B 3,653,341 - -------------------------------------------------------------------------------- 38,253 Pitney Bowes, Inc. 1,697,286 - -------------------------------------------------------------------------------- 75,066 Republic Services, Inc. Cl A 3,018,404 - -------------------------------------------------------------------------------- 8,369,031 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 0.5% - -------------------------------------------------------------------------------- 27,456 Diebold, Inc. 1,195,160 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 2.9% - -------------------------------------------------------------------------------- 86,015 AptarGroup, Inc. 4,376,444 - -------------------------------------------------------------------------------- 58,511 Bemis Co., Inc. 1,922,671 - -------------------------------------------------------------------------------- 6,299,115 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- DISTRIBUTORS -- 1.0% - -------------------------------------------------------------------------------- 48,590 Genuine Parts Company $ 2,095,687 - -------------------------------------------------------------------------------- DIVERSIFIED -- 1.8% - -------------------------------------------------------------------------------- 53,920 iShares S&P MidCap 400 Index Fund 4,061,794 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.1% - -------------------------------------------------------------------------------- 56,073 Commonwealth Telephone Enterprises, Inc. 2,311,890 - -------------------------------------------------------------------------------- 120,997 Iowa Telecommunications Services Inc. 2,394,530 - -------------------------------------------------------------------------------- 4,706,420 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 1.2% - -------------------------------------------------------------------------------- 17,373 Empire District Electric Co. 388,808 - -------------------------------------------------------------------------------- 62,120 Northeast Utilities 1,445,532 - -------------------------------------------------------------------------------- 34,372 Westar Energy Inc. 808,086 - -------------------------------------------------------------------------------- 2,642,426 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 1.9% - -------------------------------------------------------------------------------- 59,873 Hubbell Inc. Cl A 2,670,335 - -------------------------------------------------------------------------------- 30,205 Hubbell Inc. Cl B 1,446,820 - -------------------------------------------------------------------------------- 4,117,155 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.7% - -------------------------------------------------------------------------------- 84,488 CPI International Inc.(1) 1,112,707 - -------------------------------------------------------------------------------- 38,011 Vishay Intertechnology, Inc.(1) 533,674 - -------------------------------------------------------------------------------- 1,646,381 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 6.5% - -------------------------------------------------------------------------------- 68,768 ConAgra Foods, Inc. 1,683,441 - -------------------------------------------------------------------------------- 228,974 Diamond Foods Inc. 3,276,618 - -------------------------------------------------------------------------------- 38,080 General Mills, Inc. 2,155,328 - -------------------------------------------------------------------------------- 118,404 H.J. Heinz Co. 4,964,681 - -------------------------------------------------------------------------------- 95,621 Unilever N.V. New York Shares 2,346,539 - -------------------------------------------------------------------------------- 14,426,607 - -------------------------------------------------------------------------------- GAS UTILITIES -- 2.0% - -------------------------------------------------------------------------------- 22,951 AGL Resources Inc. 837,712 - -------------------------------------------------------------------------------- 110,773 WGL Holdings Inc. 3,471,625 - -------------------------------------------------------------------------------- 4,309,337 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 5.9% - -------------------------------------------------------------------------------- 98,914 Beckman Coulter, Inc. 5,693,490 - -------------------------------------------------------------------------------- 72,784 National Dentex Corp.(1) 1,430,206 - -------------------------------------------------------------------------------- 34,441 Steris Corp. 828,650 - -------------------------------------------------------------------------------- 328,701 Symmetry Medical Inc.(1) 4,960,098 - -------------------------------------------------------------------------------- 12,912,444 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 15 Mid Cap Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 2.9% - -------------------------------------------------------------------------------- 54,314 Apria Healthcare Group Inc.(1) $ 1,072,158 - -------------------------------------------------------------------------------- 90,944 HCA Inc. 4,537,196 - -------------------------------------------------------------------------------- 11,890 Universal Health Services, Inc. Cl B 712,568 - -------------------------------------------------------------------------------- 6,321,922 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 4.6% - -------------------------------------------------------------------------------- 79,209 International Speedway Corp. 3,947,777 - -------------------------------------------------------------------------------- 84,213 OSI Restaurant Partners, Inc. 2,670,394 - -------------------------------------------------------------------------------- 94,752 Speedway Motorsports Inc. 3,449,920 - -------------------------------------------------------------------------------- 10,068,091 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.3% - -------------------------------------------------------------------------------- 8,459 Hunter Douglas N.V. ORD 593,265 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 4.0% - -------------------------------------------------------------------------------- 22,842 Clorox Company 1,439,046 - -------------------------------------------------------------------------------- 113,092 Kimberly-Clark Corp. 7,391,693 - -------------------------------------------------------------------------------- 8,830,739 - -------------------------------------------------------------------------------- INSURANCE -- 5.0% - -------------------------------------------------------------------------------- 12,746 Allstate Corp. 799,557 - -------------------------------------------------------------------------------- 10,138 Ambac Financial Group, Inc. 838,920 - -------------------------------------------------------------------------------- 30,659 Aspen Insurance Holdings Ltd. 791,922 - -------------------------------------------------------------------------------- 24,491 Chubb Corp. 1,272,552 - -------------------------------------------------------------------------------- 23,766 Genworth Financial Inc. Cl A 832,048 - -------------------------------------------------------------------------------- 14,506 Hartford Financial Services Group Inc. (The) 1,258,396 - -------------------------------------------------------------------------------- 43,011 Horace Mann Educators Corp. 827,102 - -------------------------------------------------------------------------------- 102,572 Marsh & McLennan Companies, Inc. 2,887,401 - -------------------------------------------------------------------------------- 110,221 RAM Holdings Ltd.(1) 1,432,872 - -------------------------------------------------------------------------------- 10,940,770 - -------------------------------------------------------------------------------- IT SERVICES -- 1.2% - -------------------------------------------------------------------------------- 5,601 Accenture Ltd. Cl A 177,608 - -------------------------------------------------------------------------------- 16,487 DST Systems, Inc.(1) 1,016,753 - -------------------------------------------------------------------------------- 113,119 NCI Inc. Cl A(1) 1,356,297 - -------------------------------------------------------------------------------- 2,550,658 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 2.0% - -------------------------------------------------------------------------------- 95,064 Arctic Cat Inc. 1,578,062 - -------------------------------------------------------------------------------- 126,420 Hasbro, Inc. 2,876,055 - -------------------------------------------------------------------------------- 4,454,117 - -------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES -- 0.3% - -------------------------------------------------------------------------------- 27,198 PRA International(1) 725,915 - -------------------------------------------------------------------------------- MACHINERY -- 0.4% - -------------------------------------------------------------------------------- 22,549 Kaydon Corporation 834,764 - -------------------------------------------------------------------------------- MEDIA -- 0.1% - -------------------------------------------------------------------------------- 8,885 Dow Jones & Co., Inc. 298,003 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- METALS & MINING -- 1.2% - -------------------------------------------------------------------------------- 52,545 Compass Minerals International Inc. $ 1,487,549 - -------------------------------------------------------------------------------- 24,941 Newmont Mining Corporation 1,066,228 - -------------------------------------------------------------------------------- 2,553,777 - -------------------------------------------------------------------------------- MULTI-UTILITIES -- 4.7% - -------------------------------------------------------------------------------- 39,846 Ameren Corp. 2,103,470 - -------------------------------------------------------------------------------- 27,412 Consolidated Edison, Inc. 1,266,434 - -------------------------------------------------------------------------------- 93,143 Puget Energy Inc. 2,117,140 - -------------------------------------------------------------------------------- 34,541 Wisconsin Energy Corp. 1,490,099 - -------------------------------------------------------------------------------- 163,111 XCEL Energy Inc. 3,368,243 - -------------------------------------------------------------------------------- 10,345,386 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 2.0% - -------------------------------------------------------------------------------- 330,912 Dollar General Corp. 4,510,331 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 5.3% - -------------------------------------------------------------------------------- 238,753 Equitable Resources Inc. 8,351,580 - -------------------------------------------------------------------------------- 69,384 Murphy Oil Corp. 3,299,209 - -------------------------------------------------------------------------------- 11,650,789 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 1.5% - -------------------------------------------------------------------------------- 98,082 MeadWestvaco Corp. 2,600,154 - -------------------------------------------------------------------------------- 12,497 Weyerhaeuser Co. 768,940 - -------------------------------------------------------------------------------- 3,369,094 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 1.2% - -------------------------------------------------------------------------------- 101,380 Watson Pharmaceuticals, Inc.(1) 2,653,115 - -------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS -- 1.4% - -------------------------------------------------------------------------------- 61,112 Annaly Capital Management Inc. 803,012 - -------------------------------------------------------------------------------- 69,257 Education Realty Trust, Inc. 1,022,233 - -------------------------------------------------------------------------------- 33,860 Rayonier, Inc. 1,279,908 - -------------------------------------------------------------------------------- 3,105,153 - -------------------------------------------------------------------------------- ROAD & RAIL -- 0.5% - -------------------------------------------------------------------------------- 63,972 Heartland Express, Inc. 1,003,081 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.2% - -------------------------------------------------------------------------------- 56,701 Applied Materials, Inc. 1,005,309 - -------------------------------------------------------------------------------- 16,320 KLA-Tencor Corp. 725,750 - -------------------------------------------------------------------------------- 74,563 Teradyne, Inc.(1) 981,249 - -------------------------------------------------------------------------------- 2,712,308 - -------------------------------------------------------------------------------- SOFTWARE -- 0.6% - -------------------------------------------------------------------------------- 63,378 Synopsys, Inc.(1) 1,249,814 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 0.6% - -------------------------------------------------------------------------------- 42,380 Gap, Inc. (The) 803,101 - -------------------------------------------------------------------------------- 20,091 Lowe's Companies, Inc. 563,753 - -------------------------------------------------------------------------------- 1,366,854 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.4% - -------------------------------------------------------------------------------- 21,088 Liz Claiborne, Inc. 833,187 - -------------------------------------------------------------------------------- - ------ 16 See Notes to Financial Statements. (continued) Mid Cap Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 5.2% - -------------------------------------------------------------------------------- 47,163 Fannie Mae $ 2,636,883 - -------------------------------------------------------------------------------- 55,836 Freddie Mac 3,703,602 - -------------------------------------------------------------------------------- 65,054 MGIC Investment Corp. 3,901,289 - -------------------------------------------------------------------------------- 56,094 Washington Federal, Inc. 1,258,749 - -------------------------------------------------------------------------------- 11,500,523 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS -- 0.7% - -------------------------------------------------------------------------------- 21,756 Grainger (W.W.), Inc. 1,458,087 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $198,786,863) 208,407,555 - -------------------------------------------------------------------------------- Principal Amount Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 5.5% $12,200,000 FHLB Discount Notes, 4.75%, 10/2/06(2) (Cost $12,198,390) $ 12,200,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.2% (Cost $210,985,253) 220,607,555 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- (0.2)% (420,108) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $220,187,447 ================================================================================ FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS Settlement Unrealized Contracts to Sell Date Value Gain (Loss) - -------------------------------------------------------------------------------- 1,728,700 Euro for USD 10/31/06 $2,195,984 $3,458 =================================== (Value on Settlement Date $2,199,442) NOTES TO SCHEDULE OF INVESTMENTS FHLB = Federal Home Loan Bank ORD = Foreign Ordinary Share USD = United States Dollar (1) Non-income producing. (2) The rate indicated is the yield to maturity at purchase. See Notes to Financial Statements. - ------ 17 Small Cap Value - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2006 ---------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS INCEPTION DATE - -------------------------------------------------------------------------------------------- INVESTOR CLASS -0.96% 8.94% 15.07% 15.25% 7/31/98 - -------------------------------------------------------------------------------------------- RUSSELL 2000 VALUE INDEX(2)(3) -0.22% 14.01% 16.96% 11.95% -- - -------------------------------------------------------------------------------------------- Institutional Class -0.86% 9.14% 15.30% 16.49% 10/26/98 - -------------------------------------------------------------------------------------------- Advisor Class -1.15% 8.61% 14.80% 18.05% 12/31/99 - -------------------------------------------------------------------------------------------- C Class 6/1/01 No sales charge* -1.48% 7.84% 13.95%(4) 11.24%(4) With sales charge* -2.47% 7.84% 13.95%(4) 11.24%(4) - -------------------------------------------------------------------------------------------- *Sales charges include contingent deferred sales charges (CDSCs), as applicable. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. Please see the Share Class Information page for more about the applicable sales charges for each share class. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied. (1) Total returns for periods less than one year are not annualized. (2) 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. (3) 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. (4) Class returns would have been lower if American Century had not voluntarily waived a portion of its service and distribution 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. Historically, small company stocks have been more volatile than the stocks of larger, more established companies. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. (continued) - ------ 18 Small Cap Value - Performance GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made July 31, 1998
![](https://capedge.com/proxy/N-CSRS/0000908186-06-000070/growthsmallcapval0611.gif)
ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - -------------------------------------------------------------------------------------------------- 1998* 1999 2000 2001 2002 2003 2004 2005 2006 - -------------------------------------------------------------------------------------------------- Investor Class -9.80% 13.25% 21.76% 27.06% -1.21% 25.63% 24.21% 20.19% 8.94% - -------------------------------------------------------------------------------------------------- Russell 2000 Value Index -10.90% 5.83% 15.36% 5.61% -1.47% 31.66% 25.66% 17.75% 14.01% - -------------------------------------------------------------------------------------------------- *From 7/31/98, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Historically, small company stocks have been more volatile than the stocks of larger, more established companies. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. - ------ 19 Small Cap Value - Portfolio Commentary PORTFOLIO MANAGERS: BEN GIELE AND KEVIN LAUB PERFORMANCE SUMMARY For the six months ended September 30, 2006, Small Cap Value declined 0.96%*, compared with the 0.22% decline of its benchmark, the Russell 2000 Value Index. The reporting period presented some challenges for small-cap stocks. Larger firms generally attracted more investors, a trend evidenced by the 6.85% return of the Russell 1000 Value Index, which tracks the progress of larger value-oriented companies. In addition, many of the smaller firms that did command attention did not meet our value criteria and therefore did not merit inclusion in the portfolio. Ultimately, our areas of strength were not enough to offset the downdraft elsewhere in the portfolio. Though the most recent period was a challenging one, Small Cap Value's long-term performance has been strong. Since the portfolio's July 31, 1998, inception, it has posted an average annual return of 15.25%, handily outpacing the 11.95% return of its benchmark for the same period. AREAS OF STRENGTH: UTILITIES, CONSUMER STAPLES Small Cap Value's investments in the utilities sector contributed the most to total return. Electric utility companies were the strongest performers, and overweight or portfolio-only positions, such as IDACORP, Inc. and Great Plains Energy Inc., added value. We also found success in the consumer staples sector. Our small but rewarding position included companies that produce goods and services that are expected to be in demand regardless of economic conditions. In this area, prudent allocation and effective stock selection combined to bolster performance. Finally, our position in the information technology sector, a sizeable stake, added value and represented the greatest source of excess return against the benchmark, results attributable entirely to security selection. Long-time holding Sybase, Inc. was the portfolio's top-contributing stock. Sybase, an infrastructure and mobile applications software company, announced a 66% quarterly increase in net income and raised its profit outlook for 2007. The firm also announced plans to buy Mobile 365, which will make Sybase the leader in mobile messaging and content delivery. TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- iShares Russell 2000 Index Fund 3.5% 1.5% - -------------------------------------------------------------------------------- Sybase, Inc. 1.9% 2.0% - -------------------------------------------------------------------------------- Washington Federal, Inc. 1.2% 1.1% - -------------------------------------------------------------------------------- Platinum Underwriters Holdings 1.2% 1.0% - -------------------------------------------------------------------------------- Beckman Coulter, Inc. 1.1% -- - -------------------------------------------------------------------------------- Minerals Technologies Inc. 1.0% 0.8% - -------------------------------------------------------------------------------- International Speedway Corp. 1.0% 0.4% - -------------------------------------------------------------------------------- Perot Systems Corp. Cl A 1.0% 1.0% - -------------------------------------------------------------------------------- LifePoint Hospitals Inc. 1.0% 0.3% - -------------------------------------------------------------------------------- South Financial Group Inc. (The) 1.0% 0.8% - -------------------------------------------------------------------------------- * All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. (continued) - ------ 20 Small Cap Value - Portfolio Commentary Sybase is a good example of our style at work. Our disciplined stock selection guides us to higher quality names such as this one, and that mandate and bias have been rewarded in the past three months as investors have rediscovered quality names like Sybase. In addition, this quality trend represents an improving environment for our strategy. CONSUMER DISCRETIONARY SLOWED PERFORMANCE Investments in the consumer discretionary sector detracted the most from portfolio performance during the six-month period. This economically sensitive sector suffered as consumers reined in purchasing amid mixed economic signals, higher gas prices, and fears of rising interest rates. Many industries in this group suffered setbacks, and our positions were no exception. Media firms and specialty retailers suffered declines in the portfolio. Valassis Communications, Inc., a marketing services company that produces advertising inserts for newspapers, and teen novelty sensation Hot Topic, Inc. were notable decliners. ADDITIONAL DETRACTORS Holdings in the materials sector also slowed performance, with losses occurring mostly in the metals and mining sector. Both allocation and security selection worked against us, and our relatively greater exposure to companies that registered losses proved costly. Elsewhere, life reinsurance firm Scottish Re, based in Bermuda, was the portfolio's top-detracting stock. After posting unexpected losses in the second quarter of 2006, investors severely punished the stock. We eliminated the position. PORTFOLIO OBJECTIVE Small Cap Value is designed for investors seeking long-term capital growth with quarterly income. It can serve a supporting role in a portfolio that also contains large-cap growth investments. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Insurance 7.6% 7.1% - -------------------------------------------------------------------------------- Commercial Banks 6.8% 6.0% - -------------------------------------------------------------------------------- Machinery 4.9% 5.3% - -------------------------------------------------------------------------------- Software 4.8% 4.9% - -------------------------------------------------------------------------------- Real Estate Investment Trusts 4.6% 4.5% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Domestic Common Stocks 89.0% 92.0% - -------------------------------------------------------------------------------- Foreign Common Stocks 5.6% 4.3% - -------------------------------------------------------------------------------- Foreign Convertible Preferred Stocks 0.7% -- - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 95.3% 96.3% - -------------------------------------------------------------------------------- Temporary Cash Investments 4.3% 3.2% - -------------------------------------------------------------------------------- Other Assets and Liabilities 0.4% 0.5% - -------------------------------------------------------------------------------- - ------ 21 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 94.6% AEROSPACE & DEFENSE -- 2.1% - -------------------------------------------------------------------------------- 130,000 Alliant Techsystems Inc.(1) $ 10,537,800 - -------------------------------------------------------------------------------- 340,000 Curtiss-Wright Corp. 10,319,000 - -------------------------------------------------------------------------------- 265,000 DRS Technologies, Inc. 11,572,550 - -------------------------------------------------------------------------------- 235,000 EDO Corp. 5,376,800 - -------------------------------------------------------------------------------- 175,000 Moog Inc. Cl A(1) 6,065,500 - -------------------------------------------------------------------------------- 43,871,650 - -------------------------------------------------------------------------------- AIRLINES -- 0.5% - -------------------------------------------------------------------------------- 410,000 SkyWest, Inc. 10,053,200 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 0.6% - -------------------------------------------------------------------------------- 630,000 ArvinMeritor Inc. 8,971,200 - -------------------------------------------------------------------------------- 180,000 Lear Corporation 3,726,000 - -------------------------------------------------------------------------------- 12,697,200 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.5% - -------------------------------------------------------------------------------- 440,000 Griffon Corp.(1) 10,502,800 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 2.6% - -------------------------------------------------------------------------------- 355,000 Apollo Investment Corp. 7,281,050 - -------------------------------------------------------------------------------- 270,000 Cowen Group Inc.(1) 4,268,700 - -------------------------------------------------------------------------------- 160,000 Lazard Ltd. Cl A 6,396,800 - -------------------------------------------------------------------------------- 460,000 MCG Capital Corp. 7,511,800 - -------------------------------------------------------------------------------- 1,080,000 Patriot Capital Funding, Inc.(2) 14,385,600 - -------------------------------------------------------------------------------- 605,000 Waddell & Reed Financial Inc. 14,973,750 - -------------------------------------------------------------------------------- 54,817,700 - -------------------------------------------------------------------------------- CHEMICALS -- 2.7% - -------------------------------------------------------------------------------- 740,000 Ferro Corp. 13,157,200 - -------------------------------------------------------------------------------- 50,000 FMC Corp. 3,203,500 - -------------------------------------------------------------------------------- 410,000 Minerals Technologies Inc. 21,894,000 - -------------------------------------------------------------------------------- 995,000 Olin Corp. 15,283,200 - -------------------------------------------------------------------------------- 230,000 Sensient Technologies Corp. 4,501,100 - -------------------------------------------------------------------------------- 58,039,000 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 6.8% - -------------------------------------------------------------------------------- 230,000 Central Pacific Financial Corp. 8,413,400 - -------------------------------------------------------------------------------- 280,000 Chemical Financial Corp. 8,310,400 - -------------------------------------------------------------------------------- 105,000 Cullen/Frost Bankers, Inc. 6,071,100 - -------------------------------------------------------------------------------- 532,409 First Midwest Bancorp, Inc. 20,172,977 - -------------------------------------------------------------------------------- 970,000 Fulton Financial Corp. 15,704,300 - -------------------------------------------------------------------------------- 380,000 Greater Bay Bancorp 10,719,800 - -------------------------------------------------------------------------------- 440,000 Hanmi Financial Corp. 8,624,000 - -------------------------------------------------------------------------------- 315,000 Pacific Capital Bancorp 8,495,550 - -------------------------------------------------------------------------------- 115,000 Provident Bankshares Corp. 4,260,750 - -------------------------------------------------------------------------------- 255,000 Sky Financial Group Inc. 6,349,500 - -------------------------------------------------------------------------------- 805,000 South Financial Group Inc. (The) 20,954,150 - -------------------------------------------------------------------------------- 205,000 Sterling Bancshares, Inc. 4,151,250 - -------------------------------------------------------------------------------- 255,000 Susquehanna Bancshares Inc. 6,232,200 - -------------------------------------------------------------------------------- 320,000 TCF Financial Corp. 8,412,800 - -------------------------------------------------------------------------------- 115,000 Wilmington Trust Corporation 5,123,250 - -------------------------------------------------------------------------------- 141,995,427 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 2.6% - -------------------------------------------------------------------------------- 165,000 ABM Industries Inc. $ 3,095,400 - -------------------------------------------------------------------------------- 275,000 American Ecology Corp. 5,428,500 - -------------------------------------------------------------------------------- 145,000 Corrections Corp. of America(1) 6,271,250 - -------------------------------------------------------------------------------- 190,000 Ennis Inc. 4,113,500 - -------------------------------------------------------------------------------- 310,000 G&K Services Inc. Cl A 11,293,300 - -------------------------------------------------------------------------------- 250,000 Herman Miller Inc. 8,552,500 - -------------------------------------------------------------------------------- 110,000 Kelly Services, Inc. Cl A 3,015,100 - -------------------------------------------------------------------------------- 165,000 United Stationers Inc.(1) 7,674,150 - -------------------------------------------------------------------------------- 130,000 Watson Wyatt Worldwide Inc. 5,319,600 - -------------------------------------------------------------------------------- 54,763,300 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 1.0% - -------------------------------------------------------------------------------- 100,000 Avocent Corp.(1) 3,012,000 - -------------------------------------------------------------------------------- 130,000 CommScope Inc.(1) 4,271,800 - -------------------------------------------------------------------------------- 705,000 EFJ Inc.(1) 5,231,100 - -------------------------------------------------------------------------------- 210,000 Inter-Tel, Inc. 4,536,000 - -------------------------------------------------------------------------------- 240,000 Plantronics, Inc. 4,207,200 - -------------------------------------------------------------------------------- 21,258,100 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 0.7% - -------------------------------------------------------------------------------- 320,000 Electronics for Imaging, Inc.(1) 7,321,600 - -------------------------------------------------------------------------------- 130,000 Imation Corporation 5,219,500 - -------------------------------------------------------------------------------- 575,000 McData Corporation Cl A(1) 2,892,250 - -------------------------------------------------------------------------------- 15,433,350 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING -- 1.6% - -------------------------------------------------------------------------------- 80,000 Granite Construction Inc. 4,268,000 - -------------------------------------------------------------------------------- 295,000 Insituform Technologies, Inc. Cl A(1) 7,162,600 - -------------------------------------------------------------------------------- 600,000 Shaw Group Inc. (The)(1) 14,184,000 - -------------------------------------------------------------------------------- 125,000 Washington Group International, Inc.(1) 7,357,500 - -------------------------------------------------------------------------------- 32,972,100 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 0.3% - -------------------------------------------------------------------------------- 110,000 Texas Industries Inc. 5,726,600 - -------------------------------------------------------------------------------- CONSUMER FINANCE -- 0.6% - -------------------------------------------------------------------------------- 825,000 Advance America, Cash Advance Centers, Inc. 11,896,500 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 1.6% - -------------------------------------------------------------------------------- 190,000 AptarGroup, Inc. 9,667,200 - -------------------------------------------------------------------------------- 450,000 Bemis Co., Inc. 14,787,000 - -------------------------------------------------------------------------------- 250,000 Sonoco Products Co. 8,410,000 - -------------------------------------------------------------------------------- 32,864,200 - -------------------------------------------------------------------------------- DIVERSIFIED -- 3.5% - -------------------------------------------------------------------------------- 1,010,000 iShares Russell 2000 Index Fund 72,689,700 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 0.4% - -------------------------------------------------------------------------------- 435,000 Asset Acceptance Capital Corp.(1) 7,068,750 - -------------------------------------------------------------------------------- 150,000 Medallion Financial Corp. 1,654,500 - -------------------------------------------------------------------------------- 8,723,250 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 22 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.6% - -------------------------------------------------------------------------------- 185,000 Atlantic Tele-Network Inc. $ 3,418,800 - -------------------------------------------------------------------------------- 205,000 Commonwealth Telephone Enterprises, Inc. 8,452,150 - -------------------------------------------------------------------------------- 11,870,950 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 1.6% - -------------------------------------------------------------------------------- 220,000 Empire District Electric Co. 4,923,600 - -------------------------------------------------------------------------------- 335,000 Great Plains Energy Inc. 10,391,700 - -------------------------------------------------------------------------------- 190,000 IDACORP, Inc. 7,183,900 - -------------------------------------------------------------------------------- 425,000 Westar Energy Inc. 9,991,750 - -------------------------------------------------------------------------------- 32,490,950 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 0.8% - -------------------------------------------------------------------------------- 65,000 Genlyte Group Inc.(1) 4,628,000 - -------------------------------------------------------------------------------- 165,000 LSI Industries Inc. 2,681,250 - -------------------------------------------------------------------------------- 235,000 Regal-Beloit Corp. 10,222,500 - -------------------------------------------------------------------------------- 17,531,750 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 3.1% - -------------------------------------------------------------------------------- 400,000 Aeroflex Inc.(1) 4,112,000 - -------------------------------------------------------------------------------- 795,000 Avnet Inc.(1) 15,597,900 - -------------------------------------------------------------------------------- 435,000 Benchmark Electronics Inc.(1) 11,692,800 - -------------------------------------------------------------------------------- 140,000 Coherent, Inc.(1) 4,852,400 - -------------------------------------------------------------------------------- 155,000 FLIR Systems, Inc.(1) 4,209,800 - -------------------------------------------------------------------------------- 80,000 Littelfuse, Inc.(1) 2,776,000 - -------------------------------------------------------------------------------- 370,000 Methode Electronics, Inc. 3,518,700 - -------------------------------------------------------------------------------- 685,000 Paxar Corp.(1) 13,686,300 - -------------------------------------------------------------------------------- 305,000 Vishay Intertechnology, Inc.(1) 4,282,200 - -------------------------------------------------------------------------------- 64,728,100 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES -- 2.3% - -------------------------------------------------------------------------------- 480,000 Global Industries Ltd.(1) 7,468,800 - -------------------------------------------------------------------------------- 320,000 Helmerich & Payne, Inc. 7,369,600 - -------------------------------------------------------------------------------- 85,000 Hornbeck Offshore Services Inc.(1) 2,847,500 - -------------------------------------------------------------------------------- 565,000 Key Energy Group, Inc.(1) 7,684,000 - -------------------------------------------------------------------------------- 260,000 Lone Star Technologies, Inc.(1) 12,578,800 - -------------------------------------------------------------------------------- 105,000 Lufkin Industries Inc. 5,556,600 - -------------------------------------------------------------------------------- 65,000 NS Group Inc.(1) 4,195,750 - -------------------------------------------------------------------------------- 47,701,050 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 0.7% - -------------------------------------------------------------------------------- 145,000 BJ's Wholesale Club Inc.(1) 4,231,100 - -------------------------------------------------------------------------------- 240,000 Casey's General Stores, Inc. 5,344,800 - -------------------------------------------------------------------------------- 150,000 Performance Food Group Co.(1) 4,213,500 - -------------------------------------------------------------------------------- 13,789,400 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 1.9% - -------------------------------------------------------------------------------- 215,000 Corn Products International Inc. 6,996,100 - -------------------------------------------------------------------------------- 155,000 Delta and Pine Land Company 6,277,500 - -------------------------------------------------------------------------------- 210,000 JM Smucker Co. (The) 10,069,500 - -------------------------------------------------------------------------------- 260,000 Lancaster Colony Corp. 11,637,600 - -------------------------------------------------------------------------------- 190,000 Reddy Ice Holdings Inc. 4,598,000 - -------------------------------------------------------------------------------- 39,578,700 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- GAS UTILITIES -- 1.7% - -------------------------------------------------------------------------------- 375,000 Atmos Energy Corp. $ 10,706,250 - -------------------------------------------------------------------------------- 135,000 Northwest Natural Gas Co. 5,302,800 - -------------------------------------------------------------------------------- 643,791 WGL Holdings Inc. 20,176,410 - -------------------------------------------------------------------------------- 36,185,460 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 3.8% - -------------------------------------------------------------------------------- 140,000 Arrow International Inc. 4,453,400 - -------------------------------------------------------------------------------- 400,000 Beckman Coulter, Inc. 23,024,000 - -------------------------------------------------------------------------------- 225,000 Biosite Inc.(1) 10,401,750 - -------------------------------------------------------------------------------- 195,000 Dade Behring Holdings Inc. 7,831,200 - -------------------------------------------------------------------------------- 345,000 Orthofix International N.V.(1) 15,687,150 - -------------------------------------------------------------------------------- 250,000 Steris Corp. 6,015,000 - -------------------------------------------------------------------------------- 200,000 Vital Signs Inc. 11,322,000 - -------------------------------------------------------------------------------- 78,734,500 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 2.4% - -------------------------------------------------------------------------------- 380,000 Alliance Imaging Inc.(1) 2,967,800 - -------------------------------------------------------------------------------- 375,000 Amsurg Corp.(1) 8,347,500 - -------------------------------------------------------------------------------- 225,000 Community Health Systems Inc.(1) 8,403,750 - -------------------------------------------------------------------------------- 595,000 LifePoint Hospitals Inc.(1) 21,015,400 - -------------------------------------------------------------------------------- 90,000 Owens & Minor Inc. 2,960,100 - -------------------------------------------------------------------------------- 90,000 Pediatrix Medical Group, Inc.(1) 4,104,000 - -------------------------------------------------------------------------------- 50,000 Universal Health Services, Inc. Cl B 2,996,500 - -------------------------------------------------------------------------------- 50,795,050 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 3.5% - -------------------------------------------------------------------------------- 510,000 CEC Entertainment Inc.(1) 16,070,100 - -------------------------------------------------------------------------------- 425,000 International Speedway Corp. 21,182,000 - -------------------------------------------------------------------------------- 275,000 Rare Hospitality International Inc.(1) 8,404,000 - -------------------------------------------------------------------------------- 175,000 Red Robin Gourmet Burgers Inc.(1) 8,069,250 - -------------------------------------------------------------------------------- 185,000 Ruby Tuesday Inc. 5,215,150 - -------------------------------------------------------------------------------- 175,000 Speedway Motorsports Inc. 6,371,750 - -------------------------------------------------------------------------------- 555,000 Town Sports International Holdings, Inc.(1) 7,281,600 - -------------------------------------------------------------------------------- 72,593,850 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.5% - -------------------------------------------------------------------------------- 240,000 Ethan Allen Interiors Inc. 8,318,400 - -------------------------------------------------------------------------------- 165,000 WCI Communities Inc.(1) 2,877,600 - -------------------------------------------------------------------------------- 11,196,000 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 0.4% - -------------------------------------------------------------------------------- 150,000 Central Garden and Pet Co.(1) 7,239,000 - -------------------------------------------------------------------------------- 85,000 WD-40 Co. 3,031,950 - -------------------------------------------------------------------------------- 10,270,950 - -------------------------------------------------------------------------------- INSURANCE -- 6.9% - -------------------------------------------------------------------------------- 445,000 American Equity Investment Life Holding Co. 5,460,150 - -------------------------------------------------------------------------------- 90,000 AmerUs Group Co. 6,120,900 - -------------------------------------------------------------------------------- 770,000 Aspen Insurance Holdings Ltd. 19,889,100 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 23 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 105,000 Delphi Financial Group, Inc. Cl A $ 4,187,400 - -------------------------------------------------------------------------------- 235,000 Direct General Corp. 3,163,100 - -------------------------------------------------------------------------------- 305,000 Endurance Specialty Holdings Ltd. 10,754,300 - -------------------------------------------------------------------------------- 115,000 Gallagher (Arthur J.) & Co. 3,067,050 - -------------------------------------------------------------------------------- 245,000 HCC Insurance Holdings, Inc. 8,055,600 - -------------------------------------------------------------------------------- 165,000 Hilb Rogal & Hobbs Co. 7,037,250 - -------------------------------------------------------------------------------- 145,000 IPC Holdings, Ltd. 4,410,900 - -------------------------------------------------------------------------------- 605,000 National Atlantic Holdings Corp. Cl A(1)(2) 6,927,250 - -------------------------------------------------------------------------------- 165,000 PartnerRe Ltd. 11,149,050 - -------------------------------------------------------------------------------- 375,000 Phoenix Companies Inc. 5,250,000 - -------------------------------------------------------------------------------- 805,000 Platinum Underwriters Holdings 24,818,150 - -------------------------------------------------------------------------------- 90,000 ProAssurance Corp(1) 4,435,200 - -------------------------------------------------------------------------------- 185,000 Protective Life Corporation 8,463,750 - -------------------------------------------------------------------------------- 70,000 Stancorp Financial Group Inc. 3,124,100 - -------------------------------------------------------------------------------- 265,000 United Fire & Casualty Co. 8,294,500 - -------------------------------------------------------------------------------- 144,607,750 - -------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES -- 0.2% - -------------------------------------------------------------------------------- 340,000 Digitas Inc.(1) 3,270,800 - -------------------------------------------------------------------------------- IT SERVICES -- 1.9% - -------------------------------------------------------------------------------- 395,000 Covansys Corp.(1) 6,770,300 - -------------------------------------------------------------------------------- 325,000 MAXIMUS, Inc. 8,482,500 - -------------------------------------------------------------------------------- 145,000 MoneyGram International Inc. 4,213,700 - -------------------------------------------------------------------------------- 1,525,000 Perot Systems Corp. Cl A(1) 21,029,750 - -------------------------------------------------------------------------------- 40,496,250 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 0.3% - -------------------------------------------------------------------------------- 540,000 K2 Inc.(1) 6,334,200 - -------------------------------------------------------------------------------- MACHINERY -- 4.9% - -------------------------------------------------------------------------------- 335,000 AGCO Corp.(1) 8,492,250 - -------------------------------------------------------------------------------- 200,000 Albany International Corp. 6,364,000 - -------------------------------------------------------------------------------- 250,000 Briggs & Stratton Corp. 6,887,500 - -------------------------------------------------------------------------------- 200,000 Crane Co. 8,360,000 - -------------------------------------------------------------------------------- 160,000 Kadant Inc.(1) 3,929,600 - -------------------------------------------------------------------------------- 455,000 Kaydon Corporation 16,844,100 - -------------------------------------------------------------------------------- 280,000 Kennametal Inc. 15,862,000 - -------------------------------------------------------------------------------- 265,000 Mueller Industries Inc. 9,320,050 - -------------------------------------------------------------------------------- 320,000 Pentair, Inc. 8,380,800 - -------------------------------------------------------------------------------- 380,000 Timken Co. 11,316,400 - -------------------------------------------------------------------------------- 480,000 Wabash National Corp. 6,571,200 - -------------------------------------------------------------------------------- 102,327,900 - -------------------------------------------------------------------------------- MARINE -- 0.2% - -------------------------------------------------------------------------------- 95,000 Alexander & Baldwin, Inc. 4,215,150 - -------------------------------------------------------------------------------- MEDIA -- 1.4% - -------------------------------------------------------------------------------- 480,000 Hearst-Argyle Television, Inc. 11,016,000 - -------------------------------------------------------------------------------- 1,155,000 Journal Communications Inc. 13,016,850 - -------------------------------------------------------------------------------- 270,000 Valassis Communications, Inc.(1) 4,765,500 - -------------------------------------------------------------------------------- 28,798,350 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- METALS & MINING -- 2.0% - -------------------------------------------------------------------------------- 110,000 Cleveland-Cliffs Inc. $ 4,192,100 - -------------------------------------------------------------------------------- 75,000 Compass Minerals International Inc. 2,123,250 - -------------------------------------------------------------------------------- 130,000 Gibraltar Industries Inc. 2,883,400 - -------------------------------------------------------------------------------- 110,000 Oregon Steel Mills, Inc.(1) 5,375,700 - -------------------------------------------------------------------------------- 100,000 Reliance Steel & Aluminum Company 3,214,000 - -------------------------------------------------------------------------------- 595,000 Schnitzer Steel Industries, Inc. Cl A 18,766,300 - -------------------------------------------------------------------------------- 140,000 Steel Technologies Inc. 2,748,200 - -------------------------------------------------------------------------------- 150,000 Worthington Industries, Inc. 2,559,000 - -------------------------------------------------------------------------------- 41,861,950 - -------------------------------------------------------------------------------- MULTI-UTILITIES -- 0.8% - -------------------------------------------------------------------------------- 695,000 Puget Energy Inc. 15,797,350 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 0.8% - -------------------------------------------------------------------------------- 660,000 Fred's, Inc. 8,329,200 - -------------------------------------------------------------------------------- 540,000 Tuesday Morning Corp. 7,495,200 - -------------------------------------------------------------------------------- 15,824,400 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 2.9% - -------------------------------------------------------------------------------- 465,000 Alpha Natural Resources, Inc.(1) 7,328,400 - -------------------------------------------------------------------------------- 370,000 Arlington Tankers Ltd. 8,347,200 - -------------------------------------------------------------------------------- 90,000 Cimarex Energy Co. 3,167,100 - -------------------------------------------------------------------------------- 755,000 Double Hull Tankers Inc. 10,381,250 - -------------------------------------------------------------------------------- 195,000 Encore Acquisition Co.(1) 4,746,300 - -------------------------------------------------------------------------------- 120,000 Forest Oil Corporation(1) 3,790,800 - -------------------------------------------------------------------------------- 220,000 Helix Energy Solutions Group, Inc.(1) 7,348,000 - -------------------------------------------------------------------------------- 65,000 Plains Exploration & Production Co.(1) 2,789,150 - -------------------------------------------------------------------------------- 230,000 St. Mary Land & Exploration Co. 8,443,300 - -------------------------------------------------------------------------------- 110,000 Stone Energy Corp(.(1)) 4,452,800 - -------------------------------------------------------------------------------- 60,794,300 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 0.6% - -------------------------------------------------------------------------------- 270,000 Glatfelter 3,658,500 - -------------------------------------------------------------------------------- 240,000 Neenah Paper Inc. 8,215,200 - -------------------------------------------------------------------------------- 11,873,700 - -------------------------------------------------------------------------------- PERSONAL PRODUCTS -- 0.2% - -------------------------------------------------------------------------------- 100,000 Chattem, Inc.(1) 3,512,000 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 1.1% - -------------------------------------------------------------------------------- 125,000 Kos Pharmaceuticals, Inc.(1) 6,177,500 - -------------------------------------------------------------------------------- 340,000 Par Pharmaceutical Companies Inc.(1) 6,201,600 - -------------------------------------------------------------------------------- 635,000 Perrigo Co. 10,775,950 - -------------------------------------------------------------------------------- 23,155,050 - -------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS -- 4.6% - -------------------------------------------------------------------------------- 415,000 American Financial Realty Trust 4,631,400 - -------------------------------------------------------------------------------- 985,000 Annaly Capital Management Inc. 12,942,900 - -------------------------------------------------------------------------------- 240,000 Anthracite Capital, Inc. 3,086,400 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 24 Small Cap Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 310,000 Education Realty Trust, Inc. $ 4,575,600 - -------------------------------------------------------------------------------- 665,000 Getty Realty Corp. 19,471,200 - -------------------------------------------------------------------------------- 300,000 Healthcare Realty Trust Inc. 11,523,000 - -------------------------------------------------------------------------------- 280,000 Highland Hospitality Corp. 4,012,400 - -------------------------------------------------------------------------------- 495,000 Lexington Corporate Properties Trust 10,484,100 - -------------------------------------------------------------------------------- 95,000 Mack-Cali Realty Corp. 4,921,000 - -------------------------------------------------------------------------------- 350,000 National Retail Properties, Inc. 7,560,000 - -------------------------------------------------------------------------------- 515,000 Realty Income Corp. 12,725,650 - -------------------------------------------------------------------------------- 95,933,650 - -------------------------------------------------------------------------------- ROAD & RAIL -- 1.6% - -------------------------------------------------------------------------------- 145,000 Arkansas Best Corporation 6,239,350 - -------------------------------------------------------------------------------- 400,000 Heartland Express, Inc. 6,272,000 - -------------------------------------------------------------------------------- 110,000 Ryder System, Inc. 5,684,800 - -------------------------------------------------------------------------------- 785,000 Werner Enterprises Inc. 14,687,350 - -------------------------------------------------------------------------------- 32,883,500 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.5% - -------------------------------------------------------------------------------- 190,000 Cohu, Inc. 3,387,700 - -------------------------------------------------------------------------------- 300,000 Exar Corp.(1) 3,987,000 - -------------------------------------------------------------------------------- 1,360,000 Mattson Technology Inc.(1) 11,288,000 - -------------------------------------------------------------------------------- 335,000 Silicon Image, Inc.(1) 4,261,200 - -------------------------------------------------------------------------------- 115,000 Varian Semiconductor Equipment Associates, Inc.(1) 4,220,500 - -------------------------------------------------------------------------------- 210,000 Veeco Instruments Inc.(1) 4,231,500 - -------------------------------------------------------------------------------- 31,375,900 - -------------------------------------------------------------------------------- SOFTWARE -- 4.8% - -------------------------------------------------------------------------------- 535,000 Compuware Corp.(1) 4,167,650 - -------------------------------------------------------------------------------- 300,000 Dendrite International, Inc.(1) 2,934,000 - -------------------------------------------------------------------------------- 290,000 Jack Henry & Associates Inc. 6,313,300 - -------------------------------------------------------------------------------- 130,000 Kronos Inc.(1) 4,431,700 - -------------------------------------------------------------------------------- 490,000 Lawson Software Inc.(1) 3,552,500 - -------------------------------------------------------------------------------- 175,000 McAfee Inc.(1) 4,280,500 - -------------------------------------------------------------------------------- 1,190,000 Parametric Technology Corp.(1) 20,777,400 - -------------------------------------------------------------------------------- 1,625,000 Sybase, Inc(.(1)) 39,390,000 - -------------------------------------------------------------------------------- 210,000 Synopsys, Inc.(1) 4,141,200 - -------------------------------------------------------------------------------- 975,000 Ulticom, Inc.(1) 10,149,750 - -------------------------------------------------------------------------------- 100,138,000 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 2.3% - -------------------------------------------------------------------------------- 410,000 Borders Group Inc. 8,364,000 - -------------------------------------------------------------------------------- 70,000 Christopher & Banks Corporation 2,063,600 - -------------------------------------------------------------------------------- 750,000 Hot Topic, Inc.(1) 8,355,000 - -------------------------------------------------------------------------------- 105,000 PETCO Animal Supplies Inc.(1) 3,007,200 - -------------------------------------------------------------------------------- 995,000 Pier 1 Imports, Inc. 7,382,900 - -------------------------------------------------------------------------------- 105,000 Stage Stores Inc. 3,080,700 - -------------------------------------------------------------------------------- 305,000 Talbots Inc. 8,311,250 - -------------------------------------------------------------------------------- 180,000 United Auto Group, Inc. 4,212,000 - -------------------------------------------------------------------------------- 155,000 Zale Corp.(1) 4,299,700 - -------------------------------------------------------------------------------- 49,076,350 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.4% - -------------------------------------------------------------------------------- 115,000 Columbia Sportswear Co.(1) $ 6,420,450 - -------------------------------------------------------------------------------- 425,000 Kenneth Cole Productions Inc. 10,357,250 - -------------------------------------------------------------------------------- 445,000 Wolverine World Wide, Inc. 12,597,950 - -------------------------------------------------------------------------------- 29,375,650 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 2.3% - -------------------------------------------------------------------------------- 520,000 Flagstar Bancorp Inc. 7,566,000 - -------------------------------------------------------------------------------- 75,000 MAF Bancorp Inc. 3,096,750 - -------------------------------------------------------------------------------- 160,000 Triad Guaranty Inc.(1) 8,187,200 - -------------------------------------------------------------------------------- 1,115,000 Washington Federal, Inc. 25,020,600 - -------------------------------------------------------------------------------- 90,000 Webster Financial Corp. 4,239,900 - -------------------------------------------------------------------------------- 48,110,450 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS -- 0.5% - -------------------------------------------------------------------------------- 110,000 Aircastle Ltd.(1) 3,196,600 - -------------------------------------------------------------------------------- 335,000 UAP Holding Corp. 7,158,950 - -------------------------------------------------------------------------------- 10,355,550 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $1,746,315,203) 1,975,888,987 - -------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS -- 0.7% INSURANCE -- 0.7% - -------------------------------------------------------------------------------- 290,000 Aspen Insurance Holdings Ltd., 5.625%, 12/31/49 (Cost $14,421,335) 15,097,400 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 4.3% Repurchase Agreement, Merrill Lynch & Co., Inc., (collateralized by various U.S. Treasury obligations, 3.625% -- 4.625%, 2/29/08 -- 5/15/13, valued at $92,423,138), in a joint trading account at 5.00%, dated 9/29/06, due 10/2/06 (Delivery value $90,737,792) (Cost $90,700,000) 90,700,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 99.6% (Cost $1,851,436,538) 2,081,686,387 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- 0.4% 7,315,391 - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $2,089,001,778 ================================================================================ 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 April 1, 2006 to September 30, 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) - ------ 26 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 4/1/06 - EXPENSE 4/1/06 9/30/06 9/30/06 RATIO* - ----------------------------------------------------------------------------------------------------- EQUITY INCOME SHAREHOLDER FEE EXAMPLE - ----------------------------------------------------------------------------------------------------- ACTUAL: - ----------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,079.60 $5.11 0.98% - ----------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,080.60 $4.07 0.78% - ----------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,078.30 $6.41 1.23% - ----------------------------------------------------------------------------------------------------- C Class $1,000 $1,074.20 $10.30 1.98% - ----------------------------------------------------------------------------------------------------- R Class $1,000 $1,077.10 $7.71 1.48% - ----------------------------------------------------------------------------------------------------- HYPOTHETICAL: - ----------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,020.16 $4.96 0.98% - ----------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,021.16 $3.95 0.78% - ----------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,018.90 $6.23 1.23% - ----------------------------------------------------------------------------------------------------- C Class $1,000 $1,015.14 $10.00 1.98% - ----------------------------------------------------------------------------------------------------- R Class $1,000 $1,017.65 $7.49 1.48% - ----------------------------------------------------------------------------------------------------- MID CAP VALUE SHAREHOLDER FEE EXAMPLE - ----------------------------------------------------------------------------------------------------- ACTUAL: - ----------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,040.20 $5.11 1.00% - ----------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,042.10 $4.10 0.80% - ----------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,038.90 $6.39 1.25% - ----------------------------------------------------------------------------------------------------- R Class $1,000 $1,038.40 $7.66 1.50% - ----------------------------------------------------------------------------------------------------- HYPOTHETICAL: - ----------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,020.05 $5.06 1.00% - ----------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,021.06 $4.05 0.80% - ----------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,018.80 $6.33 1.25% - ----------------------------------------------------------------------------------------------------- R Class $1,000 $1,017.55 $7.59 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 183, 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 4/1/06 - EXPENSE 4/1/06 9/30/06 9/30/06 RATIO* - ----------------------------------------------------------------------------------------------------- SMALL CAP VALUE SHAREHOLDER FEE EXAMPLE - ----------------------------------------------------------------------------------------------------- ACTUAL: - ----------------------------------------------------------------------------------------------------- Investor Class $1,000 $990.40 $6.24 1.25% - ----------------------------------------------------------------------------------------------------- Institutional Class $1,000 $991.40 $5.24 1.05% - ----------------------------------------------------------------------------------------------------- Advisor Class $1,000 $988.50 $7.48 1.50% - ----------------------------------------------------------------------------------------------------- C Class $1,000 $985.20 $11.20 2.25% - ----------------------------------------------------------------------------------------------------- HYPOTHETICAL: - ----------------------------------------------------------------------------------------------------- Investor Class $1,000 $1,018.80 $6.33 1.25% - ----------------------------------------------------------------------------------------------------- Institutional Class $1,000 $1,019.80 $5.32 1.05% - ----------------------------------------------------------------------------------------------------- Advisor Class $1,000 $1,017.55 $7.59 1.50% - ----------------------------------------------------------------------------------------------------- C Class $1,000 $1,013.79 $11.36 2.25% - ----------------------------------------------------------------------------------------------------- * Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. - ------ 28 Statement of Assets and Liabilities SEPTEMBER 30, 2006 (UNAUDITED) - ------------------------------------------------------------------------------------------------------ EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - ------------------------------------------------------------------------------------------------------ ASSETS Investment securities -- unaffiliated, at value (cost of $4,982,012,821, $210,985,253 and $1,830,696,602, respectively) $5,479,885,329 $220,607,555 $2,060,373,537 - ------------------------------------------------- Investment securities -- affiliated, at value (cost of $156,079,025, $-- and $20,739,936, respectively) 173,909,596 -- 21,312,850 - ----------------------------------------------------------------------------------------------------- Total investment securities, at value (cost of $5,138,091,846, $210,985,253 and $1,851,436,538, respectively) 5,653,794,925 220,607,555 2,081,686,387 - ------------------------------------------------- Cash 18,059,480 93,014 384,090 - ------------------------------------------------- Receivable for investments sold 71,136,262 2,866,786 13,937,234 - ------------------------------------------------- Receivable for forward foreign currency exchange contracts 615,860 3,458 -- - ------------------------------------------------- Receivable for capital shares sold 353,434 -- -- - ------------------------------------------------- Dividends and interest receivable 18,134,756 368,647 2,907,745 - ----------------------------------------------------------------------------------------------------- 5,762,094,717 223,939,460 2,098,915,456 - ----------------------------------------------------------------------------------------------------- LIABILITIES - ----------------------------------------------------------------------------------------------------- Payable for investments purchased 189,566,231 3,576,412 7,751,242 - ------------------------------------------------- Payable for capital shares redeemed 37,410 -- -- - ------------------------------------------------- Accrued management fees 4,034,528 171,028 1,984,743 - ------------------------------------------------- Distribution fees payable 263,357 2,270 89,560 - ------------------------------------------------- Service fees (and distribution fees R Class) payable 232,251 2,303 88,133 - ----------------------------------------------------------------------------------------------------- 194,133,777 3,752,013 9,913,678 - ----------------------------------------------------------------------------------------------------- NET ASSETS $5,567,960,940 $220,187,447 $2,089,001,778 ===================================================================================================== See Notes to Financial Statements. (continued) - ------ 29 Statement of Assets and Liabilities SEPTEMBER 30, 2006 (UNAUDITED) - ------------------------------------------------------------------------------------------------------ EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - ------------------------------------------------------------------------------------------------------ NET ASSETS CONSIST OF: - ------------------------------------------------------------------------------------------------------ Capital (par value and paid-in surplus) $4,748,353,216 $203,270,770 $1,665,942,080 - ------------------------------------------------- Undistributed net investment income 20,593,868 314,828 6,066,484 - ------------------------------------------------- Undistributed net realized gain on investment and foreign currency transactions 282,692,050 6,976,105 186,743,365 - ------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 516,321,806 9,625,744 230,249,849 - ------------------------------------------------------------------------------------------------------ $5,567,960,940 $220,187,447 $2,089,001,778 ====================================================================================================== INVESTOR CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------------------------------ Net assets $3,994,702,117 $195,201,843 $1,233,008,007 - ------------------------------------------------- Shares outstanding 460,257,106 15,588,137 119,096,740 - ------------------------------------------------- Net asset value per share $8.68 $12.52 $10.35 - ------------------------------------------------------------------------------------------------------ INSTITUTIONAL CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------------------------------ Net assets $430,426,680 $13,409,503 $425,315,848 - ------------------------------------------------- Shares outstanding 49,577,403 1,070,579 40,979,497 - ------------------------------------------------- Net asset value per share $8.68 $12.53 $10.38 - ------------------------------------------------------------------------------------------------------ ADVISOR CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------------------------------ Net assets $1,002,150,048 $11,495,635 $427,186,001 - ------------------------------------------------- Shares outstanding 115,457,702 917,960 41,344,110 - ------------------------------------------------- Net asset value per share $8.68 $12.52 $10.33 - ------------------------------------------------------------------------------------------------------ C CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------------------------------ Net assets $108,805,986 N/A $3,491,922 - ------------------------------------------------- Shares outstanding 12,534,054 N/A 350,104 - ------------------------------------------------- Net asset value per share $8.68 N/A $9.97 - ------------------------------------------------------------------------------------------------------ R CLASS, $0.01 PAR VALUE - ------------------------------------------------------------------------------------------------------ Net assets $31,876,109 $80,466 N/A - ------------------------------------------------- Shares outstanding 3,678,790 6,427 N/A - ------------------------------------------------- Net asset value per share $8.66 $12.52 N/A - ------------------------------------------------------------------------------------------------------ See Notes to Financial Statements. - ------ 30 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) - ------------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - ------------------------------------------------------------------------------------------------------- INVESTMENT INCOME - ------------------------------------------------------------------------------------------------------- INCOME: - --------------------------------------------- Dividends (including $3,804,765, $-, and $558,100 from affiliates, respectively, and net of foreign taxes withheld of $75,878, $8,480 and $--, respectively) $71,039,037 $2,115,660 $17,395,964 - --------------------------------------------- Interest 14,186,715 190,787 2,101,978 - ------------------------------------------------------------------------------------------------------- 85,225,752 2,306,447 19,497,942 - ------------------------------------------------------------------------------------------------------- EXPENSES: - --------------------------------------------- Management fees 23,343,784 991,610 12,329,780 - --------------------------------------------- Distribution fees: - --------------------------------------------- Advisor Class 1,138,456 12,501 535,395 - --------------------------------------------- C Class 379,353 -- 13,039 - --------------------------------------------- Service fees: - --------------------------------------------- Advisor Class 1,138,456 12,501 535,395 - --------------------------------------------- C Class 126,451 -- 4,346 - --------------------------------------------- Service and distribution fees -- R Class 67,017 123 -- - --------------------------------------------- Directors' fees and expenses 53,522 1,561 22,973 - --------------------------------------------- Other expenses 20,935 183 2,336 - ------------------------------------------------------------------------------------------------------- 26,267,974 1,018,479 13,443,264 - ------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 58,957,778 1,287,968 6,054,678 - ------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - ------------------------------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS) ON: - --------------------------------------------- Investment transactions (including $160,781, $--, and $(95,138) from affiliates, respectively) 211,812,119 2,947,055 94,605,457 - --------------------------------------------- Foreign currency transactions (9,324,429) (36,217) -- - ------------------------------------------------------------------------------------------------------- 202,487,690 2,910,838 94,605,457 - ------------------------------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: - --------------------------------------------- Investments 136,151,800 4,142,650 (128,691,451) - --------------------------------------------- Translation of assets and liabilities in foreign currencies 1,220,166 12,140 -- - ------------------------------------------------------------------------------------------------------- 137,371,966 4,154,790 (128,691,451) - ------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) 339,859,656 7,065,628 (34,085,994) - ------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $398,817,434 $8,353,596 $(28,031,316) ======================================================================================================= See Notes to Financial Statements. - ------ 31 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) AND YEAR ENDED MARCH 31, 2006 - ----------------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE - ----------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2006 MARCH 31, 2006 SEPT. 30, 2006 MARCH 31, 2006 - ----------------------------------------------------------------------------------------------------------- OPERATIONS - ----------------------------------------------------------------------------------------------------------- Net investment income $58,957,778 $126,219,985 $1,287,968 $1,680,658 - --------------------------------------- Net realized gain (loss) 202,487,690 195,858,071 2,910,838 10,300,973 - --------------------------------------- Change in net unrealized appreciation (depreciation) 137,371,966 31,000,797 4,154,790 3,674,784 - ----------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 398,817,434 353,078,853 8,353,596 15,656,415 - ----------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - ----------------------------------------------------------------------------------------------------------- From net investment income: - --------------------------------------- Investor Class (31,962,507) (83,854,848) (973,118) (1,370,720) - --------------------------------------- Institutional Class (3,775,181) (8,768,725) (77,592) (193,911) - --------------------------------------- Advisor Class (6,813,496) (18,424,499) (41,640) (46,170) - --------------------------------------- C Class (375,931) (1,157,833) -- -- - --------------------------------------- R Class (174,603) (295,018) (182) (130) - --------------------------------------- From net realized gains: - --------------------------------------- Investor Class -- (152,170,341) -- (7,182,643) - --------------------------------------- Institutional Class -- (14,179,871) -- (791,767) - --------------------------------------- Advisor Class -- (38,341,620) -- (313,785) - --------------------------------------- C Class -- (3,889,372) -- -- - --------------------------------------- R Class -- (738,981) -- (1,882) - ----------------------------------------------------------------------------------------------------------- Decrease in net assets from distributions (43,101,718) (321,821,108) (1,092,532) (9,901,008) - ----------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - ----------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions 88,458,102 710,003,537 78,951,241 77,022,146 - ----------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 444,173,818 741,261,282 86,212,305 82,777,553 =========================================================================================================== NET ASSETS - ----------------------------------------------------------------------------------------------------------- Beginning of period 5,123,787,122 4,382,525,840 133,975,142 51,197,589 - ----------------------------------------------------------------------------------------------------------- End of period $5,567,960,940 $5,123,787,122 $220,187,447 $133,975,142 =========================================================================================================== Undistributed net investment income $20,751,449 $4,737,808 $345,002 $119,392 =========================================================================================================== See Notes to Financial Statements. (continued) - ------ 32 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) AND YEAR ENDED MARCH 31, 2006 - -------------------------------------------------------------------------------- SMALL CAP VALUE - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2006 MARCH 31, 2006 - -------------------------------------------------------------------------------- OPERATIONS - -------------------------------------------------------------------------------- Net investment income $6,054,678 $11,959,261 - ------------------------------------ Net realized gain (loss) 94,605,457 286,362,584 - ------------------------------------ Change in net unrealized appreciation (depreciation) (128,691,451) 54,783,454 - -------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (28,031,316) 353,105,299 - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - -------------------------------------------------------------------------------- From net investment income: - ------------------------------------ Investor Class -- (8,075,787) - ------------------------------------ Institutional Class -- (3,220,003) - ------------------------------------ Advisor Class -- (1,441,212) - ------------------------------------ From net realized gains: - ------------------------------------ Investor Class -- (162,609,222) - ------------------------------------ Institutional Class -- (49,001,133) - ------------------------------------ Advisor Class -- (50,500,601) - ------------------------------------ C Class -- (448,869) - -------------------------------------------------------------------------------- Decrease in net assets from distributions -- (275,296,827) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - -------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions (166,996,084) 11,263,917 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (195,027,400) 89,072,389 NET ASSETS - -------------------------------------------------------------------------------- Beginning of period 2,284,029,178 2,194,956,789 - -------------------------------------------------------------------------------- End of period $2,089,001,778 $2,284,029,178 ================================================================================ Undistributed net investment income $6,066,484 $11,806 ================================================================================ See Notes to Financial Statements. - ------ 33 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Equity Income Fund (Equity Income), Mid Cap Value Fund (Mid Cap Value) and Small Cap Value Fund (Small Cap Value) (collectively, the funds) are three funds in a series issued by the corporation. The funds are diversified under the 1940 Act. Equity Income's investment objective is the production of current income; capital appreciation is a secondary objective. The fund 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. 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 distribution and servicing 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 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. Securities traded on foreign securities exchanges and over-the-counter markets are normally completed before the close of business on days that the New York Stock Exchange (the Exchange) is open and may also take place on days when the Exchange is not open. If an event occurs after the value of a security was established but before the net asset value per share was determined that was likely to materially change the net asset value, that security would be valued at fair value as determined in accordance with procedures adopted by the Board of Directors. 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. Certain other circumstances may cause the funds to fair value a security such as: a security has been declared in default; or trading in a security has been halted during the trading day; or there is a foreign market holiday and no trading will commence. 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 (continued) - ------ 34 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) possibility that the change in value of the contract may not correlate with the changes in value of the underlying securities. Options purchased by the funds are accounted for in the same manner as marketable portfolio securities. The proceeds from securities sold through the exercise of put options are decreased by the premium paid to purchase the put options. Upon entering into a futures contract, the funds are required to deposit either cash or securities in an amount equal to a certain percentage of the contract value (initial margin). Subsequent payments (variation margin) are made or received daily, in cash, by the funds. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. The funds recognize a realized gain or loss when the contract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of realized gain (loss) on investment transactions and unrealized appreciation (depreciation) on investments, respectively. 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. (continued) - ------ 35 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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. (continued) - ------ 36 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) 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% - -------------------------------------------------------------------------------- The effective annual management fee for each class of the funds for the six months ended September 30, 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 six months ended September 30, 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 six months ended September 30, 2006, were as follows: - -------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - -------------------------------------------------------------------------------- Purchases $4,890,097,080 $263,167,787 $1,277,243,206 - -------------------------------------------------------------------------------- Proceeds from sales $4,477,167,801 $192,789,569 $1,452,089,725 - -------------------------------------------------------------------------------- (continued) - ------ 37 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the funds were as follows: - ------------------------------------------------------------------------------------------------------------------ EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - ------------------------------------------------------------------------------------------------------------------ SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------------------ INVESTOR CLASS - ------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 1,360,000,000 30,000,000 300,000,000 ================================================================================================================== Sold 67,904,336 $567,547,370 7,981,509 $96,564,730 8,632,664 $87,370,435 - ------------------------ Issued in reinvestment of distributions 3,517,778 29,194,443 52,330 629,306 -- -- - ------------------------ Redeemed (69,544,300) (573,325,139) (1,974,970) (23,660,662) (22,506,068) (227,238,267) - ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) 1,877,814 $23,416,674 6,058,869 $73,533,374 (13,873,404) $(139,867,832) ================================================================================================================== 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 ================================================================================================================== INSTITUTIONAL CLASS - ------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 125,000,000 5,000,000 100,000,000 ================================================================================================================== Sold 14,513,460 $119,833,770 241,206 $2,905,141 7,295,148 $74,801,078 - ------------------------ Issued in reinvestment of distributions 420,207 3,489,155 6,447 77,592 -- -- - ------------------------ Redeemed (12,584,304) (103,178,887) (45,796) (549,899) (7,899,276) (79,370,096) - ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) 2,349,363 $20,144,038 201,857 $2,432,834 (604,128) $(4,569,018) ================================================================================================================== 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 ================================================================================================================== (continued) - ------ 38 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - -------------------------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - -------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------------------------------------- ADVISOR CLASS - -------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 300,000,000 5,000,000 125,000,000 ============================================================================================================== Sold 20,207,472 $168,833,467 290,922 $3,519,165 3,953,672 $40,161,492 - ------------------------- Issued in reinvestment of distributions 804,265 6,679,593 3,447 41,509 -- -- - ------------------------- Redeemed (16,920,977) (139,579,663) (52,285) (625,765) (6,169,273) (62,591,057) - -------------------------------------------------------------------------------------------------------------- Net increase (decrease) 4,090,760 $35,933,397 242,084 $2,934,909 (2,215,601) $(22,429,565) ============================================================================================================== 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) ============================================================================================================== C CLASS - -------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 30,000,000 N/A 5,000,000 ============================================================================================================== Sold 1,477,037 $12,281,302 389 $3,979 - ------------------------- Issued in reinvestment of distributions 38,716 323,176 -- -- - ------------------------- Redeemed (1,129,331) (9,318,582) (13,691) (133,648) - -------------------------------------------------------------------------------------------------------------- Net increase (decrease) 386,422 $3,285,896 (13,302) $(129,669) ============================================================================================================== 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 ============================================================================================================== (continued) - ------ 39 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - ----------------------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - ----------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ----------------------------------------------------------------------------------------------- R CLASS - ----------------------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 10,000,000 5,000,000 N/A =============================================================================================== Sold 1,142,206 $9,496,199 4,500 $53,805 - ------------------------- Issued in reinvestment of distributions 20,763 172,685 15 182 - ------------------------- Redeemed (485,070) (3,990,787) (312) (3,863) - ----------------------------------------------------------------------------------------------- Net increase (decrease) 677,899 $5,678,097 4,203 $50,124 =============================================================================================== 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 =============================================================================================== (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 six months ended September 30, 2006 follows: - -------------------------------------------------------------------------------------------------------------------- SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND SEPTEMBER 30, 2006 FUND/COMPANY 3/31/06 COST COST GAIN (LOSS) INCOME SHARE BALANCE MARKET VALUE - -------------------------------------------------------------------------------------------------------------------- EQUITY INCOME - -------------------------------------------------------------------------------------------------------------------- Cascade Natural Gas Corp.(1) 522,391 $615,241 $2,117,022 $186,365 $242,107 447,391 $11,672,431 - -------------------- Westar Energy Inc. 3,297,649 18,873,015 -- -- 1,924,500 4,160,749 97,819,209 - -------------------- WGL Holdings Inc. 2,425,900 206,720 169,903 (25,584) 1,638,158 2,427,900 76,090,387 - -------------------------------------------------------------------------------------------------------------------- $19,694,976 $2,286,925 $160,781 $3,804,765 $185,582,027 ==================================================================================================================== SMALL CAP VALUE - -------------------------------------------------------------------------------------------------------------------- National Atlantic Holdings Corp. Cl A(2) 665,000 -- $720,000 $(95,138) -- 605,000 $6,927,250 - -------------------- Patriot Capital Funding, Inc. 675,000 $4,596,531 -- -- $558,100 1,080,000 14,385,600 - -------------------------------------------------------------------------------------------------------------------- $4,596,531 $720,000 $(95,138) $558,100 $21,312,850 ==================================================================================================================== (1) Company was not an affiliate at September 30, 2006. (2) Non-income producing. (continued) - ------ 40 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 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. The funds may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The funds did not borrow from the line during the six months ended September 30, 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 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 September 30, 2006, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- EQUITY INCOME MID CAP VALUE SMALL CAP VALUE - -------------------------------------------------------------------------------- Federal tax cost of investments $5,186,080,389 $214,587,997 $1,907,018,347 ================================================================================ Gross tax appreciation of investments $493,829,627 $10,613,416 $241,438,528 - -------------------------- Gross tax depreciation of investments (26,115,091) (4,593,858) (66,770,488) - -------------------------------------------------------------------------------- Net tax appreciation (depreciation) of investments $467,714,536 $6,019,558 $174,668,040 ================================================================================ 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. Mid Cap Value had $1,284 of net foreign currency loss deferrals 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. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes --an Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. FIN 48 is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the date of effectiveness. The FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" (FAS 157), in September 2006, which is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands the required financial statement disclosures about fair value measurements. Management is currently evaluating the impact of adopting FIN 48 and FAS 157. - ------ 41 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------------------------------------ INVESTOR CLASS - ------------------------------------------------------------------------------------------------------------ 2006(1) 2006 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------------------ PER-SHARE DATA - ------------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $8.11 $8.05 $7.84 $6.22 $7.36 $6.47 - ------------------------------------------------------------------------------------------------------------ Income From Investment Operations - ----------------------------------- Net Investment Income(2) 0.10 0.20 0.21 0.22 0.17 0.17 - ----------------------------------- Net Realized and Unrealized Gain (Loss) 0.54 0.36 0.61 1.71 (1.05) 0.93 - ------------------------------------------------------------------------------------------------------------ Total From Investment Operations 0.64 0.56 0.82 1.93 (0.88) 1.10 - ------------------------------------------------------------------------------------------------------------ Distributions - ----------------------------------- From Net Investment Income (0.07) (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 (0.07) (0.50) (0.61) (0.31) (0.26) (0.21) - ------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $8.68 $8.11 $8.05 $7.84 $6.22 $7.36 ============================================================================================================ TOTAL RETURN(3) 7.96% 7.21% 10.69% 31.30% (12.09)% 17.35% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------ Ratio of Operating Expenses to Average Net Assets 0.98%(4) 0.98% 0.99% 1.00% 1.00% 1.00% - ----------------------------------- Ratio of Net Investment Income to Average Net Assets 2.36%(4) 2.53% 2.56% 2.95% 2.60% 2.49% - ----------------------------------- Portfolio Turnover Rate 91% 150% 174% 91% 120% 139% - ----------------------------------- Net Assets, End of Period (in thousands) $3,994,702 $3,715,366 $3,290,442 $2,248,158 $1,277,478 $1,025,143 - ------------------------------------------------------------------------------------------------------------ (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 42 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------------------------ INSTITUTIONAL CLASS - ------------------------------------------------------------------------------------------------ 2006(1) 2006 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------ PER-SHARE DATA - ------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $8.11 $8.06 $7.85 $6.23 $7.36 $6.47 - ------------------------------------------------------------------------------------------------ Income From Investment Operations - ---------------------------------- Net Investment Income(2) 0.11 0.22 0.22 0.24 0.19 0.19 - ---------------------------------- Net Realized and Unrealized Gain (Loss) 0.54 0.35 0.61 1.71 (1.04) 0.92 - ------------------------------------------------------------------------------------------------ Total From Investment Operations 0.65 0.57 0.83 1.95 (0.85) 1.11 - ------------------------------------------------------------------------------------------------ Distributions - ---------------------------------- From Net Investment Income (0.08) (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 (0.08) (0.52) (0.62) (0.33) (0.28) (0.22) - ------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $8.68 $8.11 $8.06 $7.85 $6.23 $7.36 ================================================================================================ TOTAL RETURN(3) 8.06% 7.29% 10.91% 31.51% (11.77)% 17.40% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------ Ratio of Operating Expenses to Average Net Assets 0.78%(4) 0.78% 0.79% 0.80% 0.80% 0.80% - ---------------------------------- Ratio of Net Investment Income to Average Net Assets 2.56%(4) 2.73% 2.76% 3.15% 2.80% 2.69% - ---------------------------------- Portfolio Turnover Rate 91% 150% 174% 91% 120% 139% - ---------------------------------- Net Assets, End of Period (in thousands) $430,427 $382,909 $257,195 $183,330 $77,837 $65,738 - ------------------------------------------------------------------------------------------------ (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 43 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------------------------- ADVISOR CLASS - ------------------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------- PER-SHARE DATA - ------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $8.11 $8.05 $7.84 $6.22 $7.36 $6.47 - ------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------- Net Investment Income(2) 0.09 0.18 0.19 0.20 0.16 0.16 - ----------------------------------- Net Realized and Unrealized Gain (Loss) 0.54 0.36 0.61 1.72 (1.05) 0.92 - ------------------------------------------------------------------------------------------------- Total From Investment Operations 0.63 0.54 0.80 1.92 (0.89) 1.08 - ------------------------------------------------------------------------------------------------- Distributions - ----------------------------------- From Net Investment Income (0.06) (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 (0.06) (0.48) (0.59) (0.30) (0.25) (0.19) - ------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.68 $8.11 $8.05 $7.84 $6.22 $7.36 ================================================================================================= TOTAL RETURN(3) 7.83% 6.94% 10.41% 30.97% (12.30)% 17.05% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.23%(4) 1.23% 1.24% 1.25% 1.25% 1.25% - ----------------------------------- Ratio of Net Investment Income to Average Net Assets 2.11%(4) 2.28% 2.31% 2.70% 2.35% 2.24% - ----------------------------------- Portfolio Turnover Rate 91% 150% 174% 91% 120% 139% - ----------------------------------- Net Assets, End of Period (in thousands) $1,002,150 $902,749 $765,331 $457,360 $156,911 $74,868 - ------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 44 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ---------------------------------------------------------------------------------------------- C CLASS - ---------------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002(2) - ---------------------------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $8.11 $8.06 $7.85 $6.21 $7.36 $6.89 - ---------------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------- Net Investment Income(3) 0.06 0.13 0.13 0.15 0.11 0.07 - ---------------------------------- Net Realized and Unrealized Gain (Loss) 0.54 0.34 0.61 1.73 (1.06) 0.50 - ---------------------------------------------------------------------------------------------- Total From Investment Operations 0.60 0.47 0.74 1.88 (0.95) 0.57 - ---------------------------------------------------------------------------------------------- Distributions - ---------------------------------- From Net Investment Income (0.03) (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 (0.03) (0.42) (0.53) (0.24) (0.20) (0.10) - ---------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.68 $8.11 $8.06 $7.85 $6.21 $7.36 ============================================================================================== TOTAL RETURN(4) 7.42% 6.02% 9.60% 30.37% (13.08)% 8.45% RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.98%(5) 1.98% 1.99% 2.00% 2.00% 2.00%(5) - ---------------------------------- Ratio of Net Investment Income to Average Net Assets 1.36%(5) 1.53% 1.56% 1.95% 1.60% 1.36%(5) - ---------------------------------- Portfolio Turnover Rate 91% 150% 174% 91% 120% 139%(6) - ---------------------------------- Net Assets, End of Period (in thousands) $108,806 $98,481 $63,512 $42,579 $12,254 $3,960 - ---------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) July 13, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 45 Equity Income - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------------- R CLASS - -------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004(2) - -------------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $8.09 $8.04 $7.84 $7.22 - -------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------- Net Investment Income(3) 0.08 0.17 0.17 0.11 - ----------------------------------------- Net Realized and Unrealized Gain (Loss) 0.54 0.34 0.60 0.76 - -------------------------------------------------------------------------------------- Total From Investment Operations 0.62 0.51 0.77 0.87 - -------------------------------------------------------------------------------------- Distributions - ----------------------------------------- From Net Investment Income (0.05) (0.14) (0.15) (0.13) - ----------------------------------------- From Net Realized Gains -- (0.32) (0.42) (0.12) - -------------------------------------------------------------------------------------- Total Distributions (0.05) (0.46) (0.57) (0.25) - -------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.66 $8.09 $8.04 $7.84 ====================================================================================== TOTAL RETURN(4) 7.71% 6.56% 10.03% 12.19% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.48%(5) 1.48% 1.44%(6) 1.50%(5) - ----------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.86%(5) 2.03% 2.11%(6) 2.44%(5) - ----------------------------------------- Portfolio Turnover Rate 91% 150% 174% 91%(7) - ----------------------------------------- Net Assets, End of Period (in thousands) $31,876 $24,283 $6,046 $392 - -------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) August 29, 2003 (commencement of sale) through March 31, 2004. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) During a portion of the year ended March 31, 2005, the class received 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. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2004. See Notes to Financial Statements. - ------ 46 Mid Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------------- INVESTOR CLASS - ------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004(2) - ------------------------------------------------------------------------------------- PER-SHARE DATA - ------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $12.10 $11.32 $10.02 $10.00 - ------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------- Net Investment Income(3) 0.08 0.21 0.09 --(4) - ----------------------------------------- Net Realized and Unrealized Gain (Loss) 0.40 1.70 1.54 0.02 - ------------------------------------------------------------------------------------- Total From Investment Operations 0.48 1.91 1.63 0.02 - ------------------------------------------------------------------------------------- Distributions - ----------------------------------------- From Net Investment Income (0.06) (0.21) (0.06) -- - ----------------------------------------- From Net Realized Gains -- (0.92) (0.27) -- - ------------------------------------------------------------------------------------- Total Distributions (0.06) (1.13) (0.33) -- - ------------------------------------------------------------------------------------- Net Asset Value, End of Period $12.52 $12.10 $11.32 $10.02 ===================================================================================== TOTAL RETURN(5) 4.02% 17.62% 16.40% 0.20% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.00%(6) 1.00% 1.00% 1.00%(6) - ----------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.27%(6) 1.77% 0.83% 0.00%(6) - ----------------------------------------- Portfolio Turnover Rate 98% 228% 192% 0% - ----------------------------------------- Net Assets, End of Period (in thousands) $195,202 $115,262 $42,059 $1,619 - ------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) For the one day period ended March 31, 2004 (inception date). (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. See Notes to Financial Statements. - ------ 47 Mid Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- 2006(1) 2006 2005(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $12.10 $11.33 $10.07 - -------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------- Net Investment Income(3) 0.09 0.24 0.07 - ----------------------------------------- Net Realized and Unrealized Gain (Loss) 0.42 1.69 1.51 - -------------------------------------------------------------------------------- Total From Investment Operations 0.51 1.93 1.58 - -------------------------------------------------------------------------------- Distributions - ----------------------------------------- From Net Investment Income (0.08) (0.24) (0.05) - ----------------------------------------- From Net Realized Gains -- (0.92) (0.27) - -------------------------------------------------------------------------------- Total Distributions (0.08) (1.16) (0.32) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $12.53 $12.10 $11.33 ================================================================================ TOTAL RETURN(4) 4.21% 17.74% 15.82% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.80%(5) 0.80% 0.80%(5) - ----------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.47%(5) 1.97% 1.00%(5) - ----------------------------------------- Portfolio Turnover Rate 98% 228% 192%(6) - ----------------------------------------- Net Assets, End of Period (in thousands) $13,410 $10,510 $8,082 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) August 2, 2004 (commencement of sale) through March 31, 2005. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2005. See Notes to Financial Statements. - ------ 48 Mid Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------- ADVISOR CLASS - -------------------------------------------------------------------------------- 2006(1) 2006 2005(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $12.10 $11.32 $10.99 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income(3) 0.06 0.16 0.03 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 0.41 1.72 0.31 - -------------------------------------------------------------------------------- Total From Investment Operations 0.47 1.88 0.34 - -------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.05) (0.18) (0.01) - ------------------------------------------ From Net Realized Gains -- (0.92) -- - -------------------------------------------------------------------------------- Total Distributions (0.05) (1.10) (0.01) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $12.52 $12.10 $11.32 ================================================================================ TOTAL RETURN(4) 3.89% 17.32% 3.05% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.25%(5) 1.25% 1.25%(5) - ------------------------------------------ Ratio of Net Investment Income to Average Net Assets 1.02%(5) 1.52% 1.34%(5) - ------------------------------------------ Portfolio Turnover Rate 98% 228% 192%(6) - ------------------------------------------ Net Assets, End of Period (in thousands) $11,496 $8,175 $1,057 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) January 13, 2005 (commencement of sale) through March 31, 2005. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2005. See Notes to Financial Statements. - ------ 49 Mid Cap Value - Financial Highlights For a Share Outstanding Throughout the Periods Indicated - -------------------------------------------------------------------------------- R CLASS - -------------------------------------------------------------------------------- 2006(1) 2006(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $12.09 $12.21 - -------------------------------------------------------------------------------- Income From Investment Operations - -------------------------------------------- Net Investment Income(3) 0.05 0.07 - -------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.41 0.79 - -------------------------------------------------------------------------------- Total From Investment Operations 0.46 0.86 - -------------------------------------------------------------------------------- Distributions - -------------------------------------------- From Net Investment Income (0.03) (0.06) - -------------------------------------------- From Net Realized Gains -- (0.92) - -------------------------------------------------------------------------------- Total Distributions (0.03) (0.98) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $12.52 $12.09 ================================================================================ TOTAL RETURN(4) 3.84% 7.56% RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.50%(5) 1.50%(5) - -------------------------------------------- Ratio of Net Investment Income to Average Net Assets 0.77%(5) 0.97%(5) - -------------------------------------------- Portfolio Turnover Rate 98% 228%(6) - -------------------------------------------- Net Assets, End of Period (in thousands) $80 $27 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) July 29, 2005 (commencement of sale) through March 31, 2006. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2006. See Notes to Financial Statements. - ------ 50 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ----------------------------------------------------------------------------------------------------------- INVESTOR CLASS - ----------------------------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002 - ----------------------------------------------------------------------------------------------------------- PER-SHARE DATA - ----------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.45 $10.07 $9.71 $6.44 $8.62 $6.60 - ----------------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------ Net Investment Income(2) 0.03 0.06 0.03 0.05 0.03 0.02 - ------------------------------------ Net Realized and Unrealized Gain (Loss) (0.13) 1.72 1.31 3.26 (1.87) 2.20 - ----------------------------------------------------------------------------------------------------------- Total From Investment Operations (0.10) 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 $10.35 $10.45 $10.07 $9.71 $6.44 $8.62 =========================================================================================================== TOTAL RETURN(3) (0.96)% 18.67% 14.00% 51.53% (21.55)% 33.97% RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.25%(4) 1.25% 1.25% 1.26% 1.25% 1.25% - ------------------------------------ Ratio of Net Investment Income to Average Net Assets 0.58%(4) 0.58% 0.32% 0.59% 0.37% 0.27% - ------------------------------------ Portfolio Turnover Rate 63% 111% 108% 110% 104% 73% - ------------------------------------ Net Assets, End of Period (in thousands) $1,233,008 $1,390,024 $1,252,153 $1,050,500 $670,755 $1,305,952 - ----------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 51 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------------------------ INSTITUTIONAL CLASS - ------------------------------------------------------------------------------------------------ 2006(1) 2006 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------ PER-SHARE DATA - ------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $10.47 $10.08 $9.72 $6.45 $8.63 $6.61 - ------------------------------------------------------------------------------------------------ Income From Investment Operations - ----------------------------------- Net Investment Income(2) 0.04 0.08 0.05 0.07 0.04 0.03 - ----------------------------------- Net Realized and Unrealized Gain (Loss) (0.13) 1.73 1.31 3.26 (1.87) 2.20 - ------------------------------------------------------------------------------------------------ Total From Investment Operations (0.09) 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 $10.38 $10.47 $10.08 $9.72 $6.45 $8.63 ================================================================================================ TOTAL RETURN(3) (0.86)% 18.98% 14.20% 51.75% (21.38)% 34.11% Ratios/Supplemental Data - ------------------------------------------------------------------------------------------------ Ratio of Operating Expenses to Average Net Assets 1.05%(4) 1.05% 1.05% 1.06% 1.05% 1.05% - ----------------------------------- Ratio of Net Investment Income to Average Net Assets 0.78%(4) 0.78% 0.52% 0.79% 0.57% 0.47% - ----------------------------------- Portfolio Turnover Rate 63% 111% 108% 110% 104% 73% - ----------------------------------- Net Assets, End of Period (in thousands) $425,316 $435,327 $314,700 $170,784 $79,546 $83,712 - ------------------------------------------------------------------------------------------------ (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 52 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------------------------- ADVISOR CLASS - ------------------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------- PER-SHARE DATA - ------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.45 $10.06 $9.71 $6.43 $8.62 $6.60 - ------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------- Net Investment Income(2) 0.02 0.03 0.01 0.03 0.01 --(3) - ----------------------------------- Net Realized and Unrealized Gain (Loss) (0.14) 1.74 1.30 3.27 (1.87) 2.21 - ------------------------------------------------------------------------------------------------- Total From Investment Operations (0.12) 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 $10.33 $10.45 $10.06 $9.71 $6.43 $8.62 ================================================================================================= TOTAL RETURN(4) (1.15)% 18.51% 13.70% 51.38% (21.85)% 33.74% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.50%(5) 1.50% 1.50% 1.51% 1.50% 1.50% - ----------------------------------- Ratio of Net Investment Income to Average Net Assets 0.33%(5) 0.33% 0.07% 0.34% 0.12% 0.02% - ----------------------------------- Portfolio Turnover Rate 63% 111% 108% 110% 104% 73% - ----------------------------------- Net Assets, End of Period (in thousands) $427,186 $455,001 $624,633 $432,261 $173,064 $182,986 - ------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Per-share amount was less than $0.005. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. See Notes to Financial Statements. - ------ 53 Small Cap Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------------------------------ C CLASS - ------------------------------------------------------------------------------------------------------ 2006(1) 2006 2005 2004 2003 2002(2) - ------------------------------------------------------------------------------------------------------ PER-SHARE DATA - ------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $10.12 $9.83 $9.57 $6.35 $8.59 $7.57 - ------------------------------------------------------------------------------------------------------ Income From Investment Operations - ----------------------------------- Net Investment Loss(3) (0.02) (0.04) (0.07) (0.03) (0.04) (0.05) - ----------------------------------- Net Realized and Unrealized Gain (Loss) (0.13) 1.67 1.28 3.25 (1.88) 1.23 - ------------------------------------------------------------------------------------------------------ Total From Investment Operations (0.15) 1.63 1.21 3.22 (1.92) 1.18 - ------------------------------------------------------------------------------------------------------ Distributions - ----------------------------------- From Net Investment Income -- -- -- -- -- --(4) - ----------------------------------- 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 $9.97 $10.12 $9.83 $9.57 $6.35 $8.59 ====================================================================================================== TOTAL RETURN(5) (1.48)% 17.48% 12.85% 50.71% (22.58)% 15.80% RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------ Ratio of Operating Expenses to Average Net Assets 2.25%(6) 2.25% 2.25% 2.26% 2.25% 2.25%(6) - ----------------------------------- Ratio of Net Investment Loss to Average Net Assets (0.42)%(6) (0.42)% (0.68)% (0.41)% (0.63)% (0.78)%(6) - ----------------------------------- Portfolio Turnover Rate 63% 111% 108% 110% 104% 73%(7) - ----------------------------------- Net Assets, End of Period (in thousands) $3,492 $3,678 $3,470 $3,711 $2,936 $3,997 - ------------------------------------------------------------------------------------------------------ (1) Six months ended September 30, 2006 (unaudited). (2) June 1, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 54 Approval of Management Agreements for Equity Income, Mid Cap Value and Small Cap Value Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund's independent directors or trustees (the "Directors") each year. At American Century, this process is referred to as the "15(c) Process." As a part of this process, the board reviews fund performance, shareholder services, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. In addition to this annual review, the board of directors oversees and evaluates on a continuous basis at its quarterly meetings the nature and quality of significant services performed by the advisor, fund performance, audit and compliance information, and a variety of other reports relating to fund operations. The board, or committees of the board, also holds special meetings as needed. Under a Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for the board's approval or renewal of any advisory agreements within the fund's most recently completed fiscal half-year period. ANNUAL CONTRACT REVIEW PROCESS As part of the annual 15(c) Process undertaken during the most recent fiscal half-year period, the Directors reviewed extensive data and information compiled by the advisor and certain independent providers of evaluative data (the "15(c) Providers") concerning Equity Income, Mid Cap Value and Small Cap Value (the "funds") and the services provided to the funds under the management agreement. The information considered and the discussions held at the meetings included, but were not limited to: * the nature, extent and quality of investment management, shareholder services and other services provided to the funds under the management agreement; * reports on the advisor's activities relating to the wide range of programs and services the advisor provides to the funds and their shareholders on a routine and non-routine basis; * data comparing the cost of owning the funds to the cost of owning similar funds; * data comparing the funds' performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; * financial data showing the profitability of the funds to the advisor and the overall profitability of the advisor; and * data comparing services provided and charges to other investment management clients of the advisor. In keeping with its practice, the funds' board of directors held two regularly scheduled meetings and one special meeting to review and discuss the information provided by the advisor and to complete its negotiations with the advisor regarding the renewal of the management agreement, including the setting of the applicable advisory fee. The board also had the benefit of the advice of its independent counsel throughout the period. (continued) - ------ 55 Approval of Management Agreements for Equity Income, Mid Cap Value and Small Cap Value FACTORS CONSIDERED The Directors considered all of the information provided by the advisor, the 15(c) Providers, and the board's independent counsel, and evaluated such information for each fund for which the board has responsibility. The Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the agreement under the terms ultimately determined by the board to be appropriate, the Directors' decision was based on the following factors. NATURE, EXTENT AND QUALITY OF SERVICES -- GENERALLY. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the funds. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including: * fund construction and design * portfolio security selection * initial capitalization/funding * securities trading * custody of fund assets * daily valuation of the funds' portfolio * shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping and communications * legal services * regulatory and portfolio compliance * financial reporting * marketing and distribution The Directors noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings. INVESTMENT MANAGEMENT SERVICES. The nature of the investment management services provided is quite complex and allows fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes, and liquidity. In evaluating investment performance, the board expects the advisor to manage the funds in accordance with their investment objectives and approved strategies. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. At each quarterly meeting, the Directors review investment performance information for the funds, together with comparative information for appropriate benchmarks and peer groups of funds managed similarly to the funds. The Directors also review detailed performance information during the 15(c) Process comparing the funds' performance with that of similar funds not managed by the advisor. If performance (continued) - ------ 56 Approval of Management Agreements for Equity Income, Mid Cap Value and Small Cap Value concerns are identified, the Directors discuss with the advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Equity Income's performance fell below the median for both the one and three year periods during part of the past year. The board discussed the fund's performance with the advisor and was satisfied with the efforts being undertaken by the advisor. Mid Cap Value's performance for both the one and three year periods was above the median for its peer group. Small Cap Value's performance for the one year period was above the median for its peer group and slightly below the median for the three year period. SHAREHOLDER AND OTHER SERVICES. The advisor provides the funds with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at their regular quarterly meetings, including the annual meeting concerning contract review, and reports to the board. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor. COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor provides detailed information concerning its cost of providing various services to the funds, its profitability in managing the funds, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor's financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. ETHICS OF THE ADVISOR. The Directors generally consider the advisor's commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor's practices generally meet or exceed industry best practices and that the advisor was not implicated in the industry scandals of 2003 and 2004. ECONOMIES OF SCALE. The Directors review reports provided by the advisor on economies of scale for the complex as a whole and the year-over-year changes in revenue, costs, and profitability. The Directors concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. This analysis is also complicated by the additional services and content provided by the advisor and its reinvestment in its ability to provide and expand those services. Accordingly, the (continued) - ------ 57 Approval of Management Agreements for Equity Income, Mid Cap Value and Small Cap Value Directors also seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the funds specifically, the expenses incurred by the advisor in providing various functions to the funds, and the breakpoint fees of competitive funds not managed by the advisor. The Directors believe the advisor is appropriately sharing economies of scale through its competitive fee structure, fee breakpoints as the funds increase in size, and through reinvestment in its business to provide shareholders additional content and services. COMPARISON TO OTHER FUNDS' FEES. The funds pay the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the funds, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the funds' independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The board believes the unified fee structure is a benefit to fund shareholders because it clearly discloses to shareholders the cost of owning fund shares, and, since the unified fee cannot be increased without a vote of fund shareholders, it shifts to the advisor the risk of increased costs of operating the funds and provides a direct incentive to minimize administrative inefficiencies. Part of the Directors' analysis of fee levels involves reviewing certain evaluative data compiled by a 15(c) Provider comparing the funds' unified fee to the total expense ratio of other funds in the funds' peer groups. The unified fee charged to shareholders of Equity Income and Mid Cap Value was below the median of the total expense ratios of their peer groups. The unified fee charged to shareholders of Small Cap Value was at the median of the total expense ratios of its peer group. COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the funds. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the funds. The Directors analyzed this information and concluded that the fees charged and services provided to the funds were reasonable by comparison. COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information from the advisor concerning collateral benefits it receives as a result (continued) - ------ 58 Approval of Management Agreements for Equity Income, Mid Cap Value and Small Cap Value of its relationship with the funds. They concluded that the advisor's primary business is managing mutual funds and it generally does not use the funds or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is able to provide investment management services to certain clients other than the funds, at least in part, due to its existing infrastructure built to serve the fund complex. The Directors concluded, however, that the assets of those other clients are not material to the analysis and, in any event, are included with the assets of the funds to determine breakpoints in the funds' fee schedules, provided they are managed using the same investment team and strategy. CONCLUSIONS OF THE DIRECTORS As a result of this process, the independent directors, in the absence of particular circumstances and assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor concluded that the investment management agreement between the funds and the advisor is fair and reasonable in light of the services provided and should be renewed. - ------ 59 Share Class Information Five classes of shares are authorized for sale by Equity Income: Investor Class, Institutional Class, Advisor Class, C Class and R Class. Four classes of shares are authorized for sale by Mid Cap Value: Investor Class, Institutional Class, Advisor Class, and R Class. Four classes of shares are authorized for sale by Small Cap Value: Investor Class, Institutional Class, Advisor Class, and C Class. The total expense ratio of Institutional Class shares is lower than that of Investor Class shares. The total expense ratios of Advisor 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 distribution and service 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 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 website at americancentury.com and on the Securities and Exchange Commission's website 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 website 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 website 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 Holdings, Inc. American Century Investment Services, Inc., Distributor 0611 SH-SAN-51659S (c)2006 American Century Proprietary Holdings, Inc. All rights reserved.
AMERICAN CENTURY INVESTMENTS Semiannual Report September 30, 2006 [photo of fall trees] Value Fund Large Company Value Fund [american century investments logo and text logo] Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] /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. We are pleased to provide you with the semiannual report for the American Century Value and Large Company Value funds for the six months ended September 30, 2006. We hope you find this information helpful in monitoring your investment. Another useful resource we offer is our website, americancentury.com, where we post quarterly portfolio commentaries, the views of senior investment officers and analysts, and other communications about investments, portfolio strategy, personal finance, and the markets. In its most recent rankings, Dalbar -- which issues customer satisfaction ratings and rankings based on website functionality -- ranked americancentury.com fourth out of the sites provided by the top 25 fund companies that it believes lead the industry in web-based technology. Our website earned an "Excellent" rating, Dalbar's highest designation. For most of 2006, our website has linked visitors to information explaining our strategic collaboration with Lance Armstrong and the Lance Armstrong Foundation (LAF). This 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. To learn more about the collaboration and the LAF, please visit americancentury.com or www.lanceface.com on the Web and click on the links to related sites. With the approach of year end and the 2006 tax season, you can also find out more about December fund distributions and tax information via a link from our website. We've posted December distribution estimates for over 50 funds, answers to frequent distribution questions, and online descriptions of all of the tax information we provide to investors. If you haven't visited americancentury.com yet, we encourage you to do so . . . it's there to serve you. And so are we. As always, we deeply appreciate your commitment to American Century Investments. Table of Contents Market Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Six-Month Total Returns . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 OTHER INFORMATION Approval of Management Agreements for Value and Large Company Value . . . . . . . . . . . . . . . . . . . . . . 45 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. Market Perspective [photo of Phil Davidson] BY PHIL DAVIDSON, CHIEF INVESTMENT OFFICER, U.S. VALUE EQUITY MODEST RALLY FOR STOCKS Cooling energy prices and a pause in Federal Reserve interest rate hikes enabled U.S. stocks to post positive results for the six months ended September 30, 2006. In fact, during the final week of the period, the Dow Jones Industrial Average briefly surpassed its all-time closing high, only to fall back and close below the record. As a result of this late summer rally, the Dow Industrials and the S&P 500 Index overcame second-quarter losses (based on earlier fears about inflation and economic growth) to post gains. However, the technology-heavy Nasdaq Composite, which suffered a steep second-quarter decline, remained down for the period. PLAYING DEFENSE After enduring a difficult spring--the S&P 500 fell 4.15% during the last three weeks of May alone--many stock investors played defense during the summer. Seeking companies with more predictable earnings and dividend payouts, they shifted money into utilities and telecommunication service providers, as well as retailers of everyday consumer products. Meanwhile, falling oil prices drove money out of energy stocks, and, with the economy slowing, investors were lukewarm to information technology businesses and cyclical groups like industrials and materials. SIZE AND QUALITY MATTERED Within the value realm, large companies had the highest returns for the six months, as evidenced by the Russell 1000 Value Index's 6.85% gain. At the other end of the spectrum, the Russell 2000 Value Index, a measure of small-cap companies, was basically flat for the period. Medium-sized value companies performed in between as the Russell Midcap Value Index gained 2.95%. On the whole, value shares performed better than growth stocks across the capitalization range. In addition to size, quality mattered. Merrill Lynch data indicated that a multi-year rally in lower-quality issues reversed course during the period as companies rated B+ or higher by Standard & Poor's significantly outperformed lower-rated businesses, particularly during the third quarter. Historically, market cycles led by sound companies with strong balance sheets have tended to elevate returns of American Century's value funds, which generally seek higher-quality stocks. While value shares paced the market, few clear value themes emerged. That put the onus on stock-picking ability--finding attractive value investments, one by one. As "bottom-up" value investors who rely on a disciplined, repeatable process, we're confident that this situation plays to our strength. SIX-MONTH TOTAL RETURNS AS OF SEPTEMBER 30, 2006* - -------------------------------------------------------------------------------- Dow Jones Industrial Average 6.34% - -------------------------------------------------------------------------------- S&P 500 Index 4.14% - -------------------------------------------------------------------------------- Nasdaq Composite -3.15% - -------------------------------------------------------------------------------- *Total returns for periods less than one year are not annualized. - ------ 2 Value - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2006 ----------------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS 6.49% 14.69% 11.14% 11.03% 12.42% 9/1/93 - -------------------------------------------------------------------------------- RUSSELL 3000 VALUE INDEX(2) 6.18% 14.55% 11.18% 11.31% 11.89%(3) -- - -------------------------------------------------------------------------------- S&P 500 INDEX(2) 4.14% 10.79% 6.97% 8.59% 10.43%(3) -- - -------------------------------------------------------------------------------- LIPPER MULTI-CAP VALUE INDEX(2) 3.67% 10.94% 10.42% 9.65% 10.64%(3) -- - -------------------------------------------------------------------------------- Institutional Class 6.58% 14.89% 11.35% -- 9.10% 7/31/97 - -------------------------------------------------------------------------------- Advisor Class 6.35% 14.40% 10.87% -- 10.67% 10/2/96 - -------------------------------------------------------------------------------- A Class 1/31/03 No sales charge* 6.34% 14.53% -- -- 16.51% With sales charge* 0.21% 7.97% -- -- 14.66% - -------------------------------------------------------------------------------- B Class 1/31/03 No sales charge* 5.95% 13.56% -- -- 15.71%(4) With sales charge* 0.95% 9.56% -- -- 15.15%(4) - -------------------------------------------------------------------------------- C Class 6/4/01 No sales charge* 5.85% 13.49% 10.03% -- 7.56% With sales charge* 4.85% 13.49% 10.03% -- 7.56% - -------------------------------------------------------------------------------- R Class 6.22% 14.12% -- -- 9.75% 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) Total returns for periods less than one year are not annualized. (2) 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. (3) Since 8/31/93, the date nearest the Investor Class's inception for which data are available. (4) Class return would have been lower if the class had not received partial reimbursements or waivers of its distribution and service fees. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. (continued) - ------ 3 Value - Performance GROWTH OF $10,000 OVER 10 YEARS $10,000 investment made September 30, 1996
![](https://capedge.com/proxy/N-CSRS/0000908186-06-000070/growthvalue0611.gif)
ONE-YEAR RETURNS OVER 10 YEARS Periods ended September 30 - ------------------------------------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 - ------------------------------------------------------------------------------------------------------------- Investor Class 37.80% -5.98% 12.04% 2.95% 12.36% -8.55% 23.02% 19.56% 9.96% 14.69% - ------------------------------------------------------------------------------------------------------------- Russell 3000 Value Index 42.33% 1.96% 17.64% 9.35% -7.98% -15.89% 24.89% 20.89% 16.78% 14.55% - ------------------------------------------------------------------------------------------------------------- S&P 500 Index 40.45% 9.05% 27.80% 13.28% -26.62% -20.49% 24.40% 13.87% 12.25% 10.79% - ------------------------------------------------------------------------------------------------------------- Lipper Multi-Cap Value Index 37.54% -7.19% 15.36% 10.61% -6.04% -14.25% 27.08% 17.61% 15.42% 10.94% - ------------------------------------------------------------------------------------------------------------- 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. - ------ 4 Value - Portfolio Commentary PORTFOLIO MANAGERS: PHIL DAVIDSON, MICHAEL LISS, AND SCOTT MOORE PERFORMANCE SUMMARY Value gained 6.49%(1) for the six months ended September 30, 2006, significantly outperforming the Lipper Multi-Cap Value Index, which was up 3.67%. The Russell 3000 Value Index, indicative of the larger capitalization, value side of the market, gained 6.18%. The median return for Morningstar's Large Cap Value category was 5.29%(2). Looking more broadly, the S&P 500 Index gained 4.14%. These six-month results reflected an equities market in which investors generally preferred the more stable returns associated with high-quality, more-established companies. That environment fit well with Value's investment process, which seeks higher-quality businesses with strong cash flows and sound balance sheets. As a result, the portfolio received positive contributions from nine of the ten sectors in which it was invested. Over time, our disciplined investment approach has provided longer-term investors with solid performance. Since Value's inception on September 1, 1993, the portfolio has produced an average annualized return of 12.42%, versus a 10.64%(3) average return for the Lipper Multi-Cap Value Index and the Russell 3000 Value Index's 11.89%(3). The median return for Morningstar's Large Cap Value category was 10.16%. The S&P 500 had a 10.43%(3) average annualized return for the same period. FINANCIALS LED THE PORTFOLIO Financial stocks proved to be the portfolio's largest contributors to absolute results, led by shares of diversified financial services companies. Within that space, we were rewarded for taking a large position in Bank of America Corp. The second-largest bank in the United Sates, Bank of America posted a double-digit return, benefiting from synergies stemming from its acquisition of credit card giant MBNA Corp. Freddie Mac was another strong contributor--as well as a good example of our willingness to be patient while a company works through what we believe are transitory problems. The mortgage industry stock rebounded after being beset by a delay in reporting TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Bank of America Corp. 3.7% 4.8% - -------------------------------------------------------------------------------- Kimberly-Clark Corp. 3.6% 3.6% - -------------------------------------------------------------------------------- Beckman Coulter, Inc. 2.7% 1.3% - -------------------------------------------------------------------------------- Freddie Mac 2.6% 1.8% - -------------------------------------------------------------------------------- American International Group, Inc. 2.6% 1.7% - -------------------------------------------------------------------------------- Equitable Resources Inc. 2.5% 1.3% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 2.4% 3.2% - -------------------------------------------------------------------------------- International Flavors & Fragrances Inc. 2.4% 3.8% - -------------------------------------------------------------------------------- H.J. Heinz Co. 2.2% 0.8% - -------------------------------------------------------------------------------- HCA Inc. 2.1% 0.9% - -------------------------------------------------------------------------------- (1) All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. (2) The median returns for Morningstar's Large Cap Value category were 12.36%, 8.51%, and 8.80% for the 1-, 5-, and 10-year periods ended September 30, 2006, respectively. (3) Since 8/31/93, the date nearest the Investor Class's inception for which data are available. (continued) - ------ 5 Value - Portfolio Commentary its 2005 results and the prospect of increased regulation of government-sponsored enterprises. CONSUMER STAPLES ADDED TO RESULTS Investments in providers of everyday consumer products were another strong source of performance. Our top-contributing securities included Kimberly-Clark Corp. and Kraft Foods Inc. Kimberly-Clark, one of the world's largest makers of personal-care paper products, benefited from price increases, cost structure rationalization, and the stabilization of key commodity prices. Kraft, the largest branded food company in the United States, has increased its investments in brand-building and new product innovations. In the beverage realm, Anheuser-Busch added to our results. The world's largest brewer benefited from a more favorable pricing environment and a growing international beer presence. HEALTH CARE WAS ANOTHER PLUS The portfolio also benefited from stock selection and strategic weightings in several parts of the health care sector. One of our top investments was Abbott Laboratories. Abbott saw an acceleration in its underlying pharmaceutical business and a continued recovery in its U.S. diagnostics activities. The company also acquired part of Guidant's cardiovascular business from Boston Scientific, expanding Abbott's footprint in the medical technology arena, while adding products such as coronary stents and catheters to its medical technology product line. CONSUMER DISCRETIONARY STOCKS DETRACTED While we posted strong results, some investments performed below our expectations. In retailing, discounter Dollar General Corp. found its profits squeezed by markdowns, higher shrink (losses from theft) and gasoline prices that slowed spending by consumers. Another detractor was our position in OSI Restaurant Partners, Inc., whose brands include Outback Steakhouse, Carrabba's Italian Grill, and Bonefish Grill. Again, high gasoline prices led many consumers to cut back on dining out. HOW THE FUND FITS IN A DIVERSIFIED INVESTMENT STRATEGY Value is designed for investors seeking long-term capital growth with potential for some income. It can serve as a solid core holding and as a way to complement more aggressive, more volatile growth investments. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 7.3% 7.0% - -------------------------------------------------------------------------------- Insurance 6.6% 6.4% - -------------------------------------------------------------------------------- Food Products 6.0% 7.9% - -------------------------------------------------------------------------------- Commercial Banks 6.0% 10.1% - -------------------------------------------------------------------------------- Chemicals 5.9% 7.9% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Common Stocks 94.9% 95.9% - -------------------------------------------------------------------------------- Temporary Cash Investments 5.0% 4.5% - -------------------------------------------------------------------------------- Other Assets and Liabilities* 0.1% (0.4)% - -------------------------------------------------------------------------------- *Includes collateral received for securities lending and other assets and liabilities. - ------ 6 Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 94.9% AEROSPACE & DEFENSE -- 0.9% - -------------------------------------------------------------------------------- 621,618 Honeywell International Inc. $ 25,424,176 - -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS -- 1.5% - -------------------------------------------------------------------------------- 606,608 United Parcel Service, Inc. Cl B 43,639,380 - -------------------------------------------------------------------------------- BEVERAGES -- 3.4% - -------------------------------------------------------------------------------- 977,314 Anheuser-Busch Companies, Inc. 46,432,189 - -------------------------------------------------------------------------------- 493,555 Coca-Cola Company (The) 22,052,037 - -------------------------------------------------------------------------------- 1,518,012 Coca-Cola Enterprises Inc. 31,620,190 - -------------------------------------------------------------------------------- 100,104,416 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.8% - -------------------------------------------------------------------------------- 899,612 Masco Corp.(1) 24,667,361 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 0.6% - -------------------------------------------------------------------------------- 119,432 Merrill Lynch & Co., Inc. 9,341,971 - -------------------------------------------------------------------------------- 134,739 Morgan Stanley 9,823,821 - -------------------------------------------------------------------------------- 19,165,792 - -------------------------------------------------------------------------------- CHEMICALS -- 5.9% - -------------------------------------------------------------------------------- 126,074 Air Products & Chemicals, Inc. 8,367,531 - -------------------------------------------------------------------------------- 940,337 du Pont (E.I.) de Nemours & Co. 40,284,037 - -------------------------------------------------------------------------------- 1,772,008 International Flavors & Fragrances Inc. 70,065,197 - -------------------------------------------------------------------------------- 808,689 Minerals Technologies Inc.(1) 43,183,993 - -------------------------------------------------------------------------------- 591,491 Nalco Holding Co.(2) 10,954,413 - -------------------------------------------------------------------------------- 172,855,171 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 6.0% - -------------------------------------------------------------------------------- 380,521 BB&T Corporation 16,659,209 - -------------------------------------------------------------------------------- 1,420,340 Fifth Third Bancorp 54,086,547 - -------------------------------------------------------------------------------- 164,331 Marshall & Ilsley Corp. 7,917,468 - -------------------------------------------------------------------------------- 925,403 SunTrust Banks, Inc. 71,515,144 - -------------------------------------------------------------------------------- 515,467 U.S. Bancorp 17,123,814 - -------------------------------------------------------------------------------- 128,284 Zions Bancorporation 10,238,346 - -------------------------------------------------------------------------------- 177,540,528 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 1.4% - -------------------------------------------------------------------------------- 1,014,009 Republic Services, Inc. Cl A 40,773,302 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 0.8% - -------------------------------------------------------------------------------- 606,966 Dell Inc.(2) 13,863,104 - -------------------------------------------------------------------------------- 226,521 Diebold, Inc.(1) 9,860,459 - -------------------------------------------------------------------------------- 23,723,563 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 0.8% - -------------------------------------------------------------------------------- 729,864 Bemis Co., Inc. 23,983,331 - -------------------------------------------------------------------------------- DIVERSIFIED -- 2.0% - -------------------------------------------------------------------------------- 432,258 Standard and Poor's 500 Depositary Receipt(1) 57,719,411 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 4.5% - -------------------------------------------------------------------------------- 2,018,547 Bank of America Corp. $ 108,133,564 - -------------------------------------------------------------------------------- 516,617 Citigroup Inc. 25,660,366 - -------------------------------------------------------------------------------- 133,793,930 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.2% - -------------------------------------------------------------------------------- 1,785,105 AT&T Inc. 58,123,019 - -------------------------------------------------------------------------------- 369,139 Commonwealth Telephone Enterprises, Inc.(1) 15,219,601 - -------------------------------------------------------------------------------- 599,708 Verizon Communications Inc. 22,267,158 - -------------------------------------------------------------------------------- 95,609,778 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 1.0% - -------------------------------------------------------------------------------- 221,852 FPL Group, Inc. 9,983,340 - -------------------------------------------------------------------------------- 785,240 Northeast Utilities 18,272,535 - -------------------------------------------------------------------------------- 28,255,875 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 0.7% - -------------------------------------------------------------------------------- 446,423 Hubbell Inc. Cl B(1) 21,383,662 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 1.0% - -------------------------------------------------------------------------------- 609,984 Wal-Mart Stores, Inc. 30,084,411 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 6.0% - -------------------------------------------------------------------------------- 884,953 ConAgra Foods, Inc. 21,663,649 - -------------------------------------------------------------------------------- 355,536 General Mills, Inc. 20,123,338 - -------------------------------------------------------------------------------- 1,523,530 H.J. Heinz Co. 63,881,612 - -------------------------------------------------------------------------------- 1,356,382 Kraft Foods Inc. Cl A(1) 48,368,582 - -------------------------------------------------------------------------------- 974,677 Unilever N.V. New York Shares 23,918,574 - -------------------------------------------------------------------------------- 177,955,755 - -------------------------------------------------------------------------------- GAS UTILITIES -- 0.7% - -------------------------------------------------------------------------------- 623,687 WGL Holdings Inc.(1) 19,546,351 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 3.4% - -------------------------------------------------------------------------------- 1,404,203 Beckman Coulter, Inc.(1) 80,825,925 - -------------------------------------------------------------------------------- 1,367,976 Symmetry Medical Inc.(1)(2) 20,642,758 - -------------------------------------------------------------------------------- 101,468,683 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 2.1% - -------------------------------------------------------------------------------- 1,221,925 HCA Inc. 60,961,838 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 3.0% - -------------------------------------------------------------------------------- 481,388 International Speedway Corp. 23,992,378 - -------------------------------------------------------------------------------- 1,089,107 OSI Restaurant Partners, Inc.(1) 34,535,582 - -------------------------------------------------------------------------------- 843,338 Speedway Motorsports Inc.(1) 30,705,937 - -------------------------------------------------------------------------------- 89,233,897 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 3.9% - -------------------------------------------------------------------------------- 162,684 Clorox Company 10,249,092 - -------------------------------------------------------------------------------- 1,616,628 Kimberly-Clark Corp. 105,662,806 - -------------------------------------------------------------------------------- 115,911,898 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 1.9% - -------------------------------------------------------------------------------- 1,546,809 General Electric Co. 54,602,358 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 7 Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- INSURANCE -- 6.6% - -------------------------------------------------------------------------------- 124,465 Ambac Financial Group, Inc. $ 10,299,479 - -------------------------------------------------------------------------------- 1,138,112 American International Group, Inc. 75,411,301 - -------------------------------------------------------------------------------- 422 Berkshire Hathaway Inc. Cl A(2) 40,427,600 - -------------------------------------------------------------------------------- 253,239 Chubb Corp. 13,158,298 - -------------------------------------------------------------------------------- 194,503 Hartford Financial Services Group Inc. (The) 16,873,135 - -------------------------------------------------------------------------------- 1,409,142 Marsh & McLennan Companies, Inc.(1) 39,667,347 - -------------------------------------------------------------------------------- 195,837,160 - -------------------------------------------------------------------------------- IT SERVICES -- 1.2% - -------------------------------------------------------------------------------- 422,764 International Business Machines Corp. 34,641,282 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 1.2% - -------------------------------------------------------------------------------- 1,525,452 Hasbro, Inc. 34,704,033 - -------------------------------------------------------------------------------- MEDIA -- 0.3% - -------------------------------------------------------------------------------- 378,557 New York Times Co. (The) Cl A(1) 8,699,240 - -------------------------------------------------------------------------------- METALS & MINING -- 0.5% - -------------------------------------------------------------------------------- 313,779 Newmont Mining Corporation 13,414,052 - -------------------------------------------------------------------------------- MULTI-UTILITIES -- 4.3% - -------------------------------------------------------------------------------- 484,574 Ameren Corp.(1) 25,580,661 - -------------------------------------------------------------------------------- 367,653 Consolidated Edison, Inc. 16,985,569 - -------------------------------------------------------------------------------- 110,187 Dominion Resources Inc. 8,428,204 - -------------------------------------------------------------------------------- 723,247 Wisconsin Energy Corp.(1) 31,200,876 - -------------------------------------------------------------------------------- 2,196,320 XCEL Energy Inc.(1) 45,354,007 - -------------------------------------------------------------------------------- 127,549,317 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 1.7% - -------------------------------------------------------------------------------- 3,787,580 Dollar General Corp. 51,624,715 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 7.3% - -------------------------------------------------------------------------------- 382,439 BP plc ADR 25,080,350 - -------------------------------------------------------------------------------- 672,844 Chevron Corp. 43,640,662 - -------------------------------------------------------------------------------- 2,077,247 Equitable Resources Inc.(1) 72,662,099 - -------------------------------------------------------------------------------- 870,094 Exxon Mobil Corp. 58,383,307 - -------------------------------------------------------------------------------- 220,062 Murphy Oil Corp. 10,463,948 - -------------------------------------------------------------------------------- 80,430 Royal Dutch Shell plc ADR 5,316,423 - -------------------------------------------------------------------------------- 215,546,789 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 1.4% - -------------------------------------------------------------------------------- 1,141,844 MeadWestvaco Corp. 30,270,284 - -------------------------------------------------------------------------------- 184,522 Weyerhaeuser Co. 11,353,639 - -------------------------------------------------------------------------------- 41,623,923 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 4.2% - -------------------------------------------------------------------------------- 529,656 Abbott Laboratories 25,720,095 - -------------------------------------------------------------------------------- 343,990 Bristol-Myers Squibb Co. 8,572,231 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 204,697 Eli Lilly and Company $ 11,667,729 - -------------------------------------------------------------------------------- 126,094 Johnson & Johnson 8,188,544 - -------------------------------------------------------------------------------- 258,302 Merck & Co., Inc. 10,822,854 - -------------------------------------------------------------------------------- 1,063,135 Pfizer Inc. 30,150,509 - -------------------------------------------------------------------------------- 1,110,712 Watson Pharmaceuticals, Inc.(2) 29,067,333 - -------------------------------------------------------------------------------- 124,189,295 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.4% - -------------------------------------------------------------------------------- 594,388 Applied Materials, Inc. 10,538,499 - -------------------------------------------------------------------------------- 2,920,966 Intel Corp. 60,084,271 - -------------------------------------------------------------------------------- 70,622,770 - -------------------------------------------------------------------------------- SOFTWARE -- 0.4% - -------------------------------------------------------------------------------- 408,316 Microsoft Corporation 11,159,276 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 1.5% - -------------------------------------------------------------------------------- 583,015 Gap, Inc. (The) 11,048,134 - -------------------------------------------------------------------------------- 515,423 Home Depot, Inc. (The) 18,694,392 - -------------------------------------------------------------------------------- 552,066 Lowe's Companies, Inc. 15,490,972 - -------------------------------------------------------------------------------- 45,233,498 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 5.7% - -------------------------------------------------------------------------------- 991,113 Fannie Mae 55,413,128 - -------------------------------------------------------------------------------- 1,137,031 Freddie Mac 75,419,266 - -------------------------------------------------------------------------------- 624,813 MGIC Investment Corp. 37,470,036 - -------------------------------------------------------------------------------- 168,302,430 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS -- 0.7% - -------------------------------------------------------------------------------- 294,872 Grainger (W.W.), Inc. 19,762,321 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $2,518,720,295) 2,801,314,968 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 5.0% Repurchase Agreement, Bank of America Securities, LLC, (collateralized by various U.S. Treasury obligations, 4.625%, 8/31/11, valued at $59,053,283), in a joint trading account at 4.95%, dated 9/29/06, due 10/2/06 (Delivery Value $58,023,925) 58,000,000 - -------------------------------------------------------------------------------- Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 7.875%, 2/15/21, valued at $90,052,501), in a joint trading account at 4.98%, dated 9/29/06, due 10/2/06 (Delivery Value $88,436,686) 88,400,000 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENT (Cost $146,400,000) 146,400,000 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 8 Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Value - -------------------------------------------------------------------------------- COLLATERAL RECEIVED FOR SECURITIES LENDING(3) -- 9.9% REPURCHASE AGREEMENTS -- 9.9% - -------------------------------------------------------------------------------- Repurchase Agreement, Merrill Lynch & Co., Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.37%, dated 9/29/06, due 10/2/06 (Delivery value $75,033,563) $ 75,000,000 - -------------------------------------------------------------------------------- Repurchase Agreement, UBS AG, (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.375%, dated 9/29/06, due 10/2/06 (Delivery value $218,679,432) 218,581,526 - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- TOTAL COLLATERAL RECEIVED FOR SECURITIES LENDING (Cost $293,581,526) $ 293,581,526 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 109.8% (Cost $2,958,701,821) 3,241,296,494 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- (9.8)% (290,282,444) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $2,951,014,050 ================================================================================ FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS Contracts to Sell Settlement Date Value Unrealized Gain (Loss) - -------------------------------------------------------------------------------- 18,209,594 Euro for USD 10/31/06 $23,131,826 $ 36,423 - -------------------------------------------------------------------------------- 9,056,753 GBP for USD 10/31/06 16,955,760 134,695 - -------------------------------------------------------------------------------- $40,087,586 $171,118 ======================================= (Value on Settlement Date $40,258,704) NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt GBP = British Pound USD = United States Dollar (1) Security, or a portion thereof, was on loan as of September 30, 2006. (2) Non-income producing. (3) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. (See Note 6 in Notes to Financial Statements.) See Notes to Financial Statements. - ------ 9 Large Company Value - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2006 ------------------------------ AVERAGE ANNUAL RETURNS - ------------------------------------------------------------------------------- SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS INCEPTION DATE - ------------------------------------------------------------------------------- INVESTOR CLASS 7.50% 13.42% 10.13% 7.17% 7/30/99 - ------------------------------------------------------------------------------- RUSSELL 1000 VALUE INDEX(2) 6.85% 14.62% 10.73% 6.16% -- - ------------------------------------------------------------------------------- S&P 500 INDEX(2) 4.14% 10.79% 6.97% 1.68% -- - ------------------------------------------------------------------------------- Institutional Class 7.61% 13.64% 10.34 7.95% 8/10/01 - ------------------------------------------------------------------------------- Advisor Class 7.37% 13.13% 9.85 9.29% 10/26/00 - ------------------------------------------------------------------------------- A Class 1/31/03 No sales charge* 7.52% 13.29% -- 16.29% With sales charge* 1.33% 6.80% -- 14.44% - ------------------------------------------------------------------------------- B Class 1/31/03 No sales charge* 6.95% 12.43% -- 15.47%(3) With sales charge* 1.95% 8.43% -- 14.91%(3) - ------------------------------------------------------------------------------- C Class 11/7/01 No sales charge* 6.97% 12.47% -- 8.25% With sales charge* 5.97% 12.47% -- 8.25% - ------------------------------------------------------------------------------- R Class 7.23% 12.86% -- 13.40%(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) Total returns for periods less than one year are not annualized. (2) 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. (3) Class return would have been lower if the class had not received partial reimbursements or waivers of its distribution and service fees. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. - ------ 10 Large Company Value - Performance GROWTH OF $10,000 OVER LIFE OF CLASS $10,000 investment made July 30, 1999
![](https://capedge.com/proxy/N-CSRS/0000908186-06-000070/growthlrgcompvalue0611.gif)
ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - -------------------------------------------------------------------------------- 1999* 2000 2001 2002 2003 2004 2005 2006 - -------------------------------------------------------------------------------- Investor Class -8.56% 5.67% 4.99% -13.70% 23.93% 18.84% 12.38% 13.42% - -------------------------------------------------------------------------------- Russell 1000 Value Index -7.08% 8.91% -8.91% -16.95% 24.37% 20.52% 16.69% 14.62% - -------------------------------------------------------------------------------- S&P 500 Index -3.22% 13.28% -26.62% -20.49% 24.40% 13.87% 12.25% 10.79% - -------------------------------------------------------------------------------- * From 7/30/99, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. - ------ 11 Large Company Value - Portfolio Commentary PORTFOLIO MANAGERS: MARK MALLON, CHUCK RITTER, AND BRENDAN HEALY. PERFORMANCE SUMMARY For the six months ended September 30, 2006, Large Company Value gained 7.50%*, outperforming the 6.85% return of its benchmark, the Russell 1000 Value Index. This superior performance was attributable to effective security selection. The broader market, as measured by the S&P 500, returned 4.14%. Large Company Value's performance has been solid since the portfolio's July 30, 1999, inception. Our consistent, patient approach has enabled Large Company Value to produce an average annual return of 7.17%, compared with the 6.16% return of its benchmark and the 1.68% return of the S&P 500 for the same period. GRAVITATING TOWARD OUR PREFERENCES Amid mixed economic signals during the reporting period, investors gravitated toward investments in larger companies with reliable earnings and a history of dividends--exactly the kinds of companies we have been finding attractive. With our larger-cap bias, this trend has been a beneficial one as the market rediscovers the kinds of companies we find appealing. FINANCIALS: THE TOP CONTRIBUTOR Large Company Value's stake in the financials sector, its largest sector position, made the most significant contribution to total return and performance versus the Russell 1000 Value Index. Diversified financial services firms were the strongest performers, and all of our holdings in the area--Bank of America, J.P. Morgan Chase, and Citigroup--finished among the top-contributing stocks. ENERGY, HEALTH CARE ADDED VALUE Holdings in the energy sector were another source of strength on both an absolute and relative basis. We focused on diversified, multinational oil and gas companies and remained selective, holding only a handful of names. Though it was a difficult period for energy stocks as oil prices came off their highs, we sidestepped broader damage, and most of our holdings posted gains. Finally, our stake in the health care sector performed well. Our patience was rewarded when long-time holdings in the pharmaceutical industry, some of which have struggled in the past, became solid performers. Industry TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Citigroup Inc. 4.7% 4.7% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 4.5% 4.5% - -------------------------------------------------------------------------------- Bank of America Corp. 3.5% 3.3% - -------------------------------------------------------------------------------- Freddie Mac 3.0% 2.9% - -------------------------------------------------------------------------------- Chevron Corp. 2.9% 2.3% - -------------------------------------------------------------------------------- Royal Dutch Shell plc ADR 2.6% 2.7% - -------------------------------------------------------------------------------- J.P. Morgan Chase & Co. 2.5% 2.5% - -------------------------------------------------------------------------------- Wells Fargo & Co. 2.2% 2.2% - -------------------------------------------------------------------------------- Pfizer Inc. 2.0% 1.7% - -------------------------------------------------------------------------------- AT&T Inc. 1.9% 1.7% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. (continued) - ------ 12 Large Company Value - Portfolio Commentary leader Pfizer paced gains. Despite the challenges of generic competition and patent expirations, the company's stock rebounded nicely from its July lows on robust earnings reports driven by strength in key drugs such as Lipitor, the largest-selling medicine in the world. MINOR SETBACKS Our stake in the materials sector slowed performance slightly and represented the only sector-level detractor to absolute performance. While much of our position fared well, our sole holding in the paper and forest products industry disappointed. Weyerhaeuser Co., a lumber and paper products firm, saw its stock fall earlier in the year amid a weakening housing market that has crimped demand for its lumber. It has struggled since then, and though the share price is beginning to recover, the process has been slow. Elsewhere, wireless telecom firm Sprint Nextel declined sharply after reporting second-quarter revenues that fell short of investor expectations and prior year results. It was the top detractor for the period. HOW THE FUND FITS IN A DIVERSIFIED INVESTMENT STRATEGY Large Company Value is designed for investors seeking long-term capital growth. Income is a secondary goal. The fund can serve as a solid core holding and as a way to compliment more aggressive, more volatile growth investments. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 12.4% 12.3% - -------------------------------------------------------------------------------- Diversified Financial Services 10.6% 7.1% - -------------------------------------------------------------------------------- Pharmaceuticals 7.0% 6.5% - -------------------------------------------------------------------------------- Commercial Banks 6.4% 9.8% - -------------------------------------------------------------------------------- Insurance 6.4% 6.0% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Common Stocks 95.3% 96.2% - -------------------------------------------------------------------------------- Temporary Cash Investments 4.4% 4.0% - -------------------------------------------------------------------------------- Other Assets and Liabilities 0.3% (0.2)% - -------------------------------------------------------------------------------- - ------ 13 Large Company Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 95.3% AEROSPACE & DEFENSE -- 0.8% - -------------------------------------------------------------------------------- 296,900 Northrop Grumman Corp. $ 20,209,983 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 0.2% - -------------------------------------------------------------------------------- 213,100 Lear Corporation 4,411,170 - -------------------------------------------------------------------------------- BEVERAGES -- 1.8% - -------------------------------------------------------------------------------- 558,300 Coca-Cola Company (The) 24,944,844 - -------------------------------------------------------------------------------- 517,400 Pepsi Bottling Group Inc. 18,367,700 - -------------------------------------------------------------------------------- 43,312,544 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 4.0% - -------------------------------------------------------------------------------- 641,500 Bank of New York Co., Inc. (The) 22,619,290 - -------------------------------------------------------------------------------- 455,000 Merrill Lynch & Co., Inc. 35,590,100 - -------------------------------------------------------------------------------- 520,500 Morgan Stanley 37,949,655 - -------------------------------------------------------------------------------- 96,159,045 - -------------------------------------------------------------------------------- CHEMICALS -- 2.0% - -------------------------------------------------------------------------------- 499,000 du Pont (E.I.) de Nemours & Co. 21,377,160 - -------------------------------------------------------------------------------- 409,300 PPG Industries, Inc. 27,455,844 - -------------------------------------------------------------------------------- 48,833,004 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 6.4% - -------------------------------------------------------------------------------- 356,600 National City Corp. 13,051,560 - -------------------------------------------------------------------------------- 227,000 PNC Financial Services Group 16,443,880 - -------------------------------------------------------------------------------- 1,009,000 U.S. Bancorp 33,518,980 - -------------------------------------------------------------------------------- 710,700 Wachovia Corp. 39,657,060 - -------------------------------------------------------------------------------- 1,432,500 Wells Fargo & Co. 51,827,850 - -------------------------------------------------------------------------------- 154,499,330 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 1.1% - -------------------------------------------------------------------------------- 393,200 R.R. Donnelley & Sons Company 12,959,872 - -------------------------------------------------------------------------------- 377,800 Waste Management, Inc. 13,857,704 - -------------------------------------------------------------------------------- 26,817,576 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 1.4% - -------------------------------------------------------------------------------- 915,900 Hewlett-Packard Co. 33,604,371 - -------------------------------------------------------------------------------- DIVERSIFIED -- 1.2% - -------------------------------------------------------------------------------- 219,800 Standard and Poor's 500 Depositary Receipt 29,349,894 - -------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES -- 0.4% - -------------------------------------------------------------------------------- 442,300 H & R Block, Inc. 9,615,602 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 10.6% - -------------------------------------------------------------------------------- 1,550,900 Bank of America Corp. 83,081,713 - -------------------------------------------------------------------------------- 2,252,100 Citigroup Inc. 111,861,807 - -------------------------------------------------------------------------------- 1,254,700 J.P. Morgan Chase & Co. 58,920,712 - -------------------------------------------------------------------------------- 253,864,232 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 4.6% - -------------------------------------------------------------------------------- 1,416,400 AT&T Inc. 46,117,984 - -------------------------------------------------------------------------------- 710,000 BellSouth Corp. 30,352,500 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 912,600 Verizon Communications Inc. $ 33,884,838 - -------------------------------------------------------------------------------- 110,355,322 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 2.6% - -------------------------------------------------------------------------------- 571,600 Exelon Corporation 34,604,664 - -------------------------------------------------------------------------------- 833,100 PPL Corporation 27,408,990 - -------------------------------------------------------------------------------- 62,013,654 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 2.1% - -------------------------------------------------------------------------------- 1,112,800 Kroger Co. (The) 25,750,192 - -------------------------------------------------------------------------------- 477,100 Wal-Mart Stores, Inc. 23,530,572 - -------------------------------------------------------------------------------- 49,280,764 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 1.6% - -------------------------------------------------------------------------------- 695,100 Sara Lee Corp. 11,170,257 - -------------------------------------------------------------------------------- 1,081,500 Unilever N.V. New York Shares 26,540,010 - -------------------------------------------------------------------------------- 37,710,267 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 0.2% - -------------------------------------------------------------------------------- 112,800 HCA Inc. 5,627,592 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 1.2% - -------------------------------------------------------------------------------- 743,100 McDonald's Corporation 29,070,072 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.7% - -------------------------------------------------------------------------------- 568,700 Newell Rubbermaid Inc. 16,105,584 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 2.5% - -------------------------------------------------------------------------------- 916,000 General Electric Co. 32,334,800 - -------------------------------------------------------------------------------- 1,001,400 Tyco International Ltd. 28,029,186 - -------------------------------------------------------------------------------- 60,363,986 - -------------------------------------------------------------------------------- INSURANCE -- 6.4% - -------------------------------------------------------------------------------- 545,500 Allstate Corp. 34,219,215 - -------------------------------------------------------------------------------- 608,500 American International Group, Inc. 40,319,210 - -------------------------------------------------------------------------------- 320,000 Hartford Financial Services Group Inc. (The) 27,760,000 - -------------------------------------------------------------------------------- 532,400 Loews Corp. 20,177,960 - -------------------------------------------------------------------------------- 498,600 Marsh & McLennan Companies, Inc. 14,035,590 - -------------------------------------------------------------------------------- 273,400 Torchmark Corp. 17,254,274 - -------------------------------------------------------------------------------- 153,766,249 - -------------------------------------------------------------------------------- IT SERVICES -- 1.8% - -------------------------------------------------------------------------------- 289,700 Fiserv, Inc.(1) 13,641,973 - -------------------------------------------------------------------------------- 366,400 International Business Machines Corp. 30,022,816 - -------------------------------------------------------------------------------- 43,664,789 - -------------------------------------------------------------------------------- MACHINERY -- 2.8% - -------------------------------------------------------------------------------- 189,300 Deere & Co. 15,884,163 - -------------------------------------------------------------------------------- 345,400 Dover Corp. 16,385,776 - -------------------------------------------------------------------------------- 497,200 Ingersoll-Rand Company Cl A 18,883,656 - -------------------------------------------------------------------------------- 206,500 Parker-Hannifin Corp. 16,051,245 - -------------------------------------------------------------------------------- 67,204,840 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 14 Large Company Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- MEDIA -- 3.5% - -------------------------------------------------------------------------------- 505,300 Gannett Co., Inc. $ 28,716,199 - -------------------------------------------------------------------------------- 2,316,900 Time Warner Inc. 42,237,087 - -------------------------------------------------------------------------------- 378,000 Viacom Inc. Cl B 14,054,040 - -------------------------------------------------------------------------------- 85,007,326 - -------------------------------------------------------------------------------- METALS & MINING -- 0.4% - -------------------------------------------------------------------------------- 191,900 Nucor Corp. 9,497,131 - -------------------------------------------------------------------------------- MULTI-UTILITIES -- 0.5% - -------------------------------------------------------------------------------- 551,700 NiSource Inc. 11,993,958 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 0.6% - -------------------------------------------------------------------------------- 1,027,400 Dollar General Corp. 14,003,462 - -------------------------------------------------------------------------------- OFFICE ELECTRONICS -- 0.7% - -------------------------------------------------------------------------------- 1,004,500 Xerox Corp.(1) 15,630,020 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 12.4% - -------------------------------------------------------------------------------- 167,200 Anadarko Petroleum Corp. 7,328,376 - -------------------------------------------------------------------------------- 1,058,300 Chevron Corp. 68,641,338 - -------------------------------------------------------------------------------- 729,900 ConocoPhillips 43,450,947 - -------------------------------------------------------------------------------- 114,100 Devon Energy Corporation 7,205,415 - -------------------------------------------------------------------------------- 1,622,500 Exxon Mobil Corp. 108,869,750 - -------------------------------------------------------------------------------- 954,500 Royal Dutch Shell plc ADR 63,092,450 - -------------------------------------------------------------------------------- 298,588,276 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 1.2% - -------------------------------------------------------------------------------- 457,100 Weyerhaeuser Co. 28,125,363 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 7.0% - -------------------------------------------------------------------------------- 701,400 Abbott Laboratories 34,059,984 - -------------------------------------------------------------------------------- 536,300 Johnson & Johnson 34,827,322 - -------------------------------------------------------------------------------- 414,000 Merck & Co., Inc. 17,346,600 - -------------------------------------------------------------------------------- 1,719,800 Pfizer Inc. 48,773,528 - -------------------------------------------------------------------------------- 669,800 Wyeth 34,052,632 - -------------------------------------------------------------------------------- 169,060,066 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.8% - -------------------------------------------------------------------------------- 867,500 Intel Corp. 17,844,475 - -------------------------------------------------------------------------------- SOFTWARE -- 2.3% - -------------------------------------------------------------------------------- 1,479,100 Microsoft Corporation 40,423,803 - -------------------------------------------------------------------------------- 900,000 Oracle Corp.(1) 15,966,000 - -------------------------------------------------------------------------------- 56,389,803 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 1.2% - -------------------------------------------------------------------------------- 747,800 Gap, Inc. (The) 14,170,810 - -------------------------------------------------------------------------------- 413,200 Home Depot, Inc. (The) 14,986,764 - -------------------------------------------------------------------------------- 29,157,574 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.4% - -------------------------------------------------------------------------------- 441,400 Liz Claiborne, Inc. 17,439,714 - -------------------------------------------------------------------------------- 217,100 VF Corp. 15,837,445 - -------------------------------------------------------------------------------- 33,277,159 - -------------------------------------------------------------------------------- Shares/Principal Amount Value - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 4.7% - -------------------------------------------------------------------------------- 1,083,100 Freddie Mac $ 71,842,023 - -------------------------------------------------------------------------------- 200,900 MGIC Investment Corp. 12,047,973 - -------------------------------------------------------------------------------- 691,200 Washington Mutual, Inc. 30,046,464 - -------------------------------------------------------------------------------- 113,936,460 - -------------------------------------------------------------------------------- TOBACCO -- 1.4% - -------------------------------------------------------------------------------- 423,600 Altria Group Inc. 32,426,580 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.8% - -------------------------------------------------------------------------------- 1,142,000 Sprint Nextel Corp. 19,585,300 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $1,929,093,754) 2,290,362,823 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 4.4% $90,000,000 FFCB Discount Notes, 4.75%, 10/2/06(2) 90,000,000 - -------------------------------------------------------------------------------- 14,700,000 FHLB Discount Notes, 4.75%, 10/2/06(2) 14,700,000 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $104,686,185) 104,700,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 99.7% (Cost $2,033,779,939) 2,395,062,823 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- 0.3% 6,319,684 - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $2,401,382,507 ================================================================================ NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt FFCB = Federal Farm Credit Bank FHLB = Federal Home Loan Bank (1) Non-income producing. (2) The rate indicated is the yield to maturity at purchase. 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 April 1, 2006 to September 30, 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 4/1/06 - EXPENSE 4/1/06 9/30/06 9/30/06 RATIO* - ----------------------------------------------------------------------------- VALUE SHAREHOLDER FEE EXAMPLE - ----------------------------------------------------------------------------- ACTUAL - ----------------------------------------------------------------------------- Investor Class $1,000 $1,064.90 $5.12 0.99% - ----------------------------------------------------------------------------- Institutional Class $1,000 $1,065.80 $4.09 0.79% - ----------------------------------------------------------------------------- Advisor Class $1,000 $1,063.50 $6.41 1.24% - ----------------------------------------------------------------------------- A Class $1,000 $1,063.40 $6.41 1.24% - ----------------------------------------------------------------------------- B Class $1,000 $1,059.50 $10.27 1.99% - ----------------------------------------------------------------------------- C Class $1,000 $1,058.50 $10.27 1.99% - ----------------------------------------------------------------------------- R Class $1,000 $1,062.20 $7.70 1.49% - ----------------------------------------------------------------------------- HYPOTHETICAL - ----------------------------------------------------------------------------- Investor Class $1,000 $1,020.10 $5.01 0.99% - ----------------------------------------------------------------------------- Institutional Class $1,000 $1,021.11 $4.00 0.79% - ----------------------------------------------------------------------------- Advisor Class $1,000 $1,018.85 $6.28 1.24% - ----------------------------------------------------------------------------- A Class $1,000 $1,018.85 $6.28 1.24% - ----------------------------------------------------------------------------- B Class $1,000 $1,015.09 $10.05 1.99% - ----------------------------------------------------------------------------- C Class $1,000 $1,015.09 $10.05 1.99% - ----------------------------------------------------------------------------- R Class $1,000 $1,017.60 $7.54 1.49% - ----------------------------------------------------------------------------- *Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. (continued) - ------ 17 Shareholder Fee Examples (Unaudited) - ----------------------------------------------------------------------------- EXPENSES PAID BEGINNING ENDING DURING PERIOD* ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 4/1/06 - EXPENSE 4/1/06 9/30/06 9/30/06 RATIO* - ----------------------------------------------------------------------------- LARGE COMPANY VALUE SHAREHOLDER FEE EXAMPLE - ----------------------------------------------------------------------------- ACTUAL - ----------------------------------------------------------------------------- Investor Class $1,000 $1,075.00 $4.32 0.83% - ----------------------------------------------------------------------------- Institutional Class $1,000 $1,076.10 $3.28 0.63% - ----------------------------------------------------------------------------- Advisor Class $1,000 $1,073.70 $5.61 1.08% - ----------------------------------------------------------------------------- A Class $1,000 $1,075.20 $5.62 1.08% - ----------------------------------------------------------------------------- B Class $1,000 $1,069.50 $9.49 1.83% - ----------------------------------------------------------------------------- C Class $1,000 $1,069.70 $9.49 1.83% - ----------------------------------------------------------------------------- R Class $1,000 $1,072.30 $6.91 1.33% - ----------------------------------------------------------------------------- HYPOTHETICAL - ----------------------------------------------------------------------------- Investor Class $1,000 $1,020.91 $4.20 0.83% - ----------------------------------------------------------------------------- Institutional Class $1,000 $1,021.91 $3.19 0.63% - ----------------------------------------------------------------------------- Advisor Class $1,000 $1,019.65 $5.47 1.08% - ----------------------------------------------------------------------------- A Class $1,000 $1,019.65 $5.47 1.08% - ----------------------------------------------------------------------------- B Class $1,000 $1,015.89 $9.25 1.83% - ----------------------------------------------------------------------------- C Class $1,000 $1,015.89 $9.25 1.83% - ----------------------------------------------------------------------------- R Class $1,000 $1,018.40 $6.73 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 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. - ------ 18 Statement of Assets and Liabilities SEPTEMBER 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investment securities - at value (cost of $2,665,120,295 and $2,033,779,939, respectively) - including $287,902,449 and $- of securities on loan, respectively $2,947,714,968 $2,395,062,823 - --------------------------------------- Investments made with cash collateral received for securities on loan, at value (cost of $293,581,526 and $-, respectively) 293,581,526 -- - -------------------------------------------------------------------------------- Total investment securities, at value (cost of $2,958,701,821 and $2,033,779,939, respectively) 3,241,296,494 2,395,062,823 - --------------------------------------- Cash 2,215,349 7,375,831 - --------------------------------------- Receivable for investments sold 33,875,514 -- - --------------------------------------- Receivable for forward foreign currency exchange contracts 171,118 -- - --------------------------------------- Receivable for capital shares sold 20,927 144,230 - --------------------------------------- Dividends and interest receivable 4,758,329 2,426,171 - -------------------------------------------------------------------------------- 3,282,337,731 2,405,009,055 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Payable for collateral received for securities on loan 293,581,526 -- - --------------------------------------- Payable for investments purchased 35,262,072 1,892,458 - --------------------------------------- Payable for capital shares redeemed 80,609 60,560 - --------------------------------------- Accrued management fees 2,272,014 1,465,024 - --------------------------------------- Distribution fees payable 62,467 95,613 - --------------------------------------- Service fees (and distribution fees -- A Class and R Class) payable 64,993 112,893 - -------------------------------------------------------------------------------- 331,323,681 3,626,548 - -------------------------------------------------------------------------------- NET ASSETS $2,951,014,050 $2,401,382,507 ================================================================================ See Notes to Financial Statements. (continued) - ------ 19 Statement of Assets and Liabilities SEPTEMBER 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- NET ASSETS CONSIST OF: - -------------------------------------------------------------------------------- Capital (par value and paid-in surplus) $2,557,998,260 $2,015,458,496 - --------------------------------------- Undistributed net investment income 2,347,204 1,278,500 - --------------------------------------- Undistributed net realized gain on investment and foreign currency transactions 107,902,795 23,362,627 - --------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 282,765,791 361,282,884 - -------------------------------------------------------------------------------- $2,951,014,050 $2,401,382,507 ================================================================================ INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $2,359,300,936 $1,320,196,846 - --------------------------------------- Shares outstanding 310,886,522 184,330,369 - --------------------------------------- Net asset value per share $7.59 $7.16 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $262,040,262 $534,102,085 - --------------------------------------- Shares outstanding 34,490,752 74,578,883 - --------------------------------------- Net asset value per share $7.60 $7.16 - -------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $234,909,403 $228,945,276 - --------------------------------------- Shares outstanding 30,961,146 31,969,845 - --------------------------------------- Net asset value per share $7.59 $7.16 - -------------------------------------------------------------------------------- A CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $67,177,985 $222,160,931 - --------------------------------------- Shares outstanding 8,844,915 30,995,461 - --------------------------------------- Net asset value per share $7.60 $7.17 - --------------------------------------- Maximum offering price (net asset value divided by 0.9425) $8.06 $7.61 - -------------------------------------------------------------------------------- B CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $7,175,598 $16,500,973 - --------------------------------------- Shares outstanding 945,712 2,298,092 - --------------------------------------- Net asset value per share $7.59 $7.18 - -------------------------------------------------------------------------------- C CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $20,233,709 $66,136,048 - --------------------------------------- Shares outstanding 2,682,417 9,236,442 - --------------------------------------- Net asset value per share $7.54 $7.16 - -------------------------------------------------------------------------------- R CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $176,157 $13,340,348 - --------------------------------------- Shares outstanding 23,214 1,862,388 - --------------------------------------- Net asset value per share $7.59 $7.16 - -------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 20 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- INVESTMENT INCOME (LOSS) - -------------------------------------------------------------------------------- INCOME: - ------------------------------------ Dividends (including $85,105 from affiliates for Value and net of foreign taxes withheld of $63,608 and $241,236, respectively) $ 33,031,230 $ 27,196,162 - ------------------------------------ Interest 2,235,017 2,641,697 - ------------------------------------ Securities lending 206,762 -- - -------------------------------------------------------------------------------- 35,473,009 29,837,859 - -------------------------------------------------------------------------------- EXPENSES: - ------------------------------------ Management fees 13,512,434 8,450,979 - ------------------------------------ Distribution fees: - ------------------------------------ Advisor Class 270,336 253,166 - ------------------------------------ B Class 25,997 60,096 - ------------------------------------ C Class 72,686 235,230 - ------------------------------------ Service fees: - ------------------------------------ Advisor Class 270,336 253,166 - ------------------------------------ B Class 8,666 20,032 - ------------------------------------ C Class 24,229 78,410 - ------------------------------------ Distribution and service fees: - ------------------------------------ A Class 80,513 280,321 - ------------------------------------ R Class 329 29,547 - ------------------------------------ Directors' fees and expenses 25,462 22,452 - ------------------------------------ Other expenses 3,499 2,355 - -------------------------------------------------------------------------------- 14,294,487 9,685,754 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) 21,178,522 20,152,105 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------------------------------------- NET REALIZED GAIN (LOSS) ON: - ------------------------------------ Investment transactions (including $(1,078,534) from affiliates in Value) 51,480,363 15,366,428 - ------------------------------------ Foreign currency transactions (730,857) -- - ------------------------------------ Futures transactions -- (1,283,145) - -------------------------------------------------------------------------------- 50,749,506 14,083,283 - -------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: - ------------------------------------ Investments 105,342,814 130,083,882 - ------------------------------------ Translation of assets and liabilities in foreign currencies 447,046 -- - ------------------------------------ Futures -- -- - -------------------------------------------------------------------------------- 105,789,860 130,083,882 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) 156,539,366 144,167,165 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $177,717,888 $164,319,270 ================================================================================ See Notes to Financial Statements. - ------ 21 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) AND YEAR ENDED MARCH 31, 2006 - -------------------------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - -------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2006 MARCH 31, 2006 SEPT. 30, 2006 MARCH 31, 2006 - -------------------------------------------------------------------------------------------------- OPERATIONS - -------------------------------------------------------------------------------------------------- Net investment income (loss) $ 21,178,522 $ 48,954,006 $ 20,152,105 $ 31,411,374 - --------------------------- Net realized gain (loss) 50,749,506 304,719,340 14,083,283 43,968,820 - --------------------------- Change in net unrealized appreciation (depreciation) 105,789,860 (79,269,602) 130,083,882 92,216,915 - -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 177,717,888 274,403,744 164,319,270 167,597,109 - -------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - -------------------------------------------------------------------------------------------------- From net investment income: - --------------------------- Investor Class (16,477,000) (32,771,884) (10,587,118) (15,442,795) - --------------------------- Institutional Class (2,016,765) (4,697,967) (4,892,988) (9,298,838) - --------------------------- Advisor Class (1,309,708) (2,745,701) (1,552,857) (2,311,143) - --------------------------- A Class (391,466) (724,249) (1,654,409) (3,803,337) - --------------------------- B Class (15,844) (27,342) (61,315) (104,661) - --------------------------- C Class (45,081) (76,052) (242,225) (387,804) - --------------------------- R Class (827) (236) (76,418) (104,920) - --------------------------- From net realized gains: - --------------------------- Investor Class -- (216,094,034) -- (21,453,038) - --------------------------- Institutional Class -- (28,509,415) -- (11,140,239) - --------------------------- Advisor Class -- (23,330,512) -- (4,046,684) - --------------------------- A Class -- (5,863,978) -- (6,211,637) - --------------------------- B Class -- (623,983) -- (358,813) - --------------------------- C Class -- (1,709,591) -- (1,328,403) - --------------------------- R Class -- (2,371) -- (243,871) - -------------------------------------------------------------------------------------------------- Decrease in net assets from distributions (20,256,691) (317,177,315) (19,067,330) (76,236,183) - -------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions (64,423,670) 29,198,323 106,629,226 554,377,683 - -------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 93,037,527 (13,575,248) 251,881,166 645,738,609 - -------------------------------------------------------------------------------------------------- NET ASSETS - -------------------------------------------------------------------------------------------------- Beginning of period 2,857,976,523 2,871,551,771 2,149,501,341 1,503,762,732 - -------------------------------------------------------------------------------------------------- End of period $2,951,014,050 $2,857,976,523 $2,401,382,507 $2,149,501,341 ================================================================================================== Undistributed net investment income $2,347,204 $1,425,373 $1,278,500 $193,725 ================================================================================================== See Notes to Financial Statements. - ------ 22 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Value Fund (Value) and Large Company Value Fund (Large Company Value) (collectively, the funds) are two funds in a series issued by the corporation. The funds are diversified under the 1940 Act. The funds' investment objectives are long-term capital growth. The production of income is a secondary objective. The funds seek to achieve their investment objective by investing in stocks of companies that management believes to be undervalued at the time of purchase. Value invests in companies with small, medium, and large market capitalization and Large Company Value invests primarily in companies with larger market capitalization. The following is a summary of the funds' significant accounting policies. MULTIPLE CLASS -- The funds are authorized to issue the Investor Class, the Institutional Class, the Advisor Class, the A Class, the B Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing 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. Securities traded on foreign securities exchanges and over-the-counter markets are normally completed before the close of business on days that the New York Stock Exchange (the Exchange) is open and may also take place on days when the Exchange is not open. If an event occurs after the value of a security was established but before the net asset value per share was determined that was likely to materially change the net asset value, that security would be valued at fair value as determined in accordance with procedures adopted by the Board of Directors. 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. Certain other circumstances may cause the funds to fair value a security such as: a security has been declared in default; or trading in a security has been halted during the trading day; or there is a foreign market holiday and no trading will commence. SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes. INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. SECURITIES ON LOAN -- Value may lend portfolio securities through its lending agent to certain approved borrowers in order to earn additional income. Value continues to recognize any gain or loss in the market price of the securities loaned and record any interest earned or dividends declared. FUTURES CONTRACTS -- The funds may enter into futures contracts in order to manage the funds' exposure to changes in market conditions. One of the risks of entering into futures contracts is the possibility that the change in value of the contract may not correlate with the changes in value of the underlying securities. Upon entering into a futures contract, the funds are required to deposit either cash or securities in an amount equal to a certain percentage of the contract value (initial margin). Subsequent payments (variation margin) are made or received daily, in cash, by the funds. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. The funds recognize a realized gain or loss when the contract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of realized gain (loss) on futures transactions and unrealized appreciation (depreciation) on futures, respectively. (continued) - ------ 23 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. For assets and liabilities, other than investments in securities, net realized and unrealized gains and losses from foreign currency translations arise from changes in currency exchange rates. Net realized and unrealized foreign currency exchange gains or losses occurring during the holding period of investment securities are a component of realized gain (loss) on investment transactions and unrealized appreciation (depreciation) on investments, respectively. Certain countries may impose taxes on the contract amount of purchases and sales of foreign currency contracts in their currency. The funds record the foreign tax expense, if any, as a reduction to the net realized gain (loss) on foreign currency transactions. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The funds may enter into forward foreign currency exchange contracts to facilitate transactions of securities denominated in a foreign currency or to hedge the funds' exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the funds and the resulting unrealized appreciation or depreciation are determined daily using prevailing exchange rates. The funds bear the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses may arise if the counterparties do not perform under the contract terms. REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with institutions that 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 SEPTEMBER 30, 2006 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The Agreement provides that all expenses of the funds, except brokerage commissions, taxes, interest, fees and expenses of those directors who are not considered "interested persons" as defined in the 1940 Act (including counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on the daily net assets of each specific class of shares of each fund and paid monthly in arrears. For funds with a stepped fee schedule, the rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account all of the investment advisor's assets under management in each fund's investment strategy (strategy assets) to calculate the appropriate fee rate for each fund. The strategy assets include each fund's assets and the assets of other clients of the investment advisor that are not in the American Century family of funds, but that have the same investment team and investment strategy. The strategy assets of Large Company Value include the assets of NT Large Company Value Fund, one fund in a series issued by the corporation. The annual management fee schedule for each class of Value is as follows: - -------------------------------------------------------------------------------- INVESTOR, A, B, C & R INSTITUTIONAL ADVISOR - -------------------------------------------------------------------------------- STRATEGY ASSETS - -------------------------------------------------------------------------------- First $2.5 billion 1.00% 0.80% 0.75% - -------------------------------------------------------------------------------- Next $2.5 billion 0.95% 0.75% 0.70% - -------------------------------------------------------------------------------- Next $2.5 billion 0.90% 0.70% 0.65% - -------------------------------------------------------------------------------- Over $7.5 billion 0.85% 0.65% 0.60% - -------------------------------------------------------------------------------- The annual management fee schedule for each class of Large Company Value is as follows: - -------------------------------------------------------------------------------- INVESTOR, A, B, C & R INSTITUTIONAL ADVISOR - -------------------------------------------------------------------------------- STRATEGY ASSETS - -------------------------------------------------------------------------------- First $1 billion 0.90% 0.70% 0.65% - -------------------------------------------------------------------------------- Next $4 billion 0.80% 0.60% 0.55% - -------------------------------------------------------------------------------- Over $5 billion 0.70% 0.50% 0.45% - -------------------------------------------------------------------------------- For the six months ended September 30, 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 0.83% 0.63% 0.58% - -------------------------------------------------------------------------------- (continued) - ------ 25 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master Distribution and Shareholder Services Plan for the Advisor Class (the Advisor Class plan) and a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, B Class, C Class and R Class (collectively with the Advisor Class Plan, the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the Advisor Class, B Class and C Class will pay American Century Investment Services, Inc. (ACIS) the following annual distribution and service fees: - -------------------------------------------------------------------------------- ADVISOR B & C - -------------------------------------------------------------------------------- Distribution Fee 0.25% 0.75% - -------------------------------------------------------------------------------- Service Fee 0.25% 0.25% - -------------------------------------------------------------------------------- The plans provide that the A Class and the R Class will pay ACIS an annual distribution and service fee of 0.25% 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 Class, B Class, C Class and R Class shares. Fees incurred under the plans during the six months ended September 30, 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 six months ended September 30, 2006, were as follows: - -------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - -------------------------------------------------------------------------------- Purchases $1,762,132,672 $239,355,117 - -------------------------------------------------------------------------------- Proceeds from sales $1,855,581,961 $162,853,080 - -------------------------------------------------------------------------------- For the six months ended September 30, 2006, Value and Large Company Value incurred net realized gains of $1,214,447 and $5,421,041, respectively, 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) - ------ 26 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the funds were as follows: - -------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - -------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 700,000,000 350,000,000 ================================================================================ Sold 16,990,582 $122,628,613 36,568,001 $251,354,189 - ------------------- Issued in reinvestment of distributions 2,198,325 15,880,800 1,210,841 8,155,171 - ------------------- Redeemed (27,976,905) (201,584,106) (19,062,162) (130,237,480) - -------------------------------------------------------------------------------- Net increase (decrease) (8,787,998) $(63,074,693) 18,716,680 $129,271,880 ================================================================================ 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 ================================================================================ INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 100,000,000 200,000,000 ================================================================================ Sold 4,797,120 $34,590,942 8,939,813 $ 61,108,012 - ------------------- Issued in reinvestment of distributions 278,100 2,012,347 651,435 4,383,949 - ------------------- Redeemed (6,016,058) (43,496,173) (13,461,094) (92,022,098) - -------------------------------------------------------------------------------- Net increase (decrease) (940,838) $(6,892,884) (3,869,846) $(26,530,137) ================================================================================ 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 ================================================================================ ADVISOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 100,000,000 75,000,000 ================================================================================ Sold 4,505,701 $32,877,874 7,293,537 $49,785,301 - ------------------- Issued in reinvestment of distributions 180,148 1,302,431 180,332 1,214,580 - ------------------- Redeemed (3,641,390) (26,232,089) (2,979,430) (20,333,694) - -------------------------------------------------------------------------------- Net increase (decrease) 1,044,459 $ 7,948,216 4,494,439 $30,666,187 ================================================================================ 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 ================================================================================ (continued) - ------ 27 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - -------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - -------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 30,000,000 150,000,000 ================================================================================ Sold 1,463,445 $10,687,422 2,187,233 $ 14,920,625 - ------------------- Issued in reinvestment of distributions 52,702 381,563 231,820 1,557,148 - ------------------- Redeemed (1,822,073) (13,141,415) (6,564,643) (44,730,885) - -------------------------------------------------------------------------------- Net increase (decrease) (305,926) $(2,072,430) (4,145,590) $(28,253,112) ================================================================================ 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) ================================================================================ B CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 10,000,000 10,000,000 ================================================================================ Sold 62,990 $ 455,328 55,772 $ 378,677 - ------------------- Issued in reinvestment of distributions 1,891 13,773 7,504 50,517 - ------------------- Redeemed (111,832) (805,978) (133,393) (912,466) - -------------------------------------------------------------------------------- Net increase (decrease) (46,951) $(336,877) (70,117) $(483,272) ================================================================================ 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 ================================================================================ C CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 10,000,000 20,000,000 ================================================================================ Sold 283,782 $2,025,843 1,016,003 $6,941,988 - ------------------- Issued in reinvestment of distributions 4,911 35,587 12,684 85,193 - ------------------- Redeemed (303,876) (2,180,174) (973,677) (6,629,247) - -------------------------------------------------------------------------------- Net increase (decrease) (15,183) $ (118,744) 55,010 $ 397,934 ================================================================================ 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 ================================================================================ (continued) - ------ 28 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - -------------------------------------------------------------------------------- VALUE LARGE COMPANY VALUE - -------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------- R CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 5,000,000 10,000,000 ================================================================================ Sold 20,794 $149,320 336,268 $2,306,306 - ---------------------- Issued in reinvestment of distributions 114 827 11,166 75,207 - ---------------------- Redeemed (3,698) (26,405) (119,405) (821,767) - -------------------------------------------------------------------------------- Net increase (decrease) 17,210 $123,742 228,029 $1,559,746 ================================================================================ 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 ================================================================================ (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 six months ended September 30, 2006 follows: SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND 9/30/06 FUND/COMPANY 3/31/06 COST COST GAIN (LOSS) INCOME SHARE BALANCE MARKET VALUE - -------------------------------------------------------------------------------------------------------------- VALUE - -------------------------------------------------------------------------------------------------------------- Minerals Technologies Inc.(1) 960,936 $3,919,249 $13,971,804 $(1,078,534) $85,105 808,689 $43,183,993 ============================================================================================================== (1) Company was not an affiliate at September 30, 2006. 6. SECURITIES LENDING As of September 30, 2006, securities in Value valued at $287,902,449, 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 $293,581,526. Value's risk 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. (continued) - ------ 29 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 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. The funds may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The funds did not borrow from the line during the six months ended September 30, 2006. 8. FEDERAL TAX INFORMATION 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 September 30, 2006, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- LARGE VALUE COMPANY VALUE - -------------------------------------------------------------------------------- Federal tax cost of investments $3,025,258,776 $2,035,504,446 ================================================================================ Gross tax appreciation of investments $256,774,538 $385,771,474 - --------------------------------------- Gross tax depreciation of investments (40,736,820) (26,213,097) - -------------------------------------------------------------------------------- Net tax appreciation (depreciation) of investments $216,037,718 $359,558,377 ================================================================================ 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. 9. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. FIN 48 is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the date of effectiveness. The FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" (FAS 157), in September 2006, which is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands the required financial statement disclosures about fair value measurements. Management is currently evaluating the impact of adopting FIN 48 and FAS 157. - ------ 30 Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ----------------------------------------------------------------------------------------------------- INVESTOR CLASS - ----------------------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002 - ----------------------------------------------------------------------------------------------------- PER-SHARE DATA - ----------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.18 $7.31 $7.72 $5.61 $7.19 $6.27 - ----------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------- Net Investment Income (Loss)(2) 0.05 0.12 0.09 0.09 0.07 0.08 - ----------------------- Net Realized and Unrealized Gain (Loss) 0.41 0.57 0.64 2.18 (1.48) 1.03 - ----------------------------------------------------------------------------------------------------- Total From Investment Operations 0.46 0.69 0.73 2.27 (1.41) 1.11 - ----------------------------------------------------------------------------------------------------- Distributions - ----------------------- From Net Investment Income (0.05) (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 (0.05) (0.82) (1.14) (0.16) (0.17) (0.19) - ----------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.59 $7.18 $7.31 $7.72 $5.61 $7.19 ===================================================================================================== TOTAL RETURN(3) 6.49% 9.89% 9.95% 40.66% (19.85)% 17.96% - ----------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.99%(4) 0.99% 0.99% 1.00% 1.00% 1.00% - ----------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.52%(4) 1.71% 1.16% 1.26% 1.19% 1.11% - ----------------------- Portfolio Turnover Rate 65% 134% 130% 122% 102% 151% - ----------------------- Net Assets, End of Period (in thousands) $2,359,301 $2,296,153 $2,315,507 $2,152,265 $1,552,632 $2,068,901 - ----------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 31 Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ----------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ----------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002 - ----------------------------------------------------------------------------------------- PER-SHARE DATA - ----------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.19 $7.32 $7.72 $5.61 $7.20 $6.27 - ----------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------- Net Investment Income (Loss)(2) 0.06 0.14 0.10 0.10 0.09 0.09 - ----------------------- Net Realized and Unrealized Gain (Loss) 0.41 0.57 0.65 2.18 (1.50) 1.04 - ----------------------------------------------------------------------------------------- Total From Investment Operations 0.47 0.71 0.75 2.28 (1.41) 1.13 - ----------------------------------------------------------------------------------------- Distributions - ----------------------- From Net Investment Income (0.06) (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 (0.06) (0.84) (1.15) (0.17) (0.18) (0.20) - ----------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.60 $7.19 $7.32 $7.72 $5.61 $7.20 ========================================================================================= TOTAL RETURN(3) 6.58% 10.10% 10.30% 40.93% (19.70)% 18.19% - ----------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.79%(4) 0.79% 0.79% 0.80% 0.80% 0.80% - ----------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.72%(4) 1.91% 1.36% 1.46% 1.38% 1.31% - ----------------------- Portfolio Turnover Rate 65% 134% 130% 122% 102% 151% - ----------------------- Net Assets, End of Period (in thousands) $262,040 $254,778 $251,812 $223,282 $179,196 $226,681 - ----------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 32 Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ----------------------------------------------------------------------------------------- ADVISOR CLASS - ----------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002 - ----------------------------------------------------------------------------------------- PER-SHARE DATA - ----------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.18 $7.31 $7.72 $5.60 $7.19 $6.27 - ----------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------- Net Investment Income (Loss)(2) 0.05 0.10 0.07 0.07 0.06 0.06 - ----------------------- Net Realized and Unrealized Gain (Loss) 0.40 0.57 0.64 2.19 (1.49) 1.03 - ----------------------------------------------------------------------------------------- Total From Investment Operations 0.45 0.67 0.71 2.26 (1.43) 1.09 - ----------------------------------------------------------------------------------------- Distributions - ----------------------- From Net Investment Income (0.04) (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 (0.04) (0.80) (1.12) (0.14) (0.16) (0.17) - ----------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.59 $7.18 $7.31 $7.72 $5.60 $7.19 ========================================================================================= TOTAL RETURN(3) 6.35% 9.61% 9.67% 40.56% (20.07)% 17.51% - ----------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.24%(4) 1.24% 1.24% 1.25% 1.25% 1.25% - ----------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.27%(4) 1.46% 0.91% 1.01% 0.94% 0.86% - ----------------------- Portfolio Turnover Rate 65% 134% 130% 122% 102% 151% - ----------------------- Net Assets, End of Period (in thousands) $234,909 $214,835 $236,960 $403,212 $210,984 $208,311 - ----------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 33 Value - Financial Highlights For a Share Outstanding Throughout the Year Ended March 31 (except as noted) - ---------------------------------------------------------------------------- A CLASS - ---------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003(2) - ---------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.19 $7.31 $7.72 $5.60 $5.77 - ---------------------------------------------------------------------------- Income From Investment Operations - ----------------------- Net Investment Income (Loss)(3) 0.05 0.11 0.07 0.07 0.01 - ----------------------- Net Realized and Unrealized Gain (Loss) 0.40 0.57 0.64 2.19 (0.16) - ---------------------------------------------------------------------------- Total From Investment Operations 0.45 0.68 0.71 2.26 (0.15) - ---------------------------------------------------------------------------- Distributions - ----------------------- From Net Investment Income (0.04) (0.08) (0.07) (0.06) (0.02) - ----------------------- From Net Realized Gains -- (0.72) (1.05) (0.08) -- - ---------------------------------------------------------------------------- Total Distributions (0.04) (0.80) (1.12) (0.14) (0.02) - ---------------------------------------------------------------------------- Net Asset Value, End of Period $7.60 $7.19 $7.31 $7.72 $5.60 ============================================================================ TOTAL RETURN(4) 6.34% 9.75% 9.67% 40.55% (2.67)% - ---------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.24%(5) 1.24% 1.24% 1.25% 1.25%(5) - ----------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.27%(5) 1.46% 0.91% 1.01% 0.62%(5) - ----------------------- Portfolio Turnover Rate 65% 134% 130% 122% 102%(6) - ----------------------- Net Assets, End of Period (in thousands) $67,178 $65,780 $48,330 $15,029 $385 - ---------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ------ 34 Value - Financial Highlights For a Share Outstanding Throughout the Year Ended March 31 (except as noted) - ------------------------------------------------------------------------------ B CLASS - ------------------------------------------------------------------------------ 2006(1) 2006 2005 2004 2003(2) - ------------------------------------------------------------------------------ PER-SHARE DATA - ------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $7.18 $7.31 $7.73 $5.61 $5.77 - ------------------------------------------------------------------------------ Income From Investment Operations - ----------------------- Net Investment Income (Loss)(3) 0.02 0.05 0.01 0.01 --(4) - ----------------------- Net Realized and Unrealized Gain (Loss) 0.41 0.57 0.65 2.20 (0.15) - ------------------------------------------------------------------------------ Total From Investment Operations 0.43 0.62 0.66 2.21 (0.15) - ------------------------------------------------------------------------------ Distributions - ----------------------- From Net Investment Income (0.02) (0.03) (0.03) (0.01) (0.01) - ----------------------- From Net Realized Gains -- (0.72) (1.05) (0.08) -- - ------------------------------------------------------------------------------ Total Distributions (0.02) (0.75) (1.08) (0.09) (0.01) - ------------------------------------------------------------------------------ Net Asset Value, End of Period $7.59 $7.18 $7.31 $7.73 $5.61 ============================================================================== TOTAL RETURN(5) 5.95% 8.81% 8.93% 39.51% (2.59)% - ------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------ Ratio of Operating Expenses to Average Net Assets 1.99%(6) 1.99% 1.99% 2.00% 1.98%(6)(7) - ----------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.52%(6) 0.71% 0.16% 0.26% (0.17)%(6)(7) - ----------------------- Portfolio Turnover Rate 65% 134% 130% 122% 102%(8) - ----------------------- Net Assets, End of Period (in thousands) $7,176 $7,129 $5,059 $2,656 $91 - ------------------------------------------------------------------------------ (1) Six months ended September 30, 2006 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) During the period ended March 31, 2003, the distributor voluntarily waived a portion of the distribution and service fees. Had fees not been waived, the annualized ratio of operating expenses to average net assets and annualized ratio of net investment income (loss) to average net assets would have been 2.00% and (0.19)%, respectively. (8) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ------ 35 Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ----------------------------------------------------------------------------------------- C CLASS - ----------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002(2) - ----------------------------------------------------------------------------------------- PER-SHARE DATA - ----------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.14 $7.27 $7.70 $5.58 $7.18 $6.90 - ----------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------- Net Investment Income (Loss)(3) 0.02 0.05 0.01 0.02 0.01 --(4) - ----------------------- Net Realized and Unrealized Gain (Loss) 0.40 0.57 0.64 2.19 (1.50) 0.42 - ----------------------------------------------------------------------------------------- Total From Investment Operations 0.42 0.62 0.65 2.21 (1.49) 0.42 - ----------------------------------------------------------------------------------------- Distributions - ----------------------- From Net Investment Income (0.02) (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 (0.02) (0.75) (1.08) (0.09) (0.11) (0.14) - ----------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.54 $7.14 $7.27 $7.70 $5.58 $7.18 ========================================================================================= TOTAL RETURN(5) 5.85% 8.87% 8.84% 39.73% (20.90)% 6.33% - ----------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.99%(6) 1.99% 1.99% 2.00% 2.00% 2.00%(6) - ----------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.52%(6) 0.71% 0.16% 0.26% 0.19% (0.06)%(6) - ----------------------- Portfolio Turnover Rate 65% 134% 130% 122% 102% 151%(7) - ----------------------- Net Assets, End of Period (in thousands) $20,234 $19,259 $13,885 $6,613 $2,461 $1,866 - ----------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) June 4, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 36 Value - Financial Highlights For a Share Outstanding Throughout the Periods Indicated - -------------------------------------------------------------------------------- R CLASS - -------------------------------------------------------------------------------- 2006(1) 2006(2) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $7.18 $7.60 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------- Net Investment Income (Loss)(3) 0.04 0.06 - ------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.41 0.29 - -------------------------------------------------------------------------------- Total From Investment Operations 0.45 0.35 - -------------------------------------------------------------------------------- Distributions - ------------------------------------------- From Net Investment Income (0.04) (0.05) - ------------------------------------------- From Net Realized Gains -- (0.72) - -------------------------------------------------------------------------------- Total Distributions (0.04) (0.77) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $7.59 $7.18 ================================================================================ TOTAL RETURN(4) 6.22% 4.99% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.49%(5) 1.49%(5) - ------------------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.02%(5) 1.17%(5) - ------------------------------------------- Portfolio Turnover Rate 65% 134%(6) - ------------------------------------------- Net Assets, End of Period (in thousands) $176 $43 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) July 29, 2005 (commencement of sale) through March 31, 2006. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2006. See Notes to Financial Statements. - ------ 37 Large Company Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002 - -------------------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $6.72 $6.39 $5.89 $4.29 $5.53 $5.08 - -------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------- Net Investment Income (Loss)(2) 0.06 0.12 0.12 0.09 0.08 0.07 - ----------------------- Net Realized and Unrealized Gain (Loss) 0.44 0.47 0.51 1.59 (1.25) 0.45 - -------------------------------------------------------------------------------------------- Total From Investment Operations 0.50 0.59 0.63 1.68 (1.17) 0.52 - -------------------------------------------------------------------------------------------- Distributions - ----------------------- From Net Investment Income (0.06) (0.11) (0.11) (0.08) (0.07) (0.07) - ----------------------- From Net Realized Gains -- (0.15) (0.02) -- -- -- - -------------------------------------------------------------------------------------------- Total Distributions (0.06) (0.26) (0.13) (0.08) (0.07) (0.07) - -------------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.16 $6.72 $6.39 $5.89 $4.29 $5.53 ============================================================================================ TOTAL RETURN(3) 7.50% 9.44% 10.73% 39.34% (21.19)% 10.20% - -------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.83%(4) 0.84% 0.87% 0.90% 0.90% 0.90% - ----------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.86%(4) 1.75% 1.90% 1.58% 1.75% 1.34% - ----------------------- Portfolio Turnover Rate 8% 16% 18% 14% 30% 34% - ----------------------- Net Assets, End of Period (in thousands) $1,320,197 $1,112,858 $659,277 $350,516 $152,641 $69,961 - -------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 38 Large Company Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ----------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ----------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002(2) - ----------------------------------------------------------------------------------------- PER-SHARE DATA - ----------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $6.72 $6.39 $5.89 $4.29 $5.53 $5.44 - ----------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------- Net Investment Income (Loss)(3) 0.07 0.13 0.13 0.10 0.09 0.06 - ----------------------- Net Realized and Unrealized Gain (Loss) 0.44 0.47 0.51 1.59 (1.25) 0.08 - ----------------------------------------------------------------------------------------- Total From Investment Operations 0.51 0.60 0.64 1.69 (1.16) 0.14 - ----------------------------------------------------------------------------------------- Distributions - ----------------------- From Net Investment Income (0.07) (0.12) (0.12) (0.09) (0.08) (0.05) - ----------------------- From Net Realized Gains -- (0.15) (0.02) -- -- -- - ----------------------------------------------------------------------------------------- Total Distributions (0.07) (0.27) (0.14) (0.09) (0.08) (0.05) - ----------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.16 $6.72 $6.39 $5.89 $4.29 $5.53 ========================================================================================= TOTAL RETURN(4) 7.61% 9.65% 10.94% 39.61% (21.03)% 2.69% - ----------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.63%(5) 0.64% 0.67% 0.70% 0.70% 0.70%(5) - ----------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 2.06%(5) 1.95% 2.10% 1.78% 1.95% 1.74%(5) - ----------------------- Portfolio Turnover Rate 8% 16% 18% 14% 30% 34%(6) - ----------------------- Net Assets, End of Period (in thousands) $534,102 $527,109 $438,518 $151,622 $21,110 $2,632 - ----------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) August 10, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. 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. - ------ 39 Large Company Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------------- ADVISOR CLASS - -------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002 - -------------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $6.72 $6.39 $5.89 $4.29 $5.53 $5.08 - -------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------- Net Investment Income (Loss)(2) 0.05 0.10 0.10 0.07 0.07 0.06 - ----------------------- Net Realized and Unrealized Gain (Loss) 0.44 0.47 0.51 1.60 (1.25) 0.44 - -------------------------------------------------------------------------------------- Total From Investment Operations 0.49 0.57 0.61 1.67 (1.18) 0.50 - -------------------------------------------------------------------------------------- Distributions - ----------------------- From Net Investment Income (0.05) (0.09) (0.09) (0.07) (0.06) (0.05) - ----------------------- From Net Realized Gains -- (0.15) (0.02) -- -- -- - -------------------------------------------------------------------------------------- Total Distributions (0.05) (0.24) (0.11) (0.07) (0.06) (0.05) - -------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.16 $6.72 $6.39 $5.89 $4.29 $5.53 ====================================================================================== TOTAL RETURN(3) 7.37% 9.17% 10.45% 38.99% (21.38)% 9.93% - -------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.08%(4) 1.09% 1.12% 1.15% 1.15% 1.15% - ----------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.61%(4) 1.50% 1.65% 1.33% 1.50% 1.09% - ----------------------- Portfolio Turnover Rate 8% 16% 18% 14% 30% 34% - ----------------------- Net Assets, End of Period (in thousands) $228,945 $184,601 $104,612 $19,265 $1,090 $6 - -------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 40 Large Company Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ----------------------------------------------------------------------------- A CLASS - ----------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003(2) - ----------------------------------------------------------------------------- PER-SHARE DATA - ----------------------------------------------------------------------------- Net Asset Value, Beginning of Period $6.72 $6.39 $5.90 $4.29 $4.46 - ----------------------------------------------------------------------------- Income From Investment Operations - ----------------------- Net Investment Income (Loss)(3) 0.06 0.10 0.10 0.07 0.01 - ----------------------- Net Realized and Unrealized Gain (Loss) 0.44 0.47 0.50 1.61 (0.17) - ----------------------------------------------------------------------------- Total From Investment Operations 0.50 0.57 0.60 1.68 (0.16) - ----------------------------------------------------------------------------- Distributions - ----------------------- From Net Investment Income (0.05) (0.09) (0.09) (0.07) (0.01) - ----------------------- From Net Realized Gains -- (0.15) (0.02) -- -- - ----------------------------------------------------------------------------- Total Distributions (0.05) (0.24) (0.11) (0.07) (0.01) - ----------------------------------------------------------------------------- Net Asset Value, End of Period $7.17 $6.72 $6.39 $5.90 $4.29 ============================================================================= TOTAL RETURN(4) 7.52% 9.16% 10.25% 39.22% (3.49)% - ----------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.08%(5) 1.09% 1.12% 1.15% 1.15%(5) - ----------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.61%(5) 1.50% 1.65% 1.33% 1.79%(5) - ----------------------- Portfolio Turnover Rate 8% 16% 18% 14% 30%(6) - ----------------------- Net Assets, End of Period (in thousands) $222,161 $236,313 $245,416 $92,171 $3,733 - ----------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ------ 41 Large Company Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------ B CLASS - ------------------------------------------------------------------------------ 2006(1) 2006 2005 2004 2003(2) - ------------------------------------------------------------------------------ PER-SHARE DATA - ------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $6.74 $6.41 $5.91 $4.29 $4.46 - ------------------------------------------------------------------------------ Income From Investment Operations - ----------------------- Net Investment Income (Loss)(3) 0.03 0.05 0.05 0.03 0.01 - ----------------------- Net Realized and Unrealized Gain (Loss) 0.44 0.47 0.52 1.62 (0.17) - ------------------------------------------------------------------------------ Total From Investment Operations 0.47 0.52 0.57 1.65 (0.16) - ------------------------------------------------------------------------------ Distributions - ----------------------- From Net Investment Income (0.03) (0.04) (0.05) (0.03) (0.01) - ----------------------- From Net Realized Gains -- (0.15) (0.02) -- -- - ------------------------------------------------------------------------------ Total Distributions (0.03) (0.19) (0.07) (0.03) (0.01) - ------------------------------------------------------------------------------ Net Asset Value, End of Period $7.18 $6.74 $6.41 $5.91 $4.29 ============================================================================== TOTAL RETURN(4) 6.95% 8.33% 9.59% 38.41% (3.58)% - ------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------ Ratio of Operating Expenses to Average Net Assets 1.83%(5) 1.84% 1.87% 1.90% 1.88%(5)(6) - ----------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.86%(5) 0.75% 0.90% 0.58% 0.74%(5)(6) - ----------------------- Portfolio Turnover Rate 8% 16% 18% 14% 30%(7) - ----------------------- Net Assets, End of Period (in thousands) $16,501 $15,954 $13,009 $5,642 $88 - ------------------------------------------------------------------------------ (1) Six months ended September 30, 2006 (unaudited). (2) January 31, 2003 (commencement of sale) through March 31, 2003. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) During the period ended March 31, 2003, the distributor voluntarily waived a portion of the distribution and service fees. Had fees not been waived, the annualized ratio of operating expenses to average net assets and annualized ratio of net investment income (loss) to average net assets would have been 1.90% and 0.72%, respectively. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2003. See Notes to Financial Statements. - ------ 42 Large Company Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - --------------------------------------------------------------------------------------- C CLASS - --------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002(2) - --------------------------------------------------------------------------------------- PER-SHARE DATA - --------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $6.72 $6.39 $5.89 $4.28 $5.53 $5.14 - --------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------- Net Investment Income (Loss)(3) 0.03 0.05 0.05 0.03 0.03 0.01 - ----------------------- Net Realized and Unrealized Gain (Loss) 0.44 0.47 0.52 1.61 (1.25) 0.39 - --------------------------------------------------------------------------------------- Total From Investment Operations 0.47 0.52 0.57 1.64 (1.22) 0.40 - --------------------------------------------------------------------------------------- Distributions - ----------------------- From Net Investment Income (0.03) (0.04) (0.05) (0.03) (0.03) (0.01) - ----------------------- From Net Realized Gains -- (0.15) (0.02) -- -- -- - --------------------------------------------------------------------------------------- Total Distributions (0.03) (0.19) (0.07) (0.03) (0.03) (0.01) - --------------------------------------------------------------------------------------- Net Asset Value, End of Period $7.16 $6.72 $6.39 $5.89 $4.28 $5.53 ======================================================================================= TOTAL RETURN(4) 6.97% 8.35% 9.62% 38.27% (22.13)% 7.78% - --------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.83%(5) 1.84% 1.87% 1.90% 1.90% 1.90%(5) - ----------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.86%(5) 0.75% 0.90% 0.58% 0.75% 0.33%(5) - ----------------------- Portfolio Turnover Rate 8% 16% 18% 14% 30% 34%(6) - ----------------------- Net Assets, End of Period (in thousands) $66,136 $61,682 $40,789 $11,030 $1,163 $257 - --------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) November 7, 2001 (commencement of sale) through March 31, 2002. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2002. See Notes to Financial Statements. - ------ 43 Large Company Value - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ------------------------------------------------------------------------------ R CLASS - ------------------------------------------------------------------------------ 2006(1) 2006 2005 2004(2) - ------------------------------------------------------------------------------ PER-SHARE DATA - ------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $6.72 $6.39 $5.89 $5.18 - ------------------------------------------------------------------------------ Income From Investment Operations - ----------------------- Net Investment Income (Loss)(3) 0.05 0.09 0.09 0.03 - ----------------------- Net Realized and Unrealized Gain (Loss) 0.43 0.47 0.51 0.72 - ------------------------------------------------------------------------------ Total From Investment Operations 0.48 0.56 0.60 0.75 - ------------------------------------------------------------------------------ Distributions - ----------------------- From Net Investment Income (0.04) (0.08) (0.08) (0.04) - ----------------------- From Net Realized Gains -- (0.15) (0.02) -- - ------------------------------------------------------------------------------ Total Distributions (0.04) (0.23) (0.10) (0.04) - ------------------------------------------------------------------------------ Net Asset Value, End of Period $7.16 $6.72 $6.39 $5.89 ============================================================================== TOTAL RETURN(4) 7.23% 8.90% 10.17% 14.63% - ------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------ Ratio of Operating Expenses to Average Net Assets 1.33%(5) 1.34% 1.33%(6) 1.40%(5) - ----------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.36%(5) 1.25% 1.44%(6) 0.77%(5) - ----------------------- Portfolio Turnover Rate 8% 16% 18% 14%(7) - ----------------------- Net Assets, End of Period (in thousands) $13,340 $10,984 $2,143 $168 - ------------------------------------------------------------------------------ (1) Six months ended September 30, 2006 (unaudited). (2) August 29, 2003 (commencement of sale) through March 31, 2004. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) During the year ended March 31, 2005, the class received a partial reimbursement of its distribution and service fee. Had fees not been reimbursed, the ratio of operating expenses to average net assets and ratio of net investment income (loss) to average net assets would have been 1.37% and 1.40%, respectively. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2004. See Notes to Financial Statements. - ------ 44 Approval of Management Agreements for Value and Large Company Value Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund's independent directors or trustees (the "Directors") each year. At American Century, this process is referred to as the "15(c) Process." As a part of this process, the board reviews fund performance, shareholder services, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. In addition to this annual review, the board of directors oversees and evaluates on a continuous basis at its quarterly meetings the nature and quality of significant services performed by the advisor, fund performance, audit and compliance information, and a variety of other reports relating to fund operations. The board, or committees of the board, also holds special meetings as needed. Under a Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for the board's approval or renewal of any advisory agreements within the fund's most recently completed fiscal half-year period. ANNUAL CONTRACT REVIEW PROCESS As part of the annual 15(c) Process undertaken during the most recent fiscal half-year period, the Directors reviewed extensive data and information compiled by the advisor and certain independent providers of evaluative data (the "15(c) Providers") concerning Value and Large Company Value (the "funds") and the services provided to the funds under the management agreement. The information considered and the discussions held at the meetings included, but were not limited to: * the nature, extent and quality of investment management, shareholder services and other services provided to the funds under the management agreement; * reports on the advisor's activities relating to the wide range of programs and services the advisor provides to the funds and its shareholders on a routine and non-routine basis; * data comparing the cost of owning the funds to the cost of owning similar funds; * data comparing the funds' performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; * financial data showing the profitability of the funds to the advisor and the overall profitability of the advisor; and * data comparing services provided and charges to other investment management clients of the advisor. In keeping with its practice, the funds' board of directors held two regularly scheduled meetings and one special meeting to review and discuss the information provided by the advisor and to complete its negotiations with the advisor regarding the renewal of the management agreement, including the setting of the applicable advisory fee. The board also had the benefit of the advice of its independent counsel throughout the period. (continued) - ------ 45 Approval of Management Agreements for Value and Large Company Value FACTORS CONSIDERED The Directors considered all of the information provided by the advisor, the 15(c) Providers, and the board's independent counsel, and evaluated such information for each fund for which the board has responsibility. The Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the agreement under the terms ultimately determined by the board to be appropriate, the Directors' decision was based on the following factors. NATURE, EXTENT AND QUALITY OF SERVICES -- GENERALLY. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the funds. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including: * fund construction and design * portfolio security selection * initial capitalization/funding * securities trading * custody of fund assets * daily valuation of the funds' portfolio * shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping and communications * legal services * regulatory and portfolio compliance * financial reporting * marketing and distribution The Directors noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings. INVESTMENT MANAGEMENT SERVICES. The nature of the investment management services provided is quite complex and allows fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes, and liquidity. In evaluating investment performance, the board expects the advisor to manage the funds in accordance with its investment objectives and approved strategies. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. At each quarterly meeting the Directors review investment performance information for the funds, together with comparative information for appropriate benchmarks and peer groups of funds managed similarly to the funds. The Directors also review detailed performance information during the 15(c) Process comparing the funds' performance with that of similar funds not managed by the advisor. If performance concerns are identified, the Directors (continued) - ------ 46 Approval of Management Agreements for Value and Large Company Value discuss with the advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The funds' performance fell below the median for both the one and three year periods during part of the past year. The board discussed the funds' performance with the advisor and was satisfied with the efforts being undertaken by the advisor. SHAREHOLDER AND OTHER SERVICES. The advisor provides the funds with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at their regular quarterly meetings, including the annual meeting concerning contract review, and reports to the board. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor. COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor provides detailed information concerning its cost of providing various services to the funds, its profitability in managing the funds, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor's financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. ETHICS OF THE ADVISOR. The Directors generally consider the advisor's commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor's practices generally meet or exceed industry best practices and that the advisor was not implicated in the industry scandals of 2003 and 2004. ECONOMIES OF SCALE. The Directors review reports provided by the advisor on economies of scale for the complex as a whole and the year-over-year changes in revenue, costs, and profitability. The Directors concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. This analysis is also complicated by the additional services and content provided by the advisor and its reinvestment in its ability to provide and expand those services. Accordingly, the Directors also seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the funds specifically, the expenses incurred by the advisor in providing various functions to the funds, and the breakpoint fees of competitive funds not (continued) - ------ 47 Approval of Management Agreements for Value and Large Company Value managed by the advisor. The Directors believe the advisor is appropriately sharing economies of scale through its competitive fee structure, fee breakpoints as the funds increase in size, and through reinvestment in its business to provide shareholders additional content and services. COMPARISON TO OTHER FUNDS' FEES. The funds pay the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the funds, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the funds' independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The board believes the unified fee structure is a benefit to fund shareholders because it clearly discloses to shareholders the cost of owning fund shares, and, since the unified fee cannot be increased without a vote of fund shareholders, it shifts to the advisor the risk of increased costs of operating the funds and provides a direct incentive to minimize administrative inefficiencies. Part of the Directors' analysis of fee levels involves reviewing certain evaluative data compiled by a 15(c) Provider comparing the funds' unified fee to the total expense ratio of other funds in the funds' peer group. The unified fee charged to shareholders of the funds was below the median of the total expense ratios of their peer groups. COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the funds. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the funds. The Directors analyzed this information and concluded that the fees charged and services provided to the funds were reasonable by comparison. COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information from the advisor concerning collateral benefits it receives as a result of its relationship with the funds. They concluded that the advisor's primary business is managing mutual funds and it generally does not use the funds or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is able to provide investment management services to certain clients (continued) - ------ 48 Approval of Management Agreements for Value and Large Company Value other than the funds, at least in part, due to its existing infrastructure built to serve the fund complex. The Directors concluded, however, that the assets of those other clients are not material to the analysis and, in any event, are included with the assets of the funds to determine breakpoints in the funds' fee schedule, provided they are managed using the same investment team and strategy. CONCLUSIONS OF THE DIRECTORS As a result of this process, the independent directors, in the absence of particular circumstances and assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor concluded that the investment management agreement between the funds and the advisor is fair and reasonable in light of the services provided and should be renewed. - ------ 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 expense ratios of Advisor Class, A Class, B Class, C Class 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 funds are 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 distribution and service 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 distribution and service 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% after the sixth year. There is no CDSC (continued) - ------ 50 Share Class Information 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 distribution and service 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 distribution and service 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 distribution and service 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 website at americancentury.com and on the Securities and Exchange Commission's website 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 website 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 website 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 RUSSELL MIDCAP(reg.tm) VALUE INDEX measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The S&P 500 INDEX is a market value-weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. - ------ 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. 0611 SH-SAN-51661S
AMERICAN CENTURY INVESTMENTS Semiannual Report September 30, 2006 [photo of fall trees] Equity Index Fund [american century investments logo and text logo] Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] /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. We are pleased to provide you with the semiannual report for the American Century Equity Index Fund for the six months ended September 30, 2006. We hope you find this information helpful in monitoring your investment. Another useful resource we offer is our website, americancentury.com, where we post quarterly portfolio commentaries, the views of senior investment officers and analysts, and other communications about investments, portfolio strategy, personal finance, and the markets. In its most recent rankings, Dalbar -- which issues customer satisfaction ratings and rankings based on website functionality -- ranked americancentury.com fourth out of the sites provided by the top 25 fund companies that it believes lead the industry in web-based technology. Our website earned an "Excellent" rating, Dalbar's highest designation. For most of 2006, our website has linked visitors to information explaining our strategic collaboration with Lance Armstrong and the Lance Armstrong Foundation (LAF). This 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. To learn more about the collaboration and the LAF, please visit americancentury.com or www.lanceface.com on the Web and click on the links to related sites. With the approach of year end and the 2006 tax season, you can also find out more about December fund distributions and tax information via a link from our website. We've posted December distribution estimates for over 50 funds, answers to frequent distribution questions, and online descriptions of all of the tax information we provide to investors. If you haven't visited americancentury.com yet, we encourage you to do so . . . it's there to serve you. And so are we. As always, we deeply appreciate your commitment to American Century Investments. Table of Contents Market Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Six-Month Total Returns . . . . . . . . . . . . . . . . . . . . . . . . 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 OTHER INFORMATION Approval of Management Agreement for Equity Index . . . . . . . . . . . . 27 Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . 32 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 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. Market Perspective [photo of Phil Davidson] BY PHIL DAVIDSON, CHIEF INVESTMENT OFFICER, U.S. VALUE EQUITY MODEST RALLY FOR STOCKS Cooling energy prices and a pause from the Federal Reserve enabled U.S. stocks to post positive results for the six months ended September 30, 2006. The stock market endured a difficult spring--the S&P 500 Index fell by more than 4% during the last three weeks of May after unexpectedly high inflation figures led to concerns about rising interest rates. Stocks plodded along through the summer months, clouded by uncertainties about inflation and economic growth, until the Federal Reserve chose to leave short-term interest rates unchanged at its policy meeting in mid-August. After 17 consecutive rate hikes over a two-year period, the Fed decided to stand pat amid evidence of moderating economic growth and declining energy and commodity prices. In response, the major stock indexes staged a strong rally that persisted through the end of the six-month period. The Dow Jones Industrial Average flirted with its all-time closing high on two occasions in the final week, only to fall back each time and close below the record. SIZE AND QUALITY MATTERED Thanks to the stock market's late-summer rally, the broad equity indexes advanced by 2-3% for the six-month period. However, the market's overall gains masked some relatively narrow breadth. In an environment of slowing economic growth, investors focused their attention on the stocks of larger, higher-quality companies, such as those that make up the S&P 500. In contrast, mid- and small-cap stocks did not fully participate in the market's rebound late in the period and declined overall for the six months (see table below). Extending a multi-year trend, value shares performed better than growth stocks across the capitalization range. PLAYING DEFENSE Sector performance within the S&P 500 reflected the defensive, risk-averse posture of the market during the summer. Investors seeking companies with more predictable earnings and dividend payouts shifted money into utilities and telecommunication services providers, as well as companies that make everyday consumer products. In addition, dividend-paying stocks in the S&P 500 provided an average total return of almost 5% for the six months, versus a modest decline for non-dividend-payers. On the downside, the information technology sector posted the largest decline during the period as investors moved away from the more speculative and growth-oriented segments of the market. The slowing economy weighed on industrial and materials stocks, which are the most economically sensitive sectors. SIX-MONTH TOTAL RETURNS AS OF SEPTEMBER 30, 2006(1) - -------------------------------------------------------------------------------- S&P 500 Index 4.14% - -------------------------------------------------------------------------------- S&P MidCap 400 Index -4.19% - -------------------------------------------------------------------------------- S&P SmallCap 600 Index -5.40% - -------------------------------------------------------------------------------- (1) Total returns for periods less than one year are not annualized. - ------ 2 Equity Index - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2006 ---------------------- AVERAGE ANNUAL RETURNS - ------------------------------------------------------------------------------ SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS INCEPTION DATE - ------------------------------------------------------------------------------ INVESTOR CLASS 3.80% 10.17% 6.46% 2.09% 2/26/99 - ------------------------------------------------------------------------------ S&P 500 INDEX(2) 4.14% 10.79% 6.97% 2.61% -- - ------------------------------------------------------------------------------ Institutional Class 4.10% 10.59% 6.66% 2.32% 2/26/99 - ------------------------------------------------------------------------------ (1) Total returns for periods less than one year are not annualized. (2) 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
![](https://capedge.com/proxy/N-CSRS/0000908186-06-000070/growthequityindex0611.gif)
ONE-YEAR RETURNS OVER LIFE OF CLASS Periods ended September 30 - -------------------------------------------------------------------------------- 1999* 2000 2001 2002 2003 2004 2005 2006 - -------------------------------------------------------------------------------- Investor Class 4.02% 12.54% -26.89% -20.61% 23.56% 13.14% 11.87% 10.17% - -------------------------------------------------------------------------------- S&P 500 Index 4.38% 13.28% -26.62% -20.49% 24.40% 13.87% 12.25% 10.79% - -------------------------------------------------------------------------------- * 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 Equity Index returned 3.80%* for the six months ended September 30, 2006, compared with the 4.14% 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 WERE TOP CONTRIBUTORS Financial stocks, which represented the fund's largest sector weighting during the six-month period, contributed the most to fund performance. Diversified financial services firms posted the best results, benefiting from robust financial market activity and stabilizing interest rates. One of the portfolio's top contributors was Bank of America, which announced record profits of more than $5 billion. Commercial banks also performed well during the period as strong earnings and consolidation among regional banks provided a lift to the industry. Performance leaders included Wells Fargo and U.S. Bancorp, both of which posted double-digit gains for the six-month period. Real estate investment trusts (REITs), which are considered defensive stocks because of their high dividend yields and steady rental income, generated strong returns. Mergers and acquisitions helped lift performance as REITs continued to garner attention from private equity firms. DEFENSIVE STOCKS OUTPERFORMED Consumer staples stocks also benefited from a shift toward defensive sectors of the market. The consumer staples sector consists of companies that make or sell the most basic consumer products, such as food, beverages, and household goods. The top contributor in this segment of the portfolio was consumer products giant Procter & Gamble, whose strong earnings derived in part from last year's acquisition of Gillette. Other top performers in the consumer staples sector included tobacco company Altria Group and snack and beverage maker PepsiCo. Altria reported improving results as its Marlboro brand gained market share in the U.S., and its Kraft Foods subsidiary made progress on restructuring efforts. PepsiCo announced better-than-expected earnings, led by double-digit growth in its international business. Dividend-paying stocks also attracted defensive-minded investors. Consequently, the utilities and telecommunication services sectors, which typically TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Exxon Mobil Corp. 3.3% 3.1% - -------------------------------------------------------------------------------- General Electric Co. 3.0% 3.1% - -------------------------------------------------------------------------------- Citigroup Inc. 2.0% 2.0% - -------------------------------------------------------------------------------- Bank of America Corp. 2.0% 1.8% - -------------------------------------------------------------------------------- Microsoft Corporation 2.0% 2.0% - -------------------------------------------------------------------------------- Pfizer Inc. 1.7% 1.6% - -------------------------------------------------------------------------------- Procter & Gamble Co. (The) 1.6% 1.6% - -------------------------------------------------------------------------------- Johnson & Johnson 1.6% 1.5% - -------------------------------------------------------------------------------- American International Group, Inc. 1.4% 1.5% - -------------------------------------------------------------------------------- J.P. Morgan Chase & Co. 1.3% 1.2% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. (continued) - ------ 5 Equity Index - Portfolio Commentary have the highest dividend yields, posted the best absolute returns in the portfolio. The leading contributors were telecom services providers AT&T and BellSouth, which rallied sharply after announcing a merger agreement between the two companies. ECONOMICALLY SENSITIVE SECTORS DECLINED While defensive sectors fared well, those sectors tied to the economy's fortunes--such as industrials and materials--underperformed during the six-month period. The fund's industrial holdings declined largely because of weakness in transportation-related stocks, such as road and rail operators and air freight and logistics companies. Package delivery giant United Parcel Service failed to meet earnings expectations and lowered its forecast for the remainder of 2006, citing the slowing economic environment. In the materials sector, metals and mining stocks suffered the largest declines. Gold producer Newmont Mining slumped as the price of gold fell by nearly 20% from its peak in May. INFORMATION TECHNOLOGY LAGGED Information technology was the worst-performing sector in the portfolio. The biggest individual detractor from fund performance was wireless technology firm QUALCOMM, which dropped by more than 25% during the period thanks to a combination of patent litigation and reduced revenue guidance. Other weak performers in the tech sector included online auctioneer eBay and computer hardware maker Dell. eBay struggled amid perceptions of increased competition and a slowdown in e-commerce, while Dell lost market share to rivals in the consumer side of its business. LOOKING FORWARD The stock market faces some challenges going forward--many analysts expect a further deceleration in economic and profit growth as we move into 2007. On the positive side, however, interest rates appear to have stabilized after rising for much of the year. But regardless of the market's near-term outlook, a broad index fund should remain a long-term core holding within a diversified portfolio. TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 7.6% 7.7% - -------------------------------------------------------------------------------- Pharmaceuticals 6.8% 6.4% - -------------------------------------------------------------------------------- Diversified Financial Services 5.9% 3.6% - -------------------------------------------------------------------------------- Insurance 4.8% 4.7% - -------------------------------------------------------------------------------- Commercial Banks 4.3% 5.8% - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Common Stocks & Futures 99.9% 100.8% - -------------------------------------------------------------------------------- Temporary Cash Investments 0.1% -- - -------------------------------------------------------------------------------- Other Assets and Liabilities --(1) (0.8)% - -------------------------------------------------------------------------------- (1) Category is less than 0.05% of total net assets. - ------ 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 April 1, 2006 to September 30, 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. - ------ 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 4/1/06 - EXPENSE 4/1/06 9/30/06 9/30/06 RATIO* - -------------------------------------------------------------------------------- EQUITY INDEX SHAREHOLDER FEE EXAMPLE - -------------------------------------------------------------------------------- ACTUAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,038.00 $2.50 0.49% - -------------------------------------------------------------------------------- Institutional Class $1,000 $1,041.00 $1.48 0.29% - -------------------------------------------------------------------------------- HYPOTHETICAL - -------------------------------------------------------------------------------- Investor Class $1,000 $1,022.61 $2.48 0.49% - -------------------------------------------------------------------------------- Institutional Class $1,000 $1,023.61 $1.47 0.29% - -------------------------------------------------------------------------------- *Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. - ------ 8 Equity Index - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 99.3% AEROSPACE & DEFENSE -- 2.4% - -------------------------------------------------------------------------------- 65,489 Boeing Co. $ 5,163,808 - -------------------------------------------------------------------------------- 33,196 General Dynamics Corp. 2,379,157 - -------------------------------------------------------------------------------- 10,015 Goodrich Corporation 405,808 - -------------------------------------------------------------------------------- 67,799 Honeywell International Inc. 2,772,979 - -------------------------------------------------------------------------------- 9,990 L-3 Communications Holdings, Inc. 782,517 - -------------------------------------------------------------------------------- 29,244 Lockheed Martin Corp. 2,516,739 - -------------------------------------------------------------------------------- 28,308 Northrop Grumman Corp. 1,926,926 - -------------------------------------------------------------------------------- 36,818 Raytheon Company 1,767,632 - -------------------------------------------------------------------------------- 14,032 Rockwell Collins 769,515 - -------------------------------------------------------------------------------- 83,191 United Technologies Corp. 5,270,149 - -------------------------------------------------------------------------------- 23,755,230 - -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS -- 0.9% - -------------------------------------------------------------------------------- 25,174 FedEx Corporation 2,735,910 - -------------------------------------------------------------------------------- 88,976 United Parcel Service, Inc. Cl B 6,400,934 - -------------------------------------------------------------------------------- 9,136,844 - -------------------------------------------------------------------------------- AIRLINES -- 0.1% - -------------------------------------------------------------------------------- 64,355 Southwest Airlines Co. 1,072,154 - -------------------------------------------------------------------------------- AUTO COMPONENTS -- 0.1% - -------------------------------------------------------------------------------- 14,623 Goodyear Tire & Rubber Co. (The)(1) 212,034 - -------------------------------------------------------------------------------- 15,977 Johnson Controls, Inc. 1,146,189 - -------------------------------------------------------------------------------- 1,358,223 - -------------------------------------------------------------------------------- AUTOMOBILES -- 0.4% - -------------------------------------------------------------------------------- 153,675 Ford Motor Company 1,243,231 - -------------------------------------------------------------------------------- 46,460 General Motors Corp. 1,545,259 - -------------------------------------------------------------------------------- 21,833 Harley-Davidson, Inc. 1,370,021 - -------------------------------------------------------------------------------- 4,158,511 - -------------------------------------------------------------------------------- BEVERAGES -- 2.2% - -------------------------------------------------------------------------------- 63,370 Anheuser-Busch Companies, Inc. 3,010,709 - -------------------------------------------------------------------------------- 6,726 Brown-Forman Corp. Cl B 515,548 - -------------------------------------------------------------------------------- 167,692 Coca-Cola Company (The) 7,492,479 - -------------------------------------------------------------------------------- 23,636 Coca-Cola Enterprises Inc. 492,338 - -------------------------------------------------------------------------------- 17,139 Constellation Brands Inc. Cl A(1) 493,260 - -------------------------------------------------------------------------------- 4,051 Molson Coors Brewing Co. 279,114 - -------------------------------------------------------------------------------- 11,103 Pepsi Bottling Group Inc. 394,157 - -------------------------------------------------------------------------------- 135,669 PepsiCo, Inc. 8,853,758 - -------------------------------------------------------------------------------- 21,531,363 - -------------------------------------------------------------------------------- BIOTECHNOLOGY -- 1.3% - -------------------------------------------------------------------------------- 96,587 Amgen Inc.(1) 6,908,868 - -------------------------------------------------------------------------------- 28,087 Biogen Idec Inc.(1) 1,254,927 - -------------------------------------------------------------------------------- 21,368 Genzyme Corp.(1) 1,441,699 - -------------------------------------------------------------------------------- 37,593 Gilead Sciences, Inc.(1) 2,582,639 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 20,067 MedImmune, Inc.(1) $ 586,157 - -------------------------------------------------------------------------------- 12,774,290 - -------------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.1% - -------------------------------------------------------------------------------- 14,451 American Standard Companies Inc. 606,508 - -------------------------------------------------------------------------------- 32,867 Masco Corp. 901,214 - -------------------------------------------------------------------------------- 1,507,722 - -------------------------------------------------------------------------------- CAPITAL MARKETS -- 3.7% - -------------------------------------------------------------------------------- 20,023 Ameriprise Financial Inc. 939,079 - -------------------------------------------------------------------------------- 63,280 Bank of New York Co., Inc. (The) 2,231,253 - -------------------------------------------------------------------------------- 9,871 Bear Stearns Companies Inc. (The) 1,382,927 - -------------------------------------------------------------------------------- 34,868 E*TRADE Financial Corp.(1) 834,043 - -------------------------------------------------------------------------------- 7,277 Federated Investors Inc. Cl B 246,035 - -------------------------------------------------------------------------------- 13,668 Franklin Resources, Inc. 1,445,391 - -------------------------------------------------------------------------------- 35,523 Goldman Sachs Group, Inc. (The) 6,009,426 - -------------------------------------------------------------------------------- 17,682 Janus Capital Group Inc. 348,689 - -------------------------------------------------------------------------------- 10,805 Legg Mason, Inc. 1,089,792 - -------------------------------------------------------------------------------- 44,149 Lehman Brothers Holdings Inc. 3,260,845 - -------------------------------------------------------------------------------- 33,823 Mellon Financial Corp. 1,322,479 - -------------------------------------------------------------------------------- 73,258 Merrill Lynch & Co., Inc. 5,730,241 - -------------------------------------------------------------------------------- 88,184 Morgan Stanley 6,429,496 - -------------------------------------------------------------------------------- 15,322 Northern Trust Corp. 895,264 - -------------------------------------------------------------------------------- 84,817 Schwab (Charles) Corp. 1,518,224 - -------------------------------------------------------------------------------- 27,181 State Street Corp. 1,696,094 - -------------------------------------------------------------------------------- 21,834 T. Rowe Price Group Inc. 1,044,757 - -------------------------------------------------------------------------------- 36,424,035 - -------------------------------------------------------------------------------- CHEMICALS -- 1.5% - -------------------------------------------------------------------------------- 18,344 Air Products & Chemicals, Inc. 1,217,491 - -------------------------------------------------------------------------------- 5,520 Ashland Inc. 352,066 - -------------------------------------------------------------------------------- 78,966 Dow Chemical Co. 3,078,095 - -------------------------------------------------------------------------------- 75,753 du Pont (E.I.) de Nemours & Co. 3,245,258 - -------------------------------------------------------------------------------- 6,744 Eastman Chemical Company 364,311 - -------------------------------------------------------------------------------- 14,793 Ecolab Inc. 633,436 - -------------------------------------------------------------------------------- 9,325 Hercules Inc.(1) 147,055 - -------------------------------------------------------------------------------- 6,449 International Flavors & Fragrances Inc. 254,993 - -------------------------------------------------------------------------------- 44,559 Monsanto Co. 2,094,719 - -------------------------------------------------------------------------------- 13,602 PPG Industries, Inc. 912,422 - -------------------------------------------------------------------------------- 26,541 Praxair, Inc. 1,570,166 - -------------------------------------------------------------------------------- 11,878 Rohm and Haas Co. 562,423 - -------------------------------------------------------------------------------- 5,501 Sigma-Aldrich Corp. 416,261 - -------------------------------------------------------------------------------- 14,848,696 - -------------------------------------------------------------------------------- COMMERCIAL BANKS -- 4.3% - -------------------------------------------------------------------------------- 28,157 AmSouth Bancorporation 817,679 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 9 Equity Index - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 44,676 BB&T Corporation $ 1,955,915 - -------------------------------------------------------------------------------- 13,367 Comerica Inc. 760,850 - -------------------------------------------------------------------------------- 15,023 Commerce Bancorp Inc. 551,494 - -------------------------------------------------------------------------------- 10,555 Compass Bancshares Inc. 601,424 - -------------------------------------------------------------------------------- 45,882 Fifth Third Bancorp 1,747,187 - -------------------------------------------------------------------------------- 10,166 First Horizon National Corp. 386,410 - -------------------------------------------------------------------------------- 19,706 Huntington Bancshares Inc. 471,565 - -------------------------------------------------------------------------------- 33,071 KeyCorp 1,238,178 - -------------------------------------------------------------------------------- 6,477 M&T Bank Corp. 776,981 - -------------------------------------------------------------------------------- 20,811 Marshall & Ilsley Corp. 1,002,674 - -------------------------------------------------------------------------------- 49,632 National City Corp. 1,816,531 - -------------------------------------------------------------------------------- 38,418 North Fork Bancorporation, Inc. 1,100,292 - -------------------------------------------------------------------------------- 24,230 PNC Financial Services Group 1,755,221 - -------------------------------------------------------------------------------- 37,250 Regions Financial Corp. 1,370,428 - -------------------------------------------------------------------------------- 29,910 SunTrust Banks, Inc. 2,311,445 - -------------------------------------------------------------------------------- 26,391 Synovus Financial Corp. 775,104 - -------------------------------------------------------------------------------- 146,108 U.S. Bancorp 4,853,708 - -------------------------------------------------------------------------------- 137,797 Wachovia Corp. 7,689,072 - -------------------------------------------------------------------------------- 277,107 Wells Fargo & Co. 10,025,730 - -------------------------------------------------------------------------------- 8,677 Zions Bancorporation 692,511 - -------------------------------------------------------------------------------- 42,700,399 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 0.5% - -------------------------------------------------------------------------------- 19,941 Allied Waste Industries Inc.(1) 224,735 - -------------------------------------------------------------------------------- 8,103 Avery Dennison Corp. 487,558 - -------------------------------------------------------------------------------- 11,181 Cintas Corp. 456,520 - -------------------------------------------------------------------------------- 10,608 Equifax Inc. 389,420 - -------------------------------------------------------------------------------- 10,408 Monster Worldwide Inc.(1) 376,666 - -------------------------------------------------------------------------------- 18,189 Pitney Bowes, Inc. 807,045 - -------------------------------------------------------------------------------- 17,523 R.R. Donnelley & Sons Company 577,558 - -------------------------------------------------------------------------------- 13,913 Robert Half International Inc. 472,625 - -------------------------------------------------------------------------------- 44,395 Waste Management, Inc. 1,628,408 - -------------------------------------------------------------------------------- 5,420,535 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 2.8% - -------------------------------------------------------------------------------- 9,600 ADC Telecommunications, Inc.(1) 144,000 - -------------------------------------------------------------------------------- 37,071 Avaya Inc.(1) 424,092 - -------------------------------------------------------------------------------- 6,837 Ciena Corp.(1) 186,308 - -------------------------------------------------------------------------------- 502,427 Cisco Systems Inc.(1) 11,555,821 - -------------------------------------------------------------------------------- 16,669 Comverse Technology, Inc.(1) 357,383 - -------------------------------------------------------------------------------- 128,165 Corning Inc.(1) 3,128,508 - -------------------------------------------------------------------------------- 138,051 JDS Uniphase Corp.(1) 302,332 - -------------------------------------------------------------------------------- 46,138 Juniper Networks, Inc.(1) 797,265 - -------------------------------------------------------------------------------- 364,801 Lucent Technologies Inc.(1) 853,634 - -------------------------------------------------------------------------------- 200,943 Motorola, Inc. 5,023,575 - -------------------------------------------------------------------------------- 136,554 QUALCOMM Inc. 4,963,738 - -------------------------------------------------------------------------------- 36,598 Tellabs, Inc.(1) 401,114 - -------------------------------------------------------------------------------- 28,137,770 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS -- 2.5% - -------------------------------------------------------------------------------- 69,953 Apple Computer, Inc.(1) $ 5,388,479 - -------------------------------------------------------------------------------- 186,926 Dell Inc.(1) 4,269,390 - -------------------------------------------------------------------------------- 190,974 EMC Corp.(1) 2,287,869 - -------------------------------------------------------------------------------- 226,085 Hewlett-Packard Co. 8,295,058 - -------------------------------------------------------------------------------- 7,915 Lexmark International, Inc. Cl A(1) 456,379 - -------------------------------------------------------------------------------- 14,802 NCR Corp.(1) 584,383 - -------------------------------------------------------------------------------- 30,541 Network Appliance, Inc.(1) 1,130,322 - -------------------------------------------------------------------------------- 13,350 QLogic Corp.(1) 252,315 - -------------------------------------------------------------------------------- 15,942 SanDisk Corp.(1) 853,535 - -------------------------------------------------------------------------------- 288,149 Sun Microsystems, Inc.(1) 1,432,101 - -------------------------------------------------------------------------------- 24,949,831 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING -- 0.1% - -------------------------------------------------------------------------------- 7,207 Fluor Corp. 554,146 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 0.1% - -------------------------------------------------------------------------------- 7,698 Vulcan Materials Co. 602,369 - -------------------------------------------------------------------------------- CONSUMER FINANCE -- 0.9% - -------------------------------------------------------------------------------- 100,407 American Express Co. 5,630,825 - -------------------------------------------------------------------------------- 25,126 Capital One Financial Corp. 1,976,411 - -------------------------------------------------------------------------------- 33,834 SLM Corporation 1,758,691 - -------------------------------------------------------------------------------- 9,365,927 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING -- 0.2% - -------------------------------------------------------------------------------- 8,606 Ball Corp. 348,113 - -------------------------------------------------------------------------------- 8,639 Bemis Co., Inc. 283,878 - -------------------------------------------------------------------------------- 11,752 Pactiv Corp.(1) 333,992 - -------------------------------------------------------------------------------- 6,716 Sealed Air Corp. 363,470 - -------------------------------------------------------------------------------- 9,130 Temple-Inland Inc. 366,112 - -------------------------------------------------------------------------------- 1,695,565 - -------------------------------------------------------------------------------- DISTRIBUTORS -- 0.1% - -------------------------------------------------------------------------------- 14,070 Genuine Parts Company 606,839 - -------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES -- 0.1% - -------------------------------------------------------------------------------- 11,410 Apollo Group Inc. Cl A(1) 561,828 - -------------------------------------------------------------------------------- 27,024 H & R Block, Inc. 587,502 - -------------------------------------------------------------------------------- 1,149,330 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 5.9% - -------------------------------------------------------------------------------- 373,074 Bank of America Corp. 19,985,574 - -------------------------------------------------------------------------------- 2,916 Chicago Mercantile Exchange Holdings Inc. 1,394,577 - -------------------------------------------------------------------------------- 16,307 CIT Group Inc. 793,009 - -------------------------------------------------------------------------------- 407,413 Citigroup Inc. 20,236,204 - -------------------------------------------------------------------------------- 285,730 J.P. Morgan Chase & Co. 13,417,881 - -------------------------------------------------------------------------------- 28,636 McGraw-Hill Companies, Inc. (The) 1,661,747 - -------------------------------------------------------------------------------- 19,808 Moody's Corp. 1,295,047 - -------------------------------------------------------------------------------- 58,784,039 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 10 Equity Index - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.9% - -------------------------------------------------------------------------------- 319,657 AT&T Inc. $ 10,408,031 - -------------------------------------------------------------------------------- 149,377 BellSouth Corp. 6,385,867 - -------------------------------------------------------------------------------- 9,492 CenturyTel Inc. 376,548 - -------------------------------------------------------------------------------- 27,002 Citizens Communications Company 379,108 - -------------------------------------------------------------------------------- 12,110 Embarq Corp. 585,761 - -------------------------------------------------------------------------------- 131,083 Qwest Communications International Inc.(1) 1,143,044 - -------------------------------------------------------------------------------- 238,901 Verizon Communications Inc. 8,870,394 - -------------------------------------------------------------------------------- 38,632 Windstream Corp. 509,556 - -------------------------------------------------------------------------------- 28,658,309 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES -- 1.5% - -------------------------------------------------------------------------------- 13,465 Allegheny Energy, Inc.(1) 540,889 - -------------------------------------------------------------------------------- 32,138 American Electric Power 1,168,859 - -------------------------------------------------------------------------------- 26,595 Edison International 1,107,416 - -------------------------------------------------------------------------------- 17,094 Entergy Corp. 1,337,264 - -------------------------------------------------------------------------------- 55,023 Exelon Corporation 3,331,091 - -------------------------------------------------------------------------------- 27,102 FirstEnergy Corp. 1,513,918 - -------------------------------------------------------------------------------- 33,186 FPL Group, Inc. 1,493,370 - -------------------------------------------------------------------------------- 8,157 Pinnacle West Capital Corp. 367,473 - -------------------------------------------------------------------------------- 31,313 PPL Corporation 1,030,198 - -------------------------------------------------------------------------------- 20,812 Progress Energy Inc. 944,449 - -------------------------------------------------------------------------------- 60,856 Southern Co. 2,097,098 - -------------------------------------------------------------------------------- 14,932,025 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 0.5% - -------------------------------------------------------------------------------- 14,120 American Power Conversion Corp. 310,075 - -------------------------------------------------------------------------------- 7,543 Cooper Industries, Ltd. Cl A 642,814 - -------------------------------------------------------------------------------- 33,582 Emerson Electric Co. 2,816,187 - -------------------------------------------------------------------------------- 14,467 Rockwell Automation Inc. 840,533 - -------------------------------------------------------------------------------- 4,609,609 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.3% - -------------------------------------------------------------------------------- 34,277 Agilent Technologies, Inc.(1) 1,120,515 - -------------------------------------------------------------------------------- 14,977 Jabil Circuit, Inc. 427,893 - -------------------------------------------------------------------------------- 11,756 Molex Inc. 458,131 - -------------------------------------------------------------------------------- 44,123 Sanmina-SCI Corp.(1) 165,020 - -------------------------------------------------------------------------------- 75,586 Solectron Corp.(1) 246,410 - -------------------------------------------------------------------------------- 20,837 Symbol Technologies, Inc. 309,638 - -------------------------------------------------------------------------------- 6,706 Tektronix, Inc. 194,005 - -------------------------------------------------------------------------------- 2,921,612 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES -- 1.7% - -------------------------------------------------------------------------------- 27,390 Baker Hughes Inc. 1,867,998 - -------------------------------------------------------------------------------- 25,248 BJ Services Co. 760,722 - -------------------------------------------------------------------------------- 84,562 Halliburton Co. 2,405,789 - -------------------------------------------------------------------------------- 25,819 Nabors Industries Ltd.(1) 768,115 - -------------------------------------------------------------------------------- 14,262 National Oilwell Varco, Inc.(1) 835,040 - -------------------------------------------------------------------------------- 11,305 Noble Corp. 725,555 - -------------------------------------------------------------------------------- 9,023 Rowan Companies, Inc. 285,397 - -------------------------------------------------------------------------------- 97,392 Schlumberger Ltd. 6,041,226 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 16,502 Smith International, Inc. $ 640,278 - -------------------------------------------------------------------------------- 26,222 Transocean Inc.(1) 1,920,237 - -------------------------------------------------------------------------------- 28,471 Weatherford International Ltd.(1) 1,187,810 - -------------------------------------------------------------------------------- 17,438,167 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 2.3% - -------------------------------------------------------------------------------- 38,622 Costco Wholesale Corporation 1,918,741 - -------------------------------------------------------------------------------- 67,462 CVS Corp. 2,166,879 - -------------------------------------------------------------------------------- 59,218 Kroger Co. (The) 1,370,305 - -------------------------------------------------------------------------------- 36,707 Safeway Inc. 1,114,057 - -------------------------------------------------------------------------------- 17,219 Supervalu Inc. 510,543 - -------------------------------------------------------------------------------- 50,852 Sysco Corp. 1,700,999 - -------------------------------------------------------------------------------- 202,960 Wal-Mart Stores, Inc. 10,009,988 - -------------------------------------------------------------------------------- 82,880 Walgreen Co. 3,679,043 - -------------------------------------------------------------------------------- 11,499 Whole Foods Market, Inc. 683,386 - -------------------------------------------------------------------------------- 23,153,941 - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 1.1% - -------------------------------------------------------------------------------- 53,890 Archer-Daniels-Midland Co. 2,041,352 - -------------------------------------------------------------------------------- 18,821 Campbell Soup Co. 686,967 - -------------------------------------------------------------------------------- 42,385 ConAgra Foods, Inc. 1,037,585 - -------------------------------------------------------------------------------- 11,191 Dean Foods Co.(1) 470,246 - -------------------------------------------------------------------------------- 29,073 General Mills, Inc. 1,645,532 - -------------------------------------------------------------------------------- 27,346 H.J. Heinz Co. 1,146,618 - -------------------------------------------------------------------------------- 14,558 Hershey Company (The) 778,125 - -------------------------------------------------------------------------------- 20,454 Kellogg Co. 1,012,882 - -------------------------------------------------------------------------------- 10,926 McCormick & Company, Inc. 414,969 - -------------------------------------------------------------------------------- 62,047 Sara Lee Corp. 997,095 - -------------------------------------------------------------------------------- 20,834 Tyson Foods, Inc. Cl A 330,844 - -------------------------------------------------------------------------------- 18,078 Wm. Wrigley Jr. Co. 832,673 - -------------------------------------------------------------------------------- 11,394,888 - -------------------------------------------------------------------------------- GAS UTILITIES(2) - -------------------------------------------------------------------------------- 3,630 NICOR Inc. 155,219 - -------------------------------------------------------------------------------- 3,146 People's Energy Corp. 127,885 - -------------------------------------------------------------------------------- 283,104 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 1.5% - -------------------------------------------------------------------------------- 8,448 Bard (C.R.), Inc. 633,600 - -------------------------------------------------------------------------------- 4,397 Bausch & Lomb Inc. 220,422 - -------------------------------------------------------------------------------- 53,610 Baxter International, Inc. 2,437,111 - -------------------------------------------------------------------------------- 20,189 Becton Dickinson & Co. 1,426,757 - -------------------------------------------------------------------------------- 20,090 Biomet Inc. 646,697 - -------------------------------------------------------------------------------- 98,207 Boston Scientific Corp.(1) 1,452,482 - -------------------------------------------------------------------------------- 12,863 Hospira Inc.(1) 492,267 - -------------------------------------------------------------------------------- 95,067 Medtronic, Inc. 4,414,910 - -------------------------------------------------------------------------------- 29,293 St. Jude Medical, Inc.(1) 1,033,750 - -------------------------------------------------------------------------------- 24,314 Stryker Corp. 1,205,731 - -------------------------------------------------------------------------------- 19,698 Zimmer Holdings Inc.(1) 1,329,615 - -------------------------------------------------------------------------------- 15,293,342 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 11 Equity Index - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES -- 2.7% - -------------------------------------------------------------------------------- 45,597 Aetna Inc. $ 1,803,361 - -------------------------------------------------------------------------------- 17,021 AmerisourceBergen Corp. 769,349 - -------------------------------------------------------------------------------- 33,677 Cardinal Health, Inc. 2,213,926 - -------------------------------------------------------------------------------- 35,483 Caremark Rx Inc. 2,010,822 - -------------------------------------------------------------------------------- 9,088 CIGNA Corp. 1,057,116 - -------------------------------------------------------------------------------- 13,189 Coventry Health Care Inc.(1) 679,497 - -------------------------------------------------------------------------------- 11,283 Express Scripts, Inc.(1) 851,754 - -------------------------------------------------------------------------------- 34,782 HCA Inc. 1,735,274 - -------------------------------------------------------------------------------- 19,765 Health Management Associates, Inc. Cl A 413,089 - -------------------------------------------------------------------------------- 13,488 Humana Inc.(1) 891,422 - -------------------------------------------------------------------------------- 10,172 Laboratory Corp. of America Holdings(1) 666,978 - -------------------------------------------------------------------------------- 6,037 Manor Care, Inc. 315,614 - -------------------------------------------------------------------------------- 24,988 McKesson Corp. 1,317,367 - -------------------------------------------------------------------------------- 24,515 Medco Health Solutions Inc.(1) 1,473,597 - -------------------------------------------------------------------------------- 11,182 Patterson Companies, Inc.(1) 375,827 - -------------------------------------------------------------------------------- 13,231 Quest Diagnostics Inc. 809,208 - -------------------------------------------------------------------------------- 38,817 Tenet Healthcare Corp.(1) 315,970 - -------------------------------------------------------------------------------- 110,802 UnitedHealth Group Incorporated 5,451,459 - -------------------------------------------------------------------------------- 51,284 WellPoint Inc.(1) 3,951,432 - -------------------------------------------------------------------------------- 27,103,062 - -------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY(2) - -------------------------------------------------------------------------------- 16,444 IMS Health Inc. 438,068 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 1.6% - -------------------------------------------------------------------------------- 36,501 Carnival Corporation 1,716,642 - -------------------------------------------------------------------------------- 11,870 Darden Restaurants, Inc. 504,119 - -------------------------------------------------------------------------------- 15,168 Harrah's Entertainment, Inc. 1,007,610 - -------------------------------------------------------------------------------- 31,542 Hilton Hotels Corporation 878,445 - -------------------------------------------------------------------------------- 27,804 International Game Technology 1,153,866 - -------------------------------------------------------------------------------- 28,134 Marriott International, Inc. Cl A 1,087,098 - -------------------------------------------------------------------------------- 101,502 McDonald's Corporation 3,970,757 - -------------------------------------------------------------------------------- 62,840 Starbucks Corporation(1) 2,139,702 - -------------------------------------------------------------------------------- 17,782 Starwood Hotels & Resorts Worldwide, Inc.(1) 1,016,953 - -------------------------------------------------------------------------------- 12,929 Tim Hortons, Inc. 340,033 - -------------------------------------------------------------------------------- 9,547 Wendy's International, Inc. 639,649 - -------------------------------------------------------------------------------- 16,458 Wyndham Worldwide Corp.(1) 460,330 - -------------------------------------------------------------------------------- 22,097 Yum! Brands, Inc. 1,150,149 - -------------------------------------------------------------------------------- 16,065,353 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.6% - -------------------------------------------------------------------------------- 6,330 Black & Decker Corporation 502,286 - -------------------------------------------------------------------------------- 10,003 Centex Corp. 526,358 - -------------------------------------------------------------------------------- 22,152 D.R. Horton, Inc. 530,540 - -------------------------------------------------------------------------------- 12,336 Fortune Brands, Inc. 926,556 - -------------------------------------------------------------------------------- 5,466 Harman International Industries Inc. 456,083 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 6,290 KB Home $ 275,502 - -------------------------------------------------------------------------------- 15,050 Leggett & Platt, Inc. 376,702 - -------------------------------------------------------------------------------- 11,501 Lennar Corp. 520,420 - -------------------------------------------------------------------------------- 22,724 Newell Rubbermaid Inc. 643,544 - -------------------------------------------------------------------------------- 17,419 Pulte Homes Inc. 554,969 - -------------------------------------------------------------------------------- 4,781 Snap-on Incorporated 212,994 - -------------------------------------------------------------------------------- 6,539 Stanley Works (The) 325,969 - -------------------------------------------------------------------------------- 6,315 Whirlpool Corp. 531,155 - -------------------------------------------------------------------------------- 6,383,078 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 2.2% - -------------------------------------------------------------------------------- 12,355 Clorox Company 778,365 - -------------------------------------------------------------------------------- 42,424 Colgate-Palmolive Co. 2,634,530 - -------------------------------------------------------------------------------- 37,617 Kimberly-Clark Corp. 2,458,647 - -------------------------------------------------------------------------------- 261,785 Procter & Gamble Co. (The) 16,225,435 - -------------------------------------------------------------------------------- 22,096,977 - -------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.5% - -------------------------------------------------------------------------------- 54,089 AES Corp. (The)(1) 1,102,875 - -------------------------------------------------------------------------------- 14,698 Constellation Energy Group Inc. 870,122 - -------------------------------------------------------------------------------- 30,078 Dynegy Inc. Cl A(1) 166,632 - -------------------------------------------------------------------------------- 37,931 TXU Corp. 2,371,446 - -------------------------------------------------------------------------------- 4,511,075 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 4.0% - -------------------------------------------------------------------------------- 61,942 3M Co. 4,609,724 - -------------------------------------------------------------------------------- 850,671 General Electric Co. 30,028,690 - -------------------------------------------------------------------------------- 10,550 Textron Inc. 923,125 - -------------------------------------------------------------------------------- 165,174 Tyco International Ltd. 4,623,220 - -------------------------------------------------------------------------------- 40,184,759 - -------------------------------------------------------------------------------- INSURANCE -- 4.8% - -------------------------------------------------------------------------------- 26,614 Ace, Ltd. 1,456,584 - -------------------------------------------------------------------------------- 40,880 Aflac Inc. 1,870,669 - -------------------------------------------------------------------------------- 51,513 Allstate Corp. 3,231,410 - -------------------------------------------------------------------------------- 8,694 Ambac Financial Group, Inc. 719,429 - -------------------------------------------------------------------------------- 213,907 American International Group, Inc. 14,173,477 - -------------------------------------------------------------------------------- 26,280 AON Corp. 890,104 - -------------------------------------------------------------------------------- 33,965 Chubb Corp. 1,764,821 - -------------------------------------------------------------------------------- 14,185 Cincinnati Financial Corp. 681,731 - -------------------------------------------------------------------------------- 37,291 Genworth Financial Inc. Cl A 1,305,558 - -------------------------------------------------------------------------------- 24,982 Hartford Financial Services Group Inc. (The) 2,167,189 - -------------------------------------------------------------------------------- 23,500 Lincoln National Corp. 1,458,880 - -------------------------------------------------------------------------------- 37,478 Loews Corp. 1,420,416 - -------------------------------------------------------------------------------- 45,011 Marsh & McLennan Companies, Inc. 1,267,060 - -------------------------------------------------------------------------------- 10,939 MBIA Inc. 672,092 - -------------------------------------------------------------------------------- 62,423 MetLife, Inc. 3,538,136 - -------------------------------------------------------------------------------- 22,539 Principal Financial Group 1,223,417 - -------------------------------------------------------------------------------- 64,228 Progressive Corp. (The) 1,576,155 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 12 Equity Index - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 40,207 Prudential Financial, Inc. $ 3,065,784 - -------------------------------------------------------------------------------- 9,598 Safeco Corp. 565,610 - -------------------------------------------------------------------------------- 57,040 St. Paul Travelers Companies, Inc. (The) 2,674,606 - -------------------------------------------------------------------------------- 8,063 Torchmark Corp. 508,856 - -------------------------------------------------------------------------------- 28,070 UnumProvident Corp. 544,277 - -------------------------------------------------------------------------------- 14,750 XL Capital Ltd. Cl A 1,013,325 - -------------------------------------------------------------------------------- 47,789,586 - -------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL -- 0.1% - -------------------------------------------------------------------------------- 25,676 Amazon.com, Inc.(1) 824,713 - -------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES -- 1.3% - -------------------------------------------------------------------------------- 96,516 eBay Inc.(1) 2,737,194 - -------------------------------------------------------------------------------- 17,529 Google Inc. Cl A(1) 7,044,905 - -------------------------------------------------------------------------------- 20,171 VeriSign, Inc.(1) 407,454 - -------------------------------------------------------------------------------- 103,002 Yahoo! Inc.(1) 2,603,891 - -------------------------------------------------------------------------------- 12,793,444 - -------------------------------------------------------------------------------- IT SERVICES -- 2.0% - -------------------------------------------------------------------------------- 9,730 Affiliated Computer Services Inc. Cl A(1) 504,598 - -------------------------------------------------------------------------------- 46,164 Automatic Data Processing, Inc. 2,185,404 - -------------------------------------------------------------------------------- 14,546 Computer Sciences Corp.(1) 714,500 - -------------------------------------------------------------------------------- 11,503 Convergys Corp.(1) 237,537 - -------------------------------------------------------------------------------- 42,419 Electronic Data Systems Corp. 1,040,114 - -------------------------------------------------------------------------------- 62,870 First Data Corp. 2,640,539 - -------------------------------------------------------------------------------- 14,605 Fiserv, Inc.(1) 687,749 - -------------------------------------------------------------------------------- 125,558 International Business Machines Corp. 10,288,222 - -------------------------------------------------------------------------------- 27,696 Paychex, Inc. 1,020,598 - -------------------------------------------------------------------------------- 10,902 Sabre Holdings Corp. Cl A 254,998 - -------------------------------------------------------------------------------- 28,254 Unisys Corp.(1) 159,918 - -------------------------------------------------------------------------------- 19,734,177 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS -- 0.2% - -------------------------------------------------------------------------------- 7,835 Brunswick Corp. 244,374 - -------------------------------------------------------------------------------- 23,373 Eastman Kodak Co. 523,555 - -------------------------------------------------------------------------------- 12,572 Hasbro, Inc. 286,013 - -------------------------------------------------------------------------------- 32,017 Mattel, Inc. 630,735 - -------------------------------------------------------------------------------- 1,684,677 - -------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES -- 0.3% - -------------------------------------------------------------------------------- 15,116 Applera Corporation -- Applied Biosystems Group 500,491 - -------------------------------------------------------------------------------- 10,215 Fisher Scientific International(1) 799,221 - -------------------------------------------------------------------------------- 4,281 Millipore Corp.(1) 262,425 - -------------------------------------------------------------------------------- 10,790 PerkinElmer, Inc. 204,255 - -------------------------------------------------------------------------------- 13,431 Thermo Electron Corp.(1) 528,241 - -------------------------------------------------------------------------------- 8,610 Waters Corp.(1) 389,861 - -------------------------------------------------------------------------------- 2,684,494 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- MACHINERY -- 1.4% - -------------------------------------------------------------------------------- 54,294 Caterpillar Inc. $ 3,572,544 - -------------------------------------------------------------------------------- 4,305 Cummins Inc. 513,285 - -------------------------------------------------------------------------------- 19,365 Danaher Corp. 1,329,795 - -------------------------------------------------------------------------------- 19,100 Deere & Co. 1,602,681 - -------------------------------------------------------------------------------- 16,761 Dover Corp. 795,142 - -------------------------------------------------------------------------------- 12,295 Eaton Corp. 846,511 - -------------------------------------------------------------------------------- 34,462 Illinois Tool Works Inc. 1,547,344 - -------------------------------------------------------------------------------- 26,981 Ingersoll-Rand Company Cl A 1,024,738 - -------------------------------------------------------------------------------- 15,073 ITT Industries, Inc. 772,793 - -------------------------------------------------------------------------------- 5,079 Navistar International Corp.(1) 131,140 - -------------------------------------------------------------------------------- 20,487 Paccar Inc. 1,168,169 - -------------------------------------------------------------------------------- 10,330 Pall Corp. 318,267 - -------------------------------------------------------------------------------- 9,774 Parker-Hannifin Corp. 759,733 - -------------------------------------------------------------------------------- 14,382,142 - -------------------------------------------------------------------------------- MEDIA -- 3.2% - -------------------------------------------------------------------------------- 64,065 CBS Corp. Cl B 1,804,711 - -------------------------------------------------------------------------------- 40,210 Clear Channel Communications, Inc. 1,160,059 - -------------------------------------------------------------------------------- 172,901 Comcast Corporation Cl A(1) 6,371,402 - -------------------------------------------------------------------------------- 5,178 Dow Jones & Co., Inc. 173,670 - -------------------------------------------------------------------------------- 6,952 EW Scripps Co. Cl A 333,209 - -------------------------------------------------------------------------------- 19,427 Gannett Co., Inc. 1,104,036 - -------------------------------------------------------------------------------- 35,426 Interpublic Group of Companies, Inc.(1) 350,717 - -------------------------------------------------------------------------------- 3,474 Meredith Corp. 171,372 - -------------------------------------------------------------------------------- 11,925 New York Times Co. (The) Cl A 274,037 - -------------------------------------------------------------------------------- 193,469 News Corp. Cl A 3,801,666 - -------------------------------------------------------------------------------- 14,078 Omnicom Group Inc. 1,317,701 - -------------------------------------------------------------------------------- 172,761 The Walt Disney Co. 5,340,043 - -------------------------------------------------------------------------------- 334,536 Time Warner Inc. 6,098,591 - -------------------------------------------------------------------------------- 16,324 Tribune Co. 534,121 - -------------------------------------------------------------------------------- 20,482 Univision Communications Inc. Cl A(1) 703,352 - -------------------------------------------------------------------------------- 57,884 Viacom Inc. Cl B 2,152,127 - -------------------------------------------------------------------------------- 31,690,814 - -------------------------------------------------------------------------------- METALS & MINING -- 0.8% - -------------------------------------------------------------------------------- 71,162 Alcoa Inc. 1,995,383 - -------------------------------------------------------------------------------- 8,182 Allegheny Technologies Inc. 508,839 - -------------------------------------------------------------------------------- 16,063 Freeport-McMoRan Copper & Gold, Inc. Cl B 855,515 - -------------------------------------------------------------------------------- 36,968 Newmont Mining Corporation 1,580,382 - -------------------------------------------------------------------------------- 25,582 Nucor Corp. 1,266,053 - -------------------------------------------------------------------------------- 16,745 Phelps Dodge Corp. 1,418,302 - -------------------------------------------------------------------------------- 10,230 United States Steel Corp. 590,066 - -------------------------------------------------------------------------------- 8,214,540 - -------------------------------------------------------------------------------- MULTI-UTILITIES -- 1.4% - -------------------------------------------------------------------------------- 16,905 Ameren Corp. 892,415 - -------------------------------------------------------------------------------- 25,506 CenterPoint Energy, Inc. 365,246 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 13 Equity Index - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 18,248 CMS Energy Corp.(1) $ 263,501 - -------------------------------------------------------------------------------- 20,254 Consolidated Edison, Inc. 935,735 - -------------------------------------------------------------------------------- 28,975 Dominion Resources Inc. 2,216,298 - -------------------------------------------------------------------------------- 14,438 DTE Energy Company 599,321 - -------------------------------------------------------------------------------- 102,975 Duke Energy Corp. 3,109,845 - -------------------------------------------------------------------------------- 14,214 KeySpan Corporation 584,764 - -------------------------------------------------------------------------------- 22,484 NiSource Inc. 488,802 - -------------------------------------------------------------------------------- 28,445 PG&E Corp. 1,184,734 - -------------------------------------------------------------------------------- 20,617 Public Service Enterprise Group Inc. 1,261,554 - -------------------------------------------------------------------------------- 21,308 Sempra Energy 1,070,727 - -------------------------------------------------------------------------------- 17,215 TECO Energy, Inc. 269,415 - -------------------------------------------------------------------------------- 33,323 XCEL Energy Inc. 688,120 - -------------------------------------------------------------------------------- 13,930,477 - -------------------------------------------------------------------------------- MULTILINE RETAIL -- 1.2% - -------------------------------------------------------------------------------- 9,404 Big Lots Inc.(1) 186,293 - -------------------------------------------------------------------------------- 5,073 Dillard's Inc. Cl A 166,039 - -------------------------------------------------------------------------------- 25,600 Dollar General Corp. 348,928 - -------------------------------------------------------------------------------- 12,782 Family Dollar Stores, Inc. 373,746 - -------------------------------------------------------------------------------- 44,297 Federated Department Stores, Inc. 1,914,073 - -------------------------------------------------------------------------------- 18,762 J.C. Penney Co. Inc. 1,283,133 - -------------------------------------------------------------------------------- 27,250 Kohl's Corp.(1) 1,769,070 - -------------------------------------------------------------------------------- 18,659 Nordstrom, Inc. 789,276 - -------------------------------------------------------------------------------- 6,973 Sears Holdings Corp.(1) 1,102,362 - -------------------------------------------------------------------------------- 70,922 Target Corp. 3,918,441 - -------------------------------------------------------------------------------- 11,851,361 - -------------------------------------------------------------------------------- OFFICE ELECTRONICS -- 0.1% - -------------------------------------------------------------------------------- 81,342 Xerox Corp.(1) 1,265,682 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 7.6% - -------------------------------------------------------------------------------- 37,620 Anadarko Petroleum Corp. 1,648,885 - -------------------------------------------------------------------------------- 26,962 Apache Corp. 1,703,998 - -------------------------------------------------------------------------------- 31,820 Chesapeake Energy Corp. 922,144 - -------------------------------------------------------------------------------- 181,313 Chevron Corp. 11,759,960 - -------------------------------------------------------------------------------- 135,588 ConocoPhillips 8,071,553 - -------------------------------------------------------------------------------- 14,998 Consol Energy Inc. 475,887 - -------------------------------------------------------------------------------- 36,226 Devon Energy Corporation 2,287,672 - -------------------------------------------------------------------------------- 56,726 El Paso Corp. 773,743 - -------------------------------------------------------------------------------- 19,799 EOG Resources Inc. 1,287,925 - -------------------------------------------------------------------------------- 489,855 Exxon Mobil Corp. 32,869,270 - -------------------------------------------------------------------------------- 19,830 Hess Corp. 821,359 - -------------------------------------------------------------------------------- 8,763 Kinder Morgan, Inc. 918,801 - -------------------------------------------------------------------------------- 29,566 Marathon Oil Corp. 2,273,625 - -------------------------------------------------------------------------------- 15,254 Murphy Oil Corp. 725,328 - -------------------------------------------------------------------------------- 70,809 Occidental Petroleum Corp. 3,406,621 - -------------------------------------------------------------------------------- 10,867 Sunoco, Inc. 675,819 - -------------------------------------------------------------------------------- 50,579 Valero Energy Corp. 2,603,301 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 48,968 Williams Companies, Inc. (The) $ 1,168,866 - -------------------------------------------------------------------------------- 29,905 XTO Energy Inc. 1,259,898 - -------------------------------------------------------------------------------- 75,654,655 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 0.3% - -------------------------------------------------------------------------------- 37,984 International Paper Company 1,315,387 - -------------------------------------------------------------------------------- 8,686 Louisiana-Pacific Corp. 163,036 - -------------------------------------------------------------------------------- 14,695 MeadWestvaco Corp. 389,564 - -------------------------------------------------------------------------------- 20,149 Weyerhaeuser Co. 1,239,768 - -------------------------------------------------------------------------------- 3,107,755 - -------------------------------------------------------------------------------- PERSONAL PRODUCTS -- 0.2% - -------------------------------------------------------------------------------- 6,244 Alberto-Culver Company 315,884 - -------------------------------------------------------------------------------- 36,773 Avon Products, Inc. 1,127,460 - -------------------------------------------------------------------------------- 10,479 Estee Lauder Companies, Inc. Cl A 422,618 - -------------------------------------------------------------------------------- 1,865,962 - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 6.8% - -------------------------------------------------------------------------------- 125,684 Abbott Laboratories 6,103,215 - -------------------------------------------------------------------------------- 12,494 Allergan, Inc. 1,406,949 - -------------------------------------------------------------------------------- 8,751 Barr Pharmaceuticals Inc.(1) 454,527 - -------------------------------------------------------------------------------- 161,687 Bristol-Myers Squibb Co. 4,029,240 - -------------------------------------------------------------------------------- 81,339 Eli Lilly and Company 4,636,323 - -------------------------------------------------------------------------------- 25,790 Forest Laboratories, Inc.(1) 1,305,232 - -------------------------------------------------------------------------------- 241,176 Johnson & Johnson 15,661,969 - -------------------------------------------------------------------------------- 19,893 King Pharmaceuticals, Inc.(1) 338,778 - -------------------------------------------------------------------------------- 179,060 Merck & Co., Inc. 7,502,614 - -------------------------------------------------------------------------------- 17,256 Mylan Laboratories Inc. 347,363 - -------------------------------------------------------------------------------- 600,590 Pfizer Inc. 17,032,733 - -------------------------------------------------------------------------------- 121,762 Schering-Plough Corp. 2,689,723 - -------------------------------------------------------------------------------- 8,425 Watson Pharmaceuticals, Inc.(1) 220,482 - -------------------------------------------------------------------------------- 110,687 Wyeth 5,627,327 - -------------------------------------------------------------------------------- 67,356,475 - -------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS -- 1.1% - -------------------------------------------------------------------------------- 7,980 Apartment Investment and Management Co. Cl A 434,192 - -------------------------------------------------------------------------------- 17,594 Archstone-Smith Trust 957,817 - -------------------------------------------------------------------------------- 9,352 Boston Properties Inc. 966,436 - -------------------------------------------------------------------------------- 29,336 Equity Office Properties Trust 1,166,399 - -------------------------------------------------------------------------------- 23,921 Equity Residential 1,209,924 - -------------------------------------------------------------------------------- 17,688 Kimco Realty Corporation 758,285 - -------------------------------------------------------------------------------- 14,970 Plum Creek Timber Co. Inc. 509,579 - -------------------------------------------------------------------------------- 20,075 ProLogis 1,145,480 - -------------------------------------------------------------------------------- 9,914 Public Storage Inc. 852,505 - -------------------------------------------------------------------------------- 18,144 Simon Property Group, Inc. 1,644,208 - -------------------------------------------------------------------------------- 9,980 Vornado Realty Trust 1,087,820 - -------------------------------------------------------------------------------- 10,732,645 - -------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT(2) - -------------------------------------------------------------------------------- 20,573 Realogy Corp.(1) 466,596 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 14 Equity Index - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- ROAD & RAIL -- 0.7% - -------------------------------------------------------------------------------- 29,998 Burlington Northern Santa Fe Corp. $ 2,203,053 - -------------------------------------------------------------------------------- 36,266 CSX Corporation 1,190,613 - -------------------------------------------------------------------------------- 33,947 Norfolk Southern Corp. 1,495,365 - -------------------------------------------------------------------------------- 4,995 Ryder System, Inc. 258,142 - -------------------------------------------------------------------------------- 22,138 Union Pacific Corp. 1,948,144 - -------------------------------------------------------------------------------- 7,095,317 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.7% - -------------------------------------------------------------------------------- 39,652 Advanced Micro Devices, Inc.(1) 985,352 - -------------------------------------------------------------------------------- 29,108 Altera Corp.(1) 535,005 - -------------------------------------------------------------------------------- 29,307 Analog Devices, Inc. 861,333 - -------------------------------------------------------------------------------- 114,406 Applied Materials, Inc. 2,028,418 - -------------------------------------------------------------------------------- 38,393 Broadcom Corp. Cl A(1) 1,164,844 - -------------------------------------------------------------------------------- 33,499 Freescale Semiconductor Inc. Cl B(1) 1,273,297 - -------------------------------------------------------------------------------- 475,970 Intel Corp. 9,790,704 - -------------------------------------------------------------------------------- 16,255 KLA-Tencor Corp. 722,860 - -------------------------------------------------------------------------------- 24,933 Linear Technology Corp. 775,915 - -------------------------------------------------------------------------------- 32,251 LSI Logic Corp.(1) 265,103 - -------------------------------------------------------------------------------- 26,142 Maxim Integrated Products, Inc. 733,806 - -------------------------------------------------------------------------------- 59,950 Micron Technology, Inc.(1) 1,043,130 - -------------------------------------------------------------------------------- 25,302 National Semiconductor Corp. 595,356 - -------------------------------------------------------------------------------- 10,041 Novellus Systems, Inc.(1) 277,734 - -------------------------------------------------------------------------------- 28,816 NVIDIA Corp.(1) 852,665 - -------------------------------------------------------------------------------- 17,206 PMC-Sierra, Inc.(1) 102,204 - -------------------------------------------------------------------------------- 16,340 Teradyne, Inc.(1) 215,034 - -------------------------------------------------------------------------------- 126,815 Texas Instruments Inc. 4,216,599 - -------------------------------------------------------------------------------- 27,973 Xilinx, Inc. 614,007 - -------------------------------------------------------------------------------- 27,053,366 - -------------------------------------------------------------------------------- SOFTWARE -- 3.4% - -------------------------------------------------------------------------------- 48,277 Adobe Systems Inc.(1) 1,807,974 - -------------------------------------------------------------------------------- 18,811 Autodesk, Inc.(1) 654,247 - -------------------------------------------------------------------------------- 17,548 BMC Software Inc.(1) 477,657 - -------------------------------------------------------------------------------- 33,826 CA, Inc. 801,338 - -------------------------------------------------------------------------------- 14,885 Citrix Systems, Inc.(1) 538,986 - -------------------------------------------------------------------------------- 31,510 Compuware Corp.(1) 245,463 - -------------------------------------------------------------------------------- 25,050 Electronic Arts Inc.(1) 1,394,784 - -------------------------------------------------------------------------------- 28,336 Intuit Inc.(1) 909,302 - -------------------------------------------------------------------------------- 712,009 Microsoft Corporation 19,459,205 - -------------------------------------------------------------------------------- 29,331 Novell, Inc.(1) 179,506 - -------------------------------------------------------------------------------- 331,768 Oracle Corp.(1) 5,885,564 - -------------------------------------------------------------------------------- 9,235 Parametric Technology Corp.(1) 161,243 - -------------------------------------------------------------------------------- 82,454 Symantec Corp.(1) 1,754,621 - -------------------------------------------------------------------------------- 34,269,890 - -------------------------------------------------------------------------------- SPECIALTY RETAIL -- 2.0% - -------------------------------------------------------------------------------- 12,096 AutoNation, Inc.(1) 252,806 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 4,284 AutoZone, Inc.(1) $ 442,537 - -------------------------------------------------------------------------------- 23,178 Bed Bath & Beyond Inc.(1) 886,790 - -------------------------------------------------------------------------------- 33,360 Best Buy Co., Inc. 1,786,762 - -------------------------------------------------------------------------------- 10,844 Circuit City Stores Inc. 272,293 - -------------------------------------------------------------------------------- 43,229 Gap, Inc. (The) 819,190 - -------------------------------------------------------------------------------- 169,852 Home Depot, Inc. (The) 6,160,532 - -------------------------------------------------------------------------------- 28,368 Limited Brands, Inc. 751,468 - -------------------------------------------------------------------------------- 125,148 Lowe's Companies, Inc. 3,511,653 - -------------------------------------------------------------------------------- 23,804 Office Depot, Inc.(1) 945,019 - -------------------------------------------------------------------------------- 5,908 OfficeMax Inc. 240,692 - -------------------------------------------------------------------------------- 11,160 RadioShack Corp. 215,388 - -------------------------------------------------------------------------------- 9,181 Sherwin-Williams Co. 512,116 - -------------------------------------------------------------------------------- 59,479 Staples, Inc. 1,447,124 - -------------------------------------------------------------------------------- 11,735 Tiffany & Co. 389,602 - -------------------------------------------------------------------------------- 37,604 TJX Companies, Inc. (The) 1,054,040 - -------------------------------------------------------------------------------- 19,688,012 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.4% - -------------------------------------------------------------------------------- 30,708 Coach Inc.(1) 1,056,355 - -------------------------------------------------------------------------------- 9,353 Jones Apparel Group, Inc. 303,411 - -------------------------------------------------------------------------------- 8,632 Liz Claiborne, Inc. 341,050 - -------------------------------------------------------------------------------- 15,698 NIKE, Inc. Cl B 1,375,459 - -------------------------------------------------------------------------------- 7,267 VF Corp. 530,128 - -------------------------------------------------------------------------------- 3,606,403 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 1.6% - -------------------------------------------------------------------------------- 50,218 Countrywide Financial Corporation 1,759,639 - -------------------------------------------------------------------------------- 79,587 Fannie Mae 4,449,708 - -------------------------------------------------------------------------------- 56,805 Freddie Mac 3,767,876 - -------------------------------------------------------------------------------- 18,834 Golden West Financial Corp. 1,454,927 - -------------------------------------------------------------------------------- 7,091 MGIC Investment Corp. 425,247 - -------------------------------------------------------------------------------- 28,582 Sovereign Bancorp Inc. 614,799 - -------------------------------------------------------------------------------- 79,193 Washington Mutual, Inc. 3,442,520 - -------------------------------------------------------------------------------- 15,914,716 - -------------------------------------------------------------------------------- TOBACCO -- 1.5% - -------------------------------------------------------------------------------- 172,317 Altria Group Inc. 13,190,866 - -------------------------------------------------------------------------------- 13,966 Reynolds American Inc. 865,473 - -------------------------------------------------------------------------------- 13,282 UST Inc. 728,252 - -------------------------------------------------------------------------------- 14,784,591 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS(2) - -------------------------------------------------------------------------------- 6,286 Grainger (W.W.), Inc. 421,288 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.6% - -------------------------------------------------------------------------------- 31,856 ALLTEL Corp. 1,768,008 - -------------------------------------------------------------------------------- 245,637 Sprint Nextel Corp. 4,212,675 - -------------------------------------------------------------------------------- 5,980,683 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $754,983,981) 990,845,648 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 15 Equity Index - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS SEGREGATED FOR FUTURES CONTRACTS(3) -- 0.6% - -------------------------------------------------------------------------------- Repurchase Agreement, Goldman Sachs & Co., (collateralized by various U.S. Treasury obligations, 5.25%-6.00%, 2/15/26-2/15/29, valued at $6,586,119), in a joint trading account at 4.90%, dated 9/29/06, due 10/2/06 (Delivery value $6,462,238) (Cost $6,459,600) $ 6,459,600 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 0.1% - -------------------------------------------------------------------------------- Repurchase Agreement, Goldman Sachs & Co., (collateralized by various U.S. Treasury obligations, 5.25%-6.00%, 2/15/26-2/15/29, valued at $245,109), in a joint trading account at 4.90%, dated 9/29/06, due 10/2/06 (Delivery value $240,498) 240,400 - -------------------------------------------------------------------------------- $350,000 U.S. Treasury Bills, 4.80%, 12/21/06(4) 346,307 - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $586,624) $ 586,707 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.0% (Cost $762,030,205) 997,891,955 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES(2) (178,008) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $997,713,947 ================================================================================ FUTURES CONTRACTS Underlying Face Unrealized Contracts Purchased Expiration Date Amount at Value Gain (Loss) - ---------------------------------------------------------------------------- 96 S&P 500 E-Mini Futures December 2006 $6,459,600 $94,002 ============================== NOTES TO SCHEDULE OF INVESTMENTS (1) Non-income producing. (2) Category 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 SEPTEMBER 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investment securities, at value (cost of $762,030,205) $997,891,955 - --------------------------------------------------------- Receivable for investments sold 349,844 - --------------------------------------------------------- Dividends and interest receivable 1,073,648 - -------------------------------------------------------------------------------- 999,315,447 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Disbursements in excess of demand deposit cash 165,324 - --------------------------------------------------------- Payable for investments purchased 1,159,509 - --------------------------------------------------------- Payable for variation margin on futures contracts 7,591 - --------------------------------------------------------- Accrued management fees 269,076 - -------------------------------------------------------------------------------- 1,601,500 - -------------------------------------------------------------------------------- NET ASSETS $997,713,947 ================================================================================ NET ASSETS CONSIST OF: - -------------------------------------------------------------------------------- Capital (par value and paid-in surplus) $874,493,841 - --------------------------------------------------------- Undistributed net investment income 574,273 - --------------------------------------------------------- Accumulated net realized loss on investment transactions (113,309,919) - --------------------------------------------------------- Net unrealized appreciation on investments 235,955,752 - -------------------------------------------------------------------------------- $997,713,947 ================================================================================ INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $216,659,424 - --------------------------------------------------------- Shares outstanding 40,680,913 - --------------------------------------------------------- Net asset value per share $5.33 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $781,054,523 - --------------------------------------------------------- Shares outstanding 146,574,860 - --------------------------------------------------------- Net asset value per share $5.33 - -------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 17 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (LOSS) - -------------------------------------------------------------------------------- INCOME: - ------------------------------------------------------- Dividends $ 9,013,268 - ------------------------------------------------------- Interest 213,212 - -------------------------------------------------------------------------------- 9,226,480 - -------------------------------------------------------------------------------- EXPENSES: - ------------------------------------------------------- Management fees 1,611,914 - ------------------------------------------------------- Directors' fees and expenses 5,972 - ------------------------------------------------------- Other expenses 889 - -------------------------------------------------------------------------------- 1,618,775 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) 7,607,705 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------------------------------------- Net realized gain (loss) on investment transactions (4,141,076) - ------------------------------------------------------- Change in net unrealized appreciation (depreciation) on investments 34,788,628 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) 30,647,552 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $38,255,257 ================================================================================ See Notes to Financial Statements. - ------ 18 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) AND YEAR ENDED MARCH 31, 2006 - -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2006 MARCH 31, 2006 - -------------------------------------------------------------------------------- OPERATIONS - -------------------------------------------------------------------------------- Net investment income (loss) $ 7,607,705 $ 13,595,890 - ------------------------------------------ Net realized gain (loss) (4,141,076) 43,873,431 - ------------------------------------------ Change in net unrealized appreciation (depreciation) 34,788,628 31,719,229 - -------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 38,255,257 89,188,550 - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - -------------------------------------------------------------------------------- From net investment income: - ------------------------------------------ Investor Class (1,407,540) (2,174,614) - ------------------------------------------ Institutional Class (5,768,413) (11,543,721) - -------------------------------------------------------------------------------- Decrease in net assets from distributions (7,175,953) (13,718,335) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - -------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions 151,076,137 (318,251,554) - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 182,155,441 (242,781,339) - -------------------------------------------------------------------------------- NET ASSETS - -------------------------------------------------------------------------------- Beginning of period 815,558,506 1,058,339,845 - -------------------------------------------------------------------------------- End of period $997,713,947 $815,558,506 ================================================================================ Undistributed net investment income $574,273 $128,823 ================================================================================ See Notes to Financial Statements. - ------ 19 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Equity 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 distribution and shareholder servicing 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. Securities traded on foreign securities exchanges and over-the-counter markets are normally completed before the close of business on days that the New York Stock Exchange (the Exchange) is open and may also take place on days when the Exchange is not open. If an event occurs after the value of a security was established but before the net asset value per share was determined that was likely to materially change the net asset value, that security would be valued at fair value as determined in accordance with procedures adopted by the Board of Directors. 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. Certain other circumstances may cause the fund to fair value a security such as: a security has been declared in default; or trading in a security has been halted during the trading day; or there is a foreign market holiday and no trading will commence. SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes. INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund estimates the components of distributions received that may be considered nontaxable distributions or capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. FUTURES 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 (continued) - ------ 20 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement. JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other registered investment companies having management agreements with ACIM or American Century Global Investment Management, Inc. (ACGIM), may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations. INCOME TAX STATUS -- It is the fund's policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for federal or state income taxes. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on the ex-dividend date. Distributions from net investment income are declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually. INDEMNIFICATIONS -- Under the corporation's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the fund. The risk of material loss from such claims is considered by management to be remote. USE OF ESTIMATES -- The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The Agreement provides that all expenses of the fund, except brokerage commissions, taxes, interest, fees and expenses of those directors who are not considered "interested persons" as defined in the 1940 Act (including counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on the daily net assets of the specific class of shares of the fund and paid monthly in arrears. For funds with a stepped fee schedule, the rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account all of the investment advisor's assets under management in the fund's investment strategy (strategy assets) to calculate the appropriate fee rate for the fund. The strategy assets include the fund's assets and the assets of other clients of the investment advisor that are not in the American Century family of funds, but that have the same investment team and investment strategy. The annual management fee schedule for each class of the fund is as follows: - -------------------------------------------------------------------------------- INVESTOR INSTITUTIONAL CLASS CLASS - -------------------------------------------------------------------------------- STRATEGY ASSETS - -------------------------------------------------------------------------------- First $1 billion 0.490% 0.290% - -------------------------------------------------------------------------------- Next $1 billion 0.470% 0.270% - -------------------------------------------------------------------------------- Next $1 billion 0.455% 0.255% - -------------------------------------------------------------------------------- Next $1 billion 0.445% 0.245% - -------------------------------------------------------------------------------- Next $1 billion 0.435% 0.235% - -------------------------------------------------------------------------------- Over $5 billion 0.430% 0.230% - -------------------------------------------------------------------------------- The effective annual management fee for the six months ended September 30, 2006 was 0.49% and 0.29% for the Investor Class and Institutional Class, respectively. (continued) - ------ 21 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) ACIM has entered into a Subadvisory Agreement with Barclays Global Fund Advisors (BGFA) on behalf of the fund. The subadvisor makes investment decisions for the fund in accordance with the fund's investment objectives, policies and restrictions under the supervision of ACIM and the Board of Directors. ACIM pays all costs associated with retaining BGFA as the subadvisor of the fund. RELATED PARTIES -- Certain officers and directors of the corporation are also officers and/or directors, and, as a group, controlling stockholders of American Century Companies, Inc. (ACC), the parent of the corporation's investment 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 six months ended September 30, 2006, were $17,751,405 and $28,654,707, respectively. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the fund were as follows: - -------------------------------------------------------------------------------- SHARES AMOUNT - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 100,000,000 ================================================================================ Sold 3,291,377 $16,811,163 - ------------------------------------ Issued in connection with acquisition (Note 7) 33,257,723 171,655,240 - ------------------------------------ Issued in reinvestment of distributions 240,253 1,216,033 - ------------------------------------ Redeemed (25,738,980) (133,531,120) - -------------------------------------------------------------------------------- Net increase (decrease) 11,050,373 $56,151,316 ================================================================================ 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) ================================================================================ INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 400,000,000 ================================================================================ Sold 31,452,224 $163,136,949 - ------------------------------------ Issued in reinvestment of distributions 1,139,832 5,768,413 - ------------------------------------ Redeemed (14,408,334) (73,980,541) - -------------------------------------------------------------------------------- Net increase (decrease) 18,183,722 $ 94,924,821 ================================================================================ 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) ================================================================================ (continued) - ------ 22 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 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. The fund may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund did not borrow from the line during the six months ended September 30, 2006. 6. FEDERAL TAX INFORMATION 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 September 30, 2006, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- Federal tax cost of investments $803,829,845 ================================================================================ Gross tax appreciation of investments $246,820,593 - -------------------------------------------------------------- Gross tax depreciation of investments (52,758,483) - -------------------------------------------------------------------------------- Net tax appreciation (depreciation) of investments $194,062,110 ================================================================================ The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales and return of capital dividends. Following are the capital loss carryovers and capital loss deferral amounts as of March 31, 2006: - -------------------------------------------------------------------------------- Accumulated capital losses $(71,859,380) - --------------------------------------------------------- Capital loss deferral $ (5,382,183) - -------------------------------------------------------------------------------- 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 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 SEPTEMBER 30, 2006 (UNAUDITED) 7. REORGANIZATION PLAN On December 14, 2005, the Board of Directors of Mason Street Index 500 Fund (Index 500), one fund in a series issued by Mason Street Funds, Inc., approved a plan of reorganization (the reorganization) pursuant to which Equity Index acquired 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. The financial statements and performance history of Equity Index will be carried over in the post-reorganization. The reorganization was approved by shareholders on March 15, 2006. The reorganization was effective at the close of business on March 31, 2006. ORIGINAL FUND/CLASS SHARES EXCHANGED NEW FUND/CLASS SHARES RECEIVED - ---------------------------------------------------------------------------------- Index 500 Fund -- A 9,733,344 Equity Index -- Investor 28,917,087 - ---------------------------------------------------------------------------------- Index 500 Fund -- B 1,474,502 Equity Index -- Investor 4,340,636 - ---------------------------------------------------------------------------------- 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. 8. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. FIN 48 is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the date of effectiveness. The FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" (FAS 157), in September 2006, which is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands the required financial statement disclosures about fair value measurements. Management is currently evaluating the impact of adopting FIN 48 and FAS 157. - ------ 24 Equity Index - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002 - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.16 $4.70 $4.50 $3.39 $4.58 $4.63 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------ Net Investment Income (Loss)(2) 0.04 0.07 0.07 0.05 0.05 0.04 - ------------------ Net Realized and Unrealized Gain (Loss) 0.16 0.46 0.20 1.11 (1.19) (0.05) - -------------------------------------------------------------------------------- Total From Investment Operations 0.20 0.53 0.27 1.16 (1.14) (0.01) - -------------------------------------------------------------------------------- Distributions - ------------------ From Net Investment Income (0.03) (0.07) (0.07) (0.05) (0.05) (0.04) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $5.33 $5.16 $4.70 $4.50 $3.39 $4.58 ================================================================================ TOTAL RETURN(3) 3.80% 11.36% 6.04% 34.27% 25.02)% (0.16)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.49%(4) 0.49% 0.49% 0.49% 0.49% 0.49% - ------------------ Ratio of Net Investment Income (Loss) to Average Net Assets 1.43%(4) 1.43% 1.59% 1.23% 1.24% 0.91% - ------------------ Portfolio Turnover Rate 2% 17% 4% 16% 21% 4% - ------------------ Net Assets, End of Period (in thousands) $216,659 $152,799 $150,454 $142,324 $90,093 $108,760 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 25 Equity Index - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002 - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $5.16 $4.71 $4.50 $3.39 $4.58 $4.64 - -------------------------------------------------------------------------------- Income From Investment Operations - ---------------- Net Investment Income (Loss)(2) 0.04 0.08 0.08 0.06 0.05 0.05 - ---------------- Net Realized and Unrealized Gain (Loss) 0.17 0.45 0.21 1.11 (1.19) (0.06) - -------------------------------------------------------------------------------- Total From Investment Operations 0.21 0.53 0.29 1.17 (1.14) (0.01) - -------------------------------------------------------------------------------- Distributions - ---------------- From Net Investment Income (0.04) (0.08) (0.08) (0.06) (0.05) (0.05) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $5.33 $5.16 $4.71 $4.50 $3.39 $4.58 ================================================================================ TOTAL RETURN(3) 4.10% 11.35% 6.47% 34.53% (24.87)% (0.17)% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.29%(4) 0.29% 0.29% 0.29% 0.29% 0.29% - ---------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.63%(4) 1.63% 1.79% 1.43% 1.44% 1.11% - ---------------- Portfolio Turnover Rate 2% 17% 4% 16% 21% 4% - ---------------- Net Assets, End of Period (in thousands) $781,055 $662,759 $907,886 $842,269 $350,815 $449,591 - -------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 26 Approval of Management Agreement for Equity Index Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund's independent directors or trustees (the "Directors") each year. At American Century, this process is referred to as the "15(c) Process." As a part of this process, the board reviews fund performance, shareholder services, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. In addition to this annual review, the board of directors oversees and evaluates on a continuous basis at its quarterly meetings the nature and quality of significant services performed by the advisor, fund performance, audit and compliance information, and a variety of other reports relating to fund operations. The board, or committees of the board, also holds special meetings as needed. Under a Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for the board's approval or renewal of any advisory agreements within the fund's most recently completed fiscal half-year period. ANNUAL CONTRACT REVIEW PROCESS As part of the annual 15(c) Process undertaken during the most recent fiscal half-year period, the Directors reviewed extensive data and information compiled by the advisor and certain independent providers of evaluative data (the "15(c) Providers") concerning Equity Index (the "fund") and the services provided to the fund under the management agreement. The information considered and the discussions held at the meetings included, but were not limited to: * the nature, extent and quality of investment management, shareholder services and other services provided to the fund under the management agreement; * reports on the advisor's activities relating to the wide range of programs and services the advisor provides to the fund and its shareholders on a routine and non-routine basis; * data comparing the cost of owning the fund to the cost of owning a similar fund; * data comparing the fund's performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; * financial data showing the profitability of the fund to the advisor and the overall profitability of the advisor; and * data comparing services provided and charges to other investment management clients of the advisor. In keeping with its practice, the fund's board of directors held two regularly scheduled meetings and one special meeting to review and discuss the information provided by the advisor and to complete its negotiations with the advisor regarding the renewal of the management agreement, including the setting of the applicable advisory fee. The board also had the benefit of the advice of its independent counsel throughout the period. (continued) - ------ 27 Approval of Management Agreement for Equity Index FACTORS CONSIDERED The Directors considered all of the information provided by the advisor, the 15(c) Providers, and the board's independent counsel, and evaluated such information for each fund for which the board has responsibility. The Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the agreement under the terms ultimately determined by the board to be appropriate, the Directors' decision was based on the following factors. NATURE, EXTENT AND QUALITY OF SERVICES -- Generally. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the fund. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including: * fund construction and design * portfolio security selection * initial capitalization/funding * securities trading * custody of fund assets * daily valuation of the fund's portfolio * shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping and communications * legal services * regulatory and portfolio compliance * financial reporting * marketing and distribution The Directors noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings. INVESTMENT MANAGEMENT SERVICES. The nature of the investment management services provided is quite complex and allows fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes, and liquidity. In evaluating investment performance, the board expects the advisor to manage the fund in accordance with its investment objectives and approved strategies. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. At each quarterly meeting the Directors review investment performance information for the fund, together with comparative information for appropriate benchmarks and peer groups of funds managed similarly to the fund. The Directors also review detailed performance information during the 15(c) Process comparing the fund's performance with that of similar funds not managed by the advisor. If performance concerns are identified, the Directors discuss with the advisor (continued) - ------ 28 Approval of Management Agreement for Equity Index the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The performance information presented to the Directors showed that the fund's performance was slightly below its benchmark for both the one and three year periods. SHAREHOLDER AND OTHER SERVICES. The advisor provides the fund with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at their regular quarterly meetings, including the annual meeting concerning contract review, and reports to the board. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor. COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor provides detailed information concerning its cost of providing various services to the fund, its profitability in managing the fund, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor's financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. ETHICS OF THE ADVISOR. The Directors generally consider the advisor's commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor's practices generally meet or exceed industry best practices and that the advisor was not implicated in the industry scandals of 2003 and 2004. ECONOMIES OF SCALE. The Directors review reports provided by the advisor on economies of scale for the complex as a whole and the year-over-year changes in revenue, costs, and profitability. The Directors concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. This analysis is also complicated by the additional services and content provided by the advisor and its reinvestment in its ability to provide and expand those services. Accordingly, the Directors also seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the fund specifically, the expenses incurred by the advisor in providing various functions to the fund, and the breakpoint fees of competitive funds not managed by the advisor. The Directors believe the advisor is appropriately sharing economies of scale through its (continued) - ------ 29 Approval of Management Agreement for Equity Index competitive fee structure, fee break points as the fund increases in size, and through reinvestment in its business to provide shareholders additional content and services. COMPARISON TO OTHER FUNDS' FEES. The fund pays the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the fund's independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The board believes the unified fee structure is a benefit to fund shareholders because it clearly discloses to shareholders the cost of owning fund shares, and, since the unified fee cannot be increased without a vote of fund shareholders, it shifts to the advisor the risk of increased costs of operating the fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Directors' analysis of fee levels involves reviewing certain evaluative data compiled by a 15(c) Provider comparing the fund's unified fee to the total expense ratio of other funds in the fund's peer group. The unified fee charged to shareholders of the fund was above the median of the total expense ratios of its peer group. COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the fund. The Directors analyzed this information and concluded that the fees charged and services provided to the fund were reasonable by comparison. COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information from the advisor concerning collateral benefits it receives as a result of its relationship with the fund. They concluded that the advisor's primary business is managing mutual funds and it generally does not use the fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is able to provide investment management services to certain clients other than the (continued) - ------ 30 Approval of Management Agreement for Equity Index fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Directors concluded, however, that the assets of those other clients are not material to the analysis and, in any event, are included with the assets of the fund to determine breakpoints in the fund's fee schedule, provided they are managed using the same investment team and strategy. CONCLUSIONS OF THE DIRECTORS As a result of this process, the independent directors, in the absence of particular circumstances and assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor concluded that the investment management agreement between the fund and the advisor is fair and reasonable in light of the services provided and should be renewed. As a part of the 15(c) Process, the board of directors also unanimously approved the renewal of the investment subadvisory agreement by which Barclays Global Fund Advisors (the "subadvisor") is engaged to manage the investments of the fund. In approving the subadvisory agreement, the board considered all material factors including the nature, extent, and quality of investment management services provided by the subadvisor to the fund under the agreement. As a part of this review the board evaluated the subadvisor's investment performance and capabilities, as well as its compliance policies, procedures, and regulatory experience. The Directors noted that the management fees paid to the subadvisor under the subadvisory agreement were subject to arm's length negotiation between the advisor and the subadvisor and are paid by the advisor out of its unified fee. - ------ 31 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. - ------ 32 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 website at americancentury.com and on the Securities and Exchange Commission's website 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 website 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 website at americancentury.com and, upon request, by calling 1-800-345-2021. - ------ 33 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 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. - ------ 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 Holdings, Inc. American Century Investment Services, Inc., Distributor (c)2006 American Century Proprietary Holdings, Inc. All rights reserved. 0611 SH-SAN-51658N
[front cover] American Century Investments Semiannual Report September 30, 2006 [photo of autumn] Real Estate Fund [american century investments logo and text logo] Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] /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. We are pleased to provide you with the semiannual report for the American Century Real Estate Fund for the six months ended September 30, 2006. We hope you find this information helpful in monitoring your investment. Another useful resource we offer is our website, americancentury.com, where we post quarterly portfolio commentaries, the views of senior investment officers and analysts, and other communications about investments, portfolio strategy, personal finance, and the markets. In its most recent rankings, Dalbar -- which issues customer satisfaction ratings and rankings based on website functionality -- ranked americancentury.com fourth out of the sites provided by the top 25 fund companies that it believes lead the industry in web-based technology. Our website earned an "Excellent" rating, Dalbar's highest designation. For most of 2006, our website has linked visitors to information explaining our strategic collaboration with Lance Armstrong and the Lance Armstrong Foundation (LAF). This 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. To learn more about the collaboration and the LAF, please visit americancentury.com or www.lanceface.com on the Web and click on the links to related sites. With the approach of year end and the 2006 tax season, you can also find out more about December fund distributions and tax information via a link from our website. We've posted December distribution estimates for over 50 funds, answers to frequent distribution questions, and online descriptions of all of the tax information we provide to investors. If you haven't visited americancentury.com yet, we encourage you to do so...it's there to serve you. And so are we. As always, we deeply appreciate your commitment to American Century Investments. Table of Contents Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Six-Month 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 OTHER INFORMATION Approval of Management Agreement for Real Estate. . . . . . . . . . . . . .23 Share Class Information . . . . . . . . . . . . . . . . . . . . . . . . . .28 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . .29 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 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. Market Perspective [photo of Phil Davidson] BY PHIL DAVIDSON, CHIEF INVESTMENT OFFICER, U.S. VALUE EQUITY MODEST RALLY FOR STOCKS Cooling energy prices and a pause from the Federal Reserve enabled U.S. stocks to post positive results for the six months ended September 30, 2006. The stock market endured a difficult spring, with the major stock indexes falling sharply in May after unexpectedly high inflation figures led to concerns about rising interest rates. Stocks plodded along through the summer months, clouded by uncertainties about inflation and economic growth, until the Federal Reserve chose to leave short-term interest rates unchanged at its policy meeting in mid-August. After 17 consecutive rate hikes over a two-year period, the Fed decided to stand pat amid evidence of moderating economic growth and declining energy and commodity prices. In response, stocks staged a strong rally that persisted through the end of the six-month period. The Dow Jones Industrial Average flirted with its all-time closing high on two occasions in the final week, only to fall back each time and close below the record. SIZE AND QUALITY MATTERED Thanks to the stock market's late-summer rally, the broad equity indexes advanced by 2-3% for the six-month period. However, the market's overall gains masked some relatively narrow breadth. In an environment of slowing economic growth, investors focused their attention on the stocks of larger, higher-quality companies, which posted the strongest returns. In contrast, mid- and small-cap stocks did not fully participate in the market's rebound late in the period and declined overall for the six months. Extending a multi-year trend, value shares performed better than growth stocks across the capitalization range. PLAYING DEFENSE Sector performance reflected the defensive, risk-averse posture of the market during the summer. Investors seeking companies with more predictable earnings and dividend payouts shifted money into utilities and telecommunication services providers, as well as companies that make everyday consumer products. An emphasis on dividend yield also provided a lift to real estate investments trusts (see page 5 for further details). On the downside, the information technology sector posted the largest decline during the period as investors moved away from the more speculative and growth-oriented segments of the market. The slowing economy weighed on industrial and materials stocks, which are the most economically sensitive sectors. SIX-MONTH TOTAL RETURNS AS OF SEPTEMBER 30, 2006(1) - -------------------------------------------------------------------------------- Dow Jones Wilshire 5000 Index (broad) 2.32% - -------------------------------------------------------------------------------- S&P 500 Index (large-cap) 4.14% - -------------------------------------------------------------------------------- Russell 2000 Index (small-cap) -4.61% - -------------------------------------------------------------------------------- (1) Total returns for periods less than one year are not annualized. - ------ 2 Real Estate - Performance TOTAL RETURNS AS OF SEPTEMBER 30, 2006 -------------------------------- AVERAGE ANNUAL RETURNS - ------------------------------------------------------------------------------------------ SINCE INCEPTION 6 MONTHS(1) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - ------------------------------------------------------------------------------------------ INVESTOR CLASS 8.20% 28.40% 23.34% 16.50% 17.05% 9/21/95(2) - ------------------------------------------------------------------------------------------ MSCI US REIT INDEX 8.02% 26.56% 22.23% 15.42% 15.68%(3) -- - ------------------------------------------------------------------------------------------ Institutional Class 8.30% 28.66% 23.58% -- 15.08% 6/16/97 - ------------------------------------------------------------------------------------------ Advisor Class 8.02% 28.06% 23.05% -- 18.69% 10/6/98 - ------------------------------------------------------------------------------------------ (1) Total returns for periods less than one year are not annualized. (2) The inception date for RREEF Real Estate Securities Fund, Real Estate's predecessor. That fund merged with Real Estate on 6/13/97 and Real Estate was first offered to the public on 6/16/97. (3) 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 September 30, 1996
![](https://capedge.com/proxy/N-CSRS/0000908186-06-000070/growthrealestate0611.gif)
ONE-YEAR RETURNS OVER 10 YEARS Periods ended September 30 - ------------------------------------------------------------------------------------------------------------ 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 - ------------------------------------------------------------------------------------------------------------ Investor Class 49.58% -17.62% -2.94% 21.61% 10.96% 9.78% 28.35% 25.40% 25.88% 28.40% - ------------------------------------------------------------------------------------------------------------ MSCI US REIT Index 40.88% -14.26% -5.88% 21.25% 11.62% 8.56% 25.11% 24.85% 27.10% 26.56% - ------------------------------------------------------------------------------------------------------------ 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 The Real Estate fund posted a total return of 8.20%* for the six months ended September 30, 2006, surpassing both the 8.02% return of its benchmark, the Morgan Stanley Capital International (MSCI) US REIT Index, and the 2.32% return of the Dow Jones Wilshire 5000 Index, a broad stock market measure. REITS CONTINUED TO OUTPERFORM Real estate investment trusts (REITs) continued to post strong gains over the past six months. Positive influences included declining long-term interest rates (which make the relatively high dividend yields of REITs look more attractive), firm commercial property values, and rising occupancy rates. Further consolidation in the sector also boosted results as REITs continued to garner attention from private equity firms. Over the past two years, REIT acquisitions by private companies have taken approximately $80 billion out of the public REIT market. Health care and apartment REITs generated the best results during the six-month period. Health care REITs benefited from favorable Medicare and Medicaid reimbursements, while weakness in the housing sector lifted occupancy levels for apartment REITs. Retail and hotel REITs produced the lowest gains as moderating economic growth led to expectations of curtailed consumer spending and traveling. SECTOR ALLOCATION ADDED VALUE The Real Estate fund's sector weightings contributed favorably to performance relative to the MSCI US REIT Index. The fund held a notable underweight in the underperforming retail segment and an overweight in apartment REITs, which were among the best performers. On the downside, an overweight in hotel REITs worked against the fund as this segment lagged overall, but solid results from the fund's non-REIT hotel holdings helped offset the negative impact of the overweight. APARTMENT REITS LED THE WAY The top individual performance contributors were apartment REITs, led by the fund's largest overweight, Apartment Investment and Management. The TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF % OF NET ASSETS NET ASSETS AS OF AS OF 9/30/06 3/31/06 - -------------------------------------------------------------------------------- ProLogis 6.7% 5.2% - -------------------------------------------------------------------------------- Simon Property Group, Inc. 5.6% 8.0% - -------------------------------------------------------------------------------- Archstone-Smith Trust 5.3% 4.2% - -------------------------------------------------------------------------------- Equity Office Properties Trust 5.1% 0.7% - -------------------------------------------------------------------------------- Apartment Investment and Management Co. Cl A 5.0% 5.1% - -------------------------------------------------------------------------------- Vornado Realty Trust 4.3% 4.8% - -------------------------------------------------------------------------------- Weingarten Realty Investors 3.6% -- - -------------------------------------------------------------------------------- Brandywine Realty Trust 3.2% 2.8% - -------------------------------------------------------------------------------- Pennsylvania Real Estate Investment Trust 3.1% 3.4% - -------------------------------------------------------------------------------- AMB Property Corp. 3.1% 1.5% - -------------------------------------------------------------------------------- *All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. (continued) - ------ 5 Real Estate - Portfolio Commentary company reported better-than-expected earnings and raised guidance for 2006 amid higher occupancy and rising rents. Archstone-Smith Trust, an owner of luxury apartment properties, also performed well during the period. Archstone posted a double-digit gain as the company enjoyed its tenth consecutive quarter of increasing revenue growth. TAKEOVERS AFFECTED OFFICE HOLDINGS Merger and acquisition activity had the most significant impact on the office segment. So far in 2006, four of the ten largest REIT acquisition deals have been takeovers of office REITs, the largest being the $9 billion acquisition of Trizec Properties by private equity firm The Blackstone Group and Brookfield Properties, a publicly traded REIT. Trizec was a substantial fund overweight and one of the top contributors to performance. The takeover frenzy cut both ways, however. The fund held an underweight in Equity Office Properties, the nation's largest office landlord, but Equity Office registered a strong return as its significant exposure to the hot New York City office market sparked speculation about a possible private takeover. LOOKING FORWARD After nearly seven years of consistently healthy gains, REITs remain reasonably valued relative to their underlying property portfolios, largely because of sharp increases in commercial property values. Although the residential real estate market has slowed markedly in recent months, fundamentals in the commercial property market remain healthy, reflecting equilibrium between supply and demand. In addition, REITs have historically held up better than the overall stock market when the economy downshifts. Investors often favor defensive segments of the market during an economic slowdown; REITs fall into the defensive category because of their steady rental income stream. In general, real estate should remain a 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 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Regional Malls 18.4% 15.6% - -------------------------------------------------------------------------------- Office Management 17.9% 22.5% - -------------------------------------------------------------------------------- Multi-Family Residential 16.6% 18.5% - -------------------------------------------------------------------------------- Hotels, Restaurants & Leisure 13.2% 14.4% - -------------------------------------------------------------------------------- Industrials 12.3% 8.7% - -------------------------------------------------------------------------------- Diversified 6.9% 8.7% - -------------------------------------------------------------------------------- Neighborhood & Community Shopping Centers 4.5% 3.0% - -------------------------------------------------------------------------------- Health Care 4.3% 1.1% - -------------------------------------------------------------------------------- Other 3.5% 3.8% - -------------------------------------------------------------------------------- Cash and Equivalents(1) 2.4% 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 9/30/06 3/31/06 - -------------------------------------------------------------------------------- Domestic Common Stocks 93.7% 86.2% - -------------------------------------------------------------------------------- Foreign Common Stocks(2) 3.9% 10.1% - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS 97.6% 96.3% - -------------------------------------------------------------------------------- Temporary Cash Investments 2.7% 4.3% - -------------------------------------------------------------------------------- Other Assets and Liabilities (0.3)% (0.6)% - -------------------------------------------------------------------------------- (2) Includes depositary shares, dual listed securities and foreign ordinary shares. - ------ 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 April 1, 2006 to September 30, 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 4/1/06 - EXPENSE 4/1/06 9/30/06 9/30/06 RATIO* - ---------------------------------------------------------------------------------------- REAL ESTATE SHAREHOLDER FEE EXAMPLE - ---------------------------------------------------------------------------------------- ACTUAL - ---------------------------------------------------------------------------------------- Investor Class $1,000 $1,082.00 $5.95 1.14% - ---------------------------------------------------------------------------------------- Institutional Class $1,000 $1,083.00 $4.91 0.94% - ---------------------------------------------------------------------------------------- Advisor Class $1,000 $1,080.20 $7.25 1.39% - ---------------------------------------------------------------------------------------- HYPOTHETICAL - ---------------------------------------------------------------------------------------- Investor Class $1,000 $1,019.35 $5.77 1.14% - ---------------------------------------------------------------------------------------- Institutional Class $1,000 $1,020.36 $4.76 0.94% - ---------------------------------------------------------------------------------------- Advisor Class $1,000 $1,018.10 $7.03 1.39% - ---------------------------------------------------------------------------------------- *Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. - ------ 8 Real Estate - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 97.6% DIVERSIFIED -- 6.9% - -------------------------------------------------------------------------------- 398,700 British Land Co. plc ADR $ 10,158,358 - -------------------------------------------------------------------------------- 5,200 Digital Realty Trust Inc. 162,864 - -------------------------------------------------------------------------------- 3,914,900 Huntingdon Real Estate Investment Trust ORD(1) 7,705,118 - -------------------------------------------------------------------------------- 346,300 KKR Financial Corp. 8,498,202 - -------------------------------------------------------------------------------- 516,600 National Retail Properties, Inc. 11,158,560 - -------------------------------------------------------------------------------- 938,000 Spirit Finance Corp. 10,890,180 - -------------------------------------------------------------------------------- 749,500 Vornado Realty Trust 81,695,500 - -------------------------------------------------------------------------------- 130,268,782 - -------------------------------------------------------------------------------- HEALTH CARE -- 4.3% - -------------------------------------------------------------------------------- 437,000 Cogdell Spencer Inc.(1) 9,067,750 - -------------------------------------------------------------------------------- 1,491,500 Nationwide Health Properties Inc. 39,882,710 - -------------------------------------------------------------------------------- 422,800 Senior Housing Properties Trust 9,022,552 - -------------------------------------------------------------------------------- 598,400 Ventas, Inc. 23,062,336 - -------------------------------------------------------------------------------- 81,035,348 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 13.2% - -------------------------------------------------------------------------------- 1,171,100 Equity Lifestyle Properties, Inc.(1) 53,530,981 - -------------------------------------------------------------------------------- 687,700 Hospitality Properties Trust 32,459,440 - -------------------------------------------------------------------------------- 1,185,740 Host Hotels & Resorts Inc. 27,189,018 - -------------------------------------------------------------------------------- 1,868,900 Innkeepers USA Trust 30,444,381 - -------------------------------------------------------------------------------- 604,051 InterContinental Hotels Group plc ADR 10,655,460 - -------------------------------------------------------------------------------- 1,032,515 InterContinental Hotels Group plc ORD 18,076,668 - -------------------------------------------------------------------------------- 429,000 LaSalle Hotel Properties 18,592,860 - -------------------------------------------------------------------------------- 1,279,700 Strategic Hotels & Resorts, Inc. 25,440,436 - -------------------------------------------------------------------------------- 708,200 Sunstone Hotel Investors, Inc. 21,047,704 - -------------------------------------------------------------------------------- 3,280,000 Wharf Holdings Ltd. ORD 11,241,167 - -------------------------------------------------------------------------------- 248,678,115 - -------------------------------------------------------------------------------- INDUSTRIALS -- 12.3% - -------------------------------------------------------------------------------- 1,064,176 AMB Property Corp. 58,646,739 - -------------------------------------------------------------------------------- 834,300 First Potomac Realty Trust 25,212,546 - -------------------------------------------------------------------------------- 420,500 Global Signal Inc. 21,268,890 - -------------------------------------------------------------------------------- 2,219,810 ProLogis 126,662,359 - -------------------------------------------------------------------------------- 231,790,534 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- MULTI-FAMILY RESIDENTIAL -- 16.6% - -------------------------------------------------------------------------------- 637,700 American Campus Communities Inc. $ 16,267,727 - -------------------------------------------------------------------------------- 95,500 American Land Lease, Inc. 2,268,125 - -------------------------------------------------------------------------------- 1,729,800 Apartment Investment and Management Co. Cl A 94,118,418 - -------------------------------------------------------------------------------- 1,819,465 Archstone-Smith Trust 99,051,675 - -------------------------------------------------------------------------------- 453,700 Education Realty Trust, Inc. 6,696,612 - -------------------------------------------------------------------------------- 759,495 GMH Communities Trust 9,584,827 - -------------------------------------------------------------------------------- 489,500 Home Properties, Inc. 27,979,820 - -------------------------------------------------------------------------------- 450,600 Post Properties, Inc. 21,412,512 - -------------------------------------------------------------------------------- 1,151,700 United Dominion Realty Trust Inc. 34,781,340 - -------------------------------------------------------------------------------- 312,161,056 - -------------------------------------------------------------------------------- NEIGHBORHOOD & COMMUNITY SHOPPING CENTERS -- 4.5% - -------------------------------------------------------------------------------- 7,686,300 Link Real Estate Investment Trust (The) ORD 16,002,745 - -------------------------------------------------------------------------------- 1,588,600 Weingarten Realty Investors 68,341,572 - -------------------------------------------------------------------------------- 84,344,317 - -------------------------------------------------------------------------------- OFFICE MANAGEMENT -- 17.9% - -------------------------------------------------------------------------------- 575,600 Alexandria Real Estate Equities Inc. 53,991,280 - -------------------------------------------------------------------------------- 1,863,484 Brandywine Realty Trust 60,656,404 - -------------------------------------------------------------------------------- 139,242 Cousins Properties Inc. 4,763,469 - -------------------------------------------------------------------------------- 2,413,000 Equity Office Properties Trust 95,940,880 - -------------------------------------------------------------------------------- 670,600 Kilroy Realty Corp. 50,523,004 - -------------------------------------------------------------------------------- 893,300 Liberty Property Trust 42,690,807 - -------------------------------------------------------------------------------- 306,800 Mack-Cali Realty Corp. 15,892,240 - -------------------------------------------------------------------------------- 324,787 Mission West Properties 3,705,820 - -------------------------------------------------------------------------------- 84,200 SL Green Realty Corp. 9,405,140 - -------------------------------------------------------------------------------- 337,569,044 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS -- 0.4% - -------------------------------------------------------------------------------- 213,800 Rayonier, Inc. 8,081,640 - -------------------------------------------------------------------------------- REGIONAL MALLS -- 18.4% - -------------------------------------------------------------------------------- 556,400 CBL & Associates Properties, Inc. 23,318,724 - -------------------------------------------------------------------------------- 876,210 General Growth Properties, Inc. 41,751,407 - -------------------------------------------------------------------------------- 756,400 Macerich Co. (The) 57,758,704 - -------------------------------------------------------------------------------- 353,700 Mills Corp. (The) 5,910,327 - -------------------------------------------------------------------------------- 1,390,476 Pennsylvania Real Estate Investment Trust 59,192,563 - -------------------------------------------------------------------------------- 727,900 Realty Income Corp. 17,986,409 - -------------------------------------------------------------------------------- 1,159,688 Simon Property Group, Inc. 105,090,926 - -------------------------------------------------------------------------------- 797,600 Taubman Centers Inc. 35,429,392 - -------------------------------------------------------------------------------- 346,438,452 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 9 Real Estate - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- STORAGE -- 0.8% - -------------------------------------------------------------------------------- 804,500 Extra Space Storage Inc. $ 13,925,895 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE -- 1.0% - -------------------------------------------------------------------------------- 340,100 Fannie Mae 19,014,991 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES -- 1.3% - -------------------------------------------------------------------------------- 988,200 SBA Communications Corp. Cl A(2) 24,042,906 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $1,561,213,513) 1,837,351,080 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 2.7% Repurchase Agreement, Merrill Lynch & Co., Inc., (collateralized by various U.S. Treasury obligations, 3.625% -- 4.625%, 2/29/08 -- 5/15/13, valued at $51,765,109), in a joint trading account at 5.00%, dated 9/29/06, due 10/2/06 (Delivery value $50,821,167) (Cost $50,800,000) 50,800,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.3% (Cost $1,612,013,513) 1,888,151,080 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES -- (0.3)% (6,507,405) - -------------------------------------------------------------------------------- TOTAL NET ASSETS -- 100.0% $ 1,881,643,675 ================================================================================ 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.) (2) Non-income producing. See Notes to Financial Statements. - ------ 10 Statement of Assets and Liabilities SEPTEMBER 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investment securities -- unaffiliated, at value (cost of $1,544,046,050) $1,817,847,231 - ------------------------------------------------------------- Investment securities -- affiliated, at value (cost of $67,967,463) 70,303,849 - -------------------------------------------------------------------------------- Total investment securities, at value (cost of $1,612,013,513) 1,888,151,080 - ------------------------------------------------------------- Foreign currency holdings, at value (cost of $6,078) 6,405 - ------------------------------------------------------------- Receivable for investments sold 45,353,932 - ------------------------------------------------------------- Dividends and interest receivable 5,013,235 - -------------------------------------------------------------------------------- 1,938,524,652 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Disbursements in excess of demand deposit cash 7,009,741 - ------------------------------------------------------------- Payable for investments purchased 48,123,730 - ------------------------------------------------------------- Accrued management fees 1,585,004 - ------------------------------------------------------------- Distribution fees payable 81,251 - ------------------------------------------------------------- Service fees payable 81,251 - -------------------------------------------------------------------------------- 56,880,977 - -------------------------------------------------------------------------------- NET ASSETS $1,881,643,675 ================================================================================ NET ASSETS CONSIST OF: - -------------------------------------------------------------------------------- Capital (par value and paid-in surplus) $1,423,573,326 - ------------------------------------------------------------- Undistributed net investment income 1,518,861 - ------------------------------------------------------------- Undistributed net realized gain on investment and foreign currency transactions 180,415,808 - ------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 276,135,680 - -------------------------------------------------------------------------------- $1,881,643,675 ================================================================================ INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $1,212,432,473 - ------------------------------------------------------------- Shares outstanding 39,065,278 - ------------------------------------------------------------- Net asset value per share $31.04 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $277,080,585 - ------------------------------------------------------------- Shares outstanding 8,919,723 - ------------------------------------------------------------- Net asset value per share $31.06 - -------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $392,130,617 - ------------------------------------------------------------- Shares outstanding 12,621,109 - ------------------------------------------------------------- Net asset value per share $31.07 - -------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 11 Statement of Operations FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME (LOSS) - -------------------------------------------------------------------------------- INCOME: - --------------------------------------------------------- Dividends (including $802,820 from affiliates and net of foreign taxes withheld of $81,266) $ 25,377,870 - --------------------------------------------------------- Interest 1,842,864 - -------------------------------------------------------------------------------- 27,220,734 - -------------------------------------------------------------------------------- EXPENSES: - --------------------------------------------------------- Management fees 8,515,158 - --------------------------------------------------------- Distribution fees -- Advisor Class 438,462 - --------------------------------------------------------- Service fees -- Advisor Class 438,462 - --------------------------------------------------------- Directors' fees and expenses 16,761 - --------------------------------------------------------- Other expenses 3,132 - -------------------------------------------------------------------------------- 9,411,975 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) 17,808,759 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------------------------------------- Net realized gain (loss) on investment and foreign currency transactions 103,517,399 - --------------------------------------------------------- Change in net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies 14,091,710 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) 117,609,109 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 135,417,868 ================================================================================ See Notes to Financial Statements. - ------ 12 Statement of Changes in Net Assets SIX MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) AND YEAR ENDED MARCH 31, 2006 - ---------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS SEPT. 30, 2006 MARCH 31, 2006 - ---------------------------------------------------------------------------------------- OPERATIONS - ---------------------------------------------------------------------------------------- Net investment income (loss) $ 17,808,759 $ 22,613,954 - ----------------------------------------------------- Net realized gain (loss) 103,517,399 164,923,243 - ----------------------------------------------------- Change in net unrealized appreciation (depreciation) 14,091,710 194,810,843 - ---------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 135,417,868 382,348,040 - ---------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - ---------------------------------------------------------------------------------------- From net investment income: - ----------------------------------------------------- Investor Class (10,984,202) (13,511,266) - ----------------------------------------------------- Institutional Class (2,909,716) (4,087,565) - ----------------------------------------------------- Advisor Class (3,354,340) (3,806,606) - ----------------------------------------------------- From net realized gains: - ----------------------------------------------------- Investor Class -- (73,133,691) - ----------------------------------------------------- Institutional Class -- (18,989,741) - ----------------------------------------------------- Advisor Class -- (24,220,069) - ---------------------------------------------------------------------------------------- Decrease in net assets from distributions (17,248,258) (137,748,938) - ---------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - ---------------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions 202,874,615 488,550,572 - ---------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 321,044,225 733,149,674 NET ASSETS - ---------------------------------------------------------------------------------------- Beginning of period 1,560,599,450 827,449,776 - ---------------------------------------------------------------------------------------- End of period $1,881,643,675 $1,560,599,450 ======================================================================================== Undistributed net investment income $1,518,861 $958,360 ======================================================================================== See Notes to Financial Statements. - ------ 13 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Real Estate Fund (the fund) is one fund in a series issued by the corporation. The fund is non-diversified under the 1940 Act. The fund's investment objective is 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 distribution and shareholder servicing 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. Securities traded on foreign securities exchanges and over-the-counter markets are normally completed before the close of business on days that the New York Stock Exchange (the Exchange) is open and may also take place on days when the Exchange is not open. If an event occurs after the value of a security was established but before the net asset value per share was determined that was likely to materially change the net asset value, that security would be valued at fair value as determined in accordance with procedures adopted by the Board of Directors. 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. Certain other circumstances may cause the funds to fair value a security such as: a security has been declared in default; or trading in a security has been halted during the trading day; or there is a foreign market holiday and no trading will commence. 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 (continued) - ------ 14 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) the Board of Directors. Each repurchase agreement is recorded at cost. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement. JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other registered investment companies having management agreements with ACIM or American Century Global Investment Management, Inc. (ACGIM), may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations. 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 each 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 SEPTEMBER 30, 2006 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) The annual management fee schedule for each class of the fund is as follows: - -------------------------------------------------------------------------------- INVESTOR INSTITUTIONAL ADVISOR - -------------------------------------------------------------------------------- STRATEGY ASSETS - -------------------------------------------------------------------------------- First $100 million 1.20% 1.00% 0.95% - -------------------------------------------------------------------------------- Next $900 million 1.15% 0.95% 0.90% - -------------------------------------------------------------------------------- Next $1 billion 1.10% 0.90% 0.85% - -------------------------------------------------------------------------------- Over $2 billion 1.05% 0.85% 0.80% - -------------------------------------------------------------------------------- The effective annual management fee for each class of the fund for the six months ended September 30, 2006 was 1.14%, 0.94% and 0.89% 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 six months ended September 30, 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 six months ended September 30, 2006, were $1,562,722,296 and $1,327,979,279, respectively. (continued) - ------ 16 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the fund were as follows: - -------------------------------------------------------------------------------- SHARES AMOUNT - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 70,000,000 ================================================================================ Sold 10,493,582 $ 306,067,971 - ---------------------------------------------- Issued in reinvestment of distributions 346,331 9,950,317 - ---------------------------------------------- Redeemed (5,788,741) (164,466,406) - -------------------------------------------------------------------------------- Net increase (decrease) 5,051,172 $ 151,551,882 ================================================================================ 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 ================================================================================ INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 20,000,000 ================================================================================ Sold 2,842,594 $ 82,214,159 - ---------------------------------------------- Issued in reinvestment of distributions 97,844 2,810,351 - ---------------------------------------------- Redeemed (2,382,933) (68,199,253) - -------------------------------------------------------------------------------- Net increase (decrease) 557,505 $ 16,825,257 ================================================================================ 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 ================================================================================ ADVISOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED SEPTEMBER 30, 2006 SHARES AUTHORIZED 30,000,000 ================================================================================ Sold 3,276,416 $ 94,552,798 - ---------------------------------------------- Issued in reinvestment of distributions 115,049 3,296,688 - ---------------------------------------------- Redeemed (2,181,479) (63,352,010) - -------------------------------------------------------------------------------- Net increase (decrease) 1,209,986 $ 34,497,476 ================================================================================ 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 ================================================================================ (continued) - ------ 17 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 5. AFFILIATED COMPANY TRANSACTIONS If a fund's holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2006 follows: - ---------------------------------------------------------------------------------------------------------------------- SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND SEPTEMBER 30, 2006 COMPANY 3/31/06 COST COST GAIN (LOSS) INCOME SHARE BALANCE MARKET VALUE - ---------------------------------------------------------------------------------------------------------------------- Cogdell Spencer Inc. 437,000 -- -- -- $305,900 437,000 $ 9,067,750 - ------------------------ Equity Lifestyle Properties, Inc. 268,300 $39,869,918 -- -- 138,975 1,171,100 53,530,981 - ------------------------ Huntingdon Real Estate Investment Trust ORD 2,264,800 3,162,417 -- -- 357,945 3,914,900 7,705,118 - ---------------------------------------------------------------------------------------------------------------------- $43,032,335 -- -- $802,820 $70,303,849 ====================================================================================================================== 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. The fund may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund did not borrow from the line during the six months ended September 30, 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 SEPTEMBER 30, 2006 (UNAUDITED) 8. FEDERAL TAX INFORMATION 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 September 30, 2006, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- Federal tax cost of investments $1,618,443,202 ================================================================================ Gross tax appreciation of investments $274,852,275 - -------------------------------------------------------- Gross tax depreciation of investments (5,144,397) - -------------------------------------------------------------------------------- Net tax appreciation (depreciation) of investments $269,707,878 ================================================================================ The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales. As of March 31, 2006, the fund had currency loss deferrals of $1,002, which 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. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. FIN 48 is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the date of effectiveness. The FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" (FAS 157), in September 2006, which is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands the required financial statement disclosures about fair value measurements. Management is currently evaluating the impact of adopting FIN 48 and FAS 157. - ------ 19 Real Estate - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - -------------------------------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002 - -------------------------------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $29.00 $23.24 $23.09 $15.83 $16.22 $14.00 - -------------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income (Loss)(2) 0.32 0.53 0.46 0.46 0.59 0.57 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 2.03 8.44 1.79 7.49 (0.44) 2.21 - -------------------------------------------------------------------------------------------------------- Total From Investment Operations 2.35 8.97 2.25 7.95 0.15 2.78 - -------------------------------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.31) (0.49) (0.46) (0.54) (0.54) (0.56) - ------------------------------------------ From Net Realized Gains -- (2.72) (1.64) (0.15) -- -- - -------------------------------------------------------------------------------------------------------- Total Distributions (0.31) (3.21) (2.10) (0.69) (0.54) (0.56) - -------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $31.04 $29.00 $23.24 $23.09 $15.83 $16.22 ======================================================================================================== TOTAL RETURN(3) 8.20% 40.65% 9.53% 50.97% 0.93% 20.23% - -------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.14%(4) 1.15% 1.16% 1.17% 1.18% 1.20% - ------------------------------------------ Ratio of Net Investment Income (Loss) to Average Net Assets 2.21%(4) 2.00% 1.88% 2.28% 3.74% 3.83% - ------------------------------------------ Portfolio Turnover Rate 85% 177% 171% 158% 162% 156% - ------------------------------------------ Net Assets, End of Period (in thousands) $1,212,432 $986,526 $522,676 $393,604 $134,898 $107,599 - -------------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 20 Real Estate - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - --------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - --------------------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002 - --------------------------------------------------------------------------------------------------- PER-SHARE DATA - --------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $29.03 $23.25 $23.10 $15.85 $16.23 $14.01 - --------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income (Loss)(2) 0.35 0.59 0.44 0.51 0.63 0.59 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 2.02 8.45 1.86 7.47 (0.44) 2.22 - --------------------------------------------------------------------------------------------------- Total From Investment Operations 2.37 9.04 2.30 7.98 0.19 2.81 - --------------------------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.34) (0.54) (0.51) (0.58) (0.57) (0.59) - ------------------------------------------ From Net Realized Gains -- (2.72) (1.64) (0.15) -- -- - --------------------------------------------------------------------------------------------------- Total Distributions (0.34) (3.26) (2.15) (0.73) (0.57) (0.59) - --------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $31.06 $29.03 $23.25 $23.10 $15.85 $16.23 =================================================================================================== TOTAL RETURN(3) 8.30% 40.99% 9.74% 51.14% 1.19% 20.45% - --------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.94%(4) 0.95% 0.96% 0.97% 0.98% 1.00% - ------------------------------------------ Ratio of Net Investment Income (Loss) to Average Net Assets 2.41%(4) 2.20% 2.08% 2.48% 3.94% 4.03% - ------------------------------------------ Portfolio Turnover Rate 85% 177% 171% 158% 162% 156% - ------------------------------------------ Net Assets, End of Period (in thousands) $277,081 $242,745 $143,183 $82,488 $23,371 $16,305 - --------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 21 Real Estate - Financial Highlights For a Share Outstanding Throughout the Years Ended March 31 (except as noted) - ---------------------------------------------------------------------------------------------------- ADVISOR CLASS - ---------------------------------------------------------------------------------------------------- 2006(1) 2006 2005 2004 2003 2002 - ---------------------------------------------------------------------------------------------------- PER-SHARE DATA - ---------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $29.04 $23.26 $23.11 $15.83 $16.22 $14.00 - ---------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------ Net Investment Income (Loss)(2) 0.29 0.46 0.35 0.42 0.55 0.53 - ------------------------------------------ Net Realized and Unrealized Gain (Loss) 2.02 8.46 1.84 7.50 (0.44) 2.21 - ---------------------------------------------------------------------------------------------------- Total From Investment Operations 2.31 8.92 2.19 7.92 0.11 2.74 - ---------------------------------------------------------------------------------------------------- Distributions - ------------------------------------------ From Net Investment Income (0.28) (0.42) (0.40) (0.49) (0.50) (0.52) - ------------------------------------------ From Net Realized Gains -- (2.72) (1.64) (0.15) -- -- - ---------------------------------------------------------------------------------------------------- Total Distributions (0.28) (3.14) (2.04) (0.64) (0.50) (0.52) - ---------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $31.07 $29.04 $23.26 $23.11 $15.83 $16.22 ==================================================================================================== TOTAL RETURN(3) 8.02% 40.37% 9.30% 50.66% 0.69% 19.93% - ---------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ---------------------------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 1.39%(4) 1.40% 1.41% 1.42% 1.43% 1.45% - ------------------------------------------ Ratio of Net Investment Income (Loss) to Average Net Assets 1.96%(4) 1.75% 1.63% 2.03% 3.49% 3.58% - ------------------------------------------ Portfolio Turnover Rate 85% 177% 171% 158% 162% 156% - ------------------------------------------ Net Assets, End of Period (in thousands) $392,131 $331,329 $161,592 $82,471 $19,278 $16,759 - ---------------------------------------------------------------------------------------------------- (1) Six months ended September 30, 2006 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 22 Approval of Management Agreement for Real Estate Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund's independent directors or trustees (the "Directors") each year. At American Century, this process is referred to as the "15(c) Process." As a part of this process, the board reviews fund performance, shareholder services, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. In addition to this annual review, the board of directors oversees and evaluates on a continuous basis at its quarterly meetings the nature and quality of significant services performed by the advisor, fund performance, audit and compliance information, and a variety of other reports relating to fund operations. The board, or committees of the board, also holds special meetings as needed. Under a Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for the board's approval or renewal of any advisory agreements within the fund's most recently completed fiscal half-year period. ANNUAL CONTRACT REVIEW PROCESS As part of the annual 15(c) Process undertaken during the most recent fiscal half-year period, the Directors reviewed extensive data and information compiled by the advisor and certain independent providers of evaluative data (the "15(c) Providers") concerning Real Estate (the "fund") and the services provided to the fund under the management agreement. The information considered and the discussions held at the meetings included, but were not limited to: * the nature, extent and quality of investment management, shareholder services and other services provided to the fund under the management agreement; * reports on the advisor's activities relating to the wide range of programs and services the advisor provides to the fund and its shareholders on a routine and non-routine basis; * data comparing the cost of owning the fund to the cost of owning a similar fund; * data comparing the fund's performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; * financial data showing the profitability of the fund to the advisor and the overall profitability of the advisor; and * data comparing services provided and charges to other investment management clients of the advisor. In keeping with its practice, the fund's board of directors held two regularly scheduled meetings and one special meeting to review and discuss the information provided by the advisor and to complete its negotiations with the advisor regarding the renewal of the management agreement, including the setting of the applicable advisory fee. The board also had the benefit of the advice of its independent counsel throughout the period. FACTORS CONSIDERED The Directors considered all of the information provided by the advisor, the 15(c) Providers, and the board's independent counsel, and evaluated such information for each fund for which the board has responsibility. The (continued) - ------ 23 Approval of Management Agreement for Real Estate Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the agreement under the terms ultimately determined by the board to be appropriate, the Directors' decision was based on the following factors. NATURE, EXTENT AND QUALITY OF SERVICES -- GENERALLY. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the fund. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including: * fund construction and design * portfolio security selection * initial capitalization/funding * securities trading * custody of fund assets * daily valuation of the fund's portfolio * shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping and communications * legal services * regulatory and portfolio compliance * financial reporting * marketing and distribution The Directors noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings. INVESTMENT MANAGEMENT SERVICES. The nature of the investment management services provided is quite complex and allows fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes, and liquidity. In evaluating investment performance, the board expects the advisor to manage the fund in accordance with its investment objectives and approved strategies. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. At each quarterly meeting the Directors review investment performance information for the fund, together with comparative information for appropriate benchmarks and peer groups of funds managed similarly to the fund. The Directors also review detailed performance information during the 15(c) Process comparing the fund's performance with that of similar funds not managed by the advisor. If performance concerns are identified, the Directors discuss with the advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The fund's performance for both the one and three year periods was above the median for its peer group during part of the past year. SHAREHOLDER AND OTHER SERVICES. The advisor provides the fund with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations (continued) - ------ 24 Approval of Management Agreement for Real Estate of such services at their regular quarterly meetings, including the annual meeting concerning contract review, and reports to the board. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor. COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor provides detailed information concerning its cost of providing various services to the fund, its profitability in managing the fund, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor's financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. ETHICS OF THE ADVISOR. The Directors generally consider the advisor's commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor's practices generally meet or exceed industry best practices and that the advisor was not implicated in the industry scandals of 2003 and 2004. ECONOMIES OF SCALE. The Directors review reports provided by the advisor on economies of scale for the complex as a whole and the year-over-year changes in revenue, costs, and profitability. The Directors concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. This analysis is also complicated by the additional services and content provided by the advisor and its reinvestment in its ability to provide and expand those services. Accordingly, the Directors also seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the fund specifically, the expenses incurred by the advisor in providing various functions to the fund, and the breakpoint fees of competitive funds not managed by the advisor. The Directors believe the advisor is appropriately sharing economies of scale through its competitive fee structure, fee breakpoints as the fund increases in size, and through reinvestment in its business to provide shareholders additional content and services. COMPARISON TO OTHER FUNDS' FEES. The fund pays the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the fund's independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing (continued) - ------ 25 Approval of Management Agreement for Real Estate and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The board believes the unified fee structure is a benefit to fund shareholders because it clearly discloses to shareholders the cost of owning fund shares, and, since the unified fee cannot be increased without a vote of fund shareholders, it shifts to the advisor the risk of increased costs of operating the fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Directors' analysis of fee levels involves reviewing certain evaluative data compiled by a 15(c) Provider comparing the fund's unified fee to the total expense ratio of other funds in the fund's peer group. The unified fee charged to shareholders of the fund was below the median of the total expense ratios of its peer group. COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the fund. The Directors analyzed this information and concluded that the fees charged and services provided to the fund were reasonable by comparison. COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information from the advisor concerning collateral benefits it receives as a result of its relationship with the fund. They concluded that the advisor's primary business is managing mutual funds and it generally does not use the fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is able to provide investment management services to certain clients other than the fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Directors concluded, however, that the assets of those other clients are not material to the analysis and, in any event, are included with the assets of the fund to determine breakpoints in the fund's fee schedule, provided they are managed using the same investment team and strategy. CONCLUSIONS OF THE DIRECTORS As a result of this process, the independent directors, in the absence of particular circumstances and assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor concluded that the investment management agreement between the fund and the advisor is fair and (continued) - ------ 26 Approval of Management Agreement for Real Estate reasonable in light of the services provided and should be renewed. As a part of the 15(c) Process, the board of directors also unanimously approved the renewal of the investment subadvisory agreement by which J.P. Morgan Investment Management, Inc. (the "subadvisor") is engaged to manage the investments of the fund. In approving the subadvisory agreement, the board considered all material factors including the nature, extent, and quality of investment management services provided by the subadvisor to the fund under the agreement. As a part of this review the board evaluated the subadvisor's investment performance and capabilities, as well as its compliance policies, procedures, and regulatory experience. The Directors noted that the management fees paid to the subadvisor under the subadvisory agreement were subject to arm's length negotiation between the advisor and the subadvisor and are paid by the advisor out of its unified fee. - ------ 27 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 distribution and service 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. - ------ 28 Additional Information RETIREMENT ACCOUNT INFORMATION As required by law, any distributions you receive from an IRA or certain 403(b), 457 and qualified plans [those not eligible for rollover to an IRA or to another qualified plan] are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld. If you don't want us to withhold on this amount, you must notify us to not withhold the federal income tax. Even if you plan to roll over the amount you withdraw to another tax-deferred account, the withholding rate still applies to the withdrawn amount unless we have received notice not to withhold federal income tax prior to the withdrawal. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election. Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don't have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules. PROXY VOTING GUIDELINES American Century Investment Management, Inc., the fund's investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century's website at americancentury.com and on the Securities and Exchange Commission's website 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) - ------ 29 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 website 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 website at americancentury.com and, upon request, by calling 1-800-345-2021. - ------ 30 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 DOW JONES WILSHIRE 5000 INDEX measures the performance of all U.S. headquartered equity securities with readily available price data. 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 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. - ------ 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. 0611 SH-SAN-51662N American Century Investment Services, Inc., Distributor (c)2006 American Century Proprietary Holdings, Inc. All rights reserved.
[front cover] AMERICAN CENTURY INVESTMENTS Semiannual Report September 30, 2006 [insert photo of autumn trees] NT Large Company Value Fund NT Mid Cap Value Fund Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] /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. We are pleased to provide you with the semiannual report for the American Century NT Large Company and NT Mid Cap Value funds from their inception May 12, 2006 through September 30, 2006. We hope you find this information helpful in monitoring your investment. Another useful resource we offer is our website, americancentury.com, where we post quarterly portfolio commentaries, the views of senior investment officers and analysts, and other communications about investments, portfolio strategy, personal finance, and the markets. In its most recent rankings, Dalbar -- which issues customer satisfaction ratings and rankings based on website functionality -- ranked americancentury.com fourth out of the sites provided by the top 25 fund companies that it believes lead the industry in web-based technology. Our website earned an "Excellent" rating, Dalbar's highest designation. For most of 2006, our website has linked visitors to information explaining our strategic collaboration with Lance Armstrong and the Lance Armstrong Foundation (LAF). This 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. To learn more about the collaboration and the LAF, please visit americancentury.com or www.lanceface.com on the Web and click on the links to related sites. With the approach of year end and the 2006 tax season, you can also find out more about December fund distributions and tax information via a link from our website. We've posted December distribution estimates for over 50 funds, answers to frequent distribution questions, and online descriptions of all of the tax information we provide to investors. If you haven't visited americancentury.com yet, we encourage you to do so...it's there to serve you. And so are we. As always, we deeply appreciate your commitment to American Century Investments. Table of Contents Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Total Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 NT LARGE COMPANY VALUE Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Top Five Industries . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . . 5 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 6 NT MID CAP VALUE Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Top Five Industries . . . . . . . . . . . . . . . . . . . . . . . . . .10 Types of Investments in Portfolio . . . . . . . . . . . . . . . . . . .10 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . .11 Shareholder Fee Examples. . . . . . . . . . . . . . . . . . . . . . . . . .14 FINANCIAL STATEMENTS Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . . . .16 Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . .17 Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . .18 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . .19 Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . .23 OTHER INFORMATION Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . .25 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 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. Market Perspective [photo of Chief Investment Officer] BY PHIL DAVIDSON, CHIEF INVESTMENT OFFICER, U.S. VALUE EQUITY MODEST RALLY FOR STOCKS Cooling energy prices and a pause in Federal Reserve interest rate hikes enabled the major U.S. stock indices to post positive returns from the May 12, 2006, inception date for American Century's NT (No Tobacco) funds to September 30, 2006. In fact, during the final week of September, the Dow Jones Industrial Average briefly surpassed its all-time closing high, only to fall back. As a result of this late summer rally, the Dow Industrials, the S&P 500 Index, and the Nasdaq Composite all overcame May losses and a sluggish June to post gains. PLAYING DEFENSE After enduring a difficult spring, many stock investors played defense during the summer. Seeking companies with more predictable earnings and dividend payouts, they shifted money into utilities and telecommunication service providers, as well as retailers of everyday consumer products. Meanwhile, falling oil prices drove money out of energy stocks, and, with the economy slowing, investors were lukewarm to information technology businesses and cyclical groups like industrials and materials. SIZE AND QUALITY MATTERED Within the value realm, large companies had the highest returns for the reporting period, as evidenced by the Russell 1000 Value Index's 5.37% gain. At the other end of the spectrum, the Russell 2000 Value Index, a measure of small-cap companies, was up 1.68% for the period. Medium-sized value companies performed in between as the Russell Midcap Value Index gained 2.88%. On the whole, value shares performed better than growth stocks across the capitalization spectrum. In addition to size, quality mattered. Merrill Lynch data indicated that a multi-year rally in lower-quality issues reversed course as companies rated B+ or higher by Standard & Poor's significantly outperformed lower-rated businesses, particularly during the third quarter. Historically, market cycles led by sound companies with strong balance sheets have tended to elevate returns of American Century's value funds, which generally seek higher-quality stocks. While value shares paced the market, few clear value themes emerged. That put the onus on stock-picking ability -- finding attractive value investments, one by one. As "bottom-up" value investors who rely on a disciplined, repeatable process, we're confident that this situation plays to our strength. - -------------------------------------------------------------------------------- TOTAL RETURNS FROM MAY 12, 2006 (FUND INCEPTION) TO SEPTEMBER 30, 2006* - -------------------------------------------------------------------------------- Dow Jones Industrial Average 2.62% - -------------------------------------------------------------------------------- S&P 500 Index 4.20% - -------------------------------------------------------------------------------- Nasdaq Composite 0.65% - -------------------------------------------------------------------------------- *Total returns for periods less than one year are not annualized. - ------ 2 NT Large Company Value - Performance - -------------------------------------------------------------------------------- TOTAL RETURNS AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- SINCE INCEPTION(1) INCEPTION DATE - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS 5.67% 5/12/06 - -------------------------------------------------------------------------------- RUSSELL 1000 VALUE INDEX(2) 5.37% -- - -------------------------------------------------------------------------------- S&P 500 INDEX(2) 4.20% -- - -------------------------------------------------------------------------------- (1) Total returns for periods less than one year are not annualized. (2) 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. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. - ------ 3 NT Large Company Value - Portfolio Commentary PORTFOLIO MANAGERS: MARK MALLON, CHUCK RITTER, AND BRENDAN HEALY PERFORMANCE SUMMARY NT Large Company Value (NTLCV) gained 5.67%* from its inception May 12, 2006, through September 30, 2006, outpacing the 5.37% advance of its benchmark, the Russell 1000 Value Index. Effective security selection helped the fund outperform the benchmark. The broader market, as measured by the S&P 500 Index, returned 4.20%. NTLCV is one of nine new NT tracker funds available exclusively in LIVESTRONG(tm) Portfolios from American Century Investments. NT is an acronym for "No Tobacco." American Century Investments introduced LIVESTRONG Portfolios on May 12, 2006, as part of a strategic collaboration with Lance Armstrong and the Lance Armstrong Foundation (LAF)**. INVESTORS GRAVITATED TOWARD OUR TYPE OF STOCK The reporting period started slowly for stocks but finished strong. Uncertainty about inflation, interest rates, and the economy persisted in May and June, dropping the S&P 500 to its 2006-to-date closing low on June 13. However, oil prices eased, inflation fears abated, and the Federal Reserve stopped raising short-term interest rates, triggering a late-summer stock rally. The market rediscovered the kinds of companies we find appealing. Amid mixed economic signals, investors gravitated toward larger companies with reliable earnings and a history of dividends--exactly what we have been finding attractive. FINANCIALS: THE TOP CONTRIBUTOR NTLCV's stake in the financials sector, its largest sector position, made the most significant contribution to total return and performance versus the Russell 1000 Value Index. Diversified financial services firms were the strongest performers, and Bank of America finished among the top-contributing stocks. In mid July, the company reported record second-quarter earnings driven by records for checking account sales and investment-banking income. Capital markets giant Morgan Stanley also fared well. Furthermore, judicious allocation combined with effective selection made the financials sector a top overall contributor against the benchmark. - -------------------------------------------------------------------------------- TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF NET ASSETS AS OF 9/30/06 - -------------------------------------------------------------------------------- Citigroup Inc. 4.6% - -------------------------------------------------------------------------------- Exxon Mobil Corp. 4.5% - -------------------------------------------------------------------------------- Standard and Poor's 500 Depositary Receipt 3.6% - -------------------------------------------------------------------------------- Bank of America Corp. 3.4% - -------------------------------------------------------------------------------- Freddie Mac 2.9% - -------------------------------------------------------------------------------- Chevron Corp. 2.9% - -------------------------------------------------------------------------------- Royal Dutch Shell plc ADR 2.6% - -------------------------------------------------------------------------------- J.P. Morgan Chase & Co. 2.4% - -------------------------------------------------------------------------------- Wells Fargo & Co. 2.2% - -------------------------------------------------------------------------------- Pfizer Inc. 2.0% - -------------------------------------------------------------------------------- * Total returns for periods less than one year are not annualized. ** American Century Investment Services, Inc., has entered into an agreement with the Lance Armstrong Foundation for rights to use the LIVESTRONG name. LIVESTRONG is a trademark of the Lance Armstrong Foundation. For more information about the foundation, visit www.livestrong.org. (continued) - ------ 4 NT Large Company Value - Portfolio Commentary HEALTH CARE, TELECOM ADD VALUE Our stake in the health care sector performed well, aided by superior security selection. Our patience was rewarded when long-time holdings in the pharmaceutical industry, some of which have struggled in the past, became solid performers. Industry leader Pfizer paced gains. Despite the challenges of generic competition and patent expirations, the company's stock rebounded nicely from its July lows on robust earnings reports driven by strength in key drugs such as Lipitor, the largest-selling medicine in the world. Holdings in the telecommunications services sector represented additional sources of strength, particularly among diversified telecom firms. AT&T was one noteworthy name. Midway through the period, the company announced strong second-quarter earnings driven by success from the merger of AT&T and SBC Communications and increased contributions from Cingular Wireless. The share price jumped sharply and climbed for the remainder of the period, finishing as the portfolio's top-contributing stock. MINOR SETBACKS On the downside, the industrials sector represented the largest absolute shortfall during the quarter, though it detracted only modestly. Stock selection worked against us in this area, particularly in the machinery industry. Exposure to Ingersoll-Rand -- present in the portfolio but not the bench-mark -- dampened performance. This company saw its stock decline following an analyst's downgrade based on lowered expectations for profit growth in the months ahead. PORTFOLIO OBJECTIVES NTLCV seeks long-term capital appreciation, with income as a secondary objective. We seek to fulfill the fund's investment objectives by looking for large, well-established, fundamentally sound businesses, where, because of transitory issues, the stocks are selling at prices we believe are below fair market value. We attempt to purchase these stocks and hold them until the price has reached a level we believe more accurately reflects fair value. Under normal market conditions, the fund will have at least 80% of its assets in stocks of large-cap companies comprising the Russell 1000 Index. - -------------------------------------------------------------------------------- TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF NET ASSETS AS OF 9/30/06 - -------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 12.5% - -------------------------------------------------------------------------------- Diversified Financial Services 10.5% - -------------------------------------------------------------------------------- Pharmaceuticals 7.0% - -------------------------------------------------------------------------------- Commercial Banks 6.4% - -------------------------------------------------------------------------------- Insurance 5.6% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF NET ASSETS AS OF 9/30/06 - -------------------------------------------------------------------------------- Common Stocks 95.0% - -------------------------------------------------------------------------------- Temporary Cash Investments 5.3% - -------------------------------------------------------------------------------- Other Assets and Liabilities (0.3)% - -------------------------------------------------------------------------------- - ------ 5 NT Large Company Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS - 95.0% AEROSPACE & DEFENSE - 0.8% - -------------------------------------------------------------------------------- 7,300 Northrop Grumman Corp. $ 496,911 - -------------------------------------------------------------------------------- AUTO COMPONENTS - 0.2% - -------------------------------------------------------------------------------- 5,200 Lear Corporation 107,640 - -------------------------------------------------------------------------------- BEVERAGES - 1.8% - -------------------------------------------------------------------------------- 13,700 Coca-Cola Company (The) 612,116 - -------------------------------------------------------------------------------- 12,400 Pepsi Bottling Group Inc. 440,200 - -------------------------------------------------------------------------------- 1,052,316 - -------------------------------------------------------------------------------- CAPITAL MARKETS - 3.9% - -------------------------------------------------------------------------------- 15,400 Bank of New York Co., Inc. (The) 543,004 - -------------------------------------------------------------------------------- 11,100 Merrill Lynch & Co., Inc. 868,242 - -------------------------------------------------------------------------------- 12,600 Morgan Stanley 918,666 - -------------------------------------------------------------------------------- 2,329,912 - -------------------------------------------------------------------------------- CHEMICALS - 2.0% - -------------------------------------------------------------------------------- 12,300 du Pont (E.I.) de Nemours & Co. 526,932 - -------------------------------------------------------------------------------- 10,000 PPG Industries, Inc. 670,800 - -------------------------------------------------------------------------------- 1,197,732 - -------------------------------------------------------------------------------- COMMERCIAL BANKS - 6.4% - -------------------------------------------------------------------------------- 8,700 National City Corp. 318,420 - -------------------------------------------------------------------------------- 5,600 PNC Financial Services Group 405,664 - -------------------------------------------------------------------------------- 24,500 U.S. Bancorp 813,890 - -------------------------------------------------------------------------------- 17,400 Wachovia Corp. 970,920 - -------------------------------------------------------------------------------- 35,300 Wells Fargo & Co. 1,277,154 - -------------------------------------------------------------------------------- 3,786,048 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES - 1.1% - -------------------------------------------------------------------------------- 9,600 R.R. Donnelley & Sons Company 316,416 - -------------------------------------------------------------------------------- 9,000 Waste Management, Inc. 330,120 - -------------------------------------------------------------------------------- 646,536 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS - 1.4% - -------------------------------------------------------------------------------- 22,400 Hewlett-Packard Co. 821,856 - -------------------------------------------------------------------------------- DIVERSIFIED - 3.6% - -------------------------------------------------------------------------------- 16,100 Standard and Poor's 500 Depositary Receipt 2,149,833 - -------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES - 0.4% - -------------------------------------------------------------------------------- 10,800 H & R Block, Inc. 234,792 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES - 10.5% - -------------------------------------------------------------------------------- 37,700 Bank of America Corp. 2,019,589 - -------------------------------------------------------------------------------- 54,700 Citigroup Inc. 2,716,949 - -------------------------------------------------------------------------------- 30,600 J.P. Morgan Chase & Co. 1,436,976 - -------------------------------------------------------------------------------- 6,173,514 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 4.5% - -------------------------------------------------------------------------------- 34,100 AT&T Inc. 1,110,296 - -------------------------------------------------------------------------------- 17,400 BellSouth Corp. 743,850 - -------------------------------------------------------------------------------- 22,100 Verizon Communications Inc. 820,573 - -------------------------------------------------------------------------------- 2,674,719 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- ELECTRIC UTILITIES - 2.6% - -------------------------------------------------------------------------------- 13,900 Exelon Corporation $ 841,506 - -------------------------------------------------------------------------------- 20,400 PPL Corporation 671,160 - -------------------------------------------------------------------------------- 1,512,666 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING - 2.0% - -------------------------------------------------------------------------------- 26,600 Kroger Co. (The) 615,524 - -------------------------------------------------------------------------------- 11,700 Wal-Mart Stores, Inc. 577,044 - -------------------------------------------------------------------------------- 1,192,568 - -------------------------------------------------------------------------------- FOOD PRODUCTS - 1.5% - -------------------------------------------------------------------------------- 16,300 Sara Lee Corp. 261,941 - -------------------------------------------------------------------------------- 26,600 Unilever N.V. New York Shares 652,764 - -------------------------------------------------------------------------------- 914,705 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES - 0.2% - -------------------------------------------------------------------------------- 2,600 HCA Inc. 129,714 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 1.2% - -------------------------------------------------------------------------------- 18,300 McDonald's Corporation 715,896 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES - 0.7% - -------------------------------------------------------------------------------- 13,800 Newell Rubbermaid Inc. 390,816 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES - 2.5% - -------------------------------------------------------------------------------- 22,800 General Electric Co. 804,840 - -------------------------------------------------------------------------------- 24,500 Tyco International Ltd. 685,755 - -------------------------------------------------------------------------------- 1,490,595 - -------------------------------------------------------------------------------- INSURANCE - 5.6% - -------------------------------------------------------------------------------- 13,400 Allstate Corp. 840,582 - -------------------------------------------------------------------------------- 15,000 American International Group, Inc. 993,900 - -------------------------------------------------------------------------------- 8,000 Hartford Financial Services Group Inc. (The) 694,000 - -------------------------------------------------------------------------------- 11,800 Marsh & McLennan Companies, Inc. 332,170 - -------------------------------------------------------------------------------- 6,600 Torchmark Corp. 416,526 - -------------------------------------------------------------------------------- 3,277,178 - -------------------------------------------------------------------------------- IT SERVICES - 1.8% - -------------------------------------------------------------------------------- 7,000 Fiserv, Inc.(1) 329,630 - -------------------------------------------------------------------------------- 8,900 International Business Machines Corp. 729,266 - -------------------------------------------------------------------------------- 1,058,896 - -------------------------------------------------------------------------------- MACHINERY - 2.8% - -------------------------------------------------------------------------------- 4,700 Deere & Co. 394,377 - -------------------------------------------------------------------------------- 8,400 Dover Corp. 398,496 - -------------------------------------------------------------------------------- 12,300 Ingersoll-Rand Company Cl A 467,154 - -------------------------------------------------------------------------------- 4,900 Parker-Hannifin Corp. 380,877 - -------------------------------------------------------------------------------- 1,640,904 - -------------------------------------------------------------------------------- MEDIA - 3.5% - -------------------------------------------------------------------------------- 12,500 Gannett Co., Inc. 710,375 - -------------------------------------------------------------------------------- 56,800 Time Warner Inc. 1,035,464 - -------------------------------------------------------------------------------- 9,400 Viacom Inc. Cl B 349,492 - -------------------------------------------------------------------------------- 2,095,331 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 6 NT Large Company Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- METALS & MINING - 0.4% - -------------------------------------------------------------------------------- 4,500 Nucor Corp. $ 222,705 - -------------------------------------------------------------------------------- MULTI-UTILITIES - 0.5% - -------------------------------------------------------------------------------- 13,700 NiSource Inc. 297,838 - -------------------------------------------------------------------------------- MULTILINE RETAIL - 0.6% - -------------------------------------------------------------------------------- 25,300 Dollar General Corp. 344,839 - -------------------------------------------------------------------------------- OFFICE ELECTRONICS - 0.7% - -------------------------------------------------------------------------------- 25,200 Xerox Corp.(1) 392,112 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS - 12.5% - -------------------------------------------------------------------------------- 4,100 Anadarko Petroleum Corp. 179,703 - -------------------------------------------------------------------------------- 26,100 Chevron Corp. 1,692,846 - -------------------------------------------------------------------------------- 18,000 ConocoPhillips 1,071,540 - -------------------------------------------------------------------------------- 2,900 Devon Energy Corporation 183,135 - -------------------------------------------------------------------------------- 40,000 Exxon Mobil Corp. 2,684,000 - -------------------------------------------------------------------------------- 23,600 Royal Dutch Shell plc ADR 1,559,960 - -------------------------------------------------------------------------------- 7,371,184 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS - 1.1% - -------------------------------------------------------------------------------- 11,400 Weyerhaeuser Co. 701,442 - -------------------------------------------------------------------------------- PHARMACEUTICALS - 7.0% - -------------------------------------------------------------------------------- 17,200 Abbott Laboratories 835,232 - -------------------------------------------------------------------------------- 13,200 Johnson & Johnson 857,208 - -------------------------------------------------------------------------------- 9,700 Merck & Co., Inc. 406,430 - -------------------------------------------------------------------------------- 42,200 Pfizer Inc. 1,196,792 - -------------------------------------------------------------------------------- 16,200 Wyeth 823,608 - -------------------------------------------------------------------------------- 4,119,270 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.8% - -------------------------------------------------------------------------------- 21,700 Intel Corp. 446,369 - -------------------------------------------------------------------------------- SOFTWARE - 2.3% - -------------------------------------------------------------------------------- 36,000 Microsoft Corporation 983,880 - -------------------------------------------------------------------------------- 21,500 Oracle Corp.(1) 381,410 - -------------------------------------------------------------------------------- 1,365,290 - -------------------------------------------------------------------------------- SPECIALTY RETAIL - 1.2% - -------------------------------------------------------------------------------- 18,300 Gap, Inc. (The) 346,785 - -------------------------------------------------------------------------------- 10,300 Home Depot, Inc. (The) 373,581 - -------------------------------------------------------------------------------- 720,366 - -------------------------------------------------------------------------------- Shares/Principal Amount Value - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS - 1.4% - -------------------------------------------------------------------------------- 10,900 Liz Claiborne, Inc. $ 430,659 - -------------------------------------------------------------------------------- 5,300 VF Corp. 386,635 - -------------------------------------------------------------------------------- 817,294 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE - 4.7% - -------------------------------------------------------------------------------- 26,000 Freddie Mac 1,724,580 - -------------------------------------------------------------------------------- 4,900 MGIC Investment Corp. 293,853 - -------------------------------------------------------------------------------- 16,900 Washington Mutual, Inc. 734,643 - -------------------------------------------------------------------------------- 2,753,076 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES - 0.8% - -------------------------------------------------------------------------------- 28,200 Sprint Nextel Corp. 483,630 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $53,395,375) 56,126,493 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS - 5.3% $3,100,000 FHLB Discount Notes, 4.75%, 10/2/06(2) (Cost $3,099,591) 3,100,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 100.3% (Cost $56,494,966) 59,226,493 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES - (0.3)% (195,816) - -------------------------------------------------------------------------------- TOTAL NET ASSETS - 100.0% $ 59,030,677 ================================================================================ NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt FHLB = Federal Home Loan Bank (1) Non-income producing. (2) The rate indicated is the yield to maturity at purchase. See Notes to Financial Statements. - ------ 7 NT Mid Cap Value - Performance - -------------------------------------------------------------------------------- TOTAL RETURNS AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- SINCE INCEPTION(1) INCEPTION DATE - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS 2.97% 5/12/06 - -------------------------------------------------------------------------------- RUSSELL MIDCAP VALUE INDEX(2) 2.88% -- - -------------------------------------------------------------------------------- (1) Total returns for periods less than one year are not annualized. (2) 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. 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. - ------ 8 NT Mid Cap Value - Portfolio Commentary PORTFOLIO MANAGERS: SCOTT MOORE, MICHAEL LISS, AND PHIL DAVIDSON PERFORMANCE SUMMARY NT Mid Cap Value gained 2.97%* from its inception on May 12, 2006, through September 30, 2006, outperforming its benchmark, the Russell Midcap Value Index, which was up 2.88%. The median return for Morningstar's Mid Cap Value category was -0.76%. This portfolio is one of nine new NT tracker funds available exclusively in LIVESTRONG(tm) Portfolios from American Century Investments. NT is an acronym for "No Tobacco." American Century Investments introduced LIVESTRONG Portfolios on May 12, 2006, as part of a strategic collaboration with Lance Armstrong and the Lance Armstrong Foundation (LAF)**. UTILITIES LED PORTFOLIO Investments in utilities represented the portfolio's largest source of performance. Our holdings were led by multi-utility XCEL Energy Inc., an electricity and natural gas energy company that operates in eight western and Midwestern states. XCEL posted strong second-quarter results, enhanced by rate increases and sales growth. We were also rewarded for owning Northeast Utilities, which provides electricity and natural gas to customers in Connecticut, Massachusetts and New Hampshire. Northeast is in the midst of a large upgrade of transmission plant and equipment, which should increase its earnings power. CONSUMER STAPLES, FINANCIALS ADDED VALUE Investments in providers of everyday consumer products provided another boost for NT Mid Cap Value. Our top-contributing securities included Kimberly-Clark Corp. and H.J. Heinz Co. Kimberly-Clark, one of the world's largest makers of personal-care paper products, benefited from price increases, cost structure rationalization and a stabilization of key commodity prices. Heinz's shares were driven higher by the shareholder activist activities of investor Nelson Peltz. Peltz's push to gain several seats on the food company's board of directors forced management to respond with a plan to cut costs and invest behind the company's portfolio of brands. In the beverage realm, Coca-Cola Enterprises Inc., the world's largest bottler of Coca-Cola beverages, added to our results, aided by a rollout of new products to - -------------------------------------------------------------------------------- TOP TEN HOLDINGS AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF NET ASSETS AS OF 9/30/06 - -------------------------------------------------------------------------------- Equitable Resources Inc. 3.8% - -------------------------------------------------------------------------------- Kimberly-Clark Corp. 3.3% - -------------------------------------------------------------------------------- Beckman Coulter, Inc. 2.6% - -------------------------------------------------------------------------------- SunTrust Banks, Inc. 2.4% - -------------------------------------------------------------------------------- Symmetry Medical Inc. 2.3% - -------------------------------------------------------------------------------- H.J. Heinz Co. 2.3% - -------------------------------------------------------------------------------- Fifth Third Bancorp 2.2% - -------------------------------------------------------------------------------- HCA Inc. 2.1% - -------------------------------------------------------------------------------- Dollar General Corp. 2.0% - -------------------------------------------------------------------------------- AptarGroup, Inc. 2.0% - -------------------------------------------------------------------------------- * Total returns for periods less than one year are not annualized. ** American Century Investment Services, Inc., has entered into an agreement with the Lance Armstrong Foundation for rights to use the LIVESTRONG name. LIVESTRONG is a trademark of the Lance Armstrong Foundation. For more information about the foundation, visit www.livestrong.org. (continued) - ------ 9 NT Mid Cap Value - Portfolio Commentary stimulate sales during the peak summer selling season. In financials, we benefited from owning Horace Mann Educators Corp., a full-line insurance company that concentrates on educators and their families. The company posted strong second-quarter earnings on increased property and casualty underwriting. Freddie Mac was another contributor. The mortgage industry stock rebounded after being beset by a delay in reporting its 2005 results and the prospect of increased regulation of government-sponsored enterprises. CONSUMER DISCRETIONARY STOCKS DETRACTED Consumer discretionary stocks detracted from our results. For example, in retailing, discounter Dollar General Corp. found its profits squeezed by markdowns, higher shrink (loss from theft) and gasoline prices that both raised transportation costs and slowed spending by consumers. We continue to hold the position. Our position in Valassis Communications Inc. also performed below expectations. Valassis is a marketing services company that produces advertising inserts for newspapers. In July, Valassis sought to acquire ADVO Inc., a major direct mail services company. After reviewing the terms of the transaction, it was our opinion that the acquisition would have a dilutive effect on Valassis' shares. We eliminated the holding. PORTFOLIO OBJECTIVES NT Mid Cap Value seeks long-term capital growth with potential for income. We attempt to fulfill the portfolio's objectives by looking for medium-sized, fundamentally sound businesses whose shares appear to be selling below fair market value. - -------------------------------------------------------------------------------- TOP FIVE INDUSTRIES AS OF SEPTEMBER 30, 2006 - -------------------------------------------------------------------------------- % OF NET ASSETS AS OF 9/30/06 - -------------------------------------------------------------------------------- Food Products 6.5% - -------------------------------------------------------------------------------- Commercial Banks 6.3% - -------------------------------------------------------------------------------- Chemicals 5.9% - -------------------------------------------------------------------------------- Health Care Equipment & Supplies 5.9% - -------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 5.3% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- % OF NET ASSETS AS OF 9/30/06 - -------------------------------------------------------------------------------- Common Stocks 94.5% - -------------------------------------------------------------------------------- Temporary Cash Investments 5.4% - -------------------------------------------------------------------------------- Other Assets and Liabilities 0.1% - -------------------------------------------------------------------------------- - ------ 10 NT Mid Cap Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS - 94.5% AEROSPACE & DEFENSE - 1.2% - -------------------------------------------------------------------------------- 5,468 Honeywell International Inc. $ 223,641 - ------------------------------------------------------------------------------ 1,442 Northrop Grumman Corp. 98,157 - ------------------------------------------------------------------------------ 321,798 - ------------------------------------------------------------------------------ AUTOMOBILES - 0.2% - -------------------------------------------------------------------------------- 1,357 Winnebago Industries 42,583 - -------------------------------------------------------------------------------- BEVERAGES - 2.4% - -------------------------------------------------------------------------------- 6,504 Anheuser-Busch Companies, Inc. 309,005 - -------------------------------------------------------------------------------- 15,563 Coca-Cola Enterprises Inc. 324,177 - -------------------------------------------------------------------------------- 633,182 - -------------------------------------------------------------------------------- BUILDING PRODUCTS - 0.9% - -------------------------------------------------------------------------------- 8,756 Masco Corp. 240,090 - -------------------------------------------------------------------------------- CAPITAL MARKETS - 0.1% - -------------------------------------------------------------------------------- 499 Nuveen Investments Inc. Cl A 25,564 - -------------------------------------------------------------------------------- CHEMICALS - 5.9% - -------------------------------------------------------------------------------- 1,658 Air Products & Chemicals, Inc. 110,041 - -------------------------------------------------------------------------------- 5,300 du Pont (E.I.) de Nemours & Co. 227,052 - -------------------------------------------------------------------------------- 2,450 Ferro Corp. 43,561 - -------------------------------------------------------------------------------- 12,242 International Flavors & Fragrances Inc. 484,049 - -------------------------------------------------------------------------------- 9,070 Minerals Technologies Inc. 484,339 - -------------------------------------------------------------------------------- 5,260 Nalco Holding Co.(1) 97,415 - -------------------------------------------------------------------------------- 6,290 Olin Corp. 96,614 - -------------------------------------------------------------------------------- 1,543,071 - -------------------------------------------------------------------------------- COMMERCIAL BANKS - 6.3% - -------------------------------------------------------------------------------- 5,152 BB&T Corporation 225,555 - -------------------------------------------------------------------------------- 15,194 Fifth Third Bancorp 578,588 - -------------------------------------------------------------------------------- 3,776 South Financial Group Inc. (The) 98,289 - -------------------------------------------------------------------------------- 8,214 SunTrust Banks, Inc. 634,777 - -------------------------------------------------------------------------------- 1,223 Zions Bancorporation 97,608 - -------------------------------------------------------------------------------- 1,634,817 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES - 3.8% - -------------------------------------------------------------------------------- 13,099 ARAMARK Corp. Cl B 430,433 - -------------------------------------------------------------------------------- 4,507 Pitney Bowes, Inc. 199,976 - -------------------------------------------------------------------------------- 8,862 Republic Services, Inc. Cl A 356,341 - -------------------------------------------------------------------------------- 986,750 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS - 0.5% - -------------------------------------------------------------------------------- 3,243 Diebold, Inc. 141,168 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING - 2.9% - -------------------------------------------------------------------------------- 10,121 AptarGroup, Inc. 514,956 - -------------------------------------------------------------------------------- 6,894 Bemis Co., Inc. 226,537 - -------------------------------------------------------------------------------- 741,493 - -------------------------------------------------------------------------------- DISTRIBUTORS - 1.0% - -------------------------------------------------------------------------------- 5,725 Genuine Parts Company 246,919 - -------------------------------------------------------------------------------- DIVERSIFIED - 1.8% - -------------------------------------------------------------------------------- 6,347 iShares S&P MidCap 400 Index Fund 478,120 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 2.1% - -------------------------------------------------------------------------------- 6,620 Commonwealth Telephone Enterprises, Inc. $ 272,943 - -------------------------------------------------------------------------------- 14,239 Iowa Telecommunications Services Inc. 281,789 - -------------------------------------------------------------------------------- 554,732 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES - 1.2% - -------------------------------------------------------------------------------- 2,047 Empire District Electric Co. 45,812 - -------------------------------------------------------------------------------- 7,319 Northeast Utilities 170,313 - -------------------------------------------------------------------------------- 4,053 Westar Energy Inc. 95,286 - -------------------------------------------------------------------------------- 311,411 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 1.9% - -------------------------------------------------------------------------------- 7,061 Hubbell Inc. Cl A 314,920 - -------------------------------------------------------------------------------- 3,562 Hubbell Inc. Cl B 170,620 - -------------------------------------------------------------------------------- 485,540 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.7% - -------------------------------------------------------------------------------- 9,953 CPI International Inc.(1) 131,081 - -------------------------------------------------------------------------------- 4,473 Vishay Intertechnology, Inc.(1) 62,801 - -------------------------------------------------------------------------------- 193,882 - -------------------------------------------------------------------------------- FOOD PRODUCTS - 6.5% - -------------------------------------------------------------------------------- 8,102 ConAgra Foods, Inc. 198,337 - -------------------------------------------------------------------------------- 26,977 Diamond Foods Inc. 386,041 - -------------------------------------------------------------------------------- 4,487 General Mills, Inc. 253,964 - -------------------------------------------------------------------------------- 13,950 H.J. Heinz Co. 584,924 - -------------------------------------------------------------------------------- 11,249 Unilever N.V. New York Shares 276,050 - -------------------------------------------------------------------------------- 1,699,316 - -------------------------------------------------------------------------------- GAS UTILITIES - 1.9% - -------------------------------------------------------------------------------- 2,704 AGL Resources Inc. 98,696 - -------------------------------------------------------------------------------- 13,025 WGL Holdings Inc. 408,204 - -------------------------------------------------------------------------------- 506,900 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES - 5.9% - -------------------------------------------------------------------------------- 11,665 Beckman Coulter, Inc. 671,437 - -------------------------------------------------------------------------------- 8,561 National Dentex Corp.(1) 168,224 - -------------------------------------------------------------------------------- 4,058 Steris Corp. 97,635 - -------------------------------------------------------------------------------- 38,764 Symmetry Medical Inc.(1) 584,949 - -------------------------------------------------------------------------------- 1,522,245 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES - 2.9% - -------------------------------------------------------------------------------- 6,425 Apria Healthcare Group Inc.(1) 126,830 - -------------------------------------------------------------------------------- 10,742 HCA Inc. 535,917 - -------------------------------------------------------------------------------- 1,406 Universal Health Services, Inc. Cl B 84,262 - -------------------------------------------------------------------------------- 747,009 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 4.6% - -------------------------------------------------------------------------------- 9,332 International Speedway Corp. 465,107 - -------------------------------------------------------------------------------- 9,947 OSI Restaurant Partners, Inc. 315,419 - -------------------------------------------------------------------------------- 11,164 Speedway Motorsports Inc. 406,481 - -------------------------------------------------------------------------------- 1,187,007 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES - 0.3% - -------------------------------------------------------------------------------- 998 Hunter Douglas N.V. ORD 69,994 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 11 NT Mid Cap Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS - 4.0% - -------------------------------------------------------------------------------- 2,691 Clorox Company $ 169,533 - -------------------------------------------------------------------------------- 13,311 Kimberly-Clark Corp. 870,007 - -------------------------------------------------------------------------------- 1,039,540 - -------------------------------------------------------------------------------- INSURANCE - 5.0% - -------------------------------------------------------------------------------- 1,502 Allstate Corp. 94,220 - -------------------------------------------------------------------------------- 1,194 Ambac Financial Group, Inc. 98,804 - -------------------------------------------------------------------------------- 3,612 Aspen Insurance Holdings Ltd. 93,298 - -------------------------------------------------------------------------------- 2,880 Chubb Corp. 149,645 - -------------------------------------------------------------------------------- 2,800 Genworth Financial Inc. Cl A 98,028 - -------------------------------------------------------------------------------- 1,709 Hartford Financial Services Group Inc. (The) 148,256 - -------------------------------------------------------------------------------- 5,068 Horace Mann Educators Corp. 97,458 - -------------------------------------------------------------------------------- 12,116 Marsh & McLennan Companies, Inc. 341,065 - -------------------------------------------------------------------------------- 12,759 RAM Holdings Ltd.(1) 165,867 - -------------------------------------------------------------------------------- 1,286,641 - -------------------------------------------------------------------------------- IT SERVICES - 1.2% - -------------------------------------------------------------------------------- 660 Accenture Ltd. Cl A 20,929 - -------------------------------------------------------------------------------- 1,942 DST Systems, Inc.(1) 119,763 - -------------------------------------------------------------------------------- 13,333 NCI Inc. Cl A(1) 159,862 - -------------------------------------------------------------------------------- 300,554 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS - 2.0% - -------------------------------------------------------------------------------- 11,200 Arctic Cat Inc. 185,920 - -------------------------------------------------------------------------------- 14,895 Hasbro, Inc. 338,861 - -------------------------------------------------------------------------------- 524,781 - -------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES - 0.3% - -------------------------------------------------------------------------------- 3,201 PRA International(1) 85,435 - -------------------------------------------------------------------------------- MACHINERY - 0.4% - -------------------------------------------------------------------------------- 2,657 Kaydon Corporation 98,362 - -------------------------------------------------------------------------------- MEDIA - 0.1% - -------------------------------------------------------------------------------- 957 Dow Jones & Co., Inc. 32,098 - -------------------------------------------------------------------------------- METALS & MINING - 1.2% - -------------------------------------------------------------------------------- 6,191 Compass Minerals International Inc. 175,267 - -------------------------------------------------------------------------------- 2,941 Newmont Mining Corporation 125,728 - -------------------------------------------------------------------------------- 300,995 - -------------------------------------------------------------------------------- MULTI-UTILITIES - 4.7% - -------------------------------------------------------------------------------- 4,695 Ameren Corp. 247,849 - -------------------------------------------------------------------------------- 3,223 Consolidated Edison, Inc. 148,903 - -------------------------------------------------------------------------------- 10,974 Puget Energy Inc. 249,439 - -------------------------------------------------------------------------------- 4,070 Wisconsin Energy Corp. 175,580 - -------------------------------------------------------------------------------- 19,204 XCEL Energy Inc. 396,562 - -------------------------------------------------------------------------------- 1,218,333 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- MULTILINE RETAIL - 2.0% - -------------------------------------------------------------------------------- 39,024 Dollar General Corp. $ 531,897 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS - 5.3% - -------------------------------------------------------------------------------- 28,130 Equitable Resources Inc. 983,988 - -------------------------------------------------------------------------------- 8,155 Murphy Oil Corp. 387,770 - -------------------------------------------------------------------------------- 1,371,758 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS - 1.5% - -------------------------------------------------------------------------------- 11,556 MeadWestvaco Corp. 306,350 - -------------------------------------------------------------------------------- 1,470 Weyerhaeuser Co. 90,449 - -------------------------------------------------------------------------------- 396,799 - -------------------------------------------------------------------------------- PHARMACEUTICALS - 1.2% - -------------------------------------------------------------------------------- 11,915 Watson Pharmaceuticals, Inc.(1) 311,816 - -------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS - 1.4% - -------------------------------------------------------------------------------- 7,200 Annaly Capital Management Inc. 94,608 - -------------------------------------------------------------------------------- 8,160 Education Realty Trust, Inc. 120,442 - -------------------------------------------------------------------------------- 3,985 Rayonier, Inc. 150,633 - -------------------------------------------------------------------------------- 365,683 - -------------------------------------------------------------------------------- ROAD & RAIL - 0.5% - -------------------------------------------------------------------------------- 7,537 Heartland Express, Inc. 118,180 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.2% - -------------------------------------------------------------------------------- 6,680 Applied Materials, Inc. 118,437 - -------------------------------------------------------------------------------- 1,922 KLA-Tencor Corp. 85,471 - -------------------------------------------------------------------------------- 8,783 Teradyne, Inc.(1) 115,584 - -------------------------------------------------------------------------------- 319,492 - -------------------------------------------------------------------------------- SOFTWARE - 0.6% - -------------------------------------------------------------------------------- 7,475 Synopsys, Inc.(1) 147,407 - -------------------------------------------------------------------------------- SPECIALTY RETAIL - 0.6% - -------------------------------------------------------------------------------- 4,993 Gap, Inc. (The) 94,617 - -------------------------------------------------------------------------------- 2,367 Lowe's Companies, Inc. 66,418 - -------------------------------------------------------------------------------- 161,035 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS - 0.4% - -------------------------------------------------------------------------------- 2,485 Liz Claiborne, Inc. 98,182 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE - 5.2% - -------------------------------------------------------------------------------- 5,557 Fannie Mae 310,692 - -------------------------------------------------------------------------------- 6,579 Freddie Mac 436,385 - -------------------------------------------------------------------------------- 7,672 MGIC Investment Corp. 460,090 - -------------------------------------------------------------------------------- 6,603 Washington Federal, Inc. 148,171 - -------------------------------------------------------------------------------- 1,355,338 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS - 0.7% - -------------------------------------------------------------------------------- 2,566 Grainger (W.W.), Inc. 171,973 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $23,839,035) 24,549,890 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 12 NT Mid Cap Value - Schedule of Investments SEPTEMBER 30, 2006 (UNAUDITED) Principal Amount Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS - 5.4% $1,400,000 FHLB Discount Notes, 4.75%, 10/2/06(2) (Cost $1,399,815) $ 1,400,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 99.9% (Cost $25,238,850) 25,949,890 - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES - 0.1% 37,034 - -------------------------------------------------------------------------------- TOTAL NET ASSETS - 100.0% $ 25,986,924 ================================================================================ FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS Contracts to Sell Settlement Date Value Unrealized Gain (Loss) - -------------------------------------------------------------------------------- 203,354 Euro for USD 10/31/06 $258,322 $407 ================================== (Value on Settlement Date $258,729) NOTES TO SCHEDULE OF INVESTMENTS FHLB = Federal Home Loan Bank ORD = Foreign Ordinary Share USD = United States Dollar (1) Non-income producing. (2) The rate indicated is the yield to maturity at purchase. See Notes to Financial Statements. - ------ 13 Shareholder Fee Examples (Unaudited) Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2006 to September 30, 2006 (except as noted). ACTUAL EXPENSES The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If you hold Investor Class shares of any American Century fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century account (i.e., not a financial intermediary or retirement plan account), American Century may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered under your Social Security number. PERSONAL ACCOUNTS include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund's share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. (continued) - ------ 14 Shareholder Fee Examples (Unaudited) Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- EXPENSES PAID BEGINNING ENDING DURING PERIOD(1) ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE 4/1/06 -- EXPENSE 4/1/06 9/30/06 9/30/06 RATIO(1) - -------------------------------------------------------------------------------- NT LARGE COMPANY VALUE -- INSTITUTIONAL CLASS SHAREHOLDER FEE EXAMPLE - -------------------------------------------------------------------------------- Actual $1,000 $1,056.70(2) $2.50(3) 0.63% - -------------------------------------------------------------------------------- Hypothetical $1,000 $1,021.91(4) $3.19(4) 0.63% - -------------------------------------------------------------------------------- NT MID CAP VALUE -- INSTITUTIONAL CLASS SHAREHOLDER FEE EXAMPLE - -------------------------------------------------------------------------------- Actual $1,000 $1,029.70(2) $3.14(3) 0.80% - -------------------------------------------------------------------------------- Hypothetical $1,000 $1,021.06(4) $4.05(4) 0.80% - -------------------------------------------------------------------------------- (1) Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. (2) Ending account value based on actual return from May 12, 2006 (fund inception) through September 30, 2006. (3) Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 141, the number of days in the period from May 12, 2006 (fund inception) through September 30, 2006, divided by 365, to reflect the period. Had the class been available for the full period, the expenses paid during the period would have been higher. (4) Ending account value and expenses paid during period assumes the class had been available throughout the entire period and are calculated using the class's annualized expense ratio listed in the table above. - ------ 15 Statement of Assets and Liabilities SEPTEMBER 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- NT LARGE NT MID COMPANY VALUE CAP VALUE - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Investment securities, at value (cost of $56,494,966 and $25,238,850, respectively) $59,226,493 $25,949,890 - -------------------------------------------------- Cash 123,037 92,208 - -------------------------------------------------- Receivable for investments sold -- 334,798 - -------------------------------------------------- Receivable for forward foreign currency exchange contracts -- 407 - -------------------------------------------------- Dividends and interest receivable 56,107 43,431 - -------------------------------------------------------------------------------- 59,405,637 26,420,734 - -------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------- Payable for investments purchased 345,567 417,317 - -------------------------------------------------- Accrued management fees 29,393 16,493 - -------------------------------------------------------------------------------- 374,960 433,810 - -------------------------------------------------------------------------------- NET ASSETS $59,030,677 $25,986,924 ================================================================================ INSTITUTIONAL CLASS CAPITAL SHARES, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Authorized 100,000,000 100,000,000 ================================================================================ Outstanding 5,620,316 2,535,997 ================================================================================ NET ASSET VALUE PER SHARE $10.50 $10.25 ================================================================================ NET ASSETS CONSIST OF: - -------------------------------------------------------------------------------- Capital (par value and paid-in surplus) $56,266,785 $25,308,608 - -------------------------------------------------- Undistributed net investment income 36,234 33,057 - -------------------------------------------------- Accumulated net realized loss on investment and foreign currency transactions (3,869) (66,185) - -------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 2,731,527 711,444 - -------------------------------------------------------------------------------- $59,030,677 $25,986,924 ================================================================================ See Notes to Financial Statements. - ------ 16 Statement of Operations PERIOD ENDED SEPTEMBER 30, 2006 (UNAUDITED)(1) - -------------------------------------------------------------------------------- NT LARGE NT MID COMPANY VALUE CAP VALUE - -------------------------------------------------------------------------------- INVESTMENT INCOME (LOSS) - -------------------------------------------------------------------------------- INCOME: - -------------------------------------------------- Dividends (net of foreign taxes withheld of $1,987 and $457, respectively) $ 447,488 $194,989 - -------------------------------------------------- Interest 50,520 16,622 - -------------------------------------------------------------------------------- 498,008 211,611 - -------------------------------------------------------------------------------- EXPENSES: - -------------------------------------------------- Management fees 122,719 68,849 - -------------------------------------------------- Directors' fees and expenses 224 100 - -------------------------------------------------- Other expenses -- 65 - -------------------------------------------------------------------------------- 122,943 69,014 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) 375,065 142,597 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - -------------------------------------------------- Net realized gain (loss) on investment and foreign currency transactions (3,869) (66,185) - -------------------------------------------------- Change in net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies 2,731,527 711,44 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) 2,727,658 645,259 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $3,102,723 $787,856 ================================================================================ (1) May 12, 2006 (fund inception) through September 30, 2006. See Notes to Financial Statements. - ------ 17 Statement of Changes in Net Assets PERIOD ENDED SEPTEMBER 30, 2006 (UNAUDITED)(1) - -------------------------------------------------------------------------------- NT LARGE NT MID INCREASE (DECREASE) IN NET ASSETS COMPANY VALUE CAP VALUE - -------------------------------------------------------------------------------- OPERATIONS - -------------------------------------------------------------------------------- Net investment income (loss) $ 375,065 $142,597 - -------------------------------------------------- Net realized gain (loss) (3,869) (66,185) - -------------------------------------------------- Change in net unrealized appreciation (depreciation) 2,731,527 711,444 - -------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 3,102,723 787,856 - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - -------------------------------------------------------------------------------- From net investment income (338,831) (109,540) - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - -------------------------------------------------------------------------------- Proceeds from shares sold 57,921,348 26,182,811 - -------------------------------------------------- Payments for shares redeemed (1,654,563) (874,203) - -------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions 56,266,785 25,308,608 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 59,030,677 25,986,924 - -------------------------------------------------------------------------------- NET ASSETS - -------------------------------------------------------------------------------- End of period $59,030,677 $25,986,924 ================================================================================ Undistributed net investment income $36,234 $33,057 ================================================================================ TRANSACTIONS IN SHARES OF THE FUNDS - -------------------------------------------------------------------------------- Sold 5,788,199 2,625,881 - -------------------------------------------------- Redeemed (167,883) (89,884) - -------------------------------------------------------------------------------- Net increase (decrease) in shares of the funds 5,620,316 2,535,997 ================================================================================ (1) May 12, 2006 (fund inception) through September 30, 2006. See Notes to Financial Statements. - ------ 18 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. NT Large Company Value Fund (NT Large Company Value) and NT Mid Cap Value Fund (NT Mid Cap 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 objective is to seek long-term capital growth. 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. NT Large Company Value invests primarily in larger companies. NT Mid Cap Value invests in mid-sized market capitalization companies. The funds are not permitted to invest in any securities issued by companies assigned the Global Industry Classification Standard for the tobacco industry. The funds incepted on May 12, 2006. The following is a summary of the funds' significant accounting policies. 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. Securities traded on foreign securities exchanges and over-the-counter markets are normally completed before the close of business on days that the New York Stock Exchange (the Exchange) is open and may also take place on days when the Exchange is not open. If an event occurs after the value of a security was established but before the net asset value per share was determined that was likely to materially change the net asset value, that security would be valued at fair value as determined in accordance with procedures adopted by the Board of Directors. 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. Certain other circumstances may cause the funds to fair value a security such as: a security has been declared in default; or trading in a security has been halted during the trading day; or there is a foreign market holiday and no trading will commence. 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 funds estimate the components of distributions received that may be considered nontaxable distributions or capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. 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. (continued) - ------ 19 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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). 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 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 strategy assets of NT Large Company Value include the assets of Large Company Value Fund, one fund in a series issued by the corporation. The annual management fee schedule for NT Large Company Value is as follows: - -------------------------------------------------------------------------------- STRATEGY ASSETS - -------------------------------------------------------------------------------- First $1 billion 0.70% - -------------------------------------------------------------------------------- Next $4 billion 0.60% - -------------------------------------------------------------------------------- Over $5 billion 0.50% - -------------------------------------------------------------------------------- (continued) - ------ 20 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) The annual management fee schedule for NT Mid Cap Value is 0.80%. The effective annual management fee for NT Large Company Value and NT Mid Cap Value for the period May 12, 2006 (fund inception) through September 30, 2006 was 0.63% and 0.80%, respectively. RELATED PARTIES -- Certain officers and directors of the corporation are also officers and/or directors, and, as a group, controlling stockholders of American Century Companies, Inc. (ACC), the parent of the corporation's investment advisor, ACIM, the distributor of the corporation, American Century Investment Services, Inc., and the corporation's transfer agent, American Century Services, LLC. The funds are wholly owned by American Century Asset Allocation Portfolios, Inc. (ACAAP). ACAAP does not invest in the funds for the purpose of exercising management or control. JPMorgan Chase Bank 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 period May 12, 2006 (fund inception) through September 30, 2006, were as follows: - -------------------------------------------------------------------------------- NT LARGE COMPANY VALUE NT MID CAP VALUE - -------------------------------------------------------------------------------- Purchases $55,964,390 $48,280,372 - -------------------------------------------------------------------------------- Proceeds from sales $2,564,820 $24,372,083 - -------------------------------------------------------------------------------- For the period May 12, 2006 (fund inception) through September 30, 2006, NT Large Company Value and NT Mid Cap Value incurred a purchase in kind of equity securities valued at $44,081,080 and $20,534,074, respectively. A purchase in kind occurs when a fund receives securities into its portfolio in lieu of cash as payment from a purchasing shareholder. 4. FEDERAL TAX INFORMATION 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 September 30, 2006, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- NT LARGE COMPANY VALUE NT MID CAP VALUE - -------------------------------------------------------------------------------- Federal tax cost of investments $56,500,361 $25,471,676 ================================================================================ Gross tax appreciation of investments $3,370,866 $935,660 - -------------------------------------------------------------------------------- Gross tax depreciation of investments (644,734) (457,446) - -------------------------------------------------------------------------------- Net tax appreciation (depreciation) of investments $2,726,132 $478,214 ================================================================================ 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. (continued) - ------ 21 Notes to Financial Statements SEPTEMBER 30, 2006 (UNAUDITED) 5. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. FIN 48 is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the date of effectiveness. The FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" (FAS 157), in September 2006, which is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands the required financial statement disclosures about fair value measurements. Management is currently evaluating the impact of adopting FIN 48 and FAS 157. - ------ 22 NT Large Company Value - Financial Highlights For a Share Outstanding Throughout the Period Indicated - -------------------------------------------------------------------------------- 2006(1) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.00 - -------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------------------------------- Net Investment Income (Loss) 0.07 - ----------------------------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.49 - -------------------------------------------------------------------------------- Total From Investment Operations 0.56 - -------------------------------------------------------------------------------- Distributions - ----------------------------------------------------------------- From Net Investment Income (0.06) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $10.50 ================================================================================ TOTAL RETURN(2) 5.67% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.63%(3) - ----------------------------------------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.90%(3) - ----------------------------------------------------------------- Portfolio Turnover Rate 5% - ----------------------------------------------------------------- Net Assets, End of Period (in thousands) $59,031 - -------------------------------------------------------------------------------- (1) May 12, 2006 (fund inception) through September 30, 2006 (unaudited). (2) 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. (3) Annualized. See Notes to Financial Statements. - ------ 23 NT Mid Cap Value - Financial Highlights For a Share Outstanding Throughout the Period Indicated - -------------------------------------------------------------------------------- 2006(1) - -------------------------------------------------------------------------------- PER-SHARE DATA - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.00 - -------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------------------------------- Net Investment Income (Loss) 0.06 - ----------------------------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.24 - -------------------------------------------------------------------------------- Total From Investment Operations 0.30 - -------------------------------------------------------------------------------- Distributions - ----------------------------------------------------------------- From Net Investment Income (0.05) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $10.25 ================================================================================ TOTAL RETURN(2) 2.97% - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------- Ratio of Operating Expenses to Average Net Assets 0.80%(3) - ----------------------------------------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.64%(3) - ----------------------------------------------------------------- Portfolio Turnover Rate 114% - ----------------------------------------------------------------- Net Assets, End of Period (in thousands) $25,987 - -------------------------------------------------------------------------------- (1) May 12, 2006 (fund inception) through September 30, 2006 (unaudited). (2) Total return assumes reinvestment of net investment income and capital are gains distributions, if any. Total returns for periods less than one year not annualized. (3) Annualized. See Notes to Financial Statements. - ------ 24 Additional Information RETIREMENT ACCOUNT INFORMATION As required by law, any distributions you receive from an IRA or certain 403(b), 457 and qualified plans [those not eligible for rollover to an IRA or to another qualified plan] are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld. If you don't want us to withhold on this amount, you must notify us to not withhold the federal income tax. Even if you plan to roll over the amount you withdraw to another tax-deferred account, the withholding rate still applies to the withdrawn amount unless we have received notice not to withhold federal income tax prior to the withdrawal. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election. Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don't have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules. PROXY VOTING GUIDELINES American Century Investment Management, Inc., the 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 website at americancentury.com and on the Securities and Exchange Commission's website 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 website 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 website at americancentury.com and, upon request, by calling 1-800-345-2021. - ------ 25 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 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) 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 MIDCAP(reg.tm) INDEX measures the performance of the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization. The RUSSELL MIDCAP(reg.tm) VALUE INDEX measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The S&P 500 INDEX is a market value-weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. - ------ 26 Notes - ------ 27 Notes - ------ 28 CONTACT US AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR SERVICES REPRESENTATIVE: 1-800-345-2021 or 816-531-5575 BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS: 1-800-345-3533 BANKS AND TRUST COMPANIES, BROKER-DEALERS, FINANCIAL 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. American Century Investment Services, Inc., Distributor (c)2006 American Century Proprietary Holdings, Inc. All rights reserved. 0611 SH-SAN-51671N
ITEM 2. CODE OF ETHICS. Not applicable for semiannual report filings. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for semiannual report filings. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable for semiannual report filings. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. The schedule of investments is included as part of the reports to stockholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. During the reporting period, there were no material changes to the procedures by which shareholders may recommend nominees to the registrant's board. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the registrant's second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Not applicable for semiannual report filings. (a)(2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are filed and attached hereto as Exhibit 99.302CERT. (a)(3) Not applicable. (b) A certification by the registrant's chief executive officer and chief financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is furnished and attached hereto as Exhibit 99.906CERT.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. By: /s/ William M. Lyons -------------------------------------- Name: William M. Lyons Title: President Date: November 28, 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 -------------------------------------- Name: William M. Lyons Title: President (principal executive officer) Date: November 28, 2006 By: /s/ Robert J. Leach -------------------------------------- Name: Robert J. Leach Title: Vice President, Treasurer, and Chief Financial Officer (principal financial officer) Date: November 28, 2006