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) CHARLES A. ETHERINGTON, 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: 09-30-2007 -------------------------------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS. [front cover] American Century Investments Semiannual Report September 30, 2007 [photo of fall] Mid Cap Value Fund Small Cap Value Fund [american century investments logo and text logo] OUR MESSAGE TO YOU To help you monitor your investment, my colleagues and I take pride in providing you with the semiannual report for the American Century® Mid Cap Value and Small Cap Value funds for the six months ended September 30, 2007. This has been an eventful and exciting period for us. We've been working diligently to secure a smooth executive leadership transition. I'm honored to be addressing you in the "Our Message" space long devoted to company founder Jim Stowers, Jr. and his son Jim Stowers III. The Stowers family remains an integral part of our heritage, leadership, and financial structure. Jim Jr. continues as co-chair of the American Century Companies, Inc. (ACC) board of directors with Richard Brown, who has been on the board since 1998 and co-chairs the Stowers Institute for Medical Research board. But times and opportunities change. As the latest step in a career transition that began when he relinquished his executive leadership and investment management responsibilities in early 2005, Jim III stepped down from the ACC board in July 2007 to focus on new business ventures. Jim III's move reflects his family's comfort with our direction and leadership, and gives the Stowers more leeway to devote time and energy to other important priorities, such as the Stowers Institute for Medical Research. Meanwhile, American Century Investments, our clients, and our employees have been my top priority since I became company president and CEO in March. We've also added the executive talents of overall chief investment officer Enrique Chang, international equity CIO Mark On, U.S. growth equity CIO Steve Lurito, and chief operating officer Barry Fink. This skilled group, combined with our existing senior management team, has already had a positive impact on the development and management of the products and services we take pride in delivering to you. /s/Jonathan Thomas Jonathan Thomas [photo of Jonathan Thomas] Jonathan Thomas PRESIDENT AMERICAN CENTURY COMPANIES, INC. [photo of James E. Stowers, Jr.] James E. Stowers, Jr. FOUNDER AND CO-CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. [photo of Richard Brown] Richard Brown CO-CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. TABLE OF CONTENTS Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . 2 U.S. Stock Index Returns . . . . . . . . . . . . . . . . . . . . . 2 MID CAP VALUE Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 5 Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Top Five Industries. . . . . . . . . . . . . . . . . . . . . . . . . 6 Types of Investments in Portfolio. . . . . . . . . . . . . . . . . . 6 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 7 SMALL CAP 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. . . . . . . . . . . . . . . . . . . . . . . 20 FINANCIAL STATEMENTS Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 22 Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 24 Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 25 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 26 Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 34 OTHER INFORMATION Proxy Voting Results. . . . . . . . . . . . . . . . . . . . . . . . . 42 Approval of Management Agreements for Mid Cap Value and Small Cap Value . . . . . . . . . . . . . . . . . . . . . . . . . 44 Share Class Information . . . . . . . . . . . . . . . . . . . . . . . 48 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 49 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 50 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 Enrique Chang, Chief Investment Officer, American Century Investments STOCKS ADVANCED IN A VOLATILE ENVIRONMENT U.S. stocks produced positive results for the six months ended September 30, 2007, overcoming a confluence of challenges that led to extraordinary market volatility. The stock market enjoyed a steady rally during the first half of the six-month period thanks to corporate earnings growth, which decelerated but continued to surpass expectations. Robust merger activity also boosted stocks as leveraged buy-outs from private equity firms put the volume of deal-making ahead of last year's record pace. After reaching all-time highs in mid-July, however, the major stock indexes declined sharply as worsening problems in the subprime mortgage market led to a credit crisis that threatened to derail the economic expansion. Tighter lending standards crimped funding for leveraged buy-outs, removing an important leg of support for the stock market, and rising energy and commodity prices sparked inflation worries despite slowing economic activity. As investors grew increasingly risk-averse, the Federal Reserve (the Fed) stepped in to provide a measure of relief and comfort. The Fed lowered its discount rate in mid-August and federal funds rate target in September--the Fed's first rate cuts since June 2003. The Fed's actions helped alleviate some of the credit and economic concerns, allowing the major stock indexes to stage a solid recovery during the final six weeks of the period. LARGE-CAP AND GROWTH OUTPERFORMED Large-cap stocks delivered the best returns (see the accompanying table), followed by mid- and small-cap issues. Growth stocks, which have trailed value issues for much of the decade, enjoyed a resurgence during the six-month period, outpacing value shares by a wide margin across all market capitalizations. Energy was the best-performing sector in the stock market during the period, benefiting from a 24% increase in the price of oil. Information technology and industrials stocks also fared well. The only two sectors of the market to decline during the period were financials and consumer discretionary. U.S. Stock Index Returns For the six months ended September 30, 2007* RUSSELL 1000 INDEX (LARGE-CAP) 7.99% Russell 1000 Growth Index 11.35% Russell 1000 Value Index 4.67% RUSSELL MIDCAP INDEX 4.89% Russell Midcap Growth Index 9.03% Russell Midcap Value Index -0.03% RUSSELL 2000 INDEX (SMALL-CAP) 1.19% Russell 2000 Growth Index 6.70% Russell 2000 Value Index -4.10% *Total returns for periods less than one year are not annualized. - ------ 2 PERFORMANCE Mid Cap Value Total Returns as of September 30, 2007 Average Annual Returns Since Inception 6 months(1) 1 year Inception Date INVESTOR CLASS 2.66% 15.59% 15.36% 3/31/04 RUSSELL MIDCAP VALUE INDEX(2) -0.03% 13.75% 15.72% -- Institutional Class 2.76% 15.73% 17.04% 8/2/04 Advisor Class 2.53% 15.30% 14.63% 1/13/05 R Class 2.48% 15.02% 12.22% 7/29/05 (1) Total returns for periods less than one year are not annualized. (2) Data provided by Lipper Inc. - A Reuters Company. ©2007 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. International investing involves special risks, such as political instability and currency fluctuations. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. - ------ 3 Mid Cap Value Growth of $10,000 Over Life of Class $10,000 investment made March 31, 2004
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One-Year Returns Over Life of Class Periods ended September 30 2004* 2005 2006 2007 Investor Class 2.80% 20.48% 15.22% 15.59% Russell Midcap Value Index 3.50% 26.13% 12.28% 13.75% *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. International investing involves special risks, such as political instability and currency fluctuations. 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 PORTFOLIO COMMENTARY Mid Cap Value Portfolio Managers: Scott Moore, Michael Liss, and Phil Davidson PERFORMANCE SUMMARY Mid Cap Value gained 2.66%* for the six months ended September 30, 2007. By comparison, the median for Morningstar's Mid Cap Value category** (whose performance, like Mid Cap Value's, reflects fund operating expenses) advanced 2.30%. The fund's benchmark, the Russell Midcap Value Index, declined -0.03%. Its returns do not include operating expenses. The portfolio's strong return was achieved in the challenging market environment described in the Market Perspective on page 2. Overall, growth stocks outperformed value across the capitalization spectrum and investors favored stocks with lower dividend yields. Against that market backdrop, Mid Cap Value benefited from strong stock selection. In addition, during the reporting period, the portfolio's small portion of international holdings also contributed to results. Over time, our disciplined investment approach has provided longer-term investors with solid performance. Since Mid Cap Value's inception on March 31, 2004, the portfolio has produced an average annualized return of 15.36% versus 15.72% for the Russell Midcap Value Index. CONSUMER STAPLES LED PORTFOLIO Our mix of companies in the consumer staples sector added to performance. Boosting results was an overweight position in several names not represented in the benchmark. Specifically, we owned Diamond Foods, which processes and distributes nuts and other snack foods. In addition to beating earnings forecasts, the company has worked towards meeting its long-term growth objectives by continuing to improve operating performance, expand sales channels, and accelerate earnings growth. Meanwhile, Kraft -- the largest branded food company in the U.S. -- added to results as its stock traded on its own fundamentals after the company's spinoff from Altria Group. Kraft has also invested in new product development, improved marketing, and is considering the divestiture of non-core businesses. ALLOCATION TO UTILITIES ADDED VALUE As a sector, utilities -- which accounted for 14.5% of the index at the end of the period-- was a neutral performer. Our stock selection generated several notable contributors, including Virginia-based Dominion Resources, which provides gas and Top Ten Holdings as of September 30, 2007 % of % of net assets net assets as of as of 9/30/07 3/31/07 Freddie Mac 3.8% 3.4% SunTrust Banks, Inc. 3.7% 1.5% iShares S&P MidCap 400 Index Fund 3.4% 3.3% Ambac Financial Group, Inc. 3.0% 1.5% MGIC Investment Corp. 3.0% 2.7% Kraft Foods Inc. Cl A 2.8% 2.1% Speedway Motorsports Inc. 2.5% 2.9% RC2 Corp. 2.1% 0.4% South Financial Group Inc. (The) 2.1% 1.0% International Speedway Corp. 2.0% 1.1% * All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. ** The median return for Morningstar's Mid Cap Value category was 14.68% for the one-year period ended September 30, 2007. ©2007 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers: (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. - ------ 5 electric services primarily in northeastern, mid-Atlantic and mid-western states. The company used proceeds from the sale of some of its exploration and production businesses to repurchase roughly 16% of its outstanding shares through a Dutch auction, in which we participated. STOCK SELECTION BOOSTED RESULTS Health care and consumer discretionary stocks enhanced our performance relative to the Russell Midcap Value Index. In health care, we owned top performers Beckman Coulter, Symmetry Medical and Watson Pharmaceuticals. In consumer discretionary, the portfolio benefited from our small allocation to the household durables segment, and specifically homebuilders -- areas that provided negative returns for the benchmark. UNDERWEIGHT POSITION IN MATERIALS DETRACTED The materials sector generated solid results for the Russell Midcap Value Index. The portfolio's underweight position, maintained because of high valuations, hindered relative returns. Our smaller-than-the-benchmark position in chemical companies was particularly costly. Materials also provided one of our top detractors, Bemis Co. Inc., a major producer of flexible packaging, much of it for the food industry. The company reported disappointing earnings and reduced its earnings guidance, citing lower demand across its end markets. FINANCIALS: A MIXED BAG Mid Cap Value's allocation to the financials sector added to results on a relative basis. The sector also provided two top detractors -- MGIC Investment Corporation and Ambac Financial. MGIC, the nation's largest private mortgage insurer, was hurt by the housing slowdown and by significant financial losses from a joint venture involved in restructuring subprime mortgages. Ambac, a leading municipal bond insurer, saw its stock decline on concern about bond insurers in general and fears about the company's exposure to subprime loans. STARTING POINT FOR NEXT REPORTING PERIOD Your management team follows a disciplined, bottom-up process, selecting companies one at a time for the portfolio. As of September 30, 2007, we continued to see opportunities in health care and consumer staples stocks, reflected by our overweight positions in these sectors, relative to the benchmark. Our fundamental analysis and valuation work contributed to our smaller relative weightings in financials, telecommunications, and energy stocks. Top Five Industries as of September 30, 2007 % of % of net assets net assets as of as of 9/30/07 3/31/07 Food Products 9.6% 8.1% Commercial Banks 9.2% 7.2% Insurance 8.9% 8.3% Thrifts & Mortgage Finance 6.8% 7.4% Commercial Services & Supplies 5.5% 3.2% Types of Investments in Portfolio % of % of net assets net assets as of as of 9/30/07 3/31/07 Common Stocks 98.3% 97.0% Temporary Cash Investments 1.8% 3.7% Other Assets and Liabilities* (0.1)% (0.7)% * Includes securities lending collateral and other assets and liabilities. - ------ 6 SCHEDULE OF INVESTMENTS Mid Cap Value SEPTEMBER 30, 2007 (UNAUDITED) Shares Value Common Stocks -- 98.3% AIRLINES -- 1.7% 467,403 Southwest Airlines Co. $ 6,917,566 ------------ AUTO COMPONENTS -- 0.8% 53,732 Autoliv, Inc. 3,210,487 ------------ AUTOMOBILES -- 1.6% 31,200 Bayerische Motoren Werke AG ORD 2,013,678 86,600 Honda Motor Co., Ltd. ORD 2,912,953 65,117 Winnebago Industries(1) 1,554,994 ------------ 6,481,625 ------------ BEVERAGES -- 1.6% 103,662 Anheuser-Busch Companies, Inc. 5,182,063 49,035 Coca-Cola Enterprises Inc. 1,187,628 ------------ 6,369,691 ------------ BUILDING PRODUCTS -- 0.8% 139,848 Masco Corp. 3,240,278 ------------ CAPITAL MARKETS -- 0.7% 24,600 Bear Stearns Companies Inc. (The) 3,021,126 ------------ CHEMICALS -- 0.6% 34,901 Minerals Technologies Inc. 2,338,367 ------------ COMMERCIAL BANKS -- 9.2% 67,000 Associated Banc-Corp. 1,985,210 69,695 BB&T Corporation 2,814,981 119,185 Marshall & Ilsley Corp. 5,216,727 370,577 South Financial Group Inc. (The) 8,426,921 199,206 SunTrust Banks, Inc. 15,073,918 39,671 United Bankshares, Inc.(1) 1,207,585 34,800 Zions Bancorporation 2,389,716 ------------ 37,115,058 ------------ COMMERCIAL SERVICES & SUPPLIES -- 5.5% 41,000 Avery Dennison Corp. 2,337,820 157,193 HNI Corp. 5,658,948 146,759 Pitney Bowes, Inc. 6,665,793 81,101 Republic Services, Inc. 2,652,814 128,244 Waste Management, Inc. 4,839,929 ------------ 22,155,304 ------------ COMMUNICATIONS EQUIPMENT -- 0.3% 62,717 Motorola, Inc. 1,162,146 ------------ Shares Value COMPUTERS & PERIPHERALS -- 1.8% 26,300 Diebold, Inc. $ 1,194,546 437,925 QLogic Corp.(2) 5,890,091 ------------ 7,084,637 ------------ CONTAINERS & PACKAGING -- 1.9% 263,636 Bemis Co., Inc. 7,674,444 ------------ DISTRIBUTORS -- 0.3% 22,894 Genuine Parts Company 1,144,700 ------------ DIVERSIFIED -- 3.4% 155,420 iShares S&P MidCap 400 Index Fund 13,684,731 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.3% 58,936 Iowa Telecommunications Services Inc.(1) 1,169,880 ------------ ELECTRIC UTILITIES -- 4.5% 120,302 IDACORP, Inc. 3,938,687 287,120 Portland General Electric Co. 7,981,936 182,900 Sierra Pacific Resources 2,877,017 143,400 Westar Energy Inc. 3,521,904 ------------ 18,319,544 ------------ ELECTRICAL EQUIPMENT -- 0.6% 45,200 Hubbell Inc. Cl B 2,581,824 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS -- 4.1% 47,301 Littelfuse, Inc.(1)(2) 1,688,173 250,900 Molex Inc. 6,756,737 183,389 Tyco Electronics Ltd. 6,497,472 134,200 Vishay Intertechnology, Inc.(2) 1,748,626 ------------ 16,691,008 ------------ FOOD PRODUCTS -- 9.6% 82,300 Campbell Soup Co. 3,045,100 191,990 ConAgra Foods, Inc. 5,016,699 267,671 Diamond Foods Inc. 5,530,083 48,422 General Mills, Inc. 2,808,960 167,075 H.J. Heinz Co. 7,718,864 70,400 Hershey Co. (The) 3,267,264 325,013 Kraft Foods Inc. Cl A 11,216,198 ------------ 38,603,168 ------------ GAS UTILITIES -- 2.0% 193,019 Southwest Gas Corp. 5,460,508 81,252 WGL Holdings Inc. 2,753,630 8,214,138 ------------ - ------ 7 Mid Cap Value Shares Value HEALTH CARE EQUIPMENT & SUPPLIES -- 3.0% 50,412 Beckman Coulter, Inc. $ 3,718,389 78,700 Covidien Ltd.(2) 3,266,050 300,088 Symmetry Medical Inc.(2) 5,011,470 ------------ 11,995,909 ------------ HEALTH CARE PROVIDERS & SERVICES -- 1.7% 136,400 LifePoint Hospitals Inc.(2) 4,093,364 53,937 Universal Health Services, Inc. Cl B 2,935,252 ------------ 7,028,616 ------------ HOTELS, RESTAURANTS & LEISURE -- 5.0% 74,100 CEC Entertainment Inc.(2) 1,991,067 176,008 International Speedway Corp. 8,071,727 278,130 Speedway Motorsports Inc. 10,290,810 ------------ 20,353,604 ------------ HOUSEHOLD DURABLES -- 0.6% 13,200 Hunter Douglas N.V. ORD 1,186,652 13,900 Whirlpool Corp. 1,238,490 ------------ 2,425,142 ------------ HOUSEHOLD PRODUCTS -- 2.6% 63,574 Clorox Company 3,877,378 95,719 Kimberly-Clark Corp. 6,725,217 ------------ 10,602,595 ------------ INSURANCE -- 8.9% 29,004 Allstate Corp. 1,658,739 192,527 Ambac Financial Group, Inc. 12,111,873 68,711 Chubb Corp. 3,685,658 235,927 Genworth Financial Inc. Cl A 7,250,037 25,381 Hartford Financial Services Group Inc. (The) 2,349,012 78,550 Horace Mann Educators Corp. 1,548,221 294,817 Marsh & McLennan Companies, Inc. 7,517,833 ------------ 36,121,373 ------------ LEISURE EQUIPMENT & PRODUCTS -- 2.1% 305,600 RC2 Corp.(2) 8,462,064 ------------ MACHINERY -- 1.5% 355,864 Altra Holdings Inc.(2) 5,932,253 ------------ METALS & MINING -- 1.1% 80,481 Compass Minerals International Inc.(1) 2,739,573 34,441 Newmont Mining Corporation 1,540,546 4,280,119 ------------ Shares Value MULTI-UTILITIES -- 4.8% 44,856 Ameren Corp. $ 2,354,940 41,800 Consolidated Edison, Inc. 1,935,340 292,057 Puget Energy, Inc. 7,146,635 126,107 Wisconsin Energy Corp. 5,678,598 108,300 XCEL Energy Inc. 2,332,782 ------------ 19,448,295 ------------ MULTILINE RETAIL -- 0.3% 45,100 Family Dollar Stores, Inc. 1,197,856 ------------ OIL, GAS & CONSUMABLE FUELS -- 2.9% 61,951 Apache Corp. 5,579,307 69,484 Equitable Resources Inc. 3,604,135 68,654 St. Mary Land & Exploration Co. 2,448,888 ------------ 11,632,330 ------------ PAPER & FOREST PRODUCTS -- 1.1% 41,485 MeadWestvaco Corp. 1,225,052 43,036 Weyerhaeuser Co. 3,111,503 ------------ 4,336,555 ------------ PERSONAL PRODUCTS -- 0.3% 28,800 Estee Lauder Companies, Inc. (The) Cl A 1,222,848 ------------ PHARMACEUTICALS -- 1.1% 68,600 Bristol-Myers Squibb Co. 1,977,052 77,069 Watson Pharmaceuticals, Inc.(2) 2,497,036 ------------ 4,474,088 ------------ REAL ESTATE INVESTMENT TRUSTS -- 0.8% 246,668 Education Realty Trust, Inc.(1) 3,330,018 ------------ ROAD & RAIL -- 0.6% 171,051 Heartland Express, Inc.(1) 2,442,608 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.3% 84,400 Teradyne, Inc.(2) 1,164,720 ------------ SOFTWARE -- 0.6% 87,358 Synopsys, Inc.(2) 2,365,655 ------------ SPECIALTY RETAIL -- 0.9% 127,297 Lowe's Companies, Inc. 3,566,862 ------------ THRIFTS & MORTGAGE FINANCE -- 6.8% 258,591 Freddie Mac 15,259,455 373,986 MGIC Investment Corp.(1) 12,083,488 ------------ 27,342,943 ------------ TOTAL COMMON STOCKS (Cost $390,046,937) 396,906,175 ------------ - ------ 8 Mid Cap Value Principal Amount Value Temporary Cash Investments -- 1.8% $7,400,000 FHLB Discount Notes, 4.00%, 10/1/07(3) (Cost $7,400,000) $7,400,000 ------------ Temporary Cash Investments - Securities Lending Collateral(4) -- 3.1% Repurchase Agreement, Lehman Brothers, Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.15%, dated 9/28/07, due 10/1/07 (Delivery value $12,518,906) (Cost $12,513,536) 12,513,536 ------------ Principal Amount Value TOTAL INVESTMENT SECURITIES -- 103.2% (Cost $409,960,473) $416,819,711 ------------ OTHER ASSETS AND LIABILITIES -- (3.2)% (12,803,894) ------------ TOTAL NET ASSETS -- 100.0% $404,015,817 ============ Forward Foreign Currency Exchange Contracts Unrealized Contracts to Sell Settlement Date Value Gain (Loss) 2,216,792 Euro for USD 10/31/07 $3,165,693 $(31,284) 263,956,800 JPY for USD 10/31/07 2,308,592 (12,656) ------------ ------------- $5,474,285 $(43,940) ============ ============= (Value on Settlement Date $5,430,345) Notes to Schedule of Investments FHLB = Federal Home Loan Bank JPY = Japanese Yen ORD = Foreign Ordinary Share USD = United States Dollar (1) Security, or a portion thereof, was on loan as of September 30, 2007. (2) Non-income producing. (3) The rate indicated is the yield to maturity at purchase. (4) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. - ------ 9 PERFORMANCE Small Cap Value Total Returns as of September 30, 2007 Average Annual Returns Since Inception 6 months(1) 1 year 5 years Inception Date INVESTOR CLASS 0.62% 11.13% 17.81% 14.80% 7/31/98 RUSSELL 2000 VALUE INDEX(2) -4.10% 6.09% 18.70% 11.30% -- Institutional Class 0.72% 11.27% 18.01% 15.90% 10/26/98 Advisor Class 0.40% 10.81% 17.49% 17.09% 12/31/99 C Class No sales charge* 0.00% 9.98% 16.66% 11.04% With sales charge* -1.00% 9.98% 16.66% 11.04% 6/1/01 * 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. ©2007 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. Historically, small company stocks have been more volatile than the stocks of larger, more established companies. International investing involves special risks, such as political instability and currency fluctuations. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. - ------ 10 Small Cap Value Growth of $10,000 Over Life of Class $10,000 investment made July 31, 1998
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One-Year Returns Over Life of Class Periods ended September 30 1998* 1999 2000 2001 2002 2003 2004 2005 2006 2007 Investor Class -9.80% 13.25% 21.76% 27.06% -1.21% 25.63% 24.21% 20.19% 8.94% 11.13% Russell 2000 Value Index -10.90% 5.83% 15.36% 5.61% -1.47% 31.66% 25.66% 17.75% 14.01% 6.09% * 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. International investing involves special risks, such as political instability and currency fluctuations. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. - ------ 11 PORTFOLIO COMMENTARY Small Cap Value Portfolio Managers: Ben Giele and Steve Roth PERFORMANCE SUMMARY Small Cap Value gained 0.62%* for the six months ended September 30, 2007. By comparison, the median for Morningstar's Small Cap Value category** (whose performance, like Small Cap Value's, reflects fund operating expenses) returned -1.83%. The fund's benchmark, the Russell 2000 Value Index, declined - -4.10%. Its returns do not include operating expenses. The portfolio's strong relative return was achieved in the challenging market environment described in the Market Perspective on page 2. Overall, growth stocks outperformed value across the capitalization spectrum and investors favored stocks with lower dividend yields. In the volatility that characterized the second half of the period, they gravitated toward higher-quality names. Our emphasis on high-quality stocks and our risk-controlled investment approach helped mitigate the impact of this market volatility on Small Cap Value's absolute performance. In addition, during the reporting period, the portfolio's small portion of international holdings also contributed to results. Since Small Cap Value's inception on July 31, 1998, the portfolio has produced an average annualized return of 14.80%, outpacing the benchmark's return of 11.30% for that period (see performance information on pages 10 - 11). UNDERWEIGHT IN FINANCIALS ADDED VALUE The portfolio's underweight position in the financials sector was one of the top contributors against the benchmark, and stock selection boosted results further. Because of our valuation work, we had less exposure than the benchmark to real estate investment trusts (REITs). REITS, which comprise nearly 10% of the Russell 2000 Value Index, posted negative results while the portfolio was rewarded for its much smaller average stake of around 4.5%. Many financial firms came under pressure amid the fallout in the subprime lending category and suffered further in the credit crisis that followed. We successfully sidestepped broader damage in favor of names that suffered lesser declines. However, one holding was a top detractor. Triad Guaranty, which provides private mortgage insurance, lost its largest customer-- American Home Mortgage Investment Corp. -- to bankruptcy in August. This is expected to have a significant impact on the company's earnings in the months ahead. Top Ten Holdings as of September 30, 2007 % of % of net assets net assets as of as of 9/30/07 3/31/07 Parametric Technology Corp. 2.5% 1.6% Sybase, Inc. 2.5% 2.0% iShares S&P SmallCap 600 Index Fund 1.8% -- iShares Russell 2000 Value Index Fund 1.7% 2.6% Aspen Insurance, 5.625%, 12/31/49 (Conv. Pref.) 1.3% 0.8% HCC Insurance Holdings, Inc. 1.2% 0.5% Getty Realty Corp. 1.2% 1.1% W&T Offshore Inc. 1.1% 0.9% iShares Russell 2000 Index Fund 1.1% 1.7% First Midwest Bancorp, Inc. 1.0% 1.0% * 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 Small Cap Value category were 9.07% and 17.51% for the one- and five-year periods ended September 30, 2007, respectively. ©2007 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers: (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. - ------ 12 Small Cap Value INDUSTRIALS WORKED TO OUR ADVANTAGE Small Cap Value's overweight position in the industrials sector enhanced performance. Effective stock selection across several industries -- specifically, the machinery, aerospace and defense, and construction segments - -- also boosted our progress versus the benchmark. A key holding was Alliant Techsystems Inc., a major producer of commercial and military ammunition. Alliant has enjoyed solid growth and earnings and is expected to benefit from new contracts and strategic acquisitions. Another notable contributor was FTI Consulting, a global provider of bankruptcy, restructuring, and forensic services. The company's stock nearly doubled as FTI exceeded earnings expectations and announced a 4.83-million-share equity offering that could be used to fund an acquisition. LESS WAS MORE IN CONSUMER DISCRETIONARY In consumer discretionary, our underweight position added value as the sector trailed all others in the benchmark. In particular, the portfolio was rewarded for its lack of exposure to homebuilders, which declined significantly. We also owned a top performer-- Rare Hospitality International, the owner of two steak-specialty chains. The company's shares rose on news that it was being acquired by Darden Restaurants, a casual dining company that owns and operates restaurants such as Red Lobster and Olive Garden. MATERIALS, TELECOMMUNICATIONS DETRACTED SLIGHTLY There were only two areas of relative weakness during the period -- materials and telecommunications services. Stock prices in both sectors have been momentum-driven and did not meet our valuation criteria. As a result, they have not merited sizeable exposure, which modestly detracted when they outperformed for the benchmark. STARTING POINT FOR NEXT REPORTING PERIOD As bottom-up managers, we evaluate each company individually and build the portfolio one stock at a time. In our search for companies that are undervalued, we will structure exposure to market segments as warranted based on the attractiveness of individual companies. As of September 30, 2007, the portfolio was broadly diversified, with a modest overweight position in industrials and an underweight position in financials relative to the benchmark. Top Five Industries* as of September 30, 2007 % of % of net assets net assets as of as of 9/30/07 3/31/07 Insurance 7.1% 6.5% Commercial Banks 7.0% 7.9% Software 6.6% 4.9% Capital Markets 5.0% 3.9% Real Estate Investment Trusts 4.5% 4.2% * Excludes securities in the Diversified category. These securities represent investments in diversified pools of underlying securities in multiple industry categories. Types of Investments in Portfolio % of % of net assets net assets as of as of 9/30/07 3/31/07 Common Stocks 96.5% 96.5% Convertible Preferred Stocks 1.3% 0.8% Preferred Stocks 0.5% 0.1% TOTAL EQUITY EXPOSURE 98.3% 97.4% Temporary Cash Investments 1.2% 2.7% Other Assets and Liabilities(1) 0.5% (0.1)% (1) Includes securities lending collateral and other assets and liabilities. - ------ 13 SCHEDULE OF INVESTMENTS Small Cap Value SEPTEMBER 30, 2007 (UNAUDITED) Shares Value Common Stocks -- 96.5% AEROSPACE & DEFENSE -- 2.3% 310,000 AeroVironment Inc.(1)(2) $ 7,133,100 70,000 Alliant Techsystems Inc.(1) 7,651,000 60,000 American Science and Engineering Inc.(2) 3,759,600 70,000 BE Aerospace, Inc.(1) 2,907,100 80,000 Curtiss-Wright Corp. 3,800,000 170,000 DRS Technologies, Inc. 9,370,400 130,000 Moog Inc. Cl A(1)(2) 5,712,200 35,000 Triumph Group, Inc. 2,859,850 -------------- 43,193,250 -------------- AIRLINES -- 0.8% 335,000 Alaska Air Group, Inc.(1) 7,735,150 300,000 SkyWest, Inc. 7,551,000 -------------- 15,286,150 -------------- AUTO COMPONENTS -- 0.6% 355,000 ArvinMeritor, Inc.(2) 5,971,100 130,000 Superior Industries International, Inc.(2) 2,819,700 90,000 Tenneco Automotive Inc.(1) 2,790,900 -------------- 11,581,700 -------------- BUILDING PRODUCTS -- 0.6% 629,297 Griffon Corp.(1)(2) 9,502,385 85,000 Lennox International Inc. 2,873,000 -------------- 12,375,385 -------------- CAPITAL MARKETS -- 5.0% 705,000 Apollo Investment Corp.(2) 14,664,000 705,000 Ares Capital Corp.(2) 11,470,350 555,000 Cowen Group Inc.(1)(2) 7,670,100 323,631 HFF Inc. Cl A(1) 3,841,500 515,000 Highland Distressed Opportunities Inc. 6,607,450 500,000 Knight Capital Group, Inc. Cl A(1) 5,980,000 81,215 Kohlberg Capital Corp.(2) 1,223,098 75,000 Lazard Ltd. Cl A 3,180,000 615,000 MCG Capital Corp.(2) 8,849,850 370,000 MVC Capital Inc.(2) 6,856,100 500,000 Patriot Capital Funding, Inc.(2) 6,685,000 305,000 PennantPark Investment Corp. 4,087,000 425,000 TradeStation Group, Inc.(1)(2) 4,959,750 375,000 Waddell & Reed Financial Inc. 10,136,250 -------------- 96,210,448 -------------- Shares Value CHEMICALS -- 2.5% 65,000 Arch Chemicals, Inc. $ 3,047,200 40,000 CF Industries Holdings, Inc. 3,036,400 100,000 Cytec Industries Inc. 6,839,000 145,000 Ferro Corp. 2,897,100 120,000 H.B. Fuller Co. 3,561,600 270,000 Hercules Inc. 5,675,400 395,000 Innophos Holdings, Inc. 6,019,800 100,000 Minerals Technologies Inc. 6,700,000 125,000 Olin Corp. 2,797,500 135,000 Sensient Technologies Corp. 3,897,450 235,000 Spartech Corp. 4,009,100 -------------- 48,480,550 -------------- COMMERCIAL BANKS -- 7.0% 330,000 Central Pacific Financial Corp.(2) 9,636,000 160,000 Chemical Financial Corp.(2) 3,880,000 55,000 City National Corp. 3,823,050 150,000 Cullen/Frost Bankers, Inc. 7,518,000 565,000 First Midwest Bancorp, Inc.(2) 19,300,399 195,000 FirstMerit Corp.(2) 3,853,200 1,205,000 Fulton Financial Corp.(2) 17,327,900 625,000 Hanmi Financial Corp.(2) 9,681,250 1 National City Corp. 25 375,000 Pacific Capital Bancorp(2) 9,862,500 760,000 South Financial Group Inc. (The) 17,282,400 850,000 Sterling Bancshares, Inc. 9,698,500 595,000 TCF Financial Corp. 15,577,100 175,000 Wilmington Trust Corporation 6,807,500 -------------- 134,247,824 -------------- COMMERCIAL SERVICES & SUPPLIES -- 3.6% 605,000 ACCO Brands Corp.(1)(2) 13,576,200 555,000 American Ecology Corp.(2) 11,760,450 65,000 Clean Harbors Inc.(1) 2,893,800 95,000 FTI Consulting, Inc.(1)(2) 4,779,450 140,000 G&K Services Inc. Cl A(2) 5,628,000 110,000 Heidrick & Struggles International Inc.(1) 4,009,500 425,000 Herman Miller Inc. 11,534,500 295,000 Korn/Ferry International(1) 4,870,450 50,000 United Stationers Inc.(1) 2,776,000 120,000 Waste Connections, Inc.(1) 3,811,200 65,000 Watson Wyatt Worldwide, Inc. Cl A 2,921,100 -------------- 68,560,650 -------------- - ------ 14 Small Cap Value Shares Value COMMUNICATIONS EQUIPMENT -- 0.9% 265,000 Arris Group Inc.(1) $ 3,272,750 125,000 Avocent Corp.(1) 3,640,000 1,295,000 EFJ Inc.(1)(2)(3) 7,511,000 405,000 Packeteer Inc.(1)(2) 3,078,000 -------------- 17,501,750 -------------- COMPUTERS & PERIPHERALS -- 1.4% 190,000 Electronics for Imaging, Inc.(1) 5,103,400 515,000 Emulex Corp.(1) 9,872,550 145,000 Imation Corp. 3,556,850 180,000 Neoware Inc.(1)(2) 2,919,600 440,000 Rackable Systems, Inc.(1)(2) 5,706,800 -------------- 27,159,200 -------------- CONSTRUCTION & ENGINEERING -- 1.2% 95,000 Aecom Technology Corp.(1) 3,318,350 155,000 EMCOR Group Inc.(1) 4,860,800 125,000 Granite Construction Inc. 6,627,500 55,000 URS Corp.(1) 3,104,750 55,612 Washington Group International, Inc.(1) 4,883,290 -------------- 22,794,690 -------------- CONSUMER FINANCE -- 0.5% 570,000 Advance America, Cash Advance Centers, Inc. 6,081,900 200,000 Nelnet Inc. Cl A(2) 3,648,000 -------------- 9,729,900 -------------- CONTAINERS & PACKAGING -- 1.0% 100,000 AptarGroup, Inc. 3,787,000 525,000 Bemis Co., Inc. 15,282,750 -------------- 19,069,750 -------------- DIVERSIFIED -- 4.6% 260,000 iShares Russell 2000 Index Fund(2) 20,839,000 420,000 iShares Russell 2000 Value Index Fund(2) 32,214,000 490,000 iShares S&P SmallCap 600 Index Fund(2) 34,167,700 -------------- 87,220,700 -------------- DIVERSIFIED CONSUMER SERVICES -- 1.2% 1,195,000 Corinthian Colleges Inc.(1) 19,012,450 125,000 Regis Corp. 3,988,750 -------------- 23,001,200 -------------- DIVERSIFIED FINANCIAL SERVICES -- 0.3% 490,000 Asset Acceptance Capital Corp.(2) 5,684,000 -------------- Shares Value DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4% 370,000 Iowa Telecommunications Services Inc. $ 7,344,500 -------------- ELECTRIC UTILITIES -- 2.3% 150,000 Cleco Corp. 3,790,500 385,000 Empire District Electric Co.(2) 8,697,150 435,000 Great Plains Energy Inc. 12,532,350 290,000 MGE Energy, Inc.(2) 9,697,600 110,000 Portland General Electric Co. 3,058,000 230,000 Westar Energy Inc. 5,648,800 -------------- 43,424,400 -------------- ELECTRICAL EQUIPMENT -- 1.8% 75,000 Acuity Brands Inc. 3,786,000 60,000 Belden Inc. 2,814,600 40,000 General Cable Corp.(1) 2,684,800 120,000 Genlyte Group Inc.(1) 7,711,200 50,000 Hubbell Inc. Cl B 2,856,000 135,000 LSI Industries Inc. 2,770,200 120,000 Regal-Beloit Corp. 5,746,800 60,000 Smith (A.O.) Corp.(2) 2,632,800 80,000 Superior Essex Inc.(1)(2) 2,982,400 -------------- 33,984,800 -------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 2.7% 420,000 Benchmark Electronics Inc.(1)(2) 10,025,400 210,000 Coherent, Inc.(1) 6,736,800 135,000 Littelfuse, Inc.(1) 4,818,150 285,000 Plexus Corp.(1) 7,809,000 125,000 Rogers Corp.(1)(2) 5,148,750 140,000 Technitrol, Inc. 3,773,000 335,000 TTM Technologies, Inc.(1) 3,875,950 735,000 Vishay Intertechnology, Inc.(1) 9,577,050 -------------- 51,764,100 -------------- ENERGY EQUIPMENT & SERVICES -- 2.0% 145,000 Global Industries Ltd.(1) 3,735,200 85,000 Helmerich & Payne, Inc. 2,790,550 280,000 Horizon Offshore, Inc.(1) 4,620,000 75,000 Hornbeck Offshore Services Inc.(1)(2) 2,752,500 280,000 Key Energy Services, Inc.(1) 4,760,000 135,000 Lufkin Industries Inc. 7,427,700 450,000 North American Energy Partners Inc.(1) 7,767,000 65,000 W-H Energy Services Inc.(1) 4,793,750 -------------- 38,646,700 -------------- - ------ 15 Small Cap Value Shares Value FOOD & STAPLES RETAILING -- 1.0% 120,000 BJ's Wholesale Club Inc.(1) $ 3,979,200 130,000 Casey's General Stores, Inc. 3,601,000 100,000 Performance Food Group Co.(1) 3,013,000 205,000 Weis Markets Inc.(2) 8,751,450 -------------- 19,344,650 -------------- FOOD PRODUCTS -- 2.2% 450,000 B&G Foods, Inc. Cl A 5,760,000 80,000 Corn Products International Inc. 3,669,600 380,000 Del Monte Foods Co. 3,990,000 160,000 Hain Celestial Group, Inc. (The)(1) 5,140,800 140,000 J&J Snack Foods Corp. 4,874,800 55,000 J.M. Smucker Co. (The) 2,938,100 130,000 Lancaster Colony Corp. 4,962,100 115,000 Pilgrim's Pride Corp.(2) 3,993,950 70,000 Ralcorp Holdings, Inc.(1) 3,907,400 110,000 Reddy Ice Holdings Inc. 2,900,700 -------------- 42,137,450 -------------- GAS UTILITIES -- 0.8% 270,000 Atmos Energy Corp. 7,646,400 225,000 WGL Holdings Inc. 7,625,250 -------------- 15,271,650 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 2.0% 255,000 Cutera, Inc.(1)(2) 6,683,550 112,061 Datascope Corp. 3,788,783 100,000 ICU Medical Inc.(1)(2) 3,875,000 60,000 Orthofix International N.V.(1)(2) 2,938,200 145,000 Steris Corp. 3,962,850 140,000 Vital Signs Inc.(2) 7,299,600 342,754 Young Innovations, Inc. 9,806,192 -------------- 38,354,175 -------------- HEALTH CARE PROVIDERS & SERVICES -- 3.5% 510,000 Amsurg Corp.(1) 11,765,700 650,000 Assisted Living Concepts, Inc. Cl A(1)(2) 5,941,000 185,000 Community Health Systems Inc.(1) 5,816,400 200,000 LCA-Vision Inc.(2) 5,878,000 130,000 LifePoint Hospitals Inc.(1) 3,901,300 75,000 Magellan Health Services Inc.(1) 3,043,500 165,000 Nighthawk Radiology Holdings Inc.(1) 4,044,150 -------------- 1,812,121 Odyssey HealthCare, Inc.(1)(3) 17,414,483 -------------- Shares Value 150,000 Owens & Minor Inc.(2) $ 5,713,500 260,021 Skilled Healthcare Group Inc. Cl A(1) 4,095,331 -------------- 67,613,364 -------------- HEALTH CARE TECHNOLOGY -- 0.3% 260,000 Vital Images, Inc.(1)(2) 5,075,200 -------------- HOTELS, RESTAURANTS & LEISURE -- 2.9% 385,000 California Pizza Kitchen, Inc.(1) 6,764,450 528,189 CEC Entertainment Inc.(1) 14,192,438 165,000 International Speedway Corp. 7,566,900 155,000 Panera Bread Co. Cl A(1)(2) 6,324,000 180,000 Red Robin Gourmet Burgers Inc.(1) 7,722,000 365,000 Ruby Tuesday Inc. 6,694,100 150,744 Speedway Motorsports Inc. 5,577,528 -------------- 54,841,416 -------------- HOUSEHOLD DURABLES -- 1.3% 145,000 American Greetings Corporation Cl A 3,828,000 340,000 Ethan Allen Interiors Inc.(2) 11,114,600 295,000 Furniture Brands International, Inc.(2) 2,991,300 70,000 MDC Holdings Inc. 2,865,800 125,000 Tupperware Brands Corp. 3,936,250 -------------- 24,735,950 -------------- HOUSEHOLD PRODUCTS -- 0.2% 395,000 Central Garden & Pet Co.(1)(2) 3,515,500 -------------- INSURANCE -- 5.8% 665,000 American Equity Investment Life Holding Co.(2) 7,082,250 635,000 Aspen Insurance Holdings Ltd. 17,722,850 95,000 Delphi Financial Group, Inc. Cl A 3,839,900 220,000 Endurance Specialty Holdings Ltd. 9,141,000 65,000 Hanover Insurance Group Inc. 2,872,350 830,000 HCC Insurance Holdings, Inc. 23,771,200 90,000 Hilb Rogal & Hobbs Co. 3,899,700 240,000 IPC Holdings, Ltd. 6,924,000 300,000 National Atlantic Holdings Corp. Cl A(1) 2,778,000 145,000 National Financial Partners Corp. 7,682,100 226,282 Phoenix Companies Inc. 3,192,839 350,000 Platinum Underwriters Holdings Ltd. 12,586,000 75,000 ProAssurance Corp.(1) 4,040,250 140,000 United Fire & Casualty Co.(2) 5,472,600 -------------- 111,005,039 -------------- - ------ 16 Small Cap Value Shares Value IT SERVICES -- 1.3% 273,786 Gevity HR, Inc.(2) $ 2,806,307 265,000 MoneyGram International Inc. 5,986,350 255,000 MPS Group, Inc.(1) 2,843,250 795,000 Perot Systems Corp. Cl A(1) 13,443,450 -------------- 25,079,357 -------------- LEISURE EQUIPMENT & PRODUCTS -- 0.3% 335,000 Nautilus Inc.(2) 2,669,950 95,000 RC2 Corp.(1) 2,630,550 -------------- 5,300,500 -------------- LIFE SCIENCES TOOLS & SERVICES -- 0.4% 35,000 Bio-Rad Laboratories, Inc. Cl A(1) 3,167,500 130,000 PRA International(1)(2) 3,822,000 -------------- 6,989,500 -------------- MACHINERY -- 3.5% 396,140 A.S.V., Inc.(1)(2) 5,557,844 145,000 Albany International Corp. 5,436,050 285,000 Altra Holdings Inc.(1) 4,750,950 515,000 Commercial Vehicle Group Inc.(1)(2) 6,607,450 85,000 Crane Co. 4,077,450 110,000 Kaydon Corp.(2) 5,718,900 90,000 Kennametal Inc. 7,558,200 255,000 Mueller Industries Inc. 9,215,700 275,000 Mueller Water Products, Inc. Series B(1) 3,025,000 210,000 Pentair, Inc. 6,967,800 205,000 Timken Co. 7,615,750 -------------- 66,531,094 -------------- MARINE -- 0.1% 50,000 Alexander & Baldwin, Inc. 2,506,500 -------------- MEDIA -- 1.2% 275,000 Belo Corp. Series A 4,774,000 300,000 Entravision Communications Corp. Cl A(1) 2,766,000 105,000 Hearst-Argyle Television, Inc. 2,725,800 1,350,000 Journal Communications Inc. 12,798,000 -------------- 23,063,800 -------------- METALS & MINING -- 2.2% 60,000 Century Aluminum Co.(1) 3,159,000 210,000 Claymont Steel Holdings Inc.(1) 4,252,500 45,000 Cleveland-Cliffs Inc. 3,958,650 70,000 Haynes International Inc.(1) 5,975,900 85,000 Metal Management Inc. 4,607,000 485,000 NN, Inc. 4,757,850 Shares Value 70,000 Quanex Corp. $ 3,288,600 50,000 RTI International Metals, Inc.(1) 3,963,000 140,000 Ryerson Inc.(2) 4,723,600 50,000 Schnitzer Steel Industries, Inc. Cl A(2) 3,664,500 -------------- 42,350,600 MULTI-UTILITIES -- 0.6% 470,000 Puget Energy, Inc. 11,500,900 -------------- MULTILINE RETAIL -- 0.4% 365,000 Fred's, Inc. 3,843,450 465,000 Tuesday Morning Corp.(2) 4,180,350 -------------- 8,023,800 -------------- OIL, GAS & CONSUMABLE FUELS -- 3.1% 200,000 Alpha Natural Resources, Inc.(1)(2) 4,646,000 75,000 Cimarex Energy Co. 2,793,750 270,000 Double Hull Tankers Inc.(2) 4,020,300 120,000 Encore Acquisition Co.(1) 3,798,000 90,000 Forest Oil Corp.(1)(2) 3,873,600 180,000 Helix Energy Solutions Group, Inc.(1) 7,642,800 320,000 St. Mary Land & Exploration Co. 11,414,400 870,000 W&T Offshore Inc.(2) 21,210,600 -------------- 59,399,450 -------------- PAPER & FOREST PRODUCTS -- 0.4% 195,000 Glatfelter (P. H.) Co. 2,893,800 120,000 Neenah Paper Inc.(2) 3,970,800 -------------- 6,864,600 -------------- PHARMACEUTICALS -- 0.7% 225,000 Alpharma Inc. Cl A(2) 4,806,000 215,000 Par Pharmaceutical Companies Inc.(1) 3,990,400 170,000 Perrigo Co. 3,629,500 -------------- 12,425,900 -------------- REAL ESTATE INVESTMENT TRUSTS -- 4.0% 160,000 Alesco Financial Inc.(2) 787,200 290,000 Annaly Capital Management Inc. 4,619,700 555,000 Education Realty Trust, Inc. 7,492,500 210,000 Equity Inns Inc. 4,741,800 855,000 Getty Realty Corp.(2) 23,256,000 225,000 Healthcare Realty Trust Inc. 5,998,500 525,000 Lexington Realty Trust(2) 10,505,250 950,000 MFA Mortgage Investments, Inc. 7,619,000 - ------ 17 Small Cap Value Shares Value 160,000 National Retail Properties, Inc.(2) $ 3,900,800 140,000 Realty Income Corp.(2) 3,913,000 145,000 Sunstone Hotel Investors, Inc.(2) 3,717,800 -------------- 76,551,550 -------------- ROAD & RAIL -- 1.0% 140,000 Arkansas Best Corp.(2) 4,572,400 200,000 Heartland Express, Inc.(2) 2,856,000 650,000 Werner Enterprises Inc.(2) 11,147,500 -------------- 18,575,900 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.1% 90,000 Cabot Microelectronics Corp.(1)(2) 3,847,500 202,588 Cohu, Inc. 3,798,525 690,000 Mattson Technology Inc.(1)(2) 5,968,500 355,000 MKS Instruments, Inc.(1) 6,752,100 420,000 Rudolph Technologies Inc.(1) 5,808,600 495,000 Veeco Instruments Inc.(1)(2) 9,593,100 190,000 Verigy Ltd.(1) 4,694,900 -------------- 40,463,225 -------------- SOFTWARE -- 6.6% 200,000 Aspen Technology, Inc.(1) 2,864,000 500,000 Compuware Corp.(1) 4,010,000 205,000 Fair Isaac Corp.(2) 7,402,550 150,000 Jack Henry & Associates Inc. 3,879,000 2,725,000 Parametric Technology Corp.(1) 47,469,500 2,050,000 Sybase, Inc.(1) 47,416,500 1,555,000 Ulticom, Inc.(1) 12,595,500 -------------- 125,637,050 -------------- SPECIALTY RETAIL -- 2.8% 215,000 Barnes & Noble Inc. 7,580,900 130,000 Brown Shoe Company, Inc. 2,522,000 180,000 Cato Corp. (The) Cl A(2) 3,679,200 315,000 Charming Shoppes, Inc.(1)(2) 2,646,000 165,000 Group 1 Automotive, Inc.(2) 5,539,050 970,000 Hot Topic, Inc.(1) 7,236,200 275,000 Penske Automotive Group, Inc.(2) 5,566,000 610,000 Pier 1 Imports, Inc.(1)(2) 2,885,300 200,000 Rent-A-Center Inc.(1) 3,626,000 150,000 Stage Stores Inc.(2) 2,734,500 310,000 Talbots Inc.(2) 5,580,000 160,000 Zale Corp.(1)(2) 3,702,400 -------------- 53,297,550 -------------- Shares Value TEXTILES, APPAREL & LUXURY GOODS -- 2.0% 195,000 Carter's, Inc.(1) $ 3,890,250 695,000 Kenneth Cole Productions, Inc. Cl A(2) 13,462,150 155,000 Oxford Industries, Inc. 5,598,600 85,000 Warnaco Group Inc. (The)(1) 3,320,950 460,000 Wolverine World Wide, Inc. 12,604,000 -------------- 38,875,950 -------------- THRIFTS & MORTGAGE FINANCE -- 0.6% 210,000 First Niagara Financial Group Inc. 2,971,500 220,000 Triad Guaranty Inc.(1)(2) 4,173,400 145,000 Washington Federal, Inc. 3,807,700 -------------- 10,952,600 -------------- TOBACCO -- 0.3% 115,000 Universal Corp. 5,629,250 -------------- TRADING COMPANIES & DISTRIBUTORS -- 0.2% 120,000 Applied Industrial Technologies Inc. 3,699,600 -------------- TOTAL COMMON STOCKS (Cost $1,740,023,945) 1,842,874,717 -------------- Convertible Preferred Stocks -- 1.3% INSURANCE -- 1.3% 450,000 Aspen Insurance, 5.625%, 12/31/49 (Cost $22,771,370) 24,345,000 -------------- Preferred Stocks -- 0.5% REAL ESTATE INVESTMENT TRUSTS -- 0.5% Ashford Hospitality Trust, Inc., 8.45%, 215,000 7/18/12(2) 5,009,500 National Retail Properties Inc., 7.375%, 200,000 10/12/11(2) 4,806,260 -------------- TOTAL PREFERRED STOCKS (Cost $10,265,980) 9,815,760 -------------- Temporary Cash Investments -- 1.2% Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 5.25%-8.75%, 8/15/20-11/15/28, valued at $23,687,013), in a joint trading account at 3.90%, dated 9/28/07, due 10/1/07 (Delivery value $23,107,508) (Cost $23,100,000) 23,100,000 -------------- - ------ 18 Small Cap Value Shares Value Temporary Cash Investments - Securities Lending Collateral(4) -- 15.7% Repurchase Agreement, Citigroup Global Markets Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.00%, dated 9/28/07, due 10/1/07 (Delivery value $170,070,833) $ 170,000,000 Repurchase Agreement, Lehman Brothers, Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.15%, dated 9/28/07, due 10/1/07 (Delivery value $128,969,720) 128,914,394 -------------- TOTAL TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL (Cost $298,914,394) 298,914,394 -------------- TOTAL INVESTMENT SECURITIES -- 115.2% (Cost $2,095,075,689) 2,199,049,871 -------------- OTHER ASSETS AND LIABILITIES -- (15.2)% (290,898,811) -------------- TOTAL NET ASSETS -- 100.0% $1,908,151,060 ============== Notes to Schedule of Investments (1) Non-income producing. (2) Security, or a portion thereof, was on loan as of September 30, 2007. (3) 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. (4) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. - ------ 19 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, 2007 to September 30, 2007. 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. 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. - ------ 20 Expenses Paid Beginning Ending During Period* Account Account Value 4/1/07 - Annualized Value 4/1/07 9/30/07 9/30/07 Expense Ratio* Mid Cap Value ACTUAL Investor Class $1,000 $1,026.60 $5.07 1.00% Institutional Class $1,000 $1,027.60 $4.06 0.80% Advisor Class $1,000 $1,025.30 $6.33 1.25% R Class $1,000 $1,024.80 $7.59 1.50% HYPOTHETICAL Investor Class $1,000 $1,020.00 $5.05 1.00% Institutional Class $1,000 $1,021.00 $4.04 0.80% Advisor Class $1,000 $1,018.75 $6.31 1.25% R Class $1,000 $1,017.50 $7.57 1.50% Small Cap Value ACTUAL Investor Class $1,000 $1,006.20 $6.32 1.26% Institutional Class $1,000 $1,007.20 $5.32 1.06% Advisor Class $1,000 $1,004.00 $7.57 1.51% C Class $1,000 $1,000.00 $11.30 2.26% HYPOTHETICAL Investor Class $1,000 $1,018.70 $6.36 1.26% Institutional Class $1,000 $1,019.70 $5.35 1.06% Advisor Class $1,000 $1,017.45 $7.62 1.51% C Class $1,000 $1,013.70 $11.38 2.26% * 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 366, to reflect the one-half year period. - ------ 21 STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2007 (UNAUDITED) Small Cap Mid Cap Value Value ASSETS Investment securities -- unaffiliated, at value (cost of $397,446,937 and $1,766,550,399, respectively) -- including $12,046,231 and $288,193,163 of securities on loan, respectively $404,306,175 $1,875,209,994 Investment securities -- affiliated, at value (cost of $- and $29,610,896, respectively) -- including $- and $236,060 of securities on loan, respectively -- 24,925,483 Investments made with cash collateral received for securities on loan, at value (cost of $12,513,536 and $298,914,394, respectively) 12,513,536 298,914,394 ------------ -------------- Total investment securities, at value (cost of $409,960,473 and $2,095,075,689, respectively) 416,819,711 2,199,049,871 Receivable for investments sold 11,915,949 35,457,705 Dividends and interest receivable 600,638 3,220,237 ------------ -------------- 429,336,298 2,237,727,813 ------------ -------------- LIABILITIES Disbursements in excess of demand deposit cash 39,296 1,135,164 Payable for collateral received for securities on loan 12,513,536 298,914,394 Payable for investments purchased 12,390,648 27,545,234 Payable for forward foreign currency exchange contracts 43,940 -- Accrued management fees 324,727 1,890,259 Distribution fees payable 6,924 82,941 Service fees (and distribution fees R Class) payable 1,410 8,761 ------------ -------------- 25,320,481 329,576,753 ------------ -------------- NET ASSETS $404,015,817 $1,908,151,060 ============ ============== See Notes to Financial Statements. - ------ 22 SEPTEMBER 30, 2007 (UNAUDITED) Small Cap Mid Cap Value Value NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $365,379,223 $1,537,961,690 Undistributed net investment income 541,539 2,453,626 Undistributed net realized gain on investment and foreign currency transactions 31,275,032 263,761,562 Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 6,820,023 103,974,182 ------------ -------------- $404,015,817 $1,908,151,060 ============ ============== INVESTOR CLASS, $0.01 PAR VALUE Net assets $349,948,285 $1,096,911,584 Shares outstanding 25,716,447 109,376,749 Net asset value per share $13.61 $10.03 INSTITUTIONAL CLASS, $0.01 PAR VALUE Net assets $17,776,671 $414,671,754 Shares outstanding 1,306,157 41,253,951 Net asset value per share $13.61 $10.05 ADVISOR CLASS, $0.01 PAR VALUE Net assets $34,462,196 $394,133,806 Shares outstanding 2,532,410 39,367,250 Net asset value per share $13.61 $10.01 C CLASS, $0.01 PAR VALUE Net assets N/A $2,433,916 Shares outstanding N/A 253,712 Net asset value per share N/A $9.59 R CLASS, $0.01 PAR VALUE Net assets $1,828,665 N/A Shares outstanding 134,395 N/A Net asset value per share $13.61 N/A See Notes to Financial Statements. - ------ 23 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) Small Cap Mid Cap Value Value INVESTMENT INCOME (LOSS) INCOME: Dividends (including $- and $336,000, respectively, from affiliates and net of foreign taxes withheld of $4,343 and $-, respectively) $3,917,921 $ 19,303,372 Interest 276,375 1,370,492 Securities lending 30,426 679,438 ------------ ------------- 4,224,722 21,353,302 ------------ ------------- EXPENSES: Management fees 1,898,280 12,123,260 Distribution fees: Advisor Class 29,510 449,084 C Class -- 12,391 Service fees: Advisor Class 29,510 449,084 C Class -- 4,130 Distribution and service fees: Advisor Class 7,607 89,483 R Class 3,371 -- Directors' fees and expenses 4,675 32,029 Other expenses 4,337 2,789 ------------ ------------- 1,977,290 13,162,250 ------------ ------------- NET INVESTMENT INCOME (LOSS) 2,247,432 8,191,052 ------------ ------------- REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: Investment transactions (including $- and $2,668,197 from affiliates, respectively) 16,724,934 165,952,119 Foreign currency transactions (317,283) -- ------------ ------------- 16,407,651 165,952,119 ------------ ------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: Investments (11,205,592) (158,208,263) Translation of assets and liabilities in foreign currencies (17,287) -- ------------ ------------- (11,222,879) (158,208,263) ------------ ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) 5,184,772 7,743,856 ------------ ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $7,432,204 $ 15,934,908 ============ ============= See Notes to Financial Statements. - ------ 24 STATEMENT OF CHANGES IN NET ASSETS SIX MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) AND YEAR ENDED MARCH 31, 2007 Mid Cap Value Small Cap Value Increase (Decrease) in Net Assets Sept. 30, 2007 March 31, 2007 Sept. 30, 2007 March 31, 2007 OPERATIONS Net investment income (loss) $2,247,432 $3,185,670 $8,191,052 $11,833,810 Net realized gain (loss) 16,407,651 24,275,844 165,952,119 269,066,459 Change in net unrealized appreciation (depreciation) (11,222,879) 12,571,948 (158,208,263) (96,758,855) ------------ ------------ -------------- -------------- Net increase (decrease) in net assets resulting from operations 7,432,204 40,033,462 15,934,908 184,141,414 ------------ ------------ -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income: Investor Class (1,843,819) (2,544,581) (4,942,464) (5,506,596) Institutional Class (124,273) (220,317) (2,245,921) (2,633,023) Advisor Class (132,206) (116,401) (1,231,894) (1,044,209) R Class (4,758) (682) -- -- From net realized gains: Investor Class -- (12,038,352) -- (154,884,953) Institutional Class -- (747,114) -- (54,066,434) Advisor Class -- (707,570) -- (53,966,232) C Class -- -- -- (456,240) R Class -- (4,612) -- -- ------------ ------------ -------------- -------------- Decrease in net assets from distributions (2,105,056) (16,379,629) (8,420,279) (272,557,687) ------------ ------------ -------------- -------------- CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions 54,190,746 186,868,948 (241,554,134) (53,422,340) ------------ ------------ -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS 59,517,894 210,522,781 (234,039,505) (141,838,613) NET ASSETS Beginning of period 344,497,923 133,975,142 2,142,190,565 2,284,029,178 ------------ ------------ -------------- -------------- End of period $404,015,817 $344,497,923 $1,908,151,060 $2,142,190,565 ============ ============ ============== ============== Undistributed net investment income $541,539 $399,163 $2,453,626 $2,682,853 ============ ============ ============== ============== See Notes to Financial Statements. - ------ 25 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007 (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. Mid Cap Value Fund (Mid Cap Value) and Small Cap Value Fund (Small 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 long-term capital growth. The production of income is a secondary objective. Mid Cap Value seeks to achieve its investment objective by investing in stocks of mid-sized market capitalization companies that management believes to be undervalued at the time of purchase. Small Cap Value seeks to achieve its investment objective by investing in stocks of smaller market capitalization companies that management believes to be undervalued at the time of purchase. The following is a summary of the funds' significant accounting policies. MULTIPLE CLASS -- 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 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. 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 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 as determined by, or in accordance with procedures adopted by, the Board of Directors or its designee if such determination would materially impact a fund's net asset value. Certain other circumstances may cause the funds to use alternative procedures to value a security such as: a security has been declared in default; 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 -- For financial reporting, 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. SECURITIES ON LOAN -- The funds may lend portfolio securities through their lending agent to certain approved borrowers in order to earn additional income. The funds continue to recognize any gain or loss in the market price of the securities loaned and record any interest earned or dividends declared. - ------ 26 EXCHANGE TRADED FUNDS -- The funds may invest in exchange traded funds (ETFs). ETFs are a type of index fund bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities designed to track the performance and dividend yield of a particular domestic or foreign market index. A fund may purchase an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although the lack of liquidity on an ETF could result in it being more volatile. Additionally, ETFs have management fees, which increase their cost. FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. For assets and liabilities, other than investments in securities, net realized and unrealized gains and losses from foreign currency translations arise from changes in currency exchange rates. Net realized and unrealized foreign currency exchange gains or losses occurring during the holding period of investment securities are a component of realized gain (loss) on investment transactions and unrealized appreciation (depreciation) on investments, respectively. Certain countries may impose taxes on the contract amount of purchases and sales of foreign currency contracts in their currency. The funds record the foreign tax expense, if any, as a reduction to the net realized gain (loss) on foreign currency transactions. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The funds may enter into forward foreign currency exchange contracts to facilitate transactions of securities denominated in a foreign currency or to hedge the funds' exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the funds and the resulting unrealized appreciation or depreciation are determined daily using prevailing exchange rates. The funds bear the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses may arise if the counterparties do not perform under the contract terms. REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with institutions that American Century Investment Management, Inc. (ACIM) (the investment advisor) has determined are creditworthy pursuant to criteria adopted by the Board of Directors. Each repurchase agreement is recorded at cost. Each fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable each fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to each fund under each repurchase agreement. JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, each fund, along with other registered investment companies having management agreements with ACIM or American Century Global Investment Management, Inc. (ACGIM), may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations. 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. The funds are no longer subject to examination by tax authorities for years prior to 2004. At this time, management has not identified any uncertain tax positions that would materially impact the financial statements. Accordingly, no provision has been made for federal or state income taxes. Interest and penalties associated with any federal or state income tax obligations, if any, are recorded as interest expense. 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. - ------ 27 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 On July 27, 2007, the Advisor Class shareholders of Mid Cap Value and Small Cap Value approved a change to the class's fee structure. The change was approved by the Board of Directors on November 29, 2006 and March 7, 2007. Effective September 4, 2007, the fee structure change resulted in an increase of 0.25% in the unified management fee and a simultaneous decrease of 0.25% in the total distribution and service fee, resulting in no change to the total operating expense ratio of the class. 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 Mid Cap Value is 1.00%, 0.80%, 1.00% and 1.00% for the Investor Class, Institutional Class, Advisor Class and R Class, respectively. Prior to September 4, 2007, the annual management fee schedule for Mid Cap Value was 0.75% for the Advisor Class. The annual management fee schedule for Small Cap Value ranges from 1.00% to 1.25% for the Investor Class, Advisor Class and C Class. The Institutional Class is 0.20% less at each point within the range for Small Cap Value. Prior to September 4, 2007, the Advisor Class was 0.25% less at each point within the range for Small Cap Value. The effective annual management fee for each class of the funds for the six months ended September 30, 2007, was as follows: Mid Cap Value Small Cap Value Investor 1.00% 1.26% Institutional 0.80% 1.06% Advisor 0.79% 1.05% C N/A 1.26% R 1.00% N/A - ------ 28 DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the Advisor Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the Advisor Class will pay American Century Investment Services, Inc. (ACIS) an annual distribution and service fee of 0.25%. Prior to September 4, 2007, the Board of Directors had adopted a Master Distribution and Shareholder Services Plan for the Advisor Class which provided that the Advisor Class would pay ACIS an annual distribution fee of 0.25% and service fee of 0.25%. The plans provide that the C Class will pay ACIS an annual distribution fee of 0.75% and service fee of 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, 2007, 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 are eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). JPMIM is a wholly owned subsidiary of JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC. The funds have a bank line of credit agreement and securities lending agreement with JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the funds and a wholly owned subsidiary of JPM. 3. INVESTMENT TRANSACTIONS Investment transactions, excluding short-term investments, for the six months ended September 30, 2007, were as follows: Mid Cap Value Small Cap Value Purchases $462,792,636 $1,129,904,845 Proceeds from sales $405,530,869 $1,346,195,657 - ------ 29 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the funds were as follows: Six months ended Year ended September 30, 2007 March 31, 2007 Shares Amount Shares Amount Mid Cap Value INVESTOR CLASS/SHARES AUTHORIZED 75,000,000 30,000,000 =========== =========== Sold 12,036,308 $167,108,072 15,718,995 $197,688,534 Issued in reinvestment of distributions 109,512 1,479,441 795,812 10,187,220 Redeemed (9,066,565) (125,144,800) (3,406,883) (42,428,857) ----------- ------------- ----------- ------------ 3,079,255 43,442,713 13,107,924 165,446,897 ----------- ------------- ----------- ------------ INSTITUTIONAL CLASS/SHARES AUTHORIZED 20,000,000 5,000,000 =========== =========== Sold 337,645 4,658,383 949,141 12,083,371 Issued in reinvestment of distributions 8,158 110,401 72,779 930,393 Redeemed (587,119) (7,882,327) (343,169) (4,404,834) ----------- ------------- ----------- ------------ (241,316) (3,113,543) 678,751 8,608,930 ----------- ------------- ----------- ------------ ADVISOR CLASS/SHARES AUTHORIZED 20,000,000 5,000,000 =========== =========== Sold 1,119,054 15,498,910 1,059,278 13,673,755 Issued in reinvestment of distributions 9,439 127,098 64,291 822,974 Redeemed (202,937) (2,768,655) (192,591) (2,464,200) ----------- ------------- ----------- ------------ 925,556 12,857,353 930,978 12,032,529 ----------- ------------- ----------- ------------ R CLASS/SHARES AUTHORIZED 20,000,000 5,000,000 =========== =========== Sold 107,693 1,485,936 65,138 856,761 Issued in reinvestment of distributions 355 4,758 413 5,294 Redeemed (35,213) (486,471) (6,215) (81,463) ----------- ------------- ----------- ------------ 72,835 1,004,223 59,336 780,592 ----------- ------------- ----------- ------------ Net increase (decrease) 3,836,330 $54,190,746 14,776,989 $186,868,948 =========== ============= =========== ============ - ------ 30 Six months ended Year ended September 30, 2007 March 31, 2007 Shares Amount Shares Amount Small Cap Value INVESTOR CLASS/SHARES AUTHORIZED 500,000,000 300,000,000 ============ ============ Sold 6,498,002 $66,343,904 17,671,058 $178,799,480 Issued in reinvestment of distributions 475,485 4,806,081 16,039,908 156,122,757 Redeemed (23,585,489) (239,851,944) (40,692,359) (411,004,195) ------------ -------------- ------------ ------------- (16,612,002) (168,701,959) (6,981,393) (76,081,958) ------------ -------------- ------------ ------------- INSTITUTIONAL CLASS/SHARES AUTHORIZED 150,000,000 100,000,000 ============ ============ Sold 4,821,611 49,655,535 12,204,168 124,211,238 Issued in reinvestment of distributions 190,992 1,933,972 4,925,986 48,097,957 Redeemed (7,923,043) (81,880,884) (14,549,388) (146,245,526) ------------ -------------- ------------ ------------- (2,910,440) (30,291,377) 2,580,766 26,063,669 ------------ -------------- ------------ ------------- ADVISOR CLASS/SHARES AUTHORIZED 150,000,000 125,000,000 ============ ============ Sold 2,455,792 25,087,951 7,282,047 73,933,085 Issued in reinvestment of distributions 121,871 1,229,741 5,660,010 54,914,835 Redeemed (6,650,192) (67,867,281) (13,061,989) (132,193,029) ------------ -------------- ------------ ------------- (4,072,529) (41,549,589) (119,932) (3,345,109) ------------ -------------- ------------ ------------- C CLASS/SHARES AUTHORIZED 40,000,000 5,000,000 ============ ============ Sold -- -- 389 3,984 Issued in reinvestment of distributions -- -- 45,980 427,615 Redeemed (105,572) (1,011,209) (50,491) (490,541) ------------ -------------- ------------ ------------- (105,572) (1,011,209) (4,122) (58,942) ------------ -------------- ------------ ------------- Net increase (decrease) (23,700,543) $(241,554,134) (4,524,681) $(53,422,340) ============ ============== ============ ============= 5. SECURITIES LENDING As of September 30, 2007, securities in Mid Cap Value and Small Cap Value valued at $12,046,231 and $288,193,163, respectively, were on loan through the lending agent, JPMCB, to certain approved borrowers. JPMCB receives and maintains collateral in the form of cash and/or acceptable securities as approved by ACIM. Cash collateral is invested in authorized investments by the lending agent in a pooled account. The value of cash collateral received at period end is disclosed in the Statement of Assets and Liabilities and investments made with the cash by the lending agent are listed in the Schedule of Investments. Any deficiencies or excess of collateral must be delivered or transferred by the member firms no later than the close of business on the next business day. The total value of all collateral received, at this date, was $12,513,536 and $298,914,394, respectively. The funds' risks in securities lending are that the borrower may not provide additional collateral when required or return the securities when due. If the borrower defaults, receipt of the collateral by the funds may be delayed or limited. - ------ 31 6. 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, 2007 follows: September 30, 2007 Share Balance Purchase Sales Realized Dividend Share Market Fund/Company 3/31/07 Cost Cost Gain (Loss) Income Balance Value Small Cap Value EFJ Inc.(1)(2) 1,325,000 $ 402,169 $ 738,016 $(145,840) -- 1,295,000 $ 7,511,000 Neoware Inc.(1)(2)(3) 920,000 1,360,552 10,226,259 2,366,574 -- 180,000 2,919,600 Odyssey HealthCare, Inc.(2) -- 22,128,925 471,447 (70,838) -- 1,812,121 17,414,483 Patriot Capital Funding, Inc.(1)(3) 1,180,000 912,754 10,306,417 518,301 $336,000 500,000 6,685,000 ----------- ----------- ---------- -------- ----------- $24,804,400 $21,742,139 $2,668,197 $336,000 $34,530,083 =========== =========== ========== ======== =========== (1) Security, or a portion thereof, was on loan as of September 30, 2007. (2) Non-income producing. (3) Company was not an affiliate at September 30, 2007. 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 0.40%. The funds did not borrow from the line during the six months ended September 30, 2007. 8. 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. There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social, and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions. - ------ 32 9. 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, 2007, the components of investments for federal income tax purposes were as follows: Mid Cap Value Small Cap Value Federal tax cost of investments $421,682,647 $2,143,263,130 ============= =============== Gross tax appreciation of investments $15,824,865 $186,676,419 Gross tax depreciation of investments (20,687,801) (130,889,678) ------------- --------------- Net tax appreciation (depreciation) of investments $(4,862,936) $55,786,741 ============= =============== 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. Mid Cap Value had currency loss deferrals of $(8,200), which represents net capital losses incurred in the five-month period ended March 31, 2007. Mid Cap Value has elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. 10. CORPORATE EVENT On July 27, 2007, the C Class shareholders of Small Cap Value approved a reclassification of C Class shares into Advisor Class shares. The reclassification is expected to be effective December 3, 2007. The change was approved by the Board of Directors on November 29, 2006 and March 7, 2007. 11. 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. Management has concluded that the adoption of FIN 48 will not materially impact the financial statements. 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 that adopting FAS 157 will have on the financial statement disclosures. - ------ 33 FINANCIAL HIGHLIGHTS Mid Cap Value Investor Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004(2) PER-SHARE DATA Net Asset Value, Beginning of Period $13.33 $12.10 $11.32 $10.02 $10.00 -------- -------- -------- ------- -------- Income From Investment Operations Net Investment Income (Loss)(3) 0.08 0.16 0.21 0.09 --(4) Net Realized and Unrealized Gain (Loss) 0.27 1.87 1.70 1.54 0.02 -------- -------- -------- ------- -------- Total From Investment Operations 0.35 2.03 1.91 1.63 0.02 -------- -------- -------- ------- -------- Distributions From Net Investment Income (0.07) (0.14) (0.21) (0.06) -- From Net Realized Gains -- (0.66) (0.92) (0.27) -- -------- -------- -------- ------- -------- Total Distributions (0.07) (0.80) (1.13) (0.33) -- -------- -------- -------- ------- -------- Net Asset Value, End of Period $13.61 $13.33 $12.10 $11.32 $10.02 ======== ======== ======== ======= ======== TOTAL RETURN(5) 2.66% 17.12% 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% 1.00%(6) Ratio of Net Investment Income (Loss) to Average Net Assets 1.17%(6) 1.30% 1.77% 0.83% 0.00%(6) Portfolio Turnover Rate 107% 187% 228% 192% 0% Net Assets, End of Period (in thousands) $349,948 $301,642 $115,262 $42,059 $1,619 (1) Six months ended September 30, 2007 (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. - ------ 34 Mid Cap Value Institutional Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005(2) PER-SHARE DATA Net Asset Value, Beginning of Period $13.33 $12.10 $11.33 $10.07 -------- ------- ------- -------- Income From Investment Operations Net Investment Income (Loss)(3) 0.09 0.19 0.24 0.07 Net Realized and Unrealized Gain (Loss) 0.28 1.87 1.69 1.51 -------- ------- ------- -------- Total From Investment Operations 0.37 2.06 1.93 1.58 -------- ------- ------- -------- Distributions From Net Investment Income (0.09) (0.17) (0.24) (0.05) From Net Realized Gains -- (0.66) (0.92) (0.27) -------- ------- ------- -------- Total Distributions (0.09) (0.83) (1.16) (0.32) -------- ------- ------- -------- Net Asset Value, End of Period $13.61 $13.33 $12.10 $11.33 ======== ======= ======= ======== TOTAL RETURN(4) 2.76% 17.36% 17.74% 15.82% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.80%(5) 0.80% 0.80% 0.80%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.37%(5) 1.50% 1.97% 1.00%(5) Portfolio Turnover Rate 107% 187% 228% 192%(6) Net Assets, End of Period (in thousands) $17,777 $20,623 $10,510 $8,082 (1) Six months ended September 30, 2007 (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. - ------ 35 Mid Cap Value Advisor Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005(2) PER-SHARE DATA Net Asset Value, Beginning of Period $13.33 $12.10 $11.32 $10.99 -------- ------- ------ -------- Income From Investment Operations Net Investment Income (Loss)(3) 0.06 0.14 0.16 0.03 Net Realized and Unrealized Gain (Loss) 0.28 1.86 1.72 0.31 -------- ------- ------ -------- Total From Investment Operations 0.34 2.00 1.88 0.34 -------- ------- ------ -------- Distributions From Net Investment Income (0.06) (0.11) (0.18) (0.01) From Net Realized Gains -- (0.66) (0.92) -- -------- ------- ------ -------- Total Distributions (0.06) (0.77) (1.10) (0.01) -------- ------- ------ -------- Net Asset Value, End of Period $13.61 $13.33 $12.10 $11.32 ======== ======= ====== ======== TOTAL RETURN(4) 2.53% 16.83% 17.32% 3.05% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.25%(5) 1.25% 1.25% 1.25%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 0.92%(5) 1.05% 1.52% 1.34%(5) Portfolio Turnover Rate 107% 187% 228% 192%(6) Net Assets, End of Period (in thousands) $34,462 $21,412 $8,175 $1,057 (1) Six months ended September 30, 2007 (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. - ------ 36 Mid Cap Value R Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006(2) PER-SHARE DATA Net Asset Value, Beginning of Period $13.32 $12.09 $12.21 ---------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(3) 0.05 0.13 0.07 Net Realized and Unrealized Gain (Loss) 0.28 1.84 0.79 ---------- -------- -------- Total From Investment Operations 0.33 1.97 0.86 ---------- -------- -------- Distributions From Net Investment Income (0.04) (0.08) (0.06) From Net Realized Gains -- (0.66) (0.92) ---------- -------- -------- Total Distributions (0.04) (0.74) (0.98) ---------- -------- -------- Net Asset Value, End of Period $13.61 $13.32 $12.09 ========== ======== ======== TOTAL RETURN(4) 2.48% 16.55% 7.56% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.50%(5) 1.50% 1.50%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 0.67%(5) 0.80% 0.97%(5) Portfolio Turnover Rate 107% 187% 228%(6) Net Assets, End of Period $1,828,665 $820,196 $27 (1) Six months ended September 30, 2007 (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 Small Cap Value Investor Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $10.01 $10.45 $10.07 $9.71 $6.44 $8.62 -------- -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.04 0.06 0.06 0.03 0.05 0.03 Net Realized and Unrealized Gain (Loss) 0.02 0.87 1.72 1.31 3.26 (1.87) -------- -------- -------- -------- -------- -------- Total From Investment Operations 0.06 0.93 1.78 1.34 3.31 (1.84) -------- -------- -------- -------- -------- -------- Distributions From Net Investment Income (0.04) (0.04) (0.06) (0.03) (0.04) (0.02) From Net Realized Gains -- (1.33) (1.34) (0.95) -- (0.32) -------- -------- -------- -------- -------- -------- Total Distributions (0.04) (1.37) (1.40) (0.98) (0.04) (0.34) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period $10.03 $10.01 $10.45 $10.07 $9.71 $6.44 ======== ======== ======== ======== ======== ======== TOTAL RETURN(3) 0.62% 9.38% 18.67% 14.00% 51.53% (21.55)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.26%(4) 1.25% 1.25% 1.25% 1.26% 1.25% Ratio of Net Investment Income (Loss) to Average Net Assets 0.80%(4) 0.57% 0.58% 0.32% 0.59% 0.37% Portfolio Turnover Rate 56% 121% 111% 108% 110% 104% Net Assets, End of Period (in thousands) $1,096,912 $1,261,392 $1,390,024 $1,252,153 $1,050,500 $670,755 (1) Six months ended September 30, 2007 (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 Small Cap Value Institutional Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $10.03 $10.47 $10.08 $9.72 $6.45 $8.63 -------- -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.05 0.08 0.08 0.05 0.07 0.04 Net Realized and Unrealized Gain (Loss) 0.02 0.87 1.73 1.31 3.26 (1.87) -------- -------- -------- -------- -------- -------- Total From Investment Operations 0.07 0.95 1.81 1.36 3.33 (1.83) -------- -------- -------- -------- -------- -------- Distributions From Net Investment Income (0.05) (0.06) (0.08) (0.05) (0.06) (0.03) From Net Realized Gains -- (1.33) (1.34) (0.95) -- (0.32) -------- -------- -------- -------- -------- -------- Total Distributions (0.05) (1.39) (1.42) (1.00) (0.06) (0.35) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period $10.05 $10.03 $10.47 $10.08 $9.72 $6.45 ======== ======== ======== ======== ======== ======== TOTAL RETURN(3) 0.72% 9.52% 18.98% 14.20% 51.75% (21.38)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.06%(4) 1.05% 1.05% 1.05% 1.06% 1.05% Ratio of Net Investment Income (Loss) to Average Net Assets 1.00%(4) 0.77% 0.78% 0.52% 0.79% 0.57% Portfolio Turnover Rate 56% 121% 111% 108% 110% 104% Net Assets, End of Period (in thousands) $414,672 $443,173 $435,327 $314,700 $170,784 $79,546 (1) Six months ended September 30, 2007 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 39 Small Cap Value Advisor Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 $10.45 $10.06 $9.71 $6.43 $8.62 -------- -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.03 0.03 0.03 0.01 0.03 0.01 Net Realized and Unrealized Gain (Loss) 0.01 0.87 1.74 1.30 3.27 (1.87) -------- -------- -------- -------- -------- -------- Total From Investment Operations 0.04 0.90 1.77 1.31 3.30 (1.86) -------- -------- -------- -------- -------- -------- Distributions From Net Investment Income (0.03) (0.02) (0.04) (0.01) (0.02) (0.01) From Net Realized Gains -- (1.33) (1.34) (0.95) -- (0.32) -------- -------- -------- -------- -------- -------- Total Distributions (0.03) (1.35) (1.38) (0.96) (0.02) (0.33) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period $10.01 $10.00 $10.45 $10.06 $9.71 $6.43 ======== ======== ======== ======== ======== ======== TOTAL RETURN(3) 0.40% 9.10% 18.51% 13.70% 51.38% (21.85)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.51%(4) 1.50% 1.50% 1.50% 1.51% 1.50% Ratio of Net Investment Income (Loss) to Average Net Assets 0.55%(4) 0.32% 0.33% 0.07% 0.34% 0.12% Portfolio Turnover Rate 56% 121% 111% 108% 110% 104% Net Assets, End of Period (in thousands) $394,134 $434,182 $455,001 $624,633 $432,261 $173,064 (1) Six months ended September 30, 2007 (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 Small Cap Value C Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $9.58 $10.12 $9.83 $9.57 $6.35 $8.59 ---------- ------- ------- ------- ------- -------- Income From Investment Operations Net Investment Income (Loss)(2) (0.01) (0.04) (0.04) (0.07) (0.03) (0.04) Net Realized and Unrealized Gain (Loss) 0.02 0.83 1.67 1.28 3.25 (1.88) ---------- ------- ------- ------- ------- -------- Total From Investment Operations 0.01 0.79 1.63 1.21 3.22 (1.92) ---------- ------- ------- ------- ------- -------- Distributions From Net Realized Gains -- (1.33) (1.34) (0.95) -- (0.32) ---------- ------- ------- ------- ------- -------- Net Asset Value, End of Period $9.59 $9.58 $10.12 $9.83 $9.57 $6.35 ========== ======= ======= ======= ======== ======== TOTAL RETURN(3) 0.00% 8.35% 17.48% 12.85% 50.71% (22.58)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 2.26%(4) 2.25% 2.25% 2.25% 2.26% 2.25% Ratio of Net Investment Income (Loss) to Average Net Assets (0.20)%(4) (0.43)% (0.42)% (0.68)% (0.41)% (0.63)% Portfolio Turnover Rate 56% 121% 111% 108% 110% 104% Net Assets, End of Period (in thousands) $2,434 $3,444 $3,678 $3,470 $3,711 $2,936 (1) Six months ended September 30, 2007 (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, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 41 PROXY VOTING RESULTS A special meeting of shareholders was held on July 27, 2007, to vote on the following proposals. The proposals received the required number of votes of the American Century Capital Portfolios, Inc. or the applicable fund, depending on the proposal, and were adopted. A summary of voting results is listed below each proposal. PROPOSAL 1: To elect nine Directors to the Board of Directors of American Century Capital Portfolios, Inc. (the proposal was voted on by all shareholders of funds issued by American Century Capital Portfolios, Inc.). James E. Stowers, Jr. For: 11,443,781,487 Withhold: 252,686,939 Abstain: 0 Broker Non-Vote: 0 Jonathan S. Thomas For: 11,454,104,706 Withhold: 242,363,720 Abstain: 0 Broker Non-Vote: 0 Thomas A. Brown For: 11,456,645,347 Withhold: 239,823,079 Abstain: 0 Broker Non-Vote: 0 Andrea C. Hall For: 11,459,598,200 Withhold: 236,870,226 Abstain: 0 Broker Non-Vote: 0 James A. Olson For: 11,454,607,738 Withhold: 241,860,688 Abstain: 0 Broker Non-Vote: 0 Donald H. Pratt For: 11,450,710,462 Withhold: 245,757,964 Abstain: 0 Broker Non-Vote: 0 Gale E. Sayers For: 11,458,471,500 Withhold: 237,996,926 Abstain: 0 Broker Non-Vote: 0 M. Jeannine Strandjord For: 11,451,541,828 Withhold: 244,926,598 Abstain: 0 Broker Non-Vote: 0 Timothy S. Webster For: 11,460,198,888 Withhold: 236,269,538 Abstain: 0 Broker Non-Vote: 0 - ------ 42 PROPOSAL 2: To approve a change in the fee structure of the Advisor Class. This proposal was voted on by the Advisor Class shareholders of the following funds: Mid Cap Value Small Cap Value For: 8,998,501 214,431,392 Against: 503,620 9,620,540 Abstain: 1,401,876 5,767,927 Broker Non-Vote: 493,018 2,880,787 PROPOSAL 3: To approve the reclassification of the C Class shares of Small Cap Value, whereby all of the C Class shares will be reclassified as Advisor Class shares of that fund. This proposal was voted on by the C Class shareholders of Small Cap Value. Small Cap Value For: 1,887,559 Against: 63,460 Abstain: 87,206 Broker Non-Vote: 1,457,549 - ------ 43 APPROVAL OF MANAGEMENT AGREEMENTS 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 Mid Cap Value and Small Cap Value (the "funds") and the services provided to the funds under the management agreements. 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 agreements; * 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 agreements, including the setting of the applicable advisory fee. The board also had the benefit of the advice of its independent counsel throughout the period. - ------ 44 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 agreements 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 agreements, 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 agreements, 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 - ------ 45 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 discuss with the advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. 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 fell below the median for the one-year period and was above 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 agreements, 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. 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 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. - ------ 46 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 each fund's respective peer group. COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the funds. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the funds. The Directors analyzed this information and concluded that the fees charged and services provided to the funds were reasonable by comparison. COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information from the advisor concerning collateral benefits it receives as a result of its relationship with the funds. They concluded that the advisor's primary business is managing mutual funds and it generally does not use 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 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 agreements between the funds and the advisor are fair and reasonable in light of the services provided and should be renewed. - ------ 47 SHARE CLASS INFORMATION 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. INVESTOR CLASS shares are available for purchase in two ways: 1) directly from American Century without any commissions or other fees; and/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. The funds' prospectuses contain additional information regarding eligibility for Investor Class shares. 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. The unified management fee for Advisor Class shares is the same as for Investor Class shares. Advisor Class shares are subject to a 0.25% annual Rule 12b-1 distribution and service fee. 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 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. - ------ 48 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. - ------ 49 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 RUSSELL 1000® 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® GROWTH 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 higher price-to-book ratios and higher forecasted growth values. The RUSSELL 1000® 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 values. The RUSSELL 2000® 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® 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 values. The RUSSELL 2000® 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 values. The RUSSELL MIDCAP® INDEX measures the performance of the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization. The RUSSELL MIDCAP® GROWTH INDEX measures the performance of those Russell Midcap Index companies (the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization) with higher price-to-book ratios and higher forecasted growth values. The RUSSELL MIDCAP® VALUE INDEX measures the performance of those Russell Midcap Index companies (the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values. - ------ 50 NOTES - ------ 51 [back cover] 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 P.O. Box 419200 Kansas City, MO 64141-6200 PRSRT STD U.S. POSTAGE PAID AMERICAN CENTURY COMPANIES American Century Investment Services, Inc., Distributor ©2007 American Century Proprietary Holdings, Inc. All rights reserved. The American Century Investments logo, American Century and American Century Investments are service marks of American Century Proprietary Holdings, Inc. 0711 SH-SAN-56795S
[front cover] AMERICAN CENTURY INVESTMENTS Semiannual Report September 30, 2007 [photo of fall] Equity Income Fund Value Fund Large Company Value Fund [american century investments logo and text logo] OUR MESSAGE TO YOU To help you monitor your investment, my colleagues and I take pride in providing you with the semiannual report for the American Century® Equity Income, Value, and Large Company Value funds for the six months ended September 30, 2007. This has been an eventful and exciting period for us. We've been working diligently to secure a smooth executive leadership transition. I'm honored to be addressing you in the "Our Message" space long devoted to company founder Jim Stowers, Jr. and his son Jim Stowers III. The Stowers family remains an integral part of our heritage, leadership, and financial structure. Jim Jr. continues as co-chair of the American Century Companies, Inc. (ACC) board of directors with Richard Brown, who has been on the board since 1998 and co-chairs the Stowers Institute for Medical Research board. But times and opportunities change. As the latest step in a career transition that began when he relinquished his executive leadership and investment management responsibilities in early 2005, Jim III stepped down from the ACC board in July 2007 to focus on new business ventures. Jim III's move reflects his family's comfort with our direction and leadership, and gives the Stowers more leeway to devote time and energy to other important priorities, such as the Stowers Institute for Medical Research. Meanwhile, American Century Investments, our clients, and our employees have been my top priority since I became company president and CEO in March. We've also added the executive talents of overall chief investment officer Enrique Chang, international equity CIO Mark On, U.S. growth equity CIO Steve Lurito, and chief operating officer Barry Fink. This skilled group, combined with our existing senior management team, has already had a positive impact on the development and management of the products and services we take pride in delivering to you. /s/Jonathan Thomas Jonathan Thomas [photo of Jonathan Thomas] Jonathan Thomas PRESIDENT AMERICAN CENTURY COMPANIES, INC. [photo of James E. Stowers, Jr.] James E. Stowers, Jr. FOUNDER AND CO-CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. [photo of Richard Brown] Richard Brown CO-CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. TABLE OF CONTENTS Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . 2 U.S. Stock Index 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 VALUE Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 13 Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Top Five Industries. . . . . . . . . . . . . . . . . . . . . . . . . 14 Types of Investments in Portfolio. . . . . . . . . . . . . . . . . . 14 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 15 LARGE COMPANY 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. . . . . . . . . . . . . . . . . . . . . . . 25 FINANCIAL STATEMENTS Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 28 Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 30 Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 31 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 33 Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 42 OTHER INFORMATION Proxy Voting Results. . . . . . . . . . . . . . . . . . . . . . . . . 60 Approval of Management Agreements for Equity Income, Value and Large Company Value. . . . . . . . . . . . . . . . . . . . 62 Share Class Information . . . . . . . . . . . . . . . . . . . . . . . 66 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 68 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 69 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 Enrique Chang, Chief Investment Officer, American Century Investments STOCKS ADVANCED IN A VOLATILE ENVIRONMENT U.S. stocks produced positive results for the six months ended September 30, 2007, overcoming a confluence of challenges that led to extraordinary market volatility. The stock market enjoyed a steady rally during the first half of the six-month period thanks to corporate earnings growth, which decelerated but continued to surpass expectations. Robust merger activity also boosted stocks as leveraged buy-outs from private equity firms put the volume of deal-making ahead of last year's record pace. After reaching all-time highs in mid-July, however, the major stock indexes declined sharply as worsening problems in the subprime mortgage market led to a credit crisis that threatened to derail the economic expansion. Tighter lending standards crimped funding for leveraged buy-outs, removing an important leg of support for the stock market, and rising energy and commodity prices sparked inflation worries despite slowing economic activity. As investors grew increasingly risk-averse, the Federal Reserve (the Fed) stepped in to provide a measure of relief and comfort. The Fed lowered its discount rate in mid-August and federal funds rate target in September -- the Fed's first rate cuts since June 2003. The Fed's actions helped alleviate some of the credit and economic concerns, allowing the major stock indexes to stage a solid recovery during the final six weeks of the period. LARGE-CAP AND GROWTH OUTPERFORMED Large-cap stocks delivered the best returns (see the accompanying table), followed by mid- and small-cap issues. Growth stocks, which have trailed value issues for much of the decade, enjoyed a resurgence during the six-month period, outpacing value shares by a wide margin across all market capitalizations. Energy was the best-performing sector in the stock market during the period, benefiting from a 24% increase in the price of oil. Information technology and industrials stocks also fared well. The only two sectors of the market to decline during the period were financials and consumer discretionary. U.S. Stock Index Returns For the six months ended September 30, 2007* RUSSELL 1000 INDEX (LARGE-CAP) 7.99% Russell 1000 Growth Index 11.35% Russell 1000 Value Index 4.67% RUSSELL MIDCAP INDEX 4.89% Russell Midcap Growth Index 9.03% Russell Midcap Value Index -0.03% RUSSELL 2000 INDEX (SMALL-CAP) 1.19% Russell 2000 Growth Index 6.70% Russell 2000 Value Index -4.10% *Total returns for periods less than one year are not annualized. - ------ 2 PERFORMANCE Equity Income Total Returns as of September 30, 2007 Average Annual Returns 6 10 Since Inception months(1) 1 year 5 years years Inception Date INVESTOR CLASS 5.17% 12.81% 14.42% 10.51% 13.74% 8/1/94 RUSSELL 3000 VALUE INDEX(2) 3.90% 13.73% 18.10% 8.84% 12.88%(3) -- S&P 500 INDEX(2) 8.44% 16.44% 15.45% 6.57% 11.53%(3) -- LIPPER EQUITY INCOME FUNDS INDEX(2) 6.16% 15.23% 15.65% 6.90% 10.35%(3) -- Institutional Class 5.28% 13.02% 14.64% -- 10.61% 7/8/98 A Class(4) No sales charge* 5.04% 12.53% 14.13% 10.23% 11.61% With sales charge* -1.02% 6.05% 12.78% 9.58% 10.99% 3/7/97 B Class(1) No sales charge* -- -- -- -- 0.00% With sales charge* -- -- -- -- -5.00% 9/28/07 C Class No sales charge* 4.65% 11.69% 13.30% -- 9.05% With sales charge* 3.65% 11.69% 13.30% -- 9.05% 7/13/01 R Class 4.92% 12.27% -- -- 12.02% 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. ©2007 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) Prior to September 4, 2007, the A Class was referred to as the Advisor Class. Performance, with sales charge, prior to that date has been adjusted to reflect the A Class's current sales charge. 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. International investing involves special risks, such as political instability and currency fluctuations. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. - ------ 3 Equity Income Growth of $10,000 Over 10 Years $10,000 investment made September 30, 1997
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One-Year Returns Over 10 Years Periods ended September 30 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Investor Class 1.67% 15.98% 6.80% 14.30% -3.72% 20.17% 17.22% 8.79% 13.47% 12.81% Russell 3000 Value Index 1.96% 17.64% 9.35% -7.98% -15.89% 24.89% 20.89% 16.78% 14.55% 13.73% S&P 500 Index 9.05% 27.80% 13.28% -26.62% -20.49% 24.40% 13.87% 12.25% 10.79% 16.44% Lipper Equity Income Funds Index 1.29% 13.36% 8.10% -8.82% -16.74% 20.48% 17.09% 13.52% 12.09% 15.23% 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. International investing involves special risks, such as political instability and currency fluctuations. 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 PORTFOLIO COMMENTARY Equity Income Portfolio Managers: Phil Davidson, Kevin Toney, and Scott Moore PERFORMANCE SUMMARY Equity Income gained 5.17%* for the six months ended September 30, 2007. By comparison, the Lipper Equity Income Funds Index and the median for Morningstar's Large Cap Value category (whose performance, like Equity Income's, reflects fund operating expenses) advanced 6.16% and 5.54%,** respectively. Two market indices -- the Russell 3000 Value Index and the S&P 500 Index -- gained 3.90% and 8.44%, respectively. The portfolio's returns reflect operating expenses, while the indices' returns do not. The portfolio's solid return was achieved in the challenging market environment described in the Market Perspective on page 2. Overall, growth stocks outperformed value across the capitalization spectrum and investors favored stocks with lower dividend yields. In the volatility that characterized the second half of the period, they gravitated toward lower-beta names. Equity Income performed well, largely because of our focus on higher-quality businesses with sound balance sheets. In addition, during the reporting period, the portfolio's small portion of international holdings also contributed to results. Over time, our disciplined investment approach has provided longer-term investors with solid performance. Since Equity Income's inception on August 1, 1994, the portfolio has produced an average annualized return of 13.74%, topping the returns for that period for the Lipper Equity Income Funds Index, Morningstar's Large Cap Value category median, the Russell 3000 Value Index, and the S&P 500 (see performance information on pages 3 - 4). UNDERWEIGHT POSITION IN FINANCIALS ENHANCED RESULTS Our underweight position in financials, coupled with effective security selection, added value from a sector that trailed all others in the benchmark. Many financial firms came under pressure amid the fallout in the subprime lending category and suffered further in the credit crisis that followed. However, our emphasis on quality helped the portfolio steer clear of firms most exposed to the troubled subprime area. Within the sector, Equity Income benefited from a limited exposure to real estate investment trusts (REITS), which were down more than 9%. In addition, we held only a modest position in Citigroup, which comprises a large part of the benchmark. Citigroup's shares declined as the firm reported sizeable write-downs of loan commitments and increased credit losses during the period. Top Ten Holdings as of September 30, 2007 % of net % of net assets as of assets as of 9/30/07 3/31/07 General Electric Co. 5.7% 4.9% Exxon Mobil Corp. 4.1% 4.4% BP plc(1) 3.6% 2.6% Fannie Mae, 5.375%, 1/5/08 (Conv. Pref.) 3.6% 2.7% Freddie Mac 3.6% 3.7% AT&T Inc. 3.3% 3.4% Southern Co. 3.2% 1.9% United Parcel Service, Inc. Cl B 2.8% 2.5% Bank of America Corp. 2.8% 2.9% Kraft Foods Inc. Cl A 2.7% 2.5% (1) Includes shares traded on all exchanges. * 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 14.37%, 15.93% and 7.26% for the one-, five- and ten-year periods ended September 30, 2007, respectively, and 10.91% since the fund's inception. ©2007 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers: (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. - ------ 5 Equity Income CONSUMER DISCRETIONARY CONTRIBUTED The portfolio's results were aided by our relatively small allocation to the consumer discretionary sector, which was one of the weakest in the benchmark. Many investors shied away from these stocks in response to the housing downturn and slowing economic growth. Our performance benefited from a lack of exposure to homebuilders and media companies, as well as an underweight position in retailers -- all segments that provided negative returns for the benchmark. STRONG STOCK SELECTION ADDED VALUE The utilities sector provided a top performer in Virginia-based Dominion Resources, which provides gas and electric services primarily in the mid-Atlantic region. During the third quarter, the company used proceeds from the sale of some of its exploration and production businesses to repurchase roughly 16% of its outstanding shares through a Dutch auction, in which we participated. In the telecommunications sector, we owned Canada-based communications company, BCE. BCE's share price increased on news that the company would be acquired by Ontario Teachers' Pension Plan Board and affiliates of Providence Equity Partners and Madison Dearborn Partners at a significant premium. ENERGY AND CONSUMER STAPLES DETRACTED The portfolio's mix of companies in the energy sector, which was the best performer in the benchmark, hindered results. Because of valuations, we held an underweight position in higher-beta exploration and production companies whose shares rose on record oil prices. Our relative progress was also slowed by a modest underweight position in major integrated oil and gas companies, whose performance boosted the benchmark's progress. In consumer staples, an overweight position in UST, the leading producer of smokeless tobacco products, hampered results. The stock declined after tobacco company Philip Morris USA announced plans to test-market a Marlboro-branded moist smokeless tobacco. STARTING POINT FOR NEXT REPORTING PERIOD Your management team follows a disciplined, bottom-up process, selecting companies one at a time for the portfolio. As of September 30, 2007, we continued to see attractive opportunities in industrials, utilities, and consumer staples companies, reflected in our overweight positions in these sectors. With the reach of the debt market crisis still uncertain, we are being extremely selective in our ownership of financials and consumer discretionary companies, relying on our fundamental analysis to identify strong, financially sound businesses whose securities provide attractive yields. Top Five Industries as of September 30, 2007 % of net % of net assets as of assets as of 9/30/07 3/31/07 Oil, Gas & Consumable Fuels 13.4% 11.4% Food Products 8.9% 6.1% Pharmaceuticals 8.1% 7.2% Thrifts & Mortgage Finance 8.0% 7.0% Commercial Banks 7.3% 8.8% Types of Investments in Portfolio % of net % of net assets as of assets as of 9/30/07 3/31/07 Common Stocks and Options 78.7% 76.9% Convertible Bonds 14.1% 16.6% Convertible Preferred Stocks 5.5% 4.4% TOTAL EQUITY EXPOSURE 98.3% 97.9% Temporary Cash Investments 2.9% 1.4% Other Assets and Liabilities* (1.2)% 0.7% * Includes securities lending collateral and other assets and liabilities. - ------ 6 SCHEDULE OF INVESTMENTS Equity Income SEPTEMBER 30, 2007 (UNAUDITED) Shares/Principal Amount Value Common Stocks -- 78.7% AIR FREIGHT & LOGISTICS -- 2.8% 2,580,506 United Parcel Service, Inc. Cl B $ 193,796,001 -------------- AUTOMOBILES -- 0.3% 551,700 Honda Motor Co., Ltd. ORD 18,557,466 -------------- BUILDING PRODUCTS -- 0.7% 2,072,000 Masco Corp.(1) 48,008,240 -------------- CAPITAL MARKETS -- 0.6% 571,400 Merrill Lynch & Co., Inc. 40,729,392 -------------- CHEMICALS -- 0.3% 388,300 Rohm and Haas Co. 21,616,661 -------------- COMMERCIAL BANKS -- 7.3% 2,534,300 Associated Banc-Corp. 75,091,309 3,553,739 Commerce Bancshares, Inc.(1)(2) 163,081,083 1,846,700 Marshall & Ilsley Corp. 80,830,059 1,824,108 SunTrust Banks, Inc. 138,030,252 1,376,100 U.S. Bancorp 44,764,533 -------------- 501,797,236 -------------- COMMERCIAL SERVICES & SUPPLIES -- 2.9% 2,878,200 Pitney Bowes, Inc. 130,727,845 726,561 Republic Services, Inc. 23,765,810 1,212,645 Waste Management, Inc. 45,765,222 -------------- 200,258,877 -------------- CONTAINERS & PACKAGING -- 0.4% 878,600 Bemis Co., Inc. 25,576,046 -------------- DISTRIBUTORS -- 0.4% 534,300 Genuine Parts Company 26,715,000 -------------- DIVERSIFIED FINANCIAL SERVICES -- 2.9% 3,804,800 Bank of America Corp. 191,267,296 174,600 McGraw-Hill Companies, Inc. (The) 8,888,886 -------------- 200,156,182 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.4% 5,395,600 AT&T Inc. 228,287,836 261,243 Iowa Telecommunications Services Inc.(1) 5,185,674 -------------- 233,473,510 -------------- Shares/Principal Amount Value ELECTRIC UTILITIES -- 5.8% 290,300 IDACORP, Inc.(1) $ 9,504,422 2,473,143 Portland General Electric Co. 68,753,375 5,987,200 Southern Co. 217,215,617 4,247,349 Westar Energy Inc.(1)(2) 104,314,891 -------------- 399,788,305 -------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.3% 202,400 Molex Inc. 5,450,632 674,000 Molex Inc. Cl A(1) 17,092,640 -------------- 22,543,272 -------------- FOOD & STAPLES RETAILING -- 1.5% 2,268,816 Wal-Mart Stores, Inc. 99,033,818 -------------- FOOD PRODUCTS -- 8.6% 4,367,921 Campbell Soup Co. 161,613,077 3,638,000 H.J. Heinz Co. 168,075,600 1,500,300 Hershey Co. (The) 69,628,923 5,428,756 Kraft Foods Inc. Cl A 187,346,369 -------------- 586,663,969 -------------- GAS UTILITIES -- 2.4% 930,100 Nicor Inc.(1) 39,901,290 1,719,741 Piedmont Natural Gas Co., Inc.(1) 43,148,302 2,411,200 WGL Holdings Inc.(1)(2) 81,715,568 -------------- 164,765,160 -------------- HOUSEHOLD PRODUCTS -- 2.3% 230,100 Clorox Company 14,033,799 1,456,100 Colgate-Palmolive Co. 103,849,052 612,500 Kimberly-Clark Corp. 43,034,250 -------------- 160,917,101 -------------- INDUSTRIAL CONGLOMERATES -- 6.4% 533,700 3M Co. 49,943,646 9,482,500 General Electric Co. 392,575,500 -------------- 442,519,146 -------------- INSURANCE -- 3.2% 927,700 Allstate Corp. 53,055,163 343,200 American International Group, Inc. 23,217,480 5,459,880 Marsh & McLennan Companies, Inc. 139,226,940 100,600 MBIA Inc.(1) 6,141,630 -------------- 221,641,213 -------------- IT SERVICES -- 0.4% 219,900 International Business Machines Corp. 25,904,220 -------------- - ------ 7 Equity Income Shares/Principal Amount Value MACHINERY -- 0.2% 275,000 Dover Corp. $ 14,011,250 -------------- MULTI-UTILITIES -- 1.6% 1,373,914 Consolidated Edison, Inc. 63,612,218 707,900 Puget Energy, Inc. 17,322,313 1,441,600 XCEL Energy Inc. 31,052,064 -------------- 111,986,595 -------------- OIL, GAS & CONSUMABLE FUELS -- 9.0% 2,037,800 BP plc ADR 141,321,430 9,364,800 BP plc ORD 108,703,274 3,002,679 Exxon Mobil Corp. 277,927,967 2,109,000 Royal Dutch Shell plc ORD 87,051,447 -------------- 615,004,118 -------------- PAPER & FOREST PRODUCTS -- 0.3% 225,200 Weyerhaeuser Co. 16,281,960 -------------- PHARMACEUTICALS -- 7.7% 1,945,600 Abbott Laboratories 104,323,072 2,020,700 Bristol-Myers Squibb Co. 58,236,574 2,162,800 Johnson & Johnson 142,095,961 1,826,041 Merck & Co., Inc. 94,388,059 5,305,396 Pfizer Inc. 129,610,824 -------------- 528,654,490 -------------- REAL ESTATE INVESTMENT TRUSTS -- 0.6% 837,550 Rayonier, Inc. 40,235,902 -------------- THRIFTS & MORTGAGE FINANCE -- 4.4% 4,177,000 Freddie Mac 246,484,770 1,253,782 People's United Financial, Inc. 21,665,353 1,402,573 Washington Federal, Inc.(1) 36,831,567 -------------- 304,981,690 -------------- TOBACCO -- 2.0% 2,665,200 UST Inc. 132,193,920 -------------- TOTAL COMMON STOCKS (Cost $4,863,333,001) 5,397,810,740 -------------- Convertible Bonds -- 14.1% AIRLINES -- 0.1% $ 453,900 Morgan Stanley, (convertible into Southwest Airlines Co.), 3.75%, 11/9/07 (Acquired 5/2/07, Cost $6,631,479)(3)(4) 6,822,117 -------------- BIOTECHNOLOGY -- 0.2% 185,000 Morgan Stanley, (convertible into Amgen Inc.), 3.40%, 11/23/07 (Acquired 5/16/07, Cost $10,054,750)(3)(4) 10,513,550 -------------- Shares/Principal Amount Value CAPITAL MARKETS -- 0.4% $ 781,000 Deutsche Bank AG (London), (convertible into Schwab (Charles) Corp.), 15.75%, 2/1/08 (Acquired 8/2/07, Cost $15,042,060)(3)(4) $ 16,003,082 100,000 Natixis Financial Products, (convertible into Bear Stearns Companies Inc. (The)), 15.00%, 3/13/08 (Acquired 9/6/07, Cost $10,806,000)(3)(4) 11,697,650 -------------- 27,700,732 -------------- COMMERCIAL SERVICES & SUPPLIES -- 0.5% 28,318,000 Waste Connections Inc., 3.75%, 4/1/26 31,857,750 -------------- COMMUNICATIONS EQUIPMENT -- 0.2% 688,000 Credit Suisse New York, (convertible into Motorola, Inc.), 5.85%, 10/26/07(4) 12,810,560 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.7% 464,800 Bank of America N.A., (convertible into Verizon Communications Inc.), 6.15%, 12/13/07(4) 20,736,586 577,700 Natixis Financial Products, (convertible into Verizon Communications Inc.), 12.16%, 2/4/08 (Acquired 7/30/07, Cost $23,864,787)(3)(4) 25,057,738 -------------- 45,794,324 -------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.2% 500,000 Credit Suisse New York, (convertible into Molex Inc.), 5.61%, 12/14/07(4) 13,682,500 -------------- FOOD & STAPLES RETAILING -- 1.3% 514,000 Bank of America N.A., (convertible into Wal-Mart Stores, Inc.), 4.84%, 11/7/07 (Acquired 5/2/07, Cost $24,954,700)(3)(4) 22,721,881 1,137,000 Bank of America N.A., (convertible into Wal-Mart Stores, Inc.), 9.40%, 12/15/08(4) 50,705,652 422,500 Wachovia Bank N.A., (convertible into Wal-Mart Stores, Inc.), 4.10%, 12/5/07 (Acquired 5/30/07, Cost $19,730,750)(3)(4) 18,566,763 -------------- 91,994,296 -------------- - ------ 8 Equity Income Shares/Principal Amount Value FOOD PRODUCTS -- 0.3% $ 189,000 Deutsche Bank AG (London), (convertible into Hershey Co. (The)), 5.31%, 11/20/07 (Acquired 5/10/07, Cost $10,001,880)(3)(4) $ 8,885,835 227,000 Deutsche Bank AG (London), (convertible into Hershey Co. (The)), 5.91%, 1/18/08 (Acquired 7/19/07, Cost $10,998,150)(3)(4) 10,762,978 -------------- 19,648,813 -------------- HEALTH CARE PROVIDERS & SERVICES -- 1.8% 3,017,000 LifePoint Hospitals Inc., 3.50%, 5/15/14 2,700,215 126,287,000 Lincare Holdings Inc., 3.00%, 6/15/33 125,339,848 -------------- 128,040,063 -------------- INSURANCE -- 1.1% 611,700 Allegro Investment Corp. SA (convertible into Marsh & McLennan Companies, Inc.), 11.70%, 2/8/08 (Acquired 8/3/07, Cost $16,944,090)(3)(4) 16,444,020 861,400 Deutsche Bank AG (London), (convertible into Marsh & McLennan Companies, Inc.), 7.28%, 3/6/08 (Acquired 9/6/07, Cost $22,999,380)(3)(4) 22,451,098 743,000 Lehman Brothers Holdings Inc., (convertible into Marsh & McLennan Companies, Inc.), 12.50%, 2/14/08 (Acquired 8/7/07, Cost $19,793,520)(3)(4) 19,459,170 344,000 Morgan Stanley, (convertible into American International Group, Inc.), 3.30%, 11/19/07 (Acquired 5/11/07, Cost $25,019,120)(3)(4) 23,376,518 -------------- 81,730,806 -------------- LIFE SCIENCES TOOLS & SERVICES -- 0.4% 25,000,000 Invitrogen Corp., 3.25%, 6/15/25 27,000,000 -------------- Shares/Principal Amount Value OIL, GAS & CONSUMABLE FUELS -- 4.4% $ 40,258,000 Devon Energy Corporation, (convertible into Chevron Corp.), 4.90%, 8/15/08(4) $ 70,501,823 40,257,000 Devon Energy Corporation, (convertible into Chevron Corp.), 4.95%, 8/15/08(4) 70,500,072 135,390,000 Peabody Energy Corp., 4.75%, 12/15/66(1)(5) 142,836,449 19,686,000 St. Mary Land & Exploration Co., 3.50%, 4/1/27 19,218,458 -------------- 303,056,802 -------------- PHARMACEUTICALS -- 0.4% 821,700 Wachovia Bank N.A. (convertible into Bristol-Myers Squibb Co.), 10.75%, 1/31/08 (Acquired 7/26/07, Cost $24,922,161)(3)(4) 24,277,127 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.2% 76,143,000 Intel Corp., 2.95%, 12/15/35 79,188,720 -------------- SPECIALTY RETAIL -- 0.3% 840,000 Morgan Stanley, (convertible into Lowe's Companies, Inc.), 9.00%, 4/2/08 (Acquired 9/25/07, Cost $24,194,352)(3)(4)(6) 23,973,601 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.6% 2,272,700 Credit Suisse New York, (convertible into Sprint Nextel Corp.), 5.18%, 3/14/08(4) 42,454,036 -------------- TOTAL CONVERTIBLE BONDS (Cost $887,789,072) 970,545,797 -------------- Convertible Preferred Stocks -- 5.5% AEROSPACE & DEFENSE -- 1.2% 574,500 Northrop Grumman Corp., 7.00%, 4/4/21 82,986,525 -------------- HOUSEHOLD DURABLES -- 0.7% 1,038,900 Newell Financial Trust I, 5.25%, 12/1/27 48,698,438 -------------- THRIFTS & MORTGAGE FINANCE -- 3.6% 2,520 Fannie Mae, 5.375%, 1/5/08 247,090,744 -------------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $366,887,043) 378,775,707 -------------- - ------ 9 Equity Income Shares/Principal Amount Value Temporary Cash Investments -- 2.9% $ 80,500,000 FHLB Discount Notes, 4.00%, 10/1/07(7) $ 80,500,000 Repurchase Agreement, Merrill Lynch & Co., Inc., (collateralized by various U.S. Treasury obligations, 2.375%, 4/15/11, valued at $121,825,870), in a joint trading account at 3.75%, dated 9/28/07, due 10/1/07 (Delivery value $119,237,250) 119,200,000 -------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $199,700,000) 199,700,000 -------------- Shares/Principal Amount Value Temporary Cash Investments -- Securities Lending Collateral(8) -- 2.1% Repurchase Agreement, Lehman Brothers, Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.15%, dated 9/28/07, due 10/1/07 (Delivery value $141,540,197) (Cost $141,479,479) $ 141,479,479 -------------- TOTAL INVESTMENT SECURITIES -- 103.3% (Cost $6,459,188,595) 7,088,311,723 -------------- OTHER ASSETS AND LIABILITIES -- (3.3)% (226,952,862) -------------- TOTAL NET ASSETS -- 100.0% $6,861,358,861 ============== Forward Foreign Currency Exchange Contracts Unrealized Gain Contracts to Sell Settlement Date Value (Loss) 148,601,745 GBP for USD 10/31/07 $303,755,876 $(4,238,657) 1,366,285,050 JPY for USD 10/31/07 11,949,661 (65,511) ------------ ------------- $315,705,537 $(4,304,168) ============ ============= (Value on Settlement Date $311,401,369) Notes to Schedule of Investments ADR = American Depositary Receipt FHLB = Federal Home Loan Bank GBP = British Pound JPY = Japanese Yen ORD = Foreign Ordinary Share USD = United States Dollar (1) Security, or a portion thereof, was on loan as of September 30, 2007. (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. (3) 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, 2007, was $261,013,128, which represented 3.8% of total net assets. (4) Equity-linked debt security. The aggregated value of these securities at September 30, 2007, was $542,404,357, which represented 7.9% of total net assets. (5) Security, or a portion thereof, has been segregated for when-issued securities. (6) When-issued security. (7) The rate indicated is the yield to maturity at purchase. (8) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. - ------ 10 PERFORMANCE Value Total Returns as of September 30, 2007 Average Annual Returns 6 10 Since Inception months(1) 1 year 5 years years Inception Date INVESTOR CLASS 3.90% 12.11% 15.76% 8.76% 12.40% 9/1/93 RUSSELL 3000 VALUE INDEX(2) 3.90% 13.73% 18.10% 8.84% 12.02%(3) -- S&P 500 INDEX(2) 8.44% 16.44% 15.45% 6.57% 10.84%(3) -- LIPPER MULTI-CAP VALUE FUNDS INDEX(2) 4.13% 12.73% 16.62% 7.49% 10.79%(3) -- Institutional Class 4.00% 12.32% 16.01% 8.99% 9.42% 7/31/97 A Class(4) No sales charge* 3.64% 11.69% 15.44% 8.48% 10.76% With sales charge* -2.27% 5.31% 14.09% 7.85% 10.16% 10/2/96 B Class No sales charge* 3.26% 10.88% -- -- 14.65% With sales charge* -1.74% 6.88% -- -- 14.39% 1/31/03 C Class No sales charge* 3.28% 10.95% 14.59% -- 8.09% With sales charge* 2.28% 10.95% 14.59% -- 8.09% 6/4/01 R Class 3.64% 11.56% -- -- 10.58% 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. ©2007 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) Prior to September 4, 2007, the A Class was referred to as the Advisor Class. Performance, with sales charge, prior to that date has been adjusted to reflect the A Class's current sales charge. 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. International investing involves special risks, such as political instability and currency fluctuations. 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 Value Growth of $10,000 Over 10 Years $10,000 investment made September 30, 1997
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One-Year Returns Over 10 Years Periods ended September 30 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Investor Class -5.98% 12.04% 2.95% 12.36% -8.55% 23.02% 19.56% 9.96% 14.69% 12.11% Russell 3000 Value Index 1.96% 17.64% 9.35% -7.98% -15.89% 24.89% 20.89% 16.78% 14.55% 13.73% S&P 500 Index 9.05% 27.80% 13.28% -26.62% -20.49% 24.40% 13.87% 12.25% 10.79% 16.44% Lipper Multi-Cap Value Funds Index -7.19% 15.36% 10.61% -6.04% -14.25% 27.08% 17.61% 15.42% 10.94% 12.73% 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. International investing involves special risks, such as political instability and currency fluctuations. 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. - ------ 12 PORTFOLIO COMMENTARY Value Portfolio Managers: Scott Moore, Michael Liss, and Phil Davidson PERFORMANCE SUMMARY Value gained 3.90%* for the six months ended September 30, 2007. By comparison, the Lipper Multi-Cap Value Funds Index and the median for Morningstar's Large Cap Value category (whose performance, like Value's, reflects fund operating expenses) advanced 4.13% and 5.54%,** respectively. Two market indices -- the Russell 3000 Value Index and the S&P 500 Index -- gained 3.90% and 8.44%, respectively. The portfolio's returns reflect operating expenses, while the indices' returns do not. The portfolio's return was achieved in the challenging market environment described in the Market Perspective on page 2. Overall, growth stocks outperformed value across the capitalization spectrum and investors favored stocks with lower dividend yields. Against that market backdrop, Value benefited from strong stock selection. In addition, during the reporting period, the portfolio's small portion of international holdings also contributed to results. 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 12.40%, topping the returns for that period for the Lipper Multi-Cap Value Funds Index, Morningstar's Large Cap Value category median, the Russell 3000 Value Index, and the S&P 500 (see the performance information on pages 11 - 12). INFORMATION TECHNOLOGY CONTRIBUTED Strong stock selection in the information technology sector lifted results. One of our top holdings was Intel Corp., the largest semiconductor manufacturer in the world. The company's stock rose 36% over the period as it leveraged its technology leadership and superior product line in response to better-than-expected global demand for computing products. Intel is also moving into the mobile internet device market. Meanwhile, technology giant IBM continued to gain market share for virtually all its products and services and appears well-positioned to take advantage of significant technology trends. CONSUMER STAPLES OFFERED REWARDS Another positive for performance was our position in consumer staples companies. Especially beneficial was our overweight allocation to food and beverage retailers, Top Ten Holdings as of September 30, 2007 % of net % of net assets as of assets as of 9/30/07 3/31/07 Freddie Mac 4.2% 3.6% SunTrust Banks, Inc. 3.7% 1.5% Bank of America Corp. 3.7% 4.7% Kraft Foods Inc. Cl A 3.3% 3.7% BP plc ADR 3.1% 3.0% Ambac Financial Group, Inc. 3.0% 1.3% MGIC Investment Corp. 3.0% 2.3% General Electric Co. 2.7% 4.9% Pfizer Inc. 2.5% 2.1% Johnson & Johnson 2.2% 1.1% * All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. ** The median returns for Morningstar's Large Cap Value category were 14.37%, 15.93% and 7.26% for the one-, five- and ten-year periods ended September 30, 2007, respectively, and 10.72% since the fund's inception. ©2007 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers: (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. - ------ 13 Value which also provided two of the portfolio's strongest contributors -- Coca-Cola Enterprises and Kraft. Coca-Cola Enterprises manufactures and distributes Coca-Cola and other beverages in the United States, Great Britain, and parts of Europe. Its stock price has responded well to the company's cost-cutting efforts, additional brands to distribute, and -- despite slowing European sales -- strong earnings. Kraft, the largest branded food company in the U.S., added to results as its stock began to trade on its own fundamentals after the company's spinoff from Altria Group. Kraft has invested in new product development, improved marketing, and is considering the divestiture of non-core businesses. ENERGY POSITION HAMPERED RESULTS The portfolio's underweight position in the energy sector -- the best performer in the benchmark -- was a drag on results. Because of valuations, we did not own some major oil refiners, such as ConocoPhillips and Occidental Petroleum, that boosted the benchmark's performance. Our relative progress was also slowed by an underweight position in Exxon Mobil, which was up more than 23%. ALLOCATION TO FINANCIALS DETRACTED The portfolio's allocation to the financials sector slowed its progress. Detracting was our overweight position in thrifts -- specifically MGIC Investment Corporation, the nation's largest private mortgage insurer. The company's stock was hurt by the housing slowdown and by significant financial losses from a joint venture involved in restructuring subprime mortgages. The portfolio's mix of insurance stocks was also a drag on results. A top detractor was Ambac Financial Group, a leading municipal bond insurer. Its stock declined on concern about bond insurers in general and fears about the company's exposure to subprime loans. STARTING POINT FOR NEXT REPORTING PERIOD Your management team follows a disciplined, bottom-up process, selecting securities one at a time for the portfolio. As of September 30, 2007, we continued to see opportunities in consumer staples and health care companies, reflected by our overweight positions in these sectors relative to the benchmark. Our valuation work contributed to our smaller weightings in financials, energy, and telecommunications stocks. Top Five Industries as of September 30, 2007 % of net % of net assets as of assets as of 9/30/07 3/31/07 Insurance 9.8% 8.4% Food Products 9.0% 8.7% Commercial Banks 7.9% 6.4% Thrifts & Mortgage Finance 7.2% 7.1% Oil, Gas & Consumable Fuels 6.3% 6.5% Types of Investments in Portfolio % of net % of net assets as of assets as of 9/30/07 3/31/07 Domestic Common Stocks 90.4% 92.4% Foreign Common Stocks(1) 7.6% 5.1% TOTAL COMMON STOCKS 98.0% 97.5% Temporary Cash Investments 1.0% 2.3% Other Assets and Liabilities(2) 1.0% 0.2% (1) Includes depositary shares, dual listed securities and foreign ordinary shares. (2) Includes securities lending collateral and other assets and liabilities. - ------ 14 SCHEDULE OF INVESTMENTS Value SEPTEMBER 30, 2007 (UNAUDITED) Shares Value Common Stocks -- 98.0% AIR FREIGHT & LOGISTICS -- 1.5% 599,500 United Parcel Service, Inc. Cl B $ 45,022,450 -------------- AIRLINES -- 1.8% 3,669,800 Southwest Airlines Co. 54,313,040 -------------- AUTO COMPONENTS -- 0.8% 395,800 Autoliv, Inc. 23,649,050 -------------- AUTOMOBILES -- 1.4% 692,700 Toyota Motor Corp. ORD 40,926,374 -------------- BEVERAGES -- 1.7% 875,200 Anheuser-Busch Companies, Inc. 43,751,248 347,000 Coca-Cola Enterprises Inc. 8,404,340 -------------- 52,155,588 -------------- BIOTECHNOLOGY -- 0.7% 380,700 Amgen Inc.(1) 21,536,199 -------------- BUILDING PRODUCTS -- 0.8% 1,037,300 Masco Corp. 24,034,241 -------------- CAPITAL MARKETS -- 1.4% 182,600 Bear Stearns Companies Inc. (The) 22,425,106 268,400 Merrill Lynch & Co., Inc. 19,131,552 -------------- 41,556,658 -------------- CHEMICALS -- 0.9% 168,500 du Pont (E.I.) de Nemours & Co. 8,350,860 261,300 Minerals Technologies Inc. 17,507,100 -------------- 25,857,960 -------------- COMMERCIAL BANKS -- 7.9% 567,800 BB&T Corporation 22,933,442 884,700 Marshall & Ilsley Corp. 38,723,319 1,990,300 South Financial Group Inc. (The)(2) 45,259,422 1,484,400 SunTrust Banks, Inc. 112,324,548 615,300 U.S. Bancorp 20,015,709 -------------- 239,256,440 -------------- COMMERCIAL SERVICES & SUPPLIES -- 2.9% 147,800 Avery Dennison Corp. 8,427,556 735,100 Pitney Bowes, Inc. 33,388,242 597,700 Republic Services, Inc. 19,550,767 668,000 Waste Management, Inc. 25,210,320 -------------- 86,576,885 -------------- Shares Value COMMUNICATIONS EQUIPMENT -- 0.3% 452,600 Motorola, Inc. $ 8,386,678 -------------- CONTAINERS & PACKAGING -- 1.6% 1,658,200 Bemis Co., Inc. 48,270,202 -------------- DISTRIBUTORS -- 0.2% 147,800 Genuine Parts Company 7,390,000 -------------- DIVERSIFIED -- 1.4% 273,000 Standard and Poor's 500 Depositary Receipt(2) 41,670,720 -------------- DIVERSIFIED FINANCIAL SERVICES -- 4.6% 2,192,100 Bank of America Corp. 110,196,867 633,200 Citigroup Inc. 29,551,444 -------------- 139,748,311 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.5% 1,254,700 AT&T Inc. 53,086,357 528,400 Verizon Communications Inc. 23,397,552 -------------- 76,483,909 -------------- ELECTRIC UTILITIES -- 1.5% 1,009,800 Duke Energy Corp. 18,873,162 819,100 IDACORP, Inc.(2) 26,817,334 -------------- 45,690,496 -------------- ELECTRICAL EQUIPMENT -- 0.6% 329,500 Hubbell Inc. Cl B 18,821,040 -------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 2.7% 1,532,800 Molex Inc. 41,278,304 1,097,700 Tyco Electronics Ltd. 38,891,511 -------------- 80,169,815 -------------- FOOD & STAPLES RETAILING -- 1.7% 1,181,200 Wal-Mart Stores, Inc. 51,559,380 -------------- FOOD PRODUCTS -- 9.0% 630,500 Campbell Soup Co. 23,328,500 1,281,700 ConAgra Foods, Inc. 33,490,821 304,700 General Mills, Inc. 17,675,647 1,165,700 H.J. Heinz Co. 53,855,340 526,100 Hershey Co. (The) 24,416,301 2,866,900 Kraft Foods Inc. Cl A 98,936,719 671,100 Unilever N.V. New York Shares 20,703,435 -------------- 272,406,763 -------------- GAS UTILITIES -- 0.6% 553,200 WGL Holdings Inc.(2) 18,747,948 -------------- - ------ 15 Value Shares Value HEALTH CARE EQUIPMENT & SUPPLIES -- 2.2% 376,200 Beckman Coulter, Inc. $ 27,748,512 579,400 Covidien Ltd.(1) 24,045,100 1,010,320 Symmetry Medical Inc.(1) 16,872,344 -------------- 68,665,956 -------------- HEALTH CARE PROVIDERS & SERVICES -- 1.2% 489,700 LifePoint Hospitals Inc.(1) 14,695,897 398,500 Universal Health Services, Inc. Cl B 21,686,370 -------------- 36,382,267 -------------- HOTELS, RESTAURANTS & LEISURE -- 2.3% 659,500 International Speedway Corp. 30,244,670 1,052,200 Speedway Motorsports Inc.(2) 38,931,400 -------------- 69,176,070 -------------- HOUSEHOLD PRODUCTS -- 2.3% 333,700 Clorox Company 20,352,363 707,500 Kimberly-Clark Corp. 49,708,950 -------------- 70,061,313 -------------- INDUSTRIAL CONGLOMERATES -- 2.7% 1,968,600 General Electric Co. 81,500,040 -------------- INSURANCE -- 9.8% 258,100 Allstate Corp. 14,760,739 1,439,900 Ambac Financial Group, Inc.(2) 90,584,109 709,200 American International Group, Inc. 47,977,380 501,600 Chubb Corp. 26,905,824 1,653,300 Genworth Financial Inc. Cl A 50,805,909 2,045,300 Marsh & McLennan Companies, Inc. 52,155,150 205,800 MBIA Inc. 12,564,090 -------------- 295,753,201 -------------- IT SERVICES -- 0.4% 97,400 International Business Machines Corp. 11,473,720 -------------- LEISURE EQUIPMENT & PRODUCTS -- 0.6% 204,400 Polaris Industries Inc.(2) 8,915,928 304,300 RC2 Corp.(1) 8,426,067 -------------- 17,341,995 -------------- METALS & MINING -- 0.4% 270,900 Newmont Mining Corporation 12,117,357 -------------- Shares Value MULTI-UTILITIES -- 4.7% 329,600 Ameren Corp. $ 17,304,000 308,200 Consolidated Edison, Inc. 14,269,660 2,135,500 Puget Energy, Inc. 52,255,685 844,500 Wisconsin Energy Corp. 38,027,835 930,900 XCEL Energy Inc. 20,051,586 -------------- 141,908,766 -------------- OIL, GAS & CONSUMABLE FUELS -- 6.3% 159,800 Apache Corp. 14,391,590 1,338,300 BP plc ADR 92,811,105 90,700 Chevron Corp. 8,487,706 334,700 Equitable Resources Inc. 17,360,889 481,300 Exxon Mobil Corp. 44,549,128 139,500 Royal Dutch Shell plc ADR 11,464,110 -------------- 189,064,528 -------------- PAPER & FOREST PRODUCTS -- 0.8% 327,000 Weyerhaeuser Co. 23,642,100 -------------- PERSONAL PRODUCTS -- 0.3% 212,100 Estee Lauder Companies, Inc. (The) Cl A 9,005,766 -------------- PHARMACEUTICALS -- 6.0% 223,500 Abbott Laboratories 11,984,070 412,700 Bristol-Myers Squibb Co. 11,894,014 253,500 Eli Lilly and Company 14,431,755 1,004,600 Johnson & Johnson 66,002,220 3,121,700 Pfizer Inc. 76,263,130 -------------- 180,575,189 -------------- ROAD & RAIL -- 0.5% 965,800 Heartland Express, Inc.(2) 13,791,624 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.7% 781,800 Intel Corp. 20,217,348 -------------- SPECIALTY RETAIL -- 1.1% 350,000 Home Depot, Inc. (The) 11,354,000 827,500 Lowe's Companies, Inc. 23,186,550 -------------- 34,540,550 -------------- THRIFTS & MORTGAGE FINANCE -- 7.2% 2,136,600 Freddie Mac 126,080,766 2,788,500 MGIC Investment Corp.(2) 90,096,435 -------------- 216,177,201 -------------- TOTAL COMMON STOCKS (Cost $2,774,355,709) 2,955,625,138 -------------- - ------ 16 Value Shares Value Temporary Cash Investments -- 1.0% Repurchase Agreement, Bank of America Securities, LLC, (collateralized by various U.S. Treasury obligations, 0.875%, 4/15/10, valued at $34,612,630), in a joint trading account at 3.80%, dated 9/28/07, due 10/1/07 (Delivery value $30,809,753) (Cost $30,800,000) $ 30,800,000 -------------- Temporary Cash Investments -- Securities Lending Collateral(3) -- 5.9% Repurchase Agreement, Citigroup Global Markets Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.00%, dated 9/28/07, due 10/1/07 (Delivery value $165,068,750) 165,000,000 Shares Value Repurchase Agreement, Lehman Brothers, Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.15%, dated 9/28/07, due 10/1/07 (Delivery value $13,135,801) $ 13,130,166 -------------- TOTAL TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL (Cost $178,130,166) 178,130,166 -------------- TOTAL INVESTMENT SECURITIES -- 104.9% (Cost $2,983,285,875) 3,164,555,304 -------------- OTHER ASSETS AND LIABILITIES -- (4.9)% (148,635,258) -------------- TOTAL NET ASSETS -- 100.0% $3,015,920,046 ============== Forward Foreign Currency Exchange Contracts Settlement Unrealized Contracts to Sell Date Value Gain (Loss) 22,810,755 Euro for USD 10/31/07 $ 32,574,933 $ (336,721) 47,060,571 GBP for USD 10/31/07 96,196,212 (1,342,337) 3,679,622,400 JPY for USD 10/31/07 32,182,332 (176,431) ------------ ------------ $160,953,477 $(1,855,489) ============ ============ (Value on Settlement Date $159,097,988) Notes to Schedule of Investments ADR = American Depositary Receipt GBP = British Pound JPY = Japanese Yen ORD = Foreign Ordinary Share USD = United States Dollar (1) Non-income producing. (2) Security, or a portion thereof, was on loan as of September 30, 2007. (3) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. - ------ 17 PERFORMANCE Large Company Value Total Returns as of September 30, 2007 Average Annual Returns Since Inception 6 months(1) 1 year 5 years Inception Date INVESTOR CLASS 5.44% 13.15% 16.25% 7.89% 7/30/99 RUSSELL 1000 VALUE INDEX(2) 4.67% 14.45% 18.07% 7.14% -- S&P 500 INDEX(2) 8.44% 16.44% 15.45% 3.38% -- Institutional Class 5.54% 13.38% 16.48% 8.82% 8/10/01 Advisor Class 5.31% 12.87% 15.96% 9.80% 10/26/00 A Class No sales charge* 5.17% 12.71% -- 15.51% With sales charge* -0.86% 6.20% -- 14.07% 1/31/03 B Class No sales charge* 4.90% 11.99% -- 14.72% With sales charge* -0.10% 7.99% -- 14.46% 1/31/03 C Class No sales charge* 4.91% 12.03% 15.11% 8.88% With sales charge* 3.91% 12.03% 15.11% 8.88% 11/7/01 R Class 5.04% 12.59% -- 13.20% 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. ©2007 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. International investing involves special risks, such as political instability and currency fluctuations. 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. - ------ 18 Large Company Value Growth of $10,000 Over Life of Class $10,000 investment made July 30, 1999
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One-Year Returns Over Life of Class Periods ended September 30 1999* 2000 2001 2002 2003 2004 2005 2006 2007 Investor Class -8.56% 5.67% 4.99% -13.70% 23.93% 18.84% 12.38% 13.42% 13.15% Russell 1000 Value Index -7.08% 8.91% -8.91% -16.95% 24.37% 20.52% 16.69% 14.62% 14.45% S&P 500 Index -3.22% 13.28% -26.62% -20.49% 24.40% 13.87% 12.25% 10.79% 16.44% * 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. International investing involves special risks, such as political instability and currency fluctuations. 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. - ------ 19 PORTFOLIO COMMENTARY Large Company Value Portfolio Managers: Chuck Ritter and Brendan Healy PERFORMANCE SUMMARY Large Company Value gained 5.44%* for the six months ended September 30, 2007. By comparison, its benchmark, the Russell 1000 Value Index, advanced 4.67%. The broader market, as measured by the S&P 500 Index, returned 8.44%. The portfolio's returns reflect operating expenses, while the indices' returns do not. The median return for Morningstar's Large Cap Value category (whose performance, like Large Company Value's, reflects operating expenses) was 5.54%.** The portfolio's solid return was achieved in the challenging market environment described in the Market Perspective on page 2. Overall, growth stocks outperformed value across the capitalization spectrum and investors favored stocks with lower dividend yields. In the volatility that characterized the second half of the period, they gravitated toward higher-quality names. Mega-cap stocks (shares of especially large companies) found greater favor with investors. The shift benefited the portfolio because we typically hold a higher percentage of these companies than the benchmark. Over time, our disciplined investment approach has provided longer-term investors with solid performance. Since Large Company Value's inception on July 30, 1999, the portfolio has produced an average annualized return of 7.89%, topping the returns for the Morningstar's Large Cap Value category median, Russell 1000 Value Index, and the S&P 500 for that period (see performance information on pages 18 - 19). INFORMATION TECHNOLOGY CONTRIBUTED The portfolio benefited from strong stock selection in the information technology sector, with most of the gains coming from large leading technology companies, such as Hewlett-Packard, IBM, Intel, and Oracle. Hewlett-Packard was up 24% over the period. The company continued to gain ground in the PC market and moved into high-end enterprise printing equipment. Meanwhile, IBM continued to capture market share for virtually all its products and services. ENERGY BOOSTED RESULTS Our holdings in the energy sector, which led all others in the benchmark, added significantly to total return. Because of valuations, we have been selective about our investments, and over the period our mix of multi-national integrated oil companies, such as Chevron and ConocoPhillips, worked in our favor. A significant performer Top Ten Holdings as of September 30, 2007 % of net % of net assets as of assets as of 9/30/07 3/31/07 Exxon Mobil Corp. 5.2% 4.8% Citigroup Inc. 4.5% 4.6% Bank of America Corp. 3.4% 3.3% Chevron Corp. 3.2% 3.0% AT&T Inc. 3.1% 3.1% Royal Dutch Shell plc ADR 2.9% 2.6% General Electric Co. 2.4% 1.7% JPMorgan Chase & Co. 2.3% 2.3% Freddie Mac 2.2% 2.3% ConocoPhillips 2.2% 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 14.37% and 15.93% for the one- and five-year periods ended September 30, 2007, respectively, and 6.19% since the fund's inception. ©2007 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers: (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. - ------ 20 Large Company Value was Europe's largest integrated oil company, Royal Dutch Shell plc. Royal Dutch reported robust second-quarter earnings and continues to make capital investments in unconventional oil projects. UTILITIES HOLDINGS ADDED VALUE Utilities stocks continued to trade near historically high price-to-earnings ratios, making many of them unattractive to us. Strong stock selection, however, identified two top performers -- PPL Corp. and Exelon. A low-cost producer of nuclear- and coal-generated energy, PPL produces and delivers electricity to customers in the U.S., the U.K. and Latin America. The company reported solid 2006 earnings and reaffirmed its positive outlook for 2007. Exelon, which distributes electricity to customers in Illinois and Pennsylvania and gas to customers in the Philadelphia area, is the nation's largest nuclear generator. CONSUMER DISCRETIONARY DETRACTED Holdings in the consumer discretionary sector, particularly among retailers and media companies, hampered performance. A top detractor was apparel manufacturer Liz Claiborne. We liquidated our position after the company reported disappointing first-quarter results and dramatically lowered earnings guidance. Another detractor was publishing and broadcasting company Gannett, which experienced a drop in total advertising revenue. FINANCIALS HELD A TOP DETRACTOR Although it was a relatively small weighting, MGIC Investment Corporation was one of our largest detractors. MGIC, the nation's largest private mortgage insurer, was hampered by the housing slowdown and significant financial losses from a joint venture involved in restructuring subprime mortgages. STARTING POINT FOR NEXT REPORTING PERIOD As bottom-up investment managers, we evaluate each company individually and build the portfolio one stock at a time. As of September 30, 2007, Large Company Value was broadly diversified, with continued overweight positions in the information technology and health care sectors. Our valuation work contributed to our smaller relative weightings in utilities stocks. We have also continued to find greater value opportunities among mega-cap stocks and have maintained our bias toward these firms. Top Five Industries as of September 30, 2007 % of net % of net assets as of assets as of 9/30/07 3/31/07 Oil, Gas & Consumable Fuels 13.9% 13.1% Diversified Financial Services 10.2% 10.3% Pharmaceuticals 7.5% 7.3% Insurance 6.1% 6.2% Commercial Banks 6.0% 6.2% Types of Investments in Portfolio % of net % of net assets as of assets as of 9/30/07 3/31/07 Domestic Common Stocks & Futures 93.2% 90.6% Foreign Common Stocks(1) 4.4% 5.0% TOTAL COMMON STOCKS 97.6% 95.6% Temporary Cash Investments 2.4% 4.3% Other Assets and Liabilities(2) --(3) 0.1% (1) Includes depositary shares, dual listed securities and foreign ordinary shares. (2) Includes securities lending collateral and other assets and liabilities. (3) Category is less than 0.05% of total net assets. - ------ 21 SCHEDULE OF INVESTMENTS Large Company Value SEPTEMBER 30, 2007 (UNAUDITED) Shares Value Common Stocks -- 95.4% AEROSPACE & DEFENSE -- 0.9% 338,500 Northrop Grumman Corp. $ 26,403,000 -------------- BEVERAGES -- 2.1% 605,700 Coca-Cola Company (The) 34,809,579 657,100 Pepsi Bottling Group Inc. 24,424,407 -------------- 59,233,986 -------------- BIOTECHNOLOGY -- 0.6% 274,300 Amgen Inc.(1) 15,517,151 -------------- CAPITAL MARKETS -- 3.6% 614,500 Bank of New York Mellon Corp. (The) 27,124,030 560,100 Merrill Lynch & Co., Inc. 39,923,928 584,800 Morgan Stanley 36,842,400 -------------- 103,890,358 -------------- CHEMICALS -- 2.2% 531,700 du Pont (E.I.) de Nemours & Co. 26,351,052 459,000 PPG Industries, Inc. 34,677,450 -------------- 61,028,502 -------------- COMMERCIAL BANKS -- 6.0% 467,000 National City Corp. 11,717,030 252,600 PNC Financial Services Group 17,202,060 1,118,100 U.S. Bancorp 36,371,793 866,000 Wachovia Corp. 43,429,900 1,712,600 Wells Fargo & Co. 61,002,812 -------------- 169,723,595 -------------- COMMERCIAL SERVICES & SUPPLIES -- 1.4% 113,100 Avery Dennison Corp. 6,448,962 456,600 R.R. Donnelley & Sons Company 16,693,307 444,100 Waste Management, Inc. 16,760,334 -------------- 39,902,603 -------------- COMMUNICATIONS EQUIPMENT -- 0.3% 389,300 Motorola, Inc. 7,213,729 -------------- COMPUTERS & PERIPHERALS -- 1.4% 802,900 Hewlett-Packard Co. 39,976,391 -------------- CONSUMER FINANCE -- 0.3% 331,900 Discover Financial Services(1) 6,903,520 -------------- DIVERSIFIED CONSUMER SERVICES -- 0.5% 697,500 H&R Block, Inc.(2) 14,773,050 -------------- DIVERSIFIED FINANCIAL SERVICES -- 10.2% 1,894,800 Bank of America Corp. 95,251,596 2,718,100 Citigroup Inc. 126,853,727 1,449,100 JPMorgan Chase & Co. 66,397,762 -------------- 288,503,085 -------------- Shares Value DIVERSIFIED TELECOMMUNICATION SERVICES -- 4.6% 2,079,300 AT&T Inc. $ 87,975,183 967,400 Verizon Communications Inc. 42,836,472 -------------- 130,811,655 -------------- ELECTRIC UTILITIES -- 2.7% 541,900 Exelon Corporation 40,837,584 737,800 PPL Corporation 34,160,140 -------------- 74,997,724 -------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.4% 283,500 Tyco Electronics Ltd. 10,044,405 -------------- ENERGY EQUIPMENT & SERVICES -- 0.5% 98,700 National Oilwell Varco, Inc.(1) 14,262,150 -------------- FOOD & STAPLES RETAILING -- 1.6% 629,900 Kroger Co. (The) 17,964,748 650,400 Wal-Mart Stores, Inc. 28,389,960 -------------- 46,354,708 -------------- FOOD PRODUCTS -- 1.1% 1,000,700 Unilever N.V. New York Shares 30,871,595 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.5% 253,800 Medtronic, Inc. 14,316,858 -------------- HEALTH CARE PROVIDERS & SERVICES -- 0.3% 153,000 Quest Diagnostics Inc. 8,838,810 -------------- HOTELS, RESTAURANTS & LEISURE -- 0.7% 386,900 McDonald's Corporation 21,074,443 -------------- HOUSEHOLD DURABLES -- 0.7% 673,200 Newell Rubbermaid Inc. 19,401,624 -------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.2% 166,500 NRG Energy Inc.(1) 7,041,285 -------------- INDUSTRIAL CONGLOMERATES -- 2.8% 1,625,100 General Electric Co. 67,279,140 295,600 Tyco International Ltd. 13,106,904 -------------- 80,386,044 -------------- INSURANCE -- 6.1% 556,700 Allstate Corp. 31,837,673 884,000 American International Group, Inc. 59,802,600 338,500 Hartford Financial Services Group Inc. (The) 31,328,175 411,600 Loews Corp. 19,900,860 543,500 Marsh & McLennan Companies, Inc. 13,859,250 267,000 Torchmark Corp. 16,639,440 -------------- 173,367,998 -------------- - ------ 22 Large Company Value Shares Value IT SERVICES -- 1.6% 216,600 Fiserv, Inc.(1) $ 11,016,276 288,100 International Business Machines Corp. 33,938,180 -------------- 44,954,456 -------------- MACHINERY -- 3.5% 228,400 Caterpillar Inc. 17,913,412 106,300 Deere & Co. 15,777,046 392,400 Dover Corp. 19,992,780 460,600 Ingersoll-Rand Company Ltd. Cl A 25,088,882 183,200 Parker-Hannifin Corp. 20,487,256 -------------- 99,259,376 -------------- MEDIA -- 3.2% 626,600 Gannett Co., Inc. 27,382,420 2,185,800 Time Warner Inc. 40,131,288 572,300 Viacom Inc. Cl B(1) 22,302,531 -------------- 89,816,239 -------------- METALS & MINING -- 0.6% 262,400 Nucor Corp. 15,604,928 -------------- MULTILINE RETAIL -- 0.3% 126,000 Kohl's Corp.(1) 7,223,580 -------------- OFFICE ELECTRONICS -- 0.6% 929,200 Xerox Corp.(1) 16,112,328 -------------- OIL, GAS & CONSUMABLE FUELS -- 13.9% 978,900 Chevron Corp. 91,605,462 710,800 ConocoPhillips 62,386,916 140,500 Devon Energy Corporation 11,689,600 1,583,100 Exxon Mobil Corp. 146,531,736 999,900 Royal Dutch Shell plc ADR 82,171,782 -------------- 394,385,496 -------------- PAPER & FOREST PRODUCTS -- 1.1% 408,200 Weyerhaeuser Co. 29,512,860 -------------- PHARMACEUTICALS -- 7.5% 722,800 Abbott Laboratories 38,756,536 333,000 Eli Lilly and Company 18,957,690 810,600 Johnson & Johnson 53,256,420 389,000 Merck & Co., Inc. 20,107,410 2,045,700 Pfizer Inc. 49,976,451 692,900 Wyeth 30,868,695 -------------- 211,923,202 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.8% 495,300 Applied Materials, Inc. 10,252,710 504,900 Intel Corp. 13,056,714 -------------- 23,309,424 -------------- Shares Value SOFTWARE -- 2.2% 1,477,200 Microsoft Corporation $ 43,518,312 925,300 Oracle Corp.(1) 20,032,745 -------------- 63,551,057 -------------- SPECIALTY RETAIL -- 2.0% 374,100 Best Buy Co., Inc. 17,216,082 844,600 Gap, Inc. (The) 15,574,424 296,400 Home Depot, Inc. (The) 9,615,216 709,800 Staples, Inc. 15,253,602 -------------- 57,659,324 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.5% 191,900 VF Corp. 15,495,925 -------------- THRIFTS & MORTGAGE FINANCE -- 3.8% 160,100 Countrywide Financial Corp. 3,043,501 1,076,300 Freddie Mac 63,512,463 427,200 MGIC Investment Corp.(2) 13,802,832 786,700 Washington Mutual, Inc. 27,778,377 -------------- 108,137,173 -------------- TOBACCO -- 1.2% 470,800 Altria Group Inc. 32,734,724 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.9% 1,283,700 Sprint Nextel Corp. 24,390,300 -------------- TOTAL COMMON STOCKS (Cost $2,131,201,427) 2,698,908,661 -------------- Principal Amount Temporary Cash Investments -- 2.4% $69,100,000 FHLB Discount Notes, 4.00%, 10/1/07(3) (Cost $69,100,000) 69,100,000 -------------- Temporary Cash Investments -- Segregated for Futures Contracts -- 2.2% 61,600,000 FHLB Discount Notes, 4.00%, 10/1/07(3) (Cost $61,600,000) 61,600,000 -------------- Temporary Cash Investments -- Securities Lending Collateral(4) -- 0.8% Repurchase Agreement, Lehman Brothers, Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.15%, dated 9/28/07, due 10/1/07 (Delivery value $22,311,524) (Cost $22,301,953) 22,301,953 -------------- TOTAL INVESTMENT SECURITIES -- 100.8% (Cost $2,284,203,380) 2,851,910,614 -------------- OTHER ASSETS AND LIABILITIES -- (0.8)% (23,202,537) -------------- TOTAL NET ASSETS -- 100.0% $2,828,708,077 ============== - ------ 23 Large Company Value Futures Contracts Underlying Face Unrealized Gain Contracts Purchased Expiration Date Amount at Value (Loss) 800 S&P 500 E-Mini Futures December 2007 $61,600,000 $ 2,162,751 ================ ============== Notes to Schedule of Investments ADR = American Depositary Receipt FHLB = Federal Home Loan Bank (1) Non-income producing. (2) Security, or a portion thereof, was on loan as of September 30, 2007. (3) The rate indicated is the yield to maturity at purchase. (4) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. - ------ 24 SHAREHOLDER FEE EXAMPLES (UNAUDITED) Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2007 to September 30, 2007. 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. 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. - ------ 25 Beginning Ending Expenses Paid Account Account During Annualized Value Value Period(1) Expense 4/1/07 9/30/07 4/1/07 - 9/30/07 Ratio(1) Equity Income ACTUAL Investor Class $1,000 $1,051.70 $4.92 0.96% Institutional Class $1,000 $1,052.80 $3.90 0.76% A Class $1,000 $1,050.40 $6.20 1.21% C Class $1,000 $1,046.50 $10.03 1.96% R Class $1,000 $1,049.20 $7.48 1.46% HYPOTHETICAL Investor Class $1,000 $1,020.20 $4.85 0.96% Institutional Class $1,000 $1,021.20 $3.84 0.76% A Class $1,000 $1,018.95 $6.11 1.21% B Class(2) $1,000 $1,015.20 $9.87 1.96% C Class $1,000 $1,015.20 $9.87 1.96% R Class $1,000 $1,017.70 $7.36 1.46% Value ACTUAL Investor Class $1,000 $1,039.00 $5.05 0.99% Institutional Class $1,000 $1,040.00 $4.03 0.79% A Class $1,000 $1,036.40 $6.31 1.24% B Class $1,000 $1,032.60 $10.11 1.99% C Class $1,000 $1,032.80 $10.11 1.99% R Class $1,000 $1,036.40 $7.59 1.49% HYPOTHETICAL Investor Class $1,000 $1,020.05 $5.00 0.99% Institutional Class $1,000 $1,021.05 $3.99 0.79% A Class $1,000 $1,018.80 $6.26 1.24% B Class $1,000 $1,015.05 $10.02 1.99% C Class $1,000 $1,015.05 $10.02 1.99% R Class $1,000 $1,017.55 $7.52 1.49% (1) Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. (2) The B Class commenced on September 28, 2007, the last business day in the period. No expenses were paid by the share class during the most recent fiscal half-year. Therefore, the actual expense example is not presented. - ------ 26 Beginning Expenses Paid Account Ending During Annualized Value Account Value Period* Expense 4/1/07 9/30/07 4/1/07 - 9/30/07 Ratio* Large Company Value ACTUAL Investor Class $1,000 $1,054.40 $4.26 0.83% Institutional Class $1,000 $1,055.40 $3.24 0.63% Advisor Class $1,000 $1,053.10 $5.54 1.08% A Class $1,000 $1,051.70 $5.54 1.08% B Class $1,000 $1,049.00 $9.37 1.83% C Class $1,000 $1,049.10 $9.37 1.83% R Class $1,000 $1,050.40 $6.82 1.33% HYPOTHETICAL Investor Class $1,000 $1,020.85 $4.19 0.83% Institutional Class $1,000 $1,021.85 $3.18 0.63% Advisor Class $1,000 $1,019.60 $5.45 1.08% A Class $1,000 $1,019.60 $5.45 1.08% B Class $1,000 $1,015.85 $9.22 1.83% C Class $1,000 $1,015.85 $9.22 1.83% R Class $1,000 $1,018.35 $6.71 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 366, to reflect the one-half year period. - ------ 27 STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2007 (UNAUDITED) Large Equity Income Value Company Value ASSETS Investment securities -- unaffiliated, at value (cost of $6,015,682,707, $2,805,155,709 and $2,261,901,427, respectively) - -- including $131,243,244, $172,891,363 and $21,495,747 of securities on loan, respectively $6,597,720,702 $2,986,425,138 $2,829,608,661 Investment securities -- affiliated, at value (cost of $302,026,409, $- and $-, respectively) -- including $8,685,641, $- and $- of securities on loan, respectively 349,111,542 -- -- Investments made with cash collateral received for securities on loan, at value (cost of $141,479,479, $178,130,166 and $22,301,953, respectively) 141,479,479 178,130,166 22,301,953 -------------- -------------- -------------- Total investment securities, at value (cost of $6,459,188,595, $2,983,285,875 and $2,284,203,380, respectively) 7,088,311,723 3,164,555,304 2,851,910,614 Cash -- 2,262,718 4,312,752 Receivable for investments sold 138,650,125 70,729,399 -- Receivable for capital shares sold 96,254 513 32,916 Dividends and interest receivable 23,157,284 4,459,647 2,929,485 -------------- -------------- -------------- 7,250,215,386 3,242,007,581 2,859,185,767 -------------- -------------- -------------- LIABILITIES Disbursements in excess of demand deposit cash 2,688,040 -- -- Payable for collateral received for securities on loan 141,479,479 178,130,166 22,301,953 Payable for investments purchased 129,106,274 43,526,186 5,472,516 Payable for forward foreign currency exchange contracts 4,304,168 1,855,489 -- Payable for capital shares redeemed 105,555,763 75,985 555,708 Payable for variation margin on futures contracts -- -- 184,000 Accrued management fees 5,291,283 2,407,418 1,775,998 Distribution fees payable 112,487 22,174 108,649 Service fees (and distribution fees - A Class and R Class) payable 319,031 70,117 78,866 -------------- -------------- -------------- 388,856,525 226,087,535 30,477,690 -------------- -------------- -------------- NET ASSETS $6,861,358,861 $3,015,920,046 $2,828,708,077 ============== ============== ============== See Notes to Financial Statements. - ------ 28 SEPTEMBER 30, 2007 (UNAUDITED) Large Equity Income Value Company Value NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $5,806,788,050 $2,512,639,348 $2,193,085,117 Undistributed net investment income 24,374,423 8,228,598 1,591,183 Undistributed net realized gain on investment and foreign currency transactions 405,346,657 315,636,208 64,161,792 Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 624,849,731 179,415,892 569,869,985 -------------- -------------- -------------- $6,861,358,861 $3,015,920,046 $2,828,708,077 ============== ============== ============== INVESTOR CLASS, $0.01 PAR VALUE Net assets $4,829,660,190 $2,295,586,413 $1,606,771,713 Shares outstanding 537,414,539 292,221,233 203,729,370 Net asset value per share $8.99 $7.86 $7.89 INSTITUTIONAL CLASS, $0.01 PAR VALUE Net assets $613,515,195 $378,796,990 $622,034,409 Shares outstanding 68,240,184 48,159,154 78,874,743 Net asset value per share $8.99 $7.87 $7.89 ADVISOR CLASS, $0.01 PAR VALUE Net assets N/A N/A $259,912,837 Shares outstanding N/A N/A 32,959,587 Net asset value per share N/A N/A $7.89 A CLASS, $0.01 PAR VALUE Net assets $1,225,468,444 $312,577,268 $228,474,911 Shares outstanding 136,352,565 39,800,059 28,947,082 Net asset value per share $8.99 $7.85 $7.89 Maximum offering price (net asset value divided by 0.9425) $9.54 $8.33 $8.37 B CLASS, $0.01 PAR VALUE Net assets $25,000 $7,808,407 $17,485,593 Shares outstanding 2,781 994,111 2,211,400 Net asset value per share $8.99 $7.85 $7.91 C CLASS, $0.01 PAR VALUE Net assets $141,123,741 $20,223,466 $73,647,226 Shares outstanding 15,701,589 2,591,811 9,340,482 Net asset value per share $8.99 $7.80 $7.88 R CLASS, $0.01 PAR VALUE Net assets $51,566,291 $927,502 $20,381,388 Shares outstanding 5,748,461 118,077 2,583,844 Net asset value per share $8.97 $7.86 $7.89 See Notes to Financial Statements. - ------ 29 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) Large Equity Income Value Company Value INVESTMENT INCOME (LOSS) INCOME: Dividends (including $5,750,242 from affiliates in Equity Income and net of foreign taxes withheld of $210,384, $111,578 and $327,566, respectively) $106,834,953 $ 37,528,677 $ 33,812,385 Interest 10,591,300 1,809,518 2,888,993 Securities lending 373,942 168,005 347,251 ------------ ------------ ------------ 117,800,195 39,506,200 37,048,629 ------------ ------------ ------------ EXPENSES: Management fees 31,573,238 15,100,060 10,587,599 Distribution fees: Advisor Class -- -- 285,043 A Class 1,394,215 267,912 -- B Class -- 30,275 67,050 C Class 512,056 82,501 281,695 Service fees: Advisor Class -- -- 285,043 A Class 1,394,215 267,912 -- B Class -- 10,092 22,350 C Class 170,685 27,500 93,898 Distribution and service fees: Advisor Class -- -- 57,961 A Class 296,264 68,980 300,487 A Class (old) (Note 10) -- 75,843 -- R Class 124,620 1,571 49,380 Directors' fees and expenses 106,361 41,048 40,386 Other expenses 109,803 19,278 2,961 ------------ ------------ ------------ 35,681,457 15,992,972 12,073,853 ------------ ------------ ------------ NET INVESTMENT INCOME (LOSS) 82,118,738 23,513,228 24,974,776 ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: Investment transactions (including $3,125,344 from affiliates in Equity Income) 242,175,843 199,544,942 55,400,750 Foreign currency transactions (11,217,658) (6,868,452) -- ------------ ------------ ------------ 230,958,185 192,676,490 55,400,750 ------------ ------------ ------------ CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: Investments 35,596,348 (95,112,381) 65,638,207 Translation of assets and liabilities in foreign currencies (3,576,365) (1,586,598) -- ------------ ------------ ------------ 32,019,983 (96,698,979) 65,638,207 ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) 262,978,168 95,977,511 121,038,957 ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $345,096,906 $119,490,739 $146,013,733 ============ ============ ============ See Notes to Financial Statements. - ------ 30 STATEMENT OF CHANGES IN NET ASSETS SIX MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) AND YEAR ENDED MARCH 31, 2007 Equity Income Value Increase (Decrease) in Net Assets Sept. 30, 2007 March 31, 2007 Sept. 30, 2007 March 31, 2007 OPERATIONS Net investment income (loss) $ 82,118,738 $ 136,128,614 $ 23,513,228 $ 46,539,323 Net realized gain (loss) 230,958,185 472,394,144 192,676,490 269,233,247 Change in net unrealized appreciation (depreciation) 32,019,983 213,879,908 (96,698,979) 99,138,940 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations 345,096,906 822,402,666 119,490,739 414,911,510 -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income: Investor Class (57,458,497) (86,505,866) (14,445,339) (36,707,068) Institutional Class (8,125,138) (10,063,185) (2,097,653) (4,512,290) A Class (14,084,219) (18,822,568) (1,344,915) (2,977,077) A Class (old) (Note 10) -- -- (132,911) (857,715) B Class -- -- (7,447) (38,366) C Class (943,415) (1,180,752) (20,139) (110,411) R Class (472,460) (537,191) (2,562) (2,127) From net realized gains: Investor Class -- (273,126,274) -- (162,730,575) Institutional Class -- (29,014,951) -- (18,000,178) A Class -- (67,129,734) -- (15,791,328) A Class (old) (Note 10) -- -- -- (4,409,698) B Class -- -- -- (485,927) C Class -- (7,091,506) -- (1,407,351) R Class -- (2,265,013) -- (12,047) -------------- -------------- -------------- -------------- Decrease in net assets from distributions (81,083,729) (495,737,040) (18,050,966) (248,042,158) -------------- -------------- -------------- -------------- CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions (197,288,091) 1,344,181,027 (219,963,600) 109,597,998 -------------- -------------- -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS 66,725,086 1,670,846,653 (118,523,827) 276,467,350 NET ASSETS Beginning of period 6,794,633,775 5,123,787,122 3,134,443,873 2,857,976,523 -------------- -------------- -------------- -------------- End of period $6,861,358,861 $6,794,633,775 $3,015,920,046 $3,134,443,873 ============== ============== ============== ============== Undistributed net investment income $24,374,423 $23,339,414 $8,228,598 $2,766,336 ============== ============== ============== ============== See Notes to Financial Statements. - ------ 31 SIX MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) AND YEAR ENDED MARCH 31, 2007 Large Company Value Increase (Decrease) in Net Assets Sept. 30, 2007 March 31, 2007 OPERATIONS Net investment income (loss) $ 24,974,776 $ 43,797,171 Net realized gain (loss) 55,400,750 26,196,582 Change in net unrealized appreciation (depreciation) 65,638,207 273,032,776 -------------- -------------- Net increase (decrease) in net assets resulting from operations 146,013,733 343,026,529 -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income: Investor Class (13,848,328) (24,255,936) Institutional Class (5,911,467) (10,833,931) Advisor Class (2,027,019) (3,728,413) A Class (1,792,049) (3,616,661) B Class (68,535) (136,165) C Class (290,978) (550,634) R Class (126,577) (187,796) From net realized gains: Investor Class -- (11,790,615) Institutional Class -- (4,669,418) Advisor Class -- (2,125,865) A Class -- (1,905,560) B Class -- (142,111) C Class -- (577,104) R Class -- (124,357) -------------- -------------- Decrease in net assets from distributions (24,064,953) (64,644,566) -------------- -------------- CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions (7,777,979) 286,653,972 -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS 114,170,801 565,035,935 NET ASSETS Beginning of period 2,714,537,276 2,149,501,341 -------------- -------------- End of period $2,828,708,077 $2,714,537,276 ============== ============== Undistributed net investment income $1,591,183 $681,360 ============== ============== See Notes to Financial Statements. - ------ 32 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007 (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), Value Fund (Value) and Large Company Value Fund (Large Company Value) (collectively, the funds) are three funds in a series issued by the corporation. The funds are diversified under the 1940 Act. Equity Income's investment objective is the production of current income; capital appreciation is a secondary objective. Equity Income pursues its investment objective by investing in securities of companies with a favorable income-paying history that have prospects for income payments to continue or increase. Value and Large Company Value's investment objective is long-term capital growth. The production of income is a secondary objective. Value and Large Company Value seek to achieve their investment objective by investing in stocks of companies that management believes to be undervalued at the time of purchase. Value invests in companies with small, medium, and large market capitalization and Large Company Value invests in companies with larger market capitalization. The following is a summary of the funds' significant accounting policies. MULTIPLE CLASS -- Equity Income is authorized to issue the Investor Class, the Institutional Class, the A Class (formerly Advisor Class), the B Class, the C Class and the R Class. Value is authorized to issue the Investor Class, the Institutional Class, the A Class (formerly Advisor Class) (see Note 10), the B Class, the C Class and the R Class. Large Company Value is authorized to issue the Investor Class, the Institutional Class, the Advisor Class, the A Class, the B Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and 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 Equity Income's B Class commenced on September 28, 2007, the last business day in the period. Financial Highlights are not presented for Equity Income's B Class, as the class had no operating results since its commencement of sale. 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 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 as determined by, or in accordance with procedures adopted by, the Board of Directors or its designee if such determination would materially impact a fund's net asset value. Certain other circumstances may cause the funds to use alternative procedures to value a security such as: a security has been declared in default; 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 -- For financial reporting, 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. - ------ 33 SECURITIES ON LOAN -- The funds may lend portfolio securities through their lending agent to certain approved borrowers in order to earn additional income. The funds continue to recognize any gain or loss in the market price of the securities loaned and record any interest earned or dividends declared. FUTURES AND OPTIONS CONTRACTS -- The funds may enter into futures contracts and purchase put options in order to manage the funds' exposure to changes in market conditions. One of the risks of entering into futures contracts and options is the possibility that the change in value of the contract may not correlate with the changes in value of the underlying securities. Options purchased by the funds are accounted for in the same manner as marketable portfolio securities. The proceeds from securities sold through the exercise of put options are decreased by the premium paid to purchase the put options. 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. WHEN-ISSUED AND FORWARD COMMITMENTS -- The funds may engage in securities transactions on a when-issued or forward commitment basis. Under these arrangements, the securities' prices and yields are fixed on the date of the commitment, but payment and delivery are scheduled for a future date. During this period, securities are subject to market fluctuations. The funds will segregate cash, cash equivalents or other appropriate liquid securities on their records in amounts sufficient to meet the purchase price. 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. - ------ 34 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. The funds are no longer subject to examination by tax authorities for years prior to 2004. At this time, management has not identified any uncertain tax positions that would materially impact the financial statements. Accordingly, no provision has been made for federal or state income taxes. Interest and penalties associated with any federal or state income tax obligations, if any, are recorded as interest expense. 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 On July 27, 2007, the A Class (formerly Advisor Class, also referred to as "A Class (new)") shareholders of Equity Income and Value and the Advisor Class shareholders of Large Company Value approved a change to the class's fee structure. The change was approved by the Board of Directors on November 29, 2006 and March 7, 2007. Effective September 4, 2007, the fee structure change resulted in an increase of 0.25% in the unified management fee and a simultaneous decrease of 0.25% in the total distribution and service fee, resulting in no change to the total operating expense ratio of the class. 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 Equity Income ranges from 0.80% to 1.00% for the Investor Class, A Class, B Class, C Class and R Class. The annual management fee schedule for Value ranges from 0.85% to 1.00% for the Investor Class, A Class, B Class, C Class and R Class. Prior to September 4, 2007, the - ------ 35 A Class (new) management fee was 0.25% less at each point within the range for Equity Income and Value. The annual management fee schedule for Large Company Value ranges from 0.70% to 0.90% for the Investor Class, Advisor Class, A Class, B Class, C Class and R Class. Prior to September 4, 2007, the Advisor Class was 0.25% less at each point within the range for Large Company Value. The Institutional Class of each fund is 0.20% less at each point within the range. The effective annual management fee for each class of each fund for the six months ended September 30, 2007, was as follows: Equity Income Value Large Company Value Investor 0.96% 0.99% 0.83% Institutional 0.76% 0.79% 0.63% Advisor N/A N/A 0.62% A 0.75% 0.78% 0.83% B 0.96% 0.99% 0.83% C 0.96% 0.99% 0.83% R 0.96% 0.99% 0.83% DISTRIBUTION AND SERVICE FEES -- For Equity Income and Value, the Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, B Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay American Century Investment Services, Inc. (ACIS) an annual distribution and service fee of 0.25%. The plans provide that the B Class and the C Class will each pay ACIS an annual distribution fee of 0.75% and service fee of 0.25%. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. Prior to September 4, 2007, the Board of Directors had adopted a Master Distribution and Shareholder Services Plan for the A Class (new) for Equity Income and Value, pursuant to Rule 12b-1 of the 1940 Act, in which the A Class (new) paid ACIS an annual distribution fee of 0.25% and service fee of 0.25%. For Large Company Value, the Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the Advisor Class, A Class, B Class, C Class and R Class (collectively the Large Company Value plans), pursuant to Rule 12b-1 of the 1940 Act. The Large Company Value plans provide that the Advisor Class will pay ACIS an annual distribution and service fee of 0.25%. Prior to September 4, 2007, the Board of Directors had adopted a Master Distribution and Shareholder Services Plan for the Advisor Class which provided that the Advisor Class paid ACIS an annual distribution fee of 0.25% and service fee of 0.25%. The Large Company Value plans provide that the B Class and the C Class will each pay ACIS an annual distribution fee of 0.75% and service fee of 0.25%. The Large Company Value 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 prior to September 4, 2007, for A Class (new) shares. The service fee provides compensation for individual shareholder services rendered by broker/dealers or other independent financial intermediaries for A Class (new), A Class (old), B Class, C Class and R Class shares. Fees incurred under the plans during the six months ended September 30, 2007, 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 are eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). JPMIM is a wholly owned subsidiary of JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC. The funds have a bank line of credit agreement and securities lending agreement with JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the funds and a wholly owned subsidiary of JPM. - ------ 36 3. INVESTMENT TRANSACTIONS Investment transactions, excluding short-term investments, for the six months ended September 30, 2007, were as follows: Equity Income Value Large Company Value Purchases $5,354,716,926 $2,491,487,553 $252,671,559 Proceeds from sales $5,546,413,686 $2,696,043,947 $267,159,428 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the funds were as follows: Six months ended September 30, 2007(1) Year ended March 31, 2007 Shares Amount Shares Amount Equity Income INVESTOR CLASS/SHARES AUTHORIZED 1,500,000,000 1,360,000,000 ============= ============= Sold 50,987,746 $ 453,725,790 190,310,967 $ 1,637,151,978 Issued in reinvestment of distributions 5,969,337 52,636,347 38,604,239 331,069,234 Redeemed (73,446,952) (652,367,683) (133,390,090) (1,127,801,623) ------------- -------------- ------------- --------------- (16,489,869) (146,005,546) 95,525,116 840,419,589 ------------- -------------- ------------- --------------- INSTITUTIONAL CLASS/SHARES AUTHORIZED 240,000,000 125,000,000 ============= ============= Sold 17,672,349 157,195,287 27,716,304 235,066,960 Issued in reinvestment of distributions 876,384 7,728,096 4,398,103 37,748,723 Redeemed (14,016,926) (124,592,343) (15,634,070) (129,701,566) ------------- -------------- ------------- --------------- 4,531,807 40,331,040 16,480,337 143,114,117 ------------- -------------- ------------- --------------- A CLASS/SHARES AUTHORIZED 475,000,000 300,000,000 ============= ============= Sold 20,672,568 183,920,566 63,150,373 542,584,966 Issued in reinvestment of distributions 1,434,277 12,647,059 9,703,715 83,260,832 Redeemed (33,846,868) (302,084,613) (36,128,442) (306,093,143) ------------- -------------- ------------- --------------- (11,740,023) (105,516,988) 36,725,646 319,752,655 ------------- -------------- ------------- --------------- B CLASS/SHARES AUTHORIZED 20,000,000 N/A ============= Sold 2,781 25,000 ------------- -------------- C CLASS/SHARES AUTHORIZED 50,000,000 30,000,000 ============= ============= Sold 2,068,563 18,432,268 3,827,372 32,729,364 Issued in reinvestment of distributions 95,361 840,834 835,135 7,173,464 Redeemed (1,175,454) (10,442,786) (2,097,020) (17,745,905) ------------- -------------- ------------- --------------- 988,470 8,830,316 2,565,487 22,156,923 ------------- -------------- ------------- --------------- R CLASS/SHARES AUTHORIZED 20,000,000 10,000,000 ============= ============= Sold 1,186,765 10,593,512 2,794,448 23,866,772 Issued in reinvestment of distributions 52,812 464,612 323,510 2,772,472 Redeemed (676,638) (6,010,037) (933,327) (7,901,501) ------------- -------------- ------------- --------------- 562,939 5,048,087 2,184,631 18,737,743 ------------- -------------- ------------- --------------- Net increase (decrease) (22,143,895) $(197,288,091) 153,481,217 $1,344,181,027 ============= ============== ============= =============== (1) September 28, 2007 (commencement of sale) through September 30, 2007 for the B Class. - ------ 37 Six months ended September 30, 2007 Year ended March 31, 2007 Shares Amount Shares Amount Value INVESTOR CLASS/SHARES AUTHORIZED 1,250,000,000 700,000,000 ============= ============ Sold 13,128,703 $ 103,847,000 46,299,513 $349,174,054 Issued in reinvestment of distributions 1,768,531 13,785,709 25,193,051 189,713,667 Redeemed (50,433,298) (398,536,576) (63,409,787) (473,327,597) ------------- -------------- ------------ ------------- (35,536,064) (280,903,867) 8,082,777 65,560,124 ------------- -------------- ------------ ------------- INSTITUTIONAL CLASS/SHARES AUTHORIZED 125,000,000 100,000,000 ============= ============ Sold 14,361,023 113,334,252 12,275,041 91,985,893 Issued in reinvestment of distributions 268,627 2,094,679 2,982,130 22,480,817 Redeemed (4,458,919) (35,163,026) (12,700,338) (94,682,949) ------------- -------------- ------------ ------------- 10,170,731 80,265,905 2,556,833 19,783,761 ------------- -------------- ------------ ------------- A CLASS/SHARES AUTHORIZED 150,000,000 100,000,000 ============= ============ Sold 2,941,064 23,191,127 9,522,904 71,576,386 Issued in connection with reclassification (Note 10) 8,894,774 68,678,162 -- -- Issued in reinvestment of distributions 170,969 1,327,284 2,477,211 18,667,945 Redeemed (4,957,797) (39,000,270) (9,165,753) (69,029,374) ------------- -------------- ------------ ------------- 7,049,010 54,196,303 2,834,362 21,214,957 ------------- -------------- ------------ ------------- A CLASS (OLD)/SHARES AUTHORIZED N/A 30,000,000 ============= ============ Sold 662,726 5,260,916 2,619,729 19,582,575 Issued in reinvestment of distributions 15,737 125,739 682,151 5,140,730 Redeemed in connection with reclassification (Note 10) (8,894,774) (68,678,162) -- -- Redeemed (1,001,889) (7,911,168) (3,234,521) (24,036,632) ------------- -------------- ------------ ------------- (9,218,200) (71,202,675) 67,359 686,673 ------------- -------------- ------------ ------------- B CLASS/SHARES AUTHORIZED 20,000,000 10,000,000 ============= ============ Sold 52,652 414,730 130,722 977,611 Issued in reinvestment of distributions 529 4,084 60,179 453,375 Redeemed (76,175) (597,265) (166,459) (1,227,272) ------------- -------------- ------------ ------------- (22,994) (178,451) 24,442 203,714 ------------- -------------- ------------ ------------- C CLASS/SHARES AUTHORIZED 20,000,000 10,000,000 ============= ============ Sold 187,679 1,458,814 651,229 4,845,046 Issued in reinvestment of distributions 2,258 17,128 160,285 1,201,156 Redeemed (543,381) (4,212,192) (563,859) (4,173,304) ------------- -------------- ------------ ------------- (353,444) (2,736,250) 247,655 1,872,898 ------------- -------------- ------------ ------------- R CLASS/SHARES AUTHORIZED 20,000,000 5,000,000 ============= ============ Sold 85,918 686,393 39,658 290,987 Issued in reinvestment of distributions 332 2,562 1,882 14,174 Redeemed (11,645) (93,520) (4,072) (29,290) ------------- -------------- ------------ ------------- 74,605 595,435 37,468 275,871 ------------- -------------- ------------ ------------- Net increase (decrease) (27,836,356) $(219,963,600) 13,850,896 $109,597,998 ============= ============== ============ ============= - ------ 38 Six months ended September 30, 2007 Year ended March 31, 2007 Shares Amount Shares Amount Large Company Value INVESTOR CLASS/SHARES AUTHORIZED 550,000,000 350,000,000 ============ ============ Sold 46,350,561 $363,222,237 72,227,467 $ 518,958,509 Issued in reinvestment of distributions 1,332,055 10,366,617 3,744,065 27,199,318 Redeemed (42,260,964) (334,593,436) (43,277,503) (310,977,065) ------------ ------------- ------------ ------------- 5,421,652 38,995,418 32,694,029 235,180,762 ------------ ------------- ------------ ------------- INSTITUTIONAL CLASS/SHARES AUTHORIZED 200,000,000 200,000,000 ============ ============ Sold 11,775,943 93,442,754 25,602,969 185,299,046 Issued in reinvestment of distributions 675,103 5,257,819 1,929,307 13,987,715 Redeemed (11,284,809) (89,670,333) (28,272,499) (203,670,769) ------------ ------------- ------------ ------------- 1,166,237 9,030,240 (740,223) (4,384,008) ------------ ------------- ------------ ------------- ADVISOR CLASS/SHARES AUTHORIZED 150,000,000 75,000,000 ============ ============ Sold 5,142,572 40,758,965 16,186,463 116,408,513 Issued in reinvestment of distributions 210,963 1,644,934 628,205 4,579,239 Redeemed (9,849,720) (76,385,259) (6,834,302) (49,342,297) ------------ ------------- ------------ ------------- (4,496,185) (33,981,360) 9,980,366 71,645,455 ------------ ------------- ------------ ------------- A CLASS/SHARES AUTHORIZED 150,000,000 150,000,000 ============ ============ Sold 1,627,139 12,802,961 6,284,203 45,840,430 Issued in reinvestment of distributions 201,210 1,569,589 705,634 5,122,651 Redeemed (4,565,507) (36,051,150) (10,446,648) (73,879,471) ------------ ------------- ------------ ------------- (2,737,158) (21,678,600) (3,456,811) (22,916,390) ------------ ------------- ------------ ------------- B CLASS/SHARES AUTHORIZED 20,000,000 10,000,000 ============ ============ Sold 51,221 403,673 164,034 1,189,507 Issued in reinvestment of distributions 7,269 56,817 31,725 233,063 Redeemed (140,911) (1,106,176) (270,147) (1,937,433) ------------ ------------- ------------ ------------- (82,421) (645,686) (74,388) (514,863) ------------ ------------- ------------ ------------- C CLASS/SHARES AUTHORIZED 50,000,000 20,000,000 ============ ============ Sold 938,549 7,384,109 1,996,859 14,288,977 Issued in reinvestment of distributions 13,663 106,494 56,188 412,221 Redeemed (1,117,123) (8,803,876) (1,729,086) (12,288,309) ------------ ------------- ------------ ------------- (164,911) (1,313,273) 323,961 2,412,889 ------------ ------------- ------------ ------------- R CLASS/SHARES AUTHORIZED 20,000,000 10,000,000 ============ ============ Sold 453,833 3,557,323 968,486 7,058,412 Issued in reinvestment of distributions 15,941 124,290 41,974 306,715 Redeemed (237,180) (1,866,331) (293,569) (2,135,000) ------------ ------------- ------------ ------------- 232,594 1,815,282 716,891 5,230,127 ------------ ------------- ------------ ------------- Net increase (decrease) (660,192) $ (7,777,979) 39,443,825 $ 286,653,972 ============ ============= ============ ============= - ------ 39 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, 2007 follows: September 30, 2007 Share Balance Purchase Realized Dividend Share Fund/Company 3/31/07 Cost Sales Cost Gain (Loss) Income Balance Market Value Equity Income Cascade Natural Gas Corp.(1) 569,091 -- $11,798,037 $3,282,875 $ 136,582 -- -- Commerce Bancshares, Inc.(2) 3,319,053 $20,342,996 9,864,442 (353,788) 1,766,451 3,553,739 $163,081,083 Westar Energy Inc.(2) 3,949,949 12,707,629 5,442,857 212,806 2,179,439 4,247,349 104,314,891 WGL Holdings Inc.(2) 2,427,900 3,681,909 4,351,502 (16,549) 1,667,770 2,411,200 81,715,568 ----------- ----------- ---------- ---------- ------------ $36,732,534 $31,456,838 $3,125,344 $5,750,242 $349,111,542 =========== =========== ========== ========== ============ (1) Company was not an affiliate at September 30, 2007. (2) Security, or a portion thereof, was on loan as of September 30, 2007. 6. SECURITIES LENDING As of September 30, 2007, securities in Equity Income, Value and Large Company Value valued at $139,928,885, $172,891,363 and $21,495,747, respectively, 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 $141,479,479, $178,130,166 and $22,301,953, respectively. The funds' risks in securities lending are that the borrower may not provide additional collateral when required or return the securities when due. If the borrower defaults, receipt of the collateral by the funds may be delayed or limited. 7. BANK LINE OF CREDIT The funds, along with certain other funds managed by ACIM or ACGIM, have a $500,000,000 unsecured bank line of credit agreement with JPMCB. 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 0.40%. The funds did not borrow from the line during the six months ended September 30, 2007. 8. RISK FACTORS There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social, and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions. - ------ 40 9. 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, 2007, the components of investments for federal income tax purposes were as follows: Large Company Equity Income Value Value Federal tax cost of investments $6,532,523,214 $3,061,184,403 $2,287,531,979 ============== ============== =============== Gross tax appreciation of investments $636,885,580 $214,515,232 $613,126,340 Gross tax depreciation of investments (81,097,071) (111,144,331) (48,747,705) -------------- -------------- --------------- Net tax appreciation (depreciation) of investments $555,788,509 $103,370,901 $564,378,635 ============== ============== =============== 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. Equity Income had $(187,650) of net foreign currency loss deferrals incurred in the five-month period ended March 31, 2007. Equity Income has elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. 10. CORPORATE EVENT On July 27, 2007, the A Class (old) shareholders of Value approved a reclassification of A Class (old) shares into Advisor Class shares. The change was approved by the Board of Directors on November 29, 2006 and March 7, 2007. The reclassification was effective on September 4, 2007. Subsequent to the reclassification, the Advisor Class was renamed A Class. On September 25, 2007, the A Class shareholders of Large Company Value approved a reclassification of A Class shares into Advisor Class shares. The change was approved by the Board of Directors on November 29, 2006 and March 7, 2007. The reclassification is expected to be effective December 3, 2007. Subsequent to the reclassification, the Advisor Class will be renamed A Class. 11. 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. Management has concluded that the adoption of FIN 48 will not materially impact the financial statements. 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 that adopting FAS 157 will have on the financial statement disclosures. - ------ 41 FINANCIAL HIGHLIGHTS Equity Income Investor Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $8.65 $8.11 $8.05 $7.84 $6.22 $7.36 -------- -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.11 0.21 0.20 0.21 0.22 0.17 Net Realized and Unrealized Gain (Loss) 0.34 1.05 0.36 0.61 1.71 (1.05) -------- -------- -------- -------- -------- -------- Total From Investment Operations 0.45 1.26 0.56 0.82 1.93 (0.88) -------- -------- -------- -------- -------- -------- Distributions From Net Investment Income (0.11) (0.17) (0.18) (0.19) (0.19) (0.16) From Net Realized Gains -- (0.55) (0.32) (0.42) (0.12) (0.10) -------- -------- -------- -------- -------- -------- Total Distributions (0.11) (0.72) (0.50) (0.61) (0.31) (0.26) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period $8.99 $8.65 $8.11 $8.05 $7.84 $6.22 ======== ======== ======== ======== ======== ======== TOTAL RETURN(3) 5.17% 15.79% 7.21% 10.69% 31.30% (12.09)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.96%(4) 0.97% 0.98% 0.99% 1.00% 1.00% Ratio of Net Investment Income (Loss) to Average Net Assets 2.39%(4) 2.43% 2.53% 2.56% 2.95% 2.60% Portfolio Turnover Rate 77% 160% 150% 174% 91% 120% Net Assets, End of Period (in thousands) $4,829,660 $4,790,510 $3,715,366 $3,290,442 $2,248,158 $1,277,478 (1) Six months ended September 30, 2007 (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 Institutional Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $8.65 $8.11 $8.06 $7.85 $6.23 $7.36 -------- -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.12 0.23 0.22 0.22 0.24 0.19 Net Realized and Unrealized Gain (Loss) 0.33 1.05 0.35 0.61 1.71 (1.04) -------- -------- -------- -------- -------- -------- Total From Investment Operations 0.45 1.28 0.57 0.83 1.95 (0.85) -------- -------- -------- -------- -------- -------- Distributions From Net Investment Income (0.11) (0.19) (0.20) (0.20) (0.21) (0.18) From Net Realized Gains -- (0.55) (0.32) (0.42) (0.12) (0.10) -------- -------- -------- -------- -------- -------- Total Distributions (0.11) (0.74) (0.52) (0.62) (0.33) (0.28) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period $8.99 $8.65 $8.11 $8.06 $7.85 $6.23 ======== ======== ======== ======== ======== ======== TOTAL RETURN(3) 5.28% 16.01% 7.29% 10.91% 31.51% (11.77)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.76%(4) 0.77% 0.78% 0.79% 0.80% 0.80% Ratio of Net Investment Income (Loss) to Average Net Assets 2.59%(4) 2.63% 2.73% 2.76% 3.15% 2.80% Portfolio Turnover Rate 77% 160% 150% 174% 91% 120% Net Assets, End of Period (in thousands) $613,515 $551,202 $382,909 $257,195 $183,330 $77,837 (1) Six months ended September 30, 2007 (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 A Class(1) For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(2) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $8.65 $8.11 $8.05 $7.84 $6.22 $7.36 -------- -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(3) 0.10 0.19 0.18 0.19 0.20 0.16 Net Realized and Unrealized Gain (Loss) 0.33 1.05 0.36 0.61 1.72 (1.05) -------- -------- -------- -------- -------- -------- Total From Investment Operations 0.43 1.24 0.54 0.80 1.92 (0.89) -------- -------- -------- -------- -------- -------- Distributions From Net Investment Income (0.09) (0.15) (0.16) (0.17) (0.18) (0.15) From Net Realized Gains -- (0.55) (0.32) (0.42) (0.12) (0.10) -------- -------- -------- -------- -------- -------- Total Distributions (0.09) (0.70) (0.48) (0.59) (0.30) (0.25) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period $8.99 $8.65 $8.11 $8.05 $7.84 $6.22 ======== ======== ======== ======== ======== ======== TOTAL RETURN(4) 5.04% 15.51% 6.94% 10.41% 30.97% (12.30)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.21%(5) 1.22% 1.23% 1.24% 1.25% 1.25% Ratio of Net Investment Income (Loss) to Average Net Assets 2.14%(5) 2.18% 2.28% 2.31% 2.70% 2.35% Portfolio Turnover Rate 77% 160% 150% 174% 91% 120% Net Assets, End of Period (in thousands) $1,225,468 $1,280,888 $902,749 $765,331 $457,360 $156,911 (1) Prior to September 4, 2007, the A Class was referred to as the Advisor Class. (2) Six months ended September 30, 2007 (unaudited). (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. See Notes to Financial Statements. - ------ 44 Equity Income C Class For a Share Outstanding Throughout the Year Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $8.65 $8.11 $8.06 $7.85 $6.21 $7.36 -------- -------- ------- ------- ------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.06 0.12 0.13 0.13 0.15 0.11 Net Realized and Unrealized Gain (Loss) 0.34 1.06 0.34 0.61 1.73 (1.06) -------- -------- ------- ------- ------- -------- Total From Investment Operations 0.40 1.18 0.47 0.74 1.88 (0.95) -------- -------- ------- ------- ------- -------- Distributions From Net Investment Income (0.06) (0.09) (0.10) (0.11) (0.12) (0.10) From Net Realized Gains -- (0.55) (0.32) (0.42) (0.12) (0.10) -------- -------- ------- ------- ------- -------- Total Distributions (0.06) (0.64) (0.42) (0.53) (0.24) (0.20) -------- -------- ------- ------- ------- -------- Net Asset Value, End of Period $8.99 $8.65 $8.11 $8.06 $7.85 $6.21 ======== ======== ======= ======= ======= ======== TOTAL RETURN(3) 4.65% 14.65% 6.02% 9.60% 30.37% (13.08)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.96%(4) 1.97% 1.98% 1.99% 2.00% 2.00% Ratio of Net Investment Income (Loss) to Average Net Assets 1.39%(4) 1.43% 1.53% 1.56% 1.95% 1.60% Portfolio Turnover Rate 77% 160% 150% 174% 91% 120% Net Assets, End of Period (in thousands) $141,124 $127,266 $98,481 $63,512 $42,579 $12,254 (1) Six months ended September 30, 2007 (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, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 45 Equity Income R Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004(2) PER-SHARE DATA Net Asset Value, Beginning of Period $8.63 $8.09 $8.04 $7.84 $7.22 -------- ------- ------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(3) 0.08 0.17 0.17 0.17 0.11 Net Realized and Unrealized Gain (Loss) 0.34 1.05 0.34 0.60 0.76 -------- ------- ------- -------- -------- Total From Investment Operations 0.42 1.22 0.51 0.77 0.87 -------- ------- ------- -------- -------- Distributions From Net Investment Income (0.08) (0.13) (0.14) (0.15) (0.13) From Net Realized Gains -- (0.55) (0.32) (0.42) (0.12) -------- ------- ------- -------- -------- Total Distributions (0.08) (0.68) (0.46) (0.57) (0.25) -------- ------- ------- -------- -------- Net Asset Value, End of Period $8.97 $8.63 $8.09 $8.04 $7.84 ======== ======= ======= ======== ======== TOTAL RETURN(4) 4.92% 15.25% 6.56% 10.03% 12.19% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.46%(5) 1.47% 1.48% 1.44%(6) 1.50%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.89%(5) 1.93% 2.03% 2.11%(6) 2.44%(5) Portfolio Turnover Rate 77% 160% 150% 174% 91%(7) Net Assets, End of Period (in thousands) $51,566 $44,767 $24,283 $6,046 $392 (1) Six months ended September 30, 2007 (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 (loss) 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 Value Investor Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $7.61 $7.18 $7.31 $7.72 $5.61 $7.19 -------- -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.06 0.12 0.12 0.09 0.09 0.07 Net Realized and Unrealized Gain (Loss) 0.24 0.93 0.57 0.64 2.18 (1.48) -------- -------- -------- -------- -------- -------- Total From Investment Operations 0.30 1.05 0.69 0.73 2.27 (1.41) -------- -------- -------- -------- -------- -------- Distributions From Net Investment Income (0.05) (0.11) (0.10) (0.09) (0.08) (0.07) From Net Realized Gains -- (0.51) (0.72) (1.05) (0.08) (0.10) -------- -------- -------- -------- -------- -------- Total Distributions (0.05) (0.62) (0.82) (1.14) (0.16) (0.17) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period $7.86 $7.61 $7.18 $7.31 $7.72 $5.61 ======== ======== ======== ======== ======== ======== TOTAL RETURN(3) 3.90% 14.90% 9.89% 9.95% 40.66% (19.85)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.99%(4) 0.99% 0.99% 0.99% 1.00% 1.00% Ratio of Net Investment Income (Loss) to Average Net Assets 1.50%(4) 1.58% 1.71% 1.16% 1.26% 1.19% Portfolio Turnover Rate 81% 140% 134% 130% 122% 102% Net Assets, End of Period (in thousands) $2,295,586 $2,495,067 $2,296,153 $2,315,507 $2,152,265 $1,552,632 (1) Six months ended September 30, 2007 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 47 Value Institutional Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $7.62 $7.19 $7.32 $7.72 $5.61 $7.20 -------- -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.07 0.13 0.14 0.10 0.10 0.09 Net Realized and Unrealized Gain (Loss) 0.23 0.94 0.57 0.65 2.18 (1.50) -------- -------- -------- -------- -------- -------- Total From Investment Operations 0.30 1.07 0.71 0.75 2.28 (1.41) -------- -------- -------- -------- -------- -------- Distributions From Net Investment Income (0.05) (0.13) (0.12) (0.10) (0.09) (0.08) From Net Realized Gains -- (0.51) (0.72) (1.05) (0.08) (0.10) -------- -------- -------- -------- -------- -------- Total Distributions (0.05) (0.64) (0.84) (1.15) (0.17) (0.18) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period $7.87 $7.62 $7.19 $7.32 $7.72 $5.61 ======== ======== ======== ======== ======== ======== TOTAL RETURN(3) 4.00% 15.11% 10.10% 10.30% 40.93% (19.70)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.79%(4) 0.79% 0.79% 0.79% 0.80% 0.80% Ratio of Net Investment Income (Loss) to Average Net Assets 1.70%(4) 1.78% 1.91% 1.36% 1.46% 1.38% Portfolio Turnover Rate 81% 140% 134% 130% 122% 102% Net Assets, End of Period (in thousands) $378,797 $289,536 $254,778 $251,812 $223,282 $179,196 (1) Six months ended September 30, 2007 (unaudited). (2) Computed using the average shares throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 48 Value A Class(1) For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(2) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $7.61 $7.18 $7.31 $7.72 $5.60 $7.19 -------- -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(3) 0.05 0.10 0.10 0.07 0.07 0.06 Net Realized and Unrealized Gain (Loss) 0.23 0.93 0.57 0.64 2.19 (1.49) -------- -------- -------- -------- -------- -------- Total From Investment Operations 0.28 1.03 0.67 0.71 2.26 (1.43) -------- -------- -------- -------- -------- -------- Distributions From Net Investment Income (0.04) (0.09) (0.08) (0.07) (0.06) (0.06) From Net Realized Gains -- (0.51) (0.72) (1.05) (0.08) (0.10) -------- -------- -------- -------- -------- -------- Total Distributions (0.04) (0.60) (0.80) (1.12) (0.14) (0.16) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period $7.85 $7.61 $7.18 $7.31 $7.72 $5.60 ======== ======== ======== ======== ======== ======== TOTAL RETURN(4) 3.64% 14.62% 9.61% 9.67% 40.56% (20.07)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.24%(5) 1.24% 1.24% 1.24% 1.25% 1.25% Ratio of Net Investment Income (Loss) to Average Net Assets 1.25%(5) 1.33% 1.46% 0.91% 1.01% 0.94% Portfolio Turnover Rate 81% 140% 134% 130% 122% 102% Net Assets, End of Period (in thousands) $312,577 $249,265 $214,835 $236,960 $403,212 $210,984 (1) Prior to September 4, 2007, the A Class was referred to as the Advisor Class. (2) Six months ended September 30, 2007 (unaudited). (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. See Notes to Financial Statements. - ------ 49 Value B Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003(2) PER-SHARE DATA Net Asset Value, Beginning of Period $7.61 $7.18 $7.31 $7.73 $5.61 $5.77 -------- ------ ------ ------ ------ -------- Income From Investment Operations Net Investment Income (Loss)(3) 0.02 0.04 0.05 0.01 0.01 --(4) Net Realized and Unrealized Gain (Loss) 0.23 0.94 0.57 0.65 2.20 (0.15) -------- ------ ------ ------ ------ -------- Total From Investment Operations 0.25 0.98 0.62 0.66 2.21 (0.15) -------- ------ ------ ------ ------ -------- Distributions From Net Investment Income (0.01) (0.04) (0.03) (0.03) (0.01) (0.01) From Net Realized Gains -- (0.51) (0.72) (1.05) (0.08) -- -------- ------ ------ ------ ------ -------- Total Distributions (0.01) (0.55) (0.75) (1.08) (0.09) (0.01) -------- ------ ------ ------ ------ -------- Net Asset Value, End of Period $7.85 $7.61 $7.18 $7.31 $7.73 $5.61 ======== ====== ====== ====== ====== ======== TOTAL RETURN(5) 3.26% 13.78% 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% 1.99% 2.00% 1.98%(6)(7) Ratio of Net Investment Income (Loss) to Average Net Assets 0.50%(6) 0.58% 0.71% 0.16% 0.26% (0.17)%(6)(7) Portfolio Turnover Rate 81% 140% 134% 130% 122% 102%(8) Net Assets, End of Period (in thousands) $7,808 $7,740 $7,129 $5,059 $2,656 $91 (1) Six months ended September 30, 2007 (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 that $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. - ------ 50 Value C Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $7.56 $7.14 $7.27 $7.70 $5.58 $7.18 -------- ------- ------- ------- ------ -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.02 0.04 0.05 0.01 0.02 0.01 Net Realized and Unrealized Gain (Loss) 0.23 0.93 0.57 0.64 2.19 (1.50) -------- ------- ------- ------- ------ -------- Total From Investment Operations 0.25 0.97 0.62 0.65 2.21 (1.49) -------- ------- ------- ------- ------ -------- Distributions From Net Investment Income (0.01) (0.04) (0.03) (0.03) (0.01) (0.01) From Net Realized Gains -- (0.51) (0.72) (1.05) (0.08) (0.10) -------- ------- ------- ------- ------ -------- Total Distributions (0.01) (0.55) (0.75) (1.08) (0.09) (0.11) -------- ------- ------- ------- ------ -------- Net Asset Value, End of Period $7.80 $7.56 $7.14 $7.27 $7.70 $5.58 ======== ======= ======= ======= ====== ======== TOTAL RETURN(3) 3.28% 13.71% 8.87% 8.84% 39.73% (20.90)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.99%(4) 1.99% 1.99% 1.99% 2.00% 2.00% Ratio of Net Investment Income (Loss) to Average Net Assets 0.50%(4) 0.58% 0.71% 0.16% 0.26% 0.19% Portfolio Turnover Rate 81% 140% 134% 130% 122% 102% Net Assets, End of Period (in thousands) $20,223 $22,274 $19,259 $13,885 $6,613 $2,461 (1) Six months ended September 30, 2007 (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, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 51 Value R Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006(2) PER-SHARE DATA Net Asset Value, Beginning of Period $7.61 $7.18 $7.60 -------- ------ -------- Income From Investment Operations Net Investment Income (Loss)(3) 0.04 0.08 0.06 Net Realized and Unrealized Gain (Loss) 0.24 0.94 0.29 -------- ------ -------- Total From Investment Operations 0.28 1.02 0.35 -------- ------ -------- Distributions From Net Investment Income (0.03) (0.08) (0.05) From Net Realized Gains -- (0.51) (0.72) -------- ------ -------- Total Distributions (0.03) (0.59) (0.77) -------- ------ -------- Net Asset Value, End of Period $7.86 $7.61 $7.18 ======== ====== ======== TOTAL RETURN(4) 3.64% 14.34% 4.99% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.49%(5) 1.49% 1.49%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.00%(5) 1.08% 1.17%(5) Portfolio Turnover Rate 81% 140% 134%(6) Net Assets, End of Period (in thousands) $928 $331 $43 (1) Six months ended September 30, 2007 (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. - ------ 52 Large Company Value Investor Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $7.55 $6.72 $6.39 $5.89 $4.29 $5.53 -------- -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.07 0.13 0.12 0.12 0.09 0.08 Net Realized and Unrealized Gain (Loss) 0.34 0.89 0.47 0.51 1.59 (1.25) -------- -------- -------- -------- -------- -------- Total From Investment Operations 0.41 1.02 0.59 0.63 1.68 (1.17) -------- -------- -------- -------- -------- -------- Distributions From Net Investment Income (0.07) (0.13) (0.11) (0.11) (0.08) (0.07) From Net Realized Gains -- (0.06) (0.15) (0.02) -- -- -------- -------- -------- -------- -------- -------- Total Distributions (0.07) (0.19) (0.26) (0.13) (0.08) (0.07) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period $7.89 $7.55 $6.72 $6.39 $5.89 $4.29 ======== ======== ======== ======== ======== ======== TOTAL RETURN(3) 5.44% 15.37% 9.44% 10.73% 39.34% (21.19)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.83%(4) 0.83% 0.84% 0.87% 0.90% 0.90% Ratio of Net Investment Income (Loss) to Average Net Assets 1.82%(4) 1.86% 1.75% 1.90% 1.58% 1.75% Portfolio Turnover Rate 9% 12% 16% 18% 14% 30% Net Assets, End of Period (in thousands) $1,606,772 $1,498,119 $1,112,858 $659,277 $350,516 $152,641 (1) Six months ended September 30, 2007 (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. - ------ 53 Large Company Value Institutional Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $7.55 $6.72 $6.39 $5.89 $4.29 $5.53 -------- -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.08 0.15 0.13 0.13 0.10 0.09 Net Realized and Unrealized Gain (Loss) 0.34 0.88 0.47 0.51 1.59 (1.25) -------- -------- -------- -------- -------- -------- Total From Investment Operations 0.42 1.03 0.60 0.64 1.69 (1.16) -------- -------- -------- -------- -------- -------- Distributions From Net Investment Income (0.08) (0.14) (0.12) (0.12) (0.09) (0.08) From Net Realized Gains -- (0.06) (0.15) (0.02) -- -- -------- -------- -------- -------- -------- -------- Total Distributions (0.08) (0.20) (0.27) (0.14) (0.09) (0.08) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period $7.89 $7.55 $6.72 $6.39 $5.89 $4.29 ======== ======== ======== ======== ======== ======== TOTAL RETURN(3) 5.54% 15.60% 9.65% 10.94% 39.61% (21.03)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.63%(4) 0.63% 0.64% 0.67% 0.70% 0.70% Ratio of Net Investment Income (Loss) to Average Net Assets 2.02%(4) 2.06% 1.95% 2.10% 1.78% 1.95% Portfolio Turnover Rate 9% 12% 16% 18% 14% 30% Net Assets, End of Period (in thousands) $622,034 $587,012 $527,109 $438,518 $151,622 $21,110 (1) Six months ended September 30, 2007 (unaudited). (2) Computed using the average shares throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 54 Large Company Value Advisor Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $7.55 $6.72 $6.39 $5.89 $4.29 $5.53 -------- -------- -------- -------- ------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.06 0.12 0.10 0.10 0.07 0.07 Net Realized and Unrealized Gain (Loss) 0.34 0.88 0.47 0.51 1.60 (1.25) -------- -------- -------- -------- ------- -------- Total From Investment Operations 0.40 1.00 0.57 0.61 1.67 (1.18) -------- -------- -------- -------- ------- -------- Distributions From Net Investment Income (0.06) (0.11) (0.09) (0.09) (0.07) (0.06) From Net Realized Gains -- (0.06) (0.15) (0.02) -- -- -------- -------- -------- -------- ------- -------- Total Distributions (0.06) (0.17) (0.24) (0.11) (0.07) (0.06) -------- -------- -------- -------- ------- -------- Net Asset Value, End of Period $7.89 $7.55 $6.72 $6.39 $5.89 $4.29 ======== ======== ======== ======== ======= ======== TOTAL RETURN(3) 5.31% 15.08% 9.17% 10.45% 38.99% (21.38)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.08%(4) 1.08% 1.09% 1.12% 1.15% 1.15% Ratio of Net Investment Income (Loss) to Average Net Assets 1.57%(4) 1.61% 1.50% 1.65% 1.33% 1.50% Portfolio Turnover Rate 9% 12% 16% 18% 14% 30% Net Assets, End of Period (in thousands) $259,913 $282,930 $184,601 $104,612 $19,265 $1,090 (1) Six months ended September 30, 2007 (unaudited). (2) Computed using the average shares throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 55 Large Company Value A Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003(2) PER-SHARE DATA Net Asset Value, Beginning of Period $7.56 $6.72 $6.39 $5.90 $4.29 $4.46 -------- -------- -------- -------- ------- -------- Income From Investment Operations Net Investment Income (Loss)(3) 0.06 0.12 0.10 0.10 0.07 0.01 Net Realized and Unrealized Gain (Loss) 0.33 0.89 0.47 0.50 1.61 (0.17) -------- -------- -------- -------- ------- -------- Total From Investment Operations 0.39 1.01 0.57 0.60 1.68 (0.16) -------- -------- -------- -------- ------- -------- Distributions From Net Investment Income (0.06) (0.11) (0.09) (0.09) (0.07) (0.01) From Net Realized Gains -- (0.06) (0.15) (0.02) -- -- -------- -------- -------- -------- ------- -------- Total Distributions (0.06) (0.17) (0.24) (0.11) (0.07) (0.01) -------- -------- -------- -------- ------- -------- Net Asset Value, End of Period $7.89 $7.56 $6.72 $6.39 $5.90 $4.29 ======== ======== ======== ======== ======= ======== TOTAL RETURN(4) 5.17% 15.23% 9.16% 10.25% 39.22% (3.49)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.08%(5) 1.08% 1.09% 1.12% 1.15% 1.15%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.57%(5) 1.61% 1.50% 1.65% 1.33% 1.79%(5) Portfolio Turnover Rate 9% 12% 16% 18% 14% 30%(6) Net Assets, End of Period (in thousands) $228,475 $239,545 $236,313 $245,416 $92,171 $3,733 (1) Six months ended September 30, 2007 (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. - ------ 56 Large Company Value B Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003(2) PER-SHARE DATA Net Asset Value, Beginning of Period $7.57 $6.74 $6.41 $5.91 $4.29 $4.46 -------- ------- ------- ------- ------ -------- Income From Investment Operations Net Investment Income (Loss)(3) 0.03 0.06 0.05 0.05 0.03 0.01 Net Realized and Unrealized Gain (Loss) 0.34 0.89 0.47 0.52 1.62 (0.17) -------- ------- ------- ------- ------ -------- Total From Investment Operations 0.37 0.95 0.52 0.57 1.65 (0.16) -------- ------- ------- ------- ------ -------- Distributions From Net Investment Income (0.03) (0.06) (0.04) (0.05) (0.03) (0.01) From Net Realized Gains -- (0.06) (0.15) (0.02) -- -- -------- ------- ------- ------- ------ -------- Total Distributions (0.03) (0.12) (0.19) (0.07) (0.03) (0.01) -------- ------- ------- ------- ------ -------- Net Asset Value, End of Period $7.91 $7.57 $6.74 $6.41 $5.91 $4.29 ======== ======= ======= ======= ====== ======== TOTAL RETURN(4) 4.90% 14.18% 8.33% 9.59% 38.41% (3.58)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.83%(5) 1.83% 1.84% 1.87% 1.90% 1.88%(5)(6) Ratio of Net Investment Income (Loss) to Average Net Assets 0.82%(5) 0.86% 0.75% 0.90% 0.58% 0.74%(5)(6) Portfolio Turnover Rate 9% 12% 16% 18% 14% 30%(7) Net Assets, End of Period (in thousands) $17,486 $17,374 $15,954 $13,009 $5,642 $88 (1) Six months ended September 30, 2007 (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. - ------ 57 Large Company Value C Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $7.55 $6.72 $6.39 $5.89 $4.28 $5.53 -------- ------- ------- ------- ------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.03 0.06 0.05 0.05 0.03 0.03 Net Realized and Unrealized Gain (Loss) 0.33 0.89 0.47 0.52 1.61 (1.25) -------- ------- ------- ------- ------- -------- Total From Investment Operations 0.36 0.95 0.52 0.57 1.64 (1.22) -------- ------- ------- ------- ------- -------- Distributions From Net Investment Income (0.03) (0.06) (0.04) (0.05) (0.03) (0.03) From Net Realized Gains -- (0.06) (0.15) (0.02) -- -- -------- ------- ------- ------- ------- -------- Total Distributions (0.03) (0.12) (0.19) (0.07) (0.03) (0.03) -------- ------- ------- ------- ------- -------- Net Asset Value, End of Period $7.88 $7.55 $6.72 $6.39 $5.89 $4.28 ======== ======= ======= ======= ======= ======== TOTAL RETURN(3) 4.91% 14.22% 8.35% 9.62% 38.27% (22.13)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.83%(4) 1.83% 1.84% 1.87% 1.90% 1.90% Ratio of Net Investment Income (Loss) to Average Net Assets 0.82%(4) 0.86% 0.75% 0.90% 0.58% 0.75% Portfolio Turnover Rate 9% 12% 16% 18% 14% 30% Net Assets, End of Period (in thousands) $73,647 $71,792 $61,682 $40,789 $11,030 $1,163 (1) Six months ended September 30, 2007 (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, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------ 58 Large Company Value R Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004(2) PER-SHARE DATA Net Asset Value, Beginning of Period $7.56 $6.72 $6.39 $5.89 $5.18 -------- ------- ------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(3) 0.05 0.10 0.09 0.09 0.03 Net Realized and Unrealized Gain (Loss) 0.33 0.89 0.47 0.51 0.72 -------- ------- ------- -------- -------- Total From Investment Operations 0.38 0.99 0.56 0.60 0.75 -------- ------- ------- -------- -------- Distributions From Net Investment Income (0.05) (0.09) (0.08) (0.08) (0.04) From Net Realized Gains -- (0.06) (0.15) (0.02) -- -------- ------- ------- -------- -------- Total Distributions (0.05) (0.15) (0.23) (0.10) (0.04) -------- ------- ------- -------- -------- Net Asset Value, End of Period $7.89 $7.56 $6.72 $6.39 $5.89 ======== ======= ======= ======== ======== TOTAL RETURN(4) 5.04% 14.95% 8.90% 10.17% 14.63% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.33%(5) 1.33% 1.34% 1.33%(6) 1.40%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.32%(5) 1.36% 1.25% 1.44%(6) 0.77%(5) Portfolio Turnover Rate 9% 12% 16% 18% 14%(7) Net Assets, End of Period (in thousands) $20,381 $17,765 $10,984 $2,143 $168 (1) Six months ended September 30, 2007 (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. - ------ 59 PROXY VOTING RESULTS A special meeting of shareholders was held on July 27, 2007 and September 25, 2007, to vote on the following proposals. The proposals received the required number of votes of the American Century Capital Portfolios, Inc. or the applicable fund, depending on the proposal, and were adopted. A summary of voting results is listed below each proposal. PROPOSAL 1: To elect nine Directors to the Board of Directors of American Century Capital Portfolios, Inc. (the proposal was voted on by all shareholders of funds issued by American Century Capital Portfolios, Inc.). James E. Stowers, Jr. For: 11,443,781,487 Withhold: 252,686,939 Abstain: 0 Broker Non-Vote: 0 Jonathan S. Thomas For: 11,454,104,706 Withhold: 242,363,720 Abstain: 0 Broker Non-Vote: 0 Thomas A. Brown For: 11,456,645,347 Withhold: 239,823,079 Abstain: 0 Broker Non-Vote: 0 Andrea C. Hall For: 11,459,598,200 Withhold: 236,870,226 Abstain: 0 Broker Non-Vote: 0 James A. Olson For: 11,454,607,738 Withhold: 241,860,688 Abstain: 0 Broker Non-Vote: 0 Donald H. Pratt For: 11,450,710,462 Withhold: 245,757,964 Abstain: 0 Broker Non-Vote: 0 Gale E. Sayers For: 11,458,471,500 Withhold: 237,996,926 Abstain: 0 Broker Non-Vote: 0 M. Jeannine Strandjord For: 11,451,541,828 Withhold: 244,926,598 Abstain: 0 Broker Non-Vote: 0 Timothy S. Webster For: 11,460,198,888 Withhold: 236,269,538 Abstain: 0 Broker Non-Vote: 0 - ------ 60 PROPOSAL 2: To approve a change in the fee structure of the Advisor Class. This proposal was voted on by the Advisor Class shareholders of the following funds: Equity Income Value Large Company Value For: 621,408,436 126,650,418 130,489,680 Against: 36,347,838 3,056,983 1,765,929 Abstain: 31,014,717 1,704,059 2,468,013 Broker Non-Vote: 207,433,476 9,910,146 15,611,505 PROPOSAL 3: To approve the reclassification of the A Class shares of the funds, whereby all of the A Class shares will be reclassified as Advisor Class shares of the funds. This proposal was voted on by the A Class shareholders of the following funds: Value Large Company Value For: 35,681,109 123,678,866 Against: 904,615 6,476,448 Abstain: 1,574,273 7,515,962 Broker Non-Vote: 28,523,216 89,978,839 - ------ 61 APPROVAL OF MANAGEMENT AGREEMENTS Equity Income, 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 Equity Income, Value and Large Company Value (the "funds") and the services provided to the funds under the management agreements. 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 agreements; * 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 agreements, including the setting of the applicable advisory fee. The board also had the benefit of the advice of its independent counsel throughout the period. - ------ 62 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 agreements 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 agreements, 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 agreements, 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 - ------ 63 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 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 and Value's performance was above the median for the one-year period and below the median for the three-year period for each fund's respective peer group. Large Company Value's performance was above below the median for the one-year period and equal to the median for the three-year period for its peer group. 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 agreements, 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. 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 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. - ------ 64 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 respective 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 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 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 agreements between the funds and the advisor are fair and reasonable in light of the services provided and should be renewed. - ------ 65 SHARE CLASS INFORMATION Six classes of shares are authorized for sale by Equity Income and Value: Investor Class, Institutional Class, A Class, B Class, C Class and R Class. Seven classes of shares are authorized for sale by Large Company Value: Investor Class, Institutional Class, Advisor Class, A Class, B Class, C Class and R Class. The total expense ratio of Institutional Class shares is lower than that of Investor Class shares. The expense ratios of Advisor Class, A Class, B Class, C Class and R Class shares are higher that 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; and/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. The funds' prospectuses contain additional information regarding eligibility for Investor Class shares. 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. The unified management fee for Advisor Class shares is the same as for Investor Class shares. Advisor Class shares are subject to a 0.25% annual Rule 12b-1 distribution and service fee. 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 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. - ------ 66 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. - ------ 67 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. - ------ 68 INDEX DEFINITIONS The following indices are used to illustrate investment market, sector, or style performance or to serve as fund performance comparisons. They are not investment products available for purchase. The LIPPER EQUITY INCOME FUNDS 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 LIPPER MULTI-CAP VALUE FUNDS INDEX is an equally-weighted index of, typically, the 30 largest mutual funds that use a value investment strategy to purchase securities of companies of all market capitalizations. The RUSSELL 1000® 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® GROWTH 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 higher price-to-book ratios and higher forecasted growth values. The RUSSELL 1000® 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 values. The RUSSELL 2000® 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® 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 values. The RUSSELL 2000® 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 values. The RUSSELL 3000® 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. The RUSSELL 3000® VALUE INDEX measures the performance of those Russell 3000 Index companies (the 3,000 largest U.S. companies based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values. The RUSSELL MIDCAP® INDEX measures the performance of the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization. - ------ 69 The RUSSELL MIDCAP® GROWTH INDEX measures the performance of those Russell Midcap Index companies (the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization) with higher price-to-book ratios and higher forecasted growth values. The RUSSELL MIDCAP® VALUE INDEX measures the performance of those Russell Midcap Index companies (the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values. The S&P 500 INDEX is a market value-weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. - ------ 70 NOTES - ------ 71 NOTES - ------ 72 [back cover] 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 P.O. Box 419200 Kansas City, MO 64141-6200 PRSRT STD U.S. POSTAGE PAID AMERICAN CENTURY COMPANIES American Century Investment Services, Inc., Distributor ©2007 American Century Proprietary Holdings, Inc. All rights reserved. The American Century Investments logo, American Century and American Century Investments are service marks of American Century Proprietary Holdings, Inc. 0711 SH-SAN-56796S
[front cover] AMERICAN CENTURY INVESTMENTS Semiannual Report September 30, 2007 [photo of fall] Equity Index Fund [american century investments logo and text logo] OUR MESSAGE TO YOU To help you monitor your investment, my colleagues and I take pride in providing you with the semiannual report for the American Century® Equity Index Fund for the six months ended September 30, 2007. This has been an eventful and exciting period for us. We've been working diligently to secure a smooth executive leadership transition. I'm honored to be addressing you in the "Our Message" space long devoted to company founder Jim Stowers, Jr. and his son Jim Stowers III. The Stowers family remains an integral part of our heritage, leadership, and financial structure. Jim Jr. continues as co-chair of the American Century Companies, Inc. (ACC) board of directors with Richard Brown, who has been on the board since 1998 and co-chairs the Stowers Institute for Medical Research board. But times and opportunities change. As the latest step in a career transition that began when he relinquished his executive leadership and investment management responsibilities in early 2005, Jim III stepped down from the ACC board in July 2007 to focus on new business ventures. Jim III's move reflects his family's comfort with our direction and leadership, and gives the Stowers more leeway to devote time and energy to other important priorities, such as the Stowers Institute for Medical Research. Meanwhile, American Century Investments, our clients, and our employees have been my top priority since I became company president and CEO in March. We've also added the executive talents of overall chief investment officer Enrique Chang, international equity CIO Mark On, U.S. growth equity CIO Steve Lurito, and chief operating officer Barry Fink. This skilled group, combined with our existing senior management team, has already had a positive impact on the development and management of the products and services we take pride in delivering to you. /s/Jonathan Thomas Jonathan Thomas [photo of Jonathan Thomas] Jonathan Thomas PRESIDENT AMERICAN CENTURY COMPANIES, INC. [photo of James E. Stowers, Jr.] James E. Stowers, Jr. FOUNDER AND CO-CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. [photo of Richard Brown] Richard Brown CO-CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. TABLE OF CONTENTS Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . 2 U.S. Stock Index 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 Proxy Voting Results. . . . . . . . . . . . . . . . . . . . . . . . . 27 Approval of Management Agreement for Equity Index . . . . . . . . . . 29 Share Class Information . . . . . . . . . . . . . . . . . . . . . . . 34 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 35 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 36 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 Chief Investment Officer] By Enrique Chang, Chief Investment Officer, American Century Investments STOCKS ADVANCED IN A VOLATILE ENVIRONMENT U.S. stocks produced positive results for the six months ended September 30, 2007, overcoming a confluence of challenges that led to extraordinary market volatility. The stock market enjoyed a steady rally during the first half of the six-month period thanks to corporate earnings growth, which decelerated but continued to surpass expectations. Robust merger activity also boosted stocks as leveraged buy-outs from private equity firms put the volume of deal-making ahead of last year's record pace. After reaching all-time highs in mid-July, however, the major stock indexes declined sharply as worsening problems in the subprime mortgage market led to a credit crisis that threatened to derail the economic expansion. Tighter lending standards crimped funding for leveraged buy-outs, removing an important leg of support for the stock market, and rising energy and commodity prices sparked inflation worries despite slowing economic activity. As investors grew increasingly risk-averse, the Federal Reserve (the Fed) stepped in to provide a measure of relief and comfort. The Fed lowered its discount rate in mid-August and federal funds rate target in September--the Fed's first rate cuts since June 2003. The Fed's actions helped alleviate some of the credit and economic concerns, allowing the major stock indexes to stage a solid recovery during the final six weeks of the period. LARGE-CAP AND GROWTH OUTPERFORMED Large-cap stocks delivered the best returns (see the accompanying table), followed by mid- and small-cap issues. Growth stocks, which have trailed value issues for much of the decade, enjoyed a resurgence during the six-month period, outpacing value shares by a wide margin across all market capitalizations. Energy was the best-performing sector in the stock market during the period, benefiting from a 24% increase in the price of oil. Information technology and industrials stocks also fared well. The only two sectors of the market to decline during the period were financials and consumer discretionary. U.S. Stock Index Returns For the six months ended September 30, 2007* RUSSELL 1000 INDEX (LARGE-CAP) 7.99% Russell 1000 Growth Index 11.35% Russell 1000 Value Index 4.67% RUSSELL MIDCAP INDEX 4.89% Russell Midcap Growth Index 9.03% Russell Midcap Value Index -0.03% RUSSELL 2000 INDEX (SMALL-CAP) 1.19% Russell 2000 Growth Index 6.70% Russell 2000 Value Index -4.10% * Total returns for periods less than one year are not annualized. - ------ 2 PERFORMANCE Equity Index Total Returns as of September 30, 2007 Average Annual Returns Since Inception 6 months(1) 1 year 5 years Inception Date INVESTOR CLASS 8.21% 16.01% 14.84% 3.62% 2/26/99 S&P 500 INDEX(2) 8.44% 16.44% 15.45% 4.13% -- Institutional Class 8.50% 16.21% 15.11% 3.85% 2/26/99 (1) Total returns for periods less than one year are not annualized. (2) Data provided by Lipper Inc. -- A Reuters Company. ©2007 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. - ------ 3 Equity Index Growth of $10,000 Over Life of Class $10,000 investment made February 26, 1999
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One-Year Returns Over Life of Class Periods ended September 30 1999* 2000 2001 2002 2003 2004 2005 2006 2007 Investor Class 4.02% 12.54% -26.89% -20.61% 23.56% 13.14% 11.87% 10.17% 16.01% S&P 500 Index 4.38% 13.28% -26.62% -20.49% 24.40% 13.87% 12.25% 10.79% 16.44% * 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 PORTFOLIO COMMENTARY Equity Index Subadvisor: Northern Trust Investments, N.A. Effective August 1, 2007, Northern Trust Investments, N.A. replaced Barclays Global Fund Advisors as the Equity Index portfolio's subadvisor. The change was made because Barclays notified American Century that in light of its current business model, it was not interested in continuing to provide subadvisory services to Equity Index. PERFORMANCE SUMMARY Equity Index returned 8.21%* for the six months ended September 30, 2007, compared with the 8.44% return of its benchmark, the S&P 500 Index. The portfolio's results reflect operating expenses, whereas the index return does not. ENERGY AND TECHNOLOGY LED THE WAY Eight of the ten sectors in the portfolio posted positive returns during the reporting period. Energy and information technology stocks led the portfolio's advance; nine of the portfolio's top ten individual performance contributors came from these two sectors. The portfolio's energy stocks returned 26% as a group, mirroring a similar rise in the price of oil that was fueled by strong demand from China and other emerging markets. Oil producer Exxon Mobil, the portfolio's largest holding, was the portfolio's top performance contributor. Oil producers Chevron and ConocoPhillips, as well as energy services provider Schlumberger, were also among the top ten performance contributors. Information technology stocks generated solid gains across the board, led by computer and peripherals companies, semiconductor manufacturers, and communications equipment makers. The best contributor in this sector was consumer electronics maker Apple, which benefited from the continued success of the iPod and the introduction of the iPhone. Other top-ten contributors included networking products company Cisco Systems, chipmaker Intel, IT services provider IBM, and computer hardware firm Hewlett-Packard. INDUSTRIALS ALSO ADVANCED The portfolio's industrials stocks enjoyed double-digit gains as a group during the reporting period, boosted by global economic strength and increased military spending. Industrial conglomerates were the best performers in this sector, led by General Electric, which was the portfolio's second-best performance contributor. Aerospace and defense stocks also produced strong results; aerospace companies United Technologies and Boeing were the top contributors in this segment, but defense contractors Honeywell International and Raytheon also generated robust returns. Top Ten Holdings as of September 30, 2007 % of net % of net assets as of assets as of 9/30/07 3/31/07 Exxon Mobil Corp. 3.9% 3.3% General Electric Co. 3.2% 2.8% AT&T Inc. 2.0% 1.9% Microsoft Corporation 1.8% 1.9% Citigroup Inc. 1.8% 1.9% Bank of America Corp. 1.7% 1.8% Procter & Gamble Co. (The) 1.7% 1.5% Cisco Systems Inc. 1.5% 1.2% Chevron Corp. 1.5% 1.2% Johnson & Johnson 1.5% 1.3% * All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. - ------ 5 Equity Index FINANCIALS, CONSUMER DISCRETIONARY DECLINED The only sectors of the portfolio to post negative returns for the reporting period were financials and consumer discretionary. Eight of the portfolio's ten biggest detractors from performance came from these two sectors. The financials sector was hurt by the fallout from the subprime lending meltdown. Commercial banks, thrifts, and mortgage finance companies (the lenders) were hit the hardest, but diversified financial services providers and capital markets firms (the investors) also felt the impact. Citigroup, the portfolio's largest financial holding, was the biggest individual detractor in the portfolio. Mortgage lender Countrywide Financial and commercial bank National City were also significant detractors, each declining by more than 30% because of their exposure to the subprime mortgage market. The consumer discretionary sector declined amid expectations of a slowdown in consumer spending resulting from higher energy prices, tighter credit conditions, and a weaker economy. Retailers and homebuilders suffered the brunt of the decline. Home improvement retailer Home Depot was the biggest detractor in this sector, dragged down by housing market weakness. Department store chains Kohl's and Macy's were also among the portfolio's ten largest detractors. Although a small part of the portfolio, homebuilders such as Pulte Homes, Lennar, and D.R. Horton all declined by more than 40% for the reporting period. STARTING POINT FOR NEXT REPORTING PERIOD The interest rate cuts made by the Federal Reserve (the Fed) helped stabilize the stock market late in the reporting period, and the Fed is likely to lower interest rates at least once more before the end of 2007 to provide additional support to the flagging economy. However, corporate profit growth is expected to continue decelerating into early 2008, and it is unclear whether the worst of the housing and mortgage problems have passed. Consequently, uncertainty may contribute to further stock market volatility in the coming months. 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, 2007 % of net % of net assets as of assets as of 9/30/07 3/31/07 Oil, Gas & Consumable Fuels 9.5% 8.1% Pharmaceuticals 6.3% 6.2% Diversified Financial Services 5.3% 5.5% Insurance 4.6% 4.7% Industrial Conglomerates 4.0% 3.8% Types of Investments in Portfolio % of net % of net assets as of assets as of 9/30/07 3/31/07 Common Stocks & Futures 103.6% 99.7% Temporary Cash Investments -- 0.2% Other Assets & Liabilities(1) (3.6)% 0.1% (1) Includes securities lending collateral and other assets and liabilities. - ------ 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, 2007 to September 30, 2007. 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. 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. - ------ 7 Expenses Paid Beginning Ending During Period* Account Account Value 4/1/07 - Annualized Value 4/1/07 9/30/07 9/30/07 Expense Ratio* ACTUAL Investor Class $1,000 $1,082.10 $2.55 0.49% Institutional Class $1,000 $1,085.00 $1.51 0.29% HYPOTHETICAL Investor Class $1,000 $1,022.55 $2.48 0.49% Institutional Class $1,000 $1,023.55 $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 366, to reflect the one-half year period. - ------ 8 SCHEDULE OF INVESTMENTS Equity Index SEPTEMBER 30, 2007 (UNAUDITED) Shares Value Common Stocks -- 102.7% AEROSPACE & DEFENSE -- 2.9% 62,163 Boeing Co. $ 6,526,494 31,977 General Dynamics Corp. 2,701,097 9,871 Goodrich Corporation 673,498 59,744 Honeywell International Inc. 3,552,976 9,853 L-3 Communications Holdings, Inc. 1,006,385 27,558 Lockheed Martin Corp. 2,989,767 27,271 Northrop Grumman Corp. 2,127,138 10,872 Precision Castparts Corp. 1,608,839 34,717 Raytheon Company 2,215,639 13,166 Rockwell Collins 961,645 78,623 United Technologies Corp. 6,327,579 -------------- 30,691,057 -------------- AIR FREIGHT & LOGISTICS -- 0.9% 13,472 C.H. Robinson Worldwide Inc. 731,395 24,569 FedEx Corporation 2,573,603 83,423 United Parcel Service, Inc. Cl B 6,265,067 -------------- 9,570,065 -------------- AIRLINES -- 0.1% 59,429 Southwest Airlines Co. 879,549 -------------- AUTO COMPONENTS -- 0.2% 16,598 Goodyear Tire & Rubber Co. (The)(1) 504,745 15,577 Johnson Controls, Inc. 1,839,800 -------------- 2,344,545 -------------- AUTOMOBILES -- 0.4% 163,986 Ford Motor Co.(1)(2) 1,392,241 45,123 General Motors Corp. 1,656,014 20,325 Harley-Davidson, Inc. 939,218 -------------- 3,987,473 -------------- BEVERAGES -- 2.3% 62,241 Anheuser-Busch Companies, Inc. 3,111,428 6,341 Brown-Forman Corp. Cl B 475,004 158,114 Coca-Cola Company (The) 9,086,812 22,058 Coca-Cola Enterprises Inc. 534,245 15,409 Constellation Brands Inc. Cl A(1) 373,052 4,567 Molson Coors Brewing Co. 455,193 10,584 Pepsi Bottling Group Inc. 393,407 128,382 PepsiCo, Inc. 9,405,265 -------------- 23,834,406 -------------- BIOTECHNOLOGY -- 1.2% 87,718 Amgen Inc.(1) 4,962,207 22,592 Biogen Idec Inc.(1) 1,498,527 Shares Value 29,970 Celgene Corp.(1) $ 2,137,161 20,751 Genzyme Corp.(1) 1,285,732 73,845 Gilead Sciences, Inc.(1) 3,018,045 -------------- 12,901,672 -------------- BUILDING PRODUCTS -- 0.1% 14,150 American Standard Companies Inc. 504,023 29,890 Masco Corp. 692,551 -------------- 1,196,574 -------------- CAPITAL MARKETS -- 3.5% 14,205 American Capital Strategies Ltd.(2) 606,980 18,530 Ameriprise Financial Inc. 1,169,428 89,291 Bank of New York Mellon Corp. (The) 3,941,305 9,279 Bear Stearns Companies Inc. (The) 1,139,554 34,346 E*TRADE Financial Corp.(1) 448,559 7,190 Federated Investors Inc. Cl B 285,443 12,958 Franklin Resources, Inc. 1,652,145 32,270 Goldman Sachs Group, Inc. (The) 6,994,199 12,517 Janus Capital Group Inc. 353,981 10,382 Legg Mason, Inc. 875,099 42,060 Lehman Brothers Holdings Inc. 2,596,364 68,474 Merrill Lynch & Co., Inc. 4,880,827 83,311 Morgan Stanley 5,248,593 15,183 Northern Trust Corp. 1,006,177 74,619 Schwab (Charles) Corp. 1,611,770 31,355 State Street Corp. 2,137,157 20,973 T. Rowe Price Group Inc. 1,167,986 -------------- 36,115,567 -------------- CHEMICALS -- 1.8% 17,130 Air Products & Chemicals, Inc. 1,674,629 4,495 Ashland Inc. 270,644 75,307 Dow Chemical Co. 3,242,719 73,028 du Pont (E.I.) de Nemours & Co. 3,619,268 6,769 Eastman Chemical Company 451,695 14,102 Ecolab Inc. 665,614 9,310 Hercules Inc.(2) 195,696 6,247 International Flavors & Fragrances Inc. 330,216 43,236 Monsanto Co. 3,707,056 12,911 PPG Industries, Inc. 975,426 25,246 Praxair, Inc. 2,114,605 11,252 Rohm and Haas Co. 626,399 10,565 Sigma-Aldrich Corp. 514,938 -------------- 18,388,905 -------------- - ------ 9 Equity Index Shares Value COMMERCIAL BANKS -- 3.6% 42,859 BB&T Corporation $ 1,731,075 12,348 Comerica Inc. 633,205 15,097 Commerce Bancorp Inc. 585,462 43,463 Fifth Third Bancorp 1,472,526 10,016 First Horizon National Corp.(2) 267,027 29,394 Huntington Bancshares Inc. 499,110 31,066 KeyCorp 1,004,364 5,997 M&T Bank Corp. 620,390 20,448 Marshall & Ilsley Corp. 895,009 50,629 National City Corp. 1,270,282 27,255 PNC Financial Services Group 1,856,066 55,706 Regions Financial Corp. 1,642,213 28,197 SunTrust Banks, Inc. 2,133,667 25,809 Synovus Financial Corp. 723,942 137,415 U.S. Bancorp 4,470,110 151,170 Wachovia Corp. 7,581,176 263,953 Wells Fargo & Co. 9,402,005 8,651 Zions Bancorporation 594,064 -------------- 37,381,693 -------------- COMMERCIAL SERVICES & SUPPLIES -- 0.5% 20,693 Allied Waste Industries Inc.(1) 263,836 7,373 Avery Dennison Corp. 420,408 10,849 Cintas Corp. 402,498 11,278 Equifax Inc. 429,917 10,619 Monster Worldwide Inc.(1) 361,683 17,373 Pitney Bowes, Inc. 789,082 17,410 R.R. Donnelley & Sons Company 636,510 12,967 Robert Half International Inc. 387,195 42,536 Waste Management, Inc. 1,605,308 -------------- 5,296,437 -------------- COMMUNICATIONS EQUIPMENT -- 3.0% 36,195 Avaya Inc.(1) 613,867 6,813 Ciena Corp.(1)(2) 259,439 483,363 Cisco Systems Inc.(1) 16,004,148 124,261 Corning Inc. 3,063,034 16,649 JDS Uniphase Corp.(1) 249,069 40,568 Juniper Networks, Inc.(1) 1,485,194 185,656 Motorola, Inc. 3,440,206 135,426 QUALCOMM Inc. 5,723,103 35,553 Tellabs, Inc.(1) 338,465 -------------- 31,176,525 -------------- COMPUTERS & PERIPHERALS -- 3.2% 68,904 Apple Inc.(1) 10,579,520 179,498 Dell Inc.(1) 4,954,145 165,862 EMC Corp.(1) 3,449,930 204,846 Hewlett-Packard Co. 10,199,282 Shares Value 7,503 Lexmark International, Inc. Cl A(1) $311,600 29,357 Network Appliance, Inc.(1) 789,997 11,601 QLogic Corp.(1) 156,033 18,063 SanDisk Corp.(1) 995,271 282,185 Sun Microsystems, Inc.(1) 1,583,058 -------------- 33,018,836 -------------- CONSTRUCTION & ENGINEERING -- 0.1% 6,996 Fluor Corp. 1,007,284 -------------- CONSTRUCTION MATERIALS -- 0.1% 7,468 Vulcan Materials Co.(2) 665,772 -------------- CONSUMER FINANCE -- 1.0% 93,949 American Express Co. 5,577,752 32,653 Capital One Financial Corp. 2,169,139 41,602 Discover Financial Services(1) 865,322 32,506 SLM Corporation 1,614,573 -------------- 10,226,786 -------------- CONTAINERS & PACKAGING -- 0.2% 8,214 Ball Corp. 441,503 8,333 Bemis Co., Inc. 242,574 10,631 Pactiv Corp.(1) 304,684 12,828 Sealed Air Corp. 327,884 8,558 Temple-Inland Inc. 450,407 -------------- 1,767,052 -------------- DISTRIBUTORS -- 0.1% 13,409 Genuine Parts Company 670,450 -------------- DIVERSIFIED CONSUMER SERVICES -- 0.1% 11,061 Apollo Group, Inc. Cl A(1) 665,319 25,982 H&R Block, Inc. 550,299 -------------- 1,215,618 -------------- DIVERSIFIED FINANCIAL SERVICES -- 5.3% 355,215 Bank of America Corp.(3) 17,856,658 15,131 CIT Group Inc. 608,266 392,949 Citigroup Inc. 18,338,931 4,252 CME Group Inc. 2,497,412 5,500 IntercontinentalExchange Inc.(1) 835,450 271,100 JPMorgan Chase & Co. 12,421,802 13,200 Leucadia National Corp. 636,504 27,117 McGraw-Hill Companies, Inc. (The) 1,380,526 17,607 Moody's Corp. 887,393 -------------- 55,462,942 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.3% 487,252 AT&T Inc. 20,615,633 8,898 CenturyTel Inc. 411,266 27,829 Citizens Communications Company 398,511 - ------ 10 Equity Index Shares Value 11,955 Embarq Corp. $664,698 122,788 Qwest Communications International Inc.(1) 1,124,738 229,437 Verizon Communications Inc. 10,159,470 37,620 Windstream Corp. 531,194 -------------- 33,905,510 -------------- ELECTRIC UTILITIES -- 1.9% 13,034 Allegheny Energy, Inc.(1) 681,157 31,487 American Electric Power 1,450,921 99,545 Duke Energy Corp. 1,860,496 25,717 Edison International 1,426,008 15,574 Entergy Corp. 1,686,508 55,129 Exelon Corporation 4,154,522 24,130 FirstEnergy Corp. 1,528,394 32,104 FPL Group, Inc. 1,954,492 7,981 Pinnacle West Capital Corp. 315,329 30,488 PPL Corporation 1,411,594 20,154 Progress Energy Inc. 944,215 59,397 Southern Co.(2) 2,154,923 -------------- 19,568,559 -------------- ELECTRICAL EQUIPMENT -- 0.5% 14,729 Cooper Industries, Ltd. Cl A 752,505 62,895 Emerson Electric Co. 3,347,271 12,494 Rockwell Automation Inc. 868,458 -------------- 4,968,234 -------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.3% 31,261 Agilent Technologies, Inc.(1) 1,152,906 14,418 Jabil Circuit, Inc. 329,307 11,426 Molex Inc. 307,702 72,282 Solectron Corp.(1) 281,900 5,959 Tektronix, Inc. 165,303 39,180 Tyco Electronics Ltd. 1,388,147 -------------- 3,625,265 -------------- ENERGY EQUIPMENT & SERVICES -- 2.5% 25,277 Baker Hughes Inc. 2,284,282 23,201 BJ Services Co. 615,987 11,796 ENSCO International Inc. 661,756 70,753 Halliburton Co. 2,716,915 22,251 Nabors Industries Ltd.(1) 684,663 14,093 National Oilwell Varco, Inc.(1) 2,036,439 21,170 Noble Corp. 1,038,389 9,001 Rowan Companies, Inc. 329,257 94,741 Schlumberger Ltd. 9,947,804 15,831 Smith International, Inc. 1,130,333 22,787 Transocean Inc.(1) 2,576,070 26,642 Weatherford International Ltd.(1) 1,789,810 -------------- 25,811,705 -------------- Shares Value FOOD & STAPLES RETAILING -- 2.4% 34,741 Costco Wholesale Corp. $ 2,132,055 117,605 CVS/Caremark Corp. 4,660,686 55,967 Kroger Co. (The) 1,596,179 34,933 Safeway Inc. 1,156,632 16,420 SUPERVALU INC. 640,544 48,825 Sysco Corp. 1,737,682 190,677 Wal-Mart Stores, Inc. 8,323,050 79,036 Walgreen Co. 3,733,661 11,183 Whole Foods Market, Inc.(2) 547,520 -------------- 24,528,009 -------------- FOOD PRODUCTS -- 1.5% 51,524 Archer-Daniels-Midland Co. 1,704,414 17,157 Campbell Soup Co. 634,809 39,378 ConAgra Foods, Inc. 1,028,947 10,351 Dean Foods Co. 264,779 27,371 General Mills, Inc. 1,587,792 25,639 H.J. Heinz Co. 1,184,522 13,494 Hershey Co. (The) 626,257 19,857 Kellogg Co. 1,111,992 125,583 Kraft Foods Inc. Cl A 4,333,869 10,352 McCormick & Company, Inc. 372,361 58,007 Sara Lee Corp. 968,137 20,507 Tyson Foods, Inc. Cl A 366,050 17,049 Wm. Wrigley Jr. Co. 1,095,057 -------------- 15,278,986 -------------- GAS UTILITIES -- 0.1% 3,651 Nicor Inc.(2) 156,628 13,573 Questar Corp. 712,990 -------------- 869,618 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 1.8% 8,110 Bard (C.R.), Inc. 715,221 4,384 Bausch & Lomb Inc. 280,576 51,427 Baxter International Inc. 2,894,312 19,314 Becton, Dickinson & Co. 1,584,714 100,977 Boston Scientific Corp.(1) 1,408,629 39,181 Covidien Ltd.(1) 1,626,012 12,536 Hospira Inc.(1) 519,617 91,567 Medtronic, Inc. 5,165,293 26,723 St. Jude Medical, Inc.(1) 1,177,683 20,630 Stryker Corp. 1,418,519 10,255 Varian Medical Systems, Inc.(1) 429,582 18,653 Zimmer Holdings Inc.(1) 1,510,706 -------------- 18,730,864 -------------- HEALTH CARE PROVIDERS & SERVICES -- 2.2% 40,754 Aetna Inc. 2,211,720 14,175 AmerisourceBergen Corp. 642,553 28,752 Cardinal Health, Inc. 1,797,863 - ------ 11 Equity Index Shares Value 22,458 CIGNA Corp. $ 1,196,787 12,379 Coventry Health Care Inc.(1) 770,098 20,322 Express Scripts, Inc.(1) 1,134,374 13,221 Humana Inc.(1) 923,883 9,263 Laboratory Corp. of America Holdings(1) 724,644 5,831 Manor Care, Inc. 375,516 23,370 McKesson Corp. 1,373,922 21,542 Medco Health Solutions Inc.(1) 1,947,181 11,194 Patterson Companies, Inc.(1) 432,200 12,514 Quest Diagnostics Inc. 722,934 37,528 Tenet Healthcare Corp.(1) 126,094 105,235 UnitedHealth Group Inc. 5,096,531 47,981 WellPoint Inc.(1) 3,786,661 -------------- 23,262,961 -------------- HEALTH CARE TECHNOLOGY(4) 15,510 IMS Health Inc. 475,226 -------------- HOTELS, RESTAURANTS & LEISURE -- 1.6% 35,799 Carnival Corporation 1,733,746 11,158 Darden Restaurants, Inc. 467,074 14,722 Harrah's Entertainment, Inc. 1,279,783 30,762 Hilton Hotels Corporation 1,430,125 26,649 International Game Technology 1,148,572 25,924 Marriott International, Inc. Cl A 1,126,916 94,372 McDonald's Corporation 5,140,443 58,508 Starbucks Corporation(1) 1,532,910 17,009 Starwood Hotels & Resorts Worldwide, Inc. 1,033,297 6,973 Wendy's International, Inc. 243,427 14,741 Wyndham Worldwide Corp. 482,915 41,349 Yum! Brands, Inc. 1,398,837 -------------- 17,018,045 -------------- HOUSEHOLD DURABLES -- 0.5% 5,343 Black & Decker Corporation 445,072 9,609 Centex Corp. 255,311 21,985 D.R. Horton, Inc. 281,628 12,092 Fortune Brands, Inc. 985,376 5,142 Harman International Industries Inc. 444,886 6,063 KB Home(2) 151,939 14,271 Leggett & Platt, Inc. 273,432 11,047 Lennar Corp. 250,215 22,440 Newell Rubbermaid Inc. 646,720 17,092 Pulte Homes Inc. 232,622 4,588 Snap-on Incorporated 227,290 6,581 Stanley Works (The) 369,392 6,350 Whirlpool Corp. 565,785 -------------- 5,129,668 -------------- Shares Value HOUSEHOLD PRODUCTS -- 2.2% 10,911 Clorox Company $665,462 40,460 Colgate-Palmolive Co. 2,885,607 33,705 Kimberly-Clark Corp. 2,368,113 247,899 Procter & Gamble Co. (The) 17,437,216 -------------- 23,356,398 -------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.5% 52,817 AES Corp. (The)(1) 1,058,453 14,239 Constellation Energy Group Inc. 1,221,564 33,113 Dynegy Inc. Cl A(1) 305,964 38,648 TXU Corp. 2,646,228 -------------- 5,232,209 -------------- INDUSTRIAL CONGLOMERATES -- 4.0% 56,856 3M Co. 5,320,584 813,107 General Electric Co. 33,775,789 19,888 Textron Inc. 1,237,232 39,181 Tyco International Ltd. 1,737,286 -------------- 42,070,891 -------------- INSURANCE -- 4.6% 25,697 Ace, Ltd. 1,556,467 38,661 Aflac Inc. 2,205,223 46,478 Allstate Corp. 2,658,077 8,202 Ambac Financial Group, Inc. 515,988 203,763 American International Group, Inc. 13,784,568 23,225 AON Corp. 1,040,712 7,662 Assurant, Inc. 409,917 31,206 Chubb Corp. 1,673,890 13,513 Cincinnati Financial Corp. 585,248 33,661 Genworth Financial Inc. Cl A 1,034,403 25,082 Hartford Financial Services Group Inc. (The) 2,321,339 21,389 Lincoln National Corp. 1,411,032 35,267 Loews Corp. 1,705,159 42,992 Marsh & McLennan Companies, Inc. 1,096,296 10,025 MBIA Inc. 612,026 58,578 MetLife, Inc. 4,084,644 21,148 Principal Financial Group, Inc. 1,334,227 57,540 Progressive Corp. (The) 1,116,851 37,628 Prudential Financial, Inc. 3,671,740 8,396 Safeco Corp. 514,003 7,534 Torchmark Corp. 469,519 52,132 Travelers Companies, Inc. (The) 2,624,325 27,582 Unum Group 674,932 14,463 XL Capital Ltd. Cl A 1,145,470 -------------- 48,246,056 -------------- - ------ 12 Equity Index Shares Value INTERNET & CATALOG RETAIL -- 0.3% 24,527 Amazon.com, Inc.(1) $ 2,284,690 15,180 IAC/InterActiveCorp(1) 450,391 -------------- 2,735,081 -------------- INTERNET SOFTWARE & SERVICES -- 1.7% 13,270 Akamai Technologies, Inc.(1) 381,247 89,490 eBay Inc.(1) 3,491,900 18,450 Google Inc. Cl A(1) 10,466,131 19,324 VeriSign, Inc.(1) 651,992 104,724 Yahoo! Inc.(1) 2,810,792 -------------- 17,802,062 -------------- IT SERVICES -- 2.1% 8,060 Affiliated Computer Services Inc. Cl A(1) 404,934 42,218 Automatic Data Processing, Inc. 1,939,073 11,368 Cognizant Technology Solutions Corp. Cl A(1) 906,825 13,638 Computer Sciences Corp.(1) 762,364 11,133 Convergys Corp.(1) 193,269 40,245 Electronic Data Systems Corp. 878,951 13,163 Fidelity National Information Services, Inc. 584,042 13,233 Fiserv, Inc.(1) 673,030 107,927 International Business Machines Corp. 12,713,801 26,852 Paychex, Inc. 1,100,932 28,006 Unisys Corp.(1) 185,400 61,073 Western Union Co. (The) 1,280,701 -------------- 21,623,322 -------------- LEISURE EQUIPMENT & PRODUCTS -- 0.2% 7,232 Brunswick Corp. 165,324 22,747 Eastman Kodak Co.(2) 608,710 12,584 Hasbro, Inc. 350,842 31,149 Mattel, Inc. 730,755 -------------- 1,855,631 -------------- LIFE SCIENCES TOOLS & SERVICES -- 0.3% 14,768 Applera Corporation -- Applied Biosystems Group 511,564 4,283 Millipore Corp.(1) 324,651 9,765 PerkinElmer, Inc. 285,236 33,352 Thermo Fisher Scientific Inc.(1) 1,925,077 8,118 Waters Corp.(1) 543,257 -------------- 3,589,785 -------------- MACHINERY -- 1.8% 50,633 Caterpillar Inc. 3,971,145 8,191 Cummins Inc. 1,047,547 18,758 Danaher Corp. 1,551,474 17,805 Deere & Co. 2,642,618 Shares Value 16,148 Dover Corp. $822,741 11,589 Eaton Corp. 1,147,775 32,551 Illinois Tool Works Inc. 1,941,342 23,871 Ingersoll-Rand Company Ltd. Cl A 1,300,253 14,423 ITT Corporation 979,754 19,582 Paccar Inc. 1,669,366 9,863 Pall Corp. 383,671 9,120 Parker-Hannifin Corp. 1,019,890 8,096 Terex Corp.(1) 720,706 -------------- 19,198,282 -------------- MEDIA -- 3.0% 54,347 CBS Corp. Cl B 1,711,931 39,241 Clear Channel Communications, Inc. 1,469,183 245,929 Comcast Corp. Cl A(1) 5,946,562 60,339 DIRECTV Group, Inc. (The)(1) 1,465,031 5,185 Dow Jones & Co., Inc. 309,545 6,733 EW Scripps Co. Cl A 282,786 18,483 Gannett Co., Inc. 807,707 37,025 Interpublic Group of Companies, Inc.(1) 384,320 3,053 Meredith Corp. 174,937 11,577 New York Times Co. (The) Cl A(2) 228,762 184,031 News Corp. Cl A 4,046,842 26,119 Omnicom Group Inc. 1,256,063 296,219 Time Warner Inc. 5,438,580 6,081 Tribune Co. 166,133 54,453 Viacom Inc. Cl B(1) 2,122,033 154,163 Walt Disney Co. (The) 5,301,665 -------------- 31,112,080 -------------- METALS & MINING -- 1.0% 68,770 Alcoa Inc. 2,690,282 8,020 Allegheny Technologies Inc. 881,799 29,810 Freeport-McMoRan Copper & Gold, Inc. 3,126,772 38,299 Newmont Mining Corporation 1,713,114 23,277 Nucor Corp. 1,384,283 9,320 United States Steel Corp. 987,361 -------------- 10,783,611 -------------- MULTI-UTILITIES -- 1.1% 16,297 Ameren Corp. 855,593 25,373 CenterPoint Energy, Inc. 406,729 17,809 CMS Energy Corp. 299,547 21,367 Consolidated Edison, Inc. 989,292 23,061 Dominion Resources Inc. 1,944,042 13,867 DTE Energy Company(2) 671,717 6,139 Integrys Energy Group Inc. 314,501 22,050 NiSource Inc. 422,037 - ------ 13 Equity Index Shares Value 27,784 PG&E Corp. $ 1,328,075 20,040 Public Service Enterprise Group Inc. 1,763,320 20,828 Sempra Energy 1,210,523 16,660 TECO Energy, Inc. 273,724 32,301 XCEL Energy Inc. 695,764 -------------- 11,174,864 -------------- MULTILINE RETAIL -- 1.0% 8,656 Big Lots, Inc.(1) 258,295 4,784 Dillard's Inc. Cl A(2) 104,435 11,533 Family Dollar Stores, Inc. 306,316 17,604 J.C. Penney Co., Inc. 1,115,565 25,261 Kohl's Corp.(1) 1,448,214 34,484 Macy's Inc. 1,114,523 15,660 Nordstrom, Inc. 734,297 6,026 Sears Holdings Corp.(1) 766,507 67,320 Target Corp. 4,279,533 -------------- 10,127,685 -------------- OFFICE ELECTRONICS -- 0.1% 74,024 Xerox Corp.(1) 1,283,576 -------------- OIL, GAS & CONSUMABLE FUELS -- 9.5% 36,632 Anadarko Petroleum Corp. 1,968,970 26,148 Apache Corp. 2,354,889 32,347 Chesapeake Energy Corp. 1,140,555 169,353 Chevron Corp. 15,848,053 129,223 ConocoPhillips 11,341,903 14,651 Consol Energy Inc. 682,737 35,094 Devon Energy Corporation 2,919,821 55,344 El Paso Corp. 939,188 19,282 EOG Resources Inc. 1,394,667 442,020 Exxon Mobil Corp. 40,913,370 21,556 Hess Corp. 1,434,121 54,199 Marathon Oil Corp. 3,090,427 14,838 Murphy Oil Corp. 1,037,028 67,798 Occidental Petroleum Corp. 4,344,496 20,920 Peabody Energy Corp. 1,001,440 49,941 Spectra Energy Corp. 1,222,556 9,572 Sunoco, Inc. 677,506 10,900 Tesoro Corp. 501,618 43,377 Valero Energy Corp. 2,914,067 47,288 Williams Companies, Inc. (The) 1,610,629 30,249 XTO Energy Inc. 1,870,598 -------------- 99,208,639 -------------- PAPER & FOREST PRODUCTS -- 0.3% 34,148 International Paper Company 1,224,889 14,530 MeadWestvaco Corp. 429,071 17,074 Weyerhaeuser Co. 1,234,450 -------------- 2,888,410 -------------- Shares Value PERSONAL PRODUCTS -- 0.2% 34,713 Avon Products, Inc. $ 1,302,779 9,576 Estee Lauder Companies, Inc. (The) Cl A 406,597 -------------- 1,709,376 -------------- PHARMACEUTICALS -- 6.3% 121,754 Abbott Laboratories 6,528,449 24,245 Allergan, Inc. 1,563,075 8,892 Barr Pharmaceuticals Inc.(1) 506,044 155,471 Bristol-Myers Squibb Co. 4,480,674 77,994 Eli Lilly and Company 4,440,198 25,176 Forest Laboratories, Inc.(1) 938,813 232,091 Johnson & Johnson 15,248,380 19,602 King Pharmaceuticals, Inc.(1) 229,735 172,403 Merck & Co., Inc. 8,911,511 19,790 Mylan Laboratories Inc. 315,848 554,670 Pfizer Inc. 13,550,589 127,351 Schering-Plough Corp. 4,028,112 8,370 Watson Pharmaceuticals, Inc.(1) 271,188 106,246 Wyeth 4,733,259 -------------- 65,745,875 -------------- REAL ESTATE INVESTMENT TRUSTS -- 1.3% 7,819 Apartment Investment and Management Co. Cl A 352,871 19,437 Archstone-Smith Trust 1,168,941 6,309 AvalonBay Communities Inc. 744,841 9,376 Boston Properties Inc. 974,166 9,912 Developers Diversified Realty Corp. 553,783 22,995 Equity Residential 974,068 19,321 General Growth Properties, Inc. 1,035,992 41,306 Host Hotels & Resorts Inc. 926,907 17,949 Kimco Realty Corporation 811,474 14,222 Plum Creek Timber Co. Inc. 636,577 20,247 ProLogis 1,343,388 9,677 Public Storage Inc. 761,096 17,676 Simon Property Group, Inc. 1,767,601 10,310 Vornado Realty Trust 1,127,399 -------------- 13,179,104 -------------- REAL ESTATE MANAGEMENT & DEVELOPMENT(4) 15,086 CB Richard Ellis Group, Inc. Cl A(1) 419,994 -------------- ROAD & RAIL -- 0.7% 24,157 Burlington Northern Santa Fe Corp. 1,960,824 34,577 CSX Corporation 1,477,475 31,042 Norfolk Southern Corp. 1,611,390 - ------ 14 Equity Index Shares Value 4,996 Ryder System, Inc. $244,804 21,388 Union Pacific Corp. 2,418,127 -------------- 7,712,620 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.8% 44,288 Advanced Micro Devices, Inc.(1)(2) 584,602 28,069 Altera Corp. 675,902 25,820 Analog Devices, Inc. 933,651 109,205 Applied Materials, Inc. 2,260,544 36,737 Broadcom Corp. Cl A(1) 1,338,696 461,738 Intel Corp. 11,940,544 15,119 KLA-Tencor Corp. 843,338 17,823 Linear Technology Corp. 623,627 56,578 LSI Logic Corp.(1) 419,809 17,756 MEMC Electronic Materials Inc.(1) 1,045,118 17,300 Microchip Technology Inc. 628,336 59,758 Micron Technology, Inc.(1) 663,314 19,349 National Semiconductor Corp. 524,745 10,063 Novellus Systems, Inc.(1) 274,317 43,003 NVIDIA Corp.(1) 1,558,429 15,074 Teradyne, Inc.(1) 208,021 113,271 Texas Instruments Inc. 4,144,586 23,967 Xilinx, Inc. 626,497 -------------- 29,294,076 -------------- SOFTWARE -- 3.3% 46,416 Adobe Systems Inc.(1) 2,026,523 18,303 Autodesk, Inc.(1) 914,601 16,010 BMC Software Inc.(1) 499,992 30,897 CA, Inc. 794,671 14,529 Citrix Systems, Inc.(1) 585,809 24,305 Compuware Corp.(1) 194,926 24,448 Electronic Arts Inc.(1) 1,368,844 27,064 Intuit Inc.(1) 820,039 640,474 Microsoft Corporation 18,868,363 27,691 Novell, Inc.(1) 211,559 312,841 Oracle Corp.(1) 6,773,008 71,202 Symantec Corp.(1) 1,379,895 -------------- 34,438,230 -------------- SPECIALTY RETAIL -- 1.6% 6,947 Abercrombie & Fitch Co. 560,623 12,088 AutoNation, Inc.(1) 214,199 3,869 AutoZone, Inc.(1) 449,346 21,638 Bed Bath & Beyond Inc.(1) 738,289 Shares Value 31,974 Best Buy Co., Inc. $ 1,471,443 11,370 Circuit City Stores Inc.(2) 89,937 39,358 Gap, Inc. (The) 725,762 133,133 Home Depot, Inc. (The) 4,318,834 25,336 Limited Brands, Inc. 579,941 118,910 Lowe's Companies, Inc. 3,331,857 22,246 Office Depot, Inc.(1) 458,713 6,181 OfficeMax Inc. 211,823 10,817 RadioShack Corp.(2) 223,479 8,608 Sherwin-Williams Co. 565,632 56,551 Staples, Inc. 1,215,281 11,002 Tiffany & Co. 575,955 35,301 TJX Companies, Inc. (The) 1,026,200 -------------- 16,757,314 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.4% 29,364 Coach Inc.(1) 1,388,036 7,418 Jones Apparel Group, Inc. 156,742 8,452 Liz Claiborne, Inc. 290,157 30,608 NIKE, Inc. Cl B 1,795,466 4,731 Polo Ralph Lauren Corp. 367,835 7,169 VF Corp. 578,897 -------------- 4,577,133 -------------- THRIFTS & MORTGAGE FINANCE -- 1.2% 45,748 Countrywide Financial Corp. 869,669 76,902 Fannie Mae 4,676,412 52,334 Freddie Mac 3,088,229 38,356 Hudson City Bancorp, Inc. 589,915 6,683 MGIC Investment Corp.(2) 215,928 29,054 Sovereign Bancorp Inc. 495,080 70,240 Washington Mutual, Inc. 2,480,174 -------------- 12,415,407 -------------- TOBACCO -- 1.3% 167,852 Altria Group Inc. 11,670,749 13,467 Reynolds American Inc.(2) 856,367 12,888 UST Inc.(2) 639,245 -------------- 13,166,361 -------------- TRADING COMPANIES & DISTRIBUTORS -- 0.1% 5,715 Grainger (W.W.), Inc. 521,151 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.6% 27,301 ALLTEL Corp. 1,902,334 228,652 Sprint Nextel Corp. 4,344,388 -------------- 6,246,722 -------------- TOTAL COMMON STOCKS (Cost $698,745,903) 1,069,443,803 -------------- - ------ 15 Equity Index Principal Amount Value Short-Term Investments Segregated for Futures Contracts(3)(5) -- 0.9% $8,500,000 FHLB Discount Notes, 4.00%, 10/1/07 $ 8,500,000 1,080,000 U.S. Treasury Bills, 4.69%, 1/17/08 1,067,925 -------------- TOTAL SHORT-TERM INVESTMENTS SEGREGATED FOR FUTURES CONTRACTS (Cost $9,564,802) 9,567,925 -------------- Temporary Cash Investments -- Securities Lending Collateral(6) -- 0.6% Repurchase Agreement, Lehman Brothers, Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.15%, dated 9/28/07, due 10/1/07 (Delivery value $6,421,095) 6,418,340 (Cost $6,418,340) -------------- Value TOTAL INVESTMENT SECURITIES -- 104.2% (Cost $714,729,045) $1,085,430,068 -------------- OTHER ASSETS AND LIABILITIES -- (4.2)% (43,288,087) -------------- TOTAL NET ASSETS -- 100.0% $1,042,141,981 ============== Futures Contracts Expiration Underlying Face Unrealized Gain Contracts Purchased Date Amount at Value (Loss) 142 S&P 500 E-Mini Futures December 2007 $10,934,000 $238,041 =========== =========== Notes to Schedule of Investments FHLB = Federal Home Loan Bank (1) Non-income producing. (2) Security, or a portion thereof, was on loan as of September 30, 2007. (3) Security, or a portion thereof, has been segregated on the fund's records, at the custodian bank, or with the broker as initial margin on futures contracts. (4) Industry is less than 0.05% of total net assets. (5) The rate indicated is the yield to maturity at purchase. (6) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. - ------ 16 STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2007 (UNAUDITED) ASSETS Investment securities, at value (cost of $708,310,705) -- including $6,252,999 of securities on loan $1,079,011,728 Investments made with cash collateral received for securities on loan, at value (cost of $6,418,340) 6,418,340 -------------- Total investment securities, at value (cost of $714,729,045) 1,085,430,068 Cash 494,319 Receivable for investments sold 1,058,763 Dividends and interest receivable 1,215,006 -------------- 1,088,198,156 -------------- LIABILITIES Payable for collateral received for securities on loan 6,418,340 Payable for capital shares redeemed 38,769,943 Payable for investments purchased 541,583 Payable for variation margin on futures contracts 32,663 Accrued management fees 293,646 -------------- 46,056,175 -------------- NET ASSETS $1,042,141,981 ============== NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $ 778,891,855 Undistributed net investment income 699,968 Accumulated net realized loss on investment transactions (108,388,906) Net unrealized appreciation on investments 370,939,064 -------------- $1,042,141,981 ============== INVESTOR CLASS, $0.01 PAR VALUE Net assets $243,597,294 Shares outstanding 40,048,116 Net asset value per share $6.08 INSTITUTIONAL CLASS, $0.01 PAR VALUE Net assets $798,544,687 Shares outstanding 131,212,569 Net asset value per share $6.09 See Notes to Financial Statements. - ------ 17 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) INVESTMENT INCOME (LOSS) INCOME: Dividends $ 9,965,270 Interest 439,490 Securities lending 27,898 ----------- 10,432,658 ----------- EXPENSES: Management fees 1,798,502 Directors' fees and expenses 11,467 Other expenses 12,681 ----------- 1,822,650 ----------- NET INVESTMENT INCOME (LOSS) 8,610,008 ----------- REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: Investment transactions 2,244,653 Futures transactions 397,767 ----------- 2,642,420 ----------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: Investments 73,841,313 Futures 81,430 ----------- 73,922,743 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) 76,565,163 ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $85,175,171 =========== See Notes to Financial Statements. - ------ 18 STATEMENT OF CHANGES IN NET ASSETS SIX MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) AND YEAR ENDED MARCH 31, 2007 Increase (Decrease) in Net Assets Sept. 30, 2007 March 31, 2007 OPERATIONS Net investment income (loss) $ 8,610,008 $ 16,518,662 Net realized gain (loss) 2,642,420 (1,894,848) Change in net unrealized appreciation (depreciation) 73,922,743 95,849,197 -------------- -------------- Net increase (decrease) in net assets resulting from operations 85,175,171 110,473,011 -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income: Investor Class (1,731,587) (3,153,574) Institutional Class (6,858,658) (12,820,111) -------------- -------------- Decrease in net assets from distributions (8,590,245) (15,973,685) -------------- -------------- CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions (80,894,528) 136,393,751 -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS (4,309,602) 230,893,077 NET ASSETS Beginning of period 1,046,451,583 815,558,506 -------------- -------------- End of period $1,042,141,981 $1,046,451,583 ============== ============== Undistributed net investment income $699,968 $680,205 ============== ============== See Notes to Financial Statements. - ------ 19 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007 (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 nondiversified under the 1940 Act. The fund's investment objective is to seek long-term capital growth. The fund pursues its 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 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 as determined by, or in accordance with procedures adopted by, the Board of Directors or its designee if such determination would materially impact a fund's net asset value. Certain other circumstances may cause the fund to use alternative procedures to value a security such as: a security has been declared in default; 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 -- For financial reporting, 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. SECURITIES ON LOAN -- The fund may lend portfolio securities through its lending agent to certain approved borrowers in order to earn additional income. The fund continues to recognize any gain or loss in the market price of the securities loaned and records any interest earned or dividends declared. 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. - ------ 20 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 futures transactions and unrealized appreciation (depreciation) on futures, respectively. REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with institutions that American Century Investment Management, Inc. (ACIM) (the investment advisor) has determined are creditworthy pursuant to criteria adopted by the Board of Directors. Each repurchase agreement is recorded at cost. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement. JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other registered investment companies having management agreements with ACIM or American Century Global Investment Management, Inc. (ACGIM), may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations. 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. The fund is no longer subject to examination by tax authorities for years prior to 2004. At this time, management has not identified any uncertain tax positions that would materially impact the financial statements. Accordingly, no provision has been made for federal or state income taxes. Interest and penalties associated with any federal or state income tax obligations, if any, are recorded as interest expense. 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. - ------ 21 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 the fund ranges from 0.43% to 0.49% for the Investor Class. The Institutional Class is 0.20% less at each point within the range. The effective annual management fee for each class of the fund for the six months ended September 30, 2007 was 0.49% and 0.29% for the Investor Class and Institutional Class, respectively. On July 27, 2007, shareholders of the fund approved a Subadvisory Agreement between Northern Trust Investments, N.A. (NTI) and ACIM. The Subadvisory Agreement was approved by the Board of Directors on November 29, 2006. Effective August 1, 2007, ACIM entered into a Subadvisory Agreement with NTI on behalf of the fund. Prior to August 1, 2007, ACIM had a Subadvisory Agreement with Barclays Global Fund Advisors (BGFA) (collectively with NTI, the subadvisors) on behalf of the fund. The subadvisors make 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 the subadvisors 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 is eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). JPMIM is a wholly owned subsidiary of JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC. The fund has a bank line of credit agreement and securities lending 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, 2007, were $68,676,930 and $104,338,717, respectively. - ------ 22 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the fund were as follows: Six months ended September Year ended 30, 2007 March 31, 2007 Shares Amount Shares Amount INVESTOR CLASS/SHARES AUTHORIZED 150,000,000 100,000,000 ============ ============ Sold 3,635,053 $ 21,595,072 8,653,995 $ 46,849,637 Issued in connection with acquisition (Note 8) -- -- 33,257,723 171,655,240 Issued in reinvestment of distributions 257,429 1,518,563 511,586 2,737,555 Redeemed (4,974,060) (29,535,565) (30,924,150) (162,716,881) ------------ ------------- ------------ ------------- (1,081,578) (6,421,930) 11,499,154 58,525,551 ------------ ------------- ------------ ------------- INSTITUTIONAL CLASS/SHARES AUTHORIZED 500,000,000 400,000,000 ============ ============ Sold 21,359,105 127,964,619 44,066,384 233,940,765 Issued in reinvestment of distributions 1,161,832 6,858,658 2,397,106 12,820,111 Redeemed (34,917,664) (209,295,875) (31,245,332) (168,892,676) ------------ ------------- ------------ ------------- (12,396,727) (74,472,598) 15,218,158 77,868,200 ------------ ------------- ------------ ------------- Net increase (decrease) (13,478,305) $(80,894,528) 26,717,312 $ 136,393,751 ============ ============= ============ ============= 5. SECURITIES LENDING As of September 30, 2007, securities in the fund valued at $6,252,999, 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 $6,418,340. The fund's risks in securities lending are that the borrower may not provide additional collateral when required or return the securities when due. If the borrower defaults, receipt of the collateral by the fund may be delayed or limited. 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 0.40%. The fund did not borrow from the line during the six months ended September 30, 2007. 7. 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, 2007, the components of investments for federal income tax purposes were as follows: Federal tax cost of investments $754,586,380 ============ Gross tax appreciation of investments $363,253,185 Gross tax depreciation of investments (32,409,497) ------------ Net tax appreciation (depreciation) of investments $330,843,688 ============ - ------ 23 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, 2007: Accumulated capital losses $(80,019,388) Capital loss deferral $(1,218,787) 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 2014 $(2,917,398) $(10,639,477) $(49,081,742) $(1,957,751) $(1,992,016) $(5,270,954) $(8,160,050) The capital loss deferral listed above represents net capital losses incurred in the five-month period ended March 31, 2007. The fund has elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. 8. 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. The acquisition was accomplished by a tax-free exchange of shares. On April 3, 2006, in connection with the reorganization, Index 500 exchanged its shares for shares of Equity Index as follows: Original Shares New Shares Fund/Class Exchanged Fund/Class Received Index 500 Fund - A Equity Index - Investor Class 9,733,344 Class 28,917,087 Index 500 Fund - B Equity Index - Investor Class 1,474,502 Class 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. 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. Management has concluded that the adoption of FIN 48 will not materially impact the financial statements. 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 that adopting FAS 157 will have on the financial statement disclosures. - ------ 24 FINANCIAL HIGHLIGHTS Equity Index Investor Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $5.66 $5.16 $4.70 $4.50 $3.39 $4.58 ------ ------ ------ ------ ------ ------ Income From Investment Operations Net Investment Income (Loss)(2) 0.04 0.08 0.07 0.07 0.05 0.05 Net Realized and Unrealized Gain (Loss) 0.42 0.50 0.46 0.20 1.11 (1.19) ------ ------ ------ ------ ------ ------ Total From Investment Operations 0.46 0.58 0.53 0.27 1.16 (1.14) ------ ------ ------ ------ ------ ------ Distributions From Net Investment Income (0.04) (0.08) (0.07) (0.07) (0.05) (0.05) ------ ------ ------ ------ ------ ------ Net Asset Value, End of Period $6.08 $5.66 $5.16 $4.70 $4.50 $3.39 ====== ====== ====== ====== ====== ====== TOTAL RETURN(3) 8.21% 11.28% 11.36% 6.04% 34.27% (25.02)% 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 1.45%(4) 1.49% 1.43% 1.59% 1.23% 1.24% Portfolio Turnover Rate 6% 4% 17% 4% 16% 21% Net Assets, End of Period (in thousands) $243,597 $232,880 $152,799 $150,454 $142,324 $90,093 (1) Six months ended September 30, 2007 (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 Institutional Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $5.67 $5.16 $4.71 $4.50 $3.39 $4.58 ------ ------ ------ ------ ------ ------ Income From Investment Operations Net Investment Income (Loss)(2) 0.05 0.09 0.08 0.08 0.06 0.05 Net Realized and Unrealized Gain (Loss) 0.42 0.51 0.45 0.21 1.11 (1.19) ------ ------ ------ ------ ------ ------ Total From Investment Operations 0.47 0.60 0.53 0.29 1.17 (1.14) ------ ------ ------ ------ ------ ------ Distributions From Net Investment Income (0.05) (0.09) (0.08) (0.08) (0.06) (0.05) ------ ------ ------ ------ ------ ------ Net Asset Value, End of Period $6.09 $5.67 $5.16 $4.71 $4.50 $3.39 ====== ====== ====== ====== ====== ====== TOTAL RETURN(3) 8.50% 11.50% 11.35% 6.47% 34.53% (24.87)% 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 1.65%(4) 1.69% 1.63% 1.79% 1.43% 1.44% Portfolio Turnover Rate 6% 4% 17% 4% 16% 21% Net Assets, End of Period (in thousands) $798,545 $813,571 $662,759 $907,886 $842,269 $350,815 (1) Six months ended September 30, 2007 (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 PROXY VOTING RESULTS A special meeting of shareholders was held on July 27, 2007, to vote on the following proposals. The proposals received the required number of votes of the American Century Capital Portfolios, Inc. or the applicable fund, depending on the proposal, and were adopted. A summary of voting results is listed below each proposal. PROPOSAL 1: To elect nine Directors to the Board of Directors of American Century Capital Portfolios, Inc. (the proposal was voted on by all shareholders of funds issued by American Century Capital Portfolios, Inc.). James E. Stowers, Jr. For: 11,443,781,487 Withhold: 252,686,939 Abstain: 0 Broker Non-Vote: 0 Jonathan S. Thomas For: 11,454,104,706 Withhold: 242,363,720 Abstain: 0 Broker Non-Vote: 0 Thomas A. Brown For: 11,456,645,347 Withhold: 239,823,079 Abstain: 0 Broker Non-Vote: 0 Andrea C. Hall For: 11,459,598,200 Withhold: 236,870,226 Abstain: 0 Broker Non-Vote: 0 James A. Olson For: 11,454,607,738 Withhold: 241,860,688 Abstain: 0 Broker Non-Vote: 0 Donald H. Pratt For: 11,450,710,462 Withhold: 245,757,964 Abstain: 0 Broker Non-Vote: 0 Gale E. Sayers For: 11,458,471,500 Withhold: 237,996,926 Abstain: 0 Broker Non-Vote: 0 M. Jeannine Strandjord For: 11,451,541,828 Withhold: 244,926,598 Abstain: 0 Broker Non-Vote: 0 Timothy S. Webster For: 11,460,198,888 Withhold: 236,269,538 Abstain: 0 Broker Non-Vote: 0 - ------ 27 PROPOSAL 2: To approve a new subadvisory agreement between Northern Trust Investments, N.A. and American Century Investment Management, Inc., pertaining to the management of Equity Index Fund. For: 586,677,251 Against: 1,821,479 Abstain: 54,749,245 Broker Non-Vote: 27,801,160 - ------ 28 APPROVAL OF MANAGEMENT AGREEMENT 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. - ------ 29 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. - ------ 30 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 performance information presented to the Directors showed that the fund's performance fell below the median benchmark for both the one- and three-year periods during the past year. The board discussed the fund's performance with the advisor and was satisfied with the efforts being undertaken by the advisor. SHAREHOLDER AND OTHER SERVICES. The advisor provides the fund with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at 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. 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. - ------ 31 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 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. - ------ 32 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. At the meeting held November 29, 2006, the board of directors also unanimously approved an investment subadvisory agreement by which Northern Trust Investments, N.A. ("Northern Trust") would be 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 to be provided to the funds under the agreement. As a part of this review the board evaluated Northern Trust's historical performance, investment experience, and capabilities, as well as its compliance policies, procedures, and regulatory experience. The management fees to be paid to Northern Trust under the subadvisory agreement were subject to arm's length negotiation between the Advisor and Northern Trust and will be paid by the Advisor out of its unified management fee. - ------ 33 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; and/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. The fund's prospectus contains additional information regarding eligibility for investor class shares. 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. - ------ 34 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. - ------ 35 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 RUSSELL 1000® 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® GROWTH 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 higher price-to-book ratios and higher forecasted growth values. The RUSSELL 1000® 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 values. The RUSSELL 2000® 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® 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 values. The RUSSELL 2000® 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 values. The RUSSELL MIDCAP® INDEX measures the performance of the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization. The RUSSELL MIDCAP® GROWTH INDEX measures the performance of those Russell Midcap Index companies (the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization) with higher price-to-book ratios and higher forecasted growth values. The RUSSELL MIDCAP® VALUE INDEX measures the performance of those Russell Midcap Index companies (the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values. The S&P 500 INDEX is a market value-weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. - ------ 36 [back cover] 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 Investment Services, Inc., Distributor ©2007 American Century Proprietary Holdings, Inc. All rights reserved. The American Century Investments logo, American Century and American Century Investments are service marks of American Century Proprietary Holdings, Inc. 0711 SH-SAN-56794N
[cover] AMERICAN CENTURY INVESTMENTS Semiannual Report September 30, 2007 [photo of fall] Real Estate Fund [american century investments logo and text logo] OUR MESSAGE TO YOU To help you monitor your investment, my colleagues and I take pride in providing you with the semiannual report for the American Century® Real Estate Fund for the six months ended September 30, 2007. This has been an eventful and exciting period for us. We've been working diligently to secure a smooth executive leadership transition. I'm honored to be addressing you in the "Our Message" space long devoted to company founder Jim Stowers, Jr. and his son Jim Stowers III. The Stowers family remains an integral part of our heritage, leadership, and financial structure. Jim Jr. continues as co-chair of the American Century Companies, Inc. (ACC) board of directors with Richard Brown, who has been on the board since 1998 and co-chairs the Stowers Institute for Medical Research board. But times and opportunities change. As the latest step in a career transition that began when he relinquished his executive leadership and investment management responsibilities in early 2005, Jim III stepped down from the ACC board in July 2007 to focus on new business ventures. Jim III's move reflects his family's comfort with our direction and leadership, and gives the Stowers more leeway to devote time and energy to other important priorities, such as the Stowers Institute for Medical Research. Meanwhile, American Century Investments, our clients, and our employees have been my top priority since I became company president and CEO in March. We've also added the executive talents of overall chief investment officer Enrique Chang, international equity CIO Mark On, U.S. growth equity CIO Steve Lurito, and chief operating officer Barry Fink. This skilled group, combined with our existing senior management team, has already had a positive impact on the development and management of the products and services we take pride in delivering to you. /s/Jonathan Thomas Jonathan Thomas [photo of Jonathan Thomas] Jonathan Thomas PRESIDENT AMERICAN CENTURY COMPANIES, INC. [photo of James E. Stowers, Jr.] James E. Stowers, Jr. FOUNDER AND CO-CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. [photo of Richard Brown] Richard Brown CO-CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. TABLE OF CONTENTS Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . 2 U.S. Stock Index 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 . . . . . . . . . . . . . . . . . . . . . . . 13 Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 14 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 15 Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 21 OTHER INFORMATION Proxy Voting Results. . . . . . . . . . . . . . . . . . . . . . . . . 24 Approval of Management Agreement for Real Estate. . . . . . . . . . . 26 Share Class Information . . . . . . . . . . . . . . . . . . . . . . . 31 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 chief investment officer] By Enrique Chang, Chief Investment Officer, American Century Investments STOCKS ADVANCED IN A VOLATILE ENVIRONMENT U.S. stocks produced positive results for the six months ended September 30, 2007, overcoming a confluence of challenges that led to extraordinary market volatility. The stock market enjoyed a steady rally during the first half of the six-month period thanks to corporate earnings growth, which decelerated but continued to surpass expectations. Robust merger activity also boosted stocks as leveraged buy-outs from private equity firms put the volume of deal-making ahead of last year's record pace. After reaching all-time highs in mid-July, however, the major stock indexes declined sharply as worsening problems in the subprime mortgage market led to a credit crisis that threatened to derail the economic expansion. Tighter lending standards crimped funding for leveraged buy-outs, removing an important leg of support for the stock market, and rising energy and commodity prices sparked inflation worries despite slowing economic activity. As investors grew increasingly risk-averse, the Federal Reserve (the Fed) stepped in to provide a measure of relief and comfort. The Fed lowered its discount rate in mid-August and federal funds rate target in September -- the Fed's first rate cuts since June 2003. The Fed's actions helped alleviate some of the credit and economic concerns, allowing the major stock indexes to stage a solid recovery during the final six weeks of the period. LARGE-CAP AND GROWTH OUTPERFORMED Large-cap stocks delivered the best returns (see the accompanying table), followed by mid- and small-cap issues. Growth stocks, which have trailed value issues for much of the decade, enjoyed a resurgence during the six-month period, outpacing value shares by a wide margin across all market capitalizations. Energy was the best-performing sector in the stock market during the period, benefiting from a 24% increase in the price of oil. Information technology and industrials stocks also fared well. The only two sectors of the market to decline during the period were financials and consumer discretionary. U.S. Stock Index Returns For the six months ended September 30, 2007* RUSSELL 1000 INDEX (LARGE-CAP) 7.99% Russell 1000 Growth Index 11.35% Russell 1000 Value Index 4.67% RUSSELL MIDCAP INDEX 4.89% Russell Midcap Growth Index 9.03% Russell Midcap Value Index -0.03% RUSSELL 2000 INDEX (SMALL-CAP) 1.19% Russell 2000 Growth Index 6.70% Russell 2000 Value Index -4.10% *Total returns for periods less than one year are not annualized. - ------ 2 PERFORMANCE Real Estate Total Returns as of September 30, 2007 Average Annual Returns Since Inception 6 months(1) 1 year 5 years 10 years Inception Date INVESTOR CLASS -6.15% 5.84% 22.44% 12.54% 16.08% 9/21/95(2) MSCI US REIT INDEX -7.39% 4.67% 21.34% 12.05% 14.72%(3) -- Institutional Class -6.08% 6.04% 22.68% 12.78% 14.17% 6/16/97 A Class(4) 10/6/98 No sales charge* -6.29% 5.57% 22.16% -- 17.16% With sales charge* -11.69% -0.51% 20.72% -- 16.38% B Class(1) 9/28/07 No sales charge* -- -- -- -- 0.00% With sales charge* -- -- -- -- -5.00% C Class(1) 9/28/07 No sales charge* -- -- -- -- 0.00% With sales charge* -- -- -- -- -1.00% R Class(1) -- -- -- -- 0.00% 9/28/07 * Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum 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) The inception date for RREFF 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. (4) Prior to September 4, 2007, the A Class was referred to as the Advisor Class. Performance, with sales charge, prior to that date has been adjusted to reflect the A Class's current sales charge. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The fund may be subject to certain risks similar to those associated with direct investment in real estate including but not limited to: local or regional economic conditions, changes in zoning laws, changes in property values, property tax increases, overbuilding, increased competition, environmental contamination, natural disasters and interest rate risk. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. - ------ 3 Real Estate Growth of $10,000 Over 10 Years $10,000 investment made September 30, 1997
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One-Year Returns Over 10 Years Periods ended September 30 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Investor Class -17.62% -2.94% 21.61% 10.96% 9.78% 28.35% 25.40% 25.88% 28.40% 5.84% MSCI US REIT Index -14.26% -5.88% 21.25% 11.62% 8.56% 25.11% 24.85% 27.10% 26.56% 4.67% 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 PORTFOLIO COMMENTARY Real Estate Portfolio Managers: Scott Blasdell and Kay Herr PERFORMANCE SUMMARY For the six-month period ended September 30, 2007, the Real Estate Fund posted a total return of -6.15%(1), outperforming the MSCI US REIT Index's return of - -7.39%. However, the fund trailed the 8.44% return of the S&P 500 Index(2), a broad stock market measure. The portfolio's performance during the reporting period reflected a sharp decline in real estate investment trusts (REITs) in June and July. These declines were precipitated by negative sentiment resulting from defaults in the sub-prime mortgage market. Continued concerns with the state of the economy also put downward pressure on the REIT market, but the Federal Reserve (the Fed) made a dramatic gesture by cutting the discount rate twice: once in mid-August and again in mid-September. Renewed confidence in the Fed's commitment to steer the economy away from recession helped REITs recover somewhat late in the period. The portfolio outperformed its benchmark during the period. Stock selection was the main factor behind the outperformance, especially in the office/industrial and residential sectors. APARTMENTS BOOSTED RELATIVE RESULTS The apartment sector was a strong contributor to relative performance. Early in the year, investor expectations for apartment REITs were high due to the expectation for merger and acquisition activity. However, rising interest rates undermined private valuations, dragging down apartment REITs, so our underweight position added value. Although the apartment sector generally benefited the Fund, a couple of residential stocks were among the largest detractors to relative performance. Given the economic backdrop, we avoided the larger, higher-quality, and more-expensive apartment REITs, opting to overweight smaller companies. These stocks were more reasonably valued, maintained lower-quality portfolios that could benefit from lower-income residents moving to rent as a result of mortgage defaults, and provided less-volatile rents over the long term. However, declining housing sales and unexpected weakness in job growth created negative sentiment around the residential sector, hitting smaller stocks the hardest. Two examples from the portfolio were GMH Communities and UDR. Top Ten Holdings as of September 30, 2007 % of % of net assets net assets as of as of 9/30/07 3/31/07 Simon Property Group, Inc. 8.3% 8.8% ProLogis 7.8% 7.8% Public Storage Inc. 5.6% -- Boston Properties Inc. 5.2% 5.8% Kimco Realty Corporation 5.1% 3.8% UDR, Inc. 4.6% 0.8% Vornado Realty Trust 4.4% 7.0% Hospitality Properties Trust 4.2% 4.3% Apartment Investment and Management Co. Cl A 4.1% 0.8% General Growth Properties, Inc. 4.1% 2.9% (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 S&P 500 Index returned 16.44%, 15.45%, and 6.57% for the one-, five-, and ten-year periods ended September 30, 2007, respectively. - ------ 5 Real Estate STORAGE, HEALTH CARE REITS ADDED VALUE We increased our exposure to self-storage REITS in light of the slowdown in the housing market. We expect the transition of households from homeowners to renters will benefit this sector. Other strong contributors to relative performance included our overweight positions in wireless tower operator Crown Castle International and health care REIT Ventas. Crown Castle's completion of a secondary offering alleviated overhang in the stock and allowed investors to further acknowledge the strong fundamentals in the wireless tower industry. Ventas continued to perform well, backed by strong operating results, a respected management team, and the addition of health care REITs to global indices. STARTING POINT FOR NEXT REPORTING PERIOD Underlying private commercial real estate values are finally correcting, but this correction was priced into the REIT market previously and is easily overcome by the Fed's monetary actions in August and September. Demand is still strong for U.S. commercial real estate, suggesting several more years before fundamentals and cash flows slow significantly. Without an upside catalyst, however, our expectation is for continued volatility over the next couple of quarters. Industry Allocation % of % of net assets net assets as of as of 9/30/07 3/31/07 Retail REITs 24.0% 23.9% Specialized REITs 23.4% 16.1% Residential REITs 16.5% 21.8% Office REITs 16.0% 11.6% Industrial REITs 10.8% 11.5% Diversified REITs 7.3% 11.3% Wireless Telecommunication Services 1.0% 1.5% Hotels, Resorts & Cruise Lines -- 0.3% Cash and Equivalents(1) 1.0% 2.0% (1) Includes temporary cash investments, securities lending collateral and other assets and liabilities. Types of Investments in Portfolio % of % of net assets net assets as of as of 9/30/07 3/31/07 Common Stocks 99.0% 98.0% Temporary Cash Investments 1.4% 2.0% Other Assets and Liabilities(2) (0.4)% --(3) (2) Includes securities lending collateral and other assets and liabilities. (3) 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, 2007 to September 30, 2007. 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. 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. - ------ 7 Expenses Paid Beginning Ending During Annualized Account Value Account Period(1) Expense 4/1/07 Value 9/30/07 4/1/07 - 9/30/07 Ratio(1) ACTUAL Investor Class $1,000 $938.50 $5.48 1.13% Institutional Class $1,000 $939.20 $4.51 0.93% A Class $1,000 $937.10 $6.68 1.38% HYPOTHETICAL Investor Class $1,000 $1,019.35 $5.70 1.13% Institutional Class $1,000 $1,020.35 $4.70 0.93% A Class $1,000 $1,018.10 $6.96 1.38% B Class(2) $1,000 $1,014.35 $10.73 2.13% C Class(2) $1,000 $1,014.35 $10.73 2.13% R Class(2) $1,000 $1,016.85 $8.22 1.63% (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 366, to reflect the one-half year period. (2) The B Class, C Class and R Class commenced on September 28, 2007, the last business day in the period. No expenses were paid by the share classes during the most recent fiscal half-year. Therefore, the actual expense example is not presented. - ------ 8 SCHEDULE OF INVESTMENTS Real Estate SEPTEMBER 30, 2007 (UNAUDITED) Shares Value Common Stocks -- 99.0% DIVERSIFIED REITS -- 7.3% 2,745,720 Huntingdon Real Estate Investment Trust ORD(1) $ 6,133,836 1,043,900 Liberty Property Trust 41,975,219 660,800 Vornado Realty Trust 72,258,480 -------------- 120,367,535 -------------- INDUSTRIAL REITS -- 10.8% 807,600 AMB Property Corp. 48,302,556 1,947,510 ProLogis 129,217,289 -------------- 177,519,845 -------------- OFFICE REITS -- 16.0% 455,600 Alexandria Real Estate Equities, Inc. 43,856,056 1,179,800 BioMed Realty Trust, Inc.(1) 28,433,180 826,400 Boston Properties Inc. 85,862,960 126,300 Brandywine Realty Trust 3,196,653 1,150,800 Digital Realty Trust Inc. 45,330,012 1,710,312 Duke Realty Corporation 57,825,649 -------------- 264,504,510 -------------- RESIDENTIAL REITS -- 16.5% 1,515,700 Apartment Investment and Management Co. Cl A 68,403,541 628,665 Archstone-Smith Trust 37,807,913 993,400 Education Realty Trust, Inc.(1) 13,410,900 767,100 Equity Residential 32,494,356 2,095,795 GMH Communities Trust(1)(2) 16,242,411 508,147 Home Properties, Inc.(1) 26,515,110 3,149,964 UDR, Inc.(1) 76,607,125 -------------- 271,481,356 -------------- RETAIL REITS -- 24.0% 355,400 CBL & Associates Properties, Inc. 12,456,770 610,900 Developers Diversified Realty Corp. 34,130,983 1,270,610 General Growth Properties, Inc. 68,130,108 1,876,080 Kimco Realty Corporation(1) 84,817,577 1,370,188 Simon Property Group, Inc. 137,018,800 1,420,200 Weingarten Realty Investors(1) 58,881,492 -------------- 395,435,730 -------------- SPECIALIZED REITS -- 23.4% 1,095,300 Ashford Hospitality Trust, Inc. 11,007,765 273,375 Cogdell Spencer Inc. 5,057,438 777,700 Extra Space Storage Inc.(1) 11,968,803 1,293,000 HCP, Inc. 42,888,810 Shares Value 604,600 Healthcare Realty Trust Inc.(1) $ 16,118,636 1,693,000 Hospitality Properties Trust 68,820,450 2,558,825 Host Hotels & Resorts Inc. 57,420,033 1,184,389 Public Storage Inc. 93,152,194 156,200 Sovran Self Storage, Inc.(1) 7,160,208 1,465,500 U-Store-It Trust 19,344,600 1,297,800 Ventas, Inc. 53,728,920 -------------- 386,667,857 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 1.0% 411,769 Crown Castle International Corp.(3) 16,730,174 -------------- TOTAL COMMON STOCKS (Cost $1,517,181,927) 1,632,707,007 -------------- Temporary Cash Investments -- 1.4% Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 5.25%-8.75%, 8/15/20-11/15/28, valued at $23,789,555), in a joint trading account at 3.90%, dated 9/28/07, due 10/1/07 (Delivery value $23,207,540) (Cost $23,200,000) 23,200,000 -------------- Temporary Cash Investments -- Securities Lending Collateral(4) -- 8.3% Repurchase Agreement, Citigroup Global Markets Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.00%, dated 9/28/07, due 10/1/07 (Delivery value $100,041,667) 100,000,000 Repurchase Agreement, Lehman Brothers, Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.15%, dated 9/28/07, due 10/1/07 (Delivery value $36,994,135) 36,978,265 -------------- TOTAL TEMPORARY CASH INVESTMENTS -- SECURITIES LENDING COLLATERAL (Cost $136,978,265) 136,978,265 -------------- TOTAL INVESTMENT SECURITIES -- 108.7% (Cost $1,677,360,192) 1,792,885,272 -------------- OTHER ASSETS AND LIABILITIES -- (8.7)% (143,274,433) -------------- TOTAL NET ASSETS -- 100.0% $1,649,610,839 ============== - ------ 9 Real Estate Notes to Schedule of Investments ORD = Foreign Ordinary Share REIT = Real Estate Investment Trust (1) Security, or a portion thereof, was on loan as of September 30, 2007. (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. (3) Non-income producing. (4) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements - ------ 10 STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2007 (UNAUDITED) ASSETS Investment securities -- unaffiliated, at value (cost of $1,518,105,102) -- including $132,042,201 of securities on loan $1,639,664,596 Investment securities -- affiliated, at value (cost of $22,276,825) -- including $1,740,495 of securities on loan 16,242,411 Investments made with cash collateral received for securities on loan, at value (cost of $136,978,265) 136,978,265 -------------- Total investment securities, at value (cost of $1,677,360,192) 1,792,885,272 Foreign currency holdings, at value (cost of $6,138) 7,065 Receivable for investments sold 21,618,717 Receivable for capital shares sold 10,035 Dividends and interest receivable 4,259,540 -------------- 1,818,780,629 -------------- LIABILITIES Payable for collateral received for securities on loan 136,978,265 Disbursements in excess of demand deposit cash 1,769,231 Payable for investments purchased 28,837,844 Payable for capital shares redeemed 25,490 Accrued management fees 1,477,229 Distribution fees payable 7,409 Service fees (and distribution fees -- A Class and R Class) payable 74,322 -------------- 169,169,790 -------------- NET ASSETS $1,649,610,839 ============== See Notes to Financial Statements. - ------ 11 NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $1,360,756,702 Undistributed net investment income 2,764,736 Undistributed net realized gain on investment and foreign currency transactions 170,562,754 Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 115,526,647 -------------- $1,649,610,839 ============== INVESTOR CLASS, $0.01 PAR VALUE Net assets $1,039,051,206 Shares outstanding 35,683,599 Net asset value per share $29.12 INSTITUTIONAL CLASS, $0.01 PAR VALUE Net assets $241,849,281 Shares outstanding 8,296,838 Net asset value per share $29.15 A CLASS, $0.01 PAR VALUE Net assets $368,635,352 Shares outstanding 12,645,136 Net asset value per share $29.15 Maximum offering price (net asset value divided by 0.955) $30.52 B CLASS, $0.01 PAR VALUE Net assets $25,000 Shares outstanding 859 Net asset value per share $29.12 C CLASS, $0.01 PAR VALUE Net assets $25,000 Shares outstanding 859 Net asset value per share $29.12 R CLASS, $0.01 PAR VALUE Net assets $25,000 Shares outstanding 859 Net asset value per share $29.12 See Notes to Financial Statements. - ------ 12 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) INVESTMENT INCOME (LOSS) INCOME: Dividends (including $2,879,468 from affiliates and net of foreign taxes withheld of $58,105) $ 28,255,840 Interest 920,295 Securities lending 187,480 -------------- 29,363,615 -------------- EXPENSES: Management fees 10,515,656 Distribution fees -- A Class 453,330 Service fees -- A Class 453,330 Distribution and service fees -- A Class 81,750 Directors' fees and expenses 32,324 Other expenses 27,472 -------------- 11,563,862 -------------- NET INVESTMENT INCOME (LOSS) 17,799,753 -------------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on investment and foreign currency transactions (including $(5,322,119) from affiliates) (36,913,696) Change in net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies (140,090,413) -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) (177,004,109) -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(159,204,356) ============== See Notes to Financial Statements. - ------ 13 STATEMENT OF CHANGES IN NET ASSETS SIX MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) AND YEAR ENDED MARCH 31, 2007 Increase (Decrease) in Net Assets Sept. 30, 2007 March 31, 2007 OPERATIONS Net investment income (loss) $ 17,799,753 $ 33,164,414 Net realized gain (loss) (36,913,696) 352,211,903 Change in net unrealized appreciation (depreciation) (140,090,413) (6,426,910) -------------- -------------- Net increase (decrease) in net assets resulting from operations (159,204,356) 378,949,407 -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income: Investor Class (13,174,732) (19,413,786) Institutional Class (3,317,435) (5,186,921) A Class (3,906,944) (5,422,844) From net realized gains: Investor Class -- (142,353,221) Institutional Class -- (32,753,650) A Class -- (45,262,120) -------------- -------------- Decrease in net assets from distributions (20,399,111) (250,392,542) -------------- -------------- CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions (628,534,118) 768,592,109 -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS (808,137,585) 897,148,974 NET ASSETS Beginning of period 2,457,748,424 1,560,599,450 -------------- -------------- End of period $1,649,610,839 $2,457,748,424 ============== ============== Undistributed net investment income $2,764,736 $5,364,094 ============== ============== See Notes to Financial Statements. - ------ 14 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007 (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. On July 27, 2007, the shareholders of the fund approved a change in the investment objective. The change in investment objective was approved by the Board of Directors on November 29, 2006. Prior to August 1, 2007, the fund's investment objective was to seek long-term capital appreciation. Income was a secondary objective. Effective August 1, 2007, the fund's investment objective is to seek high total return through a combination of capital appreciation and current income. The fund pursues its objective by investing primarily in equity securities issued by real estate investment trusts and companies 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, the A Class (formerly Advisor 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 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. Sale of the B Class, C Class and R Class commenced on September 28, 2007, the last business day in the period. Financial Highlights are not presented for the B Class, C Class and R Class, as the classes had no operating results since their commencement of sale. 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 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 as determined by, or in accordance with procedures adopted by, the Board of Directors or its designee if such determination would materially impact a fund's net asset value. Certain other circumstances may cause the fund to use alternative procedures to value a security such as: a security has been declared in default; 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 -- For financial reporting, 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. SECURITIES ON LOAN -- The fund may lend portfolio securities through its lending agent to certain approved borrowers in order to earn additional income. The fund continues to recognize any gain or loss in the market price of the securities loaned and records any interest earned or dividends declared. - ------ 15 FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. For assets and liabilities, other than investments in securities, net realized and unrealized gains and losses from foreign currency translations arise from changes in currency exchange rates. Net realized and unrealized foreign currency exchange gains or losses occurring during the holding period of investment securities are a component of realized gain (loss) on investment transactions and unrealized appreciation (depreciation) on investments, respectively. Certain countries may impose taxes on the contract amount of purchases and sales of foreign currency contracts in their currency. The fund records the foreign tax expense, if any, as a reduction to the net realized gain (loss) on foreign currency transactions. REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with institutions that American Century Investment Management, Inc. (ACIM) (the investment advisor) has determined are creditworthy pursuant to criteria adopted by the Board of Directors. Each repurchase agreement is recorded at cost. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of 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. The fund is no longer subject to examination by tax authorities for years prior to 2004. At this time, management has not identified any uncertain tax positions that would materially impact the financial statements. Accordingly, no provision has been made for federal or state income taxes. Interest and penalties associated with any federal or state income tax obligations, if any, are recorded as interest expense. 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 On July 27, 2007, the A Class (formerly Advisor Class) shareholders of the fund approved a change in the class's fee structure. The change was approved by the Board of Directors on November 29, 2006 and March 7, 2007. Effective September 4, 2007, the fee structure change resulted in an increase of 0.25% in the unified management fee and a simultaneous decrease of 0.25% in the total distribution and service fee, resulting in no change to the total operating expense ratio of the class. - ------ 16 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 the fund ranges from 1.05% to 1.20% for the Investor Class, A Class, B Class, C Class and R Class. The Institutional Class is 0.20% less at each point within the range. Prior to September 4, 2007, the A Class was 0.25% less at each point within the range. The effective annual management fee for each class of the fund for the six months ended September 30, 2007 was 1.13% for the Investor Class, B Class, C Class and R Class, 0.93% for the Institutional Class and 0.92% for the A Class. DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master Distribution and Individual Shareholder Services Plan for each of the A Class, B Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay American Century Investment Services, Inc. (ACIS) an annual distribution and service fee of 0.25%. The plans provide that the B Class and the C Class will each pay ACIS an annual distribution fee of 0.75% and service fee of 0.25%. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. Prior to September 4, 2007, the Board of Directors had adopted a Master Distribution and Shareholder Services Plan for the A Class, pursuant to Rule 12b-1 of the 1940 Act, in which the A Class paid ACIS an annual distribution fee of 0.25% and service fee of 0.25%. 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 individual shareholder services rendered by broker/dealers or other independent financial intermediaries for A Class, B Class, C Class and R Class shares. Prior to September 4, 2007, the service fee provided compensation for shareholder and administrative services rendered by ACIS, its affiliates or independent third party providers for A Class shares. Fees incurred under the plans during the six months ended September 30, 2007, 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 and securities lending 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, 2007, were $1,551,803,188 and $2,136,372,412, respectively. - ------ 17 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the fund were as follows: Six months ended September 30, 2007(1) Year ended March 31, 2007 Shares Amount Shares Amount INVESTOR CLASS/SHARES AUTHORIZED 125,000,000 70,000,000 ============ ============ Sold 5,755,008 $171,989,268 25,428,470 $785,741,519 Issued in reinvestment of distributions 408,535 11,655,558 4,834,341 148,090,470 Redeemed (21,174,679) (619,969,193) (13,582,182) (410,903,543) ------------ -------------- ------------ ------------- (15,011,136) (436,324,367) 16,680,629 522,928,446 ------------ -------------- ------------ ------------- INSTITUTIONAL CLASS/SHARES AUTHORIZED 50,000,000 20,000,000 ============ ============ Sold 571,904 16,937,152 6,153,715 189,204,813 Issued in reinvestment of distributions 110,685 3,161,112 1,199,237 36,752,217 Redeemed (4,455,153) (129,455,772) (3,645,768) (108,055,837) ------------ -------------- ------------ ------------- (3,772,564) (109,357,508) 3,707,184 117,901,193 ------------ -------------- ------------ ------------- A CLASS/SHARES AUTHORIZED 50,000,000 30,000,000 ============ ============ Sold 2,056,099 61,069,519 7,068,111 216,728,871 Issued in reinvestment of distributions 134,327 3,834,856 1,626,953 49,869,664 Redeemed (5,091,120) (147,831,618) (4,560,357) (138,836,065) ------------ -------------- ------------ ------------- (2,900,694) (82,927,243) 4,134,707 127,762,470 ------------ -------------- ------------ ------------- B CLASS/SHARES AUTHORIZED 20,000,000 N/A ============ Sold 859 25,000 ------------ -------------- ------------ ------------- C CLASS/SHARES AUTHORIZED 20,000,000 N/A ============ Sold 859 25,000 ------------ -------------- ------------ ------------- R CLASS/SHARES AUTHORIZED 20,000,000 N/A ============ Sold 859 25,000 ------------ -------------- ------------ ------------- Net increase (decrease) (21,681,817) $(628,534,118) 24,522,520 $768,592,109 ============ ============== ============ ============= (1) September 28, 2007 (commencement of sale) through September 30, 2007 for the B Class, C Class and R Class. 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, 2007 follows: Share Balance Purchase Sales Realized Dividend 3/31/07 Cost Cost Gain (Loss) Income September 30, 2007 Share Market Balance Value Education Realty Trust, Inc.(1)(2) 1,281,200 -- $4,441,716 $(613,183) $519,245 993,400 $13,410,900 GMH Communities Trust(2) 2,592,495 -- 6,425,834 (1,638,347) 718,029 2,095,795 16,242,411 Home Properties, Inc.(1)(2) 1,263,147 $27,703,292 70,841,200 (3,062,218) 1,312,931 508,147 26,515,110 Huntingdon Real Estate Investment Trust ORD(1)(2) 3,364,317 -- 1,382,090 (8,371) 329,263 2,745,720 6,133,836 ----------- ----------- ------------ ---------- ----------- $27,703,292 $83,090,840 $(5,322,119) $2,879,468 $62,302,257 =========== =========== ============ ========== =========== (1) Company was not an affiliate at September 30, 2007. (2) Security, or a portion thereof, was on loan as of September 30, 2007. - ------ 18 6. SECURITIES LENDING As of September 30, 2007, securities in the fund valued at $133,782,696 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 $136,978,265. The fund's risks in securities lending are that the borrower may not provide additional collateral when required or return the securities when due. If the borrower defaults, receipt of the collateral by the fund may be delayed or limited. 7. 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 0.40%. The fund did not borrow from the line during the six months ended September 30, 2007. 8. 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. 9. 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, 2007, the components of investments for federal income tax purposes were as follows: Federal tax cost of investments $1,704,392,426 ============== Gross tax appreciation of investments $177,748,915 Gross tax depreciation of investments (89,256,069) -------------- Net tax appreciation (depreciation) of investments $88,492,846 ============== 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, 2007, the fund had currency loss deferrals of $(3,583), which represent net foreign currency losses incurred in the five-month period ended March 31, 2007. The fund has elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. - ------ 19 10. 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. Management has concluded that the adoption of FIN 48 will not materially impact the financial statements. 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 that adopting FAS 157 will have on the financial statement disclosures. - ------ 20 FINANCIAL HIGHLIGHTS Real Estate Investor Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $31.37 $29.00 $23.24 $23.09 $15.83 $16.22 ------ ------ ------ ------ ------ ------ Income From Investment Operations Net Investment Income (Loss)(2) 0.27 0.53 0.53 0.46 0.46 0.59 Net Realized and Unrealized Gain (Loss) (2.21) 5.70 8.44 1.79 7.49 (0.44) ------ ------ ------ ------ ------ ------ Total From Investment Operations (1.94) 6.23 8.97 2.25 7.95 0.15 ------ ------ ------ ------ ------ ------ Distributions From Net Investment Income (0.31) (0.49) (0.49) (0.46) (0.54) (0.54) From Net Realized Gains -- (3.37) (2.72) (1.64) (0.15) -- ------ ------ ------ ------ ------ ------ Total Distributions (0.31) (3.86) (3.21) (2.10) (0.69) (0.54) ------ ------ ------ ------ ------ ------ Net Asset Value, End of Period $29.12 $31.37 $29.00 $23.24 $23.09 $15.83 ====== ====== ====== ====== ====== ====== TOTAL RETURN(3) (6.15)% 22.02% 40.65% 9.53% 50.97% 0.93% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.13%(4) 1.13% 1.15% 1.16% 1.17% 1.18% Ratio of Net Investment Income (Loss) to Average Net Assets 1.80%(4) 1.72% 2.00% 1.88% 2.28% 3.74% Portfolio Turnover Rate 79% 197% 177% 171% 158% 162% Net Assets, End of Period (in thousands) $1,039,051 $1,590,428 $986,526 $522,676 $393,604 $134,898 (1) Six months ended September 30, 2007 (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 Institutional Class For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(1) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $31.41 $29.03 $23.25 $23.10 $15.85 $16.23 ------ ------ ------ ------ ------ ------ Income From Investment Operations Net Investment Income (Loss)(2) 0.30 0.59 0.59 0.44 0.51 0.63 Net Realized and Unrealized Gain (Loss) (2.22) 5.71 8.45 1.86 7.47 (0.44) ------ ------ ------ ------ ------ ------ Total From Investment Operations (1.92) 6.30 9.04 2.30 7.98 0.19 ------ ------ ------ ------ ------ ------ Distributions From Net Investment Income (0.34) (0.55) (0.54) (0.51) (0.58) (0.57) From Net Realized Gains -- (3.37) (2.72) (1.64) (0.15) -- ------ ------ ------ ------ ------ ------ Total Distributions (0.34) (3.92) (3.26) (2.15) (0.73) (0.57) ------ ------ ------ ------ ------ ------ Net Asset Value, End of Period $29.15 $31.41 $29.03 $23.25 $23.10 $15.85 ====== ====== ====== ====== ====== ====== TOTAL RETURN(3) (6.08)% 22.27% 40.99% 9.74% 51.14% 1.19% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.93%(4) 0.93% 0.95% 0.96% 0.97% 0.98% Ratio of Net Investment Income (Loss) to Average Net Assets 2.00%(4) 1.92% 2.20% 2.08% 2.48% 3.94% Portfolio Turnover Rate 79% 197% 177% 171% 158% 162% Net Assets, End of Period (in thousands) $241,849 $379,044 $242,745 $143,183 $82,488 $23,371 (1) Six months ended September 30, 2007 (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 Real Estate A Class(1) For a Share Outstanding Throughout the Years Ended March 31 (except as noted) 2007(2) 2007 2006 2005 2004 2003 PER-SHARE DATA Net Asset Value, Beginning of Period $31.41 $29.04 $23.26 $23.11 $15.83 $16.22 ------ ------ ------ ------ ------ ------ Income From Investment Operations Net Investment Income (Loss)(3) 0.23 0.45 0.46 0.35 0.42 0.55 Net Realized and Unrealized Gain (Loss) (2.21) 5.71 8.46 1.84 7.50 (0.44) ------ ------ ------ ------ ------ ------ Total From Investment Operations (1.98) 6.16 8.92 2.19 7.92 0.11 ------ ------ ------ ------ ------ ------ Distributions From Net Investment Income (0.28) (0.42) (0.42) (0.40) (0.49) (0.50) From Net Realized Gains -- (3.37) (2.72) (1.64) (0.15) -- ------ ------ ------ ------ ------ ------ Total Distributions (0.28) (3.79) (3.14) (2.04) (0.64) (0.50) ------ ------ ------ ------ ------ ------ Net Asset Value, End of Period $29.15 $31.41 $29.04 $23.26 $23.11 $15.83 ====== ====== ====== ====== ====== ====== TOTAL RETURN(4) (6.29)% 21.70% 40.37% 9.30% 50.66% 0.69% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.38%(5) 1.38% 1.40% 1.41% 1.42% 1.43% Ratio of Net Investment Income (Loss) to Average Net Assets 1.55%(5) 1.47% 1.75% 1.63% 2.03% 3.49% Portfolio Turnover Rate 79% 197% 177% 171% 158% 162% Net Assets, End of Period (in thousands) $368,635 $488,277 $331,329 $161,592 $82,471 $19,278 (1) Prior to September 4, 2007, the A Class was referred to as the Advisor Class. (2) Six months ended September 30, 2007 (unaudited). (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. See Notes to Financial Statements. - ------ 23 PROXY VOTING RESULTS A special meeting of shareholders was held on July 27, 2007, to vote on the following proposals. The proposals received the required number of votes of the American Century Capital Portfolios, Inc. or the applicable fund, depending on the proposal, and were adopted. A summary of voting results is listed below each proposal. PROPOSAL 1: To elect nine Directors to the Board of Directors of American Century Capital Portfolios, Inc. (the proposal was voted on by all shareholders of funds issued by American Century Capital Portfolios, Inc.). James E. Stowers, Jr. For: 11,443,781,487 Withhold: 252,686,939 Abstain: 0 Broker Non-Vote: 0 Jonathan S. Thomas For: 11,454,104,706 Withhold: 242,363,720 Abstain: 0 Broker Non-Vote: 0 Thomas A. Brown For: 11,456,645,347 Withhold: 239,823,079 Abstain: 0 Broker Non-Vote: 0 Andrea C. Hall For: 11,459,598,200 Withhold: 236,870,226 Abstain: 0 Broker Non-Vote: 0 James A. Olson For: 11,454,607,738 Withhold: 241,860,688 Abstain: 0 Broker Non-Vote: 0 Donald H. Pratt For: 11,450,710,462 Withhold: 245,757,964 Abstain: 0 Broker Non-Vote: 0 Gale E. Sayers For: 11,458,471,500 Withhold: 237,996,926 Abstain: 0 Broker Non-Vote: 0 M. Jeannine Strandjord For: 11,451,541,828 Withhold: 244,926,598 Abstain: 0 Broker Non-Vote: 0 Timothy S. Webster For: 11,460,198,888 Withhold: 236,269,538 Abstain: 0 Broker Non-Vote: 0 - ------ 24 PROPOSAL 2: To approve a change in the fee structure of the Advisor Class. This proposal was voted on by the Advisor Class shareholders of the fund. For: 177,836,247 Against: 21,519,705 Abstain: 6,685,709 Broker Non-Vote: 58,429,261 PROPOSAL 3: To approve an amendment to the investment objective of the fund. For: 1,225,650,819 Against: 18,026,026 Abstain: 19,297,654 Broker Non-Vote: 320,876,511 - ------ 25 APPROVAL OF MANAGEMENT AGREEMENT 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. - ------ 26 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 - ------ 27 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. 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. 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. - ------ 28 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 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. - ------ 29 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. - ------ 30 SHARE CLASS INFORMATION Six classes of shares are authorized for sale by the fund: Investor Class, Institutional Class, A Class, B Class, C Class and R Class. The total expense ratio of Institutional Class shares is lower than that of Investor Class shares. The total expense ratios of A Class, B Class, C Class and R Class shares are 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; and/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. The fund's prospectus contains additional information regarding eligibility for Investor Class shares. 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. 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 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%. - ------ 31 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 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 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 1000® 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® GROWTH 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 higher price-to-book ratios and higher forecasted growth values. The RUSSELL 1000® 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 values. The RUSSELL 2000® 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® 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 values. The RUSSELL 2000® 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 values. The RUSSELL MIDCAP® INDEX measures the performance of the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization. The RUSSELL MIDCAP® GROWTH INDEX measures the performance of those Russell Midcap Index companies (the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization) with higher price-to-book ratios and higher forecasted growth values. - ------ 34 The RUSSELL MIDCAP® VALUE INDEX measures the performance of those Russell Midcap Index companies (the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values. The S&P 500 INDEX is a market value-weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. - ------ 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 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 Investment Services, Inc., Distributor ©2007 American Century Proprietary Holdings, Inc. All rights reserved. The American Century Investments logo, American Century and American Century Investments are service marks of American Century Proprietary Holdings, Inc. 0711 SH-SAN-56797N
[front cover] AMERICAN CENTURY INVESTMENTS Semiannual Report September 30, 2007 [photo of fall] NT Large Company Value Fund NT Mid Cap Value Fund [american century investments logo and text logo] OUR MESSAGE TO YOU To help you monitor your investment, my colleagues and I take pride in providing you with the semiannual report for the American Century® NT Large Company Value and NT Mid Cap Value funds for the six months ended September 30, 2007. This has been an eventful and exciting period for us. We've been working diligently to secure a smooth executive leadership transition. I'm honored to be addressing you in the "Our Message" space long devoted to company founder Jim Stowers, Jr. and his son Jim Stowers III. The Stowers family remains an integral part of our heritage, leadership, and financial structure. Jim Jr. continues as co-chair of the American Century Companies, Inc. (ACC) board of directors with Richard Brown, who has been on the board since 1998 and co-chairs the Stowers Institute for Medical Research board. But times and opportunities change. As the latest step in a career transition that began when he relinquished his executive leadership and investment management responsibilities in early 2005, Jim III stepped down from the ACC board in July 2007 to focus on new business ventures. Jim III's move reflects his family's comfort with our direction and leadership, and gives the Stowers more leeway to devote time and energy to other important priorities, such as the Stowers Institute for Medical Research. Meanwhile, American Century Investments, our clients, and our employees have been my top priority since I became company president and CEO in March. We've also added the executive talents of overall chief investment officer Enrique Chang, international equity CIO Mark On, U.S. growth equity CIO Steve Lurito, and chief operating officer Barry Fink. This skilled group, combined with our existing senior management team, has already had a positive impact on the development and management of the products and services we take pride in delivering to you. /s/Jonathan Thomas Jonathan Thomas [photo of Jonathan Thomas] Jonathan Thomas PRESIDENT AMERICAN CENTURY COMPANIES, INC. [photo of James E. Stowers, Jr.] James E. Stowers, Jr. FOUNDER AND CO-CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. [photo of Richard Brown] Richard Brown CO-CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. TABLE OF CONTENTS Market Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . 2 U.S. Stock Index Returns . . . . . . . . . . . . . . . . . . . . . . 2 NT LARGE COMPANY VALUE Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 5 Top Ten Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Top Five Industries. . . . . . . . . . . . . . . . . . . . . . . . . 6 Types of Investments in Portfolio. . . . . . . . . . . . . . . . . . 6 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 7 NT MID CAP 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. . . . . . . . . . . . . . . . . . . . . . . 17 FINANCIAL STATEMENTS Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 19 Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 20 Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 21 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 22 Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 26 OTHER INFORMATION Proxy Voting Results. . . . . . . . . . . . . . . . . . . . . . . . . 28 Approval of Management Agreements for NT Large Company Value and NT Mid Cap Value . . . . . . . . . . . . . 29 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 33 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 34 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 Enrique Chang, Chief Investment Officer, American Century Investments STOCKS ADVANCED IN A VOLATILE ENVIRONMENT U.S. stocks produced positive results for the six months ended September 30, 2007, overcoming a confluence of challenges that led to extraordinary market volatility. The stock market enjoyed a steady rally during the first half of the six-month period thanks to corporate earnings growth, which decelerated but continued to surpass expectations. Robust merger activity also boosted stocks as leveraged buy-outs from private equity firms put the volume of deal-making ahead of last year's record pace. After reaching all-time highs in mid-July, however, the major stock indexes declined sharply as worsening problems in the subprime mortgage market led to a credit crisis that threatened to derail the economic expansion. Tighter lending standards crimped funding for leveraged buy-outs, removing an important leg of support for the stock market, and rising energy and commodity prices sparked inflation worries despite slowing economic activity. As investors grew increasingly risk-averse, the Federal Reserve (the Fed) stepped in to provide a measure of relief and comfort. The Fed lowered its discount rate in mid-August and federal funds rate target in September -- the Fed's first rate cuts since June 2003. The Fed's actions helped alleviate some of the credit and economic concerns, allowing the major stock indexes to stage a solid recovery during the final six weeks of the period. LARGE-CAP AND GROWTH OUTPERFORMED Large-cap stocks delivered the best returns (see the accompanying table), followed by mid- and small-cap issues. Growth stocks, which have trailed value issues for much of the decade, enjoyed a resurgence during the six-month period, outpacing value shares by a wide margin across all market capitalizations. Energy was the best-performing sector in the stock market during the period, benefiting from a 24% increase in the price of oil. Information technology and industrials stocks also fared well. The only two sectors of the market to decline during the period were financials and consumer discretionary. U.S. Stock Index Returns For the six months ended September 30, 2007* RUSSELL 1000 INDEX (LARGE-CAP) 7.99% Russell 1000 Growth Index 11.35% Russell 1000 Value Index 4.67% RUSSELL MIDCAP INDEX 4.89% Russell Midcap Growth Index 9.03% Russell Midcap Value Index -0.03% RUSSELL 2000 INDEX (SMALL-CAP) 1.19% Russell 2000 Growth Index 6.70% Russell 2000 Value Index -4.10% *Total returns for periods less than one year are not annualized. - ------ 2 PERFORMANCE NT Large Company Value Total Returns as of September 30, 2007 Average Annual Returns Since Inception 6 months(1) 1 year Inception Date INSTITUTIONAL CLASS 5.54% 13.13% 13.74% 5/12/06 RUSSELL 1000 VALUE INDEX(2) 4.67% 14.45% 14.49% -- S&P 500 INDEX(2) 8.44% 16.44% 14.99% -- (1) Total returns for periods less than one year are not annualized. (2) Data provided by Lipper Inc. - A Reuters Company. ©2007 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. International investing involves special risks, such as political instability and currency fluctuations. 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 Growth of $10,000 Over Life of Class $10,000 investment made May 12, 2006
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One-Year Returns Over Life of Class Periods ended September 30 2006* 2007 Institutional Class 5.67% 13.13% Russell 1000 Value Index 5.37% 14.45% S&P 500 Index 4.20% 16.44% *From 5/12/06, the Institutional 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. International investing involves special risks, such as political instability and currency fluctuations. 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 PORTFOLIO COMMENTARY NT Large Company Value Portfolio Managers: Chuck Ritter and Brendan Healy PERFORMANCE SUMMARY NT Large Company Value gained 5.54%* for the six months ended September 30, 2007. By comparison, its benchmark, the Russell 1000 Value Index, advanced 4.67%. The broader market, as measured by the S&P 500 Index, returned 8.44%. The portfolio's returns reflect operating expenses, while the indices' returns do not. The portfolio's solid return was achieved in the challenging market environment described in the Market Perspective on page 2. Overall, growth stocks outperformed value across the capitalization spectrum and investors favored stocks with lower dividend yields. In the volatility that characterized the second half of the period, they gravitated toward higher-quality names. Mega-cap stocks (shares of especially large companies) found greater favor with investors. The shift benefited the portfolio because we typically hold a higher percentage of these companies than the benchmark. INFORMATION TECHNOLOGY CONTRIBUTED The portfolio benefited from strong stock selection in the information technology sector, with most of the gains coming from large leading technology companies, such as Hewlett-Packard, IBM, Intel, and Oracle. Hewlett-Packard was up 24% over the period. The company continued to gain ground in the PC market and moved into high-end enterprise printing equipment. Meanwhile, IBM continued to capture market share for virtually all its products and services. ENERGY BOOSTED RESULTS Our holdings in the energy sector, which led all others in the benchmark, added significantly to total return. Because of valuations, we have been selective about our investments, and over the period our mix of multi-national integrated oil companies, such as Chevron and ConocoPhillips, worked in our favor. A significant performer was Europe's largest integrated oil company, Royal Dutch Shell plc. Royal Dutch reported robust second-quarter earnings and continues to make capital investments in unconventional oil projects. UTILITIES HOLDINGS ADDED VALUE Utilities stocks continued to trade near historically high price-to-earnings ratios, making many of them unattractive to us. Strong stock selection, however, identified two top performers -- PPL Corp. and Exelon. A low-cost producer of nuclear- and coal-generated energy, PPL produces and delivers electricity to customers in the U.S., the U.K. and Latin America. The company reported solid 2006 earnings and reaffirmed its positive outlook for 2007. Exelon, which distributes electricity to customers in Illinois and Pennsylvania and gas to customers in the Philadelphia area, is the nation's largest nuclear generator. Top Ten Holdings as of September 30, 2007 % of net % of net assets as of assets as of 9/30/07 3/31/07 Exxon Mobil Corp. 5.3% 4.9% Citigroup Inc. 4.4% 4.8% Bank of America Corp. 3.5% 3.4% Chevron Corp. 3.3% 3.0% AT&T Inc. 3.2% 3.2% Royal Dutch Shell plc ADR 3.0% 2.6% General Electric Co. 2.5% 1.7% JPMorgan Chase & Co. 2.4% 2.4% Freddie Mac 2.3% 2.4% ConocoPhillips 2.3% 2.0% *Total returns for periods less than one year are not annualized. - ------ 5 NT Large Company Value CONSUMER DISCRETIONARY DETRACTED Holdings in the consumer discretionary sector, particularly among retailers and media companies, hampered performance. A top detractor was apparel manufacturer Liz Claiborne. We liquidated our position after the company reported disappointing first-quarter results and dramatically lowered earnings guidance. Another detractor was publishing and broadcasting company Gannett, which experienced a drop in total advertising revenue. FINANCIALS HELD A TOP DETRACTOR Although it was a relatively small weighting, MGIC Investment Corporation was one of our largest detractors. MGIC, the nation's largest private mortgage insurer, was hampered by the housing slowdown and significant financial losses from a joint venture involved in restructuring subprime mortgages. STARTING POINT FOR NEXT REPORTING PERIOD As bottom-up investment managers, we evaluate each company individually and build the portfolio one stock at a time. As of September 30, 2007, NT Large Company Value was broadly diversified, with continued overweight positions in the information technology and health care sectors. Our valuation work contributed to our smaller relative weightings in utilities stocks. We have also continued to find greater value opportunities among mega-cap stocks and have maintained our bias toward these firms. Top Five Industries as of September 30, 2007 % of net % of net assets as of assets as of 9/30/07 3/31/07 Oil, Gas & Consumable Fuels 14.3% 13.4% Diversified Financial Services 10.3% 10.6% Pharmaceuticals 7.8% 7.6% Commercial Banks 6.2% 6.5% Insurance 5.6% 5.5% Types of Investments in Portfolio % of net % of net assets as of assets as of 9/30/07 3/31/07 Domestic Common Stocks & Futures 95.3% 93.3% Foreign Common Stocks(1) 4.5% 5.1% TOTAL COMMON STOCKS 99.8% 98.4% Temporary Cash Investments 0.5% 1.5% Other Assets and Liabilities(2) (0.3)% 0.1% (1) Includes depositary shares, dual listed securities and foreign ordinary shares. (2) Includes securities lending collateral and other assets and liabilities. - ------ 6 SCHEDULE OF INVESTMENTS NT Large Company Value SEPTEMBER 30, 2007 (UNAUDITED) Shares Value Common Stocks -- 98.5% AEROSPACE & DEFENSE -- 1.0% 11,300 Northrop Grumman Corp. $ 881,400 -------------- BEVERAGES -- 2.1% 19,800 Coca-Cola Company (The) 1,137,906 21,300 Pepsi Bottling Group Inc. 791,721 -------------- 1,929,627 -------------- BIOTECHNOLOGY -- 0.6% 9,300 Amgen Inc.(1) 526,101 -------------- CAPITAL MARKETS -- 3.8% 19,900 Bank of New York Mellon Corp. (The) 878,386 18,400 Merrill Lynch & Co., Inc. 1,311,552 19,400 Morgan Stanley 1,222,200 -------------- 3,412,138 -------------- CHEMICALS -- 2.2% 17,400 du Pont (E.I.) de Nemours & Co. 862,344 15,100 PPG Industries, Inc. 1,140,805 -------------- 2,003,149 -------------- COMMERCIAL BANKS -- 6.2% 15,400 National City Corp. 386,386 8,300 PNC Financial Services Group 565,230 36,500 U.S. Bancorp 1,187,346 28,600 Wachovia Corp. 1,434,290 55,900 Wells Fargo & Co. 1,991,158 -------------- 5,564,410 -------------- COMMERCIAL SERVICES & SUPPLIES -- 1.5% 3,800 Avery Dennison Corp. 216,676 14,900 R.R. Donnelley & Sons Company 544,744 14,500 Waste Management, Inc. 547,230 -------------- 1,308,650 -------------- COMMUNICATIONS EQUIPMENT -- 0.3% 12,800 Motorola, Inc. 237,184 -------------- COMPUTERS & PERIPHERALS -- 1.5% 26,300 Hewlett-Packard Co. 1,309,477 -------------- CONSUMER FINANCE -- 0.2% 11,600 Discover Financial Services(1) 241,280 -------------- DIVERSIFIED -- 2.2% 12,800 Standard and Poor's 500 Depositary Receipt 1,953,792 -------------- Shares Value DIVERSIFIED CONSUMER SERVICES -- 0.5% 23,200 H&R Block, Inc. $ 491,376 -------------- DIVERSIFIED FINANCIAL SERVICES -- 10.3% 62,100 Bank of America Corp. 3,121,767 85,200 Citigroup Inc. 3,976,284 47,100 JPMorgan Chase & Co. 2,158,122 -------------- 9,256,173 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 4.8% 68,300 AT&T Inc. 2,889,773 31,900 Verizon Communications Inc. 1,412,532 -------------- 4,302,305 -------------- ELECTRIC UTILITIES -- 2.7% 17,500 Exelon Corporation 1,318,800 23,400 PPL Corporation 1,083,420 -------------- 2,402,220 -------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.4% 9,600 Tyco Electronics Ltd. 340,128 -------------- ENERGY EQUIPMENT & SERVICES -- 0.5% 3,000 National Oilwell Varco, Inc.(1) 433,500 -------------- FOOD & STAPLES RETAILING -- 1.7% 21,100 Kroger Co. (The) 601,772 21,500 Wal-Mart Stores, Inc. 938,475 -------------- 1,540,247 -------------- FOOD PRODUCTS -- 1.1% 32,800 Unilever N.V. New York Shares 1,011,880 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.5% 8,500 Medtronic, Inc. 479,485 -------------- HEALTH CARE PROVIDERS & SERVICES -- 0.3% 5,200 Quest Diagnostics Inc. 300,404 -------------- HOTELS, RESTAURANTS & LEISURE -- 0.8% 12,600 McDonald's Corporation 686,322 -------------- HOUSEHOLD DURABLES -- 0.7% 22,300 Newell Rubbermaid Inc. 642,686 -------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.3% 5,500 NRG Energy Inc.(1) 232,595 -------------- INDUSTRIAL CONGLOMERATES -- 3.0% 53,600 General Electric Co. 2,219,040 10,100 Tyco International Ltd. 447,834 -------------- 2,666,874 -------------- - ------ 7 NT Large Company Value Shares Value INSURANCE -- 5.6% 18,400 Allstate Corp. $ 1,052,296 29,000 American International Group, Inc. 1,961,850 11,200 Hartford Financial Services Group Inc. (The) 1,036,560 17,800 Marsh & McLennan Companies, Inc. 453,900 8,800 Torchmark Corp. 548,416 -------------- 5,053,022 -------------- IT SERVICES -- 1.6% 6,900 Fiserv, Inc.(1) 350,934 9,400 International Business Machines Corp. 1,107,320 -------------- 1,458,254 -------------- MACHINERY -- 3.6% 7,400 Caterpillar Inc. 580,382 3,500 Deere & Co. 519,470 13,100 Dover Corp. 667,445 14,900 Ingersoll-Rand Company Ltd. Cl A 811,603 6,100 Parker-Hannifin Corp. 682,163 -------------- 3,261,063 -------------- MEDIA -- 3.2% 19,300 Gannett Co., Inc. 843,410 71,800 Time Warner Inc. 1,318,248 18,800 Viacom Inc. Cl B(1) 732,636 -------------- 2,894,294 -------------- METALS & MINING -- 0.6% 8,600 Nucor Corp. 511,442 -------------- MULTILINE RETAIL -- 0.2% 4,000 Kohl's Corp.(1) 229,320 -------------- OFFICE ELECTRONICS -- 0.6% 30,700 Xerox Corp.(1) 532,338 -------------- OIL, GAS & CONSUMABLE FUELS -- 14.3% 31,900 Chevron Corp. 2,985,202 23,300 ConocoPhillips 2,045,041 4,800 Devon Energy Corporation 399,360 51,500 Exxon Mobil Corp. 4,766,840 32,900 Royal Dutch Shell plc ADR 2,703,722 -------------- 12,900,165 -------------- PAPER & FOREST PRODUCTS -- 1.1% 13,500 Weyerhaeuser Co. 976,050 -------------- Shares Value PHARMACEUTICALS -- 7.8% 23,900 Abbott Laboratories $ 1,281,518 11,000 Eli Lilly and Company 626,230 26,500 Johnson & Johnson 1,741,050 12,800 Merck & Co., Inc. 661,632 68,800 Pfizer Inc. 1,680,784 22,800 Wyeth 1,015,740 -------------- 7,006,954 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.9% 16,500 Applied Materials, Inc. 341,550 16,700 Intel Corp. 431,862 -------------- 773,412 -------------- SOFTWARE -- 2.3% 49,100 Microsoft Corporation 1,446,486 30,300 Oracle Corp.(1) 655,995 -------------- 2,102,481 -------------- SPECIALTY RETAIL -- 2.1% 12,400 Best Buy Co., Inc. 570,648 28,700 Gap, Inc. (The) 529,228 9,700 Home Depot, Inc. (The) 314,668 23,500 Staples, Inc. 505,015 -------------- 1,919,559 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.6% 6,300 VF Corp. 508,725 -------------- THRIFTS & MORTGAGE FINANCE -- 3.9% 5,100 Countrywide Financial Corp. 96,951 35,200 Freddie Mac 2,077,152 13,400 MGIC Investment Corp.(2) 432,954 26,000 Washington Mutual, Inc. 918,060 -------------- 3,525,117 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.9% 42,500 Sprint Nextel Corp. 807,500 -------------- TOTAL COMMON STOCKS (Cost $79,540,837) 88,613,099 -------------- Temporary Cash Investments -- Segregated for Futures Contracts -- 1.3% Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 5.25%-8.75%, 8/15/20-11/15/28, valued at $1,184,351), in a joint trading account at 3.90%, dated 9/28/07, due 10/1/07 (Delivery value $1,155,375) (Cost $1,155,000) 1,155,000 -------------- - ------ 8 NT Large Company Value Shares Value Temporary Cash Investments -- 0.5% Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 5.25%-8.75%, 8/15/20-11/15/28, valued at $456,308), in a joint trading account at 3.90%, dated 9/28/07, due 10/1/07 (Delivery value $445,145) (Cost $445,000) $ 445,000 -------------- Temporary Cash Investments -- Securities Lending Collateral(3) -- 0.2% Repurchase Agreement, Lehman Brothers, Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.15%, dated 9/28/07, due 10/1/07 (Delivery value $206,214) (Cost $206,126) 206,126 -------------- Shares Value TOTAL INVESTMENT SECURITIES -- 100.5% (Cost $81,346,963) $90,419,225 -------------- OTHER ASSETS AND LIABILITIES -- (0.5)% (408,040) -------------- TOTAL NET ASSETS -- 100.0% $90,011,185 ============== Futures Contracts Expiration Underlying Face Unrealized Contracts Purchased Date Amount at Value Gain (Loss) 15 S&P 500 E-Mini Futures December 2007 $1,155,000 $29,046 ============== ============== Notes to Schedule of Investments ADR = American Depositary Receipt (1) Non-income producing. (2) Security, or a portion thereof, was on loan as of September 30, 2007. (3) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. - ------ 9 PERFORMANCE NT Mid Cap Value Total Returns as of September 30, 2007 Average Annual Returns Since Inception 6 months(1) 1 year Inception Date INSTITUTIONAL CLASS 2.62% 15.64% 13.42% 5/12/06 RUSSELL MIDCAP VALUE INDEX(2) -0.03% 13.75% 12.03% -- (1) Total returns for periods less than one year are not annualized. (2) Data provided by Lipper Inc. - A Reuters Company. ©2007 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. International investing involves special risks, such as political instability and currency fluctuations. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. - ------ 10 NT Mid Cap Value Growth of $10,000 Over Life of Class $10,000 investment made May 12, 2006
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One-Year Returns Over Life of Class Periods ended September 30 2006* 2007 Institutional Class 2.97% 15.64% Russell Midcap Value Index 2.88% 13.75% *From 5/12/06, the Institutional 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. International investing involves special risks, such as political instability and currency fluctuations. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. - ------ 11 PORTFOLIO COMMENTARY NT Mid Cap Value Portfolio Managers: Scott Moore, Michael Liss, and Phil Davidson PERFORMANCE SUMMARY NT Mid Cap Value gained 2.62%* for the six months ended September 30, 2007. By comparison, the median for Morningstar's Mid Cap Value category (whose performance, like NT Mid Cap Value's, reflects fund operating expenses) advanced 2.30%.** The fund's benchmark, the Russell Midcap Value Index, declined -0.03%. Its returns do not include operating expenses. The portfolio's strong return was achieved in the challenging market environment described in the Market Perspective on page 2. Overall, growth stocks outperformed value across the capitalization spectrum and investors favored stocks with lower dividend yields. Against that market backdrop, NT Mid Cap Value benefited from strong stock selection. In addition, during the reporting period, the portfolio's small portion of international holdings also contributed to results. CONSUMER STAPLES LED PORTFOLIO Our mix of companies in the consumer staples sector added to performance. Boosting results was an overweight position to several names not represented in the benchmark. Specifically, we owned Diamond Foods, which processes and distributes nuts and other snack foods. In addition to beating earnings forecasts, the company has worked towards meeting its long-term growth objectives by continuing to improve operating performance, expand sales channels, and accelerate earnings growth. Meanwhile, Kraft -- the largest branded food company in the U.S. -- added to results as its stock traded on its own fundamentals after the company's spinoff from Altria Group. Kraft has also invested in new product development, improved marketing, and is considering the divestiture of non-core businesses. ALLOCATION TO UTILITIES ADDED VALUE As a sector, utilities -- which accounted for 14.5% of the index at the end of the period -- was a neutral performer. Our stock selection generated several notable contributors, including Virginia-based Dominion Resources, which provides gas and electric services primarily in northeastern, mid-Atlantic and mid-western Top Ten Holdings as of September 30, 2007 % of net % of net assets as of assets as of 9/30/07 3/31/07 Freddie Mac 3.8% 3.6% SunTrust Banks, Inc. 3.7% 1.6% iShares S&P MidCap 400 Index Fund 3.4% 3.5% Ambac Financial Group, Inc. 3.0% 1.6% MGIC Investment Corp. 3.0% 2.9% Kraft Foods Inc. Cl A 2.8% 2.3% Speedway Motorsports Inc. 2.6% 3.1% RC2 Corp. 2.1% 0.4% South Financial Group Inc. (The) 2.1% 1.1% International Speedway Corp. 2.0% 1.2% * Total returns for periods less than one year are not annualized. ** The median return for Morningstar's Mid Cap Value category was 14.68% for the one-year period ended September 30, 2007. ©2007 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers: (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. - ------ 12 NT Mid Cap Value states. The company used proceeds from the sale of some of its exploration and production businesses to repurchase roughly 16% of its outstanding shares through a Dutch auction, in which we participated. STOCK SELECTION BOOSTED RESULTS Health care and consumer discretionary stocks enhanced our performance relative to the Russell Midcap Value Index. In health care, we owned top performers Beckman Coulter, Symmetry Medical and Watson Pharmaceuticals. In consumer discretionary, the portfolio benefited from our small allocation to the household durables segment, and specifically homebuilders -- areas that provided negative returns for the benchmark. UNDERWEIGHT POSITION IN MATERIALS DETRACTED The materials sector generated solid results for the Russell Midcap Value Index. The portfolio's underweight position, maintained because of high valuations, hindered relative returns. Our smaller-than-the-benchmark position in chemical companies was particularly costly. Materials also provided one of our top detractors, Bemis Co. Inc., a major producer of flexible packaging, much of it for the food industry. The company reported disappointing earnings and reduced its earnings guidance, citing lower demand across its end markets. FINANCIALS: A MIXED BAG NT Mid Cap Value's allocation to the financials sector added to results on a relative basis. The sector also provided two top detractors -- MGIC Investment Corporation and Ambac Financial. MGIC, the nation's largest private mortgage insurer, was hurt by the housing slowdown and by significant financial losses from a joint venture involved in restructuring subprime mortgages. Ambac, a leading municipal bond insurer, saw its stock decline on concern about bond insurers in general and fears about the company's exposure to subprime loans. STARTING POINT FOR NEXT REPORTING PERIOD Your management team follows a disciplined, bottom-up process, selecting companies one at a time for the portfolio. As of September 30, 2007, we continued to see opportunities in health care and consumer staples stocks, reflected by our overweight positions in these sectors relative to the benchmark. Our fundamental analysis and valuation work contributed to our smaller relative weightings in financials, telecommunications, and energy stocks. Top Five Industries as of September 30, 2007 % of net % of net assets as of assets as of 9/30/07 3/31/07 Food Products 9.6% 8.7% Commercial Banks 9.2% 7.7% Insurance 9.0% 8.9% Thrifts & Mortgage Finance 6.8% 7.9% Commercial Services & Supplies 5.5% 3.4% Types of Investments in Portfolio % of net % of net assets as of assets as of 9/30/07 3/31/07 Common Stocks 98.4% 103.5% Temporary Cash Investments 1.5% 3.9% Other Assets and Liabilities* 0.1% (7.4)% * Includes securities lending collateral and other assets and liabilities. - ------ 13 SCHEDULE OF INVESTMENTS NT Mid Cap Value SEPTEMBER 30, 2007 (UNAUDITED) Shares Value Common Stocks -- 98.4% AIRLINES -- 1.7% 46,738 Southwest Airlines Co. $ 691,722 -------------- AUTO COMPONENTS -- 0.8% 5,410 Autoliv, Inc. 323,248 -------------- AUTOMOBILES -- 1.6% 3,100 Bayerische Motoren Werke AG ORD 200,077 8,700 Honda Motor Co., Ltd. ORD 292,641 6,525 Winnebago Industries(1) 155,817 -------------- 648,535 -------------- BEVERAGES -- 1.6% 10,412 Anheuser-Busch Companies, Inc. 520,496 4,950 Coca-Cola Enterprises Inc. 119,889 -------------- 640,385 -------------- BUILDING PRODUCTS -- 0.8% 14,063 Masco Corp. 325,840 -------------- CAPITAL MARKETS -- 0.8% 2,500 Bear Stearns Companies Inc. (The) 307,025 -------------- CHEMICALS -- 0.6% 3,470 Minerals Technologies Inc. 232,490 -------------- COMMERCIAL BANKS -- 9.2% 6,700 Associated Banc-Corp. 198,521 6,988 BB&T Corporation 282,245 11,985 Marshall & Ilsley Corp. 524,583 37,052 South Financial Group Inc. (The) 842,562 19,923 SunTrust Banks, Inc. 1,507,574 4,007 United Bankshares, Inc.(1) 121,973 3,500 Zions Bancorporation 240,345 -------------- 3,717,803 -------------- COMMERCIAL SERVICES & SUPPLIES -- 5.5% 4,100 Avery Dennison Corp. 233,782 15,727 HNI Corp. 566,172 14,663 Pitney Bowes, Inc. 665,994 8,133 Republic Services, Inc. 266,030 12,896 Waste Management, Inc. 486,695 -------------- 2,218,673 -------------- COMMUNICATIONS EQUIPMENT -- 0.3% 6,297 Motorola, Inc. 116,683 -------------- Shares Value COMPUTERS & PERIPHERALS -- 1.8% 2,600 Diebold, Inc. $ 118,092 43,846 QLogic Corp.(2) 589,729 -------------- 707,821 -------------- CONTAINERS & PACKAGING -- 1.9% 26,407 Bemis Co., Inc. 768,708 -------------- DISTRIBUTORS -- 0.2% 2,256 Genuine Parts Company 112,800 -------------- DIVERSIFIED -- 3.4% 15,596 iShares S&P MidCap 400 Index Fund 1,373,228 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.3% 5,878 Iowa Telecommunications Services Inc.(1) 116,678 -------------- ELECTRIC UTILITIES -- 4.5% 12,074 IDACORP, Inc. 395,303 28,772 Portland General Electric Co. 799,861 18,300 Sierra Pacific Resources 287,859 14,400 Westar Energy Inc. 353,664 -------------- 1,836,687 -------------- ELECTRICAL EQUIPMENT -- 0.6% 4,500 Hubbell Inc. Cl B 257,040 -------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 4.1% 4,774 Littelfuse, Inc.(2) 170,384 25,100 Molex Inc. 675,943 18,424 Tyco Electronics Ltd. 652,762 13,500 Vishay Intertechnology, Inc.(2) 175,905 -------------- 1,674,994 -------------- FOOD PRODUCTS -- 9.6% 8,300 Campbell Soup Co. 307,100 19,207 ConAgra Foods, Inc. 501,879 26,742 Diamond Foods Inc. 552,490 4,866 General Mills, Inc. 282,277 16,796 H.J. Heinz Co. 775,974 7,100 Hershey Co. (The) 329,511 32,535 Kraft Foods Inc. Cl A 1,122,782 -------------- 3,872,013 -------------- GAS UTILITIES -- 2.0% 19,311 Southwest Gas Corp. 546,308 8,120 WGL Holdings Inc. 275,187 -------------- 821,495 -------------- - ------ 14 NT Mid Cap Value Shares Value HEALTH CARE EQUIPMENT & SUPPLIES -- 3.0% 5,060 Beckman Coulter, Inc. $ 373,226 7,900 Covidien Ltd.(2) 327,850 30,103 Symmetry Medical Inc.(2) 502,720 -------------- 1,203,796 -------------- HEALTH CARE PROVIDERS & SERVICES -- 1.7% 13,700 LifePoint Hospitals Inc.(2) 411,137 5,402 Universal Health Services, Inc. Cl B 293,977 -------------- 705,114 -------------- HOTELS, RESTAURANTS & LEISURE -- 5.0% 7,400 CEC Entertainment Inc.(2) 198,838 17,612 International Speedway Corp. 807,686 27,938 Speedway Motorsports Inc. 1,033,706 -------------- 2,040,230 -------------- HOUSEHOLD DURABLES -- 0.6% 1,300 Hunter Douglas N.V. ORD 116,867 1,400 Whirlpool Corp. 124,740 -------------- 241,607 -------------- HOUSEHOLD PRODUCTS -- 2.6% 6,415 Clorox Company 391,251 9,584 Kimberly-Clark Corp. 673,372 -------------- 1,064,623 -------------- INSURANCE -- 9.0% 2,935 Allstate Corp. 167,853 19,366 Ambac Financial Group, Inc. 1,218,315 6,862 Chubb Corp. 368,078 23,636 Genworth Financial Inc. Cl A 726,334 2,543 Hartford Financial Services Group Inc. (The) 235,355 7,851 Horace Mann Educators Corp. 154,743 29,554 Marsh & McLennan Companies, Inc. 753,627 -------------- 3,624,305 -------------- LEISURE EQUIPMENT & PRODUCTS -- 2.1% 30,600 RC2 Corp.(2) 847,314 -------------- MACHINERY -- 1.5% 35,557 Altra Holdings Inc.(2) 592,735 -------------- METALS & MINING -- 1.1% 8,074 Compass Minerals International Inc. 274,839 3,423 Newmont Mining Corporation 153,111 -------------- 427,950 -------------- MULTILINE RETAIL -- 0.3% 4,500 Family Dollar Stores, Inc. 119,520 -------------- Shares Value MULTI-UTILITIES -- 4.8% 4,518 Ameren Corp. $ 237,195 4,200 Consolidated Edison, Inc. 194,460 29,295 Puget Energy, Inc. 716,849 12,601 Wisconsin Energy Corp. 567,423 10,900 XCEL Energy Inc. 234,786 -------------- 1,950,713 -------------- OIL, GAS & CONSUMABLE FUELS -- 2.9% 6,248 Apache Corp. 562,695 7,030 Equitable Resources Inc. 364,646 6,887 St. Mary Land & Exploration Co. 245,659 -------------- 1,173,000 -------------- PAPER & FOREST PRODUCTS -- 1.1% 4,148 MeadWestvaco Corp. 122,490 4,306 Weyerhaeuser Co. 311,324 -------------- 433,814 -------------- PERSONAL PRODUCTS -- 0.3% 2,900 Estee Lauder Companies, Inc. (The) Cl A 123,134 -------------- PHARMACEUTICALS -- 1.1% 6,900 Bristol-Myers Squibb Co. 198,858 7,752 Watson Pharmaceuticals, Inc.(2) 251,165 -------------- 450,023 -------------- REAL ESTATE INVESTMENT TRUSTS -- 0.8% 24,699 Education Realty Trust, Inc.(1) 333,437 -------------- ROAD & RAIL -- 0.6% 17,121 Heartland Express, Inc.(1) 244,488 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.3% 8,500 Teradyne, Inc.(2) 117,300 -------------- SOFTWARE -- 0.6% 8,735 Synopsys, Inc.(2) 236,544 -------------- SPECIALTY RETAIL -- 0.9% 12,762 Lowe's Companies, Inc. 357,592 -------------- THRIFTS & MORTGAGE FINANCE -- 6.8% 25,823 Freddie Mac 1,523,815 37,454 MGIC Investment Corp.(1) 1,210,139 -------------- 2,733,954 -------------- TOTAL COMMON STOCKS (Cost $39,223,373) 39,785,061 -------------- - ------ 15 NT Mid Cap Value Shares Value Temporary Cash Investments -- 1.5% Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized by various U.S. Treasury obligations, 5.25%-8.75%, 8/15/20-11/15/28, valued at $615,247), in a joint trading account at 3.90%, dated 9/28/07, due 10/1/07 (Delivery value $600,195) (Cost $600,000) $ 600,000 -------------- Temporary Cash Investments -- Securities Lending Collateral(3) -- 3.1% Repurchase Agreement, Lehman Brothers, Inc., (collateralized by various U.S. Government Agency obligations in a pooled account at the lending agent), 5.15%, dated 9/28/07, due 10/1/07 (Delivery value $1,237,957) (Cost $1,237,426) 1,237,426 -------------- Shares Value TOTAL INVESTMENT SECURITIES -- 103.0% (Cost $41,060,799) $41,622,487 -------------- OTHER ASSETS AND LIABILITIES -- (3.0)% (1,214,004) -------------- TOTAL NET ASSETS -- 100.0% $40,408,483 ============== Forward Foreign Currency Exchange Contracts Unrealized Gain Contracts to Sell Settlement Date Value (Loss) 219,840 Euro for USD 10/31/07 $313,943 $(3,112) 26,517,600 JPY for USD 10/31/07 231,925 (1,272) -------------- -------------- $545,868 $(4,384) ============== ============== (Value on Settlement Date $541,484) Notes to Schedule of Investments JPY = Japanese Yen ORD = Foreign Ordinary Share USD = United States Dollar (1) Security, or a portion thereof, was on loan as of September 30, 2007. (2) Non-income producing. (3) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. - ------ 16 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, 2007 to September 30, 2007. 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. 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. - ------ 17 Beginning Ending Expenses Paid Account Value Account Value During Period* Annualized 4/1/07 9/30/07 4/1/07 - 9/30/07 Expense Ratio* NT Large Company Value -- Institutional Class ACTUAL $1,000 $1,055.40 $3.24 0.63% HYPOTHETICAL $1,000 $1,021.85 $3.18 0.63% NT Mid Cap Value -- Institutional Class ACTUAL $1,000 $1,026.20 $4.10 0.81% HYPOTHETICAL $1,000 $1,020.95 $4.09 0.81% * 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 366, to reflect the one-half year period. - ------ 18 STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2007 (UNAUDITED) NT Large Company NT Mid Cap Value Value ASSETS Investment securities -- at value (cost of $81,140,837 and $39,823,373, respectively) -- including $198,803 and $1,196,607 of securities on loan, respectively $90,213,099 $40,385,061 Investments made with cash collateral received for securities on loan, at value (cost of $206,126 and $1,237,426, respectively) 206,126 1,237,426 ------------ ------------ Total investment securities, at value (cost of $81,346,963 and $41,060,799, respectively) 90,419,225 41,622,487 Cash 1,677 27,601 Receivable for investments sold 230,770 1,193,907 Dividends and interest receivable 93,546 60,087 ------------ ------------ 90,745,218 42,904,082 ------------ ------------ LIABILITIES Payable for collateral received for securities on loan 206,126 1,237,426 Payable for investments purchased 479,695 1,227,599 Payable for forward foreign currency exchange contracts -- 4,384 Payable for variation margin on futures contracts 3,041 -- Accrued management fees 45,171 26,190 ------------ ------------ 734,033 2,495,599 ------------ ------------ NET ASSETS $90,011,185 $40,408,483 ============ ============ INSTITUTIONAL CLASS CAPITAL SHARES, $0.01 PAR VALUE Authorized 30,000,000 30,000,000 ============ ============ Outstanding 7,732,422 3,509,709 ============ ============ NET ASSET VALUE PER SHARE $11.64 $11.51 ============ ============ NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $80,294,669 $36,304,906 Undistributed net investment income 55,067 69,137 Undistributed net realized gain on investment transactions 560,141 3,476,639 Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 9,101,308 557,801 ------------ ------------ $90,011,185 $40,408,483 ============ ============ See Notes to Financial Statements. - ------ 19 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) NT Large Company NT Mid Cap Value Value INVESTMENT INCOME (LOSS) INCOME: Dividends (net of foreign taxes withheld of $9,956 and $443) $1,042,554 $402,939 Interest 40,904 26,056 Securities lending 5,229 3,240 ------------ ------------ 1,088,687 432,235 ------------ ------------ EXPENSES: Management fees 264,067 155,572 Directors' fees and expenses 889 409 Other expenses 612 1,004 ------------ ------------ 265,568 156,985 ------------ ------------ NET INVESTMENT INCOME (LOSS) 823,119 275,250 ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: Investment and foreign currency transactions 329,927 1,698,697 Futures transactions 58,483 -- ------------ ------------ 388,410 1,698,697 ------------ ------------ CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: Investments and translations of assets and liabilities in foreign currencies 2,806,732 (1,140,702) Futures 27,672 -- ------------ ------------ 2,834,404 (1,140,702) ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) 3,222,814 557,995 ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $4,045,933 $833,245 ============ ============ See Notes to Financial Statements. - ------ 20 STATEMENT OF CHANGES IN NET ASSETS SIX MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) AND PERIOD ENDED MARCH 31, 2007 NT Large Company Value NT Mid Cap Value Increase (Decrease) in Sept. 30, March 31, Sept. 30, March 31, Net Assets 2007 2007(1) 2007 2007(1) OPERATIONS Net investment income (loss) $ 823,119 $ 1,078,502 $ 275,250 $ 373,127 Net realized gain (loss) 388,410 239,142 1,698,697 2,264,747 Change in net unrealized appreciation (depreciation) 2,834,404 6,266,904 (1,140,702) 1,698,503 ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations 4,045,933 7,584,548 833,245 4,336,377 ----------- ----------- ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income (792,863) (1,053,691) (260,763) (317,474) From net realized gains -- (67,411) -- (487,808) ----------- ----------- ----------- ----------- Decrease in net assets from distributions (792,863) (1,121,102) (260,763) (805,282) ----------- ----------- ----------- ----------- CAPITAL SHARE TRANSACTIONS Proceeds from shares sold 18,945,046 77,274,602 8,694,444 35,046,933 Payments for shares redeemed (4,157,256) (11,767,723) (2,233,153) (5,203,318) ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from capital share transactions 14,787,790 65,506,879 6,461,291 29,843,615 ----------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS 18,040,860 71,970,325 7,033,773 33,374,710 NET ASSETS Beginning of period 71,970,325 -- 33,374,710 -- ----------- ----------- ----------- ----------- End of period $90,011,185 $71,970,325 $40,408,483 $33,374,710 =========== =========== =========== =========== Undistributed net investment income $ 55,067 $ 24,811 $ 69,137 $ 54,650 =========== =========== =========== =========== TRANSACTIONS IN SHARES OF THE FUNDS Sold 1,624,029 7,544,801 742,067 3,435,340 Redeemed (356,840) (1,079,568) (189,876) (477,822) ----------- ----------- ----------- ----------- Net increase (decrease) in shares of the funds 1,267,189 6,465,233 552,191 2,957,518 =========== =========== =========== =========== (1) May 12, 2006 (fund inception) through March 31, 2007. See Notes to Financial Statements. - ------ 21 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007 (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 pursue 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 companies with larger market capitalization. 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 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 as determined by, or in accordance with procedures adopted by, the Board of Directors or its designee if such determination would materially impact a fund's net asset value. Certain other circumstances may cause the funds to use alternative procedures to value a security such as: a security has been declared in default; 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 -- For financial reporting, 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. 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. - ------ 22 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. 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. SECURITIES ON LOAN -- The funds may lend portfolio securities through their lending agent to certain approved borrowers in order to earn additional income. The funds continue to recognize any gain or loss in the market price of the securities loaned and record any interest earned or dividends declared. 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. At this time, management has not identified any uncertain tax positions that would materially impact the financial statements. Accordingly, no provision has been made for federal or state income taxes. Interest and penalties associated with any federal or state income tax obligations, if any, are recorded as interest expense. 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. - ------ 23 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 annual management fee schedule for NT Large Company Value ranges from 0.50% to 0.70%. The effective annual manage-ment fee for NT Large Company Value for the six months ended September 30, 2007 was 0.63%. The annual management fee schedule for NT Mid Cap Value is 0.80%. 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. The funds are eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). JPMIM is a wholly owned subsidiary of JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC. The funds have a bank line of credit agreement and securities lending agreement with JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the funds and a wholly owned subsidiary of JPM. 3. INVESTMENT TRANSACTIONS Investment transactions, excluding short-term investments, for the six months ended September 30, 2007, were as follows: NT Large Company Value NT Mid Cap Value Purchases $23,543,552 $46,541,029 Proceeds from sales $8,837,188 $41,908,087 4. SECURITIES LENDING As of September 30, 2007, securities in NT Large Company Value and NT Mid Cap Value valued at $198,803 and $1,196,607, respectively, 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 $206,126 and $1,237,426, respectively. The funds' risks in securities lending are that the borrower may not provide additional collateral when required or return the securities when due. If the borrower defaults, receipt of the collateral by the funds may be delayed or limited. - ------ 24 5. 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 0.40%. The funds did not borrow from the line during the six months ended September 30, 2007. 6. RISK FACTORS There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social, and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions. 7. 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, 2007, 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 $81,667,335 $42,171,329 ============ ============ Gross tax appreciation of investments $10,954,640 $1,515,520 Gross tax depreciation of investments (2,202,750) (2,064,362) ------------ ------------ Net tax appreciation (depreciation) of investments $8,751,890 $(548,842) ============ ============ 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. NT Mid Cap Value had $(9,673) and $(874) of capital and currency loss deferrals, respectively. These deferrals represent net capital and foreign currency losses incurred in the five-month period ended March 31, 2007. NT Mid Cap Value has elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. 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. Management has concluded that the adoption of FIN 48 will not materially impact the financial statements. 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 that adopting FAS 157 will have on the financial statement disclosures. - ------ 25 FINANCIAL HIGHLIGHTS NT Large Company Value For a Share Outstanding Throughout the Periods Indicated 2007(1) 2007(2) PER-SHARE DATA Net Asset Value, Beginning of Period $11.13 $10.00 -------- -------- Income From Investment Operations Net Investment Income (Loss) 0.11 0.18 Net Realized and Unrealized Gain (Loss) 0.51 1.14 -------- -------- Total From Investment Operations 0.62 1.32 -------- -------- Distributions From Net Investment Income (0.11) (0.18) From Net Realized Gains -- (0.01) -------- -------- Total Distributions (0.11) (0.19) -------- -------- Net Asset Value, End of Period $11.64 $11.13 ======== ======== TOTAL RETURN(3) 5.54% 13.26% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.63%(4) 0.63%(4) Ratio of Net Investment Income (Loss) to Average Net Assets 1.94%(4) 2.01%(4) Portfolio Turnover Rate 11% 18% Net Assets, End of Period (in thousands) $90,011 $71,970 (1) Six months ended September 30, 2007 (unaudited). (2) May 12, 2006 (fund inception) through March 31, 2007. (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. (4) Annualized. See Notes to Financial Statements. - ------ 26 NT Mid Cap Value For a Share Outstanding Throughout the Periods Indicated 2007(1) 2007(2) PER-SHARE DATA Net Asset Value, Beginning of Period $11.28 $10.00 -------- -------- Income From Investment Operations Net Investment Income (Loss) 0.08 0.14 Net Realized and Unrealized Gain (Loss) 0.23 1.44 -------- -------- Total From Investment Operations 0.31 1.58 -------- -------- Distributions From Net Investment Income (0.08) (0.12) From Net Realized Gains -- (0.18) -------- -------- Total Distributions (0.08) (0.30) -------- -------- Net Asset Value, End of Period $11.51 $11.28 ======== ======== TOTAL RETURN(3) 2.62% 16.03% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 0.81%(4) 0.80%(4) Ratio of Net Investment Income (Loss) to Average Net Assets 1.42%(4) 1.55%(4) Portfolio Turnover Rate 111% 203% Net Assets, End of Period (in thousands) $40,408 $33,375 (1) Six months ended September 30, 2007 (unaudited). (2) May 12, 2006 (fund inception) through March 31, 2007. (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. (4) Annualized. See Notes to Financial Statements. - ------ 27 PROXY VOTING RESULTS A special meeting of shareholders was held on July 27, 2007, to vote on the following proposal. The proposal received the required number of votes of the American Century Capital Portfolios, Inc. and was adopted. A summary of voting results is listed below the proposal. PROPOSAL 1: To elect nine Directors to the Board of Directors of American Century Capital Portfolios, Inc. (the proposal was voted on by all shareholders of funds issued by American Century Capital Portfolios, Inc.). James E. Stowers, Jr. For: 11,443,781,487 Withhold: 252,686,939 Abstain: 0 Broker Non-Vote: 0 Jonathan S. Thomas For: 11,454,104,706 Withhold: 242,363,720 Abstain: 0 Broker Non-Vote: 0 Thomas A. Brown For: 11,456,645,347 Withhold: 239,823,079 Abstain: 0 Broker Non-Vote: 0 Andrea C. Hall For: 11,459,598,200 Withhold: 236,870,226 Abstain: 0 Broker Non-Vote: 0 James A. Olson For: 11,454,607,738 Withhold: 241,860,688 Abstain: 0 Broker Non-Vote: 0 Donald H. Pratt For: 11,450,710,462 Withhold: 245,757,964 Abstain: 0 Broker Non-Vote: 0 Gale E. Sayers For: 11,458,471,500 Withhold: 237,996,926 Abstain: 0 Broker Non-Vote: 0 M. Jeannine Strandjord For: 11,451,541,828 Withhold: 244,926,598 Abstain: 0 Broker Non-Vote: 0 Timothy S. Webster For: 11,460,198,888 Withhold: 236,269,538 Abstain: 0 Broker Non-Vote: 0 - ------ 28 APPROVAL OF MANAGEMENT AGREEMENTS NT Large Company Value and NT Mid 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 NT Large Company Value and NT Mid Cap Value (the "funds") and the services provided to the funds under the management agreements. 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 agreements; * 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 agreements, including the setting of the applicable advisory fee. The board also had the benefit of the advice of its independent counsel throughout the period. - ------ 29 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 agreements 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 agreements, 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 agreements, 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 - ------ 30 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 discuss with the advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. NT Large Company Value's performance was above the median for the one-year period and equal to the median for the three-year period for its peer group. NT Mid Cap Value's performance for both the one- and three-year periods was above the median for its peer group. 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 agreements, 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. 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 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. - ------ 31 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 respective 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 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 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 agreements between the funds and the advisor are fair and reasonable in light of the services provided and should be renewed. - ------ 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 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. - ------ 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 RUSSELL 1000® 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® GROWTH 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 higher price-to-book ratios and higher forecasted growth values. The RUSSELL 1000® 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 values. The RUSSELL 2000® 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® 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 values. The RUSSELL 2000® 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 values. The RUSSELL MIDCAP® INDEX measures the performance of the 800 smallest of the 1,000 largest publicly traded U.S. companies, base d on total market capitalization. The RUSSELL MIDCAP® GROWTH INDEX measures the performance of those Russell Midcap Index companies (the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization) with higher price-to-book ratios and higher forecasted growth values. The RUSSELL MIDCAP® VALUE INDEX measures the performance of those Russell Midcap Index companies (the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values. The S&P 500 INDEX is a market value-weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. - ------ 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. American Century Investment Services, Inc., Distributor ©2007 American Century Proprietary Holdings, Inc. All rights reserved. The American Century Investments logo, American Century and American Century Investments are service marks of American Century Proprietary Holdings, Inc. 0711 SH-SAN-56805N
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/ Jonathan S. Thomas -------------------------------------- Name: Jonathan S. Thomas Title: President Date: November 29, 2007 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/ Jonathan S. Thomas -------------------------------------- Name: Jonathan S. Thomas Title: President (principal executive officer) Date: November 29, 2007 By: /s/ Robert J. Leach -------------------------------------- Name: Robert J. Leach Title: Vice President, Treasurer, and Chief Financial Officer (principal financial officer) Date: November 29, 2007