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 | 811-07820 | |
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. | ||
(Exact name of registrant as specified in charter) | ||
4500 MAIN STREET, KANSAS CITY, MISSOURI | 64111 | |
(Address of principal executive offices) | (Zip Code) | |
CHARLES A. ETHERINGTON | ||
4500 MAIN STREET, KANSAS CITY, MISSOURI 64111 | ||
(Name and address of agent for service) | ||
Registrant’s telephone number, including area code: | 816-531-5575 | |
Date of fiscal year end: | 03-31 | |
Date of reporting period: | 09-30-09 | |
ITEM 1. REPORTS TO STOCKHOLDERS. |
Provided under separate cover. |
Semiannual Report |
September 30, 2009 |
American Century Investments |
Mid Cap Value Fund
Small Cap Value Fund
President’s Letter |
Dear Investor:
Thank you for your investment with us during the financial reporting period ended September 30, 2009. We appreciate your trust in American Century Investments® at this volatile, transitional time in the economy and investment markets.
As the upheavals associated with the “Great Recession” gradually subside, our senior management team has put considerable thought into how the investment environment has changed and what new challenges and opportunities await us. Critical factors that we are anticipating in the coming year include marked shifts in investment and spending behavior, along with consolidation in our industry.
Most importantly, we think the economic recovery will be slow and extended. The economy and capital markets have come a long way since Lehman Brothers collapsed over a year ago, but 2010 will likely bring continuing challenges. The stock market’s rebound since last March and the third-quarter economic surge this year were fueled largely by corporate cost-cutting and unprecedented monetary and fiscal stimulus, including some key programs that have since expired or been scaled back.
Meanwhile, the resilient but struggling consumer sector still faces rising unemployment, heavy debt burdens, tight credit conditions, and a housing market that is starting to stabilize, but remains vulnerable. Much of our investment positioning in 2009 has cautiously reflected these still unstable economic fundamentals, leading to underperformance, in some cases, versus market benchmarks buoyed by the rally of riskier assets. We still support our fundamentally based positioning because we believe strongly that some markets—driven more by technical factors than fundamentals—have advanced further than underlying economic conditions warrant, and remain susceptible to the possibility of more volatility ahead.
For more detailed information from our portfolio management team about the performance and positioning of your investment, please review the following pages, or visit our website, americancentury.com.
Thank you for your continued confidence in us.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
Independent Chairman’s Letter |
I am Don Pratt, an independent director and chairman of the mutual fund board responsible for the U.S. Growth Equity, U.S. Value Equity, Global and Non-U.S. Equity and Asset Allocation funds managed by American Century Investments. The board consists of seven independent directors and two directors who are affiliated with the investment advisor.
As one of your independent shareholder representatives on the fund board, I plan to write you from time to time with updates on board activities and news about your funds. My co-independent directors and I are committed to putting your interests first. We work closely with American Century Investments on maintaining strong fund performance, providing quality service to shareholders at competitive fees and ensuring ethical business practices and compliance with all applicable fund regulations.
Last year, the board welcomed its newest independent director, John R. Whitten. He is a great addition to an experienced board where, collectively, the independent directors have served the funds for more than 76 years. This continuity served shareholders well as the investment advisor initiated a successful management transition, creating a strong senior leadership team consisting of well-tenured company executives and experienced industry veterans. Under the leadership of President and Chief Executive Officer Jonathan Thomas and Chief Investment Officer Enrique Chang, the firm has made the achievement of superior investment performance its primary focus and the key driver of its success going forward. This focus helped the company generate strong relative performance against the backdrop of 2008’s unprecedented market volatility.
As investors in the American Century funds, my fellow directors and I share your investing experience. We know firsthand how decisions made at the board level affect all shareholders. To further guide our efforts on your behalf, I invite you to send me your comments, questions or suggestions by email to dhpratt@fundboardchair.com. Thank you for allowing me to serve as your advocate on our board.
Table of Contents |
Market Perspective | 2 |
U.S. Stock Index Returns | 2 |
Mid Cap Value | |
Performance | 3 |
Portfolio Commentary | 5 |
Top Ten Holdings | 7 |
Top Five Industries | 7 |
Types of Investments in Portfolio | 7 |
Small Cap Value | |
Performance | 8 |
Portfolio Commentary | 10 |
Top Ten Holdings | 12 |
Top Five Industries | 12 |
Types of Investments in Portfolio | 12 |
Shareholder Fee Examples | 13 |
Financial Statements | |
Schedule of Investments | 15 |
Statement of Assets and Liabilities | 25 |
Statement of Operations | 27 |
Statement of Changes in Net Assets | 28 |
Notes to Financial Statements | 29 |
Financial Highlights | 38 |
Other Information | |
Approval of Management Agreements | 45 |
Additional Information | 50 |
Index Definitions | 51 |
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 Investments or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments 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 Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for com parative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Market Perspective |
By Phil Davidson, Chief Investment Officer, U.S. Value Equity
A Value-Led Market Recovery
The U.S. stock market enjoyed an extraordinary rally during the six months ended September 30, 2009. The 35% advance in the broad equity indices—representing the market’s best six-month gain since 1938—reflected investors’ renewed confidence in an economic recovery following the deep recession and credit crisis that occurred in 2008.
As the table below indicates, value stocks led the market’s advance, outperforming growth issues across all market capitalizations. One factor behind the outperformance of value shares was a recovery in the financial sector, which comprises a significant portion of the value universe. Financial stocks were priced for failure amid the economic and credit turmoil in late 2008 and early 2009. Since then, the credit environment has improved considerably, helped in part by a series of federal government programs, and financial companies have taken steps to raise capital and reduce debt. As a result, financial stocks rebounded sharply during the six-month period, posting the best returns in the stock market.
Another factor supporting value shares was a renewed emphasis on cost management and deleveraging. As the economic downturn deepened, many businesses quickly implemented aggressive cost-cutting measures, which helped sustain profits despite declining revenues. In addition, companies that focused on growth (often using debt to do so) were hit the hardest during the recession, while those that concentrated on strengthening their balance sheets and improving cash flows held up the best.
The New Reality
Despite signs of economic improvement, particularly in housing and manufacturing, we still expect a slow, gradual recovery. Consumer spending, which accounts for 70% of the economy, is likely to remain weak as consumers continue to reduce debt and increase savings. In this environment, we believe that higher-quality companies with self-funding business models and whose strategies emphasize higher returns on capital will outperform over time. These companies will be in the best position to gain market share from weaker competitors and generate cash flows regardless of the pace of economic recovery.
U.S. Stock Index Returns | ||||
For the six months ended September 30, 2009* | ||||
Russell 1000 Index (Large-Cap) | 35.22% | Russell 2000 Index (Small-Cap) | 43.95% | |
Russell 1000 Value Index | 37.99% | Russell 2000 Value Index | 44.79% | |
Russell 1000 Growth Index | 32.58% | Russell 2000 Growth Index | 43.06% | |
Russell Midcap Index | 45.71% | *Total returns for periods less than one year are not annualized. | ||
Russell Midcap Value Index | 49.51% | |||
Russell Midcap Growth Index | 41.89% |
2
Performance |
Mid Cap Value | ||||||
Total Returns as of September 30, 2009 | ||||||
Average Annual Returns | ||||||
Since | Inception | |||||
6 months(1) | 1 year | 5 years | Inception | Date | ||
Investor Class | 37.79% | -1.72% | 6.19% | 6.14% | 3/31/04 | |
Russell Midcap Value Index(2) | 49.51% | -7.12% | 3.53% | 3.85% | — | |
Institutional Class | 37.92% | -1.52% | 6.40% | 6.58% | 8/2/04 | |
Advisor Class | 37.61% | -1.96% | — | 4.18% | 1/13/05 | |
R Class | 37.44% | -2.20% | — | 1.65% | 7/29/05 | |
(1) | Total returns for periods less than one year are not annualized. | |||||
(2) | Data provided by Lipper Inc. – A Reuters Company. © 2009 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
Mid Cap Value
One-Year Returns Over Life of Class | ||||||
Periods ended September 30 | ||||||
2004* | 2005 | 2006 | 2007 | 2008 | 2009 | |
Investor Class | 2.80% | 20.48% | 15.22% | 15.59% | -14.36% | -1.72% |
Russell Midcap Value Index | 3.50% | 26.13% | 12.28% | 13.75% | -20.50% | -7.12% |
*From 3/31/04, the Investor Class’s inception date. Not annualized. | ||||||
Total Annual Fund Operating Expenses | ||||||
Investor Class | Institutional Class | Advisor Class | R Class | |||
1.01% | 0.81% | 1.26% | 1.51% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
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 |
Mid Cap Value
Portfolio Managers: Kevin Toney, Michael Liss, and Phil Davidson
Performance Summary
Mid Cap Value returned 37.79%* for the six months ended September 30, 2009. By comparison, the average return for Morningstar’s Mid Cap Value category** (whose performance, like Mid Cap Value’s, reflects operating expenses) was 43.97%. The fund’s benchmark, the Russell Midcap Value Index (which does not include operating expenses), was up 49.51%.
The stock market rally, which began in March, persisted through the end of the reporting period. The U.S. economy continued to show signs of improvement in response to government stimulus programs, while corporate earnings were better than anticipated. Improving conditions in the capital markets were also favorable for the more highly leveraged companies. These factors led many investors to shift into riskier assets, and many of the period’s largest gains were made by lower-quality companies. That situation was at odds with Mid Cap Value’s investment approach, which emphasizes higher-quality businesses with sound balance sheets. Nonetheless, the portfolio received positive contributions in absolute terms from all 10 of the sectors in which it was invested. On a relative basis, Mid Cap Value’s positions in the consumer discretionary and financials sectors detracted. Investments among information technology compani es contributed.
Since its inception on March 31, 2004, Mid Cap Value has produced an average annual return of 6.14%, topping the returns for that period for Morningstar’s Mid Cap Value category average** and the Russell Midcap Value Index (see the performance information on pages 3-4).
Consumer Discretionary Detracted
Relative performance was hampered by the combination of an underweight position and security selection in the consumer discretionary sector, the strongest in the benchmark. Many of these stocks, which suffered steep declines as the recession took hold, rallied on optimism about a possible economic recovery and improving consumer sentiment.
Generally speaking, the portfolio’s performance was a result of what it didn’t own rather than what it did. For example, Mid Cap Value did not hold shares of Ford Motor, which nearly tripled during the period. The car maker has been able to restructure its business without the help of the U.S. government, unlike competitors General Motors and Chrysler, and has steadily gained market share.
* | All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. |
** The one-, five-year and since inception average returns as of September 30, 2009, for Morningstar’s Mid Cap Value category were -2.80%, 2.83% | |
and 2.86%, respectively. © 2009 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
Mid Cap Value
The consumer discretionary sector also provided a top detractor, Lowe’s. The home-improvement retailer experienced weak demand for the big-ticket products in its stores, but expects to gain additional market share in 2010. We also believe investors punished Lowe’s for failing to cut costs and reduce capital expenditures as meaningfully as its competitors.
Financials Slowed Results
Mid Cap Value’s underweight in financials stocks, which had been advantageous during the turmoil that roiled the sector, acted as a restraint as companies with stressed balance sheets, many of which had been staring at bankruptcy only months earlier, rallied from historic lows, outperforming stronger, higher-quality businesses. For some time, we have approached the financials sector with caution and conservatism. During the reporting period, Mid Cap Value’s investments were concentrated in the less-volatile insurance and thrifts names. However, many of these companies underperformed during the low-quality rally, including portfolio holding People’s United Financial, a conservatively run and well-capitalized thrift.
The insurance industry was the source of a notable detractor. Aon Corp., one of the world’s largest insurance brokers, lagged due to continued softness in property and casualty insurance pricing and because of weak results in its consulting segment.
Information Technology Enhanced Performance
The portfolio’s holdings in the information technology sector added to relative results. A top contributor was Emulex Corp., a maker of storage-networking equipment. Its share price rose dramatically on news of an unsolicited takeover bid from chipmaker Broadcom Corp. The stock remained elevated as Emulex resisted the takeover, urging shareholders to reject Broadcom’s offer on the grounds that it materially undervalued the company. Ultimately, Broadcom withdrew the offer.
Another notable contributor was Littelfuse Inc., a leading supplier of circuit protection components for the consumer electronics, telecommunications, and automotive markets. The company benefited from its restructuring initiatives and an improved outlook for the automotive sector.
Outlook
We continue to follow our disciplined, bottom-up process, selecting companies one at a time for the portfolio. As of September 30, 2009, we see opportunities in consumer staples, industrials, and health care stocks, reflected by overweight positions in these sectors, relative to the benchmark. Our fundamental analysis and valuation work are also directing us toward smaller relative weightings in financials, materials, and consumer discretionary stocks.
6
Mid Cap Value | ||
Top Ten Holdings as of September 30, 2009 | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Marsh & McLennan Cos., Inc. | 3.5% | 3.3% |
Wisconsin Energy Corp. | 2.6% | 2.8% |
Kimberly-Clark Corp. | 2.6% | 3.5% |
Aon Corp. | 2.5% | 2.3% |
iShares Russell Midcap Value Index Fund | 2.3% | 2.8% |
Northern Trust Corp. | 2.1% | — |
Commerce Bancshares, Inc. | 2.0% | 0.8% |
Lowe’s Cos., Inc. | 2.0% | 0.7% |
People’s United Financial, Inc. | 2.0% | 1.2% |
Waste Management, Inc. | 2.0% | 2.0% |
Top Five Industries as of September 30, 2009 | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Insurance | 9.8% | 10.0% |
Commercial Services & Supplies | 6.3% | 3.7% |
Food Products | 6.3% | 7.5% |
Oil, Gas & Consumable Fuels | 6.2% | 4.2% |
Electric Utilities | 5.2% | 6.0% |
Types of Investments in Portfolio | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Domestic Common Stocks | 93.3% | 96.3% |
Foreign Common Stocks(1) | 5.3% | 2.7% |
Total Common Stocks | 98.6% | 99.0% |
Temporary Cash Investments | 2.0% | 1.2% |
Other Assets and Liabilities | (0.6)% | (0.2)% |
(1) Includes depositary shares, dual listed securities and foreign ordinary shares. |
7
Performance |
Small Cap Value | |||||||
Total Returns as of September 30, 2009 | |||||||
Average Annual Returns | |||||||
Since | Inception | ||||||
6 months(1) | 1 year | 5 years | 10 years | Inception | Date | ||
Investor Class | 50.46% | 3.72% | 5.46% | 12.01% | 10.90% | 7/31/98 | |
Russell 2000 Value Index(2) | 44.79% | -12.61% | 1.78% | 8.05% | 6.62% | — | |
Institutional Class | 50.71% | 3.88% | 5.65% | 12.23% | 11.73% | 10/26/98 | |
Advisor Class | 50.17% | 3.53% | 5.18% | — | 12.04% | 12/31/99 | |
(1) | Total returns for periods less than one year are not annualized. | ||||||
(2) | Data provided by Lipper Inc. – A Reuters Company. © 2009 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.
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.
8
Small Cap Value
One-Year Returns Over 10 Years | |||||||||||
Periods ended September 30 | |||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | ||
Investor Class | 21.76% | 27.06% | -1.21% | 25.63% | 24.21% | 20.19% | 8.94% | 11.13% | -13.57% | 3.72% | |
Russell 2000 | |||||||||||
Value Index | 15.36% | 5.61% | -1.47% | 31.66% | 25.66% | 17.75% | 14.01% | 6.09% | -12.25% | -12.61% | |
Total Annual Fund Operating Expenses | |||||||||||
Investor Class | Institutional Class | Advisor Class | |||||||||
1.49% | 1.29% | 1.74% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Historically, small company stocks have been more volatile than the stocks of larger, more established companies.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not.
9
Portfolio Commentary |
Small Cap Value
Portfolio Managers: Ben Giele and James Pitman
Performance Summary
Small Cap Value returned 50.46%* for the six months ended September 30, 2009. By comparison, its benchmark, the Russell 2000 Value Index, returned 44.79%. The portfolio’s returns reflect operating expenses while the index’s returns do not. The Lipper Small-Cap Value Funds Index, which includes operating expenses, returned 48.06%.**
The stock market rally, which began in March, persisted through the end of the reporting period. The U.S. economy continued to show signs of improvement in response to government stimulus programs, while corporate earnings were better than anticipated. Small-company stocks posted significant gains, outperforming all other parts of the capitalization spectrum except mid-cap stocks. In this environment, Small Cap Value received positive contributions in absolute terms from all 10 of the sectors in which it was invested. On a relative basis, the portfolio outperformed largely because of effective security selection. Contributing the most were investments in the financials, utilities, and energy sectors. The portfolio’s position in the health care sector detracted.
Since Small Cap Value’s inception on July 31, 1998, the portfolio has produced an average annual return of 10.90%, outpacing the returns of the Russell 2000 Value Index and the Lipper Small-Cap Value Funds Index** for the same period (see performance information on pages 8-9).
Financials Enhanced Results
Security selection among financials stocks added significantly to relative performance. The rally in financials was primarily among large banks and financial institutions, some of which had seemed on the brink of bankruptcy just months before. Although small-cap financials advanced, their shares tended to lag their large-cap counterparts.
The portfolio benefited from its investments in well-capitalized commercial banks. A notable contributor was Webster Financial Corp., a regional bank serving customers in southern New England and eastern New York State. Webster Financial has successfully raised capital to cover credit concerns and support its expansion plans.
Small Cap Value’s mix of capital markets firms was also advantageous. A top performer was Calamos Asset Management. During the market turmoil, Calamos’ share price had suffered in sympathy with other asset managers. As the environment improved, the company earned a profit, helped by investment gains.
* | All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. |
** The Lipper Small-Cap Value Funds Index returned -4.42%, 3.02%, 8.72% and 7.16% for the one-, five-, ten-year and since inception periods | |
ended September 30, 2009, respectively. |
10
Small Cap Value
Utilities Contributed
The portfolio’s underweight in the utilities sector contributed to relative results. During difficult economic times, utilities stocks tend to be viewed as defensive investments. However, when the market rallied during the period, utilities did not gain as much as other sectors and turned in the weakest performance of the benchmark index.
Energy Powered Performance
An overweight in energy stocks was beneficial as oil prices rose and improving economic conditions sparked renewed demand for oil in the U.S., Europe, and emerging markets such as China and India. Security selection was also a plus. A key contributor was W&T Offshore, an oil and natural gas exploration and production company with primary activities in the Gulf of Mexico, which benefited from the rise in oil prices. W&T Offshore reported an increase in production and continued success in its drilling program.
Health Care Detracted
In health care, the portfolio’s overweight position hindered relative progress. Health care stocks gained, but their performance was constrained as investors priced in worst-case scenarios for health care reform. Although the health care sector rebounded from its lows by the end of the period, it remained one of the weakest performers in the benchmark. Two health care providers were notable detractors—specialty health care manager Magellan Health Services and National Healthcare Corp., which operates long-term health care centers. Shares of both companies declined with the sector as a whole.
Outlook
We continue to be bottom-up investment managers, evaluating each company individually and building the 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. As of September 30, 2009, the portfolio is broadly diversified, with larger positions than the benchmark in consumer discretionary, health care, and information technology. Our fundamental analysis and valuation work is also directing us toward a smaller relative weighting in financials and utilities stocks.
11
Small Cap Value | ||
Top Ten Holdings as of September 30, 2009 | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Aspen Insurance Holdings Ltd., Series AHL, | ||
5.625%, 2/6/13 (Conv. Pref.) | 2.6% | 3.2% |
iShares Russell 2000 Value Index Fund | 2.2% | 1.5% |
iShares Russell 2000 Index Fund | 1.1% | 1.6% |
Young Innovations, Inc. | 1.1% | 1.3% |
Parametric Technology Corp. | 0.9% | 1.4% |
HCC Insurance Holdings, Inc. | 0.9% | 0.6% |
Ares Capital Corp. | 0.8% | 0.7% |
IESI-BFC Ltd. | 0.8% | — |
Fulton Financial Corp. | 0.7% | 0.8% |
Sybase, Inc. | 0.7% | 0.6% |
Top Five Industries as of September 30, 2009 | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Insurance | 8.1% | 9.2% |
Commercial Banks | 6.6% | 8.8% |
Real Estate Investment Trusts (REITs) | 5.0% | 6.5% |
Specialty Retail | 4.7% | 3.4% |
Machinery | 3.8% | 3.6% |
Types of Investments in Portfolio | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Common Stocks | 90.9% | 92.2% |
Convertible Preferred Stocks | 4.5% | 4.6% |
Preferred Stocks | 1.0% | 1.4% |
Total Equity Exposure | 96.4% | 98.2% |
Temporary Cash Investments | 2.3% | 2.3% |
Other Assets and Liabilities | 1.3% | (0.5)% |
12
Shareholder Fee Examples (Unaudited) |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/ exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2009 to September 30, 2009.
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 Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments 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 Investments 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 Investments 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.
13
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.
Beginning | Ending | Expenses Paid | ||
Account Value | Account Value | During Period* | Annualized | |
4/1/09 | 9/30/09 | 4/1/09 - 9/30/09 | Expense Ratio* | |
Mid Cap Value | ||||
Actual | ||||
Investor Class | $1,000 | $1,377.90 | $5.96 | 1.00% |
Institutional Class | $1,000 | $1,379.20 | $4.77 | 0.80% |
Advisor Class | $1,000 | $1,376.10 | $7.45 | 1.25% |
R Class | $1,000 | $1,374.40 | $8.93 | 1.50% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.05 | $5.06 | 1.00% |
Institutional Class | $1,000 | $1,021.06 | $4.05 | 0.80% |
Advisor Class | $1,000 | $1,018.80 | $6.33 | 1.25% |
R Class | $1,000 | $1,017.55 | $7.59 | 1.50% |
Small Cap Value | ||||
Actual | ||||
Investor Class | $1,000 | $1,504.60 | $7.85 | 1.25% |
Institutional Class | $1,000 | $1,507.10 | $6.60 | 1.05% |
Advisor Class | $1,000 | $1,501.70 | $9.41 | 1.50% |
Hypothetical | ||||
Investor Class | $1,000 | $1,018.80 | $6.33 | 1.25% |
Institutional Class | $1,000 | $1,019.80 | $5.32 | 1.05% |
Advisor Class | $1,000 | $1,017.55 | $7.59 | 1.50% |
*Expenses are equal to the class’s annualized expense ratio listed in the table above, multiplied by the average account value over the period, | ||||
multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. The class’s annualized | ||||
expense ratio does not include any acquired fund fees and expenses. |
14
Schedule of Investments |
Mid Cap Value | ||||||
SEPTEMBER 30, 2009 (UNAUDITED) | ||||||
Shares | Value | Shares | Value | |||
Common Stocks — 98.6% | DIVERSIFIED FINANCIAL SERVICES — 0.1% | |||||
AEROSPACE & DEFENSE — 0.6% | McGraw-Hill Cos., Inc. (The) | 13,100 | $ 329,334 | |||
DIVERSIFIED TELECOMMUNICATION | ||||||
Northrop Grumman Corp. | 52,300 | $ 2,706,525 | SERVICES — 2.8% | |||
AIRLINES — 0.5% | BCE, Inc. | 159,527 | 3,932,114 | |||
Southwest Airlines Co. | 239,203 | 2,296,349 | CenturyTel, Inc. | 176,253 | 5,922,101 | |
BEVERAGES — 0.7% | Iowa Telecommunications | |||||
Coca-Cola Enterprises, Inc. | 83,600 | 1,789,876 | Services, Inc. | 173,089 | 2,180,921 | |
Pepsi Bottling Group, Inc. | 38,000 | 1,384,720 | 12,035,136 | |||
3,174,596 | ELECTRIC UTILITIES — 5.2% | |||||
CAPITAL MARKETS — 4.6% | American Electric Power | |||||
AllianceBernstein Holding LP | 78,800 | 2,149,664 | Co., Inc. | 46,755 | 1,448,937 | |
Ameriprise Financial, Inc. | 157,901 | 5,736,543 | Great Plains Energy, Inc. | 35,759 | 641,874 | |
Invesco Ltd. | 75,140 | 1,710,187 | IDACORP, Inc. | 275,868 | 7,942,240 | |
Legg Mason, Inc. | 29,700 | 921,591 | Northeast Utilities | 82,983 | 1,970,016 | |
Northern Trust Corp. | 155,900 | 9,067,144 | Portland General Electric Co. | 189,236 | 3,731,734 | |
19,585,129 | Westar Energy, Inc. | 334,741 | 6,530,797 | |||
CHEMICALS — 1.2% | 22,265,598 | |||||
International Flavors & | ELECTRICAL EQUIPMENT — 2.0% | |||||
Fragrances, Inc. | 86,639 | 3,286,217 | Cooper Industries plc, | |||
Minerals Technologies, Inc. | 40,801 | 1,940,496 | Class A | 76,300 | 2,866,591 | |
5,226,713 | Emerson Electric Co. | 53,200 | 2,132,256 | |||
COMMERCIAL BANKS — 2.4% | Hubbell, Inc., Class A | 4,672 | 189,169 | |||
City National Corp. | 34,100 | 1,327,513 | Hubbell, Inc., Class B | 76,400 | 3,208,800 | |
Commerce Bancshares, Inc. | 235,671 | 8,776,388 | 8,396,816 | |||
10,103,901 | ELECTRONIC EQUIPMENT, INSTRUMENTS | |||||
COMMERCIAL SERVICES & SUPPLIES — 6.3% | & COMPONENTS — 1.6% | |||||
IESI-BFC Ltd. | 378,088 | 4,884,897 | AVX Corp. | 141,301 | 1,685,721 | |
Pitney Bowes, Inc. | 249,100 | 6,190,135 | Littelfuse, Inc.(1) | 15,391 | 403,860 | |
Republic Services, Inc. | 283,498 | 7,532,542 | Molex, Inc. | 229,484 | 4,791,626 | |
Waste Management, Inc. | 288,444 | 8,601,400 | 6,881,207 | |||
27,208,974 | ENERGY EQUIPMENT & SERVICES — 1.8% | |||||
COMMUNICATIONS EQUIPMENT — 0.8% | Baker Hughes, Inc. | 38,600 | 1,646,676 | |||
Emulex Corp.(1) | 341,100 | 3,509,919 | BJ Services Co. | 66,300 | 1,288,209 | |
COMPUTERS & PERIPHERALS — 1.3% | Cameron | |||||
International Corp.(1) | 70,100 | 2,651,182 | ||||
Diebold, Inc. | 110,651 | 3,643,737 | ||||
Helmerich & Payne, Inc. | 53,900 | 2,130,667 | ||||
QLogic Corp.(1) | 105,000 | 1,806,000 | ||||
7,716,734 | ||||||
5,449,737 | FOOD & STAPLES RETAILING — 0.5% | |||||
CONTAINERS & PACKAGING — 1.1% | Costco Wholesale Corp. | 36,600 | 2,066,436 | |||
Bemis Co., Inc. | 184,768 | 4,787,339 | FOOD PRODUCTS — 6.3% | |||
DISTRIBUTORS — 1.5% | Campbell Soup Co. | 237,200 | 7,737,464 | |||
Genuine Parts Co. | 173,794 | 6,614,600 | ConAgra Foods, Inc. | 375,890 | 8,149,295 | |
DIVERSIFIED — 2.3% | General Mills, Inc. | 14,900 | 959,262 | |||
iShares Russell Midcap | ||||||
Value Index Fund | 278,400 | 9,860,928 | H.J. Heinz Co. | 171,300 | 6,809,175 | |
Kellogg Co. | 64,700 | 3,185,181 | ||||
26,840,377 |
15
Mid Cap Value | ||||||
Shares | Value | Shares | Value | |||
GAS UTILITIES — 1.9% | LEISURE EQUIPMENT & PRODUCTS — 0.9% | |||||
AGL Resources, Inc. | 29,300 | $ 1,033,411 | Mattel, Inc. | 198,800 | $ 3,669,848 | |
Southwest Gas Corp. | 283,003 | 7,239,217 | MACHINERY — 2.7% | |||
8,272,628 | Altra Holdings, Inc.(1) | 491,879 | 5,504,126 | |||
HEALTH CARE EQUIPMENT & SUPPLIES — 3.6% | Dover Corp. | 50,500 | 1,957,380 | |||
Beckman Coulter, Inc. | 52,756 | 3,636,999 | Kaydon Corp. | 131,776 | 4,272,178 | |
Boston Scientific Corp.(1) | 106,000 | 1,122,540 | 11,733,684 | |||
CareFusion Corp.(1) | 69,200 | 1,508,560 | METALS & MINING — 1.6% | |||
Covidien plc | 32,700 | 1,414,602 | Barrick Gold Corp. | 51,083 | 1,936,045 | |
Symmetry Medical, Inc.(1) | 330,841 | 3,430,821 | Newmont Mining Corp. | 110,938 | 4,883,491 | |
Zimmer Holdings, Inc.(1) | 83,300 | 4,452,385 | 6,819,536 | |||
15,565,907 | MULTI-UTILITIES — 4.1% | |||||
HEALTH CARE PROVIDERS & SERVICES — 2.5% | Ameren Corp. | 49,503 | 1,251,436 | |||
Cardinal Health, Inc. | 96,200 | 2,578,160 | PG&E Corp. | 35,000 | 1,417,150 | |
LifePoint Hospitals, Inc.(1) | 189,800 | 5,135,988 | Wisconsin Energy Corp. | 244,300 | 11,035,031 | |
Patterson Cos., Inc.(1) | 49,000 | 1,335,250 | Xcel Energy, Inc. | 211,959 | 4,078,091 | |
Select Medical | 17,781,708 | |||||
Holdings Corp.(1) | 128,378 | 1,292,767 | OIL, GAS & CONSUMABLE FUELS — 6.2% | |||
Universal Health Services, | Apache Corp. | 53,751 | 4,935,954 | |||
Inc., Class B | 3,937 | 243,818 | EOG Resources, Inc. | 40,600 | 3,390,506 | |
10,585,983 | EQT Corp. | 166,252 | 7,082,335 | |||
HEALTH CARE TECHNOLOGY — 0.8% | Imperial Oil Ltd. | 122,500 | 4,662,472 | |||
IMS Health, Inc. | 220,900 | 3,390,815 | Murphy Oil Corp. | 48,300 | 2,780,631 | |
HOTELS, RESTAURANTS & LEISURE — 3.1% | Noble Energy, Inc. | 57,500 | 3,792,700 | |||
CEC Entertainment, Inc.(1) | 148,700 | 3,845,382 | 26,644,598 | |||
International Speedway | PAPER & FOREST PRODUCTS — 0.7% | |||||
Corp., Class A | 201,807 | 5,563,819 | MeadWestvaco Corp. | 49,385 | 1,101,779 | |
Speedway Motorsports, Inc. | 280,143 | 4,031,258 | Weyerhaeuser Co. | 57,436 | 2,105,030 | |
13,440,459 | 3,206,809 | |||||
HOUSEHOLD DURABLES — 1.0% | PERSONAL PRODUCTS — 0.8% | |||||
Fortune Brands, Inc. | 100,100 | 4,302,298 | Estee Lauder Cos., Inc. | |||
Whirlpool Corp. | 2,400 | 167,904 | (The), Class A | 91,700 | 3,400,236 | |
4,470,202 | REAL ESTATE INVESTMENT TRUSTS (REITs) — 2.5% | |||||
HOUSEHOLD PRODUCTS — 2.6% | Boston Properties, Inc. | 41,599 | 2,726,814 | |||
Kimberly-Clark Corp. | 186,223 | 10,983,432 | Federal Realty | |||
INSURANCE — 9.8% | Investment Trust | 7,038 | 431,922 | |||
Aon Corp. | 263,200 | 10,709,608 | Government Properties | |||
Income Trust(1) | 150,167 | 3,605,510 | ||||
Chubb Corp. (The) | 154,500 | 7,788,345 | ||||
HCC Insurance | HCP, Inc. | 8,483 | 243,801 | |||
Holdings, Inc. | 94,332 | 2,579,980 | Host Hotels & Resorts, Inc. | 272,976 | 3,212,928 | |
Marsh & McLennan | Public Storage | 4,300 | 323,532 | |||
Cos., Inc. | 607,237 | 15,016,971 | 10,544,507 | |||
Transatlantic Holdings, Inc. | 33,549 | 1,683,153 | ROAD & RAIL — 0.4% | |||
Travelers Cos., Inc. (The) | 87,500 | 4,307,625 | Heartland Express, Inc. | 133,800 | 1,926,720 | |
42,085,682 | ||||||
IT SERVICES — 0.7% | ||||||
Accenture plc, Class A | 80,100 | 2,985,327 |
16
Mid Cap Value | ||||||
Shares | Value | Shares | Value | |||
SEMICONDUCTORS & SEMICONDUCTOR | ||||||
EQUIPMENT — 2.5% | Temporary Cash Investments — 2.0% | |||||
Applied Materials, Inc. | 321,500 | $ 4,308,100 | JPMorgan U.S. Treasury | |||
Plus Money Market Fund | ||||||
KLA-Tencor Corp. | 45,700 | 1,638,802 | Agency Shares | 57,984 | $ 57,984 | |
Teradyne, Inc.(1) | 170,000 | 1,572,500 | Repurchase Agreement, Credit Suisse First | |||
Verigy Ltd.(1) | 258,500 | 3,003,770 | Boston, Inc., (collateralized by various | |||
10,523,172 | U.S. Treasury obligations, 0.24%, 6/10/10, | |||||
valued at $8,466,648), in a joint trading | ||||||
SOFTWARE — 0.4% | account at 0.01%, dated 9/30/09, due | |||||
Synopsys, Inc.(1) | 72,658 | 1,628,992 | 10/1/09 (Delivery value $8,300,002) | 8,300,000 | ||
SPECIALTY RETAIL — 3.8% | TOTAL TEMPORARY | |||||
Lowe’s Cos., Inc. | 419,100 | 8,775,954 | CASH INVESTMENTS | |||
PetSmart, Inc. | 355,300 | 7,727,775 | (Cost $8,357,984) | 8,357,984 | ||
16,503,729 | TOTAL INVESTMENT | |||||
THRIFTS & MORTGAGE FINANCE — 2.4% | SECURITIES — 100.6% | |||||
Hudson City Bancorp., Inc. | 81,600 | 1,073,040 | (Cost $374,599,828) | 431,857,733 | ||
People’s United | OTHER ASSETS | |||||
Financial, Inc. | 553,189 | 8,607,621 | AND LIABILITIES — (0.6)% | (2,376,774) | ||
Washington Federal, Inc. | 35,514 | 598,766 | TOTAL NET ASSETS — 100.0% | $429,480,959 | ||
10,279,427 | ||||||
TOTAL COMMON STOCKS | ||||||
(Cost $366,241,844) | 423,499,749 | |||||
Forward Foreign Currency Exchange Contracts | ||||||
Contracts to Sell | Settlement Date | Value | Unrealized Gain (Loss) | |||
12,943,298 CAD for USD | 10/30/09 | $12,089,197 | $(184,606) | |||
(Value on Settlement Date $11,904,591) | ||||||
Notes to Schedule of Investments | ||||||
CAD = Canadian Dollar | ||||||
USD = United States Dollar | ||||||
(1) Non-income producing. | ||||||
See Notes to Financial Statements. |
17
Small Cap Value | ||||||
SEPTEMBER 30, 2009 (UNAUDITED) | ||||||
Shares | Value | Shares | Value | |||
Common Stocks — 90.9% | PennantPark | |||||
Investment Corp. | 405,000 | $ 3,284,550 | ||||
AEROSPACE & DEFENSE — 1.8% | Prospect Capital Corp. | 210,000 | 2,249,100 | |||
AAR Corp.(1) | 120,000 | $ 2,632,800 | ||||
Pzena Investment | ||||||
Ceradyne, Inc.(1) | 145,000 | 2,657,850 | Management, Inc., Class A(1) | 275,000 | 2,246,750 | |
Curtiss-Wright Corp. | 130,000 | 4,436,900 | TradeStation Group, Inc.(1) | 505,000 | 4,115,750 | |
Esterline | 50,091,750 | |||||
Technologies Corp.(1) | 90,000 | 3,528,900 | ||||
CHEMICALS — 2.3% | ||||||
Moog, Inc., Class A(1) | 205,000 | 6,047,500 | A. Schulman, Inc. | 105,000 | 2,092,650 | |
Orbital Sciences Corp.(1) | 150,000 | 2,245,500 | Arch Chemicals, Inc. | 140,000 | 4,198,600 | |
Triumph Group, Inc. | 115,000 | 5,518,850 | Cytec Industries, Inc. | 175,000 | 5,682,250 | |
27,068,300 | H.B. Fuller Co. | 150,000 | 3,135,000 | |||
AIR FREIGHT & LOGISTICS — 0.5% | Innophos Holdings, Inc. | 100,000 | 1,850,000 | |||
Hub Group, Inc., Class A(1) | 165,000 | 3,770,250 | Intrepid Potash, Inc.(1) | 125,000 | 2,948,750 | |
UTi Worldwide, Inc. | 285,000 | 4,126,800 | Minerals Technologies, Inc. | 80,000 | 3,804,800 | |
7,897,050 | Olin Corp. | 290,000 | 5,057,600 | |||
AIRLINES — 0.6% | OM Group, Inc.(1) | 100,000 | 3,039,000 | |||
Alaska Air Group, Inc.(1) | 110,000 | 2,946,900 | Sensient Technologies Corp. | 110,000 | 3,054,700 | |
JetBlue Airways Corp.(1) | 545,000 | 3,259,100 | 34,863,350 | |||
SkyWest, Inc. | 165,000 | 2,735,700 | COMMERCIAL BANKS — 6.4% | |||
8,941,700 | American National | |||||
AUTO COMPONENTS — 0.4% | Bankshares, Inc. | 100,000 | 2,182,000 | |||
Cooper Tire & Rubber Co. | 210,000 | 3,691,800 | Associated Banc-Corp. | 270,000 | 3,083,400 | |
Dana Holding Corp.(1) | 325,000 | 2,213,250 | Boston Private Financial | |||
5,905,050 | Holdings, Inc. | 475,000 | 3,092,250 | |||
BEVERAGES — 0.3% | Central Pacific | |||||
Financial Corp. | 425,000 | 1,071,000 | ||||
Boston Beer Co., Inc., | ||||||
Class A(1) | 140,000 | 5,191,200 | CVB Financial Corp. | 270,000 | 2,049,300 | |
BIOTECHNOLOGY — 0.1% | East West Bancorp, Inc. | 340,000 | 2,822,000 | |||
Martek Biosciences Corp.(1) | 80,000 | 1,807,200 | First Citizens BancShares, | |||
Inc., Class A | 20,000 | 3,182,000 | ||||
BUILDING PRODUCTS — 0.6% | First Midwest Bancorp., Inc. | 130,000 | 1,465,100 | |||
Apogee Enterprises, Inc. | 170,000 | 2,553,400 | FirstMerit Corp. | 165,000 | 3,139,950 | |
Griffon Corp.(1) | 270,000 | 2,718,900 | ||||
FNB Corp. | 265,000 | 1,884,150 | ||||
Simpson Manufacturing | Fulton Financial Corp. | 1,460,000 | 10,745,600 | |||
Co., Inc. | 165,000 | 4,167,900 | ||||
Hampton Roads | ||||||
9,440,200 | Bankshares, Inc. | 350,000 | 1,008,000 | |||
CAPITAL MARKETS — 3.3% | Heritage Financial Corp. | 320,000 | 4,208,000 | |||
Apollo Investment Corp. | 545,000 | 5,204,750 | Huntington Bancshares, Inc. | 460,000 | 2,166,600 | |
Ares Capital Corp. | 1,150,000 | 12,673,000 | IBERIABANK Corp. | 50,000 | 2,278,000 | |
Artio Global Investors, Inc.(1) | 110,000 | 2,876,500 | KeyCorp | 910,000 | 5,915,000 | |
Calamos Asset Management, | Marshall & Ilsley Corp. | 1,100,000 | 8,877,000 | |||
Inc., Class A | 310,000 | 4,048,600 | MB Financial, Inc. | 135,000 | 2,830,950 | |
HFF, Inc., Class A(1) | 440,000 | 2,965,600 | ||||
National Bankshares, Inc. | 85,000 | 2,163,250 | ||||
Investment Technology | ||||||
Group, Inc.(1) | 140,000 | 3,908,800 | Old National Bancorp. | 281,292 | 3,150,470 | |
MCG Capital Corp.(1) | 1,025,000 | 4,294,750 | Sterling Bancshares, Inc. | 305,000 | 2,229,550 | |
Patriot Capital Funding, Inc. | 545,000 | 2,223,600 | Synovus Financial Corp. | 975,000 | 3,656,250 |
18
Small Cap Value | ||||||
Shares | Value | Shares | Value | |||
TCF Financial Corp. | 300,000 | $ 3,912,000 | CONTAINERS & PACKAGING — 0.5% | |||
United Bankshares, Inc. | 135,000 | 2,644,650 | Bemis Co., Inc. | 75,000 | $ 1,943,250 | |
Washington Banking Co. | 272,795 | 2,526,082 | Sonoco Products Co. | 220,000 | 6,058,800 | |
Webster Financial Corp. | 170,000 | 2,119,900 | 8,002,050 | |||
Whitney Holding Corp. | 650,000 | 6,201,000 | DISTRIBUTORS — 0.2% | |||
Wilmington Trust Corp. | 225,000 | 3,195,000 | Core-Mark Holding Co., Inc.(1) | 85,000 | 2,431,000 | |
Zions Bancorp. | 125,000 | 2,246,250 | DIVERSIFIED — 3.3% | |||
96,044,702 | iShares Russell 2000 | |||||
COMMERCIAL SERVICES & SUPPLIES — 2.3% | Index Fund | 285,000 | 17,165,550 | |||
ABM Industries, Inc. | 100,000 | 2,104,000 | iShares Russell 2000 Value | |||
American Ecology Corp. | 395,000 | 7,386,500 | Index Fund | 585,000 | 33,070,050 | |
ATC Technology Corp.(1) | 155,000 | 3,062,800 | 50,235,600 | |||
Brink’s Co. (The) | 225,000 | 6,054,750 | DIVERSIFIED CONSUMER SERVICES — 1.1% | |||
Corinthian Colleges, Inc.(1) | 345,000 | 6,403,200 | ||||
Consolidated | ||||||
Graphics, Inc.(1) | 90,000 | 2,245,500 | Lincoln Educational | |||
Services Corp.(1) | 280,000 | 6,406,400 | ||||
G&K Services, Inc., Class A | 1,920 | 42,547 | ||||
IESI-BFC Ltd. | 925,000 | 11,951,000 | Regis Corp. | 195,000 | 3,022,500 | |
SYKES Enterprises, Inc.(1) | 100,000 | 2,082,000 | 15,832,100 | |||
34,929,097 | DIVERSIFIED FINANCIAL SERVICES — 0.2% | |||||
COMMUNICATIONS EQUIPMENT — 1.0% | Fifth Street Finance Corp. | 210,000 | 2,295,300 | |||
Avocent Corp.(1) | 145,000 | 2,939,150 | DIVERSIFIED TELECOMMUNICATION | |||
SERVICES — 0.2% | ||||||
Bel Fuse, Inc., Class B | 170,000 | 3,235,100 | Atlantic Tele-Network, Inc. | 30,000 | 1,602,600 | |
Black Box Corp. | 80,000 | 2,007,200 | Iowa Telecommunications | |||
Emulex Corp.(1) | 280,000 | 2,881,200 | Services, Inc. | 135,000 | 1,701,000 | |
Opnext, Inc.(1) | 825,000 | 2,417,250 | 3,303,600 | |||
Plantronics, Inc. | 80,000 | 2,144,800 | ELECTRIC UTILITIES — 2.0% | |||
15,624,700 | Central Vermont Public | |||||
COMPUTERS & PERIPHERALS — 0.9% | Service Corp. | 134,458 | 2,595,039 | |||
Electronics for | Cleco Corp. | 80,000 | 2,006,400 | |||
Imaging, Inc.(1) | 390,000 | 4,395,300 | Empire District Electric | |||
Lexmark International, Inc., | Co. (The) | 100,000 | 1,809,000 | |||
Class A(1) | 130,000 | 2,800,200 | Great Plains Energy, Inc. | 460,000 | 8,257,000 | |
NCR Corp.(1) | 230,000 | 3,178,600 | Portland General Electric Co. | 440,000 | 8,676,800 | |
QLogic Corp.(1) | 140,000 | 2,408,000 | Unitil Corp. | 115,000 | 2,581,750 | |
Silicon Graphics | Westar Energy, Inc. | 220,000 | 4,292,200 | |||
International Corp.(1) | 200,000 | 1,342,000 | 30,218,189 | |||
14,124,100 | ELECTRICAL EQUIPMENT — 2.0% | |||||
CONSTRUCTION & ENGINEERING — 1.9% | Acuity Brands, Inc. | 60,000 | 1,932,600 | |||
Comfort Systems USA, Inc. | 360,000 | 4,172,400 | Belden, Inc. | 195,000 | 4,504,500 | |
EMCOR Group, Inc.(1) | 235,000 | 5,950,200 | Brady Corp., Class A | 120,000 | 3,446,400 | |
Granite Construction, Inc. | 255,000 | 7,889,700 | Encore Wire Corp. | 160,000 | 3,574,400 | |
KBR, Inc. | 130,000 | 3,027,700 | General Cable Corp.(1) | 55,000 | 2,153,250 | |
KHD Humboldt Wedag | Hubbell, Inc., Class B | 60,000 | 2,520,000 | |||
International Ltd.(1) | 375,000 | 3,892,500 | ||||
II-VI, Inc.(1) | 115,000 | 2,925,600 | ||||
Pike Electric Corp.(1) | 246,957 | 2,958,545 | LSI Industries, Inc. | 570,000 | 3,790,500 | |
27,891,045 | Regal-Beloit Corp. | 45,000 | 2,056,950 | |||
CONSTRUCTION MATERIALS — 0.2% | Thomas & Betts Corp.(1) | 100,000 | 3,008,000 | |||
Texas Industries, Inc. | 70,000 | 2,939,300 | 29,912,200 |
19
Small Cap Value | ||||||
Shares | Value | Shares | Value | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS | GAS UTILITIES — 0.8% | |||||
& COMPONENTS — 2.8% | Nicor, Inc. | 145,000 | $ 5,305,550 | |||
Anixter International, Inc.(1) | 75,000 $ | $ 3,008,250 | Southwest Gas Corp. | 130,000 | 3,325,400 | |
Benchmark | WGL Holdings, Inc. | 120,000 | 3,976,800 | |||
Electronics, Inc.(1) | 300,000 | 5,400,000 | ||||
12,607,750 | ||||||
Coherent, Inc.(1) | 125,000 | 2,915,000 | ||||
HEALTH CARE EQUIPMENT & SUPPLIES — 2.5% | ||||||
Electro Scientific | Analogic Corp. | 100,000 | 3,702,000 | |||
Industries, Inc.(1) | 330,000 | 4,418,700 | ||||
CONMED Corp.(1) | 120,000 | 2,300,400 | ||||
FLIR Systems, Inc.(1) | 85,000 | 2,377,450 | ||||
Cutera, Inc.(1)(2) | 730,000 | 6,314,500 | ||||
Littelfuse, Inc.(1) | 70,000 | 1,836,800 | ||||
Molex, Inc. | 190,000 | 3,967,200 | Utah Medical Products, Inc. | 150,000 | 4,398,000 | |
Young Innovations, Inc.(2) | 635,000 | 16,706,850 | ||||
Park Electrochemical Corp. | 125,000 | 3,081,250 | ||||
Zoll Medical Corp.(1) | 215,000 | 4,626,800 | ||||
PC Connection, Inc.(1) | 440,000 | 2,393,600 | ||||
Rogers Corp.(1) | 215,000 | 6,443,550 | 38,048,550 | |||
HEALTH CARE PROVIDERS & SERVICES — 3.0% | ||||||
Tech Data Corp.(1) | 55,000 | 2,288,550 | ||||
Alliance HealthCare | ||||||
TTM Technologies, Inc.(1) | 160,000 | 1,835,200 | Services, Inc.(1) | 545,000 | 3,084,700 | |
Vishay | Almost Family, Inc.(1) | 100,000 | 2,975,000 | |||
Intertechnology, Inc.(1) | 280,000 | 2,212,000 | ||||
AMERIGROUP Corp.(1) | 135,000 | 2,992,950 | ||||
42,177,550 | ||||||
Amsurg Corp.(1) | 270,000 | 5,732,100 | ||||
ENERGY EQUIPMENT & SERVICES — 1.4% | ||||||
Bristow Group, Inc.(1) | 75,000 | 2,226,750 | Assisted Living Concepts, | |||
Inc., Class A(1) | 185,000 | 3,833,200 | ||||
Global Industries Ltd.(1) | 210,000 | 1,995,000 | ||||
Kindred Healthcare, Inc.(1) | 180,000 | 2,921,400 | ||||
Helix Energy Solutions | LifePoint Hospitals, Inc.(1) | 120,000 | 3,247,200 | |||
Group, Inc.(1) | 150,000 | 2,247,000 | ||||
Key Energy Services, Inc.(1) | 370,000 | 3,219,000 | Magellan Health | |||
Services, Inc.(1) | 340,000 | 10,560,400 | ||||
Lufkin Industries, Inc. | 45,000 | 2,393,100 | National Healthcare Corp. | 165,000 | 6,152,850 | |
North American Energy | U.S. Physical Therapy, Inc.(1) | 280,735 | 4,230,677 | |||
Partners, Inc.(1) | 275,000 | 1,650,000 | ||||
Superior Energy | 45,730,477 | |||||
Services, Inc.(1) | 100,000 | 2,252,000 | HOTELS, RESTAURANTS & LEISURE — 1.5% | |||
Unit Corp.(1) | 105,000 | 4,331,250 | Bally Technologies, Inc.(1) | 100,000 | 3,837,000 | |
20,314,100 | Bob Evans Farms, Inc. | 110,000 | 3,196,600 | |||
FOOD & STAPLES RETAILING — 0.9% | Burger King Holdings, Inc. | 175,000 | 3,078,250 | |||
BJ’s Wholesale Club, Inc.(1) | 65,000 | 2,354,300 | Jack in the Box, Inc.(1) | 175,000 | 3,585,750 | |
Casey’s General Stores, Inc. | 65,000 | 2,039,700 | Red Robin Gourmet | |||
Burgers, Inc.(1) | 320,000 | 6,534,400 | ||||
Ruddick Corp. | 105,000 | 2,795,100 | ||||
Ruby Tuesday, Inc.(1) | 275,000 | 2,315,500 | ||||
Weis Markets, Inc. | 175,572 | 5,609,525 | ||||
12,798,625 | 22,547,500 | |||||
FOOD PRODUCTS — 0.5% | HOUSEHOLD DURABLES — 0.6% | |||||
B&G Foods, Inc., Class A | 265,000 | 2,170,350 | CSS Industries, Inc | 15,000 | 296,550 | |
Corn Products | Helen of Troy Ltd.(1) | 95,000 | 1,845,850 | |||
International, Inc. | 65,000 | 1,853,800 | Jarden Corp. | 75,000 | 2,105,250 | |
Farmer Bros. Co. | 35,000 | 724,500 | M.D.C. Holdings, Inc. | 60,000 | 2,084,400 | |
Seneca Foods Corp., | M/I Homes, Inc.(1) | 175,000 | 2,378,250 | |||
Class A(1) | 80,000 | 2,192,000 | 8,710,300 | |||
6,940,650 | HOUSEHOLD PRODUCTS — 0.2% | |||||
WD-40 Co. | 105,000 | 2,982,000 |
20
Small Cap Value | ||||||
Shares | Value | Shares | Value | |||
INDUSTRIAL CONGLOMERATES — 0.2% | LIFE SCIENCES TOOLS & SERVICES — 0.5% | |||||
Tredegar Corp. | 170,000 | $ 2,465,000 | Pharmaceutical Product | |||
INSURANCE — 5.2% | Development, Inc. | 375,000 | $ 8,227,500 | |||
American Equity Investment | MACHINERY — 3.8% | |||||
Life Holding Co. | 335,000 | 2,351,700 | Actuant Corp., Class A | 370,000 | 5,942,200 | |
Assured Guaranty Ltd. | 185,000 | 3,592,700 | Barnes Group, Inc. | 265,000 | 4,528,850 | |
Baldwin & Lyons, Inc., | FreightCar America, Inc. | 115,000 | 2,794,500 | |||
Class B | 265,000 | 6,214,250 | IDEX Corp. | 120,000 | 3,354,000 | |
Delphi Financial Group, Inc., | Kadant, Inc.(1) | 165,000 | 2,001,450 | |||
Class A | 120,000 | 2,715,600 | ||||
Kaydon Corp. | 65,000 | 2,107,300 | ||||
Erie Indemnity Co., Class A | 260,000 | 9,739,600 | ||||
Kennametal, Inc. | 220,000 | 5,414,200 | ||||
Hanover Insurance | ||||||
Group, Inc. (The) | 125,000 | 5,166,250 | Lincoln Electric | |||
Holdings, Inc. | 115,000 | 5,456,750 | ||||
HCC Insurance | ||||||
Holdings, Inc. | 500,000 | 13,675,000 | Mueller Industries, Inc. | 425,000 | 10,144,750 | |
Max Capital Group Ltd. | 145,000 | 3,098,650 | Mueller Water Products, | |||
Inc., Class A | 930,000 | 5,096,400 | ||||
Mercer Insurance | ||||||
Group, Inc.(2) | 300,000 | 5,421,000 | Pentair, Inc. | 75,000 | 2,214,000 | |
Platinum Underwriters | RBC Bearings, Inc.(1) | 130,000 | 3,032,900 | |||
Holdings Ltd. | 180,000 | 6,451,200 | Robbins & Myers, Inc. | 135,000 | 3,169,800 | |
ProAssurance Corp.(1) | 105,000 | 5,479,950 | Wabtec Corp. | 60,000 | 2,251,800 | |
United Fire & Casualty Co. | 125,000 | 2,237,500 | 57,508,900 | |||
Unitrin, Inc. | 175,000 | 3,410,750 | MARINE — 0.5% | |||
Validus Holdings Ltd. | 145,905 | 3,764,349 | Diana Shipping, Inc. | 375,000 | 4,875,000 | |
Zenith National | Genco Shipping | |||||
Insurance Corp. | 145,000 | 4,480,500 | & Trading Ltd. | 140,000 | 2,909,200 | |
77,798,999 | 7,784,200 | |||||
INTERNET SOFTWARE & SERVICES — 0.7% | MEDIA — 3.1% | |||||
Akamai Technologies, Inc.(1) | 160,000 | 3,148,800 | Belo Corp., Class A | 625,000 | 3,381,250 | |
IAC/InterActiveCorp(1) | 170,000 | 3,432,300 | E.W. Scripps Co. (The), | |||
Class A(1) | 735,000 | 5,512,500 | ||||
RealNetworks, Inc.(1) | 1,175,000 | 4,371,000 | ||||
Entercom Communications | ||||||
10,952,100 | Corp., Class A(1) | 1,028,191 | 5,243,774 | |||
IT SERVICES — 1.5% | Entravision Communications | |||||
CACI International, Inc., | Corp., Class A(1) | 3,194,902 | 5,527,181 | |||
Class A(1) | 75,000 | 3,545,250 | ||||
Gannett Co., Inc. | 185,000 | 2,314,350 | ||||
Cass Information | Harte-Hanks, Inc. | 325,000 | 4,494,750 | |||
Systems, Inc. | 85,000 | 2,538,100 | ||||
Heartland Payment | Interactive Data Corp. | 115,000 | 3,014,150 | |||
Systems, Inc. | 150,000 | 2,176,500 | Journal Communications, | |||
MAXIMUS, Inc. | 45,000 | 2,097,000 | Inc., Class A | 984,500 | 3,622,960 | |
McClatchy Co. (The), | ||||||
NeuStar, Inc., Class A(1) | 80,000 | 1,808,000 | Class A | 2,725,000 | 6,976,000 | |
Perot Systems Corp., | Sinclair Broadcast Group, | |||||
Class A(1) | 210,000 | 6,237,000 | Inc., Class A, Class A | 1,175,000 | 4,206,500 | |
Total System Services, Inc. | 230,000 | 3,705,300 | Value Line, Inc. | 90,000 | 2,778,300 | |
22,107,150 | 47,071,715 | |||||
LEISURE EQUIPMENT & PRODUCTS — 0.5% | METALS & MINING — 2.0% | |||||
JAKKS Pacific, Inc.(1) | 165,000 | 2,362,800 | Brush Engineered | |||
RC2 Corp.(1) | 130,000 | 1,852,500 | Materials, Inc.(1) | 120,000 | 2,935,200 | |
Sport Supply Group, Inc. | 275,000 | 2,802,250 | Carpenter Technology Corp. | 155,000 | 3,625,450 | |
7,017,550 | Commercial Metals Co. | 200,000 | 3,580,000 |
21
Small Cap Value | ||||||
Shares | Value | Shares | Value | |||
Globe Specialty | PHARMACEUTICALS — 1.0% | |||||
Metals, Inc.(1) | 270,000 | $ 2,435,400 | Biovail Corp. | 160,000 | $ 2,468,800 | |
Haynes International, Inc.(1) | 180,000 | 5,727,600 | Endo Pharmaceuticals | |||
Kaiser Aluminum Corp. | 45,000 | 1,636,200 | Holdings, Inc.(1) | 185,000 | 4,186,550 | |
Mesabi Trust | 270,000 | 2,740,500 | Obagi Medical | |||
Royal Gold, Inc. | 85,000 | 3,876,000 | Products, Inc.(1) | 145,000 | 1,682,000 | |
RTI International | Par Pharmaceutical | |||||
Metals, Inc.(1) | 125,000 | 3,113,750 | Cos., Inc.(1) | 95,000 | 2,043,450 | |
29,670,100 | Perrigo Co. | 90,000 | 3,059,100 | |||
MULTILINE RETAIL — 0.5% | Sepracor, Inc.(1) | 90,000 | 2,061,000 | |||
Big Lots, Inc.(1) | 190,000 | 4,753,800 | 15,500,900 | |||
Fred’s, Inc., Class A | 185,000 | 2,355,050 | PROFESSIONAL SERVICES — 0.9% | |||
7,108,850 | CDI Corp. | 190,000 | 2,669,500 | |||
MULTI-UTILITIES — 0.8% | Heidrick & Struggles | |||||
International, Inc. | 110,000 | 2,558,600 | ||||
Avista Corp. | 165,000 | 3,336,300 | ||||
Korn/Ferry International(1) | 120,000 | 1,750,800 | ||||
Black Hills Corp. | 140,000 | 3,523,800 | ||||
MPS Group, Inc.(1) | 195,000 | 2,051,400 | ||||
MDU Resources Group, Inc. | 155,000 | 3,231,750 | ||||
TrueBlue, Inc.(1) | 150,000 | 2,110,500 | ||||
NorthWestern Corp. | 105,000 | 2,565,150 | ||||
12,657,000 | Watson Wyatt Worldwide, | |||||
Inc., Class A | 60,000 | 2,613,600 | ||||
OFFICE ELECTRONICS — 0.1% | 13,754,400 | |||||
Zebra Technologies Corp., | ||||||
Class A(1) | 80,000 | 2,074,400 | REAL ESTATE INVESTMENT TRUSTS (REITs) — 3.4% | |||
OIL, GAS & CONSUMABLE FUELS — 3.5% | BioMed Realty Trust, Inc. | 150,000 | 2,070,000 | |||
Berry Petroleum Co., Class A | 75,000 | 2,008,500 | Capstead Mortgage Corp. | 195,000 | 2,712,450 | |
Bill Barrett Corp.(1) | 185,000 | 6,066,150 | Chimera Investment Corp. | 985,000 | 3,762,700 | |
DHT Maritime, Inc. | 1,700,000 | 6,392,000 | DCT Industrial Trust, Inc. | 585,000 | 2,989,350 | |
Forest Oil Corp.(1) | 520,000 | 10,176,400 | Getty Realty Corp. | 85,000 | 2,085,900 | |
Frontier Oil Corp. | 255,000 | 3,549,600 | Hatteras Financial Corp. | 90,000 | 2,698,200 | |
Goodrich Petroleum Corp.(1) | 85,000 | 2,193,850 | Healthcare Realty Trust, Inc. | 160,000 | 3,380,800 | |
Highwoods Properties, Inc. | 195,000 | 6,132,750 | ||||
Mariner Energy, Inc.(1) | 360,000 | 5,104,800 | ||||
Inland Real Estate Corp. | 170,000 | 1,489,200 | ||||
Nordic American | ||||||
Tanker Shipping | 70,000 | 2,070,600 | Medical Properties | |||
Trust, Inc. | 290,000 | 2,264,900 | ||||
Penn Virginia Corp. | 135,000 | 3,092,850 | MFA Financial, Inc. | 800,000 | 6,368,000 | |
St. Mary Land | ||||||
& Exploration Co. | 75,000 | 2,434,500 | National Health | |||
Investors, Inc. | 110,000 | 3,481,500 | ||||
W&T Offshore, Inc. | 860,000 | 10,070,600 | National Retail | |||
53,159,850 | Properties, Inc. | 100,000 | 2,147,000 | |||
PAPER & FOREST PRODUCTS — 0.4% | Omega Healthcare | |||||
Louisiana-Pacific Corp.(1) | 475,013 | 3,168,337 | Investors, Inc. | 140,000 | 2,242,800 | |
P.H. Glatfelter Co. | 185,000 | 2,123,800 | Redwood Trust, Inc. | 120,000 | 1,860,000 | |
5,292,137 | Senior Housing | |||||
PERSONAL PRODUCTS — 0.7% | Properties Trust | 115,000 | 2,197,650 | |||
Alberto-Culver Co. | 65,000 | 1,799,200 | Sunstone Hotel | |||
Investors, Inc.(1) | 205,000 | 1,455,500 | ||||
Inter Parfums, Inc. | 305,000 | 3,724,050 | ||||
Washington Real Estate | ||||||
Prestige Brands | Investment Trust | 80,000 | 2,304,000 | |||
Holdings, Inc.(1) | 345,000 | 2,428,800 | ||||
Schiff Nutrition | 51,642,700 | |||||
International, Inc. | 460,000 | 2,396,600 | ||||
10,348,650 |
22
Small Cap Value | ||||||
Shares | Value | Shares | Value | |||
ROAD & RAIL — 0.5% | Children’s Place Retail | |||||
Arkansas Best Corp. | 90,000 | $ 2,694,600 | Stores, Inc. (The)(1) | 175,000 | $ 5,243,000 | |
Old Dominion Freight | Christopher & Banks Corp. | 680,000 | 4,603,600 | |||
Line, Inc.(1) | 65,000 | 1,977,950 | Dress Barn, Inc. (The)(1) | 245,000 | 4,392,850 | |
Werner Enterprises, Inc. | 120,000 | 2,235,600 | DSW, Inc., Class A(1) | 130,000 | 2,076,100 | |
6,908,150 | Finish Line, Inc. (The), | |||||
SEMICONDUCTORS & SEMICONDUCTOR | Class A | 590,000 | 5,994,400 | |||
EQUIPMENT — 2.5% | Foot Locker, Inc. | 200,000 | 2,390,000 | |||
Cohu, Inc. | 165,000 | 2,237,400 | Genesco, Inc.(1) | 235,000 | 5,656,450 | |
Cymer, Inc.(1) | 65,000 | 2,525,900 | Hot Topic, Inc.(1) | 400,000 | 2,996,000 | |
Integrated Device | Men’s Wearhouse, Inc. (The) | 105,000 | 2,593,500 | |||
Technology, Inc.(1) | 475,000 | 3,211,000 | ||||
PEP Boys-Manny | ||||||
Intellon Corp.(1) | 615,000 | 4,360,350 | Moe & Jack | 310,000 | 3,028,700 | |
Intersil Corp., Class A | 195,000 | 2,985,450 | RadioShack Corp. | 140,000 | 2,319,800 | |
Mattson Technology, Inc.(1) | 800,000 | 2,256,000 | Rent-A-Center, Inc., | |||
MEMC Electronic | Class A(1) | 240,000 | 4,531,200 | |||
Materials, Inc.(1) | 175,000 | 2,910,250 | Stage Stores, Inc. | 180,000 | 2,332,800 | |
MKS Instruments, Inc.(1) | 135,000 | 2,604,150 | Wet Seal, Inc. (The), | |||
Rudolph Technologies, Inc.(1) | 283,718 | 2,099,513 | Class A(1) | 1,225,000 | 4,630,500 | |
Sigma Designs, Inc.(1) | 195,000 | 2,833,350 | 71,462,400 | |||
Varian Semiconductor | TEXTILES, APPAREL & LUXURY GOODS — 1.2% | |||||
Equipment Associates, Inc.(1) | 90,000 | 2,955,600 | Crocs, Inc.(1) | 300,000 | 1,995,000 | |
Verigy Ltd.(1) | 375,000 | 4,357,500 | Deckers Outdoor Corp.(1) | 65,000 | 5,515,250 | |
Zoran Corp.(1) | 190,000 | 2,188,800 | Skechers U.S.A., Inc., | |||
Class A(1) | 105,000 | 1,799,700 | ||||
37,525,263 | ||||||
SOFTWARE — 3.5% | Volcom, Inc.(1) | 145,000 | 2,389,600 | |||
Aspen Technology, Inc.(1) | 290,000 | 2,958,000 | Weyco Group, Inc. | 100,000 | 2,290,000 | |
Cadence Design | Wolverine World Wide, Inc. | 150,000 | 3,726,000 | |||
Systems, Inc.(1) | 300,000 | 2,202,000 | 17,715,550 | |||
Compuware Corp.(1) | 400,000 | 2,932,000 | THRIFTS & MORTGAGE FINANCE — 1.7% | |||
Parametric | Brookline Bancorp., Inc. | 300,000 | 2,916,000 | |||
Technology Corp.(1) | 1,025,000 | 14,165,500 | First Financial | |||
Radiant Systems, Inc.(1) | 205,000 | 2,201,700 | Northwest, Inc. | 385,000 | 2,240,700 | |
Sybase, Inc.(1) | 275,000 | 10,697,500 | First Niagara Financial | |||
Group, Inc. | 520,000 | 6,411,600 | ||||
Synopsys, Inc.(1) | 150,000 | 3,363,000 | ||||
Flushing Financial Corp. | 185,000 | 2,109,000 | ||||
THQ, Inc.(1) | 710,000 | 4,856,400 | ||||
K-Fed Bancorp. | 260,000 | 2,345,200 | ||||
TIBCO Software, Inc.(1) | 370,000 | 3,511,300 | ||||
PMI Group, Inc. (The) | 475,000 | 2,018,750 | ||||
Ulticom, Inc.(2) | 2,112,830 | 6,127,207 | Provident Financial | |||
53,014,607 | Services, Inc. | 215,000 | 2,212,350 | |||
SPECIALTY RETAIL — 4.7% | Washington Federal, Inc. | 270,000 | 4,552,200 | |||
Aaron’s, Inc. | 115,000 | 3,036,000 | 24,805,800 | |||
American Eagle | TRADING COMPANIES & DISTRIBUTORS — 1.0% | |||||
Outfitters, Inc. | 175,000 | 2,950,500 | GATX Corp. | 80,000 | 2,236,000 | |
Barnes & Noble, Inc. | 165,000 | 3,666,300 | Kaman Corp. | 260,000 | 5,714,800 | |
Bebe Stores, Inc. | 305,000 | 2,244,800 | Lawson Products, Inc. | 180,000 | 3,133,800 | |
Cabela’s, Inc.(1) | 295,000 | 3,935,300 | WESCO International, Inc.(1) | 125,000 | 3,600,000 | |
Cato Corp. (The), Class A | 140,000 | 2,840,600 | 14,684,600 |
23
Small Cap Value | |||||||
Shares | Value | Shares | Value | ||||
WATER UTILITIES — 0.2% | Temporary Cash Investments — 2.3% | ||||||
Artesian Resources Corp., | |||||||
Class A | 175,000 | $ 2,943,500 | JPMorgan U.S. Treasury | ||||
Plus Money Market Fund | |||||||
TOTAL COMMON STOCKS | Agency Shares | 27,332 | $ 27,332 | ||||
(Cost $1,158,592,345) | 1,369,048,256 | ||||||
Repurchase Agreement, Credit Suisse First | |||||||
Convertible Preferred Stocks — 4.5% | Boston, Inc., (collateralized by various | ||||||
U.S. Treasury obligations, 0.24%, 6/10/10, | |||||||
COMMERCIAL BANKS — 0.2% | valued at $35,498,718), in a joint trading | ||||||
Huntington Bancshares, Inc., | account at 0.01%, dated 9/30/09, due | ||||||
Series A, 8.50%, 4/15/13(3) | 2,200 | 1,914,000 | 10/1/09 (Delivery value $34,800,010) | 34,800,000 | |||
Midwest Banc Holdings, Inc., | TOTAL TEMPORARY | ||||||
Series A, 7.75%, 12/10/12(3) | 140,000 | 448,000 | CASH INVESTMENTS | ||||
2,362,000 | (Cost $34,827,332) | 34,827,332 | |||||
INSURANCE — 2.6% | TOTAL INVESTMENT | ||||||
Aspen Insurance Holdings | SECURITIES — 98.7% | ||||||
Ltd., Series AHL, | (Cost $1,270,927,050) | 1,487,300,115 | |||||
5.625%, 2/6/13(3) | 770,000 | 39,077,500 | OTHER ASSETS | ||||
LEISURE EQUIPMENT & PRODUCTS — 0.3% | AND LIABILITIES — 1.3% | 19,059,836 | |||||
Callaway Golf Co., Series B, | TOTAL NET ASSETS — 100.0% | $1,506,359,951 | |||||
7.50%, 6/15/12(3)(4) | 40,000 | 5,030,000 | |||||
MEDIA — 0.2% | Notes to Schedule of Investments | ||||||
LodgeNet Interactive Corp., | (1) | Non-income producing. | |||||
10.00%, 12/31/49(1)(3)(4) | 1,669 | 3,509,073 | (2) | Affiliated Company: the fund’s holding represents ownership of | |||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.9% | 5% or more of the voting securities of the company; therefore, the | ||||||
Digital Realty Trust, Inc., | company is affiliated as defined in the Investment Company Act of | ||||||
Series D, 5.50%, 2/6/13(3) | 305,000 | 8,555,250 | 1940. | ||||
Entertainment Properties | (3) | Perpetual security. These securities do not have a predetermined | |||||
Trust, Series E, | maturity date. The coupon rates are fixed for a period of time and | ||||||
9.00%, 4/20/13(3) | 125,000 | 2,696,250 | may be structured to adjust thereafter. Interest reset or next call | ||||
date is indicated, as applicable. | |||||||
Lexington Realty Trust, | |||||||
Series C, 6.50%, 11/16/09(3) | 70,000 | 2,088,100 | (4) | Security was purchased under Rule 144A or Section 4(2) of | |||
the Securities Act of 1933 or is a private placement and, unless | |||||||
13,339,600 | registered under the Act or exempted from registration, may only | ||||||
TOBACCO — 0.3% | be sold to qualified institutional investors. The aggregate value | ||||||
Universal Corp., | of these securities at the period end was $8,539,073, which | ||||||
6.75%, 3/15/18(3) | 4,900 | 5,145,000 | represented 0.6% of total net assets. | ||||
TOTAL CONVERTIBLE | |||||||
PREFERRED STOCKS | |||||||
(Cost $63,186,360) | 68,463,173 | See Notes to Financial Statements. | |||||
Preferred Stocks — 1.0% | |||||||
INSURANCE — 0.3% | |||||||
Odyssey Re Holdings | |||||||
Corp., Series A, | |||||||
8.125%, 10/20/10(3) | 150,000 | 3,753,000 | |||||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.7% | |||||||
National Retail Properties, | |||||||
Inc., Series C, | |||||||
7.375%, 10/12/11(3) | 275,000 | 6,294,750 | |||||
PS Business Parks, Inc., | |||||||
Series K, 7.95%, 11/9/09(3) | 205,000 | 4,913,604 | |||||
11,208,354 | |||||||
TOTAL PREFERRED STOCKS | |||||||
(Cost $14,321,013) | 14,961,354 |
24
Statement of Assets and Liabilities |
SEPTEMBER 30, 2009 (UNAUDITED) | ||
Mid Cap Value | Small Cap Value | |
Assets | ||
Investment securities — unaffiliated, at value (cost of $374,599,828 | ||
and $1,228,597,570, respectively) | $431,857,733 | $1,452,730,558 |
Investment securities — affiliated, at value (cost of $– and | ||
$42,329,480, respectively) | — | 34,569,557 |
Total investment securities, at value (cost of $374,599,828 | ||
and $1,270,927,050, respectively) | 431,857,733 | 1,487,300,115 |
Receivable for investments sold | 6,022,754 | 25,684,593 |
Receivable for capital shares sold | 743,223 | 13,497,104 |
Dividends and interest receivable | 903,500 | 2,765,274 |
439,527,210 | 1,529,247,086 | |
Liabilities | ||
Payable for investments purchased | 9,331,364 | 19,247,573 |
Payable for capital shares redeemed | 189,393 | 2,160,720 |
Payable for forward foreign currency exchange contracts | 184,606 | — |
Accrued management fees | 327,920 | 1,412,353 |
Distribution and service fees payable | 12,968 | 66,489 |
10,046,251 | 22,887,135 | |
Net Assets | $429,480,959 | $1,506,359,951 |
See Notes to Financial Statements. |
25
SEPTEMBER 30, 2009 (UNAUDITED) | ||
Mid Cap Value | Small Cap Value | |
Net Assets Consist of: | ||
Capital (par value and paid-in surplus) | $480,233,522 | $1,689,164,709 |
Undistributed net investment income | 422,472 | 1,824,676 |
Accumulated net realized loss on investment | ||
and foreign currency transactions | (108,233,848) | (401,002,499) |
Net unrealized appreciation on investments and | ||
translation of assets and liabilities in foreign currencies | 57,058,813 | 216,373,065 |
$429,480,959 | $1,506,359,951 | |
Investor Class, $0.01 Par Value | ||
Net assets | $335,155,376 | $717,336,572 |
Shares outstanding | 33,393,394 | 103,076,254 |
Net asset value per share | $10.04 | $6.96 |
Institutional Class, $0.01 Par Value | ||
Net assets | $37,771,352 | $457,256,682 |
Shares outstanding | 3,762,683 | 65,480,982 |
Net asset value per share | $10.04 | $6.98 |
Advisor Class, $0.01 Par Value | ||
Net assets | $47,996,582 | $331,766,697 |
Shares outstanding | 4,782,196 | 47,800,084 |
Net asset value per share | $10.04 | $6.94 |
R Class, $0.01 Par Value | ||
Net assets | $8,557,649 | N/A |
Shares outstanding | 852,626 | N/A |
Net asset value per share | $10.04 | N/A |
See Notes to Financial Statements. |
26
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) | ||
Mid Cap Value | Small Cap Value | |
Investment Income (Loss) | ||
Income: | ||
Dividends (including $— and $9,187,418, respectively, from affiliates | ||
and net of foreign taxes withheld of $36,651 and $53,291, respectively) | $ 4,675,211 | $ 23,439,069 |
Interest | 2,798 | 18,419 |
4,678,009 | 23,457,488 | |
Expenses: | ||
Management fees | 1,668,865 | 7,161,026 |
Distribution and service fees: | ||
Advisor Class | 46,693 | 347,031 |
R Class | 15,517 | — |
Directors’ fees and expenses | 7,329 | 28,283 |
Other expenses | 5 | 10 |
1,738,409 | 7,536,350 | |
Net investment income (loss) | 2,939,600 | 15,921,138 |
Realized and Unrealized Gain (Loss) | ||
Net realized gain (loss) on: | ||
Investment transactions (including $– and $(4,486,713) | ||
from affiliates, respectively) | 7,352,257 | 17,784,970 |
Foreign currency transactions | (112,428) | — |
7,239,829 | 17,784,970 | |
Change in net unrealized appreciation (depreciation) on: | ||
Investments | 94,751,454 | 435,957,901 |
Translation of assets and liabilities in foreign currencies | (227,902) | — |
94,523,552 | 435,957,901 | |
Net realized and unrealized gain (loss) | 101,763,381 | 453,742,871 |
Net Increase (Decrease) in Net Assets Resulting from Operations | $104,702,981 | $469,664,009 |
See Notes to Financial Statements. |
27
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND YEAR ENDED MARCH 31, 2009 | ||||
Mid Cap Value | Small Cap Value | |||
Increase (Decrease) in Net Assets | Sept. 30, 2009 | March 31, 2009 | Sept. 30, 2009 | March 31, 2009 |
Operations | ||||
Net investment income (loss) | $ 2,939,600 | $ 5,984,436 | $ 15,921,138 | $ 22,796,973 |
Net realized gain (loss) | 7,239,829 | (75,849,439) | 17,784,970 | (282,679,366) |
Change in net unrealized | ||||
appreciation (depreciation) | 94,523,552 | (27,581,130) | 435,957,901 | (165,421,152) |
Net increase (decrease) in net assets | ||||
resulting from operations | 104,702,981 | (97,446,133) | 469,664,009 | (425,303,545) |
Distributions to Shareholders | ||||
From net investment income: | ||||
Investor Class | (2,132,623) | (5,060,283) | (8,919,106) | (10,241,684) |
Institutional Class | (187,088) | (410,293) | (5,773,208) | (6,416,710) |
Advisor Class | (248,184) | (457,530) | (3,951,223) | (4,047,581) |
R Class | (33,436) | (52,176) | — | — |
From net realized gains: | ||||
Investor Class | — | — | — | (1,417,907) |
Institutional Class | — | — | — | (811,201) |
Advisor Class | — | — | — | (711,770) |
Decrease in net assets from distributions | (2,601,331) | (5,980,282) | (18,643,537) | (23,646,853) |
Capital Share Transactions | ||||
Net increase (decrease) in net assets | ||||
from capital share transactions | 68,595,780 | 40,809,631 | 162,163,639 | (47,489,658) |
Net increase (decrease) in net assets | 170,697,430 | (62,616,784) | 613,184,111 | (496,440,056) |
Net Assets | ||||
Beginning of period | 258,783,529 | 321,400,313 | 893,175,840 | 1,389,615,896 |
End of period | $429,480,959 | $258,783,529 | $1,506,359,951 | $ 893,175,840 |
Undistributed net investment income | $422,472 | $84,203 | $1,824,676 | $4,547,075 |
See Notes to Financial Statements. |
28
Notes to Financial Statements |
SEPTEMBER 30, 2009 (UNAUDITED)
1. Organization and Summary of Significant Accounting Policies
Organization — American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Mid Cap Value Fund (Mid Cap Value) and Small Cap Value Fund (Small Cap Value) (collectively, the funds) are two funds in a series issued by the corporation. The funds are diversified under the 1940 Act. The funds’ investment objective is 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 und ervalued 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. 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. Investments in open-end management investment companies are valued at the reported net asset value. 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 ov er-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.
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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 fees and expenses that reduce their value.
Business Development Companies — Small Cap Value may invest in securities of closed-end investment companies that have elected to be treated as a business development company under the 1940 Act. A business development company operates similar to an exchange traded fund and represents a portfolio of securities. Small Cap Value may purchase a business development company to gain exposure to the securities in the underlying portfolio. The risks of owning a business development company generally reflect the risks of owning the underlying securities. Business development companies have expenses that reduce their value.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The funds may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, 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.
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 certain other funds in the American Century Investments family of funds, 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.
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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 2006. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. 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 maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a 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.
Subsequent Events — Management has evaluated events or transactions that may have occurred since September 30, 2009, that would merit recognition or disclosure in the financial statements. This evaluation was completed through November 27, 2009, the date the financial statements were issued.
2. Fees and Transactions with Related Parties
Management Fees — The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The Agreement provides that all expenses of the funds, except brokerage commissions, taxes, interest, fees and expenses of those directors who are not considered “interested persons” as defined in the 1940 Act (including counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on the daily net assets of each specific class of shares of each fund and paid monthly in arrears. For funds with a stepped fee schedule, the rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account each fund’s as sets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). 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. The annual management fee schedule for Small Cap Value ranges from 1.00% to 1.25% for the Investor Class and Advisor Class. The Institutional Class is 0.20% less at each point within the range for Small Cap Value.
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The effective annual management fee for each class of each fund for the six months ended September 30, 2009, was as follows:
Mid Cap Value | Small Cap Value | |
Investor | 1.00% | 1.25%�� |
Institutional | 0.80% | 1.05% |
Advisor | 1.00% | 1.25% |
R | 1.00% | N/A |
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 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%. 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 fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the six months ended September 30, 2009, are detailed in the Statement of Operations.
Acquired Fund Fees and Expenses — The funds may invest in mutual funds, exchange traded funds, and business development companies (the acquired funds). Each fund will indirectly realize its pro rata share of the fees and expenses of the acquired funds in which it invests. These indirect fees and expenses are not paid out of the fund’s assets but are reflected in the return realized by the fund on its investment in the acquired funds.
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). The funds have a Mutual Funds Services Agreement with J.P. Morgan Investor Services Co. (JPMIS) and a securities lending agreement with JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the funds. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC.
3. Investment Transactions
Investment transactions, excluding short-term investments, for the six months ended September 30, 2009, were as follows:
Mid Cap Value | Small Cap Value | |
Purchases | $301,627,804 | $863,046,935 |
Sales | $236,469,738 | $740,644,879 |
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4. Capital Share Transactions | ||||
Transactions in shares of the funds were as follows: | ||||
Six months ended September 30, 2009 | Year ended March 31, 2009 | |||
Shares | Amount | Shares | Amount | |
Mid Cap Value | ||||
Investor Class/Shares Authorized | 100,000,000 | 75,000,000 | ||
Sold | 8,379,218 | $74,918,755 | 11,583,385 | $100,805,312 |
Issued in reinvestment of distributions | 196,011 | 1,813,760 | 470,378 | 4,166,891 |
Redeemed | (3,928,225) | (34,918,736) | (9,108,024) | (81,605,589) |
4,647,004 | 41,813,779 | 2,945,739 | 23,366,614 | |
Institutional Class/Shares Authorized | 20,000,000 | 20,000,000 | ||
Sold | 1,672,719 | 16,207,066 | 1,336,091 | 11,458,786 |
Issued in reinvestment of distributions | 16,562 | 152,697 | 44,956 | 396,391 |
Redeemed | (359,629) | (3,162,995) | (578,563) | (4,718,425) |
1,329,652 | 13,196,768 | 802,484 | 7,136,752 | |
Advisor Class/Shares Authorized | 20,000,000 | 20,000,000 | ||
Sold | 1,687,382 | 14,908,071 | 2,092,852 | 17,133,819 |
Issued in reinvestment of distributions | 26,668 | 247,406 | 52,237 | 453,144 |
Redeemed | (479,992) | (4,362,822) | (1,030,530) | (9,152,116) |
1,234,058 | 10,792,655 | 1,114,559 | 8,434,847 | |
R Class/Shares Authorized | 20,000,000 | 20,000,000 | ||
Sold | 413,598 | 3,648,029 | 379,003 | 3,043,519 |
Issued in reinvestment of distributions | 3,582 | 33,436 | 6,073 | 52,176 |
Redeemed | (99,557) | (888,887) | (147,769) | (1,224,277) |
317,623 | 2,792,578 | 237,307 | 1,871,418 | |
Net increase (decrease) | 7,528,337 | $68,595,780 | 5,100,089 | $ 40,809,631 |
Small Cap Value | ||||
Investor Class/Shares Authorized | 500,000,000 | 500,000,000 | ||
Sold | 23,071,735 | $139,805,849 | 18,359,040 | $107,055,962 |
Issued in reinvestment of distributions | 1,507,232 | 8,763,042 | 1,864,672 | 11,463,956 |
Redeemed | (10,736,484) | (63,664,694) | (35,426,119) | (216,690,910) |
13,842,483 | 84,904,197 | (15,202,407) | (98,170,992) | |
Institutional Class/Shares Authorized | 200,000,000 | 200,000,000 | ||
Sold | 12,948,450 | 79,990,685 | 14,335,511 | 86,227,985 |
Issued in reinvestment of distributions | 897,316 | 5,264,663 | 1,042,135 | 6,425,536 |
Redeemed | (3,292,726) | (19,806,941) | (13,056,836) | (79,974,617) |
10,553,040 | 65,448,407 | 2,320,810 | 12,678,904 | |
Advisor Class/Shares Authorized | 190,000,000 | 190,000,000 | ||
Sold | 5,870,728 | 35,358,708 | 16,680,664 | 106,892,904 |
Issued in reinvestment of distributions | 536,261 | 3,084,386 | 664,645 | 4,023,372 |
Redeemed | (4,509,298) | (26,632,059) | (12,337,993) | (72,913,846) |
1,897,691 | 11,811,035 | 5,007,316 | 38,002,430 | |
Net increase (decrease) | 26,293,214 | $162,163,639 | (7,874,281) | $(47,489,658) |
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5. Affiliated Company Transactions
If a fund’s holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2009, follows:
March 31, 2009 | September 30, 2009 | |||||||
Share | Purchase | Realized | Dividend | Share | Market | |||
Fund/Company | Balance | Cost | Sales Cost | Gain (Loss) | Income | Balance | Value | |
Small Cap Value | ||||||||
Cutera, Inc.(1) | 655,000 | $1,156,755 | $ 942,982 | $ (394,888) | — | 730,000 | $ 6,314,500 | |
DHT Maritime, Inc.(2) | 2,318,922 | 2,357,567 | 9,280,955 | (3,244,720) | $ 487,500 | 1,700,000 | (2) | |
Mercer Insurance | ||||||||
Group, Inc. | 275,000 | 557,521 | 168,450 | 7,619 | 43,875 | 300,000 | 5,421,000 | |
Ulticom, Inc. | 1,908,975 | 519,895 | 489,975 | (232,534) | 8,524,598 | 2,112,830 | 6,127,207 | |
Utah Medical | ||||||||
Products, Inc.(2) | 180,000 | 471,677 | 1,493,763 | (93,318) | 77,987 | 150,000 | (2) | |
Young Innovations, Inc. | 725,000 | 866,505 | 3,487,482 | (528,872) | 53,458 | 635,000 | 16,706,850 | |
$5,929,920 | $15,863,607 | $(4,486,713) | $9,187,418 | $34,569,557 | ||||
(1) | Non-income producing. | |||||||
(2) | Company was not an affiliate at September 30, 2009. |
6. Fair Value Measurements
The funds’ securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the funds. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
• Level 1 valuation inputs consist of actual quoted prices in an active market for identical securities;
• Level 2 valuation inputs consist of significant direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or
• Level 3 valuation inputs consist of significant unobservable inputs (including a fund’s own assumptions).
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not an indication of the risks associated with investing in these securities or other financial instruments.
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The following is a summary of the valuation inputs used to determine the fair value of the funds’ securities and other financial instruments as of September 30, 2009:
Level 1 | Level 2 | Level 3 | |
Mid Cap Value | |||
Investment Securities | |||
Domestic Common Stocks | $400,680,522 | — | — |
Foreign Common Stocks | 14,224,641 | $ 8,594,586 | — |
Temporary Cash Investments | 57,984 | 8,300,000 | — |
Total Value of Investment Securities | $414,963,147 | $16,894,586 | — |
Other Financial Instruments | |||
Total Unrealized Gain (Loss) on Forward | |||
Foreign Currency Exchange Contracts | — | $(184,606) | — |
Small Cap Value | |||
Investment Securities | |||
Common Stocks | $1,369,048,256 | — | — |
Convertible Preferred Stocks | — | $ 68,463,173 | — |
Preferred Stocks | — | 14,961,354 | — |
Temporary Cash Investments | 27,332 | 34,800,000 | — |
Total Value of Investment Securities | $1,369,075,588 | $118,224,527 | — |
7. Derivative Instruments
Foreign Currency Risk — Mid Cap Value is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund’s exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and t he resulting unrealized appreciation or depreciation are determined daily using prevailing exchange rates. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The risk of loss from non-performance by the counterparty may be reduced by the use of master netting agreements. During the six months ended September 30, 2009, Mid Cap Value participated in forward foreign currency exchange contracts.
35
For Mid Cap Value, the value of foreign currency risk derivatives as of September 30, 2009, is disclosed on the Statement of Assets and Liabilities as a liability of $184,606 in payable for forward foreign currency exchange contracts. For Mid Cap Value, for the six months ended September 30, 2009, the effect of foreign currency exchange rate risk derivatives on the Statement of Operations was $(124,352) in net realized gain (loss) on foreign currency transactions and $(214,550) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
For Mid Cap Value, the value of derivative instruments at period end and the effect of derivatives on the Statement of Operations are indicative of the fund’s typical volume.
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. Interfund Lending
The funds, along with certain other funds in the American Century Investments family of funds, may participate in an interfund lending program, pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC). This program provides an alternative credit facility allowing the funds to borrow from or lend to other funds in the American Century Investments family of funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. The interfund loan rate earned/paid on interfund lending transactions is determined daily based on the average of certain current market rates. Interfund lending transactions normally extend only overnight, but can have a maximum duration of seven days. The program is subject to annual approval by the Board of Directors. During the six months ended September 30, 2009, the funds did not utilize the program.
10. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of September 30, 2009, the components of investments for federal income tax purposes were as follows:
Mid Cap Value | Small Cap Value | |
Federal tax cost of investments | $405,037,601 | $1,399,342,230 |
Gross tax appreciation of investments | $34,972,282 | $154,577,338 |
Gross tax depreciation of investments | (8,152,150) | (66,619,453) |
Net tax appreciation (depreciation) of investments | $26,820,132 | $ 87,957,885 |
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.
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As of March 31, 2009, the accumulated capital losses listed below represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. The capital loss carryovers expire in 2017.
The capital and currency loss deferrals listed below represent net capital and foreign currency losses incurred in the five-month period ended March 31, 2009. The funds have elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes.
Mid Cap Value | Small Cap Value | |
Accumulated capital losses | $(37,541,838) | $(77,582,460) |
Capital loss deferrals | $(35,895,371) | $(199,584,573) |
Currency loss deferrals | $(179,925) | — |
11. Recently Issued Accounting Standards
In March 2008, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) Section 815-10 (formerly Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities —an amendment of FASB Statement No. 133”). ASC Section 815-10 is effective for interim periods beginning after November 15, 2008 and has been adopted by the funds. ASC Section 815-10 amends and expands disclosures about derivative instruments and hedging activities. ASC Section 815-10 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.
37
Financial Highlights |
Mid Cap Value | |||||||
Investor Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $7.34 | $10.66 | $13.33 | $12.10 | $11.32 | $10.02 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.08 | 0.19 | 0.16 | 0.16 | 0.21 | 0.09 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 2.69 | (3.32) | (1.51) | 1.87 | 1.70 | 1.54 | |
Total From | |||||||
Investment Operations | 2.77 | (3.13) | (1.35) | 2.03 | 1.91 | 1.63 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.07) | (0.19) | (0.16) | (0.14) | (0.21) | (0.06) | |
From Net | |||||||
Realized Gains | — | — | (1.16) | (0.66) | (0.92) | (0.27) | |
Total Distributions | (0.07) | (0.19) | (1.32) | (0.80) | (1.13) | (0.33) | |
Net Asset Value, | |||||||
End of Period | $10.04 | $7.34 | $10.66 | $13.33 | $12.10 | $11.32 | |
Total Return(3) | 37.79% | (29.66)% | (10.84)% | 17.12% | 17.62% | 16.40% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 1.00%(4) | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% | |
Ratio of Net Investment | |||||||
Income (Loss) to | |||||||
Average Net Assets | 1.76%(4) | 2.10% | 1.25% | 1.30% | 1.77% | 0.83% | |
Portfolio Turnover Rate | 71% | 173% | 206% | 187% | 228% | 192% | |
Net Assets, End of Period | |||||||
(in thousands) | $335,155 | $210,960 | $274,918 | $301,642 | $115,262 | $42,059 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
38
Mid Cap Value | |||||||
Institutional Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005(2) | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $7.34 | $10.66 | $13.33 | $12.10 | $11.33 | $10.07 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(3) | 0.09 | 0.21 | 0.18 | 0.19 | 0.24 | 0.07 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 2.69 | (3.32) | (1.51) | 1.87 | 1.69 | 1.51 | |
Total From | |||||||
Investment Operations | 2.78 | (3.11) | (1.33) | 2.06 | 1.93 | 1.58 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.08) | (0.21) | (0.18) | (0.17) | (0.24) | (0.05) | |
From Net | |||||||
Realized Gains | — | — | (1.16) | (0.66) | (0.92) | (0.27) | |
Total Distributions | (0.08) | (0.21) | (1.34) | (0.83) | (1.16) | (0.32) | |
Net Asset Value, | |||||||
End of Period | $10.04 | $7.34 | $10.66 | $13.33 | $12.10 | $11.33 | |
Total Return(4) | 37.92% | (29.52)% | (10.67)% | 17.36% | 17.74% | 15.82% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 0.80%(5) | 0.80% | 0.80% | 0.80% | 0.80% | 0.80%(5) | |
Ratio of Net Investment | |||||||
Income (Loss) to | |||||||
Average Net Assets | 1.96%(5) | 2.30% | 1.45% | 1.50% | 1.97% | 1.00%(5) | |
Portfolio Turnover Rate | 71% | 173% | 206% | 187% | 228% | 192%(6) | |
Net Assets, End of Period | |||||||
(in thousands) | $37,771 | $17,859 | $17,378 | $20,623 | $10,510 | $8,082 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | August 2, 2004 (commencement of sale) through March 31, 2005. | ||||||
(3) | Computed using average shares outstanding throughout the period. | ||||||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(5) | Annualized. | ||||||
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2005. | ||||||
See Notes to Financial Statements. |
39
Mid Cap Value | |||||||
Advisor Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005(2) | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $7.34 | $10.66 | $13.33 | $12.10 | $11.32 | $10.99 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(3) | 0.07 | 0.17 | 0.13 | 0.14 | 0.16 | 0.03 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 2.69 | (3.32) | (1.51) | 1.86 | 1.72 | 0.31 | |
Total From | |||||||
Investment Operations | 2.76 | (3.15) | (1.38) | 2.00 | 1.88 | 0.34 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.06) | (0.17) | (0.13) | (0.11) | (0.18) | (0.01) | |
From Net | |||||||
Realized Gains | — | — | (1.16) | (0.66) | (0.92) | — | |
Total Distributions | (0.06) | (0.17) | (1.29) | (0.77) | (1.10) | (0.01) | |
Net Asset Value, | |||||||
End of Period | $10.04 | $7.34 | $10.66 | $13.33 | $12.10 | $11.32 | |
Total Return(4) | 37.61% | (29.84)% | (11.07)% | 16.83% | 17.32% | 3.05% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 1.25%(5) | 1.25% | 1.25% | 1.25% | 1.25% | 1.25%(5) | |
Ratio of Net Investment | |||||||
Income (Loss) to | |||||||
Average Net Assets | 1.51%(5) | 1.85% | 1.00% | 1.05% | 1.52% | 1.34%(5) | |
Portfolio Turnover Rate | 71% | 173% | 206% | 187% | 228% | 192%(6) | |
Net Assets, End of Period | |||||||
(in thousands) | $47,997 | $26,039 | $25,932 | $21,412 | $8,175 | $1,057 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | January 13, 2005 (commencement of sale) through March 31, 2005. | ||||||
(3) | Computed using average shares outstanding throughout the period. | ||||||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(5) | Annualized. | ||||||
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2005. | ||||||
See Notes to Financial Statements. |
40
Mid Cap Value | ||||||
R Class | ||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | ||||||
2009(1) | 2009 | 2008 | 2007 | 2006(2) | ||
Per-Share Data | ||||||
Net Asset Value, Beginning of Period | $7.34 | $10.65 | $13.32 | $12.09 | $12.21 | |
Income From Investment Operations | ||||||
Net Investment Income (Loss)(3) | 0.06 | 0.15 | 0.10 | 0.13 | 0.07 | |
Net Realized and | ||||||
Unrealized Gain (Loss) | 2.68 | (3.32) | (1.51) | 1.84 | 0.79 | |
Total From Investment Operations | 2.74 | (3.17) | (1.41) | 1.97 | 0.86 | |
Distributions | ||||||
From Net Investment Income | (0.04) | (0.14) | (0.10) | (0.08) | (0.06) | |
From Net Realized Gains | — | — | (1.16) | (0.66) | (0.92) | |
Total Distributions | (0.04) | (0.14) | (1.26) | (0.74) | (0.98) | |
Net Asset Value, End of Period | $10.04 | $7.34 | $10.65 | $13.32 | $12.09 | |
Total Return(4) | 37.44% | (29.95)% | (11.30)% | 16.55% | 7.56% | |
Ratios/Supplemental Data | ||||||
Ratio of Operating Expenses to | ||||||
Average Net Assets | 1.50%(5) | 1.50% | 1.50% | 1.50% | 1.50%(5) | |
Ratio of Net Investment Income (Loss) | ||||||
to Average Net Assets | 1.26%(5) | 1.60% | 0.75% | 0.80% | 0.97%(5) | |
Portfolio Turnover Rate | 71% | 173% | 206% | 187% | 228%(6) | |
Net Assets, End of Period (in thousands) | $8,558 | $3,926 | $3,172 | $820 | $27 | |
(1) | Six months ended September 30, 2009 (unaudited). | |||||
(2) | July 29, 2005 (commencement of sale) through March 31, 2006. | |||||
(3) | Computed using average shares outstanding throughout the period. | |||||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | |||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | ||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | ||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | ||||||
guidelines and does not result in any gain or loss of value between one class and another. | ||||||
(5) | Annualized. | |||||
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2006. | |||||
See Notes to Financial Statements. |
41
Small Cap Value | |||||||
Investor Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $4.70 | $7.02 | $10.01 | $10.45 | $10.07 | $9.71 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.08 | 0.12 | 0.09 | 0.06 | 0.06 | 0.03 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 2.27 | (2.31) | (1.16) | 0.87 | 1.72 | 1.31 | |
Total From | |||||||
Investment Operations | 2.35 | (2.19) | (1.07) | 0.93 | 1.78 | 1.34 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.09) | (0.11) | (0.09) | (0.04) | (0.06) | (0.03) | |
From Net | |||||||
Realized Gains | — | (0.02) | (1.83) | (1.33) | (1.34) | (0.95) | |
Total Distributions | (0.09) | (0.13) | (1.92) | (1.37) | (1.40) | (0.98) | |
Net Asset Value, | |||||||
End of Period | $6.96 | $4.70 | $7.02 | $10.01 | $10.45 | $10.07 | |
Total Return(3) | 50.46% | (31.69)% | (12.22)% | 9.38% | 18.67% | 14.00% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets(4) | 1.25%(5) | 1.25% | 1.26% | 1.25% | 1.25% | 1.25% | |
Ratio of Net Investment | |||||||
Income (Loss) to | |||||||
Average Net Assets | 2.64%(5) | 1.93% | 1.01% | 0.57% | 0.58% | 0.32% | |
Portfolio Turnover Rate | 63% | 192% | 123% | 121% | 111% | 108% | |
Net Assets, End of Period | |||||||
(in thousands) | $717,337 | $419,206 | $732,968 | $1,261,392 | $1,390,024 | $1,252,153 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Ratio of operating expenses to average net assets does not include any fees of the acquired funds. | ||||||
(5) | Annualized. | ||||||
See Notes to Financial Statements. |
42
Small Cap Value | |||||||
Institutional Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $4.71 | $7.04 | $10.03 | $10.47 | $10.08 | $9.72 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.09 | 0.13 | 0.11 | 0.08 | 0.08 | 0.05 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 2.28 | (2.32) | (1.17) | 0.87 | 1.73 | 1.31 | |
Total From | |||||||
Investment Operations | 2.37 | (2.19) | (1.06) | 0.95 | 1.81 | 1.36 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.10) | (0.12) | (0.10) | (0.06) | (0.08) | (0.05) | |
From Net | |||||||
Realized Gains | — | (0.02) | (1.83) | (1.33) | (1.34) | (0.95) | |
Total Distributions | (0.10) | (0.14) | (1.93) | (1.39) | (1.42) | (1.00) | |
Net Asset Value, | |||||||
End of Period | $6.98 | $4.71 | $7.04 | $10.03 | $10.47 | $10.08 | |
Total Return(3) | 50.71% | (31.61)% | (12.05)% | 9.52% | 18.98% | 14.20% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets(4) | 1.05%(5) | 1.05% | 1.06% | 1.05% | 1.05% | 1.05% | |
Ratio of Net Investment | |||||||
Income (Loss) to | |||||||
Average Net Assets | 2.84%(5) | 2.13% | 1.21% | 0.77% | 0.78% | 0.52% | |
Portfolio Turnover Rate | 63% | 192% | 123% | 121% | 111% | 108% | |
Net Assets, End of Period | |||||||
(in thousands) | $457,257 | $258,902 | $370,422 | $443,173 | $435,327 | $314,700 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Ratio of operating expenses to average net assets does not include any fees of the acquired funds. | ||||||
(5) | Annualized. | ||||||
See Notes to Financial Statements. |
43
Small Cap Value | |||||||
Advisor Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $4.69 | $7.00 | $10.00 | $10.45 | $10.06 | $9.71 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.07 | 0.10 | 0.07 | 0.03 | 0.03 | 0.01 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 2.27 | (2.30) | (1.17) | 0.87 | 1.74 | 1.30 | |
Total From | |||||||
Investment Operations | 2.34 | (2.20) | (1.10) | 0.90 | 1.77 | 1.31 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.09) | (0.09) | (0.07) | (0.02) | (0.04) | (0.01) | |
From Net | |||||||
Realized Gains | — | (0.02) | (1.83) | (1.33) | (1.34) | (0.95) | |
Total Distributions | (0.09) | (0.11) | (1.90) | (1.35) | (1.38) | (0.96) | |
Net Asset Value, | |||||||
End of Period | $6.94 | $4.69 | $7.00 | $10.00 | $10.45 | $10.06 | |
Total Return(3) | 50.17% | (31.82)% | (12.51)% | 9.10% | 18.51% | 13.70% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets(4) | 1.50%(5) | 1.50% | 1.51% | 1.50% | 1.50% | 1.50% | |
Ratio of Net Investment | |||||||
Income (Loss) to | |||||||
Average Net Assets | 2.39%(5) | 1.68% | 0.76% | 0.32% | 0.33% | 0.07% | |
Portfolio Turnover Rate | 63% | 192% | 123% | 121% | 111% | 108% | |
Net Assets, End of Period | |||||||
(in thousands) | $331,767 | $215,068 | $286,227 | $434,182 | $455,001 | $624,633 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Ratio of operating expenses to average net assets does not include any fees of the acquired funds. | ||||||
(5) | Annualized. | ||||||
See Notes to Financial Statements. |
44
Approval of Management Agreements |
Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund’s independent directors (the “Directors”) each year. At American Century Investments, this process is referred to as the “15(c) Process.” As a part of this process, the board reviews fund performance, shareholder services, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. In addition to this annual review, the board of directors oversees and evaluates on a continuous basis at its quarterly meetings the nature and quality of significant services performed by the advisor, fund performance, audit and compliance information, and a variety of other reports relating to fund operations. The board, or committees of the board, also holds special meetings as needed.
Under a Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for the board’s approval or renewal of any advisory agreements within the fund’s most recently completed fiscal half-year period.
Annual Contract Review Process
As part of the annual 15(c) Process undertaken during the most recent fiscal half-year period, the Directors reviewed extensive data and information compiled by the advisor and certain independent providers of evaluative data (the “15(c) Providers”) concerning the Mid Cap Value and Small Cap Value funds (the “Funds”) and the services provided to the Funds under the management agreement. The information considered and the discussions held at the meetings included, but were not limited to:
• the nature, extent and quality of investment management, shareholder services and other services provided to the Funds;
• the wide range of programs and services the advisor provides to the Funds and their shareholders on a routine and non-routine basis;
• the compliance policies, procedures, and regulatory experience of the advisor;
• data comparing the cost of owning the Funds to the cost of owning a similar fund;
• data comparing the Funds’ performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies;
• financial data showing the profitability of the Funds to the advisor and the overall profitability of the advisor;
• data comparing services provided and charges to other investment management clients of the advisor; and
• consideration of collateral benefits derived by the advisor from the manage-ment of the Funds and any potential economies of scale relating thereto.
45
In keeping with its practice, the Funds’ board of directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The board also had the benefit of the advice of its independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the advisor, the 15(c) Providers, and the board’s independent counsel, and evaluated such information for each fund for which the board has responsibility. In connection with their review of the Funds, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management and subadvisory agreements under the terms ultimately determined by the board to be appropriate, the Directors’ decision was based on the following factors.
Nature, Extent and Quality of Services – Generally. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the Funds. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including:
• Fund construction and design
• portfolio security selection
• initial capitalization/funding
• securities trading
• Fund administration
• custody of Fund assets
• daily valuation of each Fund’s portfolio
• shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping and communications
• legal services
• regulatory and portfolio compliance
• financial reporting
• marketing and distribution
The Directors noted that many of the services provided by the advisor have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. They discussed with the advisor the challenges
46
presented by these changes and the impact on the Funds. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings.
Investment Management Services. The nature of the investment management services provided to the Funds is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments, and liquidity. In evaluating investment performance, the board expects the advisor to manage the Funds in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, com pliance and other systems to conduct their business. At each quarterly meeting the Directors review investment performance information for the Funds, together with comparative information for appropriate benchmarks and/or peer groups of funds managed similarly to the Funds. The Directors also review detailed performance information during the 15(c) Process comparing each Fund’s performance with that of similar funds not managed by the advisor. If performance concerns are identified, the Directors discuss with the advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Each Fund’s performance for both the one- and three-year periods was above the median for its respective peer group.
Shareholder and Other Services. The advisor provides the Funds with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at their regular quarterly meetings, including the annual meeting concerning contract review, and reports to the board. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency serv ice level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor.
Costs of Services Provided and Profitability. The advisor provides detailed information concerning its cost of providing various services to the Funds, its profitability in managing the Funds, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor’s
47
financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The board concluded that the advisor’s profits were reasonable in light of the services provided to the Funds.
Ethics. The Directors generally consider the advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Directors review information provided by the advisor regarding the possible existence of economies of scale in connection with the management of the Funds. The Directors concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The analysis of economies of scale is further complicated by the additional services and content provided by the advisor and its reinvestment in its ability to provide and expand those services. Accordingly, the Directors seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the Funds specifically, the expenses incurred by the advisor in providing various functions to the Funds, and the fees of competitive funds no t managed by the advisor. The Directors believe the advisor is appropriately sharing economies of scale through its competitive fee structure, fee breakpoints as each Fund increases in size, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The Funds pay the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Funds, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of each Fund’s independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, record-keeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the advisor the risk of increased costs of operating the Funds and provides a direct incentive to minimize administrative inefficiencies. Part of the Directors’ analysis of fee levels involves reviewing certain evaluative data compiled by a 15(c) Provider comparing each Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group and performing a regression analysis to evaluate the effect of fee breakpoints as assets under management increase. The unified fee charged to shareholders of each of the Funds was below the median of the total expense rati os of its respective
48
peer group. In addition, the Directors also reviewed updated fee level data provided by the advisor, but recognized that comparative data was particularly difficult to evaluate given the significant market developments during the past year. The board concluded that the management fee paid by each Fund to the advisor was reasonable in light of the services provided to the Funds.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the Funds. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Funds. The Directors analyzed this information and concluded that the fees charged and services provided to the Funds were reasonable by comparison.
Collateral Benefits Derived by the Advisor. The Directors considered the existence of collateral benefits the advisor may receive as a result of its relationship with the Funds. They concluded that the advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is able to provide investment management services to certain clients other than the Funds, at least in part, due to its existing infrastructure built to serv e the fund complex. The Directors concluded, however, that the assets of those other clients are not material to the analysis and, in any event, are included with the assets of the Funds to determine breakpoints in each Fund’s fee schedule, provided they are managed using the same investment team and strategy.
Conclusions of the Directors
As a result of this process, the board, including all of the independent directors, in the absence of particular circumstances and assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor concluded that the investment management agreement between each Fund and the advisor is fair and reasonable in light of the services provided and should be renewed.
49
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans 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. 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. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
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 Investments’ 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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Index Definitions |
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 Small-Cap Value Funds Index is an equal dollar-weighted index of, typically, the 30 largest mutual funds within the Small-Cap Value fund classification, as defined by Lipper. The index is adjusted for the reinvestment of capital gains and income dividends.
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 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 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 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.
51
Notes |
52
Notes |
53
Notes |
54
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
©2009 American Century Proprietary Holdings, Inc. All rights reserved.
0911 CL-SAN-66879N
Semiannual Report |
September 30, 2009 |
American Century Investments |
Equity Income Fund
Value Fund
Large Company Value Fund
President’s Letter |
Dear Investor:
Thank you for your investment with us during the financial reporting period ended September 30, 2009. We appreciate your trust in American Century Investments® at this volatile, transitional time in the economy and investment markets.
As the upheavals associated with the “Great Recession” gradually subside, our senior management team has put considerable thought into how the investment environment has changed and what new challenges and opportunities await us. Critical factors that we are anticipating in the coming year include marked shifts in investment and spending behavior, along with consolidation in our industry.
Most importantly, we think the economic recovery will be slow and extended. The economy and capital markets have come a long way since Lehman Brothers collapsed over a year ago, but 2010 will likely bring continuing challenges. The stock market’s rebound since last March and the third-quarter economic surge this year were fueled largely by corporate cost-cutting and unprecedented monetary and fiscal stimulus, including some key programs that have since expired or been scaled back.
Meanwhile, the resilient but struggling consumer sector still faces rising unemployment, heavy debt burdens, tight credit conditions, and a housing market that is starting to stabilize, but remains vulnerable. Much of our investment positioning in 2009 has cautiously reflected these still unstable economic fundamentals, leading to underperformance, in some cases, versus market benchmarks buoyed by the rally of riskier assets. We still support our fundamentally based positioning because we believe strongly that some markets—driven more by technical factors than fundamentals—have advanced further than underlying economic conditions warrant, and remain susceptible to the possibility of more volatility ahead.
For more detailed information from our portfolio management team about the performance and positioning of your investment, please review the following pages, or visit our website, americancentury.com.
Thank you for your continued confidence in us.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
Independent Chairman’s Letter |
I am Don Pratt, an independent director and chairman of the mutual fund board responsible for the U.S. Growth Equity, U.S. Value Equity, Global and Non-U.S. Equity and Asset Allocation funds managed by American Century Investments. The board consists of seven independent directors and two directors who are affiliated with the investment advisor.
As one of your independent shareholder representatives on the fund board, I plan to write you from time to time with updates on board activities and news about your funds. My co-independent directors and I are committed to putting your interests first. We work closely with American Century Investments on maintaining strong fund performance, providing quality service to shareholders at competitive fees and ensuring ethical business practices and compliance with all applicable fund regulations.
Last year, the board welcomed its newest independent director, John R. Whitten. He is a great addition to an experienced board where, collectively, the independent directors have served the funds for more than 76 years. This continuity served shareholders well as the investment advisor initiated a successful management transition, creating a strong senior leadership team consisting of well-tenured company executives and experienced industry veterans. Under the leadership of President and Chief Executive Officer Jonathan Thomas and Chief Investment Officer Enrique Chang, the firm has made the achievement of superior investment performance its primary focus and the key driver of its success going forward. This focus helped the company generate strong relative performance against the backdrop of 2008’s unprecedented market volatility.
As investors in the American Century funds, my fellow directors and I share your investing experience. We know firsthand how decisions made at the board level affect all shareholders. To further guide our efforts on your behalf, I invite you to send me your comments, questions or suggestions by email to dhpratt@fundboardchair.com. Thank you for allowing me to serve as your advocate on our board.
Table of Contents |
Market Perspective | 2 |
U.S. Stock Index Returns | 2 |
Equity Income | |
Performance | 3 |
Portfolio Commentary | 5 |
Top Ten Holdings | 7 |
Top Five Industries | 7 |
Types of Investments in Portfolio | 7 |
Value | |
Performance | 8 |
Portfolio Commentary | 10 |
Top Ten Holdings | 12 |
Top Five Industries | 12 |
Types of Investments in Portfolio | 12 |
Large Company Value | |
Performance | 13 |
Portfolio Commentary | 15 |
Top Ten Holdings | 17 |
Top Five Industries | 17 |
Types of Investments in Portfolio | 17 |
Shareholder Fee Examples | 18 |
Financial Statements | |
Schedule of Investments | 21 |
Statement of Assets and Liabilities | 30 |
Statement of Operations | 32 |
Statement of Changes in Net Assets | 33 |
Notes to Financial Statements | 35 |
Financial Highlights | 47 |
Other Information | |
Approval of Management Agreements | 65 |
Additional Information | 70 |
Index Definitions | 71 |
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 Investments or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments 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 Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for com parative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Market Perspective |
By Phil Davidson, Chief Investment Officer, U.S. Value Equity
A Value-Led Market Recovery
The U.S. stock market enjoyed an extraordinary rally during the six months ended September 30, 2009. The 35% advance in the broad equity indices—representing the market’s best six-month gain since 1938—reflected investors’ renewed confidence in an economic recovery following the deep recession and credit crisis that occurred in 2008.
As the table below indicates, value stocks led the market’s advance, outperforming growth issues across all market capitalizations. One factor behind the outperformance of value shares was a recovery in the financial sector, which comprises a significant portion of the value universe. Financial stocks were priced for failure amid the economic and credit turmoil in late 2008 and early 2009. Since then, the credit environment has improved considerably, helped in part by a series of federal government programs, and financial companies have taken steps to raise capital and reduce debt. As a result, financial stocks rebounded sharply during the six-month period, posting the best returns in the stock market.
Another factor supporting value shares was a renewed emphasis on cost management and deleveraging. As the economic downturn deepened, many businesses quickly implemented aggressive cost-cutting measures, which helped sustain profits despite declining revenues. In addition, companies that focused on growth (often using debt to do so) were hit the hardest during the recession, while those that concentrated on strengthening their balance sheets and improving cash flows held up the best.
The New Reality
Despite signs of economic improvement, particularly in housing and manufacturing, we still expect a slow, gradual recovery. Consumer spending, which accounts for 70% of the economy, is likely to remain weak as consumers continue to reduce debt and increase savings. In this environment, we believe that higher-quality companies with self-funding business models and whose strategies emphasize higher returns on capital will outperform over time. These companies will be in the best position to gain market share from weaker competitors and generate cash flows regardless of the pace of economic recovery.
U.S. Stock Index Returns | ||||
For the six months ended September 30, 2009* | ||||
Russell 1000 Index (Large-Cap) | 35.22% | Russell 2000 Index (Small-Cap) | 43.95% | |
Russell 1000 Value Index | 37.99% | Russell 2000 Value Index | 44.79% | |
Russell 1000 Growth Index | 32.58% | Russell 2000 Growth Index | 43.06% | |
Russell Midcap Index | 45.71% | *Total returns for periods less than one year are not annualized. | ||
Russell Midcap Value Index | 49.51% | |||
Russell Midcap Growth Index | 41.89% |
2
Performance |
Equity Income | |||||||
Total Returns as of September 30, 2009 | |||||||
Average Annual Returns | |||||||
Since | Inception | ||||||
6 months(1) | 1 year | 5 years | 10 years | Inception | Date | ||
Investor Class | 17.30% | -5.63% | 2.55% | 6.50% | 10.32% | 8/1/94 | |
Russell 3000 Value Index(2) | 38.52% | -10.79% | 0.96% | 2.97% | 8.40%(3) | — | |
S&P 500 Index(2) | 34.02% | -6.91% | 1.02% | -0.15% | 7.64%(3) | — | |
Lipper Equity Income | |||||||
Funds Index(2) | 33.94% | -6.56% | 1.24% | 2.10% | 6.65%(3) | — | |
Institutional Class | 17.60% | -5.30% | 2.76% | 6.72% | 6.73% | 7/8/98 | |
A Class(4) | 3/7/97 | ||||||
No sales charge* | 17.15% | -5.87% | 2.27% | 6.23% | 7.86% | ||
With sales charge* | 10.43% | -11.29% | 1.07% | 5.61% | 7.35% | ||
B Class | 9/28/07 | ||||||
No sales charge* | 16.90% | -6.43% | — | — | -10.53% | ||
With sales charge* | 11.90% | -10.43% | — | — | -12.22% | ||
C Class | 7/13/01 | ||||||
No sales charge* | 16.71% | -6.58% | 1.51% | — | 3.89% | ||
With sales charge* | 15.71% | -6.58% | 1.51% | — | 3.89% | ||
R Class | 17.03% | -5.98% | 2.05% | — | 4.19% | 8/29/03 | |
* 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) | Total returns for periods less than one year are not annualized. | ||||||
(2) | Data provided by Lipper Inc. — A Reuters Company. © 2009 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. | |||||||
(3) | Since 7/31/94, the date nearest the Investor Class’s inception for which data are available. | ||||||
(4) | Prior to September 4, 2007, the A Class was referred to as the Advisor Class. Performance, with sales charge, prior to that date has been | ||||||
adjusted to reflect the A Class’s current sales charge. |
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. International investing involves special risks, such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not.
3
Equity Income
One-Year Returns Over 10 Years | ||||||||||
Periods ended September 30 | ||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | |
Investor Class | 6.80% | 14.30% | -3.72% | 20.17% | 17.22% | 8.79% | 13.47% | 12.81% | -13.68% | -5.63% |
Russell 3000 | ||||||||||
Value Index | 9.35% | -7.98% | -15.89% | 24.89% | 20.89% | 16.78% | 14.55% | 13.73% | -22.70% | -10.79% |
S&P 500 Index | 13.28% | -26.62% | -20.49% | 24.40% | 13.87% | 12.25% | 10.79% | 16.44% | -21.98% | -6.91% |
Lipper Equity | ||||||||||
Income Funds Index | 8.10% | -8.82% | -16.74% | 20.48% | 17.09% | 13.52% | 12.09% | 15.23% | -22.36% | -6.56% |
Total Annual Fund Operating Expenses | ||||||||||
Institutional | ||||||||||
Investor Class | Class | A Class | B Class | C Class | R Class | |||||
0.99% | 0.79% | 1.24% | 1.99% | 1.99% | 1.49% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. International investing involves special risks, such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not.
4
Portfolio Commentary |
Equity Income
Portfolio Managers: Phil Davidson, Kevin Toney, and Michael Liss
Performance Summary
Equity Income returned 17.30%* for the six months ended September 30, 2009. By comparison, the Lipper Equity Income Index returned 33.94%, and the average return for Morningstar’s Large Cap Value category (whose performance, like Equity Income’s, reflects operating expenses) was 35.95%.** Two market indices—the Russell 3000 Value Index and the S&P 500 Index—returned 38.52% and 34.02%, respectively. The portfolio’s return reflects operating expenses, while the indices’ returns do not.
The stock market rally, which began in March, persisted through the end of the reporting period. The U.S. economy continued to show signs of improvement in response to government stimulus programs, while corporate earnings were better than anticipated. Improving conditions in the capital markets were also favorable for the more highly leveraged companies. These factors led many investors to shift into riskier assets, and many of the period’s largest gains were made by lower-quality businesses. That situation was at odds with Equity Income’s investment approach, which emphasizes higher-quality, income-producing securities. Still, the portfolio received positive contributions in absolute terms from all 10 of the sectors in which it was invested. On a relative basis, Equity Income’s positions in the financials and industrials sectors were among the largest detractors. Foreign holdings accounted for a portion of the portfolio’s total return during the period.
Since its inception on August 1, 1994, Equity Income has produced an average annual return of 10.32%, topping the returns for the Lipper Equity Income Index, Morningstar’s Large Cap Value category average,** the Russell 3000 Value Index, and the S&P 500 Index for the same period (see performance information on pages 3 and 4).
Financials Slowed Progress
While financials contributed the most to the portfolio’s return, the sector was the largest source of underperformance against the benchmark. Equity Income’s underweight position, which had been advantageous during the turmoil that roiled the sector, acted as a restraint as companies with stressed balance sheets outperformed stronger, higher-quality businesses. For example, the portfolio owned People’s United Financial, Inc. The largest regional bank in New England, with excess capital and positive operating trends, People’s United nonetheless posted a modest decline for the period.
The management team has approached financials with caution and conservatism for some time, as evidenced by our investment in a convertible security issued by Bank of America. While the company’s common shares
* All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. |
**The average returns for Morningstar’s Large Cap Value category were -7.18%, 0.85% and 2.51% for the one-, five- and ten-year periods ended |
September 30, 2009, respectively, and 7.00% since the fund’s inception. © Morningstar, Inc. All Rights Reserved. The information contained herein: |
(1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete |
or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. |
5
Equity Income
rebounded strongly during the low-quality rally in financial stocks, Bank of America’s less-risky convertible still provided the portfolio with a return of more than 30%. Elsewhere in the sector, our investments were concentrated in the less-volatile names in the insurance, thrifts, and capital markets segments. In the insurance industry, Equity Income owned Marsh & McLennan and Chubb Corp., two higher-quality companies that under-performed during the first half of the reporting period. A global insurance broker, Marsh does not have a credit-sensitive business model and the management team believes it is well positioned to benefit from regulatory changes and improving operating conditions. Property and casualty insurer Chubb Corp. is a conservatively managed business with a strong balance sheet and a careful underwriting policy.
The capital markets segment provided a top contributor in T. Rowe Price Group. As the environment improves for asset managers, the company stands to be benefit from consolidation within the segment and may be able to gain market share.
Industrials Hampered Results
Relative performance was also hampered by the combination of an underweight position and stock selection in the industrials sector. Many industrials stocks, which suffered steep declines as the recession took hold, posted strong results during the period. The sector was up more than 50% in the benchmark.
An underweight in General Electric (GE) detracted. Shares of GE, which comprise nearly 3% of the benchmark, rallied as financial conditions improved and U.S. industrial production increased.
Materials Provided Notable Contributor
The materials sector was the source of key contributor Freeport-McMoRan Copper & Gold. The portfolio owned the mining company’s convertible security, which tends to be higher yielding and less volatile than its common stock. The position enhanced performance as copper and gold prices climbed during the period.
Outlook
We will continue to follow our disciplined, bottom-up investment process, selecting companies one at a time for the portfolio. As of September 30, 2009, we see attractive opportunities in consumer staples, health care, and information technology, reflected by our overweight positions in these sectors. We continue to be selective in holdings of consumer discretionary, financials, industrials, and materials companies, relying on fundamental analysis to identify strong, financially sound businesses with securities that provide attractive yields.
6
Equity Income | |||
Top Ten Holdings as of September 30, 2009 | |||
% of net assets | % of net assets | ||
as of 9/30/09 | as of 3/31/09 | ||
Exxon Mobil Corp. | 5.5% | 6.6% | |
Wyeth | 5.0% | 3.4% | |
AT&T, Inc. | 3.9% | 4.7% | |
Kimberly-Clark Corp. | 3.8% | 4.2% | |
Marsh & McLennan Cos., Inc. | 3.7% | 3.4% | |
Bank of America Corp. (Convertible Preferred Stock) | 3.6% | — | |
Total SA | 3.2% | 3.0% | |
Chevron Corp. | 3.1% | 4.7% | |
Wal-Mart Stores, Inc. | 3.0% | 0.6% | |
Johnson & Johnson | 2.9% | 2.5% | |
Top Five Industries as of September 30, 2009 | |||
% of net assets | % of net assets | ||
as of 9/30/09 | as of 3/31/09 | ||
Oil, Gas & Consumable Fuels | 13.0% | 16.0% | |
Pharmaceuticals | 10.6% | 10.7% | |
Insurance | 7.3% | 7.0% | |
Diversified Telecommunication Services | 6.2% | 5.9% | |
Commercial Services & Supplies | 6.0% | 5.1% | |
Types of Investments in Portfolio | |||
% of net assets | % of net assets | ||
as of 9/30/09 | as of 3/31/09 | ||
Domestic Common Stocks | 65.7% | 67.7% | |
Foreign Common Stocks(1) | 7.3% | 6.5% | |
Convertible Bonds | 22.6% | 23.4% | |
Convertible Preferred Stocks | 3.6% | 0.8% | |
Preferred Stocks | 0.1% | 0.2% | |
Total Equity Exposure | 99.3% | 98.6% | |
Temporary Cash Investments | 0.7% | 1.0% | |
Other Assets and Liabilities | —(2) | 0.4% | |
(1) | Includes depositary shares, dual listed securities and foreign ordinary shares. | ||
(2) | Category is less than 0.05% of total net assets. |
7
Performance |
Value | |||||||
Total Returns as of September 30, 2009 | |||||||
Average Annual Returns | |||||||
Since | Inception | ||||||
6 months(1) | 1 year | 5 years | 10 years | Inception | Date | ||
Investor Class | 30.38% | -6.14% | 1.20% | 5.14% | 8.82% | 9/1/93 | |
Russell 3000 Value Index(2) | 38.52% | -10.79% | 0.96% | 2.97% | 7.93%(3) | — | |
S&P 500 Index(2) | 34.02% | -6.91% | 1.02% | -0.15% | 7.28%(3) | — | |
Lipper Multi-Cap | |||||||
Value Funds Index(2) | 37.01% | -4.70% | 0.56% | 3.20% | 7.10%(3) | — | |
Institutional Class | 30.16% | -6.13% | 1.37% | 5.35% | 5.32% | 7/31/97 | |
A Class(4) | 10/2/96 | ||||||
No sales charge* | 29.95% | -6.56% | 0.91% | 4.87% | 6.61% | ||
With sales charge* | 22.53% | -11.97% | -0.28% | 4.25% | 6.12% | ||
B Class | 1/31/03 | ||||||
No sales charge* | 29.72% | -7.07% | 0.20% | — | 5.12% | ||
With sales charge* | 24.72% | -11.07% | 0.00% | — | 5.12% | ||
C Class | 6/4/01 | ||||||
No sales charge* | 29.69% | -7.13% | 0.19% | — | 2.26% | ||
With sales charge* | 28.69% | -7.13% | 0.19% | — | 2.26% | ||
R Class | 30.05% | -6.61% | — | — | -1.84% | 7/29/05 | |
* 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) | Total returns for periods less than one year are not annualized. | ||||||
(2) | Data provided by Lipper Inc. — A Reuters Company. © 2009 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. | |||||||
(3) | Since 8/31/93, the date nearest the Investor Class’s inception for which data are available. | ||||||
(4) | Prior to September 4, 2007, the A Class was referred to as the Advisor Class. Performance, with sales charge, prior to that date has been | ||||||
adjusted to reflect the A Class’s current sales charge. |
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. International investing involves special risks, such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not.
8
Value
One-Year Returns Over 10 Years | ||||||||||
Periods ended September 30 | ||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | |
Investor Class | 2.95% | 12.36% | -8.55% | 23.02% | 19.56% | 9.96% | 14.69% | 12.11% | -19.99% | -6.14% |
Russell 3000 | ||||||||||
Value Index | 9.35% | -7.98% | -15.89% | 24.89% | 20.89% | 16.78% | 14.55% | 13.73% | -22.70% | -10.79% |
S&P 500 Index | 13.28% | -26.62% | -20.49% | 24.40% | 13.87% | 12.25% | 10.79% | 16.44% | -21.98% | -6.91% |
Lipper Multi-Cap | ||||||||||
Value Funds Index | 10.61% | -6.04% | -14.25% | 27.08% | 17.61% | 15.42% | 10.94% | 12.73% | -25.26% | -4.70% |
Total Annual Fund Operating Expenses | ||||||||||
Institutional | ||||||||||
Investor Class | Class | A Class | B Class | C Class | R Class | |||||
0 1.01% | 0.81% | 1.26% | 2.01% | 2.01% | 1.51% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. International investing involves special risks, such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not.
9
Portfolio Commentary |
Value
Portfolio Managers: Michael Liss, Kevin Toney, and Phil Davidson
Performance Summary
Value returned 30.38%* for the six months ended September 30, 2009. By comparison, the Lipper Multi-Cap Value Index returned 37.01%, while the average return for Morningstar’s Large Cap Value category (whose performance, like Value’s, reflects operating expenses) was 35.95%.** Two market indices—the Russell 3000 Value Index and the S&P 500 Index—returned 38.52% and 34.02%, respectively. The portfolio’s return reflects operating expenses, while the indices’ returns do not.
The stock market rally, which began in March, persisted through the end of the reporting period. The U.S. economy continued to show signs of improvement in response to government stimulus programs, while corporate earnings were better than anticipated. Improving conditions in the capital markets reduced concern about the balance sheets of the more highly leveraged companies. These factors led many investors to shift into riskier assets, and many of the period’s largest gains were made by lower-quality companies. That situation was at odds with Value’s investment approach, which emphasizes higher-quality businesses with sound balance sheets. Nonetheless, the portfolio received positive contributions in absolute terms from all 10 of the sectors in which it was invested. On a relative basis, positions in the financials and consumer discretionary sectors detracted. The portfolio’s energy and information technology st ocks contributed positively. Foreign holdings accounted for a portion of Value’s total return during the period.
Since Value’s inception on September 1, 1993, the portfolio has produced an average annual return of 8.82%, topping the returns for that period for the Lipper Multi-Cap Value Index, Morningstar’s Large Cap Value category average,** the Russell 3000 Value Index, and the S&P 500 Index (see the performance information on pages 8 and 9).
Financials Slowed Results
An underweight in financials stocks, which had been advantageous during the turmoil that roiled the sector, acted as a restraint as companies with stressed balance sheets, many of which had been staring at bankruptcy only months earlier, outperformed stronger, higher-quality businesses. Value did not own Citigroup, which rose more than 90% during the period despite uncertainty about its return to profitability and how it might reduce the U.S. government’s 34% ownership stake.
For some time, we have approached the financials sector with caution and conservatism. During the period, the portfolio’s investments were concentrated in the less-volatile insurance and capital markets names. Many of these companies, however, underperformed during the low-quality rally. A notable
* All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. |
**The average returns for Morningstar’s Large Cap Value category were -7.18%, 0.85% and 2.51% for the one-, five- and ten-year periods ended |
September 30, 2009, respectively, and 7.01% since the fund’s inception. © 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. |
10
Value
detractor was Marsh & McLennan. The global insurance broker does not have a credit-sensitive business model, and we believe it is well positioned to benefit from regulatory changes and improving operating conditions.
Value’s underweight in real estate investment trusts (REITs) was also detrimental. We have been concerned for some time about this segment’s operating trends, financial leverage, access to funding, and valuation. However, in spite of deterioration in the commercial real estate market, REIT stocks posted gains of more than 67% in the benchmark.
Consumer Discretionary Detracted
Relative performance was hampered by the combination of an underweight position and security selection in the consumer discretionary sector. Many of these stocks, which suffered steep declines as the recession took hold, rallied on optimism about a possible economic recovery and improving consumer sentiment.
Generally speaking, the portfolio’s performance was a result of what it didn’t own rather than what it did. For example, Value did not hold shares of Ford Motor, which rose nearly 175% during the period. The car maker has been able to restructure its business without the help of the U.S. government, unlike competitors General Motors and Chrysler, and has steadily gained market share.
Energy Boosted Performance
Security selection among the energy sector added positively. Chevron, which faces a potentially large lawsuit in Ecuador, trailed the performance of the energy sector and the benchmark. Because the portfolio held an underweight in the stock, the position contributed to relative results. Value also owned notable contributor Cameron International, which supplies equipment for oil and gas production. The company is benefiting from expanding margins and improving orders for its subsea production equipment.
Information Technology Contributed
The portfolio’s position in information technology enhanced relative performance. The portfolio held Tyco Electronics, a global provider of engineered electronic components, network solutions, wireless systems, and undersea telecommunication systems. Tyco, which experienced a drop in earnings in the global market downturn, reported an improvement in consumer demand.
Outlook
We will continue to follow our disciplined, bottom-up process, selecting securities one at a time for the portfolio. As of September 30, 2009, we see opportunities in consumer staples, health care, and information technology, reflected by overweight positions in these sectors relative to the benchmark. Our fundamental analysis and valuation work are also directing us toward relative underweights in financials and materials stocks.
11
Value | ||
Top Ten Holdings as of September 30, 2009 | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Exxon Mobil Corp. | 5.1% | 5.7% |
AT&T, Inc. | 4.0% | 4.5% |
JPMorgan Chase & Co. | 3.0% | 3.0% |
General Electric Co. | 2.9% | 2.7% |
Total SA | 2.7% | 2.1% |
Marsh & McLennan Cos., Inc. | 2.6% | 2.7% |
Kimberly-Clark Corp. | 2.3% | 2.8% |
Pfizer, Inc. | 2.3% | 2.6% |
Lowe’s Cos., Inc. | 2.1% | 1.5% |
Berkshire Hathaway, Inc., Class A | 1.9% | 2.0% |
Top Five Industries as of September 30, 2009 | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Oil, Gas & Consumable Fuels | 14.9% | 13.1% |
Pharmaceuticals | 8.1% | 9.4% |
Insurance | 7.7% | 6.8% |
Capital Markets | 5.6% | 2.4% |
Diversified Telecommunication Services | 5.3% | 6.2% |
Types of Investments in Portfolio | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Domestic Common Stocks | 89.3% | 91.0% |
Foreign Common Stocks(1) | 8.1% | 7.6% |
Total Common Stocks | 97.4% | 98.6% |
Temporary Cash Investments | 2.2% | 1.2% |
Other Assets and Liabilities | 0.4% | 0.2% |
(1) Includes depositary shares, dual listed securities and foreign ordinary shares. |
12
Performance |
Large Company Value | |||||||
Total Returns as of September 30, 2009 | |||||||
Average Annual Returns | |||||||
Since | Inception | ||||||
6 months(1) | 1 year | 5 years | 10 years | Inception | Date | ||
Investor Class | 34.83% | -9.11% | -0.41% | 3.28% | 2.32% | 7/30/99 | |
Russell 1000 Value Index(2) | 37.99% | -10.62% | 0.90% | 2.59% | 1.81% | — | |
S&P 500 Index(2) | 34.02% | -6.91% | 1.02% | -0.15% | -0.47% | — | |
Institutional Class | 34.96% | -8.93% | -0.22% | — | 1.68% | 8/10/01 | |
A Class(3) | 10/26/00 | ||||||
No sales charge* | 34.66% | -9.34% | -0.66% | — | 2.91% | ||
With sales charge* | 26.98% | -14.53% | -1.82% | — | 2.22% | ||
B Class | 1/31/03 | ||||||
No sales charge* | 34.33% | -9.96% | -1.36% | — | 3.59% | ||
With sales charge* | 29.33% | -13.96% | -1.57% | — | 3.59% | ||
C Class | 11/7/01 | ||||||
No sales charge* | 34.15% | -10.01% | -1.40% | — | 1.21% | ||
With sales charge* | 33.15% | -10.01% | -1.40% | — | 1.21% | ||
R Class | 34.49% | -9.56% | -0.91% | — | 1.82% | 8/29/03 | |
* 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) | Total returns for periods less than one year are not annualized. | ||||||
(2) | Data provided by Lipper Inc. — A Reuters Company. © 2009 Reuters. All rights reserved. Any copying, republication or redistribution of Lipper | ||||||
content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be | |||||||
liable for any errors or delays in the content, or for any actions taken in reliance thereon. | |||||||
The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be | |||||||
reliable. Although carefully verified, data on compilations is not guaranteed by Lipper and may be incomplete. No offer or solicitations to buy or | |||||||
sell any of the securities herein is being made by Lipper. | |||||||
(3) | 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.
13
Large Company Value
One-Year Returns Over 10 Years | ||||||||||
Periods ended September 30 | ||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | |
Investor Class | 5.67% | 4.99% | -13.70% | 23.93% | 18.84% | 12.38% | 13.42% | 13.15% | -25.28% | -9.11% |
Russell 1000 | ||||||||||
Value Index | 8.91% | -8.91% | -16.95% | 24.37% | 20.52% | 16.69% | 14.62% | 14.45% | -23.56% | -10.62% |
S&P 500 Index | 13.28% | -26.62% | -20.49% | 24.40% | 13.87% | 12.25% | 10.79% | 16.44% | -21.98% | -6.91% |
Total Annual Fund Operating Expenses | ||||||||||
Institutional | ||||||||||
Investor Class | Class | A Class | B Class | C Class | R Class | |||||
0.83% | 0.63% | 1.08% | 1.83% | 1.83% | 1.33% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
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.
14
Portfolio Commentary |
Large Company Value
Portfolio Managers: Chuck Ritter and Brendan Healy
Performance Summary
Large Company Value returned 34.83%* for the six months ended September 30, 2009. By comparison, its benchmark, the Russell 1000 Value Index, returned 37.99%. The broader market, as measured by the S&P 500 Index, returned 34.02%. The portfolio’s return reflects operating expenses, while the indices’ returns do not. The average return for Morningstar’s Large Cap Value category (whose performance, like Large Company Value’s, reflects operating expenses) was 35.95%.**
The stock market rally, which began in March, persisted through the end of the reporting period. The U.S. economy continued to show signs of improvement in response to government stimulus programs, while corporate earnings were better than anticipated. Improving conditions in the capital markets were also favorable for the more highly leveraged companies. These factors led many investors to shift into riskier assets. In this environment, Large Company Value received positive contributions in absolute terms from all 10 of the sectors in which it was invested. On a relative basis, the portfolio’s exposure to the health care and financials sectors detracted. Its complement of utilities and industrials stocks added to results.
Since Large Company Value’s inception on July 30, 1999, the portfolio has produced an average annual return of 2.32%, topping the returns for Morningstar’s Large Cap Value category average,** the Russell 1000 Value Index, and the S&P 500 Index for that period (see performance information on pages 13 and 14).
Health Care Detracted
The portfolio’s overweight in health care slowed relative results. Health care stocks gained, but their performance was constrained as investors priced in worst-case scenarios for health care reform. Although the health care sector rebounded from its lows by the end of the period, it remained one of the weakest performers in the benchmark.
Security selection also dampened performance. A notable detractor was Abbott Laboratories, which develops and manufactures laboratory diagnostics, medical devices, and pharmaceutical therapies. Abbott has seen a deceleration in prescription growth for Humira, its blockbuster drug for treating rheumatoid arthritis.
Financials Hampered Results
An underweight in financials, the strongest sector in the benchmark, was a drag on relative performance. Financials stocks rallied during the period as investors moved into riskier assets. In diversified financial services,
* All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. |
**The average returns for Morningstar’s Large Cap Value category were -7.18%, 0.85% and 2.51% for the one-, five- and ten-year periods ended |
September 30, 2009, respectively, and 1.78% since the fund’s inception. © 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. |
15
Large Company Value
Large Company Value held a smaller-than-the benchmark position in Citigroup. The financial giant’s shares, which had previously suffered steep declines, benefited as optimism about the economy increased.
The portfolio was also underweight in real estate investment trusts (REITs). REIT stocks posted gains of more than 71% in the benchmark despite deterioration in the commercial real estate market.
Security selection, however, added value. Large Company Value owned Ameriprise, a notable contributor. The company’s stock rose on news it would acquire most of Bank of America’s investment management group.
Utilities Provided a Boost
Large Company Value continued to benefit from a significant underweight in the utilities sector, reflecting our belief that many of these stocks have been overvalued for some time. The stance added value during the market rally when utilities underperformed all but one other benchmark sector.
Industrials Contributed
Investments in the industrials sector enhanced relative progress. Many industrials stocks, which suffered steep declines as the recession took hold, posted strong results.
The sector also provided two key contributors, Ingersoll-Rand and R.R. Donnelley & Sons. Ingersoll-Rand, a manufacturer of industrial and commercial products, reported better-than-expected results in the second quarter driven by significant cost savings from its restructuring program. Printing services company R.R. Donnelley, which experienced a profit decline during the worldwide recession, seems likely to benefit from improving economic conditions. It has also been working to reduce its debt burden.
Outlook
We continue to be bottom-up investment managers, evaluating each company individually and building the portfolio one stock at a time. Large Company Value is broadly diversified, with ongoing overweight positions in the health care, consumer staples, and information technology sectors. Our valuation work is also directing us toward smaller relative weightings in financials and utilities stocks.
16
Large Company Value | ||
Top Ten Holdings as of September 30, 2009 | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Exxon Mobil Corp. | 4.6% | 5.0% |
JPMorgan Chase & Co. | 3.7% | 3.4% |
AT&T, Inc. | 3.7% | 3.9% |
General Electric Co. | 3.7% | 3.1% |
Pfizer, Inc. | 3.4% | 3.0% |
Chevron Corp. | 3.3% | 4.6% |
Bank of America Corp. | 3.2% | 1.6% |
ConocoPhillips | 2.6% | 2.8% |
Royal Dutch Shell plc ADR | 2.6% | 2.5% |
Verizon Communications, Inc. | 2.0% | 2.2% |
Top Five Industries as of September 30, 2009 | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Oil, Gas & Consumable Fuels | 16.1% | 16.3% |
Pharmaceuticals | 10.5% | 11.4% |
Diversified Financial Services | 7.2% | 5.0% |
Diversified Telecommunication Services | 6.0% | 6.5% |
Capital Markets | 4.4% | 3.7% |
Types of Investments in Portfolio | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Domestic Common Stocks & Futures | 94.8% | 92.0% |
Foreign Common Stocks(1) | 5.1% | 4.3% |
Convertible Preferred Stocks | — | 0.1% |
Total Equity Exposure | 99.9% | 96.4% |
Temporary Cash Investments | 0.8% | — |
Other Assets and Liabilities | (0.7)% | 3.6% |
(1) Includes depositary shares, dual listed securities and foreign ordinary shares. |
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 April 1, 2009 to September 30, 2009.
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 Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments 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 Investments 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 Investments 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.
18
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.
Beginning | Ending | Expenses Paid | ||
Account Value | Account Value | During Period* | Annualized | |
4/1/09 | 9/30/09 | 4/1/09 – 9/30/09 | Expense Ratio* | |
Equity Income | ||||
Actual | ||||
Investor Class | $1,000 | $1,173.00 | $5.34 | 0.98% |
Institutional Class | $1,000 | $1,176.00 | $4.25 | 0.78% |
A Class | $1,000 | $1,171.50 | $6.70 | 1.23% |
B Class | $1,000 | $1,169.00 | $10.77 | 1.98% |
C Class | $1,000 | $1,167.10 | $10.76 | 1.98% |
R Class | $1,000 | $1,170.30 | $8.05 | 1.48% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.16 | $4.96 | 0.98% |
Institutional Class | $1,000 | $1,021.16 | $3.95 | 0.78% |
A Class | $1,000 | $1,018.90 | $6.23 | 1.23% |
B Class | $1,000 | $1,015.14 | $10.00 | 1.98% |
C Class | $1,000 | $1,015.14 | $10.00 | 1.98% |
R Class | $1,000 | $1,017.65 | $7.49 | 1.48% |
* Expenses are equal to the class’s annualized expense ratio listed in the table above, multiplied by the average account value over the period, | ||||
multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. |
19
Beginning | Ending | Expenses Paid | ||
Account Value | Account Value | During Period* | Annualized | |
4/1/09 | 9/30/09 | 4/1/09 – 9/30/09 | Expense Ratio* | |
Value | ||||
Actual | ||||
Investor Class | $1,000 | $1,303.80 | $5.78 | 1.00% |
Institutional Class | $1,000 | $1,301.60 | $4.62 | 0.80% |
A Class | $1,000 | $1,299.50 | $7.21 | 1.25% |
B Class | $1,000 | $1,297.20 | $11.52 | 2.00% |
C Class | $1,000 | $1,296.90 | $11.52 | 2.00% |
R Class | $1,000 | $1,300.50 | $8.65 | 1.50% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.05 | $5.06 | 1.00% |
Institutional Class | $1,000 | $1,021.06 | $4.05 | 0.80% |
A Class | $1,000 | $1,018.80 | $6.33 | 1.25% |
B Class | $1,000 | $1,015.04 | $10.10 | 2.00% |
C Class | $1,000 | $1,015.04 | $10.10 | 2.00% |
R Class | $1,000 | $1,017.55 | $7.59 | 1.50% |
Large Company Value | ||||
Actual | ||||
Investor Class | $1,000 | $1,348.30 | $5.00 | 0.85% |
Institutional Class | $1,000 | $1,349.60 | $3.83 | 0.65% |
A Class | $1,000 | $1,346.60 | $6.47 | 1.10% |
B Class | $1,000 | $1,343.30 | $10.87 | 1.85% |
C Class | $1,000 | $1,341.50 | $10.86 | 1.85% |
R Class | $1,000 | $1,344.90 | $7.94 | 1.35% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.81 | $4.31 | 0.85% |
Institutional Class | $1,000 | $1,021.81 | $3.29 | 0.65% |
A Class | $1,000 | $1,019.55 | $5.57 | 1.10% |
B Class | $1,000 | $1,015.79 | $9.35 | 1.85% |
C Class | $1,000 | $1,015.79 | $9.35 | 1.85% |
R Class | $1,000 | $1,018.30 | $6.83 | 1.35% |
* Expenses are equal to the class’s annualized expense ratio listed in the table above, multiplied by the average account value over the period, | ||||
multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. |
20
Schedule of Investments |
Equity Income | ||||||
SEPTEMBER 30, 2009 (UNAUDITED) | ||||||
Shares/ | Shares/ | |||||
Principal | Principal | |||||
Amount | Value | Amount | Value | |||
Common Stocks — 73.0% | ELECTRONIC EQUIPMENT, | |||||
INSTRUMENTS & COMPONENTS — 0.6% | ||||||
AEROSPACE & DEFENSE — 0.1% | AVX Corp. | 229,553 | $ 2,738,567 | |||
Northrop Grumman Corp. | 139,927 | $ 7,241,222 | Molex, Inc., Class A | 1,650,000 | 31,003,500 | |
AIR FREIGHT & LOGISTICS — 1.9% | 33,742,067 | |||||
United Parcel Service, Inc., | FOOD & STAPLES RETAILING — 3.0% | |||||
Class B | 1,862,821 | 105,193,502 | ||||
AUTOMOBILES — 0.1% | Wal-Mart Stores, Inc. | 3,307,516 | 162,365,961 | |||
Honda Motor Co. Ltd. | 200,900 | 6,188,253 | FOOD PRODUCTS — 4.9% | |||
CAPITAL MARKETS — 2.7% | Campbell Soup Co. | 1,140,821 | 37,213,581 | |||
AllianceBernstein Holding LP | 310,073 | 8,458,792 | H.J. Heinz Co. | 2,620,200 | 104,152,950 | |
Charles Schwab Corp. (The) | 1,020,000 | 19,533,000 | Hershey Co. (The) | 1,090,300 | 42,369,058 | |
Northern Trust Corp. | 1,464,200 | 85,157,872 | Kraft Foods, Inc., Class A | 1,350,820 | 35,486,041 | |
T. Rowe Price Group, Inc. | 755,100 | 34,508,070 | Unilever NV CVA | 1,712,000 | 49,341,001 | |
147,657,734 | 268,562,631 | |||||
COMMERCIAL BANKS — 0.7% | GAS UTILITIES — 4.3% | |||||
Commerce Bancshares, Inc. | 1,009,847 | 37,606,702 | AGL Resources, Inc. | 2,806,100 | 98,971,147 | |
COMMERCIAL SERVICES & SUPPLIES — 1.8% | Nicor, Inc. | 910,200 | 33,304,218 | |||
Pitney Bowes, Inc. | 970,200 | 24,109,470 | Spectra Energy Partners LP | 880,008 | 21,401,795 | |
WGL Holdings, Inc.(1) | 2,504,288 | 82,992,104 | ||||
Waste Management, Inc. | 2,502,445 | 74,622,910 | ||||
98,732,380 | 236,669,264 | |||||
COMPUTERS & PERIPHERALS — 0.1% | HOUSEHOLD PRODUCTS — 5.5% | |||||
Diebold, Inc. | 155,670 | 5,126,213 | Clorox Co. | 1,590,100 | 93,529,682 | |
DISTRIBUTORS — 0.5% | Kimberly-Clark Corp. | 3,558,900 | 209,903,922 | |||
Genuine Parts Co. | 653,700 | 24,879,822 | 303,433,604 | |||
DIVERSIFIED TELECOMMUNICATION | INSURANCE — 7.0% | |||||
SERVICES — 6.2% | Allstate Corp. (The) | 2,878,600 | 88,142,732 | |||
AT&T, Inc. | 7,885,400 | 212,984,654 | Chubb Corp. (The) | 1,391,900 | 70,165,679 | |
BCE, Inc. | 4,455,800 | 109,829,134 | Marsh & McLennan | |||
Verizon Communications, Inc. | 540,000 | 16,345,800 | Cos., Inc. | 8,130,057 | 201,056,309 | |
339,159,588 | Transatlantic Holdings, Inc. | 530,104 | 26,595,318 | |||
ELECTRIC UTILITIES — 1.6% | 385,960,038 | |||||
Northeast Utilities | 1,456,100 | 34,567,814 | IT SERVICES — 1.1% | |||
Portland General Electric Co. | 698,543 | 13,775,268 | Automatic Data | |||
Processing, Inc. | 1,532,700 | 60,235,110 | ||||
Southern Co. | 1,279,400 | 40,518,598 | METALS & MINING — 0.4% | |||
88,861,680 | Barrick Gold Corp. | 517,606 | 19,617,267 | |||
ELECTRICAL EQUIPMENT — 1.0% | MULTI-UTILITIES — 1.6% | |||||
Cooper Industries plc, | ||||||
Class A | 1,000,000 | 37,570,000 | PG&E Corp. | 1,228,700 | 49,750,063 | |
Emerson Electric Co. | 137,200 | 5,498,976 | Wisconsin Energy Corp. | 852,300 | 38,498,391 | |
Rockwell Automation, Inc. | 340,000 | 14,484,000 | 88,248,454 | |||
57,552,976 |
21
Equity Income | ||||||
Shares/ | Shares/ | |||||
Principal | Principal | |||||
Amount | Value | Amount | Value | |||
OIL, GAS & CONSUMABLE FUELS — 12.5% | COMMERCIAL SERVICES & SUPPLIES — 4.2% | |||||
BP plc | 4,230,600 | $ 37,389,068 | Allied Waste Industries, Inc., | |||
Chevron Corp. | 2,447,500 | 172,377,425 | 4.25%, 4/15/34 | $105,227,000 | $ 105,095,466 | |
Exxon Mobil Corp. | 4,404,129 | 302,167,291 | Waste Connections, Inc., | |||
Total SA | 3,000,000 | 178,257,979 | 3.75%, 4/1/26 | 118,896,000 | 125,286,660 | |
690,191,763 | 230,382,126 | |||||
PHARMACEUTICALS — 10.6% | ENERGY EQUIPMENT & SERVICES — 2.3% | |||||
Cameron International Corp., | ||||||
Bristol-Myers Squibb Co. | 4,838,300 | 108,958,516 | 2.50%, 6/15/26 | 63,311,000 | 81,354,635 | |
Eli Lilly & Co. | 1,256,900 | 41,515,407 | Schlumberger Ltd., | |||
Johnson & Johnson | 2,629,435 | 160,106,297 | 2.125%, 6/1/23 | 29,564,000 | 46,415,480 | |
Wyeth | 5,642,700 | 274,122,366 | 127,770,115 | |||
584,702,586 | HEALTH CARE PROVIDERS & SERVICES — 1.2% | |||||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.8% | Lincare Holdings, Inc., | |||||
Annaly Capital | 2.75%, 11/1/37 | 68,149,000 | 67,978,627 | |||
Management, Inc. | 810,700 | 14,706,098 | INSURANCE — 0.3% | |||
Public Storage | 372,600 | 28,034,424 | Deutsche Bank AG (London), | |||
42,740,522 | (convertible into Aon Corp.), | |||||
SEMICONDUCTORS & SEMICONDUCTOR | 9.57%, 11/9/09(2)(3) | 451,000 | 18,043,608 | |||
EQUIPMENT — 0.3% | IT SERVICES — 1.0% | |||||
Applied Materials, Inc. | 1,261,446 | 16,903,376 | DST Systems, Inc., VRN, | |||
SPECIALTY RETAIL — 1.9% | 3.63%, 8/15/23 | 50,880,000 | 53,296,800 | |||
Lowe’s Cos., Inc. | 5,000,000 | 104,700,000 | METALS & MINING — 1.7% | |||
THRIFTS & MORTGAGE FINANCE — 1.8% | Newmont Mining Corp., | |||||
3.00%, 2/15/12 | 77,000,000 | 92,785,000 | ||||
Hudson City Bancorp., Inc. | 440,000 | 5,786,000 | OIL, GAS & CONSUMABLE FUELS — 0.5% | |||
People’s United | ||||||
Financial, Inc. | 6,160,000 | 95,849,600 | Peabody Energy Corp., | |||
4.75%, 12/15/41 | 31,504,000 | 27,881,040 | ||||
101,635,600 | PAPER & FOREST PRODUCTS — 1.0% | |||||
TOTAL COMMON STOCKS | ||||||
(Cost $3,563,417,186) | 4,017,908,315 | Rayonier TRS Holdings, Inc., | ||||
3.75%, 10/15/12 | 44,613,000 | 47,401,313 | ||||
Convertible Bonds — 22.6% | Rayonier TRS Holdings, Inc., | |||||
AUTO COMPONENTS — 1.2% | 4.50%, 8/15/15(2) | 7,500,000 | 8,221,875 | |||
BorgWarner, Inc., | 55,623,188 | |||||
3.50%, 4/15/12 | $ 56,010,000 | 68,472,225 | REAL ESTATE INVESTMENT TRUSTS (REITs) — 1.5% | |||
CAPITAL MARKETS — 0.7% | Host Hotels & Resorts LP, | |||||
Goldman Sachs Group, | 3.25%, 4/15/24(2) | 64,972,000 | 65,296,860 | |||
Inc. (The), (convertible | Reckson Operating | |||||
into Charles Schwab Corp. | Partnership LP, | |||||
(The)), 10.40%, 1/25/10(2)(3) | 1,450,000 | 26,448,921 | 4.00%, 6/15/25 | 19,400,000 | 19,303,000 | |
Janus Capital Group, Inc., | 84,599,860 | |||||
3.25%, 7/15/14 | 9,500,000 | 11,958,125 | SEMICONDUCTORS & | |||
38,407,046 | SEMICONDUCTOR EQUIPMENT — 4.1% | |||||
COMMERCIAL BANKS — 2.8% | Intel Corp., 2.95%, 12/15/35 | 176,650,000 | 158,543,375 | |||
U.S. Bancorp., VRN, | Intel Corp., 3.25%, 8/1/39(2) | 16,026,000 | 17,207,917 | |||
0.00%, 12/11/09 | 155,066,000 | 153,011,376 | Linear Technology Corp., | |||
3.125%, 5/1/27 | 34,970,000 | 35,144,850 | ||||
Verigy Ltd., 5.25%, 7/15/14(2) | 12,500,000 | 14,093,750 | ||||
224,989,892 |
22
Equity Income | ||||||
Shares/ | Shares/ | |||||
Principal | Principal | |||||
Amount | Value | Amount | Value | |||
SOFTWARE — 0.1% | Temporary Cash Investments — 0.7% | |||||
Sybase, Inc., 3.50%, | JPMorgan U.S. Treasury | |||||
8/15/29(2) | $ 3,596,000 | $ 4,023,025 | ||||
Plus Money Market Fund | ||||||
TOTAL CONVERTIBLE BONDS | Agency Shares | 81,893 | $ 81,893 | |||
(Cost $1,150,522,814) | 1,247,263,928 | Repurchase Agreement, Goldman Sachs | ||||
Convertible Preferred Stocks — 3.6% | Group, Inc., (collateralized by various U.S. | |||||
Treasury obligations, 4.75%, 2/15/37, | ||||||
DIVERSIFIED FINANCIAL SERVICES — 3.6% | valued at $38,860,655), in a joint trading | |||||
Bank of America Corp., | account at 0.01%, dated 9/30/09, due | |||||
7.25%, 12/31/49(4) | 10/1/09 (Delivery value $38,100,011) | 38,100,000 | ||||
(Cost $165,933,648) | 230,100 | 195,582,699 | TOTAL TEMPORARY | |||
Preferred Stocks — 0.1% | CASH INVESTMENTS | |||||
(Cost $38,181,893) | 38,181,893 | |||||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.1% | ||||||
TOTAL INVESTMENT | ||||||
Public Storage, | SECURITIES — 100.0% | |||||
7.50%, 11/6/09(4) | (Cost $4,924,930,872) | 5,506,837,224 | ||||
(Cost $6,875,331) | 316,522 | 7,900,389 | ||||
OTHER ASSETS AND LIABILITIES(5) | (776,182) | |||||
TOTAL NET ASSETS — 100.0% | $5,506,061,042 |
Forward Foreign Currency Exchange Contracts | |||||
Contracts to Sell | Settlement Date | Value | Unrealized Gain (Loss) | ||
111,696,039 | CAD for USD | 10/30/09 | $104,325,445 | $(1,698,546) | |
99,032,746 | EUR for USD | 10/30/09 | 144,919,567 | 347,606 | |
15,252,343 | GBP for USD | 10/30/09 | 24,372,685 | (95,267) | |
349,314,875 | JPY for USD | 10/30/09 | 3,892,170 | 8,422 | |
$277,509,867 | $(1,437,785) | ||||
(Value on Settlement Date $276,072,082) | |||||
Notes to Schedule of Investments | |||||
CAD = Canadian Dollar | |||||
CVA = Certificaten Van Aandelen | |||||
EUR = Euro | |||||
GBP = British Pound | |||||
JPY = Japanese Yen | |||||
USD = United States Dollar | |||||
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is effective at the period end. | |||||
(1) | Affiliated Company: the fund’s holding represents ownership of 5% or more of the voting securities of the company; therefore, the company is | ||||
affiliated as defined in the Investment Company Act of 1940. | |||||
(2) | 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 these securities at the period end was | |||||
$153,335,956, which represented 2.8% of total net assets. | |||||
(3) | Equity-linked debt security. The aggregated value of these securities at the period end was $44,492,529, which represented 0.8% of total net assets. | ||||
(4) | Perpetual security. These securities do not have a predetermined maturity date. The coupon rates are fixed for a period of time and may be | ||||
structured to adjust thereafter. Interest reset or next call date is indicated, as applicable. | |||||
(5) | Category is less than 0.05% of total net assets. | ||||
See Notes to Financial Statements. |
23
Value | ||||||
SEPTEMBER 30, 2009 (UNAUDITED) | ||||||
Shares | Value | Shares | Value | |||
Common Stocks — 97.4% | COMMUNICATIONS EQUIPMENT — 0.4% | |||||
AEROSPACE & DEFENSE — 1.2% | Nokia Oyj ADR | 414,180 | $ 6,055,312 | |||
Boeing Co. (The) | 60,650 | $ 3,284,197 | COMPUTERS & PERIPHERALS — 1.4% | |||
Honeywell International, Inc. | 142,600 | 5,297,590 | Diebold, Inc. | 328,250 | 10,809,273 | |
Northrop Grumman Corp. | 157,280 | 8,139,240 | Hewlett-Packard Co. | 123,900 | 5,849,319 | |
QLogic Corp.(1) | 173,020 | 2,975,944 | ||||
16,721,027 | ||||||
AIR FREIGHT & LOGISTICS — 0.8% | 19,634,536 | |||||
United Parcel Service, Inc., | CONTAINERS & PACKAGING — 0.8% | |||||
Class B | 218,500 | 12,338,695 | Bemis Co., Inc. | 477,850 | 12,381,094 | |
AIRLINES — 0.4% | DISTRIBUTORS — 1.3% | |||||
Southwest Airlines Co. | 578,620 | 5,554,752 | Genuine Parts Co. | 514,120 | 19,567,407 | |
AUTOMOBILES — 1.5% | DIVERSIFIED — 0.3% | |||||
Honda Motor Co. Ltd. | 175,900 | 5,418,187 | iShares Russell 3000 | |||
Toyota Motor Corp. | 412,900 | 16,421,244 | Value Index Fund | 71,000 | 5,160,990 | |
21,839,431 | DIVERSIFIED FINANCIAL SERVICES — 3.7% | |||||
BEVERAGES — 1.0% | JPMorgan Chase & Co. | 968,330 | 42,432,221 | |||
PepsiCo, Inc. | 237,460 | 13,929,404 | McGraw-Hill Cos., Inc. (The) | 442,850 | 11,133,249 | |
CAPITAL MARKETS — 5.6% | 53,565,470 | |||||
AllianceBernstein Holding LP | 594,550 | 16,219,324 | DIVERSIFIED TELECOMMUNICATION | |||
SERVICES — 5.3% | ||||||
Ameriprise Financial, Inc. | 374,770 | 13,615,394 | AT&T, Inc. | 2,138,720 | 57,766,827 | |
Bank of New York | ||||||
Mellon Corp. (The) | 520,450 | 15,087,845 | BCE, Inc. | 219,100 | 5,400,503 | |
Goldman Sachs | Verizon Communications, Inc. | 428,610 | 12,974,025 | |||
Group, Inc. (The) | 42,270 | 7,792,475 | 76,141,355 | |||
Legg Mason, Inc. | 245,070 | 7,604,522 | ELECTRIC UTILITIES — 3.5% | |||
Morgan Stanley | 225,450 | 6,961,896 | American Electric | |||
Northern Trust Corp. | 173,770 | 10,106,463 | Power Co., Inc. | 180,110 | 5,581,609 | |
State Street Corp. | 52,160 | 2,743,616 | IDACORP, Inc. | 573,090 | 16,499,261 | |
80,131,535 | Southern Co. | 156,910 | 4,969,340 | |||
CHEMICALS — 1.0% | Westar Energy, Inc. | 1,169,020 | 22,807,580 | |||
E.I. du Pont | 49,857,790 | |||||
de Nemours & Co. | 320,230 | 10,292,192 | ELECTRICAL EQUIPMENT — 2.2% | |||
International Flavors & | Cooper Industries plc, | |||||
Fragrances, Inc. | 76,420 | 2,898,611 | Class A | 111,950 | 4,205,961 | |
Minerals Technologies, Inc. | 16,840 | 800,910 | Emerson Electric Co. | 186,120 | 7,459,690 | |
13,991,713 | Hubbell, Inc., Class B | 480,780 | 20,192,760 | |||
COMMERCIAL BANKS —1.5% | 31,858,411 | |||||
Commerce Bancshares, Inc. | 144,750 | 5,390,490 | ELECTRONIC EQUIPMENT, | |||
U.S. Bancorp. | 753,740 | 16,476,756 | INSTRUMENTS & COMPONENTS — 1.7% | |||
21,867,246 | Molex, Inc. | 686,900 | 14,342,472 | |||
COMMERCIAL SERVICES & SUPPLIES — 2.2% | Tyco Electronics Ltd. | 434,370 | 9,677,764 | |||
Avery Dennison Corp. | 67,420 | 2,427,794 | 24,020,236 | |||
Pitney Bowes, Inc. | 250,010 | 6,212,749 | ||||
Republic Services, Inc. | 344,140 | 9,143,800 | ||||
Waste Management, Inc. | 460,060 | 13,718,989 | ||||
31,503,332 |
24
Value | ||||||
Shares | Value | Shares | Value | |||
ENERGY EQUIPMENT & SERVICES — 1.4% | INSURANCE — 7.7% | |||||
Baker Hughes, Inc. | 111,300 | $ 4,748,058 | Allstate Corp. (The) | 399,960 | $ 12,246,775 | |
Cameron International | Aon Corp. | 113,140 | 4,603,667 | |||
Corp.(1) | 71,620 | 2,708,668 | Berkshire Hathaway, Inc., | |||
Helmerich & Payne, Inc. | 70,930 | 2,803,863 | Class A(1) | 270 | 27,270,000 | |
Schlumberger Ltd. | 163,150 | 9,723,740 | Chubb Corp. (The) | 211,380 | 10,655,666 | |
19,984,329 | Marsh & McLennan | |||||
FOOD & STAPLES RETAILING — 0.5% | Cos., Inc. | 1,500,450 | 37,106,128 | |||
Costco Wholesale Corp. | 50,610 | 2,857,440 | Transatlantic Holdings, Inc. | 107,040 | 5,370,197 | |
Wal-Mart Stores, Inc. | 77,520 | 3,805,457 | Travelers Cos., Inc. (The) | 260,900 | 12,844,107 | |
6,662,897 | 110,096,540 | |||||
FOOD PRODUCTS — 5.2% | IT SERVICES — 0.7% | |||||
Campbell Soup Co. | 222,280 | 7,250,774 | Accenture plc, Class A | 105,590 | 3,935,339 | |
ConAgra Foods, Inc. | 594,160 | 12,881,389 | Automatic Data | |||
H.J. Heinz Co. | 347,960 | 13,831,410 | Processing, Inc. | 171,930 | 6,756,849 | |
Kellogg Co. | 79,760 | 3,926,585 | 10,692,188 | |||
Kraft Foods, Inc., Class A | 953,830 | 25,057,114 | LEISURE EQUIPMENT & PRODUCTS — 0.1% | |||
Unilever NV CVA | 413,070 | 11,904,957 | Mattel, Inc. | 54,020 | 997,209 | |
74,852,229 | MEDIA — 0.5% | |||||
GAS UTILITIES — 1.2% | Walt Disney Co. (The) | 253,470 | 6,960,286 | |||
Southwest Gas Corp. | 278,110 | 7,114,054 | METALS & MINING — 0.6% | |||
WGL Holdings, Inc. | 297,360 | 9,854,510 | Barrick Gold Corp. | 75,728 | 2,870,091 | |
16,968,564 | Newmont Mining Corp. | 121,960 | 5,368,679 | |||
HEALTH CARE EQUIPMENT & SUPPLIES — 2.1% | 8,238,770 | |||||
Beckman Coulter, Inc. | 195,310 | 13,464,671 | MULTILINE RETAIL — 0.7% | |||
Boston Scientific Corp.(1) | 416,500 | 4,410,735 | Target Corp. | 203,910 | 9,518,519 | |
MULTI-UTILITIES — 2.3% | ||||||
CareFusion Corp.(1) | 110,410 | 2,406,938 | ||||
Ameren Corp. | 107,773 | 2,724,501 | ||||
Zimmer Holdings, Inc.(1) | 189,060 | 10,105,257 | ||||
PG&E Corp. | 111,400 | 4,510,586 | ||||
30,387,601 | Wisconsin Energy Corp. | 399,380 | 18,039,995 | |||
HEALTH CARE PROVIDERS & SERVICES — 0.8% | Xcel Energy, Inc. | 391,060 | 7,523,994 | |||
Cardinal Health, Inc. | 145,870 | 3,909,316 | 32,799,076 | |||
LifePoint Hospitals, Inc.(1) | 275,280 | 7,449,077 | ||||
OIL, GAS & CONSUMABLE FUELS — 14.9% | ||||||
11,358,393 | Anadarko Petroleum Corp. | 34,870 | 2,187,395 | |||
HOTELS, RESTAURANTS & LEISURE — 1.6% | Apache Corp. | 158,410 | 14,546,790 | |||
International Speedway | BP plc ADR | 287,470 | 15,302,028 | |||
Corp., Class A | 508,800 | 14,027,616 | ||||
Speedway Motorsports, Inc. | 659,995 | 9,497,328 | Chevron Corp. | 382,270 | 26,923,276 | |
23,524,944 | ConocoPhillips | 73,920 | 3,338,227 | |||
HOUSEHOLD DURABLES — 0.6% | Devon Energy Corp. | 152,470 | 10,265,805 | |||
Whirlpool Corp. | 121,060 | 8,469,358 | EOG Resources, Inc. | 53,260 | 4,447,743 | |
HOUSEHOLD PRODUCTS — 3.4% | EQT Corp. | 376,720 | 16,048,272 | |||
Kimberly-Clark Corp. | 571,170 | 33,687,607 | Exxon Mobil Corp. | 1,065,210 | 73,084,058 | |
Procter & Gamble Co. (The) | 257,630 | 14,921,929 | Total SA | 647,220 | 38,457,377 | |
48,609,536 | Valero Energy Corp. | 175,210 | 3,397,322 | |||
INDUSTRIAL CONGLOMERATES — 3.5% | XTO Energy, Inc. | 158,510 | 6,549,633 | |||
3M Co. | 112,300 | 8,287,740 | 214,547,926 | |||
General Electric Co. | 2,564,530 | 42,109,583 | ||||
50,397,323 |
25
Value | ||||||
Shares | Value | Shares | Value | |||
PAPER & FOREST PRODUCTS — 0.4% | SPECIALTY RETAIL — 2.5% | |||||
Weyerhaeuser Co. | 142,110 | $ 5,208,332 | Lowe’s Cos., Inc. | 1,453,460 | $ 30,435,452 | |
PHARMACEUTICALS — 8.1% | PetSmart, Inc. | 289,620 | 6,299,235 | |||
Bristol-Myers Squibb Co. | 595,430 | 13,409,084 | 36,734,687 | |||
Eli Lilly & Co. | 353,120 | 11,663,554 | TOTAL COMMON STOCKS | |||
Johnson & Johnson | 385,570 | 23,477,357 | (Cost $1,369,929,089) | 1,400,002,026 | ||
Merck & Co., Inc. | 477,560 | 15,105,223 | Temporary Cash Investments — 2.2% | |||
Pfizer, Inc. | 1,965,420 | 32,527,701 | JPMorgan U.S. Treasury | |||
Wyeth | 416,580 | 20,237,456 | Plus Money Market Fund | |||
116,420,375 | Agency Shares | 54,370 | 54,370 | |||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.9% | Repurchase Agreement, Deutsche Bank | |||||
Securities, Inc., (collateralized by various | ||||||
Boston Properties, Inc. | 93,140 | 6,105,327 | U.S. Treasury obligations, 3.375%, | |||
Host Hotels & Resorts, Inc. | 293,870 | 3,458,850 | 6/30/13, valued at $32,946,059), in a joint | |||
Public Storage | 40,600 | 3,054,744 | trading account at 0.03%, dated 9/30/09, | |||
12,618,921 | due 10/1/09 (Delivery value $32,300,027) | 32,300,000 | ||||
SEMICONDUCTORS & | TOTAL TEMPORARY | |||||
SEMICONDUCTOR EQUIPMENT — 1.9% | CASH INVESTMENTS | |||||
(Cost $32,354,370) | 32,354,370 | |||||
Applied Materials, Inc. | 751,740 | 10,073,316 | TOTAL INVESTMENT | |||
Intel Corp. | 727,720 | 14,241,480 | SECURITIES — 99.6% | |||
KLA-Tencor Corp. | 41,140 | 1,475,281 | (Cost $1,402,283,459) | 1,432,356,396 | ||
Texas Instruments, Inc. | 86,290 | 2,044,210 | OTHER ASSETS | |||
27,834,287 | AND LIABILITIES — 0.4% | 5,533,510 | ||||
TOTAL NET ASSETS — 100.0% | $1,437,889,906 |
Forward Foreign Currency Exchange Contracts | ||||
Contracts to Sell | Settlement Date | Value | Unrealized Gain (Loss) | |
6,997,867 | CAD for USD | 10/30/09 | $ 6,536,091 | $(106,415) |
32,617,724 | EUR for USD | 10/30/09 | 47,731,146 | 114,489 |
7,614,805 | GBP for USD | 10/30/09 | 12,168,180 | (47,618) |
1,263,980,575 | JPY for USD | 10/30/09 | 14,083,646 | 42,323 |
$80,519,063 | $ 2,779 | |||
(Value on Settlement Date $80,521,842) | ||||
Notes to Schedule of Investments | ||||
ADR = American Depositary Receipt | ||||
CAD = Canadian Dollar | ||||
CVA = Certificaten Van Aandelen | ||||
EUR = Euro | ||||
GBP = British Pound | ||||
JPY = Japanese Yen | ||||
USD = United States Dollar | ||||
(1) Non-income producing. | ||||
See Notes to Financial Statements. |
26
Large Company Value | ||||||
SEPTEMBER 30, 2009 (UNAUDITED) | ||||||
Shares | Value | Shares | Value | |||
Common Stocks — 96.6% | DIVERSIFIED TELECOMMUNICATION | |||||
SERVICES — 6.0% | ||||||
AEROSPACE & DEFENSE — 2.0% | AT&T, Inc. | 1,786,100 | $ 48,242,561 | |||
Honeywell International, Inc. | 173,600 | $ 6,449,240 | CenturyTel, Inc. | 117,900 | 3,961,440 | |
Lockheed Martin Corp. | 44,200 | 3,451,136 | Verizon Communications, Inc. | 863,200 | 26,129,064 | |
Northrop Grumman Corp. | 311,200 | 16,104,600 | 78,333,065 | |||
26,004,976 | ELECTRIC UTILITIES — 2.5% | |||||
BEVERAGES — 1.4% | Exelon Corp. | 376,600 | 18,686,892 | |||
Coca-Cola Co. (The) | 344,600 | 18,505,020 | PPL Corp. | 466,700 | 14,159,678 | |
BIOTECHNOLOGY — 0.5% | 32,846,570 | |||||
Amgen, Inc.(1)(2) | 113,300 | 6,824,059 | ||||
ENERGY EQUIPMENT & SERVICES — 1.6% | ||||||
CAPITAL MARKETS — 4.4% | Baker Hughes, Inc. | 101,100 | 4,312,926 | |||
Ameriprise Financial, Inc. | 337,700 | 12,268,641 | Diamond Offshore | |||
Bank of New York | Drilling, Inc. | 37,600 | 3,591,552 | |||
Mellon Corp. (The) | 444,300 | 12,880,257 | National Oilwell | |||
Goldman Sachs | Varco, Inc.(1) | 261,300 | 11,269,869 | |||
Group, Inc. (The) | 120,200 | 22,158,870 | Smith International, Inc. | 64,000 | 1,836,800 | |
Morgan Stanley | 330,000 | 10,190,400 | 21,011,147 | |||
57,498,168 | FOOD & STAPLES RETAILING — 3.3% | |||||
CHEMICALS — 2.2% | Kroger Co. (The) | 433,200 | 8,941,248 | |||
E.I. du Pont | SYSCO Corp. | 283,600 | 7,047,460 | |||
de Nemours & Co. | 470,900 | 15,134,726 | ||||
PPG Industries, Inc. | 231,900 | 13,498,899 | Walgreen Co. | 410,500 | 15,381,435 | |
28,633,625 | Wal-Mart Stores, Inc. | 225,000 | 11,045,250 | |||
COMMERCIAL BANKS — 3.7% | 42,415,393 | |||||
PNC Financial | FOOD PRODUCTS — 0.9% | |||||
Services Group, Inc. | 177,700 | 8,634,443 | Unilever NV | |||
U.S. Bancorp. | 737,600 | 16,123,936 | New York Shares | 427,300 | 12,331,878 | |
Wells Fargo & Co. | 818,700 | 23,070,966 | HEALTH CARE EQUIPMENT & SUPPLIES — 0.4% | |||
47,829,345 | Medtronic, Inc. | 132,300 | 4,868,640 | |||
COMMERCIAL SERVICES & SUPPLIES — 1.9% | HEALTH CARE PROVIDERS & SERVICES — 1.1% | |||||
Avery Dennison Corp. | 149,100 | 5,369,091 | Aetna, Inc. | 183,700 | 5,112,371 | |
Pitney Bowes, Inc. | 207,800 | 5,163,830 | Quest Diagnostics, Inc. | 69,900 | 3,648,081 | |
WellPoint, Inc.(1) | 120,600 | 5,711,616 | ||||
R.R. Donnelley & Sons Co. | 332,100 | 7,060,446 | ||||
Waste Management, Inc. | 234,900 | 7,004,718 | 14,472,068 | |||
24,598,085 | HOTELS, RESTAURANTS & LEISURE — 0.6% | |||||
COMMUNICATIONS EQUIPMENT — 0.7% | Darden Restaurants, Inc. | 101,800 | 3,474,434 | |||
Starbucks Corp.(1) | 193,400 | 3,993,710 | ||||
Cisco Systems, Inc.(1) | 406,600 | 9,571,364 | ||||
COMPUTERS & PERIPHERALS — 1.1% | 7,468,144 | |||||
Hewlett-Packard Co. | 316,300 | 14,932,523 | HOUSEHOLD DURABLES — 0.8% | |||
DIVERSIFIED CONSUMER SERVICES — 0.5% | Newell Rubbermaid, Inc. | 641,500 | 10,065,135 | |||
INDEPENDENT POWER | ||||||
H&R Block, Inc. | 356,600 | 6,554,308 | PRODUCERS & ENERGY TRADERS — 0.3% | |||
DIVERSIFIED FINANCIAL SERVICES — 7.2% | NRG Energy, Inc.(1) | 141,800 | 3,997,342 | |||
Bank of America Corp. | 2,485,800 | 42,059,736 | INDUSTRIAL CONGLOMERATES — 4.2% | |||
Citigroup, Inc. | 575,600 | 2,785,904 | General Electric Co.(2) | 2,903,800 | 47,680,396 | |
JPMorgan Chase & Co. | 1,103,900 | 48,372,898 | ||||
Tyco International Ltd. | 189,400 | 6,530,512 | ||||
93,218,538 | ||||||
54,210,908 |
27
Large Company Value | ||||||
Shares | Value | Shares | Value | |||
INSURANCE — 4.3% | PHARMACEUTICALS — 10.5% | |||||
Allstate Corp. (The) | 536,000 | $ 16,412,320 | Abbott Laboratories | 226,100 | $ 11,185,167 | |
Chubb Corp. (The) | 144,400 | 7,279,204 | Eli Lilly & Co. | 310,400 | 10,252,512 | |
Loews Corp. | 192,789 | 6,603,024 | Johnson & Johnson | 410,700 | 25,007,523 | |
Torchmark Corp. | 197,800 | 8,590,454 | Merck & Co., Inc. | 707,300 | 22,371,899 | |
Travelers Cos., Inc. (The) | 300,400 | 14,788,692 | Pfizer, Inc. | 2,708,300 | 44,822,365 | |
XL Capital Ltd., Class A | 138,800 | 2,423,448 | Wyeth | 490,300 | 23,818,774 | |
56,097,142 | 137,458,240 | |||||
IT SERVICES — 1.5% | REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.7% | |||||
Fiserv, Inc.(1)(2) | 104,700 | 5,046,540 | Host Hotels & Resorts, Inc. | 174,300 | 2,051,511 | |
International Business | Simon Property Group, Inc. | 100,068 | 6,947,721 | |||
Machines Corp. | 118,500 | 14,173,785 | 8,999,232 | |||
19,220,325 | SEMICONDUCTORS & | |||||
MACHINERY — 2.2% | SEMICONDUCTOR EQUIPMENT — 0.8% | |||||
Dover Corp. | 287,500 | 11,143,500 | Applied Materials, Inc. | 230,500 | 3,088,700 | |
Ingersoll-Rand plc | 387,100 | 11,872,357 | Intel Corp. | 344,500 | 6,741,865 | |
Parker-Hannifin Corp. | 117,600 | 6,096,384 | 9,830,565 | |||
29,112,241 | SOFTWARE — 2.0% | |||||
MEDIA — 4.3% | Activision Blizzard, Inc.(1) | 171,100 | 2,119,929 | |||
CBS Corp., Class B | 761,800 | 9,179,690 | Microsoft Corp. | 560,500 | 14,511,345 | |
Comcast Corp., Class A | 727,300 | 12,284,097 | Oracle Corp.(2) | 429,900 | 8,959,116 | |
Time Warner Cable, Inc. | 152,120 | 6,554,851 | 25,590,390 | |||
Time Warner, Inc. | 546,600 | 15,731,148 | SPECIALTY RETAIL — 2.3% | |||
Viacom, Inc., Class B(1) | 438,600 | 12,298,344 | Best Buy Co., Inc. | 84,000 | 3,151,680 | |
56,048,130 | Gap, Inc. (The) | 304,400 | 6,514,160 | |||
METALS & MINING — 0.5% | Home Depot, Inc. (The) | 452,200 | 12,046,608 | |||
Nucor Corp. | 146,700 | 6,896,367 | Staples, Inc. | 353,400 | 8,205,948 | |
MULTILINE RETAIL — 0.7% | 29,918,396 | |||||
Kohl’s Corp.(1)(2) | 152,200 | 8,683,010 | TEXTILES, APPAREL & LUXURY GOODS — 0.5% | |||
MULTI-UTILITIES — 0.7% | VF Corp. | 97,700 | 7,076,411 | |||
PG&E Corp. | 223,400 | 9,045,466 | TOBACCO — 1.3% | |||
OFFICE ELECTRONICS — 0.4% | Altria Group, Inc. | 441,900 | 7,870,239 | |||
Xerox Corp. | 712,400 | 5,513,976 | Lorillard, Inc. | 119,900 | 8,908,570 | |
OIL, GAS & CONSUMABLE FUELS — 16.1% | 16,778,809 | |||||
Apache Corp. | 154,700 | 14,206,101 | TOTAL COMMON STOCKS | |||
Chevron Corp. | 609,300 | 42,912,999 | (Cost $1,224,027,219) | 1,258,329,398 | ||
ConocoPhillips | 756,400 | 34,159,024 | Temporary Cash Investments — | |||
Devon Energy Corp. | 142,200 | 9,574,326 | Segregated For Futures | |||
Exxon Mobil Corp. | 868,300 | 59,574,063 | Contracts — 3.3% | |||
Occidental Petroleum Corp. | 156,100 | 12,238,240 | Repurchase Agreement, Credit Suisse | |||
Royal Dutch Shell plc ADR | 583,400 | 33,364,646 | First Boston, Inc., (collateralized by | |||
Valero Energy Corp. | 171,500 | 3,325,385 | various U.S. Treasury obligations, | |||
209,354,784 | 0.24%, 6/10/10, valued at $43,606,299), | |||||
in a joint trading account at 0.01%, | ||||||
PAPER & FOREST PRODUCTS — 0.5% | dated 9/30/09, due 10/1/09 | |||||
International Paper Co. | 293,100 | 6,515,613 | (Delivery value $42,748,012) | |||
(Cost $42,748,000) | 42,748,000 |
28
Large Company Value | |||||
Shares | Value | ||||
Temporary Cash Investments — 0.8% | |||||
JPMorgan U.S. Treasury | |||||
Plus Money Market Fund | |||||
Agency Shares | 89,262 | $ 89,262 | |||
Repurchase Agreement, Credit Suisse | |||||
First Boston, Inc., (collateralized by | |||||
various U.S. Treasury obligations, 0.24%, | |||||
6/10/10, valued at $10,967,880), in a joint | |||||
trading account at 0.01%, dated 9/30/09, | |||||
due 10/1/09 (Delivery value $10,752,003) | 10,752,000 | ||||
TOTAL TEMPORARY | |||||
CASH INVESTMENTS | |||||
(Cost $10,841,262) | 10,841,262 | ||||
TOTAL INVESTMENT | |||||
SECURITIES — 100.7% | |||||
(Cost $1,277,616,481) | 1,311,918,660 | ||||
OTHER ASSETS | |||||
AND LIABILITIES — (0.7)% | (8,924,253) | ||||
TOTAL NET ASSETS — 100.0% | $1,302,994,407 | ||||
Futures Contracts | |||||
Underlying Face | |||||
Contracts Purchased | Expiration Date | Amount at Value | Unrealized Gain (Loss) | ||
812 S&P 500 E-Mini Futures | December 2009 | $42,747,740 | $1,306,052 | ||
Notes to Schedule of Investments | |||||
ADR = American Depositary Receipt | |||||
(1) | Non-income producing. | ||||
(2) | Security, or a portion thereof, has been segregated for futures contracts. At the period end, the aggregate value of securities pledged | ||||
was $42,748,000. | |||||
See Notes to Financial Statements. |
29
Statement of Assets and Liabilities |
SEPTEMBER 30, 2009 (UNAUDITED) | |||
Large | |||
Equity Income | Value | Company Value | |
Assets | |||
Investment securities — unaffiliated, at value | |||
(cost of $4,856,144,881, $1,402,283,459 | |||
and $1,277,616,481, respectively) | $5,423,845,120 | $1,432,356,396 | $1,311,918,660 |
Investment securities — affiliated, at value | |||
(cost of $68,785,991, $- and $-, respectively) | 82,992,104 | — | — |
Total investment securities, at value (cost of $4,924,930,872, | |||
$1,402,283,459 and $1,277,616,481, respectively) | 5,506,837,224 | 1,432,356,396 | 1,311,918,660 |
Receivable for investments sold | 28,651,529 | 9,545,458 | 1,313,201 |
Receivable for capital shares sold | 10,026,924 | 471,102 | 703,056 |
Receivable for forward foreign currency exchange contracts | 356,028 | 156,812 | — |
Dividends and interest receivable | 25,616,781 | 3,071,015 | 1,632,072 |
5,571,488,486 | 1,445,600,783 | 1,315,566,989 | |
Liabilities | |||
Payable for investments purchased | 51,538,113 | 4,675,406 | 2,621,243 |
Payable for capital shares redeemed | 7,467,704 | 1,701,634 | 8,971,238 |
Payable for forward foreign currency exchange contracts | 1,793,813 | 154,033 | — |
Payable for variation margin on futures contracts | — | — | 63,217 |
Accrued management fees | 4,238,452 | 1,149,064 | 848,684 |
Distribution fees payable | 97,156 | 6,213 | 15,305 |
Service fees (and distribution fees — A Class and R Class) payable | 292,206 | 24,527 | 52,895 |
65,427,444 | 7,710,877 | 12,572,582 | |
Net Assets | $5,506,061,042 | $1,437,889,906 | $1,302,994,407 |
See Notes to Financial Statements. |
30
SEPTEMBER 30, 2009 (UNAUDITED) | |||
Large | |||
Equity Income | Value | Company Value | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ 6,353,420,146 | $2,044,048,306 | $1,763,614,167 |
Accumulated undistributed net investment income (loss) | 8,136,568 | 889,491 | (210,376) |
Accumulated net realized loss on investment | |||
and foreign currency transactions | (1,435,972,496) | (637,124,272) | (496,017,615) |
Net unrealized appreciation on investments and translation | |||
of assets and liabilities in foreign currencies | 580,476,824 | 30,076,381 | 35,608,231 |
$ 5,506,061,042 | $1,437,889,906 | $1,302,994,407 | |
Investor Class, $0.01 Par Value | |||
Net assets | $3,484,504,510 | $1,186,091,955 | $759,535,609 |
Shares outstanding | 555,530,989 | 242,201,794 | 156,212,307 |
Net asset value per share | $6.27 | $4.90 | $4.86 |
Institutional Class, $0.01 Par Value | |||
Net assets | $643,169,506 | $134,593,616 | $300,246,687 |
Shares outstanding | 102,495,367 | 27,451,423 | 61,730,255 |
Net asset value per share | $6.28 | $4.90 | $4.86 |
A Class, $0.01 Par Value | |||
Net assets | $1,148,620,332 | $103,301,879 | $204,557,312 |
Shares outstanding | 183,116,266 | 21,105,641 | 42,079,826 |
Net asset value per share | $6.27 | $4.89 | $4.86 |
Maximum offering price (net asset value divided by 0.9425) | $6.65 | $5.19 | $5.16 |
B Class, $0.01 Par Value | |||
Net assets | $5,867,215 | $3,178,872 | $5,993,369 |
Shares outstanding | 934,387 | 649,379 | 1,229,091 |
Net asset value per share | $6.28 | $4.90 | $4.88 |
C Class, $0.01 Par Value | |||
Net assets | $154,824,982 | $6,950,934 | $18,709,852 |
Shares outstanding | 24,679,186 | 1,430,990 | 3,848,674 |
Net asset value per share | $6.27 | $4.86 | $4.86 |
R Class, $0.01 Par Value | |||
Net assets | $69,074,497 | $3,772,650 | $13,951,578 |
Shares outstanding | 11,034,176 | 770,467 | 2,868,355 |
Net asset value per share | $6.26 | $4.90 | $4.86 |
See Notes to Financial Statements. |
31
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) | |||
Large | |||
Equity Income | Value | Company Value | |
Investment Income (Loss) | |||
Income: | |||
Dividends (including $4,600,074 from affiliates | |||
in Equity Income and net of foreign taxes withheld | |||
of $1,270,238, $201,757 and $76, respectively) | $ 81,808,904 | $ 21,012,500 | $ 16,611,168 |
Interest | 18,984,629 | 16,933 | 37,241 |
100,793,533 | 21,029,433 | 16,648,409 | |
Expenses: | |||
Management fees | 23,642,213 | 6,601,385 | 4,708,603 |
Distribution fees: | |||
B Class | 15,889 | 11,084 | 21,688 |
C Class | 482,311 | 23,526 | 67,976 |
Service fees: | |||
B Class | 5,296 | 3,694 | 7,229 |
C Class | 160,770 | 7,842 | 22,659 |
Distribution and service fees: | |||
A Class | 1,225,256 | 119,020 | 236,085 |
R Class | 130,756 | 7,772 | 30,338 |
Directors’ fees and expenses | 124,004 | 29,077 | 28,289 |
Other expenses | 277 | 14 | 38 |
25,786,772 | 6,803,414 | 5,122,905 | |
Net investment income (loss) | 75,006,761 | 14,226,019 | 11,525,504 |
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions (including $(1,889,497) | |||
from affiliates in Equity Income) | 25,024,757 | (51,619,434) | (77,177,950) |
Foreign currency transactions | (18,663,798) | (7,141,264) | — |
Futures contract transactions | — | 2,017,808 | 17,979,515 |
6,360,959 | (56,742,890) | (59,198,435) | |
Change in net unrealized appreciation (depreciation) on: | |||
Investments | 707,043,810 | 388,882,440 | 397,067,644 |
Translation of assets and liabilities in foreign currencies | (1,973,354) | (116,741) | — |
Futures contracts | — | — | (3,085,503) |
705,070,456 | 388,765,699 | 393,982,141 | |
Net realized and unrealized gain (loss) | 711,431,415 | 332,022,809 | 334,783,706 |
Net Increase (Decrease) in Net Assets | |||
Resulting from Operations | $786,438,176 | $346,248,828 | $346,309,210 |
See Notes to Financial Statements. |
32
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND YEAR ENDED MARCH 31, 2009 | ||||
Equity Income | Value | |||
Increase (Decrease) in Net Assets: | September 30, 2009 | March 31, 2009 | September 30, 2009 | March 31, 2009 |
Operations | ||||
Net investment income (loss) | $ 75,006,761 | $ 155,553,464 | $ 14,226,019 | $ 44,173,650 |
Net realized gain (loss) | 6,360,959 | (1,038,472,929) | (56,742,890) | (307,533,855) |
Change in net unrealized | ||||
appreciation (depreciation) | 705,070,456 | (304,301,554) | 388,765,699 | (350,470,048) |
Net increase (decrease) in net assets | ||||
resulting from operations | 786,438,176 | (1,187,221,019) | 346,248,828 | (613,830,253) |
Distributions to Shareholders | ||||
From net investment income: | ||||
Investor Class | (45,453,291) | (116,479,871) | (12,445,089) | (35,722,719) |
Institutional Class | (8,696,171) | (18,736,225) | (1,472,022) | (5,401,338) |
A Class | (12,887,648) | (27,423,419) | (932,371) | (3,179,752) |
B Class | (41,288) | (28,307) | (17,486) | (67,375) |
C Class | (1,195,023) | (2,668,345) | (37,289) | (136,824) |
R Class | (622,722) | (1,185,911) | (25,516) | (44,354) |
Decrease in net assets from distributions | (68,896,143) | (166,522,078) | (14,929,773) | (44,552,362) |
Capital Share Transactions | ||||
Net increase (decrease) in net assets | ||||
from capital share transactions | 443,500,045 | 389,430,888 | (86,258,652) | (374,420,582) |
Net increase (decrease) in net assets | 1,161,042,078 | (964,312,209) | 245,060,403 | (1,032,803,197) |
Net Assets | ||||
Beginning of period | 4,345,018,964 | 5,309,331,173 | 1,192,829,503 | 2,225,632,700 |
End of period | $5,506,061,042 | $ 4,345,018,964 | $1,437,889,906 | $1,192,829,503 |
Undistributed net investment income | $8,136,568 | $2,025,950 | $889,491 | $1,593,245 |
See Notes to Financial Statements. |
33
SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND YEAR ENDED MARCH 31, 2009
Large Company Value | ||
Increase (Decrease) in Net Assets: | September 30, 2009 | March 31, 2009 |
Operations | ||
Net investment income (loss) | $ 11,525,504 | $ 43,729,282 |
Net realized gain (loss) | (59,198,435) | (434,126,077) |
Change in net unrealized appreciation (depreciation) | 393,982,141 | (467,530,642) |
Net increase (decrease) in net assets resulting from operations | 346,309,210 | (857,927,437) |
Distributions to Shareholders | ||
From net investment income: | ||
Investor Class | (6,872,716) | (24,087,668) |
Institutional Class | (3,023,688) | (12,985,767) |
A Class | (1,635,528) | (6,318,876) |
B Class | (27,552) | (146,748) |
C Class | (85,986) | (528,933) |
R Class | (90,410) | (299,117) |
From net realized gains: | ||
Investor Class | — | (12,476,507) |
Institutional Class | — | (6,638,027) |
A Class | — | (3,841,488) |
B Class | — | (121,562) |
C Class | — | (435,919) |
R Class | — | (202,323) |
Decrease in net assets from distributions | (11,735,880) | (68,082,935) |
Capital Share Transactions | ||
Net increase (decrease) in net assets from capital share transactions | (71,382,546) | (280,606,732) |
Net increase (decrease) in net assets | 263,190,784 | (1,206,617,104) |
Net Assets | ||
Beginning of period | 1,039,803,623 | 2,246,420,727 |
End of period | $1,302,994,407 | $1,039,803,623 |
Accumulated net investment loss | $(210,376) | — |
See Notes to Financial Statements. |
34
Notes to Financial Statements |
SEPTEMBER 30, 2009 (UNAUDITED)
1. Organization and Summary of Significant Accounting Policies
Organization — American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Equity Income Fund (Equity Income), Value Fund (Value) and Large Company Value Fund (Large Company Value) (collectively, the funds) are three funds in a series issued by the corporation. The funds are diversified under the 1940 Act. Equity Income’s investment objective is to seek 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 to seek long-term capital growth; income is a secondary obj ective. Value and Large Company Value pursue their investment objective by investing in stocks of companies that management believes to be undervalued at the time of purchase. Value invests in companies with small, medium, and large market capitalization and Large Company Value invests in companies with larger market capitalization. The following is a summary of the funds’ significant accounting policies.
Multiple Class — The funds are authorized to issue the Investor Class, the Institutional Class, the A Class, the B Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. All shares of each fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the funds are allocated to each class of shares based on their relative net assets.
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. Investments in open-end management investment companies are valued at the reported net asset value. 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 ov er-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.
35
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Equity-Linked Debt and Linked-Equity Securities — The funds may invest in hybrid equity securities, which usually convert into common stock at a date predetermined by the issuer. These securities generally offer a higher dividend yield than that of the common stock to which the security is linked. These instruments are issued by a company other than the one to which the security is linked and carry the credit of the issuer, not that of the underlying common stock. The securities’ appreciation is limited based on a predetermined final cap price at the date of the conversion. Risks of investing in these securities include, but are not limited to, a set time to capture the yield advantage, limited appreciation potential, decline in value of the underlying stock, and failure of the issuer to pay dividends or to deliver common stock a t maturity.
Foreign Currency Translations —All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The funds may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, 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.
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 certain other funds in the American Century Investments family of funds, 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 2006. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. 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.
36
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 maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a 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.
Subsequent Events — Management has evaluated events or transactions that may have occurred since September 30, 2009, that would merit recognition or disclosure in the financial statements. This evaluation was completed through November 27, 2009, the date the financial statements were issued.
2. Fees and Transactions with Related Parties
Management Fees — The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The Agreement provides that all expenses of the funds, except brokerage commissions, taxes, interest, fees and expenses of those directors who are not considered “interested persons” as defined in the 1940 Act (including counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on the daily net assets of each specific class of shares of each fund and paid monthly in arrears. For funds with a stepped fee schedule, the rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account each fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). 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. The Institutional Class of each fund is 0.20% less at each point within the range.
The effective annual management fee for each class of each fund for the six months ended September 30, 2009, was as follows:
Investor, A, B, C & R | Institutional | |
Equity Income | 0.97% | 0.77% |
Value | 1.00% | 0.80% |
Large Company Value | 0.84% | 0.64% |
37
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, 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%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fe es incurred under the plans during the six months ended September 30, 2009, 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). The funds have a Mutual Funds Services Agreement with J.P. Morgan Investor Services Co. (JPMIS) and a securities lending agreement with JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the funds. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC.
3. Investment Transactions
Investment transactions, excluding short-term investments, for the six months ended September 30, 2009, were as follows:
Equity Income | Value | Large Company Value | |
Purchases | $3,310,079,646 | $334,073,228 | $163,841,499 |
Sales | $2,997,485,474 | $445,544,484 | $183,103,995 |
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4. Capital Share Transactions | ||||
Transactions in shares of the funds were as follows: | ||||
Six months ended September 30, 2009 | Year ended March 31, 2009 | |||
Shares | Amount | Shares | Amount | |
Equity Income | ||||
Investor Class/Shares Authorized | 1,560,000,000 | 1,500,000,000 | ||
Sold | 89,500,006 | $ 524,474,401 | 144,479,407 | $ 866,731,526 |
Issued in reinvestment of distributions | 6,829,600 | 40,796,283 | 17,100,135 | 107,601,292 |
Redeemed | (78,639,934) | (462,381,421) | (133,115,506) | (842,860,297) |
17,689,672 | 102,889,263 | 28,464,036 | 131,472,521 | |
Institutional Class/Shares Authorized | 300,000,000 | 240,000,000 | ||
Sold | 23,680,370 | 138,474,259 | 40,221,176 | 248,521,793 |
Issued in reinvestment of distributions | 1,321,588 | 7,900,145 | 2,911,495 | 18,133,861 |
Redeemed | (15,223,437) | (88,670,988) | (18,314,225) | (117,878,477) |
9,778,521 | 57,703,416 | 24,818,446 | 148,777,177 | |
A Class/Shares Authorized | 500,000,000 | 475,000,000 | ||
Sold | 55,620,549 | 327,912,459 | 62,666,044 | 374,765,261 |
Issued in reinvestment of distributions | 2,072,887 | 12,400,102 | 4,243,751 | 26,565,849 |
Redeemed | (21,216,534) | (125,774,151) | (48,118,311) | (307,954,781) |
36,476,902 | 214,538,410 | 18,791,484 | 93,376,329 | |
B Class/Shares Authorized | 20,000,000 | 20,000,000 | ||
Sold | 527,083 | 3,083,620 | 445,508 | 2,606,785 |
Issued in reinvestment of distributions | 5,165 | 31,064 | 3,746 | 21,871 |
Redeemed | (39,156) | (234,014) | (40,178) | (245,850) |
493,092 | 2,880,670 | 409,076 | 2,382,806 | |
C Class/Shares Authorized | 100,000,000 | 50,000,000 | ||
Sold | 8,074,661 | 47,279,037 | 5,847,450 | 34,543,379 |
Issued in reinvestment of distributions | 167,573 | 1,001,503 | 382,672 | 2,394,695 |
Redeemed | (1,453,573) | (8,630,824) | (4,359,143) | (27,550,459) |
6,788,661 | 39,649,716 | 1,870,979 | 9,387,615 | |
R Class/Shares Authorized | 50,000,000 | 20,000,000 | ||
Sold | 5,793,645 | 33,844,950 | 2,434,300 | 14,833,099 |
Issued in reinvestment of distributions | 101,131 | 606,583 | 184,849 | 1,157,676 |
Redeemed | (1,443,880) | (8,612,963) | (1,898,160) | (11,956,335) |
4,450,896 | 25,838,570 | 720,989 | 4,034,440 | |
Net increase (decrease) | 75,677,744 | $ 443,500,045 | 75,075,010 | $ 389,430,888 |
39
Six months ended September 30, 2009 | Year ended March 31, 2009 | |||
Shares | Amount | Shares | Amount | |
Value | ||||
Investor Class/Shares Authorized | 1,000,000,000 | 1,250,000,000 | ||
Sold | 19,167,705 | $ 83,849,707 | 30,987,365 | $ 146,011,346 |
Issued in reinvestment of distributions | 2,571,950 | 11,477,685 | 7,104,843 | 33,183,474 |
Redeemed | (36,079,361) | (158,524,696) | (76,759,099) | (385,699,104) |
(14,339,706) | (63,197,304) | (38,666,891) | (206,504,284) | |
Institutional Class/Shares Authorized | 125,000,000 | 125,000,000 | ||
Sold | 3,141,734 | 13,727,104 | 9,345,154 | 45,000,807 |
Issued in reinvestment of distributions | 324,563 | 1,457,335 | 1,138,948 | 5,401,338 |
Redeemed | (8,433,536) | (35,229,279) | (31,202,939) | (159,526,056) |
(4,967,239) | (20,044,840) | (20,718,837) | (109,123,911) | |
A Class/Shares Authorized | 150,000,000 | 150,000,000 | ||
Sold | 2,215,067 | 9,797,351 | 6,714,489 | 33,425,372 |
Issued in reinvestment of distributions | 205,027 | 914,459 | 661,446 | 3,123,129 |
Redeemed | (3,212,299) | (14,253,421) | (18,645,461) | (92,499,588) |
(792,205) | (3,541,611) | (11,269,526) | (55,951,087) | |
B Class/Shares Authorized | 20,000,000 | 20,000,000 | ||
Sold | 13,448 | 60,625 | 27,172 | 123,211 |
Issued in reinvestment of distributions | 3,349 | 14,744 | 12,613 | 58,313 |
Redeemed | (64,559) | (282,823) | (311,458) | (1,540,863) |
(47,762) | (207,454) | (271,673) | (1,359,339) | |
C Class/Shares Authorized | 20,000,000 | 20,000,000 | ||
Sold | 134,569 | 578,971 | 283,303 | 1,313,799 |
Issued in reinvestment of distributions | 6,663 | 29,181 | 23,299 | 106,981 |
Redeemed | (144,937) | (636,625) | (881,793) | (4,338,814) |
(3,705) | (28,473) | (575,191) | (2,918,034) | |
R Class/Shares Authorized | 20,000,000 | 20,000,000 | ||
Sold | 354,563 | 1,576,156 | 432,648 | 2,018,584 |
Issued in reinvestment of distributions | 5,713 | 25,516 | 9,964 | 44,354 |
Redeemed | (182,800) | (840,642) | (130,728) | (626,865) |
177,476 | 761,030 | 311,884 | 1,436,073 | |
Net increase (decrease) | (19,973,141) | $ (86,258,652) | (71,190,234) | $(374,420,582) |
40
Six months ended September 30, 2009 | Year ended March 31, 2009 | |||
Shares | Amount | Shares | Amount | |
Large Company Value | ||||
Investor Class/Shares Authorized | 550,000,000 | 550,000,000 | ||
Sold | 21,598,089 | $ 94,326,882 | 59,296,017 | $ 310,739,279 |
Issued in reinvestment of distributions | 954,567 | 4,265,113 | 5,065,704 | 23,264,926 |
Redeemed | (22,800,403) | (100,938,943) | (101,187,145) | (517,924,401) |
(247,747) | (2,346,948) | (36,825,424) | (183,920,196) | |
Institutional Class/Shares Authorized | 200,000,000 | 200,000,000 | ||
Sold | 7,537,072 | 32,185,065 | 41,223,991 | 215,645,715 |
Issued in reinvestment of distributions | 548,666 | 2,446,744 | 3,585,809 | 16,456,627 |
Redeemed | (21,964,380) | (88,091,317) | (52,640,123) | (242,779,188) |
(13,878,642) | (53,459,508) | (7,830,323) | (10,676,846) | |
A Class/Shares Authorized | 300,000,000 | 300,000,000 | ||
Sold | 4,964,644 | 21,271,262 | 11,140,257 | 57,167,088 |
Issued in reinvestment of distributions | 234,286 | 1,042,790 | 1,541,631 | 7,055,998 |
Redeemed | (7,898,914) | (34,153,861) | (25,533,095) | (130,775,138) |
(2,699,984) | (11,839,809) | (12,851,207) | (66,552,052) | |
B Class/Shares Authorized | 20,000,000 | 20,000,000 | ||
Sold | 11,268 | 48,485 | 42,187 | 194,556 |
Issued in reinvestment of distributions | 5,054 | 22,370 | 49,239 | 219,947 |
Redeemed | (235,138) | (1,015,494) | (640,231) | (3,262,484) |
(218,816) | (944,639) | (548,805) | (2,847,981) | |
C Class/Shares Authorized | 50,000,000 | 50,000,000 | ||
Sold | 127,805 | 563,158 | 599,720 | 2,971,675 |
Issued in reinvestment of distributions | 7,073 | 31,190 | 74,819 | 335,855 |
Redeemed | (1,025,148) | (4,329,341) | (3,932,850) | (20,238,583) |
(890,270) | (3,734,993) | (3,258,311) | (16,931,053) | |
R Class/Shares Authorized | 20,000,000 | 20,000,000 | ||
Sold | 562,921 | 2,323,146 | 862,495 | 4,327,553 |
Issued in reinvestment of distributions | 19,679 | 87,649 | 108,516 | 485,125 |
Redeemed | (347,238) | (1,467,444) | (912,549) | (4,491,282) |
235,362 | 943,351 | 58,462 | 321,396 | |
Net increase (decrease) | (17,700,097) | $ (71,382,546) | (61,255,608) | $(280,606,732) |
5. Affiliated Company Transactions
If a fund’s holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2009 follows:
September 30, 2009 | |||||||
Share Balance | Purchases | Sales | Realized | Dividend | Share | Market | |
Fund/Company | 3/31/09 | Cost | Cost | Gain (Loss) | Income | Balance | Value |
Equity Income | |||||||
AGL Resources, Inc.(1) | 3,573,500 | $ 2,200,207 | $29,664,372 | $(1,891,248) | $2,825,210 | 2,806,100 | (1) |
WGL Holdings, Inc. | 2,371,288 | 10,646,152 | 6,573,199 | 1,751 | 1,774,864 | 2,504,288 | $82,992,104 |
$12,846,359 | $36,237,571 | $(1,889,497) | $4,600,074 | $82,992,104 | |||
(1) Company was not an affiliate at September 30, 2009. |
41
6. Fair Value Measurements
The funds’ securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the funds. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
• Level 1 valuation inputs consist of actual quoted prices based in an active market for identical securities;
• Level 2 valuation inputs consist of significant direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or
• Level 3 valuation inputs consist of significant unobservable inputs (including a fund’s own assumptions).
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the valuation inputs used to determine the fair value of the funds’ securities and other financial instruments as of September 30, 2009:
Level 1 | Level 2 | Level 3 | ||
Equity Income | ||||
Investment Securities | ||||
Domestic Common Stocks | $3,617,285,613 | — | — | |
Foreign Common Stocks | 19,617,267 | $ 381,005,435 | — | |
Convertible Bonds | — | 1,247,263,928 | — | |
Convertible Preferred Stocks | — | 195,582,699 | — | |
Preferred Stocks | — | 7,900,389 | — | |
Temporary Cash Investments | 81,893 | 38,100,000 | — | |
Total Value of Investment Securities | $3,636,984,773 | $1,869,852,451 | — | |
Other Financial Instruments | ||||
Total Unrealized Gain (Loss) on Forward | ||||
Foreign Currency Exchange Contracts | — | $(1,437,785) | — | |
Value | ||||
Investment Securities | ||||
Domestic Common Stocks | $1,284,559,224 | — | — | |
Foreign Common Stocks | 37,840,534 | $ 77,602,268 | — | |
Temporary Cash Investments | 54,370 | 32,300,000 | — | |
Total Value of Investment Securities | $1,322,454,128 | $109,902,268 | — | |
Other Financial Instruments | ||||
Total Unrealized Gain (Loss) on Forward | ||||
Foreign Currency Exchange Contracts | — | $2,779 | — |
42
Level 1 | Level 2 | Level 3 | ||
Large Company Value | ||||
Investment Securities | ||||
Domestic Common Stocks | $1,191,806,557 | — | — | |
Foreign Common Stocks | 66,522,841 | — | — | |
Temporary Cash Investments | 89,262 | $53,500,000 | — | |
Total Value of Investment Securities | $1,258,418,660 | $53,500,000 | — | |
Other Financial Instruments | ||||
Total Unrealized Gain (Loss) on Futures Contracts | $1,306,052 | — | — |
7. Derivative Instruments
Equity Price Risk — Value and Large Company Value are subject to equity price risk in the normal course of pursuing their investment objectives. A fund may enter into futures contracts based on an equity index in order to manage its exposure to changes in market conditions. A fund may purchase futures contracts to gain exposure to increases in market value or sell futures contracts to protect against a decline in market value. Upon entering into a futures contract, a 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 a fund. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. A fund recognizes a realized gain o r 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 net realized gain (loss) on futures contract transactions and change in net unrealized appreciation (depreciation) on futures contracts, respectively. 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. During the six months ended September 30, 2009, Value and Large Company Value purchased futures contracts.
Foreign Currency Risk — Equity Income and Value are subject to foreign currency exchange rate risk in the normal course of pursuing their investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund’s exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are deter mined daily using prevailing exchange rates. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The risk of loss from non-performance by the counterparty may be reduced by the use of master netting agreements. During the six months ended September 30, 2009, Equity Income and Value participated in forward foreign currency exchange contracts.
43
Value of Derivative Instruments as of September 30, 2009 | ||||
Asset Derivatives | Liability Derivatives | |||
Fund/Type | Location on Statement | Location on Statement | ||
of Derivative | of Assets and Liabilities | Value | of Assets and Liabilities | Value |
Equity Income | ||||
Foreign Currency Risk | Receivable for forward foreign | Payable for forward foreign | ||
currency exchange contracts | $356,028 | currency exchange contracts | $1,793, 813 | |
Value | ||||
Foreign Currency Risk | Receivable for forward foreign | Payable for forward foreign | ||
currency exchange contracts | $156,812 | currency exchange contracts | $154,033 | |
Large Company Value | ||||
Equity Price Risk | Receivable for variation margin | Payable for variation margin | ||
on futures contracts | — | on futures contracts | $63,217 | |
Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended September 30, 2009 | ||||
Change in Net Unrealized | ||||
Net Realized Gain (Loss) | Appreciation (Depreciation) | |||
Fund/Type | Location on Statement | Location on Statement | ||
of Derivative | of Operations | of Operations | ||
Equity Income | ||||
Foreign Currency Risk | Net realized gain (loss) on | Change in net unrealized | ||
foreign currency transactions | appreciation (depreciation) | |||
on translation of assets and | ||||
$(18,667,672) | liabilities in foreign currencies | $(1,982,035) | ||
Value | ||||
Equity Price Risk | Net realized gain (loss) on | Change in net unrealized | ||
futures contract transactions | appreciation (depreciation) | |||
$ 2,017,808 | on futures contracts | — | ||
Foreign Currency Risk | Net realized gain (loss) on | Change in net unrealized | ||
foreign currency transactions | appreciation (depreciation) | |||
on translation of assets and | ||||
$(7,231,415) | liabilities in foreign currencies | $(117,215) | ||
$(5,213,607) | $(117,215) | |||
Large Company Value | ||||
Equity Price Risk | Net realized gain (loss) on | Change in net unrealized | ||
futures contract transactions | appreciation (depreciation) | |||
$17,979,515 | on futures contracts | $(3,085,503) | ||
The value of derivative instruments at period end and the effect of derivatives on the | ||||
Statement of Operations is indicative of each fund’s typical volume. |
44
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 development, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws and restrictions.
9. Interfund Lending
The funds, along with certain other funds in the American Century Investments family of funds, may participate in an interfund lending program, pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC). This program provides an alternative credit facility allowing the funds to borrow from or lend to other funds in the American Century Investments family of funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. The interfund loan rate earned/paid on interfund lending transactions is determined daily based on the average of certain current market rates. Interfund lending transactions normally extend only overnight, but can have a maximum duration of seven days. The program is subject to annual approval by the Board of Directors. During the six months ended September 30, 2009, the funds did not utilize the program.
10. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of September 30, 2009, the components of investments for federal income tax purposes were as follows:
Equity Income | Value | Large Company Value | |
Federal tax cost of investments | $5,161,512,921 | $1,497,280,659 | $1,290,485,897 |
Gross tax appreciation of investments | $360,260,800 | $ 88,541,006 | $ 168,494,409 |
Gross tax depreciation of investments | (14,936,497) | (153,465,269) | (147,061,646) |
Net tax appreciation (depreciation) of investments | $345,324,303 | $ (64,924,263) | $ 21,432,763 |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
As of March 31, 2009, the accumulated capital losses listed below represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. The capital loss carryovers expire in 2017.
The capital and currency loss deferrals listed below represent net capital and foreign currency losses incurred in the five-month period ended March 31, 2009. The funds have elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes.
Equity Income | Value | Large Company Value | |
Accumulated capital losses | $(417,259,103) | $(291,984,197) | $(173,892,841) |
Capital loss deferrals | $(725,792,554) | $(171,099,788) | $(245,371,935) |
Currency loss deferrals | $(2,435,365) | — | — |
45
11. Recently Issued Accounting Standards
In March 2008, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) Section 815-10 (formerly Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities —an amendment of FASB Statement No. 133”). ASC Section 815-10 is effective for interim periods beginning after November 15, 2008 and has been adopted by the funds. ASC Section 815-10 amends and expands disclosures about derivative instruments and hedging activities. ASC Section 815-10 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.
46
Financial Highlights |
Equity Income | |||||||
Investor Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $5.42 | $7.30 | $8.65 | $8.11 | $8.05 | $7.84 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.09 | 0.22 | 0.23 | 0.21 | 0.20 | 0.21 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 0.84 | (1.87) | (0.62) | 1.05 | 0.36 | 0.61 | |
Total From | |||||||
Investment Operations | 0.93 | (1.65) | (0.39) | 1.26 | 0.56 | 0.82 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.08) | (0.23) | (0.23) | (0.17) | (0.18) | (0.19) | |
From Net Realized Gains | — | — | (0.73) | (0.55) | (0.32) | (0.42) | |
Total Distributions | (0.08) | (0.23) | (0.96) | (0.72) | (0.50) | (0.61) | |
Net Asset Value, | |||||||
End of Period | $6.27 | $5.42 | $7.30 | $8.65 | $8.11 | $8.05 | |
Total Return(3) | 17.30% | (22.98)% | (5.17)% | 15.79% | 7.21% | 10.69% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 0.98%(4) | 0.98% | 0.97% | 0.97% | 0.98% | 0.99% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 3.07%(4) | 3.36% | 2.68% | 2.43% | 2.53% | 2.56% | |
Portfolio Turnover Rate | 63% | 296% | 165% | 160% | 150% | 174% | |
Net Assets, End of Period | |||||||
(in thousands) | $3,484,505 | $2,913,351 | $3,719,757 | $4,790,510 | $3,715,366 | $3,290,442 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
47
Equity Income | |||||||
Institutional Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $5.42 | $7.31 | $8.65 | $8.11 | $8.06 | $7.85 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.10 | 0.23 | 0.25 | 0.23 | 0.22 | 0.22 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 0.85 | (1.88) | (0.61) | 1.05 | 0.35 | 0.61 | |
Total From | |||||||
Investment Operations | 0.95 | (1.65) | (0.36) | 1.28 | 0.57 | 0.83 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.09) | (0.24) | (0.25) | (0.19) | (0.20) | (0.20) | |
From Net Realized Gains | — | — | (0.73) | (0.55) | (0.32) | (0.42) | |
Total Distributions | (0.09) | (0.24) | (0.98) | (0.74) | (0.52) | (0.62) | |
Net Asset Value, | |||||||
End of Period | $6.28 | $5.42 | $7.31 | $8.65 | $8.11 | $8.06 | |
Total Return(3) | 17.60% | (22.94)% | (4.85)% | 16.01% | 7.29% | 10.91% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 0.78%(4) | 0.78% | 0.77% | 0.77% | 0.78% | 0.79% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 3.27%(4) | 3.56% | 2.88% | 2.63% | 2.73% | 2.76% | |
Portfolio Turnover Rate | 63% | 296% | 165% | 160% | 150% | 174% | |
Net Assets, End of Period | |||||||
(in thousands) | $643,170 | $502,435 | $496,033 | $551,202 | $382,909 | $257,195 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
48
Equity Income | |||||||
A Class(1) | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(2) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $5.42 | $7.30 | $8.65 | $8.11 | $8.05 | $7.84 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(3) | 0.08 | 0.20 | 0.20 | 0.19 | 0.18 | 0.19 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 0.85 | (1.86) | (0.61) | 1.05 | 0.36 | 0.61 | |
Total From | |||||||
Investment Operations | 0.93 | (1.66) | (0.41) | 1.24 | 0.54 | 0.80 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.08) | (0.22) | (0.21) | (0.15) | (0.16) | (0.17) | |
From Net Realized Gains | — | — | (0.73) | (0.55) | (0.32) | (0.42) | |
Total Distributions | (0.08) | (0.22) | (0.94) | (0.70) | (0.48) | (0.59) | |
Net Asset Value, | |||||||
End of Period | $6.27 | $5.42 | $7.30 | $8.65 | $8.11 | $8.05 | |
Total Return(4) | 17.15% | (23.18)% | (5.40)% | 15.51% | 6.94% | 10.41% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 1.23%(5) | 1.23% | 1.22% | 1.22% | 1.23% | 1.24% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 2.82%(5) | 3.11% | 2.43% | 2.18% | 2.28% | 2.31% | |
Portfolio Turnover Rate | 63% | 296% | 165% | 160% | 150% | 174% | |
Net Assets, End of Period | |||||||
(in thousands) | $1,148,620 | $794,323 | $933,600 | $1,280,888 | $902,749 | $765,331 | |
(1) | Prior to September 4, 2007, the A Class was referred to as the Advisor Class. | ||||||
(2) | Six months ended September 30, 2009 (unaudited). | ||||||
(3) | Computed using average shares outstanding throughout the period. | ||||||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. | ||||||
Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense | |||||||
differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal | |||||||
places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal | |||||||
places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(5) | Annualized. | ||||||
See Notes to Financial Statements. |
49
Equity Income | ||||
B Class | ||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | ||||
2009(1) | 2009 | 2008(2) | ||
Per-Share Data | ||||
Net Asset Value, Beginning of Period | $5.42 | $7.30 | $8.99 | |
Income From Investment Operations | ||||
Net Investment Income (Loss)(3) | 0.06 | 0.15 | 0.08 | |
Net Realized and Unrealized Gain (Loss) | 0.85 | (1.86) | (0.95) | |
Total From Investment Operations | 0.91 | (1.71) | (0.87) | |
Distributions | ||||
From Net Investment Income | (0.05) | (0.17) | (0.09) | |
From Net Realized Gains | — | — | (0.73) | |
Total Distributions | (0.05) | (0.17) | (0.82) | |
Net Asset Value, End of Period | $6.28 | $5.42 | $7.30 | |
Total Return(4) | 16.90% | (23.75)% | (10.28)% | |
Ratios/Supplemental Data | ||||
Ratio of Operating Expenses to Average Net Assets | 1.98%(5) | 1.98% | 1.97%(5) | |
Ratio of Net Investment Income (Loss) to Average Net Assets | 2.07%(5) | 2.36% | 2.11%(5) | |
Portfolio Turnover Rate | 63% | 296% | 165%(6) | |
Net Assets, End of Period (in thousands) | $5,867 | $2,392 | $235 | |
(1) | Six months ended September 30, 2009 (unaudited). | |||
(2) | September 28, 2007 (commencement of sale) through March 31, 2008. | |||
(3) | Computed using average shares outstanding throughout the period. | |||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. | |||
Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense | ||||
differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal | ||||
places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal | ||||
places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. | ||||
(5) | Annualized. | |||
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2008. | |||
See Notes to Financial Statements. |
50
Equity Income | |||||||
C Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $5.42 | $7.30 | $8.65 | $8.11 | $8.06 | $7.85 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.06 | 0.15 | 0.14 | 0.12 | 0.13 | 0.13 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 0.84 | (1.86) | (0.61) | 1.06 | 0.34 | 0.61 | |
Total From | |||||||
Investment Operations | 0.90 | (1.71) | (0.47) | 1.18 | 0.47 | 0.74 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.05) | (0.17) | (0.15) | (0.09) | (0.10) | (0.11) | |
From Net Realized Gains | — | — | (0.73) | (0.55) | (0.32) | (0.42) | |
Total Distributions | (0.05) | (0.17) | (0.88) | (0.64) | (0.42) | (0.53) | |
Net Asset Value, | |||||||
End of Period | $6.27 | $5.42 | $7.30 | $8.65 | $8.11 | $8.06 | |
Total Return(3) | 16.71% | (23.75)% | (6.10)% | 14.65% | 6.02% | 9.60% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 1.98%(4) | 1.98% | 1.97% | 1.97% | 1.98% | 1.99% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 2.07%(4) | 2.36% | 1.68% | 1.43% | 1.53% | 1.56% | |
Portfolio Turnover Rate | 63% | 296% | 165% | 160% | 150% | 174% | |
Net Assets, End of Period | |||||||
(in thousands) | $154,825 | $96,930 | $116,985 | $127,266 | $98,481 | $63,512 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. | ||||||
Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense | |||||||
differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal | |||||||
places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal | |||||||
places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
51
Equity Income | |||||||
R Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $5.41 | $7.29 | $8.63 | $8.09 | $8.04 | $7.84 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.08 | 0.18 | 0.18 | 0.17 | 0.17 | 0.17 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 0.84 | (1.86) | (0.60) | 1.05 | 0.34 | 0.60 | |
Total From | |||||||
Investment Operations | 0.92 | (1.68) | (0.42) | 1.22 | 0.51 | 0.77 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.07) | (0.20) | (0.19) | (0.13) | (0.14) | (0.15) | |
From Net Realized Gains | — | — | (0.73) | (0.55) | (0.32) | (0.42) | |
Total Distributions | (0.07) | (0.20) | (0.92) | (0.68) | (0.46) | (0.57) | |
Net Asset Value, | |||||||
End of Period | $6.26 | $5.41 | $7.29 | $8.63 | $8.09 | $8.04 | |
Total Return(3) | 17.03% | (23.40)% | (5.53)% | 15.25% | 6.56% | 10.03% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 1.48%(4) | 1.48% | 1.47% | 1.47% | 1.48% | 1.44%(5) | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 2.57%(4) | 2.86% | 2.18% | 1.93% | 2.03% | 2.11%(5) | |
Portfolio Turnover Rate | 63% | 296% | 165% | 160% | 150% | 174% | |
Net Assets, End of Period | |||||||
(in thousands) | $69,074 | $35,588 | $42,720 | $44,767 | $24,283 | $6,046 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
(5) | During a portion of the year ended March 31, 2005, the class received a partial reimbursement of its distribution and service fees. Had fees not | ||||||
been reimbursed, the ratio of operating expenses to average net assets and ratio of net investment income (loss) to average net assets would | |||||||
have been 1.49% and 2.06%, respectively. | |||||||
See Notes to Financial Statements. |
52
Value | |||||||
Investor Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $3.80 | $5.78 | $7.61 | $7.18 | $7.31 | $7.72 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.05 | 0.13 | 0.12 | 0.12 | 0.12 | 0.09 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 1.10 | (1.98) | (0.92) | 0.93 | 0.57 | 0.64 | |
Total From | |||||||
Investment Operations | 1.15 | (1.85) | (0.80) | 1.05 | 0.69 | 0.73 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.05) | (0.13) | (0.12) | (0.11) | (0.10) | (0.09) | |
From Net Realized Gains | — | — | (0.91) | (0.51) | (0.72) | (1.05) | |
Total Distributions | (0.05) | (0.13) | (1.03) | (0.62) | (0.82) | (1.14) | |
Net Asset Value, | |||||||
End of Period | $4.90 | $3.80 | $5.78 | $7.61 | $7.18 | $7.31 | |
Total Return(3) | 30.38% | (32.34)% | (11.56)% | 14.90% | 9.89% | 9.95% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 1.00%(4) | 1.00% | 1.00% | 0.99% | 0.99% | 0.99% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 2.12%(4) | 2.63% | 1.65% | 1.58% | 1.71% | 1.16% | |
Portfolio Turnover Rate | 26% | 91% | 152% | 140% | 134% | 130% | |
Net Assets, End of Period | |||||||
(in thousands) | $1,186,092 | $975,772 | $1,707,366 | $2,495,067 | $2,296,153 | $2,315,507 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
53
Value | |||||||
Institutional Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $3.81 | $5.79 | $7.62 | $7.19 | $7.32 | $7.72 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.05 | 0.14 | 0.13 | 0.13 | 0.14 | 0.10 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 1.09 | (1.98) | (0.91) | 0.94 | 0.57 | 0.65 | |
Total From | |||||||
Investment Operations | 1.14 | (1.84) | (0.78) | 1.07 | 0.71 | 0.75 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.05) | (0.14) | (0.14) | (0.13) | (0.12) | (0.10) | |
From Net Realized Gains | — | — | (0.91) | (0.51) | (0.72) | (1.05) | |
Total Distributions | (0.05) | (0.14) | (1.05) | (0.64) | (0.84) | (1.15) | |
Net Asset Value, | |||||||
End of Period | $4.90 | $3.81 | $5.79 | $7.62 | $7.19 | $7.32 | |
Total Return(3) | 30.16% | (32.14)% | (11.36)% | 15.11% | 10.10% | 10.30% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 0.80%(4) | 0.80% | 0.80% | 0.79% | 0.79% | 0.79% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 2.32%(4) | 2.83% | 1.85% | 1.78% | 1.91% | 1.36% | |
Portfolio Turnover Rate | 26% | 91% | 152% | 140% | 134% | 130% | |
Net Assets, End of Period | |||||||
(in thousands) | $134,594 | $123,484 | $307,769 | $289,536 | $254,778 | $251,812 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
54
Value | |||||||
A Class(1) | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(2) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $3.80 | $5.78 | $7.61 | $7.18 | $7.31 | $7.72 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(3) | 0.04 | 0.12 | 0.10 | 0.10 | 0.10 | 0.07 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 1.09 | (1.98) | (0.92) | 0.93 | 0.57 | 0.64 | |
Total From | |||||||
Investment Operations | 1.13 | (1.86) | (0.82) | 1.03 | 0.67 | 0.71 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.04) | (0.12) | (0.10) | (0.09) | (0.08) | (0.07) | |
From Net Realized Gains | — | — | (0.91) | (0.51) | (0.72) | (1.05) | |
Total Distributions | (0.04) | (0.12) | (1.01) | (0.60) | (0.80) | (1.12) | |
Net Asset Value, | |||||||
End of Period | $4.89 | $3.80 | $5.78 | $7.61 | $7.18 | $7.31 | |
Total Return(4) | 29.95% | (32.51)% | (11.76)% | 14.62% | 9.61% | 9.67% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 1.25%(5) | 1.25% | 1.25% | 1.24% | 1.24% | 1.24% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 1.87%(5) | 2.38% | 1.40% | 1.33% | 1.46% | 0.91% | |
Portfolio Turnover Rate | 26% | 91% | 152% | 140% | 134% | 130% | |
Net Assets, End of Period | |||||||
(in thousands) | $103,302 | $83,254 | $191,739 | $249,265 | $214,835 | $236,960 | |
(1) | Prior to September 4, 2007, the A Class was referred to as the Advisor Class. | ||||||
(2) | Six months ended September 30, 2009 (unaudited). | ||||||
(3) | Computed using average shares outstanding throughout the period. | ||||||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. | ||||||
Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense | |||||||
differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal | |||||||
places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal | |||||||
places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(5) | Annualized. | ||||||
See Notes to Financial Statements. |
55
Value | |||||||
B Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $3.80 | $5.78 | $7.61 | $7.18 | $7.31 | $7.73 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.02 | 0.08 | 0.05 | 0.04 | 0.05 | 0.01 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 1.11 | (1.97) | (0.92) | 0.94 | 0.57 | 0.65 | |
Total From | |||||||
Investment Operations | 1.13 | (1.89) | (0.87) | 0.98 | 0.62 | 0.66 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.03) | (0.09) | (0.05) | (0.04) | (0.03) | (0.03) | |
From Net Realized Gains | — | — | (0.91) | (0.51) | (0.72) | (1.05) | |
Total Distributions | (0.03) | (0.09) | (0.96) | (0.55) | (0.75) | (1.08) | |
Net Asset Value, | |||||||
End of Period | $4.90 | $3.80 | $5.78 | $7.61 | $7.18 | $7.31 | |
Total Return(3) | 29.72% | (33.01)% | (12.41)% | 13.78% | 8.81% | 8.93% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 2.00%(4) | 2.00% | 2.00% | 1.99% | 1.99% | 1.99% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 1.12%(4) | 1.63% | 0.65% | 0.58% | 0.71% | 0.16% | |
Portfolio Turnover Rate | 26% | 91% | 152% | 140% | 134% | 130% | |
Net Assets, End of Period | |||||||
(in thousands) | $3,179 | $2,651 | $5,601 | $7,740 | $7,129 | $5,059 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. | ||||||
Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense | |||||||
differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal | |||||||
places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal | |||||||
places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
56
Value | |||||||
C Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $3.77 | $5.74 | $7.56 | $7.14 | $7.27 | $7.70 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.02 | 0.08 | 0.05 | 0.04 | 0.05 | 0.01 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 1.10 | (1.96) | (0.91) | 0.93 | 0.57 | 0.64 | |
Total From | |||||||
Investment Operations | 1.12 | (1.88) | (0.86) | 0.97 | 0.62 | 0.65 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.03) | (0.09) | (0.05) | (0.04) | (0.03) | (0.03) | |
From Net Realized Gains | — | — | (0.91) | (0.51) | (0.72) | (1.05) | |
Total Distributions | (0.03) | (0.09) | (0.96) | (0.55) | (0.75) | (1.08) | |
Net Asset Value, | |||||||
End of Period | $4.86 | $3.77 | $5.74 | $7.56 | $7.14 | $7.27 | |
Total Return(3) | 29.69% | (33.06)% | (12.36)% | 13.71% | 8.87% | 8.84% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 2.00%(4) | 2.00% | 2.00% | 1.99% | 1.99% | 1.99% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 1.12%(4) | 1.63% | 0.65% | 0.58% | 0.71% | 0.16% | |
Portfolio Turnover Rate | 26% | 91% | 152% | 140% | 134% | 130% | |
Net Assets, End of Period | |||||||
(in thousands) | $6,951 | $5,414 | $11,532 | $22,274 | $19,259 | $13,885 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. | ||||||
Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense | |||||||
differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal | |||||||
places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal | |||||||
places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
57
Value | ||||||
R Class | ||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | ||||||
2009(1) | 2009 | 2008 | 2007 | 2006(2) | ||
Per-Share Data | ||||||
Net Asset Value, Beginning of Period | $3.80 | $5.78 | $7.61 | $7.18 | $7.60 | |
Income From Investment Operations | ||||||
Net Investment Income (Loss)(3) | 0.04 | 0.11 | 0.09 | 0.08 | 0.06 | |
Net Realized and Unrealized Gain (Loss) | 1.10 | (1.98) | (0.92) | 0.94 | 0.29 | |
Total From Investment Operations | 1.14 | (1.87) | (0.83) | 1.02 | 0.35 | |
Distributions | ||||||
From Net Investment Income | (0.04) | (0.11) | (0.09) | (0.08) | (0.05) | |
From Net Realized Gains | — | — | (0.91) | (0.51) | (0.72) | |
Total Distributions | (0.04) | (0.11) | (1.00) | (0.59) | (0.77) | |
Net Asset Value, End of Period | $4.90 | $3.80 | $5.78 | $7.61 | $7.18 | |
Total Return(4) | 30.05% | (32.67)% | (11.98)% | 14.34% | 4.99% | |
Ratios/Supplemental Data | ||||||
Ratio of Operating Expenses | ||||||
to Average Net Assets | 1.50%(5) | 1.50% | 1.50% | 1.49% | 1.49%(5) | |
Ratio of Net Investment Income (Loss) | ||||||
to Average Net Assets | 1.62%(5) | 2.13% | 1.15% | 1.08% | 1.17%(5) | |
Portfolio Turnover Rate | 26% | 91% | 152% | 140% | 134%(6) | |
Net Assets, End of Period (in thousands) | $3,773 | $2,255 | $1,625 | $331 | $43 | |
(1) | Six months ended September 30, 2009 (unaudited). | |||||
(2) | July 29, 2005 (commencement of sale) through March 31, 2006. | |||||
(3) | Computed using average shares outstanding throughout the period. | |||||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | |||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | ||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | ||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | ||||||
guidelines and does not result in any gain or loss of value between one class and another. | ||||||
(5) | Annualized. | |||||
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2006. | |||||
See Notes to Financial Statements. |
58
Large Company Value | |||||||
Investor Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $3.64 | $6.48 | $7.55 | $6.72 | $6.39 | $5.89 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.04 | 0.14 | 0.14 | 0.13 | 0.12 | 0.12 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 1.22 | (2.76) | (0.85) | 0.89 | 0.47 | 0.51 | |
Total From | |||||||
Investment Operations | 1.26 | (2.62) | (0.71) | 1.02 | 0.59 | 0.63 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.04) | (0.14) | (0.15) | (0.13) | (0.11) | (0.11) | |
From Net Realized Gains | — | (0.08) | (0.21) | (0.06) | (0.15) | (0.02) | |
Total Distributions | (0.04) | (0.22) | (0.36) | (0.19) | (0.26) | (0.13) | |
Net Asset Value, | |||||||
End of Period | $4.86 | $3.64 | $6.48 | $7.55 | $6.72 | $6.39 | |
Total Return(3) | 34.83% | (41.07)% | (9.88)% | 15.37% | 9.44% | 10.73% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 0.85%(4) | 0.83% | 0.83% | 0.83% | 0.84% | 0.87% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 1.96%(4) | 2.57% | 1.93% | 1.86% | 1.75% | 1.90% | |
Portfolio Turnover Rate | 15% | 22% | 18% | 12% | 16% | 18% | |
Net Assets, End of Period | |||||||
(in thousands) | $759,536 | $569,483 | $1,251,631 | $1,498,119 | $1,112,858 | $659,277 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
59
Large Company Value | |||||||
Institutional Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $3.64 | $6.48 | $7.55 | $6.72 | $6.39 | $5.89 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.05 | 0.15 | 0.16 | 0.15 | 0.13 | 0.13 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 1.22 | (2.76) | (0.86) | 0.88 | 0.47 | 0.51 | |
Total From | |||||||
Investment Operations | 1.27 | (2.61) | (0.70) | 1.03 | 0.60 | 0.64 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.05) | (0.15) | (0.16) | (0.14) | (0.12) | (0.12) | |
From Net Realized Gains | — | (0.08) | (0.21) | (0.06) | (0.15) | (0.02) | |
Total Distributions | (0.05) | (0.23) | (0.37) | (0.20) | (0.27) | (0.14) | |
Net Asset Value, | |||||||
End of Period | $4.86 | $3.64 | $6.48 | $7.55 | $6.72 | $6.39 | |
Total Return(3) | 34.96% | (40.95)% | (9.70)% | 15.60% | 9.65% | 10.94% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 0.65%(4) | 0.63% | 0.63% | 0.63% | 0.64% | 0.67% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 2.16%(4) | 2.77% | 2.13% | 2.06% | 1.95% | 2.10% | |
Portfolio Turnover Rate | 15% | 22% | 18% | 12% | 16% | 18% | |
Net Assets, End of Period | |||||||
(in thousands) | $300,247 | $275,245 | $540,297 | $587,012 | $527,109 | $438,518 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
60
Large Company Value | |||||||
A Class(1) | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(2) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $3.64 | $6.47 | $7.55 | $6.72 | $6.39 | $5.89 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(3) | 0.04 | 0.12 | 0.12 | 0.12 | 0.10 | 0.10 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 1.22 | (2.74) | (0.86) | 0.88 | 0.47 | 0.51 | |
Total From | |||||||
Investment Operations | 1.26 | (2.62) | (0.74) | 1.00 | 0.57 | 0.61 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.04) | (0.13) | (0.13) | (0.11) | (0.09) | (0.09) | |
From Net Realized Gains | — | (0.08) | (0.21) | (0.06) | (0.15) | (0.02) | |
Total Distributions | (0.04) | (0.21) | (0.34) | (0.17) | (0.24) | (0.11) | |
Net Asset Value, | |||||||
End of Period | $4.86 | $3.64 | $6.47 | $7.55 | $6.72 | $6.39 | |
Total Return(4) | 34.66% | (41.12)% | (10.24)% | 15.08% | 9.17% | 10.45% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 1.10%(5) | 1.08% | 1.08% | 1.08% | 1.09% | 1.12% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 1.71%(5) | 2.32% | 1.68% | 1.61% | 1.50% | 1.65% | |
Portfolio Turnover Rate | 15% | 22% | 18% | 12% | 16% | 18% | |
Net Assets, End of Period | |||||||
(in thousands) | $204,557 | $162,957 | $373,078 | $282,930 | $184,601 | $104,612 | |
(1) | Prior to December 3, 2007, the A Class was referred to as the Advisor Class. | ||||||
(2) | Six months ended September 30, 2009 (unaudited). | ||||||
(3) | Computed using average shares outstanding throughout the period. | ||||||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. | ||||||
Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense | |||||||
differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal | |||||||
places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal | |||||||
places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(5) | Annualized. | ||||||
See Notes to Financial Statements. |
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Large Company Value | |||||||
B Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $3.65 | $6.49 | $7.57 | $6.74 | $6.41 | $5.91 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.02 | 0.08 | 0.07 | 0.06 | 0.05 | 0.05 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 1.23 | (2.75) | (0.87) | 0.89 | 0.47 | 0.52 | |
Total From | |||||||
Investment Operations | 1.25 | (2.67) | (0.80) | 0.95 | 0.52 | 0.57 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.02) | (0.09) | (0.07) | (0.06) | (0.04) | (0.05) | |
From Net Realized Gains | — | (0.08) | (0.21) | (0.06) | (0.15) | (0.02) | |
Total Distributions | (0.02) | (0.17) | (0.28) | (0.12) | (0.19) | (0.07) | |
Net Asset Value, | |||||||
End of Period | $4.88 | $3.65 | $6.49 | $7.57 | $6.74 | $6.41 | |
Total Return(3) | 34.33% | (41.58)% | (10.88)% | 14.18% | 8.33% | 9.59% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 1.85%(4) | 1.83% | 1.83% | 1.83% | 1.84% | 1.87% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 0.96%(4) | 1.57% | 0.93% | 0.86% | 0.75% | 0.90% | |
Portfolio Turnover Rate | 15% | 22% | 18% | 12% | 16% | 18% | |
Net Assets, End of Period | |||||||
(in thousands) | $5,993 | $5,285 | $12,965 | $17,374 | $15,954 | $13,009 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. | ||||||
Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense | |||||||
differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal | |||||||
places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal | |||||||
places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
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Large Company Value | |||||||
C Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $3.64 | $6.47 | $7.55 | $6.72 | $6.39 | $5.89 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.02 | 0.08 | 0.07 | 0.06 | 0.05 | 0.05 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 1.22 | (2.74) | (0.87) | 0.89 | 0.47 | 0.52 | |
Total From | |||||||
Investment Operations | 1.24 | (2.66) | (0.80) | 0.95 | 0.52 | 0.57 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.02) | (0.09) | (0.07) | (0.06) | (0.04) | (0.05) | |
From Net Realized Gains | — | (0.08) | (0.21) | (0.06) | (0.15) | (0.02) | |
Total Distributions | (0.02) | (0.17) | (0.28) | (0.12) | (0.19) | (0.07) | |
Net Asset Value, | |||||||
End of Period | $4.86 | $3.64 | $6.47 | $7.55 | $6.72 | $6.39 | |
Total Return(3) | 34.15% | (41.56)% | (10.91)% | 14.22% | 8.35% | 9.62% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 1.85%(4) | 1.83% | 1.83% | 1.83% | 1.84% | 1.87% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 0.96%(4) | 1.57% | 0.93% | 0.86% | 0.75% | 0.90% | |
Portfolio Turnover Rate | 15% | 22% | 18% | 12% | 16% | 18% | |
Net Assets, End of Period | |||||||
(in thousands) | $18,710 | $17,246 | $51,775 | $71,792 | $61,682 | $40,789 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. | ||||||
Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense | |||||||
differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal | |||||||
places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal | |||||||
places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
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Large Company Value | |||||||
R Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $3.64 | $6.48 | $7.56 | $6.72 | $6.39 | $5.89 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.03 | 0.11 | 0.11 | 0.10 | 0.09 | 0.09 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 1.22 | (2.76) | (0.87) | 0.89 | 0.47 | 0.51 | |
Total From | |||||||
Investment Operations | 1.25 | (2.65) | (0.76) | 0.99 | 0.56 | 0.60 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.03) | (0.11) | (0.11) | (0.09) | (0.08) | (0.08) | |
From Net Realized Gains | — | (0.08) | (0.21) | (0.06) | (0.15) | (0.02) | |
Total Distributions | (0.03) | (0.19) | (0.32) | (0.15) | (0.23) | (0.10) | |
Net Asset Value, | |||||||
End of Period | $4.86 | $3.64 | $6.48 | $7.56 | $6.72 | $6.39 | |
Total Return(3) | 34.49% | (41.36)% | (10.45)% | 14.95% | 8.90% | 10.17% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 1.35%(4) | 1.33% | 1.33% | 1.33% | 1.34% | 1.33%(5) | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 1.46%(4) | 2.07% | 1.43% | 1.36% | 1.25% | 1.44%(5) | |
Portfolio Turnover Rate | 15% | 22% | 18% | 12% | 16% | 18% | |
Net Assets, End of Period | |||||||
(in thousands) | $13,952 | $9,587 | $16,675 | $17,765 | $10,984 | $2,143 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
(5) | 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. | |||||||
See Notes to Financial Statements. |
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Approval of Management Agreements |
Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund’s independent directors (the “Directors”) each year. At American Century Investments, this process is referred to as the “15(c) Process.” As a part of this process, the board reviews fund performance, shareholder services, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. In addition to this annual review, the board of directors oversees and evaluates on a continuous basis at its quarterly meetings the nature and quality of significant services performed by the advisor, fund performance, audit and compliance information, and a variety of other reports relating to fund operations. The board, or committees of the board, also holds special meetings as needed.
Under a Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for the board’s approval or renewal of any advisory agreements within the fund’s most recently completed fiscal half-year period.
Annual Contract Review Process
As part of the annual 15(c) Process undertaken during the most recent fiscal half-year period, the Directors reviewed extensive data and information compiled by the advisor and certain independent providers of evaluative data (the “15(c) Providers”) concerning the Equity Income, Value and Large Company Value funds (the “Funds”) and the services provided to the Funds under the management agreement. The information considered and the discussions held at the meetings included, but were not limited to:
• the nature, extent and quality of investment management, shareholder services and other services provided to the Funds;
• the wide range of programs and services the advisor provides to the Funds and their shareholders on a routine and non-routine basis;
• the compliance policies, procedures, and regulatory experience of the advisor;
• data comparing the cost of owning the Funds to the cost of owning a similar fund;
• data comparing the Funds’ performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies;
• financial data showing the profitability of the Funds to the advisor and the overall profitability of the advisor;
• data comparing services provided and charges to other investment management clients of the advisor; and
65
• consideration of collateral benefits derived by the advisor from the management of the Funds and any potential economies of scale relating thereto.
In keeping with its practice, the Funds’ board of directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The board also had the benefit of the advice of its independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the advisor, the 15(c) Providers, and the board’s independent counsel, and evaluated such information for each fund for which the board has responsibility. In connection with their review of the Funds, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management and subadvisory agreements under the terms ultimately determined by the board to be appropriate, the Directors’ decision was based on the following factors.
Nature, Extent and Quality of Services — Generally. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the Funds. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including:
• Fund construction and design
• portfolio security selection
• initial capitalization/funding
• securities trading
• Fund administration
• custody of Fund assets
• daily valuation of each Fund’s portfolio
• shareholder servicing and transfer agency, including shareholder
confirmations, recordkeeping and communications
• legal services
• regulatory and portfolio compliance
• financial reporting
• marketing and distribution
66
The Directors noted that many of the services provided by the advisor have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. They discussed with the advisor the challenges presented by these changes and the impact on the Funds. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings.
Investment Management Services. The nature of the investment management services provided to the Funds is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments, and liquidity. In evaluating investment performance, the board expects the advisor to manage the Funds in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, com pliance and other systems to conduct their business. At each quarterly meeting the Directors review investment performance information for the Funds, together with comparative information for appropriate benchmarks and/or peer groups of funds managed similarly to the Funds. The Directors also review detailed performance information during the 15(c) Process comparing each Fund’s performance with that of similar funds not managed by the advisor. If performance concerns are identified, the Directors discuss with the advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Equity Income’s and Value’s performance for both the one- and three-year periods were above the median for their respective peer groups. Large Company Value’s quarter end performance fell below the median for its peer group for both the one- and three-year period during the past year. The board discussed Large Company Value’s performance with the advisor and was satisfied with the efforts being undertaken by the advisor. The board will continue to monitor these efforts and the performance of the Fund. More detailed information about the Funds’ performance can be found in the Performance and Portfolio Commentary sections of this report.
Shareholder and Other Services. The advisor provides the Funds with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at their regular quarterly meetings, including the annual meeting concerning contract review, and reports to the board. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency serv ice level efficiency and the quality
67
of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor.
Costs of Services Provided and Profitability. The advisor provides detailed information concerning its cost of providing various services to the Funds, its profitability in managing the Funds, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The board concluded that the advisor’s profits were reasonable in light of the services provided to the Funds.
Ethics. The Directors generally consider the advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Directors review information provided by the advisor regarding the possible existence of economies of scale in connection with the management of the Funds. The Directors concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The analysis of economies of scale is further complicated by the additional services and content provided by the advisor and its reinvestment in its ability to provide and expand those services. Accordingly, the Directors seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the Funds specifically, the expenses incurred by the advisor in providing various functions to the Funds, and the fees of competitive funds no t managed by the advisor. The Directors believe the advisor is appropriately sharing economies of scale through its competitive fee structure, fee breakpoints as each Fund increases in size, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The Funds pay the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Funds, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of each Fund’s independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, record-keeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses
68
to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Directors’ analysis of fee levels involves reviewing certain evaluative data compiled by a 15(c) Provider comparing each Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group and performing a regression analysis to evaluate the effect of fee breakpoints as assets under management increase. The unified fee charged to shareholders of each of the Funds was below the median of the total expense ratios of its respective peer group. In addition, the Directors also reviewed updated fee level data provided by the advisor, but recognized that comparative data was particularly difficult to evaluate g iven the significant market developments during the past year. The board concluded that the management fee paid by each Fund to the advisor was reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the Funds. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Funds. The Directors analyzed this information and concluded that the fees charged and services provided to the Funds were reasonable by comparison.
Collateral Benefits Derived by the Advisor. The Directors considered the existence of collateral benefits the advisor may receive as a result of its relationship with the Funds. They concluded that the advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is able to provide investment management services to certain clients other than the Funds, at least in part, due to its existing infrastructure built to serv e the fund complex. The Directors concluded, however, that the assets of those other clients are not material to the analysis and, in any event, are included with the assets of the Funds to determine breakpoints in each Fund’s fee schedule, provided they are managed using the same investment team and strategy.
Conclusions of the Directors
As a result of this process, the board, including all of the independent directors, in the absence of particular circumstances and assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor concluded that the investment management agreement between each Fund and the advisor is fair and reasonable in light of the services provided and should be renewed.
69
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans 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. 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. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
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 Investments’ 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.
70
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 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 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 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® Value Index measures the performance of those Russell 3000 Index companies (the 3,000 largest U.S. companies based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values.
The Russell Midcap® Index measures the performance of the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization.
71
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.
72
Notes |
73
Notes |
74
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
©2009 American Century Proprietary Holdings, Inc. All rights reserved.
0911
CL-SAN-66878N
Semiannual Report |
September 30, 2009 |
American Century Investments |
Equity Index Fund
President’s Letter |
Dear Investor:
Thank you for your investment with us during the financial reporting period ended September 30, 2009. We appreciate your trust in American Century Investments® at this volatile, transitional time in the economy and investment markets.
As the upheavals associated with the “Great Recession” gradually subside, our senior management team has put considerable thought into how the investment environment has changed and what new challenges and opportunities await us. Critical factors that we are anticipating in the coming year include marked shifts in investment and spending behavior, along with consolidation in our industry.
Most importantly, we think the economic recovery will be slow and extended. The economy and capital markets have come a long way since Lehman Brothers collapsed over a year ago, but 2010 will likely bring continuing challenges. The stock market’s rebound since last March and the third-quarter economic surge this year were fueled largely by corporate cost-cutting and unprecedented monetary and fiscal stimulus, including some key programs that have since expired or been scaled back.
Meanwhile, the resilient but struggling consumer sector still faces rising unemployment, heavy debt burdens, tight credit conditions, and a housing market that is starting to stabilize, but remains vulnerable. Much of our investment positioning in 2009 has cautiously reflected these still unstable economic fundamentals, leading to underperformance, in some cases, versus market benchmarks buoyed by the rally of riskier assets. We still support our fundamentally based positioning because we believe strongly that some markets—driven more by technical factors than fundamentals—have advanced further than underlying economic conditions warrant, and remain susceptible to the possibility of more volatility ahead.
For more detailed information from our portfolio management team about the performance and positioning of your investment, please review the following pages, or visit our website, americancentury.com.
Thank you for your continued confidence in us.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
Independent Chairman’s Letter |
I am Don Pratt, an independent director and chairman of the mutual fund board responsible for the U.S. Growth Equity, U.S. Value Equity, Global and Non-U.S. Equity and Asset Allocation funds managed by American Century Investments. The board consists of seven independent directors and two directors who are affiliated with the investment advisor.
As one of your independent shareholder representatives on the fund board, I plan to write you from time to time with updates on board activities and news about your funds. My co-independent directors and I are committed to putting your interests first. We work closely with American Century Investments on maintaining strong fund performance, providing quality service to shareholders at competitive fees and ensuring ethical business practices and compliance with all applicable fund regulations.
Last year, the board welcomed its newest independent director, John R. Whitten. He is a great addition to an experienced board where, collectively, the independent directors have served the funds for more than 76 years. This continuity served shareholders well as the investment advisor initiated a successful management transition, creating a strong senior leadership team consisting of well-tenured company executives and experienced industry veterans. Under the leadership of President and Chief Executive Officer Jonathan Thomas and Chief Investment Officer Enrique Chang, the firm has made the achievement of superior investment performance its primary focus and the key driver of its success going forward. This focus helped the company generate strong relative performance against the backdrop of 2008’s unprecedented market volatility.
As investors in the American Century funds, my fellow directors and I share your investing experience. We know firsthand how decisions made at the board level affect all shareholders. To further guide our efforts on your behalf, I invite you to send me your comments, questions or suggestions by email to dhpratt@fundboardchair.com. Thank you for allowing me to serve as your advocate on our board.
Table of Contents |
Market Perspective | 2 |
U.S. Stock Index Returns | 2 |
Equity Index | |
Performance | 3 |
Portfolio Commentary | 5 |
Top Ten Holdings | 7 |
Top Five Industries | 7 |
Types of Investments in Portfolio | 7 |
Shareholder Fee Example | 8 |
Financial Statements | |
Schedule of Investments | 10 |
Statement of Assets and Liabilities | 18 |
Statement of Operations | 19 |
Statement of Changes in Net Assets | 20 |
Notes to Financial Statements | 21 |
Financial Highlights | 27 |
Other Information | |
Approval of Management Agreement | 29 |
Additional Information | 35 |
Index Definitions | 37 |
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 Investments or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments 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 Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative i ndices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Market Perspective |
By Enrique Chang, Chief Investment Officer, American Century Investments
Stocks Rallied Sharply
The U.S. stock market staged a powerful rally during the six months ended September 30, 2009, as the major stock indices enjoyed their best six-month period of performance in more than 70 years (see the table below). The market’s surge was driven by a dramatic shift in market sentiment as extreme pessimism regarding the economy and financial sector gave way to renewed optimism.
In late 2008 and early 2009, stocks fell sharply as investors grew increasingly concerned about a deep economic downturn and a collapse in the global financial system. As the six-month period began, however, early signs of stabilization in the economy began to erase this pessimistic sentiment, boosting confidence about a possible recovery. Although the unemployment rate continued to climb during the six-month period, reaching a 26-year high of 9.8%, other segments of the economy—most notably housing and manufacturing—showed evidence of improvement.
Investors also responded favorably to corporate America’s cost-management efforts, which resulted in better-than-expected profit levels despite weaker revenues. With investor confidence soaring, the major stock indices moved steadily higher throughout the six-month period, advancing by approximately 35%. The market rally was broad based, but mid- and small-cap stocks generated the best results, while value shares outpaced growth across all market capitalizations.
Challenges Still to Be Overcome
Although we are no longer peering into the abyss of an economic and financial collapse, we are not out of the woods yet. To sustain the early signs of economic revitalization we have witnessed since March, several longer-term challenges need to be addressed, including a massive and growing national debt, a weaker U.S. dollar, and the potential for significantly higher inflation once a recovery takes hold.
While these concerns are not likely to result in any dire consequences in the near term, they are major risk factors to the longer-term health of the U.S. economy and its ability to fully recover from the recent downturn. As a result, we foresee a protracted and uncertain economic recovery and continued volatility in the equity market.
U.S. Stock Index Returns | ||||
For the six months ended September 30, 2009* | ||||
Russell 1000 Index (Large-Cap) | 35.22% | Russell 2000 Index (Small-Cap) | 43.95% | |
Russell 1000 Value Index | 37.99% | Russell 2000 Value Index | 44.79% | |
Russell 1000 Growth Index | 32.58% | Russell 2000 Growth Index | 43.06% | |
Russell Midcap Index | 45.71% | |||
Russell Midcap Value Index | 49.51% | |||
Russell Midcap Growth Index | 41.89% | |||
*Total returns for periods less than one year are not annualized. |
2
Performance |
Equity Index | |||||||
Total Returns as of September 30, 2009 | |||||||
Average Annual Returns | |||||||
Since | Inception | ||||||
6 months(1) | 1 year | 5 years | 10 years | Inception | Date | ||
Investor Class | 33.59% | -7.44% | 0.56% | -0.63% | -0.22% | 2/26/99 | |
S&P 500 Index(2) | 34.02% | -6.91% | 1.02% | -0.15% | 0.26% | — | |
Institutional Class | 33.73% | -7.26% | 0.72% | -0.43% | -0.02% | 2/26/99 | |
(1) | Total returns for periods less than one year are not annualized. | ||||||
(2) | Data provided by Lipper Inc. — A Reuters Company. © 2009 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
One-Year Returns Over 10 Years | ||||||||||
Periods ended September 30 | ||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | |
Investor Class | 12.54% | -26.89% | -20.61% | 23.56% | 13.14% | 11.87% | 10.17% | 16.01% | -22.28% | -7.44% |
S&P 500 Index | 13.28% | -26.62% | -20.49% | 24.40% | 13.87% | 12.25% | 10.79% | 16.44% | -21.98% | -6.91% |
Total Annual Fund Operating Expenses | ||||||||||
Investor Class | Institutional Class | |||||||||
0.50% | 0.30% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
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 33.59%* for the six months ended September 30, 2009, compared with the 34.02% return of its benchmark, the S&P 500 Index. The portfolio’s results reflected operating expenses, whereas the index return did not.
The fund’s robust return for the six-month period reflected the dramatic boost to investor confidence provided by improving economic and financial conditions. The significant change in market sentiment helped the S&P 500 record its best six-month performance in decades. Every sector in the index advanced during the period; financials were the best performers, followed by the more economically sensitive sectors—industrials, materials, consumer discretionary, and information technology.
A Recovery in Financials
The financials sector of the portfolio posted the strongest returns, gaining nearly 70% as a group for the six-month period. Financial stocks were hit the hardest by the economic downturn and liquidity crisis in the credit markets in late 2008 and early 2009. However, as these headwinds began to abate over the last six months, financials enjoyed a substantial resurgence.
Four of the fund’s top seven performance contributors were financial stocks, led by financial services giant Bank of America, which gained approximately 150% during the period. Bank of America exceeded earnings expectations in both the first and second quarters, which provided a substantial lift to the stock. Another top contributor was investment bank JPMorgan Chase, which also reported unexpectedly strong earnings amid signs of stabilization in many of its businesses.
Other notable performers in the financials sector included commercial bank Wells Fargo, which rallied sharply as the company strengthened its balance sheet by issuing equity during the period, and investment bank Goldman Sachs, which repaid its debt to the federal government under the Troubled Asset Relief Program (as did JPMorgan Chase).
Technology and Industrials Surged
Sectors of the market that benefited the most from better economic conditions also performed well during the six-month period, led by information technology and industrials. Five of the fund’s top ten performance contributors were information technology stocks, with many of the sector’s higher-profile companies leading the way. Consumer electronics maker Apple was the top contributor as the company released a new version of its iPhone and continued to benefit from strong demand for its iPod and Mac franchises.
*All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized.
5
Equity Index
Software titan Microsoft and network equipment maker Cisco Systems were also among the best contributors in the portfolio. Microsoft rallied thanks to the introduction of a successful new search engine called Bing and favorable buzz surrounding the impending release of its latest Windows operating system upgrade. Cisco took advantage of the market downturn to make a series of attractive acquisitions that helped boost revenue and profit growth.
In the industrials sector, industrial conglomerates and aerospace and defense stocks were the best performers. Industrial giant General Electric advanced sharply amid a better financial environment for GE Capital, the company’s struggling finance arm. Defense contractor United Technologies and machinery manufacturer Caterpillar were also among the fund’s better performers.
Utilities and Telecom Lagged
The only sector of the portfolio to post a single-digit gain for the six-month period was telecommunication services. A challenging competitive environment for both wireless services providers and diversified telecom companies prevented this sector from keeping pace with the broader equity market. Notable detractors in this sector included discount wireless carrier MetroPCS Communications, which reported disappointing earnings and lost market share, and wireless services provider Sprint Nextel, which saw further deterioration in its subscriber base.
Utilities stocks also posted more modest gains than the overall stock market during the period. Utilities are generally considered to be defensive stocks that hold up well during difficult economic times, but a broad investor shift toward more cyclical segments of the market as economic conditions improved led to the overall underperformance of the utilities sector.
Among the most significant individual detractors in the portfolio, the largest was discount retailer Wal-Mart, another defensive stock that fell out of favor as the economy stabilized. Other noteworthy decliners included agricultural products maker Monsanto, which fell as a result of increased competition in its herbicide business, and for-profit education firm Apollo Group, which slid as investors grew concerned about the company’s ability to maintain its enrollment base and remain current on tuition bills.
Outlook
Despite the recent stabilization in the economic environment, we expect an eventual economic recovery to progress at a gradual pace. Obstacles to growth include a retrenched consumer, who is focusing on reducing debt and increasing savings, and the unemployment rate, which has remained persistently high. As a result of this uncertainty, we expect continued volatility in the U.S. stock market in the coming months.
6
Equity Index | ||
Top Ten Holdings as of September 30, 2009 | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Exxon Mobil Corp. | 3.5% | 4.6% |
Microsoft Corp. | 2.1% | 1.9% |
General Electric Co. | 1.9% | 1.5% |
JPMorgan Chase & Co. | 1.8% | 1.4% |
Procter & Gamble Co. (The) | 1.8% | 1.9% |
Johnson & Johnson | 1.8% | 2.0% |
Apple, Inc. | 1.8% | 1.3% |
AT&T, Inc. | 1.7% | 2.1% |
International Business Machines Corp. | 1.7% | 1.8% |
Bank of America Corp. | 1.6% | 0.6% |
Top Five Industries as of September 30, 2009 | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Oil, Gas & Consumable Fuels | 9.8% | 11.0% |
Pharmaceuticals | 6.9% | 7.9% |
Diversified Financial Services | 4.6% | 2.8% |
Software | 4.0% | 3.9% |
Computers & Peripherals | 4.0% | 3.2% |
Types of Investments in Portfolio | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Common Stocks and Futures | 99.9% | 99.7% |
Other Assets and Liabilities | 0.1% | 0.3% |
7
Shareholder Fee Example (Unaudited) |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/ exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2009 to September 30, 2009.
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 Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments 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 Investments 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 Investments 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.
8
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.
Beginning | Ending | Expenses Paid | ||
Account Value | Account Value | During Period* | Annualized | |
4/1/09 | 9/30/09 | 4/1/09 – 9/30/09 | Expense Ratio* | |
Actual | ||||
Investor Class | $1,000 | $1,335.90 | $2.87 | 0.49% |
Institutional Class | $1,000 | $1,337.30 | $1.70 | 0.29% |
Hypothetical | ||||
Investor Class | $1,000 | $1,022.61 | $2.48 | 0.49% |
Institutional Class | $1,000 | $1,023.61 | $1.47 | 0.29% |
*Expenses are equal to the class’s annualized expense ratio listed in the table above, multiplied by the average account value over the period, | ||||
multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. |
9
Schedule of Investments |
Equity Index | ||||||
SEPTEMBER 30, 2009 (UNAUDITED) | ||||||
Shares | Value | Shares | Value | |||
Common Stocks — 99.0% | Pepsi Bottling Group, Inc. | 5,784 | $ 210,769 | |||
AEROSPACE & DEFENSE — 2.7% | PepsiCo, Inc. | 65,222 | 3,825,923 | |||
Boeing Co. (The) | 30,386 | $ 1,645,402 | 10,505,448 | |||
General Dynamics Corp. | 16,130 | 1,041,998 | BIOTECHNOLOGY — 1.7% | |||
Amgen, Inc.(1) | 42,482 | 2,558,691 | ||||
Goodrich Corp. | 5,271 | 286,426 | ||||
Honeywell International, Inc. | 31,344 | 1,164,430 | Biogen Idec, Inc.(1) | 12,049 | 608,715 | |
ITT Corp. | 7,723 | 402,755 | Celgene Corp.(1) | 19,158 | 1,070,932 | |
L-3 Communications | Cephalon, Inc.(1) | 3,200 | 186,368 | |||
Holdings, Inc. | 4,865 | 390,757 | Genzyme Corp.(1) | 11,283 | 640,085 | |
Lockheed Martin Corp. | 13,529 | 1,056,344 | Gilead Sciences, Inc.(1) | 37,794 | 1,760,445 | |
Northrop Grumman Corp. | 13,298 | 688,172 | 6,825,236 | |||
Precision Castparts Corp. | 5,820 | 592,883 | BUILDING PRODUCTS — 0.1% | |||
Raytheon Co. | 16,295 | 781,671 | Masco Corp. | 14,589 | 188,490 | |
Rockwell Collins, Inc. | 6,458 | 328,066 | CAPITAL MARKETS — 3.0% | |||
United Technologies Corp. | 39,443 | 2,403,262 | Ameriprise Financial, Inc. | 10,476 | 380,593 | |
10,782,166 | Bank of New York | |||||
AIR FREIGHT & LOGISTICS — 1.0% | Mellon Corp. (The) | 50,203 | 1,455,385 | |||
C.H. Robinson | Charles Schwab Corp. (The) | 40,019 | 766,364 | |||
Worldwide, Inc. | 7,009 | 404,770 | E*TRADE Financial Corp.(1) | 38,045 | 66,579 | |
Expeditors International | Federated Investors, Inc., | |||||
of Washington, Inc. | 9,000 | 316,350 | Class B | 3,790 | 99,942 | |
FedEx Corp. | 13,048 | 981,470 | Franklin Resources, Inc. | 6,275 | 631,265 | |
United Parcel Service, Inc., | Goldman Sachs | |||||
Class B | 41,604 | 2,349,378 | Group, Inc. (The) | 21,387 | 3,942,693 | |
4,051,968 | Invesco Ltd. | 17,351 | 394,909 | |||
AIRLINES — 0.1% | Janus Capital Group, Inc. | 7,946 | 112,674 | |||
Southwest Airlines Co. | 31,629 | 303,638 | Legg Mason, Inc. | 6,776 | 210,259 | |
AUTO COMPONENTS — 0.2% | Morgan Stanley | 56,883 | 1,756,547 | |||
Goodyear Tire & | Northern Trust Corp. | 10,274 | 597,536 | |||
Rubber Co. (The)(1) | 10,498 | 178,781 | ||||
State Street Corp. | 20,681 | 1,087,821 | ||||
Johnson Controls, Inc. | 24,861 | 635,447 | T. Rowe Price Group, Inc. | 10,547 | 481,998 | |
814,228 | 11,984,565 | |||||
AUTOMOBILES — 0.3% | CHEMICALS — 2.0% | |||||
Ford Motor Co.(1) | 134,430 | 969,240 | ||||
Air Products & | ||||||
Harley-Davidson, Inc. | 9,528 | 219,144 | Chemicals, Inc. | 8,741 | 678,127 | |
1,188,384 | Airgas, Inc. | 3,484 | 168,521 | |||
BEVERAGES — 2.7% | CF Industries Holdings, Inc. | 2,100 | 181,083 | |||
Brown-Forman Corp., | Dow Chemical Co. (The) | 47,856 | 1,247,606 | |||
Class B | 4,646 | 224,030 | E.I. du Pont | |||
Coca-Cola Co. (The) | 96,999 | 5,208,846 | de Nemours & Co. | 37,845 | 1,216,338 | |
Coca-Cola Enterprises, Inc. | 12,835 | 274,797 | Eastman Chemical Co. | 2,897 | 155,106 | |
Constellation Brands, Inc., | Ecolab, Inc. | 9,952 | 460,081 | |||
Class A(1) | 8,409 | 127,396 | ||||
FMC Corp. | 3,100 | 174,375 | ||||
Dr. Pepper Snapple | International Flavors & | |||||
Group, Inc.(1) | 10,800 | 310,500 | ||||
Fragrances, Inc. | 3,347 | 126,952 | ||||
Molson Coors Brewing Co., | Monsanto Co. | 22,857 | 1,769,132 | |||
Class B | 6,639 | 323,187 | ||||
PPG Industries, Inc. | 7,011 | 408,110 |
10
Equity Index | ||||||
Shares | Value | Shares | Value | |||
Praxair, Inc. | 12,871 | $ 1,051,432 | Lexmark International, Inc., | |||
Sigma-Aldrich Corp. | 4,983 | 268,982 | Class A(1) | 3,403 | $ 73,301 | |
7,905,845 | NetApp, Inc.(1) | 14,057 | 375,041 | |||
COMMERCIAL BANKS — 2.8% | QLogic Corp.(1) | 4,458 | 76,678 | |||
BB&T Corp. | 28,447 | 774,896 | SanDisk Corp.(1) | 9,763 | 211,857 | |
Comerica, Inc. | 6,070 | 180,097 | Sun Microsystems, Inc.(1) | 31,821 | 289,253 | |
Fifth Third Bancorp. | 33,162 | 335,931 | Teradata Corp.(1) | 6,910 | 190,163 | |
First Horizon | Western Digital Corp.(1) | 9,400 | 343,382 | |||
National Corp.(1) | 9,176 | 121,393 | ||||
15,726,513 | ||||||
Huntington Bancshares, Inc. | 25,098 | 118,212 | CONSTRUCTION & ENGINEERING — 0.2% | |||
KeyCorp | 36,866 | 239,629 | Fluor Corp. | 7,424 | 377,510 | |
M&T Bank Corp. | 3,497 | 217,933 | Jacobs Engineering | |||
Marshall & Ilsley Corp. | 15,048 | 121,437 | Group, Inc.(1) | 5,300 | 243,535 | |
PNC Financial Services | Quanta Services, Inc.(1) | 8,200 | 181,466 | |||
Group, Inc. | 19,423 | 943,764 | 802,511 | |||
Regions Financial Corp. | 50,453 | 313,313 | CONSTRUCTION MATERIALS — 0.1% | |||
SunTrust Banks, Inc. | 20,802 | 469,085 | Vulcan Materials Co. | 5,279 | 285,436 | |
U.S. Bancorp. | 79,974 | 1,748,232 | CONSUMER FINANCE — 0.7% | |||
Wells Fargo & Co. | 195,402 | 5,506,428 | American Express Co. | 49,736 | 1,686,050 | |
Zions Bancorp. | 5,051 | 90,767 | Capital One Financial Corp. | 19,153 | 684,337 | |
11,181,117 | Discover Financial Services | 22,322 | 362,286 | |||
COMMERCIAL SERVICES & SUPPLIES — 0.5% | SLM Corp.(1) | 20,306 | 177,068 | |||
Avery Dennison Corp. | 4,673 | 168,275 | 2,909,741 | |||
Cintas Corp. | 5,236 | 158,703 | CONTAINERS & PACKAGING — 0.2% | |||
Iron Mountain, Inc.(1) | 7,285 | 194,218 | ||||
Ball Corp. | 4,014 | 197,489 | ||||
Pitney Bowes, Inc. | 8,773 | 218,009 | Bemis Co., Inc. | 4,333 | 112,268 | |
R.R. Donnelley & Sons Co. | 8,710 | 185,174 | Owens-Illinois, Inc.(1) | 7,100 | 261,990 | |
Republic Services, Inc. | 13,245 | 351,920 | ||||
Pactiv Corp.(1) | 5,731 | 149,292 | ||||
Stericycle, Inc.(1) | 3,700 | 179,265 | ||||
Sealed Air Corp. | 6,828 | 134,034 | ||||
Waste Management, Inc. | 20,438 | 609,461 | 855,073 | |||
2,065,025 | DISTRIBUTORS — 0.1% | |||||
COMMUNICATIONS EQUIPMENT — 2.7% | Genuine Parts Co. | 6,809 | 259,151 | |||
Ciena Corp.(1) | 4,113 | 66,960 | ||||
DIVERSIFIED CONSUMER SERVICES — 0.2% | ||||||
Cisco Systems, Inc.(1) | 241,278 | 5,679,684 | ||||
Apollo Group, Inc., Class A(1) | 5,344 | 393,693 | ||||
Harris Corp. | 5,290 | 198,904 | DeVry, Inc. | 2,600 | 143,832 | |
JDS Uniphase Corp.(1) | 9,749 | 69,315 | ||||
H&R Block, Inc. | 13,632 | 250,556 | ||||
Juniper Networks, Inc.(1) | 21,721 | 586,901 | 788,081 | |||
Motorola, Inc. | 95,618 | 821,359 | DIVERSIFIED FINANCIAL SERVICES — 4.6% | |||
QUALCOMM, Inc. | 69,553 | 3,128,494 | Bank of America Corp. | 361,922 | 6,123,720 | |
Tellabs, Inc.(1) | 17,153 | 118,699 | Citigroup, Inc. | 545,374 | 2,639,610 | |
10,670,316 | CME Group, Inc. | 2,777 | 855,844 | |||
COMPUTERS & PERIPHERALS — 4.0% | IntercontinentalExchange, | |||||
Apple, Inc.(1) | 37,470 | 6,945,814 | Inc.(1) | 3,100 | 301,289 | |
Dell, Inc.(1) | 71,975 | 1,098,338 | JPMorgan Chase & Co.(2) | 164,497 | 7,208,259 | |
EMC Corp.(1) | 84,536 | 1,440,493 | Leucadia National Corp.(1) | 7,700 | 190,344 | |
Hewlett-Packard Co. | 99,178 | 4,682,193 | McGraw-Hill Cos., Inc. (The) | 13,417 | 337,303 | |
Moody’s Corp. | 8,107 | 165,869 |
11
Equity Index | ||||||
Shares | Value | Shares | Value | |||
NASDAQ OMX Group, Inc. | Cameron | |||||
(The)(1) | 5,900 | $ 124,195 | International Corp.(1) | 9,200 | $ 347,944 | |
NYSE Euronext | 11,000 | 317,790 | Diamond Offshore | |||
18,264,223 | Drilling, Inc. | 2,845 | 271,754 | |||
DIVERSIFIED TELECOMMUNICATION | ENSCO International, Inc. | 6,096 | 259,324 | |||
SERVICES — 2.8% | FMC Technologies, Inc.(1) | 5,025 | 262,506 | |||
AT&T, Inc. | 246,918 | 6,669,255 | Halliburton Co. | 37,718 | 1,022,912 | |
CenturyTel, Inc. | 12,593 | 423,125 | Nabors Industries Ltd.(1) | 11,550 | 241,395 | |
Frontier | National Oilwell Varco, Inc.(1) | 17,448 | 752,532 | |||
Communications Corp. | 13,529 | 102,009 | Rowan Cos., Inc. | 4,901 | 113,066 | |
Qwest Communications | Schlumberger Ltd. | 50,270 | 2,996,092 | |||
International, Inc. | 62,688 | 238,841 | ||||
Verizon | Smith International, Inc. | 9,319 | 267,455 | |||
Communications, Inc. | 118,991 | 3,601,858 | �� | 7,323,966 | ||
Windstream Corp. | 17,534 | 177,619 | FOOD & STAPLES RETAILING — 2.8% | |||
11,212,707 | Costco Wholesale Corp. | 18,181 | 1,026,499 | |||
ELECTRIC UTILITIES — 2.1% | CVS Caremark Corp. | 60,373 | 2,157,731 | |||
Allegheny Energy, Inc. | 7,334 | 194,498 | Kroger Co. (The) | 27,159 | 560,562 | |
American Electric | Safeway, Inc. | 17,325 | 341,649 | |||
Power Co., Inc. | 19,887 | 616,298 | SUPERVALU, INC. | 9,020 | 135,841 | |
Duke Energy Corp. | 54,645 | 860,112 | SYSCO Corp. | 24,543 | 609,894 | |
Edison International | 13,474 | 452,457 | Walgreen Co. | 41,554 | 1,557,028 | |
Entergy Corp. | 8,174 | 652,776 | Wal-Mart Stores, Inc. | 90,448 | 4,440,092 | |
Exelon Corp. | 27,535 | 1,366,287 | Whole Foods Market, Inc.(1) | 6,083 | 185,471 | |
FirstEnergy Corp. | 12,658 | 578,724 | 11,014,767 | |||
FPL Group, Inc. | 17,130 | 946,090 | FOOD PRODUCTS — 1.6% | |||
Northeast Utilities | 7,100 | 168,554 | Archer-Daniels-Midland Co. | 26,823 | 783,768 | |
Pepco Holdings, Inc. | 9,200 | 136,896 | Campbell Soup Co. | 7,988 | 260,569 | |
Pinnacle West Capital Corp. | 4,381 | 143,784 | ConAgra Foods, Inc. | 18,403 | 398,977 | |
PPL Corp. | 15,598 | 473,243 | Dean Foods Co.(1) | 7,642 | 135,951 | |
Progress Energy, Inc. | 11,732 | 458,252 | General Mills, Inc. | 13,632 | 877,628 | |
Southern Co. | 33,197 | 1,051,349 | H.J. Heinz Co. | 13,064 | 519,294 | |
8,099,320 | Hershey Co. (The) | 7,094 | 275,673 | |||
ELECTRICAL EQUIPMENT — 0.4% | Hormel Foods Corp. | 3,100 | 110,112 | |||
Emerson Electric Co. | 31,562 | 1,265,005 | J.M. Smucker Co. (The) | 5,064 | 268,443 | |
Rockwell Automation, Inc. | 5,857 | 249,508 | Kellogg Co. | 10,757 | 529,567 | |
1,514,513 | Kraft Foods, Inc., Class A | 61,722 | 1,621,437 | |||
ELECTRONIC EQUIPMENT, | McCormick & Co., Inc. | 5,652 | 191,829 | |||
INSTRUMENTS & COMPONENTS — 0.5% | Sara Lee Corp. | 28,220 | 314,371 | |||
Agilent Technologies, Inc.(1) | 14,416 | 401,197 | ||||
Tyson Foods, Inc., Class A | 12,907 | 163,015 | ||||
Amphenol Corp., Class A | 7,021 | 264,551 | 6,450,634 | |||
Corning, Inc. | 65,005 | 995,227 | GAS UTILITIES — 0.1% | |||
FLIR Systems, Inc.(1) | 6,400 | 179,008 | Nicor, Inc. | 1,951 | 71,387 | |
Jabil Circuit, Inc. | 7,510 | 100,709 | Questar Corp. | 7,373 | 276,930 | |
Molex, Inc. | 5,380 | 112,335 | 348,317 | |||
2,053,027 | HEALTH CARE EQUIPMENT & SUPPLIES — 2.0% | |||||
ENERGY EQUIPMENT & SERVICES — 1.9% | Baxter International, Inc. | 25,218 | 1,437,678 | |||
Baker Hughes, Inc. | 12,801 | 546,091 | Becton, Dickinson & Co. | 10,001 | 697,570 | |
BJ Services Co. | 12,501 | 242,895 |
12
Equity Index | ||||||
Shares | Value | Shares | Value | |||
Boston Scientific Corp.(1) | 62,817 | $ 665,232 | Wynn Resorts Ltd.(1) | 2,938 | $ 208,275 | |
C.R. Bard, Inc. | 4,025 | 316,405 | Yum! Brands, Inc. | 19,649 | 663,350 | |
CareFusion Corp.(1) | 7,676 | 167,337 | 5,862,893 | |||
DENTSPLY International, Inc. | 6,300 | 217,602 | HOUSEHOLD DURABLES — 0.4% | |||
Hospira, Inc.(1) | 6,580 | 293,468 | Black & Decker Corp. | 2,543 | 117,715 | |
Intuitive Surgical, Inc.(1) | 1,600 | 419,600 | D.R. Horton, Inc. | 11,785 | 134,467 | |
Medtronic, Inc. | 46,317 | 1,704,466 | Fortune Brands, Inc. | 6,159 | 264,714 | |
St. Jude Medical, Inc.(1) | 14,723 | 574,344 | Harman International | |||
Stryker Corp. | 11,802 | 536,165 | Industries, Inc. | 2,642 | 89,511 | |
Varian Medical | KB Home | 3,263 | 54,198 | |||
Systems, Inc.(1) | 5,255 | 221,393 | Leggett & Platt, Inc. | 6,671 | 129,417 | |
Zimmer Holdings, Inc.(1) | 8,860 | 473,567 | Lennar Corp., Class A | 6,047 | 86,170 | |
7,724,827 | Newell Rubbermaid, Inc. | 11,078 | 173,814 | |||
HEALTH CARE PROVIDERS & SERVICES — 2.0% | Pulte Homes, Inc. | 13,205 | 145,123 | |||
Aetna, Inc. | 18,286 | 508,899 | Snap-on, Inc. | 2,180 | 75,777 | |
AmerisourceBergen Corp. | 12,261 | 274,401 | Stanley Works (The) | 3,381 | 144,335 | |
Cardinal Health, Inc. | 14,810 | 396,908 | Whirlpool Corp. | 3,150 | 220,374 | |
CIGNA Corp. | 11,558 | 324,664 | 1,635,615 | |||
Coventry Health Care, Inc.(1) | 6,579 | 131,317 | HOUSEHOLD PRODUCTS — 2.5% | |||
DaVita, Inc.(1) | 4,400 | 249,216 | Clorox Co. | 5,911 | 347,685 | |
Express Scripts, Inc.(1) | 11,522 | 893,877 | Colgate-Palmolive Co. | 20,877 | 1,592,498 | |
Kimberly-Clark Corp. | 17,353 | 1,023,480 | ||||
Humana, Inc.(1) | 6,952 | 259,310 | ||||
Procter & Gamble Co. (The) | 122,145 | 7,074,638 | ||||
Laboratory Corp. | ||||||
of America Holdings(1) | 4,433 | 291,248 | 10,038,301 | |||
McKesson Corp. | 11,131 | 662,851 | INDEPENDENT POWER PRODUCERS | |||
& ENERGY TRADERS — 0.2% | ||||||
Medco Health | ||||||
Solutions, Inc.(1) | 19,831 | 1,096,853 | AES Corp. (The)(1) | 27,416 | 406,305 | |
Patterson Cos., Inc.(1) | 3,994 | 108,836 | Constellation Energy | |||
Group, Inc. | 8,539 | 276,408 | ||||
Quest Diagnostics, Inc. | 6,414 | 334,747 | ||||
Dynegy, Inc., Class A(1) | 23,013 | 58,683 | ||||
Tenet Healthcare Corp.(1) | 17,728 | 104,241 | ||||
741,396 | ||||||
UnitedHealth Group, Inc. | 48,634 | 1,217,795 | INDUSTRIAL CONGLOMERATES — 2.5% | |||
WellPoint, Inc.(1) | 19,871 | 941,090 | ||||
3M Co. | 29,245 | 2,158,281 | ||||
7,796,253 | General Electric Co.(2) | 444,743 | 7,302,680 | |||
HEALTH CARE TECHNOLOGY(3) | ||||||
Textron, Inc. | 11,288 | 214,246 | ||||
IMS Health, Inc. | 7,910 | 121,418 | 9,675,207 | |||
HOTELS, RESTAURANTS & LEISURE — 1.5% | INSURANCE — 2.6% | |||||
Carnival Corp. | 18,247 | 607,260 | Aflac, Inc. | 19,612 | 838,217 | |
Darden Restaurants, Inc. | 5,858 | 199,934 | Allstate Corp. (The) | 22,375 | 685,123 | |
International | ||||||
Game Technology | 12,549 | 269,553 | American International | |||
Group, Inc.(1) | 5,743 | 253,324 | ||||
Marriott International, Inc., | ||||||
Class A | 10,358 | 285,777 | Aon Corp. | 11,625 | 473,021 | |
McDonald’s Corp. | 45,702 | 2,608,213 | Assurant, Inc. | 4,680 | 150,041 | |
Starbucks Corp.(1) | 30,652 | 632,964 | Chubb Corp. (The) | 14,663 | 739,162 | |
Starwood Hotels & Resorts | Cincinnati Financial Corp. | 6,913 | 179,669 | |||
Worldwide, Inc. | 7,909 | 261,234 | Genworth Financial, Inc., | |||
Wyndham Worldwide Corp. | 7,741 | 126,333 | Class A | 20,120 | 240,434 |
13
Equity Index | ||||||
Shares | Value | Shares | Value | |||
Hartford Financial Services | LEISURE EQUIPMENT & PRODUCTS — 0.1% | |||||
Group, Inc. (The) | 15,849 | $ 419,998 | Eastman Kodak Co. | 10,301 | $ 49,239 | |
Lincoln National Corp. | 12,705 | 329,187 | Hasbro, Inc. | 5,284 | 146,631 | |
Loews Corp. | 15,010 | 514,092 | Mattel, Inc. | 15,249 | 281,496 | |
Marsh & | 477,366 | |||||
McLennan Cos., Inc. | 21,992 | 543,862 | LIFE SCIENCES TOOLS & SERVICES — 0.4% | |||
MBIA, Inc.(1) | 7,425 | 57,618 | ||||
Life Technologies Corp.(1) | 7,388 | 343,911 | ||||
MetLife, Inc. | 34,350 | 1,307,704 | Millipore Corp.(1) | 2,383 | 167,596 | |
Principal Financial | ||||||
Group, Inc. | 13,248 | 362,863 | PerkinElmer, Inc. | 5,165 | 99,375 | |
Progressive Corp. (The)(1) | 28,840 | 478,167 | Thermo Fisher | |||
Scientific, Inc.(1) | 17,041 | 744,180 | ||||
Prudential Financial, Inc. | 19,353 | 965,908 | Waters Corp.(1) | 4,118 | 230,032 | |
Torchmark Corp. | 3,311 | 143,797 | ||||
1,585,094 | ||||||
Travelers Cos., Inc. (The) | 23,752 | 1,169,311 | ||||
MACHINERY — 1.5% | ||||||
Unum Group | 13,727 | 294,307 | ||||
Caterpillar, Inc. | 26,030 | 1,336,120 | ||||
XL Capital Ltd., Class A | 14,563 | 254,270 | ||||
Cummins, Inc. | 8,269 | 370,534 | ||||
10,400,075 | ||||||
Danaher Corp. | 10,858 | 730,961 | ||||
INTERNET & CATALOG RETAIL — 0.4% | ||||||
Deere & Co. | 17,678 | 758,740 | ||||
Amazon.com, Inc.(1) | 13,892 | 1,296,957 | ||||
Dover Corp. | 7,948 | 308,064 | ||||
Expedia, Inc.(1) | 9,068 | 217,179 | ||||
Eaton Corp. | 6,989 | 395,507 | ||||
1,514,136 | Flowserve Corp. | 2,400 | 236,496 | |||
INTERNET SOFTWARE & SERVICES — 1.9% | Illinois Tool Works, Inc. | 16,009 | 683,744 | |||
Akamai Technologies, Inc.(1) | 7,270 | 143,074 | ||||
PACCAR, Inc. | 15,144 | 571,080 | ||||
eBay, Inc.(1) | 46,909 | 1,107,521 | Pall Corp. | 5,063 | 163,434 | |
Google, Inc., Class A(1) | 10,060 | 4,988,251 | Parker-Hannifin Corp. | 6,607 | 342,507 | |
VeriSign, Inc.(1) | 8,224 | 194,827 | 5,897,187 | |||
Yahoo!, Inc.(1) | 49,824 | 887,365 | MEDIA — 2.5% | |||
7,321,038 | CBS Corp., Class B | 27,870 | 335,834 | |||
IT SERVICES — 2.8% | Comcast Corp., Class A | 120,184 | 2,029,908 | |||
Affiliated Computer | DIRECTV Group, Inc. | |||||
Services, Inc., Class A(1) | 4,160 | 225,347 | (The)(1) | 18,867 | 520,352 | |
Automatic Data | Gannett Co., Inc. | 10,383 | 129,891 | |||
Processing, Inc. | 21,027 | 826,361 | Interpublic Group | |||
Cognizant Technology | of Cos., Inc. (The)(1) | 20,725 | 155,852 | |||
Solutions Corp., Class A(1) | 12,436 | 480,776 | Meredith Corp. | 1,653 | 49,491 | |
Computer Sciences Corp.(1) | 6,438 | 339,347 | New York Times Co. (The), | |||
Convergys Corp.(1) | 5,533 | 54,998 | Class A | 5,277 | 42,849 | |
Fidelity National | News Corp., Class A | 94,073 | 1,127,935 | |||
Information Services, Inc. | 8,263 | 210,789 | Omnicom Group, Inc. | 12,924 | 477,413 | |
Fiserv, Inc.(1) | 6,428 | 309,830 | Scripps Networks | |||
International Business | Interactive, Inc., Class A | 3,833 | 141,629 | |||
Machines Corp. | 54,871 | 6,563,120 | Time Warner Cable, Inc. | 14,637 | 630,708 | |
MasterCard, Inc., Class A | 4,007 | 810,015 | Time Warner, Inc. | 49,521 | 1,425,214 | |
Paychex, Inc. | 13,242 | 384,680 | Viacom, Inc., Class B(1) | 25,319 | 709,945 | |
Total System Services, Inc. | 8,453 | 136,178 | Walt Disney Co. (The) | 77,855 | 2,137,898 | |
Western Union Co. (The) | 29,192 | 552,313 | Washington Post Co. (The), | |||
10,893,754 | Class B | 243 | 113,744 | |||
10,028,663 |
14
Equity Index | ||||||
Shares | Value | Shares | Value | |||
METALS & MINING — 1.0% | CONSOL Energy, Inc. | 7,651 | $ 345,137 | |||
AK Steel Holding Corp. | 4,800 | $ 94,704 | Denbury Resources, Inc.(1) | 10,600 | 160,378 | |
Alcoa, Inc. | 40,433 | 530,481 | Devon Energy Corp. | 18,617 | 1,253,483 | |
Allegheny Technologies, Inc. | 4,220 | 147,658 | El Paso Corp. | 29,844 | 307,990 | |
Freeport-McMoRan Copper | EOG Resources, Inc. | 10,502 | 877,022 | |||
& Gold, Inc. | 17,229 | 1,182,082 | EQT Corp. | 5,600 | 238,560 | |
Newmont Mining Corp. | 20,562 | 905,139 | Exxon Mobil Corp. | 201,126 | 13,799,255 | |
Nucor Corp. | 13,065 | 614,186 | Hess Corp. | 12,056 | 644,514 | |
Titanium Metals Corp. | 3,900 | 37,401 | Marathon Oil Corp. | 29,601 | 944,272 | |
United States Steel Corp. | 5,998 | 266,131 | Massey Energy Co. | 3,342 | 93,208 | |
3,777,782 | Murphy Oil Corp. | 7,895 | 454,515 | |||
MULTILINE RETAIL — 0.9% | Noble Energy, Inc. | 7,186 | 473,989 | |||
Big Lots, Inc.(1) | 3,556 | 88,971 | Occidental Petroleum Corp. | 33,961 | 2,662,542 | |
Family Dollar Stores, Inc. | 5,933 | 156,631 | Peabody Energy Corp. | 11,051 | 411,318 | |
J.C. Penney Co., Inc. | 9,959 | 336,116 | Pioneer Natural | |||
Kohl’s Corp.(1) | 12,787 | 729,499 | Resources Co. | 4,584 | 166,353 | |
Macy’s, Inc. | 17,128 | 313,271 | Range Resources Corp. | 6,608 | 326,171 | |
Nordstrom, Inc. | 6,960 | 212,559 | Southwestern Energy Co.(1) | 14,365 | 613,098 | |
Sears Holdings Corp.(1) | 2,077 | 135,649 | Spectra Energy Corp. | 26,680 | 505,319 | |
Target Corp. | 31,468 | 1,468,926 | Sunoco, Inc. | 4,972 | 141,453 | |
3,441,622 | Tesoro Corp. | 6,100 | 91,378 | |||
MULTI-UTILITIES — 1.3% | Valero Energy Corp. | 23,701 | 459,562 | |||
Ameren Corp. | 9,671 | 244,483 | Williams Cos., Inc. (The) | 23,991 | 428,719 | |
CenterPoint Energy, Inc. | 15,948 | 198,234 | XTO Energy, Inc. | 24,284 | 1,003,415 | |
CMS Energy Corp. | 9,809 | 131,441 | 38,620,988 | |||
Consolidated Edison, Inc. | 11,667 | 477,647 | PAPER & FOREST PRODUCTS — 0.2% | |||
Dominion Resources, Inc. | 24,922 | 859,809 | International Paper Co. | 18,248 | 405,653 | |
DTE Energy Co. | 7,067 | 248,334 | MeadWestvaco Corp. | 6,787 | 151,418 | |
Integrys Energy Group, Inc. | 3,239 | 116,248 | Weyerhaeuser Co. | 8,974 | 328,897 | |
NiSource, Inc. | 11,950 | 165,985 | 885,968 | |||
PG&E Corp. | 15,584 | 630,996 | PERSONAL PRODUCTS — 0.2% | |||
Public Service | Avon Products, Inc. | 17,754 | 602,926 | |||
Enterprise Group, Inc. | 21,043 | 661,592 | Estee Lauder Cos., Inc. | |||
SCANA Corp. | 4,420 | 154,258 | (The), Class A | 4,976 | 184,510 | |
Sempra Energy | 10,131 | 504,625 | 787,436 | |||
TECO Energy, Inc. | 9,260 | 130,381 | PHARMACEUTICALS — 6.9% | |||
Wisconsin Energy Corp. | 5,000 | 225,850 | Abbott Laboratories | 64,704 | 3,200,907 | |
Xcel Energy, Inc. | 19,401 | 373,275 | Allergan, Inc. | 12,839 | 728,742 | |
5,123,158 | Bristol-Myers Squibb Co. | 82,860 | 1,866,007 | |||
OFFICE ELECTRONICS — 0.1% | Eli Lilly & Co. | 42,334 | 1,398,292 | |||
Xerox Corp. | 36,924 | 285,792 | Forest Laboratories, Inc.(1) | 12,359 | 363,849 | |
OIL, GAS & CONSUMABLE FUELS — 9.8% | Johnson & Johnson | 115,328 | 7,022,322 | |||
Anadarko Petroleum Corp. | 20,525 | 1,287,533 | King Pharmaceuticals, Inc.(1) | 10,702 | 115,260 | |
Apache Corp. | 14,091 | 1,293,977 | Merck & Co., Inc. | 88,243 | 2,791,126 | |
Cabot Oil & Gas Corp. | 4,500 | 160,875 | Mylan, Inc.(1) | 12,990 | 207,970 | |
Chesapeake Energy Corp. | 26,837 | 762,171 | Pfizer, Inc. | 282,387 | 4,673,505 | |
Chevron Corp. | 83,943 | 5,912,106 | Schering-Plough Corp. | 68,293 | 1,929,277 | |
ConocoPhillips | 62,061 | 2,802,675 |
15
Equity Index | ||||||
Shares | Value | Shares | Value | |||
Watson | Linear Technology Corp. | 9,423 | $ 260,358 | |||
Pharmaceuticals, Inc.(1) | 4,570 | $ 167,445 | LSI Corp.(1) | 27,978 | 153,599 | |
Wyeth | 55,862 | 2,713,776 | MEMC Electronic | |||
27,178,478 | Materials, Inc.(1) | 9,556 | 158,916 | |||
PROFESSIONAL SERVICES — 0.1% | Microchip Technology, Inc. | 7,800 | 206,700 | |||
Dun & Bradstreet Corp. | 2,099 | 158,097 | Micron Technology, Inc.(1) | 35,158 | 288,296 | |
Equifax, Inc. | 5,378 | 156,715 | National | |||
Monster Worldwide, Inc.(1) | 4,772 | 83,415 | Semiconductor Corp. | 9,610 | 137,135 | |
Robert Half | Novellus Systems, Inc.(1) | 4,263 | 89,438 | |||
International, Inc. | 6,567 | 164,306 | NVIDIA Corp.(1) | 22,903 | 344,232 | |
562,533 | Teradyne, Inc.(1) | 7,674 | 70,985 | |||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 1.1% | Texas Instruments, Inc. | 52,589 | 1,245,833 | |||
Apartment Investment & | Xilinx, Inc. | 11,667 | 273,241 | |||
Management Co., Class A | 5,108 | 75,343 | 10,081,588 | |||
AvalonBay Communities, Inc. | 3,416 | 248,446 | SOFTWARE — 4.0% | |||
Boston Properties, Inc. | 5,833 | 382,353 | ||||
Adobe Systems, Inc.(1) | 21,958 | 725,492 | ||||
Equity Residential | 11,226 | 344,638 | ||||
Autodesk, Inc.(1) | 9,703 | 230,931 | ||||
HCP, Inc. | 12,284 | 353,042 | ||||
BMC Software, Inc.(1) | 7,618 | 285,904 | ||||
Health Care REIT, Inc. | 5,055 | 210,389 | ||||
Host Hotels & Resorts, Inc. | 25,206 | 296,675 | CA, Inc. | 16,797 | 369,366 | |
Citrix Systems, Inc.(1) | 7,429 | 291,440 | ||||
Kimco Realty Corp. | 15,810 | 206,162 | ||||
Plum Creek Timber Co., Inc. | 6,568 | 201,244 | Compuware Corp.(1) | 8,747 | 64,116 | |
ProLogis | 18,077 | 215,478 | Electronic Arts, Inc.(1) | 13,748 | 261,899 | |
Public Storage | 5,722 | 430,523 | Intuit, Inc.(1) | 13,226 | 376,941 | |
Simon Property Group, Inc. | 11,896 | 825,939 | McAfee, Inc.(1) | 6,600 | 289,014 | |
Ventas, Inc. | 6,700 | 257,950 | Microsoft Corp. | 324,476 | 8,400,684 | |
Vornado Realty Trust | 6,432 | 414,285 | Novell, Inc.(1) | 14,691 | 66,256 | |
4,462,467 | Oracle Corp. | 163,471 | 3,406,736 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT(3) | Red Hat, Inc.(1) | 8,060 | 222,778 | |||
CB Richard Ellis Group, Inc., | salesforce.com, inc.(1) | 4,600 | 261,878 | |||
Class A(1) | 9,586 | 112,540 | ||||
Symantec Corp.(1) | 34,045 | 560,721 | ||||
ROAD & RAIL — 0.9% | 15,814,156 | |||||
Burlington Northern | SPECIALTY RETAIL — 1.9% | |||||
Santa Fe Corp. | 10,978 | 876,374 | ||||
Abercrombie & Fitch Co., | ||||||
CSX Corp. | 16,410 | 686,922 | Class A | 3,747 | 123,201 | |
Norfolk Southern Corp. | 15,326 | 660,704 | AutoNation, Inc.(1) | 3,773 | 68,216 | |
Ryder System, Inc. | 2,396 | 93,588 | AutoZone, Inc.(1) | 1,350 | 197,397 | |
Union Pacific Corp. | 21,121 | 1,232,410 | Bed Bath & Beyond, Inc.(1) | 11,038 | 414,367 | |
3,549,998 | ||||||
Best Buy Co., Inc. | 14,085 | 528,469 | ||||
SEMICONDUCTORS & | ||||||
SEMICONDUCTOR EQUIPMENT — 2.6% | GameStop Corp., Class A(1) | 7,100 | 187,937 | |||
Advanced Micro | Gap, Inc. (The) | 19,958 | 427,101 | |||
Devices, Inc.(1) | 24,288 | 137,470 | Home Depot, Inc. (The) | 71,324 | 1,900,071 | |
Altera Corp. | 12,028 | 246,694 | Limited Brands, Inc. | 10,631 | 180,621 | |
Analog Devices, Inc. | 11,878 | 327,595 | Lowe’s Cos., Inc. | 61,809 | 1,294,280 | |
Applied Materials, Inc. | 55,574 | 744,692 | Office Depot, Inc.(1) | 11,746 | 77,759 | |
Broadcom Corp., Class A(1) | 18,137 | 556,625 | O’Reilly Automotive, Inc.(1) | 5,800 | 209,612 | |
Intel Corp. | 234,078 | 4,580,906 | RadioShack Corp. | 5,417 | 89,760 | |
KLA-Tencor Corp. | 7,219 | 258,873 | Sherwin-Williams Co. (The) | 3,960 | 238,234 |
16
Equity Index | ||||||
Shares | Value | Shares/ | ||||
Staples, Inc. | 30,451 | $ 707,072 | Principal | |||
Tiffany & Co. | 5,014 | 193,189 | Amount | Value | ||
TJX Cos., Inc. (The) | 17,801 | 661,307 | WIRELESS TELECOMMUNICATION SERVICES — 0.3% | |||
American Tower Corp., | ||||||
7,498,593 | Class A(1) | 16,481 | $ 599,908 | |||
TEXTILES, APPAREL & LUXURY GOODS — 0.5% | MetroPCS | |||||
Coach, Inc. | 13,202 | 434,610 | Communications, Inc.(1) | 10,800 | 101,088 | |
NIKE, Inc., Class B | 16,246 | 1,051,116 | Sprint Nextel Corp.(1) | 118,583 | 468,403 | |
Polo Ralph Lauren Corp. | 2,431 | 186,263 | 1,169,399 | |||
VF Corp. | 3,769 | 272,989 | TOTAL COMMON STOCKS | |||
1,944,978 | (Cost $315,712,689) | 390,623,770 | ||||
THRIFTS & MORTGAGE FINANCE — 0.1% | Temporary Cash Investments — | |||||
Hudson City Bancorp., Inc. | 19,590 | 257,608 | Segregated For Futures Contracts — 0.9% | |||
People’s United | ||||||
Financial, Inc. | 14,176 | 220,579 | JPMorgan U.S. Treasury | |||
Plus Money Market Fund | ||||||
478,187 | Agency Shares | 17,321 | 17,321 | |||
TOBACCO — 1.6% | Repurchase Agreement, Goldman Sachs | |||||
Altria Group, Inc. | 86,619 | 1,542,684 | Group, Inc., (collateralized by various U.S. | |||
Lorillard, Inc. | 6,862 | 509,847 | Treasury obligations, 4.75%, 2/15/37, valued | |||
Philip Morris | at $2,243,922), in a joint trading account | |||||
International, Inc. | 80,925 | 3,944,284 | at 0.01%, dated 9/30/09, due 10/1/09 | |||
(Delivery value $2,200,001) | 2,200,000 | |||||
Reynolds American, Inc. | 7,167 | 319,075 | U.S. Treasury Bills, | |||
6,315,890 | 0.17%, 11/19/09(4) | $1,130,000 | 1,129,923 | |||
TRADING COMPANIES & DISTRIBUTORS — 0.1% | TOTAL TEMPORARY CASH | |||||
Fastenal Co. | 5,600 | 216,720 | INVESTMENTS — SEGREGATED | |||
W.W. Grainger, Inc. | 2,550 | 227,868 | FOR FUTURES CONTRACTS | |||
444,588 | (Cost $3,347,059) | 3,347,244 | ||||
TOTAL INVESTMENT | ||||||
SECURITIES — 99.9% | ||||||
(Cost $319,059,748) | 393,971,014 | |||||
OTHER ASSETS | ||||||
AND LIABILITIES — 0.1% | 412,259 | |||||
TOTAL NET ASSETS — 100.0% | $394,383,273 |
Futures Contracts | ||||
Underlying Face | ||||
Contracts Purchased | Expiration Date | Amount at Value | Unrealized Gain (Loss) | |
78 S&P 500 E-Mini Futures | December 2009 | $4,106,310 | $112,336 | |
Notes to Schedule of Investments | ||||
REIT = Real Estate Investment Trust | ||||
(1) | Non-income producing. | |||
(2) | Security, or a portion thereof, has been segregated for futures contracts. At the period end, the aggregate value of securities pledged was $4,107,000. | |||
(3) | Industry is less than 0.05% of total net assets. | |||
(4) | The rate indicated is the yield to maturity at purchase. | |||
See Notes to Financial Statements. |
17
Statement of Assets and Liabilities |
SEPTEMBER 30, 2009 (UNAUDITED) | |
Assets | |
Investment securities, at value (cost of $319,059,748) | $393,971,014 |
Cash | 954 |
Receivable for capital shares sold | 222,528 |
Dividends and interest receivable | 489,064 |
394,683,560 | |
Liabilities | |
Payable for capital shares redeemed | 169,801 |
Payable for variation margin on futures contracts | 8,307 |
Accrued management fees | 122,179 |
300,287 | |
Net Assets | $394,383,273 |
Net Assets Consist of: | |
Capital (par value and paid-in surplus) | $388,368,501 |
Undistributed net investment income | 164,745 |
Accumulated net realized loss on investment transactions | (69,173,575) |
Net unrealized appreciation on investments | 75,023,602 |
$394,383,273 | |
Investor Class, $0.01 Par Value | |
Net assets | $171,330,187 |
Shares outstanding | 40,793,475 |
Net asset value per share | $4.20 |
Institutional Class, $0.01 Par Value | |
Net assets | $223,053,086 |
Shares outstanding | 53,088,133 |
Net asset value per share | $4.20 |
See Notes to Financial Statements. |
18
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) | |
Investment Income (Loss) | |
Income: | |
Dividends | $ 4,117,156 |
Interest | 7,154 |
4,124,310 | |
Expenses: | |
Management fees | 690,794 |
Directors’ fees and expenses | 7,321 |
Other expenses | 19 |
698,134 | |
Net investment income (loss) | 3,426,176 |
Realized and Unrealized Gain (Loss) | |
Net realized gain (loss) on: | |
Investment transactions | (2,126,352) |
Futures contract transactions | 3,756,462 |
1,630,110 | |
Change in net unrealized appreciation (depreciation) on: | |
Investments | 101,710,659 |
Futures contracts | (546,770) |
101,163,889 | |
Net realized and unrealized gain (loss) | 102,793,999 |
Net Increase (Decrease) in Net Assets Resulting from Operations | $106,220,175 |
See Notes to Financial Statements. |
19
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND YEAR ENDED MARCH 31, 2009 | |||
Increase (Decrease) in Net Assets | Sept. 30, 2009 | March 31, 2009 | |
Operations | |||
Net investment income (loss) | $ 3,426,176 | $ 11,301,222 | |
Net realized gain (loss) | 1,630,110 | 20,315,221 | |
Change in net unrealized appreciation (depreciation) | 101,163,889 | (245,933,033) | |
Net increase (decrease) in net assets resulting from operations | 106,220,175 | (214,316,590) | |
Distributions to Shareholders | |||
From net investment income: | |||
Investor Class | (1,316,351) | (3,550,797) | |
Institutional Class | (1,979,021) | (7,578,541) | |
Decrease in net assets from distributions | (3,295,372) | (11,129,338) | |
Capital Share Transactions | |||
Net increase (decrease) in net assets from capital share transactions | (28,620,402) | (261,960,006) | |
Net increase (decrease) in net assets | 74,304,401 | (487,405,934) | |
Net Assets | |||
Beginning of period | 320,078,872 | 807,484,806 | |
End of period | $394,383,273 | $ 320,078,872 | |
Undistributed net investment income | $164,745 | $33,941 | |
See Notes to Financial Statements. |
20
Notes to Financial Statements |
SEPTEMBER 30, 2009 (UNAUDITED)
1. Organization and Summary of Significant Accounting Policies
Organization — American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Equity Index Fund (the fund) is one fund in a series issued by the corporation. The fund is nondiversified under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. The fund pursues its objective by matching, as closely as possible, the investment characteristics and results of the S&P 500 Composite Price Index (S&P 500 Index). The following is a summary of the fund’s significant accounting policies.
Multiple Class — The fund is authorized to issue the Investor Class and the Institutional Class. The share classes differ principally in their respective distribution and shareholder servicing expenses and arrangements. All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Security Valuations — Securities traded primarily on a principal securities exchange are valued at the last reported sales price, or at the mean of the latest bid and asked prices where no last sales price is available. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official close price. Investments in open-end management investment companies are valued at the reported net asset value. 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 ov er-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 b een 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. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
21
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 certain other funds in the American Century Investments family of funds, 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 2006. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. 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 maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a 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.
Subsequent Events — Management has evaluated events or transactions that may have occurred since September 30, 2009, that would merit recognition or disclosure in the financial statements. This evaluation was completed through November 27, 2009, the date the financial statements were issued.
22
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 the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The annual management fee schedule for the fund ranges from 0.350% to 0.490% for the Investor Class. The Institutional Class is 0.200% less at each point within the range. The effective annual management fee for each class of the fund for the six months ended September 30, 2009 was 0.49% and 0.29% for the Investor Class and Institutional Class, respectively.
ACIM has entered into a Subadvisory Agreement with Northern Trust Investments, N.A. (NTI) (the subadvisor) 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 NTI as the subadvisor of the fund.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors, and, as a group, controlling stockholders of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, American Century Investment Services, Inc., and the corporation’s transfer agent, American Century Services, LLC.
The fund is eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund has a Mutual Funds Services Agreement with J.P. Morgan Investor Services Co. (JPMIS) and a securities lending agreement with JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC.
3. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2009, were $21,727,697 and $36,408,059, respectively.
23
4. Capital Share Transactions | ||||
Transactions in shares of the fund were as follows: | ||||
Six months ended September 30, 2009 | Year ended March 31, 2009 | |||
Shares | Amount | Shares | Amount | |
Investor Class/Shares Authorized | 150,000,000 | 150,000,000 | ||
Sold | 4,666,324 | $ 17,194,615 | 11,722,718 | $ 47,846,238 |
Issued in reinvestment of distributions | 331,440 | 1,282,789 | 879,869 | 3,466,687 |
Redeemed | (4,943,459) | (18,558,739) | (11,312,460) | (45,792,775) |
54,305 | (81,335) | 1,290,127 | 5,520,150 | |
Institutional Class/Shares Authorized | 310,000,000 | 310,000,000 | ||
Sold | 7,813,786 | 28,547,168 | 12,856,911 | 56,973,880 |
Issued in reinvestment of distributions | 510,874 | 1,979,021 | 1,805,909 | 7,578,541 |
Redeemed | (15,522,358) | (59,065,256) | (68,330,902) | (332,032,577) |
(7,197,698) | (28,539,067) | (53,668,082) | (267,480,156) | |
Net increase (decrease) | (7,143,393) | $(28,620,402) | (52,377,955) | $(261,960,006) |
5. Fair Value Measurements | ||||
The fund’s securities valuation process is based on several considerations and may use | ||||
multiple inputs to determine the fair value of the positions held by the fund. In conformity | ||||
with accounting principles generally accepted in the United States of America, the inputs | ||||
used to determine a valuation are classified into three broad levels as follows: | ||||
• Level 1 valuation inputs consist of actual quoted prices in an active market for | ||||
identical securities; | ||||
• Level 2 valuation inputs consist of significant direct or indirect observable market data | ||||
(including quoted prices for similar securities, evaluations of subsequent market events, | ||||
interest rates, prepayment speeds, credit risk, etc.); or | ||||
• Level 3 valuation inputs consist of significant unobservable inputs (including a fund’s | ||||
own assumptions). | ||||
The level classification is based on the lowest level input that is significant to the fair | ||||
valuation measurement. The valuation inputs are not an indication of the risks associated | ||||
with investing in these securities or other financial instruments. | ||||
The following is a summary of the valuation inputs used to determine the fair value of the | ||||
fund’s securities and other financial instruments as of September 30, 2009: | ||||
Level 1 | Level 2 | Level 3 | ||
Investment Securities | ||||
Common Stocks | $390,623,770 | — | — | |
Temporary Cash Investments | 17,321 | $3,329,923 | — | |
Total Value of Investment Securities | $390,641,091 | $3,329,923 | — | |
Other Financial Instruments | ||||
Total Unrealized Gain (Loss) | ||||
on Futures Contracts | $112,336 | — | — |
24
6. Derivative Instruments
Equity Price Risk — The fund is subject to equity price risk in the normal course of pursuing its investment objectives. A fund may enter into futures contracts based on an equity index in order to manage its exposure to changes in market conditions. A fund may purchase futures contracts to gain exposure to increases in market value or sell futures contracts to protect against a decline in market value. Upon entering into a futures contract, a 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 a fund. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. A fund recognizes a realized gain or loss when the con tract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of net realized gain (loss) on futures contract transactions and change in net unrealized appreciation (depreciation) on futures contracts, respectively. 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. During the six months ended September 30, 2009, the fund purchased futures contracts.
The value of equity price risk derivatives as of September 30, 2009, is disclosed on the Statement of Assets and Liabilities as a liability of $8,307 in payable for variation margin on futures contracts. For the six months ended September 30, 2009, the effect of equity price risk derivatives on the Statement of Operations was $3,756,462 in net realized gain (loss) on futures contract transactions and $(546,770) in change in net unrealized appreciation (depreciation) on futures contracts.
The value of derivative instruments at period end and the effect of derivatives on the Statement of Operations is indicative of the fund’s typical volume.
7. Interfund Lending
The fund, along with certain other funds in the American Century Investments family of funds, may participate in an interfund lending program, pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC). This program provides an alternative credit facility allowing the fund to borrow from or lend to other funds in the American Century Investments family of funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. The interfund loan rate earned/paid on interfund lending transactions is determined daily based on the average of certain current market rates. Interfund lending transactions normally extend only overnight, but can have a maximum duration of seven days. The program is subject to annual approval by the Board of Directors. During the six months ended September 30, 2009, the fund did not utilize the program.
25
8. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of September 30, 2009, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $347,084,286 |
Gross tax appreciation of investments | $101,808,110 |
Gross tax depreciation of investments | (54,921,382) |
Net tax appreciation (depreciation) of investments | $ 46,886,728 |
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 fund had accumulated capital losses of $(44,867,625), which represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. The capital loss carryovers expire as follows:
2010 | 2011 | 2012 | 2013 | 2014 |
$27,486,852 | $1,957,751 | $1,992,016 | $5,270,954 | $8,160,052 |
As of March 31, 2009, the fund had capital loss deferrals of $(6,548,170) which represent net capital losses incurred in the five-month period ended March 31, 2009. The fund has elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes.
9. Recently Issued Accounting Standards
In March 2008, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) Section 815-10 (formerly Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities —an amendment of FASB Statement No. 133”). ASC Section 815-10 is effective for interim periods beginning after November 15, 2008 and has been adopted by the fund. ASC Section 815-10 amends and expands disclosures about derivative instruments and hedging activities. ASC Section 815-10 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.
26
Financial Highlights |
Equity Index | |||||||
Investor Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $3.17 | $5.26 | $5.66 | $5.16 | $4.70 | $4.50 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.03 | 0.09 | 0.09 | 0.08 | 0.07 | 0.07 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 1.03 | (2.09) | (0.39) | 0.50 | 0.46 | 0.20 | |
Total From | |||||||
Investment Operations | 1.06 | (2.00) | (0.30) | 0.58 | 0.53 | 0.27 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.03) | (0.09) | (0.10) | (0.08) | (0.07) | (0.07) | |
From Tax Return | |||||||
of Capital | — | — | —(3) | — | — | — | |
Total Distributions | (0.03) | (0.09) | (0.10) | (0.08) | (0.07) | (0.07) | |
Net Asset Value, | |||||||
End of Period | $4.20 | $3.17 | $5.26 | $5.66 | $5.16 | $4.70 | |
Total Return(4) | 33.59% | (38.36)% | (5.46)% | 11.28% | 11.36% | 6.04% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to | |||||||
Average Net Assets | 0.49%(5) | 0.49% | 0.49% | 0.49% | 0.49% | 0.49% | |
Ratio of Net Investment | |||||||
Income (Loss) to | |||||||
Average Net Assets | 1.74%(5) | 1.93% | 1.51% | 1.49% | 1.43% | 1.59% | |
Portfolio Turnover Rate | 6% | 5% | 9% | 4% | 17% | 4% | |
Net Assets, End of Period | |||||||
(in thousands) | $171,330 | $129,026 | $207,571 | $232,880 | $152,799 | $150,454 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Per-share amount was less than $0.005. | ||||||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(5) | Annualized. | ||||||
See Notes to Financial Statements. |
27
Equity Index | |||||||
Institutional Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $3.17 | $5.26 | $5.67 | $5.16 | $4.71 | $4.50 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.04 | 0.10 | 0.10 | 0.09 | 0.08 | 0.08 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 1.03 | (2.09) | (0.40) | 0.51 | 0.45 | 0.21 | |
Total From | |||||||
Investment Operations | 1.07 | (1.99) | (0.30) | 0.60 | 0.53 | 0.29 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.04) | (0.10) | (0.11) | (0.09) | (0.08) | (0.08) | |
From Tax Return | |||||||
of Capital | — | — | —(3) | — | — | — | |
Total Distributions | (0.04) | (0.10) | (0.11) | (0.09) | (0.08) | (0.08) | |
Net Asset Value, | |||||||
End of Period | $4.20 | $3.17 | $5.26 | $5.67 | $5.16 | $4.71 | |
Total Return(4) | 33.73% | (38.24)% | (5.27)% | 11.50% | 11.35% | 6.47% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to | |||||||
Average Net Assets | 0.29%(5) | 0.29% | 0.29% | 0.29% | 0.29% | 0.29% | |
Ratio of Net Investment | |||||||
Income (Loss) to | |||||||
Average Net Assets | 1.94%(5) | 2.13% | 1.71% | 1.69% | 1.63% | 1.79% | |
Portfolio Turnover Rate | 6% | 5% | 9% | 4% | 17% | 4% | |
Net Assets, End of Period | |||||||
(in thousands) | $223,053 | $191,053 | $599,914 | $813,571 | $662,759 | $907,886 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Per-share amount was less than $0.005. | ||||||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(5) | Annualized. | ||||||
See Notes to Financial Statements. |
28
Approval of Management Agreement |
Under Section 15(c) of the Investment Company Act, contracts for investment advisory services (including subadvisory services) are required to be reviewed, evaluated and approved by a majority of a fund’s independent directors (the “Directors”) each year. At American Century Investments, this process is referred to as the “15(c) Process.” As a part of this process, the board reviews fund performance, shareholder services, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. In addition to this annual review, the board of directors oversees and evaluates on a continuous basis at its quarterly meetings the nature and quality of significant services performed by the advisor and the subadvisor, fund performance, audit and compliance information, and a variety of other reports relating to fund operations. The board, or committees of the board, also hol ds special meetings as needed.
Under a Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for the board’s approval or renewal of any advisory agreements within the fund’s most recently completed fiscal half-year period.
Annual Contract Review Process
As part of the annual 15(c) Process undertaken during the most recent fiscal half-year period, the Directors reviewed extensive data and information compiled by the advisor and certain independent providers of evaluative data (the “15(c) Providers”) concerning the Equity Index Fund (the “Fund”) and the services provided to the Fund under the management and subad-visory agreements. The information considered and the discussions held at the meetings included, but were not limited to:
• the nature, extent and quality of investment management, shareholder services and other services provided to the Fund;
• the wide range of programs and services the advisor provides to the Fund and their shareholders on a routine and non-routine basis;
• the compliance policies, procedures, and regulatory experience of both the advisor and the subadvisor;
• data comparing the cost of owning the Fund to the cost of owning a similar fund;
• data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies;
• financial data showing the profitability of the Fund to the advisor and the overall profitability of the advisor;
• data comparing services provided and charges to other investment management clients of the advisor; and
29
• consideration of collateral benefits derived by the advisor from the management of the Fund and any potential economies of scale relating thereto.
In keeping with its practice, the Fund’s board of directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The board also had the benefit of the advice of its independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the advisor, the 15(c) Providers, and the board’s independent counsel, and evaluated such information for each fund for which the board has responsibility. In connec tion with their review of the Fund, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management and subadvisory agreements under the terms ultimately determined by the board to be appropriate, the Directors’ decision was based on the following factors.
Nature, Extent and Quality of Services — Generally. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including:
• Fund construction and design
• portfolio security selection
• initial capitalization/funding
• securities trading
• Fund administration
• custody of Fund assets
• daily valuation of the Fund’s portfolio
• shareholder servicing and transfer agency, including shareholder
confirmations, recordkeeping and communications
• legal services
• regulatory and portfolio compliance
• financial reporting
• marketing and distribution
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The Directors noted that many of the services provided by the advisor have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. They discussed with the advisor the challenges presented by these changes and the impact on the Fund. The directors specifically noted that with respect to the Fund, the advisor had retained the subadvisor to provide the day-to-day security selection. Under the subadvisory agreement, the subadvisor is responsible for managing the investment operations and composition of the Fund, including the purchase, retention, and disposition of the investments contained in the Fund. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meeti ngs.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments, and liquidity. In evaluating investment performance, the board expects the advisor and subadvisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the advisor and subadvisor have an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the advisor and subadvisor utilize teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive info rmation technology, research, training, compliance and other systems to conduct their business. At each quarterly meeting the Directors review investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of funds managed similarly to the Fund. The Directors also review detailed performance information during the 15(c) Process comparing the Fund’s performance with that of similar funds not managed by the advisor. If performance concerns are identified, the Directors discuss with the advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The fund’s quarter end performance fell slightly below its benchmark for both the one- and three-year period during the past year. The board discussed the fund’s performance with the advisor and was satisfied with the efforts being undertaken by the advisor. More detailed information about the Fund’s pe rformance can be found in the Performance and Portfolio Commentary sections of this report.
Shareholder and Other Services. The advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at their regular quarterly meetings, including the annual meeting concerning contract review, and reports to the board. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing
31
services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor.
Costs of Services Provided and Profitability. The advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The board concluded that the advisor’s profits were reasonable in light of the services provided to the Fund. The board did not consider the profitability of the subadvisor because the subadvisor is paid from the unified fee of the advisor as a result of arm’s length negotiations.
Ethics. The Directors generally consider the advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor’s practices generally meet or exceed industry best practices. With respect to the subadvisor, as part of its oversight responsibilities, the board approves the subadvisor’s code of ethics and any changes thereto. Further, through the advisor’s compliance group, the board stays abreast of any violations of the subadvisor’s code.
Economies of Scale. The Directors review information provided by the advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Directors concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The analysis of economies of scale is further complicated by the additional services and content provided by the advisor and its reinvestment in its ability to provide and expand those services. Accordingly, the Directors seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the Fund specifically, the expenses incurred by the advisor in providing various functions to the Fund, and the fees of competitive funds not m anaged by the advisor. The Directors believe the advisor is appropriately sharing economies of scale through its competitive fee structure, fee breakpoints as the Fund increases in size, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The Fund pays the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel). The Directors specifically noted that the subadvisory fees paid to the subadvisor under the subadvisory agreement were subject to arm’s length negotiation between the advisor and the subadvisor and are paid by the advisor out of its unified fee.
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Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, record-keeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the advisor the risk of increased costs of o perating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Directors’ analysis of fee levels involves reviewing certain evaluative data compiled by a 15(c) Provider comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group and performing a regression analysis to evaluate the effect of fee breakpoints as assets under management increase. The unified fee charged to shareholders of the Fund was above the median of the total expense ratios of its peer group. In addition, the Directors also reviewed updated fee level data provided by the advisor, but recognized that comparative data was particularly difficult to evaluate given the significant market developments during the past year. The board concluded that the management fee paid by the Fund to the advisor was reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Directors analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral Benefits Derived by the Advisor. The Directors considered the existence of collateral benefits the advisor may receive as a result of its relationship with the Fund. They concluded that the advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Directors concluded, however, that the assets of those other clients are not material to the analysis and, in any event, are included with the assets of the Fund to determine breakpoints in the Fund’s fee schedule, provided they are managed using the same investment team and strategy.
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Conclusions of the Directors
As a result of this process, the board, including all of the independent directors, assisted by the advice of legal counsel independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor, negotiated changes to the breakpoint schedule used to calculate the management fee. These changes were proposed by the directors based on their review of the competitive changes in the mutual fund marketplace and their review of financial information provided by the advisor. The new schedule, effective August 1, 2009, contains lower management fees at certain asset levels than under the existing structure. Following these negotiations with the advisor, the independent directors concluded that the investment management agreement between the fund and the advisor is fair and reasonable in light of the services provided and should be renewed.
Additionally, the board, including all the independent directors, in the absence of particular circumstances and assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor, concluded that the subadvisory agreement between the advisor and the subadvisor, on behalf of the Fund, is fair and reasonable in light of the services provided and should be renewed.
34
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs or 403(b), 457 and qualified plans 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. 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. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
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 Investments’ 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.
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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.
36
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 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 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 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.
37
Notes |
38
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
©2009 American Century Proprietary Holdings, Inc. All rights reserved.
0911
CL-SAN-66880N
Semiannual Report |
September 30, 2009 |
American Century Investments |
Real Estate Fund
President’s Letter |
Dear Investor:
Thank you for your investment with us during the financial reporting period ended September 30, 2009. We appreciate your trust in American Century Investments® at this volatile, transitional time in the economy and investment markets.
As the upheavals associated with the “Great Recession” gradually subside, our senior management team has put considerable thought into how the investment environment has changed and what new challenges and opportunities await us. Critical factors that we are anticipating in the coming year include marked shifts in investment and spending behavior, along with consolidation in our industry.
Most importantly, we think the economic recovery will be slow and extended. The economy and capital markets have come a long way since Lehman Brothers collapsed over a year ago, but 2010 will likely bring continuing challenges. The stock market’s rebound since last March and the third-quarter economic surge this year were fueled largely by corporate cost-cutting and unprecedented monetary and fiscal stimulus, including some key programs that have since expired or been scaled back.
Meanwhile, the resilient but struggling consumer sector still faces rising unemployment, heavy debt burdens, tight credit conditions, and a housing market that is starting to stabilize, but remains vulnerable. Much of our investment positioning in 2009 has cautiously reflected these still unstable economic fundamentals, leading to underperformance, in some cases, versus market benchmarks buoyed by the rally of riskier assets. We still support our fundamentally based positioning because we believe strongly that some markets—driven more by technical factors than fundamentals—have advanced further than underlying economic conditions warrant, and remain susceptible to the possibility of more volatility ahead.
For more detailed information from our portfolio management team about the performance and positioning of your investment, please review the following pages, or visit our website, americancentury.com.
Thank you for your continued confidence in us.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
Independent Chairman’s Letter |
I am Don Pratt, an independent director and chairman of the mutual fund board responsible for the U.S. Growth Equity, U.S. Value Equity, Global and Non-U.S. Equity and Asset Allocation funds managed by American Century Investments. The board consists of seven independent directors and two directors who are affiliated with the investment advisor.
As one of your independent shareholder representatives on the fund board, I plan to write you from time to time with updates on board activities and news about your funds. My co-independent directors and I are committed to putting your interests first. We work closely with American Century Investments on maintaining strong fund performance, providing quality service to shareholders at competitive fees and ensuring ethical business practices and compliance with all applicable fund regulations.
Last year, the board welcomed its newest independent director, John R. Whitten. He is a great addition to an experienced board where, collectively, the independent directors have served the funds for more than 76 years. This continuity served shareholders well as the investment advisor initiated a successful management transition, creating a strong senior leadership team consisting of well-tenured company executives and experienced industry veterans. Under the leadership of President and Chief Executive Officer Jonathan Thomas and Chief Investment Officer Enrique Chang, the firm has made the achievement of superior investment performance its primary focus and the key driver of its success going forward. This focus helped the company generate strong relative performance against the backdrop of 2008’s unprecedented market volatility.
As investors in the American Century funds, my fellow directors and I share your investing experience. We know firsthand how decisions made at the board level affect all shareholders. To further guide our efforts on your behalf, I invite you to send me your comments, questions or suggestions by email to dhpratt@fundboardchair.com. Thank you for allowing me to serve as your advocate on our board.
Best regards,
Table of Contents |
Market Perspective | 2 |
U.S. Stock Index Returns | 2 |
Real Estate | |
Performance | 3 |
Portfolio Commentary | 5 |
Top Ten Holdings | 7 |
Industry Allocation | 7 |
Types of Investments in Portfolio | 7 |
Shareholder Fee Example | 8 |
Financial Statements | |
Schedule of Investments | 10 |
Statement of Assets and Liabilities | 12 |
Statement of Operations | 14 |
Statement of Changes in Net Assets | 15 |
Notes to Financial Statements | 16 |
Financial Highlights | 22 |
Other Information | |
Approval of Management Agreement | 28 |
Additional Information | 33 |
Index Definitions | 35 |
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 Investments or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments 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 Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative i ndices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Market Perspective |
By Enrique Chang, Chief Investment Officer, American Century Investments
Stocks Rallied Sharply
The U.S. stock market staged a powerful rally during the six months ended September 30, 2009, as the major stock indices enjoyed their best six-month period of performance in more than 70 years (see the table below). The market’s surge was driven by a dramatic shift in market sentiment as extreme pessimism regarding the economy and financial sector gave way to renewed optimism.
In late 2008 and early 2009, stocks fell sharply as investors grew increasingly concerned about a deep economic downturn and a collapse in the global financial system. As the six-month period began, however, early signs of stabilization in the economy began to erase this pessimistic sentiment, boosting confidence about a possible recovery. Although the unemployment rate continued to climb during the six-month period, reaching a 26-year high of 9.8%, other segments of the economy—most notably housing and manufacturing—showed evidence of improvement.
Investors also responded favorably to corporate America’s cost-management efforts, which resulted in better-than-expected profit levels despite weaker revenues. With investor confidence soaring, the major stock indices moved steadily higher throughout the six-month period, advancing by approximately 35%. The market rally was broad based, but mid- and small-cap stocks generated the best results, while value shares outpaced growth across all market capitalizations.
Challenges Still to Be Overcome
Although we are no longer peering into the abyss of an economic and financial collapse, we are not out of the woods yet. To sustain the early signs of economic revitalization we have witnessed since March, several longer-term challenges need to be addressed, including a massive and growing national debt, a weaker U.S. dollar, and the potential for significantly higher inflation once a recovery takes hold.
While these concerns are not likely to result in any dire consequences in the near term, they are major risk factors to the longer-term health of the U.S. economy and its ability to fully recover from the recent downturn. As a result, we foresee a protracted and uncertain economic recovery and continued volatility in the equity market.
U.S. Stock Index Returns | ||||
For the six months ended September 30, 2009* | ||||
Russell 1000 Index (Large-Cap) | 35.22% | Russell 2000 Index (Small-Cap) | 43.95% | |
Russell 1000 Value Index | 37.99% | Russell 2000 Value Index | 44.79% | |
Russell 1000 Growth Index | 32.58% | Russell 2000 Growth Index | 43.06% | |
Russell Midcap Index | 45.71% | |||
Russell Midcap Value Index | 49.51% | |||
Russell Midcap Growth Index | 41.89% | |||
*Total returns for periods less than one year are not annualized. |
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Performance |
Real Estate | |||||||
Total Returns as of September 30, 2009 | |||||||
Average Annual Returns | |||||||
Since | Inception | ||||||
6 months(1) | 1 year | 5 years | 10 years | Inception | Date | ||
Investor Class | 73.56% | -34.52% | -0.37% | 8.87% | 9.22% | 9/21/95(2) | |
MSCI US REIT Index | 75.19% | -28.16% | 1.34% | 9.39% | 8.90%(3) | — | |
Institutional Class | 73.76% | -34.39% | -0.17% | 9.09% | 6.83% | 6/16/97 | |
A Class(4) | 10/6/98 | ||||||
No sales charge* | 73.38% | -34.68% | -0.61% | 8.61% | 8.17% | ||
With sales charge* | 63.34% | -38.44% | -1.78% | 7.97% | 7.58% | ||
B Class | 9/28/07 | ||||||
No sales charge* | 72.72% | -35.19% | — | — | -24.91% | ||
With sales charge* | 67.72% | -39.19% | — | — | -26.93% | ||
C Class | 9/28/07 | ||||||
No sales charge* | 72.63% | -35.14% | — | — | -24.89% | ||
With sales charge* | 71.63% | -35.14% | — | — | -24.89% | ||
R Class | 73.22% | -34.83% | — | — | -24.52% | 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) | Total returns for periods less than one year are not annualized. | ||||||
(2) | The inception date for RREEF Real Estate Securities Fund, Real Estate’s predecessor. That fund merged with Real Estate on 6/13/97 and Real | ||||||
Estate was first offered to the public on 6/16/97. | |||||||
(3) | Since 9/30/95, the date nearest the Investor Class’s inception for which data are available. | ||||||
(4) | Prior to September 4, 2007, the A Class was referred to as the Advisor Class. Performance, with sales charge, prior to that date has been | ||||||
adjusted to reflect the A Class’s current sales charge. |
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The fund may be subject to certain risks similar to those associated with direct investment in real estate including but not limited to: local or regional economic conditions, changes in zoning laws, changes in property values, property tax increases, overbuilding, increased competition, environmental contamination, natural disasters and interest rate risk.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not.
3
Real Estate
One-Year Returns Over 10 Years | ||||||||||
Periods ended September 30 | ||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | |
Investor Class | 21.61% | 10.96% | 9.78% | 28.35% | 25.40% | 25.88% | 28.40% | 5.84% | -12.37% | -34.52% |
MSCI US | ||||||||||
REIT Index | 21.25% | 11.62% | 8.56% | 25.11% | 24.85% | 27.10% | 26.56% | 4.67% | -11.63% | -28.16% |
Total Annual Fund Operating Expenses | ||||||||||
Institutional | ||||||||||
Investor Class | Class | A Class | B Class | C Class | R Class | |||||
1.15% | 0.95% | 1.40% | 2.15% | 2.15% | 1.65% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
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: Steven Brown
Performance Summary
The Real Estate fund posted a total return of 73.56%* for the six months ended September 30, 2009. It was one of the fund’s best six-month returns since its inception in 1995. By comparison, the Morgan Stanley Capital International US REIT Index (the fund’s benchmark) returned 75.19%, while the S&P 500 Index** (a broad stock market measure) returned 34.02%.
REIT Market Overview
Real estate investment trusts (REITs) generated extraordinary returns during the six-month period, gaining approximately 75% and outperforming the broad stock market by a wide margin. After plummeting in late 2008 and early 2009 amid a deep economic downturn and a severe credit crunch, REITs rebounded over the last six months as growing signs of improvement in the economy—most notably rising home sales and an uptick in manufacturing activity—bolstered expectations of an economic recovery in 2010, which helped boost investor confidence.
Another positive factor for REITs was their ability to raise capital. REITs issued $15 billion in equity during the six-month period to strengthen their balance sheets and fund potential property purchases. In addition, improving credit conditions created opportunities for REITs to raise additional capital in the unsecured debt markets, refinance commercial mortgages, and roll over existing lines of credit at commercial banks. This was especially beneficial for highly leveraged REITs, which outperformed REITs with stronger balance sheets during the six-month period.
The most economically sensitive segments of the REIT market, including hotels and regional malls, produced the best returns for the six months. While regional malls benefited from better economic conditions, community shopping centers, which are considered more defensive because they are typically anchored by a grocery or discount store, underperformed during the period. Other defensive segments that lagged the overall REIT market included health care and self-storage REITs.
Portfolio Positioning
The Real Estate fund returned more than 70% for the six-month period, but nonetheless trailed the performance of its benchmark. The fund’s emphasis on high-quality, large-cap REITs for much of the period weighed on performance versus the index as lower-quality and smaller-cap REITs outperformed.
* All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. |
**The S&P 500 Index returned -6.91%, 1.02%, -0.15% for the one-, five-, and ten-year periods ended September 30, 2009, respectively. Data |
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5
Real Estate
From a broad strategy perspective, we shifted the portfolio from a somewhat defensive position at the beginning of the period to a more aggressive stance as the period progressed, increasing our holdings of cyclical REITs as it became clear in our view that the economy had turned a corner. More recently, however, we have been cutting back on our economically sensitive holdings, particularly hotel and regional mall REITs, following their strong run-up. Instead, we are finding attractive values among health care and apartment REITs, many of which lagged during the rally.
Winners and Losers
On balance, stock selection detracted from relative results for the six-month period, especially among office and apartment REITs. The most significant individual detractor was Digital Realty Trust, which runs computer-data centers for corporations. The company operates in a relatively stable market niche, which proved valuable during the economic downturn but caused it to underperform over the last six months as investors shifted toward more cyclical companies. Other notable underperformers included student housing REIT American Campus Communities and office REIT Corporate Office Properties Trust.
On the positive side, stock selection added value in the retail and hotel segments. Retail property owner Kimco Realty, which focuses on strip malls, was the top contributor. Kimco strengthened its balance sheet by issuing equity and using the proceeds to pay down debt. Another strong performer was Host Hotels & Resorts, which also raised capital in the equity market and reduced its debt load.
The fund also benefited from its position in SL Green, which owns office properties in New York City. A burgeoning recovery in the financial services sector bodes well for property values in New York, and we expect this to continue going forward. As a result, SL Green was among the fund’s largest holdings as of September 30, 2009.
A Look Ahead
Economic data continues to suggest that the U.S. economy bottomed in the first half of 2009, and we expect to see positive economic growth in 2010, which augurs well for stocks in general and REITs in particular. Within the REIT sector, we expect a change in market leadership as the more economically sensitive names slow down after their recent torrid performance.
We believe that fundamental research and individual security selection will be key drivers of performance in the REIT market going forward. We currently favor REITs trading at a discount to their underlying property values, as well as companies that are well positioned to participate in what we believe will be a buyer’s market for commercial real estate in 2010. One example is Brookfield Asset Management, a Toronto-based property owner that recently raised capital to pursue distressed commercial properties around the globe.
6
Real Estate | ||
Top Ten Holdings as of September 30, 2009 | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Simon Property Group, Inc. | 10.8% | 6.1% |
Vornado Realty Trust | 6.8% | 5.0% |
Equity Residential | 4.9% | 4.8% |
Alexandria Real Estate Equities, Inc. | 4.8% | 1.0% |
ProLogis | 4.6% | 1.7% |
Boston Properties, Inc. | 4.5% | 4.5% |
SL Green Realty Corp. | 4.4% | 0.6% |
Public Storage | 4.0% | 5.6% |
Host Hotels & Resorts, Inc. | 3.7% | 1.9% |
HCP, Inc. | 3.6% | 5.0% |
Industry Allocation | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Retail REITs | 22.7% | 17.2% |
Office REITs | 20.7% | 22.7% |
Specialized REITs | 15.8% | 23.6% |
Residential REITs | 14.3% | 20.2% |
Industrial REITs | 8.7% | 6.2% |
Diversified REITs | 6.8% | 7.9% |
Real Estate Operating Companies | 2.5% | — |
Casinos & Gaming | 2.7% | — |
Diversified Real Estate Activities | 2.1% | 0.7% |
Homebuilding | 2.0% | — |
Thrifts & Mortgage Finance | 0.7% | — |
Hotels, Resorts & Cruise Lines | 0.7% | — |
Health Care Facilities | 0.1% | — |
Cash and Equivalents* | 0.2% | 1.5% |
*Includes temporary cash investments and other assets and liabilities. | ||
Types of Investments in Portfolio | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Common Stocks | 99.8% | 96.0% |
Convertible Bonds | — | 2.5% |
Temporary Cash Investments | — | 1.3% |
Other Assets and Liabilities | 0.2% | 0.2% |
7
Shareholder Fee Example (Unaudited) |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/ exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2009 to September 30, 2009.
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 Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments 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 Investments 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 Investments 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.
8
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.
Beginning | Ending | Expenses Paid | ||
Account Value | Account Value | During Period* | Annualized | |
4/1/09 | 9/30/09 | 4/1/09 – 9/30/09 | Expense Ratio* | |
Actual | ||||
Investor Class | $1,000 | $1,735.60 | $7.95 | 1.16% |
Institutional Class | $1,000 | $1,737.60 | $6.59 | 0.96% |
A Class | $1,000 | $1,733.80 | $9.66 | 1.41% |
B Class | $1,000 | $1,727.20 | $14.77 | 2.16% |
C Class | $1,000 | $1,726.30 | $14.76 | 2.16% |
R Class | $1,000 | $1,732.20 | $11.37 | 1.66% |
Hypothetical | ||||
Investor Class | $1,000 | $1,019.25 | $5.87 | 1.16% |
Institutional Class | $1,000 | $1,020.26 | $4.86 | 0.96% |
A Class | $1,000 | $1,018.00 | $7.13 | 1.41% |
B Class | $1,000 | $1,014.24 | $10.91 | 2.16% |
C Class | $1,000 | $1,014.24 | $10.91 | 2.16% |
R Class | $1,000 | $1,016.75 | $8.39 | 1.66% |
*Expenses are equal to the class’s annualized expense ratio listed in the table above, multiplied by the average account value over the period, | ||||
multiplied by 183, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. |
9
Schedule of Investments |
Real Estate | ||||||
SEPTEMBER 30, 2009 (UNAUDITED) | ||||||
Shares | Value | Shares | Value | |||
Common Stocks — 99.8% | Duke Realty Corp. | 256,200 | $ 3,076,962 | |||
CASINOS & GAMING — 2.7% | SL Green Realty Corp. | 863,691 | 37,872,850 | |||
Las Vegas Sands Corp.(1) | 526,300 | $ 8,862,892 | 176,591,975 | |||
Melco Crown | REAL ESTATE OPERATING COMPANIES — 2.5% | |||||
Entertainment Ltd. ADR(1) | 1,052,300 | 7,324,008 | Brookfield Properties Corp. | 1,345,100 | 15,145,826 | |
MGM Mirage(1) | 410,400 | 4,941,216 | Forest City Enterprises, Inc., | |||
Class A | 460,100 | 6,151,537 | ||||
Wynn Macau Ltd.(1)(2) | 1,500,000 | 1,950,955 | ||||
21,297,363 | ||||||
23,079,071 | RESIDENTIAL REITs — 14.3% | |||||
DIVERSIFIED REAL ESTATE ACTIVITIES — 2.1% | American Campus | |||||
Brookfield Asset | Communities, Inc. | 227,400 | 6,105,690 | |||
Management, Inc., Class A | 796,000 | 18,077,160 | AvalonBay Communities, Inc. | 250,563 | 18,223,447 | |
DIVERSIFIED REITs — 6.8% | Camden Property Trust | 294,801 | 11,880,480 | |||
Vornado Realty Trust | 906,623 | 58,395,610 | Equity Residential | 1,366,400 | 41,948,480 | |
HEALTH CARE FACILITIES — 0.1% | Essex Property Trust, Inc. | 127,600 | 10,154,408 | |||
Brookdale Senior Living, Inc. | 10,000 | 181,300 | Home Properties, Inc. | 176,722 | 7,614,951 | |
Emeritus Corp.(1) | 44,300 | 972,385 | ||||
Mid-America Apartment | ||||||
1,153,685 | Communities, Inc. | 94,368 | 4,258,828 | |||
HOMEBUILDING — 2.0% | Post Properties, Inc. | 400,000 | 7,200,000 | |||
D.R. Horton, Inc. | 386,700 | 4,412,247 | UDR, Inc. | 928,079 | 14,607,964 | |
Lennar Corp., Class A | 323,400 | 4,608,450 | 121,994,248 | |||
M.D.C. Holdings, Inc. | 93,900 | 3,262,086 | RETAIL REITs — 22.7% | |||
Pulte Homes, Inc. | 456,900 | 5,021,331 | CBL & Associates | |||
17,304,114 | Properties, Inc. | 1,102,063 | 10,690,011 | |||
HOTELS, RESORTS & CRUISE LINES — 0.7% | Developers Diversified | |||||
Marriott International, Inc., | Realty Corp. | 1,050,800 | 9,709,392 | |||
Class A | 90,768 | 2,504,289 | Federal Realty | |||
Starwood Hotels & Resorts | Investment Trust | 109,802 | 6,738,549 | |||
Worldwide, Inc. | 100,400 | 3,316,212 | Kimco Realty Corp. | 1,869,958 | 24,384,252 | |
5,820,501 | Macerich Co. (The) | 854,720 | 25,923,658 | |||
INDUSTRIAL REITs — 8.7% | Regency Centers Corp. | 221,500 | 8,206,575 | |||
AMB Property Corp.(3) | 1,280,500 | 29,387,475 | Simon Property Group, Inc. | 1,330,828 | 92,399,388 | |
First Industrial | Taubman Centers, Inc. | 418,300 | 15,092,264 | |||
Realty Trust, Inc. | 1,039,500 | 5,457,375 | 193,144,089 | |||
ProLogis | 3,268,347 | 38,958,696 | SPECIALIZED REITs — 15.8% | |||
73,803,546 | HCP, Inc. | 1,058,798 | 30,429,855 | |||
OFFICE REITs — 20.7% | Health Care REIT, Inc. | 139,534 | 5,807,405 | |||
Alexandria Real Estate | Host Hotels & Resorts, Inc. | 2,697,889 | 31,754,154 | |||
Equities, Inc. | 747,600 | 40,632,060 | LaSalle Hotel Properties | 245,300 | 4,822,598 | |
BioMed Realty Trust, Inc. | 746,300 | 10,298,940 | Public Storage | 455,789 | 34,293,564 | |
Boston Properties, Inc. | 583,455 | 38,245,475 | Sovran Self Storage, Inc. | 129,100 | 3,928,513 | |
Brandywine Realty Trust | 314,800 | 3,475,392 | Ventas, Inc. | 607,900 | 23,404,150 | |
Corporate Office | 134,440,239 | |||||
Properties Trust | 201,300 | 7,423,944 | ||||
THRIFTS & MORTGAGE FINANCE — 0.7% | ||||||
Digital Realty Trust, Inc. | 576,250 | 26,340,388 | ||||
First Niagara | ||||||
Douglas Emmett, Inc. | 751,300 | 9,225,964 | Financial Group, Inc. | 476,586 | 5,876,305 |
10
Real Estate | ||||
Value | Notes to Schedule of Investments | |||
TOTAL INVESTMENT | ADR = American Depositary Receipt | |||
SECURITIES — 99.8% | REIT = Real Estate Investment Trust | |||
(Cost $638,249,892) | $850,977,906 | (1) | Non-income producing. | |
OTHER ASSETS | ||||
AND LIABILITIES — 0.2% | 1,425,727 | (2) | When-issued security. | |
TOTAL NET ASSETS — 100.0% | $852,403,633 | (3) | Security, or a portion thereof, has been segregated for when-issued | |
securities. At the period end, the aggregate value of securities | ||||
pledged was $1,951,000. | ||||
See Notes to Financial Statements. |
11
Statement of Assets and Liabilities |
SEPTEMBER 30, 2009 (UNAUDITED) | |
Assets | |
Investment securities, at value (cost of $638,249,892) | $850,977,906 |
Receivable for investments sold | 14,296,504 |
Receivable for capital shares sold | 691,405 |
Dividends and interest receivable | 1,888,650 |
867,854,465 | |
Liabilities | |
Disbursements in excess of demand deposit cash | 288,671 |
Payable for investments purchased | 12,208,140 |
Payable for capital shares redeemed | 2,162,231 |
Accrued management fees | 763,562 |
Distribution fees payable | 494 |
Service fees (and distribution fees — A Class and R Class) payable | 27,734 |
15,450,832 | |
Net Assets | $852,403,633 |
See Notes to Financial Statements. |
12
SEPTEMBER 30, 2009 (UNAUDITED) | |
Net Assets Consist of: | |
Capital (par value and paid-in surplus) | $1,507,125,821 |
Undistributed net investment income | 371,539 |
Accumulated net realized loss on investment and foreign currency transactions | (867,821,762) |
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies | 212,728,035 |
$ 852,403,633 | |
Investor Class, $0.01 Par Value | |
Net assets | $527,685,812 |
Shares outstanding | 39,557,500 |
Net asset value per share | $13.34 |
Institutional Class, $0.01 Par Value | |
Net assets | $188,941,936 |
Shares outstanding | 14,143,226 |
Net asset value per share | $13.36 |
A Class, $0.01 Par Value | |
Net assets | $134,616,132 |
Shares outstanding | 10,077,182 |
Net asset value per share | $13.36 |
Maximum offering price (net asset value divided by 0.9425) | $14.18 |
B Class, $0.01 Par Value | |
Net assets | $58,022 |
Shares outstanding | 4,365 |
Net asset value per share | $13.29 |
C Class, $0.01 Par Value | |
Net assets | $791,151 |
Shares outstanding | 59,463 |
Net asset value per share | $13.30 |
R Class, $0.01 Par Value | |
Net assets | $310,580 |
Shares outstanding | 23,303 |
Net asset value per share | $13.33 |
See Notes to Financial Statements. |
13
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) | |
Investment Income (Loss) | |
Income: | |
Dividends (including $173,680 from affiliates and net of foreign taxes withheld of $43,073) | $ 13,040,532 |
Interest | 156,818 |
13,197,350 | |
Expenses: | |
Management fees | 4,186,548 |
Distribution fees: | |
B Class | 214 |
C Class | 2,097 |
Service fees: | |
B Class | 71 |
C Class | 699 |
Distribution and service fees: | |
A Class | 143,756 |
R Class | 559 |
Directors’ fees and expenses | 16,519 |
4,350,463 | |
Net investment income (loss) | 8,846,887 |
Realized and Unrealized Gain (Loss) | |
Net realized gain (loss) on | |
investment and foreign currency transactions (including $(715,497) from affiliates) | (17,829,672) |
Change in net unrealized appreciation (depreciation) on | |
investments and translation of assets and liabilities in foreign currencies | 394,962,333 |
Net realized and unrealized gain (loss) | 377,132,661 |
Net Increase (Decrease) in Net Assets Resulting from Operations | $385,979,548 |
See Notes to Financial Statements. |
14
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND YEAR ENDED MARCH 31, 2009 | ||
Increase (Decrease) in Net Assets: | Sept. 30, 2009 | March 31, 2009 |
Operations | ||
Net investment income (loss) | $ 8,846,887 | $ 29,937,040 |
Net realized gain (loss) | (17,829,672) | (709,628,436) |
Change in net unrealized appreciation (depreciation) | 394,962,333 | (201,518,566) |
Net increase (decrease) in net assets resulting from operations | 385,979,548 | (881,209,962) |
Distributions to Shareholders: | ||
From net investment income: | ||
Investor Class | (7,206,460) | (18,036,728) |
Institutional Class | (2,355,323) | (5,022,497) |
A Class | (1,536,733) | (4,021,393) |
B Class | (543) | (935) |
C Class | (5,089) | (8,260) |
R Class | (2,692) | (3,361) |
Decrease in net assets from distributions | (11,106,840) | (27,093,174) |
Capital Share Transactions | ||
Net increase (decrease) in net assets from capital share transactions | (73,613,297) | 140,914,237 |
Net increase (decrease) in net assets | 301,259,411 | (767,388,899) |
Net Assets | ||
Beginning of period | 551,144,222 | 1,318,533,121 |
End of period | $852,403,633 | $ 551,144,222 |
Undistributed net investment income | $371,539 | $2,631,492 |
See Notes to Financial Statements. |
15
Notes to Financial Statements |
SEPTEMBER 30, 2009 (UNAUDITED)
1. Organization and Summary of Significant Accounting Policies
Organization — American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Real Estate Fund (the fund) is one fund in a series issued by the corporation. The fund is nondiversified under the 1940 Act. 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 securities issued by real estate investment trusts and in the securities of companies which are principally engaged in the real estate industry. The following is a summary of the fund’s significant accounting policies.
Multiple Class — The fund is authorized to issue the Investor Class, the Institutional Class, the A Class, the B Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective 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 allocate d 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. Investments in open-end management investment companies are valued at the reported net asset value. 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 ov er-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 be en 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.
16
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, 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.
When-Issued — The fund may engage in securities transactions on a when-issued 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 fund will segregate cash, cash equivalents or other appropriate liquid securities on its records in amounts sufficient to meet the purchase price.
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 certain other funds in the American Century Investments family of funds, 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 2006. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. 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 maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
17
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.
Subsequent Events — Management has evaluated events or transactions that may have occurred since September 30, 2009, that would merit recognition or disclosure in the financial statements. This evaluation was completed through November 27, 2009, the date the financial statements were issued.
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 the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). 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. The effective annual management fee for each class of the fund for the six months ended September 30, 2009 was 1.16%, 0.96%, 1.16%, 1.16%, 1.16% and 1.16% 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 separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, B Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plan provides 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%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder service s. Fees incurred under the plan during the six months ended September 30, 2009, 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 fund is eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund has a Mutual Funds Services Agreement with J.P. Morgan Investor Services Co. (JPMIS) and a securities lending agreement with JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC.
3. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2009, were $1,035,384,527 and $1,097,563,103, respectively.
18
4. Capital Share Transactions | ||||
Transactions in shares of the fund were as follows: | ||||
Six months ended September 30, 2009 | Year ended March 31, 2009 | |||
Shares | Amount | Shares | Amount | |
Investor Class/Shares Authorized | 125,000,000 | 125,000,000 | ||
Sold | 8,725,286 | $ 93,089,109 | 23,041,568 | $ 344,222,905 |
Issued in reinvestment of distributions | 588,980 | 6,324,798 | 1,295,267 | 16,120,892 |
Redeemed | (16,112,200) | (173,124,300) | (17,852,701) | (265,309,245) |
(6,797,934) | (73,710,393) | 6,484,134 | 95,034,552 | |
Institutional Class/Shares Authorized | 50,000,000 | 50,000,000 | ||
Sold | 2,516,805 | 26,950,329 | 6,476,609 | 89,803,524 |
Issued in reinvestment of distributions | 175,882 | 1,925,886 | 348,202 | 4,415,072 |
Redeemed | (1,938,537) | (20,419,361) | (2,694,016) | (38,510,197) |
754,150 | 8,456,854 | 4,130,795 | 55,708,399 | |
A Class/Shares Authorized | 50,000,000 | 50,000,000 | ||
Sold | 2,246,732 | 24,332,150 | 5,175,979 | 80,644,085 |
Issued in reinvestment of distributions | 138,995 | 1,498,643 | 323,244 | 3,929,378 |
Redeemed | (3,137,496) | (34,422,391) | (6,356,365) | (95,269,021) |
(751,769) | (8,591,598) | (857,142) | (10,695,558) | |
B Class/Shares Authorized | 20,000,000 | 20,000,000 | ||
Sold | 1,219 | 12,105 | 4,472 | 58,511 |
Issued in reinvestment of distributions | 52 | 535 | 83 | 935 |
Redeemed | (2,106) | (23,486) | (868) | (10,981) |
(835) | (10,846) | 3,687 | 48,465 | |
C Class/Shares Authorized | 20,000,000 | 20,000,000 | ||
Sold | 40,198 | 434,073 | 44,305 | 659,246 |
Issued in reinvestment of distributions | 408 | 4,285 | 624 | 6,903 |
Redeemed | (24,025) | (270,712) | (4,927) | (68,209) |
16,581 | 167,646 | 40,002 | 597,940 | |
R Class/Shares Authorized | 20,000,000 | 20,000,000 | ||
Sold | 10,559 | 116,739 | 16,579 | 232,799 |
Issued in reinvestment of distributions | 244 | 2,620 | 287 | 3,164 |
Redeemed | (3,814) | (44,319) | (1,735) | (15,524) |
6,989 | 75,040 | 15,131 | 220,439 | |
Net increase (decrease) | (6,772,818) | $ (73,613,297) | 9,816,607 | $ 140,914,237 |
19
5. Affiliated Company Transactions
If a fund’s holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2009, follows:
March 31, 2009 | September 30, 2009 | ||||||
Share | Purchases | Sales | Realized | Dividend | Share | Market | |
Company | Balance | Cost | Cost | Gain (Loss) | Income | Balance | Value |
Parkway Properties, Inc.(1) | — | $13,367,936 | $13,367,936 | $(715,497) | $173,680 | — | —(1) |
(1) Company was not an affiliate at September 30, 2009. |
6. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
• Level 1 valuation inputs consist of actual quoted prices in an active market for identical securities;
• Level 2 valuation inputs consist of significant direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or
• Level 3 valuation inputs consist of significant unobservable inputs (including a fund’s own assumptions).
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the valuation inputs used to determine the fair value of the fund’s securities as of September 30, 2009:
Level 1 | Level 2 | Level 3 | |
Investment Securities | |||
Total Value of Common Stocks | $849,026,951 | $1,950,955 | — |
7. Risk Factors
The fund concentrates its investments in a narrow segment of the total market. Because of this, the fund is subject to certain additional risks as compared to investing in a more diversified portfolio of investments. The fund may be subject to certain risks similar to those associated with direct investment in real estate including but not limited to: local or regional economic conditions, changes in zoning laws, changes in property values, property tax increases, overbuilding, increased competition, environmental contamination, natural disasters, and interest rate risk.
20
8. Interfund Lending
The fund, along with certain other funds in the American Century Investments family of funds, may participate in an interfund lending program, pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC). This program provides an alternative credit facility allowing the fund to borrow from or lend to other funds in the American Century Investments family of funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. The interfund loan rate earned/paid on interfund lending transactions is determined daily based on the average of certain current market rates. Interfund lending transactions normally extend only overnight, but can have a maximum duration of seven days. The program is subject to annual approval by the Board of Directors. During the six months ended September 30, 2009, the fund did not utilize the pr ogram.
9. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of September 30, 2009, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $810,266,401 |
Gross tax appreciation of investments | $44,953,961 |
Gross tax depreciation of investments | (4,242,456) |
Net tax appreciation (depreciation) of investments | $40,711,505 |
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 fund had accumulated capital losses of $(206,620,499), which represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. The capital loss carryovers expire in 2017.
As of March 31, 2009, the fund had capital loss deferrals of $(425,893,514) which represent net capital losses incurred in the five-month period ended March 31, 2009. 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 March 2008, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) Section 815-10 (formerly Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities —an amendment of FASB Statement No. 133”). ASC Section 815-10 is effective for interim periods beginning after November 15, 2008 and has been adopted by the fund. ASC Section 815-10 amends and expands disclosures about derivative instruments and hedging activities. ASC Section 815-10 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.
21
Financial Highlights |
Real Estate | |||||||
Investor Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $7.80 | $21.67 | $31.37 | $29.00 | $23.24 | $23.09 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.13 | 0.46 | 0.43 | 0.53 | 0.53 | 0.46 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 5.57 | (13.91) | (5.53) | 5.70 | 8.44 | 1.79 | |
Total From | |||||||
Investment Operations | 5.70 | (13.45) | (5.10) | 6.23 | 8.97 | 2.25 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.16) | (0.42) | (0.51) | (0.49) | (0.49) | (0.46) | |
From Net Realized Gains | — | — | (4.09) | (3.37) | (2.72) | (1.64) | |
Total Distributions | (0.16) | (0.42) | (4.60) | (3.86) | (3.21) | (2.10) | |
Net Asset Value, | |||||||
End of Period | $13.34 | $7.80 | $21.67 | $31.37 | $29.00 | $23.24 | |
Total Return(3) | 73.56% | (62.80)% | (16.60)% | 22.02% | 40.65% | 9.53% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 1.16%(4) | 1.15% | 1.14% | 1.13% | 1.15% | 1.16% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 2.35%(4) | 2.87% | 1.60% | 1.72% | 2.00% | 1.88% | |
Portfolio Turnover Rate | 141% | 109% | 153% | 197% | 177% | 171% | |
Net Assets, End of Period | |||||||
(in thousands) | $527,686 | $361,510 | $864,011 | $1,590,428 | $986,526 | $522,676 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
22
Real Estate | |||||||
Institutional Class | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(1) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $7.81 | $21.71 | $31.41 | $29.03 | $23.25 | $23.10 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(2) | 0.14 | 0.50 | 0.48 | 0.59 | 0.59 | 0.44 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 5.58 | (13.94) | (5.54) | 5.71 | 8.45 | 1.86 | |
Total From | |||||||
Investment Operations | 5.72 | (13.44) | (5.06) | 6.30 | 9.04 | 2.30 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.17) | (0.46) | (0.55) | (0.55) | (0.54) | (0.51) | |
From Net Realized Gains | — | — | (4.09) | (3.37) | (2.72) | (1.64) | |
Total Distributions | (0.17) | (0.46) | (4.64) | (3.92) | (3.26) | (2.15) | |
Net Asset Value, | |||||||
End of Period | $13.36 | $7.81 | $21.71 | $31.41 | $29.03 | $23.25 | |
Total Return(3) | 73.76% | (62.73)% | (16.44)% | 22.27% | 40.99% | 9.74% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 0.96%(4) | 0.95% | 0.94% | 0.93% | 0.95% | 0.96% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 2.55%(4) | 3.07% | 1.80% | 1.92% | 2.20% | 2.08% | |
Portfolio Turnover Rate | 141% | 109% | 153% | 197% | 177% | 171% | |
Net Assets, End of Period | |||||||
(in thousands) | $188,942 | $104,565 | $200,982 | $379,044 | $242,745 | $143,183 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||||
(2) | Computed using average shares outstanding throughout the period. | ||||||
(3) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | |||||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | |||||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | |||||||
guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(4) | Annualized. | ||||||
See Notes to Financial Statements. |
23
Real Estate | |||||||
A Class(1) | |||||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||
2009(2) | 2009 | 2008 | 2007 | 2006 | 2005 | ||
Per-Share Data | |||||||
Net Asset Value, | |||||||
Beginning of Period | $7.81 | $21.69 | $31.41 | $29.04 | $23.26 | $23.11 | |
Income From | |||||||
Investment Operations | |||||||
Net Investment | |||||||
Income (Loss)(3) | 0.11 | 0.42 | 0.36 | 0.45 | 0.46 | 0.35 | |
Net Realized and | |||||||
Unrealized Gain (Loss) | 5.59 | (13.94) | (5.53) | 5.71 | 8.46 | 1.84 | |
Total From | |||||||
Investment Operations | 5.70 | (13.52) | (5.17) | 6.16 | 8.92 | 2.19 | |
Distributions | |||||||
From Net | |||||||
Investment Income | (0.15) | (0.36) | (0.46) | (0.42) | (0.42) | (0.40) | |
From Net Realized Gains | — | — | (4.09) | (3.37) | (2.72) | (1.64) | |
Total Distributions | (0.15) | (0.36) | (4.55) | (3.79) | (3.14) | (2.04) | |
Net Asset Value, | |||||||
End of Period | $13.36 | $7.81 | $21.69 | $31.41 | $29.04 | $23.26 | |
Total Return(4) | 73.38% | (62.88)% | (16.84)% | 21.70% | 40.37% | 9.30% | |
Ratios/Supplemental Data | |||||||
Ratio of Operating | |||||||
Expenses to Average | |||||||
Net Assets | 1.41%(5) | 1.40% | 1.39% | 1.38% | 1.40% | 1.41% | |
Ratio of Net Investment | |||||||
Income (Loss) to Average | |||||||
Net Assets | 2.10%(5) | 2.62% | 1.35% | 1.47% | 1.75% | 1.63% | |
Portfolio Turnover Rate | 141% | 109% | 153% | 197% | 177% | 171% | |
Net Assets, End of Period | |||||||
(in thousands) | $134,616 | $84,568 | $253,419 | $488,277 | $331,329 | $161,592 | |
(1) | Prior to September 4, 2007, the A Class was referred to as the Advisor Class. | ||||||
(2) | Six months ended September 30, 2009 (unaudited). | ||||||
(3) | Computed using average shares outstanding throughout the period. | ||||||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. | ||||||
Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense | |||||||
differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal | |||||||
places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal | |||||||
places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. | |||||||
(5) | Annualized. | ||||||
See Notes to Financial Statements. |
24
Real Estate | ||||
B Class | ||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | ||||
2009(1) | 2009 | 2008(2) | ||
Per-Share Data | ||||
Net Asset Value, Beginning of Period | $7.77 | $21.62 | $29.12 | |
Income From Investment Operations | ||||
Net Investment Income (Loss)(3) | 0.07 | 0.37 | 0.14 | |
Net Realized and Unrealized Gain (Loss) | 5.55 | (13.93) | (3.42) | |
Total From Investment Operations | 5.62 | (13.56) | (3.28) | |
Distributions | ||||
From Net Investment Income | (0.10) | (0.29) | (0.13) | |
From Net Realized Gains | — | — | (4.09) | |
Total Distributions | (0.10) | (0.29) | (4.22) | |
Net Asset Value, End of Period | $13.29 | $7.77 | $21.62 | |
Total Return(4) | 72.72% | (63.17)% | (11.57)% | |
Ratios/Supplemental Data | ||||
Ratio of Operating Expenses to Average Net Assets | 2.16%(5) | 2.15% | 2.14%(5) | |
Ratio of Net Investment Income (Loss) to Average Net Assets | 1.35%(5) | 1.87% | 1.17%(5) | |
Portfolio Turnover Rate | 141% | 109% | 153%(6) | |
Net Assets, End of Period (in thousands) | $58 | $40 | $33 | |
(1) | Six months ended September 30, 2009 (unaudited). | |||
(2) | September 28, 2007 (commencement of sale) through March 31, 2008. | |||
(3) | Computed using average shares outstanding throughout the period. | |||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. | |||
Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense | ||||
differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal | ||||
places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal | ||||
places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. | ||||
(5) | Annualized. | |||
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2008. | |||
See Notes to Financial Statements. |
25
Real Estate | ||||
C Class | ||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | ||||
2009(1) | 2009 | 2008(2) | ||
Per-Share Data | ||||
Net Asset Value, Beginning of Period | $7.78 | $21.62 | $29.12 | |
Income From Investment Operations | ||||
Net Investment Income (Loss)(3) | 0.07 | 0.35 | 0.13 | |
Net Realized and Unrealized Gain (Loss) | 5.55 | (13.90) | (3.41) | |
Total From Investment Operations | 5.62 | (13.55) | (3.28) | |
Distributions | ||||
From Net Investment Income | (0.10) | (0.29) | (0.13) | |
From Net Realized Gains | — | — | (4.09) | |
Total Distributions | (0.10) | (0.29) | (4.22) | |
Net Asset Value, End of Period | $13.30 | $7.78 | $21.62 | |
Total Return(4) | 72.63% | (63.12)% | (11.57)% | |
Ratios/Supplemental Data | ||||
Ratio of Operating Expenses to Average Net Assets | 2.16%(5) | 2.15% | 2.14%(5) | |
Ratio of Net Investment Income (Loss) to Average Net Assets | 1.35%(5) | 1.87% | 1.15%(5) | |
Portfolio Turnover Rate | 141% | 109% | 153%(6) | |
Net Assets, End of Period (in thousands) | $791 | $334 | $62 | |
(1) | Six months ended September 30, 2009 (unaudited). | |||
(2) | September 28, 2007 (commencement of sale) through March 31, 2008. | |||
(3) | Computed using average shares outstanding throughout the period. | |||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. | |||
Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense | ||||
differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal | ||||
places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal | ||||
places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. | ||||
(5) | Annualized. | |||
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2008. | |||
See Notes to Financial Statements. |
26
Real Estate | ||||
R Class | ||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | ||||
2009(1) | 2009 | 2008(2) | ||
Per-Share Data | ||||
Net Asset Value, Beginning of Period | $7.79 | $21.65 | $29.12 | |
Income From Investment Operations | ||||
Net Investment Income (Loss)(3) | 0.10 | 0.44 | 0.19 | |
Net Realized and Unrealized Gain (Loss) | 5.57 | (13.96) | (3.41) | |
Total From Investment Operations | 5.67 | (13.52) | (3.22) | |
Distributions | ||||
From Net Investment Income | (0.13) | (0.34) | (0.16) | |
From Net Realized Gains | — | — | (4.09) | |
Total Distributions | (0.13) | (0.34) | (4.25) | |
Net Asset Value, End of Period | $13.33 | $7.79 | $21.65 | |
Total Return(4) | 73.22% | (62.98)% | (11.37)% | |
Ratios/Supplemental Data | ||||
Ratio of Operating Expenses to Average Net Assets | 1.66%(5) | 1.65% | 1.64%(5) | |
Ratio of Net Investment Income (Loss) to Average Net Assets | 1.85%(5) | 2.37% | 1.65%(5) | |
Portfolio Turnover Rate | 141% | 109% | 153%(6) | |
Net Assets, End of Period (in thousands) | $311 | $127 | $26 | |
(1) | Six months ended September 30, 2009 (unaudited). | |||
(2) | September 28, 2007 (commencement of sale) through March 31, 2008. | |||
(3) | Computed using average shares outstanding throughout the period. | |||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | |||
are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating | ||||
the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would | ||||
more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC | ||||
guidelines and does not result in any gain or loss of value between one class and another. | ||||
(5) | Annualized. | |||
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2008. | |||
See Notes to Financial Statements. |
27
Approval of Management Agreement |
Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund’s independent directors (the “Directors”) each year.
At American Century Investments, this process is referred to as the “15(c) Process.” As a part of this process, the board reviews fund performance, shareholder services, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. In addition to this annual review, the board of directors oversees and evaluates on a continuous basis at its quarterly meetings the nature and quality of significant services performed by the advisor, fund performance, audit and compliance information, and a variety of other reports relating to fund operations. The board, or committees of the board, also holds special meetings as needed.
Under a Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for the board’s approval or renewal of any advisory agreements within the fund’s most recently completed fiscal half-year period.
Annual Contract Review Process
As part of the annual 15(c) Process undertaken during the most recent fiscal half-year period, the Directors reviewed extensive data and information compiled by the advisor and certain independent providers of evaluative data (the “15(c) Providers”) concerning the Real Estate Fund (the “Fund”) and the services provided to the Fund under the management agreement. The information considered and the discussions held at the meetings included, but were not limited to:
• the nature, extent and quality of investment management, shareholder services and other services provided to the Fund;
• the wide range of programs and services the advisor provides to the Fund and their shareholders on a routine and non-routine basis;
• the compliance policies, procedures, and regulatory experience of the advisor;
• data comparing the cost of owning the Fund to the cost of owning a similar fund;
• data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies;
• financial data showing the profitability of the Fund to the advisor and the overall profitability of the advisor;
• data comparing services provided and charges to other investment management clients of the advisor; and
28
• consideration of collateral benefits derived by the advisor from the management of the Fund and any potential economies of scale relating thereto.
In keeping with its practice, the Fund’s board of directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The board also had the benefit of the advice of its independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the advisor, the 15(c) Providers, and the board’s independent counsel, and evaluated such information for each fund for which the board has responsibility. In connec tion with their review of the Fund, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management and subadvisory agreements under the terms ultimately determined by the board to be appropriate, the Directors’ decision was based on the following factors.
Nature, Extent and Quality of Services — Generally. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including:
• Fund construction and design |
• portfolio security selection |
• initial capitalization/funding |
• securities trading |
• Fund administration |
• custody of Fund assets |
• daily valuation of the Fund’s portfolio |
• shareholder servicing and transfer agency, including shareholder |
confirmations, recordkeeping and communications |
• legal services |
• regulatory and portfolio compliance |
• financial reporting |
• marketing and distribution |
29
The Directors noted that many of the services provided by the advisor have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. They discussed with the advisor the challenges presented by these changes and the impact on the Fund. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments, and liquidity. In evaluating investment performance, the board expects the advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compl iance and other systems to conduct their business. At each quarterly meeting the Directors review investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of funds managed similarly to the Fund. The Directors also review detailed performance information during the 15(c) Process comparing the Fund’s performance with that of similar funds not managed by the advisor. If performance concerns are identified, the Directors discuss with the advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The fund’s quarter end performance fell below the median for its peer group for both the one- and three-year period during the past year. The board discussed the fund’s performance with the advisor and was satisfied with the efforts being undertaken by the advisor. The board will continue to monitor these efforts and the performance of the Fund. More d etailed information about the Fund’s performance can be found in the Performance and Portfolio Commentary sections of this report.
Shareholder and Other Services. The advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at their regular quarterly meetings, including the annual meeting concerning contract review, and reports to the board. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency servi ce level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor.
30
Costs of Services Provided and Profitability. The advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The board concluded that the advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Directors generally consider the advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Directors review information provided by the advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Directors concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The analysis of economies of scale is further complicated by the additional services and content provided by the advisor and its reinvestment in its ability to provide and expand those services. Accordingly, the Directors seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the Fund specifically, the expenses incurred by the advisor in providing various functions to the Fund, and the fees of competitive funds not m anaged by the advisor. The Directors believe the advisor is appropriately sharing economies of scale through its competitive fee structure, fee breakpoints as the Fund increases in size, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The Fund pays the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, record-keeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their i nvestment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Directors’ analysis of fee levels involves reviewing certain evaluative data
31
compiled by a 15(c) Provider comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group and performing a regression analysis to evaluate the effect of fee breakpoints as assets under management increase. The unified fee charged to shareholders of the Fund was above the median of the total expense ratios of its peer group. In addition, the Directors also reviewed updated fee level data provided by the advisor, but recognized that comparative data was particularly difficult to evaluate given the significant market developments during the past year. The board concluded that the management fee paid by the Fund to the advisor was reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Directors analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral Benefits Derived by the Advisor. The Directors considered the existence of collateral benefits the advisor may receive as a result of its relationship with the Fund. They concluded that the advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Directors concluded, however, that the assets of those other clients are not material to the analysis and, in any event, are included with the assets of the Fund to determine breakpoints in the Fund’s fee schedule, provided they are managed using the same investment team and strategy.
Conclusions of the Directors
As a result of this process, the board, including all of the independent directors, in the absence of particular circumstances and assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor concluded that the investment management agreement between the Fund and the advisor is fair and reasonable in light of the services provided and should be renewed.
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Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs or 403(b), 457 and qualified plans 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. 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. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
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 Investments’ 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.
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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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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 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 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 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.
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The Russell Midcap® Value Index measures the performance of those Russell Midcap Index companies (the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values.
The S&P 500 Index is a market value-weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock’s weight in the index is proportionate to its market value. Created by Standard & Poor’s, it is considered to be a broad measure of U.S. stock market performance.
36
Notes |
37
Notes |
38
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
©2009 American Century Proprietary Holdings, Inc. All rights reserved.
0911
CL-SAN-66877N
Semiannual Report |
September 30, 2009 |
American Century Investments |
NT Large Company Value Fund
NT Mid Cap Value Fund
President’s Letter |
Dear Investor:
Thank you for your investment with us during the financial reporting period ended September 30, 2009. We appreciate your trust in American Century Investments® at this volatile, transitional time in the economy and investment markets.
As the upheavals associated with the “Great Recession” gradually subside, our senior management team has put considerable thought into how the investment environment has changed and what new challenges and opportunities await us. Critical factors that we are anticipating in the coming year include marked shifts in investment and spending behavior, along with consolidation in our industry.
Most importantly, we think the economic recovery will be slow and extended. The economy and capital markets have come a long way since Lehman Brothers collapsed over a year ago, but 2010 will likely bring continuing challenges. The stock market’s rebound since last March and the third-quarter economic surge this year were fueled largely by corporate cost-cutting and unprecedented monetary and fiscal stimulus, including some key programs that have since expired or been scaled back.
Meanwhile, the resilient but struggling consumer sector still faces rising unemployment, heavy debt burdens, tight credit conditions, and a housing market that is starting to stabilize, but remains vulnerable. Much of our investment positioning in 2009 has cautiously reflected these still unstable economic fundamentals, leading to underperformance, in some cases, versus market benchmarks buoyed by the rally of riskier assets. We still support our fundamentally based positioning because we believe strongly that some markets—driven more by technical factors than fundamentals—have advanced further than underlying economic conditions warrant, and remain susceptible to the possibility of more volatility ahead.
For more detailed information from our portfolio management team about the performance and positioning of your investment, please review the following pages, or visit our website, americancentury.com.
Thank you for your continued confidence in us.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
Independent Chairman’s Letter |
I am Don Pratt, an independent director and chairman of the mutual fund board responsible for the U.S. Growth Equity, U.S. Value Equity, Global and Non-U.S. Equity and Asset Allocation funds managed by American Century Investments. The board consists of seven independent directors and two directors who are affiliated with the investment advisor.
As one of your independent shareholder representatives on the fund board, I plan to write you from time to time with updates on board activities and news about your funds. My co-independent directors and I are committed to putting your interests first. We work closely with American Century Investments on maintaining strong fund performance, providing quality service to shareholders at competitive fees and ensuring ethical business practices and compliance with all applicable fund regulations.
Last year, the board welcomed its newest independent director, John R. Whitten. He is a great addition to an experienced board where, collectively, the independent directors have served the funds for more than 76 years. This continuity served shareholders well as the investment advisor initiated a successful management transition, creating a strong senior leadership team consisting of well-tenured company executives and experienced industry veterans. Under the leadership of President and Chief Executive Officer Jonathan Thomas and Chief Investment Officer Enrique Chang, the firm has made the achievement of superior investment performance its primary focus and the key driver of its success going forward. This focus helped the company generate strong relative performance against the backdrop of 2008’s unprecedented market volatility.
As investors in the American Century funds, my fellow directors and I share your investing experience. We know firsthand how decisions made at the board level affect all shareholders. To further guide our efforts on your behalf, I invite you to send me your comments, questions or suggestions by email to dhpratt@fundboardchair.com. Thank you for allowing me to serve as your advocate on our board.
Table of Contents |
Market Perspective | 2 |
U.S. Stock Index Returns | 2 |
NT Large Company Value | |
Performance | 3 |
Portfolio Commentary | 5 |
Top Ten Holdings | 7 |
Top Five Industries | 7 |
Types of Investments in Portfolio | 7 |
NT Mid Cap Value | |
Performance | 8 |
Portfolio Commentary | 10 |
Top Ten Holdings | 12 |
Top Five Industries | 12 |
Types of Investments in Portfolio | 12 |
Shareholder Fee Examples | 13 |
Financial Statements | |
Schedule of Investments | 15 |
Statement of Assets and Liabilities | 21 |
Statement of Operations | 22 |
Statement of Changes in Net Assets | 23 |
Notes to Financial Statements | 24 |
Financial Highlights | 31 |
Other Information | |
Approval of Management Agreements | 33 |
Additional Information | 38 |
Index Definitions | 39 |
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 Investments or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments 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 Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for com parative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Market Perspective |
By Phil Davidson, Chief Investment Officer, U.S. Value Equity
A Value-Led Market Recovery
The U.S. stock market enjoyed an extraordinary rally during the six months ended September 30, 2009. The 35% advance in the broad equity indices—representing the market’s best six-month gain since 1938—reflected investors’ renewed confidence in an economic recovery following the deep recession and credit crisis that occurred in 2008.
As the table below indicates, value stocks led the market’s advance, outperforming growth issues across all market capitalizations. One factor behind the outperformance of value shares was a recovery in the financial sector, which comprises a significant portion of the value universe. Financial stocks were priced for failure amid the economic and credit turmoil in late 2008 and early 2009. Since then, the credit environment has improved considerably, helped in part by a series of federal government programs, and financial companies have taken steps to raise capital and reduce debt. As a result, financial stocks rebounded sharply during the six-month period, posting the best returns in the stock market.
Another factor supporting value shares was a renewed emphasis on cost management and deleveraging. As the economic downturn deepened, many businesses quickly implemented aggressive cost-cutting measures, which helped sustain profits despite declining revenues. In addition, companies that focused on growth (often using debt to do so) were hit the hardest during the recession, while those that concentrated on strengthening their balance sheets and improving cash flows held up the best.
The New Reality
Despite signs of economic improvement, particularly in housing and manufacturing, we still expect a slow, gradual recovery. Consumer spending, which accounts for 70% of the economy, is likely to remain weak as consumers continue to reduce debt and increase savings. In this environment, we believe that higher-quality companies with self-funding business models and whose strategies emphasize higher returns on capital will outperform over time. These companies will be in the best position to gain market share from weaker competitors and generate cash flows regardless of the pace of economic recovery.
U.S. Stock Index Returns | ||||
For the six months ended September 30, 2009* | ||||
Russell 1000 Index (Large-Cap) | 35.22% | Russell 2000 Index (Small-Cap) | 43.95% | |
Russell 1000 Value Index | 37.99% | Russell 2000 Value Index | 44.79% | |
Russell 1000 Growth Index | 32.58% | Russell 2000 Growth Index | 43.06% | |
Russell Midcap Index | 45.71% | * Total returns for periods less than one year are not annualized. | ||
Russell Midcap Value Index | 49.51% | |||
Russell Midcap Growth Index | 41.89% |
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Performance |
NT Large Company Value | ||||
Total Returns as of September 30, 2009 | ||||
Average | ||||
Annual Returns | ||||
6 months(1) | 1 year | Since Inception | Inception Date | |
Institutional Class | 35.28% | -9.04% | -5.99% | 5/12/06 |
Russell 1000 Value Index | 37.99% | -10.62% | -5.55% | — |
S&P 500 Index | 34.02% | -6.91% | -3.66% | — |
(1) 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.
Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not.
3
NT Large Company Value
One-Year Returns Over Life of Class | ||||
Periods ended September 30 | ||||
2006* | 2007 | 2008 | 2009 | |
Institutional Class | 5.67% | 13.13% | -25.39% | -9.04% |
Russell 1000 Value Index | 5.37% | 14.45% | -23.56% | -10.62% |
S&P 500 Index | 4.20% | 16.44% | -21.98% | -6.91% |
*From 5/12/06, the Institutional Class’s inception date. Not annualized. | ||||
Total Annual Fund Operating Expenses | ||||
Institutional Class | 0.64% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com.
Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not.
4
Portfolio Commentary |
NT Large Company Value
Portfolio Managers: Chuck Ritter and Brendan Healy
Performance Summary
NT Large Company Value returned 35.28%* for the six months ended September 30, 2009. By comparison, its benchmark, the Russell 1000 Value Index, returned 37.99%. The broader market, as measured by the S&P 500 Index, returned 34.02%. The portfolio’s return reflects operating expenses, while the indices’ returns do not. The average return for Morningstar’s Large Cap Value category (whose performance, like NT Large Company Value’s, reflects operating expenses) was 35.95%.**
The stock market rally, which began in March, persisted through the end of the reporting period. The U.S. economy continued to show signs of improvement in response to government stimulus programs, while corporate earnings were better than anticipated. Improving conditions in the capital markets were also favorable for the more highly leveraged companies. These factors led many investors to shift into riskier assets. In this environment, NT Large Company Value received positive contributions in absolute terms from all 10 of the sectors in which it was invested. On a relative basis, the portfolio’s exposure to the health care and financials sectors detracted. Its complement of utilities and industrials stocks added to results.
Health Care Detracted
The portfolio’s overweight in health care slowed relative results. Health care stocks gained, but their performance was constrained as investors priced in worst-case scenarios for health care reform. Although the health care sector rebounded from its lows by the end of the period, it remained one of the weakest performers in the benchmark.
Security selection also dampened performance. A notable detractor was Abbott Laboratories, which develops and manufactures laboratory diagnostics, medical devices, and pharmaceutical therapies. Abbott has seen a deceleration in prescription growth for Humira, its blockbuster drug for treating rheumatoid arthritis.
Financials Hampered Results
An underweight in financials, the strongest sector in the benchmark, was a drag on relative performance. Financials stocks rallied during the period as investors moved into riskier assets. In diversified financial services, NT Large Company Value held a smaller-than-the benchmark position in Citigroup. The financial giant’s shares, which had previously suffered steep declines, benefited as optimism about the economy increased.
* Total returns for periods less than one year are not annualized. |
**The average return for Morningstar’s Large Cap Value category was -7.18% for the one-year period ended September 30, 2009, and 5.17% since |
the fund’s inception. © 2009 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
The portfolio was also underweight in real estate investment trusts (REITs). REIT stocks posted gains of more than 71% in the benchmark despite deterioration in the commercial real estate market.
Security selection, however, added value. NT Large Company Value owned Ameriprise Financial, a notable contributor. The company’s stock rose on news it would acquire most of Bank of America’s investment management group.
Utilities Provided a Boost
NT Large Company Value continued to benefit from a significant underweight in the utilities sector, reflecting our belief that many of these stocks have been overvalued for some time. The stance added value during the market rally when utilities underperformed all but one other benchmark sector.
Industrials Contributed
Investments in the industrials sector enhanced relative progress. Many industrials stocks, which suffered steep declines as the recession took hold, posted strong results.
The sector also provided two key contributors, Ingersoll-Rand and R.R. Donnelley & Sons. Ingersoll-Rand, a manufacturer of industrial and commercial products, reported better-than-expected results in the second quarter driven by significant cost savings from its restructuring program. Printing services company R.R. Donnelley, which experienced a profit decline during the worldwide recession, seems likely to benefit from improving economic conditions. It has also been working to reduce its debt burden.
Outlook
We continue to be bottom-up investment managers, evaluating each company individually and building the portfolio one stock at a time.
NT Large Company Value is broadly diversified, with ongoing overweight positions in the health care, consumer staples, and information technology sectors. Our valuation work is also directing us toward smaller relative weightings in financials and utilities stocks.
6
NT Large Company Value | |||
Top Ten Holdings as of September 30, 2009 | |||
% of net assets | % of net assets | ||
as of 9/30/09 | as of 3/31/09 | ||
Exxon Mobil Corp. | 4.6% | 5.6% | |
JPMorgan Chase & Co. | 3.7% | 3.4% | |
AT&T, Inc. | 3.7% | 4.3% | |
General Electric Co. | 3.6% | 3.3% | |
Pfizer, Inc. | 3.4% | 3.2% | |
Bank of America Corp. | 3.3% | 1.6% | |
Chevron Corp. | 3.3% | 4.6% | |
ConocoPhillips | 2.6% | 2.8% | |
Royal Dutch Shell plc Class A, ADR | 2.5% | 2.5% | |
Verizon Communications, Inc. | 2.0% | 2.5% | |
Top Five Industries as of September 30, 2009 | |||
% of net assets | % of net assets | ||
as of 9/30/09 | as of 3/31/09 | ||
Oil, Gas & Consumable Fuels | 15.9% | 17.0% | |
Pharmaceuticals | 10.5% | 12.1% | |
Diversified Financial Services | 7.3% | 5.0% | |
Diversified Telecommunication Services | 6.0% | 7.2% | |
Capital Markets | 4.4% | 3.9% | |
Types of Investments in Portfolio | |||
% of net assets | % of net assets | ||
as of 9/30/09 | as of 3/31/09 | ||
Domestic Common Stocks and Futures | 94.4% | 94.9% | |
Foreign Common Stocks(1) | 5.0% | 4.3% | |
Convertible Preferred Stocks | — | 0.1% | |
Total Equity Exposure | 99.4% | 99.3% | |
Temporary Cash Investments | 0.6% | 0.6% | |
Other Assets and Liabilities | —(2) | 0.1% | |
(1) | Includes depositary shares, dual listed securities and foreign ordinary shares. | ||
(2) | Category is less than 0.05% of total net assets. |
7
Performance |
NT Mid Cap Value | ||||
Total Returns as of September 30, 2009 | ||||
Average Annual | ||||
Returns | ||||
6 months(1) | 1 year | Since Inception | Inception Date | |
Institutional Class | 38.14% | -1.01% | 0.35% | 5/12/06 |
Russell Midcap Value Index | 49.51% | -7.12% | -4.22% | — |
(1) 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.
Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not.
8
NT Mid Cap Value
One-Year Returns Over Life of Class | |||||
Periods ended September 30 | |||||
2006* | 2007 | 2008 | 2009 | ||
Institutional Class | 2.97% | 15.64% | -14.17% | -1.01% | |
Russell Midcap Value Index | 2.88% | 13.75% | -20.50% | -7.12% | |
*From 5/12/06, the Institutional Class’s inception date. Not annualized. | |||||
Total Annual Fund Operating Expenses | |||||
Institutional Class | 0.81% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com.
Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the index are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not.
9
Portfolio Commentary |
NT Mid Cap Value
Portfolio Managers: Kevin Toney, Michael Liss, and Phil Davidson
Performance Summary
NT Mid Cap Value returned 38.14%* for the six months ended September 30, 2009. By comparison, the average return for Morningstar’s Mid Cap Value category (whose performance, like NT Mid Cap Value’s, reflects operating expenses) was 43.97%.** The fund’s benchmark, the Russell Midcap Value Index (which does not include operating expenses), was up 49.51%.
The stock market rally, which began in March, persisted through the end of the reporting period. The U.S. economy continued to show signs of improve ment in response to government stimulus programs, while corporate earnings were better than anticipated. Improving conditions in the capital markets were also favorable for the more highly leveraged companies. These factors led many investors to shift into riskier assets, and many of the period’s largest gains were made by lower-quality companies. That situation was at odds with NT Mid Cap Value’s investment approach, which emphasizes higher-quality businesses with sound balance sheets. Nonetheless, the portfolio received positive contributions in absolute terms from all 10 of the sectors in which it was invested. On a relative basis, NT Mid Cap Value’s positions in the consumer discretionary and financials sectors detracted. Investments among information technology companies contributed.
Consumer Discretionary Detracted
Relative performance was hampered by the combination of an underweight position and security selection in the consumer discretionary sector, the strongest in the benchmark. Many of these stocks, which suffered steep declines as the recession took hold, rallied on optimism about a possible economic recovery and improving consumer sentiment.
Generally speaking, the portfolio’s performance was a result of what it didn’t own rather than what it did. For example, NT Mid Cap Value did not hold shares of Ford Motor, which nearly tripled during the period. The car maker has been able to restructure its business without the help of the U.S. government, unlike competitors General Motors and Chrysler, and has steadily gained market share.
The consumer discretionary sector also provided a top detractor, Lowe’s. The home-improvement retailer experienced weak demand for the big-ticket products in its stores, but expects to gain additional market share in 2010. We also believe investors punished Lowe’s for failing to cut costs and reduce capital expenditures as meaningfully as its competitors.
* Total returns for periods less than one year are not annualized. |
**The average return for Morningstar’s Mid Cap Value category was -2.80% for the one-year period ended September 30, 2009, and -3.57% since |
the fund’s inception. © 2009 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. |
10
NT Mid Cap Value
Financials Slowed Results
NT Mid Cap Value’s underweight in financials stocks, which had been advantageous during the turmoil that roiled the sector, acted as a restraint as companies with stressed balance sheets, many of which had been staring at bankruptcy only months earlier, rallied from historic lows, outperforming stronger, higher-quality businesses. For some time, we have approached the financials sector with caution and conservatism. During the reporting period, NT Mid Cap Value’s investments were concentrated in the less-volatile insurance and thrifts names. However, many of these companies underperformed during the low-quality rally, including portfolio holding People’s United Financial, a conservatively run and well-capitalized thrift.
The insurance industry was the source of a notable detractor. Aon Corp., one of the world’s largest insurance brokers, lagged due to continued softness in property and casualty insurance pricing and because of weak results in its consulting segment.
Information Technology Enhanced Performance
The portfolio’s holdings in the information technology sector added to relative results. A top contributor was Emulex Corp., a maker of storage-networking equipment. Its share price rose dramatically on news of an unsolicited takeover bid from chipmaker Broadcom Corp. The stock remained elevated as Emulex resisted the takeover, urging shareholders to reject Broadcom’s offer on the grounds that it materially undervalued the company. Ultimately, Broadcom withdrew the offer.
Another notable contributor was Littelfuse, Inc., a leading supplier of circuit protection components for the consumer electronics, telecommunications, and automotive markets. The company benefited from its restructuring initiatives and an improved outlook for the automotive sector.
Outlook
We continue to follow our disciplined, bottom-up process, selecting companies one at a time for the portfolio. As of September 30, 2009, we see opportunities in consumer staples, industrials, and health care stocks, reflected by overweight positions in these sectors, relative to the benchmark. Our fundamental analysis and valuation work are also directing us toward smaller relative weightings in financials, materials, and consumer discretionary stocks.
11
NT Mid Cap Value | ||
Top Ten Holdings as of September 30, 2009 | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Marsh & McLennan Cos., Inc. | 3.5% | 3.3% |
Wisconsin Energy Corp. | 2.6% | 2.8% |
Kimberly-Clark Corp. | 2.6% | 3.4% |
Aon Corp. | 2.5% | 2.3% |
iShares Russell Midcap Value Index Fund | 2.3% | 2.8% |
Northern Trust Corp. | 2.1% | — |
Commerce Bancshares, Inc. | 2.1% | 0.8% |
Lowe’s Cos., Inc. | 2.0% | 0.7% |
People’s United Financial, Inc. | 2.0% | 1.2% |
Waste Management, Inc. | 2.0% | 2.0% |
Top Five Industries as of September 30, 2009 | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Insurance | 9.8% | 10.0% |
Commercial Services & Supplies | 6.4% | 3.7% |
Food Products | 6.3% | 7.5% |
Oil, Gas & Consumable Fuels | 6.2% | 4.2% |
Electric Utilities | 5.3% | 6.0% |
Types of Investments in Portfolio | ||
% of net assets | % of net assets | |
as of 9/30/09 | as of 3/31/09 | |
Domestic Common Stocks | 93.8% | 96.4% |
Foreign Common Stocks(1) | 5.3% | 2.6% |
Total Common Stocks | 99.1% | 99.0% |
Temporary Cash Investments | 0.8% | 0.9% |
Other Assets and Liabilities | 0.1% | 0.1% |
(1) Includes depositary shares, dual listed securities and foreign ordinary shares. |
12
Shareholder Fee Examples (Unaudited) |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/ exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2009 to September 30, 2009.
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 Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments 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 Investments 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 Investments 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.
13
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.
Beginning | Ending | Expenses Paid | ||
Account Value | Account Value | During Period* | Annualized | |
4/1/09 | 9/30/09 | 4/1/09 – 9/30/09 | Expense Ratio* | |
NT Large Company Value — Institutional Class | ||||
Actual | $1,000 | $1,352.80 | $3.77 | 0.64% |
Hypothetical | $1,000 | $1,021.86 | $3.24 | 0.64% |
NT Mid Cap Value — Institutional Class | ||||
Actual | $1,000 | $1,381.40 | $4.78 | 0.80% |
Hypothetical | $1,000 | $1,021.06 | $4.05 | 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 365, to reflect the one-half year period. |
14
Schedule of Investments |
NT Large Company Value | ||||||
SEPTEMBER 30, 2009 (UNAUDITED) | ||||||
Shares | Value | Shares | Value | |||
Common Stocks — 96.6% | DIVERSIFIED FINANCIAL SERVICES — 7.3% | |||||
AEROSPACE & DEFENSE — 2.0% | Bank of America Corp. | 433,600 | $ 7,336,512 | |||
Honeywell International, Inc. | 30,700 | $ 1,140,505 | Citigroup, Inc. | 96,700 | 468,028 | |
Lockheed Martin Corp. | 7,400 | 577,792 | JPMorgan Chase & Co. | 188,100 | 8,242,542 | |
Northrop Grumman Corp. | 52,800 | 2,732,400 | 16,047,082 | |||
DIVERSIFIED TELECOMMUNICATION | ||||||
4,450,697 | SERVICES — 6.0% | |||||
BEVERAGES — 1.4% | AT&T, Inc.(2) | 298,600 | 8,065,186 | |||
Coca-Cola Co. (The) | 58,300 | 3,130,710 | CenturyTel, Inc. | 19,000 | 638,400 | |
BIOTECHNOLOGY — 0.5% | Verizon Communications, Inc. | 147,600 | 4,467,852 | |||
Amgen, Inc.(1)(2) | 20,000 | 1,204,600 | ||||
13,171,438 | ||||||
CAPITAL MARKETS — 4.4% | ELECTRIC UTILITIES — 2.5% | |||||
Ameriprise Financial, Inc. | 59,200 | 2,150,736 | Exelon Corp. | 63,100 | 3,131,022 | |
Bank of New York | PPL Corp. | 79,400 | 2,408,996 | |||
Mellon Corp. (The) | 74,900 | 2,171,351 | ||||
Goldman Sachs | 5,540,018 | |||||
Group, Inc. (The) | 20,900 | 3,852,915 | ENERGY EQUIPMENT & SERVICES — 1.6% | |||
Morgan Stanley | 51,100 | 1,577,968 | Baker Hughes, Inc. | 16,900 | 720,954 | |
9,752,970 | Diamond Offshore Drilling, Inc. | 6,400 | 611,328 | |||
CHEMICALS — 2.2% | National Oilwell Varco, Inc.(1) | 44,700 | 1,927,911 | |||
E.I. du Pont de Nemours & Co. | 79,600 | 2,558,344 | Smith International, Inc. | 10,700 | 307,090 | |
PPG Industries, Inc. | 39,500 | 2,299,295 | 3,567,283 | |||
4,857,639 | FOOD & STAPLES RETAILING — 3.3% | |||||
COMMERCIAL BANKS — 3.8% | Kroger Co. (The) | 73,000 | 1,506,720 | |||
PNC Financial | SYSCO Corp. | 48,200 | 1,197,770 | |||
Services Group, Inc. | 30,000 | 1,457,700 | Walgreen Co. | 69,400 | 2,600,418 | |
U.S. Bancorp. | 128,900 | 2,817,754 | Wal-Mart Stores, Inc. | 38,200 | 1,875,238 | |
Wells Fargo & Co. | 144,300 | 4,066,374 | 7,180,146 | |||
8,341,828 | FOOD PRODUCTS — 0.9% | |||||
COMMERCIAL SERVICES & SUPPLIES — 1.9% | Unilever NV New York Shares | 72,500 | 2,092,350 | |||
Avery Dennison Corp. | 24,200 | 871,442 | HEALTH CARE EQUIPMENT & SUPPLIES — 0.4% | |||
Pitney Bowes, Inc. | 33,500 | 832,475 | Medtronic, Inc. | 21,000 | 772,800 | |
R.R. Donnelley & Sons Co. | 56,600 | 1,203,316 | HEALTH CARE PROVIDERS & SERVICES — 1.1% | |||
Waste Management, Inc. | 40,300 | 1,201,746 | Aetna, Inc. | 30,500 | 848,815 | |
4,108,979 | Quest Diagnostics, Inc. | 11,600 | 605,404 | |||
COMMUNICATIONS EQUIPMENT — 0.7% | WellPoint, Inc.(1) | 20,600 | 975,616 | |||
Cisco Systems, Inc.(1) | 70,200 | 1,652,508 | 2,429,835 | |||
COMPUTERS & PERIPHERALS — 1.1% | HOTELS, RESTAURANTS & LEISURE — 0.6% | |||||
Hewlett-Packard Co. | 53,700 | 2,535,177 | Darden Restaurants, Inc. | 17,500 | 597,275 | |
DIVERSIFIED — 1.4% | Starbucks Corp.(1) | 35,300 | 728,945 | |||
Standard & Poor’s 500 | 1,326,220 | |||||
Depositary Receipt, Series 1 | 29,200 | 3,082,352 | HOUSEHOLD DURABLES — 0.8% | |||
DIVERSIFIED CONSUMER SERVICES — 0.5% | Newell Rubbermaid, Inc. | 110,700 | 1,736,883 | |||
H&R Block, Inc. | 60,200 | 1,106,476 | INDEPENDENT POWER PRODUCERS | |||
& ENERGY TRADERS — 0.3% | ||||||
NRG Energy, Inc.(1) | 25,000 | 704,750 |
15
NT Large Company Value | ||||||
Shares | Value | Shares | Value | |||
INDUSTRIAL CONGLOMERATES — 4.1% | PAPER & FOREST PRODUCTS — 0.5% | |||||
General Electric Co. | 490,900 | $ 8,060,578 | International Paper Co. | 51,600 | $ 1,147,068 | |
Tyco International Ltd. | 31,100 | 1,072,328 | PHARMACEUTICALS — 10.5% | |||
9,132,906 | Abbott Laboratories | 38,500 | 1,904,595 | |||
INSURANCE — 4.3% | Eli Lilly & Co. | 52,700 | 1,740,681 | |||
Allstate Corp. (The) | 91,600 | 2,804,792 | Johnson & Johnson | 69,300 | 4,219,677 | |
Chubb Corp. (The) | 25,200 | 1,270,332 | Merck & Co., Inc. | 118,800 | 3,757,644 | |
Loews Corp. | 30,800 | 1,054,900 | Pfizer, Inc. | 460,000 | 7,613,000 | |
Torchmark Corp. | 33,400 | 1,450,562 | Wyeth | 82,200 | 3,993,276 | |
Travelers Cos., Inc. (The) | 50,800 | 2,500,884 | 23,228,873 | |||
XL Capital Ltd., Class A | 22,300 | 389,358 | REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.7% | |||
9,470,828 | Host Hotels & Resorts, Inc. | 30,300 | 356,631 | |||
IT SERVICES — 1.5% | Simon Property Group, Inc. | 15,848 | 1,100,326 | |||
Fiserv, Inc.(1)(2) | 16,800 | 809,760 | 1,456,957 | |||
International Business | SEMICONDUCTORS & | |||||
Machines Corp. | 20,100 | 2,404,161 | SEMICONDUCTOR EQUIPMENT — 0.8% | |||
3,213,921 | Applied Materials, Inc. | 41,100 | 550,740 | |||
MACHINERY — 2.3% | Intel Corp. | 56,800 | 1,111,576 | |||
Dover Corp. | 48,300 | 1,872,108 | 1,662,316 | |||
Ingersoll-Rand plc | 66,300 | 2,033,421 | SOFTWARE — 1.9% | |||
Parker-Hannifin Corp. | 20,900 | 1,083,456 | Activision Blizzard, Inc.(1) | 28,400 | 351,876 | |
4,988,985 | Microsoft Corp. | 93,700 | 2,425,893 | |||
MEDIA — 4.3% | Oracle Corp.(2) | 72,600 | 1,512,984 | |||
CBS Corp., Class B | 133,700 | 1,611,085 | 4,290,753 | |||
Comcast Corp., Class A | 122,200 | 2,063,958 | SPECIALTY RETAIL — 2.3% | |||
Time Warner Cable, Inc. | 26,000 | 1,120,340 | Best Buy Co., Inc. | 14,000 | 525,280 | |
Time Warner, Inc. | 91,800 | 2,642,004 | Gap, Inc. (The) | 51,500 | 1,102,100 | |
Viacom, Inc., Class B(1) | 73,500 | 2,060,940 | Home Depot, Inc. (The) | 76,800 | 2,045,952 | |
9,498,327 | Staples, Inc. | 59,700 | 1,386,234 | |||
METALS & MINING — 0.5% | 5,059,566 | |||||
Nucor Corp. | 25,100 | 1,179,951 | TEXTILES, APPAREL & LUXURY GOODS — 0.5% | |||
MULTILINE RETAIL — 0.7% | VF Corp. | 16,600 | 1,202,338 | |||
Kohl’s Corp.(1) | 26,100 | 1,489,005 | TOTAL COMMON STOCKS | |||
MULTI-UTILITIES — 0.7% | (Cost $197,250,589) | 213,421,002 | ||||
PG&E Corp. | 38,500 | 1,558,865 | Temporary Cash Investments — | |||
OFFICE ELECTRONICS — 0.4% | Segregated For Futures Contracts — 2.8% | |||||
Xerox Corp. | 122,900 | 951,246 | Repurchase Agreement, Credit Suisse | |||
OIL, GAS & CONSUMABLE FUELS — 15.9% | First Boston, Inc., (collateralized by various | |||||
Apache Corp. | 25,600 | 2,350,848 | U.S. Treasury obligations, 0.24%, 6/10/10, | |||
valued at $6,283,681), in a joint trading | ||||||
Chevron Corp. | 102,300 | 7,204,989 | account at 0.01%, dated 9/30/09, due | |||
ConocoPhillips | 127,300 | 5,748,868 | 10/1/09 (Delivery value $6,160,002) | |||
Devon Energy Corp. | 23,100 | 1,555,323 | (Cost $6,160,000) | 6,160,000 | ||
Exxon Mobil Corp. | 146,800 | 10,071,948 | ||||
Occidental Petroleum Corp. | 26,400 | 2,069,760 | ||||
Royal Dutch Shell plc | ||||||
Class A, ADR | 96,600 | 5,524,554 | ||||
Valero Energy Corp. | 29,400 | 570,066 | ||||
35,096,356 |
16
NT Large Company Value | ||
Shares | Value | |
Temporary Cash Investments — 0.6% | ||
JPMorgan U.S. Treasury | ||
Plus Money Market Fund | ||
Agency Shares | 47,389 | $ 47,389 |
Repurchase Agreement, Credit Suisse | ||
First Boston, Inc., (collateralized by various | ||
U.S. Treasury obligations, 0.24%, 6/10/10, | ||
valued at $1,264,897), in a joint trading | ||
account at 0.01%, dated 9/30/09, due | ||
10/1/09 (Delivery value $1,240,000) | 1,240,000 | |
TOTAL TEMPORARY | ||
CASH INVESTMENTS | ||
(Cost $1,287,389) | 1,287,389 | |
TOTAL INVESTMENT | ||
SECURITIES — 100.0% | ||
(Cost $204,697,978) | 220,868,391 | |
OTHER ASSETS AND LIABILITIES(3) | 87,934 | |
TOTAL NET ASSETS — 100.0% | $220,956,325 |
Futures Contracts | ||||
Underlying Face | ||||
Contracts Purchased | Expiration Date | Amount at Value | Unrealized Gain (Loss) | |
117 S&P 500 E-Mini Futures | December 2009 | $ 6,159,465 | $ 157,773 | |
Notes to Schedule of Investments | ||||
ADR = American Depositary Receipt | ||||
(1) | Non-income producing. | |||
(2) | Security, or a portion thereof, has been segregated for futures contracts. At the period end, the aggregate value of securities pledged | |||
was $6,160,000. | ||||
(3) | Category is less than 0.05% of total net assets. | |||
See Notes to Financial Statements. |
17
NT Mid Cap Value | ||||||
SEPTEMBER 30, 2009 (UNAUDITED) | ||||||
Shares | Value | Shares | Value | |||
Common Stocks — 99.1% | DIVERSIFIED FINANCIAL SERVICES — 0.1% | |||||
AEROSPACE & DEFENSE — 0.6% | McGraw-Hill Cos., Inc. (The) | 3,100 | $ 77,934 | |||
DIVERSIFIED TELECOMMUNICATION | ||||||
Northrop Grumman Corp. | 12,500 | $ 646,875 | SERVICES — 2.8% | |||
AIRLINES — 0.5% | BCE, Inc. | 37,025 | 912,614 | |||
Southwest Airlines Co. | 55,838 | 536,045 | CenturyTel, Inc. | 41,180 | 1,383,648 | |
BEVERAGES — 0.7% | Iowa Telecommunications | |||||
Coca-Cola Enterprises, Inc. | 19,500 | 417,495 | Services, Inc. | 40,437 | 509,506 | |
Pepsi Bottling Group, Inc. | 8,900 | 324,316 | 2,805,768 | |||
741,811 | ELECTRIC UTILITIES — 5.3% | |||||
CAPITAL MARKETS — 4.6% | American Electric | |||||
AllianceBernstein Holding LP | 18,300 | 499,224 | Power Co., Inc. | 10,891 | 337,512 | |
Ameriprise Financial, Inc. | 36,583 | 1,329,060 | Great Plains Energy, Inc. | 8,382 | 150,457 | |
Invesco Ltd. | 17,530 | 398,983 | IDACORP, Inc. | 66,179 | 1,905,293 | |
Legg Mason, Inc. | 6,900 | 214,107 | Northeast Utilities | 19,230 | 456,520 | |
Northern Trust Corp. | 36,389 | 2,116,384 | Portland General Electric Co. | 44,171 | 871,052 | |
4,557,758 | Westar Energy, Inc. | 77,631 | 1,514,581 | |||
CHEMICALS — 1.2% | 5,235,415 | |||||
International Flavors & | ELECTRICAL EQUIPMENT — 2.0% | |||||
Fragrances, Inc. | 20,198 | 766,110 | Cooper Industries plc, Class A | 17,800 | 668,746 | |
Minerals Technologies, Inc. | 9,570 | 455,149 | Emerson Electric Co. | 12,400 | 496,992 | |
1,221,259 | Hubbell, Inc., Class A | 1,189 | 48,143 | |||
COMMERCIAL BANKS — 2.4% | Hubbell, Inc., Class B | 17,900 | 751,800 | |||
City National Corp. | 7,900 | 307,547 | 1,965,681 | |||
Commerce Bancshares, Inc. | 55,130 | 2,053,041 | ELECTRONIC EQUIPMENT, | |||
2,360,588 | INSTRUMENTS & COMPONENTS — 1.6% | |||||
COMMERCIAL SERVICES & SUPPLIES — 6.4% | AVX Corp. | 33,027 | 394,012 | |||
IESI-BFC Ltd. | 89,783 | 1,159,996 | Littelfuse, Inc.(1) | 3,629 | 95,225 | |
Pitney Bowes, Inc. | 57,800 | 1,436,330 | Molex, Inc. | 53,258 | 1,112,027 | |
Republic Services, Inc. | 65,798 | 1,748,253 | 1,601,264 | |||
Waste Management, Inc. | 66,896 | 1,994,839 | ENERGY EQUIPMENT & SERVICES — 1.8% | |||
6,339,418 | Baker Hughes, Inc. | 9,000 | 383,940 | |||
COMMUNICATIONS EQUIPMENT — 0.8% | BJ Services Co. | 15,400 | 299,222 | |||
Emulex Corp.(1) | 79,100 | 813,939 | Cameron International Corp.(1) | 16,400 | 620,248 | |
COMPUTERS & PERIPHERALS — 1.3% | Helmerich & Payne, Inc. | 12,500 | 494,125 | |||
Diebold, Inc. | 25,914 | 853,348 | 1,797,535 | |||
QLogic Corp.(1) | 24,400 | 419,680 | FOOD & STAPLES RETAILING — 0.5% | |||
1,273,028 | Costco Wholesale Corp. | 8,500 | 479,910 | |||
CONTAINERS & PACKAGING — 1.1% | FOOD PRODUCTS — 6.3% | |||||
Bemis Co., Inc. | 42,811 | 1,109,233 | Campbell Soup Co. | 55,400 | 1,807,148 | |
DISTRIBUTORS — 1.6% | ConAgra Foods, Inc. | 87,207 | 1,890,648 | |||
Genuine Parts Co. | 40,656 | 1,547,367 | General Mills, Inc. | 3,500 | 225,330 | |
DIVERSIFIED — 2.3% | H.J. Heinz Co. | 39,700 | 1,578,075 | |||
iShares Russell Midcap | Kellogg Co. | 15,000 | 738,450 | |||
Value Index Fund | 64,600 | 2,288,132 | 6,239,651 |
18
NT Mid Cap Value | ||||||
Shares | Value | Shares | Value | |||
GAS UTILITIES — 1.9% | LEISURE EQUIPMENT & PRODUCTS — 0.9% | |||||
AGL Resources, Inc. | 6,800 | $ 239,836 | Mattel, Inc. | 46,400 | $ 856,544 | |
Southwest Gas Corp. | 66,120 | 1,691,349 | MACHINERY — 2.7% | |||
1,931,185 | Altra Holdings, Inc.(1) | 114,712 | 1,283,627 | |||
HEALTH CARE EQUIPMENT & SUPPLIES — 3.6% | Dover Corp. | 11,700 | 453,492 | |||
Beckman Coulter, Inc. | 12,255 | 844,860 | Kaydon Corp. | 30,583 | 991,501 | |
Boston Scientific Corp.(1) | 24,600 | 260,514 | 2,728,620 | |||
CareFusion Corp.(1) | 16,050 | 349,890 | METALS & MINING — 1.6% | |||
Covidien plc | 7,600 | 328,776 | Barrick Gold Corp. | 11,899 | 450,972 | |
Symmetry Medical, Inc.(1) | 77,262 | 801,207 | Newmont Mining Corp. | 25,878 | 1,139,150 | |
Zimmer Holdings, Inc.(1) | 19,300 | 1,031,585 | 1,590,122 | |||
3,616,832 | MULTI-UTILITIES — 4.2% | |||||
HEALTH CARE PROVIDERS & SERVICES — 2.5% | Ameren Corp. | 11,526 | 291,377 | |||
Cardinal Health, Inc. | 23,100 | 619,080 | PG&E Corp. | 8,100 | 327,969 | |
LifePoint Hospitals, Inc.(1) | 44,000 | 1,190,640 | Wisconsin Energy Corp. | 57,060 | 2,577,400 | |
Patterson Cos., Inc.(1) | 11,700 | 318,825 | Xcel Energy, Inc. | 49,197 | 946,551 | |
Select Medical | 4,143,297 | |||||
Holdings Corp.(1) | 29,819 | 300,277 | OIL, GAS & CONSUMABLE FUELS — 6.2% | |||
Universal Health Services, Inc., | Apache Corp. | 12,548 | 1,152,283 | |||
Class B | 902 | 55,861 | EOG Resources, Inc. | 9,500 | 793,345 | |
2,484,683 | EQT Corp. | 38,842 | 1,654,669 | |||
HEALTH CARE TECHNOLOGY — 0.8% | Imperial Oil Ltd. | 28,400 | 1,080,932 | |||
IMS Health, Inc. | 51,600 | 792,060 | Murphy Oil Corp. | 11,200 | 644,784 | |
HOTELS, RESTAURANTS & LEISURE — 3.2% | Noble Energy, Inc. | 13,300 | 877,268 | |||
CEC Entertainment, Inc.(1) | 34,500 | 892,170 | 6,203,281 | |||
International Speedway Corp., | PAPER & FOREST PRODUCTS — 0.7% | |||||
Class A | 47,215 | 1,301,718 | MeadWestvaco Corp. | 11,548 | 257,636 | |
Speedway Motorsports, Inc. | 67,139 | 966,130 | Weyerhaeuser Co. | 13,406 | 491,330 | |
3,160,018 | 748,966 | |||||
HOUSEHOLD DURABLES — 1.0% | PERSONAL PRODUCTS — 0.8% | |||||
Fortune Brands, Inc. | 23,200 | 997,136 | Estee Lauder Cos., Inc. (The), | |||
Whirlpool Corp. | 600 | 41,976 | Class A | 21,300 | 789,804 | |
1,039,112 | REAL ESTATE INVESTMENT TRUSTS (REITs) — 2.5% | |||||
HOUSEHOLD PRODUCTS — 2.6% | Boston Properties, Inc. | 9,658 | 633,082 | |||
Kimberly-Clark Corp. | 43,495 | 2,565,335 | Federal Realty | |||
INSURANCE — 9.8% | Investment Trust | 1,691 | 103,777 | |||
Aon Corp. | 61,100 | 2,486,159 | Government Properties | |||
Income Trust(1) | 34,843 | 836,580 | ||||
Chubb Corp. (The) | 36,100 | 1,819,801 | ||||
HCC Insurance Holdings, Inc. | 21,991 | 601,454 | HCP, Inc. | 2,018 | 57,997 | |
Marsh & McLennan Cos., Inc. | 140,835 | 3,482,850 | Host Hotels & Resorts, Inc. | 63,745 | 750,279 | |
Transatlantic Holdings, Inc. | 7,825 | 392,580 | Public Storage | 1,000 | 75,240 | |
Travelers Cos., Inc. (The) | 20,700 | 1,019,061 | 2,456,955 | |||
9,801,905 | ROAD & RAIL — 0.4% | |||||
IT SERVICES — 0.7% | Heartland Express, Inc. | 31,000 | 446,400 | |||
Accenture plc, Class A | 18,700 | 696,949 |
19
NT Mid Cap Value | ||||||
Shares | Value | Shares | Value | |||
SEMICONDUCTORS & | Temporary Cash Investments — 0.8% | |||||
SEMICONDUCTOR EQUIPMENT — 2.5% | ||||||
Applied Materials, Inc. | 74,600 | $ 999,640 | JPMorgan U.S. Treasury | |||
Plus Money Market Fund | ||||||
KLA-Tencor Corp. | 10,700 | 383,702 | Agency Shares | 63,055 | $ 63,055 | |
Teradyne, Inc.(1) | 39,700 | 367,225 | Repurchase Agreement, Credit Suisse | |||
Verigy Ltd.(1) | 60,400 | 701,848 | First Boston, Inc., (collateralized by various | |||
2,452,415 | U.S. Treasury obligations, 0.24%, 6/10/10, | |||||
valued at $714,055), in a joint trading | ||||||
SOFTWARE — 0.4% | account at 0.01%, dated 9/30/09, due | |||||
Synopsys, Inc.(1) | 16,835 | 377,441 | 10/1/09 (Delivery value $700,000) | 700,000 | ||
SPECIALTY RETAIL — 3.8% | TOTAL TEMPORARY | |||||
Lowe’s Cos., Inc. | 97,200 | 2,035,368 | CASH INVESTMENTS | |||
(Cost $763,055) | 763,055 | |||||
PetSmart, Inc. | 82,400 | 1,792,200 | ||||
TOTAL INVESTMENT | ||||||
3,827,568 | SECURITIES — 99.9% | |||||
THRIFTS & MORTGAGE FINANCE — 2.4% | (Cost $83,645,196) | 99,495,346 | ||||
Hudson City Bancorp., Inc. | 18,900 | 248,535 | OTHER ASSETS | |||
People’s United Financial, Inc. | 128,333 | 1,996,861 | AND LIABILITIES — 0.1% | 100,168 | ||
Washington Federal, Inc. | 8,232 | 138,792 | TOTAL NET ASSETS — 100.0% | $ 99,595,514 | ||
2,384,188 | ||||||
TOTAL COMMON STOCKS | ||||||
(Cost $82,882,141) | 98,732,291 |
Forward Foreign Currency Exchange Contracts | |||
Contracts to Sell | Settlement Date | Value | Unrealized Gain (Loss) |
3,039,282 CAD for USD | 10/30/09 | $ 2,838,726 | $ (43,736) |
(Value on Settlement Date $2,794,990) | |||
Notes to Schedule of Investments | |||
CAD = Canadian Dollar | |||
USD = United States Dollar | |||
(1) Non-income producing. | |||
See Notes to Financial Statements. |
20
Statement of Assets and Liabilities |
SEPTEMBER 30, 2009 (UNAUDITED) | ||
NT Large | ||
Company Value | NT Mid Cap Value | |
Assets | ||
Investment securities, at value (cost of $204,697,978 and $83,645,196, respectively) | $220,868,391 | $ 99,495,346 |
Receivable for investments sold | 151,794 | 1,565,909 |
Receivable for capital shares sold | 243,199 | 108,746 |
Dividends and interest receivable | 264,842 | 220,071 |
221,528,226 | 101,390,072 | |
Liabilities | ||
Payable for investments purchased | 440,364 | 1,683,655 |
Payable for variation margin on futures contracts | 11,731 | — |
Payable for forward foreign currency exchange contracts | — | 43,736 |
Payable for capital shares redeemed | 5,305 | 2,542 |
Accrued management fees | 114,501 | 64,625 |
571,901 | 1,794,558 | |
Net Assets | $220,956,325 | $ 99,595,514 |
Institutional Class Capital Shares, $0.01 Par Value | ||
Authorized | 100,000,000 | 100,000,000 |
Outstanding | 29,727,598 | 11,628,397 |
Net Asset Value Per Share | $7.43 | $8.56 |
Net Assets Consist of: | ||
Capital (par value and paid-in surplus) | $238,666,101 | $ 98,487,985 |
Accumulated undistributed net investment income (loss) | (13,682) | 111,808 |
Accumulated net realized loss on investment and foreign currency transactions | (34,024,280) | (14,807,588) |
Net unrealized appreciation on investments and translation of assets | ||
and liabilities in foreign currencies | 16,328,186 | 15,803,309 |
$220,956,325 | $ 99,595,514 | |
See Notes to Financial Statements. |
21
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) | ||
NT Large | ||
Company Value | NT Mid Cap Value | |
Investment Income (Loss) | ||
Income: | ||
Dividends (net of foreign taxes withheld of $12 and $8,969, respectively) | $ 2,610,285 | $ 1,169,224 |
Interest | 4,347 | 676 |
2,614,632 | 1,169,900 | |
Expenses: | ||
Management fees | 602,997 | 339,517 |
Directors’ fees and expenses | 3,673 | 1,667 |
Other expenses | 100 | — |
606,770 | 341,184 | |
Net investment income (loss) | 2,007,862 | 828,716 |
Realized and Unrealized Gain (Loss) | ||
Net realized gain (loss) on: | ||
Investment transactions | (9,226,815) | 3,938,061 |
Futures contract transactions | 2,582,665 | — |
Foreign currency transactions | — | (31,956) |
(6,644,150) | 3,906,105 | |
Change in net unrealized appreciation (depreciation) on: | ||
Investments | 61,056,547 | 22,174,276 |
Futures contracts | (674,531) | — |
Translation of assets and liabilities in foreign currencies | — | (54,329) |
60,382,016 | 22,119,947 | |
Net realized and unrealized gain (loss) | 53,737,866 | 26,026,052 |
Net Increase (Decrease) in Net Assets Resulting from Operations | $55,745,728 | $26,854,768 |
See Notes to Financial Statements. |
22
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND YEAR ENDED MARCH 31, 2009 | ||||
NT Large Company Value | NT Mid Cap Value | |||
Increase (Decrease) in Net Assets | September 30, 2009 | March 31, 2009 | September 30, 2009 | March 31, 2009 |
Operations | ||||
Net investment income (loss) | $ 2,007,862 | $ 3,106,006 | $ 828,716 | $ 1,194,891 |
Net realized gain (loss) | (6,644,150) | (26,691,514) | 3,906,105 | (14,383,457) |
Change in net unrealized | ||||
appreciation (depreciation) | 60,382,016 | (37,743,680) | 22,119,947 | (5,340,494) |
Net increase (decrease) in net assets | ||||
resulting from operations | 55,745,728 | (61,329,188) | 26,854,768 | (18,529,060) |
Distributions to Shareholders | ||||
From net investment income | (2,021,544) | (3,130,233) | (759,197) | (1,139,180) |
Capital Share Transactions | ||||
Proceeds from shares sold | 34,281,179 | 136,728,186 | 15,264,026 | 52,591,992 |
Payments for shares redeemed | (19,726,661) | (18,208,706) | (9,696,678) | (10,823,097) |
Net increase (decrease) in net assets | ||||
from capital share transactions | 14,554,518 | 118,519,480 | 5,567,348 | 41,768,895 |
Net increase (decrease) in net assets | 68,278,702 | 54,060,059 | 31,662,919 | 22,100,655 |
Net Assets | ||||
Beginning of period | 152,677,623 | 98,617,564 | 67,932,595 | 45,831,940 |
End of period | $220,956,325 | $152,677,623 | $99,595,514 | $ 67,932,595 |
Accumulated undistributed net | ||||
investment income (loss) | $(13,682) | — | $111,808 | $42,289 |
Transactions in Shares of the Fund | ||||
Sold | 5,210,713 | 20,224,219 | 2,040,013 | 7,235,875 |
Redeemed | (2,985,518) | (2,883,043) | (1,272,427) | (1,447,737) |
Net increase (decrease) in shares | ||||
of the fund | 2,225,195 | 17,341,176 | 767,586 | 5,788,138 |
See Notes to Financial Statements. |
23
Notes to Financial Statements |
SEPTEMBER 30, 2009 (UNAUDITED)
1. Organization and Summary of Significant Accounting Policies
Organization — American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. NT Large Company Value Fund (NT Large Company Value) and NT Mid Cap Value Fund (NT Mid Cap Value) (collectively, the funds) are two funds in a series issued by the corporation. The funds are diversified under the 1940 Act. The funds’ investment objective is to seek long-term capital growth. Income is a secondary objective. The funds pursue their investment objective by investing in stocks of companies that management believes to be undervalued at the time of purchase. NT Large Company Value invests primarily in companies with larger market capitalization. NT Mid Cap Value invests in mid-sized market capitalization companies. The funds are not perm itted to invest in any securities issued by companies assigned the Global Industry Classification Standard for the tobacco industry. 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. Investments in open-end management investment companies are valued at the reported net asset value. 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 ov er-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.
24
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 fees and expenses that reduce their value.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The funds may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, 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.
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 certain other funds in the American Century Investments family of funds, 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. All tax years for the funds remain subject to examination by tax authorities. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. 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.
25
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 maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a 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.
Subsequent Events — Management has evaluated events or transactions that may have occurred since September 30, 2009, that would merit recognition or disclosure in the financial statements. This evaluation was completed through November 27, 2009, the date the financial statements were issued.
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 each fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). 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 six months ended September 30, 2009 was 0.64%. 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). The funds have a Mutual Funds Services Agreement with J.P. Morgan Investor Services Co. (JPMIS) and a securities lending agreement with JPMorgan Chase Bank (JPMCB). JPMCB is a custodian of the funds. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). JPM is an equity investor in ACC.
3. Investment Transactions
Investment transactions, excluding short-term investments, for the six months ended September 30, 2009 were as follows:
NT Large Company Value | NT Mid Cap Value | |
Purchases | $44,099,282 | $74,814,710 |
Sales | $27,827,792 | $69,440,609 |
26
4. Fair Value Measurements
The funds’ securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions held by the funds. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels as follows:
• Level 1 valuation inputs consist of actual quoted prices in an active market for identical securities;
• Level 2 valuation inputs consist of significant direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or
• Level 3 valuation inputs consist of significant unobservable inputs (including a fund’s own assumptions).
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the valuation inputs used to determine the fair value of the funds’ securities and other financial instruments as of September 30, 2009:
Level 1 | Level 2 | Level 3 | ||
NT Large Company Value | ||||
Investment Securities | ||||
Domestic Common Stocks | $ 202,308,991 | — | — | |
Foreign Common Stocks | 11,112,011 | — | — | |
Temporary Cash Investments | 47,389 | $ 7,400,000 | — | |
Total Value of Investment Securities | $ 213,468,391 | $ 7,400,000 | — | |
Other Financial Instruments | ||||
Total Unrealized Gain (Loss) on Futures Contracts | $ 157,773 | — | — | |
NT Mid Cap Value | ||||
Investment Securities | ||||
Domestic Common Stocks | $ 93,400,204 | — | — | |
Foreign Common Stocks | 3,338,541 | $ 1,993,546 | — | |
Temporary Cash Investments | 63,055 | 700,000 | — | |
Total Value of Investment Securities | $ 96,801,800 | $ 2,693,546 | — | |
Other Financial Instruments | ||||
Total Unrealized Gain (Loss) on Forward | ||||
Foreign Currency Exchange Contracts | — | $ (43,736) | — |
27
5. Derivative Instruments
Equity Price Risk — NT Large Company Value is subject to equity price risk in the normal course of pursuing its investment objectives. A fund may enter into futures contracts based on an equity index in order to manage its exposure to changes in market conditions. A fund may purchase futures contracts to gain exposure to increases in market value or sell futures contracts to protect against a decline in market value. Upon entering into a futures contract, a 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 a fund. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. A fund recognizes a realized gain or loss whe n 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 net realized gain (loss) on futures contract transactions and change in net unrealized appreciation (depreciation) on futures contracts, respectively. 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. During the six months ended September 30, 2009, NT Large Company Value purchased futures contracts.
Foreign Currency Risk — NT Mid Cap Value is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund’s exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund an d the resulting unrealized appreciation or depreciation are determined daily using prevailing exchange rates. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The risk of loss from non-performance by the counterparty may be reduced by the use of master netting agreements. During the six months ended September 30, 2009, NT Mid Cap Value participated in forward foreign currency exchange contracts.
For NT Large Company Value, the value of equity price risk derivatives as of September 30, 2009, is disclosed on the Statement of Assets and Liabilities as a liability of $11,731 in payable for variation margin on futures contracts. For NT Large Company Value, for the six months ended September 30, 2009, the effect of equity price risk derivatives on the Statement of Operations was $2,582,665 in net realized gain (loss) on futures contract transactions and $(674,531) in change in net unrealized appreciation (depreciation) on futures contracts.
For NT Mid Cap Value, the value of foreign currency risk derivatives as of September 30, 2009, is disclosed on the Statement of Assets and Liabilities as a liability of $43,736 in payable for forward foreign currency exchange contracts. For NT Mid Cap Value, for the six months ended September 30, 2009, the effect of foreign currency risk derivatives on the Statement of Operations was $(34,692) in net realized gain (loss) on foreign currency transactions and $(51,659) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
The value of derivative instruments at period end and the effect of derivatives on the Statement of Operations is indicative of each fund’s typical volume.
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6. Interfund Lending
The funds, along with certain other funds in the American Century Investments family of funds, may participate in an interfund lending program, pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC). This program provides an alternative credit facility allowing the funds to borrow from or lend to other funds in the American Century Investments family of funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. The interfund loan rate earned/paid on interfund lending transactions is determined daily based on the average of certain current market rates. Interfund lending transactions normally extend only overnight, but can have a maximum duration of seven days. The program is subject to annual approval by the Board of Directors. During the six months ended September 30, 2009, the funds did not utilize the program.
7. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of September 30, 2009, the components of investments for federal income tax purposes were as follows:
NT Large | ||
Company Value | NT Mid Cap Value | |
Federal tax cost of investments | $210,469,748 | $90,824,038 |
Gross tax appreciation of investments | $18,917,245 | $9,180,889 |
Gross tax depreciation of investments | (8,518,602) | (509,581) |
Net tax appreciation (depreciation) of investments | $10,398,643 | $8,671,308 |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
As of March 31, 2009, the accumulated capital losses listed below represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. The capital loss carryovers expire in 2017.
The capital loss deferrals listed below represent net capital and foreign currency losses incurred in the five-month period ended March 31, 2009. The funds have elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes.
NT Large Company Value | NT Mid Cap Value | |
Accumulated capital losses | $(7,761,035) | $(3,595,943) |
Capital loss deferrals | $(14,977,609) | $(5,237,262) |
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8. Recently Issued Accounting Standards
In March 2008, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) Section 815-10 (formerly Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities —an amendment of FASB Statement No. 133”). ASC Section 815-10 is effective for interim periods beginning after November 15, 2008 and has been adopted by the funds. ASC Section 815-10 amends and expands disclosures about derivative instruments and hedging activities. ASC Section 815-10 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.
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Financial Highlights |
NT Large Company Value | |||||
Institutional Class | |||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||
2009(1) | 2009 | 2008 | 2007(2) | ||
Per-Share Data | |||||
Net Asset Value, Beginning of Period | $5.55 | $9.71 | $11.13 | $10.00 | |
Income From Investment Operations | |||||
Net Investment Income (Loss) | 0.07(3) | 0.20(3) | 0.22 | 0.18 | |
Net Realized and Unrealized Gain (Loss) | 1.88 | (4.16) | (1.29) | 1.14 | |
Total From Investment Operations | 1.95 | (3.96) | (1.07) | 1.32 | |
Distributions | |||||
From Net Investment Income | (0.07) | (0.20) | (0.22) | (0.18) | |
From Net Realized Gains | — | — | (0.13) | (0.01) | |
Total Distributions | (0.07) | (0.20) | (0.35) | (0.19) | |
Net Asset Value, End of Period | $7.43 | $5.55 | $9.71 | $11.13 | |
Total Return(4) | 35.28% | (41.22)% | (9.93)% | 13.26% | |
Ratios/Supplemental Data | |||||
Ratio of Operating Expenses to Average Net Assets | 0.64%(5) | 0.63% | 0.62% | 0.63%(5) | |
Ratio of Net Investment Income (Loss) to Average Net Assets | 2.13%(5) | 2.82% | 2.10% | 2.01%(5) | |
Portfolio Turnover Rate | 15% | 26% | 20% | 18% | |
Net Assets, End of Period (in thousands) | $220,956 | $152,678 | $98,618 | $71,970 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||
(2) | May 12, 2006 (fund inception) through March 31, 2007. | ||||
(3) | Computed using average shares outstanding throughout the period. | ||||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||
are not annualized. | |||||
(5) | Annualized. | ||||
See Notes to Financial Statements. |
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NT Mid Cap Value | |||||
Institutional Class | |||||
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||
2009(1) | 2009 | 2008 | 2007(2) | ||
Per-Share Data | |||||
Net Asset Value, Beginning of Period | $6.25 | $9.04 | $11.28 | $10.00 | |
Income From Investment Operations | |||||
Net Investment Income (Loss) | 0.07(3) | 0.18(3) | 0.16(3) | 0.14 | |
Net Realized and Unrealized Gain (Loss) | 2.31 | (2.79) | (1.29) | 1.44 | |
Total From Investment Operations | 2.38 | (2.61) | (1.13) | 1.58 | |
Distributions | |||||
From Net Investment Income | (0.07) | (0.18) | (0.15) | (0.12) | |
From Net Realized Gains | — | — | (0.96) | (0.18) | |
Total Distributions | (0.07) | (0.18) | (1.11) | (0.30) | |
Net Asset Value, End of Period | $8.56 | $6.25 | $9.04 | $11.28 | |
Total Return(4) | 38.14% | (29.25)% | (10.79)% | 16.03% | |
Ratios/Supplemental Data | |||||
Ratio of Operating Expenses to Average Net Assets | 0.80%(5) | 0.80% | 0.80% | 0.80%(5) | |
Ratio of Net Investment Income (Loss) to Average Net Assets | 1.95%(5) | 2.36% | 1.48% | 1.55%(5) | |
Portfolio Turnover Rate | 83% | 181% | 208% | 203% | |
Net Assets, End of Period (in thousands) | $99,596 | $67,933 | $45,832 | $33,375 | |
(1) | Six months ended September 30, 2009 (unaudited). | ||||
(2) | May 12, 2006 (fund inception) through March 31, 2007. | ||||
(3) | Computed using average shares outstanding throughout the period. | ||||
(4) | Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year | ||||
are not annualized. | |||||
(5) | Annualized. | ||||
See Notes to Financial Statements. |
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Approval of Management Agreements |
Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund’s independent directors (the “Directors”) each year. At American Century Investments, this process is referred to as the “15(c) Process.” As a part of this process, the board reviews fund performance, shareholder services, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. In addition to this annual review, the board of directors oversees and evaluates on a continuous basis at its quarterly meetings the nature and quality of significant services performed by the advisor, fund performance, audit and compliance information, and a variety of other reports relating to fund operations. The board, or committees of the board, also holds special meetings as needed.
Under a Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for the board’s approval or renewal of any advisory agreements within the fund’s most recently completed fiscal half-year period.
Annual Contract Review Process
As part of the annual 15(c) Process undertaken during the most recent fiscal half-year period, the Directors reviewed extensive data and information compiled by the advisor and certain independent providers of evaluative data (the “15(c) Providers”) concerning the NT Mid Cap Value and NT Large Company Value funds (the “Funds”) and the services provided to the Funds under the management agreement. The information considered and the discussions held at the meetings included, but were not limited to:
• the nature, extent and quality of investment management, shareholder services and other services provided to the Funds;
• the wide range of programs and services the advisor provides to the Funds and their shareholders on a routine and non-routine basis;
• the compliance policies, procedures, and regulatory experience of the advisor;
• data comparing the cost of owning the Funds to the cost of owning a similar fund;
• data comparing the Funds’ performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies;
• financial data showing the profitability of the Funds to the advisor and the overall profitability of the advisor;
• data comparing services provided and charges to other investment management clients of the advisor; and
33
• consideration of collateral benefits derived by the advisor from the management of the Funds and any potential economies of scale relating thereto.
In keeping with its practice, the Funds’ board of directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The board also had the benefit of the advice of its independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the advisor, the 15(c) Providers, and the board’s independent counsel, and evaluated such information for each fund for which the board has responsibility. In connection with their review of the Funds, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management and subadvisory agreements under the terms ultimately determined by the board to be appropriate, the Directors’ decision was based on the following factors.
Nature, Extent and Quality of Services — Generally. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the Funds. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including:
• Fund construction and design
• portfolio security selection
• initial capitalization/funding
• securities trading
• Fund administration
• custody of Fund assets
• daily valuation of each Fund’s portfolio
• shareholder servicing and transfer agency, including shareholder
confirmations, recordkeeping and communications
• legal services
• regulatory and portfolio compliance
• financial reporting
• marketing and distribution
34
The Directors noted that many of the services provided by the advisor have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. They discussed with the advisor the challenges presented by these changes and the impact on the Funds. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings.
Investment Management Services. The nature of the investment management services provided to the Funds is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments, and liquidity. In evaluating investment performance, the board expects the advisor to manage the Funds in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, com pliance and other systems to conduct their business. At each quarterly meeting the Directors review investment performance information for the Funds, together with comparative information for appropriate benchmarks and/or peer groups of funds managed similarly to the Funds. The Directors also review detailed performance information during the 15(c) Process comparing each Fund’s performance with that of similar funds not managed by the advisor. If performance concerns are identified, the Directors discuss with the advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. NT Mid Cap Value’s performance for both the one- and three-year periods was above the median for its peer group. NT Large Company Value’s quarter end performance fell below the median for its peer group for both the one- and three-year period during the past year. The board discussed NT Large Company Value’s performance with the advisor and w as satisfied with the efforts being undertaken by the advisor. The board will continue to monitor these efforts and the performance of the Fund. More detailed information about the Funds’ performance can be found in the Performance and Portfolio Commentary sections of this report.
Shareholder and Other Services. The advisor provides the Funds with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at their regular quarterly meetings, including the annual meeting concerning contract review, and reports to the board. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency serv ice level efficiency and the quality
35
of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor.
Costs of Services Provided and Profitability. The advisor provides detailed information concerning its cost of providing various services to the Funds, its profitability in managing the Funds, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The board concluded that the advisor’s profits were reasonable in light of the services provided to the Funds.
Ethics. The Directors generally consider the advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Directors review information provided by the advisor regarding the possible existence of economies of scale in connection with the management of the Funds. The Directors concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The analysis of economies of scale is further complicated by the additional services and content provided by the advisor and its reinvestment in its ability to provide and expand those services. Accordingly, the Directors seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the Funds specifically, the expenses incurred by the advisor in providing various functions to the Funds, and the fees of competitive funds no t managed by the advisor. The Directors believe the advisor is appropriately sharing economies of scale through its competitive fee structure, fee breakpoints as each Fund increases in size, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The Funds pay the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Funds, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of each Fund’s independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, record-keeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses
36
to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Directors’ analysis of fee levels involves reviewing certain evaluative data compiled by a 15(c) Provider comparing each Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group and performing a regression analysis to evaluate the effect of fee breakpoints as assets under management increase. The unified fee charged to shareholders of each of the Funds was below the median of the total expense ratios of its respective peer group. In addition, the Directors also reviewed updated fee level data provided by the advisor, but recognized that comparative data was particularly difficult to evaluate g iven the significant market developments during the past year. The board concluded that the management fee paid by each Fund to the advisor was reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the Funds. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Funds. The Directors analyzed this information and concluded that the fees charged and services provided to the Funds were reasonable by comparison.
Collateral Benefits Derived by the Advisor. The Directors considered the existence of collateral benefits the advisor may receive as a result of its relationship with the Funds. They concluded that the advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is able to provide investment management services to certain clients other than the Funds, at least in part, due to its existing infrastructure built to serv e the fund complex. The Directors concluded, however, that the assets of those other clients are not material to the analysis and, in any event, are included with the assets of the Funds to determine breakpoints in each Fund’s fee schedule, provided they are managed using the same investment team and strategy.
Conclusions of the Directors
As a result of this process, the board, including all of the independent directors, in the absence of particular circumstances and assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor concluded that the investment management agreement between each Fund and the advisor is fair and reasonable in light of the services provided and should be renewed.
37
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans 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. 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. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
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 Investments’ 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.
38
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 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 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 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.
39
Notes |
40
Notes |
41
Notes |
42
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
©2009 American Century Proprietary Holdings, Inc. All rights reserved.
0911
CL-SAN-66869N
ITEM 2. CODE OF ETHICS. | |
Not applicable for semiannual report filings. | |
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. | |
Not applicable for semiannual report filings. | |
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. | |
Not applicable for semiannual report filings. | |
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. | |
Not applicable. | |
ITEM 6. 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) | Not applicable for semiannual report filings. |
(a)(2) | Separate certifications by the registrant’s principal executive officer and principal financial |
officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the | |
Investment Company Act of 1940, are filed and attached hereto as EX-99.CERT. | |
(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 EX- | |
99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | American Century Capital Portfolios, Inc. | |
By: | /s/ Jonathan S. Thomas | |
Name: | Jonathan S. Thomas | |
Title: | President | |
Date: | November 27, 2009 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Jonathan S. Thomas | |
Name: | Jonathan S. Thomas | |
Title: | President | |
(principal executive officer) | ||
Date: | November 27, 2009 |
By: | /s/ Robert J. Leach | |
Name: | Robert J. Leach | |
Title: | Vice President, Treasurer, and | |
Chief Financial Officer | ||
(principal financial officer) | ||
Date: | November 27, 2009 |