UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-07820 | |||||
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. | ||||||
(Exact name of registrant as specified in charter) | ||||||
4500 MAIN STREET, KANSAS CITY, MISSOURI | 64111 | |||||
(Address of principal executive offices) | (Zip Code) | |||||
CHARLES A. ETHERINGTON 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111 | ||||||
(Name and address of agent for service) | ||||||
Registrant’s telephone number, including area code: | 816-531-5575 | |||||
Date of fiscal year end: | 03-31 | |||||
Date of reporting period: | 09-30-2015 | |||||
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMIANNUAL REPORT | SEPTEMBER 30, 2015 |
Equity Income Fund
Table of Contents |
President’s Letter | 2 | |
Performance | 3 | |
Fund Characteristics | ||
Shareholder Fee Example | ||
Schedule of Investments | ||
Statement of Assets and Liabilities | ||
Statement of Operations | ||
Statement of Changes in Net Assets | ||
Notes to Financial Statements | ||
Financial Highlights | ||
Approval of Management Agreement | ||
Additional Information | ||
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
 | Dear Investor: Thank you for reviewing this semiannual report for the six months ended September 30, 2015. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information. For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com. |
Jonathan Thomas | |
Divergence in Economic Growth and Monetary Policies, Combined With China Turmoil, Triggered Market Volatility
Divergence between the U.S. and the rest of the world, along with China’s struggles, lower commodity prices, capital market volatility, and risk-off trading, were key themes during the reporting period. Global divergence described not only the relatively stronger economic growth enjoyed by the U.S. compared with most of the world, but also the related contrast between the U.S. Federal Reserve’s (the Fed’s) expected unwinding of monetary stimulus versus the continuation and expansion of stimulus by other major central banks. Central bank moves—including the Fed’s delayed normalization of its extremely low interest rate positioning—helped trigger large market swings.
In 2014, the Fed ended its latest massive bond-buying program (quantitative easing, QE), leading to expectations that interest rates would rise. But while QE was halted in the U.S., other major central banks were starting or increasing QE as their economies faltered. This divergence helped fuel increased demand for the U.S. dollar and U.S. dollar-denominated assets, and put downward pressure on commodity prices, most notably crude oil. Low inflation also prevailed amid muted demand for commodities, particularly as China’s growth faltered, which had a broad dampening impact on global markets. In this environment, the U.S. dollar and U.S. government securities benefited from “flight to quality” capital flows. Conversely, emerging market, commodity-related, and value equity indices suffered significant declines.
We expect continued economic and monetary policy divergence between the U.S. and non-U.S. economies in the coming months, accompanied by further market volatility. This could present both challenges and opportunities for active investment managers. In this environment, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios to meet financial goals. We appreciate your continued trust in us.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of September 30, 2015 | |||||||
Average Annual Returns | |||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | TWEIX | -5.46% | -1.65% | 9.47% | 6.20% | 10.17% | 8/1/94 |
Russell 3000 Value Index | — | -8.59% | -4.22% | 12.11% | 5.67% | 9.31%(2) | — |
S&P 500 Index | — | -6.18% | -0.61% | 13.33% | 6.80% | 9.08%(2) | — |
Institutional Class | ACIIX | -5.25% | -1.34% | 9.67% | 6.42% | 7.85% | 7/8/98 |
A Class(3) | TWEAX | 3/7/97 | |||||
No sales charge* | -5.58% | -1.90% | 9.20% | 5.93% | 8.39% | ||
With sales charge* | -11.00% | -7.59% | 7.92% | 5.30% | 8.04% | ||
B Class | AEKBX | 9/28/07 | |||||
No sales charge* | -5.92% | -2.61% | 8.38% | — | 3.51% | ||
With sales charge* | -10.92% | -6.61% | 8.23% | — | 3.51% | ||
C Class | AEYIX | 7/13/01 | |||||
No sales charge* | -5.93% | -2.61% | 8.36% | 5.15% | 5.89% | ||
With sales charge* | -6.86% | -2.61% | 8.36% | 5.15% | 5.89% | ||
R Class | AEURX | -5.71% | -2.14% | 8.92% | 5.67% | 6.66% | 8/29/03 |
R6 Class | AEUDX | -5.29% | -1.32% | — | — | 4.81% | 7/26/13 |
* | Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum initial sales charge and may be subject to a maximum CDSC of 1.00%. B Class shares redeemed within six years of purchase are subject to a CDSC that declines from 5.00% during the first year to 0.00% after the sixth year. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied. |
(1) | Total returns for periods less than one year are not annualized. |
(2) | Since July 31, 1994, the date nearest the Investor Class’s inception for which data are available. |
(3) | Prior to September 4, 2007, the A Class was referred to as the Advisor Class and did not have a front-end sales charge. Performance prior to that date has been adjusted to reflect this charge. |
Total Annual Fund Operating Expenses | ||||||
Investor Class | Institutional Class | A Class | B Class | C Class | R Class | R6 Class |
0.93% | 0.73% | 1.18% | 1.93% | 1.93% | 1.43% | 0.58% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
3
Fund Characteristics |
SEPTEMBER 30, 2015 | |
Top Ten Holdings | % of net assets |
Bank of America Corp. (Convertible) | 4.7% |
Wells Fargo & Co. (Convertible) | 4.4% |
Exxon Mobil Corp. | 4.0% |
Johnson & Johnson | 3.6% |
PepsiCo, Inc. | 3.2% |
Merck & Co., Inc. | 3.1% |
Procter & Gamble Co. (The) | 3.0% |
SanDisk Corp. (Convertible) | 2.7% |
Pfizer, Inc. | 2.7% |
Wal-Mart Stores, Inc. | 2.6% |
Top Five Industries | % of net assets |
Banks | 14.8% |
Oil, Gas and Consumable Fuels | 11.5% |
Pharmaceuticals | 9.4% |
Semiconductors and Semiconductor Equipment | 6.0% |
Food and Staples Retailing | 4.5% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 72.3% |
Convertible Preferred Stocks | 10.6% |
Convertible Bonds | 8.7% |
Preferred Stocks | 4.8% |
Exchange-Traded Funds | 0.5% |
Total Equity Exposure | 96.9% |
Temporary Cash Investments | 2.7% |
Other Assets and Liabilities | 0.4% |
4
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2015 to September 30, 2015.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
5
Beginning Account Value 4/1/15 | Ending Account Value 9/30/15 | Expenses Paid During Period(1)4/1/15 - 9/30/15 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $945.40 | $4.52 | 0.93% |
Institutional Class | $1,000 | $947.50 | $3.55 | 0.73% |
A Class | $1,000 | $944.20 | $5.74 | 1.18% |
B Class | $1,000 | $940.80 | $9.36 | 1.93% |
C Class | $1,000 | $940.70 | $9.36 | 1.93% |
R Class | $1,000 | $942.90 | $6.95 | 1.43% |
R6 Class | $1,000 | $947.10 | $2.82 | 0.58% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.35 | $4.70 | 0.93% |
Institutional Class | $1,000 | $1,021.35 | $3.69 | 0.73% |
A Class | $1,000 | $1,019.10 | $5.96 | 1.18% |
B Class | $1,000 | $1,015.35 | $9.72 | 1.93% |
C Class | $1,000 | $1,015.35 | $9.72 | 1.93% |
R Class | $1,000 | $1,017.85 | $7.21 | 1.43% |
R6 Class | $1,000 | $1,022.10 | $2.93 | 0.58% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
6
Schedule of Investments |
SEPTEMBER 30, 2015 (UNAUDITED)
Shares/ Principal Amount | Value | |||||
COMMON STOCKS — 72.3% | ||||||
Air Freight and Logistics — 2.4% | ||||||
United Parcel Service, Inc., Class B | 2,098,818 | $ | 207,132,348 | |||
Automobiles — 0.1% | ||||||
Honda Motor Co., Ltd. | 395,500 | 11,793,295 | ||||
Banks — 4.9% | ||||||
Commerce Bancshares, Inc. | 1,844,198 | 84,021,661 | ||||
JPMorgan Chase & Co. | 1,274,297 | 77,693,888 | ||||
KeyCorp | 1,583,795 | 20,605,173 | ||||
PNC Financial Services Group, Inc. (The) | 2,188,412 | 195,206,351 | ||||
SunTrust Banks, Inc. | 999,230 | 38,210,555 | ||||
415,737,628 | ||||||
Beverages — 3.2% | ||||||
PepsiCo, Inc. | 2,880,199 | 271,602,766 | ||||
Capital Markets — 1.5% | ||||||
AllianceBernstein Holding LP | 948,878 | 25,240,155 | ||||
Goldman Sachs Group, Inc. (The) | 48,507 | 8,428,576 | ||||
Northern Trust Corp. | 1,382,340 | 94,220,295 | ||||
127,889,026 | ||||||
Chemicals — 2.0% | ||||||
Air Products & Chemicals, Inc. | 691,537 | 88,226,290 | ||||
E.I. du Pont de Nemours & Co. | 378,600 | 18,248,520 | ||||
Potash Corp. of Saskatchewan, Inc. | 2,869,785 | 58,974,082 | ||||
165,448,892 | ||||||
Commercial Services and Supplies — 3.4% | ||||||
ADT Corp. (The) | 767,724 | 22,954,948 | ||||
Republic Services, Inc. | 4,058,161 | 167,196,233 | ||||
Tyco International plc | 1,299,904 | 43,494,788 | ||||
Waste Management, Inc. | 1,016,100 | 50,611,941 | ||||
284,257,910 | ||||||
Communications Equipment — 0.6% | ||||||
Cisco Systems, Inc. | 1,594,691 | 41,860,639 | ||||
QUALCOMM, Inc. | 98,900 | 5,313,897 | ||||
47,174,536 | ||||||
Containers and Packaging — 0.2% | ||||||
Bemis Co., Inc. | 498,200 | 19,713,774 | ||||
Distributors — 0.4% | ||||||
Genuine Parts Co. | 397,900 | 32,981,931 | ||||
Diversified Telecommunication Services — 1.5% | ||||||
CenturyLink, Inc. | 898,731 | 22,576,123 | ||||
Verizon Communications, Inc. | 2,470,937 | 107,510,469 | ||||
130,086,592 | ||||||
7
Shares/ Principal Amount | Value | |||||
Electric Utilities — 2.7% | ||||||
Edison International | 1,798,799 | $ | 113,450,253 | |||
Westar Energy, Inc. | 3,016,637 | 115,959,526 | ||||
229,409,779 | ||||||
Electrical Equipment — 0.3% | ||||||
Emerson Electric Co. | 495,296 | 21,877,224 | ||||
Food and Staples Retailing — 4.5% | ||||||
Sysco Corp. | 4,234,847 | 165,031,987 | ||||
Wal-Mart Stores, Inc. | 3,361,183 | 217,939,106 | ||||
382,971,093 | ||||||
Food Products — 2.6% | ||||||
Campbell Soup Co. | 1,286,868 | 65,218,470 | ||||
General Mills, Inc. | 2,797,066 | 156,999,315 | ||||
222,217,785 | ||||||
Gas Utilities — 3.8% | ||||||
ONE Gas, Inc.(1) | 3,625,493 | 164,343,598 | ||||
Piedmont Natural Gas Co., Inc. | 2,298,468 | 92,099,613 | ||||
WGL Holdings, Inc. | 1,179,221 | 68,005,675 | ||||
324,448,886 | ||||||
Health Care Equipment and Supplies — 0.4% | ||||||
Medtronic plc | 490,100 | 32,807,294 | ||||
Health Care Providers and Services — 1.4% | ||||||
Quest Diagnostics, Inc. | 1,993,758 | 122,556,304 | ||||
Hotels, Restaurants and Leisure — 0.5% | ||||||
McDonald's Corp. | 396,863 | 39,102,911 | ||||
Household Durables — 0.2% | ||||||
Tupperware Brands Corp. | 256,100 | 12,674,389 | ||||
Household Products — 3.0% | ||||||
Procter & Gamble Co. (The) | 3,516,659 | 252,988,448 | ||||
Industrial Conglomerates — 1.0% | ||||||
3M Co. | 69,900 | 9,909,723 | ||||
General Electric Co. | 2,297,895 | 57,952,912 | ||||
Koninklijke Philips NV | 553,748 | 13,057,241 | ||||
80,919,876 | ||||||
Insurance — 2.2% | ||||||
Marsh & McLennan Cos., Inc. | 2,945,231 | 153,799,963 | ||||
MetLife, Inc. | 699,029 | 32,959,217 | ||||
186,759,180 | ||||||
Leisure Products — 0.4% | ||||||
Mattel, Inc. | 1,397,000 | 29,420,820 | ||||
Machinery — 0.8% | ||||||
Caterpillar, Inc. | 1,062,800 | 69,464,608 | ||||
Multi-Utilities — 1.7% | ||||||
PG&E Corp. | 2,735,437 | 144,431,074 | ||||
8
Shares/ Principal Amount | Value | |||||
Oil, Gas and Consumable Fuels — 11.4% | ||||||
Chevron Corp. | 1,874,416 | $ | 147,853,934 | |||
Exxon Mobil Corp. | 4,532,778 | 337,012,044 | ||||
Imperial Oil Ltd. | 1,699,000 | 53,828,190 | ||||
Occidental Petroleum Corp. | 2,346,177 | 155,199,609 | ||||
Spectra Energy Partners LP | 2,598,589 | 104,515,250 | ||||
Total SA | 3,667,513 | 165,350,121 | ||||
963,759,148 | ||||||
Pharmaceuticals — 9.4% | ||||||
Johnson & Johnson | 3,260,721 | 304,388,305 | ||||
Merck & Co., Inc. | 5,370,001 | 265,224,349 | ||||
Pfizer, Inc. | 7,299,370 | 229,273,212 | ||||
798,885,866 | ||||||
Real Estate Investment Trusts (REITs) — 0.7% | ||||||
Weyerhaeuser Co. | 2,292,300 | 62,671,482 | ||||
Semiconductors and Semiconductor Equipment — 1.4% | ||||||
Applied Materials, Inc. | 5,193,903 | 76,298,435 | ||||
KLA-Tencor Corp. | 850,500 | 42,525,000 | ||||
118,823,435 | ||||||
Software — 2.0% | ||||||
Microsoft Corp. | 3,561,336 | 157,624,731 | ||||
Oracle Corp. | 395,100 | 14,271,012 | ||||
171,895,743 | ||||||
Thrifts and Mortgage Finance — 1.7% | ||||||
Capitol Federal Financial, Inc.(1) | 11,756,879 | 142,493,373 | ||||
TOTAL COMMON STOCKS (Cost $5,405,463,877) | 6,124,397,416 | |||||
CONVERTIBLE PREFERRED STOCKS — 10.6% | ||||||
Banks — 9.0% | ||||||
Bank of America Corp., 7.25% | 365,977 | 394,157,229 | ||||
Wells Fargo & Co., 7.50% | 315,776 | 368,826,368 | ||||
762,983,597 | ||||||
Gas Utilities — 0.7% | ||||||
Laclede Group, Inc. (The), 6.75%, 4/1/17 | 1,089,897 | 57,199,865 | ||||
Machinery — 0.5% | ||||||
Stanley Black & Decker, Inc., 4.75%, 11/17/15 | 356,778 | 47,843,930 | ||||
Real Estate Investment Trusts (REITs) — 0.4% | ||||||
Welltower Inc., 6.50% | 541,627 | 32,893,008 | ||||
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $856,833,551) | 900,920,400 | |||||
CONVERTIBLE BONDS — 8.7% | ||||||
Energy Equipment and Services — 0.5% | ||||||
Citigroup, Inc., (convertible into Schlumberger Ltd.), 3.55%, 12/31/15(2)(3) | $ | 440,600 | 30,251,596 | |||
Goldman Sachs International, (convertible into Cameron International Corp.), 7.00%, 1/27/16(2)(3) | 249,500 | 12,903,273 | ||||
43,154,869 | ||||||
9
Shares/ Principal Amount | Value | |||||
Health Care Equipment and Supplies — 0.1% | ||||||
Credit Suisse AG, (convertible into Zimmer Biomet Holdings, Inc.), 2.55%, 2/19/16(2)(3) | $ | 104,300 | $ | 10,058,693 | ||
Health Care Providers and Services — 0.1% | ||||||
UBS AG, (convertible into Cigna Corp.), 1.45%, 1/26/16(2)(3) | 69,900 | 9,678,275 | ||||
Life Sciences Tools and Services — 0.1% | ||||||
Goldman Sachs Group, Inc. (The), (convertible into Agilent Technologies, Inc.), 3.50%, 12/30/15(2)(3) | 283,000 | 9,788,545 | ||||
Oil, Gas and Consumable Fuels — 0.1% | ||||||
Goldman Sachs International, (convertible into EQT Corp.), 1.40%, 1/29/16(2)(3) | 137,900 | 9,034,852 | ||||
Semiconductors and Semiconductor Equipment — 4.6% | ||||||
Bank of America Corp., (convertible into Broadcom Corp.), 5.60%, 10/9/15(2)(3) | 896,700 | 42,473,257 | ||||
Intel Corp., 2.95%, 12/15/35 | 127,052,000 | 154,606,402 | ||||
Microchip Technology, Inc., 1.625%, 2/15/25(3) | 199,992,000 | 192,367,305 | ||||
389,446,964 | ||||||
Specialty Retail — 0.5% | ||||||
Credit Suisse AG, (convertible into Bed Bath & Beyond, Inc.), 1.80%, 1/8/16(2)(3) | 185,100 | 10,568,787 | ||||
UBS AG, (convertible into Advance Auto Parts, Inc.), 1.92%, 11/23/15(2)(3) | 156,900 | 25,949,502 | ||||
36,518,289 | ||||||
Technology Hardware, Storage and Peripherals — 2.7% | ||||||
SanDisk Corp., 0.50%, 10/15/20 | 235,645,000 | 229,312,041 | ||||
TOTAL CONVERTIBLE BONDS (Cost $741,019,943) | 736,992,528 | |||||
PREFERRED STOCKS — 4.8% | ||||||
Banks — 0.9% | ||||||
U.S. Bancorp, 6.00% | 2,999,282 | 78,971,095 | ||||
Diversified Financial Services — 3.9% | ||||||
Citigroup, Inc., 5.95% | 165,231,000 | 160,480,609 | ||||
General Electric Capital Corp., 6.25% | 153,000,000 | 166,196,250 | ||||
326,676,859 | ||||||
TOTAL PREFERRED STOCKS (Cost $405,449,244) | 405,647,954 | |||||
EXCHANGE-TRADED FUNDS — 0.5% | ||||||
iShares Russell 1000 Value ETF (Cost $37,219,401) | 399,400 | 37,256,032 | ||||
TEMPORARY CASH INVESTMENTS — 2.7% | ||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.25% - 2.375%, 8/15/24 - 11/15/24, valued at $175,025,925), at 0.01%, dated 9/30/15, due 10/1/15 (Delivery value $171,580,048) | 171,580,000 | |||||
State Street Institutional Liquid Reserves Fund, Premier Class | 58,317,476 | 58,317,476 | ||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $229,897,476) | 229,897,476 | |||||
TOTAL INVESTMENT SECURITIES — 99.6% (Cost $7,675,883,492) | 8,435,111,806 | |||||
OTHER ASSETS AND LIABILITIES — 0.4% | 36,605,796 | |||||
TOTAL NET ASSETS — 100.0% | $ | 8,471,717,602 | ||||
10
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||
USD | 90,494,131 | CAD | 120,530,943 | JPMorgan Chase Bank N.A. | 10/30/15 | $ | 187,946 | |||
EUR | 3,455,325 | USD | 3,888,657 | UBS AG | 10/30/15 | (26,059 | ) | |||
USD | 141,356,673 | EUR | 126,435,399 | UBS AG | 10/30/15 | 18,545 | ||||
JPY | 583,929,840 | USD | 4,872,534 | Credit Suisse AG | 10/30/15 | (3,412 | ) | |||
JPY | 72,139,200 | USD | 602,745 | Credit Suisse AG | 10/30/15 | (1,209 | ) | |||
USD | 14,535,365 | JPY | 1,756,191,840 | Credit Suisse AG | 10/30/15 | (108,711 | ) | |||
$ | 67,100 | |||||||||
NOTES TO SCHEDULE OF INVESTMENTS | ||
CAD | - | Canadian Dollar |
EUR | - | Euro |
JPY | - | Japanese Yen |
USD | - | United States Dollar |
(1) | Affiliated Company: the fund’s holding represents ownership of 5% or more of the voting securities of the company; therefore, the company is affiliated as defined in the Investment Company Act of 1940. |
(2) | Equity-linked debt security. The aggregated value of these securities at the period end was $160,706,780, which represented 1.9% of total net assets. |
(3) | Restricted security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be sold without restriction to qualified institutional investors and have been deemed liquid under policies approved by the Board of Directors. The aggregate value of these securities at the period end was $353,074,085, which represented 4.2% of total net assets. |
See Notes to Financial Statements.
11
Statement of Assets and Liabilities |
SEPTEMBER 30, 2015 (UNAUDITED) | |||
Assets | |||
Investment securities - unaffiliated, at value (cost of $7,410,830,955) | $ | 8,128,274,835 | |
Investment securities - affiliated, at value (cost of $265,052,537) | 306,836,971 | ||
Total investment securities, at value (cost of $7,675,883,492) | 8,435,111,806 | ||
Cash | 5,762,016 | ||
Foreign currency holdings, at value (cost of $277,011) | 279,827 | ||
Receivable for investments sold | 60,130,816 | ||
Receivable for capital shares sold | 5,259,129 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 206,491 | ||
Dividends and interest receivable | 31,219,518 | ||
8,537,969,603 | |||
Liabilities | |||
Payable for investments purchased | 46,386,206 | ||
Payable for capital shares redeemed | 12,549,424 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 139,391 | ||
Accrued management fees | 6,331,138 | ||
Distribution and service fees payable | 845,842 | ||
66,252,001 | |||
Net Assets | $ | 8,471,717,602 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 7,216,677,531 | |
Undistributed net investment income | 8,387,591 | ||
Undistributed net realized gain | 487,356,401 | ||
Net unrealized appreciation | 759,296,079 | ||
$ | 8,471,717,602 | ||
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $4,784,305,227 | 588,164,804 | $8.13 | |||
Institutional Class, $0.01 Par Value | $1,094,349,891 | 134,468,179 | $8.14 | |||
A Class, $0.01 Par Value | $1,843,840,197 | 226,695,599 | $8.13* | |||
B Class, $0.01 Par Value | $4,373,461 | 537,084 | $8.14 | |||
C Class, $0.01 Par Value | $503,532,170 | 61,915,409 | $8.13 | |||
R Class, $0.01 Par Value | $105,689,665 | 13,030,033 | $8.11 | |||
R6 Class, $0.01 Par Value | $135,626,991 | 16,652,867 | $8.14 | |||
*Maximum offering price $8.63 (net asset value divided by 0.9425).
See Notes to Financial Statements.
12
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (including $6,729,159 from affiliates and net of foreign taxes withheld of $1,326,544) | $ | 144,101,113 | |
Interest | 15,438,307 | ||
159,539,420 | |||
Expenses: | |||
Management fees | 41,838,560 | ||
Distribution and service fees: | |||
A Class | 2,565,414 | ||
B Class | 25,307 | ||
C Class | 2,687,560 | ||
R Class | 298,135 | ||
Directors' fees and expenses | 159,465 | ||
Other expenses | 1,405 | ||
47,575,846 | |||
Net investment income (loss) | 111,963,574 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 237,814,891 | ||
Foreign currency transactions | 1,578,437 | ||
239,393,328 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (845,361,577 | ) | |
Translation of assets and liabilities in foreign currencies | (4,248,040 | ) | |
(849,609,617 | ) | ||
Net realized and unrealized gain (loss) | (610,216,289 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (498,252,715 | ) |
See Notes to Financial Statements.
13
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) AND YEAR ENDED MARCH 31, 2015 | ||||||
Increase (Decrease) in Net Assets | September 30, 2015 | March 31, 2015 | ||||
Operations | ||||||
Net investment income (loss) | $ | 111,963,574 | $ | 224,478,215 | ||
Net realized gain (loss) | 239,393,328 | 923,209,519 | ||||
Change in net unrealized appreciation (depreciation) | (849,609,617 | ) | (325,925,104 | ) | ||
Net increase (decrease) in net assets resulting from operations | (498,252,715 | ) | 821,762,630 | |||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Investor Class | (64,319,719 | ) | (133,181,145 | ) | ||
Institutional Class | (16,503,501 | ) | (39,559,169 | ) | ||
A Class | (22,697,361 | ) | (52,200,356 | ) | ||
B Class | (37,483 | ) | (92,083 | ) | ||
C Class | (4,067,364 | ) | (7,582,993 | ) | ||
R Class | (1,167,596 | ) | (3,003,425 | ) | ||
R6 Class | (1,895,542 | ) | (1,830,727 | ) | ||
From net realized gains: | ||||||
Investor Class | — | (395,701,675 | ) | |||
Institutional Class | — | (110,691,649 | ) | |||
A Class | — | (157,867,418 | ) | |||
B Class | — | (427,312 | ) | |||
C Class | — | (38,104,526 | ) | |||
R Class | — | (10,698,515 | ) | |||
R6 Class | — | (4,882,125 | ) | |||
Decrease in net assets from distributions | (110,688,566 | ) | (955,823,118 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (673,339,213 | ) | (389,000,119 | ) | ||
Net increase (decrease) in net assets | (1,282,280,494 | ) | (523,060,607 | ) | ||
Net Assets | ||||||
Beginning of period | 9,753,998,096 | 10,277,058,703 | ||||
End of period | $ | 8,471,717,602 | $ | 9,753,998,096 | ||
Undistributed net investment income | $ | 8,387,591 | $ | 7,112,583 | ||
See Notes to Financial Statements.
14
Notes to Financial Statements |
SEPTEMBER 30, 2015 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Equity Income Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek current income. Capital appreciation is a secondary objective.
The fund offers the Investor Class, the Institutional Class, the A Class, the B Class, the C Class, the R Class and the R6 Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class and R6 Class shareholders do not require the same level of shareholder and administrative services from American Century Investment Management, Inc. (ACIM) (the investment advisor) as shareholders of other classes. In addition, financial intermediaries do not receive any service, distribution or administrative fees for the R6 Class. As a result, the Institutional Class and R6 Class are charged lower unified management fees. On October 16, 2015, all outstanding B Class shares were converted to A Class shares and the fund discontinued offering the B Class.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Fixed income securities maturing in greater than 60 days at the time of purchase are valued at the evaluated mean as provided by independent pricing services or at the mean of the most recent bid and asked prices as provided by investment dealers. Fixed income securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors: trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
15
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Equity-Linked Debt and Linked-Equity Securities — The fund may invest in hybrid equity securities, which usually convert into common stock at a date predetermined by the issuer. These securities generally offer a higher dividend yield than that of the common stock to which the security is linked. These instruments are issued by a company other than the one to which the security is linked and carry the credit of the issuer, not that of the underlying common stock. The securities’ appreciation is limited based on a predetermined final cap price at the date of the conversion. Risks of investing in these securities include, but are not limited to, a set time to capture the yield advantage, limited appreciation potential, decline in value of the underlying stock, and failure of the issuer to pay dividends or to deliver common stock at maturity.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
16
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually. The fund may elect to treat a portion of its payment to a redeeming shareholder, which represents the pro rata share of undistributed net investment income and net realized gains, as a distribution for federal income tax purposes (tax equalization).
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc. (ACIS), and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The annual management fee schedule ranges from 0.80% to 1.00% for the Investor Class, A Class, B Class, C Class and R Class. The annual management fee schedule ranges from 0.60% to 0.80% for the Institutional Class and 0.45% to 0.65% for the R6 Class. The effective annual management fee for each class for the six months ended September 30, 2015 was 0.93% for the Investor Class, A Class, B Class, C Class and R Class, 0.73% for the Institutional Class and 0.58% for the R6 Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, B Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the B Class and C Class will each pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the six months ended September 30, 2015 are detailed in the Statement of Operations.
17
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2015 were $2,376,003,748 and $3,119,118,691, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2015 | Year ended March 31, 2015 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 3,750,000,000 | 3,000,000,000 | ||||||||
Sold | 31,000,976 | $ | 265,743,582 | 110,372,179 | $ | 992,156,979 | ||||
Issued in reinvestment of distributions | 7,152,068 | 60,104,424 | 55,640,804 | 491,422,481 | ||||||
Redeemed | (77,295,592 | ) | (663,360,010 | ) | (150,064,474 | ) | (1,346,501,750 | ) | ||
(39,142,548 | ) | (337,512,004 | ) | 15,948,509 | 137,077,710 | |||||
Institutional Class/Shares Authorized | 910,000,000 | 800,000,000 | ||||||||
Sold | 12,037,221 | 104,424,138 | 45,244,697 | 411,339,947 | ||||||
Issued in reinvestment of distributions | 1,741,281 | 14,660,092 | 15,432,164 | 136,422,405 | ||||||
Redeemed | (30,582,859 | ) | (261,566,587 | ) | (70,206,105 | ) | (626,531,762 | ) | ||
(16,804,357 | ) | (142,482,357 | ) | (9,529,244 | ) | (78,769,410 | ) | |||
A Class/Shares Authorized | 1,470,000,000 | 1,200,000,000 | ||||||||
Sold | 13,254,085 | 114,017,084 | 42,413,027 | 380,034,934 | ||||||
Issued in reinvestment of distributions | 2,636,095 | 22,167,628 | 23,166,897 | 204,705,243 | ||||||
Redeemed | (38,605,598 | ) | (331,659,534 | ) | (124,063,217 | ) | (1,118,733,276 | ) | ||
(22,715,418 | ) | (195,474,822 | ) | (58,483,293 | ) | (533,993,099 | ) | |||
B Class/Shares Authorized | 10,000,000 | 5,000,000 | ||||||||
Sold | 1,773 | 15,470 | 9,982 | 88,368 | ||||||
Issued in reinvestment of distributions | 4,126 | 34,715 | 51,900 | 457,829 | ||||||
Redeemed | (103,012 | ) | (885,671 | ) | (235,376 | ) | (2,129,994 | ) | ||
(97,113 | ) | (835,486 | ) | (173,494 | ) | (1,583,797 | ) | |||
C Class/Shares Authorized | 380,000,000 | 250,000,000 | ||||||||
Sold | 3,634,813 | 31,085,991 | 9,067,836 | 80,952,738 | ||||||
Issued in reinvestment of distributions | 403,057 | 3,385,250 | 4,237,094 | 37,309,528 | ||||||
Redeemed | (5,175,576 | ) | (44,342,048 | ) | (9,244,873 | ) | (82,980,488 | ) | ||
(1,137,706 | ) | (9,870,807 | ) | 4,060,057 | 35,281,778 | |||||
R Class/Shares Authorized | 90,000,000 | 70,000,000 | ||||||||
Sold | 899,018 | 7,676,717 | 2,337,223 | 20,958,591 | ||||||
Issued in reinvestment of distributions | 136,261 | 1,142,525 | 1,523,932 | 13,415,731 | ||||||
Redeemed | (2,730,557 | ) | (23,362,460 | ) | (8,390,547 | ) | (75,033,538 | ) | ||
(1,695,278 | ) | (14,543,218 | ) | (4,529,392 | ) | (40,659,216 | ) | |||
R6 Class/Shares Authorized | 90,000,000 | 40,000,000 | ||||||||
Sold | 4,807,102 | 41,618,262 | 11,586,359 | 103,570,127 | ||||||
Issued in reinvestment of distributions | 215,271 | 1,807,674 | 759,719 | 6,712,852 | ||||||
Redeemed | (1,856,956 | ) | (16,046,455 | ) | (1,858,023 | ) | (16,637,064 | ) | ||
3,165,417 | 27,379,481 | 10,488,055 | 93,645,915 | |||||||
Net increase (decrease) | (78,427,003 | ) | $ | (673,339,213 | ) | (42,218,802 | ) | $ | (389,000,119 | ) |
18
6. Affiliated Company Transactions
If a fund's holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2015 follows:
Company | Beginning Value | Purchase Cost | Sales Cost | Realized Gain (Loss) | Dividend Income | Ending Value | ||||||||||
Capitol Federal Financial, Inc. | $ | 124,997,237 | $ | 21,219,387 | — | — | $ | 4,569,403 | $ | 142,493,373 | ||||||
ONE Gas, Inc. | 155,480,715 | 1,241,021 | — | — | 2,159,756 | 164,343,598 | ||||||||||
$ | 280,477,952 | $ | 22,460,408 | — | — | $ | 6,729,159 | $ | 306,836,971 | |||||||
7. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments. There were no significant transfers between levels during the period.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 5,880,368,569 | $ | 244,028,847 | — | |||
Convertible Preferred Stocks | — | 900,920,400 | — | |||||
Convertible Bonds | — | 736,992,528 | — | |||||
Preferred Stocks | — | 405,647,954 | — | |||||
Exchange-Traded Funds | 37,256,032 | — | — | |||||
Temporary Cash Investments | 58,317,476 | 171,580,000 | — | |||||
$ | 5,975,942,077 | $ | 2,459,169,729 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 206,491 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | (139,391 | ) | — | |||
19
8. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $353,636,239.
The value of foreign currency risk derivative instruments as of September 30, 2015, is disclosed on the Statement of Assets and Liabilities as an asset of $206,491 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $139,391 in unrealized depreciation on forward foreign currency exchange contracts. For the six months ended September 30, 2015, the effect of foreign currency risk derivative instruments on the Statement of Operations was $1,682,108 in net realized gain (loss) on foreign currency transactions and $(4,405,642) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
9. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of September 30, 2015, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $ | 7,804,002,603 | |
Gross tax appreciation of investments | $ | 891,246,156 | |
Gross tax depreciation of investments | (260,136,953 | ) | |
Net tax appreciation (depreciation) of investments | $ | 631,109,203 | |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
20
Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||
2015(3) | $8.71 | 0.11 | (0.58) | (0.47) | (0.11) | — | (0.11) | $8.13 | (5.46)% | 0.93%(4) | 2.50%(4) | 27% | $4,784,305 | ||
2015 | $8.84 | 0.21 | 0.54 | 0.75 | (0.22) | (0.66) | (0.88) | $8.71 | 8.54% | 0.93% | 2.30% | 56% | $5,463,566 | ||
2014 | $8.47 | 0.20 | 0.92 | 1.12 | (0.20) | (0.55) | (0.75) | $8.84 | 13.64% | 0.93% | 2.31% | 57% | $5,406,362 | ||
2013 | $7.69 | 0.21 | 0.86 | 1.07 | (0.21) | (0.08) | (0.29) | $8.47 | 14.33% | 0.93% | 2.63% | 83% | $5,504,359 | ||
2012 | $7.43 | 0.20 | 0.25 | 0.45 | (0.19) | — | (0.19) | $7.69 | 6.24% | 0.95% | 2.69% | 115% | $5,363,783 | ||
2011 | $6.76 | 0.21 | 0.67 | 0.88 | (0.21) | — | (0.21) | $7.43 | 13.23% | 0.96% | 3.09% | 146% | $5,123,937 | ||
Institutional Class | |||||||||||||||
2015(3) | $8.71 | 0.12 | (0.57) | (0.45) | (0.12) | — | (0.12) | $8.14 | (5.25)% | 0.73%(4) | 2.70%(4) | 27% | $1,094,350 | ||
2015 | $8.85 | 0.22 | 0.54 | 0.76 | (0.24) | (0.66) | (0.90) | $8.71 | 8.63% | 0.73% | 2.50% | 56% | $1,318,193 | ||
2014 | $8.47 | 0.22 | 0.92 | 1.14 | (0.21) | (0.55) | (0.76) | $8.85 | 13.85% | 0.73% | 2.51% | 57% | $1,422,725 | ||
2013 | $7.69 | 0.22 | 0.87 | 1.09 | (0.23) | (0.08) | (0.31) | $8.47 | 14.69% | 0.73% | 2.83% | 83% | $1,527,723 | ||
2012 | $7.44 | 0.21 | 0.24 | 0.45 | (0.20) | — | (0.20) | $7.69 | 6.31% | 0.75% | 2.89% | 115% | $1,316,758 | ||
2011 | $6.77 | 0.23 | 0.66 | 0.89 | (0.22) | — | (0.22) | $7.44 | 13.60% | 0.76% | 3.29% | 146% | $894,544 | ||
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
A Class | |||||||||||||||
2015(3) | $8.71 | 0.10 | (0.58) | (0.48) | (0.10) | — | (0.10) | $8.13 | (5.58)% | 1.18%(4) | 2.25%(4) | 27% | $1,843,840 | ||
2015 | $8.84 | 0.18 | 0.55 | 0.73 | (0.20) | (0.66) | (0.86) | $8.71 | 8.27% | 1.18% | 2.05% | 56% | $2,172,105 | ||
2014 | $8.47 | 0.18 | 0.91 | 1.09 | (0.17) | (0.55) | (0.72) | $8.84 | 13.36% | 1.18% | 2.06% | 57% | $2,722,731 | ||
2013 | $7.69 | 0.19 | 0.86 | 1.05 | (0.19) | (0.08) | (0.27) | $8.47 | 14.05% | 1.18% | 2.38% | 83% | $2,631,737 | ||
2012 | $7.43 | 0.18 | 0.25 | 0.43 | (0.17) | — | (0.17) | $7.69 | 5.98% | 1.20% | 2.44% | 115% | $2,512,840 | ||
2011 | $6.76 | 0.20 | 0.66 | 0.86 | (0.19) | — | (0.19) | $7.43 | 12.95% | 1.21% | 2.84% | 146% | $2,188,714 | ||
B Class | |||||||||||||||
2015(3) | $8.72 | 0.06 | (0.57) | (0.51) | (0.07) | — | (0.07) | $8.14 | (5.92)% | 1.93%(4) | 1.50%(4) | 27% | $4,373 | ||
2015 | $8.85 | 0.12 | 0.54 | 0.66 | (0.13) | (0.66) | (0.79) | $8.72 | 7.47% | 1.93% | 1.30% | 56% | $5,530 | ||
2014 | $8.48 | 0.11 | 0.92 | 1.03 | (0.11) | (0.55) | (0.66) | $8.85 | 12.51% | 1.93% | 1.31% | 57% | $7,151 | ||
2013 | $7.70 | 0.13 | 0.86 | 0.99 | (0.13) | (0.08) | (0.21) | $8.48 | 13.20% | 1.93% | 1.63% | 83% | $7,304 | ||
2012 | $7.44 | 0.12 | 0.26 | 0.38 | (0.12) | — | (0.12) | $7.70 | 5.18% | 1.95% | 1.69% | 115% | $7,716 | ||
2011 | $6.77 | 0.15 | 0.66 | 0.81 | (0.14) | — | (0.14) | $7.44 | 12.08% | 1.96% | 2.09% | 146% | $8,102 | ||
C Class | |||||||||||||||
2015(3) | $8.71 | 0.06 | (0.57) | (0.51) | (0.07) | — | (0.07) | $8.13 | (5.93)% | 1.93%(4) | 1.50%(4) | 27% | $503,532 | ||
2015 | $8.84 | 0.12 | 0.54 | 0.66 | (0.13) | (0.66) | (0.79) | $8.71 | 7.47% | 1.93% | 1.30% | 56% | $549,088 | ||
2014 | $8.47 | 0.12 | 0.91 | 1.03 | (0.11) | (0.55) | (0.66) | $8.84 | 12.53% | 1.93% | 1.31% | 57% | $521,688 | ||
2013 | $7.69 | 0.13 | 0.86 | 0.99 | (0.13) | (0.08) | (0.21) | $8.47 | 13.21% | 1.93% | 1.63% | 83% | $467,913 | ||
2012 | $7.44 | 0.12 | 0.25 | 0.37 | (0.12) | — | (0.12) | $7.69 | 5.05% | 1.95% | 1.69% | 115% | $469,355 | ||
2011 | $6.77 | 0.15 | 0.66 | 0.81 | (0.14) | — | (0.14) | $7.44 | 12.25% | 1.96% | 2.09% | 146% | $384,918 | ||
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
R Class | |||||||||||||||
2015(3) | $8.69 | 0.09 | (0.58) | (0.49) | (0.09) | — | (0.09) | $8.11 | (5.71)% | 1.43%(4) | 2.00%(4) | 27% | $105,690 | ||
2015 | $8.82 | 0.16 | 0.54 | 0.70 | (0.17) | (0.66) | (0.83) | $8.69 | 8.03% | 1.43% | 1.80% | 56% | $127,897 | ||
2014 | $8.45 | 0.16 | 0.91 | 1.07 | (0.15) | (0.55) | (0.70) | $8.82 | 13.12% | 1.43% | 1.81% | 57% | $169,852 | ||
2013 | $7.67 | 0.17 | 0.86 | 1.03 | (0.17) | (0.08) | (0.25) | $8.45 | 13.81% | 1.43% | 2.13% | 83% | $179,855 | ||
2012 | $7.42 | 0.16 | 0.24 | 0.40 | (0.15) | — | (0.15) | $7.67 | 5.59% | 1.45% | 2.19% | 115% | $177,061 | ||
2011 | $6.75 | 0.18 | 0.66 | 0.84 | (0.17) | — | (0.17) | $7.42 | 12.68% | 1.46% | 2.59% | 146% | $141,693 | ||
R6 Class | |||||||||||||||
2015(3) | $8.72 | 0.12 | (0.58) | (0.46) | (0.12) | — | (0.12) | $8.14 | (5.29)% | 0.58%(4) | 2.85%(4) | 27% | $135,627 | ||
2015 | $8.85 | 0.25 | 0.53 | 0.78 | (0.25) | (0.66) | (0.91) | $8.72 | 8.90% | 0.58% | 2.65% | 56% | $117,620 | ||
2014(5) | $8.94 | 0.17 | 0.46 | 0.63 | (0.17) | (0.55) | (0.72) | $8.85 | 7.41% | 0.58%(4) | 2.93%(4) | 57%(6) | $26,550 | ||
Notes to Financial Highlights | ||||
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | Six months ended September 30, 2015 (unaudited). |
(4) | Annualized. |
(5) | July 26, 2013 (commencement of sale) through March 31, 2014. |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2014. |
See Notes to Financial Statements.
23
Approval of Management Agreement |
At a meeting held on June 30, 2015, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, the Directors requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis and the information received was supplemental to the extensive information that the Board and its committees receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
• | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
• | the Fund’s investment performance compared to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the Advisor’s compliance policies, procedures, and regulatory experience; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | data comparing services provided and charges to other investment management clients of the Advisor; |
• | acquired fund fees and expenses; |
• | payments to intermediaries by the Fund and the Advisor; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
In keeping with their practice, the Directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The independent Directors also had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the
24
Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
• | constructing and designing the Fund |
• | portfolio research and security selection |
• | initial capitalization/funding |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services (except the independent Directors’ counsel) |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution (except Rule 12b-1 plans) |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one- and ten-year periods and below its benchmark for the three- and five-year periods reviewed by the Board. The Board discussed the Fund's performance with the Advisor and was satisfied with the efforts being undertaken by the Advisor. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board particularly noted the Advisor’s continual efforts to maintain effective business continuity plans and to address cybersecurity threats. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading
25
activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services. The Board also noted that economies of scale are shared with the Fund and its shareholders through management fee breakpoints that serve to reduce the effective management fee as the assets of the Fund grow.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent Directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges, and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was below the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
26
Payments to Intermediaries. The Directors also requested and received a description of payments made to intermediaries by the Fund and the Advisor. These payments include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Board reviewed such information and found the payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. Additionally, the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions, which the Board concluded is likely to benefit other clients of the Advisor as well as Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients and, where expressly provided, these other client assets may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent Directors, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
27
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its
website at americancentury.com and, upon request, by calling 1-800-345-2021.
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| ||
Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2015 American Century Proprietary Holdings, Inc. All rights reserved. CL-SAN-87376 1511 | ||
SEMIANNUAL REPORT | SEPTEMBER 30, 2015 |
Large Company Value Fund
Table of Contents |
President’s Letter | 2 |
Performance | 3 |
Fund Characteristics | |
Shareholder Fee Example | |
Schedule of Investments | |
Statement of Assets and Liabilities | |
Statement of Operations | |
Statement of Changes in Net Assets | |
Notes to Financial Statements | |
Financial Highlights | |
Approval of Management Agreement | |
Additional Information | |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
| Dear Investor: Thank you for reviewing this semiannual report for the six months ended September 30, 2015. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information. For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com. |
Jonathan Thomas | |
Divergence in Economic Growth and Monetary Policies, Combined With China Turmoil, Triggered Market Volatility
Divergence between the U.S. and the rest of the world, along with China’s struggles, lower commodity prices, capital market volatility, and risk-off trading, were key themes during the reporting period. Global divergence described not only the relatively stronger economic growth enjoyed by the U.S. compared with most of the world, but also the related contrast between the U.S. Federal Reserve’s (the Fed’s) expected unwinding of monetary stimulus versus the continuation and expansion of stimulus by other major central banks. Central bank moves—including the Fed’s delayed normalization of its extremely low interest rate positioning—helped trigger large market swings.
In 2014, the Fed ended its latest massive bond-buying program (quantitative easing, QE), leading to expectations that interest rates would rise. But while QE was halted in the U.S., other major central banks were starting or increasing QE as their economies faltered. This divergence helped fuel increased demand for the U.S. dollar and U.S. dollar-denominated assets, and put downward pressure on commodity prices, most notably crude oil. Low inflation also prevailed amid muted demand for commodities, particularly as China’s growth faltered, which had a broad dampening impact on global markets. In this environment, the U.S. dollar and U.S. government securities benefited from “flight to quality” capital flows. Conversely, emerging market, commodity-related, and value equity indices suffered significant declines.
We expect continued economic and monetary policy divergence between the U.S. and non-U.S. economies in the coming months, accompanied by further market volatility. This could present both challenges and opportunities for active investment managers. In this environment, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios to meet financial goals. We appreciate your continued trust in us.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of September 30, 2015 | |||||||
Average Annual Returns | |||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | ALVIX | -9.53% | -4.77% | 11.80% | 4.88% | 5.38% | 7/30/99 |
Russell 1000 Value Index | — | -8.30% | -4.42% | 12.28% | 5.70% | 5.37% | — |
S&P 500 Index | — | -6.18% | -0.61% | 13.33% | 6.80% | 4.26% | — |
Institutional Class | ALVSX | -9.43% | -4.57% | 12.05% | 5.10% | 5.54% | 8/10/01 |
A Class(2) | ALPAX | 10/26/00 | |||||
No sales charge* | -9.64% | -5.00% | 11.53% | 4.62% | 5.89% | ||
With sales charge* | -14.81% | -10.48% | 10.21% | 4.00% | 5.47% | ||
B Class | ALBVX | 1/31/03 | |||||
No sales charge* | -9.95% | -5.74% | 10.72% | 3.85% | 6.42% | ||
With sales charge* | -14.95% | -9.74% | 10.59% | 3.85% | 6.42% | ||
C Class | ALPCX | 11/7/01 | |||||
No sales charge* | -9.99% | -5.76% | 10.68% | 3.85% | 4.77% | ||
With sales charge* | -10.89% | -5.76% | 10.68% | 3.85% | 4.77% | ||
R Class | ALVRX | -9.75% | -5.24% | 11.25% | 4.36% | 5.91% | 8/29/03 |
R6 Class | ALVDX | -9.36% | -4.43% | — | — | 4.84% | 7/26/13 |
* Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum initial sales charge and may be subject to a maximum CDSC of 1.00%. B Class shares redeemed within six years of purchase are subject to a CDSC that declines from 5.00% during the first year to 0.00% after the sixth year. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied.
(1) | Total returns for periods less than one year are not annualized. |
(2) | Prior to December 3, 2007, the A Class was referred to as the Advisor Class and did not have a front-end sales charge. Performance prior to that date has been adjusted to reflect this charge. |
Total Annual Fund Operating Expenses | ||||||
Investor Class | Institutional Class | A Class | B Class | C Class | R Class | R6 Class |
0.84% | 0.64% | 1.09% | 1.84% | 1.84% | 1.34% | 0.49% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
3
Fund Characteristics | ||
SEPTEMBER 30, 2015 | |
Top Ten Holdings | % of net assets |
JPMorgan Chase & Co. | 3.7% |
Wells Fargo & Co. | 3.5% |
Pfizer, Inc. | 2.7% |
Cisco Systems, Inc. | 2.6% |
Oracle Corp. | 2.5% |
Total SA ADR | 2.4% |
Bank of America Corp. | 2.4% |
Honeywell International, Inc. | 2.2% |
Ingersoll-Rand plc | 2.1% |
Medtronic plc | 2.1% |
Top Five Industries | % of net assets |
Banks | 14.0% |
Oil, Gas and Consumable Fuels | 10.6% |
Pharmaceuticals | 7.3% |
Aerospace and Defense | 5.8% |
Capital Markets | 5.4% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 98.7% |
Temporary Cash Investments | 1.1% |
Other Assets and Liabilities | 0.2% |
4
Shareholder Fee Example | ||||
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2015 to September 30, 2015.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
5
Beginning Account Value 4/1/15 | Ending Account Value 9/30/15 | Expenses Paid During Period(1) 4/1/15 - 9/30/15 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $904.70 | $4.00 | 0.84% |
Institutional Class | $1,000 | $905.70 | $3.05 | 0.64% |
A Class | $1,000 | $903.60 | $5.19 | 1.09% |
B Class | $1,000 | $900.50 | $8.74 | 1.84% |
C Class | $1,000 | $900.10 | $8.74 | 1.84% |
R Class | $1,000 | $902.50 | $6.37 | 1.34% |
R6 Class | $1,000 | $906.40 | $2.34 | 0.49% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.80 | $4.24 | 0.84% |
Institutional Class | $1,000 | $1,021.80 | $3.23 | 0.64% |
A Class | $1,000 | $1,019.55 | $5.50 | 1.09% |
B Class | $1,000 | $1,015.80 | $9.27 | 1.84% |
C Class | $1,000 | $1,015.80 | $9.27 | 1.84% |
R Class | $1,000 | $1,018.30 | $6.76 | 1.34% |
R6 Class | $1,000 | $1,022.55 | $2.48 | 0.49% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
6
Schedule of Investments | ||||
SEPTEMBER 30, 2015 (UNAUDITED)
Shares | Value | |||
COMMON STOCKS — 98.7% | ||||
Aerospace and Defense — 5.8% | ||||
Honeywell International, Inc. | 171,600 | $ | 16,248,804 | |
Huntington Ingalls Industries, Inc. | 60,200 | 6,450,430 | ||
Raytheon Co. | 67,800 | 7,407,828 | ||
United Technologies Corp. | 148,500 | 13,215,015 | ||
43,322,077 | ||||
Auto Components — 2.2% | ||||
BorgWarner, Inc. | 118,000 | 4,907,620 | ||
Delphi Automotive plc | 155,600 | 11,831,824 | ||
16,739,444 | ||||
Automobiles — 1.6% | ||||
Ford Motor Co. | 439,200 | 5,959,944 | ||
Harley-Davidson, Inc. | 105,500 | 5,791,950 | ||
11,751,894 | ||||
Banks — 14.0% | ||||
Bank of America Corp. | 1,154,400 | 17,985,552 | ||
JPMorgan Chase & Co. | 453,100 | 27,625,507 | ||
KeyCorp | 489,800 | 6,372,298 | ||
PNC Financial Services Group, Inc. (The) | 124,200 | 11,078,640 | ||
U.S. Bancorp | 382,300 | 15,678,123 | ||
Wells Fargo & Co. | 518,300 | 26,614,705 | ||
105,354,825 | ||||
Biotechnology — 0.8% | ||||
Amgen, Inc. | 42,200 | 5,837,104 | ||
Capital Markets — 5.4% | ||||
Ameriprise Financial, Inc. | 105,500 | 11,513,215 | ||
BlackRock, Inc. | 23,400 | 6,960,798 | ||
Goldman Sachs Group, Inc. (The) | 57,700 | 10,025,952 | ||
Invesco Ltd. | 401,300 | 12,532,599 | ||
41,032,564 | ||||
Chemicals — 1.7% | ||||
Dow Chemical Co. (The) | 174,900 | 7,415,760 | ||
LyondellBasell Industries NV, Class A | 61,500 | 5,126,640 | ||
12,542,400 | ||||
Communications Equipment — 2.6% | ||||
Cisco Systems, Inc. | 754,300 | 19,800,375 | ||
Consumer Finance — 2.6% | ||||
Capital One Financial Corp. | 139,100 | 10,087,532 | ||
Discover Financial Services | 188,500 | 9,800,115 | ||
19,887,647 | ||||
Containers and Packaging — 0.6% | ||||
WestRock Co. | 89,700 | 4,614,168 | ||
7
Shares | Value | |||
Diversified Financial Services — 0.9% | ||||
Berkshire Hathaway, Inc., Class B(1) | 51,200 | $ | 6,676,480 | |
Electric Utilities — 2.2% | ||||
PPL Corp. | 235,000 | 7,729,150 | ||
Westar Energy, Inc. | 90,200 | 3,467,288 | ||
Xcel Energy, Inc. | 143,200 | 5,070,712 | ||
16,267,150 | ||||
Electrical Equipment — 1.7% | ||||
Eaton Corp. plc | 245,700 | 12,604,410 | ||
Energy Equipment and Services — 2.7% | ||||
Baker Hughes, Inc. | 99,100 | 5,157,164 | ||
Halliburton Co. | 285,200 | 10,081,820 | ||
Oceaneering International, Inc. | 134,900 | 5,298,872 | ||
20,537,856 | ||||
Food and Staples Retailing — 2.1% | ||||
CVS Health Corp. | 102,200 | 9,860,256 | ||
Sysco Corp. | 143,800 | 5,603,886 | ||
15,464,142 | ||||
Food Products — 0.6% | ||||
Hershey Co. (The) | 50,300 | 4,621,564 | ||
Health Care Equipment and Supplies — 3.5% | ||||
Medtronic plc | 237,190 | 15,877,499 | ||
Zimmer Biomet Holdings, Inc. | 109,600 | 10,294,728 | ||
26,172,227 | ||||
Health Care Providers and Services — 3.7% | ||||
Anthem, Inc. | 62,200 | 8,708,000 | ||
HCA Holdings, Inc.(1) | 111,700 | 8,641,112 | ||
Laboratory Corp. of America Holdings(1) | 51,300 | 5,564,511 | ||
McKesson Corp. | 28,800 | 5,328,864 | ||
28,242,487 | ||||
Hotels, Restaurants and Leisure — 0.8% | ||||
Marriott International, Inc., Class A | 86,200 | 5,878,840 | ||
Household Durables — 1.5% | ||||
Whirlpool Corp. | 77,100 | 11,353,746 | ||
Insurance — 5.4% | ||||
Allstate Corp. (The) | 96,200 | 5,602,688 | ||
American International Group, Inc. | 172,600 | 9,807,132 | ||
MetLife, Inc. | 209,400 | 9,873,210 | ||
Principal Financial Group, Inc. | 62,200 | 2,944,548 | ||
Prudential Financial, Inc. | 104,200 | 7,941,082 | ||
Travelers Cos., Inc. (The) | 43,900 | 4,369,367 | ||
40,538,027 | ||||
Machinery — 3.0% | ||||
Ingersoll-Rand plc | 313,100 | 15,896,087 | ||
Stanley Black & Decker, Inc. | 68,300 | 6,623,734 | ||
22,519,821 | ||||
8
Shares | Value | |||
Media — 2.3% | ||||
AMC Networks, Inc.(1) | 82,700 | $ | 6,051,159 | |
Time Warner, Inc. | 160,300 | 11,020,625 | ||
17,071,784 | ||||
Multiline Retail — 0.6% | ||||
Macy's, Inc. | 95,800 | 4,916,456 | ||
Oil, Gas and Consumable Fuels — 10.6% | ||||
Apache Corp. | 38,500 | 1,507,660 | ||
Chevron Corp. | 150,500 | 11,871,440 | ||
Exxon Mobil Corp. | 154,300 | 11,472,205 | ||
Imperial Oil Ltd. | 407,200 | 12,901,024 | ||
Oasis Petroleum, Inc.(1) | 362,900 | 3,149,972 | ||
Occidental Petroleum Corp. | 183,100 | 12,112,065 | ||
Total SA ADR | 406,295 | 18,165,449 | ||
Valero Energy Corp. | 138,300 | 8,311,830 | ||
79,491,645 | ||||
Pharmaceuticals — 7.3% | ||||
Allergan plc(1) | 41,900 | 11,388,839 | ||
Johnson & Johnson | 118,600 | 11,071,310 | ||
Merck & Co., Inc. | 246,000 | 12,149,940 | ||
Pfizer, Inc. | 636,100 | 19,979,901 | ||
54,589,990 | ||||
Real Estate Investment Trusts (REITs) — 0.8% | ||||
Brixmor Property Group, Inc. | 258,000 | 6,057,840 | ||
Semiconductors and Semiconductor Equipment — 3.4% | ||||
Applied Materials, Inc. | 775,500 | 11,392,095 | ||
Microchip Technology, Inc. | 184,700 | 7,958,723 | ||
NXP Semiconductors NV(1) | 42,900 | 3,735,303 | ||
ON Semiconductor Corp.(1) | 256,600 | 2,412,040 | ||
25,498,161 | ||||
Software — 4.0% | ||||
Electronic Arts, Inc.(1) | 169,000 | 11,449,750 | ||
Oracle Corp. | 523,800 | 18,919,656 | ||
30,369,406 | ||||
Specialty Retail — 1.4% | ||||
Lowe's Cos., Inc. | 150,900 | 10,400,028 | ||
Technology Hardware, Storage and Peripherals — 0.9% | ||||
Western Digital Corp. | 90,400 | 7,181,376 | ||
Tobacco — 2.0% | ||||
Altria Group, Inc. | 81,100 | 4,411,840 | ||
Philip Morris International, Inc. | 134,900 | 10,701,617 | ||
15,113,457 | ||||
TOTAL COMMON STOCKS (Cost $654,780,025) | 742,449,391 | |||
9
Shares | Value | |||
TEMPORARY CASH INVESTMENTS — 1.1% | ||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 2/15/25, valued at $5,992,444), at 0.01%, dated 9/30/15, due 10/1/15 (Delivery value $5,872,002) | $ | 5,872,000 | ||
State Street Institutional Liquid Reserves Fund, Premier Class | 2,193,952 | 2,193,952 | ||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $8,065,952) | 8,065,952 | |||
TOTAL INVESTMENT SECURITIES — 99.8% (Cost $662,845,977) | 750,515,343 | |||
OTHER ASSETS AND LIABILITIES — 0.2% | 1,663,529 | |||
TOTAL NET ASSETS — 100.0% | $ | 752,178,872 | ||
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||
USD | 8,851,323 | CAD | 11,789,254 | JPMorgan Chase Bank N.A. | 10/30/15 | $ | 18,383 | |||
EUR | 509,375 | USD | 573,256 | UBS AG | 10/30/15 | (3,842 | ) | |||
USD | 13,612,016 | EUR | 12,175,164 | UBS AG | 10/30/15 | 1,786 | ||||
$ | 16,327 | |||||||||
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
CAD | - | Canadian Dollar |
EUR | - | Euro |
USD | - | United States Dollar |
(1) | Non-income producing. |
See Notes to Financial Statements.
10
Statement of Assets and Liabilities | ||||
SEPTEMBER 30, 2015 (UNAUDITED) | |||
Assets | |||
Investment securities, at value (cost of $662,845,977) | $ | 750,515,343 | |
Cash | 86,623 | ||
Foreign currency holdings, at value (cost of $103,701) | 85,287 | ||
Receivable for investments sold | 1,680,037 | ||
Receivable for capital shares sold | 1,113,203 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 20,169 | ||
Dividends and interest receivable | 1,337,149 | ||
754,837,811 | |||
Liabilities | |||
Payable for investments purchased | 1,838,038 | ||
Payable for capital shares redeemed | 283,680 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 3,842 | ||
Accrued management fees | 509,862 | ||
Distribution and service fees payable | 23,517 | ||
2,658,939 | |||
Net Assets | $ | 752,178,872 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 835,790,226 | |
Undistributed net investment income | 980,978 | ||
Accumulated net realized loss | (172,259,505 | ) | |
Net unrealized appreciation | 87,667,173 | ||
$ | 752,178,872 | ||
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $596,750,339 | 73,204,695 | $8.15 | |||
Institutional Class, $0.01 Par Value | $44,342,617 | 5,436,810 | $8.16 | |||
A Class, $0.01 Par Value | $61,546,127 | 7,555,040 | $8.15* | |||
B Class, $0.01 Par Value | $167,518 | 20,501 | $8.17 | |||
C Class, $0.01 Par Value | $10,076,416 | 1,237,301 | $8.14 | |||
R Class, $0.01 Par Value | $4,942,637 | 606,261 | $8.15 | |||
R6 Class, $0.01 Par Value | $34,353,218 | 4,211,824 | $8.16 | |||
*Maximum offering price $8.65 (net asset value divided by 0.9425).
See Notes to Financial Statements.
11
Statement of Operations | ||||
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $123,689) | $ | 8,486,349 | |
Interest | 1,168 | ||
8,487,517 | |||
Expenses: | |||
Management fees | 3,236,470 | ||
Distribution and service fees: | |||
A Class | 85,998 | ||
B Class | 1,664 | ||
C Class | 56,487 | ||
R Class | 13,688 | ||
Directors' fees and expenses | 13,451 | ||
Other expenses | 48 | ||
3,407,806 | |||
Net investment income (loss) | 5,079,711 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 39,714,786 | ||
Foreign currency transactions | 182,794 | ||
39,897,580 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (123,607,433 | ) | |
Translation of assets and liabilities in foreign currencies | (239,947 | ) | |
(123,847,380 | ) | ||
Net realized and unrealized gain (loss) | (83,949,800 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (78,870,089 | ) |
See Notes to Financial Statements.
12
Statement of Changes in Net Assets | ||||
SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) AND YEAR ENDED MARCH 31, 2015 | ||||||
Increase (Decrease) in Net Assets | September 30, 2015 | March 31, 2015 | ||||
Operations | ||||||
Net investment income (loss) | $ | 5,079,711 | $ | 10,351,928 | ||
Net realized gain (loss) | 39,897,580 | 118,468,572 | ||||
Change in net unrealized appreciation (depreciation) | (123,847,380 | ) | (47,547,195 | ) | ||
Net increase (decrease) in net assets resulting from operations | (78,870,089 | ) | 81,273,305 | |||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Investor Class | (4,239,310 | ) | (7,695,113 | ) | ||
Institutional Class | (362,928 | ) | (1,168,803 | ) | ||
A Class | (371,901 | ) | (749,306 | ) | ||
B Class | (512 | ) | (2,404 | ) | ||
C Class | (20,283 | ) | (33,834 | ) | ||
R Class | (22,957 | ) | (42,940 | ) | ||
R6 Class | (305,990 | ) | (63,861 | ) | ||
Decrease in net assets from distributions | (5,323,881 | ) | (9,756,261 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 73,710,226 | (56,470,160 | ) | |||
Net increase (decrease) in net assets | (10,483,744 | ) | 15,046,884 | |||
Net Assets | ||||||
Beginning of period | 762,662,616 | 747,615,732 | ||||
End of period | $ | 752,178,872 | $ | 762,662,616 | ||
Undistributed net investment income | $ | 980,978 | $ | 1,225,148 | ||
See Notes to Financial Statements.
13
Notes to Financial Statements |
SEPTEMBER 30, 2015 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Large Company Value Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective.
The fund offers the Investor Class, the Institutional Class, the A Class, the B Class, the C Class, the R Class and the R6 Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class and R6 Class shareholders do not require the same level of shareholder and administrative services from American Century Investment Management, Inc. (ACIM) (the investment advisor) as shareholders of other classes. In addition, financial intermediaries do not receive any service, distribution or administrative fees for the R6 Class. As a result, the Institutional Class and R6 Class are charged lower unified management fees. On October 16, 2015, all outstanding B Class shares were converted to A Class shares and the fund discontinued offering the B Class.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Fixed income securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors: trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
14
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
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Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc. (ACIS), and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC. Various funds issued by American Century Asset Allocation Portfolios, Inc. and American Century Strategic Asset Allocations, Inc. own, in aggregate, 47% of the shares of the fund. Related parties do not invest in the fund for the purpose of exercising management or control.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The strategy assets of the fund also include the assets of NT Large Company Value Fund, one fund in a series issued by the corporation. The annual management fee schedule ranges from 0.70% to 0.90% for the Investor Class, A Class, B Class, C Class and R Class. The annual management fee schedule ranges from 0.50% to 0.70% for the Institutional Class and 0.35% to 0.55% for the R6 Class. The effective annual management fee for each class for the six months ended September 30, 2015 was 0.84% for the Investor Class, A Class, B Class, C Class and R Class, 0.64% for the Institutional Class and 0.49% for the R6 Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, B Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the B Class and C Class will each pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the six months ended September 30, 2015 are detailed in the Statement of Operations.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2015 were $259,657,270 and $184,657,489, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2015 | Year ended March 31, 2015 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 415,000,000 | 320,000,000 | ||||||||
Sold | 11,411,753 | $ | 102,663,168 | 10,602,272 | $ | 93,205,250 | ||||
Issued in reinvestment of distributions | 470,679 | 4,146,789 | 857,289 | 7,598,172 | ||||||
Redeemed | (3,568,323 | ) | (32,030,242 | ) | (15,922,735 | ) | (142,211,204 | ) | ||
8,314,109 | 74,779,715 | (4,463,174 | ) | (41,407,782 | ) | |||||
Institutional Class/Shares Authorized | 50,000,000 | 65,000,000 | ||||||||
Sold | 647,243 | 5,895,340 | 1,214,195 | 10,709,367 | ||||||
Issued in reinvestment of distributions | 40,857 | 360,144 | 131,329 | 1,163,382 | ||||||
Redeemed | (498,109 | ) | (4,503,754 | ) | (5,897,634 | ) | (52,541,206 | ) | ||
189,991 | 1,751,730 | (4,552,110 | ) | (40,668,457 | ) | |||||
A Class/Shares Authorized | 70,000,000 | 70,000,000 | ||||||||
Sold | 819,623 | 7,390,133 | 1,086,169 | 9,486,498 | ||||||
Issued in reinvestment of distributions | 40,915 | 360,538 | 82,165 | 726,707 | ||||||
Redeemed | (1,078,419 | ) | (9,695,804 | ) | (2,440,653 | ) | (21,358,443 | ) | ||
(217,881 | ) | (1,945,133 | ) | (1,272,319 | ) | (11,145,238 | ) | |||
B Class/Shares Authorized | 10,000,000 | 5,000,000 | ||||||||
Sold | — | — | 32 | 279 | ||||||
Issued in reinvestment of distributions | 56 | 504 | 228 | 2,005 | ||||||
Redeemed | (30,186 | ) | (275,532 | ) | (61,297 | ) | (540,748 | ) | ||
(30,130 | ) | (275,028 | ) | (61,037 | ) | (538,464 | ) | |||
C Class/Shares Authorized | 15,000,000 | 10,000,000 | ||||||||
Sold | 94,157 | 832,883 | 196,172 | 1,732,751 | ||||||
Issued in reinvestment of distributions | 1,371 | 12,070 | 2,196 | 19,288 | ||||||
Redeemed | (127,674 | ) | (1,156,692 | ) | (148,976 | ) | (1,295,308 | ) | ||
(32,146 | ) | (311,739 | ) | 49,392 | 456,731 | |||||
R Class/Shares Authorized | 10,000,000 | 5,000,000 | ||||||||
Sold | 47,653 | 430,437 | 179,630 | 1,564,239 | ||||||
Issued in reinvestment of distributions | 2,541 | 22,403 | 4,771 | 42,181 | ||||||
Redeemed | (87,923 | ) | (804,839 | ) | (281,041 | ) | (2,431,491 | ) | ||
(37,729 | ) | (351,999 | ) | (96,640 | ) | (825,071 | ) | |||
R6 Class/Shares Authorized | 40,000,000 | 15,000,000 | ||||||||
Sold | 491,904 | 4,441,632 | 4,297,031 | 38,502,849 | ||||||
Issued in reinvestment of distributions | 34,710 | 305,990 | 7,113 | 63,861 | ||||||
Redeemed | (520,619 | ) | (4,684,942 | ) | (101,629 | ) | (908,589 | ) | ||
5,995 | 62,680 | 4,202,515 | 37,658,121 | |||||||
Net increase (decrease) | 8,192,209 | $ | 73,710,226 | (6,193,373 | ) | $ | (56,470,160 | ) | ||
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6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments. There were no significant transfers between levels during the period.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 729,548,367 | $ | 12,901,024 | — | |||
Temporary Cash Investments | 2,193,952 | 5,872,000 | — | |||||
$ | 731,742,319 | $ | 18,773,024 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 20,169 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | (3,842 | ) | — | |||
7. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $23,824,723.
The value of foreign currency risk derivative instruments as of September 30, 2015, is disclosed on the Statement of Assets and Liabilities as an asset of $20,169 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $3,842 in unrealized depreciation on forward foreign currency exchange contracts. For the six months ended September 30, 2015, the effect of foreign currency risk derivative instruments on the Statement of Operations was $194,206 in net realized gain (loss) on foreign
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currency transactions and $(243,464) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
8. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of September 30, 2015, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $ | 670,302,854 | |
Gross tax appreciation of investments | $ | 131,854,667 | |
Gross tax depreciation of investments | (51,642,178 | ) | |
Net tax appreciation (depreciation) of investments | $ | 80,212,489 | |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
As of March 31, 2015, the fund had accumulated short-term capital losses of $(204,181,448), which represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. Capital loss carryovers expire in 2018.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | ||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Distributions From Net Investment Income | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||
2015(3) | $9.07 | 0.06 | (0.92) | (0.86) | (0.06) | $8.15 | (9.53)% | 0.84%(4) | 1.30%(4) | 24% | $596,750 | ||
2015 | $8.28 | 0.12 | 0.78 | 0.90 | (0.11) | $9.07 | 10.92% | 0.84% | 1.36% | 56% | $588,608 | ||
2014 | $6.92 | 0.12 | 1.36 | 1.48 | (0.12) | $8.28 | 21.57% | 0.85% | 1.64% | 35% | $574,367 | ||
2013 | $6.09 | 0.12 | 0.83 | 0.95 | (0.12) | $6.92 | 15.85% | 0.87% | 1.87% | 33% | $487,161 | ||
2012 | $5.80 | 0.10 | 0.29 | 0.39 | (0.10) | $6.09 | 6.91% | 0.87% | 1.84% | 56% | $553,916 | ||
2011 | $5.24 | 0.08 | 0.56 | 0.64 | (0.08) | $5.80 | 12.39% | 0.87% | 1.58% | 38% | $629,706 | ||
Institutional Class | |||||||||||||
2015(3) | $9.08 | 0.07 | (0.92) | (0.85) | (0.07) | $8.16 | (9.43)% | 0.64%(4) | 1.50%(4) | 24% | $44,343 | ||
2015 | $8.29 | 0.13 | 0.79 | 0.92 | (0.13) | $9.08 | 11.14% | 0.64% | 1.56% | 56% | $47,616 | ||
2014 | $6.93 | 0.14 | 1.36 | 1.50 | (0.14) | $8.29 | 21.78% | 0.65% | 1.84% | 35% | $81,195 | ||
2013 | $6.10 | 0.13 | 0.83 | 0.96 | (0.13) | $6.93 | 16.05% | 0.67% | 2.07% | 33% | $57,325 | ||
2012 | $5.80 | 0.11 | 0.30 | 0.41 | (0.11) | $6.10 | 7.29% | 0.67% | 2.04% | 56% | $77,706 | ||
2011 | $5.24 | 0.09 | 0.56 | 0.65 | (0.09) | $5.80 | 12.61% | 0.67% | 1.78% | 38% | $230,853 | ||
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | ||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Distributions From Net Investment Income | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
A Class | |||||||||||||
2015(3) | $9.07 | 0.05 | (0.92) | (0.87) | (0.05) | $8.15 | (9.64)% | 1.09%(4) | 1.05%(4) | 24% | $61,546 | ||
2015 | $8.28 | 0.10 | 0.78 | 0.88 | (0.09) | $9.07 | 10.65% | 1.09% | 1.11% | 56% | $70,462 | ||
2014 | $6.92 | 0.11 | 1.35 | 1.46 | (0.10) | $8.28 | 21.27% | 1.10% | 1.39% | 35% | $74,863 | ||
2013 | $6.09 | 0.10 | 0.84 | 0.94 | (0.11) | $6.92 | 15.57% | 1.12% | 1.62% | 33% | $69,270 | ||
2012 | $5.79 | 0.09 | 0.30 | 0.39 | (0.09) | $6.09 | 6.83% | 1.12% | 1.59% | 56% | $75,521 | ||
2011 | $5.24 | 0.07 | 0.55 | 0.62 | (0.07) | $5.79 | 11.92% | 1.12% | 1.33% | 38% | $94,159 | ||
B Class | |||||||||||||
2015(3) | $9.09 | 0.01 | (0.91) | (0.90) | (0.02) | $8.17 | (9.95)% | 1.84%(4) | 0.30%(4) | 24% | $168 | ||
2015 | $8.31 | 0.03 | 0.78 | 0.81 | (0.03) | $9.09 | 9.73% | 1.84% | 0.36% | 56% | $460 | ||
2014 | $6.94 | 0.05 | 1.36 | 1.41 | (0.04) | $8.31 | 20.45% | 1.85% | 0.64% | 35% | $928 | ||
2013 | $6.11 | 0.05 | 0.84 | 0.89 | (0.06) | $6.94 | 14.67% | 1.87% | 0.87% | 33% | $1,404 | ||
2012 | $5.81 | 0.05 | 0.29 | 0.34 | (0.04) | $6.11 | 6.01% | 1.87% | 0.84% | 56% | $2,753 | ||
2011 | $5.26 | 0.03 | 0.55 | 0.58 | (0.03) | $5.81 | 11.04% | 1.87% | 0.58% | 38% | $4,743 | ||
C Class | |||||||||||||
2015(3) | $9.06 | 0.01 | (0.91) | (0.90) | (0.02) | $8.14 | (9.99)% | 1.84%(4) | 0.30%(4) | 24% | $10,076 | ||
2015 | $8.28 | 0.03 | 0.78 | 0.81 | (0.03) | $9.06 | 9.77% | 1.84% | 0.36% | 56% | $11,505 | ||
2014 | $6.92 | 0.05 | 1.35 | 1.40 | (0.04) | $8.28 | 20.36% | 1.85% | 0.64% | 35% | $10,101 | ||
2013 | $6.09 | 0.05 | 0.84 | 0.89 | (0.06) | $6.92 | 14.72% | 1.87% | 0.87% | 33% | $8,961 | ||
2012 | $5.80 | 0.05 | 0.28 | 0.33 | (0.04) | $6.09 | 5.85% | 1.87% | 0.84% | 56% | $9,232 | ||
2011 | $5.24 | 0.03 | 0.56 | 0.59 | (0.03) | $5.80 | 11.27% | 1.87% | 0.58% | 38% | $10,885 | ||
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | ||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Distributions From Net Investment Income | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
R Class | |||||||||||||
2015(3) | $9.07 | 0.03 | (0.91) | (0.88) | (0.04) | $8.15 | (9.75)% | 1.34%(4) | 0.80%(4) | 24% | $4,943 | ||
2015 | $8.28 | 0.07 | 0.79 | 0.86 | (0.07) | $9.07 | 10.37% | 1.34% | 0.86% | 56% | $5,842 | ||
2014 | $6.92 | 0.09 | 1.35 | 1.44 | (0.08) | $8.28 | 20.96% | 1.35% | 1.14% | 35% | $6,135 | ||
2013 | $6.10 | 0.08 | 0.83 | 0.91 | (0.09) | $6.92 | 15.10% | 1.37% | 1.37% | 33% | $5,792 | ||
2012 | $5.80 | 0.07 | 0.30 | 0.37 | (0.07) | $6.10 | 6.55% | 1.37% | 1.34% | 56% | $6,454 | ||
2011 | $5.24 | 0.05 | 0.56 | 0.61 | (0.05) | $5.80 | 11.83% | 1.37% | 1.08% | 38% | $7,058 | ||
R6 Class | |||||||||||||
2015(3) | $9.08 | 0.07 | (0.91) | (0.84) | (0.08) | $8.16 | (9.36)% | 0.49%(4) | 1.65%(4) | 24% | $34,353 | ||
2015 | $8.29 | 0.17 | 0.76 | 0.93 | (0.14) | $9.08 | 11.30% | 0.49% | 1.71% | 56% | $38,170 | ||
2014(5) | $7.65 | 0.10 | 0.65 | 0.75 | (0.11) | $8.29 | 9.90% | 0.50%(4) | 1.98%(4) | 35%(6) | $27 | ||
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | Six months ended September 30, 2015 (unaudited). |
(4) | Annualized. |
(5) | July 26, 2013 (commencement of sale) through March 31, 2014. |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2014. |
See Notes to Financial Statements.
22
Approval of Management Agreement |
At a meeting held on June 30, 2015, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, the Directors requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis and the information received was supplemental to the extensive information that the Board and its committees receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
• | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
• | the Fund’s investment performance compared to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the Advisor’s compliance policies, procedures, and regulatory experience; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | data comparing services provided and charges to other investment management clients of the Advisor; |
• | acquired fund fees and expenses; |
• | payments to intermediaries by the Fund and the Advisor; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
In keeping with their practice, the Directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The independent Directors also had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the
23
Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
• | constructing and designing the Fund |
• | portfolio research and security selection |
• | initial capitalization/funding |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services (except the independent Directors’ counsel) |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution (except Rule 12b-1 plans) |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one- and three-year periods and below its benchmark for the five- and ten-year periods reviewed by the Board. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board particularly noted the Advisor’s continual efforts to maintain effective business continuity plans and to address cybersecurity threats. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to
24
other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services. The Board also noted that economies of scale are shared with the Fund and its shareholders through management fee breakpoints that serve to reduce the effective management fee as the assets of the Fund grow.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent Directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges, and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was below the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
25
Payments to Intermediaries. The Directors also requested and received a description of payments made to intermediaries by the Fund and the Advisor. These payments include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Board reviewed such information and found the payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. Additionally, the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions, which the Board concluded is likely to benefit other clients of the Advisor as well as Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients and, where expressly provided, these other client assets may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent Directors, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
26
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its
website at americancentury.com and, upon request, by calling 1-800-345-2021.
27
Notes |
28
| ||
Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2015 American Century Proprietary Holdings, Inc. All rights reserved. CL-SAN-87377 1511 | ||
SEMIANNUAL REPORT |  |
SEPTEMBER 30, 2015 | |
AC Alternatives™ Market Neutral Value Fund
Table of Contents |
President’s Letter | 2 | |
Performance | 3 | |
Fund Characteristics | ||
Shareholder Fee Example | ||
Schedule of Investments | ||
Statement of Assets and Liabilities | ||
Statement of Operations | ||
Statement of Changes in Net Assets | ||
Notes to Financial Statements | ||
Financial Highlights | ||
Approval of Management Agreement | ||
Additional Information | ||
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
| Dear Investor: Thank you for reviewing this semiannual report for the six months ended September 30, 2015. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information. For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com. |
Jonathan Thomas | |
Divergence in Economic Growth and Monetary Policies, Combined With China Turmoil, Triggered Market Volatility
Divergence between the U.S. and the rest of the world, along with China’s struggles, lower commodity prices, capital market volatility, and risk-off trading, were key themes during the reporting period. Global divergence described not only the relatively stronger economic growth enjoyed by the U.S. compared with most of the world, but also the related contrast between the U.S. Federal Reserve’s (the Fed’s) expected unwinding of monetary stimulus versus the continuation and expansion of stimulus by other major central banks. Central bank moves—including the Fed’s delayed normalization of its extremely low interest rate positioning—helped trigger large market swings.
In 2014, the Fed ended its latest massive bond-buying program (quantitative easing, QE), leading to expectations that interest rates would rise. But while QE was halted in the U.S., other major central banks were starting or increasing QE as their economies faltered. This divergence helped fuel increased demand for the U.S. dollar and U.S. dollar-denominated assets, and put downward pressure on commodity prices, most notably crude oil. Low inflation also prevailed amid muted demand for commodities, particularly as China’s growth faltered, which had a broad dampening impact on global markets. In this environment, the U.S. dollar and U.S. government securities benefited from “flight to quality” capital flows. Conversely, emerging market, commodity-related, and value equity indices suffered significant declines.
We expect continued economic and monetary policy divergence between the U.S. and non-U.S. economies in the coming months, accompanied by further market volatility. This could present both challenges and opportunities for active investment managers. In this environment, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios to meet financial goals. We appreciate your continued trust in us.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of September 30, 2015 | |||||
Average Annual Returns | |||||
Ticker Symbol | 6 months(1) | 1 year | Since Inception | Inception Date | |
Investor Class | ACVVX | 1.82%(2) | 3.96%(2) | 3.43%(2) | 10/31/11 |
Barclays U.S. 1-3 Month Treasury Bill Index | — | 0.01% | 0.02% | 0.04% | — |
Institutional Class | ACVKX | 1.90%(2) | 4.13%(2) | 3.65%(2) | 10/31/11 |
A Class | ACVQX | 10/31/11 | |||
No sales charge* | 1.64%(2) | 3.70%(2) | 3.19%(2) | ||
With sales charge* | -4.19%(2) | -2.25%(2) | 1.65%(2) | ||
C Class | ACVHX | 10/31/11 | |||
No sales charge* | 1.29%(2) | 2.98%(2) | 2.41%(2) | ||
With sales charge* | 0.29%(2) | 2.98%(2) | 2.41%(2) | ||
R Class | ACVWX | 1.56%(2) | 3.43%(2) | 2.93%(2) | 10/31/11 |
* Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum initial sales charge and may be subject to a maximum CDSC of 1.00%. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied.
(1) | Total returns for periods less than one year are not annualized. |
(2) | Returns would have been lower if a portion of the management fee had not been waived. |
Total Annual Fund Operating Expenses | ||||
Investor Class | Institutional Class | A Class | C Class | R Class |
4.20% | 4.00% | 4.45% | 5.20% | 4.70% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
3
Fund Characteristics |
SEPTEMBER 30, 2015 | |
Top Ten Long Holdings | % of net assets |
iShares Russell 1000 Value ETF | 4.47% |
Brown-Forman Corp., Class B | 4.32% |
HEICO Corp., Class A | 3.65% |
Caterpillar, Inc. | 1.93% |
H&R Block, Inc. | 1.89% |
Precision Castparts Corp. | 1.79% |
Lennar Corp., Class B | 1.78% |
Cameron International Corp. | 1.78% |
Capitol Federal Financial, Inc. | 1.70% |
Edison International | 1.69% |
Top Ten Short Holdings | % of net assets |
iShares Russell 1000 Growth ETF | (4.63)% |
Brown-Forman Corp., Class A | (4.29)% |
HEICO Corp. | (3.65)% |
Utilities Select Sector SPDR Fund | (3.63)% |
Industrial Select Sector SPDR Fund | (3.11)% |
Technology Select Sector SPDR Fund | (2.33)% |
Consumer Discretionary Select Sector SPDR Fund | (2.19)% |
Deere & Co. | (1.92)% |
Schlumberger Ltd. | (1.78)% |
Lennar Corp., Class A | (1.77)% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 71.2% |
Exchange-Traded Funds | 4.6% |
Convertible Bonds | 2.2% |
Convertible Preferred Stocks | 1.0% |
Common Stocks Sold Short | (59.3)% |
Exchange-Traded Funds Sold Short | (18.0)% |
Temporary Cash Investments | 15.7% |
Other Assets and Liabilities* | 82.6% |
*Amount relates primarily to deposits with broker for securities sold short at period end.
4
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2015 to September 30, 2015.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
5
Beginning Account Value 4/1/15 | Ending Account Value 9/30/15 | Expenses Paid During Period(1)4/1/15 - 9/30/15 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class (after waiver) | $1,000 | $1,018.20 | $18.67 | 3.70% |
Investor Class (before waiver) | $1,000 | $1,018.20(2) | $20.18 | 4.00% |
Institutional Class (after waiver) | $1,000 | $1,019.00 | $17.67 | 3.50% |
Institutional Class (before waiver) | $1,000 | $1,019.00(2) | $19.18 | 3.80% |
A Class (after waiver) | $1,000 | $1,016.40 | $19.91 | 3.95% |
A Class (before waiver) | $1,000 | $1,016.40(2) | $21.42 | 4.25% |
C Class (after waiver) | $1,000 | $1,012.90 | $23.65 | 4.70% |
C Class (before waiver) | $1,000 | $1,012.90(2) | $25.16 | 5.00% |
R Class (after waiver) | $1,000 | $1,015.60 | $21.16 | 4.20% |
R Class (before waiver) | $1,000 | $1,015.60(2) | $22.68 | 4.50% |
Hypothetical | ||||
Investor Class (after waiver) | $1,000 | $1,006.50 | $18.56 | 3.70% |
Investor Class (before waiver) | $1,000 | $1,005.00 | $20.05 | 4.00% |
Institutional Class (after waiver) | $1,000 | $1,007.50 | $17.57 | 3.50% |
Institutional Class (before waiver) | $1,000 | $1,006.00 | $19.06 | 3.80% |
A Class (after waiver) | $1,000 | $1,005.25 | $19.80 | 3.95% |
A Class (before waiver) | $1,000 | $1,003.75 | $21.29 | 4.25% |
C Class (after waiver) | $1,000 | $1,001.50 | $23.52 | 4.70% |
C Class (before waiver) | $1,000 | $1,000.00 | $25.00 | 5.00% |
R Class (after waiver) | $1,000 | $1,004.00 | $21.04 | 4.20% |
R Class (before waiver) | $1,000 | $1,002.50 | $22.53 | 4.50% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
(2) | Ending account value assumes the return earned after waiver and would have been lower if a portion of the management fee had not been waived. |
6
Schedule of Investments |
SEPTEMBER 30, 2015 (UNAUDITED)
Shares | Value | ||||
COMMON STOCKS — 71.2% | |||||
Aerospace and Defense — 7.1% | |||||
BWX Technologies, Inc. | 4,990 | $ | 131,536 | ||
HEICO Corp., Class A(1) | 93,493 | 4,245,517 | |||
L-3 Communications Holdings, Inc.(1) | 9,314 | 973,499 | |||
Precision Castparts Corp.(1) | 9,043 | 2,077,267 | |||
Raytheon Co.(1) | 1,441 | 157,444 | |||
Textron, Inc.(1) | 10,820 | 407,265 | |||
Vectrus, Inc.(1)(2) | 12,990 | 286,300 | |||
8,278,828 | |||||
Air Freight and Logistics — 0.4% | |||||
United Parcel Service, Inc., Class B(1) | 4,667 | 460,586 | |||
Automobiles — 0.8% | |||||
Honda Motor Co., Ltd. ADR(1) | 22,550 | 674,245 | |||
Toyota Motor Corp. ADR | 1,970 | 231,042 | |||
905,287 | |||||
Banks — 0.6% | |||||
PNC Financial Services Group, Inc. (The)(1) | 7,750 | 691,300 | |||
Beverages — 5.4% | |||||
Brown-Forman Corp., Class B(1) | 51,820 | 5,021,358 | |||
PepsiCo, Inc.(1) | 13,609 | 1,283,329 | |||
6,304,687 | |||||
Chemicals — 1.4% | |||||
Air Products & Chemicals, Inc.(1) | 8,295 | 1,058,276 | |||
E.I. du Pont de Nemours & Co.(1) | 5,343 | 257,533 | |||
Potash Corp. of Saskatchewan, Inc.(1) | 13,377 | 274,897 | |||
1,590,706 | |||||
Commercial Services and Supplies — 1.8% | |||||
ADT Corp. (The)(1) | 11,075 | 331,142 | |||
Clean Harbors, Inc.(1)(2) | 11,340 | 498,620 | |||
Republic Services, Inc.(1) | 11,155 | 459,586 | |||
Tyco International plc(1) | 25,219 | 843,828 | |||
2,133,176 | |||||
Communications Equipment — 0.2% | |||||
Cisco Systems, Inc.(1) | 7,683 | 201,679 | |||
Containers and Packaging — 0.1% | |||||
Sonoco Products Co.(1) | 3,707 | 139,902 | |||
Diversified Consumer Services — 1.9% | |||||
H&R Block, Inc.(1) | 60,600 | 2,193,720 | |||
Diversified Telecommunication Services — 0.9% | |||||
CenturyLink, Inc.(1) | 10,920 | 274,310 | |||
Verizon Communications, Inc.(1) | 16,788 | 730,446 | |||
1,004,756 | |||||
Electric Utilities — 3.4% | |||||
Edison International(1) | 31,088 | 1,960,720 | |||
Westar Energy, Inc.(1) | 42,164 | 1,620,784 | |||
7
Shares | Value | ||||
Xcel Energy, Inc.(1) | 9,642 | $ | 341,424 | ||
3,922,928 | |||||
Electrical Equipment — 1.0% | |||||
Eaton Corp. plc(1) | 3,010 | 154,413 | |||
Emerson Electric Co.(1) | 4,814 | 212,634 | |||
Hubbell, Inc., Class A | 1,390 | 150,315 | |||
Rockwell Automation, Inc.(1) | 6,559 | 665,542 | |||
1,182,904 | |||||
Energy Equipment and Services — 3.3% | |||||
Cameron International Corp.(1)(2) | 33,710 | 2,067,097 | |||
FMC Technologies, Inc.(1)(2) | 32,270 | 1,000,370 | |||
Frank's International NV(1) | 48,590 | 744,885 | |||
3,812,352 | |||||
Food and Staples Retailing — 2.2% | |||||
Sysco Corp.(1) | 39,402 | 1,535,496 | |||
Wal-Mart Stores, Inc.(1) | 15,287 | 991,209 | |||
2,526,705 | |||||
Food Products — 1.4% | |||||
General Mills, Inc.(1) | 25,609 | 1,437,433 | |||
J.M. Smucker Co. (The) | 1,990 | 227,039 | |||
1,664,472 | |||||
Gas Utilities — 2.2% | |||||
AGL Resources, Inc. | 5,720 | 349,149 | |||
Atmos Energy Corp.(1) | 4,000 | 232,720 | |||
Laclede Group, Inc. (The)(1) | 3,997 | 217,956 | |||
ONE Gas, Inc.(1) | 37,607 | 1,704,725 | |||
2,504,550 | |||||
Health Care Equipment and Supplies — 1.5% | |||||
Medtronic plc(1) | 5,120 | 342,733 | |||
Zimmer Biomet Holdings, Inc.(1) | 15,070 | 1,415,525 | |||
1,758,258 | |||||
Health Care Providers and Services — 1.4% | |||||
Cardinal Health, Inc.(1) | 12,421 | 954,181 | |||
Quest Diagnostics, Inc.(1) | 10,387 | 638,489 | |||
1,592,670 | |||||
Hotels, Restaurants and Leisure — 0.5% | |||||
Carnival Corp.(1) | 7,045 | 350,137 | |||
McDonald's Corp.(1) | 2,370 | 233,516 | |||
583,653 | |||||
Household Durables — 1.8% | |||||
Lennar Corp., Class B(1) | 52,214 | 2,067,674 | |||
Household Products — 1.3% | |||||
Procter & Gamble Co. (The)(1) | 20,369 | 1,465,346 | |||
Industrial Conglomerates — 0.3% | |||||
Koninklijke Philips NV(1) | 15,167 | 355,818 | |||
Insurance — 4.3% | |||||
Crawford & Co., Class A(1) | 7,328 | 40,964 | |||
EMC Insurance Group, Inc.(1) | 9,990 | 231,868 | |||
Marsh & McLennan Cos., Inc.(1) | 23,782 | 1,241,896 | |||
MetLife, Inc.(1) | 32,248 | 1,520,493 | |||
8
Shares | Value | ||||
ProAssurance Corp.(1) | 26,139 | $ | 1,282,641 | ||
Reinsurance Group of America, Inc.(1) | 6,914 | 626,339 | |||
4,944,201 | |||||
Internet and Catalog Retail — 0.7% | |||||
Liberty TripAdvisor Holdings, Inc., Class A(1)(2) | 38,320 | 849,554 | |||
IT Services — 0.1% | |||||
Leidos Holdings, Inc. | 1,650 | 68,161 | |||
Leisure Products — 1.0% | |||||
Arctic Cat, Inc.(1) | 11,987 | 265,872 | |||
Mattel, Inc.(1) | 41,652 | 877,191 | |||
1,143,063 | |||||
Life Sciences Tools and Services — 0.6% | |||||
Waters Corp.(1)(2) | 6,212 | 734,321 | |||
Machinery — 3.1% | |||||
Caterpillar, Inc.(1) | 34,262 | 2,239,364 | |||
Parker-Hannifin Corp.(1) | 7,981 | 776,551 | |||
Pentair plc(1) | 6,570 | 335,333 | |||
Stanley Black & Decker, Inc.(1) | 2,880 | 279,303 | |||
3,630,551 | |||||
Media — 1.0% | |||||
Discovery Communications, Inc., Class C(1)(2) | 47,120 | 1,144,545 | |||
Multi-Utilities — 2.4% | |||||
Ameren Corp. | 10,460 | 442,144 | |||
NorthWestern Corp.(1) | 11,837 | 637,186 | |||
PG&E Corp.(1) | 33,416 | 1,764,365 | |||
2,843,695 | |||||
Multiline Retail — 1.2% | |||||
Dollar General Corp.(1) | 20,090 | 1,455,320 | |||
Oil, Gas and Consumable Fuels — 4.0% | |||||
Chevron Corp.(1) | 13,030 | 1,027,806 | |||
Cimarex Energy Co.(1) | 2,274 | 233,039 | |||
Devon Energy Corp.(1) | 12,520 | 464,367 | |||
EQT Corp.(1) | 10,028 | 649,514 | |||
EQT GP Holdings LP(1)(2) | 6,829 | 155,291 | |||
Imperial Oil Ltd.(1) | 20,037 | 633,370 | |||
Noble Energy, Inc.(1) | 3,438 | 103,759 | |||
Occidental Petroleum Corp.(1) | 8,773 | 580,334 | |||
Shell Midstream Partners LP | 14,390 | 423,498 | |||
Williams Partners LP(1) | 11,090 | 353,993 | |||
4,624,971 | |||||
Pharmaceuticals — 3.0% | |||||
Johnson & Johnson | 3,720 | 347,262 | |||
Merck & Co., Inc.(1) | 26,653 | 1,316,392 | |||
Pfizer, Inc.(1) | 54,668 | 1,717,122 | |||
Teva Pharmaceutical Industries Ltd. ADR | 2,050 | 115,743 | |||
3,496,519 | |||||
Real Estate Investment Trusts (REITs) — 0.9% | |||||
Piedmont Office Realty Trust, Inc., Class A(1) | 25,711 | 459,970 | |||
Weyerhaeuser Co.(1) | 20,552 | 561,891 | |||
1,021,861 | |||||
9
Shares | Value | ||||
Road and Rail — 0.3% | |||||
Heartland Express, Inc.(1) | 18,860 | $ | 376,068 | ||
Semiconductors and Semiconductor Equipment — 1.4% | |||||
Applied Materials, Inc.(1) | 35,296 | 518,498 | |||
KLA-Tencor Corp.(1) | 11,990 | 599,500 | |||
Lam Research Corp.(1) | 8,470 | 553,345 | |||
1,671,343 | |||||
Software — 0.5% | |||||
Microsoft Corp.(1) | 11,990 | 530,677 | |||
Specialty Retail — 1.9% | |||||
Advance Auto Parts, Inc.(1) | 5,916 | 1,121,260 | |||
Bed Bath & Beyond, Inc.(1)(2) | 3,620 | 206,412 | |||
CST Brands, Inc.(1) | 27,376 | 921,476 | |||
2,249,148 | |||||
Technology Hardware, Storage and Peripherals — 0.7% | |||||
SanDisk Corp.(1) | 15,980 | 868,193 | |||
Textiles, Apparel and Luxury Goods — 0.1% | |||||
Ralph Lauren Corp. | 1,110 | 131,158 | |||
Thrifts and Mortgage Finance — 1.7% | |||||
Capitol Federal Financial, Inc.(1) | 162,843 | 1,973,657 | |||
Trading Companies and Distributors — 1.3% | |||||
Rush Enterprises, Inc., Class B(1)(2) | 66,484 | 1,549,742 | |||
Wireless Telecommunication Services — 0.1% | |||||
Telephone & Data Systems, Inc.(1) | 5,592 | 139,576 | |||
TOTAL COMMON STOCKS (Cost $83,102,009) | 82,788,281 | ||||
EXCHANGE-TRADED FUNDS — 4.6% | |||||
iShares Russell 1000 Value ETF(1) | 55,704 | 5,196,069 | |||
iShares Silver Trust(1)(2) | 10,629 | 147,424 | |||
TOTAL EXCHANGE-TRADED FUNDS (Cost $5,151,442) | 5,343,493 | ||||
CONVERTIBLE BONDS — 2.2% | |||||
Capital Markets — 1.4% | |||||
Janus Capital Group, Inc., 0.75%, 7/15/18 | 1,191,000 | 1,588,496 | |||
Semiconductors and Semiconductor Equipment — 0.8% | |||||
Intel Corp., 2.95%, 12/15/35 | 793,000 | 964,982 | |||
TOTAL CONVERTIBLE BONDS (Cost $2,665,418) | 2,553,478 | ||||
CONVERTIBLE PREFERRED STOCKS — 1.0% | |||||
Food Products — 1.0% | |||||
Tyson Foods, Inc., 4.75%, 7/15/17(1) (Cost $1,161,180) | 23,197 | 1,189,078 | |||
TEMPORARY CASH INVESTMENTS — 15.7% | |||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.25%, 11/15/24, valued at $13,503,263), at 0.01%, dated 9/30/15, due 10/1/15 (Delivery value $13,238,004) | 13,238,000 | ||||
State Street Institutional Liquid Reserves Fund, Premier Class | 4,944,312 | 4,944,312 | |||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $18,182,312) | 18,182,312 | ||||
TOTAL INVESTMENT SECURITIES BEFORE SECURITIES SOLD SHORT — 94.7% (Cost $110,262,361) | 110,056,642 | ||||
10
Shares | Value | ||||
SECURITIES SOLD SHORT — (77.3)% | |||||
COMMON STOCKS SOLD SHORT — (59.3)% | |||||
Aerospace and Defense — (6.5)% | |||||
General Dynamics Corp. | (2,950 | ) | $ | (406,953 | ) |
HEICO Corp. | (86,899 | ) | (4,247,623 | ) | |
Honeywell International, Inc. | (16,130 | ) | (1,527,350 | ) | |
Lockheed Martin Corp. | (4,594 | ) | (952,382 | ) | |
Northrop Grumman Corp. | (2,410 | ) | (399,939 | ) | |
(7,534,247 | ) | ||||
Air Freight and Logistics — (0.2)% | |||||
FedEx Corp. | (1,790 | ) | (257,724 | ) | |
Automobiles — (0.8)% | |||||
General Motors Co. | (8,500 | ) | (255,170 | ) | |
Tesla Motors, Inc. | (1,690 | ) | (419,796 | ) | |
Volkswagen AG ADR | (9,620 | ) | (231,842 | ) | |
(906,808 | ) | ||||
Banks — (2.3)% | |||||
JPMorgan Chase & Co. | (11,404 | ) | (695,302 | ) | |
People's United Financial, Inc. | (125,381 | ) | (1,972,243 | ) | |
(2,667,545 | ) | ||||
Beverages — (5.4)% | |||||
Brown-Forman Corp., Class A | (46,650 | ) | (4,991,084 | ) | |
Coca-Cola Co. (The) | (31,978 | ) | (1,282,957 | ) | |
(6,274,041 | ) | ||||
Biotechnology — (1.5)% | |||||
AbbVie, Inc. | (31,989 | ) | (1,740,521 | ) | |
Capital Markets — (1.3)% | |||||
Janus Capital Group, Inc. | (114,490 | ) | (1,557,064 | ) | |
Chemicals — (1.4)% | |||||
Dow Chemical Co. (The) | (6,233 | ) | (264,279 | ) | |
Mosaic Co. (The) | (8,880 | ) | (276,257 | ) | |
Praxair, Inc. | (10,380 | ) | (1,057,307 | ) | |
(1,597,843 | ) | ||||
Commercial Services and Supplies — (1.3)% | |||||
Cintas Corp. | (11,780 | ) | (1,010,135 | ) | |
Waste Management, Inc. | (9,246 | ) | (460,543 | ) | |
(1,470,678 | ) | ||||
Containers and Packaging — (0.1)% | |||||
Berry Plastics Group, Inc. | (4,990 | ) | (150,049 | ) | |
Diversified Financial Services — (1.6)% | |||||
Berkshire Hathaway, Inc., Class B | (14,764 | ) | (1,925,226 | ) | |
Diversified Telecommunication Services — (0.6)% | |||||
AT&T, Inc. | (22,824 | ) | (743,606 | ) | |
Electric Utilities — (4.4)% | |||||
American Electric Power Co., Inc. | (30,920 | ) | (1,758,111 | ) | |
Duke Energy Corp. | (27,358 | ) | (1,968,135 | ) | |
Southern Co. (The) | (30,000 | ) | (1,341,000 | ) | |
(5,067,246 | ) | ||||
Electrical Equipment — (0.1)% | |||||
Hubbell, Inc., Class B | (1,830 | ) | (155,458 | ) | |
11
Shares | Value | ||||
Energy Equipment and Services — (3.3)% | |||||
National Oilwell Varco, Inc. | (46,492 | ) | $ | (1,750,424 | ) |
Schlumberger Ltd. | (29,990 | ) | (2,068,410 | ) | |
(3,818,834 | ) | ||||
Food and Staples Retailing — (0.1)% | |||||
Whole Foods Market, Inc. | (1,983 | ) | (62,762 | ) | |
Food Products — (2.5)% | |||||
Kraft Heinz Co. (The) | (20,271 | ) | (1,430,727 | ) | |
Nestle SA ADR | (2,999 | ) | (225,645 | ) | |
Tyson Foods, Inc., Class A | (28,001 | ) | (1,206,843 | ) | |
(2,863,215 | ) | ||||
Health Care Equipment and Supplies — (1.5)% | |||||
Stryker Corp. | (18,470 | ) | (1,738,027 | ) | |
Health Care Providers and Services — (1.4)% | |||||
AmerisourceBergen Corp. | (6,790 | ) | (644,982 | ) | |
Express Scripts Holding Co. | (3,900 | ) | (315,744 | ) | |
Laboratory Corp. of America Holdings | (5,799 | ) | (629,018 | ) | |
(1,589,744 | ) | ||||
Hotels, Restaurants and Leisure — (0.5)% | |||||
Chipotle Mexican Grill, Inc. | (330 | ) | (237,682 | ) | |
Royal Caribbean Cruises Ltd. | (3,895 | ) | (347,006 | ) | |
(584,688 | ) | ||||
Household Durables — (1.8)% | |||||
Lennar Corp., Class A | (42,760 | ) | (2,058,039 | ) | |
Household Products — (1.3)% | |||||
Kimberly-Clark Corp. | (13,597 | ) | (1,482,617 | ) | |
Industrial Conglomerates — (0.8)% | |||||
General Electric Co. | (39,265 | ) | (990,263 | ) | |
Insurance — (2.6)% | |||||
Aon plc | (13,990 | ) | (1,239,654 | ) | |
Crawford & Co., Class B | (4,968 | ) | (27,870 | ) | |
Prudential Financial, Inc. | (19,913 | ) | (1,517,570 | ) | |
Travelers Cos., Inc. (The) | (2,390 | ) | (237,877 | ) | |
(3,022,971 | ) | ||||
Internet and Catalog Retail — (0.7)% | |||||
TripAdvisor, Inc. | (13,610 | ) | (857,702 | ) | |
Leisure Products — (0.7)% | |||||
Hasbro, Inc. | (11,994 | ) | (865,247 | ) | |
Life Sciences Tools and Services — (0.6)% | |||||
Thermo Fisher Scientific, Inc. | (6,090 | ) | (744,685 | ) | |
Machinery — (2.2)% | |||||
Deere & Co. | (30,230 | ) | (2,237,020 | ) | |
Snap-on, Inc. | (1,850 | ) | (279,239 | ) | |
(2,516,259 | ) | ||||
Media — (1.8)% | |||||
Discovery Communications, Inc., Class A | (44,460 | ) | (1,157,294 | ) | |
Walt Disney Co. (The) | (9,390 | ) | (959,658 | ) | |
(2,116,952 | ) | ||||
Multiline Retail — (2.2)% | |||||
Dollar Tree, Inc. | (21,690 | ) | (1,445,855 | ) | |
12
Shares | Value | ||||
Kohl's Corp. | (3,920 | ) | $ | (181,535 | ) |
Target Corp. | (11,710 | ) | (921,109 | ) | |
(2,548,499 | ) | ||||
Oil, Gas and Consumable Fuels — (2.7)% | |||||
Apache Corp. | (18,927 | ) | (741,181 | ) | |
ConocoPhillips | (11,983 | ) | (574,705 | ) | |
EQT Midstream Partners LP | (2,150 | ) | (142,609 | ) | |
Exxon Mobil Corp. | (8,490 | ) | (631,232 | ) | |
Royal Dutch Shell plc, Class B ADR | (21,790 | ) | (1,034,589 | ) | |
(3,124,316 | ) | ||||
Pharmaceuticals — (1.5)% | |||||
Sanofi ADR | (27,820 | ) | (1,320,615 | ) | |
Valeant Pharmaceuticals International, Inc. | (2,670 | ) | (476,275 | ) | |
(1,796,890 | ) | ||||
Real Estate Investment Trusts (REITs) — (0.4)% | |||||
Boston Properties, Inc. | (3,900 | ) | (461,760 | ) | |
Road and Rail — (0.5)% | |||||
Union Pacific Corp. | (2,391 | ) | (211,389 | ) | |
Werner Enterprises, Inc. | (14,983 | ) | (376,073 | ) | |
(587,462 | ) | ||||
Semiconductors and Semiconductor Equipment — (0.8)% | |||||
Intel Corp. | (29,990 | ) | (903,899 | ) | |
Technology Hardware, Storage and Peripherals — (0.5)% | |||||
Hewlett-Packard Co. | (20,940 | ) | (536,273 | ) | |
Trading Companies and Distributors — (1.3)% | |||||
Rush Enterprises, Inc., Class A | (63,356 | ) | (1,533,215 | ) | |
Wireless Telecommunication Services — (0.1)% | |||||
United States Cellular Corp. | (4,064 | ) | (143,988 | ) | |
TOTAL COMMON STOCKS SOLD SHORT (Proceeds $74,378,494) | (68,996,363 | ) | |||
EXCHANGE-TRADED FUNDS SOLD SHORT — (18.0)% | |||||
Alerian MLP ETF | (49,630 | ) | (619,382 | ) | |
Consumer Discretionary Select Sector SPDR Fund | (34,330 | ) | (2,549,346 | ) | |
Industrial Select Sector SPDR Fund | (72,484 | ) | (3,616,227 | ) | |
iShares Russell 1000 Growth ETF | (57,900 | ) | (5,384,700 | ) | |
iShares U.S. Oil & Gas Exploration & Production ETF | (9,160 | ) | (507,922 | ) | |
iShares U.S. Telecommunications ETF | (9,963 | ) | (269,001 | ) | |
SPDR Gold Shares | (1,370 | ) | (146,398 | ) | |
Technology Select Sector SPDR Fund | (68,620 | ) | (2,710,490 | ) | |
United States Natural Gas Fund LP | (11,990 | ) | (139,204 | ) | |
Utilities Select Sector SPDR Fund | (97,620 | ) | (4,225,970 | ) | |
Vanguard REIT ETF | (9,393 | ) | (709,547 | ) | |
TOTAL EXCHANGE-TRADED FUNDS SOLD SHORT (Proceeds $21,948,149) | (20,878,187 | ) | |||
TOTAL SECURITIES SOLD SHORT — (77.3)% (Proceeds $96,326,643) | (89,874,550 | ) | |||
OTHER ASSETS AND LIABILITIES(3) — 82.6% | 96,096,467 | ||||
TOTAL NET ASSETS — 100.0% | $ | 116,278,559 | |||
13
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||
USD | 36,879 | CAD | 49,146 | JPMorgan Chase Bank N.A. | 10/30/15 | $ | 57 | |||
USD | 700,030 | CAD | 932,384 | JPMorgan Chase Bank N.A. | 10/30/15 | 1,454 | ||||
USD | 19,681 | CAD | 26,311 | JPMorgan Chase Bank N.A. | 10/30/15 | (32 | ) | |||
USD | 29,385 | CAD | 39,324 | JPMorgan Chase Bank N.A. | 10/30/15 | (78 | ) | |||
CAD | 25,129 | USD | 18,748 | JPMorgan Chase Bank N.A. | 10/30/15 | 79 | ||||
USD | 848,900 | JPY | 102,565,755 | Credit Suisse AG | 10/30/15 | (6,349 | ) | |||
JPY | 4,816,534 | USD | 40,191 | Credit Suisse AG | 10/30/15 | (28 | ) | |||
JPY | 5,238,749 | USD | 43,695 | Credit Suisse AG | 10/30/15 | (12 | ) | |||
$ | (4,909 | ) | ||||||||
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
CAD | - | Canadian Dollar |
JPY | - | Japanese Yen |
USD | - | United States Dollar |
(1) | Security, or a portion thereof, has been pledged at the custodian bank or with a broker for collateral requirements on securities sold short. At the period end, the aggregate value of securities pledged was $67,950,005. |
(2) | Non-income producing. |
(3) | Amount relates primarily to deposits with broker for securities sold short at period end. |
See Notes to Financial Statements.
14
Statement of Assets and Liabilities |
SEPTEMBER 30, 2015 (UNAUDITED) | |||
Assets | |||
Investment securities, at value (cost of $110,262,361) | $ | 110,056,642 | |
Deposits with broker for securities sold short | 94,879,667 | ||
Receivable for investments sold | 9,438,177 | ||
Receivable for capital shares sold | 1,213,932 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 1,590 | ||
Dividends and interest receivable | 156,946 | ||
215,746,954 | |||
Liabilities | |||
Securities sold short, at value (proceeds of $96,326,643) | 89,874,550 | ||
Payable for investments purchased | 9,319,825 | ||
Payable for capital shares redeemed | 25,427 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 6,499 | ||
Accrued management fees | 139,097 | ||
Distribution and service fees payable | 11,671 | ||
Dividend expense payable on securities sold short | 91,326 | ||
99,468,395 | |||
Net Assets | $ | 116,278,559 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 113,243,385 | |
Accumulated net investment loss | (1,201,263 | ) | |
Accumulated net realized loss | (2,005,025 | ) | |
Net unrealized appreciation | 6,241,462 | ||
$ | 116,278,559 | ||
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $77,603,379 | 7,302,923 | $10.63 | |||
Institutional Class, $0.01 Par Value | $7,140,487 | 666,178 | $10.72 | |||
A Class, $0.01 Par Value | $20,713,215 | 1,968,208 | $10.52* | |||
C Class, $0.01 Par Value | $10,788,344 | 1,057,193 | $10.20 | |||
R Class, $0.01 Par Value | $33,134 | 3,181 | $10.42 | |||
*Maximum offering price $11.16 (net asset value divided by 0.9425).
See Notes to Financial Statements.
15
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $11,479) | $ | 763,191 | |
Interest | 28,878 | ||
792,069 | |||
Expenses: | |||
Dividend expense on securities sold short | 776,847 | ||
Broker fees and charges on securities sold short | 127,764 | ||
Management fees | 811,917 | ||
Distribution and service fees: | |||
A Class | 14,736 | ||
C Class | 43,152 | ||
R Class | 211 | ||
Directors' fees and expenses | 1,405 | ||
Other expenses | 242 | ||
1,776,274 | |||
Fees waived | (129,237 | ) | |
1,647,037 | |||
Net investment income (loss) | (854,968 | ) | |
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | (279,642 | ) | |
Securities sold short transactions | 677,976 | ||
Foreign currency transactions | 86,508 | ||
484,842 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (5,386,151 | ) | |
Securities sold short | 7,188,362 | ||
Translation of assets and liabilities in foreign currencies | (42,117 | ) | |
1,760,094 | |||
Net realized and unrealized gain (loss) | 2,244,936 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 1,389,968 | |
See Notes to Financial Statements.
16
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) AND YEAR ENDED MARCH 31, 2015 | ||||||
Increase (Decrease) in Net Assets | September 30, 2015 | March 31, 2015 | ||||
Operations | ||||||
Net investment income (loss) | $ | (854,968 | ) | $ | (1,537,661 | ) |
Net realized gain (loss) | 484,842 | 973,583 | ||||
Change in net unrealized appreciation (depreciation) | 1,760,094 | 3,395,433 | ||||
Net increase (decrease) in net assets resulting from operations | 1,389,968 | 2,831,355 | ||||
Distributions to Shareholders | ||||||
From net realized gains: | ||||||
Investor Class | — | (932,471 | ) | |||
Institutional Class | — | (103,125 | ) | |||
A Class | — | (252,822 | ) | |||
C Class | — | (144,211 | ) | |||
R Class | — | (8,359 | ) | |||
Decrease in net assets from distributions | — | (1,440,988 | ) | |||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 41,705,159 | (4,496,697 | ) | |||
Net increase (decrease) in net assets | 43,095,127 | (3,106,330 | ) | |||
Net Assets | ||||||
Beginning of period | 73,183,432 | 76,289,762 | ||||
End of period | $ | 116,278,559 | $ | 73,183,432 | ||
Accumulated net investment loss | $ | (1,201,263 | ) | $ | (346,295 | ) |
See Notes to Financial Statements.
17
Notes to Financial Statements |
SEPTEMBER 30, 2015 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. AC Alternatives Market Neutral Value Fund (formerly Market Neutral Value Fund) (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth, independent of equity market conditions.
The fund offers the Investor Class, the Institutional Class, the A Class, the C Class and the R Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class is made available to institutional shareholders or through financial intermediaries whose clients do not require the same level of shareholder and administrative services as shareholders of other classes. As a result, the Institutional Class is charged a lower unified management fee.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Fixed income securities maturing in greater than 60 days at the time of purchase are valued at the evaluated mean as provided by independent pricing services or at the mean of the most recent bid and asked prices as provided by investment dealers. Fixed income securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors: trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
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If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Securities Sold Short — The fund enters into short sales, which is selling securities it does not own, as part of its normal investment activities. Upon selling a security short, the fund will segregate cash, cash equivalents or other appropriate liquid securities in at least an amount equal to the current market value of the securities sold short until the fund replaces the borrowed security. Interest earned on segregated cash for securities sold short is reflected as interest income. The fund is required to pay any dividends or interest due on securities sold short. Such dividends and interest are recorded as an expense. The fund may pay fees or charges to the broker on the assets borrowed for securities sold short. These fees are calculated daily based upon the value of each security sold short and a rate that is dependent on the availability of such security. Liabilities for securities sold short are valued daily and changes in value are recorded as change in net unrealized appreciation (depreciation) on securities sold short. The fund records realized gain (loss) on a security sold short when it is terminated by the fund and includes as a component of net realized gain (loss) on securities sold short transactions.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively. Net realized and unrealized foreign currency exchange gains or losses related to securities sold short are a component of net realized gain (loss) on securities sold short transactions and change in net unrealized appreciation (depreciation) on securities sold short, respectively.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover certain types of investments, including, but not limited to, futures contracts and short sales. American Century Investment Management, Inc. (ACIM) (the investment advisor) monitors, on a daily basis, the securities segregated to ensure the fund designates a sufficient amount of liquid assets, marked-to-market daily. The fund may also receive assets or be required to pledge assets at the custodian bank or with a broker for margin requirements on futures contracts and short sales.
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Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc. (ACIS), and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, expenses on securities sold short, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The annual management fee is 1.90% for the Investor Class, A Class, C Class and R Class and 1.70% for the Institutional Class. During the six months ended September 30, 2015, the investment advisor voluntarily agreed to waive 0.30% of the fund's management fee. The investment advisor expects the fee waiver to continue until July 31, 2016, and cannot terminate it prior to such date without the approval of the Board of Directors. The total amount of the waiver for each class for the six months ended September 30, 2015 was $88,602, $9,880, $17,683, $12,945 and $127 for the Investor Class, Institutional Class, A Class, C Class and R Class, respectively. The effective annual management fee after waiver for each class for the six months ended September 30, 2015 was 1.60% for the Investor Class, A Class, C Class and R Class and 1.40% for the Institutional Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, C Class and R Class (collectively the plans),
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pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the C Class will pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the six months ended September 30, 2015 are detailed in the Statement of Operations.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
Acquired Fund Fees and Expenses — The fund may invest in mutual funds, exchange-traded funds, and business development companies (the acquired funds). The fund will indirectly realize its pro rata share of the fees and expenses of the acquired funds in which it invests. These indirect fees and expenses are not paid out of the fund's assets but are reflected in the return realized by the fund on its investment in the acquired funds.
4. Investment Transactions
Purchases and sales of investment securities and securities sold short, excluding short-term investments, for the six months ended September 30, 2015 were $243,624,179 and $244,044,098, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2015 | Year ended March 31, 2015 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||
Sold | 3,384,717 | $ | 35,757,720 | 1,358,179 | $ | 14,061,175 | ||||
Issued in reinvestment of distributions | — | — | 85,909 | 882,278 | ||||||
Redeemed | (818,696 | ) | (8,619,132 | ) | (1,566,788 | ) | (16,203,149 | ) | ||
2,566,021 | 27,138,588 | (122,700 | ) | (1,259,696 | ) | |||||
Institutional Class/Shares Authorized | 20,000,000 | 20,000,000 | ||||||||
Sold | 130,844 | 1,392,547 | 336,272 | 3,506,275 | ||||||
Issued in reinvestment of distributions | — | — | 9,974 | 103,125 | ||||||
Redeemed | (36,122 | ) | (384,207 | ) | (330,897 | ) | (3,422,772 | ) | ||
94,722 | 1,008,340 | 15,349 | 186,628 | |||||||
A Class/Shares Authorized | 10,000,000 | 5,000,000 | ||||||||
Sold | 1,586,084 | 16,628,826 | 760,742 | 7,849,870 | ||||||
Issued in reinvestment of distributions | — | — | 24,790 | 252,614 | ||||||
Redeemed | (517,036 | ) | (5,385,815 | ) | (1,228,595 | ) | (12,561,119 | ) | ||
1,069,048 | 11,243,011 | (443,063 | ) | (4,458,635 | ) | |||||
C Class/Shares Authorized | 10,000,000 | 5,000,000 | ||||||||
Sold | 321,929 | 3,270,740 | 328,117 | 3,292,359 | ||||||
Issued in reinvestment of distributions | — | — | 14,469 | 143,820 | ||||||
Redeemed | (53,383 | ) | (541,061 | ) | (240,538 | ) | (2,414,029 | ) | ||
268,546 | 2,729,679 | 102,048 | 1,022,150 | |||||||
R Class/Shares Authorized | 10,000,000 | 5,000,000 | ||||||||
Sold | 187 | 1,929 | 440 | 4,497 | ||||||
Issued in reinvestment of distributions | — | — | 827 | 8,359 | ||||||
Redeemed | (40,548 | ) | (416,388 | ) | — | — | ||||
(40,361 | ) | (414,459 | ) | 1,267 | 12,856 | |||||
Net increase (decrease) | 3,957,976 | $ | 41,705,159 | (447,099 | ) | $ | (4,496,697 | ) | ||
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6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments. There were no significant transfers between levels during the period.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 82,788,281 | — | — | ||||
Exchange-Traded Funds | 5,343,493 | — | — | |||||
Convertible Bonds | — | $ | 2,553,478 | — | ||||
Convertible Preferred Stocks | — | 1,189,078 | — | |||||
Temporary Cash Investments | 4,944,312 | 13,238,000 | — | |||||
$ | 93,076,086 | $ | 16,980,556 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 1,590 | — | ||||
Liabilities | ||||||||
Securities Sold Short | ||||||||
Common Stocks | $ | (68,996,363 | ) | — | — | |||
Exchange-Traded Funds | (20,878,187 | ) | — | — | ||||
$ | (89,874,550 | ) | — | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | (6,499 | ) | — | |||
7. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, respectively. A fund bears the risk of an unfavorable change in the foreign
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currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $2,597,739.
The value of foreign currency risk derivative instruments as of September 30, 2015, is disclosed on the Statement of Assets and Liabilities as an asset of $1,590 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $6,499 in unrealized depreciation on forward foreign currency exchange contracts. For the six months ended September 30, 2015, the effect of foreign currency risk derivative instruments on the Statement of Operations was $86,608 in net realized gain (loss) on foreign currency transactions and $(42,132) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
8. Risk Factors
The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
The fund is subject to short sales risk. If the market price of a security increases after the fund borrows the security, the fund may suffer a loss when it replaces the borrowed security at the higher price. Any loss will be increased by the amount of compensation, interest or dividends, and transaction costs the fund must pay to the lender of the borrowed security.
9. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of September 30, 2015, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $ | 114,415,449 | |
Gross tax appreciation of investments | $ | 1,538,793 | |
Gross tax depreciation of investments | (5,897,600 | ) | |
Net tax appreciation (depreciation) of investments | (4,358,807 | ) | |
Net tax appreciation (depreciation) on securities sold short | 4,799,559 | ||
Net tax appreciation (depreciation) | $ | 440,752 | |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
As of March 31, 2015, the fund had late-year ordinary loss deferrals of $(346,295), which represent certain qualified losses that the fund has elected to treat as having been incurred in the following fiscal year for federal income tax purposes.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | ||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | |||||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Distributions From Net Realized Gains | Net Asset Value, End of Period | Total Return(2) | Operating Expenses(3) | Operating Expenses (before expense waiver)(3) | Operating Expenses (excluding expenses on securities sold short)(3) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | ||||||||||||||||
2015(4) | $10.44 | (0.10) | 0.29 | 0.19 | — | $10.63 | 1.82% | 3.70%(5) | 4.00%(5) | 1.60%(5) | (1.86)%(5) | (2.16)%(5) | 359% | $77,603 | ||
2015 | $10.22 | (0.20) | 0.62 | 0.42 | (0.20) | $10.44 | 4.10% | 3.88% | 4.18% | 1.60% | (1.95)% | (2.25)% | 447% | $49,465 | ||
2014 | $10.25 | (0.04) | 0.21 | 0.17 | (0.20) | $10.22 | 1.69% | 4.09% | 4.39% | 1.60% | (0.35)% | (0.65)% | 521% | $49,665 | ||
2013 | $10.32 | (0.25) | 0.52 | 0.27 | (0.34) | $10.25 | 2.61% | 4.74% | 5.04% | 1.60% | (2.46)% | (2.76)% | 588% | $8,214 | ||
2012(6) | $10.00 | (0.11) | 0.43 | 0.32 | — | $10.32 | 3.20% | 4.92%(5) | 5.22%(5) | 1.61%(5) | (2.49)%(5) | (2.79)%(5) | 292% | $3,118 | ||
Institutional Class | ||||||||||||||||
2015(4) | $10.52 | (0.09) | 0.29 | 0.20 | — | $10.72 | 1.90% | 3.50%(5) | 3.80%(5) | 1.40%(5) | (1.66)%(5) | (1.96)%(5) | 359% | $7,140 | ||
2015 | $10.28 | (0.18) | 0.62 | 0.44 | (0.20) | $10.52 | 4.28% | 3.68% | 3.98% | 1.40% | (1.75)% | (2.05)% | 447% | $6,013 | ||
2014 | $10.28 | 0.11 | 0.09 | 0.20 | (0.20) | $10.28 | 1.98% | 3.89% | 4.19% | 1.40% | (0.15)% | (0.45)% | 521% | $5,714 | ||
2013 | $10.33 | (0.24) | 0.53 | 0.29 | (0.34) | $10.28 | 2.81% | 4.54% | 4.84% | 1.40% | (2.26)% | (2.56)% | 588% | $425 | ||
2012(6) | $10.00 | (0.09) | 0.42 | 0.33 | — | $10.33 | 3.30% | 4.72%(5) | 5.02%(5) | 1.41%(5) | (2.29)%(5) | (2.59)%(5) | 292% | $413 | ||
A Class | ||||||||||||||||
2015(4) | $10.36 | (0.11) | 0.27 | 0.16 | — | $10.52 | 1.64% | 3.95%(5) | 4.25%(5) | 1.85%(5) | (2.11)%(5) | (2.41)%(5) | 359% | $20,713 | ||
2015 | $10.16 | (0.23) | 0.63 | 0.40 | (0.20) | $10.36 | 3.93% | 4.13% | 4.43% | 1.85% | (2.20)% | (2.50)% | 447% | $9,311 | ||
2014 | $10.21 | (0.07) | 0.22 | 0.15 | (0.20) | $10.16 | 1.50% | 4.34% | 4.64% | 1.85% | (0.60)% | (0.90)% | 521% | $13,640 | ||
2013 | $10.31 | (0.28) | 0.52 | 0.24 | (0.34) | $10.21 | 2.32% | 4.99% | 5.29% | 1.85% | (2.71)% | (3.01)% | 588% | $2,265 | ||
2012(6) | $10.00 | (0.11) | 0.42 | 0.31 | — | $10.31 | 3.10% | 5.17%(5) | 5.47%(5) | 1.86%(5) | (2.74)%(5) | (3.04)%(5) | 292% | $432 | ||
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | ||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | |||||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Distributions From Net Realized Gains | Net Asset Value, End of Period | Total Return(2) | Operating Expenses(3) | Operating Expenses (before expense waiver)(3) | Operating Expenses (excluding expenses on securities sold short)(3) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
C Class | ||||||||||||||||
2015(4) | $10.08 | (0.15) | 0.27 | 0.12 | — | $10.20 | 1.29% | 4.70%(5) | 5.00%(5) | 2.60%(5) | (2.86)%(5) | (3.16)%(5) | 359% | $10,788 | ||
2015 | $9.97 | (0.30) | 0.61 | 0.31 | (0.20) | $10.08 | 3.10% | 4.88% | 5.18% | 2.60% | (2.95)% | (3.25)% | 447% | $7,948 | ||
2014 | $10.10 | (0.14) | 0.21 | 0.07 | (0.20) | $9.97 | 0.72% | 5.09% | 5.39% | 2.60% | (1.35)% | (1.65)% | 521% | $6,844 | ||
2013 | $10.28 | (0.35) | 0.51 | 0.16 | (0.34) | $10.10 | 1.54% | 5.74% | 6.04% | 2.60% | (3.46)% | (3.76)% | 588% | $1,111 | ||
2012(6) | $10.00 | (0.14) | 0.42 | 0.28 | — | $10.28 | 2.80% | 5.92%(5) | 6.22%(5) | 2.61%(5) | (3.49)%(5) | (3.79)%(5) | 292% | $411 | ||
R Class | ||||||||||||||||
2015(4) | $10.26 | (0.09) | 0.25 | 0.16 | — | $10.42 | 1.56% | 4.20%(5) | 4.50%(5) | 2.10%(5) | (2.36)%(5) | (2.66)%(5) | 359% | $33 | ||
2015 | $10.10 | (0.25) | 0.61 | 0.36 | (0.20) | $10.26 | 3.56% | 4.38% | 4.68% | 2.10% | (2.45)% | (2.75)% | 447% | $447 | ||
2014 | $10.17 | (0.18) | 0.31 | 0.13 | (0.20) | $10.10 | 1.21% | 4.59% | 4.89% | 2.10% | (0.85)% | (1.15)% | 521% | $427 | ||
2013 | $10.30 | (0.31) | 0.52 | 0.21 | (0.34) | $10.17 | 2.13% | 5.24% | 5.54% | 2.10% | (2.96)% | (3.26)% | 588% | $421 | ||
2012(6) | $10.00 | (0.12) | 0.42 | 0.30 | — | $10.30 | 3.00% | 5.42%(5) | 5.72%(5) | 2.11%(5) | (2.99)%(5) | (3.29)%(5) | 292% | $412 | ||
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | Ratio of operating expenses to average net assets does not include any fees and expenses of the acquired funds. |
(4) | Six months ended September 30, 2015 (unaudited). |
(5) | Annualized. |
(6) | October 31, 2011 (fund inception) through March 31, 2012. |
See Notes to Financial Statements.
25
Approval of Management Agreement |
At a meeting held on June 30, 2015, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, the Directors requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis and the information received was supplemental to the extensive information that the Board and its committees receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
• | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
• | the Fund’s investment performance compared to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the Advisor’s compliance policies, procedures, and regulatory experience; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | data comparing services provided and charges to other investment management clients of the Advisor; |
• | acquired fund fees and expenses; |
• | payments to intermediaries by the Fund and the Advisor; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
In keeping with their practice, the Directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The independent Directors also had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the
26
Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
• | constructing and designing the Fund |
• | portfolio research and security selection |
• | initial capitalization/funding |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services (except the independent Directors’ counsel) |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution (except Rule 12b-1 plans) |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one- and three-year periods reviewed by the Board. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board particularly noted the Advisor’s continual efforts to maintain effective business continuity plans and to address cybersecurity threats. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to
27
other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent Directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges, and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was above the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Payments to Intermediaries. The Directors also requested and received a description of payments made to intermediaries by the Fund and the Advisor. These payments include various
28
payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Board reviewed such information and found the payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. Additionally, the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions, which the Board concluded is likely to benefit other clients of the Advisor as well as Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients and, where expressly provided, these other client assets may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent Directors, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
29
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its
website at americancentury.com and, upon request, by calling 1-800-345-2021.
30
Notes |
31
Notes |
32
| ||
Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2015 American Century Proprietary Holdings, Inc. All rights reserved. CL-SAN-87378 1511 | ||
SEMIANNUAL REPORT | SEPTEMBER 30, 2015 |
Mid Cap Value Fund
Table of Contents |
President’s Letter | 2 |
Performance | 3 |
Fund Characteristics | |
Shareholder Fee Example | |
Schedule of Investments | |
Statement of Assets and Liabilities | |
Statement of Operations | |
Statement of Changes in Net Assets | |
Notes to Financial Statements | |
Financial Highlights | |
Approval of Management Agreement | |
Additional Information | |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
| Dear Investor: Thank you for reviewing this semiannual report for the six months ended September 30, 2015. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information. For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com. |
Jonathan Thomas | |
Divergence in Economic Growth and Monetary Policies, Combined With China Turmoil, Triggered Market Volatility
Divergence between the U.S. and the rest of the world, along with China’s struggles, lower commodity prices, capital market volatility, and risk-off trading, were key themes during the reporting period. Global divergence described not only the relatively stronger economic growth enjoyed by the U.S. compared with most of the world, but also the related contrast between the U.S. Federal Reserve’s (the Fed’s) expected unwinding of monetary stimulus versus the continuation and expansion of stimulus by other major central banks. Central bank moves—including the Fed’s delayed normalization of its extremely low interest rate positioning—helped trigger large market swings.
In 2014, the Fed ended its latest massive bond-buying program (quantitative easing, QE), leading to expectations that interest rates would rise. But while QE was halted in the U.S., other major central banks were starting or increasing QE as their economies faltered. This divergence helped fuel increased demand for the U.S. dollar and U.S. dollar-denominated assets, and put downward pressure on commodity prices, most notably crude oil. Low inflation also prevailed amid muted demand for commodities, particularly as China’s growth faltered, which had a broad dampening impact on global markets. In this environment, the U.S. dollar and U.S. government securities benefited from “flight to quality” capital flows. Conversely, emerging market, commodity-related, and value equity indices suffered significant declines.
We expect continued economic and monetary policy divergence between the U.S. and non-U.S. economies in the coming months, accompanied by further market volatility. This could present both challenges and opportunities for active investment managers. In this environment, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios to meet financial goals. We appreciate your continued trust in us.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of September 30, 2015 | |||||||
Average Annual Returns | |||||||
Class | Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date |
Investor Class | ACMVX | -7.11% | 0.49% | 12.83% | 9.02% | 9.82% | 3/31/04 |
Russell Midcap Value Index | — | -9.84% | -2.07% | 13.15% | 7.41% | 8.95% | — |
Institutional Class | AVUAX | -7.02% | 0.69% | 13.05% | 9.24% | 10.26% | 8/2/04 |
A Class(2) | ACLAX | 1/13/05 | |||||
No sales charge* | -7.24% | 0.23% | 12.56% | 8.75% | 9.04% | ||
With sales charge* | -12.58% | -5.53% | 11.24% | 8.11% | 8.44% | ||
C Class | ACCLX | 3/1/10 | |||||
No sales charge* | -7.57% | -0.49% | 11.70% | — | 11.35% | ||
With sales charge* | -8.49% | -0.49% | 11.70% | — | 11.35% | ||
R Class | AMVRX | -7.31% | 0.04% | 12.28% | 8.48% | 8.05% | 7/29/05 |
R6 Class | AMDVX | -6.95% | 0.90% | — | — | 8.26% | 7/26/13 |
* | Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum initial sales charge and may be subject to a maximum CDSC of 1.00%. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied. |
(1) | Total returns for periods less than one year are not annualized. |
(2) | Prior to March 1, 2010, the A Class was referred to as the Advisor Class and did not have a front-end sales charge. Performance prior to that date has been adjusted to reflect this charge. |
Total Annual Fund Operating Expenses | |||||
Investor Class | Institutional Class | A Class | C Class | R Class | R6 Class |
1.01% | 0.81% | 1.26% | 2.01% | 1.51% | 0.66% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
3
Fund Characteristics |
SEPTEMBER 30, 2015 | |
Top Ten Holdings | % of net assets |
Republic Services, Inc. | 3.0% |
Northern Trust Corp. | 2.8% |
Sysco Corp. | 2.7% |
Imperial Oil Ltd. | 2.1% |
Zimmer Biomet Holdings, Inc. | 1.8% |
LifePoint Health, Inc. | 1.8% |
Cameron International Corp. | 1.7% |
ConAgra Foods, Inc. | 1.6% |
Weyerhaeuser Co. | 1.6% |
Edison International | 1.5% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 8.5% |
Banks | 7.8% |
Insurance | 7.5% |
Food Products | 6.4% |
Commercial Services and Supplies | 5.9% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 98.3% |
Temporary Cash Investments | 2.0% |
Other Assets and Liabilities | (0.3)% |
4
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2015 to September 30, 2015.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
5
Beginning Account Value 4/1/15 | Ending Account Value 9/30/15 | Expenses Paid During Period(1)4/1/15 - 9/30/15 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class (after waiver) | $1,000 | $928.90 | $4.82 | 1.00% |
Investor Class (before waiver) | $1,000 | $928.90(2) | $4.87 | 1.01% |
Institutional Class (after waiver) | $1,000 | $929.80 | $3.86 | 0.80% |
Institutional Class (before waiver) | $1,000 | $929.80(2) | $3.91 | 0.81% |
A Class (after waiver) | $1,000 | $927.60 | $6.02 | 1.25% |
A Class (before waiver) | $1,000 | $927.60(2) | $6.07 | 1.26% |
C Class (after waiver) | $1,000 | $924.30 | $9.62 | 2.00% |
C Class (before waiver) | $1,000 | $924.30(2) | $9.67 | 2.01% |
R Class (after waiver) | $1,000 | $926.90 | $7.23 | 1.50% |
R Class (before waiver) | $1,000 | $926.90(2) | $7.27 | 1.51% |
R6 Class (after waiver) | $1,000 | $930.50 | $3.14 | 0.65% |
R6 Class (before waiver) | $1,000 | $930.50(2) | $3.19 | 0.66% |
Hypothetical | ||||
Investor Class (after waiver) | $1,000 | $1,020.00 | $5.05 | 1.00% |
Investor Class (before waiver) | $1,000 | $1,019.95 | $5.10 | 1.01% |
Institutional Class (after waiver) | $1,000 | $1,021.00 | $4.04 | 0.80% |
Institutional Class (before waiver) | $1,000 | $1,020.95 | $4.09 | 0.81% |
A Class (after waiver) | $1,000 | $1,018.75 | $6.31 | 1.25% |
A Class (before waiver) | $1,000 | $1,018.70 | $6.36 | 1.26% |
C Class (after waiver) | $1,000 | $1,015.00 | $10.07 | 2.00% |
C Class (before waiver) | $1,000 | $1,014.95 | $10.13 | 2.01% |
R Class (after waiver) | $1,000 | $1,017.50 | $7.57 | 1.50% |
R Class (before waiver) | $1,000 | $1,017.45 | $7.62 | 1.51% |
R6 Class (after waiver) | $1,000 | $1,021.75 | $3.29 | 0.65% |
R6 Class (before waiver) | $1,000 | $1,021.70 | $3.34 | 0.66% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
(2) | Ending account value assumes the return earned after waiver and would have been lower if a portion of the management fee had not been waived. |
6
Schedule of Investments |
SEPTEMBER 30, 2015 (UNAUDITED)
Shares | Value | |||
COMMON STOCKS — 98.3% | ||||
Aerospace and Defense — 1.1% | ||||
L-3 Communications Holdings, Inc. | 333,992 | $ | 34,908,844 | |
Textron, Inc. | 920,515 | 34,648,184 | ||
69,557,028 | ||||
Automobiles — 1.2% | ||||
Honda Motor Co., Ltd. ADR | 1,217,974 | 36,417,423 | ||
Thor Industries, Inc. | 671,644 | 34,791,159 | ||
71,208,582 | ||||
Banks — 7.8% | ||||
Bank of Hawaii Corp. | 660,690 | 41,947,208 | ||
BB&T Corp. | 1,209,522 | 43,058,983 | ||
BOK Financial Corp. | 550,350 | 35,613,149 | ||
Comerica, Inc. | 826,699 | 33,977,329 | ||
Commerce Bancshares, Inc. | 1,523,236 | 69,398,632 | ||
Cullen / Frost Bankers, Inc. | 503,042 | 31,983,410 | ||
M&T Bank Corp. | 578,007 | 70,487,954 | ||
PNC Financial Services Group, Inc. (The) | 600,575 | 53,571,290 | ||
SunTrust Banks, Inc. | 1,060,259 | 40,544,304 | ||
Westamerica Bancorporation(1) | 1,414,911 | 62,878,645 | ||
483,460,904 | ||||
Capital Markets — 5.5% | ||||
Franklin Resources, Inc. | 1,098,161 | 40,917,479 | ||
LPL Financial Holdings, Inc. | 1,164,557 | 46,314,432 | ||
Northern Trust Corp. | 2,486,882 | 169,505,877 | ||
State Street Corp. | 610,175 | 41,009,862 | ||
T. Rowe Price Group, Inc. | 549,605 | 38,197,547 | ||
335,945,197 | ||||
Chemicals — 0.7% | ||||
Mosaic Co. (The) | 1,373,587 | 42,732,292 | ||
Commercial Services and Supplies — 5.9% | ||||
ADT Corp. (The) | 1,889,511 | 56,496,379 | ||
Clean Harbors, Inc.(2) | 1,054,005 | 46,344,600 | ||
Republic Services, Inc. | 4,455,775 | 183,577,930 | ||
Tyco International plc | 2,256,253 | 75,494,225 | ||
361,913,134 | ||||
Communications Equipment — 0.4% | ||||
Harris Corp. | 292,215 | 21,375,527 | ||
Containers and Packaging — 1.3% | ||||
Bemis Co., Inc. | 721,948 | 28,567,482 | ||
Sonoco Products Co. | 1,322,506 | 49,911,377 | ||
78,478,859 | ||||
Diversified Telecommunication Services — 1.5% | ||||
CenturyLink, Inc. | 2,788,111 | 70,037,348 | ||
Level 3 Communications, Inc.(2) | 569,764 | 24,892,989 | ||
94,930,337 | ||||
7
Shares | Value | |||
Electric Utilities — 5.5% | ||||
Edison International | 1,503,952 | $ | 94,854,253 | |
Great Plains Energy, Inc. | 2,098,648 | 56,705,469 | ||
OGE Energy Corp. | 885,588 | 24,229,688 | ||
Westar Energy, Inc. | 2,164,532 | 83,204,610 | ||
Xcel Energy, Inc. | 2,294,164 | 81,236,347 | ||
340,230,367 | ||||
Electrical Equipment — 1.4% | ||||
Emerson Electric Co. | 2,006,754 | 88,638,324 | ||
Electronic Equipment, Instruments and Components — 2.0% | ||||
Keysight Technologies, Inc.(2) | 2,102,649 | 64,845,695 | ||
TE Connectivity Ltd. | 977,497 | 58,542,295 | ||
123,387,990 | ||||
Energy Equipment and Services — 3.1% | ||||
Cameron International Corp.(2) | 1,661,907 | 101,908,137 | ||
FMC Technologies, Inc.(2) | 1,275,638 | 39,544,778 | ||
Helmerich & Payne, Inc. | 1,019,455 | 48,179,444 | ||
189,632,359 | ||||
Food and Staples Retailing — 2.7% | ||||
Sysco Corp. | 4,330,613 | 168,763,989 | ||
Food Products — 6.4% | ||||
Campbell Soup Co. | 498,409 | 25,259,368 | ||
ConAgra Foods, Inc. | 2,385,309 | 96,628,868 | ||
Danone SA | 255,920 | 16,185,398 | ||
General Mills, Inc. | 837,815 | 47,026,556 | ||
J.M. Smucker Co. (The) | 651,138 | 74,288,334 | ||
Kellogg Co. | 1,081,465 | 71,971,496 | ||
Mondelez International, Inc., Class A | 1,428,542 | 59,813,053 | ||
391,173,073 | ||||
Gas Utilities — 2.2% | ||||
Atmos Energy Corp. | 1,021,749 | 59,445,357 | ||
Laclede Group, Inc. (The) | 1,439,653 | 78,504,278 | ||
137,949,635 | ||||
Health Care Equipment and Supplies — 3.4% | ||||
Becton Dickinson and Co. | 255,846 | 33,940,531 | ||
Boston Scientific Corp.(2) | 3,861,217 | 63,362,571 | ||
Zimmer Biomet Holdings, Inc. | 1,208,726 | 113,535,633 | ||
210,838,735 | ||||
Health Care Providers and Services — 3.6% | ||||
Cardinal Health, Inc. | 237,273 | 18,227,312 | ||
Express Scripts Holding Co.(2) | 225,288 | 18,239,316 | ||
LifePoint Health, Inc.(2) | 1,575,333 | 111,691,110 | ||
Quest Diagnostics, Inc. | 1,199,336 | 73,723,184 | ||
221,880,922 | ||||
Hotels, Restaurants and Leisure — 0.5% | ||||
Carnival Corp. | 644,616 | 32,037,415 | ||
Household Durables — 1.1% | ||||
PulteGroup, Inc. | 2,168,166 | 40,913,292 | ||
Toll Brothers, Inc.(2) | 763,486 | 26,141,761 | ||
67,055,053 | ||||
8
Shares | Value | |||
Industrial Conglomerates — 1.3% | ||||
Koninklijke Philips NV | 3,344,627 | $ | 78,865,481 | |
Insurance — 7.5% | ||||
ACE Ltd. | 746,689 | 77,207,643 | ||
Aflac, Inc. | 510,419 | 29,670,656 | ||
Allstate Corp. (The) | 366,091 | 21,321,140 | ||
Brown & Brown, Inc. | 1,371,561 | 42,477,244 | ||
Chubb Corp. (The) | 303,953 | 37,279,835 | ||
HCC Insurance Holdings, Inc. | 200,177 | 15,507,712 | ||
MetLife, Inc. | 616,319 | 29,059,441 | ||
ProAssurance Corp. | 688,181 | 33,769,042 | ||
Reinsurance Group of America, Inc. | 706,797 | 64,028,740 | ||
Torchmark Corp. | 476,899 | 26,897,104 | ||
Travelers Cos., Inc. (The) | 293,210 | 29,183,191 | ||
Unum Group | 1,734,358 | 55,638,205 | ||
462,039,953 | ||||
Leisure Products — 0.9% | ||||
Mattel, Inc. | 2,695,051 | 56,757,774 | ||
Machinery — 1.3% | ||||
Oshkosh Corp. | 823,385 | 29,913,577 | ||
Parker-Hannifin Corp. | 261,207 | 25,415,441 | ||
Pentair plc | 433,315 | 22,116,398 | ||
77,445,416 | ||||
Media — 0.7% | ||||
Markit Ltd.(2) | 1,576,950 | 45,731,550 | ||
Metals and Mining — 0.9% | ||||
Nucor Corp. | 1,422,878 | 53,429,069 | ||
Multi-Utilities — 2.7% | ||||
Ameren Corp. | 807,563 | 34,135,688 | ||
Consolidated Edison, Inc. | 628,336 | 42,004,262 | ||
NorthWestern Corp. | 601,733 | 32,391,287 | ||
PG&E Corp. | 1,056,613 | 55,789,166 | ||
164,320,403 | ||||
Multiline Retail — 0.4% | ||||
Target Corp. | 340,443 | 26,779,246 | ||
Oil, Gas and Consumable Fuels — 8.5% | ||||
Anadarko Petroleum Corp. | 547,967 | 33,091,727 | ||
Cimarex Energy Co. | 617,396 | 63,270,742 | ||
Devon Energy Corp. | 1,562,180 | 57,941,256 | ||
EQT Corp. | 1,143,584 | 74,069,936 | ||
Imperial Oil Ltd. | 4,001,345 | 126,771,725 | ||
Noble Energy, Inc. | 2,791,991 | 84,262,288 | ||
Occidental Petroleum Corp. | 1,297,996 | 85,862,436 | ||
525,270,110 | ||||
Real Estate Investment Trusts (REITs) — 4.8% | ||||
Boston Properties, Inc. | 193,509 | 22,911,466 | ||
Corrections Corp. of America | 2,007,043 | 59,288,050 | ||
Empire State Realty Trust, Inc. | 1,434,716 | 24,433,213 | ||
Host Hotels & Resorts, Inc. | 1,758,537 | 27,802,470 | ||
9
Shares | Value | |||
Piedmont Office Realty Trust, Inc., Class A | 3,687,317 | $ | 65,966,101 | |
Weyerhaeuser Co. | 3,495,443 | 95,565,412 | ||
295,966,712 | ||||
Road and Rail — 1.0% | ||||
Heartland Express, Inc. | 3,138,321 | 62,578,121 | ||
Semiconductors and Semiconductor Equipment — 5.1% | ||||
Applied Materials, Inc. | 5,261,198 | 77,286,999 | ||
Lam Research Corp. | 1,048,943 | 68,527,446 | ||
Maxim Integrated Products, Inc. | 1,625,487 | 54,291,266 | ||
Microchip Technology, Inc. | 1,409,004 | 60,713,982 | ||
Teradyne, Inc. | 2,851,742 | 51,359,873 | ||
312,179,566 | ||||
Specialty Retail — 2.5% | ||||
Advance Auto Parts, Inc. | 285,295 | 54,071,961 | ||
Bed Bath & Beyond, Inc.(2) | 535,516 | 30,535,122 | ||
CST Brands, Inc. | 1,393,019 | 46,889,020 | ||
Lowe's Cos., Inc. | 320,002 | 22,054,538 | ||
153,550,641 | ||||
Technology Hardware, Storage and Peripherals — 1.9% | ||||
SanDisk Corp. | 1,164,286 | 63,255,659 | ||
Western Digital Corp. | 696,171 | 55,303,824 | ||
118,559,483 | ||||
Textiles, Apparel and Luxury Goods — 0.8% | ||||
Ralph Lauren Corp. | 416,264 | 49,185,754 | ||
Thrifts and Mortgage Finance — 0.7% | ||||
Capitol Federal Financial, Inc. | 3,530,013 | 42,783,758 | ||
TOTAL COMMON STOCKS (Cost $5,857,312,936) | 6,056,632,759 | |||
TEMPORARY CASH INVESTMENTS — 2.0% | ||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.25% - 2.375%, 8/15/24 - 11/15/24, valued at $93,928,475), at 0.01%, dated 9/30/15, due 10/1/15 (Delivery value $92,081,026) | 92,081,000 | |||
State Street Institutional Liquid Reserves Fund, Premier Class | 34,388,128 | 34,388,128 | ||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $126,469,128) | 126,469,128 | |||
TOTAL INVESTMENT SECURITIES — 100.3% (Cost $5,983,782,064) | 6,183,101,887 | |||
OTHER ASSETS AND LIABILITIES — (0.3)% | (19,378,893) | |||
TOTAL NET ASSETS — 100.0% | $ | 6,163,722,994 | ||
10
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||
USD | 104,706,755 | CAD | 139,461,022 | JPMorgan Chase Bank N.A. | 10/30/15 | $ | 217,464 | |
USD | 2,738,060 | CAD | 3,664,155 | JPMorgan Chase Bank N.A. | 10/30/15 | (7,258 | ) | |
EUR | 1,847,547 | USD | 2,064,005 | UBS AG | 10/30/15 | 1,309 | ||
USD | 79,342,291 | EUR | 70,967,107 | UBS AG | 10/30/15 | 10,409 | ||
USD | 1,973,635 | EUR | 1,756,684 | UBS AG | 10/30/15 | 9,893 | ||
USD | 22,013,458 | JPY | 2,659,709,963 | Credit Suisse AG | 10/30/15 | (164,641 | ) | |
$ | 67,176 | |||||||
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
CAD | - | Canadian Dollar |
EUR | - | Euro |
JPY | - | Japanese Yen |
USD | - | United States Dollar |
(1) | Affliated Company: Affiliated Company: the fund’s holding represents ownership of 5% or more of the voting securities of the company; therefore, the company is affiliated as defined in the Investment Company Act of 1940. |
(2) | Non-income producing. |
See Notes to Financial Statements.
11
Statement of Assets and Liabilities |
SEPTEMBER 30, 2015 (UNAUDITED) | |||
Assets | |||
Investment securities - unaffiliated, at value (cost of $5,919,031,515) | $ | 6,120,223,242 | |
Investment securities - affiliated, at value (cost of $64,750,549) | 62,878,645 | ||
Total investment securities, at value (cost of $5,983,782,064) | 6,183,101,887 | ||
Foreign currency holdings, at value (cost of $516,227) | 499,950 | ||
Receivable for investments sold | 38,716,850 | ||
Receivable for capital shares sold | 4,776,195 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 239,075 | ||
Dividends and interest receivable | 13,404,170 | ||
6,240,738,127 | |||
Liabilities | |||
Payable for investments purchased | 62,274,852 | ||
Payable for capital shares redeemed | 9,357,468 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 171,899 | ||
Accrued management fees | 4,828,621 | ||
Distribution and service fees payable | 382,293 | ||
77,015,133 | |||
Net Assets | $ | 6,163,722,994 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 5,486,565,487 | |
Undistributed net investment income | 11,665,438 | ||
Undistributed net realized gain | 466,124,257 | ||
Net unrealized appreciation | 199,367,812 | ||
$ | 6,163,722,994 | ||
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||
Investor Class, $0.01 Par Value | $3,372,180,288 | 218,653,088 | $15.42 | ||
Institutional Class, $0.01 Par Value | $991,248,416 | 64,242,662 | $15.43 | ||
A Class, $0.01 Par Value | $1,271,213,399 | 82,552,549 | $15.40* | ||
C Class, $0.01 Par Value | $81,099,472 | 5,300,757 | $15.30 | ||
R Class, $0.01 Par Value | $119,527,304 | 7,778,585 | $15.37 | ||
R6 Class, $0.01 Par Value | $328,454,115 | 21,289,378 | $15.43 | ||
* Maximum offering price $16.34 (net asset value divided by 0.9425).
See Notes to Financial Statements.
12
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (including $1,013,161 from affiliates and net of foreign taxes withheld of $273,090) | $ | 72,619,932 | |
Interest | 18,486 | ||
72,638,418 | |||
Expenses: | |||
Management fees | 31,497,368 | ||
Distribution and service fees: | |||
A Class | 1,767,527 | ||
C Class | 417,103 | ||
R Class | 318,550 | ||
Directors' fees and expenses | 112,114 | ||
Other expenses | 1,149 | ||
34,113,811 | |||
Fees waived | (358,245 | ) | |
33,755,566 | |||
Net investment income (loss) | 38,882,852 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions (including $(92,230) from affiliates) | 254,874,470 | ||
Foreign currency transactions | 5,922,859 | ||
260,797,329 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (769,820,197 | ) | |
Translation of assets and liabilities in foreign currencies | (3,372,298 | ) | |
(773,192,495 | ) | ||
Net realized and unrealized gain (loss) | (512,395,166 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (473,512,314 | ) |
See Notes to Financial Statements.
13
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) AND YEAR ENDED MARCH 31, 2015 | ||||||
Increase (Decrease) in Net Assets | September 30, 2015 | March 31, 2015 | ||||
Operations | ||||||
Net investment income (loss) | $ | 38,882,852 | $ | 65,291,642 | ||
Net realized gain (loss) | 260,797,329 | 612,577,453 | ||||
Change in net unrealized appreciation (depreciation) | (773,192,495) | 86,882,674 | ||||
Net increase (decrease) in net assets resulting from operations | (473,512,314) | 764,751,769 | ||||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Investor Class | (21,371,504) | (37,256,893) | ||||
Institutional Class | (7,052,735) | (11,727,859) | ||||
A Class | (6,583,050) | (9,032,919) | ||||
C Class | (85,361) | (171,139) | ||||
R Class | (437,499) | (835,736) | ||||
R6 Class | (2,338,896) | (1,610,130) | ||||
From net realized gains: | ||||||
Investor Class | — | (328,624,367) | ||||
Institutional Class | — | (88,881,075) | ||||
A Class | — | (129,993,613) | ||||
C Class | — | (6,378,011) | ||||
R Class | — | (11,745,677) | ||||
R6 Class | — | (12,874,828) | ||||
Decrease in net assets from distributions | (37,869,045) | (639,132,247) | ||||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (8,172,525) | 1,445,027,845 | ||||
Net increase (decrease) in net assets | (519,553,884) | 1,570,647,367 | ||||
Net Assets | ||||||
Beginning of period | 6,683,276,878 | 5,112,629,511 | ||||
End of period | $ | 6,163,722,994 | $ | 6,683,276,878 | ||
Undistributed net investment income | $ | 11,665,438 | $ | 10,651,631 | ||
See Notes to Financial Statements.
14
Notes to Financial Statements |
SEPTEMBER 30, 2015 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Mid Cap Value Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective.
The fund offers the Investor Class, the Institutional Class, the A Class, the C Class, the R Class and the R6 Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class and R6 Class shareholders do not require the same level of shareholder and administrative services from American Century Investment Management, Inc. (ACIM) (the investment advisor) as shareholders of other classes. In addition, financial intermediaries do not receive any service, distribution or administrative fees for the R6 Class. As a result, the Institutional Class and R6 Class are charged lower unified management fees.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Fixed income securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors: trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
15
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
16
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc. (ACIS), and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The annual management fee is 1.00% for the Investor Class, A Class, C Class and R Class, 0.80% for the Institutional Class and 0.65% for the R6 Class. During the six months ended September 30, 2015, the investment advisor voluntarily agreed to waive 0.05% of its management fee for assets over $7 billion. The fee waiver is determined by applying a formula that takes into account the fund's assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The strategy assets of the fund also include the assets of NT Mid Cap Value Fund, one fund in a series issued by the corporation. The investment advisor expects the fee waiver to continue through July 31, 2016, and cannot terminate it without the approval of the Board of Directors. The total amount of the waiver for each class for the six months ended September 30, 2015 was $198,809, $55,698, $76,837, $4,514, $6,908 and $15,479 for the Investor Class, Institutional Class, A Class, C Class, R Class and R6 Class, respectively. The effective annual management fee after waiver for each class for the six months ended September 30, 2015 was 0.99% for the Investor Class, A Class, C Class and R Class, 0.79% for the Institutional Class and 0.64% for the R6 Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the C Class will pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the six months ended September 30, 2015 are detailed in the Statement of Operations.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
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4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2015 were $2,428,436,532 and $2,399,560,068, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2015 | Year ended March 31, 2015 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 1,355,000,000 | 1,000,000,000 | ||||||||
Sold | 19,121,258 | $ | 315,295,469 | 47,845,228 | $ | 805,464,849 | ||||
Issued in reinvestment of distributions | 1,274,761 | 20,739,822 | 21,749,952 | 357,551,089 | ||||||
Redeemed | (27,516,967 | ) | (454,141,823 | ) | (42,736,259 | ) | (717,011,409 | ) | ||
(7,120,948 | ) | (118,106,532 | ) | 26,858,921 | 446,004,529 | |||||
Institutional Class/Shares Authorized | 370,000,000 | 350,000,000 | ||||||||
Sold | 11,596,214 | 191,362,254 | 21,317,473 | 358,366,290 | ||||||
Issued in reinvestment of distributions | 332,912 | 5,413,021 | 4,863,510 | 80,063,695 | ||||||
Redeemed | (8,601,568 | ) | (142,082,554 | ) | (14,945,599 | ) | (251,817,748 | ) | ||
3,327,558 | 54,692,721 | 11,235,384 | 186,612,237 | |||||||
A Class/Shares Authorized | 530,000,000 | 350,000,000 | ||||||||
Sold | 12,044,185 | 198,086,574 | 52,471,389 | 867,401,841 | ||||||
Issued in reinvestment of distributions | 394,814 | 6,419,976 | 8,314,134 | 136,295,978 | ||||||
Redeemed | (17,692,611 | ) | (291,508,354 | ) | (22,106,527 | ) | (370,969,551 | ) | ||
(5,253,612 | ) | (87,001,804 | ) | 38,678,996 | 632,728,268 | |||||
C Class/Shares Authorized | 40,000,000 | 20,000,000 | ||||||||
Sold | 923,225 | 15,118,210 | 1,327,076 | 22,095,693 | ||||||
Issued in reinvestment of distributions | 4,606 | 74,836 | 358,656 | 5,834,066 | ||||||
Redeemed | (423,911 | ) | (6,906,280 | ) | (605,325 | ) | (10,095,709 | ) | ||
503,920 | 8,286,766 | 1,080,407 | 17,834,050 | |||||||
R Class/Shares Authorized | 70,000,000 | 40,000,000 | ||||||||
Sold | 1,128,539 | 18,543,463 | 2,530,872 | 42,216,647 | ||||||
Issued in reinvestment of distributions | 26,691 | 433,078 | 760,719 | 12,445,520 | ||||||
Redeemed | (1,227,917 | ) | (20,215,541 | ) | (2,210,722 | ) | (36,981,897 | ) | ||
(72,687 | ) | (1,239,000 | ) | 1,080,869 | 17,680,270 | |||||
R6 Class/Shares Authorized | 90,000,000 | 50,000,000 | ||||||||
Sold | 9,842,684 | 163,289,443 | 9,299,284 | 156,315,103 | ||||||
Issued in reinvestment of distributions | 144,106 | 2,338,896 | 880,443 | 14,484,958 | ||||||
Redeemed | (1,843,604 | ) | (30,433,015 | ) | (1,593,718 | ) | (26,631,570 | ) | ||
8,143,186 | 135,195,324 | 8,586,009 | 144,168,491 | |||||||
Net increase (decrease) | (472,583 | ) | $ | (8,172,525 | ) | 87,520,586 | $ | 1,445,027,845 | ||
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6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments. There were no significant transfers between levels during the period.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 5,834,810,155 | $ | 221,822,604 | — | |||
Temporary Cash Investments | 34,388,128 | 92,081,000 | — | |||||
$ | 5,869,198,283 | $ | 313,903,604 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 239,075 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | (171,899 | ) | — | |||
7. Affiliated Company Transactions
If a fund's holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2015 follows:
Company | Beginning Value | Purchase Cost | Sales Cost | Realized Gain (Loss) | Dividend Income | Ending Value | ||||||||||||
Westamerica Bancorporation | $ | 49,253,783 | $ | 14,168,307 | $ | 2,044,370 | $ | (92,230 | ) | $ | 1,013,161 | $ | 62,878,645 | |||||
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8. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $242,865,714.
The value of foreign currency risk derivative instruments as of September 30, 2015, is disclosed on the Statement of Assets and Liabilities as an asset of $239,075 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $171,899 in unrealized depreciation on forward foreign currency exchange contracts. For the six months ended September 30, 2015, the effect of foreign currency risk derivative instruments on the Statement of Operations was $5,806,819 in net realized gain (loss) on foreign currency transactions and $(3,381,013) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
9. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of September 30, 2015, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $ | 6,050,995,859 | |
Gross tax appreciation of investments | $ | 584,127,224 | |
Gross tax depreciation of investments | (452,021,196) | ||
Net tax appreciation (depreciation) of investments | $ | 132,106,028 | |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||||
2015(3) | $16.70 | 0.10 | (1.28) | (1.18) | (0.10) | — | (0.10) | $15.42 | (7.11)% | 1.00%(4) | 1.01%(4) | 1.21%(4) | 1.20%(4) | 38% | $3,372,180 | ||
2015 | $16.35 | 0.20 | 1.98 | 2.18 | (0.18) | (1.65) | (1.83) | $16.70 | 13.62% | 1.00% | 1.00% | 1.16% | 1.16% | 66% | $3,771,117 | ||
2014 | $14.53 | 0.21 | 2.77 | 2.98 | (0.20) | (0.96) | (1.16) | $16.35 | 21.02% | 1.00% | 1.00% | 1.34% | 1.34% | 67% | $3,252,177 | ||
2013 | $12.86 | 0.22 | 2.02 | 2.24 | (0.25) | (0.32) | (0.57) | $14.53 | 18.11% | 1.00% | 1.00% | 1.69% | 1.69% | 61% | $2,459,353 | ||
2012 | $13.13 | 0.22 | 0.28 | 0.50 | (0.16) | (0.61) | (0.77) | $12.86 | 4.48% | 1.01% | 1.01% | 1.80% | 1.80% | 82% | $1,615,365 | ||
2011 | $11.41 | 0.25 | 1.70 | 1.95 | (0.23) | — | (0.23) | $13.13 | 17.34% | 1.01% | 1.01% | 2.07% | 2.07% | 71% | $1,334,230 | ||
Institutional Class | |||||||||||||||||
2015(3) | $16.71 | 0.12 | (1.29) | (1.17) | (0.11) | — | (0.11) | $15.43 | (7.02)% | 0.80%(4) | 0.81%(4) | 1.41%(4) | 1.40%(4) | 38% | $991,248 | ||
2015 | $16.36 | 0.23 | 1.99 | 2.22 | (0.22) | (1.65) | (1.87) | $16.71 | 13.83% | 0.80% | 0.80% | 1.36% | 1.36% | 66% | $1,017,915 | ||
2014 | $14.53 | 0.24 | 2.78 | 3.02 | (0.23) | (0.96) | (1.19) | $16.36 | 21.33% | 0.80% | 0.80% | 1.54% | 1.54% | 67% | $812,521 | ||
2013 | $12.86 | 0.25 | 2.02 | 2.27 | (0.28) | (0.32) | (0.60) | $14.53 | 18.34% | 0.80% | 0.80% | 1.89% | 1.89% | 61% | $421,877 | ||
2012 | $13.14 | 0.25 | 0.27 | 0.52 | (0.19) | (0.61) | (0.80) | $12.86 | 4.60% | 0.81% | 0.81% | 2.00% | 2.00% | 82% | $262,032 | ||
2011 | $11.41 | 0.28 | 1.70 | 1.98 | (0.25) | — | (0.25) | $13.14 | 17.66% | 0.81% | 0.81% | 2.27% | 2.27% | 71% | $170,182 | ||
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
A Class | |||||||||||||||||
2015(3) | $16.68 | 0.08 | (1.28) | (1.20) | (0.08) | — | (0.08) | $15.40 | (7.24)% | 1.25%(4) | 1.26%(4) | 0.96%(4) | 0.95%(4) | 38% | $1,271,213 | ||
2015 | $16.33 | 0.15 | 2.00 | 2.15 | (0.15) | (1.65) | (1.80) | $16.68 | 13.40% | 1.25% | 1.25% | 0.91% | 0.91% | 66% | $1,464,424 | ||
2014 | $14.52 | 0.17 | 2.76 | 2.93 | (0.16) | (0.96) | (1.12) | $16.33 | 20.71% | 1.25% | 1.25% | 1.09% | 1.09% | 67% | $802,480 | ||
2013 | $12.86 | 0.19 | 2.01 | 2.20 | (0.22) | (0.32) | (0.54) | $14.52 | 17.83% | 1.25% | 1.25% | 1.44% | 1.44% | 61% | $488,491 | ||
2012 | $13.13 | 0.19 | 0.29 | 0.48 | (0.14) | (0.61) | (0.75) | $12.86 | 4.19% | 1.26% | 1.26% | 1.55% | 1.55% | 82% | $316,497 | ||
2011 | $11.41 | 0.21 | 1.71 | 1.92 | (0.20) | — | (0.20) | $13.13 | 17.05% | 1.26% | 1.26% | 1.82% | 1.82% | 71% | $215,813 | ||
C Class | |||||||||||||||||
2015(3) | $16.57 | 0.02 | (1.27) | (1.25) | (0.02) | — | (0.02) | $15.30 | (7.57)% | 2.00%(4) | 2.01%(4) | 0.21%(4) | 0.20%(4) | 38% | $81,099 | ||
2015 | $16.26 | 0.03 | 1.97 | 2.00 | (0.04) | (1.65) | (1.69) | $16.57 | 12.53% | 2.00% | 2.00% | 0.16% | 0.16% | 66% | $79,490 | ||
2014 | $14.49 | 0.05 | 2.75 | 2.80 | (0.07) | (0.96) | (1.03) | $16.26 | 19.75% | 2.00% | 2.00% | 0.34% | 0.34% | 67% | $60,443 | ||
2013 | $12.84 | 0.09 | 2.02 | 2.11 | (0.14) | (0.32) | (0.46) | $14.49 | 16.96% | 2.00% | 2.00% | 0.69% | 0.69% | 61% | $31,407 | ||
2012 | $13.14 | 0.11 | 0.27 | 0.38 | (0.07) | (0.61) | (0.68) | $12.84 | 3.41% | 2.01% | 2.01% | 0.80% | 0.80% | 82% | $15,242 | ||
2011 | $11.42 | 0.13 | 1.71 | 1.84 | (0.12) | — | (0.12) | $13.14 | 16.24% | 2.01% | 2.01% | 1.07% | 1.07% | 71% | $5,989 | ||
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
R Class | |||||||||||||||||
2015(3) | $16.64 | 0.06 | (1.27) | (1.21) | (0.06) | — | (0.06) | $15.37 | (7.31)% | 1.50%(4) | 1.51%(4) | 0.71%(4) | 0.70%(4) | 38% | $119,527 | ||
2015 | $16.31 | 0.11 | 1.98 | 2.09 | (0.11) | (1.65) | (1.76) | $16.64 | 13.07% | 1.50% | 1.50% | 0.66% | 0.66% | 66% | $130,669 | ||
2014 | $14.51 | 0.13 | 2.76 | 2.89 | (0.13) | (0.96) | (1.09) | $16.31 | 20.41% | 1.50% | 1.50% | 0.84% | 0.84% | 67% | $110,440 | ||
2013 | $12.85 | 0.15 | 2.02 | 2.17 | (0.19) | (0.32) | (0.51) | $14.51 | 17.49% | 1.50% | 1.50% | 1.19% | 1.19% | 61% | $73,023 | ||
2012 | $13.14 | 0.16 | 0.28 | 0.44 | (0.12) | (0.61) | (0.73) | $12.85 | 3.91% | 1.51% | 1.51% | 1.30% | 1.30% | 82% | $50,444 | ||
2011 | $11.41 | 0.19 | 1.71 | 1.90 | (0.17) | — | (0.17) | $13.14 | 16.85% | 1.51% | 1.51% | 1.57% | 1.57% | 71% | $40,933 | ||
R6 Class | |||||||||||||||||
2015(3) | $16.71 | 0.13 | (1.28) | (1.15) | (0.13) | — | (0.13) | $15.43 | (6.95)% | 0.65%(4) | 0.66%(4) | 1.56%(4) | 1.55%(4) | 38% | $328,454 | ||
2015 | $16.35 | 0.26 | 1.99 | 2.25 | (0.24) | (1.65) | (1.89) | $16.71 | 14.07% | 0.65% | 0.65% | 1.51% | 1.51% | 66% | $219,661 | ||
2014(5) | $15.66 | 0.20 | 1.61 | 1.81 | (0.16) | (0.96) | (1.12) | $16.35 | 12.01% | 0.65%(4) | 0.65%(4) | 1.83%(4) | 1.83%(4) | 67%(6) | $74,570 | ||
Notes to Financial Highlights | ||||
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | Six months ended September 30, 2015 (unaudited). |
(4) | Annualized. |
(5) | July 26, 2013 (commencement of sale) through March 31, 2014. |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2014. |
See Notes to Financial Statements.
23
Approval of Management Agreement |
At a meeting held on June 30, 2015, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, the Directors requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis and the information received was supplemental to the extensive information that the Board and its committees receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
• | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
• | the Fund’s investment performance compared to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the Advisor’s compliance policies, procedures, and regulatory experience; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | data comparing services provided and charges to other investment management clients of the Advisor; |
• | acquired fund fees and expenses; |
• | payments to intermediaries by the Fund and the Advisor; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
In keeping with their practice, the Directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The independent Directors also had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the
24
Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
• | constructing and designing the Fund |
• | portfolio research and security selection |
• | initial capitalization/funding |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services (except the independent Directors’ counsel) |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution (except Rule 12b-1 plans) |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one- and ten-year periods and slightly below its benchmark for the three- and five-year periods reviewed by the Board. The Board discussed the Fund's performance with the Advisor and was satisfied with the efforts being undertaken by the Advisor. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board particularly noted the Advisor’s continual efforts to maintain effective business continuity plans and to address cybersecurity threats. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading
25
activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent Directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges, and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was below the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board and the Advisor agreed to a reduction of the Fund's annual unified management fee of 0.05% for strategy assets over $7 billion for at least one year, beginning August 1, 2015. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
26
Payments to Intermediaries. The Directors also requested and received a description of payments made to intermediaries by the Fund and the Advisor. These payments include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Board reviewed such information and found the payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. Additionally, the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions, which the Board concluded is likely to benefit other clients of the Advisor as well as Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients and, where expressly provided, these other client assets may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent Directors, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
27
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its
website at americancentury.com and, upon request, by calling 1-800-345-2021.
28
| ||
Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2015 American Century Proprietary Holdings, Inc. All rights reserved. CL-SAN-87379 1511 | ||
SEMIANNUAL REPORT | SEPTEMBER 30, 2015 |
NT Large Company Value Fund
Table of Contents |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Performance |
Total Returns as of September 30, 2015 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | Since Inception | Inception Date | |
Institutional Class | ACLLX | -9.97% | -5.09% | 11.80% | 4.39% | 5/12/06 |
Russell 1000 Value Index | — | -8.30% | -4.42% | 12.28% | 5.14% | — |
S&P 500 Index | — | -6.18% | -0.61% | 13.33% | 6.56% | — |
R6 Class | ACDLX | -9.91% | -4.96% | — | 4.47% | 7/26/13 |
(1) | Total returns for periods less than one year are not annualized. |
Total Annual Fund Operating Expenses | |
Institutional Class | R6 Class |
0.64% | 0.49% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
2
Fund Characteristics |
SEPTEMBER 30, 2015 | |
Top Ten Holdings | % of net assets |
JPMorgan Chase & Co. | 3.7% |
Wells Fargo & Co. | 3.6% |
Pfizer, Inc. | 2.8% |
Cisco Systems, Inc. | 2.6% |
Oracle Corp. | 2.5% |
Total SA ADR | 2.4% |
Bank of America Corp. | 2.4% |
Honeywell International, Inc. | 2.2% |
Medtronic plc | 2.1% |
Ingersoll-Rand plc | 2.1% |
Top Five Industries | % of net assets |
Banks | 14.1% |
Oil, Gas and Consumable Fuels | 10.6% |
Pharmaceuticals | 7.6% |
Aerospace and Defense | 5.8% |
Capital Markets | 5.5% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 97.9% |
Exchange-Traded Funds | 1.2% |
Total Equity Exposure | 99.1% |
Temporary Cash Investments | 2.3% |
Other Assets and Liabilities | (1.4)% |
3
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2015 to September 30, 2015.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 4/1/15 | Ending Account Value 9/30/15 | Expenses Paid During Period(1) 4/1/15 - 9/30/15 | Annualized Expense Ratio(1) | |
Actual | ||||
Institutional Class | $1,000 | $900.30 | $3.04 | 0.64% |
R6 Class | $1,000 | $900.90 | $2.33 | 0.49% |
Hypothetical | ||||
Institutional Class | $1,000 | $1,021.80 | $3.23 | 0.64% |
R6 Class | $1,000 | $1,022.55 | $2.48 | 0.49% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
4
Schedule of Investments |
SEPTEMBER 30, 2015 (UNAUDITED)
Shares | Value | |||
COMMON STOCKS — 97.9% | ||||
Aerospace and Defense — 5.8% | ||||
Honeywell International, Inc. | 342,800 | $ | 32,459,732 | |
Huntington Ingalls Industries, Inc. | 121,400 | 13,008,010 | ||
Raytheon Co. | 133,300 | 14,564,358 | ||
United Technologies Corp. | 294,300 | 26,189,757 | ||
86,221,857 | ||||
Auto Components — 2.2% | ||||
BorgWarner, Inc. | 236,800 | 9,848,512 | ||
Delphi Automotive plc | 307,900 | 23,412,716 | ||
33,261,228 | ||||
Automobiles — 1.6% | ||||
Ford Motor Co. | 918,400 | 12,462,688 | ||
Harley-Davidson, Inc. | 210,100 | 11,534,490 | ||
23,997,178 | ||||
Banks — 14.1% | ||||
Bank of America Corp. | 2,296,200 | 35,774,796 | ||
JPMorgan Chase & Co. | 895,300 | 54,586,441 | ||
KeyCorp | 974,100 | 12,673,041 | ||
PNC Financial Services Group, Inc. (The) | 248,900 | 22,201,880 | ||
U.S. Bancorp | 759,500 | 31,147,095 | ||
Wells Fargo & Co. | 1,028,000 | 52,787,800 | ||
209,171,053 | ||||
Biotechnology — 0.8% | ||||
Amgen, Inc. | 83,500 | 11,549,720 | ||
Capital Markets — 5.5% | ||||
Ameriprise Financial, Inc. | 210,200 | 22,939,126 | ||
BlackRock, Inc. | 46,600 | 13,862,102 | ||
Goldman Sachs Group, Inc. (The) | 116,300 | 20,208,288 | ||
Invesco Ltd. | 795,500 | 24,843,465 | ||
81,852,981 | ||||
Chemicals — 1.7% | ||||
Dow Chemical Co. (The) | 344,200 | 14,594,080 | ||
LyondellBasell Industries NV, Class A | 121,400 | 10,119,904 | ||
24,713,984 | ||||
Communications Equipment — 2.6% | ||||
Cisco Systems, Inc. | 1,486,600 | 39,023,250 | ||
Consumer Finance — 2.7% | ||||
Capital One Financial Corp. | 276,700 | 20,066,284 | ||
Discover Financial Services | 372,900 | 19,387,071 | ||
39,453,355 | ||||
Containers and Packaging — 0.6% | ||||
WestRock Co. | 183,500 | 9,439,240 | ||
5
Shares | Value | |||
Diversified Financial Services — 0.9% | ||||
Berkshire Hathaway, Inc., Class B(1) | 102,900 | $ | 13,418,160 | |
Electric Utilities — 2.2% | ||||
PPL Corp. | 463,500 | 15,244,515 | ||
Westar Energy, Inc. | 179,200 | 6,888,448 | ||
Xcel Energy, Inc. | 282,300 | 9,996,243 | ||
32,129,206 | ||||
Electrical Equipment — 1.7% | ||||
Eaton Corp. plc | 484,700 | 24,865,110 | ||
Energy Equipment and Services — 2.7% | ||||
Baker Hughes, Inc. | 195,800 | 10,189,432 | ||
Halliburton Co. | 562,500 | 19,884,375 | ||
Oceaneering International, Inc. | 267,400 | 10,503,472 | ||
40,577,279 | ||||
Food and Staples Retailing — 2.1% | ||||
CVS Health Corp. | 201,400 | 19,431,072 | ||
Sysco Corp. | 319,100 | 12,435,327 | ||
31,866,399 | ||||
Food Products — 0.8% | ||||
Hershey Co. (The) | 122,300 | 11,236,924 | ||
Health Care Equipment and Supplies — 3.6% | ||||
Medtronic plc | 475,600 | 31,836,664 | ||
Zimmer Biomet Holdings, Inc. | 222,800 | 20,927,604 | ||
52,764,268 | ||||
Health Care Providers and Services — 3.8% | ||||
Anthem, Inc. | 123,600 | 17,304,000 | ||
HCA Holdings, Inc.(1) | 225,400 | 17,436,944 | ||
Laboratory Corp. of America Holdings(1) | 105,400 | 11,432,738 | ||
McKesson Corp. | 59,000 | 10,916,770 | ||
57,090,452 | ||||
Hotels, Restaurants and Leisure — 0.8% | ||||
Marriott International, Inc., Class A | 172,100 | 11,737,220 | ||
Household Durables — 1.5% | ||||
Whirlpool Corp. | 154,800 | 22,795,848 | ||
Insurance — 5.4% | ||||
Allstate Corp. (The) | 188,100 | 10,954,944 | ||
American International Group, Inc. | 345,900 | 19,654,038 | ||
MetLife, Inc. | 416,500 | 19,637,975 | ||
Principal Financial Group, Inc. | 126,900 | 6,007,446 | ||
Prudential Financial, Inc. | 206,700 | 15,752,607 | ||
Travelers Cos., Inc. (The) | 85,800 | 8,539,674 | ||
80,546,684 | ||||
Machinery — 3.0% | ||||
Ingersoll-Rand plc | 617,500 | 31,350,475 | ||
Stanley Black & Decker, Inc. | 134,700 | 13,063,206 | ||
44,413,681 | ||||
6
Shares | Value | |||
Media — 2.3% | ||||
AMC Networks, Inc.(1) | 165,100 | $ | 12,080,367 | |
Time Warner, Inc. | 322,100 | 22,144,375 | ||
34,224,742 | ||||
Multiline Retail — 0.6% | ||||
Macy's, Inc. | 185,200 | 9,504,464 | ||
Oil, Gas and Consumable Fuels — 10.6% | ||||
Apache Corp. | 76,300 | 2,987,908 | ||
Chevron Corp. | 302,600 | 23,869,088 | ||
Exxon Mobil Corp. | 304,400 | 22,632,140 | ||
Imperial Oil Ltd. | 803,300 | 25,450,374 | ||
Oasis Petroleum, Inc.(1) | 718,700 | 6,238,316 | ||
Occidental Petroleum Corp. | 363,300 | 24,032,295 | ||
Total SA ADR | 813,600 | 36,376,056 | ||
Valero Energy Corp. | 273,500 | 16,437,350 | ||
158,023,527 | ||||
Pharmaceuticals — 7.6% | ||||
Allergan plc(1) | 87,300 | 23,729,013 | ||
Johnson & Johnson | 249,400 | 23,281,490 | ||
Merck & Co., Inc. | 497,900 | 24,591,281 | ||
Pfizer, Inc. | 1,321,800 | 41,517,738 | ||
113,119,522 | ||||
Real Estate Investment Trusts (REITs) — 0.8% | ||||
Brixmor Property Group, Inc. | 518,300 | 12,169,684 | ||
Semiconductors and Semiconductor Equipment — 3.4% | ||||
Applied Materials, Inc. | 1,535,200 | 22,552,088 | ||
Microchip Technology, Inc. | 361,100 | 15,559,799 | ||
NXP Semiconductors NV(1) | 91,600 | 7,975,612 | ||
ON Semiconductor Corp.(1) | 513,000 | 4,822,200 | ||
50,909,699 | ||||
Software — 4.1% | ||||
Electronic Arts, Inc.(1) | 337,700 | 22,879,175 | ||
Oracle Corp. | 1,033,200 | 37,319,184 | ||
60,198,359 | ||||
Specialty Retail — 1.4% | ||||
Lowe's Cos., Inc. | 300,900 | 20,738,028 | ||
Technology Hardware, Storage and Peripherals — 1.0% | ||||
Western Digital Corp. | 176,700 | 14,037,048 | ||
TOTAL COMMON STOCKS (Cost $1,361,619,369) | 1,455,050,150 | |||
EXCHANGE-TRADED FUNDS — 1.2% | ||||
iShares Russell 1000 Value ETF (Cost $18,192,504) | 196,000 | 18,282,880 | ||
TEMPORARY CASH INVESTMENTS — 2.3% | ||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 2/15/25, valued at $25,733,138), at 0.01%, dated 9/30/15, due 10/1/15 (Delivery value $25,226,007) | 25,226,000 | |||
7
Shares | Value | |||
State Street Institutional Liquid Reserves Fund, Premier Class | 9,422,373 | $ | 9,422,373 | |
TOTAL TEMPORARY CASH INVESTMENTS (Cost $34,648,373) | 34,648,373 | |||
TOTAL INVESTMENT SECURITIES — 101.4% (Cost $1,414,460,246) | 1,507,981,403 | |||
OTHER ASSETS AND LIABILITIES — (1.4)% | (21,027,444) | |||
TOTAL NET ASSETS — 100.0% | $ | 1,486,953,959 | ||
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||
USD | 17,243,995 | CAD | 22,967,622 | JPMorgan Chase Bank N.A. | 10/30/15 | $ | 35,814 | |||
EUR | 1,020,017 | USD | 1,147,937 | UBS AG | 10/30/15 | (7,693 | ) | |||
USD | 27,257,870 | EUR | 24,380,594 | UBS AG | 10/30/15 | 3,576 | ||||
$ | 31,697 | |||||||||
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
CAD | - | Canadian Dollar |
EUR | - | Euro |
USD | - | United States Dollar |
(1) | Non-income producing. |
See Notes to Financial Statements.
8
Statement of Assets and Liabilities |
SEPTEMBER 30, 2015 (UNAUDITED) | |||
Assets | |||
Investment securities, at value (cost of $1,414,460,246) | $ | 1,507,981,403 | |
Cash | 170,955 | ||
Foreign currency holdings, at value (cost of $54,652) | 54,501 | ||
Receivable for investments sold | 3,881,996 | ||
Receivable for capital shares sold | 21,375 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 39,390 | ||
Dividends and interest receivable | 2,301,640 | ||
1,514,451,260 | |||
Liabilities | |||
Payable for investments purchased | 26,716,256 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 7,693 | ||
Accrued management fees | 773,352 | ||
27,497,301 | |||
Net Assets | $ | 1,486,953,959 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 1,266,511,442 | |
Undistributed net investment income | 1,817,105 | ||
Undistributed net realized gain | 125,072,744 | ||
Net unrealized appreciation | 93,552,668 | ||
$ | 1,486,953,959 | ||
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Institutional Class, $0.01 Par Value | $1,410,424,887 | 127,520,076 | $11.06 | |||
R6 Class, $0.01 Par Value | $76,529,072 | 6,917,362 | $11.06 | |||
See Notes to Financial Statements.
9
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $240,659) | $ | 15,965,100 | |
Interest | 2,546 | ||
15,967,646 | |||
Expenses: | |||
Management fees | 4,842,084 | ||
Directors' fees and expenses | 25,728 | ||
4,867,812 | |||
Net investment income (loss) | 11,099,834 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 54,432,461 | ||
Futures contract transactions | 140,977 | ||
Foreign currency transactions | 297,142 | ||
54,870,580 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (222,208,824 | ) | |
Futures contracts | (31,023 | ) | |
Translation of assets and liabilities in foreign currencies | (456,155 | ) | |
(222,696,002 | ) | ||
Net realized and unrealized gain (loss) | (167,825,422 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (156,725,588 | ) |
See Notes to Financial Statements.
10
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) AND YEAR ENDED MARCH 31, 2015 | ||||||
Increase (Decrease) in Net Assets | September 30, 2015 | March 31, 2015 | ||||
Operations | ||||||
Net investment income (loss) | $ | 11,099,834 | $ | 22,299,199 | ||
Net realized gain (loss) | 54,870,580 | 173,358,088 | ||||
Change in net unrealized appreciation (depreciation) | (222,696,002 | ) | (34,839,783 | ) | ||
Net increase (decrease) in net assets resulting from operations | (156,725,588 | ) | 160,817,504 | |||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Institutional Class | (11,082,431 | ) | (20,503,969 | ) | ||
R6 Class | (617,530 | ) | (639,472 | ) | ||
From net realized gains: | ||||||
Institutional Class | — | (105,699,397 | ) | |||
R6 Class | — | (3,167,409 | ) | |||
Decrease in net assets from distributions | (11,699,961 | ) | (130,010,247 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 203,248,275 | 79,600,811 | ||||
Net increase (decrease) in net assets | 34,822,726 | 110,408,068 | ||||
Net Assets | ||||||
Beginning of period | 1,452,131,233 | 1,341,723,165 | ||||
End of period | $ | 1,486,953,959 | $ | 1,452,131,233 | ||
Undistributed net investment income | $ | 1,817,105 | $ | 2,417,232 | ||
See Notes to Financial Statements.
11
Notes to Financial Statements |
SEPTEMBER 30, 2015 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. NT Large Company Value Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective. The fund is not permitted to invest in securities issued by companies assigned the Global Industry Classification Standard for the tobacco industry.
The fund offers the Institutional Class and the R6 Class, which have different fees and expenses. The difference in the fee structures between the classes is not the result of any difference in advisory or custodial fees or other expenses related to management of the fund’s assets, which do not vary by class. The fund’s R6 Class shares are available for purchase exclusively by certain American Century Investments funds of funds that are offered only through employer-sponsored retirement plans where a financial intermediary provides retirement recordkeeping services to plan participants. Because financial intermediaries do not receive any service, distribution or administrative fees for offering such funds of funds, American Century Investment Management, Inc. (ACIM) (the investment advisor) is able to charge the R6 Class a lower unified management fee.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Fixed income securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors: trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Exchange-traded futures contracts are valued at the settlement price as provided by the appropriate clearing corporation. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
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If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover futures contracts. ACIM monitors, on a daily basis, the securities segregated to ensure the fund designates a sufficient amount of liquid assets, marked-to-market daily. The fund may also receive assets or be required to pledge assets at the custodian bank or with a broker for margin requirements on futures contracts.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination
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by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc., and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC. Various funds issued by American Century Asset Allocation Portfolios, Inc. own, in aggregate, 100% of the shares of the fund. Related parties do not invest in the fund for the purpose of exercising management or control.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The strategy assets of the fund also include the assets of Large Company Value Fund, one fund in a series issued by the corporation. The annual management fee schedule ranges from 0.50% to 0.70% for the Institutional Class and 0.35% to 0.55% for the R6 Class. The effective annual management fee for each class for the six months ended September 30, 2015 was 0.64% for the Institutional Class and 0.49% for the R6 Class.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2015 were $583,628,228 and $373,276,424, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2015 | Year ended March 31, 2015 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Institutional Class/Shares Authorized | 700,000,000 | 500,000,000 | ||||||||
Sold | 16,560,161 | $ | 196,957,558 | 21,882,704 | $ | 266,961,883 | ||||
Issued in reinvestment of distributions | 924,276 | 11,082,431 | 10,198,049 | 126,203,366 | ||||||
Redeemed | (2,400,069 | ) | (29,893,029 | ) | (28,455,605 | ) | (356,182,291 | ) | ||
15,084,368 | 178,146,960 | 3,625,148 | 36,982,958 | |||||||
R6 Class/Shares Authorized | 50,000,000 | 20,000,000 | ||||||||
Sold | 2,626,071 | 31,983,751 | 4,384,819 | 53,708,520 | ||||||
Issued in reinvestment of distributions | 51,591 | 617,530 | 307,590 | 3,806,881 | ||||||
Redeemed | (638,894 | ) | (7,499,966 | ) | (1,190,945 | ) | (14,897,548 | ) | ||
2,038,768 | 25,101,315 | 3,501,464 | 42,617,853 | |||||||
Net increase (decrease) | 17,123,136 | $ | 203,248,275 | 7,126,612 | $ | 79,600,811 | ||||
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments. There were no significant transfers between levels during the period.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 1,429,599,776 | $ | 25,450,374 | — | |||
Exchange-Traded Funds | 18,282,880 | — | — | |||||
Temporary Cash Investments | 9,422,373 | 25,226,000 | — | |||||
$ | 1,457,305,029 | $ | 50,676,374 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 39,390 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | (7,693 | ) | — | |||
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7. Derivative Instruments
Equity Price Risk — The fund is subject to equity price risk in the normal course of pursuing its investment objectives. A fund may enter into futures contracts based on an equity index in order to manage its exposure to changes in market conditions. A fund may purchase futures contracts to gain exposure to increases in market value or sell futures contracts to protect against a decline in market value. Upon entering into a futures contract, a fund is required to deposit either cash or securities in an amount equal to a certain percentage of the contract value (initial margin). Subsequent payments (variation margin) are made or received daily, in cash, by a fund. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. A fund recognizes a realized gain or loss when the contract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of net realized gain (loss) on futures contract transactions and change in net unrealized appreciation (depreciation) on futures contracts, respectively. One of the risks of entering into futures contracts is the possibility that the change in value of the contract may not correlate with the changes in value of the underlying securities. During the period, the fund participated in equity price risk derivative instruments for temporary investment purposes.
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $46,076,786.
Value of Derivative Instruments as of September 30, 2015 | ||||||||
Asset Derivatives | Liability Derivatives | |||||||
Type of Risk Exposure | Location on Statement of Assets and Liabilities | Value | Location on Statement of Assets and Liabilities | Value | ||||
Foreign Currency Risk | Unrealized appreciation on forward foreign currency exchange contracts | $ | 39,390 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 7,693 | ||
Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended September 30, 2015 | ||||||||
Net Realized Gain (Loss) | Change in Net Unrealized Appreciation (Depreciation) | |||||||
Type of Risk Exposure | Location on Statement of Operations | Value | Location on Statement of Operations | Value | ||||
Equity Price Risk | Net realized gain (loss) on futures contract transactions | $ | 140,977 | Change in net unrealized appreciation (depreciation) on futures contracts | $ | (31,023 | ) | |
Foreign Currency Risk | Net realized gain (loss) on foreign currency transactions | 328,569 | Change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies | (471,118 | ) | |||
$ | 469,546 | $ | (502,141 | ) | ||||
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8. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of September 30, 2015, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $ | 1,429,088,163 | |
Gross tax appreciation of investments | $ | 181,142,888 | |
Gross tax depreciation of investments | (102,249,648 | ) | |
Net tax appreciation (depreciation) of investments | $ | 78,893,240 | |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
17
Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Institutional Class | |||||||||||||||
2015(3) | $12.38 | 0.09 | (1.32) | (1.23) | (0.09) | — | (0.09) | $11.06 | (9.97)% | 0.64%(4) | 1.45%(4) | 25% | $1,410,425 | ||
2015 | $12.18 | 0.19 | 1.14 | 1.33 | (0.18) | (0.95) | (1.13) | $12.38 | 11.01% | 0.64% | 1.52% | 68% | $1,391,730 | ||
2014 | $10.45 | 0.21 | 2.03 | 2.24 | (0.20) | (0.31) | (0.51) | $12.18 | 21.75% | 0.65% | 1.81% | 35% | $1,324,951 | ||
2013 | $9.31 | 0.19 | 1.25 | 1.44 | (0.19) | (0.11) | (0.30) | $10.45 | 15.87% | 0.67% | 2.03% | 37% | $941,901 | ||
2012 | $8.86 | 0.17 | 0.44 | 0.61 | (0.16) | — | (0.16) | $9.31 | 7.07% | 0.67% | 2.02% | 47% | $668,644 | ||
2011 | $8.02 | 0.14 | 0.83 | 0.97 | (0.13) | — | (0.13) | $8.86 | 12.24% | 0.66% | 1.70% | 38% | $481,887 | ||
R6 Class | |||||||||||||||
2015(3) | $12.38 | 0.10 | (1.32) | (1.22) | (0.10) | — | (0.10) | $11.06 | (9.91)% | 0.49%(4) | 1.60%(4) | 25% | $76,529 | ||
2015 | $12.18 | 0.21 | 1.14 | 1.35 | (0.20) | (0.95) | (1.15) | $12.38 | 11.17% | 0.49% | 1.67% | 68% | $60,401 | ||
2014(5) | $11.54 | 0.15 | 0.96 | 1.11 | (0.16) | (0.31) | (0.47) | $12.18 | 9.83% | 0.50%(4) | 1.93%(4) | 35%(6) | $16,772 | ||
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Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day. Total returns for periods less than one year are not annualized. |
(3) | Six months ended September 30, 2015 (unaudited). |
(4) | Annualized. |
(5) | July 26, 2013 (commencement of sale) through March 31, 2014. |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2014. |
See Notes to Financial Statements.
19
Approval of Management Agreement |
At a meeting held on June 30, 2015, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, the Directors requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis and the information received was supplemental to the extensive information that the Board and its committees receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
• | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
• | the Fund’s investment performance compared to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the Advisor’s compliance policies, procedures, and regulatory experience; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | data comparing services provided and charges to other investment management clients of the Advisor; |
• | acquired fund fees and expenses; |
• | payments to intermediaries by the Fund and the Advisor; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
In keeping with their practice, the Directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The independent Directors also had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the
20
Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
• | constructing and designing the Fund |
• | portfolio research and security selection |
• | initial capitalization/funding |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services (except the independent Directors’ counsel) |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution (except Rule 12b-1 plans) |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one-year period and slightly below its benchmark for the three- and five-year periods reviewed by the Board. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board particularly noted the Advisor’s continual efforts to maintain effective business continuity plans and to address cybersecurity threats. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to
21
other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services. The Board also noted that economies of scale are shared with the Fund and its shareholders through management fee breakpoints that serve to reduce the effective management fee as the assets of the Fund grow.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent Directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges, and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was below the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
22
Payments to Intermediaries. The Directors also requested and received a description of payments made to intermediaries by the Fund and the Advisor. These payments include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Board reviewed such information and found the payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. Additionally, the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions, which the Board concluded is likely to benefit other clients of the Advisor as well as Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients and, where expressly provided, these other client assets may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent Directors, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
23
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its
website at americancentury.com and, upon request, by calling 1-800-345-2021.
24
| ||
Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2015 American Century Proprietary Holdings, Inc. All rights reserved. CL-SAN-87398 1511 | ||
SEMIANNUAL REPORT | SEPTEMBER 30, 2015 |
NT Mid Cap Value Fund
Table of Contents |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Performance |
Total Returns as of September 30, 2015 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | Since Inception | Inception Date | |
Institutional Class | ACLMX | -7.07% | 0.82% | 13.18% | 8.65% | 5/12/06 |
Russell Midcap Value Index | — | -9.84% | -2.07% | 13.15% | 6.92% | — |
R6 Class | ACDSX | -6.93% | 0.97% | — | 8.24% | 7/26/13 |
(1) | Total returns for periods less than one year are not annualized. |
Total Annual Fund Operating Expenses | |
Institutional Class | R6 Class |
0.81% | 0.66% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
2
Fund Characteristics |
SEPTEMBER 30, 2015 | |
Top Ten Holdings | % of net assets |
Republic Services, Inc. | 3.0% |
Northern Trust Corp. | 2.8% |
Sysco Corp. | 2.7% |
Imperial Oil Ltd. | 2.1% |
Zimmer Biomet Holdings, Inc. | 1.8% |
LifePoint Health, Inc. | 1.8% |
Cameron International Corp. | 1.7% |
ConAgra Foods, Inc. | 1.6% |
Weyerhaeuser Co. | 1.6% |
Edison International | 1.5% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 8.5% |
Banks | 7.8% |
Insurance | 7.5% |
Food Products | 6.4% |
Commercial Services and Supplies | 5.9% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 98.1% |
Temporary Cash Investments | 2.2% |
Other Assets and Liabilities | (0.3)% |
3
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2015 to September 30, 2015.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 4/1/15 | Ending Account Value 9/30/15 | Expenses Paid During Period(1)4/1/15 - 9/30/15 | Annualized Expense Ratio(1) | |
Actual | ||||
Institutional Class (after waiver) | $1,000 | $929.30 | $3.81 | 0.79% |
Institutional Class (before waiver) | $1,000 | $929.30(2) | $3.86 | 0.80% |
R6 Class (after waiver) | $1,000 | $930.70 | $3.09 | 0.64% |
R6 Class (before waiver) | $1,000 | $930.70(2) | $3.14 | 0.65% |
Hypothetical | ||||
Institutional Class (after waiver) | $1,000 | $1,021.05 | $3.99 | 0.79% |
Institutional Class (before waiver) | $1,000 | $1,021.00 | $4.04 | 0.80% |
R6 Class (after waiver) | $1,000 | $1,021.80 | $3.23 | 0.64% |
R6 Class (before waiver) | $1,000 | $1,021.75 | $3.29 | 0.65% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
(2) | Ending account value assumes the return earned after waiver and would have been lower if a portion of the management fee had not been waived. |
4
Schedule of Investments |
SEPTEMBER 30, 2015 (UNAUDITED)
Shares | Value | |||
COMMON STOCKS — 98.1% | ||||
Aerospace and Defense — 1.1% | ||||
L-3 Communications Holdings, Inc. | 43,429 | $ | 4,539,199 | |
Textron, Inc. | 119,596 | 4,501,594 | ||
9,040,793 | ||||
Automobiles — 1.1% | ||||
Honda Motor Co., Ltd. ADR | 158,294 | 4,732,991 | ||
Thor Industries, Inc. | 85,739 | 4,441,280 | ||
9,174,271 | ||||
Banks — 7.8% | ||||
Bank of Hawaii Corp. | 85,771 | 5,445,601 | ||
BB&T Corp. | 156,992 | 5,588,915 | ||
BOK Financial Corp. | 70,650 | 4,571,762 | ||
Comerica, Inc. | 107,021 | 4,398,563 | ||
Commerce Bancshares, Inc. | 199,208 | 9,075,917 | ||
Cullen / Frost Bankers, Inc. | 65,787 | 4,182,737 | ||
M&T Bank Corp. | 74,961 | 9,141,494 | ||
PNC Financial Services Group, Inc. (The) | 77,923 | 6,950,732 | ||
SunTrust Banks, Inc. | 138,660 | 5,302,358 | ||
Westamerica Bancorporation | 183,580 | 8,158,295 | ||
62,816,374 | ||||
Capital Markets — 5.4% | ||||
Franklin Resources, Inc. | 140,352 | 5,229,516 | ||
LPL Financial Holdings, Inc. | 151,375 | 6,020,184 | ||
Northern Trust Corp. | 323,207 | 22,029,789 | ||
State Street Corp. | 78,991 | 5,308,985 | ||
T. Rowe Price Group, Inc. | 70,141 | 4,874,799 | ||
43,463,273 | ||||
Chemicals — 0.7% | ||||
Mosaic Co. (The) | 178,461 | 5,551,922 | ||
Commercial Services and Supplies — 5.9% | ||||
ADT Corp. (The) | 243,456 | 7,279,334 | ||
Clean Harbors, Inc.(1) | 137,005 | 6,024,110 | ||
Republic Services, Inc. | 578,451 | 23,832,181 | ||
Tyco International plc | 292,908 | 9,800,702 | ||
46,936,327 | ||||
Communications Equipment — 0.4% | ||||
Harris Corp. | 37,854 | 2,769,020 | ||
Containers and Packaging — 1.3% | ||||
Bemis Co., Inc. | 93,874 | 3,714,594 | ||
Sonoco Products Co. | 171,906 | 6,487,733 | ||
10,202,327 | ||||
5
Shares | Value | |||
Diversified Telecommunication Services — 1.5% | ||||
CenturyLink, Inc. | 361,889 | $ | 9,090,652 | |
Level 3 Communications, Inc.(1) | 74,061 | 3,235,725 | ||
12,326,377 | ||||
Electric Utilities — 5.5% | ||||
Edison International | 195,310 | 12,318,202 | ||
Great Plains Energy, Inc. | 274,460 | 7,415,909 | ||
OGE Energy Corp. | 115,817 | 3,168,753 | ||
Westar Energy, Inc. | 280,588 | 10,785,803 | ||
Xcel Energy, Inc. | 296,994 | 10,516,557 | ||
44,205,224 | ||||
Electrical Equipment — 1.4% | ||||
Emerson Electric Co. | 260,716 | 11,515,826 | ||
Electronic Equipment, Instruments and Components — 2.0% | ||||
Keysight Technologies, Inc.(1) | 272,689 | 8,409,729 | ||
TE Connectivity Ltd. | 126,876 | 7,598,603 | ||
16,008,332 | ||||
Energy Equipment and Services — 3.1% | ||||
Cameron International Corp.(1) | 215,740 | 13,229,177 | ||
FMC Technologies, Inc.(1) | 165,604 | 5,133,724 | ||
Helmerich & Payne, Inc. | 132,342 | 6,254,483 | ||
24,617,384 | ||||
Food and Staples Retailing — 2.7% | ||||
Sysco Corp. | 561,883 | 21,896,581 | ||
Food Products — 6.4% | ||||
Campbell Soup Co. | 66,255 | 3,357,803 | ||
ConAgra Foods, Inc. | 309,985 | 12,557,492 | ||
Danone SA | 33,222 | 2,101,091 | ||
General Mills, Inc. | 108,761 | 6,104,755 | ||
J.M. Smucker Co. (The) | 84,527 | 9,643,686 | ||
Kellogg Co. | 140,618 | 9,358,128 | ||
Mondelez International, Inc., Class A | 185,689 | 7,774,799 | ||
50,897,754 | ||||
Gas Utilities — 2.2% | ||||
Atmos Energy Corp. | 132,907 | 7,732,529 | ||
Laclede Group, Inc. (The) | 186,896 | 10,191,439 | ||
17,923,968 | ||||
Health Care Equipment and Supplies — 3.4% | ||||
Becton Dickinson and Co. | 33,256 | 4,411,741 | ||
Boston Scientific Corp.(1) | 501,662 | 8,232,273 | ||
Zimmer Biomet Holdings, Inc. | 156,917 | 14,739,214 | ||
27,383,228 | ||||
Health Care Providers and Services — 3.6% | ||||
Cardinal Health, Inc. | 30,611 | 2,351,537 | ||
Express Scripts Holding Co.(1) | 29,418 | 2,381,681 | ||
LifePoint Health, Inc.(1) | 204,770 | 14,518,193 | ||
6
Shares | Value | |||
Quest Diagnostics, Inc. | 155,896 | $ | 9,582,927 | |
28,834,338 | ||||
Hotels, Restaurants and Leisure — 0.5% | ||||
Carnival Corp. | 83,502 | 4,150,049 | ||
Household Durables — 1.1% | ||||
PulteGroup, Inc. | 277,601 | 5,238,331 | ||
Toll Brothers, Inc.(1) | 100,659 | 3,446,564 | ||
8,684,895 | ||||
Industrial Conglomerates — 1.3% | ||||
Koninklijke Philips NV | 434,545 | 10,246,464 | ||
Insurance — 7.5% | ||||
ACE Ltd. | 96,085 | 9,935,189 | ||
Aflac, Inc. | 66,447 | 3,862,564 | ||
Allstate Corp. (The) | 47,207 | 2,749,336 | ||
Brown & Brown, Inc. | 176,800 | 5,475,496 | ||
Chubb Corp. (The) | 39,501 | 4,844,798 | ||
HCC Insurance Holdings, Inc. | 25,807 | 1,999,268 | ||
MetLife, Inc. | 79,840 | 3,764,456 | ||
ProAssurance Corp. | 89,090 | 4,371,646 | ||
Reinsurance Group of America, Inc. | 91,499 | 8,288,895 | ||
Torchmark Corp. | 62,369 | 3,517,612 | ||
Travelers Cos., Inc. (The) | 38,346 | 3,816,577 | ||
Unum Group | 224,825 | 7,212,386 | ||
59,838,223 | ||||
Leisure Products — 0.9% | ||||
Mattel, Inc. | 349,857 | 7,367,988 | ||
Machinery — 1.3% | ||||
Oshkosh Corp. | 108,783 | 3,952,087 | ||
Parker-Hannifin Corp. | 33,131 | 3,223,646 | ||
Pentair plc | 57,178 | 2,918,365 | ||
10,094,098 | ||||
Media — 0.8% | ||||
Markit Ltd.(1) | 207,324 | 6,012,396 | ||
Metals and Mining — 0.9% | ||||
Nucor Corp. | 184,685 | 6,934,922 | ||
Multi-Utilities — 2.7% | ||||
Ameren Corp. | 104,684 | 4,424,993 | ||
Consolidated Edison, Inc. | 81,397 | 5,441,390 | ||
NorthWestern Corp. | 78,216 | 4,210,367 | ||
PG&E Corp. | 136,188 | 7,190,726 | ||
21,267,476 | ||||
Multiline Retail — 0.4% | ||||
Target Corp. | 43,779 | 3,443,656 | ||
Oil, Gas and Consumable Fuels — 8.5% | ||||
Anadarko Petroleum Corp. | 71,191 | 4,299,224 | ||
Cimarex Energy Co. | 79,465 | 8,143,573 | ||
7
Shares | Value | |||
Devon Energy Corp. | 203,060 | $ | 7,531,495 | |
EQT Corp. | 148,461 | 9,615,819 | ||
Imperial Oil Ltd. | 519,433 | 16,456,821 | ||
Noble Energy, Inc. | 362,733 | 10,947,282 | ||
Occidental Petroleum Corp. | 167,351 | 11,070,269 | ||
68,064,483 | ||||
Real Estate Investment Trusts (REITs) — 4.8% | ||||
Boston Properties, Inc. | 24,466 | 2,896,774 | ||
Corrections Corp. of America | 262,480 | 7,753,659 | ||
Empire State Realty Trust, Inc. | 186,492 | 3,175,959 | ||
Host Hotels & Resorts, Inc. | 228,584 | 3,613,913 | ||
Piedmont Office Realty Trust, Inc., Class A | 477,616 | 8,544,550 | ||
Weyerhaeuser Co. | 454,355 | 12,422,066 | ||
38,406,921 | ||||
Road and Rail — 1.0% | ||||
Heartland Express, Inc. | 403,918 | 8,054,125 | ||
Semiconductors and Semiconductor Equipment — 5.0% | ||||
Applied Materials, Inc. | 678,605 | 9,968,707 | ||
Lam Research Corp. | 135,032 | 8,821,640 | ||
Maxim Integrated Products, Inc. | 209,599 | 7,000,607 | ||
Microchip Technology, Inc. | 182,356 | 7,857,720 | ||
Teradyne, Inc. | 369,975 | 6,663,250 | ||
40,311,924 | ||||
Specialty Retail — 2.5% | ||||
Advance Auto Parts, Inc. | 37,037 | 7,019,623 | ||
Bed Bath & Beyond, Inc.(1) | 69,609 | 3,969,105 | ||
CST Brands, Inc. | 179,005 | 6,025,308 | ||
Lowe's Cos., Inc. | 41,309 | 2,847,016 | ||
19,861,052 | ||||
Technology Hardware, Storage and Peripherals — 1.9% | ||||
SanDisk Corp. | 151,131 | 8,210,947 | ||
Western Digital Corp. | 90,377 | 7,179,549 | ||
15,390,496 | ||||
Textiles, Apparel and Luxury Goods — 0.8% | ||||
Ralph Lauren Corp. | 54,126 | 6,395,529 | ||
Thrifts and Mortgage Finance — 0.7% | ||||
Capitol Federal Financial, Inc. | 458,185 | 5,553,202 | ||
TOTAL COMMON STOCKS (Cost $764,043,468) | 785,641,218 | |||
TEMPORARY CASH INVESTMENTS — 2.2% | ||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 4.375%, 5/15/41, valued at $12,791,244), at 0.01%, dated 9/30/15, due 10/1/15 (Delivery value $12,540,003) | 12,540,000 | |||
State Street Institutional Liquid Reserves Fund, Premier Class | 4,683,782 | 4,683,782 | ||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $17,223,782) | 17,223,782 | |||
TOTAL INVESTMENT SECURITIES — 100.3% (Cost $781,267,250) | 802,865,000 | |||
OTHER ASSETS AND LIABILITIES — (0.3)% | (2,034,746) | |||
TOTAL NET ASSETS — 100.0% | $ | 800,830,254 | ||
8
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||
USD | 13,649,761 | CAD | 18,180,389 | JPMorgan Chase Bank N.A. | 10/30/15 | $ | 28,349 | |
EUR | 216,755 | USD | 242,150 | UBS AG | 10/30/15 | 153 | ||
USD | 10,281,656 | EUR | 9,196,348 | UBS AG | 10/30/15 | 1,349 | ||
USD | 255,702 | EUR | 227,594 | UBS AG | 10/30/15 | 1,282 | ||
USD | 2,855,710 | JPY | 345,032,639 | Credit Suisse AG | 10/30/15 | (21,358) | ||
$ | 9,775 | |||||||
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
CAD | - | Canadian Dollar |
EUR | - | Euro |
JPY | - | Japanese Yen |
USD | - | United States Dollar |
(1) | Non-income producing. |
See Notes to Financial Statements.
9
Statement of Assets and Liabilities |
SEPTEMBER 30, 2015 (UNAUDITED) | |||
Assets | |||
Investment securities, at value (cost of $781,267,250) | $ | 802,865,000 | |
Foreign currency holdings, at value (cost of $24,464) | 23,692 | ||
Receivable for investments sold | 4,878,430 | ||
Receivable for capital shares sold | 10,125 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 31,133 | ||
Dividends and interest receivable | 1,733,688 | ||
809,542,068 | |||
Liabilities | |||
Payable for investments purchased | 8,170,240 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 21,358 | ||
Accrued management fees | 520,216 | ||
8,711,814 | |||
Net Assets | $ | 800,830,254 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 730,443,334 | |
Undistributed net investment income | 1,627,832 | ||
Undistributed net realized gain | 47,152,734 | ||
Net unrealized appreciation | 21,606,354 | ||
$ | 800,830,254 | ||
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||
Institutional Class, $0.01 Par Value | $759,102,552 | 64,179,193 | $11.83 | ||
R6 Class, $0.01 Par Value | $41,727,702 | 3,528,699 | $11.83 | ||
See Notes to Financial Statements.
10
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $34,434) | $ | 9,216,698 | |
Interest | 2,658 | ||
9,219,356 | |||
Expenses: | |||
Management fees | 3,315,780 | ||
Directors' fees and expenses | 14,074 | ||
3,329,854 | |||
Fees waived | (45,300 | ) | |
3,284,554 | |||
Net investment income (loss) | 5,934,802 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 25,094,350 | ||
Foreign currency transactions | 785,711 | ||
25,880,061 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (91,797,461 | ) | |
Translation of assets and liabilities in foreign currencies | (399,400 | ) | |
(92,196,861 | ) | ||
Net realized and unrealized gain (loss) | (66,316,800 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (60,381,998 | ) |
See Notes to Financial Statements.
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Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) AND YEAR ENDED MARCH 31, 2015 | ||||||
Increase (Decrease) in Net Assets | September 30, 2015 | March 31, 2015 | ||||
Operations | ||||||
Net investment income (loss) | $ | 5,934,802 | $ | 9,098,462 | ||
Net realized gain (loss) | 25,880,061 | 71,375,114 | ||||
Change in net unrealized appreciation (depreciation) | (92,196,861) | 6,353,964 | ||||
Net increase (decrease) in net assets resulting from operations | (60,381,998) | 86,827,540 | ||||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Institutional Class | (5,495,954) | (8,223,940) | ||||
R6 Class | (309,441) | (248,270) | ||||
From net realized gains: | ||||||
Institutional Class | — | (64,721,591) | ||||
R6 Class | — | (1,950,906) | ||||
Decrease in net assets from distributions | (5,805,395) | (75,144,707) | ||||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 71,657,223 | 179,477,410 | ||||
Net increase (decrease) in net assets | 5,469,830 | 191,160,243 | ||||
Net Assets | ||||||
Beginning of period | 795,360,424 | 604,200,181 | ||||
End of period | $ | 800,830,254 | $ | 795,360,424 | ||
Undistributed net investment income | $ | 1,627,832 | $ | 1,498,425 | ||
See Notes to Financial Statements.
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Notes to Financial Statements |
SEPTEMBER 30, 2015 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. NT Mid Cap Value Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective. The fund is not permitted to invest in securities issued by companies assigned the Global Industry Classification Standard for the tobacco industry.
The fund offers the Institutional Class and the R6 Class, which have different fees and expenses. The difference in the fee structures between the classes is not the result of any difference in advisory or custodial fees or other expenses related to management of the fund’s assets, which do not vary by class. The fund’s R6 Class shares are available for purchase exclusively by certain American Century Investments funds of funds that are offered only through employer-sponsored retirement plans where a financial intermediary provides retirement recordkeeping services to plan participants. Because financial intermediaries do not receive any service, distribution or administrative fees for offering such funds of funds, American Century Investment Management, Inc. (ACIM) (the investment advisor) is able to charge the R6 Class a lower unified management fee.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Fixed income securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors: trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
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If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
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Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc., and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC. Various funds issued by American Century Asset Allocation Portfolios, Inc. own, in aggregate, 100% of the shares of the fund. Related parties do not invest in the fund for the purpose of exercising management or control.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The annual management fee is 0.80% for the Institutional Class and 0.65% for the R6 Class. During the six months ended September 30, 2015, the investment advisor voluntarily agreed to waive 0.05% of its management fee for assets over $7 billion. The fee waiver is determined by applying a formula that takes into account the fund's assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The strategy assets of the fund also include the assets of Mid Cap Value Fund, one fund in a series issued by the corporation. The investment advisor expects the fee waiver to continue through July 31, 2016, and cannot terminate it without the approval of the Board of Directors. The total amount of the waiver for each class for the six months ended September 30, 2015 was $43,126 for the Institutional Class and $2,174 for the R6 Class. The effective annual management fee after waiver for each class for the six months ended September 30, 2015 was 0.79% for the Institutional Class and 0.64% for the R6 Class.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2015 were $364,754,952 and $288,828,644, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2015 | Year ended March 31, 2015 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Institutional Class/Shares Authorized | 375,000,000 | 200,000,000 | ||||||||
Sold | 5,805,511 | $ | 73,736,781 | 9,880,789 | $ | 126,528,252 | ||||
Issued in reinvestment of distributions | 440,831 | 5,495,954 | 5,774,389 | 72,945,531 | ||||||
Redeemed | (1,534,089 | ) | (19,595,342 | ) | (3,456,473 | ) | (45,260,550 | ) | ||
4,712,253 | 59,637,393 | 12,198,705 | 154,213,233 | |||||||
R6 Class/Shares Authorized | 20,000,000 | 20,000,000 | ||||||||
Sold | 1,229,600 | 15,531,782 | 1,984,889 | 25,266,784 | ||||||
Issued in reinvestment of distributions | 24,853 | 309,441 | 174,175 | 2,199,176 | ||||||
Redeemed | (312,831 | ) | (3,821,393 | ) | (169,794 | ) | (2,201,783 | ) | ||
941,622 | 12,019,830 | 1,989,270 | 25,264,177 | |||||||
Net increase (decrease) | 5,653,875 | $ | 71,657,223 | 14,187,975 | $ | 179,477,410 | ||||
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments. There were no significant transfers between levels during the period.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 756,836,842 | $ | 28,804,376 | — | |||
Temporary Cash Investments | 4,683,782 | 12,540,000 | — | |||||
$ | 761,520,624 | $ | 41,344,376 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 31,133 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | (21,358 | ) | — | |||
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7. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $30,903,339.
The value of foreign currency risk derivative instruments as of September 30, 2015, is disclosed on the Statement of Assets and Liabilities as an asset of $31,133 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $21,358 in unrealized depreciation on forward foreign currency exchange contracts. For the six months ended September 30, 2015, the effect of foreign currency risk derivative instruments on the Statement of Operations was $772,371 in net realized gain (loss) on foreign currency transactions and $(399,635) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
8. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of September 30, 2015, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $ | 790,774,168 | |
Gross tax appreciation of investments | $ | 71,461,050 | |
Gross tax depreciation of investments | (59,370,218 | ) | |
Net tax appreciation (depreciation) of investments | $ | 12,090,832 | |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
17
Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Institutional Class | |||||||||||||||||
2015(3) | $12.82 | 0.09 | (0.99) | (0.90) | (0.09) | — | (0.09) | $11.83 | (7.07)% | 0.79%(4) | 0.80%(4) | 1.42%(4) | 1.41%(4) | 36% | $759,103 | ||
2015 | $12.62 | 0.18 | 1.56 | 1.74 | (0.17) | (1.37) | (1.54) | $12.82 | 14.05% | 0.80% | 0.80% | 1.37% | 1.37% | 67% | $762,209 | ||
2014 | $11.41 | 0.19 | 2.15 | 2.34 | (0.18) | (0.95) | (1.13) | $12.62 | 21.19% | 0.80% | 0.80% | 1.55% | 1.55% | 69% | $596,655 | ||
2013 | $10.16 | 0.19 | 1.59 | 1.78 | (0.22) | (0.31) | (0.53) | $11.41 | 18.32% | 0.80% | 0.80% | 1.89% | 1.89% | 71% | $423,477 | ||
2012 | $10.70 | 0.20 | 0.22 | 0.42 | (0.14) | (0.82) | (0.96) | $10.16 | 4.93% | 0.81% | 0.81% | 2.01% | 2.01% | 82% | $301,868 | ||
2011 | $9.73 | 0.23 | 1.45 | 1.68 | (0.23) | (0.48) | (0.71) | $10.70 | 17.91% | 0.80% | 0.80% | 2.35% | 2.35% | 102% | $216,381 | ||
R6 Class | |||||||||||||||||
2015(3) | $12.81 | 0.10 | (0.98) | (0.88) | (0.10) | — | (0.10) | $11.83 | (6.93)% | 0.64%(4) | 0.65%(4) | 1.57%(4) | 1.56%(4) | 36% | $41,728 | ||
2015 | $12.62 | 0.20 | 1.55 | 1.75 | (0.19) | (1.37) | (1.56) | $12.81 | 14.14% | 0.65% | 0.65% | 1.52% | 1.52% | 67% | $33,151 | ||
2014(5) | $12.30 | 0.14 | 1.26 | 1.40 | (0.13) | (0.95) | (1.08) | $12.62 | 11.89% | 0.65%(4) | 0.65%(4) | 1.70%(4) | 1.70%(4) | 69%(6) | $7,546 | ||
18
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day. Total returns for periods less than one year are not annualized. |
(3) | Six months ended September 30, 2015 (unaudited). |
(4) | Annualized. |
(5) | July 26, 2013 (commencement of sale) through March 31, 2014. |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2014. |
See Notes to Financial Statements.
19
Approval of Management Agreement |
At a meeting held on June 30, 2015, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, the Directors requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis and the information received was supplemental to the extensive information that the Board and its committees receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
• | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
• | the Fund’s investment performance compared to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the Advisor’s compliance policies, procedures, and regulatory experience; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | data comparing services provided and charges to other investment management clients of the Advisor; |
• | acquired fund fees and expenses; |
• | payments to intermediaries by the Fund and the Advisor; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
In keeping with their practice, the Directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The independent Directors also had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the
20
Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
• | constructing and designing the Fund |
• | portfolio research and security selection |
• | initial capitalization/funding |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services (except the independent Directors’ counsel) |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution (except Rule 12b-1 plans) |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one-year period, at its benchmark for the three-year period, and slightly below its benchmark for the five-year period reviewed by the Board. The Board discussed the Fund's performance with the Advisor and was satisfied with the efforts being undertaken by the Advisor. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board particularly noted the Advisor’s continual efforts to maintain effective business continuity plans and to address cybersecurity threats. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading
21
activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent Directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges, and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was below the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board and the Advisor agreed to a reduction of the Fund's annual unified management fee of 0.05% for strategy assets over $7 billion for at least one year, beginning August 1, 2015. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
22
Payments to Intermediaries. The Directors also requested and received a description of payments made to intermediaries by the Fund and the Advisor. These payments include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Board reviewed such information and found the payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. Additionally, the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions, which the Board concluded is likely to benefit other clients of the Advisor as well as Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients and, where expressly provided, these other client assets may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent Directors, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
23
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its
website at americancentury.com and, upon request, by calling 1-800-345-2021.
24
| ||
Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2015 American Century Proprietary Holdings, Inc. All rights reserved. CL-SAN-87399 1511 | ||
SEMIANNUAL REPORT | SEPTEMBER 30, 2015 |
Small Cap Value Fund
Table of Contents |
President’s Letter | 2 | |
Performance | 3 | |
Fund Characteristics | ||
Shareholder Fee Example | ||
Schedule of Investments | ||
Statement of Assets and Liabilities | ||
Statement of Operations | ||
Statement of Changes in Net Assets | ||
Notes to Financial Statements | ||
Financial Highlights | ||
Approval of Management Agreement | ||
Additional Information | ||
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
| Dear Investor: Thank you for reviewing this semiannual report for the six months ended September 30, 2015. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information. For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com. |
Jonathan Thomas | |
Divergence in Economic Growth and Monetary Policies, Combined With China Turmoil, Triggered Market Volatility
Divergence between the U.S. and the rest of the world, along with China’s struggles, lower commodity prices, capital market volatility, and risk-off trading, were key themes during the reporting period. Global divergence described not only the relatively stronger economic growth enjoyed by the U.S. compared with most of the world, but also the related contrast between the U.S. Federal Reserve’s (the Fed’s) expected unwinding of monetary stimulus versus the continuation and expansion of stimulus by other major central banks. Central bank moves—including the Fed’s delayed normalization of its extremely low interest rate positioning—helped trigger large market swings.
In 2014, the Fed ended its latest massive bond-buying program (quantitative easing, QE), leading to expectations that interest rates would rise. But while QE was halted in the U.S., other major central banks were starting or increasing QE as their economies faltered. This divergence helped fuel increased demand for the U.S. dollar and U.S. dollar-denominated assets, and put downward pressure on commodity prices, most notably crude oil. Low inflation also prevailed amid muted demand for commodities, particularly as China’s growth faltered, which had a broad dampening impact on global markets. In this environment, the U.S. dollar and U.S. government securities benefited from “flight to quality” capital flows. Conversely, emerging market, commodity-related, and value equity indices suffered significant declines.
We expect continued economic and monetary policy divergence between the U.S. and non-U.S. economies in the coming months, accompanied by further market volatility. This could present both challenges and opportunities for active investment managers. In this environment, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios to meet financial goals. We appreciate your continued trust in us.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of September 30, 2015 | |||||||
Average Annual Returns | |||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | ASVIX | -9.07% | 3.05% | 10.56% | 7.41% | 10.98% | 7/31/98 |
Russell 2000 Value Index | — | -11.80% | -1.60% | 10.16% | 5.34% | 7.93% | — |
Institutional Class | ACVIX | -8.88% | 3.35% | 10.79% | 7.62% | 11.60% | 10/26/98 |
A Class(2) | ACSCX | 12/31/99 | |||||
No sales charge* | -9.18% | 2.83% | 10.26% | 7.13% | 11.58% | ||
With sales charge* | -14.36% | -3.09% | 8.96% | 6.50% | 11.16% | ||
C Class | ASVNX | 3/1/10 | |||||
No sales charge* | -9.52% | 2.07% | 9.44% | — | 9.07% | ||
With sales charge* | -10.42% | 2.07% | 9.44% | — | 9.07% | ||
R Class | ASVRX | -9.24% | 2.68% | 10.01% | — | 9.65% | 3/1/10 |
R6 Class | ASVDX | -8.89% | 3.50% | — | — | 4.14% | 7/26/13 |
* Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum initial sales charge and may be subject to a maximum CDSC of 1.00%. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied.
(1) | Total returns for periods less than one year are not annualized. |
(2) | Prior to March 1, 2010, the A Class was referred to as the Advisor Class and did not have a front-end sales charge. Performance prior to that date has been adjusted to reflect this charge. |
Total Annual Fund Operating Expenses | |||||
Investor Class | Institutional Class | A Class | C Class | R Class | R6 Class |
1.25% | 1.05% | 1.50% | 2.25% | 1.75% | 0.90% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
3
Fund Characteristics |
SEPTEMBER 30, 2015 | |
Top Ten Holdings | % of net assets |
BankUnited, Inc. | 2.0% |
UMB Financial Corp. | 2.0% |
Mentor Graphics Corp. | 1.9% |
Berry Plastics Group, Inc. | 1.8% |
Endurance Specialty Holdings Ltd. | 1.7% |
EVERTEC, Inc. | 1.7% |
Entravision Communications Corp., Class A | 1.7% |
ClubCorp Holdings, Inc. | 1.7% |
Allied World Assurance Co. Holdings Ltd. | 1.6% |
Bank of the Ozarks, Inc. | 1.6% |
Top Five Industries | % of net assets |
Banks | 18.7% |
Real Estate Investment Trusts (REITs) | 11.0% |
Insurance | 6.3% |
Machinery | 5.2% |
Media | 4.1% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 98.1% |
Temporary Cash Investments | 1.7% |
Other Assets and Liabilities | 0.2% |
4
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2015 to September 30, 2015.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
5
Beginning Account Value 4/1/15 | Ending Account Value 9/30/15 | Expenses Paid During Period(1)4/1/15 - 9/30/15 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $909.30 | $6.01 | 1.26% |
Institutional Class | $1,000 | $911.20 | $5.06 | 1.06% |
A Class | $1,000 | $908.20 | $7.20 | 1.51% |
C Class | $1,000 | $904.80 | $10.76 | 2.26% |
R Class | $1,000 | $907.60 | $8.39 | 1.76% |
R6 Class | $1,000 | $911.10 | $4.35 | 0.91% |
Hypothetical | ||||
Investor Class | $1,000 | $1,018.70 | $6.36 | 1.26% |
Institutional Class | $1,000 | $1,019.70 | $5.35 | 1.06% |
A Class | $1,000 | $1,017.45 | $7.62 | 1.51% |
C Class | $1,000 | $1,013.70 | $11.38 | 2.26% |
R Class | $1,000 | $1,016.20 | $8.87 | 1.76% |
R6 Class | $1,000 | $1,020.45 | $4.60 | 0.91% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
6
Schedule of Investments |
SEPTEMBER 30, 2015 (UNAUDITED)
Shares | Value | |||
COMMON STOCKS — 98.1% | ||||
Auto Components — 1.4% | ||||
Dana Holding Corp. | 310,000 | $ | 4,922,800 | |
Stoneridge, Inc.(1) | 370,000 | 4,565,800 | ||
Tower International, Inc.(1) | 440,000 | 10,454,400 | ||
19,943,000 | ||||
Banks — 18.7% | ||||
Bank of the Ozarks, Inc. | 525,000 | 22,974,000 | ||
BankUnited, Inc. | 789,936 | 28,240,212 | ||
Capital Bank Financial Corp., Class A(1) | 585,000 | 17,684,550 | ||
Cullen / Frost Bankers, Inc. | 180,000 | 11,444,400 | ||
Eagle Bancorp, Inc.(1) | 390,000 | 17,745,000 | ||
FCB Financial Holdings, Inc., Class A(1) | 465,000 | 15,168,300 | ||
First Financial Bankshares, Inc. | 565,000 | 17,955,700 | ||
First NBC Bank Holding Co.(1) | 240,000 | 8,409,600 | ||
Home Bancshares, Inc. | 510,000 | 20,655,000 | ||
LegacyTexas Financial Group, Inc. | 715,000 | 21,793,200 | ||
ServisFirst Bancshares, Inc. | 210,000 | 8,721,300 | ||
Southside Bancshares, Inc. | 635,000 | 17,494,250 | ||
Texas Capital Bancshares, Inc.(1) | 360,000 | 18,871,200 | ||
UMB Financial Corp. | 555,000 | 28,199,550 | ||
Valley National Bancorp | 1,350,000 | 13,284,000 | ||
268,640,262 | ||||
Building Products — 1.1% | ||||
Continental Building Products, Inc.(1) | 576,086 | 11,832,806 | ||
NCI Building Systems, Inc.(1) | 330,000 | 3,488,100 | ||
15,320,906 | ||||
Capital Markets — 0.8% | ||||
Ares Management LP | 660,000 | 11,536,800 | ||
Chemicals — 2.6% | ||||
Chemtura Corp.(1) | 270,000 | 7,727,400 | ||
Innophos Holdings, Inc. | 275,000 | 10,901,000 | ||
Innospec, Inc. | 393,455 | 18,299,592 | ||
LSB Industries, Inc.(1) | 60,009 | 919,338 | ||
37,847,330 | ||||
Commercial Services and Supplies — 3.9% | ||||
Brink's Co. (The) | 605,000 | 16,341,050 | ||
Clean Harbors, Inc.(1) | 280,000 | 12,311,600 | ||
InnerWorkings, Inc.(1) | 894,933 | 5,593,331 | ||
Multi-Color Corp. | 275,000 | 21,034,750 | ||
55,280,731 | ||||
Communications Equipment — 0.7% | ||||
Polycom, Inc.(1) | 975,000 | 10,218,000 | ||
Construction and Engineering — 0.4% | ||||
Great Lakes Dredge & Dock Corp.(1) | 1,210,000 | 6,098,400 | ||
7
Shares | Value | |||
Containers and Packaging — 3.3% | ||||
Berry Plastics Group, Inc.(1) | 840,000 | $ | 25,258,800 | |
Graphic Packaging Holding Co. | 1,755,000 | 22,446,450 | ||
47,705,250 | ||||
Diversified Consumer Services — 0.8% | ||||
Steiner Leisure, Ltd.(1) | 185,000 | 11,688,300 | ||
Diversified Financial Services — 0.8% | ||||
Compass Diversified Holdings | 755,000 | 12,170,600 | ||
Electric Utilities — 1.7% | ||||
ALLETE, Inc. | 175,000 | 8,835,750 | ||
El Paso Electric Co. | 190,000 | 6,995,800 | ||
Great Plains Energy, Inc. | 320,000 | 8,646,400 | ||
24,477,950 | ||||
Electrical Equipment — 0.3% | ||||
Thermon Group Holdings, Inc.(1) | 217,449 | 4,468,577 | ||
Electronic Equipment, Instruments and Components — 1.0% | ||||
Ingram Micro, Inc., Class A | 530,000 | 14,437,200 | ||
Energy Equipment and Services — 1.6% | ||||
Dril-Quip, Inc.(1) | 130,000 | 7,568,600 | ||
Forum Energy Technologies, Inc.(1) | 750,000 | 9,157,500 | ||
Matrix Service Co.(1) | 250,000 | 5,617,500 | ||
22,343,600 | ||||
Food and Staples Retailing — 0.5% | ||||
Fresh Market, Inc. (The)(1) | 335,000 | 7,567,650 | ||
Food Products — 0.5% | ||||
Inventure Foods, Inc.(1) | 570,000 | 5,061,600 | ||
TreeHouse Foods, Inc.(1) | 20,000 | 1,555,800 | ||
6,617,400 | ||||
Gas Utilities — 0.6% | ||||
Laclede Group, Inc. (The) | 60,000 | 3,271,800 | ||
South Jersey Industries, Inc. | 185,000 | 4,671,250 | ||
7,943,050 | ||||
Health Care Equipment and Supplies — 1.7% | ||||
Haemonetics Corp.(1) | 410,000 | 13,251,200 | ||
Utah Medical Products, Inc.(2) | 208,692 | 11,242,238 | ||
24,493,438 | ||||
Health Care Providers and Services — 1.5% | ||||
AMN Healthcare Services, Inc.(1) | 175,000 | 5,251,750 | ||
Hanger, Inc.(1) | 380,000 | 5,183,200 | ||
Magellan Health, Inc.(1) | 30,000 | 1,662,900 | ||
National Healthcare Corp. | 50,000 | 3,044,500 | ||
Owens & Minor, Inc. | 85,000 | 2,714,900 | ||
Providence Service Corp. (The)(1) | 85,000 | 3,704,300 | ||
21,561,550 | ||||
Health Care Technology — 0.7% | ||||
MedAssets, Inc.(1) | 510,000 | 10,230,600 | ||
Hotels, Restaurants and Leisure — 2.9% | ||||
ClubCorp Holdings, Inc. | 1,120,000 | 24,035,200 | ||
Peak Resorts, Inc. | 380,200 | 2,619,578 | ||
Red Robin Gourmet Burgers, Inc.(1) | 190,000 | 14,390,600 | ||
41,045,378 | ||||
8
Shares | Value | |||
Household Durables — 1.7% | ||||
Beazer Homes USA, Inc.(1) | 90,000 | $ | 1,199,700 | |
Cavco Industries, Inc.(1) | 155,000 | 10,553,950 | ||
Century Communities, Inc.(1) | 470,000 | 9,329,500 | ||
Libbey, Inc. | 105,000 | 3,424,050 | ||
24,507,200 | ||||
Industrial Conglomerates — 0.5% | ||||
Raven Industries, Inc. | 454,935 | 7,711,148 | ||
Insurance — 6.3% | ||||
Allied World Assurance Co. Holdings Ltd. | 620,000 | 23,665,400 | ||
Atlas Financial Holdings, Inc.(1) | 505,000 | 9,342,500 | ||
Endurance Specialty Holdings Ltd. | 405,000 | 24,717,150 | ||
Infinity Property & Casualty Corp. | 95,000 | 7,651,300 | ||
James River Group Holdings Ltd. | 269,344 | 7,242,660 | ||
Validus Holdings Ltd. | 395,000 | 17,802,650 | ||
90,421,660 | ||||
Internet Software and Services — 0.2% | ||||
Everyday Health, Inc.(1) | 250,000 | 2,285,000 | ||
IT Services — 3.4% | ||||
Cardtronics, Inc.(1) | 150,000 | 4,905,000 | ||
EVERTEC, Inc. | 1,340,000 | 24,213,800 | ||
VeriFone Systems, Inc.(1) | 705,000 | 19,549,650 | ||
48,668,450 | ||||
Leisure Products — 0.7% | ||||
Malibu Boats, Inc.(1) | 425,000 | 5,941,500 | ||
MCBC Holdings, Inc.(1) | 315,032 | 4,082,815 | ||
10,024,315 | ||||
Machinery — 5.2% | ||||
Actuant Corp., Class A | 655,000 | 12,045,450 | ||
Albany International Corp., Class A | 580,000 | 16,593,800 | ||
Dynamic Materials Corp. | 495,000 | 4,722,300 | ||
EnPro Industries, Inc. | 240,000 | 9,400,800 | ||
Global Brass & Copper Holdings, Inc. | 300,000 | 6,153,000 | ||
Graham Corp. | 400,000 | 7,060,000 | ||
Valmont Industries, Inc. | 189,986 | 18,027,772 | ||
74,003,122 | ||||
Media — 4.1% | ||||
Cumulus Media, Inc., Class A(1) | 3,005,000 | 2,114,919 | ||
Entercom Communications Corp., Class A(1) | 820,656 | 8,337,865 | ||
Entravision Communications Corp., Class A | 3,629,973 | 24,103,021 | ||
Nexstar Broadcasting Group, Inc., Class A | 465,000 | 22,017,750 | ||
Townsquare Media, Inc.(1) | 220,000 | 2,149,400 | ||
58,722,955 | ||||
Metals and Mining — 1.3% | ||||
Compass Minerals International, Inc. | 209,987 | 16,456,681 | ||
Haynes International, Inc. | 55,000 | 2,081,200 | ||
18,537,881 | ||||
Oil, Gas and Consumable Fuels — 2.2% | ||||
Aegean Marine Petroleum Network, Inc. | 563,951 | 3,801,030 | ||
Ardmore Shipping Corp. | 580,000 | 7,006,400 | ||
9
Shares | Value | |||
Delek US Holdings, Inc. | 100,000 | $ | 2,770,000 | |
Euronav SA(1) | 220,000 | 3,058,000 | ||
Northern Tier Energy LP | 155,000 | 3,534,000 | ||
Scorpio Tankers, Inc. | 575,988 | 5,281,810 | ||
Western Refining, Inc. | 125,000 | 5,515,000 | ||
30,966,240 | ||||
Paper and Forest Products — 1.4% | ||||
KapStone Paper and Packaging Corp. | 1,215,000 | 20,059,650 | ||
Professional Services — 1.8% | ||||
CDI Corp. | 605,999 | 5,181,291 | ||
Kforce, Inc. | 235,000 | 6,175,800 | ||
On Assignment, Inc.(1) | 395,000 | 14,575,500 | ||
25,932,591 | ||||
Real Estate Investment Trusts (REITs) — 11.0% | ||||
Apollo Commercial Real Estate Finance, Inc. | 420,000 | 6,598,200 | ||
Armada Hoffler Properties, Inc. | 765,000 | 7,474,050 | ||
Blackstone Mortgage Trust, Inc., Class A | 150,000 | 4,116,000 | ||
Campus Crest Communities, Inc. | 1,290,000 | 6,862,800 | ||
Capstead Mortgage Corp. | 270,000 | 2,670,300 | ||
CBL & Associates Properties, Inc. | 200,000 | 2,750,000 | ||
Chatham Lodging Trust | 310,000 | 6,658,800 | ||
DiamondRock Hospitality Co. | 250,000 | 2,762,500 | ||
Easterly Government Properties, Inc. | 325,000 | 5,183,750 | ||
EPR Properties | 85,000 | 4,383,450 | ||
Hatteras Financial Corp. | 365,000 | 5,529,750 | ||
Healthcare Realty Trust, Inc. | 140,000 | 3,479,000 | ||
Kite Realty Group Trust | 635,000 | 15,119,350 | ||
Lexington Realty Trust | 1,050,000 | 8,505,000 | ||
Mack-Cali Realty Corp. | 155,000 | 2,926,400 | ||
Medical Properties Trust, Inc. | 545,000 | 6,027,700 | ||
MFA Financial, Inc. | 495,000 | 3,370,950 | ||
New Residential Investment Corp. | 160,000 | 2,096,000 | ||
Outfront Media, Inc. | 430,000 | 8,944,000 | ||
PennyMac Mortgage Investment Trust | 345,000 | 5,337,150 | ||
Rexford Industrial Realty, Inc. | 245,000 | 3,378,550 | ||
RLJ Lodging Trust | 110,000 | 2,779,700 | ||
Rouse Properties, Inc. | 485,000 | 7,556,300 | ||
Sabra Health Care REIT, Inc. | 140,000 | 3,245,200 | ||
Summit Hotel Properties, Inc. | 620,000 | 7,235,400 | ||
Sunstone Hotel Investors, Inc. | 230,000 | 3,042,900 | ||
Two Harbors Investment Corp. | 935,000 | 8,246,700 | ||
Urstadt Biddle Properties, Inc., Class A | 385,000 | 7,214,900 | ||
Washington Real Estate Investment Trust | 180,000 | 4,487,400 | ||
157,982,200 | ||||
Road and Rail — 0.5% | ||||
Celadon Group, Inc. | 160,000 | 2,563,200 | ||
Marten Transport Ltd. | 245,000 | 3,961,650 | ||
6,524,850 | ||||
Semiconductors and Semiconductor Equipment — 3.3% | ||||
Exar Corp.(1) | 2,000,000 | 11,900,000 | ||
10
Shares | Value | |||
Fairchild Semiconductor International, Inc.(1) | 800,000 | $ | 11,232,000 | |
Kulicke & Soffa Industries, Inc.(1) | 1,380,000 | 12,668,400 | ||
Semtech Corp.(1) | 800,000 | 12,080,000 | ||
47,880,400 | ||||
Software — 3.6% | ||||
AVG Technologies NV(1) | 300,000 | 6,525,000 | ||
BroadSoft, Inc.(1) | 595,000 | 17,826,200 | ||
Mentor Graphics Corp. | 1,115,000 | 27,462,450 | ||
51,813,650 | ||||
Specialty Retail — 1.7% | ||||
Destination Maternity Corp. | 435,000 | 4,010,700 | ||
MarineMax, Inc.(1) | 460,000 | 6,499,800 | ||
Penske Automotive Group, Inc. | 280,000 | 13,563,200 | ||
24,073,700 | ||||
Technology Hardware, Storage and Peripherals — 0.5% | ||||
Silicon Graphics International Corp.(1)(2) | 1,870,000 | 7,349,100 | ||
Textiles, Apparel and Luxury Goods — 0.5% | ||||
Culp, Inc. | 243,496 | 7,808,917 | ||
Trading Companies and Distributors — 0.7% | ||||
DXP Enterprises, Inc.(1) | 395,520 | 10,789,786 | ||
TOTAL COMMON STOCKS (Cost $1,375,709,342) | 1,407,698,787 | |||
TEMPORARY CASH INVESTMENTS — 1.7% | ||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.375%, 8/15/24, valued at $17,891,100), at 0.01%, dated 9/30/15, due 10/1/15 (Delivery value $17,538,005) | 17,538,000 | |||
State Street Institutional Liquid Reserves Fund, Premier Class | 6,550,489 | 6,550,489 | ||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $24,088,489) | 24,088,489 | |||
TOTAL INVESTMENT SECURITIES — 99.8% (Cost $1,399,797,831) | 1,431,787,276 | |||
OTHER ASSETS AND LIABILITIES — 0.2% | 2,884,175 | |||
TOTAL NET ASSETS — 100.0% | $ | 1,434,671,451 | ||
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||
EUR | 89,926 | USD | 101,032 | UBS AG | 10/30/15 | $ | (507 | ) | ||
EUR | 75,500 | USD | 84,969 | UBS AG | 10/30/15 | (569 | ) | |||
USD | 2,742,468 | EUR | 2,452,980 | UBS AG | 10/30/15 | 360 | ||||
$ | (716 | ) | ||||||||
NOTES TO SCHEDULE OF INVESTMENTS | ||
EUR | - | Euro |
USD | - | United States Dollar |
(1) | Non-income producing. |
(2) | Affiliated Company: the fund’s holding represents ownership of 5% or more of the voting securities of the company; therefore, the company is affiliated as defined in the Investment Company Act of 1940. |
See Notes to Financial Statements.
11
Statement of Assets and Liabilities |
SEPTEMBER 30, 2015 (UNAUDITED) | |||
Assets | |||
Investment securities - unaffiliated, at value (cost of $1,377,923,010) | $ | 1,413,195,938 | |
Investment securities - affiliated, at value (cost of $21,874,821) | 18,591,338 | ||
Total investment securities, at value (cost of $1,399,797,831) | 1,431,787,276 | ||
Receivable for investments sold | 18,317,696 | ||
Receivable for capital shares sold | 741,995 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 360 | ||
Dividends and interest receivable | 3,036,308 | ||
1,453,883,635 | |||
Liabilities | |||
Payable for investments purchased | 16,739,980 | ||
Payable for capital shares redeemed | 1,036,790 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 1,076 | ||
Accrued management fees | 1,399,657 | ||
Distribution and service fees payable | 34,681 | ||
19,212,184 | |||
Net Assets | $ | 1,434,671,451 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 1,256,962,396 | |
Undistributed net investment income | 1,408,023 | ||
Undistributed net realized gain | 144,312,303 | ||
Net unrealized appreciation | 31,988,729 | ||
$ | 1,434,671,451 | ||
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||
Investor Class, $0.01 Par Value | $684,561,649 | 82,365,024 | $8.31 | |
Institutional Class, $0.01 Par Value | $548,582,878 | 65,568,453 | $8.37 | |
A Class, $0.01 Par Value | $159,932,309 | 19,376,367 | $8.25* | |
C Class, $0.01 Par Value | $133,516 | 16,517 | $8.08 | |
R Class, $0.01 Par Value | $2,203,981 | 267,298 | $8.25 | |
R6 Class, $0.01 Par Value | $39,257,118 | 4,691,161 | $8.37 | |
*Maximum offering price $8.75 (net asset value divided by 0.9425).
See Notes to Financial Statements.
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Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (including $310,805 from affiliates and net of foreign taxes withheld of $55,723) | $ | 14,222,678 | |
Interest | 2,544 | ||
14,225,222 | |||
Expenses: | |||
Management fees | 10,035,696 | ||
Distribution and service fees: | |||
A Class | 369,825 | ||
C Class | 519 | ||
R Class | 5,714 | ||
Directors' fees and expenses | 29,245 | ||
Other expenses | 3,095 | ||
10,444,094 | |||
Net investment income (loss) | 3,781,128 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions (including $1,459,055 from affiliates) | 97,477,679 | ||
Foreign currency transactions | (8,695 | ) | |
97,468,984 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (241,927,401 | ) | |
Translation of assets and liabilities in foreign currencies | (56,759 | ) | |
(241,984,160 | ) | ||
Net realized and unrealized gain (loss) | (144,515,176 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (140,734,048 | ) |
See Notes to Financial Statements.
13
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) AND YEAR ENDED MARCH 31, 2015 | ||||||
Increase (Decrease) in Net Assets | September 30, 2015 | March 31, 2015 | ||||
Operations | ||||||
Net investment income (loss) | $ | 3,781,128 | $ | 13,860,486 | ||
Net realized gain (loss) | 97,468,984 | 186,158,622 | ||||
Change in net unrealized appreciation (depreciation) | (241,984,160 | ) | (93,539,572 | ) | ||
Net increase (decrease) in net assets resulting from operations | (140,734,048 | ) | 106,479,536 | |||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Investor Class | (1,770,542 | ) | (4,893,634 | ) | ||
Institutional Class | (2,176,985 | ) | (5,170,957 | ) | ||
A Class | (143,275 | ) | (1,318,762 | ) | ||
C Class | — | (127 | ) | |||
R Class | — | (11,688 | ) | |||
R6 Class | (192,895 | ) | (201,251 | ) | ||
From net realized gains: | ||||||
Investor Class | — | (102,787,586 | ) | |||
Institutional Class | — | (78,648,675 | ) | |||
A Class | — | (48,736,094 | ) | |||
C Class | — | (16,573 | ) | |||
R Class | — | (571,308 | ) | |||
R6 Class | — | (2,772,634 | ) | |||
Decrease in net assets from distributions | (4,283,697 | ) | (245,129,289 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (262,356,038 | ) | (294,024,279 | ) | ||
Net increase (decrease) in net assets | (407,373,783 | ) | (432,674,032 | ) | ||
Net Assets | ||||||
Beginning of period | 1,842,045,234 | 2,274,719,266 | ||||
End of period | $ | 1,434,671,451 | $ | 1,842,045,234 | ||
Undistributed net investment income | $ | 1,408,023 | $ | 1,910,592 | ||
See Notes to Financial Statements.
14
Notes to Financial Statements |
SEPTEMBER 30, 2015 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Small Cap Value Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective.
The fund offers the Investor Class, the Institutional Class, the A Class, the C Class, the R Class and the R6 Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class and R6 Class shareholders do not require the same level of shareholder and administrative services from American Century Investment Management, Inc. (ACIM) (the investment advisor) as shareholders of other classes. In addition, financial intermediaries do not receive any service, distribution or administrative fees for the R6 Class. As a result, the Institutional Class and R6 Class are charged lower unified management fees.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Fixed income securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors: trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the
15
Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
16
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually. The fund may elect to treat a portion of its payment to a redeeming shareholder, which represents the pro rata share of undistributed net investment income and net realized gains, as a distribution for federal income tax purposes (tax equalization).
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc. (ACIS), and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The annual management fee schedule ranges from 1.00% to 1.25% for the Investor Class, A Class, C Class and R Class. The annual management fee schedule ranges from 0.80% to 1.05% for the Institutional Class and 0.65% to 0.90% for the R6 Class. The effective annual management fee for each class for the six months ended September 30, 2015 was 1.25% for the Investor Class, A Class, C Class, and R Class, 1.05% for the Institutional Class and 0.90% for the R6 Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the C Class will pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the six months ended September 30, 2015 are detailed in the Statement of Operations.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
Acquired Fund Fees and Expenses — The fund may invest in mutual funds, exchange-traded funds, and business development companies (the acquired funds). The fund will indirectly realize its pro rata share of the fees and expenses of the acquired funds in which it invests. These indirect fees and expenses are not paid out of the fund's assets but are reflected in the return realized by the fund on its investment in the acquired funds.
17
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2015 were $806,379,230 and $1,077,936,823, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2015 | Year ended March 31, 2015 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 535,000,000 | 420,000,000 | ||||||||
Sold | 3,709,903 | $ | 33,468,055 | 10,166,681 | $ | 94,504,849 | ||||
Issued in reinvestment of distributions | 189,972 | 1,692,237 | 11,634,702 | 101,989,905 | ||||||
Redeemed | (10,504,543 | ) | (95,183,301 | ) | (28,834,424 | ) | (271,097,031 | ) | ||
(6,604,668 | ) | (60,023,009 | ) | (7,033,041 | ) | (74,602,277 | ) | |||
Institutional Class/Shares Authorized | 400,000,000 | 320,000,000 | ||||||||
Sold | 6,291,137 | 57,368,143 | 11,809,491 | 112,378,784 | ||||||
Issued in reinvestment of distributions | 212,721 | 1,911,839 | 8,454,194 | 74,708,737 | ||||||
Redeemed | (5,969,054 | ) | (54,267,226 | ) | (43,210,829 | ) | (411,464,385 | ) | ||
534,804 | 5,012,756 | (22,947,144 | ) | (224,376,864 | ) | |||||
A Class/Shares Authorized | 255,000,000 | 200,000,000 | ||||||||
Sold | 1,347,143 | 11,963,678 | 3,755,908 | 35,301,113 | ||||||
Issued in reinvestment of distributions | 16,058 | 140,777 | 5,706,790 | 49,554,605 | ||||||
Redeemed | (24,311,904 | ) | (223,169,763 | ) | (11,346,318 | ) | (105,816,806 | ) | ||
(22,948,703 | ) | (211,065,308 | ) | (1,883,620 | ) | (20,961,088 | ) | |||
C Class/Shares Authorized | 10,000,000 | 5,000,000 | ||||||||
Sold | 8,427 | 73,804 | 3,379 | 31,140 | ||||||
Issued in reinvestment of distributions | — | — | 1,958 | 16,700 | ||||||
Redeemed | (7,352 | ) | (66,197 | ) | (1,614 | ) | (14,498 | ) | ||
1,075 | 7,607 | 3,723 | 33,342 | |||||||
R Class/Shares Authorized | 10,000,000 | 5,000,000 | ||||||||
Sold | 44,201 | 395,999 | 113,438 | 1,061,446 | ||||||
Issued in reinvestment of distributions | — | — | 67,147 | 582,996 | ||||||
Redeemed | (12,149 | ) | (107,821 | ) | (405,081 | ) | (3,645,988 | ) | ||
32,052 | 288,178 | (224,496 | ) | (2,001,546 | ) | |||||
R6 Class/Shares Authorized | 50,000,000 | 20,000,000 | ||||||||
Sold | 788,903 | 7,201,116 | 3,063,302 | 28,932,187 | ||||||
Issued in reinvestment of distributions | 21,468 | 192,895 | 336,422 | 2,973,885 | ||||||
Redeemed | (442,106 | ) | (3,970,273 | ) | (427,470 | ) | (4,021,918 | ) | ||
368,265 | 3,423,738 | 2,972,254 | 27,884,154 | |||||||
Net increase (decrease) | (28,617,175 | ) | $ | (262,356,038 | ) | (29,112,324 | ) | $ | (294,024,279 | ) |
18
6. Affiliated Company Transactions
If a fund's holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the six months ended September 30, 2015 follows:
Company | Beginning Value | Purchase Cost | Sales Cost | Realized Gain (Loss) | Dividend Income | Ending Value | ||||||||||||
Entravision Communications Corp., Class A(1) | $ | 28,548,300 | $ | 3,080,305 | $ | 6,649,523 | $ | 4,073,040 | $ | 202,500 | (1 | ) | ||||||
Silicon Graphics International Corp.(2) | 13,773,650 | 5,704,340 | 6,143,546 | (2,641,871 | ) | — | $ | 7,349,100 | ||||||||||
Utah Medical Products, Inc. | 12,931,855 | — | 398,836 | 27,886 | 108,305 | 11,242,238 | ||||||||||||
$ | 55,253,805 | $ | 8,784,645 | $ | 13,191,905 | $ | 1,459,055 | $ | 310,805 | $ | 18,591,338 | |||||||
(1) | Company was not an affiliate at September 30, 2015. |
(2) | Non-income producing. |
7. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments. There were no significant transfers between levels during the period.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 1,407,698,787 | — | — | ||||
Temporary Cash Investments | 6,550,489 | $ | 17,538,000 | — | ||||
$ | 1,414,249,276 | $ | 17,538,000 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 360 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | (1,076 | ) | — | |||
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Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $7,177,546.
The value of foreign currency risk derivative instruments as of September 30, 2015, is disclosed on the Statement of Assets and Liabilities as an asset of $360 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $1,076 in unrealized depreciation on forward foreign currency exchange contracts. For the six months ended September 30, 2015, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(8,695) in net realized gain (loss) on foreign currency transactions and $(56,759) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
8. Risk Factors
The fund invests in common stocks of small companies. Because of this, the fund may be subject to greater risk and market fluctuations than a fund investing in larger, more established companies.
9. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of September 30, 2015, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $ | 1,425,100,605 | |
Gross tax appreciation of investments | $ | 154,262,633 | |
Gross tax depreciation of investments | (147,575,962 | ) | |
Net tax appreciation (depreciation) of investments | $ | 6,686,671 | |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||
2015(3) | $9.16 | 0.02 | (0.85) | (0.83) | (0.02) | — | (0.02) | $8.31 | (9.07)% | 1.26%(4) | 0.41%(4) | 49% | $684,562 | ||
2015 | $9.88 | 0.06 | 0.48 | 0.54 | (0.05) | (1.21) | (1.26) | $9.16 | 6.18% | 1.24% | 0.66% | 78% | $815,048 | ||
2014 | $9.45 | 0.06 | 2.04 | 2.10 | (0.08) | (1.59) | (1.67) | $9.88 | 23.27% | 1.22% | 0.62% | 111% | $948,338 | ||
2013 | $8.61 | 0.10 | 1.25 | 1.35 | (0.12) | (0.39) | (0.51) | $9.45 | 16.58% | 1.25% | 1.17% | 126% | $894,194 | ||
2012 | $9.48 | 0.10 | (0.30) | (0.20) | (0.07) | (0.60) | (0.67) | $8.61 | (1.39)% | 1.24% | 1.14% | 120% | $880,194 | ||
2011 | $8.02 | 0.09 | 1.43 | 1.52 | (0.06) | — | (0.06) | $9.48 | 19.06% | 1.24% | 1.03% | 99% | $1,096,617 | ||
Institutional Class | |||||||||||||||
2015(3) | $9.22 | 0.03 | (0.85) | (0.82) | (0.03) | — | (0.03) | $8.37 | (8.88)% | 1.06%(4) | 0.61%(4) | 49% | $548,583 | ||
2015 | $9.94 | 0.08 | 0.48 | 0.56 | (0.07) | (1.21) | (1.28) | $9.22 | 6.35% | 1.04% | 0.86% | 78% | $599,932 | ||
2014 | $9.50 | 0.08 | 2.05 | 2.13 | (0.10) | (1.59) | (1.69) | $9.94 | 23.45% | 1.02% | 0.82% | 111% | $874,415 | ||
2013 | $8.65 | 0.12 | 1.26 | 1.38 | (0.14) | (0.39) | (0.53) | $9.50 | 16.89% | 1.05% | 1.37% | 126% | $721,572 | ||
2012 | $9.52 | 0.11 | (0.30) | (0.19) | (0.08) | (0.60) | (0.68) | $8.65 | (1.20)% | 1.04% | 1.34% | 120% | $742,867 | ||
2011 | $8.05 | 0.10 | 1.44 | 1.54 | (0.07) | — | (0.07) | $9.52 | 19.30% | 1.04% | 1.23% | 99% | $861,881 | ||
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
A Class | |||||||||||||||
2015(3) | $9.09 | —(5) | (0.83) | (0.83) | (0.01) | — | (0.01) | $8.25 | (9.18)% | 1.51%(4) | 0.16%(4) | 49% | $159,932 | ||
2015 | $9.81 | 0.04 | 0.48 | 0.52 | (0.03) | (1.21) | (1.24) | $9.09 | 5.96% | 1.49% | 0.41% | 78% | $384,891 | ||
2014 | $9.40 | 0.04 | 2.02 | 2.06 | (0.06) | (1.59) | (1.65) | $9.81 | 22.92% | 1.47% | 0.37% | 111% | $433,905 | ||
2013 | $8.57 | 0.08 | 1.24 | 1.32 | (0.10) | (0.39) | (0.49) | $9.40 | 16.19% | 1.50% | 0.92% | 126% | $401,510 | ||
2012 | $9.44 | 0.08 | (0.30) | (0.22) | (0.05) | (0.60) | (0.65) | $8.57 | (1.56)% | 1.49% | 0.89% | 120% | $432,711 | ||
2011 | $8.00 | 0.06 | 1.43 | 1.49 | (0.05) | — | (0.05) | $9.44 | 18.63% | 1.49% | 0.78% | 99% | $516,974 | ||
C Class | |||||||||||||||
2015(3) | $8.93 | (0.02) | (0.83) | (0.85) | — | — | — | $8.08 | (9.52)% | 2.26%(4) | (0.59)%(4) | 49% | $134 | ||
2015 | $9.71 | (0.03) | 0.47 | 0.44 | (0.01) | (1.21) | (1.22) | $8.93 | 5.14% | 2.24% | (0.34)% | 78% | $138 | ||
2014 | $9.35 | (0.04) | 2.01 | 1.97 | (0.02) | (1.59) | (1.61) | $9.71 | 21.94% | 2.22% | (0.38)% | 111% | $114 | ||
2013 | $8.53 | 0.01 | 1.24 | 1.25 | (0.04) | (0.39) | (0.43) | $9.35 | 15.35% | 2.25% | 0.17% | 126% | $80 | ||
2012 | $9.43 | 0.02 | (0.30) | (0.28) | (0.02) | (0.60) | (0.62) | $8.53 | (2.30)% | 2.24% | 0.14% | 120% | $77 | ||
2011 | $8.01 | 0.01 | 1.42 | 1.43 | (0.01) | — | (0.01) | $9.43 | 17.85% | 2.24% | 0.03% | 99% | $59 | ||
R Class | |||||||||||||||
2015(3) | $9.09 | —(5) | (0.84) | (0.84) | — | — | — | $8.25 | (9.24)% | 1.76%(4) | (0.09)%(4) | 49% | $2,204 | ||
2015 | $9.83 | 0.02 | 0.47 | 0.49 | (0.02) | (1.21) | (1.23) | $9.09 | 5.65% | 1.74% | 0.16% | 78% | $2,138 | ||
2014 | $9.42 | 0.01 | 2.03 | 2.04 | (0.04) | (1.59) | (1.63) | $9.83 | 22.64% | 1.72% | 0.12% | 111% | $4,517 | ||
2013 | $8.58 | 0.06 | 1.25 | 1.31 | (0.08) | (0.39) | (0.47) | $9.42 | 15.98% | 1.75% | 0.67% | 126% | $3,516 | ||
2012 | $9.46 | 0.05 | (0.29) | (0.24) | (0.04) | (0.60) | (0.64) | $8.58 | (1.80)% | 1.74% | 0.64% | 120% | $3,245 | ||
2011 | $8.02 | 0.06 | 1.41 | 1.47 | (0.03) | — | (0.03) | $9.46 | 18.36% | 1.73% | 0.54% | 99% | $4,939 | ||
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For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
R6 Class | |||||||||||||||
2015(3) | $9.23 | 0.04 | (0.86) | (0.82) | (0.04) | — | (0.04) | $8.37 | (8.89)% | 0.91%(4) | 0.76%(4) | 49% | $39,257 | ||
2015 | $9.94 | 0.11 | 0.48 | 0.59 | (0.09) | (1.21) | (1.30) | $9.23 | 6.62% | 0.89% | 1.01% | 78% | $39,898 | ||
2014(6) | $10.38 | 0.07 | 1.14 | 1.21 | (0.06) | (1.59) | (1.65) | $9.94 | 12.46% | 0.87%(4) | 1.06%(4) | 111%(7) | $13,430 | ||
Notes to Financial Highlights | ||||
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | Six months ended September 30, 2015 (unaudited). |
(4) | Annualized. |
(5) | Per share amount was less than $0.005. |
(6) | July 26, 2013 (commencement of sale) through March 31, 2014. |
(7) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2014. |
See Notes to Financial Statements.
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Approval of Management Agreement |
At a meeting held on June 30, 2015, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, the Directors requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis and the information received was supplemental to the extensive information that the Board and its committees receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
• | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
• | the Fund’s investment performance compared to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the Advisor’s compliance policies, procedures, and regulatory experience; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | data comparing services provided and charges to other investment management clients of the Advisor; |
• | acquired fund fees and expenses; |
• | payments to intermediaries by the Fund and the Advisor; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
In keeping with their practice, the Directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The independent Directors also had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the
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Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
• | constructing and designing the Fund |
• | portfolio research and security selection |
• | initial capitalization/funding |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services (except the independent Directors’ counsel) |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution (except Rule 12b-1 plans) |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one-, three-, five-, and ten-year periods reviewed by the Board. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board particularly noted the Advisor’s continual efforts to maintain effective business continuity plans and to address cybersecurity threats. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to
25
other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services. The Board also noted that economies of scale are shared with the Fund and its shareholders through management fee breakpoints that serve to reduce the effective management fee as the assets of the Fund grow.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent Directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges, and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was above the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
26
Payments to Intermediaries. The Directors also requested and received a description of payments made to intermediaries by the Fund and the Advisor. These payments include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Board reviewed such information and found the payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. Additionally, the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions, which the Board concluded is likely to benefit other clients of the Advisor as well as Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients and, where expressly provided, these other client assets may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent Directors, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
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Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its
website at americancentury.com and, upon request, by calling 1-800-345-2021.
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American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2015 American Century Proprietary Holdings, Inc. All rights reserved. CL-SAN-87380 1511 | ||
SEMIANNUAL REPORT | SEPTEMBER 30, 2015 |
Value Fund
Table of Contents |
President’s Letter | 2 | |
Performance | 3 | |
Fund Characteristics | ||
Shareholder Fee Example | ||
Schedule of Investments | ||
Statement of Assets and Liabilities | ||
Statement of Operations | ||
Statement of Changes in Net Assets | ||
Notes to Financial Statements | ||
Financial Highlights | ||
Approval of Management Agreement | ||
Additional Information | ||
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
| Dear Investor: Thank you for reviewing this semiannual report for the six months ended September 30, 2015. It provides a macroeconomic and financial market overview (below), followed by fund performance, a schedule of fund investments, and other financial information. For additional commentary and updated information on fund performance, key factors that affected asset returns, and other insights regarding the investment markets, we encourage you to visit our website, americancentury.com. |
Jonathan Thomas | |
Divergence in Economic Growth and Monetary Policies, Combined With China Turmoil, Triggered Market Volatility
Divergence between the U.S. and the rest of the world, along with China’s struggles, lower commodity prices, capital market volatility, and risk-off trading, were key themes during the reporting period. Global divergence described not only the relatively stronger economic growth enjoyed by the U.S. compared with most of the world, but also the related contrast between the U.S. Federal Reserve’s (the Fed’s) expected unwinding of monetary stimulus versus the continuation and expansion of stimulus by other major central banks. Central bank moves—including the Fed’s delayed normalization of its extremely low interest rate positioning—helped trigger large market swings.
In 2014, the Fed ended its latest massive bond-buying program (quantitative easing, QE), leading to expectations that interest rates would rise. But while QE was halted in the U.S., other major central banks were starting or increasing QE as their economies faltered. This divergence helped fuel increased demand for the U.S. dollar and U.S. dollar-denominated assets, and put downward pressure on commodity prices, most notably crude oil. Low inflation also prevailed amid muted demand for commodities, particularly as China’s growth faltered, which had a broad dampening impact on global markets. In this environment, the U.S. dollar and U.S. government securities benefited from “flight to quality” capital flows. Conversely, emerging market, commodity-related, and value equity indices suffered significant declines.
We expect continued economic and monetary policy divergence between the U.S. and non-U.S. economies in the coming months, accompanied by further market volatility. This could present both challenges and opportunities for active investment managers. In this environment, we continue to believe in a disciplined, diversified, long-term investment approach, using professionally managed stock and bond portfolios to meet financial goals. We appreciate your continued trust in us.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of September 30, 2015 | |||||||
Average Annual Returns | |||||||
Ticker Symbol | 6 months(1) | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | TWVLX | -8.66% | -5.64% | 11.15% | 6.01% | 9.38% | 9/1/93 |
Russell 1000 Value Index | — | -8.30% | -4.42% | 12.28% | 5.70% | 8.90% | — |
S&P 500 Index | — | -6.18% | -0.61% | 13.33% | 6.80% | 8.75% | — |
Institutional Class | AVLIX | -8.56% | -5.45% | 11.39% | 6.22% | 7.20% | 7/31/97 |
A Class(2) | TWADX | 10/2/96 | |||||
No sales charge* | -8.78% | -5.88% | 10.89% | 5.74% | 7.86% | ||
With sales charge* | -14.02% | -11.31% | 9.58% | 5.12% | 7.52% | ||
B Class | ACBVX | 1/31/03 | |||||
No sales charge* | -9.04% | -6.52% | 10.08% | 4.97% | 7.30% | ||
With sales charge* | -14.04% | -10.52% | 9.94% | 4.97% | 7.30% | ||
C Class | ACLCX | 6/4/01 | |||||
No sales charge* | -9.12% | -6.57% | 10.06% | 4.96% | 5.34% | ||
With sales charge* | -10.02% | -6.57% | 10.06% | 4.96% | 5.34% | ||
R Class | AVURX | -8.88% | -6.10% | 10.61% | 5.49% | 5.16% | 7/29/05 |
R6 Class | AVUDX | -8.49% | -5.31% | — | — | 4.64% | 7/26/13 |
* | Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum initial sales charge and may be subject to a maximum CDSC of 1.00%. B Class shares redeemed within six years of purchase are subject to a CDSC that declines from 5.00% during the first year to 0.00% after the sixth year. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied. |
(1) | Total returns for periods less than one year are not annualized. |
(2) | Prior to September 4, 2007, the A Class was referred to as the Advisor Class and did not have a front-end sales charge. Performance prior to that date has been adjusted to reflect this charge. |
Total Annual Fund Operating Expenses | ||||||
Investor Class | Institutional Class | A Class | B Class | C Class | R Class | R6 Class |
0.97% | 0.77% | 1.22% | 1.97% | 1.97% | 1.47% | 0.62% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
3
Fund Characteristics |
SEPTEMBER 30, 2015 | |
Top Ten Holdings | % of net assets |
Exxon Mobil Corp. | 4.0% |
General Electric Co. | 3.4% |
Pfizer, Inc. | 3.2% |
Procter & Gamble Co. (The) | 2.9% |
JPMorgan Chase & Co. | 2.8% |
Johnson & Johnson | 2.5% |
Wells Fargo & Co. | 2.5% |
Chevron Corp. | 2.5% |
Cisco Systems, Inc. | 2.0% |
AT&T, Inc. | 1.9% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 16.1% |
Banks | 12.9% |
Pharmaceuticals | 7.7% |
Insurance | 4.4% |
Industrial Conglomerates | 4.2% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 98.1% |
Temporary Cash Investments | 1.6% |
Other Assets and Liabilities | 0.3% |
4
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2015 to September 30, 2015.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
5
Beginning Account Value 4/1/15 | Ending Account Value 9/30/15 | Expenses Paid During Period(1)4/1/15 - 9/30/15 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $913.40 | $4.64 | 0.97% |
Institutional Class | $1,000 | $914.40 | $3.69 | 0.77% |
A Class | $1,000 | $912.20 | $5.83 | 1.22% |
B Class | $1,000 | $909.60 | $9.40 | 1.97% |
C Class | $1,000 | $908.80 | $9.40 | 1.97% |
R Class | $1,000 | $911.20 | $7.02 | 1.47% |
R6 Class | $1,000 | $915.10 | $2.97 | 0.62% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.15 | $4.90 | 0.97% |
Institutional Class | $1,000 | $1,021.15 | $3.89 | 0.77% |
A Class | $1,000 | $1,018.90 | $6.16 | 1.22% |
B Class | $1,000 | $1,015.15 | $9.92 | 1.97% |
C Class | $1,000 | $1,015.15 | $9.92 | 1.97% |
R Class | $1,000 | $1,017.65 | $7.41 | 1.47% |
R6 Class | $1,000 | $1,021.90 | $3.13 | 0.62% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 183, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. |
6
Schedule of Investments |
SEPTEMBER 30, 2015 (UNAUDITED)
Shares | Value | |||
COMMON STOCKS — 98.1% | ||||
Aerospace and Defense — 0.4% | ||||
Textron, Inc. | 360,130 | $ | 13,555,293 | |
Air Freight and Logistics — 0.2% | ||||
United Parcel Service, Inc., Class B | 81,202 | 8,013,825 | ||
Automobiles — 1.3% | ||||
General Motors Co. | 935,279 | 28,077,076 | ||
Honda Motor Co., Ltd. | 484,300 | 14,441,195 | ||
42,518,271 | ||||
Banks — 12.9% | ||||
Bank of America Corp. | 2,958,470 | 46,092,962 | ||
BB&T Corp. | 503,650 | 17,929,940 | ||
BOK Financial Corp. | 340,360 | 22,024,696 | ||
Comerica, Inc. | 246,070 | 10,113,477 | ||
Commerce Bancshares, Inc. | 479,044 | 21,825,245 | ||
Cullen / Frost Bankers, Inc. | 311,176 | 19,784,570 | ||
JPMorgan Chase & Co. | 1,517,961 | 92,550,082 | ||
M&T Bank Corp. | 145,340 | 17,724,213 | ||
PNC Financial Services Group, Inc. (The) | 437,503 | 39,025,268 | ||
U.S. Bancorp | 1,349,912 | 55,359,891 | ||
Wells Fargo & Co. | 1,633,078 | 83,858,555 | ||
426,288,899 | ||||
Beverages — 0.3% | ||||
PepsiCo, Inc. | 111,050 | 10,472,015 | ||
Biotechnology — 0.4% | ||||
AbbVie, Inc. | 239,910 | 13,053,503 | ||
Capital Markets — 3.7% | ||||
Franklin Resources, Inc. | 404,040 | 15,054,530 | ||
Goldman Sachs Group, Inc. (The) | 112,274 | 19,508,730 | ||
LPL Financial Holdings, Inc. | 420,853 | 16,737,324 | ||
Northern Trust Corp. | 794,537 | 54,155,642 | ||
State Street Corp. | 267,045 | 17,948,095 | ||
123,404,321 | ||||
Chemicals — 0.3% | ||||
Mosaic Co. (The) | 309,840 | 9,639,122 | ||
Commercial Services and Supplies — 3.3% | ||||
ADT Corp. (The) | 955,462 | 28,568,314 | ||
Republic Services, Inc. | 1,234,575 | 50,864,490 | ||
Tyco International plc | 843,532 | 28,224,581 | ||
107,657,385 | ||||
Communications Equipment — 2.4% | ||||
Cisco Systems, Inc. | 2,555,419 | 67,079,749 | ||
QUALCOMM, Inc. | 222,080 | 11,932,358 | ||
79,012,107 | ||||
7
Shares | Value | |||
Containers and Packaging — 0.4% | ||||
Bemis Co., Inc. | 118,141 | $ | 4,674,840 | |
Sonoco Products Co. | 196,380 | 7,411,381 | ||
12,086,221 | ||||
Diversified Financial Services — 1.8% | ||||
Berkshire Hathaway, Inc., Class A(1) | 209 | 40,805,160 | ||
Berkshire Hathaway, Inc., Class B(1) | 142,050 | 18,523,320 | ||
59,328,480 | ||||
Diversified Telecommunication Services — 2.6% | ||||
AT&T, Inc. | 1,973,540 | 64,297,933 | ||
CenturyLink, Inc. | 871,329 | 21,887,785 | ||
86,185,718 | ||||
Electric Utilities — 2.4% | ||||
Edison International | 380,703 | 24,010,938 | ||
Great Plains Energy, Inc. | 1,069,264 | 28,891,513 | ||
Westar Energy, Inc. | 682,874 | 26,249,677 | ||
79,152,128 | ||||
Electrical Equipment — 1.1% | ||||
Eaton Corp. plc | 197,750 | 10,144,575 | ||
Emerson Electric Co. | 621,300 | 27,442,821 | ||
37,587,396 | ||||
Electronic Equipment, Instruments and Components — 0.8% | ||||
Keysight Technologies, Inc.(1) | 415,141 | 12,802,948 | ||
TE Connectivity Ltd. | 201,612 | 12,074,543 | ||
24,877,491 | ||||
Energy Equipment and Services — 2.6% | ||||
Cameron International Corp.(1) | 522,090 | 32,014,559 | ||
Halliburton Co. | 941,904 | 33,296,306 | ||
Helmerich & Payne, Inc. | 473,810 | 22,392,261 | ||
87,703,126 | ||||
Food and Staples Retailing — 2.6% | ||||
Sysco Corp. | 983,312 | 38,319,669 | ||
Wal-Mart Stores, Inc. | 734,541 | 47,627,638 | ||
85,947,307 | ||||
Food Products — 1.9% | ||||
ConAgra Foods, Inc. | 291,440 | 11,806,235 | ||
General Mills, Inc. | 142,017 | 7,971,414 | ||
Kellogg Co. | 280,946 | 18,696,956 | ||
Mondelez International, Inc., Class A | 581,236 | 24,336,351 | ||
62,810,956 | ||||
Health Care Equipment and Supplies — 3.1% | ||||
Becton Dickinson and Co. | 96,168 | 12,757,647 | ||
Boston Scientific Corp.(1) | 667,895 | 10,960,157 | ||
Medtronic plc | 609,400 | 40,793,236 | ||
Zimmer Biomet Holdings, Inc. | 399,402 | 37,515,830 | ||
102,026,870 | ||||
8
Shares | Value | |||
Health Care Providers and Services — 1.2% | ||||
Cigna Corp. | 98,630 | $ | 13,317,023 | |
Express Scripts Holding Co.(1) | 121,579 | 9,843,036 | ||
LifePoint Health, Inc.(1) | 241,347 | 17,111,502 | ||
40,271,561 | ||||
Hotels, Restaurants and Leisure — 0.8% | ||||
Carnival Corp. | 251,593 | 12,504,172 | ||
International Speedway Corp., Class A | 455,683 | 14,454,265 | ||
26,958,437 | ||||
Household Durables — 0.1% | ||||
Tupperware Brands Corp. | 93,790 | 4,641,667 | ||
Household Products — 2.9% | ||||
Procter & Gamble Co. (The) | 1,356,711 | 97,601,789 | ||
Industrial Conglomerates — 4.2% | ||||
General Electric Co. | 4,475,857 | 112,881,113 | ||
Koninklijke Philips NV | 1,067,194 | 25,164,172 | ||
138,045,285 | ||||
Insurance — 4.4% | ||||
ACE Ltd. | 269,911 | 27,908,797 | ||
Aflac, Inc. | 317,913 | 18,480,283 | ||
Brown & Brown, Inc. | 211,898 | 6,562,481 | ||
Chubb Corp. (The) | 173,644 | 21,297,437 | ||
HCC Insurance Holdings, Inc. | 184,039 | 14,257,501 | ||
MetLife, Inc. | 606,008 | 28,573,277 | ||
Reinsurance Group of America, Inc. | 160,033 | 14,497,390 | ||
Unum Group | 447,830 | 14,366,386 | ||
145,943,552 | ||||
Leisure Products — 0.4% | ||||
Mattel, Inc. | 665,102 | 14,007,048 | ||
Machinery — 0.2% | ||||
Oshkosh Corp. | 195,459 | 7,101,026 | ||
Media — 0.2% | ||||
Discovery Communications, Inc., Class A(1) | 245,773 | 6,397,471 | ||
Metals and Mining — 0.9% | ||||
BHP Billiton Ltd. | 556,330 | 8,774,276 | ||
Newmont Mining Corp. | 515,462 | 8,283,474 | ||
Nucor Corp. | 338,250 | 12,701,288 | ||
29,759,038 | ||||
Multi-Utilities — 1.2% | ||||
Ameren Corp. | 157,980 | 6,677,814 | ||
PG&E Corp. | 598,456 | 31,598,477 | ||
38,276,291 | ||||
Multiline Retail — 0.6% | ||||
Target Corp. | 252,114 | 19,831,287 | ||
Oil, Gas and Consumable Fuels — 16.1% | ||||
Anadarko Petroleum Corp. | 246,660 | 14,895,797 | ||
9
Shares | Value | |||
Apache Corp. | 756,775 | $ | 29,635,309 | |
Chevron Corp. | 1,053,457 | 83,096,688 | ||
Cimarex Energy Co. | 217,790 | 22,319,119 | ||
Devon Energy Corp. | 1,233,185 | 45,738,832 | ||
EOG Resources, Inc. | 104,030 | 7,573,384 | ||
EQT Corp. | 266,300 | 17,248,251 | ||
Exxon Mobil Corp. | 1,759,626 | 130,828,193 | ||
Imperial Oil Ltd. | 852,796 | 27,018,520 | ||
Noble Energy, Inc. | 896,200 | 27,047,316 | ||
Occidental Petroleum Corp. | 893,553 | 59,108,531 | ||
Southwestern Energy Co.(1) | 721,858 | 9,160,378 | ||
Total SA | 1,292,014 | 58,250,556 | ||
531,920,874 | ||||
Pharmaceuticals — 7.7% | ||||
Johnson & Johnson | 899,249 | 83,944,894 | ||
Merck & Co., Inc. | 1,284,357 | 63,434,392 | ||
Pfizer, Inc. | 3,388,203 | 106,423,457 | ||
253,802,743 | ||||
Real Estate Investment Trusts (REITs) — 2.2% | ||||
Annaly Capital Management, Inc. | 1,911,748 | 18,868,953 | ||
Capstead Mortgage Corp. | 1,022,540 | 10,112,921 | ||
Corrections Corp. of America | 809,349 | 23,908,169 | ||
Piedmont Office Realty Trust, Inc., Class A | 447,465 | 8,005,149 | ||
Weyerhaeuser Co. | 446,370 | 12,203,756 | ||
73,098,948 | ||||
Road and Rail — 0.5% | ||||
Heartland Express, Inc. | 750,190 | 14,958,789 | ||
Semiconductors and Semiconductor Equipment — 3.7% | ||||
Applied Materials, Inc. | 1,894,114 | 27,824,535 | ||
Broadcom Corp., Class A | 155,100 | 7,976,793 | ||
Intel Corp. | 2,003,077 | 60,372,741 | ||
Marvell Technology Group Ltd. | 1,215,620 | 11,001,361 | ||
MKS Instruments, Inc. | 288,546 | 9,674,947 | ||
Teradyne, Inc. | 399,844 | 7,201,190 | ||
124,051,567 | ||||
Software — 1.8% | ||||
Microsoft Corp. | 713,862 | 31,595,532 | ||
Oracle Corp. | 760,569 | 27,471,752 | ||
59,067,284 | ||||
Specialty Retail — 1.1% | ||||
Advance Auto Parts, Inc. | 50,576 | 9,585,669 | ||
CST Brands, Inc. | 453,819 | 15,275,548 | ||
Lowe's Cos., Inc. | 177,624 | 12,241,846 | ||
37,103,063 | ||||
Technology Hardware, Storage and Peripherals — 2.7% | ||||
Apple, Inc. | 84,160 | 9,282,848 | ||
EMC Corp. | 1,403,795 | 33,915,687 | ||
10
Shares | Value | |||
Hewlett-Packard Co. | 533,225 | $ | 13,655,892 | |
SanDisk Corp. | 257,880 | 14,010,621 | ||
Western Digital Corp. | 217,264 | 17,259,452 | ||
88,124,500 | ||||
Textiles, Apparel and Luxury Goods — 0.7% | ||||
Coach, Inc. | 477,088 | 13,802,156 | ||
Ralph Lauren Corp. | 93,440 | 11,040,870 | ||
24,843,026 | ||||
TOTAL COMMON STOCKS (Cost $3,012,784,474) | 3,247,125,680 | |||
TEMPORARY CASH INVESTMENTS — 1.6% | ||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.375%, 8/15/24, valued at $39,031,850), at 0.01%, dated 9/30/15, due 10/1/15 (Delivery value $38,263,011) | 38,263,000 | |||
State Street Institutional Liquid Reserves Fund, Premier Class | 14,290,370 | 14,290,370 | ||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $52,553,370) | 52,553,370 | |||
TOTAL INVESTMENT SECURITIES — 99.7% (Cost $3,065,337,844) | 3,299,679,050 | |||
OTHER ASSETS AND LIABILITIES — 0.3% | 10,404,871 | |||
TOTAL NET ASSETS — 100.0% | $ | 3,310,083,921 | ||
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||
AUD | 496,525 | USD | 348,561 | Credit Suisse AG | 10/30/15 | $ | (581 | ) | ||
USD | 6,670,305 | AUD | 9,513,243 | Credit Suisse AG | 10/30/15 | 3,115 | ||||
USD | 19,894,966 | CAD | 26,498,504 | JPMorgan Chase Bank N.A. | 10/30/15 | 41,320 | ||||
EUR | 1,745,913 | USD | 1,964,868 | UBS AG | 10/30/15 | (13,167 | ) | |||
USD | 62,619,860 | EUR | 56,009,857 | UBS AG | 10/30/15 | 8,215 | ||||
JPY | 76,277,250 | USD | 637,319 | Credit Suisse AG | 10/30/15 | (1,278 | ) | |||
USD | 11,084,162 | JPY | 1,339,210,575 | Credit Suisse AG | 10/30/15 | (82,900 | ) | |||
$ | (45,276 | ) | ||||||||
NOTES TO SCHEDULE OF INVESTMENTS | ||
AUD | - | Australian Dollar |
CAD | - | Canadian Dollar |
EUR | - | Euro |
JPY | - | Japanese Yen |
USD | - | United States Dollar |
(1) | Non-income producing. |
See Notes to Financial Statements.
11
Statement of Assets and Liabilities |
SEPTEMBER 30, 2015 (UNAUDITED) | |||
Assets | |||
Investment securities, at value (cost of $3,065,337,844) | $ | 3,299,679,050 | |
Foreign currency holdings, at value (cost of $944,020) | 913,869 | ||
Receivable for investments sold | 17,928,010 | ||
Receivable for capital shares sold | 1,071,890 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 52,650 | ||
Dividends and interest receivable | 8,066,076 | ||
3,327,711,545 | |||
Liabilities | |||
Payable for investments purchased | 10,213,047 | ||
Payable for capital shares redeemed | 4,759,758 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 97,926 | ||
Accrued management fees | 2,481,696 | ||
Distribution and service fees payable | 75,197 | ||
17,627,624 | |||
Net Assets | $ | 3,310,083,921 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 2,906,439,609 | |
Undistributed net investment income | 2,241,719 | ||
Undistributed net realized gain | 167,139,374 | ||
Net unrealized appreciation | 234,263,219 | ||
$ | 3,310,083,921 | ||
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $1,921,572,185 | 248,287,754 | $7.74 | |||
Institutional Class, $0.01 Par Value | $1,127,137,323 | 145,388,373 | $7.75 | |||
A Class, $0.01 Par Value | $142,667,227 | 18,445,059 | $7.73* | |||
B Class, $0.01 Par Value | $365,344 | 47,451 | $7.70 | |||
C Class, $0.01 Par Value | $26,597,075 | 3,485,785 | $7.63 | |||
R Class, $0.01 Par Value | $55,489,264 | 7,171,087 | $7.74 | |||
R6 Class, $0.01 Par Value | $36,255,503 | 4,676,723 | $7.75 | |||
*Maximum offering price $8.20 (net asset value divided by 0.9425).
See Notes to Financial Statements.
12
Statement of Operations |
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $306,458) | $ | 49,695,825 | |
Interest | 9,874 | ||
49,705,699 | |||
Expenses: | |||
Management fees | 16,293,647 | ||
Distribution and service fees: | |||
A Class | 314,532 | ||
B Class | 2,455 | ||
C Class | 146,467 | ||
R Class | 143,076 | ||
Directors' fees and expenses | 61,959 | ||
Other expenses | 581 | ||
16,962,717 | |||
Net investment income (loss) | 32,742,982 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 98,518,251 | ||
Foreign currency transactions | 716,671 | ||
99,234,922 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (443,977,432 | ) | |
Translation of assets and liabilities in foreign currencies | (1,668,174 | ) | |
(445,645,606 | ) | ||
Net realized and unrealized gain (loss) | (346,410,684 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (313,667,702 | ) |
See Notes to Financial Statements.
13
Statement of Changes in Net Assets |
SIX MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) AND YEAR ENDED MARCH 31, 2015 | ||||||
Increase (Decrease) in Net Assets | September 30, 2015 | March 31, 2015 | ||||
Operations | ||||||
Net investment income (loss) | $ | 32,742,982 | $ | 57,607,347 | ||
Net realized gain (loss) | 99,234,922 | 341,615,789 | ||||
Change in net unrealized appreciation (depreciation) | (445,645,606 | ) | (81,658,968 | ) | ||
Net increase (decrease) in net assets resulting from operations | (313,667,702 | ) | 317,564,168 | |||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Investor Class | (17,812,613 | ) | (32,607,044 | ) | ||
Institutional Class | (11,769,186 | ) | (17,954,867 | ) | ||
A Class | (1,987,793 | ) | (4,570,033 | ) | ||
B Class | (1,850 | ) | (4,377 | ) | ||
C Class | (117,118 | ) | (166,099 | ) | ||
R Class | (368,287 | ) | (453,848 | ) | ||
R6 Class | (412,047 | ) | (376,762 | ) | ||
From net realized gains: | ||||||
Investor Class | — | (118,879,291 | ) | |||
Institutional Class | — | (69,788,523 | ) | |||
A Class | — | (21,244,768 | ) | |||
B Class | — | (44,404 | ) | |||
C Class | — | (1,748,414 | ) | |||
R Class | — | (2,917,911 | ) | |||
R6 Class | — | (1,466,916 | ) | |||
Decrease in net assets from distributions | (32,468,894 | ) | (272,223,257 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (44,667,694 | ) | 70,132,562 | |||
Net increase (decrease) in net assets | (390,804,290 | ) | 115,473,473 | |||
Net Assets | ||||||
Beginning of period | 3,700,888,211 | 3,585,414,738 | ||||
End of period | $ | 3,310,083,921 | $ | 3,700,888,211 | ||
Undistributed net investment income | $ | 2,241,719 | $ | 1,967,631 | ||
See Notes to Financial Statements.
14
Notes to Financial Statements |
SEPTEMBER 30, 2015 (UNAUDITED)
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Value Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective.
The fund offers the Investor Class, the Institutional Class, the A Class, the B Class, the C Class, the R Class and the R6 Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and distribution and shareholder servicing expenses and arrangements. The Institutional Class and R6 Class shareholders do not require the same level of shareholder and administrative services from American Century Investment Management, Inc. (ACIM) (the investment advisor) as shareholders of other classes. In addition, financial intermediaries do not receive any service, distribution or administrative fees for the R6 Class. As a result, the Institutional Class and R6 Class are charged lower unified management fees. On October 16, 2015, all outstanding B Class shares were converted to A Class shares and the fund discontinued offering the B Class.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Fixed income securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors: trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
15
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
16
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.The fund may elect to treat a portion of its payment to a redeeming shareholder, which represents the pro rata share of undistributed net investment income and net realized gains, as a distribution for federal income tax purposes (tax equalization).
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc. (ACIS), and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The annual management fee schedule ranges from 0.85% to 1.00% for the Investor Class, A Class, B Class, C Class and R Class. The annual management fee schedule ranges from 0.65% to 0.80% for the Institutional Class and 0.50% to 0.65% for the R6 Class. The effective annual management fee for each class for the six months ended September 30, 2015 was 0.97% for the Investor Class, A Class, B Class, C Class and R Class, 0.77% for the Institutional Class and 0.62% for the R6 Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, B Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the B Class and C Class will each pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the six months ended September 30, 2015 are detailed in the Statement of Operations.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the six months ended September 30, 2015 were $892,382,818 and $888,792,909, respectively.
17
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Six months ended September 30, 2015 | Year ended March 31, 2015 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 1,640,000,000 | 1,100,000,000 | ||||||||
Sold | 35,521,753 | $ | 305,165,976 | 38,992,922 | $ | 339,632,680 | ||||
Issued in reinvestment of distributions | 2,116,959 | 17,436,556 | 17,161,364 | 148,523,748 | ||||||
Redeemed | (23,813,101 | ) | (199,880,186 | ) | (106,119,978 | ) | (935,780,725 | ) | ||
13,825,611 | 122,722,346 | (49,965,692 | ) | (447,624,297 | ) | |||||
Institutional Class/Shares Authorized | 850,000,000 | 550,000,000 | ||||||||
Sold | 18,523,605 | 156,589,323 | 70,987,309 | 624,529,431 | ||||||
Issued in reinvestment of distributions | 1,423,962 | 11,764,456 | 10,115,992 | 87,701,593 | ||||||
Redeemed | (16,485,980 | ) | (139,720,691 | ) | (27,707,045 | ) | (242,977,703 | ) | ||
3,461,587 | 28,633,088 | 53,396,256 | 469,253,321 | |||||||
A Class/Shares Authorized | 255,000,000 | 200,000,000 | ||||||||
Sold | 1,651,002 | 14,086,260 | 5,786,264 | 50,218,496 | ||||||
Issued in reinvestment of distributions | 225,521 | 1,891,069 | 2,882,404 | 24,905,222 | ||||||
Redeemed | (26,168,011 | ) | (226,338,241 | ) | (8,801,229 | ) | (76,866,176 | ) | ||
(24,291,488 | ) | (210,360,912 | ) | (132,561 | ) | (1,742,458 | ) | |||
B Class/Shares Authorized | 10,000,000 | 5,000,000 | ||||||||
Sold | 8,093 | 67,339 | 9,504 | 84,715 | ||||||
Issued in reinvestment of distributions | 224 | 1,850 | 5,196 | 44,625 | ||||||
Redeemed | (27,929 | ) | (234,552 | ) | (52,622 | ) | (452,267 | ) | ||
(19,612 | ) | (165,363 | ) | (37,922 | ) | (322,927 | ) | |||
C Class/Shares Authorized | 30,000,000 | 15,000,000 | ||||||||
Sold | 262,450 | 2,176,577 | 634,259 | 5,448,432 | ||||||
Issued in reinvestment of distributions | 12,757 | 103,880 | 198,644 | 1,689,979 | ||||||
Redeemed | (286,565 | ) | (2,346,923 | ) | (431,769 | ) | (3,681,907 | ) | ||
(11,358 | ) | (66,466 | ) | 401,134 | 3,456,504 | |||||
R Class/Shares Authorized | 70,000,000 | 40,000,000 | ||||||||
Sold | 1,542,537 | 12,945,911 | 2,029,107 | 17,675,973 | ||||||
Issued in reinvestment of distributions | 44,661 | 368,287 | 390,446 | 3,371,759 | ||||||
Redeemed | (573,819 | ) | (4,794,980 | ) | (645,541 | ) | (5,564,956 | ) | ||
1,013,379 | 8,519,218 | 1,774,012 | 15,482,776 | |||||||
R6 Class/Shares Authorized | 50,000,000 | 20,000,000 | ||||||||
Sold | 1,087,367 | 9,399,939 | 3,954,535 | 34,646,197 | ||||||
Issued in reinvestment of distributions | 49,847 | 412,047 | 212,765 | 1,843,678 | ||||||
Redeemed | (445,545 | ) | (3,761,591 | ) | (552,837 | ) | (4,860,232 | ) | ||
691,669 | 6,050,395 | 3,614,463 | 31,629,643 | |||||||
Net increase (decrease) | (5,330,212 | ) | $ | (44,667,694 | ) | 9,049,690 | $ | 70,132,562 | ||
18
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments. There were no significant transfers between levels during the period.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 3,113,476,961 | $ | 133,648,719 | — | |||
Temporary Cash Investments | 14,290,370 | 38,263,000 | — | |||||
$ | 3,127,767,331 | $ | 171,911,719 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 52,650 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | (97,926 | ) | — | |||
7. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on foreign currency transactions and change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $119,739,937.
The value of foreign currency risk derivative instruments as of September 30, 2015, is disclosed on the Statement of Assets and Liabilities as an asset of $52,650 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $97,926 in unrealized depreciation on forward foreign currency exchange contracts. For the six months ended September 30, 2015, the effect of foreign currency risk derivative instruments on the Statement of Operations was $801,010 in net realized gain (loss) on foreign
19
currency transactions and $(1,701,043) in change in net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies.
8. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of September 30, 2015, the components of investments for federal income tax purposes were as follows:
Federal tax cost of investments | $ | 3,125,006,196 | |
Gross tax appreciation of investments | $ | 421,525,688 | |
Gross tax depreciation of investments | (246,852,834 | ) | |
Net tax appreciation (depreciation) of investments | $ | 174,672,854 | |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
20
Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||
2015(3) | $8.55 | 0.07 | (0.81) | (0.74) | (0.07) | — | (0.07) | $7.74 | (8.66)% | 0.97%(4) | 1.77%(4) | 25% | $1,921,572 | ||
2015 | $8.46 | 0.13 | 0.62 | 0.75 | (0.13) | (0.53) | (0.66) | $8.55 | 8.91% | 0.97% | 1.54% | 45% | $2,003,967 | ||
2014 | $7.11 | 0.13 | 1.34 | 1.47 | (0.12) | — | (0.12) | $8.46 | 20.82% | 0.98% | 1.60% | 49% | $2,406,139 | ||
2013 | $6.23 | 0.10 | 0.89 | 0.99 | (0.11) | — | (0.11) | $7.11 | 16.08% | 1.00% | 1.65% | 48% | $1,955,536 | ||
2012 | $5.97 | 0.10 | 0.26 | 0.36 | (0.10) | — | (0.10) | $6.23 | 6.22% | 1.01% | 1.70% | 62% | $1,811,710 | ||
2011 | $5.40 | 0.11 | 0.57 | 0.68 | (0.11) | — | (0.11) | $5.97 | 12.84% | 1.01% | 2.05% | 76% | $1,668,403 | ||
Institutional Class | |||||||||||||||
2015(3) | $8.56 | 0.08 | (0.81) | (0.73) | (0.08) | — | (0.08) | $7.75 | (8.56)% | 0.77%(4) | 1.97%(4) | 25% | $1,127,137 | ||
2015 | $8.47 | 0.15 | 0.62 | 0.77 | (0.15) | (0.53) | (0.68) | $8.56 | 9.10% | 0.77% | 1.74% | 45% | $1,215,076 | ||
2014 | $7.12 | 0.14 | 1.34 | 1.48 | (0.13) | — | (0.13) | $8.47 | 21.03% | 0.78% | 1.80% | 49% | $749,868 | ||
2013 | $6.24 | 0.12 | 0.88 | 1.00 | (0.12) | — | (0.12) | $7.12 | 16.29% | 0.80% | 1.85% | 48% | $172,891 | ||
2012 | $5.98 | 0.11 | 0.26 | 0.37 | (0.11) | — | (0.11) | $6.24 | 6.42% | 0.81% | 1.90% | 62% | $126,086 | ||
2011 | $5.41 | 0.12 | 0.57 | 0.69 | (0.12) | — | (0.12) | $5.98 | 13.05% | 0.81% | 2.25% | 76% | $225,950 | ||
21
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
A Class | |||||||||||||||
2015(3) | $8.54 | 0.06 | (0.81) | (0.75) | (0.06) | — | (0.06) | $7.73 | (8.78)% | 1.22%(4) | 1.52%(4) | 25% | $142,667 | ||
2015 | $8.45 | 0.11 | 0.62 | 0.73 | (0.11) | (0.53) | (0.64) | $8.54 | 8.64% | 1.22% | 1.29% | 45% | $365,063 | ||
2014 | $7.10 | 0.11 | 1.34 | 1.45 | (0.10) | — | (0.10) | $8.45 | 20.55% | 1.23% | 1.35% | 49% | $362,439 | ||
2013 | $6.23 | 0.09 | 0.87 | 0.96 | (0.09) | — | (0.09) | $7.10 | 15.64% | 1.25% | 1.40% | 48% | $295,085 | ||
2012 | $5.97 | 0.08 | 0.27 | 0.35 | (0.09) | — | (0.09) | $6.23 | 5.95% | 1.26% | 1.45% | 62% | $255,777 | ||
2011 | $5.40 | 0.10 | 0.57 | 0.67 | (0.10) | — | (0.10) | $5.97 | 12.57% | 1.26% | 1.80% | 76% | $214,896 | ||
B Class | |||||||||||||||
2015(3) | $8.50 | 0.03 | (0.80) | (0.77) | (0.03) | — | (0.03) | $7.70 | (9.04)% | 1.97%(4) | 0.77%(4) | 25% | $365 | ||
2015 | $8.42 | 0.05 | 0.61 | 0.66 | (0.05) | (0.53) | (0.58) | $8.50 | 7.83% | 1.97% | 0.54% | 45% | $570 | ||
2014 | $7.08 | 0.05 | 1.34 | 1.39 | (0.05) | — | (0.05) | $8.42 | 19.65% | 1.98% | 0.60% | 49% | $884 | ||
2013 | $6.21 | 0.04 | 0.88 | 0.92 | (0.05) | — | (0.05) | $7.08 | 14.86% | 2.00% | 0.65% | 48% | $1,523 | ||
2012 | $5.96 | 0.04 | 0.26 | 0.30 | (0.05) | — | (0.05) | $6.21 | 5.14% | 2.01% | 0.70% | 62% | $2,283 | ||
2011 | $5.39 | 0.06 | 0.57 | 0.63 | (0.06) | — | (0.06) | $5.96 | 11.87% | 2.01% | 1.05% | 76% | $2,916 | ||
C Class | |||||||||||||||
2015(3) | $8.43 | 0.03 | (0.80) | (0.77) | (0.03) | — | (0.03) | $7.63 | (9.12)% | 1.97%(4) | 0.77%(4) | 25% | $26,597 | ||
2015 | $8.36 | 0.05 | 0.60 | 0.65 | (0.05) | (0.53) | (0.58) | $8.43 | 7.77% | 1.97% | 0.54% | 45% | $29,473 | ||
2014 | $7.03 | 0.05 | 1.33 | 1.38 | (0.05) | — | (0.05) | $8.36 | 19.64% | 1.98% | 0.60% | 49% | $25,869 | ||
2013 | $6.16 | 0.04 | 0.88 | 0.92 | (0.05) | — | (0.05) | $7.03 | 14.98% | 2.00% | 0.65% | 48% | $16,761 | ||
2012 | $5.92 | 0.04 | 0.25 | 0.29 | (0.05) | — | (0.05) | $6.16 | 5.01% | 2.01% | 0.70% | 62% | $11,194 | ||
2011 | $5.35 | 0.06 | 0.57 | 0.63 | (0.06) | — | (0.06) | $5.92 | 11.96% | 2.01% | 1.05% | 76% | $7,659 | ||
22
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
R Class | |||||||||||||||
2015(3) | $8.55 | 0.05 | (0.81) | (0.76) | (0.05) | — | (0.05) | $7.74 | (8.88)% | 1.47%(4) | 1.27%(4) | 25% | $55,489 | ||
2015 | $8.46 | 0.09 | 0.62 | 0.71 | (0.09) | (0.53) | (0.62) | $8.55 | 8.37% | 1.47% | 1.04% | 45% | $52,623 | ||
2014 | $7.10 | 0.09 | 1.35 | 1.44 | (0.08) | — | (0.08) | $8.46 | 20.39% | 1.48% | 1.10% | 49% | $37,076 | ||
2013 | $6.23 | 0.07 | 0.88 | 0.95 | (0.08) | — | (0.08) | $7.10 | 15.35% | 1.50% | 1.15% | 48% | $30,293 | ||
2012 | $5.97 | 0.07 | 0.26 | 0.33 | (0.07) | — | (0.07) | $6.23 | 5.72% | 1.51% | 1.20% | 62% | $21,241 | ||
2011 | $5.40 | 0.07 | 0.58 | 0.65 | (0.08) | — | (0.08) | $5.97 | 12.29% | 1.51% | 1.55% | 76% | $17,470 | ||
R6 Class | |||||||||||||||
2015(3) | $8.56 | 0.09 | (0.81) | (0.72) | (0.09) | — | (0.09) | $7.75 | (8.49)% | 0.62%(4) | 2.12%(4) | 25% | $36,256 | ||
2015 | $8.47 | 0.17 | 0.61 | 0.78 | (0.16) | (0.53) | (0.69) | $8.56 | 9.27% | 0.62% | 1.89% | 45% | $34,116 | ||
2014(5) | $7.77 | 0.14 | 0.66 | 0.80 | (0.10) | — | (0.10) | $8.47 | 10.41% | 0.62%(4) | 2.58%(4) | 49%(6) | $3,140 | ||
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | Six months ended September 30, 2015 (unaudited). |
(4) | Annualized. |
(5) | July 26, 2013 (commencement of sale) through March 31, 2014. |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2014. |
See Notes to Financial Statements.
23
Approval of Management Agreement |
At a meeting held on June 30, 2015, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, the Directors requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis and the information received was supplemental to the extensive information that the Board and its committees receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
• | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
• | the Fund’s investment performance compared to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the Advisor’s compliance policies, procedures, and regulatory experience; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
• | possible economies of scale associated with the Advisor’s management of the Fund and other accounts under its management; |
• | data comparing services provided and charges to other investment management clients of the Advisor; |
• | acquired fund fees and expenses; |
• | payments to intermediaries by the Fund and the Advisor; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
In keeping with their practice, the Directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The independent Directors also had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the
24
Fund. The Board noted that under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
• | constructing and designing the Fund |
• | portfolio research and security selection |
• | initial capitalization/funding |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services (except the independent Directors’ counsel) |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution (except Rule 12b-1 plans) |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one- and ten-year periods and slightly below its benchmark for the three- and five-year periods reviewed by the Board. The Board discussed the Fund's performance with the Advisor and was satisfied with the efforts being undertaken by the Advisor. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board particularly noted the Advisor’s continual efforts to maintain effective business continuity plans and to address cybersecurity threats. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading
25
activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services. The Board also noted that economies of scale are shared with the Fund and its shareholders through management fee breakpoints that serve to reduce the effective management fee as the assets of the Fund grow.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent Directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges, and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was above the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
26
Payments to Intermediaries. The Directors also requested and received a description of payments made to intermediaries by the Fund and the Advisor. These payments include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Board reviewed such information and found the payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. Additionally, the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions, which the Board concluded is likely to benefit other clients of the Advisor as well as Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients and, where expressly provided, these other client assets may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent Directors, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
27
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain IRAs are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
Distributions you receive from 403(b), 457 and qualified plans are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its
website at americancentury.com and, upon request, by calling 1-800-345-2021.
28
| ||
Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2015 American Century Proprietary Holdings, Inc. All rights reserved. CL-SAN-87381 1511 | ||
ITEM 2. CODE OF ETHICS.
Not applicable for semiannual report filings.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semiannual report filings.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semiannual report filings.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) | The schedule of investments is included as part of the report to stockholders filed under Item 1 of this Form. |
(b) | Not applicable. |
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the reporting period, there were no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) | The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. |
(b) | There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the registrant's second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. |
ITEM 12. EXHIBITS.
(a)(1) | Not applicable for semiannual report filings. |
(a)(2) | Separate certifications by the registrant’s principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are filed and attached hereto as EX-99.CERT. |
(a)(3) | Not applicable. |
(b) | A certification by the registrant’s chief executive officer and chief financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is furnished and attached hereto as EX- 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | American Century Capital Portfolios, Inc. | ||
By: | /s/ Jonathan S. Thomas | ||
Name: | Jonathan S. Thomas | ||
Title: | President | ||
Date: | November 24, 2015 | ||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Jonathan S. Thomas | |
Name: | Jonathan S. Thomas | |
Title: | President | |
(principal executive officer) | ||
Date: | November 24, 2015 | |
By: | /s/ C. Jean Wade | |
Name: | C. Jean Wade | |
Title: | Vice President, Treasurer, and | |
Chief Financial Officer | ||
(principal financial officer) | ||
Date: | November 24, 2015 | |