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
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AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
4500 MAIN STREET, KANSAS CITY, MISSOURI 64111
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(Address of principal executive offices) (Zip code)
CHARLES A. ETHERINGTON, 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 816-531-5575
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Date of fiscal year end: 03-31
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Date of reporting period: 03-31-2008
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ITEM 1. REPORTS TO STOCKHOLDERS.
[front cover]
ANNUAL REPORT
MARCH 31, 2008
[american century investments logo and text logo ®]
AMERICAN CENTURY INVESTMENTS
MID CAP VALUE FUND
SMALL CAP VALUE FUND
PRESIDENT'S LETTER
[photo of Jonathan Thomas]
Jonathan Thomas
Dear Investor,
At American Century Investments®, we are committed to helping you reach your
financial goals. Your success is the ultimate measure of our performance.
That's why we focus on achieving superior investment results and building
long-term relationships with investors like you.
Part of that relationship is to clearly communicate investment results and
what influenced them. To help you monitor your investment with us, we take
pride in providing you with the annual report for the American Century® Mid
Cap Value and Small Cap Value funds for the 12 months ended March 31, 2008. We
also recommend our website, americancentury.com, where we provide company
news, quarterly portfolio commentaries, investment views, and other useful
information about portfolio strategy, personal finance, government policy, and
the markets.
As noted on the website, 2008 marks our 50th year. Since 1958, we've worked
for you with integrity, always striving to make wise decisions with your
interests as our guide. Fifty years also means that we've met the challenges
of previous recessionary cycles. As we've crossed those hurdles and earned
your trust, our assets under management have grown to close to $100 billion,
putting us in the top 5% of our industry. This growth has given us the
resources to offer a wide array of financial products and services, including
a well-diversified line-up of portfolios that provide you with many choices in
these turbulent times.
Our investment discipline and integrity are important features of our
portfolios. For example, our fixed-income investment team anticipated the
current credit squeeze. Instead of chasing higher yields and adding leveraged
exposure as the credit bubble inflated, the team minimized our portfolios'
direct exposure to subprime-related debt, preserving investors' hard-earned
capital. The team also positioned the portfolios to capitalize on
opportunities, including attractive high-quality securities discarded by
investors with liquidity needs.
We'll continue to work hard to earn your trust. Thank you for your continued
support.
Sincerely,
/s/Jonathan S. Thomas
Jonathan S. Thomas
President and Chief Executive Officer
American Century Investments
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 . . . . . . . . . . . . . . . . . . . . . . . . 35
Report of Independent Registered Public Accounting Firm. . . . . . . 42
OTHER INFORMATION
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Additional Information . . . . . . . . . . . . . . . . . . . . . . . 46
Index Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 47
The opinions expressed in the Market Perspective and each of the Portfolio
Commentaries reflect those of the portfolio management team as of the date of
the report, and do not necessarily represent the opinions of American Century
or any other person in the American Century organization. Any such opinions
are subject to change at any time based upon market or other conditions and
American Century disclaims any responsibility to update such opinions. These
opinions may not be relied upon as investment advice and, because investment
decisions made by American Century funds are based on numerous factors, may
not be relied upon as an indication of trading intent on behalf of any
American Century fund. Security examples are used for representational
purposes only and are not intended as recommendations to purchase or sell
securities. Performance information for comparative indices and securities is
provided to American Century by third party vendors. To the best of American
Century's knowledge, such information is accurate at the time of printing.
MARKET PERSPECTIVE
[photo of Chief Investment Officer]
By Phil Davidson, Chief Investment Officer, U.S. Value Equity
A CHALLENGING PERIOD FOR VALUE STOCKS
The 12 months ended March 31, 2008, were a difficult time for value stocks.
Growth stocks outpaced value by a substantial margin across the capitalization
range (see the accompanying table), and momentum investing -- which is
essentially the opposite of value investing -- was the favored strategy.
The lagging performance of value stocks was driven in large part by the
bursting of the housing market bubble, which led to a meltdown in the subprime
lending industry, a liquidity crunch in the credit markets, and a marked
slowdown in the U.S. economy. Value-oriented stocks often underperform in a
slowing economic environment as investors seek out the steady growth rates of
high-quality growth companies.
Financials stocks, which make up a meaningful portion of the value stock
universe, were hit the hardest by the subprime turmoil and credit crunch. Many
of the country's largest financial institutions faced substantial
subprime-related write-downs and credit losses, resulting in steep markdowns
in their share prices. Financials stocks slumped despite the Federal Reserve's
efforts to shore up the financial system with short-term interest rate cuts
and injections of liquidity.
The economic slowdown and credit issues triggered unusually high levels of
stock market volatility. Several of the major U.S. stock indexes hit all-time
highs, then suffered their first 10% correction since 2003. The last three
months of the period brought the worst quarterly performance for stocks in
nearly six years as the credit crunch deepened and a recession loomed.
THE BRIGHT SIDE
There were a few silver linings in the otherwise clouded financial markets.
Value stocks outperformed in the final three months of the period, pointing up
the importance of downside protection in a highly volatile market environment.
In addition, good security selection became increasingly important, which
plays to our strengths--rigorous analysis and research to separate companies
with weaker business models from those that are fundamentally sound.
The period also brought the resurgence of large-cap stocks, which often tend
to hold up well when the economy slows and the stock market is in turmoil.
Despite their recent outperformance, large-cap issues remain the least
expensive segment of the market.
U.S. Stock Index Returns
For the 12 months ended March 31, 2008
RUSSELL 1000 INDEX (LARGE-CAP) -5.40%
Russell 1000 Growth Index -0.75%
Russell 1000 Value Index -9.99%
RUSSELL MIDCAP INDEX -8.92%
Russell Midcap Growth Index -4.55%
Russell Midcap Value Index -14.12%
RUSSELL 2000 INDEX (SMALL-CAP) -13.00%
Russell 2000 Growth Index -8.94%
Russell 2000 Value Index -16.88%
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2
PERFORMANCE
Mid Cap Value
Total Returns as of March 31, 2008
Average Annual Returns
Since Inception
1 year Inception Date
INVESTOR CLASS -10.84% 9.39% 3/31/04
RUSSELL MIDCAP VALUE INDEX(1) -14.12% 9.39% --
Institutional Class -10.67% 10.25% 8/2/04
Advisor Class -11.07% 7.35% 1/13/05
R Class -11.30% 4.05% 7/29/05
(1) Data provided by Lipper Inc. - A Reuters Company. ©2008 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.
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3
Mid Cap Value
Growth of $10,000 Over Life of Class
$10,000 investment made March 31, 2004
One-Year Returns Over Life of Class
Periods ended March 31
2005 2006 2007 2008
Investor Class 16.63% 17.62% 17.12% -10.84%
Russell Midcap Value Index 18.34% 20.30% 17.13% -14.12%
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.
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4
PORTFOLIO COMMENTARY
Mid Cap Value
Portfolio Managers: Scott Moore, Michael Liss, and Phil Davidson
PERFORMANCE SUMMARY
Mid Cap Value returned -10.84%* for the 12 months ended March 31, 2008. By
comparison, the median return for Morningstar's Mid Cap Value category**
(whose performance, like Mid Cap Value's, reflects fund operating expenses)
was -11.02%. The fund's benchmark, the Russell Midcap Value Index, returned
- -14.12%. Its returns do not include fund expenses.
The challenging market environment described in the Market Perspective on page
2 (in which growth outperformed value across the capitalization spectrum)
hampered Mid Cap Value's absolute performance. However, on a relative basis,
the portfolio significantly outpaced the performance of its benchmark, the
Russell Midcap Value Index. For much of the period, investors favored
companies that were already strong performers, a momentum bias that did not
fit well with the portfolio's investment approach of seeking stocks that are
undervalued by the market. But in spite of these negative factors, Mid Cap
Value benefited from strong security selection and our continued emphasis on
less-risky businesses with sound balance sheets.
Since its inception on March 31, 2004, Mid Cap Value has produced an average
annualized return of 9.39%, identical to that of the Russell Midcap Value
Index.
CONSUMER STAPLES LED PORTFOLIO
On the positive side, an overweight in consumer staples companies contributed
to absolute and relative performance. Our valuation work uncovered a number of
attractively priced businesses -- industry leaders with high and sustainable
market-share positions, solid returns on capital, and good financial strength.
Adding significant value was our basket of high-profile food stocks, household
products companies, and beverage makers.
We owned Diamond Foods, which processes and distributes nuts and other snack
foods. In addition to beating earnings forecasts, the company has continued to
upgrade operating performance, expand sales channels, and improve its returns
on capital. Another holding was processed food manufacturer H.J. Heinz. The
company has streamlined its suite of products and is enjoying strong sales of
its top brands. We also held Kimberly-Clark Corp., one of the largest makers
of personal-care and paper products, which has benefited from price increases
and cost-cutting initiatives.
Top Ten Holdings as of March 31, 2008
% of % of
net assets net assets
as of as of
3/31/08 9/30/07
Bemis Co., Inc. 3.4% 1.9%
Kimberly-Clark Corp. 2.9% 1.7%
Portland General Electric Co. 2.7% 2.0%
Southwest Gas Corp. 2.6% 1.4%
Kraft Foods Inc. Cl A 2.5% 2.8%
International Speedway Corp. Cl A 2.1% 2.0%
iShares S&P MidCap 400 Index Fund 1.8% 3.4%
Speedway Motorsports Inc. 1.8% 2.5%
Beckman Coulter, Inc. 1.7% 0.9%
Marshall & Ilsley Corp. 1.7% 1.3%
* All fund returns referenced in this commentary are for Investor Class
shares.
** ©2008 Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar and/or its content providers: 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
Mid Cap Value
ALLOCATION TO UTILITIES ADDED VALUE
Security selection in the utilities sector enhanced our results against the
benchmark. Notable contributors included Puget Energy, Inc. and Dominion
Resources. Puget Energy, which delivers electricity and gas to customers in
Washington State, agreed to be acquired by a private equity group for $30 per
share. Dominion Resources, a provider of gas and electric services primarily
in Northeastern, Mid-Atlantic and Midwestern states, 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.
FINANCIALS SLOWED PROGRESS
Despite an underweight position, the broad decline in the financials sector
was a drag on both absolute and relative performance. Detracting the most was
our greater-than- the-benchmark allocation to thrifts -- specifically MGIC
Investment Corp., the nation's largest private mortgage insurer, and Freddie
Mac, a stockholder-owned corporation chartered by Congress to keep money
flowing to mortgage lenders in support of homeownership. Both stocks declined
on news of bigger-than-expected losses resulting from housing weakness and the
deterioration of mortgage credit.
Our mix of insurance stocks also hindered progress. A top detractor was Ambac
Financial Group, a leading municipal bond insurer. Its stock declined on
concerns about bond insurers in general and the company's exposure to
mortgage-related loans.
ENERGY POSITION HAMPERED RESULTS
The portfolio's underweight position in the energy sector -- the top performer
in the benchmark -- slowed relative performance. Because of valuations, we did
not own some major integrated oil companies and refining companies, such as
Hess Corp. and Chesapeake Energy Corp.
OUTLOOK
We continue to follow our disciplined, bottom-up process, selecting companies
one at a time for the portfolio. We see opportunities in health care, consumer
staples, and industrials stocks, reflected by our overweight positions in
these sectors, relative to the benchmark. Our fundamental analysis and
valuation work is also directing us toward smaller relative weightings in
financials, telecommunications, and energy stocks.
Top Five Industries as of March 31, 2008
% of % of
net assets net assets
as of as of
3/31/08 9/30/07
Food Products 9.2% 9.6%
Insurance 6.2% 8.9%
Electric Utilities 5.8% 4.5%
Commercial Banks 5.7% 9.2%
Gas Utilities 5.4% 2.0%
Types of Investments in Portfolio
% of % of
net assets net assets
as of as of
3/31/08 9/30/07
Common Stocks 96.6% 98.3%
Temporary Cash Investments 1.5% 1.8%
Other Assets and Liabilities(1) 1.9% (0.1)%
(1) Includes securities lending collateral and other assets and liabilities.
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6
SCHEDULE OF INVESTMENTS
Mid Cap Value
MARCH 31, 2008
Shares Value
Common Stocks -- 96.6%
AIRLINES -- 1.0%
271,203 Southwest Airlines Co. $ 3,362,919
------------
AUTO COMPONENTS -- 0.9%
54,432 Autoliv, Inc. 2,732,486
------------
AUTOMOBILES -- 1.3%
43,100 Bayerische Motoren Werke AG ORD 2,379,066
115,102 Winnebago Industries, Inc.(1) 1,945,224
------------
4,324,290
------------
BEVERAGES -- 2.1%
102,862 Anheuser-Busch Companies, Inc. 4,880,802
19,700 Coca-Cola Enterprises Inc. 476,740
42,500 Pepsi Bottling Group Inc. 1,441,175
------------
6,798,717
------------
BUILDING PRODUCTS -- 0.6%
89,248 Masco Corp. 1,769,788
------------
CAPITAL MARKETS -- 2.2%
43,100 AllianceBernstein Holding L.P. 2,731,678
39,900 Ameriprise Financial Inc. 2,068,815
37,900 Legg Mason, Inc. 2,121,642
------------
6,922,135
------------
CHEMICALS -- 2.4%
77,900 Ferro Corp. 1,157,594
45,239 International Flavors & Fragrances Inc. 1,992,778
48,901 Minerals Technologies Inc. 3,070,983
56,800 Olin Corp. 1,122,368
8,900 Rohm and Haas Co. 481,312
------------
7,825,035
------------
COMMERCIAL BANKS -- 5.7%
101,000 Associated Banc-Corp 2,689,630
80,020 Commerce Bancshares, Inc. 3,363,241
230,916 Marshall & Ilsley Corp. 5,357,251
123,519 South Financial Group Inc. (The) 1,835,492
47,606 SunTrust Banks, Inc. 2,624,995
42,200 United Bankshares, Inc. 1,124,630
30,100 Zions Bancorporation 1,371,055
------------
18,366,294
------------
COMMERCIAL SERVICES & SUPPLIES -- 5.2%
83,200 Avery Dennison Corp. 4,097,600
110,493 HNI Corp.(1) 2,971,157
86,059 Pitney Bowes, Inc. 3,013,786
Shares Value
70,898 Republic Services, Inc. $ 2,073,058
136,444 Waste Management, Inc. 4,579,060
------------
16,734,661
------------
COMPUTERS & PERIPHERALS -- 2.1%
97,651 Diebold, Inc. 3,666,795
106,600 Emulex Corp.(2) 1,731,184
84,325 QLogic Corp.(2) 1,294,389
------------
6,692,368
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CONTAINERS & PACKAGING -- 3.4%
435,709 Bemis Co., Inc. 11,080,080
------------
DISTRIBUTORS -- 0.9%
68,294 Genuine Parts Co. 2,746,785
------------
DIVERSIFIED -- 1.8%
75,820 iShares S&P MidCap 400 Index Fund 5,891,972
------------
DIVERSIFIED FINANCIAL SERVICES -- 0.6%
49,800 McGraw-Hill Companies, Inc. (The) 1,840,110
------------
ELECTRIC UTILITIES -- 5.8%
102,582 Empire District Electric Co.(1) 2,077,286
65,583 IDACORP, Inc. 2,105,870
381,109 Portland General Electric Co. 8,594,008
168,100 Sierra Pacific Resources 2,123,103
163,000 Westar Energy Inc. 3,711,510
------------
18,611,777
------------
ELECTRICAL EQUIPMENT -- 1.3%
92,300 Hubbell Inc. Cl B 4,032,587
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 3.7%
40,591 Littelfuse, Inc.(2) 1,419,467
199,584 Molex Inc. 4,622,366
109,989 Tyco Electronics Ltd. 3,774,822
232,700 Vishay Intertechnology, Inc.(2) 2,108,262
------------
11,924,917
------------
FOOD PRODUCTS -- 9.2%
107,800 Campbell Soup Co. 3,659,810
169,890 ConAgra Foods, Inc. 4,068,866
77,015 Diamond Foods Inc. 1,397,052
31,622 General Mills, Inc. 1,893,525
104,875 H.J. Heinz Co. 4,925,978
71,677 Hershey Co. (The) 2,700,073
39,200 Kellogg Co. 2,060,352
255,613 Kraft Foods Inc. Cl A 7,926,558
62,420 Maple Leaf Foods Inc. ORD 793,591
------------
29,425,805
------------
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7
Mid Cap Value
Shares Value
GAS UTILITIES -- 5.4%
14,200 AGL Resources Inc. $ 487,344
139,900 Nicor Inc. 4,688,049
298,355 Southwest Gas Corp. 8,342,006
123,315 WGL Holdings Inc. 3,953,479
------------
17,470,878
------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 3.2%
83,212 Beckman Coulter, Inc. 5,371,335
37,000 Boston Scientific Corp.(2) 476,190
26,100 Covidien Ltd. 1,154,925
40,716 STERIS Corp. 1,092,410
130,755 Symmetry Medical Inc.(2) 2,170,533
------------
10,265,393
------------
HEALTH CARE PROVIDERS & SERVICES -- 1.2%
69,700 LifePoint Hospitals Inc.(2) 1,914,659
38,637 Universal Health Services, Inc. Cl B 2,074,421
------------
3,989,080
------------
HEALTH CARE TECHNOLOGY -- 0.3%
52,400 IMS Health Inc. 1,100,924
------------
HOTELS, RESTAURANTS & LEISURE -- 3.9%
162,533 International Speedway Corp. Cl A 6,696,360
228,271 Speedway Motorsports Inc. 5,722,754
------------
12,419,114
------------
HOUSEHOLD DURABLES -- 1.6%
49,400 Hunter Douglas N.V. ORD 3,340,746
20,800 Whirlpool Corp. 1,805,024
------------
5,145,770
------------
HOUSEHOLD PRODUCTS -- 3.5%
36,900 Clorox Co. 2,090,016
141,919 Kimberly-Clark Corp. 9,160,871
------------
11,250,887
------------
INSURANCE -- 6.2%
95,604 Allstate Corp. 4,594,728
42,200 Chubb Corp. 2,088,056
101,578 Gallagher (Arthur J.) & Co. 2,399,272
76,727 Genworth Financial Inc. Cl A 1,737,099
31,881 Hartford Financial Services Group Inc. (The) 2,415,623
116,850 Horace Mann Educators Corp. 2,042,538
190,317 Marsh & McLennan Companies, Inc. 4,634,219
------------
19,911,535
------------
Shares Value
LEISURE EQUIPMENT & PRODUCTS -- 1.5%
50,100 Hasbro, Inc. $ 1,397,790
27,100 Polaris Industries Inc.(1) 1,111,371
112,516 RC2 Corp.(2) 2,359,461
------------
4,868,622
------------
MACHINERY -- 3.1%
369,378 Altra Holdings Inc.(2) 4,968,134
58,000 Dover Corp. 2,423,240
55,200 Kaydon Corp. 2,423,832
------------
9,815,206
------------
MULTI-UTILITIES -- 3.4%
46,800 Ameren Corp. 2,061,072
138,257 Puget Energy, Inc. 3,576,709
95,000 Wisconsin Energy Corp. 4,179,050
56,200 Xcel Energy Inc. 1,121,190
------------
10,938,021
------------
MULTILINE RETAIL -- 0.1%
24,900 Family Dollar Stores, Inc. 485,550
------------
OIL, GAS & CONSUMABLE FUELS -- 2.0%
22,451 Apache Corp. 2,712,530
63,952 Equitable Resources Inc. 3,766,773
------------
6,479,303
------------
PAPER & FOREST PRODUCTS -- 1.6%
88,185 MeadWestvaco Corp. 2,400,396
42,436 Weyerhaeuser Co. 2,760,037
------------
5,160,433
------------
PHARMACEUTICALS -- 1.2%
98,800 Bristol-Myers Squibb Co. 2,104,440
65,269 Watson Pharmaceuticals, Inc.(2) 1,913,687
------------
4,018,127
------------
REAL ESTATE INVESTMENT TRUSTS (REITS) -- 2.8%
21,800 Boston Properties Inc. 2,007,126
84,832 Education Realty Trust, Inc.(1) 1,066,338
47,900 Host Hotels & Resorts Inc. 762,568
7,900 Kimco Realty Corp. 309,443
8,900 Public Storage Inc. 788,718
71,100 Rayonier, Inc. 3,088,584
32,000 Realty Income Corp.(1) 819,840
------------
8,842,617
------------
ROAD & RAIL -- 0.3%
78,200 Heartland Express, Inc.(1) 1,115,132
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.1%
66,200 KLA-Tencor Corp. 2,456,020
86,900 Teradyne, Inc.(2) 1,079,298
------------
3,535,318
------------
- ------
8
Mid Cap Value
Shares Value
SOFTWARE -- 0.6%
79,258 Synopsys, Inc.(2) $ 1,799,949
------------
SPECIALTY RETAIL -- 0.9%
105,097 Lowe's Companies, Inc. 2,410,925
9,400 Sherwin-Williams Co. 479,776
------------
2,890,701
------------
THRIFTS & MORTGAGE FINANCE -- 2.0%
282,500 People's United Financial, Inc. 4,890,075
61,000 Washington Federal, Inc. 1,393,240
------------
6,283,315
------------
TRADING COMPANIES & DISTRIBUTORS -- 0.5%
22,800 Grainger (W.W.), Inc. 1,741,692
------------
TOTAL COMMON STOCKS
(Cost $320,510,769) 310,610,293
------------
Temporary Cash Investments -- 1.5%
Repurchase Agreement, Morgan Stanley Group, Inc.,
(collateralized by various U.S. Treasury obligations, 7.875%,
2/15/21, valued at $4,808,146), in a joint trading account at
1.30%, dated 3/31/08, due 4/1/08 (Delivery value $4,700,170)
(Cost $4,700,000) 4,700,000
------------
Temporary Cash Investments - Securities
Lending Collateral(3) -- 2.3%
Repurchase Agreement, Barclays Bank plc, (collateralized by
various U.S. Government Agency obligations in a pooled account
at the lending agent), 2.30%, dated 3/31/08 due 4/1/08 (Delivery
value $2,125,746) $ 2,125,610
Repurchase Agreement, BNP Paribas, (collateralized by various
U.S. Government Agency obligations in a pooled account at the
lending agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery value
$1,130,559) 1,130,487
Repurchase Agreement, Deutsche Bank AG, (collateralized by
various U.S. Government Agency obligations in a pooled account
at the lending agent), 2.25%, dated 3/31/08, due 4/1/08
(Delivery value $2,125,133) 2,125,000
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency obligations in
a pooled account at the lending agent), 2.15%, dated 3/31/08,
due 4/1/08 (Delivery value $2,125,127) 2,125,000
------------
TOTAL TEMPORARY CASH INVESTMENTS -
SECURITIES LENDING COLLATERAL
(Cost $7,506,097) 7,506,097
------------
TOTAL INVESTMENT SECURITIES -- 100.4%
(Cost $332,716,866) 322,816,390
------------
OTHER ASSETS AND LIABILITIES -- (0.4)% (1,416,077)
------------
TOTAL NET ASSETS -- 100.0% $321,400,313
============
Forward Foreign Currency Exchange Contracts
Settlement Unrealized
Contracts to Sell Date Value Gain (Loss)
738,179 CAD for USD 4/30/08 $ 718,781 $ 9,799
3,684,213 Euro for USD 4/30/08 5,809,151 6,952
------------ ------------
$6,527,932 $16,751
============ ============
(Value on Settlement Date $6,544,683)
Notes to Schedule of Investments
CAD = Canadian Dollar
ORD = Foreign Ordinary Share
USD = United States Dollar
(1) Security, or a portion thereof, was on loan as of March 31, 2008.
(2) Non-income producing.
(3) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions.
As of March 31, 2008, securities with an aggregate value of $5,719,812, which
represented 1.8% of total net assets, were valued in accordance with
alternative pricing procedures adopted by the Board of Directors.
See Notes to Financial Statements.
- ------
9
PERFORMANCE
Small Cap Value
Total Returns as of March 31, 2008
Average Annual Returns
Since Inception
1 year 5 years Inception Date
INVESTOR CLASS -12.22% 14.49% 12.38% 7/31/98
RUSSELL 2000 VALUE INDEX(1) -16.88% 15.45% 9.06% --
Institutional Class -12.05% 14.69% 13.35% 10/26/98
Advisor Class -12.51% 14.24% 14.05% 12/31/99
(1) Data provided by Lipper Inc. - A Reuters Company. ©2008 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. The fund's
performance may be affected by investments in initial public offerings.
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
One-Year Returns Over Life of Class
Periods ended March 31
1999* 2000 2001 2002 2003 2004 2005 2006 2007 2008
Investor
Class -4.24% 14.37% 36.51% 33.97% -21.55% 51.53% 14.00% 18.67% 9.38% -12.22%
Russell 2000
Value
Index -12.23% 13.26% 19.45% 23.74% -23.27% 64.49% 9.79% 23.77% 10.38% -16.88%
*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. The fund's
performance may be affected by investments in initial public offerings.
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 James Pitman
Portfolio manager Steve Roth left American Century Investments in March to
pursue another career opportunity. He has been replaced by James Pitman,
previously a senior investment analyst for the portfolio.
PERFORMANCE SUMMARY
Small Cap Value returned -12.22%* for the 12 months ended March 31, 2008. By
comparison, its benchmark, the Russell 2000 Value Index, returned -16.88%. The
portfolio's returns reflect operating expenses while the index's returns do
not. The Lipper Small-Cap Value Funds Index, which includes fund expenses,
returned -13.51%.**
The challenging market environment described in the Market Perspective on page
2 (in which growth outperformed value across the capitalization spectrum)
hampered Small Cap Value's absolute performance. However, on a relative basis,
the portfolio significantly outpaced the performance of its benchmark, the
Russell 2000 Value Index. For much of the period, the market was
momentum-driven -- investors preferred stocks that were already strong
performers. The key to our outperformance was our continued focus on
higher-quality businesses with sound balance sheets and our risk-controlled
investment approach. Our results were also enhanced by takeovers, which
affected more than 20 of our holdings. Contributing modestly was our
participation in some initial public offerings.
Since Small Cap Value's inception on July 31, 1998, the portfolio has produced
an average annualized return of 12.38%, outpacing the benchmark's return of
9.06% for that period (see performance information on pages 10-11).
CONSUMER DISCRETIONARY ENHANCED RESULTS
On the positive side, strong security selection boosted performance in the
consumer discretionary sector, which trailed all others in the benchmark. We
sidestepped many of the decliners; for instance, we held few homebuilders, an
industry that struggled over the period. One top holding was Rare Hospitality
International, the owner of two steak-specialty chains, which was acquired by
casual dining company Darden Restaurants.
INDUSTRIALS, INFORMATION TECHNOLOGY CONTRIBUTED
Our position in industrials enhanced results. One notable contributor was FTI
Consulting, a global provider of bankruptcy, restructuring, and forensic
services, which exceeded earnings expectations on greater demand for
bankruptcy services amid the subprime turmoil.
Top Ten Holdings as of March 31, 2008
% of % of
net assets net assets
as of as of
3/31/08 9/30/07
Parametric Technology Corp. 2.5% 2.5%
HCC Insurance Holdings, Inc. 2.4% 1.2%
Sybase, Inc. 2.1% 2.5%
Aspen Insurance Holdings Ltd., 5.625%, 12/31/49 (Conv.
Pref.) 1.8% 1.3%
Bemis Co., Inc. 1.3% 0.8%
Granite Construction Inc. 1.0% 0.3%
iShares Russell 2000 Value Index Fund 1.0% 1.7%
Double Hull Tankers Inc. 0.9% 0.2%
Fulton Financial Corp. 0.9% 0.9%
First Midwest Bancorp, Inc. 0.8% 1.0%
* All fund returns referenced in this commentary are for Investor Class shares.
** The Lipper Small-Cap Value Funds Index returned 16.23% for the five-year
period ended March 31, 2008..
- ------
12
Small Cap Value
Our mix of information technology names also added to relative progress. A top
contributor was long-term holding Sybase, Inc. The data management software
company reported solid earnings and announced a tender offer to repurchase up
to $300 million of its common stock.
ENERGY ADDED VALUE
Although the portfolio was conservatively positioned among energy names, the
sector provided a significant contributor -- W&T Offshore, an oil and natural
gas exploration and production company with primary activities in the Gulf of
Mexico. We believe the stock was overly punished for 2007 earnings stumbles;
it has rebounded sharply on energy price increases and the announcement of a
robust 2008 drilling program.
FINANCIALS PROVIDED KEY DETRACTOR
Many financials firms came under pressure amid the subprime lending fallout
and suffered further in the credit crisis that followed. Our complement of
stocks experienced lesser declines but yielded a top detractor. Getty Realty
Corp., a publicly-traded U.S. real estate investment trust, announced that its
largest tenant, an affiliate of the Russian energy company Lukoil, was
pressuring Getty to renegotiate lease terms on retail fuel and convenience
store properties, which could potentially reduce rent and income to Getty
while increasing risk.
MATERIALS HAMPERED PROGRESS
Materials was an area of relative weakness. Because stock prices there have
been largely momentum-driven, we have limited our exposure. For example, we
held a smaller-than-the-benchmark position in CF Industries Holdings, a major
distributor of fertilizer products, whose earnings were propelled by rapidly
rising prices for nitrogen and phosphate. Although the stock was one of our
best absolute performers, our decision to underweight it detracted as its
share price rose dramatically.
OUTLOOK
We continue to be bottom-up investment managers, evaluating each company
individually and building our portfolio one stock at a time. In our search for
companies that are undervalued, we will structure exposure to market segments
based on the attractiveness of individual companies. The portfolio is broadly
diversified, with larger positions than the benchmark in industrials,
information technology, and health care. Our fundamental analysis and
valuation work is also directing us toward a smaller relative weighting in
financials stocks.
Top Five Industries as of March 31, 2008
% of % of
net assets net assets
as of as of
3/31/08 9/30/07
Insurance 8.6% 7.1%
Commercial Banks 6.0% 7.0%
Software 5.9% 6.6%
Real Estate Investment Trusts (REITs) 4.5% 4.5%
Capital Markets 4.3% 5.0%
Types of Investments in Portfolio
% of % of
net assets net assets
as of as of
3/31/08 9/30/07
Common Stocks & Rights 92.2% 96.5%
Convertible Preferred Stocks 2.8% 1.3%
Preferred Stocks 1.0% 0.5%
TOTAL EQUITY EXPOSURE 96.0% 98.3%
Temporary Cash Investments 3.9% 1.2%
Other Assets and Liabilities(1) 0.1% 0.5%
(1) Includes securities lending collateral and other assets and liabilities.
- ------
13
SCHEDULE OF INVESTMENTS
Small Cap Value
MARCH 31, 2008
Shares Value
Common Stocks & Rights -- 92.2%
AEROSPACE & DEFENSE -- 2.5%
285,000 AeroVironment, Inc.(1) $5,828,250
25,000 Alliant Techsystems Inc.(1) 2,588,250
85,000 American Science and Engineering, Inc.(2) 4,638,450
70,000 Curtiss-Wright Corp. 2,903,600
95,000 DRS Technologies, Inc. 5,536,600
70,000 Esterline Technologies Corp.(1) 3,525,900
100,000 Moog Inc. Cl A(1) 4,221,000
100,000 Triumph Group, Inc.(2) 5,693,000
-------------
34,935,050
-------------
AIRLINES -- 0.3%
115,000 Alaska Air Group, Inc.(1) 2,256,300
85,000 SkyWest, Inc. 1,795,200
-------------
4,051,500
-------------
AUTO COMPONENTS -- 1.0%
115,000 Aftermarket Technology Corp.(1) 2,235,600
105,000 American Axle & Manufacturing Holdings, Inc. 2,152,500
265,000 ArvinMeritor, Inc. 3,315,150
85,000 Lear Corp.(1) 2,202,350
105,000 Superior Industries International, Inc.(2) 2,178,750
80,000 Tenneco Inc.(1) 2,235,200
-------------
14,319,550
-------------
BUILDING PRODUCTS -- 0.6%
985,000 Griffon Corp.(1) 8,471,000
-------------
CAPITAL MARKETS -- 4.3%
615,000 Apollo Investment Corp.(2) 9,735,449
765,000 Ares Capital Corp.(2) 9,616,050
255,000 Ares Capital Corp. Rights(2) 142,800
149,531 Calamos Asset Management, Inc. Cl A 2,434,365
750,000 Cowen Group Inc.(1)(2)(3) 5,317,500
445,000 HFF, Inc. Cl A(1) 2,229,450
530,000 Highland Distressed Opportunities Inc. 3,704,700
55,000 Lazard Ltd Cl A 2,101,000
480,000 MCG Capital Corp.(2) 4,363,200
68,571 MCG Capital Corp. Rights 73,371
265,000 MVC Capital Inc.(2) 4,038,600
-------------
615,000 Patriot Capital Funding, Inc.(2) 6,439,050
-------------
Shares Value
494,954 PennantPark Investment Corp. $4,212,059
335,000 TradeStation Group, Inc.(1) 2,854,200
85,000 Waddell & Reed Financial, Inc. Cl A 2,731,050
-------------
59,992,844
-------------
CHEMICALS -- 2.7%
55,000 Arch Chemicals, Inc. 2,049,300
50,000 CF Industries Holdings, Inc. 5,181,000
80,000 Cytec Industries Inc. 4,308,000
115,000 Ferro Corp. 1,708,900
95,000 H.B. Fuller Co. 1,938,950
42,703 Hawkins, Inc. 649,086
255,000 Hercules Inc. 4,663,950
300,000 Innophos Holdings, Inc.(2) 4,827,000
70,000 Minerals Technologies Inc. 4,396,000
95,000 OM Group, Inc.(1) 5,181,300
75,000 Sensient Technologies Corp. 2,211,750
-------------
37,115,236
-------------
COMMERCIAL BANKS -- 5.7%
290,000 Central Pacific Financial Corp. 5,466,500
90,000 City National Corp. 4,451,400
95,000 Cullen/Frost Bankers, Inc. 5,038,800
425,000 First Midwest Bancorp, Inc. 11,802,250
170,000 FirstMerit Corp. 3,512,200
965,000 Fulton Financial Corp. 11,859,850
746,708 Hanmi Financial Corp. 5,518,172
100,000 Pacific Capital Bancorp 2,150,000
315,000 South Financial Group Inc. (The) 4,680,900
1,050,000 Sterling Bancshares, Inc. 10,437,000
315,000 TCF Financial Corp. 5,644,800
275,000 Wilmington Trust Corporation 8,552,500
-------------
79,114,372
-------------
COMMERCIAL SERVICES & SUPPLIES -- 2.4%
355,000 ACCO Brands Corp.(1)(2) 4,817,350
405,000 American Ecology Corp.(2) 10,258,650
100,000 G&K Services Inc. Cl A 3,561,000
105,000 Heidrick & Struggles International, Inc. 3,415,650
165,000 Herman Miller Inc. 4,054,050
40,000 United Stationers Inc.(1) 1,908,000
65,000 Waste Connections, Inc.(1) 1,998,100
50,000 Watson Wyatt Worldwide, Inc. Cl A 2,837,500
-------------
32,850,300
-------------
- ------
14
Small Cap Value
Shares Value
COMMUNICATIONS EQUIPMENT -- 0.4%
145,000 Bel Fuse Inc. $4,039,700
110,000 Plantronics, Inc. 2,124,100
-------------
6,163,800
-------------
COMPUTERS & PERIPHERALS -- 1.6%
415,000 Electronics for Imaging, Inc.(1) 6,191,800
510,000 Emulex Corp.(1) 8,282,400
95,000 Imation Corp. 2,160,300
110,000 Lexmark International, Inc. Cl A(1) 3,379,200
320,000 Rackable Systems, Inc.(1)(2) 2,918,400
-------------
22,932,100
-------------
CONSTRUCTION & ENGINEERING -- 1.6%
250,000 EMCOR Group Inc.(1) 5,552,500
435,000 Granite Construction Inc. 14,228,850
165,000 Sterling Construction Co., Inc.(1) 3,006,300
-------------
22,787,650
-------------
CONSUMER FINANCE -- 0.3%
560,000 Advance America, Cash Advance Centers, Inc. 4,228,000
-------------
CONTAINERS & PACKAGING -- 1.4%
55,000 AptarGroup, Inc. 2,141,150
700,000 Bemis Co., Inc. 17,801,000
-------------
19,942,150
-------------
DISTRIBUTORS -- 0.3%
147,768 Core-Mark Holding Co., Inc.(1)(2) 4,246,852
-------------
DIVERSIFIED -- 1.3%
40,000 iShares Russell 2000 Index Fund 2,740,400
210,000 iShares Russell 2000 Value Index Fund 13,769,700
30,000 iShares S&P SmallCap 600/BARRA Value Index Fund 1,962,900
-------------
18,473,000
-------------
DIVERSIFIED CONSUMER SERVICES -- 0.5%
620,000 Corinthian Colleges Inc.(1) 4,482,600
100,000 Regis Corp. 2,749,000
-------------
7,231,600
-------------
DIVERSIFIED FINANCIAL SERVICES -- 0.3%
430,000 Asset Acceptance Capital Corp.(2) 4,140,900
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.5%
410,000 Iowa Telecommunications Services Inc. 7,269,300
-------------
Shares Value
ELECTRIC UTILITIES -- 3.1%
145,000 Cleco Corp. $3,216,100
475,000 Empire District Electric Co.(2) 9,618,750
465,000 Great Plains Energy Inc. 11,462,250
335,000 MGE Energy, Inc.(2) 11,410,100
85,000 Portland General Electric Co. 1,916,750
250,000 Westar Energy Inc. 5,692,500
-------------
43,316,450
-------------
ELECTRICAL EQUIPMENT -- 1.4%
65,000 Acuity Brands Inc. 2,791,750
60,000 Belden Inc. 2,119,200
115,000 Brady Corp. Cl A 3,844,450
35,000 General Cable Corp.(1) 2,067,450
85,000 Hubbell Inc. Cl B 3,713,650
150,000 LSI Industries Inc. 1,981,500
80,000 Regal-Beloit Corp. 2,930,400
-------------
19,448,400
-------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 2.7%
30,000 Anixter International Inc.(1) 1,921,200
430,000 Benchmark Electronics Inc.(1) 7,718,500
70,000 Coherent, Inc.(1) 1,952,300
250,000 Electro Scientific Industries Inc.(1) 4,120,000
120,000 Insight Enterprises Inc.(1) 2,100,000
80,000 Littelfuse, Inc.(1) 2,797,600
85,000 Park Electrochemical Corp. 2,197,250
100,000 Rogers Corp.(1) 3,341,000
110,000 Technitrol, Inc. 2,544,300
940,000 Vishay Intertechnology, Inc.(1) 8,516,400
-------------
37,208,550
-------------
ENERGY EQUIPMENT & SERVICES -- 3.3%
345,000 Cal Dive International, Inc.(1) 3,581,100
70,000 Exterran Holdings, Inc.(1) 4,517,800
350,000 Global Industries Ltd.(1) 5,631,500
365,000 Helix Energy Solutions Group, Inc.(1) 11,497,500
45,000 Hornbeck Offshore Services Inc.(1) 2,055,150
290,000 Key Energy Services, Inc.(1) 3,891,800
85,000 Lufkin Industries Inc. 5,424,700
325,000 North American Energy Partners Inc.(1) 4,985,500
80,000 Oil States International, Inc.(1) 3,584,800
-------------
45,169,850
-------------
- ------
15
Small Cap Value
Shares Value
FOOD & STAPLES RETAILING -- 1.5%
80,000 BJ's Wholesale Club Inc.(1) $2,855,200
125,000 Casey's General Stores, Inc. 2,825,000
85,000 Performance Food Group Co.(1) 2,777,800
8,387 Village Super Market, Inc. Cl A 431,931
330,000 Weis Markets Inc. 11,375,100
-------------
20,265,031
-------------
FOOD PRODUCTS -- 3.0%
765,000 B&G Foods, Inc. Cl A 8,415,000
55,000 Corn Products International Inc. 2,042,700
220,000 Del Monte Foods Co. 2,096,600
310,000 Diamond Foods Inc. 5,623,400
120,000 Farmer Bros. Co.(2) 2,776,800
95,000 Hain Celestial Group, Inc. (The)(1) 2,802,500
275,000 J&J Snack Foods Corp. 7,554,250
40,000 J.M. Smucker Co. (The) 2,024,400
65,000 Lancaster Colony Corp. 2,597,400
85,000 Pilgrim's Pride Corp. 1,719,550
45,000 Ralcorp Holdings, Inc.(1) 2,616,750
85,000 Reddy Ice Holdings Inc. 1,107,550
-------------
41,376,900
-------------
GAS UTILITIES -- 1.7%
80,000 AGL Resources Inc. 2,745,600
220,000 Atmos Energy Corp. 5,610,000
85,000 Nicor Inc. 2,848,350
300,000 Southwest Gas Corp. 8,388,000
125,000 WGL Holdings Inc. 4,007,500
-------------
23,599,450
-------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 2.7%
530,000 Cutera, Inc.(1) 7,139,100
30,000 Datascope Corp. 1,242,900
110,000 ICU Medical Inc.(1)(2) 3,164,700
105,000 STERIS Corp. 2,817,150
100,000 Utah Medical Products, Inc. 2,967,000
180,000 Vital Signs Inc. 9,117,000
600,000 Young Innovations, Inc.(3) 10,392,000
-------------
36,839,850
-------------
HEALTH CARE PROVIDERS & SERVICES -- 3.1%
39,346 Almost Family Inc.(1) 783,379
175,000 Amsurg Corp.(1) 4,144,000
845,000 Assisted Living Concepts, Inc. Cl A(1) 4,977,050
145,000 LCA-Vision Inc.(2) 1,812,500
Shares Value
105,000 LifePoint Hospitals Inc.(1) $2,884,350
105,000 Magellan Health Services Inc.(1) 4,167,450
55,000 National HealthCare Corp.(2) 2,678,500
305,000 Nighthawk Radiology Holdings Inc.(1)(2) 2,854,800
1,130,000 Odyssey HealthCare, Inc.(1) 10,170,000
60,000 Owens & Minor Inc. 2,360,400
265,000 U.S. Physical Therapy Inc.(1) 3,821,300
55,000 Universal Health Services, Inc. Cl B 2,952,950
-------------
43,606,679
-------------
HEALTH CARE TECHNOLOGY -- 0.3%
235,000 Vital Images, Inc.(1)(2) 3,482,700
-------------
HOTELS, RESTAURANTS & LEISURE -- 1.9%
305,000 California Pizza Kitchen, Inc.(1) 3,998,550
140,000 CEC Entertainment Inc.(1) 4,043,200
85,000 International Speedway Corp. Cl A 3,502,000
100,000 Panera Bread Co. Cl A(1)(2) 4,189,000
105,000 Red Robin Gourmet Burgers Inc.(1) 3,944,850
930,000 Ruby Tuesday Inc. 6,975,000
-------------
26,652,600
-------------
HOUSEHOLD DURABLES -- 0.9%
155,000 American Greetings Corp. Cl A 2,875,250
185,000 Ethan Allen Interiors Inc.(2) 5,259,550
40,000 Snap-on Inc. 2,034,000
55,000 Tupperware Brands Corp. 2,127,400
-------------
12,296,200
-------------
HOUSEHOLD PRODUCTS -- 0.2%
65,000 WD-40 Co. 2,161,250
-------------
INSURANCE -- 6.7%
590,000 American Equity Investment Life Holding Co. 5,475,200
315,000 Aspen Insurance Holdings Ltd. 8,309,700
120,000 Assured Guaranty Ltd. 2,848,800
70,000 Delphi Financial Group, Inc. Cl A 2,046,100
75,000 Endurance Specialty Holdings Ltd. 2,745,000
110,000 Hanover Insurance Group Inc. 4,525,400
1,450,000 HCC Insurance Holdings, Inc. 32,900,500
60,000 Hilb Rogal & Hobbs Co. 1,888,200
150,000 IPC Holdings, Ltd. 4,200,000
100,000 National Financial Partners Corp.(2) 2,247,000
- ------
16
Small Cap Value
Shares Value
150,000 Odyssey Re Holdings Corp. $5,512,500
323,352 OneBeacon Insurance Group Ltd. 6,150,155
180,000 Phoenix Companies Inc. 2,197,800
130,000 Platinum Underwriters Holdings, Ltd. 4,219,800
80,000 ProAssurance Corp.(1) 4,306,400
90,000 United Fire & Casualty Co. 3,366,000
-------------
92,938,555
-------------
IT SERVICES -- 1.5%
75,000 CACI International Inc.(1) 3,416,250
230,000 MPS Group, Inc.(1) 2,718,600
210,000 NeuStar, Inc. Cl A(1) 5,560,800
565,000 Perot Systems Corp. Cl A(1) 8,497,600
-------------
20,193,250
-------------
LEISURE EQUIPMENT & PRODUCTS -- 0.2%
100,000 RC2 Corp.(1) 2,097,000
-------------
LIFE SCIENCES TOOLS & SERVICES -- 0.1%
20,000 Bio-Rad Laboratories, Inc. Cl A(1) 1,779,000
-------------
MACHINERY -- 2.6%
260,000 Altra Holdings Inc.(1) 3,497,000
225,000 Barnes Group Inc. 5,163,750
295,000 Commercial Vehicle Group Inc.(1) 2,923,450
100,000 Kaydon Corp.(2) 4,391,000
145,000 Kennametal Inc. 4,267,350
250,000 Mueller Industries Inc. 7,212,500
245,000 Mueller Water Products, Inc. Series B(2) 1,930,600
85,000 Pentair, Inc. 2,711,500
120,000 Timken Co. 3,566,400
-------------
35,663,550
-------------
MARINE -- 0.5%
50,000 Alexander & Baldwin, Inc. 2,154,000
212,422 OceanFreight Inc.(2) 4,649,918
-------------
6,803,918
-------------
MEDIA -- 1.4%
325,000 Belo Corp. Series A 3,435,250
560,000 Entravision Communications Corp. Cl A(1) 3,729,600
90,000 Hearst-Argyle Television, Inc. 1,856,700
1,400,000 Journal Communications Inc. 10,332,000
11,688 Value Line, Inc. 536,479
-------------
19,890,029
-------------
Shares Value
METALS & MINING -- 2.3%
30,000 Century Aluminum Co.(1) $1,987,200
35,587 Great Northern Iron Ore Properties 4,725,954
160,000 Haynes International Inc.(1) 8,780,800
175,000 Mesabi Trust 4,446,750
635,000 NN, Inc. 6,178,550
65,000 RTI International Metals, Inc.(1) 2,938,650
40,000 Schnitzer Steel Industries, Inc. Cl A 2,840,800
-------------
31,898,704
-------------
MULTI-UTILITIES -- 0.4%
115,000 Black Hills Corp. 4,114,700
80,000 Puget Energy, Inc. 2,069,600
-------------
6,184,300
-------------
MULTILINE RETAIL -- 0.4%
125,000 Dollar Tree, Inc.(1) 3,448,750
210,000 Fred's, Inc. 2,152,500
-------------
5,601,250
-------------
OIL, GAS & CONSUMABLE FUELS -- 4.1%
85,710 Cross Timbers Royalty Trust(2) 4,204,076
1,170,000 Double Hull Tankers Inc.(2) 12,413,699
125,000 Encore Acquisition Co.(1) 5,035,000
105,000 Hugoton Royalty Trust 2,895,900
44,308 Mesa Royalty Trust 3,022,249
195,000 Nordic American Tanker Shipping(2) 5,460,000
325,000 PetroHawk Energy Corp.(1) 6,555,250
220,000 St. Mary Land & Exploration Co. 8,470,000
75,000 Swift Energy Co.(1) 3,374,250
85,000 Whiting Petroleum Corp.(1) 5,495,250
-------------
56,925,674
-------------
PAPER & FOREST PRODUCTS -- 0.4%
160,000 Glatfelter (P.H.) Co. 2,417,600
115,000 Neenah Paper Inc. 2,964,700
-------------
5,382,300
-------------
PERSONAL PRODUCTS -- 0.1%
300,119 Schiff Nutrition International, Inc. 1,797,713
-------------
- ------
17
Small Cap Value
Shares Value
PHARMACEUTICALS -- 1.1%
100,000 Alpharma Inc. Cl A(1) $2,621,000
125,000 Par Pharmaceutical Companies Inc.(1) 2,173,750
215,000 Sepracor Inc.(1) 4,196,800
215,000 Watson Pharmaceuticals, Inc.(1) 6,303,800
-------------
15,295,350
-------------
REAL ESTATE INVESTMENT TRUSTS (REITS) -- 3.5%
305,000 Capstead Mortgage Corp. 3,477,000
450,000 Education Realty Trust, Inc. 5,656,500
480,000 Getty Realty Corp. 7,646,400
195,000 Healthcare Realty Trust Inc. 5,099,250
485,000 Lexington Realty Trust(2) 6,988,850
1,385,000 MFA Mortgage Investments, Inc. 8,725,500
90,000 National Retail Properties, Inc.(2) 1,984,500
240,000 Realty Income Corp.(2) 6,148,800
190,000 Sunstone Hotel Investors, Inc. 3,041,900
-------------
48,768,700
-------------
ROAD & RAIL -- 0.7%
65,000 Arkansas Best Corp.(2) 2,070,900
140,000 Heartland Express, Inc.(2) 1,996,400
270,000 Werner Enterprises Inc.(2) 5,011,200
-------------
9,078,500
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.5%
155,000 Advanced Energy Industries, Inc.(1) 2,055,300
65,000 Cabot Microelectronics Corp.(1) 2,089,750
160,000 Cohu, Inc. 2,600,000
555,000 Mattson Technology Inc.(1) 3,379,950
95,000 MKS Instruments, Inc.(1) 2,033,000
440,000 Rudolph Technologies Inc.(1) 4,298,800
145,000 Semtech Corp.(1) 2,077,850
100,000 Supertex Inc.(1)(2) 2,041,000
75,000 Varian Semiconductor Equipment Associates, Inc.(1) 2,111,250
375,000 Veeco Instruments Inc.(1)(2) 6,236,250
305,000 Verigy Ltd.(1) 5,746,200
-------------
34,669,350
-------------
Shares Value
SOFTWARE -- 5.9%
204,809 Aspen Technology, Inc.(1) $2,611,315
115,000 Fair Isaac Corp. 2,474,800
2,175,000 Parametric Technology Corp.(1) 34,756,500
1,100,000 Sybase, Inc.(1) 28,930,000
95,000 Synopsys, Inc.(1) 2,157,450
1,670,000 Ulticom, Inc.(1) 11,272,500
-------------
82,202,565
-------------
SPECIALTY RETAIL -- 1.8%
130,000 Barnes & Noble Inc. 3,984,500
285,000 Cato Corp. (The) Cl A 4,257,900
85,000 Group 1 Automotive, Inc.(2) 1,995,800
816,814 Hot Topic, Inc.(1) 3,520,468
145,000 Penske Automotive Group, Inc.(2) 2,821,700
215,000 Pier 1 Imports, Inc.(1) 1,350,200
155,000 Rent-A-Center Inc.(1) 2,844,250
130,000 Stage Stores Inc. 2,106,000
100,000 Zale Corp.(1) 1,976,000
-------------
24,856,818
-------------
TEXTILES, APPAREL & LUXURY GOODS -- 1.3%
390,000 Kenneth Cole Productions, Inc. Cl A 6,606,600
55,000 Warnaco Group Inc. (The)(1) 2,169,200
58,139 Weyco Group, Inc. 1,724,984
280,000 Wolverine World Wide, Inc. 8,122,800
-------------
18,623,584
-------------
THRIFTS & MORTGAGE FINANCE -- 0.6%
265,000 First Niagara Financial Group Inc. 3,601,350
23,300 MASSBANK Corp. 902,409
360,000 PMI Group, Inc. (The) 2,095,200
85,000 Washington Federal, Inc. 1,941,400
-------------
8,540,359
-------------
TRADING COMPANIES & DISTRIBUTORS -- 0.6%
75,000 Applied Industrial Technologies Inc. 2,241,750
205,000 Kaman Corp. 5,799,450
9,266 Lawson Products, Inc. 255,278
-------------
8,296,478
-------------
TOTAL COMMON STOCKS & RIGHTS
(Cost $1,332,929,601) 1,281,176,061
-------------
- ------
18
Small Cap Value
Shares Value
Convertible Preferred Stocks -- 2.8%
COMMERCIAL BANKS -- 0.3%
150,900 Midwest Banc Holdings, Inc., Series A, 7.75%,
12/31/49 $3,830,597
-------------
INSURANCE -- 1.8%
505,000 Aspen Insurance Holdings Ltd., 5.625%, 12/31/49 25,186,874
-------------
METALS & MINING -- 0.3%
30,000 Hecla Mining Co., 6.50%, 1/1/11 3,337,500
-------------
REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.1%
54,795 Lexington Realty Trust, 6.50%, 12/31/49 2,041,114
-------------
TOBACCO -- 0.3%
3,000 Universal Corp., 6.75%, 12/31/49 4,627,500
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $39,125,014) 39,023,585
-------------
Preferred Stocks -- 1.0%
INSURANCE -- 0.1%
37,241 Odyssey Re Holdings Corp., Series A, 8.125%,
10/20/10 931,025
-------------
REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.9%
305,000 Ashford Hospitality Trust, Inc., Series D, 8.45%,
7/18/12 5,551,000
200,000 National Retail Properties Inc., Series C, 7.375%,
10/12/11 4,310,000
125,000 PS Business Parks, Inc., Series K, 7.95%, 6/30/09 2,981,250
-------------
12,842,250
-------------
TOTAL PREFERRED STOCKS
(Cost $16,081,990) 13,773,275
-------------
Value
Temporary Cash Investments -- 3.9%
Repurchase Agreement, Bank of America Securities, LLC,
(collateralized by various U.S. Treasury obligations, 2.00%,
4/15/12, valued at $55,627,438), in a joint trading account at
1.20%, dated 3/31/08, due 4/1/08 (Delivery value $54,401,813)
(Cost $54,400,000) $ 54,400,000
--------------
Temporary Cash Investments - Securities Lending Collateral(4) -- 7.2%
Repurchase Agreement, Barclays Bank plc, (collateralized by
various U.S. Government Agency obligations in a pooled account
at the lending agent), 2.30%, dated 3/31/08, due 4/1/08
(Delivery value $24,342,471) 24,340,916
Repurchase Agreement, BNP Paribas, (collateralized by various
U.S. Government Agency obligations in a pooled account at the
lending agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery value
$24,399,665) 24,398,106
Repurchase Agreement, Deutsche Bank AG, (collateralized by
various U.S. Government Agency obligations in a pooled account
at the lending agent), 2.25%, dated 3/31/08, due 4/1/08
(Delivery value $28,251,766) 28,250,000
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency obligations in
a pooled account at the lending agent), 2.15%, dated 3/31/08,
due 4/1/08 (Delivery value $23,044,397) 23,043,021
--------------
TOTAL TEMPORARY CASH INVESTMENTS -
SECURITIES LENDING COLLATERAL
(Cost $100,032,043) 100,032,043
--------------
TOTAL INVESTMENT SECURITIES -- 107.1%
(Cost $1,542,568,648) 1,488,404,964
--------------
OTHER ASSETS AND LIABILITIES -- (7.1)% (98,789,068)
--------------
TOTAL NET ASSETS -- 100.0% $1,389,615,896
==============
Notes to Schedule of Investments
(1) Non-income producing.
(2) Security, or a portion thereof, was on loan as of March 31, 2008.
(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 October 1, 2007 to March 31, 2008.
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* Annualized
Account Account Value 10/1/07 - Expense
Value 10/1/07 3/31/08 3/31/08 Ratio*
Mid Cap Value
ACTUAL
Investor Class $1,000 $868.50 $4.67 1.00%
Institutional
Class $1,000 $869.30 $3.74 0.80%
Advisor Class $1,000 $867.40 $5.84 1.25%
R Class $1,000 $865.50 $7.00 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 $872.40 $5.90 1.26%
Institutional
Class $1,000 $873.20 $4.96 1.06%
Advisor Class $1,000 $871.40 $7.06 1.51%
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%
* 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
MARCH 31, 2008
Small Cap
Mid Cap Value Value
ASSETS
Investment securities - unaffiliated, at value
(cost of $325,210,769 and $1,418,186,252,
respectively) -- including $7,211,656 and
$96,577,813 of securities on loan, respectively $315,310,293 $1,372,663,421
Investment securities - affiliated, at value
(cost of $- and $24,350,353, respectively) --
including $- and $679,832 of securities on loan,
respectively -- 15,709,500
Investments made with cash collateral received
for securities on loan, at value (cost of
$7,506,097 and $100,032,043, respectively) 7,506,097 100,032,043
------------ --------------
Total investment securities, at value (cost of
$332,716,866 and $1,542,568,648, respectively) 322,816,390 1,488,404,964
Cash 3,578,380 --
Receivable for investments sold 6,828,467 19,878,889
Receivable for forward foreign currency exchange
contracts 16,751 --
Receivable for capital shares sold -- 69,912
Dividends and interest receivable 599,177 3,128,316
------------ --------------
333,839,165 1,511,482,081
------------ --------------
LIABILITIES
Disbursements in excess of demand deposit cash -- 6,355,978
Payable for collateral received for securities on
loan 7,506,097 100,032,043
Payable for investments purchased 4,663,340 14,014,767
Accrued management fees 262,667 1,403,318
Distribution and service fees payable 6,748 60,079
------------ --------------
12,438,852 121,866,185
------------ --------------
NET ASSETS $321,400,313 $1,389,615,896
============ ==============
See Notes to Financial Statements.
- -------
22
MARCH 31, 2008
Mid Cap Value Small Cap Value
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $370,852,961 $1,574,412,706
Undistributed net investment income 287,310 3,361,075
Accumulated net realized loss
on investment and foreign
currency transactions (39,856,349) (133,994,201)
Net unrealized depreciation on
investments and translation of assets
and liabilities in foreign currencies (9,883,609) (54,163,684)
--------------- ---------------
$321,400,313 $1,389,615,896
=============== ===============
INVESTOR CLASS, $0.01 PAR VALUE
Net assets $274,918,442 $732,967,650
Shares outstanding 25,800,651 104,436,178
Net asset value per share $10.66 $7.02
INSTITUTIONAL CLASS, $0.01 PAR VALUE
Net assets $17,377,742 $370,421,695
Shares outstanding 1,630,547 52,607,132
Net asset value per share $10.66 $7.04
ADVISOR CLASS, $0.01 PAR VALUE
Net assets $25,932,212 $286,226,551
Shares outstanding 2,433,579 40,895,077
Net asset value per share $10.66 $7.00
R CLASS, $0.01 PAR VALUE
Net assets $3,171,917 N/A
Shares outstanding 297,696 N/A
Net asset value per share $10.65 N/A
See Notes to Financial Statements.
- -------
23
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2008
Mid Cap
Value Small Cap Value
INVESTMENT INCOME (LOSS)
INCOME:
Dividends (including $- and $768,900,
respectively, from affiliates and net of foreign
taxes withheld of $5,704 and $-, respectively) $7,858,660 $38,184,509
Interest 389,528 2,100,884
Securities lending, net 75,776 1,354,459
------------- --------------
8,323,964 41,639,852
------------- --------------
EXPENSES:
Management fees 3,636,708 21,727,904
Distribution fees:
Advisor Class 29,510 449,084
C Class -- 14,704
Service fees:
Advisor Class 29,510 449,084
C Class -- 4,901
Distribution and service fees:
Advisor Class 44,417 496,218
R Class 10,689 --
Directors' fees and expenses 8,099 49,422
Other expenses 6,095 5,940
------------- --------------
3,765,028 23,197,257
------------- --------------
NET INVESTMENT INCOME (LOSS) 4,558,936 18,442,595
------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
Investment transactions (including $- and
$(4,812,559) from affiliates, respectively) (20,304,281) 88,882,119
Foreign currency transactions (747,301) --
------------- --------------
(21,051,582) 88,882,119
------------- --------------
CHANGE IN NET UNREALIZED APPRECIATION
(DEPRECIATION) ON:
Investments (27,965,306) (316,346,129)
Translation of assets and liabilities in foreign
currencies 38,795 --
------------- --------------
(27,926,511) (316,346,129)
------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS) (48,978,093) (227,464,010)
------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $(44,419,157) $(209,021,415)
============= ==============
See Notes to Financial Statements.
- -------
24
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED MARCH 31, 2008 AND MARCH 31, 2007
Mid Cap Value Small Cap Value
Increase
(Decrease) in Net
Assets 2008 2007 2008 2007
OPERATIONS
Net investment
income (loss) $4,558,936 $3,185,670 $18,442,595 $11,833,810
Net realized gain
(loss) (21,051,582) 24,275,844 88,882,119 269,066,459
Change in net
unrealized
appreciation
(depreciation) (27,926,511) 12,571,948 (316,346,129) (96,758,855)
------------ ------------ -------------- --------------
Net increase
(decrease) in net
assets resulting
from operations (44,419,157) 40,033,462 (209,021,415) 184,141,414
------------ ------------ -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net
investment income:
Investor
Class (4,104,303) (2,544,581) (10,158,186) (5,506,596)
Institutional
Class (260,361) (220,317) (4,596,852) (2,633,023)
Advisor Class (310,213) (116,401) (2,850,364) (1,044,209)
R Class (21,175) (682) -- --
From net realized
gains:
Investor
Class (29,129,100) (12,038,352) (181,311,827) (154,884,953)
Institutional
Class (1,403,616) (747,114) (74,519,198) (54,066,434)
Advisor Class (2,795,932) (707,570) (65,013,709) (53,966,232)
C Class -- -- -- (456,240)
R Class (318,237) (4,612) -- --
------------ ------------ -------------- --------------
Decrease in net
assets from
distributions (38,342,937) (16,379,629) (338,450,136) (272,557,687)
------------ ------------ -------------- --------------
CAPITAL SHARE TRANSACTIONS
Net increase
(decrease) in net
assets from
capital share
transactions 59,664,484 186,868,948 (205,103,118) (53,422,340)
------------ ------------ -------------- --------------
NET INCREASE
(DECREASE) IN NET
ASSETS (23,097,610) 210,522,781 (752,574,669) (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 $321,400,313 $344,497,923 $1,389,615,896 $2,142,190,565
============ ============ ============== ==============
Undistributed net
investment income $287,310 $399,163 $3,361,075 $2,682,853
============ ============ ============== ==============
See Notes to Financial Statements.
- -------
25
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
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 to seek long-term capital growth.
The production of income is a secondary objective. Mid Cap Value pursues 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 pursues 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 and the
Advisor Class. Prior to December 3, 2007, Small Cap Value was authorized to
issue the C Class (see Note 10). The share classes differ principally in their
respective 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 the Board of Directors or its designee, in accordance
with procedures adopted by the Board of Directors, 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 purposes, 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 income earned, net of any rebates or fees, is included in the
Statement of Operations. 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 2005. 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 each fund for the year
ended March 31, 2008, was as follows:
Mid Cap Value Small Cap Value
Investor 1.00% 1.26%
Institutional 0.80% 1.06%
Advisor 0.90% 1.14%
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, pursuant to Rule
12b-1 of the 1940 Act, 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 R Class shares. Fees incurred
under the plans during the year ended March 31, 2008, 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 securities lending agreement with
JPMorgan Chase Bank (JPMCB). Prior to December 12, 2007, the funds had a bank
line of credit agreement with JPMCB. JPMCB is a custodian of the funds and a
wholly owned subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the year ended
March 31, 2008, were as follows:
Mid Cap Value Small Cap Value
Purchases $768,040,652 $2,194,319,298
Proceeds from sales $743,150,774 $2,715,368,077
- -------
29
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows:
Year ended March 31, 2008 Year ended March 31, 2007
Shares Amount Shares Amount
Mid Cap Value
INVESTOR CLASS/SHARES
AUTHORIZED 75,000,000 30,000,000
============ ===========
Sold 17,293,738 $228,962,537 15,718,995 $197,688,534
Issued in
reinvestment of
distributions 2,316,859 26,920,796 795,812 10,187,220
Redeemed (16,447,138) (211,237,414) (3,406,883) (42,428,857)
------------ ------------- ----------- ------------
3,163,459 44,645,919 13,107,924 165,446,897
------------ ------------- ----------- ------------
INSTITUTIONAL
CLASS/SHARES
AUTHORIZED 20,000,000 5,000,000
============ ===========
Sold 848,248 10,325,708 949,141 12,083,371
Issued in
reinvestment of
distributions 141,623 1,648,141 72,779 930,393
Redeemed (906,797) (11,720,977) (343,169) (4,404,834)
------------ ------------- ----------- ------------
83,074 252,872 678,751 8,608,930
------------ ------------- ----------- ------------
ADVISOR CLASS/SHARES
AUTHORIZED 20,000,000 5,000,000
============ ===========
Sold 1,655,353 21,805,126 1,059,278 13,673,755
Issued in
reinvestment of
distributions 247,640 2,873,707 64,291 822,974
Redeemed (1,076,268) (12,988,849) (192,591) (2,464,200)
------------ ------------- ----------- ------------
826,725 11,689,984 930,978 12,032,529
------------ ------------- ----------- ------------
R CLASS/SHARES
AUTHORIZED 20,000,000 5,000,000
============ ===========
Sold 300,359 3,892,667 65,138 856,761
Issued in
reinvestment of
distributions 29,385 339,412 413 5,294
Redeemed (93,608) (1,156,370) (6,215) (81,463)
------------ ------------- ----------- ------------
236,136 3,075,709 59,336 780,592
------------ ------------- ----------- ------------
Net increase
(decrease) 4,309,394 $59,664,484 14,776,989 $186,868,948
============ ============= =========== ============
- -------
30
Year ended March 31, 2008 Year ended March 31, 2007
Shares Amount Shares Amount
Small Cap Value
INVESTOR
CLASS/SHARES
AUTHORIZED 500,000,000 300,000,000
============ ============
Sold 14,409,793 $127,579,003 17,671,058 $178,799,480
Issued in
reinvestment of
distributions 24,242,645 186,591,128 16,039,908 156,122,757
Redeemed (60,205,011) (531,313,197) (40,692,359) (411,004,195)
------------- --------------- ------------ --------------
(21,552,573) (217,143,066) (6,981,393) (76,081,958)
------------- --------------- ------------ --------------
INSTITUTIONAL
CLASS/SHARES
AUTHORIZED 150,000,000 100,000,000
============ ============
Sold 17,780,266 148,386,323 12,204,168 124,211,238
Issued in
reinvestment of
distributions 8,820,939 68,112,615 4,925,986 48,097,957
Redeemed (18,158,464) (164,133,933) (14,549,388) (146,245,526)
------------- --------------- ------------ --------------
8,442,741 52,365,005 2,580,766 26,063,669
------------- --------------- ------------ --------------
ADVISOR
CLASS/SHARES
AUTHORIZED 190,000,000 125,000,000
============ ============
Sold 4,535,149 41,436,663 7,282,047 73,933,085
Issued in
connection with
reclassification
(Note 10) 125,057 1,134,706 -- --
Issued in
reinvestment of
distributions 8,838,593 67,729,817 5,660,010 54,914,835
Redeemed (16,043,501) (147,271,195) (13,061,989) (132,193,029)
------------- --------------- ------------ --------------
(2,544,702) (36,970,009) (119,932) (3,345,109)
------------- --------------- ------------ --------------
C CLASS/SHARES
AUTHORIZED N/A 5,000,000
============ ============
Sold = -- 389 3,984
Issued in
reinvestment of
distributions -- -- 45,980 427,615
Redeemed in
connection with
reclassification
(Note 10) (125,057) (1,134,706) -- --
Redeemed (234,227) (2,220,342) (50,491) (490,541)
------------- --------------- ------------ --------------
(359,284) (3,355,048) (4,122) (58,942)
------------- --------------- ------------ --------------
Net increase
(decrease) (16,013,818) $(205,103,118) (4,524,681) $(53,422,340)
============= =============== ============ ==============
5. SECURITIES LENDING
As of March 31, 2008, securities in Mid Cap Value and Small Cap Value valued
at $7,211,656 and $97,257,645, 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 $7,506,097 and
$100,032,043, 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 year ended March 31, 2008, follows:
March 31, 2008
Share
Balance Purchase Sales Realized Dividend Share Market
Fund/Company 3/31/07 Cost Cost Gain (Loss) Income Balance Value
Small Cap Value
Cowen Group
Inc.(1)(2) 310,806 $9,680,699 $4,910,537 $(181,585) -- 750,000 $5,317,500
EFJ Inc.(2)(3) 1,325,000 402,169 8,691,434 (5,119,431) -- -- --
Neoware
Inc.(2)(3) 920,000 1,360,552 12,162,647 3,355,185 -- -- --
Odyssey
HealthCare,
Inc.(2)(3) -- 24,525,595 12,296,518 (3,329,558) -- 1,130,000 (3)
Patriot
Capital
Funding,
Inc.(1)(3) 1,180,000 2,271,454 10,440,056 492,866 $710,550 615,000 (3)
Young
Innovations,
Inc. -- 15,263,002 171,061 (30,036) 58,350 600,000 10,392,000
----------- ----------- ------------ -------- -----------
$53,503,471 $48,672,253 $(4,812,559) $768,900 $15,709,500
=========== =========== ============ ======== ===========
(1) Security, or a portion thereof, was on loan as of March 31, 2008.
(2) Non-income producing.
(3) Company was not an affiliate at March 31, 2008.
7. BANK LINE OF CREDIT
Effective December 12, 2007, the funds, along with certain other funds managed
by ACIM or ACGIM, have a $500,000,000 unsecured bank line of credit agreement
with Bank of America, N.A. Prior to December 12, 2007, the funds, along with
certain other funds managed by ACIM or ACGIM, had 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, which is subject to annual renewal, bear interest at the
Federal Funds rate plus 0.40%. The funds did not borrow from the line during
the year ended March 31, 2008.
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. In addition, Small Cap Value's performance may be affected by
investments in initial public offerings (IPOs). The impact of IPOs on a fund's
performance depends on the strength of the IPO market and the size of the
fund. IPOs may have less impact on a fund's performance as its assets grow.
9. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2008
and March 31, 2007 were as follows:
Mid Cap Value Small Cap Value
2008 2007 2008 2007
DISTRIBUTIONS PAID FROM
Ordinary income $27,984,860 $15,937,992 $168,602,495 $113,553,665
Long-term
capital gains $10,358,077 $441,637 $169,847,641 $159,004,022
- -------
32
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect
the differing character of certain income items and net realized gains and
losses for financial statement and tax purposes, and may result in
reclassification among certain capital accounts on the financial statements.
As of March 31, 2008, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
Mid Cap Value Small Cap Value
Federal tax cost of investments $344,568,487 $1,623,217,724
============== ===============
Gross tax appreciation of investments $7,456,483 $76,728,866
Gross tax depreciation of investments (29,208,580) (211,541,626)
-------------- ---------------
Net tax appreciation (depreciation) of
investments $(21,752,097) $(134,812,760)
============== ===============
Net tax appreciation (depreciation) on
derivatives and translation of assets and
liabilities in foreign currencies -- --
-------------- ---------------
Net tax appreciation (depreciation) $(21,752,097) $(134,812,760)
============== ===============
Undistributed ordinary income $287,424 $4,886,121
Accumulated long-term gains -- $1,361,697
Capital loss deferrals $(27,987,975) $(56,231,868)
The difference between book-basis and tax-basis cost and unrealized
appreciation (depreciation) is attributable primarily to the tax deferral of
losses on wash sales, return of capital dividends received and the realization
for tax purposes of unrealized gains on certain forward foreign currency
exchange contracts.
The capital loss deferrals listed above represent net capital losses incurred
in the five-month period ended March 31, 2008. The funds have 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 was 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. The
adoption of FIN 48 did 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.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, "Disclosures about Derivative Instruments and Hedging Activities -- an
amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for
fiscal years beginning after November 15, 2008. FAS 161 amends and expands
disclosures about derivative instruments and hedging activities. FAS 161
requires qualitative disclosures about the objectives and strategies of
derivative instruments, quantitative disclosures about the fair value amounts
of and gains and losses on derivative instruments, and disclosures of
credit-risk-related contingent features in hedging activities. Management is
currently evaluating the impact that adopting FAS 161 will have on the
financial statement disclosures.
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33
12. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The funds hereby designate up to the maximum amount allowable as qualified
dividend income for the fiscal year ended March 31, 2008.
The funds hereby designate long-term capital gain distributions for the fiscal
year ended March 31, 2008, as follows:
Mid Cap Value Small Cap Value
$10,358,077 $169,847,641
For corporate taxpayers, the funds hereby designate the following ordinary
income distributions paid during the fiscal year ended March 31, 2008, or up
to the maximum amount allowable, as qualified for the corporate dividends
received deduction.
Mid Cap Value Small Cap Value
$6,816,468 $24,965,136
The funds hereby designate qualified short-term capital gain distributions for
purposes of Internal Revenue Code 871 for the fiscal year ended March 31,
2008, as follows:
Mid Cap Value Small Cap Value
$23,261,268 $150,997,093
- -------
34
FINANCIAL HIGHLIGHTS
Mid Cap Value
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006 2005 2004(1)
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)(2) 0.16 0.16 0.21 0.09 --(3)
Net Realized and
Unrealized Gain (Loss) (1.51) 1.87 1.70 1.54 0.02
-------- -------- -------- ------- --------
Total From
Investment Operations (1.35) 2.03 1.91 1.63 0.02
-------- -------- -------- ------- --------
Distributions
From Net
Investment Income (0.16) (0.14) (0.21) (0.06) --
From Net Realized Gains (1.16) (0.66) (0.92) (0.27) --
-------- -------- -------- ------- --------
Total Distributions (1.32) (0.80) (1.13) (0.33) --
-------- -------- -------- ------- --------
Net Asset Value,
End of Period $10.66 $13.33 $12.10 $11.32 $10.02
======== ======== ======== ======= ========
TOTAL RETURN(4) (10.84)% 17.12% 17.62% 16.40% 0.20%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average
Net Assets 1.00% 1.00% 1.00% 1.00% 1.00%(5)
Ratio of Net Investment
Income (Loss) to Average Net
Assets 1.25% 1.30% 1.77% 0.83% 0.00%(5)
Portfolio Turnover Rate 206% 187% 228% 192% 0%
Net Assets, End of Period
(in thousands) $274,918 $301,642 $115,262 $42,059 $1,619
(1) For the one day period ended March 31, 2004 (fund inception).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
- -------
35
Mid Cap Value
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006 2005(1)
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)(2) 0.18 0.19 0.24 0.07
Net Realized and
Unrealized Gain (Loss) (1.51) 1.87 1.69 1.51
-------- ------- ------- -------
Total From
Investment Operations (1.33) 2.06 1.93 1.58
-------- ------- ------- -------
Distributions
From Net Investment Income (0.18) (0.17) (0.24) (0.05)
From Net Realized Gains (1.16) (0.66) (0.92) (0.27)
-------- ------- ------- -------
Total Distributions (1.34) (0.83) (1.16) (0.32)
-------- ------- ------- -------
Net Asset Value, End of Period $10.66 $13.33 $12.10 $11.33
======== ======= ======= =======
TOTAL RETURN(3) (10.67)% 17.36% 17.74% 15.82%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average
Net Assets 0.80% 0.80% 0.80% 0.80%(4)
Ratio of Net Investment Income (Loss) to
Average Net Assets 1.45% 1.50% 1.97% 1.00%(4)
Portfolio Turnover Rate 206% 187% 228% 192%(5)
Net Assets, End of Period (in thousands) $17,378 $20,623 $10,510 $8,082
(1) August 2, 2004 (commencement of sale) through March 31, 2005.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2005.
See Notes to Financial Statements.
- -------
36
Mid Cap Value
Advisor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006 2005(1)
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)(2) 0.13 0.14 0.16 0.03
Net Realized and
Unrealized Gain (Loss) (1.51) 1.86 1.72 0.31
-------- ------- ------- --------
Total From Investment Operations (1.38) 2.00 1.88 0.34
-------- ------- ------- --------
Distributions
From Net Investment Income (0.13) (0.11) (0.18) (0.01)
From Net Realized Gains (1.16) (0.66) (0.92) --
-------- ------- ------- --------
Total Distributions (1.29) (0.77) (1.10) (0.01)
-------- ------- ------- --------
Net Asset Value, End of Period $10.66 $13.33 $12.10 $11.32
======== ======= ======= -=======
TOTAL RETURN(3) (11.07)% 16.83% 17.32% 3.05%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average
Net Assets 1.25% 1.25% 1.25% 1.25%(4)
Ratio of Net Investment Income (Loss)
to Average Net Assets 1.00% 1.05% 1.52% 1.34%(4)
Portfolio Turnover Rate 206% 187% 228% 192%(5)
Net Assets, End of Period (in thousands) $25,932 $21,412 $8,175 $1,057
(1) January 13, 2005 (commencement of sale) through March 31, 2005.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2005.
See Notes to Financial Statements.
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37
Mid Cap Value
R Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $13.32 $12.09 $12.21
-------- ------ --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.10 0.13 0.07
Net Realized and Unrealized Gain (Loss) (1.51) 1.84 0.79
-------- ------ --------
Total From Investment Operations (1.41) 1.97 0.86
-------- ------ --------
Distributions
From Net Investment Income (0.10) (0.08) (0.06)
From Net Realized Gains (1.16) (0.66) (0.92)
-------- ------ --------
Total Distributions (1.26) (0.74) (0.98)
-------- ------ --------
Net Asset Value, End of Period $10.65 $13.32 $12.09
======== ====== ========
TOTAL RETURN(3) (11.30)% 16.55% 7.56%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets 1.50% 1.50% 1.50%(4)
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.75% 0.80% 0.97%(4)
Portfolio Turnover Rate 206% 187% 228%(5)
Net Assets, End of Period (in thousands) $3,172 $820 $27
(1) July 29, 2005 (commencement of sale) through March 31, 2006.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2006.
See Notes to Financial Statements.
- -------
38
Small Cap Value
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $10.01 $10.45 $10.07 $9.71 $6.44
-------- --------- --------- --------- ---------
Income From
Investment
Operations
Net Investment
Income
(Loss)(1) 0.09 0.06 0.06 0.03 0.05
Net Realized
and Unrealized
Gain (Loss) (1.16) 0.87 1.72 1.31 3.26
-------- --------- --------- --------- ---------
Total From
Investment
Operations (1.07) 0.93 1.78 1.34 3.31
-------- --------- --------- --------- ---------
Distributions
From Net
Investment
Income (0.09) (0.04) (0.06) (0.03) (0.04)
From Net
Realized Gains (1.83) (1.33) (1.34) (0.95) --
-------- --------- --------- --------- ---------
Total
Distributions (1.92) (1.37) (1.40) (0.98) (0.04)
-------- --------- --------- --------- ---------
Net Asset Value,
End of Period $7.02 $10.01 $10.45 $10.07 $9.71
======== ========= ========= ========= =========
TOTAL RETURN(2) (12.22)% 9.38% 18.67% 14.00% 51.53%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets 1.26% 1.25% 1.25% 1.25% 1.26%
Ratio of Net
Investment Income
(Loss) to Average
Net Assets 1.01% 0.57% 0.58% 0.32% 0.59%
Portfolio Turnover
Rate 123% 121% 111% 108% 110%
Net Assets, End of
Period (in
thousands) $732,968 $1,261,392 $1,390,024 $1,252,153 $1,050,500
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
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39
Small Cap Value
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $10.03 $10.47 $10.08 $9.72 $6.45
-------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss)(1) 0.11 0.08 0.08 0.05 0.07
Net Realized and
Unrealized
Gain (Loss) (1.17) 0.87 1.73 1.31 3.26
-------- -------- -------- -------- --------
Total From
Investment Operations (1.06) 0.95 1.81 1.36 3.33
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.10) (0.06) (0.08) (0.05) (0.06)
From Net
Realized Gains (1.83) (1.33) (1.34) (0.95) --
-------- -------- -------- -------- --------
Total Distributions (1.93) (1.39) (1.42) (1.00) (0.06)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $7.04 $10.03 $10.47 $10.08 $9.72
======== ======== ======== ======== ========
TOTAL RETURN(2) (12.05)% 9.52% 18.98% 14.20% 51.75%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.06% 1.05% 1.05% 1.05% 1.06%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 1.21% 0.77% 0.78% 0.52% 0.79%
Portfolio Turnover Rate 123% 121% 111% 108% 110%
Net Assets, End of Period
(in thousands) $370,422 $443,173 $435,327 $314,700 $170,784
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- -------
40
Small Cap Value
Advisor Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $10.00 $10.45 $10.06 $9.71 $6.43
-------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss)(1) 0.07 0.03 0.03 0.01 0.03
Net Realized and
Unrealized Gain (Loss) (1.17) 0.87 1.74 1.30 3.27
-------- -------- -------- -------- --------
Total From
Investment Operations (1.10) 0.90 1.77 1.31 3.30
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.07) (0.02) (0.04) (0.01) (0.02)
From Net
Realized Gains (1.83) (1.33) (1.34) (0.95) --
-------- -------- -------- -------- --------
Total Distributions (1.90) (1.35) (1.38) (0.96) (0.02)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $7.00 $10.00 $10.45 $10.06 $9.71
======== ======== ======== ======== ========
TOTAL RETURN(2) (12.51)% 9.10% 18.51% 13.70% 51.38%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average
Net Assets 1.51% 1.50% 1.50% 1.50% 1.51%
Ratio of Net Investment
Income (Loss) to
Average Net Assets 0.76% 0.32% 0.33% 0.07% 0.34%
Portfolio Turnover Rate 123% 121% 111% 108% 110%
Net Assets, End of Period
(in thousands) $286,227 $434,182 $455,001 $624,633 $432,261
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- -------
41
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders,
American Century Capital Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Mid Cap Value Fund and Small Cap
Value Fund, two of the mutual funds constituting American Century Capital
Portfolios, Inc. (the "Corporation"), as of March 31, 2008, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Corporation is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Corporation's internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. Our procedures included confirmation of securities owned as of
March 31, 2008, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing
procedures. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the respective financial
positions of Mid Cap Value Fund and Small Cap Value Fund, two of the mutual
funds of American Century Capital Portfolios, Inc. as of March 31, 2008, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for the periods presented, in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 13, 2008
- -------
42
MANAGEMENT
The individuals listed below serve as directors or officers of the funds. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
72. Those listed as interested directors are "interested" primarily by virtue
of their engagement as directors and/or officers of, or ownership interest in,
American Century Companies, Inc. (ACC) or its wholly owned, direct or
indirect, subsidiaries, including the funds' investment advisor, American
Century Investment Management, Inc. (ACIM); the funds' principal underwriter,
American Century Investment Services, Inc. (ACIS); and the funds' transfer
agent, American Century Services, LLC (ACS).
The other directors (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers
of, and have no financial interest in, ACC or any of its wholly owned, direct
or indirect, subsidiaries, including ACIM, ACIS and ACS. The directors serve
in this capacity for seven registered investment companies in the American
Century Investments family of funds.
All persons named as officers of the funds also serve in similar capacities
for the other 14 investment companies in the American Century Investments
family of funds advised by ACIM or American Century Global Investment
Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise
noted. Only officers with policy-making functions are listed. No officer is
compensated for his or her service as an officer of the funds. The listed
officers are interested persons of the funds and are appointed or re-appointed
on an annual basis.
INTERESTED DIRECTORS
JAMES E. STOWERS, JR., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1924
POSITION(S) HELD WITH FUNDS: Director (since 1958) and Vice Chairman (since
2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Co-Chairman, Director
and Controlling Shareholder, ACC; Co-Vice Chairman, ACC (January 2005 to
February 2007); Chairman, ACC (January 1995 to December 2004); Director, ACIM,
ACGIM, ACS, ACIS and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
JONATHAN S. THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUNDS: Director (since 2007) and President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC
(February 2006 to February 2007); Executive Vice President, ACC (November 2005
to February 2007). Also serves as: President, Chief Executive Officer and
Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM,
ACGIM, ACIS and other ACC subsidiaries. Managing Director, Morgan Stanley
(March 2000 to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 105
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- -------
43
INDEPENDENT DIRECTORS
THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1940
POSITION(S) HELD WITH FUNDS: Director (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Managing Member, Associated
Investments, LLC (real estate investment company); Managing Member, Brown
Cascade Properties, LLC (real estate investment company); Retired, Area Vice
President, Applied Industrial Technologies
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUNDS: Director (since 1997)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Advisor to the
President, Midwest Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
JAMES A. OLSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1942
POSITION(S) HELD WITH FUNDS: Director (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member, Plaza Belmont LLC; Chief
Financial Officer, Plaza Belmont LLC (September 1999 to December 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Saia, Inc. and Entertainment
Properties Trust
DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUNDS: Director (since 1995) and Chairman of the Board
(since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman and Chief Executive
Officer, Western Investments, Inc.; Retired Chairman of the Board, Butler
Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1943
POSITION(S) HELD WITH FUNDS: Director (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive
Officer and Founder, Sayers40, Inc., a technology products and services
provider
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUNDS: Director (since 1994)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Senior Vice
President, Sprint Corporation
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide, Inc.; Director, Charming Shoppes, Inc.
- -------
44
OFFICERS
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUNDS: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS
(October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007);
Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as:
Director, ACC, ACS, ACIS and other ACC subsidiaries
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUNDS: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century Investments funds (July 2000 to August 2006). Also serves as: Senior
Vice President, ACS
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUNDS: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney, ACC (February 1994 to
present); Vice President, ACC (November 2005 to present); General Counsel, ACC
(March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUNDS: Vice President, Treasurer and Chief Financial
Officer (all since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February
2000 to present) and Controller, various American Century Investments funds
(1997 to September 2006)
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUNDS: Tax Officer (since 1998)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the funds' directors and is available
without charge, upon request, by calling 1-800-345-2021.
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45
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.
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46
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.
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47
NOTES
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48
[back cover]
[american century investments logo and text logo ®]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE . . . . . . . . . . . . 1-800-345-8765
1-800-345-2021 or
INVESTOR SERVICES REPRESENTATIVE . . . . . . . . . 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
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
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
0805
CL-ANN-60045S
[front cover]
ANNUAL REPORT
MARCH 31, 2008
[american century investments logo and text logo ®]
AMERICAN CENTURY INVESTMENTS
EQUITY INCOME FUND
VALUE FUND
LARGE COMPANY VALUE FUND
PRESIDENT'S LETTER
[photo of Jonathan Thomas]
JONATHAN THOMAS
Dear Investor,
At American Century Investments®, we are committed to helping you reach your
financial goals. Your success is the ultimate measure of our performance.
That's why we focus on achieving superior investment results and building
long-term relationships with investors like you.
Part of that relationship is to clearly communicate investment results and
what influenced them. To help you monitor your investment with us, we take
pride in providing you with the annual report for the American Century® Equity
Income, Value and Large Company Value funds for the 12 months ended March 31,
2008. We also recommend our website, americancentury.com, where we provide
company news, quarterly portfolio commentaries, investment views, and other
useful information about portfolio strategy, personal finance, government
policy, and the markets.
As noted on the website, 2008 marks our 50th year. Since 1958, we've worked
for you with integrity, always striving to make wise decisions with your
interests as our guide. Fifty years also means that we've met the challenges
of previous recessionary cycles. As we've crossed those hurdles and earned
your trust, our assets under management have grown to close to $100 billion,
putting us in the top 5% of our industry. This growth has given us the
resources to offer a wide array of financial products and services, including
a well-diversified line-up of portfolios that provide you with many choices in
these turbulent times.
Our investment discipline and integrity are important features of our
portfolios. For example, our fixed-income investment team anticipated the
current credit squeeze. Instead of chasing higher yields and adding leveraged
exposure as the credit bubble inflated, the team minimized our portfolios'
direct exposure to subprime-related debt, preserving investors' hard-earned
capital. The team also positioned the portfolios to capitalize on
opportunities, including attractive high-quality securities discarded by
investors with liquidity needs.
We'll continue to work hard to earn your trust. Thank you for your continued
support.
Sincerely,
/s/ Jonathan Thomas
Jonathan S. Thomas
President and Chief Executive Officer
American Century Investments
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. . . . . . . . . . . . . . . . . . . . . . . . . 43
Report of Independent Registered Public Accounting Firm . . . . . . . 61
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 65
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 66
The opinions expressed in the Market Perspective and each of the Portfolio
Commentaries reflect those of the portfolio management team as of the date of
the report, and do not necessarily represent the opinions of American Century
or any other person in the American Century organization. Any such opinions
are subject to change at any time based upon market or other conditions and
American Century disclaims any responsibility to update such opinions. These
opinions may not be relied upon as investment advice and, because investment
decisions made by American Century funds are based on numerous factors, may
not be relied upon as an indication of trading intent on behalf of any
American Century fund. Security examples are used for representational
purposes only and are not intended as recommendations to purchase or sell
securities. Performance information for comparative indices and securities is
provided to American Century by third party vendors. To the best of American
Century's knowledge, such information is accurate at the time of printing.
MARKET PERSPECTIVE
[photo of chief investment officer]
By Phil Davidson, Chief Investment Officer, U.S. Value Equity
A CHALLENGING PERIOD FOR VALUE STOCKS
The 12 months ended March 31, 2008, were a difficult time for value stocks.
Growth stocks outpaced value by a substantial margin across the capitalization
range (see the accompanying table), and momentum investing -- which is
essentially the opposite of value investing -- was the favored strategy.
The lagging performance of value stocks was driven in large part by the
bursting of the housing market bubble, which led to a meltdown in the subprime
lending industry, a liquidity crunch in the credit markets, and a marked
slowdown in the U.S. economy. Value-oriented stocks often underperform in a
slowing economic environment as investors seek out the steady growth rates of
high-quality growth companies.
Financials stocks, which make up a meaningful portion of the value stock
universe, were hit the hardest by the subprime turmoil and credit crunch. Many
of the country's largest financial institutions faced substantial
subprime-related write-downs and credit losses, resulting in steep markdowns
in their share prices. Financials stocks slumped despite the Federal Reserve's
efforts to shore up the financial system with short-term interest rate cuts
and injections of liquidity.
The economic slowdown and credit issues triggered unusually high levels of
stock market volatility. Several of the major U.S. stock indexes hit all-time
highs, then suffered their first 10% correction since 2003. The last three
months of the period brought the worst quarterly performance for stocks in
nearly six years as the credit crunch deepened and a recession loomed.
THE BRIGHT SIDE
There were a few silver linings in the otherwise clouded financial markets.
Value stocks outperformed in the final three months of the period, pointing up
the importance of downside protection in a highly volatile market environment.
In addition, good security selection became increasingly important, which
plays to our strengths -- rigorous analysis and research to separate companies
with weaker business models from those that are fundamentally sound.
The period also brought the resurgence of large-cap stocks, which often tend
to hold up well when the economy slows and the stock market is in turmoil.
Despite their recent outperformance, large-cap issues remain the least
expensive segment of the market.
U.S. Stock Index Returns
For the 12 months ended March 31, 2008
RUSSELL 1000 INDEX (LARGE-CAP) -5.40%
Russell 1000 Growth Index -0.75%
Russell 1000 Value Index -9.99%
RUSSELL MIDCAP INDEX -8.92%
Russell Midcap Growth Index -4.55%
Russell Midcap Value Index -14.12%
RUSSELL 2000 INDEX (SMALL-CAP) -13.00%
Russell 2000 Growth Index -8.94%
Russell 2000 Value Index -16.88%
- ------
2
PERFORMANCE
Equity Income
Total Returns as of March 31, 2008
Average Annual Returns
Since Inception
1 year 5 years 10 years Inception Date
INVESTOR CLASS -5.17% 11.33% 8.23% 12.35% 8/1/94
RUSSELL 3000 VALUE INDEX(1) -10.60% 13.79% 5.63% 11.16%(2) --
S&P 500 INDEX(1) -5.08% 11.32% 3.50% 10.01%(2) --
LIPPER EQUITY INCOME FUNDS
INDEX(1) -7.07% 12.05% 4.21% 8.89%(2) --
Institutional Class -4.85% 11.54% -- 8.90% 7/8/98
A Class(3)
No sales charge* -5.40% 11.05% 7.95% 10.01%
With sales charge* -10.86% 9.74% 7.31% 9.42% 3/7/97
B Class
No sales charge* -- -- -- -10.28%(4)
With sales charge* -- -- -- -15.28%(4) 9/28/07
C Class -6.10% 10.27% -- 6.61% 7/13/01
R Class -5.53% -- -- 8.14% 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%. The SEC requires that mutual funds provide
performance information net of maximum sales charges in all cases where
charges could be applied.
(1) Data provided by Lipper Inc. -- A Reuters Company. ©2008 Reuters. All
rights reserved. Any copying, republication or redistribution of Lipper
content, including by caching, framing or similar means, is expressly
prohibited without the prior written consent of Lipper. Lipper shall not be
liable for any errors or delays in the content, or for any actions taken in
reliance thereon.
Lipper Fund Performance -- Performance data is total return, and is
preliminary and subject to revision.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by Lipper
and may be incomplete. No offer or solicitations to buy or sell any of the
securities herein is being made by Lipper.
(2) Since 7/31/94, the date nearest the Investor Class's inception for which
data are available.
(3) 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.
(4) Total returns for periods less than one year are not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance 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 March 31, 1998
One-Year Returns Over 10 Years
Periods ended March 31
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Investor Class -0.44% 3.88% 20.85% 17.35% -12.09% 31.30% 10.69% 7.21% 15.79% -5.17%
Russell 3000
Value Index 2.51% 6.81% 1.48% 5.67% -22.79% 42.45% 12.88% 14.20% 16.22% -10.60%
S&P 500 Index 18.46% 17.94% -21.68% 0.24% -24.76% 35.12% 6.69% 11.73% 11.83% -5.08%
Lipper Equity
Income Funds
Index 1.59% 3.25% 1.73% 3.91% -22.91% 35.57% 9.96% 11.49% 14.38% -7.07%
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the
indices are provided for comparison. The fund's total returns include
operating expenses (such as transaction costs and management fees) that reduce
returns, while the total returns of the indices do not.
- ------
4
PORTFOLIO COMMENTARY
Equity Income
Portfolio Managers: Phil Davidson, Kevin Toney, and Scott Moore
PERFORMANCE SUMMARY
Equity Income returned -5.17%* for the 12 months ended March 31, 2008. By
comparison, the Lipper Equity Income Funds Index returned -7.07%, and the
median return for Morningstar's Large Cap Value category** (whose performance,
like Equity Income's, reflects fund operating expenses) was -9.10%. Two market
indices -- the Russell 3000 Value Index and the S&P 500 Index -- returned
- -10.60% and -5.08%, respectively. The portfolio's return reflects operating
expenses, while the indices' returns do not.
The challenging market environment described in the Market Perspective on page
2 (in which growth outperformed value across the capitalization spectrum)
hampered Equity Income's absolute performance. However, on a relative basis,
the portfolio significantly outpaced the performance of its benchmark, the
Russell 3000 Value Index. The key to our results was our continued focus on
higher-quality businesses with sound balance sheets.
Since Equity Income's inception on August 1, 1994, the portfolio has produced
an average annualized return of 12.35%, topping the returns for the Lipper
Equity Income Funds Index, Morningstar's Large Cap Value category median,**
the Russell 3000 Value Index, and the S&P 500 for the same period (see
performance information on pages 3 and 4).
UNDERWEIGHT IN FINANCIALS BOOSTED RESULTS
An underweight position enhanced relative results in the financials sector,
which trailed all others in the benchmark. Because of our conservative
investment approach, we had limited exposure to companies hardest-hit by the
subprime meltdown and the credit crisis that followed. For example, we did not
own Citigroup when it suffered significant losses on mortgage-related
investments. Nor did we hold Wachovia Corp., which was similarly hurt by
credit losses. Both companies -- which together averaged roughly 3.7% of the
benchmark -- cut their dividends significantly and issued dilutive equity
either during or subsequent to the reporting period.
CONSUMER DISCRETIONARY ENHANCED PERFORMANCE
Our results were also enhanced by our relatively small allocation to the
consumer discretionary sector, one of the weakest in the benchmark. An
underweight in media
* All fund returns referenced in this commentary are for Investor Class
shares.
** The median returns for Morningstar's Large Cap Value category were 11.96%
and 4.44% for the five- and ten-year periods ended March 31, 2008,
respectively, and 9.27% since the fund's inception. ©2008 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.
Top Ten Holdings as of March 31, 2008
% of net % of net
assets assets
as of as of
3/31/08 9/30/07
Exxon Mobil Corp. 6.9% 4.1%
General Electric Co. 5.4% 5.7%
BP plc(1) 4.9% 3.6%
AT&T Inc. 4.3% 3.3%
Lincare Holdings Inc., 3.00%, 6/15/33 (Conv. Bond) 3.8% 1.8%
Southern Co. 3.4% 3.2%
Kimberly-Clark Corp. 3.1% 0.6%
Kraft Foods Inc. Cl A 2.5% 2.7%
Intel Corp., 2.95%, 12/15/35 (Conv. Bond) 2.4% 1.2%
UST Inc. 2.4% 2.0%
(1) Includes shares traded on all exchanges.
- ------
5
Equity Income
companies, and in newspapers in particular, was advantageous. The newspaper
business has been hurt by declining circulation and falling advertising
revenues.
Home Depot, the home-improvement chain, was another source of strong relative
performance. Last summer, the company's shares climbed on news that it would
sell its supply business to a private equity consortium and buy back a large
number of shares in a Dutch auction. We locked in our gains by liquidating our
position ahead of the stock's decline last fall.
INFORMATION TECHNOLOGY ADDED VALUE
Strong security selection contributed to our relative outperformance in the
information technology sector. The portfolio held convertible securities in
chipmaker Intel, which has captured significant market share by capitalizing
on the difficulties of its chief rival, Advanced Micro Devices.
STOCK SELECTION IN FINANCIALS DETRACTED
As credit-market turmoil spread, even higher-quality financials holdings were
affected. One was Freddie Mac, the stockholder-owned corporation chartered by
Congress to keep money flowing to mortgage lenders in support of home
ownership. We limited the impact by selling our shares before
deeper-than-expected losses were announced. Also detracting were convertible
securities issued by Fannie Mae, another government-sponsored entity in the
mortgage industry. However, the convertibles retained more of their value when
Fannie Mae's stock declined with the sector. We have eliminated the position.
ENERGY HAMPERED PROGRESS
Investments in the energy sector boosted absolute performance, but our mix of
companies slowed us against the benchmark. We were underweight in higher-beta
exploration and production companies whose shares rose strongly on record oil
prices. Our progress was also hindered by a slight underweight in major
integrated oil and gas companies, such as Chevron and ConocoPhillips, which
added to the benchmark's results.
OUTLOOK
We will continue to follow our disciplined, bottom-up investment process,
selecting companies one at a time for the portfolio. We see attractive
opportunities in utilities, health care, and consumer staples, reflected by
our overweight positions in these sectors. As the debt market crisis and a
slowing economy continue to weigh on the market, we are being very selective
in our ownership of financials and consumer discretionary companies, relying
on fundamental analysis to identify strong, financially sound businesses whose
securities provide attractive yields.
Top Five Industries as of March 31, 2008
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Oil, Gas & Consumable Fuels 16.0% 13.4%
Pharmaceuticals 7.0% 8.1%
Industrial Conglomerates 6.8% 6.4%
Food Products 6.7% 8.9%
Electric Utilities 6.3% 5.8%
Types of Investments in Portfolio
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Common Stocks 84.0% 78.7%
Convertible Bonds 13.5% 14.1%
Convertible Preferred Stocks 1.6% 5.5%
Preferred Stocks 0.1% --
TOTAL EQUITY EXPOSURE 99.2% 98.3%
Temporary Cash Investments 0.3% 2.9%
Other Assets and Liabilities(1) 0.5% (1.2)%
(1) Includes securities lending collateral and other assets and liabilities.
- ------
6
SCHEDULE OF INVESTMENTS
Equity Income
MARCH 31, 2008
Shares/Principal Amount Value
Common Stocks -- 84.0%
AEROSPACE & DEFENSE -- 0.6%
393,027 Northrop Grumman Corp. $ 30,581,431
--------------
AIR FREIGHT & LOGISTICS -- 0.1%
94,306 United Parcel Service, Inc. Cl B 6,886,224
--------------
AUTOMOBILES -- 0.2%
392,100 Honda Motor Co., Ltd. ORD 11,232,156
--------------
BUILDING PRODUCTS -- 0.6%
1,752,200 Masco Corp. 34,746,126
--------------
CAPITAL MARKETS -- 0.9%
802,613 AllianceBernstein Holding L.P. 50,869,612
--------------
CHEMICALS -- 1.4%
1,225,600 du Pont (E.I.) de Nemours & Co. 57,309,056
181,000 International Flavors & Fragrances Inc. 7,973,050
161,500 Rohm and Haas Co. 8,733,920
--------------
74,016,026
--------------
COMMERCIAL BANKS -- 5.1%
3,187,500 Associated Banc-Corp 84,883,125
2,629,344 Commerce Bancshares, Inc. 110,511,329
2,457,491 Marshall & Ilsley Corp. 57,013,791
329,000 SunTrust Banks, Inc. 18,141,060
--------------
270,549,305
--------------
COMMERCIAL SERVICES & SUPPLIES -- 1.7%
2,653,945 Waste Management, Inc. 89,066,394
--------------
CONTAINERS & PACKAGING -- 0.3%
610,600 Bemis Co., Inc. 15,527,558
--------------
DIVERSIFIED FINANCIAL SERVICES -- 1.8%
456,300 Bank of America Corp. 17,298,333
1,817,900 JPMorgan Chase & Co. 78,078,805
--------------
95,377,138
--------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 4.8%
5,972,600 AT&T Inc. 228,750,493
753,300 Verizon Communications Inc. 27,457,785
--------------
256,208,278
--------------
Shares/Principal Amount Value
ELECTRIC UTILITIES -- 6.3%
2,597,243 Portland General Electric Co. $ 58,567,830
5,082,800 Southern Co. 180,998,507
4,124,849 Westar Energy Inc. 93,922,812
--------------
333,489,149
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.5%
1,154,000 Molex Inc. Cl A 25,226,440
--------------
FOOD & STAPLES RETAILING -- 1.2%
1,273,016 Wal-Mart Stores, Inc. 67,062,483
--------------
FOOD PRODUCTS -- 6.7%
2,672,121 Campbell Soup Co. 90,718,508
1,966,800 H.J. Heinz Co. 92,380,596
1,030,400 Hershey Co. (The)(1) 38,815,168
4,267,256 Kraft Foods Inc. Cl A 132,327,609
--------------
354,241,881
--------------
GAS UTILITIES -- 4.3%
2,255,000 Nicor Inc.(2) 75,565,050
2,724,680 Piedmont Natural Gas Co., Inc.(1) 71,550,097
2,471,500 WGL Holdings Inc.(2) 79,236,290
--------------
226,351,437
--------------
HOTELS, RESTAURANTS & LEISURE -- 0.4%
353,100 McDonald's Corp. 19,692,387
--------------
HOUSEHOLD DURABLES -- 0.2%
154,300 Whirlpool Corp. 13,390,154
--------------
HOUSEHOLD PRODUCTS -- 4.9%
2,524,000 Kimberly-Clark Corp. 162,924,200
1,372,200 Procter & Gamble Co. (The) 96,150,054
--------------
259,074,254
--------------
INDUSTRIAL CONGLOMERATES -- 6.8%
994,400 3M Co. 78,706,760
7,685,200 General Electric Co. 284,429,252
--------------
363,136,012
--------------
INSURANCE -- 4.6%
1,943,700 Allstate Corp. 93,414,222
908,700 Gallagher (Arthur J.) & Co. 21,463,494
384,500 Hartford Financial Services Group Inc. (The) 29,133,565
4,024,580 Marsh & McLennan Companies, Inc. 97,998,523
--------------
242,009,804
--------------
IT SERVICES -- 1.3%
581,700 International Business Machines Corp. 66,976,938
--------------
- ------
7
Equity Income
Shares/Principal Amount Value
LEISURE EQUIPMENT & PRODUCTS -- 0.1%
189,600 Hasbro, Inc. $ 5,289,840
--------------
MACHINERY -- 0.1%
130,900 Dover Corp. 5,469,002
53,300 Kaydon Corp. 2,340,403
--------------
7,809,405
--------------
MULTI-UTILITIES -- 0.8%
677,614 Consolidated Edison, Inc. 26,901,276
669,900 Xcel Energy Inc. 13,364,505
--------------
40,265,781
--------------
OIL, GAS & CONSUMABLE FUELS -- 13.9%
2,078,800 BP plc ADR 126,079,220
13,236,200 BP plc ORD 133,923,042
4,300,879 Exxon Mobil Corp. 363,768,346
1,503,700 Total SA ORD 111,781,777
--------------
735,552,385
--------------
PAPER & FOREST PRODUCTS -- 1.3%
1,060,100 Weyerhaeuser Co. 68,948,904
--------------
PHARMACEUTICALS -- 7.0%
1,020,000 Abbott Laboratories 56,253,000
4,401,900 Bristol-Myers Squibb Co. 93,760,470
1,905,200 Johnson & Johnson 123,590,324
531,600 Merck & Co., Inc. 20,174,220
3,825,296 Pfizer Inc. 80,063,445
--------------
373,841,459
--------------
REAL ESTATE INVESTMENT TRUSTS -- 0.8%
953,250 Rayonier, Inc. 41,409,180
--------------
THRIFTS & MORTGAGE FINANCE -- 2.9%
6,635,782 People's United Financial, Inc. 114,865,386
1,683,596 Washington Federal, Inc. 38,453,333
--------------
153,318,719
--------------
TOBACCO -- 2.4%
2,311,700 UST Inc. 126,033,884
--------------
TOTAL COMMON STOCKS
(Cost $4,285,492,296) 4,458,180,744
--------------
Convertible Bonds -- 13.5%
CAPITAL MARKETS -- 2.0%
$ 310,000 Allegro Investment Corp. SA (convertible into
Ameriprise Financial Inc.), 16.85%, 7/25/08
(Acquired 1/22/08, Cost $15,288,890)(3)(4) 15,464,905
195,000 Allegro Investment Corp. SA (convertible into
Legg Mason, Inc.), 12.00%, 7/10/08 (Acquired
1/4/08, Cost $13,651,950)(3)(4) 11,195,743
Shares/Principal Amount Value
$ 238,600 Citigroup Funding Inc. (convertible into
Merrill Lynch & Co.), 24.00%, 9/18/08(4) $9,907,264
302,900 Deutsche Bank AG (London), (convertible into
Morgan Stanley), 15.31%, 6/13/08 (Acquired
12/13/07, Cost $14,448,330)(3)(4) 13,787,121
200,000 Morgan Stanley (convertible into Ameriprise
Financial Inc.), 14.83%, 8/7/08 (Acquired
2/4/08, Cost $11,036,000)(3)(4) 10,465,644
213,000 Morgan Stanley (convertible into Legg Mason
Inc.), 12.50%, 7/22/08 (Acquired 1/16/08, Cost
$14,922,780)(3)(4) 12,281,501
231,200 Natixis Financial Products, (convertible into
Legg Mason, Inc.), 11.51%, 7/2/08 (Acquired
12/27/07, Cost $16,563,168)(3)(4) 13,716,331
421,000 Natixis Financial Products, (convertible into
Morgan Stanley), 11.30%, 8/7/08 (Acquired
2/4/08, Cost $20,056,440)(3)(4) 18,839,540
--------------
105,658,049
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 1.2%
66,080,000 Vishay Intertechnology, Inc., 3.625%, 8/1/23 66,080,000
--------------
HEALTH CARE PROVIDERS & SERVICES -- 3.8%
204,716,000 Lincare Holdings Inc., 3.00%, 6/15/33 203,436,525
--------------
INSURANCE -- 0.7%
289,400 Allegro Investment Corp. SA (convertible into
American International Group, Inc.), 18.00%,
7/23/08 (Acquired 1/18/08, Cost
$14,849,114)(3)(4) 13,018,611
558,500 Natixis Financial Products, (convertible into
American International Group, Inc.), 20.20%,
8/14/08 (Acquired 2/11/08, Cost
$25,300,050)(3)(4) 24,671,647
--------------
37,690,258
--------------
LEISURE EQUIPMENT & PRODUCTS -- 0.3%
11,090,000 Hasbro Inc., 2.75%, 12/1/21 15,096,263
--------------
- ------
8
Equity Income
Shares/Principal Amount Value
MEDIA -- 0.2%
$ 725,000 Natixis Financial Products, (convertible into
Time Warner Inc.), 6.27%, 6/13/08(4) $ 10,140,653
--------------
MULTILINE RETAIL -- 0.2%
262,200 Credit Suisse New York, (convertible into
Target Corp.), 17.84%, 6/30/08(4) 13,007,529
--------------
OIL, GAS & CONSUMABLE FUELS -- 2.1%
47,326,000 Devon Energy Corp., (convertible into Chevron
Corp.), 4.95%, 8/15/08(4) 75,721,600
31,811,000 Peabody Energy Corp., 4.75%, 12/15/66 36,264,540
--------------
111,986,140
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.6%
130,660,000 Intel Corp., 2.95%, 12/15/35 128,863,425
458,800 Morgan Stanley, (convertible into Applied
Materials, Inc.), 10.45%, 3/20/08 (Acquired
12/14/07, Cost $8,212,520)(3)(4) 8,484,294
--------------
137,347,719
--------------
SPECIALTY RETAIL -- 0.4%
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) 19,269,600
--------------
TOTAL CONVERTIBLE BONDS
(Cost $713,859,333) 719,712,736
--------------
Convertible Preferred Stocks -- 1.6%
DIVERSIFIED FINANCIAL SERVICES -- 0.6%
30,850 Bank of America Corp., 7.25%, 12/31/49 31,868,050
--------------
HOUSEHOLD DURABLES -- 1.0%
1,141,600 Newell Financial Trust I, 5.25%, 12/1/27 51,800,100
--------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $85,135,872) 83,668,150
--------------
Preferred Stocks -- 0.1%
DIVERSIFIED FINANCIAL SERVICES -- 0.1%
342,359 Citigroup Inc., 8.125%, 2/15/18
(Cost $8,694,871) 8,230,310
--------------
Shares/Principal Amount Value
Temporary Cash Investments -- 0.3%
Repurchase Agreement, Deutsche Bank Securities, Inc.,
(collateralized by various U.S. Treasury obligations, 2.375%,
04/15/11, valued at $13,968,810), in a joint trading account at
1.35%, dated 3/31/08, due 4/1/08 (Delivery value $13,700,514)
(Cost $13,700,000) $ 13,700,000
--------------
Temporary Cash Investments -- Securities Lending Collateral(5) -- 1.6%
Repurchase Agreement, Barclays Bank plc, (collateralized by
various U.S. Government Agency obligations in a pooled account
at the lending agent), 2.30%, dated 3/31/08 due 4/1/08 (Delivery
value $21,003,486) 21,002,144
Repurchase Agreement, BNP Paribas, (collateralized by various
U.S. Government Agency obligations in a pooled account at the
lending agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery value
$20,537,984) 20,536,672
Repurchase Agreement, Deutsche Bank AG, (collateralized by
various U.S. Government Agency obligations in a pooled account
at the lending agent), 2.25%, dated 3/31/08, due 4/1/08
(Delivery value $22,501,406) 22,500,000
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency obligations in
a pooled account at the lending agent), 2.15%, dated 3/31/08,
due 4/1/08 (Delivery value $21,489,408) 21,488,125
--------------
TOTAL TEMPORARY CASH INVESTMENTS -- SECURITIES LENDING COLLATERAL
(Cost $85,526,941) 85,526,941
--------------
TOTAL INVESTMENT SECURITIES -- 101.1%
(Cost $5,192,409,313) 5,369,018,881
--------------
OTHER ASSETS AND LIABILITIES -- (1.1)% (59,687,708)
--------------
TOTAL NET ASSETS -- 100.0% $5,309,331,173
==============
- ------
9
Equity Income
Forward Foreign Currency Exchange Contracts
Unrealized
Contracts to Sell Settlement Date Value Gain (Loss)
55,104,742 Euro for USD 4/30/08 $ 86,887,421 $ 103,955
118,831,608 GBP for USD 4/30/08 235,186,397 3,004,432
779,886,900 JPY for USD 4/30/08 7,834,133 (10,777)
------------ -------------
$329,907,951 $3,097,610
============ =============
(Value on Settlement Date $333,005,561)
Notes to Schedule of Investments
ADR = American Depositary Receipt
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 March 31, 2008.
(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 March 31, 2008, was $161,194,937,
which represented 3.0% of total net assets.
(4) Equity-linked debt security. The aggregated value of these securities at
March 31, 2008, was $269,971,983, which represented 5.1% of total net assets.
(5) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions.
As of March 31, 2008, securities with an aggregate value of $256,936,975,
which represented 4.8% of total net assets, were valued in accordance with
alternative pricing procedures adopted by the Board of Directors.
See Notes to Financial Statements.
- ------
10
PERFORMANCE
Value
Total Returns as of March 31, 2008
Average Annual Returns
Since Inception
1 year 5 years 10 years Inception Date
INVESTOR CLASS -11.56% 11.54% 5.93% 10.72% 9/1/93
RUSSELL 3000 VALUE INDEX(1) -10.60% 13.79% 5.63% 10.44%(2) --
S&P 500 INDEX(1) -5.08% 11.32% 3.50% 9.45%(2) --
LIPPER MULTI-CAP VALUE FUNDS
INDEX(1) -11.70% 12.04% 4.59% 9.16%(2) --
Institutional Class -11.36% 11.78% 6.15% 7.34% 7/31/97
A Class(3)
No sales charge* -11.76% 11.30% 5.67% 8.74%
With sales charge* -16.79% 10.00% 5.05% 8.18% 10/2/96
B Class
No sales charge* -12.41% 10.50% -- 9.60%
With sales charge* -16.41% 10.36% -- 9.47% 1/31/03
C Class -12.36% 10.52% -- 4.92% 6/4/01
R Class -11.98% -- -- 2.08% 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%. The SEC requires that mutual funds provide
performance information net of maximum sales charges in all cases where
charges could be applied.
(1) Data provided by Lipper Inc. -- A Reuters Company. ©2008 Reuters. All
rights reserved. Any copying, republication or redistribution of Lipper
content, including by caching, framing or similar means, is expressly
prohibited without the prior written consent of Lipper. Lipper shall not be
liable for any errors or delays in the content, or for any actions taken in
reliance thereon.
Lipper Fund Performance -- Performance data is total return, and is
preliminary and subject to revision.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by Lipper
and may be incomplete. No offer or solicitations to buy or sell any of the
securities herein is being made by Lipper.
(2) Since 8/31/93, the date nearest the Investor Class's inception for which
data are available.
(3) 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.
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 March 31, 1998
One-Year Returns Over 10 Years
Periods ended March 31
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Investor Class -9.88% 1.42% 19.20% 17.96% -19.85% 40.66% 9.95% 9.89% 14.90% -11.56%
Russell 3000
Value Index 2.51% 6.81% 1.48% 5.67% -22.79% 42.45% 12.88% 14.20% 16.22% -10.60%
S&P 500 Index 18.46% 17.94% -21.68% 0.24% -24.76% 35.12% 6.69% 11.73% 11.83% -5.08%
Lipper
Multi-Cap
Value Funds
Index -3.71% 5.42% 6.54% 6.47% -22.91% 42.99% 10.27% 12.97% 12.23% -11.70%
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the
indices are provided for comparison. The fund's total returns include
operating expenses (such as transaction costs and management fees) that reduce
returns, while the total returns of the indices do not.
- ------
12
PORTFOLIO COMMENTARY
Value
Portfolio Managers: Scott Moore, Michael Liss, and Phil Davidson
PERFORMANCE SUMMARY
Value returned -11.56%* for the 12 months ended March 31, 2008. By comparison,
the Lipper Multi-Cap Value Funds Index returned -11.70%, while the median
return for Morningstar's Large Cap Value category** (whose performance, like
Value's, reflects fund operating expenses) was -9.10%. Two market indices --
the Russell 3000 Value Index and the S&P 500 Index -- returned -10.60% and
- -5.08%, respectively. The portfolio's returns reflect operating expenses,
while the indices' returns do not.
Value's performance for the period was hampered by the volatile, challenging
market environment described in the Market Perspective on page 2. In addition,
the portfolio faced headwinds as growth stocks outperformed value across the
capitalization spectrum, and for much of the period, investors favored
companies that were already strong performers, a momentum bias that did not
fit well with the portfolio's investment approach of seeking stocks that are
undervalued by the market. Nevertheless, we continued to emphasize on
less-risky businesses with sound balance sheets.
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 10.72%, 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 and 12).
FINANCIALS DETRACTED
Despite an underweight position, the broad decline in the financials sector
was a drag on both absolute and relative performance. Detracting the most was
our greater-than-the-benchmark allocation to thrifts -- specifically MGIC
Investment Corp., the nation's largest private mortgage insurer. It was hurt
by larger-than-expected losses in its core business, which were a direct
result of the housing slowdown.
Our mix of insurance stocks also hindered progress. A top detractor was Ambac
Financial Group, a leading municipal bond insurer. Its stock declined on
concerns about bond insurers in general and the company's exposure to subprime
loans.
* All fund returns referenced in this commentary are for Investor Class
shares.
** The median returns for Morningstar's Large Cap Value category were 11.96%
and 4.44% for the five- and ten-year periods ended March 31, 2008,
respectively, and 9.31% since the fund's inception. ©2008 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.
Top Ten Holdings as of March 31, 2008
% of net % of net
assets as of assets as of
3/31/08 9/30/07
General Electric Co. 4.9% 2.7%
Exxon Mobil Corp. 4.7% 1.5%
Kraft Foods Inc. Cl A 4.0% 3.3%
AT&T Inc. 3.8% 1.8%
BP plc ADR 3.8% 3.1%
Bemis Co., Inc. 3.2% 1.6%
Kimberly-Clark Corp. 2.9% 1.6%
Johnson & Johnson 2.6% 2.2%
Pfizer Inc. 2.3% 2.5%
American International Group, Inc. 2.2% 1.6%
- ------
13
Value
ENERGY POSITION HAMPERED RESULTS
Value's underweight in the energy sector -- the benchmark's top performer --
slowed relative performance. Because of valuations, we did not own some major
integrated oil companies and refining companies, such as ConocoPhillips and
Occidental Petroleum. Our progress was also slowed by an underweight in Exxon
Mobil, which reported record earnings.
CONSUMER STAPLES LED RESULTS
On the positive side, an overweight in consumer staples companies benefited
performance. Our valuation work uncovered a number of attractively priced
businesses -- industry leaders with high and sustainable market-share
positions, solid returns on capital, and good financial strength. The
portfolio's basket of high-profile food stocks contributed positively,
providing two of our strongest contributors -- Kraft and H.J. Heinz. Kraft,
the largest branded food company in the U.S., has invested in new product
development and marketing, and is considering the divestiture of non-core
businesses. Heinz, which has streamlined its suite of products, reported
strong sales of its top brands.
INFORMATION TECHNOLOGY CONTRIBUTED
Strong security selection in information technology was another performance
factor. A top holding was Intel Corp., the world's largest semiconductor
manufacturer. Intel has leveraged its technology leadership and superior
product line in response to better-than-expected global demand for computing
products. Another key holding was Diebold Inc., a leading provider of
automatic teller machines, electronic surveillance and monitoring equipment
and services, and electronic voting machines. The company received an
unsolicited takeover offer from United Technology.
UTILITIES PROVIDED A TOP CONTRIBUTOR
Key holdings in the utilities sector added to relative performance. Puget
Energy, Inc., which provides electric and gas services to customers in
Washington State, agreed to be acquired by a private equity group for $30 per
share.
OUTLOOK
We will continue to follow our disciplined, bottom-up process, selecting
securities one at a time for the portfolio. We see opportunities in consumer
staples, healthcare, and information technology companies, reflected by our
overweight positions in these sectors relative to the benchmark. Our
fundamental analysis and valuation work is also directing us toward smaller
weightings in financials and energy stocks.
Top Five Industries as of March 31, 2008
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Food Products 10.4% 9.0%
Oil, Gas & Consumable Fuels 9.9% 6.3%
Insurance 7.2% 9.8%
Pharmaceuticals 6.7% 6.0%
Industrial Conglomerates 5.7% 2.7%
Types of Investments in Portfolio
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Domestic Common Stocks 91.1% 90.4%
Foreign Common Stocks(1) 7.9% 7.6%
TOTAL COMMON STOCKS 99.0% 98.0%
Temporary Cash Investments 2.0% 1.0%
Other Assets and Liabilities(2) (1.0)% 1.0%
(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
MARCH 31, 2008
Shares Value
Common Stocks -- 99.0%
AEROSPACE & DEFENSE -- 0.3%
71,950 Northrop Grumman Corp. $ 5,598,431
-------------
AIR FREIGHT & LOGISTICS -- 0.5%
165,590 United Parcel Service, Inc. Cl B 12,091,382
-------------
AIRLINES -- 1.1%
1,909,220 Southwest Airlines Co. 23,674,328
-------------
AUTO COMPONENTS -- 0.8%
337,550 Autoliv, Inc. 16,945,010
-------------
AUTOMOBILES -- 2.2%
285,400 Honda Motor Co., Ltd. ORD 8,175,612
191,160 Thor Industries Inc.(1) 5,690,833
679,800 Toyota Motor Corp. ORD 34,242,627
-------------
48,109,072
-------------
BEVERAGES -- 1.8%
841,450 Anheuser-Busch Companies, Inc. 39,926,803
-------------
BIOTECHNOLOGY -- 0.9%
464,100 Amgen Inc.(2) 19,390,098
-------------
BUILDING PRODUCTS -- 0.5%
531,910 Masco Corp. 10,547,775
-------------
CAPITAL MARKETS -- 2.5%
232,150 AllianceBernstein Holding L.P. 14,713,667
194,400 Ameriprise Financial Inc. 10,079,640
184,900 Legg Mason, Inc. 10,350,702
196,670 Merrill Lynch & Co., Inc. 8,012,336
273,380 Morgan Stanley 12,493,466
-------------
55,649,811
-------------
CHEMICALS -- 1.5%
170,830 du Pont (E.I.) de Nemours & Co. 7,988,011
181,940 International Flavors & Fragrances Inc. 8,014,457
289,000 Minerals Technologies Inc. 18,149,200
-------------
34,151,668
-------------
COMMERCIAL BANKS -- 5.3%
564,530 Associated Banc-Corp 15,033,434
379,980 BB&T Corporation 12,182,159
1,625,290 Marshall & Ilsley Corp. 37,706,728
873,720 South Financial Group Inc. (The)(1) 12,983,479
334,630 SunTrust Banks, Inc. 18,451,498
368,620 U.S. Bancorp 11,928,543
212,040 Zions Bancorporation 9,658,422
-------------
117,944,263
-------------
Shares Value
COMMERCIAL SERVICES & SUPPLIES -- 3.8%
540,250 Avery Dennison Corp. $ 26,607,313
414,400 Pitney Bowes, Inc. 14,512,288
422,320 Republic Services, Inc. 12,348,637
946,200 Waste Management, Inc. 31,754,471
-------------
85,222,709
-------------
COMPUTERS & PERIPHERALS -- 0.8%
454,140 Diebold, Inc. 17,052,957
-------------
CONTAINERS & PACKAGING -- 3.2%
2,787,790 Bemis Co., Inc. 70,893,500
-------------
DISTRIBUTORS -- 0.7%
367,690 Genuine Parts Co. 14,788,492
-------------
DIVERSIFIED FINANCIAL SERVICES -- 4.1%
1,294,330 Bank of America Corp. 49,068,050
700,670 JPMorgan Chase & Co. 30,093,777
349,720 McGraw-Hill Companies, Inc. (The) 12,922,154
-------------
92,083,981
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 5.2%
2,220,000 AT&T Inc. 85,026,000
867,290 Verizon Communications Inc. 31,612,721
-------------
116,638,721
-------------
ELECTRIC UTILITIES -- 2.2%
471,280 IDACORP, Inc. 15,132,801
283,030 Southern Co. 10,078,698
1,039,060 Westar Energy Inc. 23,659,396
-------------
48,870,895
-------------
ELECTRICAL EQUIPMENT -- 0.9%
445,640 Hubbell Inc. Cl B 19,470,012
-------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 2.4%
1,308,900 Molex Inc. 30,314,124
659,760 Tyco Electronics Ltd. 22,642,963
-------------
52,957,087
-------------
FOOD & STAPLES RETAILING -- 0.2%
105,970 Wal-Mart Stores, Inc. 5,582,500
-------------
FOOD PRODUCTS -- 10.4%
778,940 Campbell Soup Co. 26,445,013
1,165,250 ConAgra Foods, Inc. 27,907,738
279,130 General Mills, Inc. 16,714,304
738,500 H.J. Heinz Co. 34,687,345
492,040 Hershey Co. (The) 18,535,147
2,854,940 Kraft Foods Inc. Cl A 88,531,688
574,930 Unilever N.V. CVA 19,313,624
-------------
232,134,859
-------------
- ------
15
Value
Shares Value
GAS UTILITIES -- 1.1%
288,080 Southwest Gas Corp. $ 8,054,717
498,910 WGL Holdings Inc.(1) 15,995,054
--------------
24,049,771
--------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 1.7%
578,700 Beckman Coulter, Inc. 37,355,085
--------------
HEALTH CARE PROVIDERS & SERVICES -- 1.1%
360,200 LifePoint Hospitals Inc.(2) 9,894,694
269,600 Universal Health Services, Inc. Cl B 14,474,824
--------------
24,369,518
--------------
HOTELS, RESTAURANTS & LEISURE -- 2.4%
681,930 International Speedway Corp., Cl A 28,095,516
1,048,580 Speedway Motorsports Inc. 26,287,901
--------------
54,383,417
--------------
HOUSEHOLD DURABLES -- 0.3%
92,160 Whirlpool Corp. 7,997,645
--------------
HOUSEHOLD PRODUCTS -- 3.2%
1,000,080 Kimberly-Clark Corp. 64,555,164
88,630 Procter & Gamble Co. (The) 6,210,304
--------------
70,765,468
--------------
INDUSTRIAL CONGLOMERATES -- 5.7%
238,970 3M Co. 18,914,476
2,922,730 General Electric Co. 108,170,237
--------------
127,084,713
--------------
INSURANCE -- 7.2%
626,810 Allstate Corp. 30,124,489
1,144,920 American International Group, Inc. 49,517,789
110 Berkshire Hathaway Inc. Cl A(2) 14,674,000
248,360 Chubb Corp. 12,288,853
244,460 Genworth Financial Inc. Cl A 5,534,574
224,100 Hartford Financial Services Group Inc. (The) 16,980,057
1,245,940 Marsh & McLennan Companies, Inc. 30,338,639
--------------
159,458,401
--------------
IT SERVICES -- 0.6%
121,040 International Business Machines Corp. 13,936,546
--------------
LEISURE EQUIPMENT & PRODUCTS -- 0.5%
502,530 RC2 Corp.(2) 10,538,054
--------------
Shares Value
MULTI-UTILITIES -- 3.4%
278,540 Ameren Corp. $ 12,266,902
973,110 Puget Energy, Inc. 25,174,356
641,480 Wisconsin Energy Corp. 28,218,705
527,200 Xcel Energy Inc. 10,517,640
--------------
76,177,603
--------------
MULTILINE RETAIL -- 0.2%
112,050 Target Corp. 5,678,694
--------------
OIL, GAS & CONSUMABLE FUELS -- 9.9%
46,420 Apache Corp. 5,608,464
1,398,720 BP plc ADR 84,832,368
144,750 Chevron Corp. 12,355,860
107,280 Equitable Resources Inc. 6,318,792
1,237,780 Exxon Mobil Corp. 104,691,432
80,040 Royal Dutch Shell plc ADR 5,521,159
--------------
219,328,075
--------------
PAPER & FOREST PRODUCTS -- 0.8%
263,780 Weyerhaeuser Co. 17,156,251
--------------
PHARMACEUTICALS -- 6.7%
908,700 Bristol-Myers Squibb Co. 19,355,310
285,600 Eli Lilly and Company 14,734,104
887,480 Johnson & Johnson 57,570,828
146,290 Merck & Co., Inc. 5,551,706
2,451,180 Pfizer Inc. 51,303,197
--------------
148,515,145
--------------
ROAD & RAIL -- 0.2%
384,740 Heartland Express, Inc.(1) 5,486,392
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.6%
792,670 Intel Corp. 16,788,751
330,280 KLA-Tencor Corp. 12,253,388
219,860 Texas Instruments Inc. 6,215,442
--------------
35,257,581
--------------
SPECIALTY RETAIL -- 0.8%
740,110 Lowe's Companies, Inc. 16,978,123
--------------
THRIFTS & MORTGAGE FINANCE -- 0.1%
127,600 Fannie Mae 3,358,432
--------------
TRADING COMPANIES & DISTRIBUTORS -- 0.2%
73,010 Grainger (W.W.), Inc. 5,577,235
--------------
TOTAL COMMON STOCKS
(Cost $2,212,483,157) 2,203,176,503
--------------
Principal Amount
Temporary Cash Investments -- 2.0%
$45,100,000 FNMA, 1.35%, 4/1/08(3) 45,100,000
(Cost $45,100,000)
--------------
- ------
16
Value
Value
Temporary Cash Investments -- Securities Lending Collateral(4) -- 0.5%
Repurchase Agreement, Barclays Bank plc, (collateralized
by various U.S. Government Agency obligations in a pooled
account at the lending agent), 2.30%, dated 3/31/08 due
4/1/08 (Delivery value $2,661,860) $ 2,661,690
Repurchase Agreement, BNP Paribas, (collateralized by
various U.S. Government Agency obligations in a pooled
account at the lending agent), 2.30%, dated 3/31/08, due
4/1/08 (Delivery value $2,595,457) 2,595,291
Repurchase Agreement, Deutsche Bank AG, (collateralized by
various U.S. Government Agency obligations in a pooled
account at the lending agent), 2.25%, dated 3/31/08, due
4/1/08 (Delivery value $2,750,172) 2,750,000
Value
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency
obligations in a pooled account at the lending agent),
2.15%, dated 3/31/08, due 4/1/08 (Delivery value
$2,728,264) $ 2,728,100
--------------
TOTAL TEMPORARY CASH INVESTMENTS -- SECURITIES LENDING
COLLATERAL
(Cost $10,735,081) 10,735,081
--------------
TOTAL INVESTMENT SECURITIES -- 101.5%
(Cost $2,268,318,238) 2,259,011,584
--------------
OTHER ASSETS AND LIABILITIES -- (1.5)% (33,378,884)
--------------
TOTAL NET ASSETS -- 100.0% $2,225,632,700
==============
Forward Foreign Currency Exchange Contracts
Unrealized
Contracts to Sell Settlement Date Value Gain (Loss)
12,217,263 Euro for USD 4/30/08 $ 19,263,795 $ 23,276
43,946,082 GBP for USD 4/30/08 86,976,191 1,114,735
3,460,557,600 JPY for USD 4/30/08 34,762,052 (48,347)
------------ -----------
$141,002,038 $1,089,664
============ ===========
(Value on Settlement Date $142,091,702)
Notes to Schedule of Investments
ADR = American Depositary Receipt
CVA = Certificaten Van Aandelen
FNMA = Federal National Mortgage Association
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 March 31, 2008.
(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.
As of March 31, 2008, securities with an aggregate value of $61,731,863, which
represented 2.8% of total net assets, were valued in accordance with
alternative pricing procedures adopted by the Board of Directors.
See Notes to Financial Statements.
- ------
17
PERFORMANCE
Large Company Value
Total Returns as of March 31, 2008
Average Annual Returns
Since Inception
1 year 5 years Inception Date
INVESTOR CLASS -9.88% 11.90% 5.49% 7/30/99
RUSSELL 1000 VALUE INDEX(1) -9.99% 13.68% 4.87% --
S&P 500 INDEX(1) -5.08% 11.32% 1.61% --
Institutional Class -9.70% 12.12% 5.62% 8/10/01
A Class(2)
No sales charge* -10.24% 11.59% 6.79%
With sales charge* -15.40% 10.28% 5.93% 10/26/00
B Class
No sales charge* -10.88% 10.82% 9.68%
With sales charge* -14.88% 10.68% 9.55% 1/31/03
C Class -10.91% 10.80% 5.43% 11/7/01
R Class -10.45% -- 7.86% 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%. The SEC requires that mutual funds provide
performance information net of maximum sales charges in all cases where
charges could be applied.
(1) Data provided by Lipper Inc. -- A Reuters Company. ©2008 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.
(2) Prior to December 3, 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.
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
One-Year Returns Over Life of Class
Periods ended March 31
2000* 2001 2002 2003 2004 2005 2006 2007 2008
Investor Class -7.22% 12.38% 10.20% -21.19% 39.34% 10.73% 9.44% 15.37% -9.88%
Russell 1000
Value Index -1.56% 0.27% 4.38% -22.79% 40.82% 13.17% 13.31% 16.83% -9.99%
S&P 500 Index 13.73% -21.68% 0.24% -24.76% 35.12% 6.69% 11.73% 11.83% -5.08%
* From 7/30/99, the Investor Class's inception date. Not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns for the
indices are provided for comparison. The fund's total returns include
operating expenses (such as transaction costs and management fees) that reduce
returns, while the total returns of the indices do not.
- ------
19
PORTFOLIO COMMENTARY
Large Company Value
Portfolio Managers: Chuck Ritter and Brendan Healy
PERFORMANCE SUMMARY
Large Company Value returned -9.88%* for the 12 months ended March 31, 2008.
By comparison, its benchmark, the Russell 1000 Value Index, returned -9.99%.
The broader market, as measured by the S&P 500 Index, returned -5.08%. The
portfolio's return reflects 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 fund operating expenses) was
- -9.10%.**
The challenging market environment described in the Market Perspective on page
2 (in which growth outperformed value across the capitalization spectrum)
hampered Large Company Value's absolute performance. However, on a relative
basis, the portfolio finished slightly ahead of its benchmark, the Russell
1000 Value Index. For much of the period, investors preferred companies that
were already strong performers, a momentum bias that did not fit well with the
portfolio's investment approach of seeking stocks that are undervalued by the
market. But in spite of these negative factors, Large Company Value benefited
from strong security selection. Investments in the information technology and
consumer staples sectors added most to performance versus the benchmark, while
positions in financials and energy stocks detracted.
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 5.49%, topping the
returns for Morningstar's Large Cap Value category median,** the Russell 1000
Value Index, and the S&P 500 for that period (see performance information on
pages 18 and 19).
FINANCIALS DETRACTED
Financials stocks -- the portfolio's largest sector position, but a relative
underweight nonetheless -- represented our largest source of underperformance
versus the benchmark. Many financials firms came under pressure amid the
fallout in the subprime lending category. Three of our top detractors were
Freddie Mac, a stockholder-owned corporation chartered by Congress to keep
money flowing to mortgage lenders in support of home ownership; Washington
Mutual, a major thrift involved in mortgage finance; and Citigroup, a
diversified global financial services company. All three stocks declined on
news of bigger-than-expected losses, resulting from housing weakness and the
deterioration of mortgage credit.
* All fund returns referenced in this commentary are for Investor Class
shares.
** The median return for Morningstar's Large Cap Value category was 11.96% for
the five-year period ended March 31, 2008, and 4.05% since the fund's
inception. ©2008 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.
Top Ten Holdings as of March 31, 2008
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Exxon Mobil Corp. 5.1% 5.2%
General Electric Co. 5.0% 2.4%
AT&T Inc. 4.0% 3.1%
Chevron Corp. 3.6% 3.2%
Bank of America Corp. 3.0% 3.4%
Johnson & Johnson 2.7% 1.9%
Citigroup Inc. 2.7% 4.5%
JPMorgan Chase & Co. 2.6% 2.3%
Royal Dutch Shell plc ADR 2.6% 2.9%
Pfizer Inc. 2.6% 1.8%
- ------
20
Large Company Value
ENERGY POSITION HAMPERED PERFORMANCE
Although the portfolio's position in the energy sector contributed on an
absolute basis, it underperformed in relative terms. Energy stocks,
specifically oil and gas companies, provided the strongest results for the
Russell 1000 Value Index. Because of valuations, our allocation was smaller
than the benchmark's, which hindered our progress.
INFORMATION TECHNOLOGY CONTRIBUTED
On the positive side, the portfolio benefited most from strong security
selection in the information technology sector, with most of the gains coming
from large leading software and technology companies. A significant holding
was software giant Microsoft, which benefited from strong sales of its new
Vista operating system and Office 2007. Hewlett-Packard continued to gain
ground in the PC market and moved into high-end enterprise printing equipment.
CONSUMER STAPLES ADDED VALUE
Our position in consumer staples also benefited performance as the U.S.
economy slowed and investors sought out companies that provide everyday goods
and services. During difficult economic times or periods of stock market
turbulence, investors often regard consumer staples stocks as lower-risk,
defensive investments. Moreover, our preference for large industry leaders
proved advantageous as many of these names outperformed the benchmark.
Coca-Cola Co., for example, gained about 30% during the period. Coke reported
growing revenues and bought back a large number of its shares. Another top
performer was Unilever N.V., a foreign-based, global supplier of foods, home
goods, and personal products, with a strong presence in the U.S. market. Its
stock benefited from the company's stronger-than-expected revenue growth and
progress in cost-cutting efforts.
OUTLOOK
We continue to be bottom-up investment managers, evaluating each company
individually and building our portfolio one stock at a time. Large Company
Value is broadly diversified, with ongoing overweight positions in the
information technology and health care sectors. Our valuation work is also
directing us toward smaller relative weightings in utilities stocks. We are
still finding greater value opportunities among mega-cap stocks and have
maintained our bias toward these firms.
Top Five Industries as of March 31, 2008
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Oil, Gas & Consumable Fuels 13.9% 13.9%
Pharmaceuticals 8.9% 7.5%
Diversified Financial Services 8.3% 10.2%
Diversified Telecommunication Services 6.0% 4.6%
Insurance 6.0% 6.1%
Types of Investments in Portfolio
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Common Stocks & Futures 99.1% 97.6%
Temporary Cash Investments 0.8% 2.4%
Other Assets and Liabilities(1) 0.1% --(2)
(1) Includes securities lending collateral and other assets and liabilities.
(2) Category is less than 0.05% of total net assets.
- ------
21
SCHEDULE OF INVESTMENTS
Large Company Value
MARCH 31, 2008
Shares Value
Common Stocks -- 97.0%
AEROSPACE & DEFENSE -- 1.2%
338,500 Northrop Grumman Corp. $ 26,338,696
--------------
BEVERAGES -- 2.1%
525,200 Coca-Cola Co. (The) 31,968,924
428,800 Pepsi Bottling Group Inc. 14,540,608
--------------
46,509,532
--------------
BIOTECHNOLOGY -- 0.6%
313,900 Amgen Inc.(1) 13,114,742
--------------
CAPITAL MARKETS -- 2.7%
271,500 Bank of New York Mellon Corp. (The) 11,329,695
533,500 Merrill Lynch & Co., Inc. 21,734,790
584,800 Morgan Stanley 26,725,360
--------------
59,789,845
--------------
CHEMICALS -- 2.2%
614,000 du Pont (E.I.) de Nemours & Co. 28,710,640
354,500 PPG Industries, Inc. 21,450,795
--------------
50,161,435
--------------
COMMERCIAL BANKS -- 5.2%
467,000 National City Corp. 4,646,650
252,600 PNC Financial Services Group 16,562,982
844,200 U.S. Bancorp 27,318,312
866,000 Wachovia Corp. 23,382,000
1,541,900 Wells Fargo & Co. 44,869,290
--------------
116,779,234
--------------
COMMERCIAL SERVICES & SUPPLIES -- 1.7%
180,500 Avery Dennison Corp. 8,889,625
456,600 R.R. Donnelley & Sons Company 13,839,546
471,100 Waste Management, Inc. 15,810,116
--------------
38,539,287
--------------
COMMUNICATIONS EQUIPMENT -- 0.2%
389,300 Motorola, Inc. 3,620,490
--------------
COMPUTERS & PERIPHERALS -- 1.2%
598,400 Hewlett-Packard Co. 27,322,944
--------------
CONSUMER FINANCE -- 0.2%
331,900 Discover Financial Services 5,433,203
--------------
DIVERSIFIED CONSUMER SERVICES -- 0.7%
743,800 H&R Block, Inc. 15,441,288
--------------
Shares Value
DIVERSIFIED FINANCIAL SERVICES -- 8.3%
1,756,700 Bank of America Corp. $ 66,596,497
2,826,500 Citigroup Inc. 60,543,630
1,375,400 JPMorgan Chase & Co. 59,073,430
--------------
186,213,557
--------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 6.0%
2,353,300 AT&T Inc. 90,131,390
134,400 Embarq Corp. 5,389,440
1,106,300 Verizon Communications Inc. 40,324,635
--------------
135,845,465
--------------
ELECTRIC UTILITIES -- 2.8%
437,700 Exelon Corporation 35,571,879
578,200 PPL Corporation 26,550,944
--------------
62,122,823
--------------
ENERGY EQUIPMENT & SERVICES -- 0.5%
181,000 National Oilwell Varco, Inc.(1) 10,566,780
--------------
FOOD & STAPLES RETAILING -- 2.7%
629,900 Kroger Co. (The) 15,999,460
566,700 Wal-Mart Stores, Inc. 29,853,756
414,300 Walgreen Co. 15,780,687
--------------
61,633,903
--------------
FOOD PRODUCTS -- 1.1%
712,900 Unilever N.V. New York Shares 24,046,117
--------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.7%
330,700 Medtronic, Inc. 15,995,959
--------------
HEALTH CARE PROVIDERS & SERVICES -- 0.3%
153,000 Quest Diagnostics Inc. 6,926,310
--------------
HOTELS, RESTAURANTS & LEISURE -- 0.5%
77,400 Darden Restaurants, Inc. 2,519,370
156,200 McDonald's Corp. 8,711,274
--------------
11,230,644
--------------
HOUSEHOLD DURABLES -- 0.7%
673,200 Newell Rubbermaid Inc. 15,396,084
--------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.7%
377,800 NRG Energy Inc.(1) 14,730,422
--------------
INDUSTRIAL CONGLOMERATES -- 5.7%
3,018,800 General Electric Co. 111,725,788
349,200 Tyco International Ltd. 15,382,260
--------------
127,108,048
--------------
- ------
22
Large Company Value
Shares Value
INSURANCE -- 6.0%
556,700 Allstate Corp. $ 26,755,002
1,041,700 American International Group, Inc. 45,053,525
338,500 Hartford Financial Services Group Inc. (The) 25,648,145
420,218 Loews Corp. 16,901,168
197,900 Marsh & McLennan Companies, Inc. 4,818,865
267,000 Torchmark Corp. 16,049,370
--------------
135,226,075
--------------
IT SERVICES -- 1.7%
216,600 Fiserv, Inc.(1) 10,416,294
248,600 International Business Machines Corp. 28,623,804
--------------
39,040,098
--------------
MACHINERY -- 3.6%
269,500 Caterpillar Inc. 21,099,155
63,500 Deere & Co. 5,107,940
392,400 Dover Corp. 16,394,472
460,600 Ingersoll-Rand Company Ltd. Cl A 20,533,548
244,500 Parker-Hannifin Corp. 16,936,515
--------------
80,071,630
--------------
MEDIA -- 3.0%
97,600 CBS Corp. Cl B 2,155,008
650,200 Gannett Co., Inc. 18,888,310
1,732,900 Time Warner Inc. 24,295,258
572,300 Viacom Inc. Cl B(1) 22,674,526
--------------
68,013,102
--------------
METALS & MINING -- 0.8%
262,400 Nucor Corp. 17,774,976
--------------
MULTILINE RETAIL -- 0.6%
333,700 Kohl's Corp.(1) 14,312,393
--------------
OFFICE ELECTRONICS -- 0.6%
929,200 Xerox Corp. 13,910,124
--------------
OIL, GAS & CONSUMABLE FUELS -- 13.9%
935,600 Chevron Corp. 79,862,816
716,000 ConocoPhillips 54,566,360
54,100 Devon Energy Corporation 5,644,253
1,344,500 Exxon Mobil Corp. 113,717,810
853,700 Royal Dutch Shell plc ADR 58,888,226
--------------
312,679,465
--------------
PAPER & FOREST PRODUCTS -- 1.2%
408,200 Weyerhaeuser Co. 26,549,328
--------------
Shares Value
PHARMACEUTICALS -- 8.9%
373,900 Abbott Laboratories $ 20,620,585
355,900 Eli Lilly and Company 18,360,881
950,600 Johnson & Johnson 61,665,422
389,000 Merck & Co., Inc. 14,762,550
2,757,700 Pfizer Inc. 57,718,661
655,200 Wyeth 27,361,152
--------------
200,489,251
--------------
ROAD & RAIL -- 0.2%
276,700 YRC Worldwide Inc.(1)(2) 3,630,304
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.9%
495,300 Applied Materials, Inc. 9,663,303
504,900 Intel Corp. 10,693,782
--------------
20,357,085
--------------
SOFTWARE -- 1.6%
810,000 Microsoft Corporation 22,987,800
728,500 Oracle Corp.(1) 14,249,460
--------------
37,237,260
--------------
SPECIALTY RETAIL -- 2.5%
374,100 Best Buy Co., Inc. 15,510,186
550,900 Gap, Inc. (The) 10,841,712
526,300 Home Depot, Inc. (The) 14,720,611
709,800 Staples, Inc. 15,693,678
--------------
56,766,187
--------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.7%
191,900 VF Corp. 14,874,169
--------------
THRIFTS & MORTGAGE FINANCE -- 1.4%
872,700 Freddie Mac 22,096,764
393,300 MGIC Investment Corp.(2) 4,141,449
495,600 Washington Mutual, Inc.(2) 5,104,680
--------------
31,342,893
--------------
TOBACCO -- 1.0%
305,600 Altria Group Inc. 6,784,320
305,600 Philip Morris International Inc.(1) 15,457,248
--------------
22,241,568
--------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.4%
1,333,900 Sprint Nextel Corp. 8,923,791
--------------
TOTAL COMMON STOCKS
(Cost $2,068,751,326) 2,178,306,507
--------------
- ------
23
Large Company Value
Value
Temporary Cash Investments -- 0.8%
Repurchase Agreement, Morgan Stanley Group, Inc.,
(collateralized by various U.S. Treasury obligations,
7.875%, 2/15/21, valued at $17,793,733), in a joint
trading account at 1.30%, dated 3/31/08, due 4/1/08
(Delivery value $17,394,140)
(Cost $17,393,512) $ 17,393,512
--------------
Temporary Cash Investments -- Segregated For Futures Contracts -- 2.1%
Repurchase Agreement, Morgan Stanley Group, Inc.,
(collateralized by various U.S. Treasury obligations,
7.875%, 2/15/21, valued at $49,827,213), in a joint
trading account at 1.30%, dated 3/31/08, due 4/1/08
(Delivery value $48,708,247)
(Cost $48,706,488) 48,706,488
--------------
Temporary Cash Investments -- Securities Lending Collateral(3) -- 0.5%
Repurchase Agreement, Barclays Bank plc, (collateralized
by various U.S. Government Agency obligations in a
pooled account at the lending agent), 2.30%, dated
3/31/08 due 4/1/08 (Delivery value $2,500,160) 2,500,000
Value
Repurchase Agreement, BNP Paribas, (collateralized by
various U.S. Government Agency obligations in a pooled
account at the lending agent), 2.30%, dated 3/31/08, due
4/1/08 (Delivery value $3,056,070) $ 3,055,875
Repurchase Agreement, Deutsche Bank AG, (collateralized
by various U.S. Government Agency obligations in a
pooled account at the lending agent), 2.25%, dated
3/31/08, due 4/1/08 (Delivery value $3,000,188) 3,000,000
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency
obligations in a pooled account at the lending agent),
2.15%, dated 3/31/08, due 4/1/08 (Delivery value
$3,000,179) 3,000,000
--------------
TOTAL TEMPORARY CASH INVESTMENTS - SECURITIES LENDING
COLLATERAL
(Cost $11,555,875) 11,555,875
--------------
TOTAL INVESTMENT SECURITIES -- 100.4%
(Cost $2,146,407,201) 2,255,962,382
--------------
OTHER ASSETS AND LIABILITIES -- (0.4)% (9,541,655)
--------------
TOTAL NET ASSETS -- 100.0% $2,246,420,727
==============
Futures Contracts
Expiration Underlying Face Amount Unrealized Gain
Contracts Purchased Date at Value (Loss)
737 S&P 500 E-Mini
Futures June 2008 $48,706,488 $(398,449)
============= ===========
Notes to Schedule of Investments
ADR = American Depositary Receipt
(1) Non-income producing.
(2) Security, or a portion thereof, was on loan as of March 31, 2008.
(3) 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 October 1, 2007 to March 31, 2008.
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
Account Account Expenses Paid
Value Value During Period* Annualized
10/1/07 3/31/08 10/1/07 - 3/31/08 Expense Ratio*
Equity Income
ACTUAL
Investor Class $1,000 $901.60 $4.61 0.97%
Institutional Class $1,000 $903.80 $3.66 0.77%
A Class $1,000 $900.60 $5.80 1.22%
B Class $1,000 $897.20 $9.34 1.97%
C Class $1,000 $897.20 $9.34 1.97%
R Class $1,000 $900.40 $6.98 1.47%
HYPOTHETICAL
Investor Class $1,000 $1,020.15 $4.90 0.97%
Institutional Class $1,000 $1,021.15 $3.89 0.77%
A Class $1,000 $1,018.90 $6.16 1.22%
B Class $1,000 $1,015.15 $9.92 1.97%
C Class $1,000 $1,015.15 $9.92 1.97%
R Class $1,000 $1,017.65 $7.41 1.47%
Value
ACTUAL
Investor Class $1,000 $851.20 $4.63 1.00%
Institutional Class $1,000 $852.30 $3.70 0.80%
A Class $1,000 $851.40 $5.79 1.25%
B Class $1,000 $848.30 $9.24 2.00%
C Class $1,000 $848.60 $9.24 2.00%
R Class $1,000 $849.20 $6.93 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%
A Class $1,000 $1,018.75 $6.31 1.25%
B Class $1,000 $1,015.00 $10.08 2.00%
C Class $1,000 $1,015.00 $10.08 2.00%
R Class $1,000 $1,017.50 $7.57 1.50%
* Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 183, the number of days in the most recent fiscal half-year,
divided by 366, to reflect the one-half year period.
- ------
26
Beginning Ending
Account Account Expenses Paid
Value Value During Period* Annualized
10/1/07 3/31/08 10/1/07 - 3/31/08 Expense Ratio*
Large Company Value
ACTUAL
Investor Class $1,000 $854.80 $3.85 0.83%
Institutional Class $1,000 $855.60 $2.92 0.63%
A Class $1,000 $852.40 $5.00 1.08%
B Class $1,000 $849.50 $8.46 1.83%
C Class $1,000 $849.10 $8.46 1.83%
R Class $1,000 $852.60 $6.16 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%
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
MARCH 31, 2008
Large
Equity Income Value Company Value
ASSETS
Investment securities -
unaffiliated, at value (cost
of $4,944,189,035,
$2,257,583,157 and
$2,134,851,326, respectively)
- -- including $84,425,002,
$10,341,766 and $11,421,425 of
securities on loan,
respectively $5,128,690,600 $2,248,276,503 $2,244,406,507
Investment securities -
affiliated, at value (cost of
$162,693,337, $- and $-,
respectively) 154,801,340 -- --
Investments made with cash
collateral received for
securities on loan, at value
(cost of $85,526,941,
$10,735,081 and $11,555,875,
respectively) 85,526,941 10,735,081 11,555,875
-------------- -------------- --------------
Total investment securities,
at value (cost of
$5,192,409,313, $2,268,318,238
and $2,146,407,201,
respectively) 5,369,018,881 2,259,011,584 2,255,962,382
Cash 14,922,572 345,594 22,094
Receivable for investments sold 129,086,574 23,189,720 --
Receivable for forward foreign
currency exchange contracts 3,108,387 1,138,011 --
Receivable for capital shares
sold 8,616,099 789,064 47,910
Receivable for variation
margin on futures contracts -- -- 105,016
Dividends and interest
receivable 21,638,879 4,817,031 3,521,372
-------------- -------------- --------------
5,546,391,392 2,289,291,004 2,259,658,774
-------------- -------------- --------------
LIABILITIES
Payable for collateral
received for securities on loan 85,526,941 10,735,081 11,555,875
Payable for investments
purchased 108,761,499 42,190,374 --
Payable for forward foreign
currency exchange contracts 10,777 48,347 --
Payable for capital shares
redeemed 38,148,193 8,795,977 75,089
Accrued management fees 4,296,212 1,832,465 1,467,916
Distribution fees payable 74,119 11,013 41,292
Service fees (and distribution
fees -- A Class and R Class)
payable 242,478 45,047 97,875
-------------- -------------- --------------
237,060,219 63,658,304 13,238,047
-------------- -------------- --------------
NET ASSETS $5,309,331,173 $2,225,632,700 $2,246,420,727
============== ============== ==============
See Notes to Financial Statements.
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28
MARCH 31, 2008
Large
Equity Income Value Company Value
NET ASSETS CONSIST OF:
Capital (par value and paid-in
surplus) $5,520,926,693 $2,504,853,405 $2,116,209,267
Undistributed net investment
income 14,458,511 1,230,216 94,000
Accumulated undistributed net
realized gain (loss) on
investment and foreign
currency transactions (405,761,953) (272,231,651) 20,960,728
Net unrealized appreciation
(depreciation) on investments
and translation of assets and
liabilities in foreign
currencies 179,707,922 (8,219,270) 109,156,732
-------------- -------------- --------------
$5,309,331,173 $2,225,632,700 $2,246,420,727
============== ============== ==============
INVESTOR CLASS,
$0.01 PAR VALUE
Net assets $3,719,757,487 $1,707,366,420 $1,251,630,935
Shares outstanding 509,377,281 295,208,391 193,285,478
Net asset value per share $7.30 $5.78 $6.48
INSTITUTIONAL CLASS,
$0.01 PAR VALUE
Net assets $496,033,397 $307,769,162 $540,297,304
Shares outstanding 67,898,400 53,137,499 83,439,220
Net asset value per share $7.31 $5.79 $6.48
A CLASS, $0.01 PAR VALUE
Net assets $933,600,022 $191,738,555 $373,078,155
Shares outstanding 127,847,880 33,167,372 57,631,017
Net asset value per share $7.30 $5.78 $6.47
Maximum offering price (net
asset value divided by 0.9425) $7.75 $6.13 $6.86
B CLASS, $0.01 PAR VALUE
Net assets $235,313 $5,600,706 $12,964,654
Shares outstanding 32,219 968,814 1,996,712
Net asset value per share $7.30 $5.78 $6.49
C CLASS, $0.01 PAR VALUE
Net assets $116,985,298 $11,532,380 $51,774,692
Shares outstanding 16,019,546 2,009,886 7,997,255
Net asset value per share $7.30 $5.74 $6.47
R CLASS, $0.01 PAR VALUE
Net assets $42,719,656 $1,625,477 $16,674,987
Shares outstanding 5,862,291 281,107 2,574,531
Net asset value per share $7.29 $5.78 $6.48
See Notes to Financial Statements.
- ------
29
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2008
Large
Equity Income Value Company Value
INVESTMENT INCOME (LOSS)
INCOME:
Dividends (including
$12,848,923 from affiliates in
Equity Income and net of
foreign taxes withheld of
$401,888, $222,918 and
$581,973, respectively) $ 191,317,460 $ 72,830,214 $ 68,089,878
Interest 46,271,997 2,126,639 4,759,541
Securities lending, net 716,341 354,350 511,790
-------------- -------------- --------------
238,305,798 75,311,203 73,361,209
-------------- -------------- --------------
EXPENSES:
Management fees 60,057,565 27,381,603 20,398,779
Distribution fees:
A Class 1,394,215 267,912 285,043
B Class 469 54,586 123,728
C Class 994,152 139,986 511,362
Service fees:
A Class 1,394,215 267,912 285,043
B Class 156 18,195 41,243
C Class 331,384 46,662 170,454
Distribution and service fees:
A Class 1,643,383 361,574 495,185
A Class (old) (Note 10) -- 75,843 390,735
R Class 242,555 4,923 94,652
Directors' fees and expenses 172,874 66,421 68,206
Other expenses 203,685 25,570 7,775
-------------- -------------- --------------
66,434,653 28,711,187 22,872,205
-------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) 171,871,145 46,600,016 50,489,004
-------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS)
NET REALIZED GAIN (LOSS) ON:
Investment transactions
(including $(408,210) from
affiliates in Equity Income) (29,103,193) (50,674,190) 97,417,325
Foreign currency transactions (18,498,076) (15,003,934) --
Futures transactions -- -- (10,394,817)
-------------- -------------- --------------
(47,601,269) (65,678,124) 87,022,508
-------------- -------------- --------------
CHANGE IN NET UNREALIZED
APPRECIATION (DEPRECIATION) ON:
Investments (416,917,212) (285,688,464) (394,655,836)
Translation of assets and
liabilities in foreign
currencies 3,795,386 1,354,323 --
Futures -- -- (419,210)
-------------- -------------- --------------
(413,121,826) (284,334,141) (395,075,046)
-------------- -------------- --------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) (460,723,095) (350,012,265) (308,052,538)
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $(288,851,950) $(303,412,249) $(257,563,534)
============== ============== ==============
See Notes to Financial Statements.
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30
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED MARCH 31, 2008 AND MARCH 31, 2007
Equity Income Value
Increase
(Decrease) in
Net Assets 2008 2007 2008 2007
OPERATIONS
Net investment
income (loss) $ 171,871,145 $ 136,128,614 $ 46,600,016 $ 46,539,323
Net realized
gain (loss) (47,601,269) 472,394,144 (65,678,124) 269,233,247
Change in net
unrealized
appreciation
(depreciation) (413,121,826) 213,879,908 (284,334,141) 99,138,940
--------------- -------------- -------------- --------------
Net increase
(decrease) in
net assets
resulting from
operations (288,851,950) 822,402,666 (303,412,249) 414,911,510
--------------- -------------- -------------- --------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net
investment
income:
Investor
Class (126,757,125) (86,505,866) (37,683,425) (36,707,068)
Institutional
Class (18,178,082) (10,063,185) (6,387,555) (4,512,290)
A Class (30,371,773) (18,822,568) (3,763,083) (2,977,077)
A Class (old)
(Note 10) -- -- (132,911) (857,715)
B Class (1,723) -- (52,218) (38,366)
C Class (2,423,835) (1,180,752) (120,758) (110,411)
R Class (1,137,635) (537,191) (17,413) (2,127)
From net
realized gains:
Investor
Class (373,678,155) (273,126,274) (254,095,425) (162,730,575)
Institutional
Class (49,979,556) (29,014,951) (42,172,944) (18,000,178)
A Class (95,264,362) (67,129,734) (30,107,815) (15,791,328)
A Class (old)
(Note 10) -- -- -- (4,409,698)
B Class (9,280) -- (850,431) (485,927)
C Class (11,272,883) (7,091,506) (2,109,263) (1,407,351)
R Class (4,226,795) (2,265,013) (156,140) (12,047)
--------------- -------------- -------------- --------------
Decrease in net
assets from
distributions (713,301,204) (495,737,040) (377,649,381) (248,042,158)
--------------- -------------- -------------- --------------
CAPITAL SHARE
TRANSACTIONS
Net increase
(decrease) in
net assets from
capital share
transactions (483,149,448) 1,344,181,027 (227,749,543) 109,597,998
--------------- -------------- -------------- --------------
Net increase
(decrease) in
net assets (1,485,302,602) 1,670,846,653 (908,811,173) 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 $ 5,309,331,173 $6,794,633,775 $2,225,632,700 $3,134,443,873
=============== ============== ============== ==============
Undistributed
net investment
income $14,458,511 $23,339,414 $1,230,216 $2,766,336
=============== ============== ============== ==============
See Notes to Financial Statements.
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31
YEARS ENDED MARCH 31, 2008 AND MARCH 31, 2007
Large Company Value
Increase (Decrease) in Net Assets 2008 2007
OPERATIONS
Net investment income (loss) $ 50,489,004 $ 43,797,171
Net realized gain (loss) 87,022,508 26,196,582
Change in net unrealized appreciation
(depreciation) (395,075,046) 273,032,776
-------------- --------------
Net increase (decrease) in net assets resulting
from operations (257,563,534) 343,026,529
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class (29,578,990) (24,255,936)
Institutional Class (12,612,481) (10,833,931)
A Class (6,000,251) (3,728,413)
A Class (old) (Note 10) (1,792,049) (3,616,661)
B Class (155,982) (136,165)
C Class (639,654) (550,634)
R Class (278,651) (187,796)
From net realized gains:
Investor Class (42,817,971) (11,790,615)
Institutional Class (16,693,652) (4,669,418)
A Class (12,534,118) (2,125,865)
A Class (old) (Note 10) -- (1,905,560)
B Class (447,000) (142,111)
C Class (1,803,288) (577,104)
R Class (545,099) (124,357)
-------------- --------------
Decrease in net assets from distributions (125,899,186) (64,644,566)
-------------- --------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets from
capital share transactions (84,653,829) 286,653,972
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS (468,116,549) 565,035,935
NET ASSETS
Beginning of period 2,714,537,276 2,149,501,341
-------------- --------------
End of period $2,246,420,727 $2,714,537,276
============== ==============
Undistributed net investment income $94,000 $681,360
============== ==============
See Notes to Financial Statements.
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32
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
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 and Large Company Value are 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. 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.
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 the Board of Directors or its designee, in accordance
with procedures adopted by the Board of Directors, 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 purposes, 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.
- ------
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 income earned, net of any rebates or fees, is included in the
Statement of Operations. 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 futures transactions and unrealized appreciation (depreciation)
on futures, 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 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.
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
- ------
34
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 2005. 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 the funds 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. The annual management fee
schedule for Large Company Value ranges from 0.70% to 0.90% for the Investor
Class, A Class, B Class, C Class and R Class. Prior to September 4, 2007, the
A Class (new) management fee was 0.25% less at each point within the range for
the funds. The Institutional Class of each fund is 0.20% less at each point
within the range.
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35
The effective annual management fee for each class of each fund for the year
ended March 31, 2008, was as follows:
Equity Income Value Large Company Value
Investor 0.96% 1.00% 0.83%
Institutional 0.76% 0.80% 0.63%
A 0.84% 0.89% 0.73%
B 0.96% 1.00% 0.83%
C 0.96% 1.00% 0.83%
R 0.96% 1.00% 0.83%
DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a separate
Master Distribution and Individual Shareholder Services Plan for each of the A
Class (new), 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 the funds, 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%. 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 (new), A Class (old), 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 year ended March 31, 2008, 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 securities lending agreement with
JPMorgan Chase Bank (JPMCB). Prior to December 12, 2007, the funds had a bank
line of credit agreement with JPMCB. JPMCB is a custodian of the funds and a
wholly owned subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the year ended
March 31, 2008, were as follows:
Equity Income Value Large Company Value
Purchases $10,669,018,687 $4,252,632,932 $456,401,171
Proceeds from sales $11,639,324,108 $4,768,289,560 $575,448,583
- ------
36
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows:
Year ended March 31, 2008(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 86,497,946 $732,783,293 190,310,967 $ 1,637,151,978
Issued in
reinvestment of
distributions 57,630,203 461,310,501 38,604,239 331,069,234
Redeemed (188,655,276) (1,565,013,939) (133,390,090) (1,127,801,623)
------------- --------------- ------------- ---------------
(44,527,127) (370,920,145) 95,525,116 840,419,589
------------- --------------- ------------- ---------------
INSTITUTIONAL
CLASS/SHARES
AUTHORIZED 240,000,000 125,000,000
============= =============
Sold 25,454,164 220,747,714 27,716,304 235,066,960
Issued in
reinvestment of
distributions 8,329,370 66,669,823 4,398,103 37,748,723
Redeemed (29,593,511) (246,373,931) (15,634,070) (129,701,566)
------------- --------------- ------------- ---------------
4,190,023 41,043,606 16,480,337 143,114,117
------------- --------------- ------------- ---------------
A CLASS/SHARES
AUTHORIZED 475,000,000 300,000,000
============= =============
Sold 34,637,326 295,784,082 63,150,373 542,584,966
Issued in
reinvestment of
distributions 15,215,308 121,615,154 9,703,715 83,260,832
Redeemed (70,097,342) (588,618,649) (36,128,442) (306,093,143)
------------- --------------- ------------- ---------------
(20,244,708) (171,219,413) 36,725,646 319,752,655
------------- --------------- ------------- ---------------
B CLASS/SHARES
AUTHORIZED 20,000,000 N/A
============= =============
Sold 31,226 249,461
Issued in
reinvestment of
distributions 993 7,818
------------- --------------- ------------- ---------------
32,219 257,279
------------- --------------- ------------- ---------------
C CLASS/SHARES
AUTHORIZED 50,000,000 30,000,000
============= =============
Sold 3,062,619 26,442,946 3,827,372 32,729,364
Issued in
reinvestment of
distributions 1,577,148 12,559,343 835,135 7,173,464
Redeemed (3,333,340) (27,468,435) (2,097,020) (17,745,905)
------------- --------------- ------------- ---------------
1,306,427 11,533,854 2,565,487 22,156,923
------------- --------------- ------------- ---------------
R CLASS/SHARES
AUTHORIZED 20,000,000 10,000,000
============= =============
Sold 1,863,334 15,974,449 2,794,448 23,866,772
Issued in
reinvestment of
distributions 660,261 5,258,200 323,510 2,772,472
Redeemed (1,846,826) (15,077,278) (933,327) (7,901,501)
------------- --------------- ------------- ---------------
676,769 6,155,371 2,184,631 18,737,743
------------- --------------- ------------- ---------------
Net increase
(decrease) (58,566,397) $(483,149,448) 153,481,217 $ 1,344,181,027
============= ============== ============= ===============
(1) September 28, 2007 (commencement of sale) through March 31, 2008 for the B
Class.
- ------
37
Year ended March 31, 2008 Year ended March 31, 2007
Shares Amount Shares Amount
Value
INVESTOR
CLASS/SHARES
AUTHORIZED 1,250,000,000 700,000,000
============= ============
Sold 26,795,945 $ 192,485,324 46,299,513 $ 349,174,054
Issued in
reinvestment of
distributions 43,153,018 275,895,444 25,193,051 189,713,667
Redeemed (102,497,869) (735,388,471) (63,409,787) (473,327,597)
------------- -------------- ------------ -------------
(32,548,906) (267,007,703) 8,082,777 65,560,124
------------- -------------- ------------ -------------
INSTITUTIONAL
CLASS/SHARES
AUTHORIZED 125,000,000 100,000,000
============= ============
Sold 21,049,735 154,695,580 12,275,041 91,985,893
Issued in
reinvestment of
distributions 7,589,258 48,506,946 2,982,130 22,480,817
Redeemed (13,489,917) (93,706,190) (12,700,338) (94,682,949)
------------- -------------- ------------ -------------
15,149,076 109,496,336 2,556,833 19,783,761
------------- -------------- ------------ -------------
A CLASS/SHARES
AUTHORIZED 150,000,000 100,000,000
============= ============
Sold 5,656,979 40,732,287 9,522,904 71,576,386
Issued in
connection with
reclassification
(Note 10) 8,894,774 68,678,162 -- --
Issued in
reinvestment of
distributions 5,215,034 33,245,516 2,477,211 18,667,945
Redeemed (19,350,464) (136,544,275) (9,165,753) (69,029,374)
------------- -------------- ------------ -------------
416,323 6,111,690 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 81,475 595,253 130,722 977,611
Issued in
reinvestment of
distributions 120,823 765,058 60,179 453,375
Redeemed (250,589) (1,720,368) (166,459) (1,227,272)
------------- -------------- ------------ -------------
(48,291) (360,057) 24,442 203,714
------------- -------------- ------------ -------------
C CLASS/SHARES
AUTHORIZED 20,000,000 10,000,000
============= ============
Sold 326,344 2,353,715 651,229 4,845,046
Issued in
reinvestment of
distributions 262,066 1,650,552 160,285 1,201,156
Redeemed (1,523,779) (10,474,334) (563,859) (4,173,304)
------------- -------------- ------------ -------------
(935,369) (6,470,067) 247,655 1,872,898
------------- -------------- ------------ -------------
R CLASS/SHARES
AUTHORIZED 20,000,000 5,000,000
============= ============
Sold 284,329 1,995,315 39,658 290,987
Issued in
reinvestment of
distributions 27,378 173,553 1,882 14,174
Redeemed (74,072) (485,935) (4,072) (29,290)
------------- -------------- ------------ -------------
237,635 1,682,933 37,468 275,871
------------- -------------- ------------ -------------
Net increase
(decrease) (26,947,732) $(227,749,543) 13,850,896 $109,597,998
============= ============== ============ =============
- ------
38
Year ended March 31, 2008 Year ended March 31, 2007
Shares Amount Shares Amount
Large Company Value
INVESTOR
CLASS/SHARES
AUTHORIZED 550,000,000 350,000,000
============ ============
Sold 76,540,681 $ 576,064,660 72,227,467 $ 518,958,509
Issued in
reinvestment of
distributions 7,187,899 52,324,248 3,744,065 27,199,318
Redeemed (88,750,820) (657,473,389) (43,277,503) (310,977,065)
------------ ------------- ------------ -------------
(5,022,240) (29,084,481) 32,694,029 235,180,762
------------ ------------- ------------ -------------
INSTITUTIONAL
CLASS/SHARES
AUTHORIZED 200,000,000 200,000,000
============ ============
Sold 33,589,521 243,933,475 25,602,969 185,299,046
Issued in
reinvestment of
distributions 3,541,198 25,810,952 1,929,307 13,987,715
Redeemed (31,400,005) (228,197,043) (28,272,499) (203,670,769)
------------ ------------- ------------ -------------
5,730,714 41,547,384 (740,223) (4,384,008)
------------ ------------- ------------ -------------
A CLASS/SHARES
AUTHORIZED 300,000,000 75,000,000
============ ============
Sold 12,320,960 90,750,995 16,186,463 116,408,513
Issued in
connection with
reclassification
(Note 10) 27,248,825 204,605,063 -- --
Issued in
reinvestment of
distributions 2,102,988 15,217,432 628,205 4,579,239
Redeemed (21,497,528) (157,103,590) (6,834,302) (49,342,297)
------------ ------------- ------------ -------------
20,175,245 153,469,900 9,980,366 71,645,455
------------ ------------- ------------ -------------
A CLASS
(OLD)/SHARES
AUTHORIZED N/A 150,000,000
============ ============
Sold 2,048,715 16,003,585 6,284,203 45,840,430
Issued in
reinvestment of
distributions 201,210 1,569,589 705,634 5,122,651
Redeemed in
connection with
reclassification
(Note 10) (27,248,825) (204,605,063) -- --
Redeemed (6,685,340) (52,269,420) (10,446,648) (73,879,471)
------------ ------------- ------------ -------------
(31,684,240) (239,301,309) (3,456,811) (22,916,390)
------------ ------------- ------------ -------------
B CLASS/SHARES
AUTHORIZED 20,000,000 10,000,000
============ ============
Sold 74,011 572,482 164,034 1,189,507
Issued in
reinvestment of
distributions 69,313 504,234 31,725 233,063
Redeemed (440,433) (3,203,529) (270,147) (1,937,433)
------------ ------------- ------------ -------------
(297,109) (2,126,813) (74,388) (514,863)
------------ ------------- ------------ -------------
C CLASS/SHARES
AUTHORIZED 50,000,000 20,000,000
============ ============
Sold 1,786,478 13,418,691 1,996,859 14,288,977
Issued in
reinvestment of
distributions 125,755 912,831 56,188 412,221
Redeemed (3,420,371) (25,225,156) (1,729,086) (12,288,309)
------------ ------------- ------------ -------------
(1,508,138) (10,893,634) 323,961 2,412,889
------------ ------------- ------------ -------------
R CLASS/SHARES
AUTHORIZED 20,000,000 10,000,000
============ ============
Sold 862,344 6,446,439 968,486 7,058,412
Issued in
reinvestment of
distributions 109,464 795,585 41,974 306,715
Redeemed (748,527) (5,506,900) (293,569) (2,135,000)
------------ ------------- ------------ -------------
223,281 1,735,124 716,891 5,230,127
------------ ------------- ------------ -------------
Net increase
(decrease) (12,382,487) $(84,653,829) 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 year ended March 31, 2008 follows:
March 31, 2008
Share
Balance Purchase Sales Realized Dividend Share Market
Fund/Company 3/31/07 Cost Cost Gain (Loss) Income Balance Value
Equity Income
Cascade
Natural Gas
Corp.(1) 569,091 -- $ 11,798,037 $ 3,282,875 $136,582 -- --
Commerce
Bancshares,
Inc.(1) 3,319,053 $ 29,401,046 68,657,967 (3,664,409) 3,384,296 2,629,344(2) (1)
Nicor Inc. -- 95,243,272 807,469 (52,631) 1,384,258 2,255,000 $ 75,565,050
Westar Energy
Inc.(1) 3,949,949 30,730,727 26,699,263 11,517 4,604,378 4,124,849 (1)
WGL Holdings
Inc. 2,427,900 8,587,793 7,291,554 14,438 3,339,409 2,471,500 79,236,290
------------ ------------ ----------- ----------- ------------ ------------
$163,962,838 $115,254,290 $ (408,210) $12,848,923 $154,801,340
============ ============ =========== ============ ============
(1) Company was not an affiliate at March 31, 2008.
(2) Includes adjustments for shares received from a stock split and/or stock
spinoff during the period.
6. SECURITIES LENDING
As of March 31, 2008, securities in Equity Income, Value and Large Company
Value valued at $84,425,002, $10,341,766 and $11,421,425, 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 $85,526,941, $10,735,081 and $11,555,875, 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
Effective December 12, 2007, the funds, along with certain other funds managed
by ACIM or ACGIM, have a $500,000,000 unsecured bank line of credit agreement
with Bank of America, N.A. Prior to December 12, 2007, the funds, along with
certain other funds managed by ACIM or ACGIM, had 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, which is subject to annual renewal, bear interest at the
Federal Funds rate plus 0.40%. The funds did not borrow from the line during
the year ended March 31, 2008.
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 tax character of distributions paid during the years ended March 31, 2008
and March 31, 2007 were as follows:
Equity Income Value Large Company Value
2008 2007 2008 2007 2008 2007
DISTRIBUTIONS PAID FROM
Ordinary
income $487,684,994 $305,974,608 $209,835,327 $159,385,059 $60,740,054 $55,108,975
Long-term
capital
gains $225,616,210 $189,762,432 $167,814,054 $88,657,099 $65,159,132 $9,535,591
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect
the differing character of certain income items and net realized gains and
losses for financial statement and tax purposes, and may result in
reclassification among certain capital accounts on the financial statements.
As of March 31, 2008, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
Large Company
Equity Income Value Value
Federal tax cost of investments $5,288,332,339 $2,338,779,684 $2,149,549,359
============== ============== ==============
Gross tax appreciation of
investments $ 321,017,568 $ 85,249,355 $ 390,831,275
Gross tax depreciation of
investments (240,331,026) (165,017,455) (284,418,252)
-------------- -------------- --------------
Net tax appreciation
(depreciation) of investments $ 80,686,542 $ (79,768,100) $ 106,413,023
============== ============== ==============
Net tax appreciation
(depreciation) on derivatives
and translation of assets and
liabilities in foreign
currencies $6,436 $(2,278) --
-------------- -------------- --------------
Net tax appreciation
(depreciation) $80,692,978 $(79,770,378) $106,413,023
============== ============== ==============
Undistributed ordinary income $14,428,269 $1,451,703 $94,000
Accumulated long-term gains $392,555 -- $23,704,437
Capital loss deferrals $(307,109,322) $(200,845,570) --
Currency loss deferrals -- $(56,460) --
The difference between book-basis and tax-basis cost and unrealized
appreciation (depreciation) is attributable primarily to the tax deferral of
losses on wash sales and the realization for tax purposes of unrealized gains
(losses) on certain forward foreign currency exchange contracts and on certain
futures contracts.
The capital and currency loss deferrals listed above represent net capital and
foreign currency losses incurred in the five-month period ended March 31,
2008. The funds have 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 (old) shareholders of Large Company 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 December 3, 2007.
Subsequent to the reclassification, the Advisor Class was renamed A Class.
- ------
41
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. The
adoption of FIN 48 did 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.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, "Disclosures about Derivative Instruments and Hedging Activities -- an
amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for
fiscal years beginning after November 15, 2008. FAS 161 amends and expands
disclosures about derivative instruments and hedging activities. FAS 161
requires qualitative disclosures about the objectives and strategies of
derivative instruments, quantitative disclosures about the fair value amounts
of and gains and losses on derivative instruments, and disclosures of
credit-risk-related contingent features in hedging activities. Management is
currently evaluating the impact that adopting FAS 161 will have on the
financial statement disclosures.
12. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The funds hereby designate up to the maximum amount allowable as qualified
dividend income for the fiscal year ended March 31, 2008.
For corporate taxpayers, the funds hereby designate the following ordinary
income distributions paid during the fiscal year ended March 31, 2008, or up
to the maximum amount allowable, as qualified for the corporate dividends
received deduction.
Equity Income Value Large Company Value
$147,245,588 $62,827,782 $60,176,395
The funds hereby designate long-term capital gain distributions for the fiscal
year ended March 31, 2008, as follows:
Equity Income Value Large Company Value
$225,616,210 $167,814,054 $65,159,132
The funds hereby designate qualified short-term capital gain distributions for
purposes of Internal Revenue Code 871 for the fiscal year ended March 31,
2008, as follows:
Equity Income Value Large Company Value
$306,994,588 $161,677,964 $9,663,689
- ------
42
FINANCIAL HIGHLIGHTS
Equity Income
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of
Period $8.65 $8.11 $8.05 $7.84 $6.22
-------- -------- -------- -------- --------
Income From
Investment
Operations
Net
Investment
Income
(Loss)(1) 0.23 0.21 0.20 0.21 0.22
Net Realized
and
Unrealized
Gain (Loss) (0.62) 1.05 0.36 0.61 1.71
-------- -------- -------- -------- --------
Total From
Investment
Operations (0.39) 1.26 0.56 0.82 1.93
-------- -------- -------- -------- --------
Distributions
From Net
Investment
Income (0.23) (0.17) (0.18) (0.19) (0.19)
From Net
Realized
Gains (0.73) (0.55) (0.32) (0.42) (0.12)
-------- -------- -------- -------- --------
Total
Distributions (0.96) (0.72) (0.50) (0.61) (0.31)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $7.30 $8.65 $8.11 $8.05 $7.84
======== ======== ======== ======== ========
TOTAL RETURN(2) (5.17)% 15.79% 7.21% 10.69% 31.30%
RATIOS/SUPPLEMENTAL DATA
Ratio of
Operating
Expenses to
Average Net Assets 0.97% 0.97% 0.98% 0.99% 1.00%
Ratio of Net
Investment Income
(Loss) to Average
Net Assets 2.68% 2.43% 2.53% 2.56% 2.95%
Portfolio
Turnover Rate 165% 160% 150% 174% 91%
Net Assets, End
of Period (in
thousands) $3,719,757 $4,790,510 $3,715,366 $3,290,442 $2,248,158
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
43
Equity Income
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $8.65 $8.11 $8.06 $7.85 $6.23
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.25 0.23 0.22 0.22 0.24
Net Realized and
Unrealized Gain (Loss) (0.61) 1.05 0.35 0.61 1.71
-------- -------- -------- -------- --------
Total From Investment
Operations (0.36) 1.28 0.57 0.83 1.95
-------- -------- -------- -------- --------
Distributions
From Net Investment
Income (0.25) (0.19) (0.20) (0.20) (0.21)
From Net Realized Gains (0.73) (0.55) (0.32) (0.42) (0.12)
-------- -------- -------- -------- --------
Total Distributions (0.98) (0.74) (0.52) (0.62) (0.33)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period $7.31 $8.65 $8.11 $8.06 $7.85
======== ======== ======== ======== ========
TOTAL RETURN(2) (4.85)% 16.01% 7.29% 10.91% 31.51%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.77% 0.77% 0.78% 0.79% 0.80%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 2.88% 2.63% 2.73% 2.76% 3.15%
Portfolio Turnover Rate 165% 160% 150% 174% 91%
Net Assets, End of Period
(in thousands) $496,033 $551,202 $382,909 $257,195 $183,330
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
44
Equity Income
A Class(1)
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $8.65 $8.11 $8.05 $7.84 $6.22
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income
(Loss)(2) 0.20 0.19 0.18 0.19 0.20
Net Realized and
Unrealized Gain
(Loss) (0.61) 1.05 0.36 0.61 1.72
-------- -------- -------- -------- --------
Total From Investment
Operations (0.41) 1.24 0.54 0.80 1.92
-------- -------- -------- -------- --------
Distributions
From Net Investment
Income (0.21) (0.15) (0.16) (0.17) (0.18)
From Net Realized
Gains (0.73) (0.55) (0.32) (0.42) (0.12)
-------- -------- -------- -------- --------
Total Distributions (0.94) (0.70) (0.48) (0.59) (0.30)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period $7.30 $8.65 $8.11 $8.05 $7.84
======== ======== ======== ======== ========
TOTAL RETURN(3) (5.40)% 15.51% 6.94% 10.41% 30.97%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average Net
Assets 1.22% 1.22% 1.23% 1.24% 1.25%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 2.43% 2.18% 2.28% 2.31% 2.70%
Portfolio Turnover Rate 165% 160% 150% 174% 91%
Net Assets, End of Period
(in thousands) $933,600 $1,280,888 $902,749 $765,331 $457,360
(1) Prior to September 4, 2007, the A Class was referred to as the Advisor
Class.
(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.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is made
in accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
See Notes to Financial Statements.
- ------
45
Equity Income
B Class
For a Share Outstanding Throughout the Period Indicated
2008(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $8.99
--------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.08
Net Realized and Unrealized Gain (Loss) (0.95)
--------
Total From Investment Operations (0.87)
--------
Distributions
From Net Investment Income (0.09)
From Net Realized Gains (0.73)
--------
Total Distributions (0.82)
--------
Net Asset Value, End of Period $7.30
========
TOTAL RETURN(3) (10.28)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.97%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 2.11%(4)
Portfolio Turnover Rate 165%(5)
Net Assets, End of Period (in thousands) $235
(1) September 28, 2007 (commencement of sale) through March 31, 2008.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the total
return differences would more closely reflect the class expense differences.
The calculation of net asset values to two decimal places is made in
accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2008.
See Notes to Financial Statements.
- ------
46
Equity Income
C Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning of
Period $8.65 $8.11 $8.06 $7.85 $6.21
------- ------- ------- ------- -------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.14 0.12 0.13 0.13 0.15
Net Realized and
Unrealized Gain (Loss) (0.61) 1.06 0.34 0.61 1.73
------- ------- ------- ------- -------
Total From Investment
Operations (0.47) 1.18 0.47 0.74 1.88
------- ------- ------- ------- -------
Distributions
From Net Investment Income (0.15) (0.09) (0.10) (0.11) (0.12)
From Net Realized Gains (0.73) (0.55) (0.32) (0.42) (0.12)
------- ------- ------- ------- -------
Total Distributions (0.88) (0.64) (0.42) (0.53) (0.24)
------- ------- ------- ------- -------
Net Asset Value, End of Period $7.30 $8.65 $8.11 $8.06 $7.85
======= ======= ======= ======= =======
TOTAL RETURN(2) (6.10)% 14.65% 6.02% 9.60% 30.37%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets 1.97% 1.97% 1.98% 1.99% 2.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets 1.68% 1.43% 1.53% 1.56% 1.95%
Portfolio Turnover Rate 165% 160% 150% 174% 91%
Net Assets, End of Period (in
thousands) $116,985 $127,266 $98,481 $63,512 $42,579
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is made
in accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
See Notes to Financial Statements.
- ------
47
Equity Income
R Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006 2005 2004(1)
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)(2) 0.18 0.17 0.17 0.17 0.11
Net Realized and
Unrealized Gain (Loss) (0.60) 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 (0.19) (0.13) (0.14) (0.15) (0.13)
From Net Realized Gains (0.73) (0.55) (0.32) (0.42) (0.12)
------- ------- ------- ------- -------
Total Distributions (0.92) (0.68) (0.46) (0.57) (0.25)
------- ------- ------- ------- -------
Net Asset Value, End of Period $7.29 $8.63 $8.09 $8.04 $7.84
======= ======= ======= ======= =======
TOTAL RETURN(3) (5.53)% 15.25% 6.56% 10.03% 12.19%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets 1.47% 1.47% 1.48% 1.44%(4) 1.50%(5)
Ratio of Net Investment Income
(Loss) to Average Net Assets 2.18% 1.93% 2.03% 2.11%(4) 2.44%(5)
Portfolio Turnover Rate 165% 160% 150% 174% 91%(6)
Net Assets, End of Period (in
thousands) $42,720 $44,767 $24,283 $6,046 $392
(1) August 29, 2003 (commencement of sale) through March 31, 2004.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) During a portion of the year ended March 31, 2005, the class received
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.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2004.
See Notes to Financial Statements.
- ------
48
Value
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of
Period $7.61 $7.18 $7.31 $7.72 $5.61
-------- -------- -------- -------- --------
Income From
Investment
Operations
Net
Investment
Income
(Loss)(1) 0.12 0.12 0.12 0.09 0.09
Net Realized
and
Unrealized
Gain (Loss) (0.92) 0.93 0.57 0.64 2.18
-------- -------- -------- -------- --------
Total From
Investment
Operations (0.80) 1.05 0.69 0.73 2.27
-------- -------- -------- -------- --------
Distributions
From Net
Investment
Income (0.12) (0.11) (0.10) (0.09) (0.08)
From Net
Realized
Gains (0.91) (0.51) (0.72) (1.05) (0.08)
-------- -------- -------- -------- --------
Total
Distributions (1.03) (0.62) (0.82) (1.14) (0.16)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $5.78 $7.61 $7.18 $7.31 $7.72
======== ======== ======== ======== ========
TOTAL RETURN(2) (11.56)% 14.90% 9.89% 9.95% 40.66%
RATIOS/SUPPLEMENTAL DATA
Ratio of
Operating
Expenses to
Average Net Assets 1.00% 0.99% 0.99% 0.99% 1.00%
Ratio of Net
Investment Income
(Loss) to Average
Net Assets 1.65% 1.58% 1.71% 1.16% 1.26%
Portfolio
Turnover Rate 152% 140% 134% 130% 122%
Net Assets, End
of Period (in
thousands) $1,707,366 $2,495,067 $2,296,153 $2,315,507 $2,152,265
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
49
Value
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $7.62 $7.19 $7.32 $7.72 $5.61
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.13 0.13 0.14 0.10 0.10
Net Realized and
Unrealized Gain (Loss) (0.91) 0.94 0.57 0.65 2.18
-------- -------- -------- -------- --------
Total From Investment
Operations (0.78) 1.07 0.71 0.75 2.28
-------- -------- -------- -------- --------
Distributions
From Net Investment
Income (0.14) (0.13) (0.12) (0.10) (0.09)
From Net Realized Gains (0.91) (0.51) (0.72) (1.05) (0.08)
-------- -------- -------- -------- --------
Total Distributions (1.05) (0.64) (0.84) (1.15) (0.17)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period $5.79 $7.62 $7.19 $7.32 $7.72
======== ======== ======== ======== ========
TOTAL RETURN(2) (11.36)% 15.11% 10.10% 10.30% 40.93%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.80% 0.79% 0.79% 0.79% 0.80%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 1.85% 1.78% 1.91% 1.36% 1.46%
Portfolio Turnover Rate 152% 140% 134% 130% 122%
Net Assets, End of Period
(in thousands) $307,769 $289,536 $254,778 $251,812 $223,282
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
50
Value
A Class(1)
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $7.61 $7.18 $7.31 $7.72 $5.60
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income
(Loss)(2) 0.10 0.10 0.10 0.07 0.07
Net Realized and
Unrealized Gain (Loss) (0.92) 0.93 0.57 0.64 2.19
-------- -------- -------- -------- --------
Total From Investment
Operations (0.82) 1.03 0.67 0.71 2.26
-------- -------- -------- -------- --------
Distributions
From Net Investment
Income (0.10) (0.09) (0.08) (0.07) (0.06)
From Net Realized Gains (0.91) (0.51) (0.72) (1.05) (0.08)
-------- -------- -------- -------- --------
Total Distributions (1.01) (0.60) (0.80) (1.12) (0.14)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period $5.78 $7.61 $7.18 $7.31 $7.72
======== ======== ======== ======== ========
TOTAL RETURN(3) (11.76)% 14.62% 9.61% 9.67% 40.56%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.25% 1.24% 1.24% 1.24% 1.25%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 1.40% 1.33% 1.46% 0.91% 1.01%
Portfolio Turnover Rate 152% 140% 134% 130% 122%
Net Assets, End of Period
(in thousands) $191,739 $249,265 $214,835 $236,960 $403,212
(1) Prior to September 4, 2007, the A Class was referred to as the Advisor
Class.
(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.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is made
in accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
See Notes to Financial Statements.
- ------
51
Value
B Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning of
Period $7.61 $7.18 $7.31 $7.73 $5.61
-------- -------- -------- -------- --------
Income From Investment Operations
Net Investment Income
(Loss)(1) 0.05 0.04 0.05 0.01 0.01
Net Realized and Unrealized
Gain (Loss) (0.92) 0.94 0.57 0.65 2.20
-------- -------- -------- -------- --------
Total From Investment
Operations (0.87) 0.98 0.62 0.66 2.21
-------- -------- -------- -------- --------
Distributions
From Net Investment Income (0.05) (0.04) (0.03) (0.03) (0.01)
From Net Realized Gains (0.91) (0.51) (0.72) (1.05) (0.08)
-------- -------- -------- -------- --------
Total Distributions (0.96) (0.55) (0.75) (1.08) (0.09)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $5.78 $7.61 $7.18 $7.31 $7.73
======== ======== ======== ======== ========
TOTAL RETURN(2) (12.41)% 13.78% 8.81% 8.93% 39.51%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets 2.00% 1.99% 1.99% 1.99% 2.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets 0.65% 0.58% 0.71% 0.16% 0.26%
Portfolio Turnover Rate 152% 140% 134% 130% 122%
Net Assets, End of Period (in
thousands) $5,601 $7,740 $7,129 $5,059 $2,656
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is made
in accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
See Notes to Financial Statements.
- ------
52
Value
C Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning of
Period $7.56 $7.14 $7.27 $7.70 $5.58
------- ------- ------- ------- -------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.05 0.04 0.05 0.01 0.02
Net Realized and Unrealized
Gain (Loss) (0.91) 0.93 0.57 0.64 2.19
------- ------- ------- ------- -------
Total From Investment
Operations (0.86) 0.97 0.62 0.65 2.21
------- ------- ------- ------- -------
Distributions
From Net Investment Income (0.05) (0.04) (0.03) (0.03) (0.01)
From Net Realized Gains (0.91) (0.51) (0.72) (1.05) (0.08)
------- ------- ------- ------- -------
Total Distributions (0.96) (0.55) (0.75) (1.08) (0.09)
------- ------- ------- ------- -------
Net Asset Value, End of Period $5.74 $7.56 $7.14 $7.27 $7.70
======= ======= ======= ======= =======
TOTAL RETURN(2) (12.36)% 13.71% 8.87% 8.84% 39.73%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets 2.00% 1.99% 1.99% 1.99% 2.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets 0.65% 0.58% 0.71% 0.16% 0.26%
Portfolio Turnover Rate 152% 140% 134% 130% 122%
Net Assets, End of Period (in
thousands) $11,532 $22,274 $19,259 $13,885 $6,613
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is made
in accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
See Notes to Financial Statements.
- ------
53
Value
R Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $7.61 $7.18 $7.60
-------- -------- --------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.09 0.08 0.06
Net Realized and Unrealized Gain (Loss) (0.92) 0.94 0.29
-------- -------- --------
Total From Investment Operations (0.83) 1.02 0.35
-------- -------- --------
Distributions
From Net Investment Income (0.09) (0.08) (0.05)
From Net Realized Gains (0.91) (0.51) (0.72)
-------- -------- --------
Total Distributions (1.00) (0.59) (0.77)
-------- -------- --------
Net Asset Value, End of Period $5.78 $7.61 $7.18
======== ======== ========
TOTAL RETURN(3) (11.98)% 14.34% 4.99%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.50% 1.49% 1.49%(4)
Ratio of Net Investment Income (Loss) to Average
Net Assets 1.15% 1.08% 1.17%(4)
Portfolio Turnover Rate 152% 140% 134%(5)
Net Assets, End of Period (in thousands) $1,625 $331 $43
(1) July 29, 2005 (commencement of sale) through March 31, 2006.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2006.
See Notes to Financial Statements.
- ------
54
Large Company Value
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $7.55 $6.72 $6.39 $5.89 $4.29
-------- -------- -------- -------- --------
Income From
Investment Operations
Net Investment
Income (Loss)(1) 0.14 0.13 0.12 0.12 0.09
Net Realized and
Unrealized Gain
(Loss) (0.85) 0.89 0.47 0.51 1.59
-------- -------- -------- -------- --------
Total From
Investment
Operations (0.71) 1.02 0.59 0.63 1.68
-------- -------- -------- -------- --------
Distributions
From Net
Investment Income (0.15) (0.13) (0.11) (0.11) (0.08)
From Net Realized
Gains (0.21) (0.06) (0.15) (0.02) --
-------- -------- -------- -------- --------
Total
Distributions (0.36) (0.19) (0.26) (0.13) (0.08)
-------- -------- -------- -------- --------
Net Asset Value, End
of Period $6.48 $7.55 $6.72 $6.39 $5.89
======== ======== ======== ======== ========
TOTAL RETURN(2) (9.88)% 15.37% 9.44% 10.73% 39.34%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets 0.83% 0.83% 0.84% 0.87% 0.90%
Ratio of Net
Investment Income
(Loss) to Average Net
Assets 1.93% 1.86% 1.75% 1.90% 1.58%
Portfolio Turnover
Rate 18% 12% 16% 18% 14%
Net Assets, End of
Period (in thousands) $1,251,631 $1,498,119 $1,112,858 $659,277 $350,516
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
55
Large Company Value
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $7.55 $6.72 $6.39 $5.89 $4.29
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.16 0.15 0.13 0.13 0.10
Net Realized and
Unrealized Gain (Loss) (0.86) 0.88 0.47 0.51 1.59
-------- -------- -------- -------- --------
Total From Investment
Operations (0.70) 1.03 0.60 0.64 1.69
-------- -------- -------- -------- --------
Distributions
From Net Investment
Income (0.16) (0.14) (0.12) (0.12) (0.09)
From Net Realized Gains (0.21) (0.06) (0.15) (0.02) --
-------- -------- -------- -------- --------
Total Distributions (0.37) (0.20) (0.27) (0.14) (0.09)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period $6.48 $7.55 $6.72 $6.39 $5.89
======== ======== ======== ======== ========
TOTAL RETURN(2) (9.70)% 15.60% 9.65% 10.94% 39.61%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.63% 0.63% 0.64% 0.67% 0.70%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 2.13% 2.06% 1.95% 2.10% 1.78%
Portfolio Turnover Rate 18% 12% 16% 18% 14%
Net Assets, End of Period
(in thousands) $540,297 $587,012 $527,109 $438,518 $151,622
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
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56
Large Company Value
A Class(1)
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $7.55 $6.72 $6.39 $5.89 $4.29
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income
(Loss)(2) 0.12 0.12 0.10 0.10 0.07
Net Realized and
Unrealized Gain (Loss) (0.86) 0.88 0.47 0.51 1.60
-------- -------- -------- -------- --------
Total From Investment
Operations (0.74) 1.00 0.57 0.61 1.67
-------- -------- -------- -------- --------
Distributions
From Net Investment
Income (0.13) (0.11) (0.09) (0.09) (0.07)
From Net Realized Gains (0.21) (0.06) (0.15) (0.02) --
-------- -------- -------- -------- --------
Total Distributions (0.34) (0.17) (0.24) (0.11) (0.07)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period $6.47 $7.55 $6.72 $6.39 $5.89
======== ======== ======== ======== ========
TOTAL RETURN(3) (10.24)% 15.08% 9.17% 10.45% 38.99%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.08% 1.08% 1.09% 1.12% 1.15%
Ratio of Net Investment
Income (Loss) to Average Net
Assets 1.68% 1.61% 1.50% 1.65% 1.33%
Portfolio Turnover Rate 18% 12% 16% 18% 14%
Net Assets, End of Period
(in thousands) $373,078 $282,930 $184,601 $104,612 $19,265
(1) Prior to December 3, 2007, the A Class was referred to as the Advisor
Class.
(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.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is made
in accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
See Notes to Financial Statements.
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57
Large Company Value
B Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning of
Period $7.57 $6.74 $6.41 $5.91 $4.29
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.07 0.06 0.05 0.05 0.03
Net Realized and
Unrealized Gain (Loss) (0.87) 0.89 0.47 0.52 1.62
-------- -------- -------- -------- --------
Total From Investment
Operations (0.80) 0.95 0.52 0.57 1.65
-------- -------- -------- -------- --------
Distributions
From Net Investment Income (0.07) (0.06) (0.04) (0.05) (0.03)
From Net Realized Gains (0.21) (0.06) (0.15) (0.02) --
-------- -------- -------- -------- --------
Total Distributions (0.28) (0.12) (0.19) (0.07) (0.03)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $6.49 $7.57 $6.74 $6.41 $5.91
======== ======== ======== ======== ========
TOTAL RETURN(2) (10.88)% 14.18% 8.33% 9.59% 38.41%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets 1.83% 1.83% 1.84% 1.87% 1.90%
Ratio of Net Investment Income
(Loss) to Average Net Assets 0.93% 0.86% 0.75% 0.90% 0.58%
Portfolio Turnover Rate 18% 12% 16% 18% 14%
Net Assets, End of Period (in
thousands) $12,965 $17,374 $15,954 $13,009 $5,642
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is made
in accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
See Notes to Financial Statements.
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58
Large Company Value
C Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning of
Period $7.55 $6.72 $6.39 $5.89 $4.28
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.07 0.06 0.05 0.05 0.03
Net Realized and
Unrealized Gain (Loss) (0.87) 0.89 0.47 0.52 1.61
-------- -------- -------- -------- --------
Total From Investment
Operations (0.80) 0.95 0.52 0.57 1.64
-------- -------- -------- -------- --------
Distributions
From Net Investment
Income (0.07) (0.06) (0.04) (0.05) (0.03)
From Net Realized Gains (0.21) (0.06) (0.15) (0.02) --
-------- -------- -------- -------- --------
Total Distributions (0.28) (0.12) (0.19) (0.07) (0.03)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $6.47 $7.55 $6.72 $6.39 $5.89
======== ======== ======== ======== ========
TOTAL RETURN(2) (10.91)% 14.22% 8.35% 9.62% 38.27%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets 1.83% 1.83% 1.84% 1.87% 1.90%
Ratio of Net Investment Income
(Loss) to Average Net Assets 0.93% 0.86% 0.75% 0.90% 0.58%
Portfolio Turnover Rate 18% 12% 16% 18% 14%
Net Assets, End of Period (in
thousands) $51,775 $71,792 $61,682 $40,789 $11,030
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is made
in accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
See Notes to Financial Statements.
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59
Large Company Value
R Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007 2006 2005 2004(1)
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)(2) 0.11 0.10 0.09 0.09 0.03
Net Realized and
Unrealized Gain (Loss) (0.87) 0.89 0.47 0.51 0.72
-------- -------- -------- -------- --------
Total From Investment
Operations (0.76) 0.99 0.56 0.60 0.75
-------- -------- -------- -------- --------
Distributions
From Net Investment
Income (0.11) (0.09) (0.08) (0.08) (0.04)
From Net Realized Gains (0.21) (0.06) (0.15) (0.02) --
-------- -------- -------- -------- --------
Total Distributions (0.32) (0.15) (0.23) (0.10) (0.04)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period $6.48 $7.56 $6.72 $6.39 $5.89
======== ======== ======== ======== ========
TOTAL RETURN(3) (10.45)% 14.95% 8.90% 10.17% 14.63%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.33% 1.33% 1.34% 1.33%(4) 1.40%(5)
Ratio of Net Investment
Income (Loss) to Average Net
Assets 1.43% 1.36% 1.25% 1.44%(4) 0.77%(5)
Portfolio Turnover Rate 18% 12% 16% 18% 14%(6)
Net Assets, End of Period
(in thousands) $16,675 $17,765 $10,984 $2,143 $168
(1) August 29, 2003 (commencement of sale) through March 31, 2004.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) During the year ended March 31, 2005, the class received a partial
reimbursement of its distribution and service fee. Had fees not been
reimbursed, the ratio of operating expenses to average net assets and ratio of
net investment income (loss) to average net assets would have been 1.37% and
1.40%, respectively.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2004.
See Notes to Financial Statements.
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60
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders,
American Century Capital Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Equity Income Fund, Value Fund and
Large Company Value Fund, three of the mutual funds constituting American
Century Capital Portfolios, Inc. (the "Corporation"), as of March 31, 2008,
and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Corporation is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Corporation's internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. Our procedures included confirmation of securities owned as of
March 31, 2008, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing
procedures. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the respective financial
positions of Equity Income Fund, Value Fund and Large Company Value Fund,
three of the mutual funds of American Century Capital Portfolios, Inc. as of
March 31, 2008, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then
ended, and the financial highlights for the periods presented, in conformity
with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 13, 2008
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61
MANAGEMENT
The individuals listed below serve as directors or officers of the funds. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
72. Those listed as interested directors are "interested" primarily by virtue
of their engagement as directors and/or officers of, or ownership interest in,
American Century Companies, Inc. (ACC) or its wholly owned, direct or
indirect, subsidiaries, including the funds' investment advisor, American
Century Investment Management, Inc. (ACIM); the funds' principal underwriter,
American Century Investment Services, Inc. (ACIS); and the funds' transfer
agent, American Century Services, LLC (ACS).
The other directors (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers
of, and have no financial interest in, ACC or any of its wholly owned, direct
or indirect, subsidiaries, including ACIM, ACIS and ACS. The directors serve
in this capacity for seven registered investment companies in the American
Century Investments family of funds.
All persons named as officers of the funds also serve in similar capacities
for the other 14 investment companies in the American Century Investments
family of funds advised by ACIM or American Century Global Investment
Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise
noted. Only officers with policy-making functions are listed. No officer is
compensated for his or her service as an officer of the funds. The listed
officers are interested persons of the funds and are appointed or re-appointed
on an annual basis.
INTERESTED DIRECTORS
JAMES E. STOWERS, JR., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1924
POSITION(S) HELD WITH FUNDS: Director (since 1958) and Vice Chairman (since
2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Co-Chairman, Director
and Controlling Shareholder, ACC; Co-Vice Chairman, ACC (January 2005 to
February 2007); Chairman, ACC (January 1995 to December 2004); Director, ACIM,
ACGIM, ACS, ACIS and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
JONATHAN S. THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUNDS: Director (since 2007) and President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC
(February 2006 to February 2007); Executive Vice President, ACC (November 2005
to February 2007). Also serves as: President, Chief Executive Officer and
Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM,
ACGIM, ACIS and other ACC subsidiaries. Managing Director, Morgan Stanley
(March 2000 to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 105
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
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62
INDEPENDENT DIRECTORS
THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1940
POSITION(S) HELD WITH FUNDS: Director (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Managing Member, Associated
Investments, LLC (real estate investment company); Managing Member, Brown
Cascade Properties, LLC (real estate investment company); Retired, Area Vice
President, Applied Industrial Technologies
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUNDS: Director (since 1997)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Advisor to the
President, Midwest Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
JAMES A. OLSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1942
POSITION(S) HELD WITH FUNDS: Director (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member, Plaza Belmont LLC; Chief
Financial Officer, Plaza Belmont LLC (September 1999 to December 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Saia, Inc. and Entertainment
Properties Trust
DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUNDS: Director (since 1995) and Chairman of the Board
(since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman and Chief Executive
Officer, Western Investments, Inc.; Retired Chairman of the Board, Butler
Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1943
POSITION(S) HELD WITH FUNDS: Director (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive
Officer and Founder, Sayers40, Inc., a technology products and services
provider
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUNDS: Director (since 1994)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Senior Vice
President, Sprint Corporation
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide, Inc.; Director, Charming Shoppes, Inc.
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63
OFFICERS
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUNDS: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS
(October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007);
Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as:
Director, ACC, ACS, ACIS and other ACC subsidiaries
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUNDS: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century Investments funds (July 2000 to August 2006). Also serves as: Senior
Vice President, ACS
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUNDS: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney, ACC (February 1994 to
present); Vice President, ACC (November 2005 to present); General Counsel, ACC
(March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUNDS: Vice President, Treasurer and Chief Financial
Officer (all since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February
2000 to present) and Controller, various American Century Investments funds
(1997 to September 2006)
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUNDS: Tax Officer (since 1998)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the funds' directors and is available
without charge, upon request, by calling 1-800-345-2021.
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64
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.
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65
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.
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66
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.
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67
NOTES
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68
[back cover]
[american century investments logo and text logo ®]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE . . . . . . . . . . . . . . . . 1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE . . . . . . . . . . . . . 1-800-345-2021 or
816-531-5575
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AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
INVESTMENT ADVISOR:
American Century Investment Management, Inc.
Kansas City, Missouri
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©2008 American Century Proprietary Holdings, Inc. All rights reserved.
0805
CL-ANN-60044S
[front cover]
ANNUAL REPORT
MARCH 31, 2008
[american century investments logo and text logo ®]
AMERICAN CENTURY INVESTMENTS
EQUITY INDEX FUND
PRESIDENT'S LETTER
JONATHAN THOMAS
[photo of Jonathan Thomas]
Dear Investor,
At American Century Investments®, we are committed to helping you reach your
financial goals. Your success is the ultimate measure of our performance.
That's why we focus on achieving superior investment results and building
long-term relationships with investors like you.
Part of that relationship is to clearly communicate investment results and
what influenced them. To help you monitor your investment with us, we take
pride in providing you with the annual report for the American Century® Equity
Index Fund for the 12 months ended March 31, 2008. We also recommend our
website, americancentury.com, where we provide company news, quarterly
portfolio commentaries, investment views, and other useful information about
portfolio strategy, personal finance, government policy, and the markets.
As noted on the website, 2008 marks our 50th year. Since 1958, we've worked
for you with integrity, always striving to make wise decisions with your
interests as our guide. Fifty years also means that we've met the challenges
of previous recessionary cycles. As we've crossed those hurdles and earned
your trust, our assets under management have grown to close to $100 billion,
putting us in the top 5% of our industry. This growth has given us the
resources to offer a wide array of financial products and services, including
a well-diversified line-up of portfolios that provide you with many choices in
these turbulent times.
Our investment discipline and integrity are important features of our
portfolios. For example, our fixed-income investment team anticipated the
current credit squeeze. Instead of chasing higher yields and adding leveraged
exposure as the credit bubble inflated, the team minimized our portfolios'
direct exposure to subprime-related debt, preserving investors' hard-earned
capital. The team also positioned the portfolios to capitalize on
opportunities, including attractive high-quality securities discarded by
investors with liquidity needs.
We'll continue to work hard to earn your trust. Thank you for your continued
support.
Sincerely,
/s/Jonathan Thomas
Jonathan S. Thomas
President and Chief Executive Officer
American Century Investments
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
Report of Independent Registered Public Accounting Firm . . . . . . . 27
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 31
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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
ECONOMIC AND SUBPRIME TURMOIL SANK STOCKS
The broad U.S. equity indexes declined for the 12 months ended March 31, 2008,
as the market environment changed dramatically. Stocks began the period on an
upward trajectory, boosted by better-than-expected earnings and robust merger
activity.
However, the market reversed course in mid-2007 as the bursting of the housing
market bubble led to a meltdown in the subprime lending industry and a
liquidity crunch in the credit markets. Tighter lending standards brought an
end to the easy credit that fueled the merger and leveraged buy-out boom of
the past few years, and the economy threatened to tip into recession amid
sluggish job growth and weaker consumer spending.
The Federal Reserve (the Fed) responded aggressively, cutting short-term
interest rates six times between September 2007 and March 2008 and injecting
liquidity into the financial system to provide some relief to the credit
markets. But the Fed's game plan was complicated by persistently high energy
and food prices, which led to concerns about rising inflation.
These exceptional events triggered unusually high levels of financial market
volatility. Several of the major U.S. stock indexes hit all-time highs, then
suffered their first 10% correction since 2003. The first quarter of 2008
brought the worst quarterly performance for stocks in nearly six years as the
credit crunch deepened and a recession loomed.
LARGE-CAP AND GROWTH LED THE WAY
While stocks fell across the board, large-cap shares held up the best, while
small-cap stocks experienced the largest declines (see the accompanying
table). Growth-oriented issues outpaced value stocks across all market
capitalizations, though value outperformed during the final three months of
the period.
By far, energy stocks generated the best returns as the price of oil soared by
54% during the period, peaking at a record high of more than $110 a barrel.
Consumer staples stocks, which tend to hold up well in a weaker economic
environment, also delivered strong results. The financials and consumer
discretionary sectors sustained the largest losses.
U.S. Stock Index Returns
For the 12 months ended March 31, 2008
RUSSELL 1000 INDEX (LARGE-CAP) -5.40%
Russell 1000 Growth Index -0.75%
Russell 1000 Value Index -9.99%
RUSSELL MIDCAP INDEX -8.92%
Russell Midcap Growth Index -4.55%
Russell Midcap Value Index -14.12%
RUSSELL 2000 INDEX (SMALL-CAP) -13.00%
Russell 2000 Growth Index -8.94%
Russell 2000 Value Index -16.88%
- ------
2
PERFORMANCE
Equity Index
Total Returns as of March 31, 2008
Average Annual Returns
Since Inception
1 year 5 years Inception Date
INVESTOR CLASS -5.46% 10.76% 1.90% 2/26/99
S&P 500 INDEX(1) -5.08% 11.32% 2.39% --
Institutional Class -5.27% 10.98% 2.10% 2/26/99
(1) Data provided by Lipper Inc. -- A Reuters Company. ©2008 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
One-Year Returns Over Life of Class
Periods ended March 31
1999* 2000 2001 2002 2003 2004 2005 2006 2007 2008
Investor
Class 4.00% 17.17% -22.04% -0.16% -25.02% 34.27% 6.04% 11.36% 11.28% -5.46%
S&P 500
Index 4.00% 17.94% -21.68% 0.24% -24.76% 35.12% 6.69% 11.73% 11.83% -5.08%
*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.
PERFORMANCE SUMMARY
Equity Index returned -5.46%* for the 12 months ended March 31, 2008, compared
with the -5.08% return of its benchmark, the S&P 500 Index. The portfolio's
results reflected operating expenses, whereas the index return did not.
FINANCIALS STRUGGLED MIGHTILY
Reflecting the broad decline in the stock market, six of the ten sectors in
the portfolio posted negative returns for the reporting period. Financials
stocks suffered the biggest losses, declining by 28% as a group; seven of the
portfolio's ten worst individual contributors to performance came from the
financials sector.
Significant losses resulting from subprime-related write-downs and credit
market difficulties led to the sharp slide in financials stocks. The damage
spread across virtually every segment of the financials sector, from financial
services companies to banks to insurance firms. Financial services giant
Citigroup, capital markets firm Merrill Lynch, and commercial bank Wachovia
were among the biggest casualties, with each of them losing approximately half
of their market value during the period.
Thrifts and mortgage-finance companies, many of which had direct exposure to
the subprime lending collapse, also sustained substantial declines. Examples
included government-sponsored mortgage lenders Fannie Mae and Freddie Mac, as
well as Washington Mutual, a thrift that is one of the nation's largest
mortgage lenders.
CONSUMER DISCRETIONARY AND HEALTH CARE DECLINED
The only other sector of the portfolio to post double-digit declines as a
group was consumer discretionary. This sector came under pressure as consumer
spending weakened in the face of a slowing economy and higher fuel prices.
Within the consumer discretionary sector, media stocks had the biggest
negative impact on performance, led by cable companies Time Warner and
Comcast. Cable operators slumped as increased competition from
telecommunications firms to provide television, internet, and phone services
led to weaker subscriber growth and lower profit margins. Retailers also
struggled with falling sales; apparel retailer Kohl's, home improvement chain
Home Depot, and coffee retailer Starbucks detracted the most from results.
Top Ten Holdings as of March 31, 2008
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Exxon Mobil Corp. 3.9% 3.9%
General Electric Co. 3.2% 3.2%
AT&T Inc. 2.0% 2.0%
Microsoft Corporation 1.9% 1.8%
Procter & Gamble Co. (The) 1.9% 1.7%
Johnson & Johnson 1.6% 1.5%
Chevron Corp. 1.5% 1.5%
Bank of America Corp. 1.4% 1.7%
International Business Machines Corp. 1.4% 1.2%
JPMorgan Chase & Co. 1.2% 1.2%
* All fund returns referenced in this commentary are for Investor Class shares.
- ------
5
Equity Index
One other declining sector of note was health care, where health services
providers UnitedHealth Group and Wellpoint had the biggest negative impact.
Both companies reported disappointing earnings amid higher-than-expected
health care costs.
ENERGY AND CONSUMER STAPLES ADVANCED
Among the four sectors of the portfolio to produce positive returns, energy
and consumer staples generated the best results. Six of the top ten
performance contributors came from these two sectors.
The energy stocks in the portfolio gained more than 20% as a group as oil
prices surged to record highs. Although oil and gas producers Exxon Mobil (the
portfolio's largest holding) and Chevron were the top individual contributors,
energy services and equipment providers delivered the strongest returns, led
by Schlumberger and Transocean.
Consumer staples stocks attracted greater investor demand as the U.S. economy
slowed. Companies in this sector tend to hold up well in a weaker economic
environment because their products and services remain in demand regardless of
economic conditions. Beverage makers and household products producers had the
greatest positive impact on performance in the consumer staples sector.
Coca-Cola and PepsiCo were the top contributors in the beverage industry as
both companies benefited from robust sales overseas, particularly in emerging
markets. Procter & Gamble was the leading contributor among household products
stocks.
OUTLOOK
The investment environment is likely to remain challenging in the months ahead
as credit issues and the risk of a looming recession cast a shadow over the
equity markets. Given the near-term uncertainty about economic and profit
growth going forward, we could see continued equity market volatility until
investors are able to establish a better consensus view on how broad and deep
the economic and credit challenges are.
It's this kind of uncertain investment environment that reinforces the need
for a broad index fund as a long-term core holding within a diversified
portfolio.
Top Five Industries as of March 31, 2008
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Oil, Gas & Consumable Fuels 10.4% 9.5%
Pharmaceuticals 6.1% 6.3%
Diversified Financial Services 4.3% 5.3%
Insurance 4.0% 4.6%
Industrial Conglomerates 4.0% 4.0%
Types of Investments in Portfolio
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Common Stocks and Futures 100.9% 103.6%
Other Assets and Liabilities(1) (0.9)% (3.6)%
(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 October 1, 2007 to March 31, 2008.
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
Beginning Expenses Paid
Account Ending During Period* Annualized
Value Account Value 10/1/07 - Expense
10/1/07 3/31/08 3/31/08 Ratio*
ACTUAL
Investor Class $1,000 $873.60 $2.30 0.49%
Institutional Class $1,000 $873.10 $1.36 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
MARCH 31, 2008
Shares Value
Common Stocks -- 98.8%
AEROSPACE & DEFENSE -- 2.9%
53,063 Boeing Co. $ 3,946,295
27,777 General Dynamics Corp. 2,315,768
8,671 Goodrich Corporation 498,669
51,444 Honeywell International Inc. 2,902,470
8,653 L-3 Communications Holdings, Inc. 946,119
23,858 Lockheed Martin Corp. 2,369,099
23,271 Northrop Grumman Corp. 1,810,717
9,572 Precision Castparts Corp. 977,110
29,617 Raytheon Co. 1,913,554
11,266 Rockwell Collins 643,852
68,723 United Technologies Corp. 4,729,518
------------
23,053,171
------------
AIR FREIGHT & LOGISTICS -- 1.1%
11,672 C.H. Robinson Worldwide Inc. 634,957
14,700 Expeditors International of Washington, Inc. 664,146
21,369 FedEx Corp. 1,980,265
72,423 United Parcel Service, Inc. Cl B 5,288,327
------------
8,567,695
------------
AIRLINES -- 0.1%
50,629 Southwest Airlines Co. 627,800
------------
AUTO COMPONENTS -- 0.2%
15,998 Goodyear Tire & Rubber Co. (The)(1) 412,748
40,931 Johnson Controls, Inc. 1,383,468
------------
1,796,216
------------
AUTOMOBILES -- 0.3%
145,486 Ford Motor Co.(1) 832,180
39,023 General Motors Corp.(2) 743,388
16,625 Harley-Davidson, Inc. 623,438
------------
2,199,006
------------
BEVERAGES -- 2.6%
49,641 Anheuser-Busch Companies, Inc. 2,355,465
5,941 Brown-Forman Corp. Cl B 393,413
139,614 Coca-Cola Co. (The) 8,498,305
19,658 Coca-Cola Enterprises Inc. 475,724
13,409 Constellation Brands Inc. Cl A(1) 236,937
8,834 Molson Coors Brewing Co. Cl B 464,403
9,584 Pepsi Bottling Group Inc. 324,993
110,882 PepsiCo, Inc. 8,005,681
------------
20,754,921
------------
Shares Value
BIOTECHNOLOGY -- 1.4%
76,218 Amgen Inc.(1) $ 3,184,388
20,192 Biogen Idec Inc.(1) 1,245,644
29,270 Celgene Corp.(1) 1,793,958
18,351 Genzyme Corp.(1) 1,367,884
65,745 Gilead Sciences, Inc.(1) 3,387,840
------------
10,979,714
------------
BUILDING PRODUCTS -- 0.1%
25,390 Masco Corp. 503,484
11,750 Trane Inc. 539,325
------------
1,042,809
------------
CAPITAL MARKETS -- 3.0%
13,205 American Capital Strategies Ltd.(2) 451,083
16,030 Ameriprise Financial Inc. 831,156
78,491 Bank of New York Mellon Corp. (The) 3,275,429
7,979 Bear Stearns Companies Inc. (The)(2) 83,700
64,519 Charles Schwab Corp. (The) 1,214,893
31,446 E*TRADE Financial Corp.(1)(2) 121,382
5,990 Federated Investors Inc. Cl B 234,568
11,158 Franklin Resources, Inc. 1,082,214
27,770 Goldman Sachs Group, Inc. (The) 4,592,880
10,617 Janus Capital Group Inc. 247,058
9,282 Legg Mason, Inc. 519,606
36,560 Lehman Brothers Holdings Inc. 1,376,118
68,574 Merrill Lynch & Co., Inc. 2,793,705
75,011 Morgan Stanley 3,428,003
15,183 Northern Trust Corp. 1,009,214
26,555 State Street Corp. 2,097,845
18,173 T. Rowe Price Group Inc. 908,650
------------
24,267,504
------------
CHEMICALS -- 1.9%
14,830 Air Products and Chemicals, Inc. 1,364,360
3,995 Ashland Inc. 188,964
65,107 Dow Chemical Co. 2,399,193
61,928 du Pont (E.I.) de Nemours & Co. 2,895,753
5,569 Eastman Chemical Co. 347,784
12,002 Ecolab Inc. 521,247
8,310 Hercules Inc. 151,990
5,647 International Flavors & Fragrances Inc. 248,750
38,136 Monsanto Co. 4,252,163
11,311 PPG Industries, Inc. 684,429
- ------
9
Equity Index
Shares Value
21,746 Praxair, Inc. $ 1,831,666
8,652 Rohm and Haas Co. 467,900
8,965 Sigma-Aldrich Corp. 534,762
------------
15,888,961
------------
COMMERCIAL BANKS -- 2.9%
37,859 BB&T Corporation 1,213,760
10,348 Comerica Inc. 363,008
36,663 Fifth Third Bancorp 766,990
9,116 First Horizon National Corp.(2) 127,715
25,194 Huntington Bancshares Inc. 270,836
26,766 KeyCorp 587,514
5,197 M&T Bank Corp. 418,255
17,748 Marshall & Ilsley Corp. 411,754
43,729 National City Corp. 435,104
24,055 PNC Financial Services Group 1,577,286
47,906 Regions Financial Corp. 946,144
24,097 SunTrust Banks, Inc. 1,328,709
119,015 U.S. Bancorp 3,851,324
136,170 Wachovia Corp. 3,676,590
232,553 Wells Fargo & Co. 6,767,291
7,451 Zions Bancorporation 339,393
------------
23,081,673
------------
COMMERCIAL SERVICES & SUPPLIES -- 0.4%
19,993 Allied Waste Industries Inc.(1) 216,124
7,073 Avery Dennison Corp. 348,345
9,349 Cintas Corp. 266,820
9,078 Equifax Inc. 313,009
8,819 Monster Worldwide Inc.(1) 213,508
14,973 Pitney Bowes, Inc. 524,355
14,810 R.R. Donnelley & Sons Company 448,891
11,067 Robert Half International Inc. 284,865
35,036 Waste Management, Inc. 1,175,809
------------
3,791,726
------------
COMMUNICATIONS EQUIPMENT -- 2.5%
6,213 Ciena Corp.(1) 191,547
413,563 Cisco Systems Inc.(1) 9,962,733
108,561 Corning Inc. 2,609,806
15,149 JDS Uniphase Corp.(1) 202,845
35,968 Juniper Networks, Inc.(1) 899,200
156,456 Motorola, Inc. 1,455,041
111,826 QUALCOMM Inc. 4,584,866
30,253 Tellabs, Inc.(1)(2) 164,879
------------
20,070,917
------------
COMPUTERS & PERIPHERALS -- 3.0%
60,604 Apple Inc.(1)(3) 8,696,675
154,498 Dell Inc.(1) 3,077,600
144,562 EMC Corp.(1) 2,073,019
Shares Value
172,646 Hewlett-Packard Co. $ 7,883,016
6,503 Lexmark International, Inc. Cl A(1) 199,772
23,657 NetApp, Inc.(1) 474,323
9,901 QLogic Corp.(1) 151,980
15,763 SanDisk Corp.(1) 355,771
57,121 Sun Microsystems, Inc.(1) 887,089
12,476 Teradata Corp.(1) 275,221
------------
24,074,466
------------
CONSTRUCTION & ENGINEERING -- 0.2%
6,096 Fluor Corp. 860,511
8,300 Jacobs Engineering Group Inc.(1) 610,797
------------
1,471,308
------------
CONSTRUCTION MATERIALS -- 0.1%
6,968 Vulcan Materials Co.(2) 462,675
------------
CONSUMER FINANCE -- 0.7%
80,649 American Express Co. 3,525,974
26,953 Capital One Financial Corp. 1,326,627
32,902 Discover Financial Services 538,606
35,506 SLM Corporation(1) 545,017
------------
5,936,224
------------
CONTAINERS & PACKAGING -- 0.1%
6,914 Ball Corp. 317,629
7,233 Bemis Co., Inc. 183,935
9,331 Pactiv Corp.(1) 244,566
11,128 Sealed Air Corp. 280,982
------------
1,027,112
------------
DISTRIBUTORS -- 0.1%
11,609 Genuine Parts Co. 466,914
------------
DIVERSIFIED CONSUMER SERVICES -- 0.1%
9,361 Apollo Group, Inc. Cl A(1) 404,395
22,382 H&R Block, Inc. 464,651
------------
869,046
------------
DIVERSIFIED FINANCIAL SERVICES -- 4.3%
308,515 Bank of America Corp. 11,695,804
13,131 CIT Group Inc. 155,602
359,849 Citigroup Inc. 7,707,966
3,752 CME Group Inc. 1,760,063
4,800 IntercontinentalExchange Inc.(1) 626,400
233,100 JPMorgan Chase & Co. 10,011,645
11,700 Leucadia National Corp. 529,074
22,417 McGraw-Hill Companies, Inc. (The) 828,308
14,807 Moody's Corp. 515,728
18,200 NYSE Euronext, Inc. 1,123,122
------------
34,953,712
------------
- ------
10
Equity Index
Shares Value
DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.1%
417,952 AT&T Inc. $16,007,561
7,598 CenturyTel Inc. 252,558
22,629 Citizens Communications Company 237,378
10,555 Embarq Corp. 423,256
108,188 Qwest Communications International Inc.(2) 490,092
198,313 Verizon Communications Inc. 7,228,516
32,920 Windstream Corp. 393,394
------------
25,032,755
------------
ELECTRIC UTILITIES -- 2.1%
11,434 Allegheny Energy, Inc. 577,417
27,587 American Electric Power 1,148,447
86,945 Duke Energy Corp. 1,551,968
22,517 Edison International 1,103,783
13,474 Entergy Corp. 1,469,744
47,229 Exelon Corporation 3,838,301
21,030 FirstEnergy Corp. 1,443,079
28,004 FPL Group, Inc. 1,756,971
13,800 Pepco Holdings, Inc. 341,136
7,081 Pinnacle West Capital Corp. 248,401
25,688 PPL Corporation 1,179,593
17,854 Progress Energy Inc. 744,512
52,297 Southern Co. 1,862,296
------------
17,265,648
------------
ELECTRICAL EQUIPMENT -- 0.5%
12,429 Cooper Industries, Ltd. Cl A 499,024
54,195 Emerson Electric Co. 2,788,876
10,294 Rockwell Automation Inc. 591,081
------------
3,878,981
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.3%
25,461 Agilent Technologies, Inc.(1) 759,502
14,018 Jabil Circuit, Inc. 132,610
9,726 Molex Inc. 225,254
34,280 Tyco Electronics Ltd. 1,176,490
------------
2,293,856
------------
ENERGY EQUIPMENT & SERVICES -- 2.7%
21,877 Baker Hughes Inc. 1,498,575
20,201 BJ Services Co. 575,931
15,100 Cameron International Corp.(1) 628,764
9,996 ENSCO International Inc. 625,950
60,753 Halliburton Co. 2,389,415
19,551 Nabors Industries Ltd.(1) 660,237
24,586 National Oilwell Varco, Inc.(1) 1,435,331
18,470 Noble Corp. 917,405
7,701 Rowan Companies, Inc. 317,127
83,041 Schlumberger Ltd. 7,224,566
Shares Value
13,831 Smith International, Inc. $ 888,365
22,500 Transocean Inc.(1) 3,042,000
23,242 Weatherford International Ltd.(1) 1,684,348
------------
21,888,014
------------
FOOD & STAPLES RETAILING -- 2.6%
30,441 Costco Wholesale Corp. 1,977,752
99,305 CVS/Caremark Corp. 4,022,845
46,967 Kroger Co. (The) 1,192,962
30,533 Safeway Inc. 896,144
14,520 SUPERVALU INC. 435,310
41,925 SYSCO Corp. 1,216,664
162,877 Wal-Mart Stores, Inc. 8,580,359
68,336 Walgreen Co. 2,602,918
9,583 Whole Foods Market, Inc.(2) 315,952
------------
21,240,906
------------
FOOD PRODUCTS -- 1.5%
44,324 Archer-Daniels-Midland Co. 1,824,376
15,357 Campbell Soup Co. 521,370
33,578 ConAgra Foods, Inc. 804,193
9,551 Dean Foods Co. 191,880
23,271 General Mills, Inc. 1,393,467
21,839 H.J. Heinz Co. 1,025,778
11,594 Hershey Co. (The)(2) 436,746
18,157 Kellogg Co. 954,332
106,683 Kraft Foods Inc. Cl A 3,308,240
8,752 McCormick & Company, Inc. 323,561
49,907 Sara Lee Corp. 697,700
18,907 Tyson Foods, Inc. Cl A 301,567
14,949 Wm. Wrigley Jr. Co. 939,395
------------
12,722,605
------------
GAS UTILITIES -- 0.1%
3,251 Nicor Inc. 108,941
11,873 Questar Corp. 671,537
------------
780,478
------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 1.9%
43,727 Baxter International Inc. 2,528,295
16,814 Becton, Dickinson & Co. 1,443,482
92,477 Boston Scientific Corp.(1) 1,190,179
7,010 C.R. Bard, Inc. 675,764
34,281 Covidien Ltd. 1,516,934
10,836 Hospira Inc.(1) 463,456
77,967 Medtronic, Inc. 3,771,263
23,623 St. Jude Medical, Inc.(1) 1,020,277
16,430 Stryker Corp. 1,068,772
8,655 Varian Medical Systems, Inc.(1) 405,400
16,153 Zimmer Holdings Inc.(1) 1,257,673
------------
15,341,495
------------
- ------
11
Equity Index
Shares Value
HEALTH CARE PROVIDERS & SERVICES -- 1.9%
34,454 Aetna Inc. $ 1,450,169
11,575 AmerisourceBergen Corp. 474,344
24,952 Cardinal Health, Inc. 1,310,230
19,258 CIGNA Corp. 781,297
10,679 Coventry Health Care Inc.(1) 430,898
17,422 Express Scripts, Inc.(1) 1,120,583
11,621 Humana Inc.(1) 521,318
7,763 Laboratory Corp. of America Holdings(1) 571,978
19,970 McKesson Corp. 1,045,829
36,384 Medco Health Solutions Inc.(1) 1,593,255
9,694 Patterson Companies, Inc.(1) 351,892
10,814 Quest Diagnostics Inc. 489,550
32,628 Tenet Healthcare Corp.(1) 184,674
86,835 UnitedHealth Group Inc. 2,983,650
37,381 WellPoint Inc.(1) 1,649,623
------------
14,959,290
------------
HEALTH CARE TECHNOLOGY(4)
13,410 IMS Health Inc. 281,744
------------
HOTELS, RESTAURANTS & LEISURE -- 1.3%
30,099 Carnival Corporation 1,218,408
9,758 Darden Restaurants, Inc. 317,623
21,749 International Game Technology 874,527
21,524 Marriott International, Inc. Cl A 739,565
79,872 McDonald's Corp. 4,454,461
50,308 Starbucks Corporation(1) 880,390
13,709 Starwood Hotels & Resorts Worldwide, Inc. 709,441
6,273 Wendy's International, Inc. 144,655
12,241 Wyndham Worldwide Corp. 253,144
33,249 Yum! Brands, Inc. 1,237,195
------------
10,829,409
------------
HOUSEHOLD DURABLES -- 0.5%
4,243 Black & Decker Corp. 280,462
8,409 Centex Corp. 203,582
19,085 D.R. Horton, Inc. 300,589
10,592 Fortune Brands, Inc. 736,143
4,342 Harman International Industries Inc. 189,051
5,563 KB Home(2) 137,573
11,671 Leggett & Platt, Inc. 177,983
9,547 Lennar Corp.(2) 179,579
19,240 Newell Rubbermaid Inc. 440,019
15,092 Pulte Homes Inc. 219,589
3,988 Snap-on Inc. 202,790
5,681 Stanley Works (The) 270,529
5,250 Whirlpool Corp. 455,595
------------
3,793,484
------------
Shares Value
HOUSEHOLD PRODUCTS -- 2.5%
9,511 Clorox Co. $ 538,703
35,160 Colgate-Palmolive Co. 2,739,316
29,205 Kimberly-Clark Corp. 1,885,183
213,799 Procter & Gamble Co. (The) 14,980,895
------------
20,144,097
------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.3%
46,117 AES Corp. (The)(1) 768,770
12,439 Constellation Energy Group Inc. 1,097,990
32,013 Dynegy Inc. Cl A(1) 252,583
------------
2,119,343
------------
INDUSTRIAL CONGLOMERATES -- 4.0%
49,156 3M Co. 3,890,697
692,707 General Electric Co. 25,637,086
17,188 Textron Inc. 952,559
34,081 Tyco International Ltd. 1,501,268
------------
31,981,610
------------
INSURANCE -- 4.0%
22,697 Ace, Ltd. 1,249,697
32,961 Aflac Inc. 2,140,817
38,878 Allstate Corp. 1,868,477
19,802 Ambac Financial Group, Inc.(2) 113,862
174,763 American International Group, Inc. 7,558,499
20,225 Aon Corp. 813,045
6,562 Assurant, Inc. 399,363
25,706 Chubb Corp. 1,271,933
11,413 Cincinnati Financial Corp. 434,151
30,261 Genworth Financial Inc. Cl A 685,109
21,682 Hartford Financial Services Group Inc. (The) 1,642,845
18,589 Lincoln National Corp. 966,628
30,267 Loews Corp. 1,217,339
35,792 Marsh & McLennan Companies, Inc. 871,535
14,225 MBIA Inc.(2) 173,830
49,178 MetLife, Inc. 2,963,465
18,048 Principal Financial Group, Inc. 1,005,635
47,040 Progressive Corp. (The) 755,933
30,928 Prudential Financial, Inc. 2,420,116
6,196 Safeco Corp. 271,880
6,334 Torchmark Corp. 380,737
43,032 Travelers Companies, Inc. (The) 2,059,081
24,082 Unum Group 530,045
12,263 XL Capital Ltd. Cl A 362,372
------------
32,156,394
------------
- ------
12
Equity Index
Shares Value
INTERNET & CATALOG RETAIL -- 0.3%
21,127 Amazon.com, Inc.(1) $ 1,506,354
14,268 Expedia Inc.(1) 312,327
12,680 IAC/InterActiveCorp(1) 263,237
------------
2,081,918
------------
INTERNET SOFTWARE & SERVICES -- 1.6%
11,470 Akamai Technologies, Inc.(1) 322,995
78,290 eBay Inc.(1) 2,336,174
16,150 Google Inc. Cl A(1) 7,113,590
15,224 VeriSign, Inc.(1) 506,046
92,124 Yahoo! Inc.(1) 2,665,147
------------
12,943,952
------------
IT SERVICES -- 2.2%
6,960 Affiliated Computer Services Inc. Cl A(1) 348,766
36,218 Automatic Data Processing, Inc. 1,535,280
20,036 Cognizant Technology Solutions Corp. Cl A(1) 577,638
11,338 Computer Sciences Corp.(1) 462,477
9,433 Convergys Corp.(1) 142,061
35,245 Electronic Data Systems Corp. 586,829
11,763 Fidelity National Information Services, Inc. 448,641
11,333 Fiserv, Inc.(1) 545,004
96,127 International Business Machines Corp. 11,068,062
22,952 Paychex, Inc. 786,336
11,753 Total System Services Inc. 278,076
24,806 Unisys Corp.(1) 109,891
51,773 Western Union Co. (The) 1,101,212
------------
17,990,273
------------
LEISURE EQUIPMENT & PRODUCTS -- 0.1%
6,332 Brunswick Corp. 101,122
19,847 Eastman Kodak Co.(2) 350,696
10,184 Hasbro, Inc. 284,134
25,249 Mattel, Inc. 502,455
------------
1,238,407
------------
LIFE SCIENCES TOOLS & SERVICES -- 0.4%
11,568 Applera Corporation -- Applied Biosystems Group 380,124
3,783 Millipore Corp.(1) 255,012
8,165 PerkinElmer, Inc. 198,001
29,052 Thermo Fisher Scientific Inc.(1) 1,651,316
6,918 Waters Corp.(1) 385,333
------------
2,869,786
------------
Shares Value
MACHINERY -- 1.9%
43,333 Caterpillar Inc. $ 3,392,541
14,082 Cummins Inc. 659,319
17,458 Danaher Corp. 1,327,332
30,210 Deere & Co. 2,430,092
13,648 Dover Corp. 570,213
10,089 Eaton Corp. 803,791
28,451 Illinois Tool Works Inc. 1,372,192
18,771 Ingersoll-Rand Company Ltd. Cl A 836,811
12,523 ITT Corporation 648,817
9,000 Manitowoc Co., Inc. (The) 367,200
25,323 Paccar Inc. 1,139,535
8,463 Pall Corp. 296,797
11,580 Parker-Hannifin Corp. 802,147
7,096 Terex Corp.(1) 443,500
------------
15,090,287
------------
MEDIA -- 2.8%
47,147 CBS Corp. Cl B(2) 1,041,006
34,941 Clear Channel Communications, Inc. 1,020,976
208,829 Comcast Corp. Cl A 4,038,753
49,439 DIRECTV Group, Inc. (The)(1) 1,225,593
6,233 EW Scripps Co. Cl A 261,848
15,983 Gannett Co., Inc. 464,306
32,425 Interpublic Group of Companies, Inc. (The)(1) 272,694
2,653 Meredith Corp. 101,477
9,877 New York Times Co. (The) Cl A(2) 186,478
158,431 News Corp. Cl A 2,970,581
22,519 Omnicom Group Inc. 994,889
248,119 Time Warner Inc. 3,478,628
44,453 Viacom Inc. Cl B(1) 1,761,228
130,663 Walt Disney Co. (The) 4,100,206
443 Washington Post Co. (The) Cl B 293,045
------------
22,211,708
------------
METALS & MINING -- 1.1%
56,570 Alcoa Inc. 2,039,914
7,020 Allegheny Technologies Inc. 500,947
26,310 Freeport-McMoRan Copper & Gold, Inc. 2,531,549
31,199 Newmont Mining Corporation 1,413,315
19,877 Nucor Corp. 1,346,468
6,400 Titanium Metals Corp. 96,320
8,120 United States Steel Corp. 1,030,184
------------
8,958,697
------------
- ------
13
Equity Index
Shares Value
MULTI-UTILITIES -- 1.1%
14,397 Ameren Corp. $ 634,044
22,173 CenterPoint Energy, Inc. 316,409
15,509 CMS Energy Corp. 209,992
18,767 Consolidated Edison, Inc. 745,050
40,322 Dominion Resources Inc. 1,646,749
11,267 DTE Energy Company 438,174
5,239 Integrys Energy Group Inc. 244,347
18,850 NiSource Inc. 324,974
24,384 PG&E Corp. 897,819
35,080 Public Service Enterprise Group Inc. 1,409,865
18,028 Sempra Energy 960,532
14,460 TECO Energy, Inc. 230,637
29,001 Xcel Energy Inc. 578,570
------------
8,637,162
------------
MULTILINE RETAIL -- 0.8%
6,456 Big Lots, Inc.(1) 143,969
4,084 Dillard's Inc. Cl A(2) 70,286
10,033 Family Dollar Stores, Inc. 195,644
15,304 J.C. Penney Co., Inc. 577,114
21,661 Kohl's Corp.(1) 929,040
29,884 Macy's Inc. 689,125
12,460 Nordstrom, Inc. 406,196
5,026 Sears Holdings Corp.(1)(2) 513,104
58,120 Target Corp. 2,945,521
------------
6,469,999
------------
OFFICE ELECTRONICS -- 0.1%
63,724 Xerox Corp. 953,948
------------
OIL, GAS & CONSUMABLE FUELS -- 10.4%
32,132 Anadarko Petroleum Corp. 2,025,280
23,448 Apache Corp. 2,832,987
33,647 Chesapeake Energy Corp. 1,552,809
144,053 Chevron Corp. 12,296,364
108,323 ConocoPhillips 8,255,296
12,551 Consol Energy Inc. 868,404
31,894 Devon Energy Corporation 3,327,501
48,244 El Paso Corp. 802,780
16,982 EOG Resources Inc. 2,037,840
371,120 Exxon Mobil Corp. 31,389,330
19,156 Hess Corp. 1,689,176
48,899 Marathon Oil Corp. 2,229,794
12,938 Murphy Oil Corp. 1,062,727
11,800 Noble Energy Inc. 859,040
57,098 Occidental Petroleum Corp. 4,177,861
18,220 Peabody Energy Corp. 929,220
9,308 Range Resources Corporation 590,593
Shares Value
43,541 Spectra Energy Corp. $ 990,558
8,072 Sunoco, Inc. 423,538
9,500 Tesoro Corp. 285,000
37,077 Valero Energy Corp. 1,820,851
40,588 Williams Companies, Inc. (The) 1,338,592
33,886 XTO Energy Inc. 2,096,188
------------
83,881,729
------------
PAPER & FOREST PRODUCTS -- 0.3%
29,448 International Paper Company 800,986
12,730 MeadWestvaco Corp. 346,511
14,474 Weyerhaeuser Co. 941,388
------------
2,088,885
------------
PERSONAL PRODUCTS -- 0.2%
29,613 Avon Products, Inc. 1,170,898
7,876 Estee Lauder Companies, Inc. (The) Cl A 361,115
------------
1,532,013
------------
PHARMACEUTICALS -- 6.1%
106,454 Abbott Laboratories 5,870,938
21,145 Allergan, Inc. 1,192,367
7,392 Barr Pharmaceuticals Inc.(1) 357,108
136,371 Bristol-Myers Squibb Co. 2,904,702
67,994 Eli Lilly and Company 3,507,810
21,476 Forest Laboratories, Inc.(1) 859,255
198,091 Johnson & Johnson 12,850,163
16,802 King Pharmaceuticals, Inc.(1) 146,177
150,003 Merck & Co., Inc. 5,692,614
18,590 Mylan Inc.(2) 215,644
473,170 Pfizer Inc. 9,903,448
111,651 Schering-Plough Corp. 1,608,891
7,170 Watson Pharmaceuticals, Inc.(1) 210,224
92,346 Wyeth 3,856,369
------------
49,175,710
------------
REAL ESTATE INVESTMENT TRUSTS (REITS) -- 1.1%
6,640 Apartment Investment and Management Co. Cl A 237,778
5,409 AvalonBay Communities Inc. 522,077
8,276 Boston Properties Inc. 761,971
8,512 Developers Diversified Realty Corp.(2) 356,483
18,695 Equity Residential 775,656
16,821 General Growth Properties, Inc. 642,058
12,730 HCP, Inc. 430,401
36,006 Host Hotels & Resorts Inc. 573,216
17,449 Kimco Realty Corp. 683,477
11,922 Plum Creek Timber Co. Inc. 485,225
17,747 ProLogis 1,044,588
- ------
14
Equity Index
Shares Value
8,577 Public Storage Inc. $ 760,094
15,376 Simon Property Group, Inc. 1,428,584
9,210 Vornado Realty Trust 793,994
------------
9,495,602
------------
REAL ESTATE MANAGEMENT & DEVELOPMENT(4)
13,586 CB Richard Ellis Group, Inc. Cl A(1) 294,001
------------
ROAD & RAIL -- 0.9%
20,557 Burlington Northern Santa Fe Corp. 1,895,767
27,977 CSX Corp. 1,568,670
26,242 Norfolk Southern Corp. 1,425,465
3,996 Ryder System, Inc. 243,396
18,088 Union Pacific Corp. 2,267,874
------------
7,401,172
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.4%
40,888 Advanced Micro Devices, Inc.(1) 240,830
21,269 Altera Corp. 391,988
20,420 Analog Devices, Inc. 602,798
93,905 Applied Materials, Inc. 1,832,087
32,437 Broadcom Corp. Cl A(1) 625,061
401,538 Intel Corp. 8,504,576
12,519 KLA-Tencor Corp. 464,455
15,423 Linear Technology Corp. 473,332
45,878 LSI Logic Corp.(1) 227,096
15,756 MEMC Electronic Materials Inc.(1) 1,117,100
13,000 Microchip Technology Inc.(2) 425,490
52,458 Micron Technology, Inc.(1) 313,174
15,749 National Semiconductor Corp. 288,522
7,063 Novellus Systems, Inc.(1) 148,676
38,303 NVIDIA Corp.(1) 758,016
12,574 Teradyne, Inc.(1) 156,169
91,971 Texas Instruments Inc. 2,600,020
19,867 Xilinx, Inc. 471,841
------------
19,641,231
------------
SOFTWARE -- 3.3%
39,516 Adobe Systems Inc.(1) 1,406,374
15,903 Autodesk, Inc.(1) 500,626
13,510 BMC Software Inc.(1) 439,345
26,997 CA, Inc. 607,433
13,029 Citrix Systems, Inc.(1) 382,141
20,605 Compuware Corp.(1) 151,241
21,648 Electronic Arts Inc.(1) 1,080,668
22,964 Intuit Inc.(1) 620,258
554,474 Microsoft Corporation 15,735,972
24,091 Novell, Inc.(1) 151,532
Shares Value
273,141 Oracle Corp.(1) $ 5,342,638
59,802 Symantec Corp.(1) 993,909
------------
27,412,137
------------
SPECIALTY RETAIL -- 1.6%
5,947 Abercrombie & Fitch Co. 434,964
9,488 AutoNation, Inc.(1) 142,035
3,069 AutoZone, Inc.(1) 349,344
18,238 Bed Bath & Beyond Inc.(1) 538,021
25,074 Best Buy Co., Inc. 1,039,568
952 Circuit City Stores, Inc. 3,789
10,900 GameStop Corp. Cl A(1) 563,639
31,558 Gap, Inc. (The) 621,061
119,633 Home Depot, Inc. (The) 3,346,136
21,436 Limited Brands, Inc. 366,556
100,810 Lowe's Companies, Inc. 2,312,581
19,446 Office Depot, Inc.(1) 214,878
5,181 OfficeMax Inc. 99,164
9,017 RadioShack Corp. 146,526
7,208 Sherwin-Williams Co. 367,896
48,751 Staples, Inc. 1,077,885
8,702 Tiffany & Co. 364,092
30,101 TJX Companies, Inc. (The) 995,440
------------
12,983,575
------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.4%
24,364 Coach Inc.(1) 734,575
6,318 Jones Apparel Group, Inc. 84,788
7,052 Liz Claiborne, Inc. 127,994
26,608 NIKE, Inc. Cl B 1,809,343
4,031 Polo Ralph Lauren Corp. 234,967
6,069 VF Corp. 470,408
------------
3,462,075
------------
THRIFTS & MORTGAGE FINANCE -- 0.6%
39,848 Countrywide Financial Corp.(2) 219,164
67,402 Fannie Mae 1,774,021
45,534 Freddie Mac 1,152,921
35,856 Hudson City Bancorp, Inc. 633,934
6,183 MGIC Investment Corp.(2) 65,107
24,854 Sovereign Bancorp Inc. 231,639
59,840 Washington Mutual, Inc.(2) 616,352
------------
4,693,138
------------
TOBACCO -- 1.5%
146,252 Altria Group Inc. 3,246,794
146,252 Philip Morris International Inc.(1) 7,397,426
11,767 Reynolds American Inc. 694,606
10,788 UST Inc. 588,162
------------
11,926,988
------------
- ------
15
Equity Index
Shares Value
TRADING COMPANIES & DISTRIBUTORS(4)
4,615 Grainger (W.W.), Inc. $ 352,540
------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.3%
27,900 American Tower Corp. Cl A(1) 1,093,959
196,052 Sprint Nextel Corp. 1,311,588
------------
2,405,547
------------
TOTAL COMMON STOCKS
(Cost $578,606,130) 798,286,159
------------
Principal Amount
Short-Term Investments Segregated For Futures Contracts(3) -- 2.1%
Repurchase Agreement, Deutsche Bank Securities, Inc.,
(collateralized by various U.S. Treasury obligations, 2.375%,
4/15/11, valued at $15,294,317), in a joint trading account at
1.35%, dated 3/31/08, due 4/1/08 (Delivery value $15,000,563) 15,000,000
$1,600,000 U.S. Treasury Bills, 2.50%, 6/26/08(5) 1,595,069
------------
SHORT TERM INVESTMENTS SEGREGATED FOR FUTURES CONTRACTS
(Cost $16,590,429) 16,595,069
------------
Value
Temporary Cash Investments -- Securities Lending Collateral(6) -- 1.0%
Repurchase Agreement, Barclays Bank plc, (collateralized by
various U.S. Government Agency obligations in a pooled
account at the lending agent), 2.30%, dated 3/31/08, due
4/1/08 (Delivery value $2,231,265) $ 2,231,122
Repurchase Agreement, BNP Paribas, (collateralized by
various U.S. Government Agency obligations in a pooled
account at the lending agent), 2.30%, dated 3/31/08, due
4/1/08 (Delivery value $1,598,021) 1,597,919
Repurchase Agreement, Deutsche Bank AG, (collateralized by
various U.S. Government Agency obligations in a pooled
account at the lending agent), 2.25%, dated 3/31/08, due
4/1/08 (Delivery value $2,200,138) 2,200,000
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency
obligations in a pooled account at the lending agent),
2.15%, dated 3/31/08, due 4/1/08 (Delivery value $2,146,433) 2,146,305
------------
TOTAL TEMPORARY CASH INVESTMENTS -- SECURITIES LENDING
COLLATERAL
(Cost $8,175,346) 8,175,346
------------
TOTAL INVESTMENT SECURITIES -- 101.9%
(Cost $603,371,905) 823,056,574
------------
OTHER ASSETS AND LIABILITIES -- (1.9)% (15,571,768)
------------
TOTAL NET ASSETS -- 100.0% $807,484,806
============
Futures Contracts
Expiration Underlying Face Unrealized Gain
Contracts Purchased Date Amount at Value (Loss)
271 S&P 500 E-Mini
Futures June 2008 $17,909,713 $108,077
=========== ========
Notes to Schedule of Investments
(1) Non-income producing.
(2) Security, or a portion thereof, was on loan as of March 31, 2008.
(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
MARCH 31, 2008
ASSETS
Investment securities, at value (cost of $595,196,559) --
including $7,993,400 of securities on loan $814,881,228
Investments made with cash collateral received for securities on
loan, at value (cost of $8,175,346) 8,175,346
------------
Total investment securities, at value (cost of $603,371,905) 823,056,574
Receivable for investments sold 8,988,525
Receivable for variation margin on futures contracts 64,235
Dividends and interest receivable 1,139,862
------------
833,249,196
------------
LIABILITIES
Disbursements in excess of demand deposit cash 8,468,301
Payable for collateral received for securities on loan 8,175,346
Payable for investments purchased 8,883,934
Accrued management fees 236,809
------------
25,764,390
------------
NET ASSETS $807,484,806
============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $678,948,909
Accumulated net realized loss on investment transactions (91,256,849)
Net unrealized appreciation on investments 219,792,746
------------
$807,484,806
============
INVESTOR CLASS, $0.01 PAR VALUE
Net assets $207,570,929
Shares outstanding 39,449,043
Net asset value per share $5.26
INSTITUTIONAL CLASS, $0.01 PAR VALUE
Net assets $599,913,877
Shares outstanding 113,953,913
Net asset value per share $5.26
See Notes to Financial Statements.
- ------
17
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2008
INVESTMENT INCOME (LOSS)
INCOME:
Dividends $ 19,501,927
Interest 594,175
Securities lending, net 70,128
-------------
20,166,230
-------------
EXPENSES:
Management fees 3,387,743
Directors' fees and expenses 19,902
Other expenses 20,135
-------------
3,427,780
-------------
NET INVESTMENT INCOME (LOSS) 16,738,450
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investment transactions 19,760,873
Change in net unrealized appreciation (depreciation) on
investments (77,223,575)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) (57,462,702)
-------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(40,724,252)
=============
See Notes to Financial Statements.
- ------
18
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED MARCH 31, 2008 AND MARCH 31, 2007
Increase (Decrease) in Net Assets 2008 2007
OPERATIONS
Net investment income (loss) $ 16,738,450 $ 16,518,662
Net realized gain (loss) 19,760,873 (1,894,848)
Change in net unrealized appreciation
(depreciation) (77,223,575) 95,849,197
------------- --------------
Net increase (decrease) in net assets resulting
from operations (40,724,252) 110,473,011
------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class (3,698,248) (3,153,574)
Institutional Class (13,706,733) (12,820,111)
From return of capital:
Investor Class (222,628) --
Institutional Class (718,537) --
------------- --------------
Decrease in net assets from distributions (18,346,146) (15,973,685)
------------- --------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets from
capital share transactions (179,896,379) 136,393,751
------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS (238,966,777) 230,893,077
NET ASSETS
Beginning of period 1,046,451,583 815,558,506
------------- --------------
End of period $ 807,484,806 $1,046,451,583
============= ==============
Undistributed net investment income -- $680,205
============= ==============
See Notes to Financial Statements.
- ------
19
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
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 the Board of Directors or its designee, in accordance
with procedures adopted by the Board of Directors, 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 purposes, 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 income earned, net of any rebates or fees, is included in the
Statement of Operations. 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 investment transactions and unrealized appreciation
(depreciation) on investments, respectively.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that American Century Investment Management, Inc. (ACIM) (the
investment advisor) has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities,
received in a repurchase transaction be transferred to the custodian in a
manner sufficient to enable the fund to obtain those securities in the event
of a default under the repurchase agreement. ACIM monitors, on a daily basis,
the securities transferred to ensure the value, including accrued interest, of
the securities under each repurchase agreement is equal to or greater than
amounts owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM or American
Century Global Investment Management, Inc. (ACGIM), may transfer uninvested
cash balances into a joint trading account. These balances are invested in one
or more repurchase agreements that are collateralized by U.S. Treasury or
Agency obligations.
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 2005. 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
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
- ------
21
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 year ended March 31, 2008 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 securities lending agreement with JPMorgan
Chase Bank (JPMCB). Prior to December 12, 2007, the fund had a bank line of
credit agreement with JPMCB. JPMCB is a custodian of the fund and a wholly
owned subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term
investments, for the year ended March 31, 2008, were $85,862,634 and
$258,210,724, respectively.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows:
Year ended March 31, 2008 Year ended March 31, 2007
Shares Amount Shares Amount
INVESTOR
CLASS/SHARES
AUTHORIZED 150,000,000 100,000,000
============ ============
Sold 7,464,834 $ 43,252,429 8,653,995 $ 46,849,637
Issued in
connection with
acquisition (Note
8) -- -- 33,257,723 171,655,240
Issued in
reinvestment of
distributions 636,655 3,658,806 511,586 2,737,555
Redeemed (9,782,140) (56,794,873) (30,924,150) (162,716,881)
------------ -------------- ------------ -------------
(1,680,651) (9,883,638) 11,499,154 58,525,551
------------ -------------- ------------ -------------
INSTITUTIONAL
CLASS/SHARES
AUTHORIZED 500,000,000 400,000,000
============ ============
Sold 29,366,320 173,102,007 44,066,384 233,940,765
Issued in
reinvestment of
distributions 2,498,910 14,425,270 2,397,106 12,820,111
Redeemed (61,520,613) (357,540,018) (31,245,332) (168,892,676)
------------ -------------- ------------ -------------
(29,655,383) (170,012,741) 15,218,158 77,868,200
------------ -------------- ------------ -------------
Net increase
(decrease) (31,336,034) $(179,896,379) 26,717,312 $ 136,393,751
============ ============== ============ =============
5. SECURITIES LENDING
As of March 31, 2008, securities in the fund valued at $7,993,400 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
- ------
22
day. The total value of all collateral received, at this date, was $8,175,346.
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
Effective December 12, 2007, the fund, along with certain other funds managed
by ACIM or ACGIM, has a $500,000,000 unsecured bank line of credit agreement
with Bank of America, N.A. Prior to December 12, 2007, the fund, along with
certain other funds managed by ACIM or ACGIM, had 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, which is subject to annual renewal, bear interest at the
Federal Funds rate plus 0.40%. The fund did not borrow from the line during
the year ended March 31, 2008.
7. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2008
and March 31, 2007 were as follows:
2008 2007
DISTRIBUTIONS PAID FROM
Ordinary income $17,404,981 $15,973,685
Long-term capital gains -- --
Return of capital $941,165 --
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect
the differing character of certain income items and net realized gains and
losses for financial statement and tax purposes, and may result in
reclassification among certain capital accounts on the financial statements.
As of March 31, 2008, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
Federal tax cost of investments $630,368,870
=============
Gross tax appreciation of investments $258,884,957
Gross tax depreciation of investments (66,197,253)
-------------
Net tax appreciation (depreciation) of investments $192,687,704
=============
Net tax appreciation (depreciation) on derivatives --
-------------
Net tax appreciation (depreciation) $192,687,704
=============
Undistributed ordinary income --
Accumulated capital losses $(64,151,807)
The difference between book-basis and tax-basis cost and unrealized
appreciation (depreciation) is attributable primarily to the tax deferral of
losses on wash sales, the realization for tax purposes of unrealized gains on
certain futures contracts, and return of capital dividends received.
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:
2011 2012 2013 2014 2015
$(46,771,036) $(1,957,751) $(1,992,016) $(5,270,954) $(8,160,050)
- ------
23
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 Fund/Class Shares Exchanged New Fund/Class Shares Received
Index 500 Fund - Equity Index -
A Class 9,733,344 Investor Class 28,917,087
Index 500 Fund - Equity Index -
B Class 1,474,502 Investor 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. The
adoption of FIN 48 did 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.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, "Disclosures about Derivative Instruments and Hedging Activities -- an
amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for
fiscal years beginning after November 15, 2008. FAS 161 amends and expands
disclosures about derivative instruments and hedging activities. FAS 161
requires qualitative disclosures about the objectives and strategies of
derivative instruments, quantitative disclosures about the fair value amounts
of and gains and losses on derivative instruments, and disclosures of
credit-risk-related contingent features in hedging activities. Management is
currently evaluating the impact that adopting FAS 161 will have on the
financial statement disclosures.
10. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified
dividend income for the fiscal year ended March 31, 2008.
For corporate taxpayers, the fund hereby designates $17,404,980, or up to the
maximum amount allowable, of ordinary income distributions paid during the
fiscal year ended March 31, 2008 as qualified for the corporate dividends
received deduction.
- ------
24
FINANCIAL HIGHLIGHTS
Equity Index
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $5.66 $5.16 $4.70 $4.50 $3.39
------ ------ ------ ------ ------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.09 0.08 0.07 0.07 0.05
Net Realized and
Unrealized Gain (Loss) (0.39) 0.50 0.46 0.20 1.11
------ ------ ------ ------ ------
Total From Investment
Operations (0.30) 0.58 0.53 0.27 1.16
------ ------ ------ ------ ------
Distributions
From Net Investment
Income (0.10) (0.08) (0.07) (0.07) (0.05)
From Return of Capital --(2) -- -- -- --
------ ------ ------ ------ ------
Total From
Distributions (0.10) (0.08) (0.07) (0.07) (0.05)
------ ------ ------ ------ ------
Net Asset Value, End of
Period $5.26 $5.66 $5.16 $4.70 $4.50
====== ====== ====== ====== ======
TOTAL RETURN(3) (5.46)% 11.28% 11.36% 6.04% 34.27%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.49% 0.49% 0.49% 0.49% 0.49%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 1.51% 1.49% 1.43% 1.59% 1.23%
Portfolio Turnover Rate 9% 4% 17% 4% 16%
Net Assets, End of Period
(in thousands) $207,571 $232,880 $152,799 $150,454 $142,324
(1) Computed using average shares outstanding throughout the period.
(2) Per-share amount was less than $0.005.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
25
Equity Index
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $5.67 $5.16 $4.71 $4.50 $3.39
------ ------ ------ ------ ------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.10 0.09 0.08 0.08 0.06
Net Realized and
Unrealized Gain (Loss) (0.40) 0.51 0.45 0.21 1.11
------ ------ ------ ------ ------
Total From Investment
Operations (0.30) 0.60 0.53 0.29 1.17
------ ------ ------ ------ ------
Distributions
From Net Investment
Income (0.11) (0.09) (0.08) (0.08) (0.06)
From Return of Capital --(2) -- -- -- --
------ ------ ------ ------ ------
Total From
Distributions (0.11) (0.09) (0.08) (0.08) (0.06)
------ ------ ------ ------ ------
Net Asset Value, End of
Period $5.26 $5.67 $5.16 $4.71 $4.50
====== ====== ====== ====== ======
TOTAL RETURN(3) (5.27)% 11.50% 11.35% 6.47% 34.53%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.29% 0.29% 0.29% 0.29% 0.29%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 1.71% 1.69% 1.63% 1.79% 1.43%
Portfolio Turnover Rate 9% 4% 17% 4% 16%
Net Assets, End of Period
(in thousands) $599,914 $813,571 $662,759 $907,886 $842,269
(1) Computed using average shares outstanding throughout the period.
(2) Per-share amount was less than $0.005.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders,
American Century Capital Portfolios, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Equity Index Fund, one of the mutual
funds constituting American Century Capital Portfolios, Inc. (the
"Corporation"), as of March 31, 2008, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Corporation is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Corporation's internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. Our procedures included confirmation of securities owned as of
March 31, 2008, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing
procedures. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Equity Index Fund of American Century Capital Portfolios, Inc. as of March 31,
2008, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States
of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 13, 2008
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27
MANAGEMENT
The individuals listed below serve as directors or officers of the fund. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
72. Those listed as interested directors are "interested" primarily by virtue
of their engagement as directors and/or officers of, or ownership interest in,
American Century Companies, Inc. (ACC) or its wholly owned, direct or
indirect, subsidiaries, including the fund's investment advisor, American
Century Investment Management, Inc. (ACIM); the fund's principal underwriter,
American Century Investment Services, Inc. (ACIS); and the fund's transfer
agent, American Century Services, LLC (ACS).
The other directors (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers
of, and have no financial interest in, ACC or any of its wholly owned, direct
or indirect, subsidiaries, including ACIM, ACIS and ACS. The directors serve
in this capacity for seven registered investment companies in the American
Century Investments family of funds.
All persons named as officers of the fund also serve in similar capacities for
the other 14 investment companies in the American Century Investments family
of funds advised by ACIM or American Century Global Investment Management,
Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise noted. Only
officers with policy-making functions are listed. No officer is compensated
for his or her service as an officer of the fund. The listed officers are
interested persons of the fund and are appointed or re-appointed on an annual
basis.
INTERESTED DIRECTORS
JAMES E. STOWERS, JR., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1924
POSITION(S) HELD WITH FUND: Director (since 1958) and Vice Chairman (since
2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Co-Chairman, Director
and Controlling Shareholder, ACC; Co-Vice Chairman, ACC (January 2005 to
February 2007); Chairman, ACC (January 1995 to December 2004); Director, ACIM,
ACGIM, ACS, ACIS and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
JONATHAN S. THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUND: Director (since 2007) and President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC
(February 2006 to February 2007); Executive Vice President, ACC (November 2005
to February 2007). Also serves as: President, Chief Executive Officer and
Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM,
ACGIM, ACIS and other ACC subsidiaries. Managing Director, Morgan Stanley
(March 2000 to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 105
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
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28
INDEPENDENT DIRECTORS
THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1940
POSITION(S) HELD WITH FUND: Director (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Managing Member, Associated
Investments, LLC (real estate investment company); Managing Member, Brown
Cascade Properties, LLC (real estate investment company); Retired, Area Vice
President, Applied Industrial Technologies
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Director (since 1997)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Advisor to the
President, Midwest Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
JAMES A. OLSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1942
POSITION(S) HELD WITH FUND: Director (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member, Plaza Belmont LLC; Chief
Financial Officer, Plaza Belmont LLC (September 1999 to December 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Saia, Inc. and Entertainment
Properties Trust
DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Director (since 1995) and Chairman of the Board
(since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman and Chief Executive
Officer, Western Investments, Inc.; Retired Chairman of the Board, Butler
Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1943
POSITION(S) HELD WITH FUND: Director (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive
Officer and Founder, Sayers40, Inc., a technology products and services
provider
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Director (since 1994)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Senior Vice
President, Sprint Corporation
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide, Inc.; Director, Charming Shoppes, Inc.
- ------
29
OFFICERS
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS
(October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007);
Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as:
Director, ACC, ACS, ACIS and other ACC subsidiaries
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century Investments funds (July 2000 to August 2006). Also serves as: Senior
Vice President, ACS
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUND: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney, ACC (February 1994 to
present); Vice President, ACC (November 2005 to present); General Counsel, ACC
(March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Vice President, Treasurer and Chief Financial
Officer (all since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February
2000 to present) and Controller, various American Century Investments funds
(1997 to September 2006)
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer (since 1998)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the fund's directors and is available
without charge, upon request, by calling 1-800-345-2021.
- ------
30
ADDITIONAL INFORMATION
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain
403(b), 457 and qualified plans [those not eligible for rollover to an IRA or
to another qualified plan] are subject to federal income tax withholding,
unless you elect not to have withholding apply. Tax will be withheld on the
total amount withdrawn even though you may be receiving amounts that are not
subject to withholding, such as nondeductible contributions. In such case,
excess amounts of withholding could occur. You may adjust your withholding
election so that a greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right
to revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments
are not sufficient.
State tax will be withheld if, at the time of your distribution, your address
is within one of the mandatory withholding states and you have federal income
tax withheld. State taxes will be withheld from your distribution in
accordance with the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's investment advisor,
is responsible for exercising the voting rights associated with the securities
purchased and/or held by the fund. A description of the policies and
procedures the advisor uses in fulfilling this responsibility is available
without charge, upon request, by calling 1-800-345-2021. It is also available
on American Century's 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.
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31
INDEX DEFINITIONS
The following indices are used to illustrate investment market, sector, or
style performance or to serve as fund performance comparisons. They are not
investment products available for purchase.
The 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.
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32
[back cover]
[american century investments logo and text logo ®]
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
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
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
0805
CL-ANN-60046N
[front cover]
ANNUAL REPORT
MARCH 31, 2008
[american century investments logo and text logo ®]
AMERICAN CENTURY INVESTMENTS
REAL ESTATE FUND
PRESIDENT'S LETTER
JONATHAN THOMAS
[photo of Jonathan Thomas]
Dear Investor,
At American Century Investments®, we are committed to helping you reach your
financial goals. Your success is the ultimate measure of our performance.
That's why we focus on achieving superior investment results and building
long-term relationships with investors like you.
Part of that relationship is to clearly communicate investment results and
what influenced them. To help you monitor your investment with us, we take
pride in providing you with the annual report for the American Century® Real
Estate Fund for the 12 months ended March 31, 2008. We also recommend our
website, americancentury.com, where we provide company news, quarterly
portfolio commentaries, investment views, and other useful information about
portfolio strategy, personal finance, government policy, and the markets.
As noted on the website, 2008 marks our 50th year. Since 1958, we've worked
for you with integrity, always striving to make wise decisions with your
interests as our guide. Fifty years also means that we've met the challenges
of previous recessionary cycles. As we've crossed those hurdles and earned
your trust, our assets under management have grown to close to $100 billion,
putting us in the top 5% of our industry. This growth has given us the
resources to offer a wide array of financial products and services, including
a well-diversified line-up of portfolios that provide you with many choices in
these turbulent times.
Our investment discipline and integrity are important features of our
portfolios. For example, our fixed-income investment team anticipated the
current credit squeeze. Instead of chasing higher yields and adding leveraged
exposure as the credit bubble inflated, the team minimized our portfolios'
direct exposure to subprime-related debt, preserving investors' hard-earned
capital. The team also positioned the portfolios to capitalize on
opportunities, including attractive high-quality securities discarded by
investors with liquidity needs.
We'll continue to work hard to earn your trust. Thank you for your continued
support.
Sincerely,
/s/Jonathan Thomas
Jonathan S. Thomas
President and Chief Executive Officer
American Century Investments
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. . . . . . . . . . . . . . . . . . . . . . . . . 22
Report of Independent Registered Public Accounting Firm . . . . . . . 28
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 32
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 33
The opinions expressed in the Market Perspective and the Portfolio Commentary
reflect those of the portfolio management team as of the date of the report,
and do not necessarily represent the opinions of American Century or any other
person in the American Century organization. Any such opinions are subject to
change at any time based upon market or other conditions and American Century
disclaims any responsibility to update such opinions. These opinions may not
be relied upon as investment advice and, because investment decisions made by
American Century funds are based on numerous factors, may not be relied upon
as an indication of trading intent on behalf of any American Century fund.
Security examples are used for representational purposes only and are not
intended as recommendations to purchase or sell securities. Performance
information for comparative indices and securities is provided to American
Century by third party vendors. To the best of American Century's knowledge,
such information is accurate at the time of printing.
MARKET PERSPECTIVE
[photo of Chief Investment Officer]
By Enrique Chang, Chief Investment Officer, American Century Investments
ECONOMIC AND SUBPRIME TURMOIL SANK STOCKS
The broad U.S. equity indexes declined for the 12 months ended March 31, 2008,
as the market environment changed dramatically. Stocks began the period on an
upward trajectory, boosted by better-than-expected earnings and robust merger
activity.
However, the market reversed course in mid-2007 as the bursting of the housing
market bubble led to a meltdown in the subprime lending industry and a
liquidity crunch in the credit markets. Tighter lending standards brought an
end to the easy credit that fueled the merger and leveraged buy-out boom of
the past few years, and the economy threatened to tip into recession amid
sluggish job growth and weaker consumer spending.
The Federal Reserve (the Fed) responded aggressively, cutting short-term
interest rates six times between September 2007 and March 2008 and injecting
liquidity into the financial system to provide some relief to the credit
markets. But the Fed's game plan was complicated by persistently high energy
and food prices, which led to concerns about rising inflation.
These exceptional events triggered unusually high levels of financial market
volatility. Several of the major U.S. stock indexes hit all-time highs, then
suffered their first 10% correction since 2003. The first quarter of 2008
brought the worst quarterly performance for stocks in nearly six years as the
credit crunch deepened and a recession loomed.
LARGE-CAP AND GROWTH LED THE WAY
While stocks fell across the board, large-cap shares held up the best, while
small-cap stocks experienced the largest declines (see the accompanying
table). Growth-oriented issues outpaced value stocks across all market
capitalizations, though value outperformed during the final three months of
the period.
By far, energy stocks generated the best returns as the price of oil soared by
54% during the period, peaking at a record high of more than $110 a barrel.
Consumer staples stocks, which tend to hold up well in a weaker economic
environment, also delivered strong results. The financials and consumer
discretionary sectors sustained the largest losses.
U.S. Stock Index Returns
For the 12 months ended March 31, 2008
RUSSELL 1000 INDEX (LARGE-CAP) -5.40%
Russell 1000 Growth Index -0.75%
Russell 1000 Value Index -9.99%
RUSSELL MIDCAP INDEX -8.92%
Russell Midcap Growth Index -4.55%
Russell Midcap Value Index -14.12%
RUSSELL 2000 INDEX (SMALL-CAP) -13.00%
Russell 2000 Growth Index -8.94%
Russell 2000 Value Index -16.88%
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2
PERFORMANCE
Real Estate
Total Returns as of March 31, 2008
Average Annual Returns
Since Inception
1 year 5 years 10 years Inception Date
INVESTOR CLASS -16.60% 18.78% 11.25% 14.31% 9/21/95(1)
MSCI US REIT INDEX -17.87% 18.16% 10.68% 13.00%(2) --
Institutional Class -16.44% 19.00% 11.49% 12.25% 6/16/97
A Class(3)
No sales charge* -16.84% 18.50% -- 14.73%
With sales charge* -21.63% 17.10% -- 14.01% 10/6/98
B Class(4)
No sales charge* -- -- -- -11.57%
With sales charge* -- -- -- -16.57% 9/28/07
C Class(4)
No sales charge* -- -- -- -11.57%
With sales charge* -- -- -- -12.32% 9/28/07
R Class(4) -- -- -- -11.37% 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%. The SEC requires that mutual funds provide
performance information net of maximum sales charges in all cases where
charges could be applied.
(1) The inception date for RREEF Real Estate Securities Fund, Real Estate's
predecessor. That fund merged with Real Estate on 6/13/97 and Real Estate was
first offered to the public on 6/16/97.
(2) Since 9/30/95, the date nearest the Investor Class's inception for which
data are available.
(3) 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.
(4) Total returns for periods less than one year are not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. 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.
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3
Real Estate
Growth of $10,000 Over 10 Years
$10,000 investment made March 31, 1998
One-Year Returns Over 10 Years
Periods ended March 31
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Investor
Class -21.04% 2.87% 24.57% 20.23% 0.93% 50.97% 9.53% 40.65% 22.02% -16.60%
MSCI US
REIT Index -20.32% 2.94% 22.93% 22.79% -3.28% 51.60% 8.62% 39.50% 22.10% -17.87%
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 Manager: Kay Herr
Scott Blasdell, co-portfolio manager, left the Real Estate team on March 31,
2008, to take on new responsibilities within JPMorgan (which subadvises
American Century Real Estate). Kay Herr has been a member of the Real Estate
team since 2002, and has taken over Scott's responsibilities on the portfolio.
PERFORMANCE SUMMARY
Real Estate posted a total return of -16.60%* for the 12 months ended March
31, 2008, outperforming the MSCI US REIT Index, which returned -17.87%.
The portfolio's performance resulted from a steep decline in the real estate
investment trust (REIT) market during the period--a much more significant drop
than was suffered by the broader stock market, as the S&P 500 Index** returned
- -5.08% over the same time. The subprime mortgage meltdown, accompanied by a
weakening economy put strong downward pressure on the REIT market as rich
valuations were repriced to accommodate elevated risk from higher debt costs,
a potential slowdown in demand and negative revaluation of the properties held
by the REIT operators. Redemptions increased dramatically around the middle of
2007, particularly in June. Outflows were driven by both dedicated REIT
investors and non-dedicated investors rotating out of the sector. In the
broader market, investors responded to increasing defaults in subprime
mortgages by aggressively selling mortgage securities and CDOs. Decreasing
values as well as redemptions from funds holding these types of securities put
pressure on lenders, brokers and monoline insurers, resulting in a massive
tightening in the money markets.
The Fed responded with multiple cuts in the discount rate and federal funds
rate as well as other creative money operations to ameliorate high levels of
illiquidity. In general, the interplay of Federal Reserve operations and
negative sentiment on the state of the U.S. economy and financial sector in
particular drove the market to high levels of volatility.
OFFICE/INDUSTRIAL AND RETAIL STOCKS BUOYED RELATIVE RETURNS
Stock selection in the office/industrial, retail and "other" sectors was
strong. A positive contributor was our overweight position in Crown Castle
International, a firm which rents wireless bandwidth supported by a series of
towers it owns and operates. This stock benefited from improving tower leasing
trends as investors anticipated accelerating revenue growth in late 2007 and
2008 from the deployment of advanced wireless services spectrum. The company
has continued to add shareholder value through its periodic stock buy-back
program and the acquisition of Global Signal. Another contributor was the
industrial REIT, ProLogis.
Top Ten Holdings as of March 31, 2008
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Simon Property Group, Inc. 9.3% 8.3%
Kimco Realty Corp. 6.2% 5.1%
ProLogis 6.0% 7.8%
Apartment Investment and Management Co. Cl A 5.4% 4.1%
Public Storage Inc. 4.7% 5.6%
Liberty Property Trust 4.0% 2.5%
Developers Diversified Realty Corp. 3.8% 2.1%
Duke Realty Corporation 3.6% 3.5%
Macerich Co. (The) 3.6% --
Digital Realty Trust Inc. 3.6% 2.7%
* All fund returns referenced in this commentary are for Investor Class shares.
**The S&P 500 Index returned 11.32% and 3.50% for the five- and ten-year
periods ended March 31, 2008, respectively.
- ------
5
Real Estate
Shares rose due to the company's ability to generate strong margins on
development and sales of newly developed properties into its own funds
management business. ProLogis has operations diversified across all three
major global regions, and was consequently considered a defensive play over
2007 due to its exposure to healthier global markets.
MORTGAGE REIT WAS A MAJOR DETRACTOR FROM PERFORMANCE
Our exposure to Annaly Capital Management, a mortgage REIT that owns agency
mortgage-backed securities (i.e. mortgages guaranteed by Fannie Mae or Freddie
Mac), was a major detractor. The stock came under pressure when Fannie Mae and
Freddie Mac reported poor earnings at the end of February and a Carlyle
Capital fund owning agency mortgage-backed securities defaulted on loans from
one of its repo lenders. While the spreads between the cost of debt and yields
on their investments reached 1998 levels at one point for firms like Annaly,
we have eliminated our position as negative sentiment for anything "mortgage"
will be hard to overcome. Another holding that weighed on performance was
suburban office and industrial REIT, Duke Realty Corp., which suffered as
fears of an economic slowdown impacted investor expectations for margins on
its merchant building business (developing property for sale) as well as
overall portfolio occupancy. Investors are wary of Duke's large development
pipeline, which increases capital requirements just as liquidity in the debt
markets is tightening. However, we still have high conviction in the name due
to its attractive valuation and high dividend yield.
OUTLOOK
While it seems that underlying private commercial real estate values are
finally correcting downward, the scale and eventual timing of value changes is
still very uncertain. On the other hand - absent a full-fledged recession -
commercial real estate fundamentals are still reasonably strong, suggesting
cash flow should not slow dramatically in the short term. Without any positive
catalyst, however, we don't expect REITs to stage a sustainable rally until
ongoing problems in the financial markets are resolved and the scale of direct
real estate repricing is determined. Until then, subprime fallout and the
housing slowdown will continue to weigh on both the U.S. economy and REIT
market.
Industry Allocation
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Retail REITs 30.5% 24.0%
Office REITs 17.8% 16.0%
Specialized REITs 17.5% 23.4%
Residential REITs 12.3% 16.5%
Industrial REITs 8.8% 10.8%
Diversified REITs 8.7% 7.3%
Homebuilding 0.5% --
Wireless Telecommunication Services -- 1.0%
Cash and Equivalents(1) 3.9% 1.0%
(1) Includes temporary cash investments, securities lending collateral and
other assets and liabilities.
Types of Investments in Portfolio
% of net % of net
assets as of assets as of
3/31/08 9/30/07
Common Stocks 96.1% 99.0%
Temporary Cash Investments 3.4% 1.4%
Other Assets and Liabilities(2) 0.5% (0.4)%
(2) 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 October 1, 2007 to March 31, 2008.
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
Beginning Expenses Paid
Account Ending During Period* Annualized
Value Account Value 10/1/07 - Expense
10/1/07 3/31/08 3/31/08 Ratio*
ACTUAL
Investor Class $1,000 $888.70 $5.43 1.15%
Institutional Class $1,000 $889.70 $4.49 0.95%
A Class $1,000 $887.40 $6.61 1.40%
B Class $1,000 $884.30 $10.13 2.15%
C Class $1,000 $884.30 $10.13 2.15%
R Class $1,000 $886.30 $7.78 1.65%
HYPOTHETICAL
Investor Class $1,000 $1,019.25 $5.81 1.15%
Institutional Class $1,000 $1,020.25 $4.80 0.95%
A Class $1,000 $1,018.00 $7.06 1.40%
B Class $1,000 $1,014.25 $10.83 2.15%
C Class $1,000 $1,014.25 $10.83 2.15%
R Class $1,000 $1,016.75 $8.32 1.65%
* 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
Real Estate
MARCH 31, 2008
Shares Value
Common Stocks -- 96.1%
DIVERSIFIED REITS -- 8.7%
1,480,610 Colonial Properties Trust $ 35,608,672
1,709,522 Liberty Property Trust 53,183,229
294,400 Vornado Realty Trust 25,380,224
--------------
114,172,125
--------------
HOMEBUILDING -- 0.5%
251,300 Centex Corp. 6,083,973
--------------
INDUSTRIAL REITS -- 8.8%
695,100 AMB Property Corp. 37,827,342
1,337,690 ProLogis 78,736,433
--------------
116,563,775
--------------
OFFICE REITS -- 17.8%
406,100 Alexandria Real Estate Equities, Inc. 37,653,592
427,800 Boston Properties Inc. 39,387,546
991,800 Brandywine Realty Trust 16,820,928
1,325,300 Digital Realty Trust Inc. 47,048,150
2,104,912 Duke Realty Corporation 48,013,043
671,000 Kilroy Realty Corp. 32,952,810
311,810 Mack-Cali Realty Corp. 11,134,735
99,800 Maguire Properties, Inc.(1) 1,428,138
--------------
234,438,942
--------------
RESIDENTIAL REITS -- 12.3%
1,992,661 Apartment Investment and Management Co. Cl A 71,357,190
148,500 AvalonBay Communities Inc. 14,333,220
735,000 Camden Property Trust 36,897,000
58,600 Education Realty Trust, Inc. 736,602
229,300 Post Properties, Inc. 8,855,566
1,242,484 UDR, Inc. 30,465,708
--------------
162,645,286
--------------
RETAIL REITS -- 30.5%
689,100 CBL & Associates Properties, Inc. 16,214,523
1,212,100 Developers Diversified Realty Corp. 50,762,748
279,210 General Growth Properties, Inc. 10,657,446
2,082,580 Kimco Realty Corp. 81,574,659
682,254 Macerich Co. (The) 47,941,989
1,811,040 National Retail Properties, Inc.(1) 39,933,432
Shares Value
1,316,751 Simon Property Group, Inc. $ 122,339,335
946,000 Weingarten Realty Investors(1) 32,580,240
--------------
402,004,372
--------------
SPECIALIZED REITS -- 17.5%
212,026 Cogdell Spencer Inc. 3,333,049
1,061,400 HCP, Inc. 35,885,934
179,100 Healthcare Realty Trust Inc.(1) 4,683,465
1,172,600 Hospitality Properties Trust 39,891,852
2,133,825 Host Hotels & Resorts Inc. 33,970,494
692,589 Public Storage Inc. 61,377,236
252,650 Sovran Self Storage, Inc.(1) 10,790,682
916,300 Ventas, Inc. 41,151,033
--------------
231,083,745
--------------
TOTAL COMMON STOCKS
(Cost $1,247,708,662) 1,266,992,218
--------------
Temporary Cash Investments -- 3.4%
Repurchase Agreement, Bank of America Securities, LLC,
(collateralized by various U.S. Treasury obligations, 2.00%,
4/15/12, valued at $11,043,683), in a joint trading account at
1.20%, dated 3/31/08, due 4/1/08 (Delivery value $10,800,360) 10,800,000
Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized
by various U.S. Treasury obligations, 7.875%, 2/15/21, valued at
$35,191,536), in a joint trading account at 1.30%, dated 3/31/08,
due 4/1/08 (Delivery value $34,401,242) 34,400,000
--------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $45,200,000) 45,200,000
--------------
Temporary Cash Investments -- Securities Lending Collateral(2) -- 2.5%
Repurchase Agreement, Barclays Bank plc, (collateralized by
various U.S. Government Agency obligations in a pooled account at
the lending agent), 2.30%, dated 3/31/08 due 4/1/08 (Delivery
value $8,271,236) 8,270,708
Repurchase Agreement, BNP Paribas, (collateralized by various
U.S. Government Agency obligations in a pooled account at the
lending agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery value
$7,508,478) 7,507,998
Repurchase Agreement, Deutsche Bank AG, (collateralized by
various U.S. Government Agency obligations in a pooled account at
the lending agent), 2.25%, dated 3/31/08, due 4/1/08 (Delivery
value $8,350,522) 8,350,000
- ------
9
Real Estate
Value
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency obligations in
a pooled account at the lending agent), 2.15%, dated 3/31/08,
due 4/1/08 (Delivery value $8,287,070) $ 8,286,575
--------------
TOTAL TEMPORARY CASH INVESTMENTS -- SECURITIES LENDING COLLATERAL
(Cost $32,415,281) 32,415,281
--------------
TOTAL INVESTMENT SECURITIES -- 102.0%
(Cost $1,325,323,943) 1,344,607,499
--------------
OTHER ASSETS AND LIABILITIES -- (2.0)% (26,074,378)
--------------
TOTAL NET ASSETS -- 100.0% $1,318,533,121
==============
Notes to Schedule of Investments
REIT = Real Estate Investment Trust
(1) Security, or a portion thereof, was on loan as of March 31, 2008.
(2) 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
MARCH 31, 2008
ASSETS
Investment securities -- unaffiliated, at value (cost of
$1,292,908,662) -- including $31,583,188 of securities on loan $1,312,192,218
Investments made with cash collateral received for securities on
loan, at value (cost of $32,415,281) 32,415,281
--------------
Total investment securities, at value (cost of $1,325,323,943) 1,344,607,499
Cash 355,864
Foreign currency holdings, at value (cost of $6,138) 6,850
Receivable for investments sold 7,130,727
Receivable for capital shares sold 8,770
Dividends and interest receivable 4,544,135
--------------
1,356,653,845
--------------
LIABILITIES
Payable for collateral received for securities on loan 32,415,281
Payable for investments purchased 4,436,857
Payable for capital shares redeemed 15,375
Accrued management fees 1,200,678
Distribution fees payable 39
Service fees (and distribution fees -- A Class and R Class)
payable 52,494
--------------
38,120,724
--------------
NET ASSETS $1,318,533,121
==============
See Notes to Financial Statements.
- ------
11
MARCH 31, 2008
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $1,439,824,897
Accumulated net investment loss (2,071)
Accumulated net realized loss on investment and foreign currency
transactions (140,573,973)
Net unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 19,284,268
--------------
$1,318,533,121
==============
INVESTOR CLASS, $0.01 PAR VALUE
Net assets $864,011,185
Shares outstanding 39,871,300
Net asset value per share $21.67
INSTITUTIONAL CLASS, $0.01 PAR VALUE
Net assets $200,982,273
Shares outstanding 9,258,281
Net asset value per share $21.71
A CLASS, $0.01 PAR VALUE
Net assets $253,419,076
Shares outstanding 11,686,093
Net asset value per share $21.69
Maximum offering price (net asset value divided by 0.9425) $23.01
B CLASS, $0.01 PAR VALUE
Net assets $32,712
Shares outstanding 1,513
Net asset value per share $21.62
C CLASS, $0.01 PAR VALUE
Net assets $62,266
Shares outstanding 2,880
Net asset value per share $21.62
R CLASS, $0.01 PAR VALUE
Net assets $25,609
Shares outstanding 1,183
Net asset value per share $21.65
See Notes to Financial Statements.
- ------
12
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2008
INVESTMENT INCOME (LOSS)
INCOME:
Dividends (including $3,568,487 from affiliates and net of
foreign taxes withheld of $83,766) $ 44,600,050
Interest 1,535,903
Securities lending, net 230,031
--------------
46,365,984
--------------
EXPENSES:
Management fees 18,205,820
Distribution fees:
A Class 453,330
B Class 104
C Class 139
Service fees:
A Class 453,330
B Class 35
C Class 46
Distribution and service fees:
A Class 444,479
R Class 60
Directors' fees and expenses 47,359
Other expenses 70,457
--------------
19,675,159
--------------
NET INVESTMENT INCOME (LOSS) 26,690,825
--------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investment and foreign currency
transactions (including $(19,439,138) from affiliates) (130,456,267)
Change in net unrealized appreciation (depreciation) on
investments and translation of assets and liabilities in foreign
currencies (236,332,792)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) (366,789,059)
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(340,098,234)
==============
See Notes to Financial Statements.
- ------
13
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED MARCH 31, 2008 AND MARCH 31, 2007
Increase (Decrease) in Net Assets 2008 2007
OPERATIONS
Net investment income (loss) $ 26,690,825 $ 33,164,414
Net realized gain (loss) (130,456,267) 352,211,903
Change in net unrealized appreciation
(depreciation) (236,332,792) (6,426,910)
--------------- --------------
Net increase (decrease) in net assets
resulting from operations (340,098,234) 378,949,407
--------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class (21,143,716) (19,413,786)
Institutional Class (5,215,050) (5,186,921)
A Class (6,187,601) (5,422,844)
B Class (162) --
C Class (186) --
R Class (171) --
From net realized gains:
Investor Class (138,287,089) (142,353,221)
Institutional Class (31,745,958) (32,753,650)
A Class (47,058,947) (45,262,120)
B Class (4,266) --
C Class (4,409) --
R Class (3,591) --
--------------- --------------
Decrease in net assets from distributions (249,651,146) (250,392,542)
--------------- --------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets from
capital share transactions (549,465,923) 768,592,109
--------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS (1,139,215,303) 897,148,974
NET ASSETS
Beginning of period 2,457,748,424 1,560,599,450
--------------- --------------
End of period $ 1,318,533,121 $2,457,748,424
=============== ==============
Accumulated undistributed net investment
income (loss) $(2,071) $5,364,094
=============== ==============
See Notes to Financial Statements.
- ------
14
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
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 investment 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 B Class, C Class and R
Class commenced on September 28, 2007.
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 the Board of Directors or its designee, in accordance
with procedures adopted by the Board of Directors, 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 purposes, 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 income earned, net of any rebates or fees, is included in the
Statement of Operations. 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 2005. 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.
- ------
16
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.
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 year ended March 31, 2008
was 1.13%, 0.93%, 1.00%, 1.13%, 1.13% and 1.13% for the Investor Class,
Institutional Class, A Class, B Class, C Class and R Class, respectively.
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. 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
year ended March 31, 2008, 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 securities
lending agreement with JPMorgan Chase Bank (JPMCB). Prior to December 12,
2007, the fund had a bank line of credit agreement with JPMCB. JPMCB is a
custodian of the fund and a wholly owned subsidiary of JPM.
- ------
17
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term
investments, for the year ended March 31, 2008, were $2,528,530,889 and
$3,262,103,409, respectively.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows:
Year ended March 31, 2008(1) Year ended March 31, 2007
Shares Amount Shares Amount
INVESTOR
CLASS/SHARES
AUTHORIZED 125,000,000 70,000,000
============ ===========
Sold 14,161,256 $ 359,902,447 25,428,470 $ 785,741,519
Issued in
reinvestment of
distributions 6,214,862 140,796,874 4,834,341 148,090,470
Redeemed (31,199,553) (852,159,766) (13,582,182) (410,903,543)
------------ -------------- ----------- -------------
(10,823,435) (351,460,445) 16,680,629 522,928,446
------------ -------------- ----------- -------------
INSTITUTIONAL
CLASS/SHARES
AUTHORIZED 50,000,000 20,000,000
============ ===========
Sold 2,096,335 52,082,339 6,153,715 189,204,813
Issued in
reinvestment of
distributions 1,510,649 34,353,181 1,199,237 36,752,217
Redeemed (6,418,105) (176,831,718) (3,645,768) (108,055,837)
------------ -------------- ----------- -------------
(2,811,121) (90,396,198) 3,707,184 117,901,193
------------ -------------- ----------- -------------
A CLASS/SHARES
AUTHORIZED 50,000,000 30,000,000
============ ===========
Sold 3,823,982 101,152,569 7,068,111 216,728,871
Issued in
reinvestment of
distributions 2,298,933 52,033,616 1,626,953 49,869,664
Redeemed (9,982,652) (260,936,432) (4,560,357) (138,836,065)
------------ -------------- ----------- -------------
(3,859,737) (107,750,247) 4,134,707 127,762,470
------------ -------------- ----------- -------------
B CLASS/SHARES
AUTHORIZED 20,000,000 N/A
============ ===========
Sold 1,314 35,689
Issued in
reinvestment of
distributions 199 4,428
------------ -------------- ----------- -------------
1,513 40,117
------------ -------------- ----------- -------------
C CLASS/SHARES
AUTHORIZED 20,000,000 N/A
============ ===========
Sold 2,673 64,147
Issued in
reinvestment of
distributions 207 4,595
------------ -------------- ----------- -------------
2,880 68,742
------------ -------------- ----------- -------------
R CLASS/SHARES
AUTHORIZED 20,000,000 N/A
============ ===========
Sold 1,030 28,645
Issued in
reinvestment of
distributions 169 3,762
Redeemed (16) (299)
------------ -------------- ----------- -------------
1,183 32,108
------------ -------------- ----------- -------------
Net increase
(decrease) (17,488,717) $(549,465,923) 24,522,520 $ 768,592,109
============ ============== =========== =============
(1) September 28, 2007 (commencement of sale) through March 31, 2008 for the B
Class, C Class and R Class.
- ------
18
5. AFFILIATED COMPANY TRANSACTIONS
If a fund's holding represents ownership of 5% or more of the voting
securities of a company, the company is affiliated as defined in the 1940 Act.
A summary of transactions for each company which is or was an affiliate at or
during the year ended March 31, 2008 follows:
March 31, 2008
Share
Balance Purchase Sales Realized Dividend Share Market
3/31/07 Cost Cost Gain (Loss) Income Balance Value
Education
Realty Trust,
Inc.(1) 1,281,200 -- $ 18,208,194 $ (3,992,527) $ 856,634 58,600 (1)
GMH
Communities
Trust(1) 2,592,495 -- 29,443,714 (12,697,103) 924,246 -- --
Home
Properties,
Inc.(1) 1,263,147 $28,728,195 98,188,776 (2,976,653) 1,312,931 -- --
Huntingdon
Real Estate
Investment
Trust ORD(1) 3,364,317 -- 6,992,376 227,145 474,676 -- --
----------- ------------ ------------- ---------- ---
$28,728,195 $152,833,060 $(19,439,138) $3,568,487 --
=========== ============ ============= ========== ===
(1) Company was not an affiliate at March 31, 2008.
6. SECURITIES LENDING
As of March 31, 2008, securities in the fund valued at $31,583,188 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 $32,415,281. 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
Effective December 12, 2007, the fund, along with certain other funds managed
by ACIM or ACGIM, has a $500,000,000 unsecured bank line of credit agreement
with Bank of America, N.A. Prior to December 12, 2007, the fund, along with
certain other funds managed by ACIM or ACGIM, had 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, which is subject to annual renewal, bear interest at the
Federal Funds rate plus 0.40%. The fund did not borrow from the line during
the year ended March 31, 2008.
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.
- ------
19
9. FEDERAL TAX INFORMATION
The tax character of distributions paid during the years ended March 31, 2008
and March 31, 2007 were as follows:
2008 2007
DISTRIBUTIONS PAID FROM
Ordinary income $140,797,227 $164,210,413
Long-term capital gains $108,853,919 $86,182,129
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect
the differing character of certain income items and net realized gains and
losses for financial statement and tax purposes, and may result in
reclassification among certain capital accounts on the financial statements.
As of March 31, 2008, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
Federal tax cost of investments $1,384,508,237
==============
Gross tax appreciation of investments $ 100,439,076
Gross tax depreciation of investments (140,339,814)
--------------
Net tax appreciation (depreciation) of investments $(39,900,738)
==============
Net tax appreciation (depreciation) on derivatives and
translation of assets and liabilities in foreign currencies $712
--------------
Net tax appreciation (depreciation) $(39,900,026)
==============
Accumulated long-term gains $67,421
Capital loss deferral $(81,457,100)
Currency loss deferral $(2,071)
The difference between book-basis and tax-basis cost and unrealized
appreciation (depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
The capital and currency loss deferrals listed above represent net capital and
foreign currency losses incurred in the five-month period ended March 31,
2008. The fund has elected to treat such losses as having been incurred in the
following fiscal year for federal income tax purposes.
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. The
adoption of FIN 48 did 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
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, "Disclosures about Derivative Instruments and Hedging Activities - an
amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for
fiscal years beginning after November 15, 2008. FAS 161 amends and expands
disclosures about derivative instruments and hedging activities. FAS 161
requires qualitative disclosures about the objectives and strategies of
derivative instruments, quantitative disclosures about the fair value amounts
of and gains and losses on derivative instruments, and disclosures of
credit-risk-related contingent features in hedging activities. Management is
currently evaluating the impact that adopting FAS 161 will have on the
financial statement disclosures.
11. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified
dividend income for the fiscal year ended March 31, 2008.
For corporate taxpayers, the fund hereby designates $9,032, or up to the
maximum amount allowable, of ordinary income distributions paid during the
fiscal year ended March 31, 2008 as qualified for the corporate dividends
received deduction.
The fund hereby designates $108,853,919 of long-term capital gain
distributions, respectively, for the fiscal year ended March 31, 2008.
The fund hereby designates $108,734,108 of distributions as qualified
short-term capital gains for purposes of Internal Revenue Code Section 871.
- ------
21
FINANCIAL HIGHLIGHTS
Real Estate
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value,
Beginning of Period $31.37 $29.00 $23.24 $23.09 $15.83
------ ------ ------ ------ ------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.43 0.53 0.53 0.46 0.46
Net Realized and
Unrealized Gain
(Loss) (5.53) 5.70 8.44 1.79 7.49
------ ------ ------ ------ ------
Total From Investment
Operations (5.10) 6.23 8.97 2.25 7.95
------ ------ ------ ------ ------
Distributions
From Net Investment
Income (0.51) (0.49) (0.49) (0.46) (0.54)
From Net Realized
Gains (4.09) (3.37) (2.72) (1.64) (0.15)
------ ------ ------ ------ ------
Total Distributions (4.60) (3.86) (3.21) (2.10) (0.69)
------ ------ ------ ------ ------
Net Asset Value, End of
Period $21.67 $31.37 $29.00 $23.24 $23.09
====== ====== ====== ====== ======
TOTAL RETURN(2) (16.60)% 22.02% 40.65% 9.53% 50.97%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average Net
Assets 1.14% 1.13% 1.15% 1.16% 1.17%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 1.60% 1.72% 2.00% 1.88% 2.28%
Portfolio Turnover Rate 153% 197% 177% 171% 158%
Net Assets, End of Period
(in thousands) $864,011 $1,590,428 $986,526 $522,676 $393,604
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
22
Real Estate
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $31.41 $29.03 $23.25 $23.10 $15.85
------ ------ ------ ------ ------
Income From Investment
Operations
Net Investment Income
(Loss)(1) 0.48 0.59 0.59 0.44 0.51
Net Realized and
Unrealized Gain (Loss) (5.54) 5.71 8.45 1.86 7.47
------ ------ ------ ------ ------
Total From Investment
Operations (5.06) 6.30 9.04 2.30 7.98
------ ------ ------ ------ ------
Distributions
From Net Investment
Income (0.55) (0.55) (0.54) (0.51) (0.58)
From Net Realized Gains (4.09) (3.37) (2.72) (1.64) (0.15)
------ ------ ------ ------ ------
Total Distributions (4.64) (3.92) (3.26) (2.15) (0.73)
------ ------ ------ ------ ------
Net Asset Value, End of
Period $21.71 $31.41 $29.03 $23.25 $23.10
====== ====== ====== ====== ======
TOTAL RETURN(2) (16.44)% 22.27% 40.99% 9.74% 51.14%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.94% 0.93% 0.95% 0.96% 0.97%
Ratio of Net Investment
Income (Loss) to Average Net
Assets 1.80% 1.92% 2.20% 2.08% 2.48%
Portfolio Turnover Rate 153% 197% 177% 171% 158%
Net Assets, End of Period
(in thousands) $200,982 $379,044 $242,745 $143,183 $82,488
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating the
net asset values to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely reflect
the class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
See Notes to Financial Statements.
- ------
23
Real Estate
A Class(1)
For a Share Outstanding Throughout the Years Ended March 31
2008 2007 2006 2005 2004
PER-SHARE DATA
Net Asset Value, Beginning
of Period $31.41 $29.04 $23.26 $23.11 $15.83
------ ------ ------ ------ ------
Income From Investment
Operations
Net Investment Income
(Loss)(2) 0.36 0.45 0.46 0.35 0.42
Net Realized and
Unrealized Gain (Loss) (5.53) 5.71 8.46 1.84 7.50
------ ------ ------ ------ ------
Total From Investment
Operations (5.17) 6.16 8.92 2.19 7.92
------ ------ ------ ------ ------
Distributions
From Net Investment
Income (0.46) (0.42) (0.42) (0.40) (0.49)
From Net Realized Gains (4.09) (3.37) (2.72) (1.64) (0.15)
------ ------ ------ ------ ------
Total Distributions (4.55) (3.79) (3.14) (2.04) (0.64)
------ ------ ------ ------ ------
Net Asset Value, End of
Period $21.69 $31.41 $29.04 $23.26 $23.11
====== ====== ====== ====== ======
TOTAL RETURN(3) (16.84)% 21.70% 40.37% 9.30% 50.66%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.39% 1.38% 1.40% 1.41% 1.42%
Ratio of Net Investment
Income (Loss) to Average Net
Assets 1.35% 1.47% 1.75% 1.63% 2.03%
Portfolio Turnover Rate 153% 197% 177% 171% 158%
Net Assets, End of Period
(in thousands) $253,419 $488,277 $331,329 $161,592 $82,471
(1) Prior to September 4, 2007, the A Class was referred to as the Advisor
Class.
(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.
The total return of the classes may not precisely reflect the class expense
differences because of the impact of calculating the net asset values to two
decimal places. If net asset values were calculated to three decimal places,
the total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is made
in accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
See Notes to Financial Statements.
- ------
24
Real Estate
B Class
For a Share Outstanding Throughout the Period Indicated
2008(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $29.12
------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.14
Net Realized and Unrealized Gain (Loss) (3.42)
------
Total From Investment Operations (3.28)
------
Distributions
From Net Investment Income (0.13)
From Net Realized Gains (4.09)
------
Total Distributions (4.22)
------
Net Asset Value, End of Period $21.62
======
TOTAL RETURN(3) (11.57)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 2.14%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 1.17%(4)
Portfolio Turnover Rate 153%(5)
Net Assets, End of Period (in thousands) $33
(1) September 28, 2007 (commencement of sale) through March 31, 2008.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the total
return differences would more closely reflect the class expense differences.
The calculation of net asset values to two decimal places is made in
accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2008.
See Notes to Financial Statements.
- ------
25
Real Estate
C Class
For a Share Outstanding Throughout the Period Indicated
2008(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $29.12
------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.13
Net Realized and Unrealized Gain (Loss) (3.41)
------
Total From Investment Operations (3.28)
------
Distributions
From Net Investment Income (0.13)
From Net Realized Gains (4.09)
------
Total Distributions (4.22)
------
Net Asset Value, End of Period $21.62
======
TOTAL RETURN(3) (11.57)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 2.14%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 1.15%(4)
Portfolio Turnover Rate 153%(5)
Net Assets, End of Period (in thousands) $62
(1) September 28, 2007 (commencement of sale) through March 31, 2008.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales charges.
Total returns for periods less than one year are not annualized. The total
return of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the total
return differences would more closely reflect the class expense differences.
The calculation of net asset values to two decimal places is made in
accordance with SEC guidelines and does not result in any gain or loss of
value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2008.
See Notes to Financial Statements.
- ------
26
Real Estate
R Class
For a Share Outstanding Throughout the Period Indicated
2008(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $29.12
------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.19
Net Realized and Unrealized Gain (Loss) (3.41)
------
Total From Investment Operations (3.22)
------
Distributions
From Net Investment Income (0.16)
From Net Realized Gains (4.09)
------
Total Distributions (4.25)
------
Net Asset Value, End of Period $21.65
======
TOTAL RETURN(3) (11.37)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.64%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 1.65%(4)
Portfolio Turnover Rate 153%(5)
Net Assets, End of Period (in thousands) $26
(1) September 28, 2007 (commencement of sale) through March 31, 2008.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended March 31, 2008.
See Notes to Financial Statements.
- ------
27
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders,
American Century Capital Portfolios, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Real Estate Fund, one of the mutual
funds constituting American Century Capital Portfolios, Inc. (the
"Corporation"), as of March 31, 2008, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended, and the financial highlights for the
periods presented. These financial statements and financial highlights are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Corporation is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Corporation's internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. Our procedures included confirmation of securities owned as of
March 31, 2008, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing
procedures. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Real
Estate Fund of American Century Capital Portfolios, Inc. as of March 31, 2008,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for the periods presented, in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 13, 2008
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28
MANAGEMENT
The individuals listed below serve as directors or officers of the fund. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
72. Those listed as interested directors are "interested" primarily by virtue
of their engagement as directors and/or officers of, or ownership interest in,
American Century Companies, Inc. (ACC) or its wholly owned, direct or
indirect, subsidiaries, including the fund's investment advisor, American
Century Investment Management, Inc. (ACIM); the fund's principal underwriter,
American Century Investment Services, Inc. (ACIS); and the fund's transfer
agent, American Century Services, LLC (ACS).
The other directors (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers
of, and have no financial interest in, ACC or any of its wholly owned, direct
or indirect, subsidiaries, including ACIM, ACIS and ACS. The directors serve
in this capacity for seven registered investment companies in the American
Century Investments family of funds.
All persons named as officers of the fund also serve in similar capacities for
the other 14 investment companies in the American Century Investments family
of funds advised by ACIM or American Century Global Investment Management,
Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise noted. Only
officers with policy-making functions are listed. No officer is compensated
for his or her service as an officer of the fund. The listed officers are
interested persons of the fund and are appointed or re-appointed on an annual
basis.
INTERESTED DIRECTORS
JAMES E. STOWERS, JR., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1924
POSITION(S) HELD WITH FUND: Director (since 1958) and Vice Chairman (since
2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Co-Chairman, Director
and Controlling Shareholder, ACC; Co-Vice Chairman, ACC (January 2005 to
February 2007); Chairman, ACC (January 1995 to December 2004); Director, ACIM,
ACGIM, ACS, ACIS and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
JONATHAN S. THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUND: Director (since 2007) and President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC
(February 2006 to February 2007); Executive Vice President, ACC (November 2005
to February 2007). Also serves as: President, Chief Executive Officer and
Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM,
ACGIM, ACIS and other ACC subsidiaries. Managing Director, Morgan Stanley
(March 2000 to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 105
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
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29
INDEPENDENT DIRECTORS
THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1940
POSITION(S) HELD WITH FUND: Director (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Managing Member, Associated
Investments, LLC (real estate investment company); Managing Member, Brown
Cascade Properties, LLC (real estate investment company); Retired, Area Vice
President, Applied Industrial Technologies
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Director (since 1997)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Advisor to the
President, Midwest Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
JAMES A. OLSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1942
POSITION(S) HELD WITH FUND: Director (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member, Plaza Belmont LLC; Chief
Financial Officer, Plaza Belmont LLC (September 1999 to December 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Saia, Inc. and Entertainment
Properties Trust
DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUND: Director (since 1995) and Chairman of the Board
(since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman and Chief Executive
Officer, Western Investments, Inc.; Retired Chairman of the Board, Butler
Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1943
POSITION(S) HELD WITH FUND: Director (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive
Officer and Founder, Sayers40, Inc., a technology products and services
provider
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUND: Director (since 1994)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Senior Vice
President, Sprint Corporation
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide, Inc.; Director, Charming Shoppes, Inc.
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30
OFFICERS
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUND: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS
(October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007);
Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as:
Director, ACC, ACS, ACIS and other ACC subsidiaries
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUND: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century Investments funds (July 2000 to August 2006). Also serves as: Senior
Vice President, ACS
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUND: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney, ACC (February 1994 to
present); Vice President, ACC (November 2005 to present); General Counsel, ACC
(March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUND: Vice President, Treasurer and Chief Financial
Officer (all since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February
2000 to present) and Controller, various American Century Investments funds
(1997 to September 2006)
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUND: Tax Officer (since 1998)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the fund's directors and is available
without charge, upon request, by calling 1-800-345-2021.
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31
ADDITIONAL INFORMATION
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain
403(b), 457 and qualified plans [those not eligible for rollover to an IRA or
to another qualified plan] are subject to federal income tax withholding,
unless you elect not to have withholding apply. Tax will be withheld on the
total amount withdrawn even though you may be receiving amounts that are not
subject to withholding, such as nondeductible contributions. In such case,
excess amounts of withholding could occur. You may adjust your withholding
election so that a greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right
to revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments
are not sufficient.
State tax will be withheld if, at the time of your distribution, your address
is within one of the mandatory withholding states and you have federal income
tax withheld. State taxes will be withheld from your distribution in
accordance with the respective state rules.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's investment advisor,
is responsible for exercising the voting rights associated with the securities
purchased and/or held by the fund. A description of the policies and
procedures the advisor uses in fulfilling this responsibility is available
without charge, upon request, by calling 1-800-345-2021. It is also available
on American Century's 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.
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32
INDEX DEFINITIONS
The following indices are used to illustrate investment market, sector, or
style performance or to serve as fund performance comparisons. They are not
investment products available for purchase.
The 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.
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.
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33
NOTES
- ------
34
NOTES
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35
NOTES
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36
[back cover]
[american century investments logo and text logo ®]
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
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
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
0805
CL-ANN-60043N
[front cover]
ANNUAL REPORT
MARCH 31, 2008
[american century investments logo and text logo ®]
AMERICAN CENTURY INVESTMENTS
NT LARGE COMPANY VALUE FUND
NT MID CAP VALUE FUND
PRESIDENT'S LETTER
[photo of Jonathan Thomas]
JONATHAN THOMAS
Dear Investor,
At American Century Investments®, we are committed to helping you reach your
financial goals. Your success is the ultimate measure of our performance.
That's why we focus on achieving superior investment results and building
long-term relationships with investors like you.
Part of that relationship is to clearly communicate investment results and
what influenced them. To help you monitor your investment with us, we take
pride in providing you with the annual report for the American Century® NT
Large Company Value and NT Mid Cap Value funds for the 12 months ended March
31, 2008. We also recommend our website, americancentury.com, where we provide
company news, quarterly portfolio commentaries, investment views, and other
useful information about portfolio strategy, personal finance, government
policy, and the markets.
As noted on the website, 2008 marks our 50th year. Since 1958, we've worked
for you with integrity, always striving to make wise decisions with your
interests as our guide. Fifty years also means that we've met the challenges
of previous recessionary cycles. As we've crossed those hurdles and earned
your trust, our assets under management have grown to close to $100 billion,
putting us in the top 5% of our industry. This growth has given us the
resources to offer a wide array of financial products and services, including
a well-diversified line-up of portfolios that provide you with many choices in
these turbulent times.
Our investment discipline and integrity are important features of our
portfolios. For example, our fixed-income investment team anticipated the
current credit squeeze. Instead of chasing higher yields and adding leveraged
exposure as the credit bubble inflated, the team minimized our portfolios'
direct exposure to subprime-related debt, preserving investors' hard-earned
capital. The team also positioned the portfolios to capitalize on
opportunities, including attractive high-quality securities discarded by
investors with liquidity needs.
We'll continue to work hard to earn your trust. Thank you for your continued
support.
Sincerely,
/s/Jonathan S. Thomas
Jonathan S. Thomas
President and Chief Executive Officer
American Century Investments
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. . . . . . . . . . . . . . . . . . . . . . . 18
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 20
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 21
Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 22
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 23
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 28
Report of Independent Registered Public Accounting Firm . . . . . . . 30
OTHER INFORMATION
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 34
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 35
The opinions expressed in the Market Perspective and each of the Portfolio
Commentaries reflect those of the portfolio management team as of the date of
the report, and do not necessarily represent the opinions of American Century
or any other person in the American Century organization. Any such opinions
are subject to change at any time based upon market or other conditions and
American Century disclaims any responsibility to update such opinions. These
opinions may not be relied upon as investment advice and, because investment
decisions made by American Century funds are based on numerous factors, may
not be relied upon as an indication of trading intent on behalf of any
American Century fund. Security examples are used for representational
purposes only and are not intended as recommendations to purchase or sell
securities. Performance information for comparative indices and securities is
provided to American Century by third party vendors. To the best of American
Century's knowledge, such information is accurate at the time of printing.
MARKET PERSPECTIVE
[photo of chief investment officer]
By Phil Davidson, Chief Investment Officer,
U.S. Value Equity
A CHALLENGING PERIOD FOR VALUE STOCKS
The 12 months ended March 31, 2008, were a difficult time for value stocks.
Growth stocks outpaced value by a substantial margin across the capitalization
range (see the accompanying table), and momentum investing -- which is
essentially the opposite of value investing -- was the favored strategy.
The lagging performance of value stocks was driven in large part by the
bursting of the housing market bubble, which led to a meltdown in the subprime
lending industry, a liquidity crunch in the credit markets, and a marked
slowdown in the U.S. economy. Value-oriented stocks often underperform in a
slowing economic environment as investors seek out the steady growth rates of
high-quality growth companies.
Financials stocks, which make up a meaningful portion of the value stock
universe, were hit the hardest by the subprime turmoil and credit crunch. Many
of the country's largest financial institutions faced substantial
subprime-related write-downs and credit losses, resulting in steep markdowns
in their share prices. Financials stocks slumped despite the Federal Reserve's
aggressive short-term interest rate cuts and injections of liquidity.
The economic slowdown and credit issues triggered unusually high levels of
stock market volatility. Several of the major U.S. stock indexes hit all-time
highs, then suffered their first 10% correction since 2003. The last three
months of the period brought the worst quarterly performance for stocks in
nearly six years as the credit crunch deepened and a recession loomed.
THE BRIGHT SIDE
There were a few silver linings in the otherwise clouded financial markets.
Value stocks outperformed in the final three months of the period, pointing up
the importance of downside protection in a highly volatile market environment.
In addition, good security selection became increasingly important, which
plays to our strengths -- rigorous analysis and research to separate companies
with weaker business models from those that are fundamentally sound.
The period also brought the resurgence of large-cap stocks, which often tend
to hold up well when the economy slows and the stock market is in turmoil.
Despite their recent outperformance, large-cap issues remain the least
expensive segment of the market.
U.S. Stock Index Returns
For the 12 months ended March 31, 2008
RUSSELL 1000 INDEX (LARGE-CAP) -5.40%
Russell 1000 Growth Index -0.75%
Russell 1000 Value Index -9.99%
RUSSELL MIDCAP INDEX -8.92%
Russell Midcap Growth Index -4.55%
Russell Midcap Value Index -14.12%
RUSSELL 2000 INDEX (SMALL-CAP) -13.00%
Russell 2000 Growth Index -8.94%
Russell 2000 Value Index -16.88%
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2
PERFORMANCE
NT Large Company Value
Total Returns as of March 31, 2008
Average Annual Returns
Since Inception
1 year Inception Date
INSTITUTIONAL CLASS -9.93% 1.06% 5/12/06
RUSSELL 1000 VALUE INDEX -9.99% 1.95% --
S&P 500 INDEX -5.08% 3.24% --
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.
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3
NT Large Company Value
Growth of $10,000 Over Life of Class
$10,000 investment made May 12, 2006
One-Year Returns Over Life of Class
Periods ended March 31
2007* 2008
Institutional Class 13.26% -9.93%
Russell 1000 Value Index 15.22% -9.99%
S&P 500 Index 11.89% -5.08%
*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.
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4
PORTFOLIO COMMENTARY
NT Large Company Value
Portfolio Managers: Chuck Ritter and Brendan Healy
PERFORMANCE SUMMARY
NT Large Company Value returned -9.93% for the 12 months ended March 31, 2008.
By comparison, its benchmark, the Russell 1000 Value Index, returned -9.99%.
The broader market, as measured by the S&P 500 Index, returned -5.08%. The
portfolio's return reflects operating expenses, while the indices' returns do
not. The median return for Morningstar's Large Cap Value category (whose
performance, like NT Large Company Value's, reflects fund operating expenses)
was -9.10%.*
The challenging market environment described in the Market Perspective on page
2 (in which growth outperformed value across the capitalization spectrum)
hampered NT Large Company Value's absolute performance. However, on a relative
basis, the portfolio finished slightly ahead of its benchmark, the Russell
1000 Value Index. For much of the period, investors preferred companies that
were already strong performers, a momentum bias that did not fit well with the
portfolio's investment approach of seeking stocks that are undervalued by the
market. But in spite of these negative factors, NT Large Company Value
benefited from strong security selection. Investments in the information
technology and consumer staples sectors added most to performance versus the
benchmark, while positions in financials and energy stocks detracted.
FINANCIALS DETRACTED
Financials stocks -- the portfolio's largest sector position, but a relative
underweight nonetheless -- represented our largest source of underperformance
versus the benchmark. Many financials firms came under pressure amid the
fallout in the subprime lending category. Three of our top detractors were
Freddie Mac, a stockholder-owned corporation chartered by Congress to keep
money flowing to mortgage lenders in support of home ownership; Washington
Mutual, a major thrift involved in mortgage finance; and Citigroup, a
diversified global financial services company. All three stocks declined on
news of bigger-than-expected losses, resulting from housing weakness and the
deterioration of mortgage credit.
Top Ten Holdings as of March 31, 2008
% of % of
net assets net assets
as of as of
3/31/08 9/30/07
Exxon Mobil Corp. 4.9% 5.3%
General Electric Co. 4.9% 2.5%
AT&T Inc. 3.9% 3.2%
Chevron Corp. 3.4% 3.3%
Bank of America Corp. 2.9% 3.5%
Johnson & Johnson 2.7% 1.9%
Citigroup Inc. 2.7% 4.4%
JPMorgan Chase & Co. 2.6% 2.4%
Royal Dutch Shell plc ADR 2.6% 3.0%
Pfizer Inc. 2.6% 1.9%
*The median return for Morningstar's Large Cap Value category was 0.72% since
the fund's inception. ©2008 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
NT Large Company Value
ENERGY POSITION HAMPERED PERFORMANCE
Although the portfolio's position in the energy sector contributed on an
absolute basis, it underperformed in relative terms. Energy stocks,
specifically oil and gas companies, provided the strongest results for the
Russell 1000 Value Index. Because of valuations, our allocation was smaller
than the benchmark's, which hindered our progress.
INFORMATION TECHNOLOGY CONTRIBUTED
On the positive side, the portfolio benefited most from strong security
selection in the information technology sector, with most of the gains coming
from large leading software and technology companies. A significant holding
was software giant Microsoft, which benefited from strong sales of its new
Vista operating system and Office 2007. Hewlett-Packard continued to gain
ground in the PC market and moved into high-end enterprise printing equipment.
CONSUMER STAPLES ADDED VALUE
Our position in consumer staples also benefited performance as the U.S.
economy slowed and investors sought out companies that provide everyday goods
and services. During difficult economic times or periods of stock market
turbulence, investors often regard consumer staples stocks as lower-risk,
defensive investments. Moreover, our preference for large industry leaders
proved advantageous as many of these names outperformed the benchmark.
Coca-Cola Co., for example, gained about 30% during the period. Coke reported
growing revenues and bought back a large number of its shares. Another top
performer was Unilever, a foreign-based, global supplier of foods, home goods,
and personal products, with a strong presence in the U.S. market. Its stock
benefited from the company's stronger-than-expected revenue growth and
progress in cost-cutting efforts.
OUTLOOK
We continue to be bottom-up investment managers, evaluating each company
individually and building our portfolio one stock at a time. The portfolio is
broadly diversified, with ongoing overweight positions in the information
technology and health care sectors. Our valuation work is also directing us
toward smaller relative weightings in utilities stocks. We are still finding
greater value opportunities among mega-cap stocks and have maintained our bias
toward these firms.
Top Five Industries as of March 31, 2008
% of % of
net assets net assets
as of as of
3/31/08 9/30/07
Oil, Gas & Consumable Fuels 13.7% 14.3%
Pharmaceuticals 8.8% 7.8%
Diversified Financial Services 8.2% 10.3%
Diversified Telecommunication Services 5.9% 4.8%
Industrial Conglomerates 5.6% 3.0%
Types of Investments in Portfolio
% of % of
net assets net assets
as of as of
3/31/08 9/30/07
Common Stocks and Futures 99.2% 99.8%
Temporary Cash Investments 1.0% 0.5%
Other Assets and Liabilities(1) (0.2)% (0.3)%
(1) Includes securities lending collateral and other assets and liabilities
- ------
6
SCHEDULE OF INVESTMENTS
NT Large Company Value
MARCH 31, 2008
Shares Value
Common Stocks -- 95.3%
AEROSPACE & DEFENSE -- 1.1%
13,700 Northrop Grumman Corp. $ 1,065,998
-----------
BEVERAGES -- 2.1%
22,700 Coca-Cola Co. (The) 1,381,749
18,900 Pepsi Bottling Group Inc. 640,899
-----------
2,022,648
-----------
BIOTECHNOLOGY -- 0.6%
13,800 Amgen Inc.(1) 576,564
-----------
CAPITAL MARKETS -- 2.6%
11,700 Bank of New York Mellon Corp. (The) 488,241
23,400 Merrill Lynch & Co., Inc. 953,316
25,600 Morgan Stanley 1,169,920
-----------
2,611,477
-----------
CHEMICALS -- 2.1%
25,800 du Pont (E.I.) de Nemours & Co. 1,206,408
15,000 PPG Industries, Inc. 907,650
-----------
2,114,058
-----------
COMMERCIAL BANKS -- 5.2%
19,300 National City Corp. 192,035
11,100 PNC Financial Services Group 727,827
36,900 U.S. Bancorp 1,194,084
37,600 Wachovia Corp. 1,015,200
67,400 Wells Fargo & Co. 1,961,340
-----------
5,090,486
-----------
COMMERCIAL SERVICES & SUPPLIES -- 1.7%
8,100 Avery Dennison Corp. 398,925
19,400 R.R. Donnelley & Sons Company 588,014
20,600 Waste Management, Inc. 691,336
-----------
1,678,275
-----------
COMMUNICATIONS EQUIPMENT -- 0.1%
14,800 Motorola, Inc. 137,640
-----------
COMPUTERS & PERIPHERALS -- 1.2%
25,900 Hewlett-Packard Co. 1,182,594
-----------
CONSUMER FINANCE -- 0.2%
14,300 Discover Financial Services 234,091
-----------
DIVERSIFIED -- 1.9%
13,900 Standard and Poor's 500 Depositary Receipt Series
1 1,830,630
-----------
DIVERSIFIED CONSUMER SERVICES -- 0.7%
31,700 H&R Block, Inc. 658,092
-----------
Shares Value
DIVERSIFIED FINANCIAL SERVICES -- 8.2%
76,700 Bank of America Corp. $ 2,907,697
123,000 Citigroup Inc. 2,634,660
60,000 JPMorgan Chase & Co. 2,577,000
-----------
8,119,357
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 5.9%
101,400 AT&T Inc. 3,883,620
5,800 Embarq Corp. 232,580
47,800 Verizon Communications Inc. 1,742,310
-----------
5,858,510
-----------
ELECTRIC UTILITIES -- 2.7%
19,000 Exelon Corporation 1,544,130
24,600 PPL Corporation 1,129,632
-----------
2,673,762
-----------
ENERGY EQUIPMENT & SERVICES -- 0.4%
7,500 National Oilwell Varco, Inc.(1) 437,850
-----------
FOOD & STAPLES RETAILING -- 2.7%
27,500 Kroger Co. (The) 698,500
23,800 Wal-Mart Stores, Inc. 1,253,784
18,100 Walgreen Co. 689,429
-----------
2,641,713
-----------
FOOD PRODUCTS -- 1.0%
28,200 Unilever N.V. New York Shares 951,186
-----------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.7%
14,300 Medtronic, Inc. 691,691
-----------
HEALTH CARE PROVIDERS & SERVICES -- 0.3%
6,700 Quest Diagnostics Inc. 303,309
-----------
HOTELS, RESTAURANTS & LEISURE -- 0.5%
3,200 Darden Restaurants, Inc. 104,160
6,400 McDonald's Corp. 356,928
-----------
461,088
-----------
HOUSEHOLD DURABLES -- 0.7%
29,400 Newell Rubbermaid Inc. 672,378
-----------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.6%
15,900 NRG Energy Inc.(1) 619,941
-----------
INDUSTRIAL CONGLOMERATES -- 5.6%
130,800 General Electric Co. 4,840,908
15,100 Tyco International Ltd. 665,155
-----------
5,506,063
-----------
- ------
7
NT Large Company Value
Shares Value
INSURANCE -- 5.2%
24,000 Allstate Corp. $ 1,153,440
45,300 American International Group, Inc. 1,959,225
14,700 Hartford Financial Services Group Inc. (The) 1,113,819
7,500 Marsh & McLennan Companies, Inc. 182,625
11,300 Torchmark Corp. 679,243
-----------
5,088,352
-----------
IT SERVICES -- 1.7%
9,500 Fiserv, Inc.(1) 456,855
10,800 International Business Machines Corp. 1,243,512
-----------
1,700,367
-----------
MACHINERY -- 3.5%
11,700 Caterpillar Inc. 915,993
2,700 Deere & Co. 217,188
17,000 Dover Corp. 710,260
19,900 Ingersoll-Rand Company Ltd. Cl A 887,142
10,700 Parker-Hannifin Corp. 741,189
-----------
3,471,772
-----------
MEDIA -- 3.0%
4,300 CBS Corp. Cl B 94,944
28,500 Gannett Co., Inc. 827,925
75,900 Time Warner Inc. 1,064,118
24,100 Viacom Inc. Cl B(1) 954,842
-----------
2,941,829
-----------
METALS & MINING -- 0.8%
11,300 Nucor Corp. 765,462
-----------
MULTILINE RETAIL -- 0.6%
14,500 Kohl's Corp.(1) 621,905
-----------
OFFICE ELECTRONICS -- 0.6%
39,800 Xerox Corp. 595,806
-----------
OIL, GAS & CONSUMABLE FUELS -- 13.7%
39,400 Chevron Corp. 3,363,184
31,300 ConocoPhillips 2,385,373
2,300 Devon Energy Corporation 239,959
57,300 Exxon Mobil Corp. 4,846,434
37,000 Royal Dutch Shell plc ADR 2,552,260
-----------
13,387,210
-----------
PAPER & FOREST PRODUCTS -- 1.1%
16,700 Weyerhaeuser Co. 1,086,168
-----------
PHARMACEUTICALS -- 8.8%
16,300 Abbott Laboratories 898,945
15,400 Eli Lilly and Company 794,486
41,500 Johnson & Johnson 2,692,105
Shares Value
16,800 Merck & Co., Inc. $ 637,560
120,500 Pfizer Inc. 2,522,065
28,300 Wyeth 1,181,808
-----------
8,726,969
-----------
ROAD & RAIL -- 0.2%
12,100 YRC Worldwide Inc.(1)(2) 158,752
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.9%
21,800 Applied Materials, Inc. 425,318
22,000 Intel Corp. 465,960
-----------
891,278
-----------
SOFTWARE -- 1.6%
35,300 Microsoft Corporation 1,001,814
31,800 Oracle Corp.(1) 622,008
-----------
1,623,822
-----------
SPECIALTY RETAIL -- 2.5%
16,300 Best Buy Co., Inc. 675,798
24,100 Gap, Inc. (The) 474,288
23,000 Home Depot, Inc. (The) 643,310
30,400 Staples, Inc. 672,144
-----------
2,465,540
-----------
TEXTILES, APPAREL & LUXURY GOODS -- 0.6%
8,100 VF Corp. 627,831
-----------
THRIFTS & MORTGAGE FINANCE -- 1.3%
38,100 Freddie Mac 964,692
13,600 MGIC Investment Corp.(2) 143,208
20,200 Washington Mutual, Inc.(2) 208,060
-----------
1,315,960
-----------
WIRELESS TELECOMMUNICATION SERVICES -- 0.4%
58,300 Sprint Nextel Corp. 390,027
-----------
TOTAL COMMON STOCKS
(Cost $100,295,143) 93,998,451
-----------
Temporary Cash Investments -- Segregated For Futures Contracts -- 3.9%
Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized
by various U.S. Treasury obligations, 7.875%, 2/15/21, valued at
$3,921,273), in a joint trading account at 1.30%, dated 3/31/08,
due 4/1/08 (Delivery value $3,833,213) (Cost $3,833,075) 3,833,075
-----------
- ------
8
NT Large Company Value
Shares Value
Temporary Cash Investments -- 1.0%
Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized
by various U.S. Treasury obligations, 7.875%, 2/15/21, valued at
$989,174), in a joint trading account at 1.30%, dated 3/31/08, due
4/1/08 (Delivery value $966,960) (Cost $966,925) $ 966,925
-----------
Temporary Cash Investments -- Securities Lending Collateral(3) -- 0.5%
Repurchase Agreement, Barclays Bank plc, (collateralized by various
U.S. Government Agency obligations in a pooled account at the
lending agent), 2.30%, dated 3/31/08 due 4/1/08 (Delivery value
$124,008) 124,000
Repurchase Agreement, BNP Paribas, (collateralized by various U.S.
Government Agency obligations in a pooled account at the lending
agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery value $79,405) 79,400
Shares Value
Repurchase Agreement, Deutsche Bank AG, (collateralized by various
U.S. Government Agency obligations in a pooled account at the
lending agent), 2.25%, dated 3/31/08, due 4/1/08 (Delivery value
$137,509) $ 137,500
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency obligations in a
pooled account at the lending agent), 2.15%, dated 3/31/08, due
4/1/08 (Delivery value $119,307) 119,300
-----------
TOTAL TEMPORARY CASH INVESTMENTS -- SECURITIES LENDING COLLATERAL
(Cost $460,200) 460,200
-----------
TOTAL INVESTMENT SECURITIES -- 100.7% (Cost $105,555,343) 99,258,651
-----------
OTHER ASSETS AND LIABILITIES -- (0.7)% (641,087)
-----------
TOTAL NET ASSETS -- 100.0% $98,617,564
===========
Futures Contracts
Expiration Underlying Face Unrealized Gain
Contracts Purchased Date Amount at Value (Loss)
58 S&P 500 E-Mini June 2008
Futures $3,833,075 $(13,458)
========== =========
Notes to Schedule of Investments
ADR = American Depositary Receipt
(1) Non-income producing.
(2) Security, or a portion thereof, was on loan as of March 31, 2008.
(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 March 31, 2008
Average Annual Returns
Since Inception
1 year Inception Date
INSTITUTIONAL CLASS -10.79% 1.85% 5/12/06
RUSSELL MIDCAP VALUE INDEX -14.12% 0.28% --
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
One-Year Returns Over Life of Class
Periods ended March 31
2007* 2008
Institutional Class 16.03% -10.79%
Russell Midcap Value Index 17.06% -14.12%
*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 returned -10.79% for the 12 months ended March 31, 2008. By
comparison, the median return for Morningstar's Mid Cap Value category (whose
performance, like NT Mid Cap Value's, reflects fund operating expenses) was
- -11.02%.* The fund's benchmark, the Russell Midcap Value Index, dropped
- -14.12%. Its returns do not include fund expenses.
The challenging market environment described in the Market Perspective on page
2 (in which growth outperformed value across the capitalization spectrum)
hampered NT Mid Cap Value's absolute performance. However, on a relative
basis, the portfolio significantly outpaced the performance of its benchmark,
the Russell Midcap Value Index. For much of the period, investors favored
companies that were already strong performers, a momentum bias that did not
fit well with the portfolio's investment approach of seeking stocks that are
undervalued by the market. But in spite of these negative factors, NT Mid Cap
Value benefited from strong security selection and our continued emphasis on
less-risky businesses with sound balance sheets.
CONSUMER STAPLES LED PORTFOLIO
On the positive side, an overweight in consumer staples companies contributed
to absolute and relative performance. Our valuation work uncovered a number of
attractively priced businesses -- industry leaders with high and sustainable
market-share positions, solid returns on capital, and good financial strength.
Adding significant value was our basket of high-profile food stocks, household
products companies, and beverage makers.
We owned Diamond Foods, which processes and distributes nuts and other snack
foods. In addition to beating earnings forecasts, the company has continued to
upgrade operating performance, expand sales channels, and improve its returns
on capital. Another holding was processed food manufacturer H.J. Heinz. The
company has streamlined its suite of products and is enjoying strong sales of
its top brands. We also held Kimberly-Clark Corp., one of the largest makers
of personal-care and paper products, which has benefited from price increases
and cost-cutting initiatives.
Top Ten Holdings as of March 31, 2008
% of % of
net assets net assets
as of as of
3/31/08 9/30/07
Bemis Co., Inc. 3.5% 1.9%
Kimberly-Clark Corp. 2.9% 1.7%
Portland General Electric Co. 2.7% 2.0%
Southwest Gas Corp. 2.6% 1.4%
Kraft Foods Inc. Cl A 2.5% 2.8%
International Speedway Corp. 2.1% 2.0%
iShares S&P MidCap 400 Index Fund 1.8% 3.4%
Speedway Motorsports Inc. 1.8% 2.6%
Beckman Coulter, Inc. 1.7% 1.0%
Marshall & IIsley Corp. 1.7% 1.3%
*The median return for Morningstar's Mid Cap Value category was -0.31% since
the fund's inception. ©2008 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
ALLOCATION TO UTILITIES ADDED VALUE
Security selection in the utilities sector enhanced our results against the
benchmark. Notable contributors included Puget Energy Inc. and Dominion
Resources. Puget Energy, which delivers electricity and gas to customers in
Washington State, agreed to be acquired by a private equity group for $30 per
share. Dominion Resources, a provider of gas and electric services primarily
in Northeastern, Mid-Atlantic and Midwestern states, 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.
FINANCIALS SLOWED PROGRESS
Despite an underweight position, the broad decline in the financials sector
was a drag on both absolute and relative performance. Detracting the most was
our greater-than-the-benchmark allocation to thrifts -- specifically MGIC
Investment Corporation, the nation's largest private mortgage insurer, and
Freddie Mac, a stockholder-owned corporation chartered by Congress to keep
money flowing to mortgage lenders in support of homeownership. Both stocks
declined on news of bigger-than-expected losses resulting from housing
weakness and the deterioration of mortgage credit.
Our mix of insurance stocks also hindered progress. A top detractor was Ambac
Financial Group, a leading municipal bond insurer. Its stock declined on
concerns about bond insurers in general and the company's exposure to
mortgage-related loans.
ENERGY POSITION HAMPERED RESULTS
The portfolio's underweight position in the energy sector -- the top performer
in the benchmark -- slowed relative performance. Because of valuations, we did
not own some major integrated oil companies and refining companies, such as
Hess Corp. and Chesapeake Energy Corp.
OUTLOOK
We will continue to follow our disciplined, bottom-up process, selecting
companies one at a time for the portfolio. We see opportunities in health
care, consumer staples, and industrials stocks, reflected by our overweight
positions in these sectors, relative to the benchmark. Our fundamental
analysis and valuation work is also directing us toward smaller relative
weightings in financials, telecommunications, and energy stocks.
Top Five Industries as of March 31, 2008
% of % of
net assets net assets
as of as of
3/31/08 9/30/07
Food Products 9.2% 9.6%
Insurance 6.2% 9.0%
Electric Utilities 5.8% 4.5%
Commercial Banks 5.8% 9.2%
Gas Utilities 5.5% 2.0%
Types of Investments in Portfolio
% of % of
net assets net assets
as of as of
3/31/08 9/30/07
Common Stocks 97.0% 98.4%
Temporary Cash Investments 2.2% 1.5%
Other Assets and Liabilities* 0.8% 0.1%
* Includes securities lending collateral and other assets and liabilities.
- ------
13
SCHEDULE OF INVESTMENTS
NT Mid Cap Value
MARCH 31, 2008
Shares Value
Common Stocks -- 97.0%
AIRLINES -- 1.1%
38,838 Southwest Airlines Co. $ 481,591
-----------
AUTO COMPONENTS -- 0.8%
7,810 Autoliv, Inc. 392,062
-----------
AUTOMOBILES -- 1.4%
6,200 Bayerische Motoren Werke AG ORD 342,232
16,549 Winnebago Industries, Inc.(1) 279,678
-----------
621,910
-----------
BEVERAGES -- 2.1%
14,712 Anheuser-Busch Companies, Inc. 698,084
2,800 Coca-Cola Enterprises Inc. 67,760
6,100 Pepsi Bottling Group Inc. 206,851
-----------
972,695
-----------
BUILDING PRODUCTS -- 0.4%
12,663 Masco Corp. 251,107
-----------
CAPITAL MARKETS -- 2.2%
6,200 AllianceBernstein Holding L.P. 392,956
5,700 Ameriprise Financial Inc. 295,545
5,400 Legg Mason, Inc. 302,292
-----------
990,793
-----------
CHEMICALS -- 2.4%
11,100 Ferro Corp. 164,946
6,498 International Flavors & Fragrances Inc. 286,237
7,070 Minerals Technologies Inc. 443,996
8,100 Olin Corp. 160,056
1,300 Rohm and Haas Co. 70,304
-----------
1,125,539
-----------
COMMERCIAL BANKS -- 5.8%
14,532 Associated Banc-Corp 386,987
11,505 Commerce Bancshares, Inc. 483,555
33,168 Marshall & Ilsley Corp. 769,498
17,771 South Financial Group Inc. (The) 264,077
6,823 SunTrust Banks, Inc. 376,220
6,000 United Bankshares, Inc. 159,900
4,300 Zions Bancorporation 195,865
-----------
2,636,102
-----------
COMMERCIAL SERVICES & SUPPLIES -- 5.2%
11,900 Avery Dennison Corp. 586,075
15,927 HNI Corp.(1) 428,277
12,363 Pitney Bowes, Inc. 432,952
Shares Value
10,198 Republic Services, Inc. $ 298,190
19,496 Waste Management, Inc. 654,286
-----------
2,399,780
-----------
COMPUTERS & PERIPHERALS -- 2.1%
14,014 Diebold, Inc. 526,226
15,300 Emulex Corp.(2) 248,472
12,146 QLogic Corp.(2) 186,441
-----------
961,139
-----------
CONTAINERS & PACKAGING -- 3.5%
62,340 Bemis Co., Inc. 1,585,306
-----------
DISTRIBUTORS -- 0.8%
9,756 Genuine Parts Co. 392,386
-----------
DIVERSIFIED -- 1.8%
10,896 iShares S&P MidCap 400 Index Fund 846,728
-----------
DIVERSIFIED FINANCIAL SERVICES -- 0.6%
7,200 McGraw-Hill Companies, Inc. (The) 266,040
-----------
ELECTRIC UTILITIES -- 5.8%
14,584 Empire District Electric Co.(1) 295,326
9,424 IDACORP, Inc. 302,605
54,496 Portland General Electric Co. 1,228,885
23,900 Sierra Pacific Resources 301,857
23,200 Westar Energy Inc. 528,264
-----------
2,656,937
-----------
ELECTRICAL EQUIPMENT -- 1.3%
13,200 Hubbell Inc. Cl B 576,708
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 3.7%
5,829 Littelfuse, Inc.(2) 203,840
28,606 Molex Inc. 662,515
15,724 Tyco Electronics Ltd. 539,648
33,300 Vishay Intertechnology, Inc.(2) 301,698
-----------
1,707,701
-----------
FOOD PRODUCTS -- 9.2%
15,500 Campbell Soup Co. 526,225
24,307 ConAgra Foods, Inc. 582,153
11,051 Diamond Foods Inc. 200,465
4,566 General Mills, Inc. 273,412
15,096 H.J. Heinz Co. 709,059
10,206 Hershey Co. (The) 384,460
5,600 Kellogg Co. 294,336
36,535 Kraft Foods Inc. Cl A 1,132,951
8,890 Maple Leaf Foods Inc. ORD 113,025
-----------
4,216,086
-----------
- ------
14
NT Mid Cap Value
Shares Value
GAS UTILITIES -- 5.5%
2,000 AGL Resources Inc. $ 68,640
20,000 Nicor Inc. 670,200
42,953 Southwest Gas Corp. 1,200,966
17,553 WGL Holdings Inc. 562,749
-----------
2,502,555
-----------
HEALTH CARE EQUIPMENT & SUPPLIES -- 3.2%
11,960 Beckman Coulter, Inc. 772,018
5,300 Boston Scientific Corp.(2) 68,211
3,700 Covidien Ltd. 163,725
5,819 Steris Corp. 156,124
18,757 Symmetry Medical Inc.(2) 311,366
-----------
1,471,444
-----------
HEALTH CARE PROVIDERS & SERVICES -- 1.3%
10,000 LifePoint Hospitals Inc.(2) 274,700
5,602 Universal Health Services, Inc. Cl B 300,771
-----------
575,471
-----------
HEALTH CARE TECHNOLOGY -- 0.3%
7,500 IMS Health Inc. 157,575
-----------
HOTELS, RESTAURANTS & LEISURE -- 3.9%
23,386 International Speedway Corp. Cl A 963,503
32,530 Speedway Motorsports Inc. 815,527
-----------
1,779,030
-----------
HOUSEHOLD DURABLES -- 1.6%
7,100 Hunter Douglas N.V. ORD 480,148
3,000 Whirlpool Corp. 260,340
-----------
740,488
-----------
HOUSEHOLD PRODUCTS -- 3.5%
5,300 Clorox Co. 300,192
20,284 Kimberly-Clark Corp. 1,309,332
-----------
1,609,524
-----------
INSURANCE -- 6.2%
13,635 Allstate Corp. 655,299
6,000 Chubb Corp. 296,880
14,539 Gallagher (Arthur J.) & Co. 343,411
10,936 Genworth Financial Inc. Cl A 247,591
4,543 Hartford Financial Services Group Inc. (The) 344,223
16,651 Horace Mann Educators Corp. 291,059
27,354 Marsh & McLennan Companies, Inc. 666,071
-----------
2,844,534
-----------
Shares Value
LEISURE EQUIPMENT & PRODUCTS -- 1.5%
7,100 Hasbro, Inc. $ 198,090
3,900 Polaris Industries Inc.(1) 159,939
16,052 RC2 Corp.(2) 336,610
-----------
694,639
-----------
MACHINERY -- 3.1%
52,583 Altra Holdings Inc.(2) 707,241
8,300 Dover Corp. 346,774
7,900 Kaydon Corp. 346,889
-----------
1,400,904
-----------
MULTI-UTILITIES -- 3.4%
6,700 Ameren Corp. 295,068
19,795 Puget Energy, Inc. 512,097
13,560 Wisconsin Energy Corp. 596,504
8,000 Xcel Energy Inc. 159,600
-----------
1,563,269
-----------
MULTILINE RETAIL -- 0.2%
3,600 Family Dollar Stores, Inc. 70,200
-----------
OIL, GAS & CONSUMABLE FUELS -- 2.0%
3,248 Apache Corp. 392,423
9,242 Equitable Resources Inc. 544,354
-----------
936,777
-----------
PAPER & FOREST PRODUCTS -- 1.6%
12,648 MeadWestvaco Corp. 344,279
6,106 Weyerhaeuser Co. 397,134
-----------
741,413
-----------
PHARMACEUTICALS -- 1.3%
14,100 Bristol-Myers Squibb Co. 300,330
9,352 Watson Pharmaceuticals, Inc.(2) 274,201
-----------
574,531
-----------
REAL ESTATE INVESTMENT TRUSTS (REITS) -- 2.8%
3,100 Boston Properties Inc. 285,417
12,119 Education Realty Trust, Inc. 152,336
6,900 Host Hotels & Resorts Inc. 109,848
1,100 Kimco Realty Corp. 43,087
1,300 Public Storage Inc. 115,206
10,200 Rayonier, Inc. 443,088
4,600 Realty Income Corp.(1) 117,852
-----------
1,266,834
-----------
ROAD & RAIL -- 0.3%
11,200 Heartland Express, Inc.(1) 159,712
-----------
- ------
15
NT Mid Cap Value
Shares Value
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.1%
9,400 KLA-Tencor Corp. $ 348,740
12,500 Teradyne, Inc.(2) 155,250
-----------
503,990
-----------
SOFTWARE -- 0.6%
11,335 Synopsys, Inc.(2) 257,418
-----------
SPECIALTY RETAIL -- 0.8%
15,062 Lowe's Companies, Inc. 345,522
1,300 Sherwin-Williams Co. 66,352
-----------
411,874
-----------
THRIFTS & MORTGAGE FINANCE -- 2.0%
40,200 People's United Financial, Inc. 695,862
8,700 Washington Federal, Inc. 198,709
-----------
894,571
-----------
TRADING COMPANIES & DISTRIBUTORS -- 0.6%
3,300 Grainger (W.W.), Inc. 252,087
-----------
TOTAL COMMON STOCKS
(Cost $45,468,001) 44,489,450
-----------
Temporary Cash Investments -- 2.2%
Repurchase Agreement, Morgan Stanley Group, Inc., (collateralized
by various U.S. Treasury obligations, 7.875%, 2/15/21, valued at
$1,023,010), in a joint trading account at 1.30%, dated 3/31/08,
due 4/1/08 (Delivery value $1,000,036) (Cost $1,000,000) 1,000,000
-----------
Shares Value
Temporary Cash Investments -- Securities Lending Collateral(3) -- 1.5%
Repurchase Agreement, Barclays Bank plc, (collateralized by various
U.S. Government Agency obligations in a pooled account at the
lending agent), 2.30%, dated 3/31/08 due 4/1/08 (Delivery value
$112,157) $ 112,150
Repurchase Agreement, BNP Paribas, (collateralized by various U.S.
Government Agency obligations in a pooled account at the lending
agent), 2.30%, dated 3/31/08, due 4/1/08 (Delivery value $165,636) 165,625
Repurchase Agreement, Deutsche Bank AG, (collateralized by various
U.S. Government Agency obligations in a pooled account at the
lending agent), 2.25%, dated 3/31/08, due 4/1/08 (Delivery value
$195,012) 195,000
Repurchase Agreement, Goldman Sachs Group, Inc. (The),
(collateralized by various U.S. Government Agency obligations in a
pooled account at the lending agent), 2.15%, dated 3/31/08, due
4/1/08 (Delivery value $192,601) 192,589
-----------
TOTAL TEMPORARY CASH INVESTMENTS -- SECURITIES LENDING COLLATERAL
(Cost $665,364) 665,364
-----------
TOTAL INVESTMENT SECURITIES -- 100.7%
(Cost $47,133,365) 46,154,814
-----------
OTHER ASSETS AND LIABILITIES -- (0.7)% (322,874)
-----------
TOTAL NET ASSETS -- 100.0% $45,831,940
===========
Forward Foreign Currency Exchange Contracts
Unrealized Gain
Contracts to Sell Settlement Date Value (Loss)
105,134 CAD for USD 4/30/08 $ 102,371 $ 1,395
527,912 Euro for USD 4/30/08 832,395 996
--------- ---------
$ 934,766 $ 2,391
========= =========
(Value on Settlement Date $937,157)
- ------
16
NT Mid Cap Value
Notes to Schedule of Investments
CAD = Canadian Dollar
ORD = Foreign Ordinary Share
USD = United States Dollar
(1) Security, or a portion thereof, was on loan as of March 31, 2008.
(2) Non-income producing.
(3) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions.
As of March 31, 2008, securities with an aggregate value of $822,380, which
represented 1.8% of total net assets, were valued in accordance with
alternative pricing procedures adopted by the Board of Directors.
See Notes to Financial Statements.
- ------
17
SHAREHOLDER FEE EXAMPLES (UNAUDITED)
Fund shareholders may incur two types of costs: (1) transaction costs,
including sales charges (loads) on purchase payments and redemption/exchange
fees; and (2) ongoing costs, including management fees; distribution and
service (12b-1) fees; and other fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in your fund
and to compare these costs with the ongoing cost of investing in other mutual
funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from October 1, 2007 to March 31, 2008.
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.
- ------
18
Beginning Ending Expenses Paid
Account Value Account Value During Period* Annualized
10/1/07 3/31/08 10/1/07 - 3/31/08 Expense Ratio*
NT Large Company Value -- Institutional Class
Actual $1,000 $853.40 $2.87 0.62%
Hypothetical $1,000 $1,021.90 $3.13 0.62%
NT Mid Cap Value -- Institutional Class
Actual $1,000 $869.30 $3.74 0.80%
Hypothetical $1,000 $1,021.00 $4.04 0.80%
*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.
- ------
19
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2008
NT Large
Company NT Mid Cap
Value Value
ASSETS
Investment securities, at value (cost of
$105,095,143 and $46,468,001, respectively) --
including $453,863 and $642,526 of securities on
loan, respectively $ 98,798,451 $45,489,450
Investments made with cash collateral received for
securities on loan, at value (cost of $460,200 and
$665,364, respectively) 460,200 665,364
------------ -----------
Total investment securities, at value (cost of
$105,555,343 and $47,133,365, respectively) 99,258,651 46,154,814
Cash 197,353 119,827
Receivable for investments sold -- 908,510
Receivable for forward foreign currency exchange
contracts -- 2,391
Receivable for variation margin on futures contracts 8,265 --
Dividends and interest receivable 147,181 84,812
------------ -----------
99,611,450 47,270,354
------------ -----------
LIABILITIES
Payable for collateral received for securities on
loan 460,200 665,364
Payable for investments purchased 482,901 742,924
Accrued management fees 50,785 30,126
------------ -----------
993,886 1,438,414
------------ -----------
NET ASSETS $ 98,617,564 $45,831,940
============ ===========
INSTITUTIONAL CLASS CAPITAL SHARES, $0.01 PAR VALUE
Authorized 30,000,000 30,000,000
============ ===========
Outstanding 10,161,227 5,072,673
============ ===========
NET ASSET VALUE PER SHARE $9.71 $9.04
============ ===========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $105,597,074 $51,155,655
Undistributed net investment income 22,354 39,713
Accumulated net realized loss on investment and
foreign currency transactions (691,714) (4,387,284)
Net unrealized depreciation on investments and
translation of assets and liabilities in foreign
currencies (6,310,150) (976,144)
------------ -----------
$ 98,617,564 $45,831,940
============ ===========
See Notes to Financial Statements.
- ------
20
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2008
NT Large
Company NT Mid Cap
Value Value
INVESTMENT INCOME (LOSS)
INCOME:
Dividends (net of foreign taxes withheld of
$19,001 and $607, respectively) $ 2,302,988 $ 856,473
Interest 96,828 45,424
Securities lending, net 14,761 7,519
------------ -----------
2,414,577 909,416
------------ -----------
EXPENSES:
Management fees 551,429 318,763
Directors' fees and expenses 1,675 752
Other expenses 748 986
------------ -----------
553,852 320,501
------------ -----------
NET INVESTMENT INCOME (LOSS) 1,860,725 588,915
------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
Investment and foreign currency transactions 574,349 (2,452,313)
Futures transactions (342,562) --
------------ -----------
231,787 (2,452,313)
------------ -----------
CHANGE IN NET UNREALIZED APPRECIATION
(DEPRECIATION) ON:
Investments and translation of assets and
liabilities in foreign currencies (12,562,222) (2,674,647)
Futures (14,832) --
------------ -----------
(12,577,054) (2,674,647)
------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) (12,345,267) (5,126,960)
------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $(10,484,542) $(4,538,045)
============= ============
See Notes to Financial Statements.
- ------
21
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED MARCH 31, 2008 AND PERIOD ENDED MARCH 31, 2007
NT Large Company Value NT Mid Cap Value
Increase (Decrease) in
Net Assets 2008 2007(1) 2008 2007(1)
OPERATIONS
Net investment income
(loss) $ 1,860,725 $ 1,078,502 $ 588,915 $ 373,127
Net realized gain (loss) 231,787 239,142 (2,452,313) 2,264,747
Change in net
unrealized appreciation
(depreciation) (12,577,054) 6,266,904 (2,674,647) 1,698,503
------------ ------------ ----------- -----------
Net increase (decrease)
in net assets resulting
from operations (10,484,542) 7,584,548 (4,538,045) 4,336,377
------------ ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment
income (1,863,182) (1,053,691) (608,003) (317,474)
From net realized gains (1,095,232) (67,411) (3,708,762) (487,808)
------------ ------------ ----------- -----------
Decrease in net assets
from distributions (2,958,414) (1,121,102) (4,316,765) (805,282)
------------ ------------ ----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares
sold 48,365,507 77,274,602 25,235,011 35,046,933
Payments for shares
redeemed (8,275,312) (11,767,723) (3,922,971) (5,203,318)
------------ ------------ ----------- -----------
Net increase (decrease)
in net assets from
capital share
transactions 40,090,195 65,506,879 21,312,040 29,843,615
------------ ------------ ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS 26,647,239 71,970,325 12,457,230 33,374,710
NET ASSETS
Beginning of period 71,970,325 -- 33,374,710 --
------------ ------------ ----------- -----------
End of period $98,617,564 $71,970,325 $45,831,940 $33,374,710
============ ============ =========== ===========
Undistributed net
investment income $22,354 $24,811 $39,713 $54,650
============ ============ =========== ===========
TRANSACTIONS IN SHARES OF THE FUNDS
Sold 4,428,581 7,544,801 2,465,147 3,435,340
Redeemed (732,587) (1,079,568) (349,992) (477,822)
------------ ------------ ----------- -----------
Net increase (decrease)
in shares of the funds 3,695,994 6,465,233 2,115,155 2,957,518
============ ============ =========== ===========
(1) May 12, 2006 (fund inception) through March 31, 2007.
See Notes to Financial Statements.
- ------
22
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
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 the Board of Directors or its designee, in accordance
with procedures adopted by the Board of Directors, 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 purposes, 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.
- ------
23
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 income earned, net of any rebates or fees, is included in the
Statement of Operations. 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.
- ------
24
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 management fee for NT Large Company
Value for the year ended March 31, 2008 was 0.62%. The annual management fee
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, in aggregate, by various
funds in a series issued 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 securities lending agreement with
JPMorgan Chase Bank (JPMCB). Prior to December 12, 2007, the funds had a bank
line of credit agreement with JPMCB. JPMCB is a custodian of the funds and a
wholly owned subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the year ended
March 31, 2008, were as follows:
NT Large Company Value NT Mid Cap Value
Purchases $52,564,898 $95,535,281
Proceeds from sales $17,348,233 $80,538,028
4. SECURITIES LENDING
As of March 31, 2008, securities in NT Large Company Value and NT Mid Cap
Value valued at $453,863 and $642,526, 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 $460,200 and $665,364, 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.
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25
5. BANK LINE OF CREDIT
Effective December 12, 2007, the funds, along with certain other funds managed
by ACIM or ACGIM, have a $500,000,000 unsecured bank line of credit agreement
with Bank of America, N.A. Prior to December 12, 2007, the funds, along with
certain other funds managed by ACIM or ACGIM, had 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, which is subject to annual renewal, bear interest at the
Federal Funds rate plus 0.40%. The funds did not borrow from the line during
the year ended March 31, 2008.
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 tax character of distributions paid during the year ended March 31, 2008
and the period May 12, 2006 (fund inception) through March 31, 2007, were as
follows:
NT Large Company Value NT Mid Cap Value
2008 2007* 2008 2007*
DISTRIBUTIONS PAID FROM
Ordinary income $2,544,622 $1,121,102 $3,661,052 $805,282
Long-term capital gains $413,792 -- $655,713 --
*May 12, 2006 (fund inception) through March 31, 2007.
The book-basis character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences reflect
the differing character of certain income items and net realized gains and
losses for financial statement and tax purposes, and may result in
reclassification among certain capital accounts on the financial statements.
As of March 31, 2008, the components of distributable earnings on a tax-basis
and the federal tax cost of investments were as follows:
NT Large Company
Value NT Mid Cap Value
Federal tax cost of investments $106,143,183 $49,075,001
============ ============
Gross tax appreciation of investments $6,865,760 $957,609
Gross tax depreciation of investments (13,750,292) (3,877,796)
------------ ------------
Net tax appreciation (depreciation) of
investments $(6,884,532) $(2,920,187)
============ ============
Undistributed ordinary income $22,379 $39,728
Accumulated long-term gains $221 --
Capital loss deferrals $(117,578) $(2,443,256)
The difference between book-basis and tax-basis cost and unrealized
appreciation (depreciation) is attributable primarily to the tax deferral of
losses on wash sales and return of capital dividends received and the
realization for tax purposes of unrealized gains (losses) on certain forward
foreign currency exchange contracts and on certain futures contracts.
The capital loss deferrals listed above represent net capital losses incurred
in the five-month period ended March 31, 2008. The funds have elected to treat
such losses as having been incurred in the following fiscal year for federal
income tax purposes.
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26
8. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether an entity is taxable
in a particular jurisdiction), and requires certain expanded tax disclosures.
FIN 48 is effective for fiscal years beginning after December 15, 2006, and is
to be applied to all open tax years as of the date of effectiveness. The
adoption of FIN 48 did 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.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161, "Disclosures about Derivative Instruments and Hedging Activities -- an
amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for
fiscal years beginning after November 15, 2008. FAS 161 amends and expands
disclosures about derivative instruments and hedging activities. FAS 161
requires qualitative disclosures about the objectives and strategies of
derivative instruments, quantitative disclosures about the fair value amounts
of and gains and losses on derivative instruments, and disclosures of
credit-risk-related contingent features in hedging activities. Management is
currently evaluating the impact that adopting FAS 161 will have on the
financial statement disclosures.
9. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The funds hereby designate up to the maximum amount allowable as qualified
dividend income for the fiscal year ended March 31, 2008.
For corporate taxpayers, NT Large Company Value and NT Mid Cap Value hereby
designate $2,226,923 and $743,098, respectively, or up to the maximum amount
allowable, of ordinary income distributions paid during the fiscal year ended
March 31, 2008 as qualified for the corporate dividends received deduction.
NT Large Company Value and NT Mid Cap Value hereby designate $413,792 and
$655,713 of long-term capital gain distributions, respectively, for the fiscal
year ended March 31, 2008.
NT Large Company Value and NT Mid Cap Value designate $681,440 and $3,052,152
of distributions as qualified short-term capital gains, respectively, for
purposes of Internal Revenue Code Section 871.
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27
FINANCIAL HIGHLIGHTS
NT Large Company Value
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $11.13 $10.00
------- --------
Income From Investment Operations
Net Investment Income (Loss) 0.22 0.18
Net Realized and Unrealized Gain (Loss) (1.29) 1.14
------- --------
Total From Investment Operations (1.07) 1.32
------- --------
Distributions
From Net Investment Income (0.22) (0.18)
From Net Realized Gains (0.13) (0.01)
------- --------
Total Distributions (0.35) (0.19)
------- --------
Net Asset Value, End of Period $9.71 $11.13
======= ========
TOTAL RETURN(2) (9.93)% 13.26%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.62% 0.63%(3)
Ratio of Net Investment Income (Loss) to Average Net Assets 2.10% 2.01%(3)
Portfolio Turnover Rate 20% 18%
Net Assets, End of Period (in thousands) $98,618 $71,970
(1) May 12, 2006 (fund inception) through March 31, 2007.
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized.
(3) Annualized.
See Notes to Financial Statements.
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28
NT Mid Cap Value
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
2008 2007(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $11.28 $10.00
-------- --------
Income From Investment Operations
Net Investment Income (Loss) 0.16(2) 0.14
Net Realized and Unrealized Gain (Loss) (1.29) 1.44
-------- --------
Total From Investment Operations (1.13) 1.58
-------- --------
Distributions
From Net Investment Income (0.15) (0.12)
From Net Realized Gains (0.96) (0.18)
-------- --------
Total Distributions (1.11) (0.30)
-------- --------
Net Asset Value, End of Period $9.04 $11.28
======== ========
TOTAL RETURN(3) (10.79)% 16.03%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.80% 0.80%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 1.48% 1.55%(4)
Portfolio Turnover Rate 208% 203%
Net Assets, End of Period (in thousands) $45,832 $33,375
(1) May 12, 2006 (fund inception) through March 31, 2007.
(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.
(4) Annualized.
See Notes to Financial Statements.
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29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders,
American Century Capital Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of NT Large Company Value Fund and NT
Mid Cap Value Fund, two of the mutual funds constituting American Century
Capital Portfolios, Inc. (the "Corporation"), as of March 31, 2008, and the
related statements of operations for the year then ended, the statements of
changes in net assets for the year then ended and the period May 12, 2006
(fund inception) to March 31, 2007, and the financial highlights for the year
then ended and the period May 12, 2006 to March 31, 2007. These financial
statements and financial highlights are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Corporation is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Corporation's internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. Our procedures included confirmation of securities owned as of
March 31, 2008, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing
procedures. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the respective financial
positions of NT Large Company Value Fund and NT Mid Cap Value Fund, two of the
mutual funds of American Century Capital Portfolios, Inc. as of March 31,
2008, the results of their operations for the year then ended, the changes in
their net assets for the year then ended and the period May 12, 2006 (fund
inception) to March 31, 2007, and the financial highlights for the year then
ended and the period May 12, 2006 to March 31, 2007, in conformity with
accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 13, 2008
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30
MANAGEMENT
The individuals listed below serve as directors or officers of the funds. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
72. Those listed as interested directors are "interested" primarily by virtue
of their engagement as directors and/or officers of, or ownership interest in,
American Century Companies, Inc. (ACC) or its wholly owned, direct or
indirect, subsidiaries, including the funds' investment advisor, American
Century Investment Management, Inc. (ACIM); the funds' principal underwriter,
American Century Investment Services, Inc. (ACIS); and the funds' transfer
agent, American Century Services, LLC (ACS).
The other directors (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers
of, and have no financial interest in, ACC or any of its wholly owned, direct
or indirect, subsidiaries, including ACIM, ACIS and ACS. The directors serve
in this capacity for seven registered investment companies in the American
Century Investments family of funds.
All persons named as officers of the funds also serve in similar capacities
for the other 14 investment companies in the American Century Investments
family of funds advised by ACIM or American Century Global Investment
Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise
noted. Only officers with policy-making functions are listed. No officer is
compensated for his or her service as an officer of the funds. The listed
officers are interested persons of the funds and are appointed or re-appointed
on an annual basis.
INTERESTED DIRECTORS
JAMES E. STOWERS, JR., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1924
POSITION(S) HELD WITH FUNDS: Director (since 1958) and Vice Chairman (since
2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Co-Chairman, Director
and Controlling Shareholder, ACC; Co-Vice Chairman, ACC (January 2005 to
February 2007); Chairman, ACC (January 1995 to December 2004); Director, ACIM,
ACGIM, ACS, ACIS and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
JONATHAN S. THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUNDS: Director (since 2007) and President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC
(February 2006 to February 2007); Executive Vice President, ACC (November 2005
to February 2007). Also serves as: President, Chief Executive Officer and
Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM,
ACGIM, ACIS and other ACC subsidiaries. Managing Director, Morgan Stanley
(March 2000 to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 105
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
- ------
31
INDEPENDENT DIRECTORS
THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1940
POSITION(S) HELD WITH FUNDS: Director (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Managing Member, Associated
Investments, LLC (real estate investment company); Managing Member, Brown
Cascade Properties, LLC (real estate investment company); Retired, Area Vice
President, Applied Industrial Technologies
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUNDS: Director (since 1997)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Advisor to the
President, Midwest Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
JAMES A. OLSON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1942
POSITION(S) HELD WITH FUNDS: Director (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member, Plaza Belmont LLC; Chief
Financial Officer, Plaza Belmont LLC (September 1999 to December 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Saia, Inc. and Entertainment
Properties Trust
DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUNDS: Director (since 1995) and Chairman of the Board
(since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman and Chief Executive
Officer, Western Investments, Inc.; Retired Chairman of the Board, Butler
Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1943
POSITION(S) HELD WITH FUNDS: Director (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive
Officer and Founder, Sayers40, Inc., a technology products and services
provider
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUNDS: Director (since 1994)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Senior Vice
President, Sprint Corporation
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide, Inc.; Director, Charming Shoppes, Inc.
- ------
32
OFFICERS
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUNDS: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS
(October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007);
Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as:
Director, ACC, ACS, ACIS and other ACC subsidiaries
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUNDS: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century Investments funds (July 2000 to August 2006). Also serves as: Senior
Vice President, ACS
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUNDS: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney, ACC (February 1994 to
present); Vice President, ACC (November 2005 to present); General Counsel, ACC
(March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS,
ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUNDS: Vice President, Treasurer and Chief Financial
Officer (all since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February
2000 to present) and Controller, various American Century Investments funds
(1997 to September 2006)
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUNDS: Tax Officer (since 1998)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the funds' directors and is available
without charge, upon request, by calling 1-800-345-2021.
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33
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.
- ------
34
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.
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35
NOTES
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36
[back cover]
[american century investments logo and text logo ®]
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
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
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
0805
CL-ANN-60035N
ITEM 2. CODE OF ETHICS.
a. The registrant has adopted a Code of Ethics for Senior Financial
Officers that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer, and persons
performing similar functions.
b. No response required.
c. None.
d. None.
e. Not applicable.
f. The registrant's Code of Ethics for Senior Financial Officers was
filed as Exhibit 12 (a)(1) to American Century Asset Allocation
Portfolios, Inc.'s Annual Certified Shareholder Report on Form N-CSR,
File No. 811-21591, on September 29, 2005, and is incorporated herein
by reference.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant's board has determined that the registrant has at least
one audit committee financial expert serving on its audit committee.
(a)(2) Thomas A. Brown and Gale E. Sayers are the registrant's designated
audit committee financial experts. They are "independent" as defined
in Item 3 of Form N-CSR.
(a)(3) Not applicable.
(b) No response required.
(c) No response required.
(d) No response required.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees.
The aggregate fees billed for each of the last two fiscal years for professional
services rendered by the principal accountant for the audit of the registrant's
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for those fiscal years were as follows:
FY 2007: $138,928
FY 2008: $157,806
(b) Audit-Related Fees.
The aggregate fees billed in each of the last two fiscal years for assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item were as follows:
For services rendered to the registrant:
FY 2007: $0
FY 2008: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit
services with the registrant's investment adviser and its affiliates):
FY 2007: $0
FY 2008: $0
(c) Tax Fees.
The aggregate fees billed in each of the last two fiscal years for professional
services rendered by the principal accountant for tax compliance, tax advice,
and tax planning were as follows:
For services rendered to the registrant:
FY 2007: $8,788*
FY 2008: $1,498*
* This amount has been restated as certain prior year services related
to review of federal and state income tax forms and federal excise tax
forms that were paid in advance were refunded as management changed
service providers. Some of the 2007 fiscal year end services were
received in fiscal year 2008.
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit
services with the registrant's investment adviser and its affiliates):
FY 2007: $0
FY 2008: $0
(d) All Other Fees.
The aggregate fees billed in each of the last two fiscal years for products and
services provided by the principal accountant, other than the services reported
in paragraphs (a) through (c) of this Item were as follows:
For services rendered to the registrant:
FY 2007: $0
FY 2008: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit
services with the registrant's investment adviser and its affiliates):
FY 2007: $0
FY 2008: $0
(e)(1) In accordance with paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation
S-X, before the accountant is engaged by the registrant to render
audit or non-audit services, the engagement is approved by the
registrant's audit committee. Pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X, the registrant's audit committee also
pre-approves its accountant's engagements for non-audit services with
the registrant's investment adviser, its parent company, and any
entity controlled by, or under common control with the investment
adviser that provides ongoing services to the registrant, if the
engagement relates directly to the operations and financial reporting
of the registrant.
(e)(2) All services described in each of paragraphs (b) through (d) of this
Item were pre-approved before the engagement by the registrant's audit
committee pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of
Regulation S-X. Consequently, none of such services were required to
be approved by the audit committee pursuant to paragraph (c)(7)(i)(C).
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was less than 50%.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen
by another investment adviser), and any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant for each of the last two fiscal years of
the registrant were as follows:
FY 2007: $212,310*
FY 2008: $39,525
* This amount has been restated as certain prior year services related
to review of federal and state income tax forms and federal excise tax
forms that were paid in advance were refunded as management changed
service providers. Some of the 2007 fiscal year end services were
received in fiscal year 2008.
(h) The registrant's investment adviser and accountant have notified the
registrant's audit committee of all non-audit services that were
rendered by the registrant's accountant to the registrant's investment
adviser, its parent company, and any entity controlled by, or under
common control with the investment adviser that provides services to
the registrant, which services were not required to be pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The
notification provided to the registrant's audit committee included
sufficient details regarding such services to allow the registrant's
audit committee to consider the continuing independence of its
principal accountant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) The schedule of investments is included as part of the report to
stockholders filed under Item 1 of this Form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the reporting period, there were no material changes to the procedures by
which shareholders may recommend nominees to the registrant's board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940) are effective based on their evaluation of these controls
and procedures as of a date within 90 days of the filing date of this
report.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) that occurred during the registrant's second
fiscal quarter of the period covered by this report that have
materially affected, or are reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Registrant's Code of Ethics for Senior Financial Officers, which is
the subject of the disclosure required by Item 2 of Form N-CSR, was
filed as Exhibit 12(a)(1) to American Century Asset Allocation
Portfolios, Inc.'s Certified Shareholder Report on Form N-CSR, File
No. 811-21591, on September 29, 2005.
(a)(2) Separate certifications by the registrant's principal executive
officer and principal financial officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment
Company Act of 1940, are filed and attached hereto as Exhibit
99.302CERT.
(a)(3) Not applicable.
(b) A certification by the registrant's chief executive officer and chief
financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, is furnished and attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
/s/ Jonathan S. Thomas
By: ----------------------------------------
Name: Jonathan S. Thomas
Title: President
Date: May 30, 2008
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.
/s/ Jonathan S. Thomas
By: ----------------------------------------
Name: Jonathan S. Thomas
Title: President
(principal executive officer)
Date: May 30, 2008
/s/ Robert J. Leach
By: ----------------------------------------
Name: Robert J. Leach
Title: Vice President, Treasurer, and
Chief Financial Officer
(principal financial officer)
Date: May 30, 2008