[front cover]
September 30, 2000
AMERICAN CENTURY
Semiannual Report
Value
Equity Income
Small Cap Value
Large Cap Value
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American
Century
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[left margin]
VALUE
(TWVLX)
--------------------------
EQUITY INCOME
(TWEIX)
--------------------------
SMALL CAP VALUE
(ASVIX)
--------------------------
LARGE CAP VALUE
(N/A)
--------------------------
TURN TO THE INSIDE BACK COVER TO SEE A LIST OF AMERICAN CENTURY FUNDS CLASSIFIED
BY OBJECTIVE AND RISK.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers, Jr., standing, with James E. Stowers III]
James E. Stowers, Jr., standing, with James E. Stowers III
A steep correction in technology and telecommunications stocks, a steadily
broadening stock market, and increasing signs of a slowing economy led to
improved returns for value-oriented investors over the six-month period covered
in this report. American Century's conservative equity funds provided positive
returns in this environment, even as the overall market, measured by the S&P
500 Index, posted negative results.
Turning to corporate matters, Chase Manhattan Corp. recently announced
plans to acquire J.P. Morgan & Co., a substantial minority shareholder in
American Century Companies, Inc. since 1998. If the transaction is completed as
expected, J.P. Morgan Chase, the new enterprise, will own the shares of American
Century currently held by Morgan. Corporate control of American Century is not
affected by this transaction. We will be exploring ways to partner with J.P.
Morgan Chase for the benefit of fund shareholders.
In other corporate news, some American Century executives have assumed
important new responsibilities. For example, we chose to share chairman of the
board responsibilities, and also named American Century President William M.
Lyons chief executive officer, giving him ultimate management responsibility for
the entire company.
These changes, plus the promotion of some key investment professionals,
strengthen the leadership of our investment management area and allow us to
pursue additional worthwhile endeavors. For example, Jim Stowers III will focus
more on product innovation (in particular, leveraging our earnings-acceleration
screening system to build the next generation of portfolio management
technologies). However, his first priority will be continuing involvement on the
investment teams responsible for Ultra and Veedot Funds.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E Stowers III
James E. Stowers, Jr. James E. Stowers III
Founder and Chairman of the Board Co-Chairman of the Board
Table of Contents
Report Highlights ...................................................... 2
Market Perspective ..................................................... 3
VALUE
Performance Information ................................................ 4
Management Q&A ......................................................... 5
Schedule of Investments ................................................ 8
EQUITY INCOME
Performance Information ................................................ 10
Management Q&A ......................................................... 11
Schedule of Investments ................................................ 14
SMALL CAP VALUE
Performance Information ................................................ 16
Management Q&A ......................................................... 17
Schedule of Investments ................................................ 20
LARGE CAP VALUE
Performance Information ................................................ 22
Management Q&A ......................................................... 23
Schedule of Investments ................................................ 26
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ............................................................ 28
Statement of Operations ................................................ 30
Statement of Changes
in Net Assets ....................................................... 32
Notes to Financial
Statements .......................................................... 34
Financial Highlights ................................................... 39
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................. 49
Background Information
Portfolio Managers ............................................... 50
Investment Philosophy
and Policies ........................................................ 50
Comparative Indices .............................................. 50
Glossary ............................................................... 51
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
Investment terms are defined in the Glossary on pages 51-52.
MARKET PERSPECTIVE
* The six months ended September 2000 saw major shifts in sentiment, as
investors concerned about high technology valuations and a slowing economy
sought the relative security of Old Economy companies before returning to
the tech arena with a new-found sense of discrimination.
* Against a backdrop of volatility driven by uncertainty and persistent
inflation concerns, the market appeared to broaden. In a brief respite from
the technology run-up, companies with solid fundamentals gained strength,
particularly mid-capitalization firms valued at levels investors deemed
reasonable.
VALUE
* Value gained 7.01% during the period, outperforming its benchmark, the
Lipper Multi-Cap Value Index, which gained 4.70%. The S&P 500 fell 3.60%.
* Banks and financial services firms were Value's strongest contributors to
performance, as investors gained confidence that interest rate increases
might cease for now. Electrical utility companies also helped performance.
* Value's holdings of telecommunications companies, particularly those in the
long-distance industry, detracted from performance. These firms suffered in
a highly competitive environment, and were further restrained by the
downturn in technology.
EQUITY INCOME
* Equity Income gained 9.60%, beating its benchmark, the Lipper Equity Income
Index, which returned 4.73%.
* A diverse group comprised Equity Income's best contributors, including
stocks of chemical companies, insurance and financial services firms, banks,
and electrical utilities.
* Technology holdings restrained performance, as did those of
telecommunications firms struggling with tough competition and the broader
technology decline.
SMALL CAP VALUE
* Small Cap Value gained 13.58% during the period, surpassing its benchmark,
the S&P SmallCap 600/BARRA Value Index, which returned 9.75%.
* Holdings in energy exploration and production firms, built during an earlier
downturn in this industry, provided the largest contribution to the fund's
performance during the period. Strength in the utility sector was also
beneficial.
* The financial sector also contributed positively to performance, as smaller
insurance companies emerged from an unfavorable market perception related to
the rising interest-rate environment.
* Select stocks, including those of an engineering software firm and a forest
and paper products company, dampened performance.
LARGE CAP VALUE
* Large Cap Value gained 4.14%, exactly matching the return posted by its
benchmark, the S&P 500/BARRA Value Index.
* Holdings in several industries contributed to performance, including
financial services, property and casualty insurance, defense/aerospace, and
pharmaceuticals.
* Holdings in telecommunications companies hurt performance, as such firms
suffered from an intensely competitive environment and the downturn in
technology.
[left margin]
VALUE(1)
(TWVLX)
TOTAL RETURNS: AS OF 9/30/00
6 Months 7.01%(2)
1 Year 2.95%
INCEPTION DATE: 9/1/93
NET ASSETS: $1.6 billion(3)
EQUITY INCOME(1)
(TWEIX)
TOTAL RETURNS: AS OF 9/30/00
6 Months 9.60%(2)
1 Year 6.80%
INCEPTION DATE: 8/1/94
NET ASSETS: $340.4 million(3)
SMALL CAP VALUE(1)
(ASVIX)
TOTAL RETURNS: AS OF 9/30/00
6 Months 13.58%(2)
1 Year 21.76%
INCEPTION DATE: 7/31/98
NET ASSETS: $38.7 million(3)
LARGE CAP VALUE
(N/A)
TOTAL RETURNS: AS OF 9/30/00
6 Months 4.14%(2)
1 Year 5.67%
INCEPTION DATE: 7/30/99
NET ASSETS: $13.2 million
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor, Advisor, and
Institutional classes.
2 1-800-345-2021
Market Perspective from Mark Mallon
--------------------------------------------------------------------------------
[photo of Mark Mallon]
Mark Mallon, chief investment officer, specialty, asset allocation, and growth
and income equities
A RENAISSANCE FOR VALUE STOCKS
Value stocks rebounded during the six months ended September 30, 2000,
proving to be among the market leaders in that timeframe. During the second and
third quarters of 2000, the Standard & Poor's 500/BARRA Value Index returned
4.14%, while the S&P 500 fell 3.60%.
SHIFTS AMID QUARTERS
At the start of the six-month period, the market experienced a shift away
from New Economy technology companies. By April 10, a steady drumbeat of Fed
interest rate increases, the judgment against Microsoft, and rich valuations
across the technology sector propelled investors into other sectors of the
market.
This shift played to value-oriented funds, as Old Economy companies became
beacons for defensive-minded investors. Then, late in the second quarter,
investors began moving back into technology stocks -- albeit with a greater
degree of discrimination -- as concerns about interest rates and inflation
began to cool.
VALUE BACK IN VOGUE
In the third quarter, though, value was back in style. Investors began to
doubt the sustainability of earnings implicit in many technology company share
prices. Coming off the speculative froth that drove technology shares higher in
late 1999 and early 2000, investors paid much closer attention to what they were
paying for a company's earnings.
Looking for alternatives, they found solid fundamentals in three areas that
had helped populate the value universe during the tech run-up. First was the
utilities sector, offering relative safety, healthy dividends, and the fruits of
deregulation. Second was energy, where rising oil and natural gas prices lifted
most shares. Finally, the perception that the Fed had, for at least the time
being, finished raising rates boosted the previously downtrodden financial
sector.
Overall, mid-capitalization stocks provided the best performance among
value companies. During the third quarter, the S&P MidCap 400/BARRA Value Index
returned 13.05%, while the S&P 500 lost 0.97%.
OPPORTUNITIES STILL REMAIN
Many intriguing values still beckon in the aftermath of the narrow market
advance we saw in late 1999 and early 2000. The question going forward: Will the
market's appetite for reasonably priced stocks continue?
The value style is a time-tested approach for making money with stocks. If
the market continues to reward those companies that are rebounding from
temporary difficulties or that have fallen out of favor, it's our goal to be
positioned so that fund shareholders fully participate.
[right margin]
"AT THE START OF THE SIX-MONTH PERIOD, THE MARKET EXPERIENCED A SHIFT AWAY FROM
NEW ECONOMY TECHNOLOGY COMPANIES."
MARKET RETURNS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
S&P 500/BARRA VALUE 4.14%
S&P MIDCAP 400/BARRA VALUE 10.04%
S&P SMALLCAP 600/BARRA VALUE 9.75%
Source: Lipper Inc. and Russell/Mellon Analytical
These indices represent the performance of large-, medium-, and
small-capitalization value stocks.
MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
[mountain chart data below]
S&P 500/ S&P 400/ S&P 600/
BARRA Value BARRA Value BARRA Value
3/31/2000 $1.00 $1.00 $1.00
4/30/2000 $0.99 $0.99 $1.01
5/31/2000 $1.00 $1.02 $0.99
6/30/2000 $0.96 $0.97 $1.02
7/31/2000 $0.98 $1.01 $1.04
8/31/2000 $1.04 $1.08 $1.10
9/30/2000 $1.04 $1.10 $1.10
Value on 9/30/00
S&P 500/BARRA VALUE $1.04
S&P MIDCAP 400/BARRA VALUE $1.10
S&P SMALLCAP 600/BARRA VALUE $1.10
www.americancentury.com 3
Value--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS VALUE
(INCEPTION 9/1/93) (INCEPTION 10/2/96) (INCEPTION 7/31/97)
VALUE S&P LIPPER S&P 500/ VALUE S&P LIPPER S&P 500/ VALUE S&P LIPPER S&P 500/
500 MULTI-CAP BARRA 500 MULTI-CAP BARRA 500 MULTI-CAP BARRA
VALUE VALUE VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 7.01% -3.60% 4.70% 4.14% 6.69% -3.60% 4.70% 4.14% 7.11% -3.60% 4.70% 4.14%
1 YEAR 2.95% 13.28% 10.61% 13.74% 2.72% 13.28% 10.61% 13.74% 3.34% 13.28% 10.61% 13.74%
========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 2.74% 16.44% 5.80% 11.31% 2.50% 16.44% 5.80% 11.31% 3.00% 16.44% 5.80% 11.31%
5 YEARS 12.79% 21.69% 13.60% 17.90% -- -- -- -- -- -- -- --
LIFE
OF FUND 13.36% 19.64% 13.38% 16.35% 10.07% 22.03% 12.97% 17.71%(2) 4.63% 15.35% 6.30% 11.06%
(1) Returns for periods less than one year are not annualized.
(2) Since 9/30/96, the date nearest the class's inception for which data are available.
</TABLE>
See pages 49-52 for information about share classes, the indices, and returns.
GROWTH OF $10,000 OVER LIFE OF FUND
[line chart - data below]
Value S&P 500 Lipper S&P 500/
Multi-Cap BARRA Value
Value Fund
Index.
9/01/1993 $10,000 $10,000 $10,000 $10,000
9/30/1993 $10,000 $9,923 $9,993 $9,996
12/31/1993 $10,307 $10,153 $10,207 $10,038
3/31/1994 $10,083 $9,768 $9,925 $9,710
6/30/1994 $10,270 $9,809 $9,986 $9,800
9/30/1994 $10,741 $10,289 $10,419 $10,051
12/31/1994 $10,718 $10,287 $10,217 $9,976
3/31/1995 $11,953 $11,289 $11,038 $10,937
6/30/1995 $12,743 $12,367 $11,950 $11,890
9/30/1995 $13,305 $13,350 $12,868 $12,836
12/31/1995 $14,233 $14,154 $13,385 $13,667
3/31/1996 $15,295 $14,914 $14,162 $14,540
6/30/1996 $16,121 $15,584 $14,516 $14,838
9/30/1996 $16,253 $16,065 $14,944 $15,230
12/31/1996 $17,683 $17,403 $16,195 $16,672
3/31/1997 $17,745 $17,870 $16,468 $16,967
6/30/1997 $20,029 $20,992 $18,687 $19,422
9/30/1997 $22,396 $22,562 $20,553 $21,201
12/31/1997 $22,282 $23,209 $20,553 $21,672
3/31/1998 $24,833 $26,447 $22,903 $24,175
6/30/1998 $23,621 $27,320 $22,497 $24,301
9/30/1998 $21,058 $24,602 $19,078 $21,164
12/31/1998 $23,396 $29,842 $21,895 $24,853
3/31/1999 $22,383 $31,331 $22,053 $25,561
6/30/1999 $26,512 $33,543 $24,658 $28,321
9/30/1999 $23,596 $31,446 $22,007 $25,707
12/31/1999 $23,211 $36,126 $23,195 $28,013
3/31/2000 $22,701 $36,953 $23,249 $28,078
6/30/2000 $22,347 $35,970 $23,016 $26,873
9/30/2000 $24,290 $35,621 $24,342 $29,241
Value on 9/30/00
S&P 500 $35,621
S&P 500/BARRA Value $29,241
Lipper Multi-Cap Value $24,342
Value $24,290
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The
indices are provided for comparison in each graph. Value'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. The graphs are based on
Investor Class shares only; performance for other classes will vary due to
differences in fee structures (see the Total Returns table above). Past
performance does not guarantee future results. Investment return and principal
value will fluctuate, and redemption value may be more or less than original
cost.
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED SEPTEMBER 30)
[bar chart - data below]
Value S&P 500 Lipper Multi-Cap
Value Fund Index
9/30/1993 0.00% -0.77% -0.07%
9/30/1994 7.41% 3.69% 4.27%
9/30/1995 23.88% 29.75% 23.51%
9/30/1996 22.15% 20.34% 16.13%
9/30/1997 37.80% 40.44% 37.54%
9/30/1998 -5.98% 9.05% -7.19%
9/30/1999 12.04% 27.80% 15.36%
9/30/2000 2.95% 13.28% 10.61%
* From 9/1/93 to 9/30/93.
4 1-800-345-2021
Value--Q&A
--------------------------------------------------------------------------------
[photo of Phil Davidson (left) and Scott Moore]
An interview with Phil Davidson (left) and Scott Moore, portfolio managers
on the Value investment team.
HOW DID VALUE PERFORM FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000?
Value was up 7.01%* for the period. Its benchmark, the Lipper Multi-Cap
Value Index, gained 4.70% for the six months. The fund's previous benchmark, the
S&P 500/BARRA Value Index, rose 4.14% in the same time frame, while the S&P 500
Index, considered to be representative of the broad market declined 3.60%.
WHY WAS THE FUND'S BENCHMARK CHANGED?
Value's original benchmark, the S&P 500/BARRA Value Index, reflects the
performance of S&P 500 stocks that have characteristics associated with
value-style securities. But because the index tracks stocks in the S&P 500, it
reflects the performance of generally larger companies. In contrast, Value tends
to invest across the capitalization spectrum.
In September 1999, Lipper Inc., the leading mutual fund ranking
organization, introduced value-oriented indices based on investment style as
well as capitalization. Its new Lipper Multi-Cap Value Index is not restricted
by capitalization, and reflects the performance of small-, medium- and large-cap
value stocks. In our opinion, it is more representative of Value's portfolio.
WHAT FACTORS CONTRIBUTED TO VALUE'S PERFORMANCE?
First and foremost, the market played more to our strength. With the
economy appearing to slow after six interest rate increases by the Federal
Reserve since mid-1999, investors grew more nervous about corporate earnings,
especially for richly valued technology companies and larger multinationals with
exposure to a plummeting European currency. Their trepidation seemed justified
during the third quarter, when several household-name technology companies and
consumer products giants warned of lower-than-expected earnings. The news took
money out of growth stocks, as investors sought more reasonably priced companies
with predictable earnings prospects -- Value's hunting ground.
During the past several years, which have been exceedingly frustrating for
value-oriented investors, we've detailed our intention to stick closely with our
disciplined value approach, despite the temptation to try what was working in
the market at the time. Our positive results for this short-term period help
illustrate why we refused to budge.
WHICH INDUSTRIES OR STOCKS CONTRIBUTED THE MOST TO RETURNS?
Banks and financial services firms were among Value's top contributors. The
financial sector, which includes banks, brokerages, credit card companies,
insurance providers and financial services firms, generally struggled as
interest rates rose. However, in the second and third quarters, investors grew
increasingly confident that the Fed would not raise rates further and began to
look more favorably on bank stocks.
Although a number of holdings in this group fared well during the period,
two firms -- Summit Bancorp and First Virginia Banks, Inc. -- should be noted.
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"FIRST AND FOREMOST, THE MARKET PLAYED MORE TO OUR STRENGTH."
PORTFOLIO AT A GLANCE
9/30/00 3/31/00
NO. OF COMPANIES 69 60
P/E RATIO 17.1 18.6
MEDIAN MARKET $5.68 $2.77
CAPITALIZATION BILLION BILLION
WEIGHTED MARKET $20.6 $16.7
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 62%(1) 115%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 1.00%(3) 1.00%
DIVIDEND YIELD 2.57% 2.52%
(1) Six months ended 9/30/00.
(2) Year ended 3/31/00.
(3) Annualized.
Investment terms are defined in the Glossary on pages 51-52.
www.americancentury.com 5
Value--Q&A
--------------------------------------------------------------------------------
(Continued)
We built a position in each firm on the basis of its sound fundamentals.
New Jersey-based Summit, the 25th-largest bank holding company in the United
States, struggled moderately with rising rates, but nonetheless held its own via
the introduction of new products and some recent acquisitions. Summit's stock
was further enhanced by speculation that it would be acquired by FleetBoston
Financial -- a deal that was announced the day after the third quarter closed.
First Virginia is another strong regional bank, with nearly 400 offices
serving Virginia, Maryland and Tennessee. This stock has been volatile in recent
months, following a sharp selloff that started in late 1999 when rates began
rising. First Virginia's low price, combined with its strong underwriting,
deposit franchise, and equity capitalization, has led us to maintain our
position.
ASIDE FROM BANKS, WERE THERE OTHER HOLDINGS IN THE FINANCIAL SECTOR THAT
PERFORMED WELL?
Yes. We were pleased with our stake in MGIC Investment, a holding company
whose primary subsidiary is Mortgage Guaranty Insurance Corporation (MGIC). MGIC
is the leading provider of private mortgage insurance. A weak
mortgage-origination market and rising rates had weighed on the firm, and it
additionally struggled as an Old Economy stock. We were confident in MGIC's
fundamental health and bought into its price weakness. MGIC subsequently enjoyed
a dramatic recovery -- our shares essentially doubled in value during the
period.
WHICH OTHER INDUSTRIES OR STOCKS ADDED TO RETURNS?
Electric utilities were another bright spot for Value, buoyed by FPL Group,
Inc. FPL's principal subsidiary, Florida Power and Light, serves more than seven
million customers on the eastern seaboard and in southern Florida. This is a
sound, well-managed firm whose balance sheet is one of the industry's strongest.
FPL's stock began to rebound in April as investors began exiting technology, and
rose again in July when the company announced it would merge with Entergy
Corporation to become one of the largest U.S. electric utilities and power
producers.
A second winner in the utility space was another Florida company, Florida
Progress Group, which supplies electricity to western and central Florida. This
stock began moving up with the industry in general when investors began looking
for safer havens in March and April. More recently, Florida Progress Group's
shareholders approved a proposed acquisition by Carolina Power and Light in a
combination cash-and-stock deal, to which investors responded quite positively.
Incidentally, we don't specifically hunt for companies "in play." The same
characteristics that make a company attractive to us as a potential portfolio
candidate -- a sound balance sheet, a strong underlying business, and a low
price relative to its fair market value -- are also attractive to companies
shopping for acquisition candidates. This was the case in the examples we
mentioned.
WHICH SECTORS OR STOCKS WERE DISAPPOINTING?
Value's positions in telecommunications companies (mainly on the
long-distance side of the industry) detracted the most from performance. A
highly competitive environment, as well as "guilt by association" during the
recent downturn in technology-oriented companies, have pressured telecom firms.
Our greatest detractor in this group was Sprint Corp., a provider of local
tele-
[right margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
9/30/00 3/31/00
SUMMIT BANCORP. 4.7% 4.2%
FIRST VIRGINIA
BANKS, INC. 4.2% 4.4%
MINNESOTA MINING &
MANUFACTURING CO. 4.2% 4.3%
VERIZON
COMMUNICATIONS(1) 4.1% 4.3%
CHEVRON CORP. 4.0% 3.3%
SPRINT CORP. 3.2% 1.3%
FPL GROUP, INC. 3.0% 4.7%
AGL RESOURCES INC. 2.5% 3.1%
FLORIDA PROGRESS CORP. 2.2% 1.7%
USA EDUCATION INC. 1.9% --
(1) Bell Atlantic Corp. acquired GTE Corp. on 7/3/00. On that date, Bell
Atlantic changed its name to Verizon Communications. The percentage as of
3/31/00 represents GTE Corp. shares owned by the fund.
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
9/30/00 3/31/00
CHEMICALS 9.0% 5.3%
BANKS 8.9% 10.6%
TELEPHONE 8.1% 7.1%
ELECTRICAL UTILITIES 7.7% 8.1%
ENERGY RESERVES
& PRODUCTION 5.3% 9.1%
6 1-800-345-2021
Value--Q&A
--------------------------------------------------------------------------------
(Continued)
phone and long-distance services. Sprint agreed in October 1999 to be
acquired by WorldCom, Inc., a deal we thought would enhance both firms. However,
in June, regulators blocked the deal on the belief that the combined company
would have unfair market advantages and reduce competition. This decision, along
with slowing growth in Sprint's core long-distance business and increased
dilution of the company's shares to fund new growth initiatives, resulted in
poor performance. Looking longer term, we believe that Sprint's strategically
well positioned assets and solid financial position, coupled with the
industry's excellent growth prospects, bode well for the firm. We are holding
this position.
Large-cap technology firms also struggled as a group during the six months.
Value was underweight in technology companies because their valuations usually
fall outside of our price-driven parameters. Unfortunately, the few large
technology firms we held were liabilities. Our worst tech disappointment was
Xerox, which has suffered sharp earnings disappointments following a difficult
realignment of its sales force and slow sales of its higher-end products. In
addition, the company recently came under investigation by the Securities and
Exchange Commission regarding accounting issues in its Mexican operations. That
was enough for us -- we sold our entire position at prices significantly higher
than where the stock is now.
WHAT CHANGES HAVE YOU MADE TO THE PORTFOLIO SINCE THE LAST REPORT?
We substantially reduced our exposure to the food and beverage group, from
7.45% of investments at the start of the period to less than 3% at its close, as
several key holdings reached what we perceived to be fair market value. We also
trimmed our stake in several medical providers, including HCA -- The Healtcare
Co., which was a top contributor to performance. Finally, based on our belief
that prices for oil and gas have plateaued, we moved out of Baker Hughes.
On the buy side, we added to our stake in transportation with the purchase
of Union Pacific Railroad (UNP). Its stock has been hurt by rising oil prices --
fuel is a major cost for UNP -- and by its 1999 acquisition of Southern Pacific
Railroad (SPR), which resulted in serious operating problems. The company has
now completed integration of SPR, and we're optimistic that any move in oil
prices to a more normal range will increase margins. We also built an overweight
position in several high-quality specialty chemical companies, including Praxair
and Air Products and Chemicals, as fundamentals continued to improve for these
companies.
WHAT'S YOUR OUTLOOK FOR VALUE INVESTING?
We're optimistic. As we stated earlier, it's too soon to know if what we're
seeing is a true and sustainable rotation. In the meantime, we remain committed
to our discipline of buying undervalued, leading businesses that have transitory
issues affecting the price of their stocks. In recent months, broad market
factors, rather than company-specific issues, have further depressed prices, so
we are finding an abundance of compelling stocks that meet our investment
criteria. We believe that these stocks offer investors good opportunities for
handsome, risk-adjusted returns at reasonable prices.
[right margin]
"...WE REMAIN COMMITTED TO OUR DISCIPLINE OF BUYING UNDERVALUED, LEADING
BUSINESSES THAT HAVE TRANSITORY ISSUES AFFECTING THE PRICE OF THEIR STOCKS."
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF SEPTEMBER 30, 2000
= COMMON STOCKS AND FUTURES 95.3%
= TEMPORARY CASH INVESTMENTS 4.7%
[pie chart]
AS OF MARCH 31, 2000
= COMMON STOCKS AND FUTURES 97.3%
= TEMPORARY CASH INVESTMENTS 2.7%
[pie chart]
www.americancentury.com 7
<TABLE>
Value--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 90.3%
<S> <C> <C> <C>
BANKS -- 8.9%
1,545,350 First Virginia Banks, Inc. $ 65,870,544
2,110,600 Summit Bancorp. 72,815,699
-------------------
138,686,243
-------------------
CHEMICALS -- 9.0%
600,000 Air Products & Chemicals, Inc. 21,600,000
722,700 Minnesota Mining & Manufacturing Co. 65,856,037
832,000 Praxair, Inc. 31,096,000
725,200 Rohm and Haas Co. 21,076,125
-------------------
139,628,162
-------------------
COMPUTER HARDWARE
& BUSINESS MACHINES -- 1.2%
470,000 Pitney Bowes, Inc. 18,535,625
-------------------
COMPUTER SOFTWARE -- 2.8%
600,000 Autodesk, Inc. 15,206,250
822,600 Computer Associates International, Inc. 20,719,237
210,000 Synopsys, Inc.(1) 7,947,188
-------------------
43,872,675
-------------------
CONSTRUCTION & REAL PROPERTY -- 0.9%
159,100 Fluor Corp. 4,773,000
500,000 Masco Corp. 9,312,500
-------------------
14,085,500
-------------------
DEFENSE/AEROSPACE -- 2.4%
803,700 Honeywell Inc. 28,631,813
270,100 Lockheed Martin Corp. 8,902,496
-------------------
37,534,309
-------------------
DEPARTMENT STORES -- 1.0%
148,700 Family Dollar Stores, Inc. 2,862,475
487,900 Federated Department Stores, Inc.(1) 12,746,388
-------------------
15,608,863
-------------------
DRUGS -- 1.0%
263,500 Bristol-Myers Squibb Co. 15,052,438
-------------------
ELECTRICAL EQUIPMENT -- 0.3%
91,300 Litton Industries, Inc.(1) 4,079,969
-------------------
ELECTRICAL UTILITY -- 7.7%
650,000 Florida Progress Corp. 34,409,375
710,900 FPL Group, Inc. 46,741,674
1,055,100 Niagara Mohawk Holdings Inc.(1) 16,617,825
1,060,600 Wisconsin Energy Corp. 21,145,713
-------------------
118,914,587
-------------------
ENERGY RESERVES & PRODUCTION -- 5.3%
349,400 Burlington Resources, Inc. 12,862,288
719,100 Chevron Corp. 61,303,274
114,800 Murphy Oil Corp. 7,440,475
-------------------
81,606,037
-------------------
Shares Value
-------------------------------------------------------------------------------
FINANCIAL SERVICES -- 4.1%
350,000 MGIC Investment Corp. $ 21,393,749
173,000 Student Loan Corp. (The) 8,444,563
702,600 USA Education Inc. 33,856,537
-------------------
63,694,849
-------------------
FOOD & BEVERAGE -- 2.9%
1,300,070 Archer-Daniels-Midland Co. 11,213,104
229,200 General Mills, Inc. 8,136,600
179,500 Lance, Inc. 1,741,711
2,340,000 Tyson Foods, Inc. Cl A 23,400,000
-------------------
44,491,415
-------------------
FOREST PRODUCTS & PAPER -- 1.8%
700,000 Bemis Co. 22,487,500
330,000 Sonoco Products Co. 5,960,625
-------------------
28,448,125
-------------------
GAS & WATER UTILITIES -- 4.1%
1,943,200 AGL Resources Inc.(2) 38,985,450
918,300 Washington Gas Light Co. 24,679,313
-------------------
63,664,763
-------------------
GROCERY STORES -- 0.4%
274,100 Albertson's Inc. 5,756,100
-------------------
HEAVY ELECTRICAL EQUIPMENT -- 3.3%
770,000 Cooper Industries, Inc. 27,142,500
369,500 Emerson Electric Co. 24,756,500
-------------------
51,899,000
-------------------
HEAVY MACHINERY -- 1.1%
510,900 Deere & Co. 16,987,425
-------------------
HOME PRODUCTS -- 2.0%
387,600 Clorox Company 15,334,425
670,000 Newell Co. 15,284,375
-------------------
30,618,800
-------------------
INDUSTRIAL PARTS -- 2.1%
637,200 Flowserve Corp. 10,473,975
214,500 Tecumseh Products Cl A 8,988,891
515,000 York International Corp. 12,810,625
-------------------
32,273,491
-------------------
INDUSTRIAL SERVICES -- 1.8%
620,000 XTRA Corp.(1)(2) 27,551,250
-------------------
INFORMATION SERVICES -- 3.2%
387,800 Computer Sciences Corp.(1) 28,794,150
450,000 Electronic Data Systems Corp. 18,675,000
55,300 First Data Corp. 2,160,156
-------------------
49,629,306
-------------------
LEISURE -- 1.6%
120,000 Eastman Kodak Co. 4,905,000
1,239,600 GTECH Holdings Corp.(1) 20,530,875
-------------------
25,435,875
-------------------
8 1-800-345-2021 See Notes to Financial Statements
Value--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
LIFE & HEALTH INSURANCE -- 0.7%
400,000 MetLife, Inc.(1) $ 10,475,000
-------------------
MEDICAL PRODUCTS & SUPPLIES -- 1.3%
449,700 Becton Dickinson & Co. 11,888,944
372,400 Sybron International Corp.(1) 8,937,600
-------------------
20,826,544
-------------------
MEDICAL PROVIDERS & SERVICES -- 0.8%
293,000 HCA - The Healthcare Co. 10,877,625
244,500 LabOne, Inc.(2) 2,177,578
-------------------
13,055,203
-------------------
MOTOR VEHICLES & PARTS -- 1.3%
649,600 Superior Industries International, Inc.(2) 19,488,000
-------------------
OIL SERVICES -- 1.9%
481,400 Royal Dutch Petroleum Co.
New York Shares 28,853,913
-------------------
PROPERTY & CASUALTY INSURANCE -- 3.2%
400,000 Argonaut Group, Inc. 7,087,500
340,000 Chubb Corp. 26,902,500
916,400 Horace Mann Educators Corp. 15,006,050
-------------------
48,996,050
-------------------
PUBLISHING -- 0.7%
415,700 Banta Corp. 10,132,688
-------------------
RAILROADS -- 1.0%
402,100 Union Pacific Corp. 15,631,638
-------------------
RESTAURANTS -- 0.9%
711,100 Wendy's International, Inc. 14,266,444
-------------------
TELEPHONE -- 8.1%
307,800 BellSouth Corp. 12,388,950
1,708,600 Sprint Corp. 50,083,337
1,307,060 Verizon Communications 63,310,718
-------------------
125,783,005
-------------------
TOBACCO -- 1.5%
1,036,400 UST Inc. 23,707,650
-------------------
TRUCKING, SHIPPING & AIR FREIGHT(3)
23,300 Swift Transportation Co. Inc.(1) 303,628
-------------------
TOTAL COMMON STOCKS 1,399,574,570
-------------------
(Cost $1,391,696,363)
Principal Amount Value
-------------------------------------------------------------------------------
===============================================================================
TEMPORARY CASH INVESTMENTS* -- 9.7%
$50,000,000 FNMA Discount Notes,
6.41%, 10/25/00(4) $ 49,793,600
Repurchase Agreements, Deutsche Bank,
(U.S. Treasury obligations), in a joint trading
account at 6.44%, dated 9/29/00,
due 10/2/00 (Delivery value $23,412,558) 23,400,000
Repurchase Agreements, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 6.45%, dated 9/29/00,
due 10/2/00 (Delivery value $77,941,871) 77,900,000
-------------------
TOTAL TEMPORARY CASH INVESTMENTS 151,093,600
-------------------
(Cost $151,086,333)
TOTAL INVESTMENT SECURITIES -- 100.0% $1,550,668,170
===================
(Cost $1,542,782,696)
FUTURES CONTRACTS
Expiration Underlying Face Unrealized
Purchased Date Amount at Value Loss
---------------------------------------------------------------------------------------------
212 S&P 500 December
Futures 2000 $77,062,000 $(2,872,496)
================================================
</TABLE>
*Futures contracts typically are based on a stock index, such as the S&P 500,
and tend to track the performance of the index while remaining very liquid (easy
to buy and sell). By investing its cash assets in index futures, the fund can
have full exposure to stocks and have easy access to the money. Temporary cash
investments, less the required reserves for futures contracts, are 4.7%.
NOTES TO SCHEDULE OF INVESTMENTS
FNMA = Federal National Mortgage Association
(1) Non-income producing.
(2) Affiliated Company: represents ownership of at least 5% of the voting
securities of the issuer and is, therefore, an affiliate as defined in the
Investment Company Act of 1940. (See Note 5 in Notes to Financial Statements for
a summary of transactions for each issuer which is or was an affiliate at or
during the six months ended September 30, 2000.
(3) Industry is less than 0.05% of total investment securities.
(4) Rate disclosed is the yield to maturity at purchase.
See Notes to Financial Statements www.americancentury.com 9
Equity Income--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 8/1/94) (INCEPTION 3/7/97) (INCEPTION 7/8/98)
EQUITY S&P LIPPER EQUITY S&P LIPPER EQUITY S&P LIPPER
INCOME 500 EQUITY INCOME INCOME 500 EQUITY INCOME INCOME 500 EQUITY INCOME
FUND INDEX FUND INDEX FUND INDEX
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS* 9.60% -3.60% 4.73% 9.46% -3.60% 4.73% 9.89% -3.60% 4.73%
1 YEAR 6.80% 13.28% 8.10% 6.51% 13.28% 8.10% 7.18% 13.28% 8.10%
===============================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 8.00% 16.44% 7.47% 7.71% 16.44% 7.47% -- -- --
5 YEARS 15.39% 21.69% 13.82% -- -- -- -- -- --
LIFE OF FUND 16.22% 22.61% 14.70% 12.16% 19.57% 10.99% 6.98% 11.55% 4.01%
</TABLE>
* Returns for periods less than one year are not annualized.
See pages 49-52 for information about share classes, the indices, and returns.
GROWTH OF $10,000 OVER LIFE OF FUND
[line chart - data below]
Equity S&P Lipper Equity
Income 500 Income Fund Index
8/01/1994 $10,000 $10,000 $10,000
9/30/1994 $10,248 $10,489 $10,423
12/31/1994 $10,051 $10,487 $10,166
3/31/1995 $11,067 $11,508 $10,932
6/30/1995 $11,807 $12,607 $11,690
9/30/1995 $12,345 $13,610 $12,536
12/31/1995 $13,029 $14,429 $13,197
3/31/1996 $13,910 $15,204 $13,768
6/30/1996 $14,555 $15,886 $14,120
9/30/1996 $14,925 $16,377 $14,481
12/31/1996 $16,067 $17,742 $15,569
3/31/1997 $16,168 $18,217 $15,833
6/30/1997 $18,336 $21,400 $17,894
9/30/1997 $20,050 $23,000 $19,297
12/31/1997 $20,606 $23,660 $19,799
3/31/1998 $22,277 $26,961 $21,802
6/30/1998 $21,740 $27,851 $21,698
9/30/1998 $20,386 $25,080 $19,545
12/31/1998 $23,278 $30,421 $22,131
3/31/1999 $22,180 $31,940 $22,151
6/30/1999 $25,149 $34,194 $24,129
9/30/1999 $23,646 $32,057 $22,158
12/31/1999 $23,239 $36,827 $23,057
3/31/2000 $23,041 $37,671 $22,871
6/30/2000 $23,286 $36,669 $22,543
9/30/2000 $25,255 $36,313 $23,950
Value on 9/30/00
S&P 500 $36,313
Equity Income $25,255
Lipper Equity Income $23,950
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The S&P
500 Index and the Lipper Equity Income Fund Index are provided for comparison.
Equity Income'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. The graphs are based on Investor Class shares only; performance
for other classes will vary due to differences in fee structures (see the Total
Returns table above). Past performance does not guarantee future results.
Investment return and principal value will fluctuate, and redemption value may
be more or less than original cost.
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED SEPTEMBER 30)
[bar chart - data below]
Equity Income Lipper Equity Income Fund Index
9/30/1994 2.48% 1.37%
9/30/1995 20.48% 20.28%
9/30/1996 20.89% 15.44%
9/30/1997 34.35% 33.71%
9/30/1998 1.67% 1.29%
9/30/1999 15.98% 13.36%
9/30/2000 6.80% 8.10%
* From 8/1/94 to 9/30/94.
10 1-800-345-2021
Equity Income--Q&A
--------------------------------------------------------------------------------
An interview with Phil Davidson and Scott Moore, portfolio managers on the
Equity Income investment team. A photo of Phil and Scott appears on page 5.
HOW DID EQUITY INCOME PERFORM DURING THE FIRST HALF OF ITS FISCAL YEAR?
Equity Income gained 9.60%* for the six months ended September 30, 2000, a
significantly higher gain than the 4.73% increase posted by its benchmark, the
Lipper Equity Income Index. In contrast, the S&P 500 Index declined 3.60% over
the same period.
The third quarter of 2000 was particularly rewarding for the fund: It
gained 8.45% from July through September. Taking a longer view, Equity Income's
average annual return of 15.39% for the past five years compares favorably
against the 13.56% average annual return for the average equity income fund
tracked by Lipper Inc.
WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
Significantly, the market played more to our strength. With the economy
appearing to slow after six interest rate increases by the Federal Reserve since
mid-1999, investors became nervous about corporate earnings, particularly for
technology companies and multinational firms with exposure to a plummeting
European currency. Investors' trepidation seemed justified during the third
quarter, when several technology companies and consumer products giants warned
of lower-than-expected earnings. The news drove money out of growth stocks as
investors sought more reasonably priced companies with predictable earnings
prospects -- Equity Income's hunting ground.
Over the past several years, which have been exceedingly frustrating for
value-oriented investors, we detailed our intention to stick closely with our
disciplined value approach, despite the temptation to try what was "working" in
the market at the time. Our positive results for this short-term period help
illustrate why we refused to budge.
WHAT STOCKS OR SECTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
Specialty chemical company Bush Boake Allen was Equity Income's top
contributor to performance. Bush Boake is a global producer of flavor,
fragrance, and aroma chemicals used in consumer products. We bought the stock
due to BBA's strong fundamentals and reasonable valuation. In April,
International Paper put up for sale its nearly 70% ownership in the company to
fund an acquisition in its core paper business. Industry leader International
Flavors and Fragrances announced in early September that it would buy Bush
Boake Allen. We sold the stock at a gain to the fund.
Another top pick was insurance and financial services firm MetLife. We
bought MetLife's convertible preferred stock in the spring on the company's
initial public offering. MetLife's new status was well received, and we sold
our position at a significant gain.
Our bank stocks were also strong contributors. The improving interest rate
environment benefited most financial stocks, particularly banks. Summit Bancorp,
our second-largest contributor to performance, is an excellent example. We liked
Summit's dominant market share and quality balance sheet. The company's
fundamentals remained solid
[right margin]
"EQUITY INCOME'S AVERAGE ANNUAL RETURN OF 15.39%
FOR THE PAST FIVE YEARS COMPARES FAVORABLY AGAINST THE 13.56% AVERAGE ANNUAL
RETURN FOR THE AVERAGE EQUITY INCOME FUND TRACKED BY LIPPER INC."
PORTFOLIO AT A GLANCE
9/30/00 3/31/00
NO. OF COMPANIES 54 58
P/E RATIO 15.2 16.1
MEDIAN MARKET $2.12 $1.87
CAPITALIZATION BILLION BILLION
WEIGHTED MARKET $16.4 $11.2
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 87%(1) 141%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 1.00%(3) 1.00%
DIVIDEND YIELD 3.49% 3.46%
(1) Six months ended 9/30/00.
(2) Year ended 3/31/00.
(3) Annualized.
Investment terms are defined in the Glossary on pages 51-52.
* All fund returns referenced in this interview are for Investor Class shares.
www.americancentury.com 11
Equity Income--Q&A
--------------------------------------------------------------------------------
(Continued)
during the previous two quarters despite industry pressure, and its stock
price was further lifted by speculation that it would be acquired by FleetBoston
Financial, a deal that was announced the day after the third quarter.
WERE THERE OTHER HOLDINGS THAT CONTRIBUTED SIGNIFICANTLY?
Our holdings in electric utilities are an example of the virtue of
patience. This was another classic value group that was passed over during the
tech rally, but it recovered when investors rediscovered the industry's
dependable earnings, attractive yields and consistent growth opportunities. FPL
Group is benefiting from strong customer growth and rising per-customer usage,
and has exceeded earnings expectations over the past few quarters. Additionally,
the announcement in July that FPL would merge sometime next year with Entergy
Corporation to form one of the largest utility companies in the country was
received favorably by the market and the stock appreciated substantially.
UST Inc., the dominant player in the smokeless tobacco market, was also a
positive contributor. In early 2000, we took advantage of depressed prices and
bought the stock when we felt it was unfairly punished over an antitrust ruling.
The stock recovered, and speculation that UST may be a takeover candidate
further boosted its value.
WHAT STOCKS OR SECTORS DETRACTED FROM EQUITY INCOME'S PERFORMANCE?
We could not completely dodge the technology sector's broad decline,
although strong stock selection and our underweight position helped mitigate
the impact. Xerox was one holding that detracted from performance. We cut our
losses and sold the position before the stock's value further declined when the
company unexpectedly announced that third-quarter sales would come in below
expectations.
Equity Income's position in telecommunications companies (mainly on the
long-distance side of the industry) also detracted from performance. A highly
competitive environment, as well as "guilt by association" during the recent
downturn in technology-oriented companies, have pressured telecom firms. Our
greatest detractor in this group was Sprint Corp., a provider of local telephone
and long-distance services. Sprint agreed in October 1999 to be acquired by
WorldCom -- a deal we thought would enhance both firms. However, in June,
regulators blocked the deal on the belief that the combined company would have
unfair market advantages and reduce competition. This decision, along with
slowing growth in Sprint's core long- distance businesses and increased
dilution of the company's shares to fund new growth initiatives, resulted in
poor performance. Looking longer term, we believe that Sprint's strategically
well positioned assets and solid financial position, coupled with the industry's
excellent growth prospects, bode well for the firm. We are holding this
position.
WHAT SIGNIFICANT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE SIX MONTHS?
We reduced our exposure to the food and beverage industry. We see less
investment opportunity in this area, but will continue to hold names we believe
can withstand the difficult competitive environment. We also trimmed our stake
in the bank industry due to the outperformance of the group.
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
9/30/00 3/31/00
SUMMIT BANCORP. 4.7% 3.6%
UNION PACIFIC CAPITAL
TRUST, 6.25%,
4/1/28 (CON. PREF.) 4.5% 1.8%
FIRST VIRGINIA
BANKS, INC. 4.3% 4.4%
MINNESOTA MINING &
MANUFACTURING CO. 4.2% 4.6%
CHEVRON CORP. 4.0% 2.8%
VERIZON
COMMUNICATIONS(1) 3.9% 1.4%
STUDENT LOAN
CORP. (THE) 3.7% 3.1%
FLORIDA PROGRESS CORP. 3.5% 0.9%
WASHINGTON GAS
LIGHT CO. 3.5% 3.1%
NATIONAL PRESTO
INDUSTRIES, INC. 3.0% 3.5%
(1) Bell Atlantic Corp. acquired GTE Corp. on 7/3/00. On that date, Bell
Atlantic changed its name to Verizon Communications. The percentage as of
3/31/00 represents GTE Corp. shares owned by the fund.
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
9/30/00 3/31/00
BANKS 10.1% 10.7%
GAS & WATER UTILITIES 8.2% 12.4%
ELECTRICAL UTILITIES 8.1% 5.7%
CHEMICALS 7.9% 8.9%
TELEPHONE 6.4% 2.1%
12 1-800-345-2021
Equity Income--Q&A
--------------------------------------------------------------------------------
(Continued)
WHAT ARE ATTRACTIVE AREAS GOING FORWARD?
Information Services is an industry that has served us well and one in
which we see many attractive investments. Many investors discarded these stocks
during the first quarter after the group in general completed one-time-only
business related to Y2K. In our case, we believe our holdings in this area will
continue to contribute to performance as industry leaders, such as Computer
Sciences, benefit from the worldwide trend of outsourcing information
technology services.
We also increased our weighting in railroads, including Union Pacific,
believing the industry -- and this company especially -- has worked through
operational issues arising from merger activity and is now in a position to
regain market share lost to truckers. These companies would also benefit from
declining fuel costs. This convertible preferred is an attractive vehicle for
this fund.
WHAT IS YOUR OUTLOOK FOR THE MARKET AND THE FUND?
We are optimistic. Although it's too soon to know if the resurgence we're
seeing in value-oriented investing is sustainable, we remain committed to our
disciplined investment strategy. We continue to search for undervalued
businesses that have temporary problems affecting their stock price. The good
news is that we are finding a wealth of compelling stocks that meet our
investment criteria. We believe that these companies offer investors good
opportunities for handsome, risk- adjusted returns at reasonable prices.
[right margin]
"THE GOOD NEWS IS THAT WE ARE FINDING A WEALTH OF COMPELLING STOCKS THAT MEET
OUR INVESTMENT CRITERIA."
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF SEPTEMBER 30, 2000
= COMMON STOCKS AND FUTURES 83.3%
= CONVERTIBLE PREFERRED STOCKS 10.3%
= CONVERTIBLE BONDS 4.2%
= TEMPORARY CASH INVESTMENTS 2.2%
[pie chart]
AS OF MARCH 31, 2000
= COMMON STOCKS AND FUTURES 82.5%
= CONVERTIBLE PREFERRED STOCKS 5.8%
= CONVERTIBLE BONDS 8.5%
= TEMPORARY CASH INVESTMENTS 3.2%
[pie chart]
www.americancentury.com 13
Equity Income--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
================================================================================
<TABLE>
COMMON STOCKS -- 77.9%
<S> <C> <C>
APPAREL & TEXTILES -- 0.6%
119,800 Kellwood Co. $ 2,186,350
-------------------
BANKS -- 10.1%
113,150 Commerce Bancshares, Inc. 4,161,798
340,000 First Virginia Banks, Inc. 14,492,500
459,600 Summit Bancorp. 15,856,200
-------------------
34,510,498
-------------------
CHEMICALS -- 7.9%
125,100 Air Products & Chemicals, Inc. 4,503,600
157,400 Minnesota Mining & Manufacturing Co. 14,343,076
92,400 Praxair, Inc. 3,453,450
155,400 Rohm and Haas Co. 4,516,313
-------------------
26,816,439
-------------------
COMPUTER HARDWARE
& BUSINESS MACHINES -- 1.1%
92,000 Pitney Bowes, Inc. 3,628,250
-------------------
COMPUTER SOFTWARE -- 0.7%
100,000 Autodesk, Inc. 2,534,375
-------------------
CONSTRUCTION & REAL PROPERTY -- 0.5%
56,000 Fluor Corp. 1,680,000
-------------------
CONSUMER DURABLES -- 3.1%
15,300 HON INDUSTRIES Inc. 376,763
343,800 National Presto Industries, Inc.(1) 10,292,512
-------------------
10,669,275
-------------------
DEFENSE/AEROSPACE -- 1.5%
140,000 Honeywell Inc. 4,987,500
-------------------
DEPARTMENT STORES -- 0.2%
32,400 Family Dollar Stores, Inc. 623,700
-------------------
DRUGS -- 0.7%
40,000 Bristol-Myers Squibb Co. 2,285,000
-------------------
ELECTRICAL UTILITY -- 8.1%
224,800 Florida Progress Corp. 11,900,350
103,200 FPL Group, Inc. 6,785,400
443,500 Wisconsin Energy Corp. 8,842,281
-------------------
27,528,031
-------------------
ENERGY RESERVES & PRODUCTION -- 5.4%
160,500 Chevron Corp. 13,682,625
78,000 Royal Dutch Petroleum Co.
New York Shares 4,675,125
-------------------
18,357,750
-------------------
EQUITY REAL ESTATE
INVESTMENT TRUST -- 0.5%
65,000 Manufactured Home Communities, Inc. 1,625,000
-------------------
Shares Value
-------------------------------------------------------------------------------
FINANCIAL SERVICES -- 3.7%
256,600 Student Loan Corp. (The) $ 12,525,288
-------------------
FOOD & BEVERAGE -- 2.3%
75,800 General Mills, Inc. 2,690,900
534,900 Lance, Inc. 5,190,202
-------------------
7,881,102
-------------------
FOREST PRODUCTS & PAPER -- 1.3%
140,000 Bemis Co. 4,497,500
-------------------
GAS & WATER UTILITIES -- 8.2%
319,000 AGL Resources Inc. 6,399,938
336,200 Northwest Natural Gas Co. 7,648,550
62,000 Piedmont Natural Gas Co., Inc. 1,898,750
440,000 Washington Gas Light Co. 11,824,999
-------------------
27,772,237
-------------------
GROCERY STORES -- 0.4%
38,400 Weis Markets, Inc. 1,524,000
-------------------
HEAVY ELECTRICAL EQUIPMENT -- 3.4%
191,700 Cooper Industries, Inc. 6,757,425
70,000 Emerson Electric Co. 4,690,000
-------------------
11,447,425
-------------------
HEAVY MACHINERY -- 1.1%
110,300 Deere & Co. 3,667,475
-------------------
HOME PRODUCTS -- 0.7%
116,400 WD-40 Co. 2,480,775
-------------------
INDUSTRIAL PARTS -- 2.1%
239,100 Pall Corp. 4,767,056
101,100 York International Corp. 2,514,863
-------------------
7,281,919
-------------------
INDUSTRIAL SERVICES -- 1.4%
108,600 XTRA Corp.(2) 4,825,913
-------------------
INFORMATION SERVICES -- 0.8%
66,900 Electronic Data Systems Corp. 2,776,350
-------------------
LEISURE -- 0.7%
121,700 Russ Berrie and Co., Inc. 2,403,575
-------------------
MEDICAL PRODUCTS & SUPPLIES -- 0.8%
97,700 Becton Dickinson & Co. 2,582,944
-------------------
PROPERTY & CASUALTY INSURANCE -- 1.3%
185,900 CNA Surety Corp. 2,137,850
150,000 Horace Mann Educators Corp. 2,456,250
-------------------
4,594,100
-------------------
TELEPHONE -- 6.4%
290,800 Sprint Corp. 8,524,075
273,792 Verizon Communications 13,261,800
-------------------
21,785,875
-------------------
14 1-800-345-2021 See Notes to Financial Statements
Equity Income--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Shares/Principal Amount Value
--------------------------------------------------------------------------------
THRIFTS -- 1.1%
166,300 Washington Federal, Inc. $ 3,788,522
-------------------
TOBACCO -- 1.8%
261,200 UST Inc. 5,974,950
-------------------
TOTAL COMMON STOCKS 265,242,118
-------------------
(Cost $260,247,004)
CONVERTIBLE PREFERRED STOCKS -- 10.3%
FOREST PRODUCTS & PAPER -- 0.5%
46,100 International Paper Co.,
5.25%, 7/20/25 1,802,222
-------------------
HOME PRODUCTS -- 2.8%
260,400 Newell Financial Trust,
5.25%, 12/1/27 9,569,700
-------------------
RAILROADS -- 4.6%
381,200 Union Pacific Capital Trust,
6.25%, 4/1/28 15,390,950
-------------------
RESTAURANTS -- 2.4%
172,900 Wendy's International Inc.,
Series A, 5.00%, 9/15/26 8,212,750
-------------------
TOTAL CONVERTIBLE PREFERRED STOCKS 34,975,622
-------------------
(Cost $35,746,177)
CONVERTIBLE BONDS -- 4.2%
DEPARTMENT STORES -- 0.3%
$ 1,400,000 Costco Wholesale Corp.,
1.27%, 8/19/17(3) 1,183,875
-------------------
MEDICAL PROVIDERS & SERVICES -- 3.2%
12,015,000 Medical Care Intl. Inc.,
6.75%, 10/1/06
(Acquired 10/23/97-4/27/00,
Cost $10,816,800)(4) 10,933,650
-------------------
OIL SERVICES -- 0.7%
2,830,000 Baker Hughes Inc.,
3.49%, 5/5/08(3) 2,256,925
-------------------
TOTAL CONVERTIBLE BONDS 14,374,450
-------------------
(Cost $14,255,071)
Value
-------------------------------------------------------------------------------
===============================================================================
TEMPORARY CASH INVESTMENTS* -- 7.6%
Repurchase Agreements, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 6.45%, dated 9/29/00,
due 10/2/00 (Delivery value $9,104,890) $ 9,100,000
Repurchase Agreements, Morgan Stanley
Group, Inc., (U.S. Treasury obligations), in a
joint trading account at 6.45%, dated
9/29/00, due 10/2/00 (Delivery value
$16,909,084) 16,900,000
-------------------
TOTAL TEMPORARY CASH INVESTMENTS 26,000,000
-------------------
(Cost $26,000,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $340,592,190
===================
(Cost $336,248,252)
FUTURES CONTRACTS
Expiration Underlying Face Unrealized
Purchased Date Amount at Value Loss
-----------------------------------------------------------------------------------
51 S&P 500 December
Futures 2000 $18,538,500 $(277,009)
========================================
</TABLE>
*Futures contracts typically are based on a stock index, such as the S&P 500,
and tend to track the performance of the index while remaining very liquid (easy
to buy and sell). By investing its cash assets in index futures, the fund can
have full exposure to stocks and have easy access to the money. Temporary cash
investments, less the required reserves for futures contracts, are 2.2%.
NOTES TO SCHEDULE OF INVESTMENTS
(1) Affiliated Company: represents ownership of at least 5% of the voting
securities of the issuer and is, therefore, an affiliate as defined in the
Investment Company Act of 1940. (See Note 5 in Notes to Financial Statements for
a summary of transactions for each issuer which is or was an affiliate at or
during the six months ended September 30, 2000.
(2) Non-income producing.
(3) Security is a zero-coupon bond. The yield to maturity at purchase is
indicated. Zero coupon securities are purchased at a substantial discount from
their value at maturity.
(4) Security was purchased under Rule 144A of the Securities Act of
1933 or is a private placement and, unless registered under the Act or exempted
from registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at September 30, 2000, was $10,933,650,
which represented 3.2% of net assets.
See Notes to Financial Statements www.americancentury.com 15
Small Cap Value--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 7/31/98) (INCEPTION 12/31/99) (INCEPTION 10/26/98)
SMALL CAP S&P SMALLCAP SMALL CAP S&P SMALLCAP SMALL CAP S&P SMALLCAP
VALUE 600/BARRA VALUE 600/BARRA VALUE 600/BARRA
VALUE INDEX VALUE INDEX VALUE INDEX
<S> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 13.58% 9.75% 13.44% 9.75% 13.69% 9.75%
1 YEAR 21.76% 15.81% -- -- 22.06% 15.81%
LIFE OF FUND 10.61% 6.02% 21.22% 12.86% 14.26% 12.82%(2)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Since 10/31/98, the date nearest the class's inception for which data
are available.
See pages 49-52 for information about share classes, the index, and returns.
GROWTH OF $10,000 OVER LIFE OF FUND
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The S&P
SmallCap 600/BARRA Value Index is provided for comparison in each graph. Small
Cap Value's total returns include operating expenses (such as transaction costs
and management fees) that reduce returns, while the total returns of the S&P
SmallCap 600/BARRA Value Index do not. The graphs are based on Investor Class
shares only; performance for other classes will vary due to differences in fee
structures (see the Total Returns table above). Past performance does not
guarantee future results. Investment return and principal value will fluctuate,
and redemption value may be more or less than original cost.
[line chart - data below]
Small Cap Value S&P 600/ BARRA Value
7/31/1998 $10,000 $10,000
8/31/1998 $8,620 $8,196
9/30/1998 $9,020 $8,630
10/31/1998 $9,820 $9,008
11/30/1998 $10,240 $9,392
12/31/1998 $10,331 $9,761
1/31/1999 $9,928 $9,649
2/28/1999 $9,443 $8,864
3/31/1999 $9,576 $8,829
4/30/1999 $10,203 $9,598
5/31/1999 $10,872 $9,981
6/30/1999 $11,089 $10,587
7/31/1999 $11,089 $10,422
8/31/1999 $10,642 $9,985
9/30/1999 $10,216 $9,801
10/31/1999 $9,952 $9,575
11/30/1999 $10,114 $9,790
12/31/1999 $10,242 $10,058
1/31/2000 $9,982 $9,543
2/29/2000 $9,982 $9,974
3/31/2000 $10,952 $10,343
4/30/2000 $10,952 $10,415
5/31/2000 $11,148 $10,245
6/30/2000 $11,373 $10,538
7/31/2000 $11,656 $10,746
8/31/2000 $12,528 $11,373
9/30/2000 $12,439 $11,351
Value on 9/30/00
Small Cap Value $12,439
S&P SmallCap 600/BARRA Value $11,351
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED SEPTEMBER 30)
[bar chart - data below]
Small-Cap Value S&P 600/BARRA Value
9/30/1998 -9.80% -13.69%
9/30/1999 13.25% 13.56%
9/30/2000 21.76% 15.81%
* From 7/31/98 to 9/30/98.
16 1-800-345-2021
Small Cap Value--Q&A
--------------------------------------------------------------------------------
[photo of Todd Vingers (left) and Ben Giele]
An interview with Todd Vingers (left) and Ben Giele, portfolio managers on
the Small Cap Value investment team.
HOW DID SMALL CAP VALUE PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER 30,
2000?
Small Cap Value gained 13.58%*, outperforming its benchmark, the S&P
SmallCap 600/BARRA Value Index, which posted a 9.75% return. The average
small-cap value fund tracked by Lipper Inc. returned 7.95% in the last six
months.
Small Cap Value's longer-term performance also has been strong. Since the
fund's inception on July 31, 1998, it has posted an annualized return of 10.61%,
significantly outpacing the 6.02% return of its benchmark. Small Cap Value also
has outperformed most of its peers.
WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
To begin with, the market could no longer ignore the prices at the small
end of the value universe. The bull market in large-cap and technology stocks
triggered tremendous cash flows from small-cap value stocks during the last few
years. Over time, this continual sell-off led to increasingly more attractive
valuations on many small, fundamentally strong and profitable companies. We
stuck to our disciplined value approach, and took advantage of those conditions
to build a portfolio of inexpensive, solid stocks. Our shareholders were
well-positioned when investors rediscovered value stocks in the third quarter of
2000 -- Small Cap Value gained almost 10% during those three months alone.
An environment in which small, sound businesses languish also creates
opportunities for companies looking to make acquisitions. Some of the factors
that make a company attractive to us -- good fundamentals at a low price -- are
also attractive to potential acquirers. This scenario played out several times
in our portfolio. One example was Lilly Industries, Small Cap Value's top
contributor for the period. Lilly produces industrial coatings and specialty
chemical products. Attractively priced but unable to command attention from
investors, Lilly was bought out by a competitor, Valspar Corp., at a healthy
gain for investors.
Other acquisitions that contributed to the fund's performance during the
period included buyouts of Keystone Financial, Inc. and Splash Technologies, a
manufacturer of hardware and software that link computers with color laser
copiers.
WHICH INDUSTRIES CONTRIBUTED THE MOST TO RETURNS?
Energy exploration and production companies provided outstanding returns
for the fund during the period. Because we had taken advantage of an earlier
downturn in this industry to buy attractively priced companies, the portfolio
was ready and waiting when these stocks moved up.
Our best performers in this area were Pure Resources, Inc. and Swift
Energy. We were attracted to them because of their financial strength and their
positions in the natural gas market. Both companies have performed well as
rising demand for the limited supply of domestic natural gas has driven up
prices.
[right margin]
"OUR SHAREHOLDERS WERE WELL-POSITIONED WHEN INVESTORS REDISCOVERED VALUE STOCKS
IN THE THIRD QUARTER OF 2000 -- SMALL CAP VALUE GAINED ALMOST 10% DURING THOSE
THREE MONTHS ALONE."
PORTFOLIO AT A GLANCE
9/30/00 3/31/00
NO. OF COMPANIES 85 72
P/E RATIO 15.6 13.9
MEDIAN MARKET $608 $614
CAPITALIZATION MILLION MILLION
WEIGHTED MARKET $853 $846
CAPITALIZATION MILLION MILLION
PORTFOLIO TURNOVER 71%(1) 178%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 1.25%(3) 1.25%
DIVIDEND YIELD 1.94% 2.25%
(1) Six months ended 9/30/00.
(2) Year ended 3/31/00.
(3) Annualized.
Investment terms are defined in the Glossary on pages 51-52.
* All fund returns referenced in this interview are for Investor Class shares.
www.americancentury.com 17
Small Cap Value--Q&A
--------------------------------------------------------------------------------
(Continued)
Small Cap Value also has benefited from strong performance in the utility
sector. This is another area where we built a healthy weighting while stock
prices were depressed. Because utilities generally are viewed as safe harbors,
these stocks were lifted when investors began running for cover during April's
technology meltdown. Utilities also have benefited from sentiment that interest
rates have peaked, which tends to bode well for this capital-intensive sector.
Because we bought our holdings when valuations were low, we caught the
earliest stages of the utility rally. Some of the companies that provided
favorable returns were Northwest Natural Gas, Maine Public Service and People's
Energy.
WERE YOU ABLE TO TAKE ADVANTAGE OF THE STRENGTH IN THE FINANCIAL SECTOR?
Yes, but while banks and financial services companies were grabbing
headlines, we found our success in smaller insurance companies. Many insurers
have had great fundamentals for the last two years. However, their stock prices
had been beaten down because of the perception that they would suffer in a
rising interest-rate environment.
The truth is that some insurers, particularly mortgage insurance companies,
actually benefit from modest interest rate increases. Lenders require homebuyers
who make small down payments to carry private mortgage insurance until they
achieve 20% equity in their homes. When interest rates are flat or rising, fewer
homeowners refinance their loans. This reduces the chances that homeowners will
drop their mortgage insurance or change insurance providers. Radian and PMI, key
players in this market, have benefited from these conditions. They were two of
the best performers in our portfolio during the last six months.
HCC Insurance Holdings, a property and casualty insurance broker, also was
a significant contributor. It has little exposure to the risk-bearing portion of
the insurance business and has taken advantage of its competitive position and
pricing power to increase fees, which has been good for earnings.
THE TECHNOLOGY SECTOR WAS VOLATILE DURING THE PERIOD. HOW DID THIS AFFECT THE
FUND?
Technology was a mixed bag. On the positive side, Structural Dynamics
Research, a designer of engineering software, was one of our top contributors.
This stock was punished by investors who worried the firm was losing market
share. This was not the case at all; Structural Dynamics enjoys a very stable,
established customer base. We aggressively built our position, which
subsequently performed well.
Technology also produced some disappointments, including Brightpoint and
ScanSoft. Brightpoint is a cellular phone distributor that has not been able to
overcome the slowdown in demand for cellular phones. We mentioned ScanSoft in
our last report because it had purchased one of our holdings, Caere Corporation.
With Caere in the fold, ScanSoft held a dominant position in the scanning
software market during the last six months, but aggressive discounting has hurt
the company's profits. We sold our stake in Brightpoint, but continue to hold
ScanSoft on the belief that it can turn its market position into pricing power.
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
9/30/00 3/31/00
NATIONAL PRESTO
INDUSTRIES, INC. 2.6% 2.4%
NORTHWEST NATURAL
GAS CO. 2.6% 2.3%
CLAIRE'S STORES INC. 2.4% 1.7%
WISCONSIN ENERGY
CORP. 2.3% --
CIRCOR INTERNATIONAL
INC. 2.3% --
GRIFFON CORP. 2.0% 1.9%
WENDY'S INTERNATIONAL,
INC. 2.0% 0.5%
MICHAEL FOODS, INC. 2.0% 1.2%
WAUSAU-MOSINEE
PAPER CORP. 2.0% 1.9%
PIEDMONT NATURAL
GAS CO., INC. 1.9% 1.6%
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
9/30/00 3/31/00
FOOD & BEVERAGE 9.3% 9.3%
MEDICAL PRODUCTS
& SUPPLIES 7.6% 4.1%
GAS & WATER UTILITIES 6.8% 10.6%
LEISURE 6.1% 7.1%
RESTAURANTS 5.8% 3.0%
18 1-800-345-2021
Small Cap Value--Q&A
--------------------------------------------------------------------------------
(Continued)
WHAT WERE SOME OF THE OTHER DISAPPOINTMENTS DURING THE PERIOD?
Wausau-Mosinee Paper Corp., a significant presence in the forest and paper
products industry, was one of the largest detractors. In addition to
experiencing operational difficulties, this company has been suffering from weak
earnings caused by rapidly increasing pulp prices and softening demand for paper
products.
We were also disappointed by the performance of Lancaster Colony
Corporation. A diversified company, Lancaster Colony's stock was hurt by a
downturn in its candle business. However, we still like this solid company and
its attractive return on capital.
DID YOU MAKE ANY SIGNIFICANT CHANGES TO THE PORTFOLIO SINCE THE ANNUAL REPORT?
Slowing sales growth has caused investors to shy away from restaurant
stocks, which has created some pretty compelling valuations relative to good
growth prospects. We've used this opportunity to build our position.
As we mentioned earlier, utilities have enjoyed a nice rally because
investors recognized the attractive valuations in this area at about the same
time they were looking for safety in a volatile market. Because we had
overweighted positions in utilities while valuations were low, we took advantage
of the run-up to trim our position.
Small Cap Value maintains significant positions in property and casualty
insurance companies and in the food and beverage industry.
THE FUND'S SUCCESSES HAVE NOT BEEN LIMITED TO TRADITIONAL VALUE SECTORS. CAN
YOU EXPLAIN HOW YOUR PROCESS KEEPS THE WHOLE INVESTMENT LANDSCAPE OPEN TO YOU?
Yes. We use a bottom-up approach, examining each company we consider
investing in individually, on its own merits. The starting point is finding
stocks that meet our initial valuation criteria. We then dig deeper, winnowing
the universe to identify sound companies trading at a discount to fair value,
regardless of sector or industry. This bottom-up approach enables us to step
outside traditional value arenas -- railroads, steel companies, and cyclicals
-- and search for value opportunities in non-traditional sectors such as
software and medical products.
WHAT IS YOUR OUTLOOK FOR THIS APPROACH TO INVESTING?
Though investors have begun to recognize the attractive pricing in the
small-cap value realm, we continue to see opportunities for the fund. We are
applying our investment process to build positions in inexpensively priced,
solid companies, which we believe will benefit our investors when these stocks
are discovered by the market.
[right margin]
"WE USE A BOTTOM-UP APPROACH, EXAMINING EACH COMPANY WE CONSIDER INVESTING IN
INDIVIDUALLY, ON ITS OWN MERITS."
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF SEPTEMBER 30, 2000
COMMON STOCKS AND FUTURES 97.8%
TEMPORARY CASH INVESTMENTS 2.2%
[pie chart]
AS OF MARCH 31, 2000
COMMON STOCKS AND FUTURES 95.1%
TEMPORARY CASH INVESTMENTS 4.9%
[pie chart]
www.americancentury.com 19
Small Cap Value--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
================================================================================
<TABLE>
COMMON STOCKS -- 97.8%
<S> <C> <C>
APPAREL & TEXTILES - 2.3%
20,600 Kellwood Co. $ 375,950
52,500 Wolverine World Wide, Inc. 488,906
-------------------
864,856
-------------------
BANKS - 5.0%
10,700 Centura Banks, Inc. 409,944
38,000 Colonial Bancgroup Inc. 394,250
7,300 Mercantile Bankshares Corporation 264,853
6,900 Whitney Holding Corp. 251,419
9,800 Wilmington Trust Corporation 525,525
-------------------
1,845,991
-------------------
CLOTHING STORES - 0.7%
23,700 Buckle Inc.(1) 275,513
-------------------
COMPUTER HARDWARE
& BUSINESS MACHINES - 1.3%
18,400 Adaptec, Inc.(1) 368,575
65,513 ScanSoft, Inc.(1) 104,411
-------------------
472,986
-------------------
COMPUTER SOFTWARE - 3.4%
13,000 Autodesk, Inc. 329,469
16,600 Structural Dynamics Research Corp.(1) 270,788
10,200 Synopsys, Inc.(1) 386,006
13,400 Unigraphics Solutions Inc.(1) 262,975
-------------------
1,249,238
-------------------
CONSUMER DURABLES - 4.6%
99,100 Griffon Corp.(1) 749,444
32,000 National Presto Industries, Inc. 958,000
-------------------
1,707,444
-------------------
ELECTRICAL UTILITY - 2.3%
43,300 Wisconsin Energy Corp. 863,294
-------------------
ENERGY RESERVES & PRODUCTION - 4.4%
9,700 Barrett Resources Corp.(1) 366,781
67,800 Belco Oil & Gas Corp.(1) 601,725
31,123 Pure Resources Inc.(1) 659,419
-------------------
1,627,925
-------------------
FINANCIAL SERVICES - 1.5%
41,600 MicroFinancial Inc. 374,400
8,600 Mutual Risk Management Ltd. 188,663
-------------------
563,063
-------------------
Shares Value
-------------------------------------------------------------------------------
FOOD & BEVERAGE -- 9.3%
16,200 Corn Products International Inc. $ 368,550
28,300 International Multifoods Corp. 491,713
24,100 Lancaster Colony Corp. 592,709
66,500 Lance, Inc. 645,257
31,081 Michael Foods, Inc. 727,489
39,500 Omega Protein Corp.(1) 83,938
25,500 Universal Foods Corp. 519,562
-------------------
3,429,218
-------------------
FOREST PRODUCTS & PAPER - 3.6%
16,800 Caraustar Industries Inc. 185,325
5,500 Rayonier, Inc. 197,656
32,200 Sappi Ltd. ADR 235,463
93,400 Wausau-Mosinee Paper Corp. 723,850
-------------------
1,342,294
-------------------
GAS & WATER UTILITIES - 6.8%
18,800 AGL Resources Inc. 377,175
41,900 Northwest Natural Gas Co. 953,224
8,300 People's Energy Corp. 277,013
23,100 Piedmont Natural Gas Co., Inc. 707,437
7,200 Washington Gas Light Co. 193,500
-------------------
2,508,349
-------------------
HEAVY ELECTRICAL EQUIPMENT - 0.8%
14,900 National Service Industries, Inc. 291,481
-------------------
HEAVY MACHINERY - 1.1%
11,300 Regal-Beloit Corp. 191,648
4,500 Tennant Co. 198,563
-------------------
390,211
-------------------
HOME PRODUCTS - 0.8%
14,200 WD-40 Co. 302,638
-------------------
INDUSTRIAL PARTS - 4.9%
80,900 Circor International Inc. 834,280
35,300 Flowserve Corp. 580,244
9,300 Tecumseh Products Cl A 389,728
-------------------
1,804,252
-------------------
INDUSTRIAL SERVICES - 3.5%
14,100 G & K Services Inc. Cl A 396,122
76,000 Schawk, Inc. 703,000
4,100 XTRA Corp.(1) 182,194
-------------------
1,281,316
-------------------
INFORMATION SERVICES - 1.3%
25,200 Pomeroy Computer Resources, Inc.(1) 478,013
-------------------
20 1-800-345-2021 See Notes to Financial Statements
Small Cap Value--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
LEISURE - 6.1%
73,400 Boyds Collection Ltd.(1) $ 541,325
41,400 Department 56(1) 545,962
18,800 GTECH Holdings Corp.(1) 311,375
18,000 Hasbro, Inc. 205,875
5,300 Polaris Industries Inc. 186,825
24,200 Russ Berrie and Co., Inc. 477,950
-------------------
2,269,312
-------------------
MEDICAL PRODUCTS & SUPPLIES - 7.6%
14,400 Arrow International Inc. 522,900
15,700 Conmed Corp.(1) 215,384
11,200 Dentsply International Inc. 392,000
8,800 Orthofix International N.V.(1) 217,250
21,600 Schein (Henry), Inc.(1) 431,325
23,400 Sybron International Corp.(1) 561,599
30,200 Young Innovations Inc.(1) 473,763
-------------------
2,814,221
-------------------
MEDICAL PROVIDERS & SERVICES - 1.4%
62,500 Covance Inc.(1) 511,719
-------------------
MOTOR VEHICLES & PARTS - 1.4%
17,400 Superior Industries International, Inc. 522,000
-------------------
OIL REFINING - 1.1%
15,900 Ultramar Diamond Shamrock Corp. 403,463
-------------------
OIL SERVICES - 2.9%
25,000 Hydril Co.(1) 570,313
59,300 NATCO Group Inc.(1) 515,169
-------------------
1,085,482
-------------------
PROPERTY & CASUALTY INSURANCE - 5.4%
7,500 HCC Insurance Holdings, Inc. 152,344
35,600 Horace Mann Educators Corp. 582,949
9,775 Medical Assurance, Inc.(1) 119,744
5,700 PMI Group, Inc. (The) 386,175
16,600 Professionals Group Inc.(1) 371,425
5,800 Radian Group Inc. 391,500
-------------------
2,004,137
-------------------
PUBLISHING - 1.0%
15,700 Banta Corp. 382,688
-------------------
Shares Value
--------------------------------------------------------------------------------
RESTAURANTS - 5.8%
28,000 Jack in the Box Inc.(1) $ 600,249
23,900 O'Charleys Inc.(1) 295,016
20,600 Papa John's International, Inc.(1) 515,644
36,300 Wendy's International, Inc. 728,268
-------------------
2,139,177
-------------------
SECURITIES & ASSET MANAGEMENT - 1.6%
12,500 John Nuveen Co. Cl A 604,688
-------------------
SEMICONDUCTOR - 2.5%
21,900 ATI Technologies Inc.(1) 178,280
16,000 Avnet Inc. 454,000
16,400 Electroglas, Inc.(1) 278,800
-------------------
911,080
-------------------
SPECIALTY STORES - 2.4%
49,000 Claire's Stores Inc. 882,000
-------------------
TRUCKING, SHIPPING & AIR FREIGHT - 1.0%
3,200 Heartland Express, Inc.(1) 56,100
50,200 Motor Cargo Industries, Inc.(1) 307,475
-------------------
363,575
-------------------
TOTAL COMMON STOCKS 36,191,624
-------------------
(Cost $34,074,745)
TEMPORARY CASH INVESTMENTS - 2.2%
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations),
in a joint trading account at 6.45%,
dated 9/29/00, due 10/2/00 (Delivery
value $800,430) 800,000
-------------------
(Cost $800,000)
TOTAL INVESTMENT SECURITIES - 100.0% $36,991,624
===================
(Cost $34,874,745)
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
See Notes to Financial Statements www.americancentury.com 21
Large Cap Value--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
INVESTOR CLASS
(INCEPTION 7/30/99)
LARGE CAP S&P 500 S&P 500/
VALUE BARRA VALUE
6 MONTHS* 4.14% -3.60% 4.14%
1 YEAR 5.67% 13.28% 13.74%
LIFE OF FUND -2.90% 8.20% 5.57%
* Returns for periods less than one year are not annualized.
See pages 49-52 for information about the indices and returns.
GROWTH OF $10,000 OVER LIFE OF FUND
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The S&P
500/BARRA Value Index and S&P 500 Index are provided for comparison. Large Cap
Value'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. Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
[line chart - data below]
Large Cap Value S&P 500 S&P 500/BARRA Value
7/30/1999 $10,000 $10,000 $10,000
8/31/1999 $9,560 $9,951 $9,747
9/30/1999 $9,144 $9,678 $9,366
10/31/1999 $9,505 $10,291 $9,894
11/30/1999 $9,465 $10,502 $9,836
12/31/1999 $9,403 $11,118 $10,206
1/31/2000 $9,161 $10,560 $9,881
2/29/2000 $8,316 $10,361 $9,263
3/31/2000 $9,278 $11,374 $10,230
4/30/2000 $9,318 $11,032 $10,161
5/31/2000 $9,479 $10,805 $10,193
6/30/2000 $9,077 $11,072 $9,790
7/31/2000 $9,097 $10,900 $9,986
8/31/2000 $9,685 $11,576 $10,656
9/30/2000 $9,663 $10,965 $10,654
Value on 9/30/00
S&P 500 $10,965
S&P 500/BARRA Value $10,654
Large Cap Value $9,663
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED SEPTEMBER 30)
[bar chart - data below]
Large Cap Value S&P 500/BARRA Value
9/30/1999 -8.56% -6.35%
9/30/2000 5.67% 13.74%
* From 7/30/99 to 9/30/99.
22 1-800-345-2021
Large Cap Value--Q&A
--------------------------------------------------------------------------------
[photo of Mark Mallon and Chuck Ritter]
An interview with Mark Mallon and Chuck Ritter, portfolio managers on the
Large Cap Value investment team.
HOW DID LARGE CAP VALUE PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER 30,
2000?
Large Cap Value gained 4.14%, in line with its benchmark, the S&P 500/
BARRA Value Index, which also returned 4.14%. The S&P 500 Index, considered to
be representative of the broad market, declined 3.60%.
WHAT CONTRIBUTED TO LARGE CAP VALUE'S PERFORMANCE?
Several factors played a role. First, we positioned Large Cap Value
conservatively, with smaller stakes in areas of the market, such as technology,
that proved the most volatile during the period.
A second -- and significant -- factor was that the market was kind to value
stocks, particularly in the second half of the period. With the economy
appearing to slow, investor concerns about earnings intensified. Then, in the
third quarter, several well-known consumer products companies and leading
technology firms warned that earnings would be lower than expected. This news
sent money out of growth and technology stocks and into the types of stocks
found in Large Cap Value's portfolio -- reasonably priced on conservative
earnings expectations.
FINANCIAL STOCKS REPRESENTED THE FUND'S LARGEST SECTOR WEIGHTING AT THE END OF
SEPTEMBER. WHAT WAS THE ATTRACTION THERE?
The financial sector is broad, encompassing banks, brokerages, credit card
firms, financial services firms and insurance providers. However, the group in
general has struggled in the wake of the Federal Reserve's series of interest
rate hikes, which were designed to moderate economic growth and head off
inflation. Higher rates reduce the margins between the rates lending
institutions pay depositors and those they charge for loans. As investors
shunned the group in lieu of faster-growing areas of the market, a number of
financial firms became very attractively valued. Later, as signs of slowing
growth emerged, the market became convinced that the Fed had reached or was
nearing the end of its rate-hike program, and financial stocks -- and bank
shares in particular -- rebounded smartly. With about a quarter of Large Cap
Value's assets in financials, the fund was well positioned to gain from this
shift in sentiment.
WERE THESE SOME OF THE STOCKS THAT PROVED TO BE TOP PERFORMERS DURING THE
PERIOD?
Yes. For example, Washington Mutual, a thrift, and Household International,
a high-quality financial services company, were downtrodden for some time,
mostly due to investor concerns about how the companies might perform in a
rising rate environment. As rates stabilized, though, confidence in the
companies' prospects grew and their share prices responded accordingly.
Within the financial sector, the fund also profited from its investments in
property and casualty insurance
[right margin]
"WITH THE ECONOMY APPEARING TO SLOW, INVESTOR CONCERNS ABOUT
EARNINGS INTENSIFIED."
PORTFOLIO AT A GLANCE
9/30/00 3/31/00
NO. OF COMPANIES 81 89
P/E RATIO 19.0 20.5
MEDIAN MARKET $10.9 $12.7
CAPITALIZATION BILLION BILLION
WEIGHTED MARKET $61.1 $77.1
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 32%(1) 74%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.90%(3) 0.90%(3)
DIVIDEND YIELD 2.42% 2.30%
(1) Six months ended 9/30/00.
(2) For the period from 7/30/99 to 3/31/00.
(3) Annualized.
Investment terms are defined in the Glossary on pages 51-52.
www.americancentury.com 23
Large Cap Value--Q&A
--------------------------------------------------------------------------------
(Continued)
companies. One top contributor was Allstate. Like other insurers, Allstate
was hurt by intensive rate competition and the costs of spring storms in the
Midwest. As insurance rates began to increase during the third quarter, however,
the company rebounded strongly.
WHICH OTHER STOCKS CONTRIBUTED TO PERFORMANCE?
Two top contributors we'd like to highlight are Boeing, the world's biggest
maker of jet planes, and drug giant Eli Lilly. Last year, investors appeared
concerned that orders for Boeing's airplanes would decline. Instead, with the
global economy on the rebound, Boeing's orders have improved, along with its
production outlook for the next few years. In addition, Boeing has
significantly raised the productivity of its assembly lines, resulting in more
profit per plane.
Our investment in Lilly reflects our strategy of investing in high-quality
growth companies when their share prices become cheap relative to their
long-term prospects. Lilly, a large pharmaceutical company, suffered last year
from concerns about patent expirations among its key products. However, this
firm, a leader in its industry, has a strong research effort. The stock soared
this year in response to news about promising developments in its research
laboratories, and we sold at a very nice gain.
WHAT ABOUT DISAPPOINTMENTS?
Telecommunications companies detracted most from performance during the
period. This industry has become increasingly competitive, and has also
struggled in recent months in sympathy with the downturn in technology-oriented
firms. Telephone service providers have had the toughest time. The biggest
detractors in this group were Sprint and WorldCom, whose problems were
compounded when their proposed merger was disallowed by federal regulators on
the belief that the combined organization would have unfair market advantages
and reduce competition. AT&T also hurt performance. These firms struggled with
weakness in consumer long-distance pricing and the developing perception that
the voice long-distance business may be in a serious decline.
Another holding, Computer Associates, also slowed our progress during the
quarter, but we believe the company remains a solid value opportunity. This
business, which sells mainframe software, saw revenues slow as IBM, the leader
in mainframes, embarked upon a major upgrade cycle. Because we believe Computer
Associates' current troubles are transitory, we added to the fund's position.
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
9/30/00 3/31/00
EXXON MOBIL CORP. 5.6% 4.7%
CITIGROUP INC. 3.5% 2.8%
VERIZON
COMMUNICATIONS(1) 2.5% 3.4%
LOEWS CORP. 2.3% 1.0%
AT&T CORP. 2.2% 2.6%
PHILIP MORRIS
COMPANIES INC. 2.2% 2.0%
ALLSTATE CORP. 2.0% 1.3%
FPL GROUP, INC. 2.0% 1.8%
FORD MOTOR COMPANY 1.8% 1.6%
ROYAL DUTCH PETROLEUM
CO. NEW YORK SHARES 1.8% 1.5%
(1) Bell Atlantic Corp. acquired GTE Corp. on 7/3/00. On that date, Bell
Atlantic changed its name to Verizon Communications. The percentage as of
3/31/00 represents GTE Corp. and Bell Atlantic Corp. shares owned by the fund.
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
9/30/00 3/31/00
BANKS 12.2% 11.7%
ENERGY RESERVES
& PRODUCTION 9.6% 7.5%
TELEPHONE 6.9% 8.1%
INVESTMENT TRUSTS 6.1% 6.9%
FINANCIAL SERVICES 6.0% 4.1%
24 1-800-345-2021
Large Cap Value--Q&A
--------------------------------------------------------------------------------
(Continued)
ENERGY STOCKS REPRESENT A SUBSTANTIAL PORTION OF INVESTMENTS. WHAT ATTRACTED
YOU TO THIS SECTOR?
Energy proved to be a fruitful sector for the fund, as rising energy prices
lifted most stocks in that realm. Although we've done well in this group, we
have remained relatively cautious and, in fact, are underweight compared to the
index. We generally believe that many companies have reached their peak in
earnings and no longer trade at the bargain prices we look for. Our investments
remain focused among integrated oil firms, such as Exxon/Mobil and Royal Dutch
Petroleum. These firms offer a chance to participate in the sector's success,
and also offer a measure of stability. We have avoided some of the more richly
valued energy service companies whose earnings are dependent on even higher
energy prices.
WHAT ABOUT CONSUMER CYCLICALS?
This sector is at the opposite end of the spectrum from energy. While many
energy firms' prices reflect an increasingly optimistic outlook, many consumer
cyclical companies are currently valued as if a recession is imminent. While
history tells us that a recession is inevitable at some point, we do not believe
it's right around the corner. For that reason, we've taken substantial positions
in economically sensitive sectors, such as consumer cyclicals and industrials,
where stock prices appear to have been driven down to levels that are
interesting to us. We feel these areas offer good value and opportunities.
WHAT IS YOUR OUTLOOK FOR THE REST OF 2000 AND THE BEGINNING OF 2001?
Over the short term, we anticipate a relatively benign interest-rate
environment. We also expect that economic growth will continue to be healthy,
but will proceed at a slower rate than the pace it has set over the past few
years. As a result, we're not positioning the fund for an imminent economic
downturn. Instead, we continue to look for fundamentally sound firms that appear
to be undervalued. Many Old Economy stocks came down severely over the past
year, and the marketplace is offering a diverse menu of value opportunities.
As far as the future of value-oriented investing is concerned, we've seen
indications in recent months that investors have begun to pay attention to the
price they're willing to pay for a company's business prospects. This is a
profound reversal in sentiment from 1999 and early 2000, when price momentum,
rather than relative value or fundamentals, drove the market. This development
is an encouraging sign for investors pursuing a value strategy.
[right margin]
"MANY OLD ECONOMY STOCKS CAME DOWN SEVERELY OVER THE PAST YEAR, AND THE
MARKETPLACE IS OFFERING A DIVERSE MENU OF VALUE OPPORTUNITIES. "
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF SEPTEMBER 30, 2000
COMMON STOCKS 95.5%
TEMPORARY CASH INVESTMENTS 4.5%
[pie chart}
AS OF MARCH 31, 2000
COMMON STOCKS 94.5%
TEMPORARY CASH INVESTMENTS 5.5%
[pie chart}
www.americancentury.com 25
Large Cap Value--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
================================================================================
<TABLE>
COMMON STOCKS -- 95.5%
<S> <C> <C>
APPAREL & TEXTILES -- 1.5%
1,300 Liz Claiborne, Inc. $ 50,050
6,000 VF Corp. 148,125
-------------------
198,175
-------------------
BANKS -- 12.2%
3,200 Bank of America Corp. 167,600
4,600 Bank One Corp. 177,674
2,400 Chase Manhattan Corp. 110,850
8,666 Citigroup Inc. 468,505
3,400 First Union Corp. 109,438
3,300 Fleet Boston Financial Corp. 128,700
4,200 KeyCorp 106,313
5,800 National City Corp. 128,325
2,700 Summit Bancorp. 93,150
4,600 U.S. Bancorp 104,650
-------------------
1,595,205
-------------------
CHEMICALS - 2.9%
2,800 Air Products & Chemicals, Inc. 100,800
2,400 FMC Corp.(1) 160,950
5,800 Sherwin-Williams Co. 123,975
-------------------
385,725
-------------------
COMPUTER HARDWARE
& BUSINESS MACHINES - 2.0%
4,900 Compaq Computer Corp. 135,142
1,300 Hewlett-Packard Co. 126,100
-------------------
261,242
-------------------
COMPUTER SOFTWARE - 2.8%
4,000 Computer Associates International, Inc. 100,750
1,700 International Business Machines Corp. 191,250
1,300 Microsoft Corp.(1) 78,406
-------------------
370,406
-------------------
CONSUMER DURABLES - 1.2%
4,200 Whirlpool Corp. 163,275
-------------------
DEFENSE/AEROSPACE - 2.2%
1,400 Boeing Co. 88,200
3,800 Raytheon Co. Cl A 104,025
2,400 TRW Inc. 97,500
-------------------
289,725
-------------------
DEPARTMENT STORES - 2.5%
24,200 Kmart Corp.(1) 145,200
6,200 May Department Stores Co. (The) 127,100
1,900 Sears, Roebuck & Co. 61,598
-------------------
333,898
-------------------
DRUGS - 2.3%
2,800 Bristol-Myers Squibb Co. 159,950
2,000 Merck & Co., Inc. 148,875
-------------------
308,825
-------------------
Shares Value
--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.0%
2,400 Lucent Technologies Inc.(1) $ 70,050
2,400 Motorola, Inc. 67,800
-------------------
137,850
-------------------
ELECTRICAL UTILITY - 3.0%
7,000 Edison International 135,188
4,000 FPL Group, Inc. 263,000
-------------------
398,188
-------------------
ENERGY RESERVES & PRODUCTION - 9.6%
1,900 Chevron Corp. 161,975
8,368 Exxon Mobil Corp. 745,798
6,000 Occidental Petroleum Corp. 130,875
3,900 Royal Dutch Petroleum Co.
New York Shares 233,756
-------------------
1,272,404
-------------------
ENTERTAINMENT - 0.6%
2,200 Disney (Walt) Co. 84,150
-------------------
ENVIRONMENTAL SERVICES - 0.7%
5,100 Waste Management, Inc. 88,931
-------------------
EQUITY REAL ESTATE INVESTMENT TRUST - 0.9%
2,500 Equity Residential Properties Trust 120,000
-------------------
FINANCIAL SERVICES - 6.0%
2,000 Block (H & R), Inc. 74,125
3,900 Countrywide Credit Industries, Inc. 147,225
1,800 Fannie Mae 128,700
2,900 Household International, Inc. 164,212
2,000 MBIA Inc. 142,250
2,300 MGIC Investment Corp. 140,588
-------------------
797,100
-------------------
FOOD & BEVERAGE - 2.1%
7,900 ConAgra, Inc. 158,494
3,200 Heinz (H.J.) Co. 118,600
-------------------
277,094
-------------------
FOREST PRODUCTS & PAPER - 1.2%
1,900 Fort James Corp. 58,069
3,300 International Paper Co. 94,669
-------------------
152,738
-------------------
GROCERY STORES - 0.5%
3,100 Albertson's Inc. 65,100
-------------------
HEAVY ELECTRICAL EQUIPMENT - 2.1%
3,400 Cooper Industries, Inc. 119,850
2,400 Emerson Electric Co. 160,800
-------------------
280,650
-------------------
HOME PRODUCTS - 1.7%
2,000 Avon Products, Inc. 81,750
5,400 Fortune Brands, Inc. 143,100
-------------------
224,850
-------------------
26 1-800-345-2021 See Notes to Financial Statements
Large Cap Value--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
INDUSTRIAL PARTS - 2.7%
4,000 ITT Industries, Inc. $ 129,750
2,900 Parker-Hannifin Corp. 97,875
5,600 Snap-on Inc. 131,950
-------------------
359,575
-------------------
INFORMATION SERVICES - 0.7%
2,100 Electronic Data Systems Corp. 87,150
-------------------
INVESTMENT TRUSTS - 6.1%
2,000 iShares Russell 1000 Value
Index Fund(1) 116,063
1,800 iShares S&P 500/BARRA Value
Index Fund(1) 113,569
4,000 Standard and Poor's 500 Depositary
Receipt 574,499
-------------------
804,131
-------------------
LEISURE - 1.3%
2,600 Eastman Kodak Co. 106,275
6,354 Mattel, Inc. 71,085
-------------------
177,360
-------------------
LIFE & HEALTH INSURANCE - 1.0%
4,800 Torchmark Corp. 133,500
-------------------
MEDICAL PROVIDERS & SERVICES - 2.0%
4,000 HCA - The Healthcare Co. 148,500
14,000 HEALTHSOUTH Corp.(1) 113,750
-------------------
262,250
-------------------
MOTOR VEHICLES & PARTS - 2.9%
9,265 Ford Motor Company 234,520
2,200 General Motors Corp. 143,000
-------------------
377,520
-------------------
OIL REFINING - 1.4%
6,700 USX - Marathon Group 190,113
-------------------
PROPERTY & CASUALTY INSURANCE - 4.4%
7,800 Allstate Corp 271,050
3,700 Loews Corp. 308,488
-------------------
579,538
-------------------
Shares Value
-------------------------------------------------------------------------------
PUBLISHING - 2.3%
4,300 American Greetings $ 75,250
4,800 Deluxe Corp. 97,500
2,500 Knight-Ridder, Inc. 127,031
-------------------
299,781
-------------------
RAILROADS - 0.3%
1,600 Burlington Northern Santa Fe Corp. 34,500
-------------------
RESTAURANTS - 0.5%
3,600 Wendy's International, Inc. 72,225
-------------------
SECURITIES & ASSET MANAGEMENT - 0.6%
1,800 Franklin Resources, Inc. 79,974
-------------------
TELEPHONE - 6.9%
10,000 AT&T Corp. 293,750
3,300 Sprint Corp. 96,731
6,894 Verizon Communications 333,928
6,300 WorldCom, Inc.(1) 191,363
-------------------
915,772
-------------------
THRIFTS - 1.2%
3,900 Washington Mutual, Inc. 155,269
-------------------
TOBACCO - 2.2%
9,900 Philip Morris Companies Inc. 291,431
-------------------
TOTAL COMMON STOCKS 12,625,620
-------------------
(Cost $13,082,498)
TEMPORARY CASH INVESTMENTS -- 4.5%
Repurchase Agreements, Morgan Stanley
Group, Inc., (U.S. Treasury obligations), in a
joint trading account at 6.45%, dated
9/29/00, due 10/2/00 (Delivery value
$600,323) 600,000
-------------------
(Cost $600,000)
TOTAL INVESTMENT SECURITIES - 100.0% $13,225,620
===================
(Cost $13,682,498)
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(1) Non-income producing.
See Notes to Financial Statements www.americancentury.com 27
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. For each class of shares, the net assets divided by shares outstanding
is the share price, or NET ASSET VALUE PER SHARE. This statement also breaks
down the fund's net assets into capital (shareholder investments) and
performance (investment income and gains/losses).
SEPTEMBER 30, 2000 (UNAUDITED)
VALUE EQUITY INCOME
ASSETS
Investment securities -- unaffiliated,
at value (identified cost of
$1,461,387,896 and $323,740,116)
(Note 3) .............................. $ 1,462,465,892 $ 330,299,678
Investment securities -- affiliated,
at value (identified cost of
$81,394,800 and $12,508,136)
(Note 3 and 5) ........................ 88,202,278 10,292,512
Cash ..................................... -- 919,593
Receivable for investments sold .......... 23,988,465 4,303,212
Receivable for capital shares sold ....... 158,675 260,912
Receivable for variation margin on
futures contracts ..................... 2,743,761 384,235
Dividends and interest receivable ........ 1,417,141 1,004,500
--------------- ---------------
1,578,976,212 347,464,642
--------------- ---------------
LIABILITIES
Disbursements in excess of
demand deposit cash ................... 1,985,451 --
Payable for investments purchased ........ 20,290,631 6,758,470
Accrued management fees (Note 2) ......... 1,227,912 266,174
Distribution fees payable (Note 2) ....... 14,181 4,003
Service fees payable (Note 2) ............ 14,181 4,003
Payable for directors' fees and expenses . 517 115
Accrued expenses and other liabilities ... 904 70
--------------- ---------------
23,533,777 7,032,835
--------------- ---------------
Net Assets ............................... $ 1,555,442,435 $ 340,431,807
=============== ===============
NET ASSETS CONSIST OF:
Capital (par value and
paid-in surplus) ...................... $ 1,732,232,249 $ 359,742,933
Accumulated undistributed net
investment income (loss) .............. 70,149 (4,614)
Accumulated undistributed net
realized loss on investments
and foreign currency transactions ..... (181,872,941) (23,373,441)
Net unrealized appreciation on
investments and translation
of assets and liabilities
in foreign currencies (Note 3) ......... 5,012,978 4,066,929
--------------- ---------------
$ 1,555,442,435 $ 340,431,807
=============== ===============
Investor Class, $0.01 Par Value
Net assets ............................... $ 1,375,262,526 $ 305,808,128
Shares outstanding ....................... 242,408,287 51,449,887
Net asset value per share ................ $ 5.67 $ 5.94
Advisor Class, $0.01 Par Value
Net assets ............................... $ 70,756,314 $ 19,811,154
Shares outstanding ....................... 12,471,063 3,332,753
Net asset value per share ................ $ 5.67 $ 5.94
Institutional Class, $0.01 Par Value
Net assets ............................... $ 109,423,595 $ 14,812,525
Shares outstanding ....................... 19,267,543 2,491,256
Net asset value per share ................ $ 5.68 $ 5.95
28 1-800-345-2021 See Notes to Financial Statements
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
SMALL CAP LARGE CAP
VALUE VALUE
ASSETS
Investment securities - unaffiliated,
at value (identified cost of
$34,874,745 and $13,682,498)
(Note 3) ................................... $ 36,991,624 $ 13,225,620
Cash ......................................... 1,649,432 --
Receivable for investments sold .............. 1,991,326 257,378
Receivable for capital shares sold ........... 2,566 482
Receivable for variation margin
on futures contracts ...................... 95,225 3,675
Dividends and interest receivable ............ 33,311 22,124
------------ ------------
0,763,484 13,509,279
------------ ------------
LIABILITIES
Disbursements in excess of
demand deposit cash ....................... -- 219,670
Payable for investments purchased ............ 2,046,565 36,708
Accrued management fees (Note 2) ............. 36,772 9,806
Distribution fees payable (Note 2) ........... 731 --
Service fees payable (Note 2) ................ 731 --
Payable for directors' fees and expenses ..... 14 4
Accrued expenses and other liabilities ....... 265 4
------------ ------------
2,085,078 266,192
------------ ------------
Net Assets ................................... $ 38,678,406 $ 13,243,087
============ ============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ...... $ 35,239,566 $ 13,739,403
Accumulated net investment loss .............. (2,890) (4,241)
Accumulated undistributed net realized
gain (loss) on investments and
foreign currency transactions ............. 1,324,851 (35,197)
Net unrealized appreciation
(depreciation) on investments
and translation of assets and
liabilities in foreign
currencies (Note 3) ....................... 2,116,879 (456,878)
------------ ------------
$ 38,678,406 $ 13,243,087
------------ ------------
Investor Class, $0.01 Par Value
Net assets ................................... $ 29,574,704 $ 13,243,087
Shares outstanding ........................... 5,193,078 2,796,907
Net asset value per share .................... $ 5.70 $ 4.73
Advisor Class, $0.01 Par Value
Net assets ................................... $ 4,248,259 N/A
Shares outstanding ........................... 744,760 N/A
Net asset value per share .................... $ 5.70 N/A
Institutional Class, $0.01 Par Value
Net assets ................................... $ 4,855,443 N/A
Shares outstanding ........................... 851,916 N/A
Net asset value per share .................... $ 5.70 N/A
See Notes to Financial Statements www.americancentury.com 29
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
VALUE EQUITY
INCOME
INVESTMENT INCOME
Income:
Dividends (including $1,971,677 from
affiliates for Value and net of
foreign taxes withheld of $123,471
and $23,965, respectively) ............. $ 18,833,574 $ 5,284,743
Interest .................................. 3,497,716 1,191,403
------------- -------------
22,331,290 6,476,146
------------- -------------
Expenses (Note 2):
Management fees ........................... 7,502,468 1,640,852
Distribution fees -- Advisor Class ........ 82,051 25,097
Service fees -- Advisor Class ............. 82,051 25,097
Directors' fees and expenses .............. 6,376 1,201
------------- -------------
7,672,946 1,692,247
------------- -------------
Net investment income ..................... 14,658,344 4,783,899
------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY (NOTE 3)
Net realized gain on:
Investments (includes $(12,093,340)
and $(133,413) from affiliates,
for Value and Equity Income,
respectively) .......................... 5,471,072 3,956,442
Foreign currency transactions ............. (114,354) 16,097
------------- -------------
5,356,718 3,972,539
------------- -------------
Change in net unrealized
appreciation on:
Investments ............................... 80,549,802 22,126,018
------------- -------------
Net realized and unrealized gain on
investments and foreign currency ....... 85,906,520 26,098,557
------------- -------------
Net Increase in Net Assets
Resulting from Operations .............. $ 100,564,864 $ 30,882,456
============= =============
30 1-800-345-2021 See Notes to Financial Statements
Statement of Operations
--------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
SMALL CAP LARGE CAP
VALUE VALUE
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes
withheld $0, and $805, respectively) .......... $ 226,832 $ 153,772
Interest ......................................... 61,114 12,774
---------- ----------
287,946 166,546
---------- ----------
Expenses (Note 2):
Management fees .................................. 165,231 60,863
Distribution fees -- Advisor Class ............... 1,754 --
Service fees -- Advisor Class .................... 1,754 --
Directors' fees and expenses ..................... 119 53
---------- ----------
168,858 60,916
---------- ----------
Net investment income ............................ 119,088 105,630
---------- ----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY (NOTE 3)
Net realized gain on:
Investments ...................................... 1,686,243 19,781
Foreign currency transactions .................... -- --
---------- ----------
1,686,243 19,781
---------- ----------
Change in net unrealized appreciation on:
Investments ...................................... 1,546,975 402,727
---------- ----------
Net realized and unrealized gain on
investments and foreign currency .............. 3,233,218 422,508
---------- ----------
Net Increase in Net Assets Resulting
from Operations ............................... $3,352,306 $ 528,138
========== ==========
See Notes to Financial Statements www.americancentury.com 31
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous pages for the most recent period),
income and capital gain distributions, and shareholder investments and
redemptions.
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND THE YEAR ENDED MARCH
31, 2000
<TABLE>
Increase (Decrease) in Net Assets
VALUE EQUITY INCOME
SEPT. 30, 2000 MARCH 31, 2000 SEPT. 30, 2000 MARCH 31, 2000
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income .......... $ 14,658,344 $ 27,456,716 $ 4,783,899 $ 12,072,464
Net realized gain (loss)
on investments and
foreign currency transactions 5,356,718 (64,634,047) 3,972,539 (4,967,548)
Change in net unrealized
appreciation (depreciation)
on investments .............. 80,549,802 54,410,260 22,126,018 (946,610)
--------------- --------------- --------------- ---------------
Net increase in net assets
resulting from operations ... 100,564,864 17,232,929 30,882,456 6,158,306
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class ............... (13,113,984) (25,653,978) (4,468,248) (11,012,731)
Advisor Class ................ (566,442) (772,801) (267,073) (597,277)
Institutional Class .......... (1,124,594) (1,071,307) (222,563) (364,992)
From net realized gains
on investment transactions:
Investor Class ............... -- -- -- (1,310,069)
Advisor Class ................ -- -- -- (86,899)
Institutional Class .......... -- -- -- (37,489)
In excess of net realized gains
on investment transactions:
Investor Class ............... -- (115,434,046) -- (24,998,209)
Advisor Class ................ -- (4,234,803) -- (1,632,922)
Institutional Class .......... -- (4,904,936) -- (714,849)
--------------- --------------- --------------- ---------------
Decrease in net assets
from distributions .......... (14,805,020) (152,071,871) (4,957,884) (40,755,437)
--------------- --------------- --------------- ---------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4)
Net increase (decrease) in
net assets from capital
share transactions .......... (75,488,789) (129,951,071) (2,181,685) 39,795,865
--------------- --------------- --------------- ---------------
Net increase (decrease)
in net assets ............... 10,271,055 (264,790,013) 23,742,887 5,198,734
NET ASSETS
Beginning of period ............ 1,545,171,380 1,809,961,393 316,688,920 311,490,186
--------------- --------------- --------------- ---------------
End of period .................. $ 1,555,442,435 $ 1,545,171,380 $ 340,431,807 $ 316,688,920
=============== =============== =============== ===============
Undistributed net investment
income (loss) ............... $ 70,149 $ 261,825 $ (4,614) $ 169,371
=============== =============== =============== ===============
</TABLE>
32 1-800-345-2021 See Notes to Financial Statements
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND THE YEAR ENDED
MARCH 31, 2000
SMALL CAP VALUE LARGE CAP VALUE
SEPT. 30, 2000 MARCH 31, 2000 SEPT. 30, 2000 MARCH 31, 2000
Increase in Net Assets
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income ............. $ 119,088 $ 194,751 $ 105,630 $ 137,224
Net realized gain (loss) on
investments and
foreign currency transactions ... 1,686,243 733,268 19,781 (54,978)
Change in net unrealized
appreciation (depreciation)
on investments ................. 1,546,975 969,916 402,727 (859,605)
------------ ------------ ------------ ------------
Net increase (decrease) in
net assets resulting
from operations ................ 3,352,306 1,897,935 528,138 (777,359)
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class .................. (102,806) (195,699) (112,132) (134,963)
Advisor Class ................... (6,004) (260) -- --
Institutional Class ............. (17,272) (17,199) -- --
From net realized gains
on investment transactions:
Investor Class .................. -- (674,150) -- --
Advisor Class ................... -- -- -- --
Institutional Class ............. -- (19,226) -- --
In excess of net realized gains
on investment transactions:
Investor Class .................. -- (351,429) -- --
Advisor Class ................... -- -- -- --
Institutional Class ............. -- (9,963) -- --
------------ ------------ ------------ ------------
Decrease in net assets
from distributions ............. (126,082) (1,267,926) (112,132) (134,963)
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4)
Net increase in net assets from
capital
share transactions .............. 15,311,858 7,114,046 156,102 13,583,301
------------ ------------ ------------ ------------
Net increase in net assets ........ 18,538,082 7,744,055 572,108 12,670,979
NET ASSETS
Beginning of period ............... 20,140,324 12,396,269 12,670,979 --
------------ ------------ ------------ ------------
End of period ..................... $ 38,678,406 $ 20,140,324 $ 13,243,087 $ 12,670,979
============ ============ ============ ============
Undistributed net investment
income (loss) .................. $ (2,890) $ 4,105 $ (4,241) $ 2,261
============ ============ ============ ============
</TABLE>
(1) July 30, 1999 (inception) through March 31, 2000.
See Notes to Financial Statements www.americancentury.com 33
Notes to Financial Statements
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Capital Portfolios, Inc. (the corporation)
is registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Value Fund (Value), Equity Income Fund
(Equity Income), Small Cap Value Fund (Small Cap Value), and Large Cap Value
Fund (Large Cap Value) (the funds) are four of the six funds issued by the
corporation. The funds are diversified under the 1940 Act. The investment
objective of Value, Small Cap Value and Large Cap Value is long-term capital
growth. The production of income is a secondary objective. Value, Small Cap
Value and Large Cap Value seek to achieve their investment objective by
primarily investing in equity securities of companies that management believes
to be undervalued at the time of purchase. Small Cap Value invests in companies
with smaller market capitalization, Value invests in companies with medium to
large market capitalization, and Large Cap Value invests in companies with
larger market capitalization. The investment objective of Equity Income is the
production of current income through investments in income-producing equity
securities. Capital appreciation is a secondary objective. The following
significant accounting policies are in accordance with generally accepted
accounting principles; these policies may require the use of estimates by fund
management.
MULTIPLE CLASS -- The funds are authorized to issue three classes of shares:
the Investor Class, the Advisor Class, and the Institutional Class. The three
classes of shares differ principally in their respective shareholder servicing
and distribution expenses and arrangements. All shares of each fund represent an
equal pro rata interest in the 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. Sale of the Advisor Class and
Institutional Class had not commenced for Large Cap Value as of September 30,
2000.
SECURITY VALUATIONS -- Portfolio 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.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or, in the case of certain foreign securities, at the last reported
sales price, depending on local convention or regulation. 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. When
valuations are not readily available, securities are valued at fair value as
determined in accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FUTURES CONTRACTS -- The funds may enter into stock index futures contracts
in order to manage each fund's exposure to changes in market conditions. One of
the risks of entering into futures contracts is the possibility that the change
in value of the contract may not correlate with the changes in value of the
underlying securities. Upon entering into a futures contract, each fund is
required to deposit either cash or securities in an amount equal to a certain
percentage of the contract value (initial margin). Subsequent payments
(variation margin) are made or received daily, in cash, by the funds. The
variation margin is equal to the daily change in the contract value and is
recorded as unrealized gains and losses. The fund recognizes a realized gain or
loss when the contract is closed or expires. Net realized and unrealized gains
or losses occurring during the holding period of futures contracts are a
component of realized gain (loss) on investments and unrealized appreciation
(depreciation) on investments, respectively.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. Each fund requires that the collateral, represented by securities,
received in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable each fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to each fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, each fund, along with other registered
investment companies having management agreements with ACIM, 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 funds' policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under the provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income are declared
and paid quarterly. Distributions from net realized gains are generally declared
and paid annually.
The 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.
At March 31, 2000, Large Cap Value had accumulated net realized capital loss
carryovers for federal income tax purposes of $4,788 (expiring in 2008) which
may be used to offset future taxable gains.
For the five month period ended March 31, 2000, Value, Equity Income, and
Small Cap Value incurred net capital losses of $173,002,368, $25,386,721, and
$73,910, respectively. The funds have elected to treat such losses as having
been incurred in the following fiscal year.
34 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
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 per class. The Agreement
provides that all expenses of the funds, except brokerage commissions, taxes,
interest, 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 daily and paid monthly based
on each fund's class average daily closing net assets during the previous month.
Following are the management fee schedules for the funds:
Value Equity Small Cap Large Cap
Income Value Value
Investor 1.00% 1.00% 1.25% 0.70% to 0.90%
Advisor 0.75% 0.75% 1.00% 0.45% to 0.65%
Institutional 0.80% 0.80% 1.05% 0.50% to 0.70%
The management fee for Large Cap Value varies depending on fund asset
levels. As fund assets increase, the fee applied decreases. For the period ended
September 30, 2000, the effective annual Investor Class management fee for Large
Cap Value was 0.90%.
The Board of Directors has adopted a Master Distribution and Shareholder
Services Plan (the plan) for the Advisor Class, pursuant to Rule 12b-1 of the
1940 Act. The plan provides that the funds will pay ACIM an annual distribution
fee equal to 0.25% and service fee equal to 0.25%. The fees are computed daily
and paid monthly based on the Advisor Class's average daily closing net assets
during the previous month. The distribution fee provides compensation for
distribution expenses incurred in connection with distributing shares of the
Advisor Class including, but not limited to, payments to brokers, dealers, and
financial institutions that have entered into sales agreements with respect to
shares of the funds. The service fee provides compensation for shareholder and
administrative services rendered by ACIM, its affiliates or independent third
party providers. Fees incurred under the plan during the six month period ended
were $164,102, $50,194, and $3,508 for Value, Equity Income, and Small Cap
Value, respectively.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, the
distributor of the corporation, American Century Service, Inc., and the
corporation's transfer agent, American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six months
ended September 30, 2000 for Value, Equity Income, Small Cap Value, and Large
Cap Value, were as follows:
<TABLE>
VALUE EQUITY INCOME SMALL CAP VALUE LARGE CAP VALUE
<S> <C> <C> <C> <C>
Purchases $872,449,250 $272,776,262 $32,482,678 $3,995,495
========================================================================================
Proceeds from sales $1,020,475,074 $282,049,877 $17,899,710 $4,048,990
On September 30, 2000, the composition of unrealized appreciation and
depreciaton of investment securities based on the aggregate cost of investments
for federal income tax purposes was as follows:
VALUE EQUITY INCOME SMALL CAP VALUE LARGE CAP VALUE
Appreciation $ 122,813,616 $ 17,895,415 $ 3,058,656 $ 935,573
Depreciation (128,950,320) (15,621,376) (1,793,175) (1,433,603)
---------------- ---------------- ---------------- ----------------
Net $ (6,136,704) $ 2,274,039 $ 1,265,481 $ (498,030)
================ ================ ================ ================
Federal Tax Cost $1,556,804,874 $ 338,318,151 $ 35,726,143 $ 13,723,650
================ ================ ================ ================
</TABLE>
www.americancentury.com 35
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
<TABLE>
Transactions in shares of the funds were as follows:
VALUE EQUITY INCOME
SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
<S> <C> <C> <C> <C>
Shares authorized ........................ 500,000,000 75,000,000
============== ==============
Six months ended September 30, 2000
Sold ..................................... 50,396,637 $ 271,334,843 24,344,585 $135,306,892
Issued in reinvestment of distributions .. 2,384,170 12,959,653 734,020 4,213,167
Redeemed ................................. (69,701,611) (373,275,511) (25,007,602) (139,700,614)
-------------- -------------- -------------- --------------
Net increase (decrease) .................. (16,920,804) $ (88,981,015) 71,003 $ (180,555)
============== ============== ============== ==============
Year ended March 31, 2000
Sold ..................................... 186,053,261 $ 1,117,033,732 35,646,612 $220,011,159
Issued in reinvestment of distributions .. 25,598,938 139,493,288 6,084,481 34,369,985
Redeemed ................................. (250,174,546) (1,463,357,452) (40,203,694) (237,400,931)
-------------- -------------- -------------- --------------
Net increase (decrease) .................. (38,522,347) $ (206,830,432) 1,527,399 $ 16,980,213
============== ============== ============== ==============
ADVISOR CLASS
Shares authorized ........................ 25,000,000 25,000,000
============== ==============
Six months ended September 30, 2000
Sold ..................................... 5,654,778 $29,772,686 644,230 $ 3,523,436
Issued in reinvestment of distributions .. 100,701 548,863 44,697 256,502
Redeemed ................................. (4,735,594) (24,818,114) (1,042,153) (5,790,579)
-------------- -------------- -------------- --------------
Net increase (decrease) .................. 1,019,885 $ 5,503,435 (353,226) $(2,010,641)
============== ============== ============== ==============
Year ended March 31, 2000
Sold ..................................... 8,119,010 $47,286,198 4,221,019 $ 25,880,618
Issued in reinvestment of distributions .. 900,517 4,889,948 387,918 2,177,940
Redeemed ................................. (6,972,925) (40,826,420) (2,982,534) (17,692,229)
-------------- -------------- -------------- --------------
Net increase (decrease) .................. 2,046,602 $11,349,726 1,626,403 $ 10,366,329
============== ============== ============== ==============
INSTITUTIONAL CLASS
Shares authorized ........................ 25,000,000 25,000,000
============== ==============
Six months ended September 30, 2000
Sold ..................................... 5,867,100 $31,734,904 1,216,087 $7,006,043
Issued in reinvestment of distributions .. 198,502 1,083,214 22,122 125,748
Redeemed ................................. (4,561,923) (24,829,327) (1,239,225) (7,122,280)
-------------- -------------- -------------- --------------
Net increase (decrease) .................. 1,503,679 $ 7,988,791 (1,016) $ 9,511
============== ============== ============== ==============
Year ended March 31, 2000
Sold ..................................... 15,501,895 $89,167,470 2,511,738 $15,122,592
Issued in reinvestment of distributions .. 1,078,998 5,826,592 182,011 1,022,370
Redeemed ................................. (5,102,420) (29,464,427) (647,360) (3,695,639)
-------------- -------------- -------------- --------------
Net increase ............................. 11,478,473 $65,529,635 2,046,389 $12,449,323
============== ============== ============== ==============
</TABLE>
36 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
Transactions in shares of the funds were as follows:
SMALL CAP VALUE LARGE CAP VALUE
SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
<S> <C> <C> <C> <C>
Shares authorized ........................ 50,000,000 50,000,000
============== ==============
Six months ended September 30, 2000
Sold ..................................... 2,846,233 $15,351,850 847,393 $3,924,317
Issued in reinvestment of distributions .. 18,419 100,067 23,028 105,668
Redeemed ................................. (1,183,794) (6,256,837) (835,647) (3,873,883)
-------------- -------------- -------------- --------------
Net increase ............................. 1,680,858 $ 9,195,080 34,774 $ 156,102
============== ============== ============== ==============
Year ended March 31, 2000
Sold ..................................... 5,348,105 $ 26,704,906 4,620,800 $22,127,099
Issued in reinvestment of distributions .. 261,755 1,209,414 27,851 128,228
Redeemed ................................. (4,509,836) (22,066,727) (1,886,518) (8,672,026)
-------------- -------------- -------------- --------------
Net increase ............................. 1,100,024 $ 5,847,593 2,762,133 $13,583,301
============== ============== ============== ==============
ADVISOR CLASS
Shares authorized ........................ 25,000,000 25,000,000
============== ==============
Six months ended September 30, 2000
Sold ..................................... 1,188,320 $6,547,196
Issued in reinvestment of distributions .. 1,079 5,974
Redeemed ................................. (462,731) (2,540,769)
-------------- --------------
Net increase ............................. 726,668 $ 4,012,401
============== ==============
Year ended March 31, 2000
Sold ..................................... 18,043 $84,220
Issued in reinvestment of distributions .. 52 260
Redeemed ................................. (3) (12)
-------------- --------------
Net increase ............................. 18,092 $84,468
============== ==============
INSTITUTIONAL CLASS
Shares authorized ........................ 25,000,000 25,000,000
============== ==============
Six months ended September 30, 2000
Sold ..................................... 411,009 $2,255,284
Issued in reinvestment of distributions .. 2,606 14,112
Redeemed ................................. (29,751) (165,019)
-------------- --------------
Net increase ............................. 383,864 $2,104,377
============== ==============
Year ended March 31, 2000
Sold ..................................... 383,046 $1,788,334
Issued in reinvestment of distributions .. 7,871 36,738
Redeemed ................................. (131,063) (643,087)
-------------- --------------
Net increase ............................. 259,854 $1,181,985
============== ==============
</TABLE>
www.americancentury.com 37
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
5. AFFILIATED COMPANY TRANSACTIONS
A summary of transactions for each issuer which is or was an affiliate at or
during the six months ended September 30, 2000 follows:
<TABLE>
SEPTEMBER 30, 2000
SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND ----------------------------
FUND/ISSUER 3/31/00 COST COST GAIN (LOSS) INCOME SHARE BALANCE MARKET VALUE
VALUE
<S> <C> <C> <C> <C> <C> <C>
AGL Resources Inc. 2,550,800 -- $ 11,580,376 $ (69,670) $1,310,013 1,943,200 $38,985,450
Interstate Bakeries Corp. 3,333,400 -- 70,229,917 (12,430,490) 432,257 -- --
LabOne, Inc. 620,000 -- 8,722,385 (5,849,104) -- 244,500 2,177,578
Superior
Industries
International, Inc. 1,382,300 -- 16,966,055 6,259,672 229,407 649,600 19,488,000
XTRA Corp. 621,200 -- 56,416 (3,748) -- 620,000 27,551,250
-- $107,555,149 $(12,093,340) $1,971,677 $88,202,278
EQUITY INCOME
National Presto
Industries, Inc. 335,800 $834,441 $685,011 $(133,413) -- 343,800 $10,292,512
</TABLE>
--------------------------------------------------------------------------------
6. BANK LOANS
The funds, along with certain other funds managed by ACIM, have entered into
an unsecured $620,000,000 bank line of credit agreement with Chase Manhattan
Bank. The funds may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The funds did not borrow from the line during the
six month period ended September 30, 2000.
38 1-800-345-2021
Value--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
investment income as a percentage of average net assets), EXPENSE RATIO
(operating expenses as a percentage of average net assets), and PORTFOLIO
TURNOVER (a gauge of the fund's trading activity).
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 2000 1999 1998 1997 1996
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $ 5.35 $ 5.77 $ 7.73 $ 6.58 $ 6.32 $ 5.46
----------- ----------- ----------- ------------- ------------- -----------
Income From Investment Operations
Net Investment Income(2) ............. 0.05 0.09 0.08 0.10 0.12 0.13
Net Realized and Unrealized Gain(Loss)
on Investment Transactions ........ 0.32 (0.01) (0.80) 2.35 0.87 1.34
----------- ----------- ----------- ------------- ------------- -----------
Total From Investment Operations ..... 0.37 0.08 (0.72) 2.45 0.99 1.47
----------- ----------- ----------- ------------- ------------- -----------
Distributions
From Net Investment Income ........... (0.05) (0.09) (0.09) (0.10) (0.12) (0.12)
In Excess of Net Investment Income ... -- -- -- -- --(3) (0.01)
From Net Realized Gains
on Investment Transactions ........ -- -- (1.15) (1.20) (0.61) (0.48)
In Excess of Net Realized Gains
on Investment Transactions ........ -- (0.41) -- -- -- --
----------- ----------- ----------- ------------- ------------- -----------
Total Distributions .................. (0.05) (0.50) (1.24) (1.30) (0.73) (0.61)
----------- ----------- ----------- ------------- ------------- -----------
Net Asset Value, End of Period ......... $ 5.67 $ 5.35 $ 5.77 $ 7.73 $ 6.58 $ 6.32
=========== =========== =========== ============= ============= ===========
Total Return(4) ........................ 7.01% 1.42% (9.88)% 39.94% 15.92% 28.06%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets .................. 1.00%(5) 1.00% 1.00% 1.00% 1.00% 0.97%
Ratio of Net Investment Income to
Average Net Assets .................. 1.90%(5) 1.48% 1.19% 1.38% 1.86% 2.17%
Portfolio Turnover Rate ................ 62% 115% 130% 130% 111% 145%
Net Assets, End of Period (in thousands) $ 1,375,263 $ 1,388,646 $ 1,719,367 $ 2,713,562 $ 1,743,582 $ 881,885
(1) Six months ended September 30, 2000 (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 dividends and capital gains distributions, if any.
Total returns for periods less than one year are not
annualized.
(5) Annualized.
</TABLE>
See Notes to Financial Statements www.americancentury.com 39
Value--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 2000 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ....................... $ 5.36 $ 5.77 $ 7.73 $ 6.58 $ 6.71
---------- ---------- ---------- ---------- ----------
Income From Investment Operations
Net Investment Income(3) ................................. 0.05 0.07 0.06 0.08 0.05
Net Realized and Unrealized Gain (Loss) on
Investment Transactions ............................... 0.31 0.01 (0.80) 2.35 0.48
---------- ---------- ---------- ---------- ----------
Total From Investment Operations ......................... 0.36 0.08 (0.74) 2.43 0.53
---------- ---------- ---------- ---------- ----------
Distributions
From Net Investment Income ............................... (0.05) (0.08) (0.07) (0.08) (0.05)
In Excess of Net Investment Income ....................... -- -- -- -- --(4)
From Net Realized Gains on Investment Transactions ....... -- -- (1.15) (1.20) (0.61)
In Excess of Net Realized Gains on Investment Transactions -- (0.41) -- -- --
---------- ---------- ---------- ---------- ----------
Total Distributions ...................................... (0.05) (0.49) (1.22) (1.28) (0.66)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............................. $ 5.67 $ 5.36 $ 5.77 $ 7.73 $ 6.58
========== ========== ========== ========== ==========
Total Return(5) .......................................... 6.69% 1.36% (10.09)% 39.60% 8.07%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets .......... 1.25%(6) 1.25% 1.25% 1.25% 1.25%(6)
Ratio of Net Investment Income to Average Net Assets ....... 1.65%(6) 1.23% 0.94% 1.13% 1.50%(6)
Portfolio Turnover Rate .................................... 62% 115% 130% 130% 111%
Net Assets, End of Period (in thousands) ................... $ 70,756 $ 61,323 $ 54,277 $ 56,118 $ 29,250
(1) Six months ended September 30, 2000 (unaudited).
(2) October 2, 1996 (commencement of sale) through March 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Per share amount was less than $0.005.
(5) Total return assumes reinvestment of dividends and capital gains distributions, if any.
Total returns for periods less than one year are not
annualized.
(6) Annualized.
</TABLE>
40 1-800-345-2021 See Notes to Financial Statements
Value--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
Institutional Class
2000(1) 2000 1999 1998(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............................... $ 5.36 $ 5.78 $ 7.73 $ 7.84
----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(3) ......................................... 0.06 0.10 0.10 0.15
Net Realized and Unrealized Gain (Loss) on Investment Transactions 0.32 (0.01) (0.80) 1.02
----------- ----------- ----------- -----------
Total From Investment Operations ................................. 0.38 0.09 (0.70) 1.17
----------- ----------- ----------- -----------
Distributions
From Net Investment Income ....................................... (0.06) (0.10) (0.10) (0.08)
From Net Realized Gains on Investment Transactions ............... -- .-- (1.15) (1.20)
In Excess of Net Realized Gains on Investment Transactions ....... -- (0.41) -- --
----------- ----------- ----------- -----------
Total Distributions .............................................. (0.06) (0.51) (1.25) (1.28)
----------- ----------- ----------- -----------
Net Asset Value, End of Period ..................................... $ 5.68 $ 5.36 $ 5.78 $ 7.73
=========== =========== =========== ===========
Total Return(4) .................................................. 7.11% 1.65% (9.52)% 17.14%
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 to Average Net Assets ............... 2.10%(5) 1.68% 1.39% 2.97%(5)
Portfolio Turnover Rate ............................................ 62% 115% 130% 130%
Net Assets, End of Period (in thousands) ........................... $ 109,424 $ 95,202 $ 36,318 $ 5,944
</TABLE>
(1) Six months ended September 30, 2000 (unaudited).
(2) July 31, 1997 (commencement of sale) through March 31, 1998.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 41
Equity Income--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
investment income as a percentage of average net assets), EXPENSE RATIO
(operating expenses as a percentage of average net assets), and PORTFOLIO
TURNOVER (a gauge of the fund's trading activity).
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 2000 1999 1998 1997 1996
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $ 5.50 $ 5.95 $ 7.15 $ 6.31 $ 6.10 $ 5.42
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(2) ............. 0.08 0.21 0.22 0.25 0.22 0.20
Net Realized and Unrealized Gain(Loss)
on Investment Transactions ........... 0.44 0.03 (0.23) 1.99 0.75 1.13
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment Operations ..... 0.52 0.24 (0.01) 2.24 0.97 1.33
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income ........... (0.08) (0.21) (0.23) (0.24) (0.21) (0.19)
In Excess of Net Investment Income ... -- -- -- -- --(3) (0.01)
From Net Realized Gains
on Investment Transactions ........... -- (0.02) (0.96) (1.16) (0.55) (0.45)
In Excess of Net Realized Gains
on Investment Transactions ........... -- (0.46) -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions .................. (0.08) (0.69) (1.19) (1.40) (0.76) (0.65)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ......... $ 5.94 $ 5.50 $ 5.95 $ 7.15 $ 6.31 $ 6.10
=========== =========== =========== =========== =========== ===========
Total Return(4) ...................... 9.60% 3.88% (0.44)% 37.78% 16.24% 25.67%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets .................. 1.00%(5) 1.00% 1.00% 1.00% 1.00% 0.98%
Ratio of Net Investment Income to
Average Net Assets .................. 2.84%(5) 3.41% 3.31% 3.52% 3.46% 3.51%
Portfolio Turnover Rate ................ 87% 141% 180% 158% 159% 170%
Net Assets, End of Period (in thousands) $ 305,808 $ 282,692 $ 296,585 $ 355,962 $ 199,388 $ 116,692
(1) Six months ended September 30, 2000 (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 dividends and capital gains distributions, if any.
Total returns for periods less than one year are not
annualized.
(5) Annualized.
</TABLE>
42 1-800-345-2021 See Notes to Financial Statements
Equity Income--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 2000 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $ 5.50 $ 5.95 $ 7.16 $ 6.31 $ 6.57
---------- ---------- ---------- ---------- ----------
Income From Investment Operations
Net Investment Income(3) .................. 0.07 0.20 0.21 0.23 0.02
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ............. 0.45 0.02 (0.24) 2.00 (0.21)
---------- ---------- ---------- ---------- ----------
Total From Investment Operations .......... 0.52 0.22 (0.03) 2.23 (0.19)
---------- ---------- ---------- ---------- ----------
Distributions
From Net Investment Income ................ (0.08) (0.19) (0.22) (0.22) (0.07)
In Excess of Net Investment Income ........ -- -- -- -- --(4)
From Net Realized Gains
on Investment Transactions ............. -- (0.02) (0.96) (1.16) --
In Excess of Net Realized Gains
on Investment Transactions ............. -- (0.46) -- -- --
---------- ---------- ---------- ---------- ----------
Total Distributions ....................... (0.08) (0.67) (1.18) (1.38) (0.07)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period .............. $ 5.94 $ 5.50 $ 5.95 $ 7.16 $ 6.31
========== ========== ========== ========== ==========
Total Return(5) ........................... 9.46% 3.61% (0.75)% 37.71% (2.89)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................... 1.25%(6) 1.25% 1.25% 1.25% 1.25%(6)
Ratio of Net Investment Income
to Average Net Assets ................... 2.59%(6) 3.16% 3.06% 3.27% 1.64%(6)
Portfolio Turnover Rate ..................... 87% 141% 180% 158% 159%
Net Assets, End of Period (in thousands) .... $ 19,811 $ 20,281 $ 12,251 $ 731 $ 18
(1) Six months ended September 30, 2000 (unaudited).
(2) March 7, 1997 (commencement of sale) through March 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Per share amount was less than $0.005.
(5) Total return assumes reinvestment of dividends and capital gains distributions, if any.
Total returns for periods less than one year are not annualized.
(6) Annualized.
</TABLE>
See Notes to Financial Statements www.americancentury.com 43
Equity Income--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
Institutional Class
2000(1) 2000 1999(2)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 5.50 $ 5.95 $ 6.96
---------- ---------- ----------
Income From Investment Operations
Net Investment Income(3) ................ 0.09 0.22 0.07
Net Realized and Unrealized Gain
on Investment Transactions ........... 0.45 0.03 0.06
---------- ---------- ----------
Total From Investment Operations ........ 0.54 0.25 0.13
---------- ---------- ----------
Distributions
From Net Investment Income .............. (0.09) (0.22) (0.18)
From Net Realized Gains
on Investment Transactions ........... -- (0.02) (0.96)
In Excess of Net Realized Gains
on Investment Transactions ........... -- (0.46) --
---------- ---------- ----------
Total Distributions ..................... (0.09) (0.70) (1.14)
---------- ---------- ----------
Net Asset Value, End of Period ............ $ 5.95 $ 5.50 $ 5.95
========== ========== ==========
Total Return(4) ......................... 9.89% 4.09% 1.60%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ 0.80%(5) 0.80% 0.80%(5)
Ratio of Net Investment Income
to Average Net Assets ................ 3.04%(5) 3.61% 1.61%(5)
Portfolio Turnover Rate ................... 87% 141% 180%
Net Assets, End of Period (in thousands) .. $ 14,813 $ 13,716 $ 2,654
(1) Six months ended September 30, 2000 (unaudited).
(2) July 8, 1998 (commencement of sale) through March 31, 1999.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains distributions, if any.
Total returns for periods less than one year are not
annualized.
(5) Annualized.
</TABLE>
44 1-800-345-2021 See Notes to Financial Statements
Small Cap Value--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
investment income as a percentage of average net assets), EXPENSE RATIO
(operating expenses as a percentage of average net assets), and PORTFOLIO
TURNOVER (a gauge of the fund's trading activity).
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 2000 1999(2)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .......................... $ 5.04 $ 4.73 $ 5.00
---------- ---------- ----------
Income From Investment Operations
Net Investment Income(3) .................................... 0.02 0.05 0.03
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ............................... 0.66 0.60 (0.24)
---------- ---------- ----------
Total From Investment Operations ............................ 0.68 0.65 (0.21)
---------- ---------- ----------
Distributions
From Net Investment Income .................................. (0.02) (0.06) (0.02)
From Net Realized Gains on Investment Transactions .......... -- (0.17) (0.02)
In Excess of Net Realized Gains on Investment Transactions .. -- (0.11) (0.02)
---------- ---------- ----------
Total Distributions ......................................... (0.02) (0.34) (0.06)
---------- ---------- ----------
Net Asset Value, End of Period ................................ $ 5.70 $ 5.04 $ 4.73
========== ========== ==========
Total Return(4) ............................................. 13.58% 14.37% (4.24)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ............. 1.25%(5) 1.25% 1.25%(5)
Ratio of Net Investment Income to Average Net Assets .......... 0.86%(5) 1.04% 1.02%(5)
Portfolio Turnover Rate ....................................... 71% 178% 153%
Net Assets, End of Period (in thousands) ...................... $ 29,575 $ 17,690 $ 11,410
(1) Six months ended September 30, 2000 (unaudited).
(2) July 31, 1998 (inception) through March 31, 1999.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains distributions, if any.
Total returns for periods less than one year are not
annualized.
(5) Annualized.
</TABLE>
See Notes to Financial Statements www.americancentury.com 45
Small Cap Value--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
Advisor Class
2000(1) 2000(2)
PER-SHARE DATA
<S> <C> <C>
Net Asset Value, Beginning of Period .................. $ 5.04 $ 4.73
--------- ---------
Income From Investment Operations
Net Investment Income(3) ............................ 0.02 0.03
Net Realized and Unrealized Gain
on Investment Transactions ....................... 0.66 0.29
--------- ---------
Total From Investment Operations .................... 0.68 0.32
--------- ---------
Distributions
From Net Investment Income .......................... (0.02) (0.01)
--------- ---------
Net Asset Value, End of Period ........................ $ 5.70 $ 5.04
========= =========
Total Return(4) ..................................... 13.44% 6.86%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ..... 1.50%(5) 1.50%(5)
Ratio of Net Investment Income to Average Net Assets .. 0.61%(5) 2.21%(5)
Portfolio Turnover Rate ............................... 71% 178%
Net Assets, End of Period (in thousands) .............. $ 4,248 $ 91
(1) Six months ended September 30, 2000 (unaudited).
(2) December 31, 1999 (commencement of sale) through March 31, 2000.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains distributions, if any.
Total returns for periods less than one year are not
annualized.
(5) Annualized.
</TABLE>
46 1-800-345-2021 See Notes to Financial Statements
Small Cap Value--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
Institutional Class
2000(1) 2000 1999(2)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .......................... $ 5.04 $ 4.74 $ 4.83
--------- --------- ---------
Income From Investment Operations
Net Investment Income(3) .................................... 0.03 0.07 0.03
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ............................... 0.66 0.58 (0.06)
--------- --------- ---------
Total From Investment Operations ............................ 0.69 0.65 (0.03)
--------- --------- ---------
Distributions
From Net Investment Income .................................. (0.03) (0.07) (0.02)
From Net Realized Gains on Investment Transactions .......... -- (0.17) (0.04)
In Excess of Net Realized Gains on Investment Transactions .. -- (0.11) --
--------- --------- ---------
Total Distributions ......................................... (0.03) (0.35) (0.06)
--------- --------- ---------
Net Asset Value, End of Period ................................ $ 5.70 $ 5.04 $ 4.74
========= ========= =========
Total Return(4) ............................................. 13.69% 14.39% (0.60)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ............. 1.05%(5) 1.05% 1.05%(5)
Ratio of Net Investment Income to Average Net Assets .......... 1.06%(5) 1.24% 1.22%(5)
Portfolio Turnover Rate ....................................... 71% 178% 153%
Net Assets, End of Period (in thousands) ...................... $ 4,855 $ 2,359 $ 986
(1) Six months ended September 30, 2000 (unaudited).
(2) October 26, 1998 (commencement of sale) through March 31, 1999.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains distributions, if any.
Total returns for periods less than one year are not
annualized.
(5) Annualized.
</TABLE>
See Notes to Financial Statements www.americancentury.com 47
Large Cap Value--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
investment income as a percentage of average net assets), EXPENSE RATIO
(operating expenses as a percentage of average net assets), and PORTFOLIO
TURNOVER (a gauge of the fund's trading activity).
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
Investor Class
2000(1) 2000(2)
PER-SHARE DATA
<S> <C> <C>
Net Asset Value, Beginning of Period .................. $ 4.59 $ 5.00
---------- ----------
Income From Investment Operations
Net Investment Income(3) ............................ 0.04 0.05
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ....................... 0.14 (0.41)
---------- ----------
Total From Investment Operations .................... 0.18 (0.36)
---------- ----------
Distributions
From Net Investment Income .......................... (0.04) (0.05)
---------- ----------
Net Asset Value, End of Period ........................ $ 4.73 $ 4.59
========== ==========
Total Return(4) ..................................... 4.14% (7.22)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ..... 0.90%(5) 0.90%(5)
Ratio of Net Investment Income to Average Net Assets .. 1.56%(5) 1.72%(5)
Portfolio Turnover Rate ............................... 32% 51%
Net Assets, End of Period (in thousands) .............. $ 13,243 $ 12,671
(1) Six months ended September 30, 2000 (unaudited).
(2) July 30, 1999 (inception) through March 31, 2000.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains distributions, if any.
Total returns for periods less than one year are not
annualized.
(5) Annualized.
</TABLE>
48 1-800-345-2021 See Notes to Financial Statements
Share Class and Retirement Account Information
--------------------------------------------------------------------------------
SHARE CLASSES
Three classes of shares are authorized for sale by the funds: Investor
Class, Advisor Class and Institutional Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
shares is 0.25% higher than the total expense ratio of the Investor Class
shares.
INSTITUTIONAL CLASS shares are available to endowments, foundations, defined
benefit pension plans or financial intermediaries serving these investors. This
class recognizes the relatively lower cost of serving institutional customers
and others who invest at least $5 million in an American Century fund or at
least $10 million in multiple funds. In recognition of the larger investments
and account balances and comparatively lower transaction costs, the total
expense ratio of the Institutional Class shares is 0.20% less than the total
expense ratio of the Investor Class shares.
All classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice
to us.
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.
www.americancentury.com 49
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY & POLICIES
American Century offers 15 growth and income funds including domestic equity,
balanced, asset allocation, and specialty. Value, Equity Income, Small Cap
Value, and Large Cap Value are general equity funds managed to provide growth
over time with less volatility than more aggressive growth funds. Stock
purchases are based on a company-by-company analysis to determine whether a
stock is trading below what the fund management team considers fair value.
Equity Income may buy stocks that are trading at fair value if the stock pays a
generous dividend. In all four funds, broad diversification across many
industries is stressed to prevent the performance of one sector from dominating
fund returns.
AMERICAN CENTURY VALUE invests in the equity securities of seasoned,
established businesses that the management team believes are temporarily
undervalued. This is determined by comparing a stock's share price with key
financial measures, including earnings, book value, cash flow and dividends. If
the stock's price relative to these measures is low and the company's balance
sheet is solid, its securities are candidates for purchase. The management team
may look secondarily for income.
AMERICAN CENTURY EQUITY INCOME purchases the securities of seasoned
companies that pay steady income, with the goal of providing shareholders a
higher yield than the aggregate yield of the stocks making up the S&P 500. The
team may secondarily search out stocks whose share prices are undervalued or
fairly valued. Under normal circumstances, the fund can be expected to have less
share-price volatility than American Century Value.
AMERICAN CENTURY SMALL CAP VALUE focuses on the stocks of small companies
with market capitalizations of less than the largest company in the S&P SmallCap
600/BARRA Value Index. Historically, small-cap stocks have been more volatile
than the stocks of larger, more established companies. The fund seeks capital
appreciation over time by investing in common stocks that the management team
believes to be undervalued. Income is a secondary objective.
AMERICAN CENTURY LARGE CAP VALUE seeks long-term capital growth with income
as a secondary objective. The fund invests primarily in equity securities of
large well-established companies that have good cash flow and reasonable growth
prospects, and appear to be undervalued at the time of purchase. It uses a
relative value approach, which considers the price for a company's fundamentals
within the context of its historical relationship to the overall market.
COMPARATIVE INDICES
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
THE S&P 500 INDEX is a capitalization- weighted index of the stocks of 500
publicly traded U.S. companies that are considered to be leading firms in
leading industries. Created by Standard & Poor's, it is intended to be a broad
measure of U.S. stock market performance.
THE S&P 500/BARRA VALUE INDEX is a capitalization-weighted index
consisting of S&P 500 stocks that have lower price-to-book ratios and, in
general, share other characteristics associated with value-style stocks.
THE LIPPER EQUITY INCOME FUND INDEX is a non-weighted index of the 30
largest equity income mutual funds. Lipper, Inc., is an independent mutual fund
ranking service.
THE LIPPER MULTI-CAP VALUE INDEX consists of the largest funds tracked by
Lipper Inc., that seek long-term growth of capital by investing in companies of
all capitalization sizes that are considered to be undervalued relative to a
major unmanaged stock index based on price-to- current earnings, book value,
asset value, or other factors.
THE S&P SMALLCAP 600/BARRA VALUE INDEX is a capitalization-weighted index
consisting of S&P SmallCap 600 stocks that have lower price-to-book ratios. The
S&P SmallCap 600 Index consists of 600 domestic stocks chosen for market size,
liquidity, and industry group representation.
[left margin]
PORTFOLIO MANAGERS
Value and Equity Income
PHIL DAVIDSON, CFA
SCOTT MOORE, CFA
Small Cap Value
TODD VINGERS, CFA
BEN GIELE, CFA
Large Cap Value
MARK MALLON, CFA
CHARLES RITTER, CFA
50 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on pages 39-48.
INVESTMENT TERMS
* MEDIAN MARKET CAPITALIZATION-- market capitalization (market cap) is the total
value of a company's stock and is calculated by multiplying the number of
outstanding common shares by the current share price. The company whose market
cap is in the middle of the portfolio is the median market cap. Half the
companies in the portfolio have values greater than the median, and half have
values that are less. If there is an even number of companies, then the median
is the average of the two companies in the middle.
* WEIGHTED AVERAGE MARKET CAPITALIZATION-- average market capitalization
represents the average value of the companies held in a portfolio. When that
figure is weighted, the impact of each company's capitalization on the overall
average is proportional to the total market value of its shares.
* NUMBER OF COMPANIES-- the number of different companies held by a fund on a
given date.
* PORTFOLIO TURNOVER-- the percentage of a fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
* PRICE/BOOK RATIO-- a stock value measurement calculated by dividing a
company's stock price by its book value per share, with the result expressed as
a multiple instead of as a percentage. (Book value per share is calculated by
subtracting a company's liabilities from its assets, then dividing that value by
the number of outstanding shares.)
* PRICE/EARNINGS (P/E) RATIO-- a stock value measurement calculated by dividing
a company's stock price by its earnings per share, with the result expressed as
a multiple instead of as a percentage. (Earnings per share is calculated by
dividing the after-tax earnings of a corporation by its outstanding shares.)
When this figure is weighted, the impact of each company's P/E ratio is in
proportion to the percentage of the fund that the company represents.
* DIVIDEND YIELD -- a stock value measurement calculated by dividing the
12-month dividend per share by the current price of the share. Dividend yields
for each of the stocks held in the fund are then weighted according to their
proportion of fund assets and the resulting figures are averaged to arrive at
the fund's dividend yield.
TYPES OF STOCKS
* BLUE CHIP STOCKS-- stocks of the most established companies in American
industry. They are generally large, fairly stable companies that have
demonstrated consistent earnings and usually have long-term growth potential.
Examples include General Electric and Coca-Cola.
* CYCLICAL STOCKS-- generally considered to be stocks whose price and earnings
fluctuations tend to follow the ups and downs of the business cycle. Examples
include the stocks of automobile manufacturers, steel producers and textile
operators.
* GROWTH STOCKS-- stocks of companies that have experienced above-average
earnings growth and are expected to continue such growth. These stocks often
sell at high P/E ratios. Examples can include the stocks of high-tech,
healthcare and consumer staple companies.
* LARGE-CAPITALIZATION ("LARGE-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of more
than $9.9 billion. This is Lipper's market capitalization breakpoint as of
September 30, 2000, although it may be subject to change based on market
fluctuations. The Dow Jones Industrial Average and the S&P 500 Index generally
consist of stocks in this range.
www.americancentury.com 51
Glossary
--------------------------------------------------------------------------------
(Continued)
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of
between $2.3 billion and $9.9 billion. This is Lipper's market capitalization
breakpoint as of September 30, 2000, although it may be subject to change based
on market fluctuations. The S&P 400 Index and Russell 2500 Index generally
consist of stocks in this range.
* SMALL-CAPITALIZATION ("SMALL-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of less
than $2.3 billion. This is Lipper's market capitalization breakpoint as of
September 30, 2000, although it may be subject to change based on market
fluctuations. The S&P 600 Index and the Russell 2000 Index generally consist of
stocks in this range.
* VALUE STOCKS-- generally considered to be stocks that are purchased because
they are relatively inexpensive. These stocks are typically characterized by low
P/E ratios.
FUND CLASSIFICATIONS
Please be aware that a fund's category may change over time. Therefore, it
is important that you read the fund's prospectus or fund profile carefully
before investing to ensure its objectives, policies and risk potential are
consistent with your needs.
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income provided
by either dividend-paying equities or a combination of equity and fixed-income
securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with correspondingly high
price-fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price-fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price-fluctuation risk.
52 1-800-345-2021
[inside back cover]
AMERICAN CENTURY FUNDS
===============================================================================
GROWTH
===============================================================================
MODERATE RISK
SPECIALTY
Global Natural Resources
AGGRESSIVE RISK
DOMESTIC EQUITY INTERNATIONAL
Veedot(reg.sm) Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth SPECIALTY
Ultra(reg.tm) Global Gold
Select Technology
Life Sciences
===============================================================================
GROWTH AND INCOME
===============================================================================
MODERATE RISK
ASSET ALLOCATION DOMESTIC EQUITY
Balanced Equity Growth
Strategic Allocation: Equity Index
Aggressive Large Cap Value
Strategic Allocation: Tax-Managed Value
Moderate Income & Growth
Strategic Allocation: Value
Conservative Equity Income
SPECIALTY
Utilities
Real Estate
AGGRESSIVE RISK
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
===============================================================================
INCOME
===============================================================================
CONSERVATIVE RISK
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term
Intermediate-Term Treasury Tax-Free
GNMA AZ Intermediate-Term
Inflation-Adjusted Treasury Municipal
Limited-Term Bond FL Intermediate-Term
Target 2000* Municipal
Short-Term Government Intermediate-Term Tax-Free
Short-Term Treasury CA Limited-Term Tax-Free
Limited-Term Tax-Free
MODERATE RISK
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
AGGRESSIVE RISK
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
===============================================================================
CAPITAL PRESERVATION
===============================================================================
CONSERVATIVE RISK
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs. For a definition of fund categories, see the Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon. Target
2000 will close on December 15, 2000. The fund closed to new investors on
10/1/2000, and will no longer accept investments from current shareholders
beginning 11/01/2000.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
Who We Are
American Century offers investors more than 70 mutual funds spanning the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, and offer a range of services
designed to make investing easy and convenient.
For four decades, American Century has been a leader in performance, service
and innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over
the Internet, we have been committed to building long-term relationships and
to helping investors achieve their dreams.
In a very real sense, investors put their futures in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo and text logo (reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
--------------------------------------------------------------------------------
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0011 American Century Investment Services, Inc.
SH-ANN-22487 (c)2000 American Century Services Corporation
<PAGE>
[front cover]
September 30, 2000
AMERICAN CENTURY
Semiannual Report
[graphic of runners]
[graphic of person looking at computer screen]
Real Estate
[american century logo and text logo(reg.sm)]
American
Century
[inside front cover]
REVIEW THE DAY'S MARKET ACTIVITY AT WWW.AMERICANCENTURY.COM
Now you can find more perspective on daily stock and bond market activity on
American Century's Web site.
INFORMATION AND ADVANCE NOTICE
Our Daily Market Wraps provide at-a-glance descriptions of daily news and
events that influenced the U.S. stock and bond markets. In addition, these
write-ups provide advance notice of key economic reports or figures that are
likely to affect market activity.
REVIEW THE WEEK
To put the week in perspective, look no further than our Weekly Market Wrap.
This commentary discusses the week's economic and market news, providing a
succinct review of what happened and what to look for in the week ahead.
EASY TO FIND
The Daily and Weekly Market Wraps are easy to find on our Web site. Just go
to www.americancentury.com, click on "News" in the tool bar, and locate the Wrap
you're looking for in the left column.
[Dalbar seal]
American Century's fund performance reports have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
[left margin]
REAL ESTATE
(REACX)
---------------------------
TURN TO THE INSIDE BACK COVER TO SEE A LIST OF AMERICAN CENTURY FUNDS CLASSIFIED
BY OBJECTIVE AND RISK.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers, Jr. and James E. Stowers III]
James E. Stowers, Jr., standing, with James E. Stowers III
The six months covered by this report saw investors begin to look beyond
technology stocks for ways to diversify and broaden their holdings. Many of them
found a previously out-of-favor sector that offered attractive valuations and
stability -- real estate investment trusts (REITs).
Those two qualities alone were significant contributions during one of the
most volatile periods in the market's history. But REITs also provided investors
with solid earnings growth and the opportunity to take part in a neglected
sector with strong fundamentals. That shift in investors' focus, along with
intelligent stock selections, resulted in superior performance by American
Century Real Estate.
Turning to corporate matters, Chase Manhattan Corp. recently announced
plans to acquire J.P. Morgan & Co., a substantial minority shareholder in
American Century Companies, Inc. since 1998. If the transaction is completed as
expected, J.P. Morgan Chase, the new enterprise, will own the shares of American
Century currently held by Morgan. Corporate control of American Century is not
affected by this transaction. We will be exploring ways to partner with J.P.
Morgan Chase for the benefit of fund shareholders.
In other corporate news, some American Century executives have assumed
important new responsibilities. For example, we chose to share the chairman of
the board position and named American Century President William M. Lyons chief
executive officer, giving him ultimate management responsibility for the entire
company.
These changes, plus the promotion of some key investment professionals,
strengthen the leadership of our investment management area and allow us to
pursue additional worthwhile endeavors. For example, Jim Stowers III will focus
more on product innovation (in particular, leveraging our earnings-acceleration
screening system to build the next generation of portfolio management
technologies). However, his first priority will be continuing involvement on the
investment teams responsible for the Ultra and Veedot funds.
We appreciate your continued confidence in American Century.
Sincerely,
/signature/ /signature/
James E. Stowers, Jr. James E. Stowers III
Founder and Chairman of the Board Co-Chairman of the Board
[right margin]
Table of Contents
Report Highlights ........................................................ 2
Market Perspective ....................................................... 3
REAL ESTATE
Performance Information .................................................. 4
Management Q&A ........................................................... 5
Portfolio at a Glance .................................................... 5
Top Ten Holdings ......................................................... 6
Yield .................................................................... 6
Fund Allocation .......................................................... 7
Schedule of Investments .................................................. 8
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ........................................................... 9
Statement of Operations .................................................. 10
Statement of Changes
in Net Assets ......................................................... 11
Notes to Financial
Statements ............................................................ 12
Financial Highlights ..................................................... 16
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................... 19
Background Information
Investment Philosophy
and Policies ....................................................... 20
Fund Management
Team ............................................................... 20
Fund Background ....................................................... 20
Comparative Indices ................................................... 20
Portfolio Manager ..................................................... 20
Glossary ................................................................. 21
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
* After several years of focusing almost exclusively on technology stocks,
investors broadened their holdings during the six months ended September
30, 2000, boosting real estate investment trusts (REITs) and other
underappreciated sectors of the market.
* Many investors were drawn to the attractive valuations and stability of REITs
as an alternative to the volatility and rich prices of most tech stocks.
* Another attraction was the favorable fundamentals of the REIT market. Real
estate demand has been outstripping supply, leading to steady earnings
growth for REITs. While the Nasdaq Composite Index declined in four of the
six months during the period, the Morgan Stanley REIT Index advanced in
each month.
* Every industry within the REIT sector turned in solid returns during the
period. In particular, office and industrial REITs benefited from declining
vacancies, rising rents, and a lag in the construction of new space.
ACRE
* The American Century Real Estate Fund (ACRE) posted a return of 20.05% during
the six months ended September 30. ACRE outperformed the Morgan Stanley
REIT Index, which gained 18.99%. The fund also surpassed the 19.37% average
return of the real estate funds tracked by Lipper Inc. The S&P 500 declined
3.60% during the period.
* ACRE focused on well-managed REITs that operate properties in tight markets
and high-growth regions. These companies tended to outperform their weaker
peers. The fund also benefited from overweight positions in office and
industrial REITs, which were the top two performers in the REIT market.
Merger and acquisition activity boosted the performance and long-term
strategies of several fund holdings.
* The long-term performance of the REIT market is driven by the attractive
income and steady growth of the underlying properties. While the sector's
performance so far in 2000 has been strong, it still hasn't made up for two
years of negative returns. Nonetheless, the fundamentals of the real estate
market remain attractive, and REIT earnings continue to grow at a healthy
pace.
[left margin]
REAL ESTATE(1)
(REACX)
TOTAL RETURNS: AS OF 9/30/00
6 Months 20.05%(2)
1 Year 21.61%
30-Day SEC Yield 5.31%
INCEPTION DATE: 9/21/95
NET ASSETS: $106.6 million(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor, Advisor, and Institutional classes.
Investment terms are defined in the Glossary on pages 21-22.
2 1-800-345-2021
Market Perspective from Mark Mallon
--------------------------------------------------------------------------------
[photo of Mark Mallon]
Mark Mallon, head of specialty, asset allocation, and growth and income equity
funds at American Century
PERFORMANCE OVERVIEW
The winds of change blew through the U.S. stock market during the six
months ended September 30, 2000. After posting returns of 20% or more for the
past five years, the broader market declined as signs of a slowing global
economy led to concerns about corporate profits. In contrast, real estate
investment trusts (REITs), which invest in shopping centers, apartments and
other rental property, produced very strong returns after more than two years of
disappointing performance (see the table at right).
AN ALTERNATIVE TO TECHNOLOGY
The REIT market has been in a rut since late 1997, when investors began
focusing their attention almost exclusively on technology stocks. Investors
embraced the potential of electronic commerce and bid up the stock prices of
"dot-coms" and other Internet- and computer-related companies. As technology
stocks soared throughout 1998 and 1999, REITs were largely ignored, posting
negative returns.
However, this year brought a sharp reversal in investor sentiment. After
the tech sector peaked in March and began its precipitous decline, investors
began to question sustainability and profitability in the technology sector.
Many began to seek out opportunities in undervalued, underappreciated sectors of
the market, such as REITs.
The graph at right shows the degree to which REITs and technology stocks
moved in opposite directions during the past six months. The Nasdaq Composite
Index, which is dominated by tech stocks, fell in four of the six months, while
the Morgan Stanley REIT Index rose in each of those months.
Here's another illustrative statistic -- according to a study done by J.P.
Morgan & Co., the Nasdaq and the Morgan Stanley REIT Index have had a
correlation of approximately -0.6 this year. A correlation of 1.0 means they
move an equal amount in the same direction; a correlation of -1.0 means they
move an equal amount in the opposite direction.
FUNDAMENTALLY STRONG
Investors returned to the REIT sector in part because it had been beaten
down, but they were also attracted by the favorable fundamentals in the property
market.
Demand has remained consistently strong, especially for commercial real
estate, while supply has grown increasingly constrained. Construction of new
space is under way, but it hasn't been enough to keep up with demand. As a
result, rents have risen steadily, fueling healthy earnings growth for many
REITs.
SECTOR PERFORMANCE
Every industry within the REIT sector produced solid returns during the
period. Industrial and office companies were the top performers. Rent growth has
been especially high among office buildings and industrial complexes, thanks to
low vacancy rates. Again, supply of new space isn't meeting demand.
[right margin]
"INVESTORS RETURNED TO THE REIT SECTOR IN PART BECAUSE IT HAD BEEN BEATEN DOWN,
BUT THEY WERE ALSO ATTRACTED BY THE FAVORABLE FUNDAMENTALS IN THE PROPERTY
MARKET."
MARKET RETURNS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
S&P 500 -3.60%
MORGAN STANLEY REIT 18.99%
NASDAQ COMPOSITE -19.68%
Source: Lipper Inc. and Russell/Mellon Analytical
MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
[data for line chart below]
S&P 500 Morgan Stanley REIT Nasdaq Composite
3/31/00 $1.00 $1.00 $1.00
4/30/00 $0.97 $1.07 $0.84
5/31/00 $0.95 $1.08 $0.74
6/30/00 $0.97 $1.10 $0.87
7/31/00 $0.96 $1.20 $0.82
8/31/00 $1.02 $1.15 $0.92
9/30/00 $0.96 $1.19 $0.80
Value on 9/30/00
S&P 500 $0.96
Morgan Stanley REIT $1.19
Nasdaq Composite $0.80
www.americancentury.com 3
ACRE--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 9/21/95)(1) (INCEPTION 10/6/98) (INCEPTION 6/16/97)
ACRE WILSHIRE MORGAN ACRE WILSHIRE MORGAN ACRE WILSHIRE MORGAN
REIT STANLEY REIT REIT STANLEY REIT REIT STANLEY REIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(2) 20.05% 21.60% 18.99% 19.82% 21.60% 18.99% 20.08% 21.60% 18.99%
1 YEAR 21.61% 25.45% 21.25% 21.22% 25.45% 21.25% 21.88% 25.45% 21.25%
AVERAGE ANNUAL RETURNS
3 YEARS -0.93% 0.78% -0.72% -- -- -- -0.69% 0.78% -0.72%
5 YEARS 12.36% 11.56% 10.27% -- -- -- -- -- --
LIFE OF FUND 12.33% 11.56%(3) 10.27%(3) 12.25% 9.29%(4) 6.83%(4) 4.34% 4.29%(5) 2.76%(5)
</TABLE>
(1) The inception date for RREEF Real Estate Securities Fund, ACRE's
predecessor. That fund merged with ACRE on 6/13/97 and was first offered
to the public on 6/16/97.
(2) Returns for periods less than one year are not annualized.
(3) Since 9/30/95, the date nearest the class's inception for which data are
available.
(4) Since 9/30/98, the date nearest the class's inception for which data are
available.
(5) Since 6/30/97, the date nearest the class's inception for which data are
available.
See pages 19-22 for information about share classes, the indices and returns.
GROWTH OF $10,000 OVER LIFE OF FUND
[data for mountain chart below]
Morgan
ACRE Stanley REIT Wilshire REIT
9/21/1995 $10,000 $10,000 $10,000
12/31/1995 $10,500 $10,441 $10,405
3/31/1996 $10,883 $10,651 $10,685
6/30/1996 $11,350 $11,106 $11,123
9/30/1996 $12,329 $11,827 $11,873
12/31/1996 $14,784 $14,189 $14,259
3/31/1997 $15,320 $14,220 $14,403
6/30/1997 $16,096 $14,921 $15,076
9/30/1997 $18,438 $16,661 $16,882
12/31/1997 $18,510 $16,825 $17,063
3/31/1998 $18,386 $16,704 $16,892
6/30/1998 $17,529 $15,970 $16,189
9/30/1998 $15,189 $14,285 $14,466
12/31/1998 $15,159 $13,982 $14,161
3/31/1999 $14,518 $13,309 $13,581
6/30/1999 $16,287 $14,628 $15,015
9/30/1999 $14,743 $13,445 $13,774
12/31/1999 $14,749 $13,345 $13,806
3/31/2000 $14,934 $13,700 $14,219
6/30/2000 $16,579 $15,121 $15,812
9/30/2000 $17,930 $16,302 $17,291
$10,000 investment made 9/21/95
Value on 9/30/00
ACRE $17,930
Wilshire REIT $17,291
Morgan Stanley REIT $16,302
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The
Wilshire REIT Index and Morgan Stanley REIT Index are provided for comparison in
each graph. The indices' returns in both graphs are since 9/30/95, the date
nearest the Investor Class's inception for which data are available. ACRE'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. The graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). Past performance does not guarantee future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost.
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED SEPTEMBER 30)
[data for bar chart below]
ACRE Morgan Stanley REIT Wilshire REIT
9/30/96* 23.16% 18.27% 18.73%
9/30/97 49.58% 40.88% 42.20%
9/30/98 -17.62% -14.26% -14.31%
9/30/99 -2.94% -5.88% -4.78%
9/30/00 21.61% 21.25% 25.45%
* From 9/21/95 to 9/30/96.
4 1-800-345-2021
ACRE--Q&A
--------------------------------------------------------------------------------
[photo of Daniel O'Connor]
An interview with Daniel O'Connor, a portfolio manager on the American
Century Real Estate (ACRE) fund investment team. Mr. O'Connor works for J.P.
Morgan Investment Management, which took over day-to-day management
responsibilities of ACRE from RREEF America on January 1, 2000.
HOW DID ACRE PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER 30, 2000?
The fund returned 20.05%, reflecting the strong recovery of real estate
investment trusts (REITs).* This performance beat both the 18.99% return of its
benchmark, the Morgan Stanley REIT Index, and the 19.37% average return of the
real estate funds tracked by Lipper Inc. (See the previous page for additional
fund performance comparisons.) The S&P 500, a broad stock market measure, fell
3.60%.
WHY DID THE FUND PERFORM SO WELL COMPARED WITH ITS BENCHMARK AND PEERS?
The most important factor was probably our decision to overweight office
and industrial REITs compared with the index. These two areas of the market were
the best performers during the six-month period, and they made up more than a
third of the fund's portfolio.
We've been attracted to office REITs -- and this applies to industrial
REITs as well -- because they have the strongest fundamentals in the real estate
sector. Low vacancy rates, consistently strong demand for office space, and a
limited amount of new construction has led to healthy rent increases, which, in
turn, have produced spectacular earnings growth for office REITs.
CAN YOU GIVE SOME EXAMPLES OF YOUR FAVORITE OFFICE AND INDUSTRIAL HOLDINGS?
One of ACRE's better performers was Arden Realty, an office REIT based in
Southern California. The company's properties benefited from declining vacancies
and increasing rental rates. In addition, Arden is finally getting recognition
for its exposure to the Los Angeles-San Diego area, one of the strongest office
markets in the country. Arden shares were up more than 30% during the six-month
period.
The fund also benefited from positions in Spieker Properties (up 33%) and
Mission West Properties (up 67%), two office REITs with sizable property
portfolios in Silicon Valley. The Valley is one of the strongest markets in the
country -- earlier this year, property owners were seeing rental rate increases
in excess of 50% on new leases.
Among industrial REITs, Prologis (up 27%) was the fund's best performer and
a top-10 holding. Low vacancies in its property portfolio, combined with a
high-yielding development pipeline, boosted the company's operating profits.
Prologis, and others in that field, rent buildings to light manufacturing
businesses.
THE FUND'S LARGEST HOLDING IS ANOTHER OFFICE REIT, EQUITY OFFICE PROPERTIES,
WHICH MAKES UP NEARLY 10% OF THE PORTFOLIO. WHY SUCH A LARGE POSITION?
Equity Office is the largest REIT in the nation, partly because of its
recently completed acquisition of Cornerstone
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"LOW VACANCY RATES, CONSISTENTLY STRONG DEMAND FOR OFFICE SPACE, AND A LIMITED
AMOUNT OF NEW CONSTRUCTION HAS LED TO HEALTHY RENT INCREASES, WHICH, IN TURN,
HAVE PRODUCED SPECTACULAR EARNINGS GROWTH FOR OFFICE REITS."
PORTFOLIO AT A GLANCE
9/30/00 3/31/00
NO. OF COMPANIES 38 36
MEDIAN REIT
FFO* RATIO 6.3 7.9
MEDIAN MARKET $1.67 $1.25
CAPITALIZATION BILLION BILLION
WEIGHTED MARKET $3.07 $2.13
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 107%(1) 102%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 1.20%(3) 1.20%
*Funds from operations
(1) Six months ended 9/30/00.
(2) Year ended 3/31/00.
(3) Annualized.
Investment terms are defined in the Glossary on pages 21-22.
www.americancentury.com 5
ACRE--Q&A
--------------------------------------------------------------------------------
(Continued)
Properties, another big office REIT. The combined company now constitutes
more than 7% of the Morgan Stanley REIT Index.
We hold a larger percentage because we think the long-term outlook for the
company is excellent. We expect greater profit growth as Equity Office leverages
its dominant position in a number of high-growth markets. In addition, the
acquisition of Cornerstone has provided exposure to the strong Northern
California market, and the embedded rental increases in this area should add to
the company's bottom line.
WERE THERE ANY OTHER IMPORTANT MERGERS IN THE REIT MARKET?
A couple of REITs were bought by other companies and taken private. The
most significant of these was the acquisition of Urban Shopping Centers, a
high-quality shopping mall REIT, by Rodamco, a Dutch real estate company.
Rodamco paid a substantial premium for Urban's properties, and that drove
Urban's share price up by nearly 70%. ACRE held an overweight position in
Urban.
Another important acquisition was one that never took place. Mack-Cali
Realty, an office REIT, agreed to acquire Prentiss Properties in June. The move
made little economic sense -- our view was that Mack-Cali was overpaying for a
company that would dilute its property portfolio's exposure to tightly
constrained markets. The market registered its protest by punishing Mack-Cali's
share price, and by September, the two companies had called off the deal.
When the merger was originally announced, we shifted from an overweight in
Mack-Cali to an overweight in Prentiss, figuring that Prentiss would benefit
whether the merger happened or not. This proved to be true, and we reduced our
stake in Prentiss after the deal was abandoned.
ACRE HAD PLENTY OF SUCCESSES DURING THE PERIOD, BUT WAS THERE ANY BAD NEWS IN
THE PORTFOLIO?
With so few REITs posting negative returns, the main weaknesses in the
portfolio were missed opportunities -- underweights that performed well.
A good example is Archstone Community Properties, a residential REIT that
returned 27% during the period. We'd been avoiding Archstone because many of its
properties were in weak, overbuilt markets. However, Archstone has been
repositioning its property portfolio into more desirable markets, and the
company also agreed to buy back some of its shares.
Although we added Archstone to the fund late in the period, we missed out
on just about all of its gains.
HAVE THERE BEEN ANY NEW TRENDS DEVELOPING IN THE REIT MARKET?
We're beginning to see a few firms issue new equity. In the mid-1990s,
REITs raised the funds needed to buy properties by issuing new shares. But when
REITs fell out of favor in 1998, that source of funding dried up, so companies
stopped issuing equity. Instead, they started selling properties that were
unprofitable or in weak markets and used the proceeds to buy new, more
attractive properties.
In the past few months, however, Kimco Realty issued 1.8 million new
shares, and Equity Office Properties issued $300 million in convertible
securities. Although the sizes of these offerings are relatively small, the
market's tolerance for equity issuance --
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
9/30/00 3/31/00
EQUITY OFFICE
PROPERTIES TRUST 9.5% 5.6%
EQUITY RESIDENTIAL
PROPERTIES TRUST 8.6% 6.1%
VORNADO REALTY TRUST 5.7% 4.5%
PROLOGIS TRUST 4.7% 5.4%
MERISTAR HOSPITALITY
CORP. 3.7% 3.4%
ARDEN REALTY, INC. 3.6% 3.4%
SPIEKER PROPERTIES,
INC. 3.5% 1.3%
PUBLIC STORAGE, INC. 3.5% 5.2%
GENERAL GROWTH
PROPERTIES, INC. 3.4% 2.9%
LIBERTY PROPERTY TRUST 3.4% 1.5%
YIELD AS OF SEPTEMBER 30, 2000
30-DAY SEC YIELD
INVESTOR CLASS 5.31%
ADVISOR CLASS 5.05%
INSTITUTIONAL CLASS 5.52%
6 1-800-345-2021
ACRE--Q&A
--------------------------------------------------------------------------------
(Continued)
even if only by a select group of premier companies--is a positive sign.
That said, we don't expect a huge rash of new equity issuance in the months
ahead. REITs appear to be showing remarkable restraint given the sector's
previous excesses. Most companies have become cautious in their use of capital
markets, and they continue to recycle their property portfolios into more
promising projects rather than tap the equity markets.
DO YOU THINK REITS CAN MAINTAIN THEIR STRONG PERFORMANCE GOING FORWARD?
Probably not at the same pace, but our outlook is still positive. Even
though REITs have done well this year, it's really been a recovery from the
excessive pessimism that produced the bear market of 1998 and 1999. If you look
at the three-year returns of the fund and Morgan Stanley REIT Index, you can see
that they're slightly negative, which means this year's healthy returns haven't
yet made up for the declines of the previous two years.
As a result, we still think the REIT market is fundamentally attractive.
Supply remains constrained in most markets and property types. And while REIT
performance has been essentially flat to slightly negative over the past three
years, funds from operations (FFO) -- the REIT equivalent of earnings -- have
averaged double-digit annual growth during that time.
We're also seeing a quality distinction in the REIT market. Well-managed
companies operating in tight markets and high-growth regions have been
outperforming their weaker peers. We expect this trend to continue as investors
cautiously return to the market.
However, the REIT market doesn't operate in a vacuum -- its performance may
be affected by upheaval in the broader equity market. Cash flows into REITs so
far this year have mirrored flows out of the technology sector, and we may see
this effect continue in the coming months.
It's important to remember, though, that the long-term performance of the
REIT market is driven by the underlying properties. Except for a few rare
moments, core real estate returns reflect a mix of attractive income -- REITs
have a current yield of 7% on average -- supported by steady growth.
HOW WILL THIS OUTLOOK AFFECT YOUR PLANS FOR ACRE IN THE COMING MONTHS?
Our focus will remain on quality firms that are well-positioned in strong
markets. We still like the outlook for office and industrial companies. In
recent months, we've seen increased development in the office sector, with the
bulk of new construction concentrated in tight markets, such as Boston, New
York, Portland, and San Francisco. Overall, though, demand is still outstripping
supply, and the low vacancy rates should be positive for rent growth.
[right margin]
"WE STILL THINK THE REIT MARKET IS FUNDAMENTALLY ATTRACTIVE."
FUND ALLOCATION
AS OF SEPTEMBER 30, 2000
* OFFICE 25%
* MULTI-FAMILY RESIDENTIAL 23%
* MALLS & SHOPPING CENTERS 21%
* INDUSTRIAL 9%
* DIVERSIFIED COMPANIES 7%
* STORAGE 6%
* OTHER 9%
[pie chart]
AS OF MARCH 31, 2000
* OFFICE 23%
* MULTI-FAMILY RESIDENTIAL 20%
* MALLS & SHOPPING CENTERS 23%
* INDUSTRIAL 7%
* DIVERSIFIED COMPANIES 11%
* STORAGE 7%
* OTHER 9%
[pie chart]
www.americancentury.com 7
ACRE--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS - 97.1%
CONSTRUCTION & REAL PROPERTY -- 0.6%
17,000 Starwood Hotels & Resorts
Worldwide, Inc. $ 531,250
---------------------
DIVERSIFIED COMPANIES -- 7.3%
117,600 Catellus Development Corp.(1) 2,058,000
101,300 Crescent Real Estate Equities Co. 2,260,256
94,124 Duke-Weeks Realty Corp. 2,270,742
---------------------
6,588,998
---------------------
HOTELS -- 5.6%
77,000 Host Marriott Corp. 866,250
22,900 Marriott International, Inc. 834,419
164,855 Meristar Hospitality Corp. 3,338,314
---------------------
5,038,983
---------------------
INDUSTRIAL -- 8.7%
16,700 First Industrial Realty Trust, Inc. 513,525
112,500 Liberty Property Trust 3,093,750
180,410 Prologis Trust 4,284,738
---------------------
7,892,013
---------------------
MULTI-FAMILY RESIDENTIAL -- 23.2%
83,500 Archstone Communities Trust 2,050,969
42,269 AvalonBay Communities Inc. 2,015,703
17,400 BRE Properties 556,800
85,189 Camden Property Trust 2,640,859
161,622 Equity Residential Properties Trust 7,757,855
97,430 Gables Residential Trust 2,648,878
55,500 Home Properties of New York, Inc. 1,658,063
67,200 Summit Properties Inc. 1,617,000
---------------------
20,946,127
---------------------
NEIGHBORHOOD & COMMUNITY
SHOPPING CENTERS -- 11.1%
117,700 Federal Realty Investment Trust 2,251,013
61,100 Kimco Realty Corporation 2,581,475
139,600 Vornado Realty Trust 5,182,650
---------------------
10,015,138
---------------------
Shares Value
-------------------------------------------------------------------------------
OFFICE -- 24.9%
120,100 Arden Realty, Inc. $ 3,220,181
25,900 Boston Properties Inc. 1,112,081
35,000 CarrAmerica Realty Corp. 1,058,750
47,100 Cousins Properties Inc. 2,028,244
276,448 Equity Office Properties Trust 8,587,166
23,600 Kilroy Realty Corp. 629,825
45,900 Mack-Cali Realty Corp. 1,293,806
108,400 Mission West Properties Inc. 1,504,050
55,200 Spieker Properties, Inc. 3,177,450
---------------------
22,611,553
---------------------
REGIONAL MALLS -- 9.5%
96,200 General Growth Properties, Inc. 3,096,437
58,500 IRT Property Co. 511,875
68,100 Macerich Co. (The) 1,447,125
64,200 Rouse Company 1,600,988
44,300 Simon Property Group, Inc. 1,038,281
14,800 Urban Shopping Centers, Inc. 703,000
12,400 Western Properties Trust 152,675
---------------------
8,550,381
---------------------
STORAGE -- 6.2%
52,560 Centerpoint Properties Corp. Cl A 2,421,045
132,348 Public Storage, Inc. 3,168,080
---------------------
5,589,125
---------------------
TOTAL COMMON STOCKS 87,763,568
---------------------
(Cost $76,402,235)
TEMPORARY CASH INVESTMENTS -- 2.9%
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations),
in a joint trading account at 6.45%,
dated 9/29/00, due 10/2/00
(Delivery value $2,601,397) 2,600,000
---------------------
(Cost $2,600,000)
TOTAL INVESTMENT SECURITIES - 100.0% $90,363,568
=====================
(Cost $79,002,235)
NOTES TO SCHEDULE OF INVESTMENTS
(1) Non-income producing.
8 1-800-345-2021 See Notes to Financial Statements
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other payables) as of the last day of the reporting period.
Subtracting the liabilities from the assets results in the fund's NET ASSETS.
For each class of shares, the net assets divided by shares outstanding is the
share price, or NET ASSET VALUE PER SHARE. This statement also breaks down the
fund's net assets into capital (shareholder investments) and performance
(investment income and gains/losses).
SEPTEMBER 30, 2000 (UNAUDITED)
ASSETS
Investment securities, at value
(identified cost of $79,002,235) (Note 3) .................. $ 90,363,568
Cash .......................................................... 791,345
Receivable for investments sold ............................... 16,548,118
Receivable for capital shares sold ............................ 26,473
Dividends and interest receivable ............................. 684,119
-------------
108,413,623
-------------
LIABILITIES
Payable for investments purchased ............................. 1,730,080
Accrued management fees (Note 2) .............................. 102,280
Distribution fees payable (Note 2) ............................ 1,438
Service fees payable (Note 2) ................................. 1,438
Payable for directors' fees and expenses ...................... 38
-------------
1,835,274
-------------
NET ASSETS .................................................... $ 106,578,349
=============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ....................... $ 127,913,102
Undistributed net investment income ........................... 651,932
Accumulated net realized loss on investment transactions ...... (33,348,018)
Net unrealized appreciation on investments (Note 3) ........... 11,361,333
-------------
$ 106,578,349
=============
INVESTOR CLASS, $0.01 PAR VALUE
Net assets .................................................... $ 86,531,535
Shares outstanding ............................................ 6,289,589
Net asset value per share ..................................... $ 13.76
ADVISOR CLASS, $0.01 PAR VALUE
Net assets .................................................... $ 7,161,760
Shares outstanding ............................................ 520,687
Net asset value per share ..................................... $ 13.75
INSTITUTIONAL CLASS, $0.01 PAR VALUE
Net assets .................................................... $ 12,885,054
Shares outstanding ............................................ 936,250
Net asset value per share ..................................... $ 13.76
See Notes to Financial Statements www.americancentury.com 9
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
INVESTMENT INCOME
INCOME:
Dividends ...................................................... $ 3,808,818
Interest ....................................................... 89,996
-----------
3,898,814
-----------
EXPENSES (Note 2):
Management fees ................................................ 651,303
Distribution fees -- Advisor Class ............................. 8,020
Service fees -- Advisor Class .................................. 8,020
Directors' fees and expenses ................................... 293
-----------
667,636
-----------
NET INVESTMENT INCOME .......................................... 3,231,178
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3)
Net realized gain on investments ............................... 3,822,559
Change in net unrealized appreciation on investments ........... 12,313,086
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ................ 16,135,645
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $19,366,823
===========
10 1-800-345-2021 See Notes to Financial Statements
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
<TABLE>
SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND YEAR ENDED MARCH 31, 2000
INCREASE (DECREASE) IN NET ASSETS SEPTEMBER 30, 2000 MARCH 31, 2000
OPERATIONS
<S> <C> <C>
Net investment income ................................................ $ 3,231,178 $ 7,998,276
Net realized gain (loss) on investments transactions ................. 3,822,559 (22,624,326)
Change in net unrealized appreciation (depreciation) on investments .. 12,313,086 17,189,552
------------- -------------
Net increase in net assets resulting from operations ................. 19,366,823 2,563,502
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class ..................................................... (2,098,616) (5,683,209)
Advisor Class ...................................................... (150,934) (208,155)
Institutional Class ................................................ (377,894) (1,271,720)
------------- -------------
Decrease in net assets from distributions ............................ (2,627,444) (7,163,084)
------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net decrease in net assets from capital share transactions ........... (4,782,993) (37,826,998)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS ................................ 11,956,386 (42,426,580)
NET ASSETS
Beginning of period .................................................. 94,621,963 137,048,543
------------- -------------
End of period ........................................................ $ 106,578,349 $ 94,621,963
============= =============
Undistributed net investment income .................................. $ 651,932 $ 48,198
============= =============
</TABLE>
See Notes to Financial Statements www.americancentury.com 11
Notes to Financial Statements
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (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 of
the six funds issued by the corporation. The fund is non-diversified under the
1940 Act. The fund's investment objective is long-term capital appreciation with
income as a secondary objective. The fund seeks to achieve 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. There are certain additional risks involved in investing in the fund
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
ownership of real estate including but not limited to: local or regional
economic conditions, changes in zoning laws, credit risk, and interest rate
risk. The following significant accounting policies are in accordance with
generally accepted accounting principles; these policies may require the use of
estimates by fund management.
MULTIPLE CLASS -- The fund is authorized to issue three classes of shares:
the Investor Class, the Advisor Class, and the Institutional Class. The three
classes of shares differ principally in their respective shareholder servicing
and distribution expenses and arrangements. All shares of the fund represent an
equal pro rata interest in the 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.
SECURITY VALUATIONS -- Portfolio 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.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or at the last reported sales price. When valuations are not
readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal and state 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.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), 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 that the value, including accrued interest, of
the securities under each repurchase agreement is equal to or greater than
amounts owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM, 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 policy of the fund to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income are declared
and paid quarterly. Distributions from net realized gains are declared and paid
annually.
The 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.
At March 31, 2000 the fund had accumulated net realized capital loss
carryovers for federal income tax purposes of $17,682,932 (expiring in 2007
through 2008) which may be used to offset future taxable gains.
For the five month period ended March 31, 2000, the fund incurred net
capital losses of $17,337,181. The fund has elected to treat such losses as
having been incurred in the following fiscal year.
12 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
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 per class. The Agreement provides
that all expenses of the fund, except brokerage commissions, taxes, interest,
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 daily and paid monthly based on the
fund's class average daily closing net assets during the previous month.
The annual management fee for each class of Real Estate is as follows:
INVESTOR ADVISOR INSTITUTIONAL
CLASS CLASS CLASS
FUND AVERAGE NET ASSETS
$0 to $100,000,000 .......... 1.20% 0.95% 1.00%
Over $100,000,000 ........... 1.15% 0.90% 0.95%
ACIM has entered into a Subadvisory Agreement with J.P. Morgan Investment
Management (JPMIM) on behalf of the fund. The subadvisor makes investment
decisions for the fund in accordance with the fund's investment objectives,
policies, and restrictions under the supervision of ACIM and the Board of
Directors. ACIM pays all costs associated with retaining JPMIM as the subadvisor
of the fund. JPMIM is a wholly owned subsidiary of J.P. Morgan & Co.
Incorporated, an equity investor in American Century Companies, Inc.
The Board of Directors has adopted a Master Distribution and Shareholder
Services Plan (the plan) for the Advisor Class, pursuant to Rule 12b-1 of the
1940 Act. The plan provides that the fund will pay ACIM an annual distribution
fee equal to 0.25% and service fee equal to 0.25%. The fees are computed daily
and paid monthly based on the Advisor Class's average daily closing net assets
during the previous month. The distribution fee provides compensation for
distribution expenses incurred by financial intermediaries in connection with
distributing shares of the Advisor Class including, but not limited to, payments
to brokers, dealers, and financial institutions that have entered into sales
agreements with respect to shares of the fund. The service fee provides
compensation for shareholder and administrative services rendered by ACIM, its
affiliates or independent third party providers. Fees incurred under the plan
for the six month period ended September 30, 2000 were $16,040.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, the
distributor of the corporation, American Century Services, Inc., and the
corporation's transfer agent, American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term
investments, for the six month period ended September 30, 2000, were
$110,124,674 and $130,487,950, respectively.
As of September 30, 2000, accumulated net unrealized appreciation was
$9,213,654, based on the aggregate cost of investments for federal income tax
purposes of $81,149,914, which consisted of unrealized appreciation of
$11,341,212 and unrealized depreciation of $2,127,558.
www.americancentury.com 13
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows:
SHARES AMOUNT
INVESTOR CLASS
SHARES AUTHORIZED ......................... 50,000,000
================
SIX MONTHS ENDED SEPTEMBER 30, 2000
Sold ...................................... 6,517,095 $ 80,912,100
Issued in reinvestment of distributions ... 148,327 1,969,231
Redeemed .................................. (6,661,117) (83,145,663)
----------------- -----------------
Net increase (decrease) ................... 4,305 $ (264,332)
================= =================
YEAR ENDED MARCH 31, 2000
Sold ...................................... 10,178,382 $ 125,814,882
Issued in reinvestment of distributions ... 443,712 5,211,042
Redeemed .................................. (13,447,772) (164,093,568)
----------------- -----------------
Net decrease .............................. (2,825,678) $ (33,067,644)
================= =================
ADVISOR CLASS
SHARES AUTHORIZED ......................... 12,500,000
================
SIX MONTHS ENDED SEPTEMBER 30, 2000
Sold ...................................... 216,912 $ 2,608,548
Issued in reinvestment of distributions ... 10,745 142,970
Redeemed .................................. (162,890) (1,881,224)
----------------- -----------------
Net increase .............................. 64,767 $ 870,294
================= =================
YEAR ENDED MARCH 31, 2000
Sold ...................................... 496,150 $ 6,097,594
Issued in reinvestment of distributions ... 16,812 192,141
Redeemed .................................. (94,105) (1,087,568)
----------------- -----------------
Net increase .............................. 418,857 $ 5,202,167
================= =================
INSTITUTIONAL CLASS
SHARES AUTHORIZED ......................... 12,500,000
================
SIX MONTHS ENDED SEPTEMBER 30, 2000
Sold ...................................... 497,618 $ 5,821,745
Issued in reinvestment of distributions ... 26,040 345,011
Redeemed .................................. (903,218) (11,555,711)
----------------- -----------------
Net decrease .............................. (379,560) $ (5,388,955)
================= =================
YEAR ENDED MARCH 31, 2000
Sold ...................................... 2,415,404 $ 28,971,588
Issued in reinvestment of distributions ... 91,834 1,074,105
Redeemed .................................. (3,364,595) (40,007,214)
----------------- -----------------
Net decrease .............................. (857,357) $ (9,961,521)
================= =================
14 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
5. BANK LOANS
The fund, along with certain other funds managed by ACIM, has entered into
an unsecured $620,000,000 bank line of credit agreement with Chase Manhattan
Bank. The fund may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The fund did not borrow from the line during the
six month period ended September 30, 2000.
www.americancentury.com 15
ACRE--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 2000 1999 1998(2) 1997 1996 1995(3)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period ........ $ 11.74 $ 12.10 $ 16.12 $ 16.06 $ 12.29 $ 9.82 $ 10.00
-------- ----------- ----------- ----------- ----------- ----------- -----------
Income From
Investment Operations
Net Investment Income .... 0.38(4) 0.74(4) 0.73(4) 0.25(4) 0.67(4) 0.55 0.07
Net Realized and
Unrealized Gain
(Loss) on Investment
Transactions ............. 1.96 (0.41) (4.09) 0.26 4.13 2.27 (0.25)
-------- ----------- ----------- ----------- ----------- ----------- -----------
Total From
Investment Operations .... 2.34 0.33 (3.36) 0.51 4.80 2.82 (0.18)
-------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income (0.32) (0.69) (0.54) (0.18) (0.48) (0.35) --
From Net Realized Gains on
Investment Transactions .. -- -- (0.12) (0.27) (0.55) -- --
-------- ----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ...... (0.32) (0.69) (0.66) (0.45) (1.03) (0.35) --
-------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value,
End of Period .............. $ 13.76 $ 11.74 $ 12.10 $ 16.12 $ 16.06 $ 12.29 $ 9.82
======== =========== =========== =========== =========== =========== ===========
TOTAL RETURN(5) .......... 20.05% 2.87% (21.04)% 3.26% 40.69% 29.28% (1.80)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to
Average Net Assets ......... 1.19%(6) 1.20% 1.20% 1.15%(6) 1.17% 1.00% 1.50%(6)
Ratio of Operating
Expenses to Average
Net Assets (before
expense waivers and
reimbursements)(7) ......... 1.19%(6) 1.20% 1.20% 1.20%(6) 1.82% 6.83% 14.83%(6)
Ratio of Net
Investment Income
to Average
Net Assets ................. 6.00%(6) 5.95% 5.41% 3.75%(6) 4.48% 5.84% 6.66%(6)
Ratio of Net
Investment Income
to Average Net Assets
(before expense
waivers and
reimbursements)(7) ......... 6.00%(6) 5.95% 5.41% 3.70%(6) 3.84% 0.01% (6.67)%(6)
Portfolio Turnover Rate .... 107% 102% 66% 28% 69% 86% --
Net Assets,
End of Period
(in thousands) ............. $ 86,532 $ 73,812 $ 110,285 $ 135,922 $ 76,932 $ 7,209 $ 2,983
(1) Six months ended September 30, 2000 (unaudited).
(2) The period ended March 31, 1998, represents a five-month reporting period.
The fund's fiscal year-end was changed from October 31 to March 31 during
the period. Periods prior to 1998 are based on a fiscal year ended October 31.
(3) September 21, 1995 (inception) through October 31, 1995.
(4) Computed using average shares outstanding throughout the period.
(5) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(6) Annualized.
(7) During the period ended October 31, 1996, and October 31, 1995, and for a
portion of the period October 31, 1997, the manager voluntarily agreed to
waive its management fee and reimburse certain expenses incurred by the
fund. Also, prior to the unified management fee structure, effective
July 13, 1997, the custodian offset part of its fees for balance credits
given to the fund. During the period ended March 31, 1998, a portion of
the subadvisory fee which is paid for subadvisory services was waived.
</TABLE>
16 1-800-345-2021 See Notes to Financial Statements
ACRE--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 2000 1999(2)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $ 11.74 $ 12.10 $ 12.22
--------- --------- ---------
Income From Investment Operations
Net Investment Income(3) ............................ 0.36 0.75 0.43
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ....................... 1.95 (0.45) (0.15)
--------- --------- ---------
Total From Investment Operations .................... 2.31 0.30 0.28
--------- --------- ---------
Distributions
From Net Investment Income .......................... (0.30) (0.66) (0.28)
From Net Realized Gains on Investment Transactions .. -- -- (0.12)
--------- --------- ---------
Total Distributions ................................. (0.30) (0.66) (0.40)
--------- --------- ---------
Net Asset Value, End of Period ........................ $ 13.75 $ 11.74 $ 12.10
========= ========= =========
TOTAL RETURN(4) ..................................... 19.82% 2.62% 2.25%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ..... 1.44%(5) 1.45% 1.45%(5)
Ratio of Net Investment Income to Average Net Assets .. 5.75%(5) 5.70% 5.16%(5)
Portfolio Turnover Rate ............................... 107% 102% 66%
Net Assets, End of Period (in thousands) .............. $ 7,162 $ 5,353 $ 449
(1) Six months ended September 30, 2000 (unaudited).
(2) October 6, 1998 (commencement of sale) through March 31, 1999.
(3) Computed using averages shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one
year are not annualized.
(5) Annualized.
</TABLE>
See Notes to Financial Statements www.americancentury.com 17
ACRE--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
Institutional Class
2000(1) 2000 1999 1998(2) 1997(3)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 11.75 $ 12.11 $ 16.12 $ 16.06 $ 14.24
---------- ---------- ---------- ---------- ----------
Income From Investment Operations
Net Investment Income(4) ................ 0.38 0.75 0.78 0.26 0.28
Net Realized and Unrealized Gain (Loss)
on Investment Transactions .............. 1.96 (0.38) (4.09) 0.26 1.63
---------- ---------- ---------- ---------- ----------
Total From Investment Operations ........ 2.34 0.37 (3.31) 0.52 1.91
---------- ---------- ---------- ---------- ----------
Distributions
From Net Investment Income .............. (0.33) (0.73) (0.58) (0.19) (0.09)
From Net Realized Gains
on Investment Transactions .............. -- -- (0.12) (0.27) --
---------- ---------- ---------- ---------- ----------
Total Distributions ..................... (0.33) (0.73) (0.70) (0.46) (0.09)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............ $ 13.76 $ 11.75 $ 12.11 $ 16.12 $ 16.06
========== ========== ========== ========== ==========
TOTAL RETURN(5) ......................... 20.08% 3.18% (20.77)% 3.32% 13.40%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..................... 0.99%(6) 1.00% 1.00% 0.95%(6) 1.00%(6)
Ratio of Operating Expenses
to Average Net Assets
(before expense waivers
and reimbursements)(7) .................... 0.99%(6) 1.00% 1.00% 1.00%(6) 1.00%(6)
Ratio of Net Investment
Income to Average Net Assets .............. 6.20%(6) 6.15% 5.61% 4.00%(6) 4.85%(6)
Ratio of Net Investment Income
to Average Net Assets (before
expense waivers and reimbursements)(7) .... 6.20%(6) 6.15% 5.61% 3.95%(6) 4.85%(6)
Portfolio Turnover Rate ................... 107% 102% 66% 28% 69%
Net Assets, End of Period (in thousands) .. $ 12,885 $ 15,457 $ 26,315 $ 14,795 $ 13,365
(1) Six months ended September 30, 2000 (unaudited).
(2) The period ended March 31, 1998, represents a five-month reporting period.
The fund's fiscal year-end was changed from October 31 to March 31 during
the period. Periods prior to 1998 are based on a fiscal year ended
October 31.
(3) June 16, 1997 (inception) through October 31, 1997.
(4) Computed using average shares outstanding throughout the period.
(5) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(6) Annualized.
(7) During the period ended March 31, 1998, a portion of the subadvisory fee,
which is paid for subadvisory services was waived.
</TABLE>
18 1-800-345-2021 See Notes to Financial Statements
Share Class and Retirement Account Information
--------------------------------------------------------------------------------
SHARE CLASSES
Three classes of shares are authorized for sale by the fund: Investor Class,
Advisor Class and Institutional Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
shares is 0.25% higher than the total expense ratio of the Investor Class
shares.
INSTITUTIONAL CLASS shares are available to endowments, foundations, defined
benefit pension plans or financial intermediaries serving these investors. This
class recognizes the relatively lower cost of serving institutional customers
and others who invest at least $5 million in an American Century fund or at
least $10 million in multiple funds. In recognition of the larger investments
and account balances and comparatively lower transaction costs, the total
expense ratio of the Institutional Class shares is 0.20% less than the total
expense ratio of the Investor Class shares.
All classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
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.
www.americancentury.com 19
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 15 growth and income funds including domestic
equity, balanced, asset allocation, and specialty. Specialty equity funds
concentrate their holdings in specific industries or sectors of the stock
market. These funds typically respond differently than general equity funds to
changing market or economic conditions. The funds are managed to provide a broad
representation of their respective industries.
AMERICAN CENTURY REAL ESTATE FUND'S primary investment objective is
long-term capital appreciation, with income as a secondary objective.
ACRE typically invests at least 80% of its assets in the equity securities
of real estate investment trusts (REITs) and other companies engaged in the real
estate industry. The fund's management team evaluates potential investments
based on cash flow, property types, and exposure to growing property markets.
Real estate investing involves inherent risks, including interest rate
fluctuations, credit risk, and the impact of changing economic conditions. In
addition, by focusing on a specific market sector, the fund may experience
greater volatility than do funds with a broader investment strategy. The fund is
not intended to serve as a complete investment program by itself.
FUND MANAGEMENT TEAM
RREEF America LLC, and its predecessor company, served as the fund's
investment subadvisor from its inception until it resigned on December 31, 1999.
In connection with its resignation, RREEF informed ACIM and the fund that RREEF
had entered into an arrangement with J.P. Morgan Investment Management Inc.
(JPMIM), providing for RREEF's resignation as subadvisor and the purchase by
JPMIM from RREEF of certain books and records relating to the fund. JPMIM began
subadvising the fund on January 1, 2000. JPMIM's parent company is a significant
minority shareholder of ACIM's parent company. (See Note 2 in Notes to Financial
Statements.)
FUND BACKGROUND
To better serve investors, RREEF and American Century merged an existing
fund managed by RREEF, RREEF Real Estate Securities Fund, into ACRE on June 13,
1997.
The RREEF fund commenced operations on September 21, 1995, and had $25
million in assets at the time of the merger. ACRE was offered to the public by
American Century on June 16, 1997.
COMPARATIVE INDICES
The following indices are used in the report as fund performance
comparisons. They are not investment products available for purchase.
The S&P SMALL CAP 600 INDEX consists of 600 domestic stocks chosen for
market size, liquidity, and industry group representation.
The S&P MIDCAP 400 INDEX is the medium capitalization sector of the U.S.
market. Created by Standard & Poor's, it is considered to represent the
performance of mid-cap stocks in general.
The S&P 500 INDEX is a capitalization-weighted index of 500 widely traded
stocks. Created by Standard & Poor's, it is considered to represent the
performance of the stock market in general.
The MORGAN STANLEY REIT INDEX is a market capitalization-weighted
total-return index of real estate investment trusts (REITs) that meet certain
liquidity requirements. The index was designed to track the total-return
performance of a broad group of REIT stocks, assuming dividend reinvestment in
the index on the ex-dividend date.
The WILSHIRE REIT INDEX (full name: Wilshire Real Estate Securities Index -
REIT component) is a market capitalization-weighted index composed of 98 equity
REITs. It does not include special purpose or healthcare REITs.
[left margin]
PORTFOLIO MANAGER
ACRE
----------------------------------
DANIEL O'CONNOR
20 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on pages 16-18.
INVESTMENT TERMS
* FUNDS FROM OPERATIONS (FFO)-- FFO is the most commonly used measure of a
REIT's earnings performance. It is similar to the net income of non-real estate
companies. FFO is the company's net income with real estate depreciation and
amortization (excluding deferred financing costs) added back in. The FFO ratio
is the price of the stock divided by the company's FFO. It is comparable to a
P/E ratio. The median FFO is in the middle of the REIT's portfolio. Half the
companies in the portfolio have FFOs greater than the median, and half have FFOs
that are less. If the portfolio contains an even number of companies, then the
median is the average of the two company FFOs in the middle.
* MEDIAN MARKET CAPITALIZATION-- market capitalization (market cap) is the
total value of a company's stock and is calculated by multiplying the number of
outstanding common shares by the current share price. The company whose market
cap is in the middle of the portfolio is the median market cap. Half the
companies in the portfolio have values greater than the median, and half have
values that are less. If there is an even number of companies, then the median
is the average of the two companies in the middle.
* WEIGHTED AVERAGE MARKET CAPITALIZATION-- average market capitalization
represents the average value of the companies held in a portfolio. When that
figure is weighted, the impact of each company's capitalization on the overall
average is proportional to the total market value of its shares.
* NUMBER OF COMPANIES-- the number of different companies held by a fund on a
given date.
* PORTFOLIO TURNOVER-- the percentage of a fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
* PRICE/BOOK RATIO-- a stock value measurement calculated by dividing a
company's stock price by its book value per share, with the result expressed as
a multiple instead of as a percentage. (Book value per share is calculated by
subtracting a company's liabilities from its assets, then dividing that value by
the number of outstanding shares.)
* PRICE/EARNINGS (P/E) RATIO-- a stock value measurement calculated by
dividing a company's stock price by its earnings per share, with the result
expressed as a multiple instead of as a percentage. (Earnings per share is
calculated by dividing the after-tax earnings of a corporation by its
outstanding shares.) When this figure is weighted, the impact of each company's
P/E ratio is in proportion to the percentage of the fund that the company
represents.
TYPES OF STOCKS
* BLUE CHIP STOCKS-- stocks of the most established companies in American
industry. They are generally large, fairly stable companies that have
demonstrated consistent earnings and usually have long-term growth potential.
Examples include General Electric and Coca-Cola.
* CYCLICAL STOCKS-- generally considered to be stocks whose price and earnings
fluctuations tend to follow the ups and downs of the business cycle. Examples
include the stocks of automobile manufacturers, steel producers and textile
operators.
* GROWTH STOCKS-- stocks of companies that have experienced above-average
earnings growth and are expected to continue such growth. These stocks often
sell at high P/E ratios. Examples can include the stocks of high-tech,
healthcare and consumer staple companies.
www.americancentury.com 21
Glossary
--------------------------------------------------------------------------------
(Continued)
* LARGE-CAPITALIZATION ("LARGE-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of
more than $9.9 billion. This is Lipper's market capitalization breakpoint as of
September 30, 2000, although it may be subject to change based on market
fluctuations. The Dow Jones Industrial Average and the S&P 500 Index generally
consist of stocks in this range.
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of
between $2.3 billion and $9.9 billion. This is Lipper's market capitalization
breakpoint as of September 30, 2000, although it may be subject to change
based on market fluctuations. The S&P 400 Index and Russell 2500 Index
generally consist of stocks in this range.
* SMALL-CAPITALIZATION ("SMALL-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of
less than $2.3 billion. This is Lipper's market capitalization breakpoint as
of September 30, 2000, although it may be subject to change based on market
fluctuations. The S&P 600 Index and the Russell 2000 Index generally consist
of stocks in this range.
* VALUE STOCKS-- generally considered to be stocks that are purchased because
they are relatively inexpensive. These stocks are typically characterized by low
P/E ratios.
FUND CLASSIFICATIONS
Please be aware that the fund's category may change over time. Therefore, it
is important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs.
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive
yields, as well as a strong and stable foundation and generally lower volatility
levels than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income
provided by either dividend-paying equities or a combination of equity and
fixed-income securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with correspondingly high
price-fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price-fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
correspondingly high price-fluctuation risk.
22 1-800-345-2021
Notes
--------------------------------------------------------------------------------
www.americancentury.com 23
Notes
--------------------------------------------------------------------------------
24 1-800-345-2021
[inside back cover]
AMERICAN CENTURY FUNDS
===============================================================================
GROWTH
===============================================================================
MODERATE RISK
SPECIALTY
Global Natural Resources
AGGRESSIVE RISK
DOMESTIC EQUITY INTERNATIONAL
Veedot(reg.sm) Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth SPECIALTY
Ultra(reg.tm) Global Gold
Select Technology
Life Sciences
===============================================================================
GROWTH AND INCOME
===============================================================================
MODERATE RISK
ASSET ALLOCATION DOMESTIC EQUITY
Balanced Equity Growth
Strategic Allocation: Equity Index
Aggressive Large Cap Value
Strategic Allocation: Tax-Managed Value
Moderate Income & Growth
Strategic Allocation: Value
Conservative Equity Income
SPECIALTY
Utilities
Real Estate
AGGRESSIVE RISK
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
===============================================================================
INCOME
===============================================================================
CONSERVATIVE RISK
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term
Intermediate-Term Treasury Tax-Free
GNMA AZ Intermediate-Term
Inflation-Adjusted Treasury Municipal
Limited-Term Bond FL Intermediate-Term
Target 2000* Municipal
Short-Term Government Intermediate-Term Tax-Free
Short-Term Treasury CA Limited-Term Tax-Free
Limited-Term Tax-Free
MODERATE RISK
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
AGGRESSIVE RISK
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
===============================================================================
CAPITAL PRESERVATION
===============================================================================
CONSERVATIVE RISK
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs. For a definition of fund categories, see the Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon. Target
2000 will close on December 15, 2000. The fund closed to new investors on
10/1/2000, and will no longer accept investments from current shareholders
beginning 11/01/2000.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
[graphic of runners]
Who We Are
American Century offers investors more than 70 mutual funds spanning the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, and offer a range of services
designed to make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have been committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their futures in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo and text logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
-------------------------------------------------------------------------------
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0011 American Century Investment Services, Inc.
SH-SAN-22485 (c)2000 American Century Services Corporation
<PAGE>
[front cover]
September 30, 2000
AMERICAN CENTURY
Semiannual Report
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[graphic of person looking at computer screen]
Equity Index
[american century logo and text logo (reg. sm)]
American
Century
[inside front cover]
[left margin]
EQUITY INDEX
(ACIVX)
Turn to the inside back cover to see a list of American Century funds classified
by objective and risk.
Review the day's market activity at www.americancentury.com
Now you can find more perspective on daily stock and bond market activity on
American Century's Web site.
Information and advance notice
Our Daily Market Wraps provide at-a-glance descriptions of daily news and
events that influenced the U.S. stock and bond markets. In addition, these
write-ups provide advance notice of key economic reports or figures that are
likely to affect market activity.
Review the week
To put the week in perspective, look no further than our Weekly Market Wrap.
This commentary discusses the week's economic and market news, providing a
succinct review of what happened and what to look for in the week ahead.
Easy to find
The Daily and Weekly Market Wraps are easy to find on our Web site. Just go
to www.americancentury.com, click on "News" in the tool bar, and locate the
Wrap you're looking for in the left column.
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American Century' s fund performance reports have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
Table of Contents
Report Highlights ........................................................ 2
Market Perspective ....................................................... 3
EQUITY INDEX
Performance Information .................................................. 4
Management Q&A ........................................................... 5
Portfolio at a Glance .................................................... 5
Top Ten Holdings ......................................................... 6
Top Five Industries ...................................................... 6
Types of Investments ..................................................... 7
Schedule of Investments .................................................. 8
FINANCIAL STATEMENTS
Statement of Assets and Liabilities ...................................... 15
Statement of Operations .................................................. 16
Statement of Changes
in Net Assets ......................................................... 17
Notes to Financial
Statements ............................................................ 18
Financial Highlights ..................................................... 21
OTHER INFORMATION
Share Class and Retirement
Account Information ...................................................... 23
Background Information
Investment Philosophy
and Policies ....................................................... 24
Comparative Indices ................................................... 24
Fund Management ....................................................... 24
Glossary ................................................................. 25
Our Message to You
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/photo/ James E. Stowers, Jr., and James E.Stowers III
James E. Stowers, Jr., standing, with James E. Stowers III
U.S. stocks sputtered during the second and third quarters of 2000 as rising
oil prices and a plummeting euro--the European currency--created new concerns
for investors. The period was marked by heightened nervousness about corporate
earnings, especially for richly priced technology companies. Investors punished
growth stocks nearly across the board in September, when several bellwether tech
companies warned of lower-than-expected third quarter earnings. As a result,
Equity Index, which closely tracks the S&P 500 Index, finished the six months
with a modest decline.
Turning to corporate matters, Chase Manhattan Corp. recently announced plans
to acquire J.P. Morgan & Co., a substantial minority shareholder in American
Century Companies, Inc. since 1998. If the transaction is completed as expected,
J.P. Morgan Chase, the new enterprise, will own the shares of American Century
currently held by Morgan. Corporate control of American Century is not affected
by this transaction. We will be exploring ways to partner with J.P. Morgan Chase
for the benefit of fund shareholders.
In other corporate news, some American Century executives have assumed
important new responsibilities. For example, we chose to share chairman of the
board responsibilities, and also named American Century President William M.
Lyons chief executive officer, giving him ultimate management responsibility for
the entire company.
These changes, plus the promotion of some key investment professionals,
strengthen the leadership of our investment management area and allow us to
pursue additional worthwhile endeavors. For example, Jim Stowers III will focus
more on product innovation (in particular, leveraging our earnings-acceleration
screening system to build the next generation of portfolio management
technologies). However, his first priority will be continuing involvement on the
investment teams responsible for the Ultra and Veedot funds.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/signature/James E.Stowers, Jr and James E. Stowers III
James E. Stowers, Jr James E. Stowers III
Founder and Chairman of the Board Co-Chairman of the Board
www.americancentury.com 1
Report Highlights
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MARKET PERSPECTIVE
* U.S. stocks struggled during the second and third quarters of 2000 as rising
oil prices, a slowing economy and a plummeting euro created new concerns for
investors.
* The period was marked by heightened nervousness about corporate earnings,
especially for technology companies. Investors generally punished growth
stocks in September, when several bellwether tech companies warned of
lower-than-expected third quarter earnings.
* In this environment, the Standard & Poor's 500 Index posted a modest loss of
3.60%. As an indication of the change in investor sentiment toward
technology-oriented companies, the Nasdaq Composite Index fell 19.68% during
the same period.
EQUITY INDEX
* Equity Index declined 3.94% for the six months ended September 30, 2000. The
fund's slight underperformance versus that of the S&P 500 Index, which it
tracks, takes into account the fund's management fee.
* The fund was slowed by a sharp correction in technology and telecommunications
stocks, which had been market leaders during the previous six months. With the
economy appearing to slow after six interest rate hikes by the Federal Reserve
since mid-1999, investors had little patience with richly priced technology
companies whose earnings came in below the market's very high expectations.
* Weakness in the technology sector was fairly broad-based, with industries such
as computer hardware, software, electrical equipment and semiconductors all
posting losses for the six months.
* In this uncertain climate, investors sought companies that could provide more
predictable earnings. That mission took them to utilities, the best performing
sector in the S&P 500 for the period, and healthcare companies, particularly
pharmaceutical firms, hospitals and HMOs.
* The financial sector, which had been slowed by rising interest rates,
rebounded strongly toward the end of the period as investors became
increasingly confident that the Federal Reserve would not be moving interest
rates higher in the short term. Among the biggest beneficiaries of this
sentiment were banks and property and casualty insurers.
[left margin]
EQUITY INDEX(1)
(ACIVX)
TOTAL RETURNS: AS OF 9/30/00
6 Months -3.94%(2)
1 Year 12.54%
INCEPTION DATE: 2/26/99
NET ASSETS: $491 million(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Institutional classes.
Investment terms are defined in the Glossary on pages 25-26.
2 1-800-345-2021
Market Perspective from Mark Mallon
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/photo/Mark Mallon
Mark Mallon, chief investment officer, specialty, asset allocation, and growth
and income equities
The six months ended September 30, 2000, proved to be difficult for stock market
investors. The Standard & Poor's 500 Index posted a negative return of 3.60% for
the period, as the previously high-flying technology and telecommunications
sectors suffered significant losses. At the same time, sectors that had been
out-of-favor, such as financials and utilities, witnessed a rebound.
Investors who had been willing to pay exorbitant prices for some stocks that
offered only the promise of future earnings became spooked by a slew of earnings
warnings from some prominent tech and telecom companies. Much of the downdraft
occurred in September, after the technology-laden Nasdaq Composite Index had
reached lofty heights in August.
REBIRTH FOR OLD ECONOMY STOCKS
The market witnessed a sea change during the period, as investors focused
much more on what they were paying for a company's earnings. For that reason,
many Old Economy stocks witnessed a rebound, while many New Economy firms were
brought back down to earth. Investors also felt more comfortable widening their
scope; the economy showed enough signs of a slowdown that the Federal Reserve
Board felt it could forego further increases in interest rates. With more
Interest rate stability, financial stocks posted noteworthy gains. Another
sector of the Old Economy that attracted interest was energy, where skyrocketing
oil and natural gas prices helped lift the share prices of most companies.
INVESTORS LOOK FOR SAFETY, AND SHIFT TO VALUE AND MID-CAP STOCKS
Within a fairly volatile stock market environment, sectors that offered some
modicum of protection led the way. The utilities sector offered the best
absolute returns within the S&P 500. There, investors found stable earnings and
the promise offered by industry deregulation. These stocks also tend to be
interest rate sensitive, so the Fed's lack of action also helped lift their
shares. Other sectors offering steady, regular earnings -- such as food,
beverage, and healthcare stocks -- became market leaders.
Overall, the market turned away from the high-growth, large-capitalization
tendencies it had exhibited over the past several years. Once investors started
looking elsewhere, they found particular value in many pockets of the market,
including mid-cap stocks. As a result, mid-capitalization companies posted the
most significant gains during the period; the S&P MidCap 400 returned a very
healthy 8.45%.
A FOCUS ON EARNINGS AND PRICE
The U.S. economy appears to have lost some of its momentum, reflecting that
corporate earnings growth appears to have slowed. Market volatility could remain
part of the picture, as investors look for companies whose earnings meet or beat
expectations and shun those that do not. With interest rates stable, a company's
earnings growth and stock valuation should become more significant factors in
determining whether or not it performs well.
[right margin]
"THE MARKET WITNESSED A SEA CHANGE DURING THE PERIOD, AS INVESTORS FOCUSED MUCH
MORE ON WHAT THEY WERE PAYING FOR A COMPANY'S EARNINGS."
MARKET RETURNS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------
S&P 500 -3.60%
S&P MIDCAP 400 8.45%
RUSSELL 2000 -2.72%
Source: Lipper Inc.
These indices represent the performance of large-, medium-, and
small-capitalization stocks.
MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
[data in line chart]
S&P 500 Index S&P Mid-Cap 400 Russell 2000
3/31 1.00 1.00 1.00
4/30 0.97 0.97 0.94
5/31 0.95 0.95 0.89
6/30 0.97 0.97 0.96
7/31 0.96 0.98 0.93
8/31 1.02 1.09 1.00
9/30 0.96 1.08 0.97
Value on 9/30/00
S&P 500 $0.96
S&P MidCap 400 $1.08
Russell 2000 $0.97
www.americancentury.com 3
Equity Index--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
INVESTOR CLASS (INCEPTION 2/26/99) INSTITUTIONAL CLASS (INCEPTION 2/26/99)
EQUITY INDEX S&P 500 EQUITY INDEX S&P 500
<S> <C> <C> <C> <C>
6 MONTHS* ............... -3.94% -3.60% -3.68% -3.60%
1 YEAR .................. 12.54% 13.28% 12.96% 13.28%
AVERAGE ANNUAL RETURNS
LIFE OF FUND ............ 10.42% 11.16% 10.76% 11.16%
</TABLE>
*Returns for periods less than one year are not annualized.
See pages 24-26 for information about share classes, the S&P 500 Index, and
returns.
GROWTH OF $10,000 OVER LIFE OF FUND
[data in mountain chart]
Equity Index S&P 500 Index
Date Value Value
2/26/1999 10000.00 10000.00
3/31/1999 10400.00 10400.00
4/30/1999 10779.60 10802.48
5/31/1999 10519.81 10547.54
6/30/1999 11097.35 11133.98
7/31/1999 10756.66 10785.49
8/31/1999 10696.42 10732.64
9/30/1999 10402.27 10438.57
10/31/1999 11046.17 11099.33
11/30/1999 11267.10 11326.87
12/31/1999 11922.84 11991.75
1/31/2000 11313.58 11389.77
2/29/2000 11109.94 11174.50
3/31/2000 12186.49 12267.37
4/30/2000 11800.18 11898.12
5/31/2000 11555.92 11654.21
6/30/2000 11826.33 11942.07
7/31/2000 11643.02 11755.77
8/31/2000 12356.73 12485.80
9/30/2000 11706.00 11826.55
Value on 9/30/00
S&P 500 $11,827
Equity Index $11,706
The graph at left shows the growth of a $10,000 investment over the life of the
fund. The S&P 500 Index is provided for comparison. Equity Index's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the S&P 500 Index do not. The graph
is based on Investor Class shares only; performance for other classes will vary
due to differences in fee structures (see the Total Returns table above). Past
performance does not guarantee future results. Investment return and principal
value will fluctuate, and redemption value may be more or less than original
cost.
4 1-800-345-2021
Equity Index--Q&A
--------------------------------------------------------------------------------
An interview with Barclays Global Investors, the subadvisor on the Equity
Index Fund.
HOW DID EQUITY INDEX PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER 30, 2000?
Equity Index declined 3.94%* during the period compared to a 3.60% decline
for the Standard & Poor's 500 Index.
WHY DID THE MARKET POST NEGATIVE RETURNS FOR THE SIX-MONTH PERIOD?
Several key sectors witnessed sharp declines during this time. Most notable
was technology -- the largest sector within the S&P 500 at around 32% -- which
had been riding high in late 1999 and early 2000. With some large technology
companies struggling to meet their earnings targets, investors became less
inclined to maintain investments in companies whose stock prices reflected, in
some cases, unreasonably promising earnings trends. In addition, the
telecommunications sector stumbled, knocked off-balance by a number of issues,
including the collapse of the WorldCom/ Sprint merger. Finally, certain cyclical
sectors -- those whose prospects move in synch with the economy -- were caught
in a downdraft, some due to concerns that the economy would cool off
significantly because of Federal Reserve Board interest rate hikes, others
because of poor commodity pricing.
NEVERTHELESS, THERE MUST HAVE BEEN POCKETS OF OPPORTUNITY...
Absolutely. With many technology stocks on the decline, investors turned
their attention to the Old Economy stocks that were neglected during the
record-shattering days of the fourth quarter of 1999 and the first quarter of
2000.
The best-performing sector was utilities. These stocks were considered safe
havens amid the stock market volatility of the past six months. In addition,
utilities investments were helped by the growing perception that the Fed might
be nearing or reaching the end of its most recent rate hike cycle. Stocks of
utilities are very sensitive to changes in interest rates because they generally
generate healthy dividend income. Finally, deregulation in the industry put some
wind in these companies' sails. Among the stocks in the sector that performed
best were AES Corp., Entergy, Reliant Energy, and PPL Corp.
Health care also proved to be fertile ground, with pharmaceutical
companies, hospitals and HMOs among its leaders. These companies attracted
investors because they tend to offer steady earnings -- a positive
characteristic in an uncertain environment -- and were selling at more
reasonable share prices than were the technology and telecommunications sectors.
The same attributes drew investors to consumer non-cyclical stocks, such as food
and beverage and supermarket companies. Among the health care and consumer
non-cyclical stocks that posted significant share-price gains were Cardinal
Health, Allergan, Alza Corp., Unitedhealth Group, Bestfoods, and Nabisco.
WHAT ABOUT FINANCIAL STOCKS, WHICH MAKE UP THE SECOND-LARGEST SECTOR OF THE S&P
500?
This sector rebounded smartly. Share prices in the financial sector had
been beaten down steadily over the past 12 to 18 months because of the negative
influence of Federal Reserve rate hikes. As the second and third quarters of
[right margin]
"SEVERAL KEY SECTORS WITNESSED SHARP DECLINES DURING THIS TIME. MOST
NOTABLE WAS TECHNOLOGY -- THE LARGEST SECTOR WITHIN THE S&P 500 AT AROUND 32% --
WHICH HAD BEEN RIDING HIGH IN LATE 1999 AND EARLY 2000."
PORTFOLIO AT A GLANCE
-------------------------------------------------------------------------------
9/30/00 3/31/00
NO. OF COMPANIES 500 502
P/E RATIO 34.7 38.7
MEDIAN MARKET $8.22 $7.61
CAPITALIZATION BILLION BILLION
WEIGHTED MARKET $130 $157
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 3%(1) 13%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.49%(3) 0.49%
(1) Six months ended 9/30/00.
(2) Year ended 3/31/00.
(3) Annualized.
Investment terms are defined in the Glossary on pages 25-26.
*All fund returns referenced in this interview are for Investor class shares.
www.americancentury.com 5
Equity Index--Q&A
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(Continued)
2000 progressed, emerging data pointed to a slowing economy, and the Fed stopped
raising rates. In response, investors became more willing to look at the
long-term prospects of financial companies and sentiment toward them improved.
Banks such as Mellon Financial performed particularly well. Other strong
performers in the sector included property and casualty insurers, such as
Allstate, which benefited from an improved pricing environment.
HAVE HIGHER ENERGY PRICES BOOSTED ENERGY COMPANY SHARES?
Yes. Remember, it wasn't that long ago that oil prices were extremely low
and energy companies lagged well behind New Economy firms. As the Organization
of Petroleum Exporting Countries (OPEC) tightened production quotas, oil prices
marched steadily upward to 30-year highs. This, despite political pressure that
encouraged OPEC to increase production modestly, and President Clinton's
decision to tap into the national strategic petroleum reserve in an attempt to
keep prices down. We witnessed rekindled activity for companies whose earnings
are highly sensitive to the price of oil, namely energy services providers and
exploration and production firms. The performance of many of these companies was
further buoyed by increases in the price of natural gas. As with oil, demand for
natural gas continued to grow while supply grew even tighter.
WHICH SECTORS PROVED TO BE THE MOST DISAPPOINTING DURING THE PERIOD?
As we said, technology really dragged the S&P 500 down during the six
months in question. Weakness in the sector was fairly broad-based, with
industries such as computer hardware, software, electrical equipment, and
semiconductors posting losses. On the computer side, Apple and Dell suffered
from earnings shortfalls, while software provider Computer Associates was
dragged down by a lag in the production of a new mainframe by its number one
client, IBM. Within the sector, however, there were some pockets of solid
performance. Corning's leadership position as a fiberoptic network equipment
provider helped insulate it from many of the problems encountered within the
electrical equipment industry. And, defense and aerospace offered healthy
returns, paced by the strong performance of Northrop Grumman, Lockheed Martin,
and Boeing. Last year, investors appeared worried that Boeing's airplane orders
would decline. However, with the global economy on the rebound, Boeing's
production outlook for the next few years has improved. In addition, the company
became more efficient, significantly improving profits per plane.
Telecommunications were another problem spot. The failed merger between
WorldCom and Sprint put a damper on the excitement inspired by potential
consolidation activity, which had been encouraged by the telecommunications
deregulation legislation of 1996. In addition, other companies, such as AT&T,
suffered from a weak long-distance pricing climate.
WHAT IS THE OUTLOOK?
While it's impossible to predict the direction of the stock market, we can
review the factors that might color the market backdrop. First, the
interest rate environment appears to be more favorable than in the past year or
so. There
TOP TEN HOLDINGS
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% OF FUND INVESTMENTS
AS OF AS OF
9/30/00 3/31/00
GENERAL ELECTRIC CO.
(U.S.) 4.4% 3.9%
CISCO SYSTEMS INC. 3.0% 4.0%
MICROSOFT CORP. 2.4% 4.2%
EXXON MOBIL CORP. 2.4% 2.0%
PFIZER, INC. 2.2% 1.1%
INTEL CORP. 2.1% 3.3%
CITIGROUP INC. 1.9% 1.5%
ORACLE CORP. 1.7% 1.7%
AMERICAN INTERNATIONAL
GROUP INC. 1.7% 1.3%
EMC CORP. (MASS.) 1.7% 1.0%
TOP FIVE INDUSTRIES
-------------------------------------------------------------------------------
% OF FUND INVESTMENTS
AS OF AS OF
9/30/00 3/31/00
ELECTRICAL EQUIPMENT 9.0% 9.3%
DRUGS 7.8% 6.2%
FINANCIAL SERVICES 7.5% 6.2%
BANKS 7.0% 6.2%
COMPUTER HARDWARE & BUSINESS MACHINES 6.1% 5.5%
6 1-800-345-2021
Equity Index--Q&A
--------------------------------------------------------------------------------
(Continued)
have been signs that the economy is slowing and that inflation appears under
control. These factors, coupled with the upcoming presidential election, will
probably keep the Fed on the sidelines for the foreseeable future. That should
be a positive for the stock market. What's more uncertain is the effect of
rising energy prices. Will they effectively dampen growth by limiting economic
activity, or will they spark more broad-based inflation? Other issues that could
be influential are the results of the election itself, as well as turmoil in
the Middle East and the continuing struggles of the euro.
In the short term, with interest rates firm and inflation still benign, the
main driver of the market is likely to be corporate earnings. That said, we will
have to wait and see if investors continue to evaluate more closely what they
are paying for a company's earnings. Or, like last year, will they pay any price
for the market's best earnings growth? What kinds of stocks will lead the market
averages? Old Economy? New Economy? Only time will provide the answers.
[right margin]
"IN THE SHORT TERM, WITH INTEREST RATES FIRM AND INFLATION STILL BENIGN, THE
MAIN DRIVER OF THE MARKET IS LIKELY TO BE CORPORATE EARNINGS."
[pie charts - data below]
TYPES OF INVESTMENTS IN THE PORTFOLIO
-------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000
COMMON STOCKS & FUTURES 99.9%
TEMPORARY CASH INVESTMENTS 0.1%
-------------------------------------------------------------------------------
AS OF MARCH 31, 2000
COMMON STOCKS & FUTURES 99.7%
TEMPORARY CASH INVESTMENTS 0.3%
www.americancentury.com 7
Equity Index--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS - 96.9%
AIRLINES - 0.2%
5,682 AMR Corp.(1) $ 185,730
4,623 Delta Air Lines Inc. 205,146
18,812 Southwest Airlines Co. 456,191
2,546 US Airways Group Inc.(1) 77,494
-----------------
924,561
-----------------
ALCOHOL - 0.3%
34,210 Anheuser-Busch Companies, Inc. 1,447,511
2,588 Brown-Forman Corp. Cl B 141,693
1,393 Coors (Adolph) Co. Cl B 88,020
-----------------
1,677,224
-----------------
APPAREL & TEXTILES - 0.1%
2,012 Liz Claiborne, Inc. 77,462
10,184 NIKE, Inc. 407,996
2,155 Reebok International Ltd.(1) 40,541
1,244 Russell Corp. 19,749
677 Springs Industries, Inc. Cl A 19,083
4,335 VF Corp. 107,020
-----------------
671,851
-----------------
BANKS - 7.0%
14,233 Amsouth Bancorporation 177,913
62,044 Bank of America Corp. 3,249,554
27,884 Bank of New York Co., Inc. (The) 1,563,247
43,652 Bank One Corp. 1,686,059
15,101 BB&T Corporation 454,918
7,935 Charter One Financial Inc. 193,416
49,427 Chase Manhattan Corp. 2,282,909
169,920 Citigroup Inc. 9,186,299
5,909 Comerica Inc. 345,307
17,544 Fifth Third Bancorp 944,635
37,205 First Union Corp. 1,197,536
36,190 Firstar Corp. 809,751
34,086 Fleet Boston Financial Corp. 1,329,354
9,491 Huntington Bancshares Inc. 139,696
16,260 KeyCorp 411,581
18,444 Mellon Bank Corp. 855,341
6,006 Morgan (J.P.) & Co. 981,230
22,912 National City Corp. 506,928
8,388 Northern Trust Corp. 745,746
5,176 Old Kent Financial Corp. 149,781
10,917 PNC Bank Corp. 709,605
8,271 Regions Financial Corp. 188,941
6,353 SouthTrust Corp. 199,921
6,091 State Street Corp. 791,830
6,564 Summit Bancorp. 226,458
11,263 SunTrust Banks, Inc. 561,038
10,689 Synovus Financial Corp. 226,473
28,170 U.S. Bancorp 640,868
5,092 Union Planters Corp. 168,354
Shares Value
--------------------------------------------------------------------------------
7,681 Wachovia Corp. $ 435,417
62,185 Wells Fargo & Co. 2,856,622
-----------------
34,216,728
-----------------
CHEMICALS - 1.8%
8,645 Air Products & Chemicals, Inc. 311,220
2,637 Ashland Inc. 88,834
4,212 Avery Dennison Corp. 195,332
25,618 Dow Chemical Co. 638,849
39,381 du Pont (E.I.) de Nemours & Co. 1,631,850
2,907 Eastman Chemical Company 107,377
4,834 Engelhard Corp. 78,553
1,151 FMC Corp.(1) 77,189
5,899 Goodyear Tire & Rubber Co. (The) 106,182
2,558 Grace (W.R.) & Co. (Del.)(1) 17,586
1,972 Great Lakes Chemical Corp. 57,804
4,083 Hercules Inc. 57,672
14,925 Minnesota Mining &
Manufacturing Co. 1,360,041
49,020 Pharmacia Corporation 2,950,390
6,571 PPG Industries, Inc. 260,787
5,968 Praxair, Inc. 223,054
8,202 Rohm and Haas Co. 238,371
3,164 Sealed Air Corp.(1) 143,171
6,161 Sherwin-Williams Co. 131,691
5,092 Union Carbide Corp. 192,223
3,806 Vulcan Materials Co. 152,954
-----------------
9,021,130
-----------------
CLOTHING STORES - 0.3%
32,108 Gap, Inc. (The) 646,173
16,280 Limited, Inc. (The) 359,178
4,915 Nordstrom, Inc. 76,490
11,044 TJX Companies, Inc. (The) 248,490
-----------------
1,330,331
-----------------
COMPUTER HARDWARE &
BUSINESS MACHINES - 6.1%
3,745 Adaptec, Inc.(1) 75,017
12,278 Apple Computer, Inc.(1) 315,775
64,212 Compaq Computer Corp. 1,770,967
97,721 Dell Computer Corp.(1) 3,007,975
82,358 EMC Corp. (Mass.)(1) 8,163,736
12,172 Gateway Inc.(1) 569,041
37,667 Hewlett-Packard Co. 3,653,699
66,504 International Business
Machines Corp. 7,481,699
4,816 Lexmark International Group, Inc.
Cl A(1) 180,600
11,802 Network Appliances, Inc.(1) 1,503,649
21,334 Palm Inc.(1) 1,130,035
9,640 Pitney Bowes, Inc. 380,178
5,720 Sanmina Corp.(1) 536,071
8,650 Seagate Technology, Inc.(1) 596,850
25,196 Xerox Corp. 379,515
-----------------
29,744,807
-----------------
8 1-800-345-2021 See Notes to Financial Statements
Equity Index--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
COMPUTER SOFTWARE - 5.7%
4,519 Adobe Systems Inc. $ 701,716
2,170 Autodesk, Inc. 54,996
9,322 BMC Software Inc.(1) 177,992
7,030 Citrix Systems, Inc.(1) 141,259
22,320 Computer Associates
International, Inc. 562,185
13,784 Compuware Corp.(1) 115,226
5,892 Comverse Technology, Inc.(1) 636,520
5,810 Convergys Corp.(1) 225,864
3,020 Mercury Interactive Corp.(1) 473,479
198,769 Microsoft Corp.(1)(4) 11,988,254
3,606 NCR Corp.(1) 136,352
12,268 Novell, Inc.(1) 122,105
106,325 Oracle Corp.(1) 8,373,094
10,281 Parametric Technology Corp.(1) 112,770
10,562 PeopleSoft, Inc.(1) 295,406
15,740 Siebel Systems, Inc.(1) 1,751,567
11,774 Unisys Corp.(1) 132,458
15,178 Veritas Software Corp.(1) 2,158,596
-----------------
28,159,839
-----------------
CONSTRUCTION & REAL PROPERTY - 0.1%
1,495 Armstrong Holdings Inc. 17,847
2,218 Centex Corp. 71,253
2,858 Fluor Corp. 85,740
1,833 Kaufman & Broad Home Corp. 49,376
17,261 Masco Corp. 321,486
1,527 Pulte Corp. 50,391
-----------------
596,093
-----------------
CONSUMER DURABLES - 0.1%
3,142 Black & Decker Corporation 107,417
7,435 Leggett & Platt, Inc. 117,566
2,933 Maytag Corp. 91,106
2,698 Whirlpool Corp. 104,885
-----------------
420,974
-----------------
DEFENSE/AEROSPACE - 1.0%
33,889 Boeing Co. 2,135,007
3,836 Goodrich (B.F.) Company (The) 150,323
30,233 Honeywell Inc. 1,077,051
16,145 Lockheed Martin Corp. 532,139
2,710 Northrop Grumman Corp. 246,271
12,839 Raytheon Co. Cl B 365,109
5,408 Textron Inc. 249,444
4,686 TRW Inc. 190,369
-----------------
4,945,713
-----------------
DEPARTMENT STORES - 2.3%
16,885 Costco Companies, Inc.(1) 590,447
3,475 Dillards Inc. 36,922
7,852 Federated Department Stores, Inc.(1) 205,134
18,139 Kmart Corp.(1) 108,834
12,448 Kohl's Corp.(1) 718,094
12,006 May Department Stores Co. (The) 246,123
Shares Value
--------------------------------------------------------------------------------
9,847 Penney (J.C.) Company, Inc. $ 116,318
12,951 Sears, Roebuck & Co. 419,871
34,370 Target Corporation 880,731
168,697 Wal-Mart Stores, Inc. 8,118,543
-----------------
11,441,017
-----------------
DRUGS - 7.8%
4,962 Allergan, Inc. 418,979
4,372 Alza Corp.(1) 378,178
49,246 American Home Products Corp. 2,785,477
38,851 Amgen Inc.(1) 2,707,429
5,590 Biogen, Inc.(1) 341,165
74,229 Bristol-Myers Squibb Co. 4,240,332
10,493 Cardinal Health, Inc. 925,351
42,663 Lilly (Eli) & Co. 3,461,036
10,716 McKesson HBOC, Inc. 327,508
7,930 MedImmune, Inc.(1) 612,840
86,896 Merck & Co., Inc. 6,468,321
238,478 Pfizer, Inc. 10,716,605
55,338 Schering-Plough Corp. 2,573,217
3,044 Sigma-Aldrich Corp. 100,642
38,145 Walgreen Co. 1,447,126
3,863 Watson Pharmaceuticals, Inc.(1) 250,612
-----------------
37,754,818
-----------------
ELECTRICAL EQUIPMENT - 9.0%
26,664 ADC Telecommunications Inc.(1) 714,095
6,959 Cabletron Systems, Inc.(1) 204,421
268,048 Cisco Systems Inc.(1) 14,809,651
11,104 Corning Inc. 3,297,888
7,668 Dover Corp. 359,917
7,500 General Dynamics Corp. 471,094
3,326 ITT Industries, Inc. 107,887
35,350 JDS Uniphase Corp.(1) 3,346,098
126,137 Lucent Technologies Inc. 3,855,062
1,734 Millipore Corp. 83,991
82,363 Motorola, Inc. 2,326,755
112,826 Nortel Networks Corp. 6,720,198
28,142 QUALCOMM Inc.(1) 2,005,118
62,731 Qwest Communications
International Inc.(1) 3,015,009
6,016 Scientific-Atlanta, Inc. 382,768
22,720 Solectron Corp.(1) 1,047,960
1,813 Tektronix, Inc. 139,261
15,483 Tellabs, Inc.(1) 739,797
6,551 Thermo Electron Corp.(1) 170,326
-----------------
43,797,296
-----------------
ELECTRICAL UTILITY - 2.1%
17,262 AES Corp. (The)(1) 1,182,446
5,185 Ameren Corp. 217,122
12,141 American Electric Power 475,017
6,030 C P & L Energy Inc. 251,376
6,006 Cinergy Corp. 198,573
4,154 CMS Energy Corp. 111,898
7,983 Consolidated Edison, Inc. 272,420
See Notes to Financial Statements www.americancentury.com 9
Equity Index--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
5,654 Constellation Energy Group $ 281,287
8,987 Dominion Resources Inc.(Va) 521,807
5,382 DTE Energy Company 205,862
13,905 Duke Energy Corp. 1,192,353
12,306 Edison International 237,660
8,415 Entergy Corp. 313,459
8,637 FirstEnergy Corp. 232,659
3,727 Florida Progress Corp. 197,298
6,710 FPL Group, Inc. 441,183
4,582 GPU Inc. 148,629
6,060 Niagara Mohawk Holdings Inc.(1) 95,445
6,409 PECO Energy Co. 388,145
14,583 PG&E Corp. 352,726
3,203 Pinnacle West Capital Corp. 162,953
5,458 PP&L Resources, Inc. 227,872
8,101 Public Service Enterprise Group Inc. 362,013
11,103 Reliant Energy, Inc. 516,290
24,526 Southern Co. 795,561
9,956 Texas Utilities Co. 394,507
6,644 Unicom Corp. 373,310
12,810 XCEL Energy Inc. 352,275
-----------------
10,502,146
-----------------
ENERGY RESERVES & PRODUCTION - 5.3%
3,403 Amerada Hess Corp. 227,788
9,186 Anadarko Petroleum Corp. 610,502
4,613 Apache Corp. 272,744
8,138 Burlington Resources, Inc. 299,580
24,639 Chevron Corp. 2,100,475
4,820 Devon Energy Corporation 289,923
27,915 Enron Corp. 2,446,052
131,593 Exxon Mobil Corp. 11,728,225
3,563 Kerr-McGee Corp. 236,049
13,953 Occidental Petroleum Corp. 304,350
9,620 Phillips Petroleum Co. 603,655
80,993 Royal Dutch Petroleum Co.
New York Shares 4,854,518
20,820 Texaco Inc. 1,093,050
5,428 Tosco Corp. 169,286
9,148 Unocal Corp. 324,182
16,731 Williams Companies, Inc. (The) 706,885
-----------------
26,267,264
-----------------
ENTERTAINMENT - 0.8%
22,265 Carnival Corp. Cl A 548,276
57,289 Viacom, Inc. Cl B(1) 3,351,406
-----------------
3,899,682
-----------------
ENVIRONMENTAL SERVICES - 0.1%
7,435 Allied Waste Industries Inc.(1) 68,309
23,525 Waste Management, Inc. 410,217
-----------------
478,526
-----------------
FINANCIAL SERVICES - 7.5%
50,304 American Express Co. 3,055,968
9,653 AON Corp. 378,880
Shares Value
--------------------------------------------------------------------------------
27,517 Associates First Capital Corp. $ 1,045,646
3,702 Block (H & R), Inc. 137,205
7,408 Capital One Financial Corp. 519,023
27,428 Cendant Corporation(1) 298,280
9,910 CIT Group Inc. 173,425
4,303 Countrywide Credit Industries, Inc. 162,438
38,048 Fannie Mae 2,720,432
26,253 Federal Home Loan Mortgage
Corporation 1,419,303
374,117 General Electric Co. (U.S.)(4) 21,581,874
17,840 Household International, Inc. 1,010,190
10,243 Marsh & McLennan Companies, Inc. 1,359,758
3,724 MBIA Inc. 264,870
32,175 MBNA Corp. 1,238,738
5,392 Providian Financial Corp. 684,784
1,930 Temple-Inland Inc. 73,099
5,861 USA Education Inc. 282,427
-----------------
36,406,340
-----------------
FOOD & BEVERAGE - 3.0%
23,888 Archer-Daniels-Midland Co. 206,034
10,480 Bestfoods 762,420
15,908 Campbell Soup Company 411,620
93,553 Coca-Cola Company (The) 5,157,108
15,802 Coca-Cola Enterprises Inc. 251,844
20,145 ConAgra, Inc. 404,159
10,783 General Mills, Inc. 382,797
13,127 Heinz (H.J.) Co. 486,519
5,165 Hershey Foods Corp. 279,556
15,360 Kellogg Co. 371,520
12,316 Nabisco Group Holdings Corp. 351,006
54,509 PepsiCo, Inc. 2,507,414
5,006 Quaker Oats Co. (The) 396,100
32,849 Sara Lee Corp. 667,245
5,003 Supervalu Inc. 75,358
12,587 SYSCO Corp. 582,935
21,590 Unilever N.V. New York Shares 1,041,718
4,289 Wrigley (Wm.) Jr. Company 321,139
-----------------
14,656,492
-----------------
FOREST PRODUCTS & PAPER - 0.6%
2,008 Bemis Co., Inc. 64,507
2,158 Boise Cascade Corp. 57,322
7,757 Fort James Corp. 237,073
6,412 Georgia-Pacific Corp. 150,682
18,259 International Paper Co. 523,805
20,328 Kimberly-Clark Corp. 1,134,556
3,937 Louisiana-Pacific Corp. 36,171
3,893 Mead Corp. (The) 90,999
1,067 Potlatch Corp. 33,744
3,800 Westvaco Corp. 101,413
8,314 Weyerhaeuser Co. 335,678
4,127 Willamette Industries, Inc. 115,556
-----------------
2,881,506
-----------------
10 1-800-345-2021 See Notes to Financial Statements
Equity Index--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
GAS & WATER UTILITIES - 0.3%
3,000 Columbia Energy Group $ 213,000
1,035 Eastern Enterprises 66,046
8,773 EL Paso Energy Corporation 540,636
5,050 Keyspan Energy Corp. 202,631
1,730 NICOR Inc. 62,604
1,113 ONEOK, Inc. 44,242
1,331 People's Energy Corp. 44,422
7,740 Sempra Energy 161,089
-----------------
1,334,670
-----------------
GOLD - 0.1%
14,980 Barrick Gold Corp. 228,445
9,945 Homestake Mining Co. 51,590
6,382 Newmont Mining Corp. 108,494
12,450 Placer Dome Inc. 117,497
-----------------
506,026
-----------------
GROCERY STORES - 0.4%
15,981 Albertson's Inc. 335,601
31,198 Kroger Co. (The)(1) 703,905
18,780 Safeway Inc.(1) 876,791
5,317 Winn-Dixie Stores, Inc. 76,432
-----------------
1,992,729
-----------------
HEAVY ELECTRICAL EQUIPMENT - 0.5%
7,350 American Power Conversion Corp.(1) 140,569
3,094 Andrew Corp.(1) 81,121
3,522 Cooper Industries, Inc. 124,151
1,587 Cummins Engine Company, Inc. 47,511
2,756 Eaton Corp. 169,839
16,144 Emerson Electric Co. 1,081,647
3,548 Grainger (W.W.), Inc. 93,357
7,413 Molex Inc. 403,313
6,989 Rockwell International Corp. 211,417
2,219 Thomas & Betts Corp. 38,694
-----------------
2,391,619
-----------------
HEAVY MACHINERY - 0.1%
8,863 Deere & Co. 294,695
-----------------
HOME PRODUCTS - 0.8%
2,138 Alberto-Culver Company Cl B 61,601
8,951 Avon Products, Inc. 365,872
8,864 Clorox Company 350,682
21,692 Colgate-Palmolive Co. 1,023,861
4,840 Ecolab Inc. 174,543
5,947 Fortune Brands, Inc. 157,596
39,764 Gillette Company 1,227,713
3,778 International Flavors &
Fragrances Inc. 68,949
10,077 Newell Co. 229,882
6,427 Pactiv Corp.(1) 71,902
11,585 Ralston Purina Co. 274,420
2,219 Tupperware Corp. 39,942
-----------------
4,046,963
-----------------
Shares Value
--------------------------------------------------------------------------------
HOTELS - 0.1%
4,404 Harrah's Entertainment, Inc.(1) $ 121,110
13,902 Hilton Hotels Corporation 160,742
9,049 Marriott International, Inc. 329,723
-----------------
611,575
-----------------
INDUSTRIAL PARTS - 0.6%
832 Briggs & Stratton Corp. 31,460
13,062 Caterpillar Inc. 440,843
2,326 Crane Co. 53,207
6,603 Genuine Parts Company 125,870
11,401 Illinois Tool Works Inc. 637,030
6,076 Ingersoll-Rand Co. 205,825
1,566 National Service Industries, Inc. 30,635
4,661 Pall Corp. 92,929
4,224 Parker-Hannifin Corp. 142,560
2,248 Snap-on Inc. 52,969
3,256 Stanley Works (The) 75,092
2,281 Timken Co. 31,221
17,685 United Technologies Corp. 1,224,685
-----------------
3,144,326
-----------------
INDUSTRIAL SERVICES (2)
2,273 Ryder System, Inc. 41,908
-----------------
INFORMATION SERVICES - 1.6%
23,686 Automatic Data Processing, Inc. 1,584,001
5,500 Ceridian Corp.(1) 154,344
6,346 Computer Sciences Corp.(1) 471,191
6,122 Dun & Bradstreet Corp. (The)(1) 210,826
17,621 Electronic Data Systems Corp. 731,272
5,331 Equifax Inc. 143,604
15,310 First Data Corp. 598,047
11,212 IMS Health Inc. 232,649
11,625 Interpublic Group of Companies, Inc. 395,977
6,708 Omnicom Group Inc. 489,265
14,057 Paychex, Inc. 741,067
4,879 Sabre Holdings Corp. 141,186
4,500 Sapient Corp.(1) 182,953
20,750 Yahoo! Inc.(1) 1,891,491
2,774 Young & Rubicam Inc. 137,313
-----------------
8,105,186
-----------------
INTERNET - 2.4%
87,212 America Online, Inc.(1) 4,687,645
59,924 Sun Microsystems, Inc.(1) 7,039,197
-----------------
11,726,842
-----------------
LEISURE - 0.3%
3,329 Brunswick Corp. 60,754
11,634 Eastman Kodak Co. 475,540
11,430 Harley-Davidson, Inc. 547,211
6,543 Hasbro, Inc. 74,836
16,101 Mattel, Inc. 180,130
1,706 Polaroid Corp. 22,924
-----------------
1,361,395
-----------------
See Notes to Financial Statements www.americancentury.com 11
Equity Index--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
LIFE & HEALTH INSURANCE - 0.7%
5,333 Aetna Inc. $ 309,647
10,011 Aflac Inc. 641,330
9,536 American General Corp. 743,808
5,953 CIGNA Corp. 621,493
12,302 Conseco Inc. 93,803
3,888 Jefferson-Pilot Corp. 263,898
7,200 Lincoln National Corp. 346,500
4,813 Torchmark Corp. 133,862
9,064 UNUM Corp. 246,994
-----------------
3,401,335
-----------------
MEDIA - 3.1%
141,873 AT&T Corp. 4,167,520
22,114 Clear Channel
Communications, Inc.(1) 1,249,441
34,173 Comcast Corp. Cl A(1) 1,398,957
78,744 Disney (Walt) Co. 3,011,958
1,924 Meredith Corp. 56,758
16,490 Seagram Co. Ltd. (The) 947,144
49,989 Time Warner Inc. 3,911,640
11,639 Tribune Co. 507,751
-----------------
15,251,169
-----------------
MEDICAL PRODUCTS & SUPPLIES - 3.5%
58,546 Abbott Laboratories 2,784,594
1,917 Bard (C.R.), Inc. 80,993
2,011 Bausch & Lomb Inc. Cl A 78,303
11,040 Baxter International, Inc. 881,130
9,564 Becton Dickinson & Co. 252,848
6,710 Biomet Inc. 235,060
15,349 Boston Scientific Corp.(1) 252,299
11,590 Guidant Corp.(1) 819,268
52,511 Johnson & Johnson 4,932,753
2,535 Mallinckrodt Inc. 115,659
45,254 Medtronic, Inc. 2,344,723
7,870 PE Corp-PE Biosystems Group 916,855
49,404 Procter & Gamble Co. (The) 3,310,068
3,183 St. Jude Medical, Inc.(1) 162,333
-----------------
17,166,886
-----------------
MEDICAL PROVIDERS & SERVICES - 0.5%
21,063 HCA - The Healthcare Co. 781,963
3,901 HCR Manor Care, Inc.(1) 61,197
14,574 HEALTHSOUTH Corp.(1) 118,414
6,265 Humana Inc.(1) 67,349
4,362 Quintiles Transnational Corp.(1) 69,656
11,894 Tenet Healthcare Corp. 432,644
6,072 United HealthCare Corp. 599,610
2,370 Wellpoint Health Networks Inc.(1) 227,520
-----------------
2,358,353
-----------------
MINING & METALS - 0.4%
8,259 Alcan Aluminium Ltd. 238,995
32,730 Alcoa Inc. 828,478
3,090 Allegheny Technologies Inc. 56,006
1,113 Ball Corporation 35,268
Shares Value
--------------------------------------------------------------------------------
4,985 Bethlehem Steel Corp.(1) 14,955
4,759 Crown Cork & Seal Co., Inc. 50,862
5,772 Freeport-McMoRan Copper
& Gold, Inc. Cl B(1) 50,866
6,856 Inco Ltd.(1) 110,553
3,062 Nucor Corp. 92,243
5,557 Owens-Illinois, Inc.(1) 51,402
2,972 Phelps Dodge Corp. 124,081
3,352 USX-U.S. Steel Group 50,909
3,275 Worthington Industries, Inc. 30,703
-----------------
1,735,321
-----------------
MOTOR VEHICLES & PARTS - 0.8%
2,809 Cooper Tire & Rubber Company 28,266
5,642 Dana Corp. 121,303
21,147 Delphi Automotive Systems 319,848
71,498 Ford Motor Company 1,809,793
20,268 General Motors Corp. 1,317,420
3,241 Johnson Controls, Inc. 172,381
2,238 Navistar International Corp.(1) 67,000
2,903 PACCAR Inc. 107,683
4,916 Visteon Corp. 74,355
-----------------
4,018,049
-----------------
MULTI-INDUSTRY - 0.7%
5,355 Danaher Corp. 266,411
63,640 Tyco International Ltd. 3,301,325
-----------------
3,567,736
-----------------
OIL REFINING - 0.3%
8,103 Coastal Corp. 600,635
23,518 Conoco Inc. 633,516
3,285 Sunoco, Inc. 88,490
11,779 USX-Marathon Group 334,229
-----------------
1,656,870
-----------------
OIL SERVICES - 0.7%
12,480 Baker Hughes Inc. 463,320
16,826 Halliburton Co. 823,422
2,234 McDermott International, Inc. 24,574
3,555 Rowan Companies, Inc.(1) 103,095
21,531 Schlumberger Ltd. 1,772,271
7,950 Transocean Sedco Forex, Inc. 466,069
-----------------
3,652,751
-----------------
PROPERTY & CASUALTY INSURANCE - 2.4%
27,737 Allstate Corp. 963,861
87,397 American International Group, Inc. 8,362,800
6,601 Chubb Corp. 522,304
6,080 Cincinnati Financial Corp. 216,030
8,472 Hartford Financial Services
Group Inc. (The) 617,927
3,726 Loews Corp. 310,655
4,014 MGIC Investment Corp. 245,356
2,758 Progressive Corp. (Ohio) 225,811
4,787 SAFECO Corp. 130,745
8,436 St. Paul Companies, Inc. 416,000
-----------------
12,011,489
-----------------
12 1-800-345-2021 See Notes to Financial Statements
Equity Index--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
PUBLISHING - 0.4%
2,381 American Greetings Corp. Cl A 41,668
2,763 Deluxe Corp. 56,123
4,607 Donnelley (R.R.) & Sons Co. 113,159
3,300 Dow Jones & Co., Inc. 199,650
9,958 Gannett Co., Inc. 527,774
2,762 Harcourt General Inc. 162,958
2,852 Knight-Ridder, Inc. 144,917
7,352 McGraw-Hill Companies, Inc. (The) 467,312
6,309 New York Times Co. (The) Cl A 248,023
-----------------
1,961,584
-----------------
RAILROADS - 0.2%
15,268 Burlington Northern Santa Fe Corp. 329,216
8,224 CSX Corporation 179,386
14,508 Norfolk Southern Corp. 212,180
9,342 Union Pacific Corp. 363,170
-----------------
1,083,952
-----------------
RESTAURANTS - 0.4%
4,617 Darden Restaurants, Inc. 96,091
49,887 McDonald's Corp. 1,505,964
7,070 Starbucks Corp.(1) 283,463
5,502 Tricon Global Restaurants Inc.(1) 168,499
4,275 Wendy's International, Inc. 85,767
-----------------
2,139,784
-----------------
SECURITIES & ASSET MANAGEMENT - 2.0%
4,067 Bear Stearns Companies Inc. (The) 256,221
9,191 Franklin Resources, Inc. 408,356
4,584 Lehman Brothers Holdings Inc. 677,286
30,344 Merrill Lynch & Co., Inc. 2,002,704
42,494 Morgan Stanley Dean Witter & Co. 3,885,545
5,585 Paine Webber Group, Inc. 380,478
4,594 Price (T. Rowe) Associates, Inc. 215,774
52,149 Schwab (Charles) Corp. 1,851,290
8,492 Stilwell Financial Inc.(1) 369,402
-----------------
10,047,056
-----------------
SEMICONDUCTOR - 5.3%
11,762 Advanced Micro Devices, Inc.(1) 277,877
17,102 Agilent Technologies, Inc.(1) 836,929
15,070 Altera Corp.(1) 720,063
13,420 Analog Devices, Inc.(1) 1,107,989
30,636 Applied Materials, Inc.(1) 1,815,183
8,380 Broadcom Corp.(1) 2,043,149
8,610 Conexant Systems, Inc.(1) 360,275
253,602 Intel Corp. 10,532,407
7,025 KLA-Tencor Corp.(1) 289,562
11,740 Linear Technology Corp. 760,532
11,718 LSI Logic Corp.(1) 342,752
10,680 Maxim Integrated Products, Inc.(1) 858,739
21,326 Micron Technology, Inc.(1) 980,996
6,728 National Semiconductor Corp.(1) 270,802
4,950 Novellus Systems, Inc.(1) 230,639
Shares Value
--------------------------------------------------------------------------------
1,866 PerkinElmer, Inc. $ 194,764
6,551 Teradyne, Inc.(1) 229,285
65,288 Texas Instruments Inc. 3,080,777
12,414 Xilinx, Inc.(1) 1,063,725
-----------------
25,996,445
-----------------
SPECIALTY STORES - 1.7%
4,816 Autozone Inc.(1) 109,263
10,680 Bed Bath & Beyond Inc.(1) 259,991
7,808 Best Buy Co., Inc.(1) 496,784
7,758 Circuit City Stores-Circuit
City Group 178,434
4,200 Cons Stores Corp.(1) 56,700
14,754 CVS Corp. 683,294
12,425 Dollar General Corp. 208,119
87,473 Home Depot, Inc. 4,641,535
1,427 Longs Drug Stores Corp. 27,291
14,467 Lowe's Companies, Inc. 649,207
11,542 Office Depot, Inc.(1) 90,172
7,017 RadioShack Corp. 453,474
17,155 Staples, Inc.(1) 243,923
5,500 Tiffany & Co. 212,094
8,158 Toys 'R' Us, Inc.(1) 132,568
-----------------
8,442,849
-----------------
TELEPHONE - 4.0%
70,785 BellSouth Corp. 2,849,096
5,307 CenturyTel Inc. 144,616
33,261 Global Crossing Ltd.(1) 1,032,130
128,029 SBC Communications Inc. 6,401,450
33,414 Sprint Corp. 979,448
102,659 Verizon Communications 4,972,545
108,516 WorldCom, Inc.(1) 3,296,174
-----------------
19,675,459
-----------------
THRIFTS - 0.2%
5,969 Golden West Financial Corp. (Del.) 320,088
20,354 Washington Mutual, Inc. 810,343
-----------------
1,130,431
-----------------
TOBACCO - 0.5%
85,060 Philip Morris Companies Inc. 2,503,954
6,170 UST Inc. 141,139
-----------------
2,645,093
-----------------
TRUCKING, SHIPPING & AIR FREIGHT - 0.1%
10,757 FedEx Corporation(1) 476,965
-----------------
WIRELESS TELECOMMUNICATIONS - 0.6%
11,917 ALLTEL Corp. 621,918
28,754 Nextel Communications, Inc.(1) 1,345,149
35,056 Sprint PCS(1) 1,229,151
-----------------
3,196,218
-----------------
TOTAL COMMON STOCKS 476,968,067
-----------------
(Cost $424,147,730)
See Notes to Financial Statements www.americancentury.com 13
Equity Index--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS* - 3.1%
$1,200,000 U.S. Treasury Bills, 5.96%,
12/21/00(3) $ 1,184,000
Repurchase Agreements, Morgan Stanley Group,
Inc., (U.S. Treasury obligations), in a joint
trading account at 6.45%, dated 9/29/00,
due 10/2/00 (Delivery value $14,307,686) 14,300,000
-----------------
TOTAL TEMPORARY CASH INVESTMENTS 15,484,000
-----------------
(Cost $15,483,908)
TOTAL INVESTMENT SECURITIES - 100.0% $492,452,067
=================
(Cost $439,631,638)
FUTURES CONTRACTS
Expiration Underlying Face Unrealized
Purchased Date Amount at Value Loss
------------------------------------------------------------------------------
41 S&P 500 December
Futures 2000 $14,903,500 $(673,700)
==============================================
*Futures contracts typically are based on a stock index, such as the S&P 500,
and tend to track the performance of the index while remaining very liquid (easy
to buy and sell). By investing its cash assets in index futures, the fund can
have full exposure to stocks and have easy access to the money. Temporary cash
investments, less the required reserves for futures contracts, are 0.1% of total
investments.
NOTES TO SCHEDULE OF INVESTMENTS
(1) Non-income producing.
(2) Industry is less than 0.05% of total investment securities.
(3) The rate indicated is the yield to maturity at purchase.
(4) Security has been segregated with the broker as initial margin on futures
contracts.
14 1-800-345-2021 See Notes to Financial Statements
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other payables) as of the last day of the reporting period.
Subtracting the liabilities from the assets results in the fund's NET ASSETS.
The net assets divided by shares outstanding is the share price, or NET ASSET
VALUE PER SHARE. This statement also breaks down the fund's net assets into
capital (shareholder investments) and performance (investment income and
gains/losses).
SEPTEMBER 30, 2000 (UNAUDITED)
ASSETS
-------------------------------------------------------------------------------
Investment securities, at value (identified cost of $439,631,638)
(Note 3) ..................................................... $492,452,067
Receivable for investments sold ................................. 5,507
Receivable for capital shares sold .............................. 2,313
Dividends and interest receivable ............................... 392,908
--------------
492,852,795
--------------
LIABILITIES
-------------------------------------------------------------------------------
Disbursements in excess of demand deposit cash .................. 1,528,045
Payable for variation margin on futures contracts ............... 226,020
Accrued management fees (Note 2) ................................ 131,630
Payable for directors' fees and expenses ........................ 547
Accrued expenses and other liabilities .......................... 156
--------------
1,886,398
--------------
Net Assets ...................................................... $490,966,397
==============
NET ASSETS CONSIST OF:
-------------------------------------------------------------------------------
Capital (par value and paid-in surplus) ......................... $444,410,31
Undistributed net investment income ............................. 48,823
Accumulated net realized loss on investment transactions ........ (5,639,468)
Net unrealized appreciation on investments (Note 3) ............. 52,146,729
--------------
$490,966,397
===============
Investor Class, $0.01 Par Value
Net assets ...................................................... $71,040,724
Shares outstanding .............................................. 12,396,827
Net asset value per share ....................................... $5.73
Institutional Class, $0.01 Par Value
Net assets ...................................................... $419,925,67
Shares outstanding .............................................. 73,212,508
Net asset value per share ....................................... $5.74
See Notes to Financial Statements www.americancentury.com 15
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
INVESTMENT INCOME
--------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld $21,550) ............... $ 2,688,677
Interest ........................................................ 558,363
---------------
3,247,040
---------------
Expenses (Note 2):
Management fees ................................................. 787,757
Directors' fees and expenses .................................... 1,149
---------------
788,906
---------------
Net investment income ........................................... 2,458,134
---------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 3)
--------------------------------------------------------------------------------
Net realized loss on investments ................................ (1,779,521)
Change in net unrealized appreciation on investments ............ (18,841,12)
----------------
Net realized and unrealized loss on investments ................. (20,620,64)
----------------
Net Decrease in Net Assets Resulting from Operations
$(18,162,512)
================
16 1-800-345-2021 See Notes to Financial Statements
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
<TABLE>
SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND YEAR ENDED MARCH 31, 2000
Increase in Net Assets
SEPT. 30, 2000 MARCH 31, 2000
OPERATIONS
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income ............................................ $ 2,458,134 $ 4,565,911
Net realized loss on investments ................................. (1,779,521) (1,209,726)
Change in net unrealized appreciation on investments ............. (18,841,125) 61,820,765
------------------ ---------------
Net increase (decrease) in net assets resulting from operations .. (18,162,512) 65,176,950
------------------ ---------------
DISTRIBUTIONS TO SHAREHOLDERS
---------------------------------------------------------------------------------------------------------
From net investment income:
Investor Class ................................................. (294,085) (481,669)
Institutional Class ............................................ (2,159,858) (4,363,580)
In excess of net realized gains
Investor Class ................................................. -- (408,312)
Institutional Class ............................................ -- (2,893,013)
------------------ ---------------
Decrease in net assets from distributions ........................ (2,453,943) (8,146,574)
------------------ ---------------
CAPITAL SHARE TRANSACTIONS (Note 4)
---------------------------------------------------------------------------------------------------------
Net increase in net assets from capital share transactions ....... 44,117,799 128,845,313
------------------ ---------------
Net increase in net assets ....................................... 23,501,344 185,875,689
NET ASSETS
---------------------------------------------------------------------------------------------------------
Beginning of period .............................................. 467,465,053 281,589,364
------------------ ---------------
End of period .................................................... $490,966,397 $467,465,053
================== ===============
Undistributed net investment income .............................. $48,823 $44,628
================== ===============
</TABLE>
See Notes to Financial Statements www.americancentury.com 17
Notes to Financial Statements
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (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. American Century Equity Index Fund (the
fund) is one of the six funds issued by the corporation. The fund is
non-diversified under the 1940 Act. The investment objective of the fund is
long-term capital growth. The fund seeks to achieve this objective by matching,
as closely as possible, the investment results of the Standard & Poor's 500
Composite Stock Price Index. The following significant accounting policies are
in accordance with generally accepted accounting principles; these policies may
require the use of estimates by fund management.
MULTIPLE CLASS -- The fund is authorized to issue two classes of shares: the
Investor Class and the Institutional Class. The two classes of shares differ
principally in their respective shareholder servicing and distribution expenses
and arrangements. All shares of the fund represent an equal pro rata interest in
the 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.
SECURITY VALUATIONS -- Portfolio 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. When
valuations are not readily available, securities are valued at fair value as
determined in accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld (if any)
is recorded as of the ex-dividend date. Interest income is recorded on the
accrual basis and includes accretion of discounts and amortization of premiums.
FUTURES CONTRACTS -- The fund may enter into stock index futures contracts
in order to manage the fund's exposure to changes in market conditions. One of
the risks of entering into futures contracts is the possibility that the change
in value of the contract may not correlate with the changes in value of the
underlying securities. Upon entering into a futures contract, the fund is
required to deposit either cash or securities in an amount equal to a certain
percentage of the contract value (initial margin). Subsequent payments
(variation margin) are made or received daily, in cash, by the fund. The
variation margin is equal to the daily change in the contract value and is
recorded as unrealized gains and losses. The fund recognizes a realized gain or
loss when the contract is closed or expires. Net realized and unrealized gains
or losses occurring during the holding period of futures contracts are a
component of realized gain (loss) on investments and unrealized appreciation
(depreciation) on investments, respectively.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities, received
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM, 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 all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under the provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income are declared
and paid quarterly. Distributions from net realized gains are declared and paid
annually.
The 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.
For the five month period ended March 31, 2000, Equity Index incurred net
capital losses of $856,910. The fund has elected to treat such losses as having
been incurred in the following fiscal year.
18 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
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 per class. The Agreement provides
that all expenses of the fund, except brokerage commissions, taxes, interest,
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 daily and paid monthly based on the
fund's class average daily closing net assets during the previous month. The
annual management fee is 0.49% and 0.29% for the Investor and Institutional
Class, respectively.
ACIM has entered into a Subadvisory Agreement with Barclays Global Fund
Advisors (BGFA) on behalf of the fund. The subadvisor makes investment decisions
for the fund in accordance with the fund's investment objectives, policies and
restrictions under the supervision of ACIM and the Board of Directors. ACIM pays
all costs associated with retaining BGFA as the subadvisor of the fund.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, the
distributor of the corporation, American Century Services, Inc., and the
corporation's transfer agent, American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term
investments, for the six months ended September 30, 2000, were $56,956,968 and
$14,330,366, respectively.
On September 30, 2000, accumulated net unrealized appreciation on
investments was $50,452,771, based on the aggregate cost of investments for
federal income tax purposes of $441,999,296, which consisted of unrealized
appreciation of $101,457,094 and unrealized depreciation of $51,004,323.
www.americancentury.com 19
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
<TABLE>
Transactions in shares of the fund were as follows:
SHARES AMOUNT
INVESTOR CLASS
----------------------------------------------------------------------------------
<S> <C> <C>
Shares Authorized ................................ 25,000,000
=============
Six months ended September 30, 2000
Sold ............................................. 3,414,060 $20,032,901
Issued in reinvestment of distributions .......... 48,618 280,361
Redeemed ......................................... (2,577,562) (15,004,055)
-------------- -------------
Net increase ..................................... 885,116 $ 5,309,207
============== ==============
Year ended March 31, 2000
Sold ............................................. 14,625,346 $80,452,103
Issued in reinvestment of distributions .......... 152,909 853,014
Redeemed ......................................... (6,540,236) (36,337,553)
-------------- -------------
Net increase ..................................... 8,238,019 $44,967,564
============== ==============
INSTITUTIONAL CLASS
----------------------------------------------------------------------------------
Shares Authorized ................................ 150,000,000
=============
Six months ended September 30, 2000
Sold ............................................. 17,098,224 $99,756,235
Issued in reinvestment of distributions .......... 371,826 2,147,870
Redeemed ......................................... (10,810,501) (63,095,513)
-------------- -------------
Net increase ..................................... 6,659,549 $38,808,592
============== ==============
Year ended March 31, 2000
Sold ............................................. 45,743,723 $250,635,461
Issued in reinvestment of distributions .......... 1,302,279 7,229,861
Redeemed ......................................... (31,407,870) (173,987,573)
-------------- -------------
Net increase ..................................... 15,638,132 $ 83,877,749
============== ==============
</TABLE>
--------------------------------------------------------------------------------
5. BANK LOANS
The fund, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The funds may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The fund did not borrow from the line during the
period ended September 30, 2000.
20 1-800-345-2021
Equity Index--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
investment income as a percentage of average net assets), EXPENSE RATIO
(operating expenses as a percentage of average net assets), and PORTFOLIO
TURNOVER (a gauge of the fund's trading activity).
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 2000 1999(2)
PER-SHARE DATA
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .......................... $5.99 $5.20 $5.00
-------- -------- ---------
Income From Investment Operations
Net Investment Income(3) .................................... 0.02 0.05 0.01
Net Realized and Unrealized Gain (Loss) on Investments ...... (0.26) 0.83 0.19
-------- -------- ---------
Total From Investment Operations ............................ (0.24) 0.88 0.20
-------- -------- ---------
Distributions
From Net Investment Income .................................. (0.02) (0.05) --
In Excess of Net Realized Gains ............................. -- (0.04) --
-------- -------- ---------
Total Distributions ......................................... (0.02) (0.09) --
-------- -------- ---------
Net Asset Value, End of Period ................................ $5.73 $5.99 $5.20
======== ======== =========
Total Return(4) ............................................. (3.94)% 17.17% 4.00%
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets ............. 0.49%(5) 0.49% 0.49%(5)
Ratio of Net Investment Income to Average Net Assets .......... 0.82%(5) 0.94% 1.13%(5)
Portfolio Turnover Rate ....................................... 3% 13% 0%
Net Assets, End of Period (in thousands) ...................... $71,041 $68,905 $17,010
(1) Six months ended September 30, 2000 (unaudited).
(2) February 26, 1999 (inception) through March 31, 1999.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
</TABLE>
See Notes to Financial Statements www.americancentury.com 21
Equity Index--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
Institutional Class
2000(1) 2000 1999(2)
PER-SHARE DATA
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .......................... $5.99 $5.20 $5.00
------- -------- ----------
Income From Investment Operations
Net Investment Income(3) .................................... 0.03 0.06 0.01
Net Realized and Unrealized Gain (Loss) on Investments ...... (0.25) 0.84 0.19
------- -------- ----------
Total From Investment Operations ............................ (0.22) 0.90 0.20
------- -------- ----------
Distributions
From Net Investment Income .................................. (0.03) (0.07) --
In Excess of Net Realized Gains ............................. -- (0.04) --
------- -------- ----------
Total Distributions ......................................... (0.03) (0.11) --
------- -------- ----------
Net Asset Value, End of Period ................................ $5.74 $5.99 $5.20
======= ======== ==========
Total Return(4) ............................................. (3.68)% 17.43% 4.00%
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets ............. 0.29%(5) 0.29% 0.29%(5)
Ratio of Net Investment Income to Average Net Assets .......... 1.02%(5) 1.14% 1.33%(5)
Portfolio Turnover Rate ....................................... 3% 13% 0%
Net Assets, End of Period (in thousands) ......................$419,926 $398,560 $264,580
(1) Six months ended September 30, 2000 (unaudited).
(2) February 26, 1999 (inception) through March 31, 1999.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
</TABLE>
22 1-800-345-2021 See Notes to Financial Statements
Share Class and Retirement Account Information
--------------------------------------------------------------------------------
SHARE CLASSES
Two classes of shares are authorized for sale by the fund: Investor Class
and Institutional Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
INSTITUTIONAL CLASS shares are available to endowments, foundations, defined
benefit pension plans or financial intermediaries serving these investors. This
class recognizes the relatively lower cost of serving institutional customers
and others who invest at least $5 million in an American Century fund or at
least $10 million in multiple funds. In recognition of the larger investments
and account balances and comparatively lower transaction costs, the total
expense ratio of the Institutional Class shares is 0.20% less than the total
expense ratio of the Investor Class shares.
All classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
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.
www.americancentury.com 23
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 15 growth and income funds including domestic
equity, balanced, asset allocation, and specialty.
The Equity Index Fund seeks to match, as closely as possible, the investment
characteristics and results of the S&P 500 Index. The S&P 500 Index comprises
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The fund is managed by buying and selling stocks and other securities
in order to build an investment portfolio that will match, as closely as
possible, the investment characteristics of the S&P 500 Index.
Standard & Poor's, a division of The McGraw-Hill Companies, Inc., chooses
the stocks included in the S&P 500 Index on a market capitalization-weighted
basis. The weightings of stocks in the S&P 500 Index are further based on each
stock's total market capitalization relative to the other stocks contained in
the index. Because of this weighting, the fund expects that the 50 largest
companies will make up a large proportion of the S&P 500 Index.
The advisor generally will select stocks for the fund's portfolio in order
of their weightings in the S&P 500 Index, beginning with the heaviest-weighted
stocks. The fund attempts to be fully invested at all times in the stocks that
make up the S&P 500 Index, and, in any event, at least 80% of the fund's total
assets will be so invested.
FUND MANAGEMENT
Barclays Global Fund Advisors (BGFA), a subsidiary of Barclays Global
Investors (BGI), serves as subadvisor of the American Century Equity Index Fund,
with oversight by American Century's quantitative equity group.
In 1971, BGI introduced the concept of indexing. With assets under
management of more than $600 billion, BGI is the world's largest institutional
investment firm. BGI's clients include corporate and government retirement
plans, universities, foundations, financial planning advisors, mutual fund
distributors and central banks. A subsidiary of London, UK-based Barclays PLC,
BGI is headquartered in San Francisco, CA, and has offices worldwide.
COMPARATIVE INDICES
The following indices are used in the report for fund performance
comparisons. They are not investment products available for purchase.
The S&P 500 is a capitalization-weighted index of the stocks of 500 publicly
traded U.S. companies that are considered to be leading firms in dominant
industries. Created by Standard & Poor's, it is considered to be a broad measure
of U.S. stock market performance.
The S&P MIDCAP 400 is the medium capitalization sector of the U.S. market.
Created by Standard & Poor's, it is considered to represent the performance of
mid-cap stocks generally.
The RUSSELL 2000 INDEX was created by the Frank Russell Company. It measures
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 represents
approximately 10% of the total market capitalization of the top 3,000 companies.
The average market capitalization of the index is approximately $420 million.
"Standard & Poor's,(reg.tm)" "S&P 500,(reg.tm)" "S&P,(reg.tm)" and "S&P MidCap
400" are trademarks of The McGraw-Hill Companies, Inc., and have been licensed
for use by American Century Investment Management, Inc. The fund is not
sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard &
Poor's makes no representation regarding the advisability of investing in the
fund.
24 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on pages 21-22.
INVESTMENT TERMS
* MEDIAN MARKET CAPITALIZATION-- market capitalization (market cap) is the
total value of a company's stock and is calculated by multiplying the number of
outstanding common shares by the current share price. The company whose market
cap is in the middle of the portfolio is the median market cap. Half the
companies in the portfolio have values greater than the median, and half have
values that are less. If there is an even number of companies, then the median
is the average of the two companies in the middle.
* WEIGHTED AVERAGE MARKET CAPITALIZATION-- average market capitalization
represents the average value of the companies held in a portfolio. When that
figure is weighted, the impact of each company's capitalization on the overall
average is proportional to the total market value of its shares.
* NUMBER OF COMPANIES-- the number of different companies held by a fund on a
given date.
* PORTFOLIO TURNOVER-- the percentage of a fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
* PRICE/BOOK RATIO-- a stock value measurement calculated by dividing a
company's stock price by its book value per share, with the result expressed as
a multiple instead of as a percentage. (Book value per share is calculated by
subtracting a company's liabilities from its assets, then dividing that value by
the number of outstanding shares.)
* PRICE/EARNINGS (P/E) RATIO-- a stock value measurement calculated by
dividing a company's stock price by its earnings per share, with the result
expressed as a multiple instead of as a percentage. (Earnings per share is
calculated by dividing the after-tax earnings of a corporation by its
outstanding shares.) When this figure is weighted, the impact of each company's
P/E ratio is in proportion to the percentage of the fund that the company
represents.
TYPES OF STOCKS
* BLUE CHIP STOCKS-- stocks of the most established companies in American
industry. They are generally large, fairly stable companies that have
demonstrated consistent earnings and usually have long-term growth potential.
Examples include General Electric and Coca-Cola.
* CYCLICAL STOCKS-- generally considered to be stocks whose price and earnings
fluctuations tend to follow the ups and downs of the business cycle. Examples
include the stocks of automobile manufacturers, steel producers and textile
operators.
* GROWTH STOCKS-- stocks of companies that have experienced above-average
earnings growth and are expected to continue such growth. These stocks often
sell at high P/E ratios. Examples can include the stocks of high-tech,
healthcare and consumer staple companies.
* LARGE-CAPITALIZATION ("LARGE-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of more
than $9.9 billion. This is Lipper's market capitalization breakpoint as of
September 30, 2000, although it may be subject to change based on market
fluctuations. The Dow Jones Industrial Average and the S&P 500 Index generally
consist of stocks in this range.
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of
between $2.3 billion and $9.9 billion. This is Lipper's market capitalization
breakpoint as of September 30, 2000, although it may be subject to change based
on market fluctuations. The S&P 400 Index and Russell 2500 Index generally
consist of stocks in this range.
www.americancentury.com 25
Glossary
--------------------------------------------------------------------------------
(Continued)
* SMALL-CAPITALIZATION ("SMALL-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of
less than $2.3 billion. This is Lipper's market capitalization breakpoint as of
September 30, 2000, although it may be subject to change based on market
fluctuations. The S&P 600 Index and the Russell 2000 Index generally consist of
stocks in this range.
* VALUE STOCKS-- generally considered to be stocks that are purchased because
they are relatively inexpensive. These stocks are typically characterized by low
P/E ratios.
FUND CLASSIFICATIONS
Please be aware that a fund's category may change over time. Therefore, it
is important that you read the fund's prospectus or fund profile carefully
before investing to ensure its objectives, policies and risk potential are
consistent with your needs.
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive
yields, as well as a strong and stable foundation and generally lower volatility
levels than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income
provided by either dividend-paying equities or a combination of equity and
fixed-income securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with correspondingly high
price-fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price-fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
correspondingly high price-fluctuation risk.
26 1-800-345-2021
Notes
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www.americancentury.com 27
Notes
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28 1-800-345-2021
[inside back cover]
AMERICAN CENTURY FUNDS
===============================================================================
GROWTH
===============================================================================
MODERATE RISK
SPECIALTY
Global Natural Resources
AGGRESSIVE RISK
DOMESTIC EQUITY INTERNATIONAL
Veedot(reg.sm) Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth SPECIALTY
Ultra(reg.tm) Global Gold
Select Technology
Life Sciences
===============================================================================
GROWTH AND INCOME
===============================================================================
MODERATE RISK
ASSET ALLOCATION DOMESTIC EQUITY
Balanced Equity Growth
Strategic Allocation: Equity Index
Aggressive Large Cap Value
Strategic Allocation: Tax-Managed Value
Moderate Income & Growth
Strategic Allocation: Value
Conservative Equity Income
SPECIALTY
Utilities
Real Estate
AGGRESSIVE RISK
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
===============================================================================
INCOME
===============================================================================
CONSERVATIVE RISK
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term
Intermediate-Term Treasury Tax-Free
GNMA AZ Intermediate-Term
Inflation-Adjusted Treasury Municipal
Limited-Term Bond FL Intermediate-Term
Target 2000* Municipal
Short-Term Government Intermediate-Term Tax-Free
Short-Term Treasury CA Limited-Term Tax-Free
Limited-Term Tax-Free
MODERATE RISK
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
AGGRESSIVE RISK
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
===============================================================================
CAPITAL PRESERVATION
===============================================================================
CONSERVATIVE RISK
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs. For a definition of fund categories, see the Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon. Target
2000 will close on December 15, 2000. The fund closed to new investors on
10/1/2000, and will no longer accept investments from current shareholders
beginning 11/01/2000.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
Who We Are
[graphic of runners]
American Century offers investors more than 70 mutual funds spanning the
investment spectrum. We currently manage $100
billion for roughly 2 million individuals, institutions and corporations, and
offer a range of services designed to make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have been committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their futures in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[american logo and text logo (reg. sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
--------------------------------------------------------------------------------
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0011 American Century Investment Services, Inc.
SH-SAN-22483 (c)2000 American Century Services Corporation
