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 | 811-00816 | |||||||||||||||||||
AMERICAN CENTURY MUTUAL FUNDS, 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: | 10-31 | |||||||||||||||||||
Date of reporting period: | 10-31-2020 |
ITEM 1. REPORTS TO STOCKHOLDERS.
![image81.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image81.jpg)
Annual Report | |||||
October 31, 2020 | |||||
Balanced Fund | |||||
Investor Class (TWBIX) | |||||
I Class (ABINX) | |||||
R5 Class (ABGNX) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | |||||
Performance | |||||
Portfolio Commentary | |||||
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 | |||||
Report of Independent Registered Public Accounting Firm | |||||
Management | |||||
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 |
![image181.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image181.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2020. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Pandemic Disrupted Economic, Market Courses
Market sentiment began the period relatively upbeat. A dovish Federal Reserve (Fed), modest inflation, improving economic and earnings data, and progress on U.S.-China trade policy helped boost global growth outlooks. Against this backdrop, riskier assets generally remained in favor.
However, beginning in late February, the COVID-19 outbreak rapidly spread worldwide, halting most U.S. and global economic activity and triggering a deep worldwide recession. Global stocks and credit-sensitive assets sold off sharply, while U.S. Treasury yields plunged to record lows amid soaring demand. Quick and aggressive action from the Fed and other central banks and federal governments helped stabilize and restore confidence in the financial markets. By summer, declining coronavirus infection and death rates in many regions and the reopening of economies were positive influences. By the end of the reporting period, most data suggested an economic recovery was underway. But, at the same time, COVID-19 infection rates were rising in the U.S. and Europe, prompting new lockdown measures in some European countries.
Overall, the broad U.S. stock market overcame the effects of the early 2020 sell-off to deliver a solid gain for the 12-month period. Growth stocks rallied and significantly outperformed value stocks, which generally declined. Global bond returns were broadly positive, as yields declined.
Science Helps Steer the Return to Normal
The return to pre-pandemic life will take time and patience, but we are confident we will get there. The first COVID-19 vaccine is on track for approval by year-end, and medical professionals continue to fine-tune virus treatment protocols. In the meantime, investors likely will face periods of outbreak-related disruptions, economic and political uncertainty, and heightened market volatility. These influences can be unsettling, but they tend to be temporary.
We appreciate your confidence in us during these extraordinary times. Our firm has a long history of helping clients weather unpredictable markets, and we’re confident we will continue to meet today’s challenges.
Sincerely,
![image191.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image191.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of October 31, 2020 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |||||||||||||||
Investor Class | TWBIX | 7.54% | 7.49% | 8.32% | — | 10/20/88 | ||||||||||||||
Blended Index | — | 8.96% | 8.89% | 9.39% | — | — | ||||||||||||||
S&P 500 Index | — | 9.71% | 11.70% | 13.00% | — | — | ||||||||||||||
Bloomberg Barclays U.S. Aggregate Bond Index | — | 6.19% | 4.08% | 3.55% | — | — | ||||||||||||||
I Class | ABINX | 7.75% | 7.70% | 8.54% | — | 5/1/00 | ||||||||||||||
R5 Class | ABGNX | 7.75% | — | — | 8.09% | 4/10/17 |
Average annual returns since inception are presented when ten years of performance history is not available.
The blended index combines monthly returns of two widely known indices in proportion to the asset mix of the fund. The S&P 500 Index represents 60% of the index and the remaining 40% is represented by the Bloomberg Barclays U.S. Aggregate Bond Index.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. 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
Growth of $10,000 Over 10 Years | ||
$10,000 investment made October 31, 2010 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-77b0227030ec4c8fafe1.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/chart-77b0227030ec4c8fafe1.jpg)
Value on October 31, 2020 | |||||
Investor Class — $22,251 | |||||
Blended Index — $24,530 | |||||
S&P 500 Index — $33,987 | |||||
Bloomberg Barclays U.S. Aggregate Bond Index — $14,177 | |||||
Total Annual Fund Operating Expenses | ||||||||
Investor Class | I Class | R5 Class | ||||||
0.91% | 0.71% | 0.71% |
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. Total returns for periods less than one year are not annualized. 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.
4
Portfolio Commentary |
Equity Portfolio Managers: Steven Rossi and Guan Wang
Guan Wang joined the portfolio management team in August 2020, when Claudia Musat departed.
Fixed-Income Portfolio Managers: Bob Gahagan, Brian Howell and Charles Tan
Performance Summary
Balanced returned 7.54%* for the 12 months ended October 31, 2020. By comparison, the fund’s benchmark (a blended index consisting of 60% S&P 500 Index and 40% Bloomberg Barclays U.S. Aggregate Bond Index) returned 8.96%.
Balanced seeks long-term capital growth and current income by investing approximately 60% of its assets in equity securities and the remainder in bonds and other fixed-income securities. The purpose of the broad bond market exposure is to reduce the volatility of the equity portfolio, providing a more attractive overall risk/return profile for investors. The total fund’s drivers of both absolute and relative returns, however, are typically a function of the equity allocation. Therefore, the performance attribution discussion focuses primarily on the equity segment.
Consumer Discretionary and Information Technology Largest Equity Detractors
The largest detractors from relative performance were the consumer discretionary and information technology sectors. Within consumer discretionary, stock selection within the textiles, apparel and luxury goods industry provided a headwind. An overweight to Ralph Lauren weighed on sector results, as did reduced exposure to NIKE. We have since exited both of these positions. Positioning among specialty retail companies also hurt relative returns. Elsewhere in the sector, an underweight position in internet and direct marketing retail company Amazon was a top detractor from the portfolio’s relative performance. Due to the pandemic, a major shift occurred in consumer behavior. People stopped visiting brick-and-mortar stores and turned to online shopping. Companies with a strong online presence tended to outperform. Amazon was a leading contributor to index returns for the period because of this shift. Our exposure to Amazon was less than the benchmark, which hurt relative results.
Performance within the semiconductors and semiconductor equipment industry hampered relative results within the information technology sector. During the lockdown, chips and processors used in computer and other electronics products were in high demand, lifting the stock price of many companies within the industry. An underweight position in chip and electronic component maker NVIDIA was among the top detractors from performance. Security selection within the technology hardware,storage and peripherals and IT services industries also weighed on results.
Elsewhere, overweight exposure to media company Discovery and reduced exposure to software company Microsoft were also among the leading detractors from relative returns. Microsoft benefited during the period from increased demand for its Teams platform due to the work-from-home trend that emerged due to the pandemic. We have since exited our position in Discovery.
*All fund returns referenced in this commentary are for Investor Class shares. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund’s benchmark, other share classes may not. See page 3 for returns for all share classes.
5
Energy and Real Estate Led Equity Gains
Reduced exposure to the energy sector was a main contributor to performance compared with the benchmark for the year. The sector underperformed the broader market as slower economic growth and steps to slow the spread of the virus weighed heavily on energy demand. In addition, a pricing disagreement between Russia and Saudi Arabia worked to drive down prices even further. As a result, underweight exposure to the oil, gas and consumable fuels industry was a primary contributor to relative performance within the sector, led by reduced exposure to Exxon Mobil.
An underweight to the real estate sector also benefited relative performance. As lockdowns progressed, tenants in retail spaces began to have problems making their lease payments. Lessened exposure to equity real estate investment trusts helped to boost the portfolio’s relative performance. Underweight exposure to Simon Property Group, which owns malls, helped relative returns, as did avoidance of several other index positions. We have since exited our position in Simon Property Group.
Other top contributors to relative performance for the 12-month period included a lack of exposure to aircraft company Boeing. The company’s stock price was volatile over the period. First, continued issues stemming from the grounding of its 737 MAX aircraft depressed the price early in the period. Next, the company’s order book was hurt by the pandemic as people discontinued business travel and airlines canceled orders for new planes. The company was also confronted with continued scrutiny of its governance practices. Elsewhere, overweights to software companies Adobe and Cadence Design Systems were also among the leading performers. The companies benefited from increased demand for their products and services during the lockdown.
Bond Performance Positive
Bond market performance was strong during the year. In late 2019, the long end of the yield curve steepened, as investors felt optimistic toward economic prospects for 2020. The U.S. Federal Reserve’s (Fed) commitment to continued accommodative monetary policies helped fuel a risk-on environment, where spread products outperformed like-duration Treasuries through the end of the calendar year.
However, a shift occurred early in 2020, as the coronavirus spread across the globe. As equity and credit markets entered free-fall in March, a flight to quality ensued. The Fed, as well as other global central banks and governments, enacted historic monetary and fiscal assistance and quantitative easing programs. These efforts helped to provide liquidity within credit markets and ease investor anxiety brought on by widespread lockdowns and their dampening effects on economic activity. As part of these measures, the Fed cut the target overnight lending rate to near zero. This led to falling interest rates across much of the Treasury curve, boosting returns for Treasuries. In addition, the Fed’s purchase of corporate credit worked to support risk asset prices. Generally, investment-grade corporate debt outperformed like-duration Treasuries over the period. High-yield debt lagged the broader market, due in part to the high concentration of energy issuers within the universe. Energy companies lagged the broader market for much of the year.
Outlook
The U.S. continues to face challenges relating to the coronavirus pandemic. While hope for a vaccine and extensive central bank intervention have helped fuel a recovery in risk assets, uncertainty remains regarding the country’s economic recovery. As a result, we think it’s only prudent to expect some volatility ahead. Of course, volatility in and of itself is not a bad thing—downside volatility, for example, can provide buying opportunities. We will continue to monitor the situation and invest appropriately. We believe that the continued economic and market uncertainty highlights the benefits of a balanced approach involving exposure to both stocks and bonds, which is intended to reduce overall price fluctuations and improve risk-adjusted performance.
6
Fund Characteristics |
OCTOBER 31, 2020 | |||||
Key Fixed-Income Portfolio Statistics | |||||
Weighted Average Life to Maturity | 8.1 years | ||||
Average Duration (effective) | 6.0 years | ||||
Top Ten Common Stocks | % of net assets | ||||
Apple, Inc. | 3.7% | ||||
Microsoft Corp. | 3.5% | ||||
Amazon.com, Inc. | 3.1% | ||||
Alphabet, Inc., Class A | 2.0% | ||||
Facebook, Inc., Class A | 2.0% | ||||
Adobe, Inc. | 1.1% | ||||
Home Depot, Inc. (The) | 1.0% | ||||
Broadcom, Inc. | 0.9% | ||||
Merck & Co., Inc. | 0.9% | ||||
NVIDIA Corp. | 0.9% | ||||
Top Five Common Stocks Industries | % of net assets | ||||
Software | 7.5% | ||||
Semiconductors and Semiconductor Equipment | 4.9% | ||||
Interactive Media and Services | 4.4% | ||||
Internet and Direct Marketing Retail | 3.8% | ||||
Technology Hardware, Storage and Peripherals | 3.7% | ||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 59.1% | ||||
U.S. Treasury Securities | 13.7% | ||||
Corporate Bonds | 11.3% | ||||
U.S. Government Agency Mortgage-Backed Securities | 10.1% | ||||
Collateralized Mortgage Obligations | 2.8% | ||||
Collateralized Loan Obligations | 1.8% | ||||
Asset-Backed Securities | 1.4% | ||||
Municipal Securities | 0.7% | ||||
U.S. Government Agency Securities | 0.5% | ||||
Sovereign Governments and Agencies | 0.3% | ||||
Preferred Stocks | 0.1% | ||||
Temporary Cash Investments | 1.2% | ||||
Other Assets and Liabilities | (3.0)% |
7
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 May 1, 2020 to October 31, 2020.
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 I Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not through a financial intermediary or employer-sponsored retirement plan account), American Century Investments may charge you a $25.00 annual 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 $25.00 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.
8
Beginning Account Value 5/1/20 | Ending Account Value 10/31/20 | Expenses Paid During Period(1) 5/1/20 - 10/31/20 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,078.60 | $4.70 | 0.90% | ||||||||||
I Class | $1,000 | $1,079.10 | $3.66 | 0.70% | ||||||||||
R5 Class | $1,000 | $1,079.70 | $3.66 | 0.70% | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,020.61 | $4.57 | 0.90% | ||||||||||
I Class | $1,000 | $1,021.62 | $3.56 | 0.70% | ||||||||||
R5 Class | $1,000 | $1,021.62 | $3.56 | 0.70% |
(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 184, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses.
9
Schedule of Investments |
OCTOBER 31, 2020
Shares/ Principal Amount | Value | |||||||
COMMON STOCKS — 59.1% | ||||||||
Aerospace and Defense — 0.8% | ||||||||
General Dynamics Corp. | 9,737 | $ | 1,278,760 | |||||
Huntington Ingalls Industries, Inc. | 4,572 | 674,279 | ||||||
L3Harris Technologies, Inc. | 15,350 | 2,473,038 | ||||||
Lockheed Martin Corp. | 7,217 | 2,526,888 | ||||||
Textron, Inc. | 23,752 | 850,322 | ||||||
7,803,287 | ||||||||
Air Freight and Logistics — 0.1% | ||||||||
United Parcel Service, Inc., Class B | 8,655 | 1,359,787 | ||||||
Auto Components — 0.2% | ||||||||
BorgWarner, Inc. | 42,064 | 1,471,399 | ||||||
Banks — 1.0% | ||||||||
Bank of America Corp. | 232,057 | 5,499,751 | ||||||
Citigroup, Inc. | 14,036 | 581,371 | ||||||
East West Bancorp, Inc. | 18,035�� | 657,917 | ||||||
JPMorgan Chase & Co. | 23,736 | 2,327,077 | ||||||
9,066,116 | ||||||||
Beverages — 0.1% | ||||||||
Coca-Cola Co. (The) | 12,178 | 585,275 | ||||||
Biotechnology — 1.5% | ||||||||
AbbVie, Inc. | 45,187 | 3,845,414 | ||||||
Alexion Pharmaceuticals, Inc.(1) | 9,886 | 1,138,274 | ||||||
Amgen, Inc. | 3,866 | 838,690 | ||||||
Biogen, Inc.(1) | 11,791 | 2,972,157 | ||||||
Exelixis, Inc.(1) | 33,635 | 688,845 | ||||||
Incyte Corp.(1) | 22,616 | 1,959,450 | ||||||
Regeneron Pharmaceuticals, Inc.(1) | 3,132 | 1,702,430 | ||||||
Vertex Pharmaceuticals, Inc.(1) | 6,909 | 1,439,559 | ||||||
14,584,819 | ||||||||
Building Products — 1.5% | ||||||||
Allegion plc | 23,509 | 2,315,636 | ||||||
Fortune Brands Home & Security, Inc. | 68,934 | 5,574,693 | ||||||
Masco Corp. | 114,442 | 6,134,091 | ||||||
14,024,420 | ||||||||
Capital Markets — 1.1% | ||||||||
Ameriprise Financial, Inc. | 10,756 | 1,729,888 | ||||||
Cboe Global Markets, Inc. | 15 | 1,219 | ||||||
FactSet Research Systems, Inc. | 7,232 | 2,216,608 | ||||||
Franklin Resources, Inc. | 27,882 | 522,788 | ||||||
LPL Financial Holdings, Inc. | 24,833 | 1,984,902 | ||||||
Moody's Corp. | 8,606 | 2,262,517 | ||||||
State Street Corp. | 25,039 | 1,474,797 | ||||||
10,192,719 | ||||||||
Chemicals — 0.3% | ||||||||
Eastman Chemical Co. | 11,724 | 947,768 |
10
Shares/ Principal Amount | Value | |||||||
LyondellBasell Industries NV, Class A | 30,029 | $ | 2,055,485 | |||||
3,003,253 | ||||||||
Communications Equipment — 0.6% | ||||||||
Cisco Systems, Inc. | 34,124 | 1,225,052 | ||||||
Lumentum Holdings, Inc.(1) | 7,171 | 592,970 | ||||||
Motorola Solutions, Inc. | 23,503 | 3,714,884 | ||||||
5,532,906 | ||||||||
Construction and Engineering — 0.3% | ||||||||
Quanta Services, Inc. | 45,499 | 2,840,503 | ||||||
Consumer Finance — 0.1% | ||||||||
Synchrony Financial | 50,230 | 1,256,755 | ||||||
Containers and Packaging — 0.7% | ||||||||
International Paper Co. | 57,335 | 2,508,406 | ||||||
Packaging Corp. of America | 20,689 | 2,368,684 | ||||||
WestRock Co. | 38,688 | 1,452,734 | ||||||
6,329,824 | ||||||||
Distributors — 0.1% | ||||||||
LKQ Corp.(1) | 26,083 | 834,395 | ||||||
Diversified Financial Services — 0.7% | ||||||||
Berkshire Hathaway, Inc., Class B(1) | 33,880 | 6,840,372 | ||||||
Diversified Telecommunication Services — 0.9% | ||||||||
AT&T, Inc. | 86,134 | 2,327,341 | ||||||
CenturyLink, Inc. | 111,989 | 965,345 | ||||||
Verizon Communications, Inc. | 85,409 | 4,867,459 | ||||||
8,160,145 | ||||||||
Electric Utilities — 0.8% | ||||||||
Duke Energy Corp. | 20,273 | 1,867,346 | ||||||
NextEra Energy, Inc. | 7,016 | 513,641 | ||||||
NRG Energy, Inc. | 57,537 | 1,819,320 | ||||||
PPL Corp. | 94,564 | 2,600,510 | ||||||
Southern Co. (The) | 8,395 | 482,293 | ||||||
7,283,110 | ||||||||
Electrical Equipment — 0.6% | ||||||||
Emerson Electric Co. | 39,492 | 2,558,687 | ||||||
Rockwell Automation, Inc. | 12,466 | 2,955,938 | ||||||
5,514,625 | ||||||||
Electronic Equipment, Instruments and Components — 0.5% | ||||||||
Jabil, Inc. | 76,588 | 2,538,127 | ||||||
SYNNEX Corp. | 5,788 | 761,932 | ||||||
Zebra Technologies Corp., Class A(1) | 5,472 | 1,552,078 | ||||||
4,852,137 | ||||||||
Entertainment — 1.6% | ||||||||
Activision Blizzard, Inc. | 32,191 | 2,437,824 | ||||||
Electronic Arts, Inc.(1) | 43,892 | 5,259,578 | ||||||
Netflix, Inc.(1) | 2,358 | 1,121,795 | ||||||
Take-Two Interactive Software, Inc.(1) | 23,055 | 3,571,681 | ||||||
Zynga, Inc., Class A(1) | 303,646 | 2,729,778 | ||||||
15,120,656 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 0.2% | ||||||||
Iron Mountain, Inc. | 23,413 | 610,143 |
11
Shares/ Principal Amount | Value | |||||||
Public Storage | 3,921 | $ | 898,183 | |||||
1,508,326 | ||||||||
Food and Staples Retailing — 0.4% | ||||||||
BJ's Wholesale Club Holdings, Inc.(1) | 55,396 | 2,121,113 | ||||||
Kroger Co. (The) | 20,104 | 647,550 | ||||||
Walmart, Inc. | 8,788 | 1,219,335 | ||||||
3,987,998 | ||||||||
Food Products — 1.7% | ||||||||
Campbell Soup Co. | 19,846 | 926,213 | ||||||
General Mills, Inc. | 55,145 | 3,260,172 | ||||||
Hershey Co. (The) | 38,594 | 5,305,131 | ||||||
Hormel Foods Corp. | 46,387 | 2,258,583 | ||||||
J.M. Smucker Co. (The) | 9,193 | 1,031,455 | ||||||
Kellogg Co. | 35,895 | 2,257,436 | ||||||
Kraft Heinz Co. (The) | 18,998 | 581,149 | ||||||
15,620,139 | ||||||||
Health Care Equipment and Supplies — 1.6% | ||||||||
Abbott Laboratories | 39,919 | 4,195,886 | ||||||
ABIOMED, Inc.(1) | 5,341 | 1,345,291 | ||||||
Baxter International, Inc. | 32,230 | 2,500,081 | ||||||
Danaher Corp. | 6,834 | 1,568,677 | ||||||
Medtronic plc | 13,360 | 1,343,615 | ||||||
Novocure Ltd.(1) | 26,286 | 3,209,521 | ||||||
Zimmer Biomet Holdings, Inc. | 6,332 | 836,457 | ||||||
14,999,528 | ||||||||
Health Care Providers and Services — 2.1% | ||||||||
Anthem, Inc. | 10,940 | 2,984,432 | ||||||
Cardinal Health, Inc. | 10,234 | 468,615 | ||||||
CVS Health Corp. | 26,025 | 1,459,742 | ||||||
HCA Healthcare, Inc. | 25,748 | 3,191,207 | ||||||
Henry Schein, Inc.(1) | 8,380 | 532,800 | ||||||
Humana, Inc. | 12,307 | 4,913,939 | ||||||
McKesson Corp. | 16,744 | 2,469,573 | ||||||
UnitedHealth Group, Inc. | 13,112 | 4,000,996 | ||||||
20,021,304 | ||||||||
Health Care Technology — 0.6% | ||||||||
Cerner Corp. | 86,245 | 6,044,912 | ||||||
Household Durables — 0.1% | ||||||||
PulteGroup, Inc. | 29,446 | 1,200,219 | ||||||
Household Products — 1.5% | ||||||||
Colgate-Palmolive Co. | 46,319 | 3,654,106 | ||||||
Kimberly-Clark Corp. | 47,353 | 6,278,534 | ||||||
Procter & Gamble Co. (The) | 33,159 | 4,546,099 | ||||||
14,478,739 | ||||||||
Industrial Conglomerates — 0.6% | ||||||||
3M Co. | 30,728 | 4,915,251 | ||||||
Honeywell International, Inc. | 6,798 | 1,121,330 | ||||||
6,036,581 | ||||||||
Insurance — 1.1% | ||||||||
Aon plc, Class A | 3,910 | 719,479 | ||||||
Brown & Brown, Inc. | 45,578 | 1,983,099 |
12
Shares/ Principal Amount | Value | |||||||
Marsh & McLennan Cos., Inc. | 24,410 | $ | 2,525,458 | |||||
MetLife, Inc. | 88,305 | 3,342,344 | ||||||
Principal Financial Group, Inc. | 39,276 | 1,540,405 | ||||||
10,110,785 | ||||||||
Interactive Media and Services — 4.4% | ||||||||
Alphabet, Inc., Class A(1) | 11,731 | 18,958,587 | ||||||
Facebook, Inc., Class A(1) | 71,484 | 18,808,155 | ||||||
Pinterest, Inc., Class A(1) | 67,814 | 3,997,635 | ||||||
41,764,377 | ||||||||
Internet and Direct Marketing Retail — 3.8% | ||||||||
Amazon.com, Inc.(1) | 9,503 | 28,852,534 | ||||||
eBay, Inc. | 102,621 | 4,887,838 | ||||||
Wayfair, Inc., Class A(1) | 7,566 | 1,876,595 | ||||||
35,616,967 | ||||||||
IT Services — 1.5% | ||||||||
Akamai Technologies, Inc.(1) | 12,043 | 1,145,530 | ||||||
Cognizant Technology Solutions Corp., Class A | 20,104 | 1,435,828 | ||||||
International Business Machines Corp. | 37,007 | 4,132,201 | ||||||
Mastercard, Inc., Class A | 6,537 | 1,886,840 | ||||||
PayPal Holdings, Inc.(1) | 4,256 | 792,169 | ||||||
Visa, Inc., Class A | 16,914 | 3,073,443 | ||||||
Western Union Co. (The) | 92,188 | 1,792,135 | ||||||
14,258,146 | ||||||||
Life Sciences Tools and Services — 0.4% | ||||||||
Agilent Technologies, Inc. | 30,643 | 3,128,344 | ||||||
Illumina, Inc.(1) | 2,643 | 773,606 | ||||||
3,901,950 | ||||||||
Machinery — 0.9% | ||||||||
AGCO Corp. | 33,480 | 2,578,965 | ||||||
Cummins, Inc. | 13,915 | 3,059,769 | ||||||
Snap-on, Inc. | 16,442 | 2,590,108 | ||||||
8,228,842 | ||||||||
Media — 0.1% | ||||||||
Interpublic Group of Cos., Inc. (The) | 34,369 | 621,735 | ||||||
Metals and Mining — 0.4% | ||||||||
Reliance Steel & Aluminum Co. | 19,309 | 2,104,488 | ||||||
Steel Dynamics, Inc. | 42,890 | 1,350,177 | ||||||
3,454,665 | ||||||||
Multi-Utilities — 0.6% | ||||||||
CenterPoint Energy, Inc. | 113,760 | 2,403,749 | ||||||
Dominion Energy, Inc. | 28,788 | 2,312,828 | ||||||
Sempra Energy | 8,273 | 1,037,103 | ||||||
5,753,680 | ||||||||
Multiline Retail — 0.9% | ||||||||
Dollar Tree, Inc.(1) | 7,348 | 663,671 | ||||||
Target Corp. | 52,668 | 8,017,123 | ||||||
8,680,794 | ||||||||
Oil, Gas and Consumable Fuels — 0.6% | ||||||||
Chevron Corp. | 11,336 | 787,852 | ||||||
Exxon Mobil Corp. | 35,642 | 1,162,642 | ||||||
Kinder Morgan, Inc. | 58,603 | 697,376 |
13
Shares/ Principal Amount | Value | |||||||
Williams Cos., Inc. (The) | 138,792 | $ | 2,663,418 | |||||
5,311,288 | ||||||||
Personal Products — 0.6% | ||||||||
Estee Lauder Cos., Inc. (The), Class A | 13,102 | 2,877,985 | ||||||
Herbalife Nutrition Ltd.(1) | 54,240 | 2,448,394 | ||||||
5,326,379 | ||||||||
Pharmaceuticals — 2.3% | ||||||||
Bristol-Myers Squibb Co. | 112,274 | 6,562,415 | ||||||
Jazz Pharmaceuticals plc(1) | 5,325 | 767,333 | ||||||
Johnson & Johnson | 15,434 | 2,116,156 | ||||||
Merck & Co., Inc. | 111,177 | 8,361,622 | ||||||
Mylan NV(1) | 139,717 | 2,031,485 | ||||||
Pfizer, Inc. | 46,407 | 1,646,520 | ||||||
21,485,531 | ||||||||
Professional Services — 0.1% | ||||||||
Robert Half International, Inc. | 15,465 | 783,921 | ||||||
Road and Rail — 0.4% | ||||||||
Kansas City Southern | 13,397 | 2,359,747 | ||||||
Union Pacific Corp. | 7,399 | 1,311,029 | ||||||
3,670,776 | ||||||||
Semiconductors and Semiconductor Equipment — 4.9% | ||||||||
Applied Materials, Inc. | 72,667 | 4,304,066 | ||||||
Broadcom, Inc. | 24,860 | 8,691,802 | ||||||
Intel Corp. | 22,377 | 990,853 | ||||||
KLA Corp. | 24,456 | 4,822,234 | ||||||
Lam Research Corp. | 9,598 | 3,283,284 | ||||||
NVIDIA Corp. | 16,194 | 8,119,024 | ||||||
NXP Semiconductors NV | 12,247 | 1,654,815 | ||||||
Qorvo, Inc.(1) | 7,388 | 940,936 | ||||||
QUALCOMM, Inc. | 50,873 | 6,275,693 | ||||||
Skyworks Solutions, Inc. | 15,969 | 2,256,260 | ||||||
Texas Instruments, Inc. | 36,071 | 5,215,506 | ||||||
46,554,473 | ||||||||
Software — 7.5% | ||||||||
Adobe, Inc.(1) | 22,767 | 10,179,126 | ||||||
Autodesk, Inc.(1) | 20,413 | 4,808,078 | ||||||
Cadence Design Systems, Inc.(1) | 20,886 | 2,284,302 | ||||||
Dropbox, Inc., Class A(1) | 90,925 | 1,660,290 | ||||||
Fortinet, Inc.(1) | 7,684 | 848,083 | ||||||
Microsoft Corp. | 165,385 | 33,485,501 | ||||||
Oracle Corp., (New York) | 80,142 | 4,496,767 | ||||||
Palo Alto Networks, Inc.(1) | 12,100 | 2,676,399 | ||||||
Proofpoint, Inc.(1) | 1,550 | 148,397 | ||||||
salesforce.com, Inc.(1) | 16,658 | 3,869,154 | ||||||
ServiceNow, Inc.(1) | 11,644 | 5,793,705 | ||||||
VMware, Inc., Class A(1) | 5,601 | 721,017 | ||||||
70,970,819 | ||||||||
Specialty Retail — 2.3% | ||||||||
AutoZone, Inc.(1) | 617 | 696,581 | ||||||
Best Buy Co., Inc. | 31,953 | 3,564,357 | ||||||
Dick's Sporting Goods, Inc. | 29,570 | 1,675,140 |
14
Shares/ Principal Amount | Value | |||||||
Home Depot, Inc. (The) | 34,394 | $ | 9,173,224 | |||||
Lowe's Cos., Inc. | 38,724 | 6,122,264 | ||||||
Ulta Beauty, Inc.(1) | 4,076 | 842,795 | ||||||
22,074,361 | ||||||||
Technology Hardware, Storage and Peripherals — 3.7% | ||||||||
Apple, Inc. | 324,953 | 35,374,384 | ||||||
Textiles, Apparel and Luxury Goods — 0.1% | ||||||||
Hanesbrands, Inc. | 69,555 | 1,117,749 | ||||||
Trading Companies and Distributors — 0.2% | ||||||||
W.W. Grainger, Inc. | 6,075 | 2,126,371 | ||||||
TOTAL COMMON STOCKS (Cost $424,094,611) | 557,742,242 | |||||||
U.S. TREASURY SECURITIES — 13.7% | ||||||||
U.S. Treasury Bonds, 5.00%, 5/15/37 | $ | 200,000 | 315,453 | |||||
U.S. Treasury Bonds, 3.50%, 2/15/39 | 150,000 | 204,598 | ||||||
U.S. Treasury Bonds, 4.625%, 2/15/40 | 1,300,000 | 2,034,145 | ||||||
U.S. Treasury Bonds, 4.375%, 5/15/41 | 1,400,000 | 2,152,172 | ||||||
U.S. Treasury Bonds, 3.125%, 11/15/41 | 1,000,000 | 1,309,609 | ||||||
U.S. Treasury Bonds, 3.00%, 5/15/42 | 3,300,000 | 4,249,395 | ||||||
U.S. Treasury Bonds, 2.75%, 11/15/42 | 2,000,000 | 2,478,516 | ||||||
U.S. Treasury Bonds, 2.875%, 5/15/43 | 1,300,000 | 1,644,855 | ||||||
U.S. Treasury Bonds, 3.625%, 2/15/44 | 300,000 | 425,063 | ||||||
U.S. Treasury Bonds, 3.125%, 8/15/44 | 500,000 | 659,336 | ||||||
U.S. Treasury Bonds, 3.00%, 11/15/44 | 600,000 | 776,203 | ||||||
U.S. Treasury Bonds, 2.50%, 2/15/45(2) | 5,000,000 | 5,951,562 | ||||||
U.S. Treasury Bonds, 3.00%, 5/15/45 | 600,000 | 777,258 | ||||||
U.S. Treasury Bonds, 3.00%, 11/15/45 | 200,000 | 259,813 | ||||||
U.S. Treasury Bonds, 3.375%, 11/15/48 | 1,900,000 | 2,664,824 | ||||||
U.S. Treasury Bonds, 2.25%, 8/15/49 | 1,200,000 | 1,369,359 | ||||||
U.S. Treasury Bonds, 2.375%, 11/15/49 | 1,900,000 | 2,225,523 | ||||||
U.S. Treasury Bonds, 2.00%, 2/15/50 | 1,900,000 | 2,057,344 | ||||||
U.S. Treasury Bonds, 1.25%, 5/15/50 | 500,000 | 451,563 | ||||||
U.S. Treasury Bonds, 1.375%, 8/15/50 | 200,000 | 186,469 | ||||||
U.S. Treasury Inflation Indexed Notes, 0.25%, 7/15/29 | 2,235,574 | 2,473,353 | ||||||
U.S. Treasury Inflation Indexed Notes, 0.125%, 7/15/30 | 3,548,300 | 3,894,706 | ||||||
U.S. Treasury Notes, 1.875%, 1/31/22(2) | 500,000 | 510,859 | ||||||
U.S. Treasury Notes, 0.375%, 3/31/22 | 5,500,000 | 5,518,906 | ||||||
U.S. Treasury Notes, 1.875%, 3/31/22 | 900,000 | 922,078 | ||||||
U.S. Treasury Notes, 0.125%, 4/30/22 | 5,000,000 | 4,999,609 | ||||||
U.S. Treasury Notes, 1.875%, 4/30/22 | 1,800,000 | 1,846,688 | ||||||
U.S. Treasury Notes, 0.125%, 5/31/22 | 300,000 | 299,930 | ||||||
U.S. Treasury Notes, 1.75%, 6/15/22 | 3,000,000 | 3,077,812 | ||||||
U.S. Treasury Notes, 1.625%, 11/15/22 | 3,000,000 | 3,089,707 | ||||||
U.S. Treasury Notes, 2.00%, 11/30/22 | 800,000 | 830,625 | ||||||
U.S. Treasury Notes, 0.50%, 3/15/23 | 18,600,000 | 18,744,586 | ||||||
U.S. Treasury Notes, 0.25%, 4/15/23 | 400,000 | 400,766 | ||||||
U.S. Treasury Notes, 0.25%, 6/15/23 | 500,000 | 500,898 | ||||||
U.S. Treasury Notes, 2.875%, 11/30/23 | 6,600,000 | 7,140,891 | ||||||
U.S. Treasury Notes, 2.375%, 2/29/24 | 1,500,000 | 1,607,021 | ||||||
U.S. Treasury Notes, 1.125%, 2/28/25 | 12,200,000 | 12,625,094 | ||||||
U.S. Treasury Notes, 0.50%, 3/31/25 | 1,200,000 | 1,209,047 | ||||||
U.S. Treasury Notes, 0.25%, 5/31/25 | 2,000,000 | 1,991,797 |
15
Shares/ Principal Amount | Value | |||||||
U.S. Treasury Notes, 0.25%, 8/31/25 | $ | 6,300,000 | $ | 6,264,562 | ||||
U.S. Treasury Notes, 2.625%, 12/31/25 | 2,200,000 | 2,448,875 | ||||||
U.S. Treasury Notes, 1.375%, 8/31/26 | 1,500,000 | 1,574,590 | ||||||
U.S. Treasury Notes, 1.625%, 10/31/26 | 100,000 | 106,480 | ||||||
U.S. Treasury Notes, 1.75%, 12/31/26 | 700,000 | 751,133 | ||||||
U.S. Treasury Notes, 1.50%, 1/31/27 | 2,000,000 | 2,116,016 | ||||||
U.S. Treasury Notes, 1.125%, 2/28/27 | 1,200,000 | 1,241,508 | ||||||
U.S. Treasury Notes, 0.625%, 3/31/27 | 10,000,000 | 10,026,367 | ||||||
U.S. Treasury Notes, 0.50%, 6/30/27 | 500,000 | 496,367 | ||||||
U.S. Treasury Notes, 0.50%, 8/31/27 | 600,000 | 594,750 | ||||||
TOTAL U.S. TREASURY SECURITIES (Cost $122,173,126) | 129,498,081 | |||||||
CORPORATE BONDS — 11.3% | ||||||||
Aerospace and Defense — 0.1% | ||||||||
Boeing Co. (The), 5.15%, 5/1/30 | 150,000 | 166,271 | ||||||
Boeing Co. (The), 5.81%, 5/1/50 | 430,000 | 506,857 | ||||||
Lockheed Martin Corp., 3.80%, 3/1/45 | 80,000 | 95,918 | ||||||
Raytheon Technologies Corp., 4.125%, 11/16/28 | 500,000 | 586,122 | ||||||
1,355,168 | ||||||||
Airlines — 0.1% | ||||||||
Delta Air Lines, Inc. / SkyMiles IP Ltd., 4.50%, 10/20/25(3) | 590,000 | 599,280 | ||||||
Southwest Airlines Co., 5.125%, 6/15/27 | 508,000 | 565,567 | ||||||
1,164,847 | ||||||||
Auto Components† | ||||||||
BorgWarner, Inc., 2.65%, 7/1/27 | 210,000 | 220,495 | ||||||
Automobiles — 0.3% | ||||||||
Ford Motor Credit Co. LLC, 5.875%, 8/2/21 | 440,000 | 449,878 | ||||||
Ford Motor Credit Co. LLC, 2.98%, 8/3/22 | 400,000 | 397,916 | ||||||
Ford Motor Credit Co. LLC, 3.35%, 11/1/22 | 310,000 | 309,259 | ||||||
General Motors Co., 5.15%, 4/1/38 | 260,000 | 288,830 | ||||||
General Motors Financial Co., Inc., 2.75%, 6/20/25 | 430,000 | 444,286 | ||||||
General Motors Financial Co., Inc., 2.70%, 8/20/27 | 650,000 | 656,388 | ||||||
2,546,557 | ||||||||
Banks — 1.5% | ||||||||
Banco Santander SA, 3.50%, 4/11/22 | 600,000 | 623,947 | ||||||
Bank of America Corp., MTN, VRN, 1.32%, 6/19/26 | 895,000 | 900,431 | ||||||
Bank of America Corp., MTN, VRN, 2.50%, 2/13/31 | 930,000 | 964,914 | ||||||
Bank of America Corp., MTN, VRN, 2.68%, 6/19/41 | 600,000 | 607,694 | ||||||
Bank of America Corp., MTN, VRN, 2.83%, 10/24/51 | 155,000 | 153,705 | ||||||
Bank of America Corp., VRN, 3.00%, 12/20/23 | 911,000 | 955,962 | ||||||
Barclays plc, VRN, 2.65%, 6/24/31 | 300,000 | 301,213 | ||||||
BNP Paribas SA, VRN, 2.59%, 8/12/35(3) | 490,000 | 472,673 | ||||||
BPCE SA, 5.15%, 7/21/24(3) | 200,000 | 224,571 | ||||||
BPCE SA, VRN, 1.65%, 10/6/26(3) | 300,000 | 302,257 | ||||||
Citigroup, Inc., 4.05%, 7/30/22 | 70,000 | 74,212 | ||||||
Citigroup, Inc., 4.65%, 7/23/48 | 140,000 | 181,533 | ||||||
Citigroup, Inc., VRN, 3.11%, 4/8/26 | 277,000 | 299,444 | ||||||
Citigroup, Inc., VRN, 3.52%, 10/27/28 | 390,000 | 433,046 | ||||||
Citigroup, Inc., VRN, 2.57%, 6/3/31 | 390,000 | 406,343 | ||||||
Cooperatieve Rabobank UA, 3.95%, 11/9/22 | 450,000 | 479,940 | ||||||
DNB Bank ASA, VRN, 1.13%, 9/16/26(3) | 380,000 | 379,762 | ||||||
Fifth Third BanCorp., 4.30%, 1/16/24 | 110,000 | 121,058 |
16
Shares/ Principal Amount | Value | |||||||
FNB Corp., 2.20%, 2/24/23 | $ | 460,000 | $ | 465,119 | ||||
HSBC Holdings plc, VRN, 2.01%, 9/22/28 | 240,000 | 238,732 | ||||||
JPMorgan Chase & Co., VRN, 4.02%, 12/5/24 | 220,000 | 242,237 | ||||||
JPMorgan Chase & Co., VRN, 2.18%, 6/1/28 | 670,000 | 698,852 | ||||||
JPMorgan Chase & Co., VRN, 2.52%, 4/22/31 | 905,000 | 954,909 | ||||||
JPMorgan Chase & Co., VRN, 3.11%, 4/22/51 | 170,000 | 179,390 | ||||||
Lloyds Banking Group plc, VRN, 2.44%, 2/5/26 | 540,000 | 563,372 | ||||||
Natwest Group plc, VRN, 2.36%, 5/22/24 | 110,000 | 113,706 | ||||||
Santander UK Group Holdings plc, VRN, 1.53%, 8/21/26 | 405,000 | 402,854 | ||||||
Societe Generale SA, VRN, 3.65%, 7/8/35(3) | 90,000 | 90,613 | ||||||
Wells Fargo & Co., 4.125%, 8/15/23 | 200,000 | 218,452 | ||||||
Wells Fargo & Co., 3.00%, 10/23/26 | 695,000 | 759,135 | ||||||
Wells Fargo & Co., MTN, VRN, 2.39%, 6/2/28 | 525,000 | 545,186 | ||||||
Wells Fargo & Co., VRN, 2.19%, 4/30/26 | 180,000 | 187,332 | ||||||
Wells Fargo & Co., VRN, 3.07%, 4/30/41 | 310,000 | 321,870 | ||||||
13,864,464 | ||||||||
Beverages — 0.2% | ||||||||
Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide, Inc., 4.90%, 2/1/46 | 500,000 | 613,743 | ||||||
Anheuser-Busch InBev Worldwide, Inc., 4.75%, 1/23/29 | 630,000 | 762,959 | ||||||
PepsiCo, Inc., 1.625%, 5/1/30 | 110,000 | 112,130 | ||||||
1,488,832 | ||||||||
Biotechnology — 0.4% | ||||||||
AbbVie, Inc., 3.25%, 10/1/22(3) | 400,000 | 418,091 | ||||||
AbbVie, Inc., 3.85%, 6/15/24(3) | 440,000 | 482,523 | ||||||
AbbVie, Inc., 3.60%, 5/14/25 | 120,000 | 133,075 | ||||||
AbbVie, Inc., 3.20%, 11/21/29(3) | 440,000 | 486,031 | ||||||
AbbVie, Inc., 4.55%, 3/15/35(3) | 110,000 | 132,274 | ||||||
AbbVie, Inc., 4.40%, 11/6/42 | 240,000 | 283,434 | ||||||
Gilead Sciences, Inc., 3.65%, 3/1/26 | 840,000 | 947,992 | ||||||
Gilead Sciences, Inc., 1.65%, 10/1/30 | 420,000 | 414,781 | ||||||
3,298,201 | ||||||||
Building Products† | ||||||||
Lennox International, Inc., 1.70%, 8/1/27 | 140,000 | 139,945 | ||||||
Capital Markets — 0.8% | ||||||||
Ares Capital Corp., 3.25%, 7/15/25 | 653,000 | 655,783 | ||||||
Ares Finance Co. II LLC, 3.25%, 6/15/30(3) | 305,000 | 316,739 | ||||||
Credit Suisse Group AG, VRN, 2.59%, 9/11/25(3) | 280,000 | 293,726 | ||||||
Credit Suisse Group AG, VRN, 2.19%, 6/5/26(3) | 780,000 | 805,909 | ||||||
Goldman Sachs Group, Inc. (The), 3.50%, 4/1/25 | 468,000 | 515,738 | ||||||
Goldman Sachs Group, Inc. (The), 3.50%, 11/16/26 | 1,058,000 | 1,172,087 | ||||||
Goldman Sachs Group, Inc. (The), 2.60%, 2/7/30 | 445,000 | 469,844 | ||||||
Golub Capital BDC, Inc., 3.375%, 4/15/24 | 595,000 | 593,874 | ||||||
Intercontinental Exchange, Inc., 1.85%, 9/15/32 | 280,000 | 277,438 | ||||||
Morgan Stanley, 4.875%, 11/1/22 | 327,000 | 353,904 | ||||||
Morgan Stanley, VRN, 2.19%, 4/28/26 | 1,205,000 | 1,263,406 | ||||||
Oaktree Specialty Lending Corp., 3.50%, 2/25/25 | 210,000 | 210,435 | ||||||
Owl Rock Technology Finance Corp., 4.75%, 12/15/25(3) | 540,000 | 536,132 | ||||||
UBS Group AG, 4.125%, 9/24/25(3) | 200,000 | 227,659 | ||||||
7,692,674 | ||||||||
Chemicals — 0.2% | ||||||||
CF Industries, Inc., 4.50%, 12/1/26(3) | 300,000 | 352,014 |
17
Shares/ Principal Amount | Value | |||||||
CF Industries, Inc., 5.15%, 3/15/34 | $ | 230,000 | $ | 269,920 | ||||
Dow Chemical Co. (The), 3.60%, 11/15/50 | 550,000 | 558,395 | ||||||
LYB International Finance III LLC, 3.375%, 10/1/40 | 168,000 | 166,254 | ||||||
Nutrition & Biosciences, Inc., 1.83%, 10/15/27(3) | 177,000 | 177,370 | ||||||
1,523,953 | ||||||||
Commercial Services and Supplies — 0.1% | ||||||||
RELX Capital, Inc., 3.00%, 5/22/30 | 235,000 | 254,059 | ||||||
Republic Services, Inc., 2.30%, 3/1/30 | 508,000 | 535,615 | ||||||
Waste Connections, Inc., 2.60%, 2/1/30 | 580,000 | 617,192 | ||||||
1,406,866 | ||||||||
Communications Equipment† | ||||||||
Juniper Networks, Inc., 4.50%, 3/15/24 | 80,000 | 89,091 | ||||||
Motorola Solutions, Inc., 2.30%, 11/15/30 | 290,000 | 288,416 | ||||||
377,507 | ||||||||
Construction and Engineering† | ||||||||
Quanta Services, Inc., 2.90%, 10/1/30 | 330,000 | 344,283 | ||||||
Construction Materials — 0.1% | ||||||||
Martin Marietta Materials, Inc., 2.50%, 3/15/30 | 542,000 | 560,602 | ||||||
Vulcan Materials Co., 3.50%, 6/1/30 | 310,000 | 347,716 | ||||||
908,318 | ||||||||
Consumer Finance — 0.2% | ||||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust, 3.15%, 2/15/24 | 355,000 | 352,947 | ||||||
Capital One Bank USA N.A., 3.375%, 2/15/23 | 250,000 | 264,864 | ||||||
Park Aerospace Holdings Ltd., 5.50%, 2/15/24(3) | 370,000 | 382,517 | ||||||
Synchrony Financial, 2.85%, 7/25/22 | 533,000 | 550,074 | ||||||
1,550,402 | ||||||||
Containers and Packaging† | ||||||||
Ball Corp., 2.875%, 8/15/30 | 150,000 | 148,500 | ||||||
Diversified Consumer Services† | ||||||||
Pepperdine University, 3.30%, 12/1/59 | 355,000 | 373,165 | ||||||
Diversified Financial Services — 0.1% | ||||||||
Block Financial LLC, 3.875%, 8/15/30 | 140,000 | 144,384 | ||||||
Equitable Holdings, Inc., 5.00%, 4/20/48 | 204,000 | 243,928 | ||||||
GE Capital Funding LLC, 4.40%, 5/15/30(3) | 610,000 | 665,275 | ||||||
NatWest Markets plc, 2.375%, 5/21/23(3) | 200,000 | 207,155 | ||||||
1,260,742 | ||||||||
Diversified Telecommunication Services — 0.5% | ||||||||
AT&T, Inc., 2.30%, 6/1/27 | 140,000 | 145,478 | ||||||
AT&T, Inc., 4.10%, 2/15/28 | 150,000 | 172,087 | ||||||
AT&T, Inc., 2.75%, 6/1/31 | 835,000 | 866,498 | ||||||
AT&T, Inc., 3.50%, 6/1/41 | 100,000 | 101,203 | ||||||
AT&T, Inc., 3.30%, 2/1/52 | 818,000 | 755,142 | ||||||
AT&T, Inc., 3.55%, 9/15/55(3) | 173,000 | 164,358 | ||||||
Deutsche Telekom International Finance BV, 1.95%, 9/19/21(3) | 354,000 | 358,070 | ||||||
Deutsche Telekom International Finance BV, 3.60%, 1/19/27(3) | 140,000 | 156,567 | ||||||
Telefonica Emisiones SA, 5.46%, 2/16/21 | 100,000 | 101,420 | ||||||
Verizon Communications, Inc., 4.40%, 11/1/34 | 898,000 | 1,108,625 | ||||||
Verizon Communications, Inc., 2.99%, 10/30/56(3) | 360,000 | 364,577 | ||||||
4,294,025 | ||||||||
Electric Utilities — 0.8% | ||||||||
AEP Texas, Inc., 2.10%, 7/1/30 | 340,000 | 350,492 |
18
Shares/ Principal Amount | Value | |||||||
AEP Transmission Co. LLC, 3.75%, 12/1/47 | $ | 100,000 | $ | 117,438 | ||||
American Electric Power Co., Inc., 3.20%, 11/13/27 | 110,000 | 120,106 | ||||||
Berkshire Hathaway Energy Co., 3.50%, 2/1/25 | 160,000 | 176,679 | ||||||
Berkshire Hathaway Energy Co., 3.80%, 7/15/48 | 150,000 | 172,289 | ||||||
Commonwealth Edison Co., 3.20%, 11/15/49 | 215,000 | 233,317 | ||||||
DTE Electric Co., 2.25%, 3/1/30 | 330,000 | 347,521 | ||||||
Duke Energy Florida LLC, 1.75%, 6/15/30 | 370,000 | 374,659 | ||||||
Duke Energy Florida LLC, 3.85%, 11/15/42 | 220,000 | 254,034 | ||||||
Duke Energy Progress LLC, 4.15%, 12/1/44 | 130,000 | 158,904 | ||||||
Duke Energy Progress LLC, 3.70%, 10/15/46 | 270,000 | 312,362 | ||||||
EDP Finance BV, 1.71%, 1/24/28(3) | 500,000 | 494,858 | ||||||
Entergy Arkansas LLC, 2.65%, 6/15/51 | 180,000 | 178,017 | ||||||
Entergy Texas, Inc., 1.75%, 3/15/31 | 670,000 | 659,864 | ||||||
Exelon Corp., 4.45%, 4/15/46 | 150,000 | 181,780 | ||||||
FirstEnergy Corp., 4.85%, 7/15/47 | 90,000 | 97,805 | ||||||
Florida Power & Light Co., 4.125%, 2/1/42 | 140,000 | 172,486 | ||||||
Florida Power & Light Co., 3.15%, 10/1/49 | 170,000 | 189,476 | ||||||
MidAmerican Energy Co., 4.40%, 10/15/44 | 250,000 | 314,758 | ||||||
Nevada Power Co., 2.40%, 5/1/30 | 231,000 | 245,852 | ||||||
NextEra Energy Capital Holdings, Inc., 3.55%, 5/1/27 | 290,000 | 325,873 | ||||||
NextEra Energy Operating Partners LP, 4.50%, 9/15/27(3) | 120,000 | 131,400 | ||||||
Northern States Power Co., 2.60%, 6/1/51 | 160,000 | 160,880 | ||||||
Oncor Electric Delivery Co. LLC, 3.10%, 9/15/49 | 170,000 | 185,918 | ||||||
PacifiCorp, 2.70%, 9/15/30 | 99,000 | 107,941 | ||||||
PacifiCorp, 3.30%, 3/15/51 | 310,000 | 338,702 | ||||||
Potomac Electric Power Co., 3.60%, 3/15/24 | 120,000 | 130,470 | ||||||
Southern Co. Gas Capital Corp., 1.75%, 1/15/31 | 360,000 | 356,467 | ||||||
Southern Co. Gas Capital Corp., 3.95%, 10/1/46 | 90,000 | 100,013 | ||||||
Xcel Energy, Inc., 3.40%, 6/1/30 | 330,000 | 374,820 | ||||||
7,365,181 | ||||||||
Energy Equipment and Services† | ||||||||
Baker Hughes a GE Co. LLC / Baker Hughes Co-Obligor, Inc., 3.14%, 11/7/29 | 209,000 | 217,802 | ||||||
Entertainment — 0.1% | ||||||||
Netflix, Inc., 3.625%, 6/15/25(3) | 464,000 | 482,850 | ||||||
Netflix, Inc., 4.875%, 4/15/28 | 325,000 | 366,057 | ||||||
Netflix, Inc., 5.875%, 11/15/28 | 86,000 | 102,906 | ||||||
951,813 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 0.8% | ||||||||
Alexandria Real Estate Equities, Inc., 4.70%, 7/1/30 | 100,000 | 122,803 | ||||||
Alexandria Real Estate Equities, Inc., 1.875%, 2/1/33 | 435,000 | 423,616 | ||||||
American Tower Corp., 3.375%, 10/15/26 | 110,000 | 121,714 | ||||||
Brixmor Operating Partnership LP, 4.05%, 7/1/30 | 220,000 | 237,867 | ||||||
CubeSmart LP, 2.00%, 2/15/31 | 385,000 | 375,325 | ||||||
Equinix, Inc., 5.375%, 5/15/27 | 335,000 | 365,363 | ||||||
Essex Portfolio LP, 3.25%, 5/1/23 | 50,000 | 52,621 | ||||||
Healthcare Realty Trust, Inc., 2.40%, 3/15/30 | 300,000 | 302,840 | ||||||
Healthcare Realty Trust, Inc., 2.05%, 3/15/31 | 160,000 | 157,074 | ||||||
Highwoods Realty LP, 2.60%, 2/1/31 | 290,000 | 286,958 | ||||||
Kilroy Realty LP, 3.80%, 1/15/23 | 130,000 | 135,287 | ||||||
Kilroy Realty LP, 2.50%, 11/15/32 | 400,000 | 388,553 | ||||||
Kimco Realty Corp., 2.80%, 10/1/26 | 240,000 | 256,930 |
19
Shares/ Principal Amount | Value | |||||||
Kimco Realty Corp., 1.90%, 3/1/28 | $ | 420,000 | $ | 414,372 | ||||
Lexington Realty Trust, 2.70%, 9/15/30 | 549,000 | 554,731 | ||||||
National Retail Properties, Inc., 2.50%, 4/15/30 | 544,000 | 539,778 | ||||||
Omega Healthcare Investors, Inc., 3.375%, 2/1/31 | 445,000 | 429,135 | ||||||
Realty Income Corp., 3.25%, 1/15/31 | 140,000 | 153,202 | ||||||
Regency Centers LP, 3.70%, 6/15/30 | 300,000 | 327,851 | ||||||
Scentre Group Trust 2, VRN, 4.75%, 9/24/80(3) | 320,000 | 314,799 | ||||||
Spirit Realty LP, 3.20%, 2/15/31 | 280,000 | 279,214 | ||||||
Ventas Realty LP, 4.40%, 1/15/29 | 330,000 | 372,110 | ||||||
VEREIT Operating Partnership LP, 3.40%, 1/15/28 | 471,000 | 494,266 | ||||||
Welltower, Inc., 2.75%, 1/15/31 | 330,000 | 337,540 | ||||||
7,443,949 | ||||||||
Food and Staples Retailing — 0.2% | ||||||||
Costco Wholesale Corp., 1.60%, 4/20/30 | 430,000 | 434,510 | ||||||
Kroger Co. (The), 3.875%, 10/15/46 | 350,000 | 394,152 | ||||||
Sysco Corp., 5.95%, 4/1/30 | 700,000 | 895,124 | ||||||
Walmart, Inc., 4.05%, 6/29/48 | 210,000 | 271,662 | ||||||
1,995,448 | ||||||||
Food Products — 0.1% | ||||||||
Conagra Brands, Inc., 1.375%, 11/1/27 | 252,000 | 249,305 | ||||||
Mars, Inc., 1.625%, 7/16/32(3) | 470,000 | 460,027 | ||||||
Mondelez International, Inc., 2.75%, 4/13/30 | 412,000 | 444,255 | ||||||
1,153,587 | ||||||||
Gas Utilities† | ||||||||
CenterPoint Energy Resources Corp., 1.75%, 10/1/30 | 323,000 | 324,628 | ||||||
Health Care Equipment and Supplies — 0.2% | ||||||||
Becton Dickinson and Co., 3.73%, 12/15/24 | 290,000 | 319,976 | ||||||
Danaher Corp., 2.60%, 10/1/50 | 190,000 | 188,711 | ||||||
DENTSPLY SIRONA, Inc., 3.25%, 6/1/30 | 380,000 | 412,230 | ||||||
Smith & Nephew plc, 2.03%, 10/14/30 | 280,000 | 278,099 | ||||||
Stryker Corp., 1.95%, 6/15/30 | 360,000 | 365,329 | ||||||
Zimmer Biomet Holdings, Inc., 3.55%, 3/20/30 | 310,000 | 343,099 | ||||||
1,907,444 | ||||||||
Health Care Providers and Services — 0.4% | ||||||||
Anthem, Inc., 2.375%, 1/15/25 | 100,000 | 106,124 | ||||||
Cigna Corp., 2.40%, 3/15/30 | 330,000 | 342,163 | ||||||
CVS Health Corp., 4.30%, 3/25/28 | 620,000 | 718,958 | ||||||
CVS Health Corp., 1.75%, 8/21/30 | 310,000 | 300,886 | ||||||
CVS Health Corp., 4.78%, 3/25/38 | 160,000 | 192,886 | ||||||
Duke University Health System, Inc., 3.92%, 6/1/47 | 160,000 | 189,987 | ||||||
Partners Healthcare System, Inc., 3.19%, 7/1/49 | 215,000 | 225,937 | ||||||
UnitedHealth Group, Inc., 3.75%, 7/15/25 | 210,000 | 238,580 | ||||||
UnitedHealth Group, Inc., 2.00%, 5/15/30 | 200,000 | 208,462 | ||||||
UnitedHealth Group, Inc., 4.75%, 7/15/45 | 140,000 | 189,413 | ||||||
Universal Health Services, Inc., 2.65%, 10/15/30(3) | 730,000 | 729,055 | ||||||
3,442,451 | ||||||||
Hotels, Restaurants and Leisure — 0.1% | ||||||||
Las Vegas Sands Corp., 3.90%, 8/8/29 | 230,000 | 229,669 | ||||||
Marriott International, Inc., 3.50%, 10/15/32 | 482,000 | 476,151 | ||||||
705,820 |
20
Shares/ Principal Amount | Value | |||||||
Household Durables — 0.1% | ||||||||
D.R. Horton, Inc., 5.75%, 8/15/23 | $ | 110,000 | $ | 123,598 | ||||
D.R. Horton, Inc., 2.50%, 10/15/24 | 310,000 | 327,809 | ||||||
Lennar Corp., 4.75%, 4/1/21 | 352,000 | 355,881 | ||||||
807,288 | ||||||||
Industrial Conglomerates — 0.1% | ||||||||
Carlisle Cos., Inc., 2.75%, 3/1/30 | 315,000 | 333,977 | ||||||
General Electric Co., 3.625%, 5/1/30 | 370,000 | 390,729 | ||||||
General Electric Co., 4.35%, 5/1/50 | 180,000 | 190,580 | ||||||
915,286 | ||||||||
Insurance — 0.6% | ||||||||
American International Group, Inc., 4.50%, 7/16/44 | 533,000 | 639,021 | ||||||
Athene Global Funding, 2.55%, 6/29/25(3) | 270,000 | 279,575 | ||||||
Athene Global Funding, 2.45%, 8/20/27(3) | 197,000 | 199,872 | ||||||
Athene Holding Ltd., 3.50%, 1/15/31 | 440,000 | 443,058 | ||||||
Belrose Funding Trust, 2.33%, 8/15/30(3) | 140,000 | 139,612 | ||||||
Berkshire Hathaway Finance Corp., 2.85%, 10/15/50 | 200,000 | 203,284 | ||||||
Five Corners Funding Trust II, 2.85%, 5/15/30(3) | 601,000 | 646,906 | ||||||
Great-West Lifeco US Finance 2020 LP, 0.90%, 8/12/25(3) | 474,000 | 472,214 | ||||||
Kemper Corp., 2.40%, 9/30/30 | 240,000 | 236,388 | ||||||
Liberty Mutual Group, Inc., 4.50%, 6/15/49(3) | 120,000 | 142,168 | ||||||
Lincoln National Corp., 4.35%, 3/1/48 | 327,000 | 373,911 | ||||||
Lincoln National Corp., 4.375%, 6/15/50 | 147,000 | 171,039 | ||||||
Markel Corp., 4.90%, 7/1/22 | 190,000 | 203,265 | ||||||
Protective Life Global Funding, 1.74%, 9/21/30(3) | 400,000 | 394,491 | ||||||
Teachers Insurance & Annuity Association of America, 3.30%, 5/15/50(3) | 265,000 | 270,216 | ||||||
Unum Group, 4.50%, 3/15/25 | 280,000 | 311,658 | ||||||
WR Berkley Corp., 4.625%, 3/15/22 | 130,000 | 137,094 | ||||||
5,263,772 | ||||||||
Internet and Direct Marketing Retail† | ||||||||
Expedia Group, Inc., 3.60%, 12/15/23(3) | 396,000 | 407,460 | ||||||
IT Services — 0.2% | ||||||||
Fiserv, Inc., 3.50%, 7/1/29 | 172,000 | 193,091 | ||||||
Global Payments, Inc., 3.20%, 8/15/29 | 340,000 | 367,952 | ||||||
International Business Machines Corp., 1.70%, 5/15/27 | 300,000 | 306,716 | ||||||
International Business Machines Corp., 1.95%, 5/15/30 | 200,000 | 203,113 | ||||||
PayPal Holdings, Inc., 2.30%, 6/1/30 | 399,000 | 418,997 | ||||||
1,489,869 | ||||||||
Machinery† | ||||||||
Cummins, Inc., 2.60%, 9/1/50 | 410,000 | 390,685 | ||||||
Media — 0.3% | ||||||||
Charter Communications Operating LLC / Charter Communications Operating Capital, 4.20%, 3/15/28 | 200,000 | 226,838 | ||||||
Charter Communications Operating LLC / Charter Communications Operating Capital, 4.80%, 3/1/50 | 645,000 | 734,112 | ||||||
Comcast Corp., 3.30%, 2/1/27 | 91,000 | 101,772 | ||||||
Comcast Corp., 1.95%, 1/15/31 | 230,000 | 233,488 | ||||||
Comcast Corp., 3.20%, 7/15/36 | 248,000 | 276,051 | ||||||
Comcast Corp., 3.75%, 4/1/40 | 100,000 | 116,993 | ||||||
Discovery Communications LLC, 3.625%, 5/15/30 | 100,000 | 110,683 | ||||||
Time Warner Entertainment Co. LP, 8.375%, 3/15/23 | 311,000 | 364,270 |
21
Shares/ Principal Amount | Value | |||||||
ViacomCBS, Inc., 4.75%, 5/15/25 | $ | 425,000 | $ | 488,029 | ||||
ViacomCBS, Inc., 4.375%, 3/15/43 | 345,000 | 372,401 | ||||||
3,024,637 | ||||||||
Metals and Mining — 0.1% | ||||||||
Newcrest Finance Pty Ltd., 4.20%, 5/13/50(3) | 170,000 | 197,485 | ||||||
Steel Dynamics, Inc., 3.45%, 4/15/30 | 155,000 | 170,338 | ||||||
Steel Dynamics, Inc., 3.25%, 10/15/50 | 70,000 | 67,878 | ||||||
Teck Resources Ltd., 3.90%, 7/15/30(3) | 140,000 | 146,864 | ||||||
Teck Resources Ltd., 6.25%, 7/15/41 | 160,000 | 182,625 | ||||||
765,190 | ||||||||
Multi-Utilities — 0.3% | ||||||||
Ameren Corp., 3.50%, 1/15/31 | 430,000 | 489,795 | ||||||
CenterPoint Energy, Inc., 4.25%, 11/1/28 | 369,000 | 435,578 | ||||||
Dominion Energy, Inc., 4.90%, 8/1/41 | 200,000 | 254,050 | ||||||
NiSource, Inc., 1.70%, 2/15/31 | 220,000 | 215,916 | ||||||
NiSource, Inc., 5.65%, 2/1/45 | 140,000 | 195,438 | ||||||
Sempra Energy, 2.875%, 10/1/22 | 200,000 | 207,284 | ||||||
Sempra Energy, 3.25%, 6/15/27 | 180,000 | 194,512 | ||||||
Sempra Energy, 4.00%, 2/1/48 | 100,000 | 112,607 | ||||||
WEC Energy Group, Inc., 1.375%, 10/15/27 | 490,000 | 489,192 | ||||||
2,594,372 | ||||||||
Oil, Gas and Consumable Fuels — 0.8% | ||||||||
Aker BP ASA, 3.75%, 1/15/30(3) | 510,000 | 490,251 | ||||||
Aker BP ASA, 4.00%, 1/15/31(3) | 160,000 | 156,807 | ||||||
BP Capital Markets America, Inc., 1.75%, 8/10/30 | 270,000 | 263,330 | ||||||
Chevron Corp., 2.00%, 5/11/27 | 240,000 | 251,953 | ||||||
Chevron USA, Inc., 1.02%, 8/12/27 | 140,000 | 138,387 | ||||||
Diamondback Energy, Inc., 3.50%, 12/1/29 | 400,000 | 398,449 | ||||||
Ecopetrol SA, 5.875%, 5/28/45 | 90,000 | 98,275 | ||||||
Energy Transfer Operating LP, 3.60%, 2/1/23 | 160,000 | 164,899 | ||||||
Energy Transfer Operating LP, 4.25%, 3/15/23 | 370,000 | 385,618 | ||||||
Energy Transfer Operating LP, 4.90%, 3/15/35 | 70,000 | 68,883 | ||||||
Enterprise Products Operating LLC, 4.85%, 3/15/44 | 460,000 | 523,341 | ||||||
EOG Resources, Inc., 4.10%, 2/1/21 | 130,000 | 131,180 | ||||||
Equinor ASA, 1.75%, 1/22/26 | 240,000 | 249,234 | ||||||
Equinor ASA, 3.25%, 11/18/49 | 230,000 | 235,759 | ||||||
Exxon Mobil Corp., 1.57%, 4/15/23 | 390,000 | 400,947 | ||||||
Kinder Morgan Energy Partners LP, 6.50%, 9/1/39 | 210,000 | 261,474 | ||||||
MPLX LP, 5.25%, 1/15/25 | 200,000 | 206,269 | ||||||
MPLX LP, 2.65%, 8/15/30 | 290,000 | 279,459 | ||||||
MPLX LP, 4.50%, 4/15/38 | 120,000 | 121,570 | ||||||
Ovintiv, Inc., 6.50%, 2/1/38 | 90,000 | 82,209 | ||||||
Petroleos Mexicanos, 4.875%, 1/24/22 | 240,000 | 243,124 | ||||||
Petroleos Mexicanos, 3.50%, 1/30/23 | 60,000 | 58,848 | ||||||
Petroleos Mexicanos, 6.625%, 6/15/35 | 50,000 | 41,256 | ||||||
Petroleos Mexicanos, 5.50%, 6/27/44 | 230,000 | 168,072 | ||||||
Plains All American Pipeline LP / PAA Finance Corp., 3.80%, 9/15/30 | 650,000 | 628,696 | ||||||
Sabine Pass Liquefaction LLC, 5.625%, 3/1/25 | 590,000 | 675,839 | ||||||
Sunoco Logistics Partners Operations LP, 4.00%, 10/1/27 | 200,000 | 204,493 | ||||||
Transcontinental Gas Pipe Line Co. LLC, 3.25%, 5/15/30(3) | 250,000 | 268,224 |
22
Shares/ Principal Amount | Value | |||||||
Valero Energy Corp., 1.20%, 3/15/24 | $ | 462,000 | $ | 452,941 | ||||
7,649,787 | ||||||||
Paper and Forest Products† | ||||||||
Georgia-Pacific LLC, 2.10%, 4/30/27(3) | 370,000 | 385,417 | ||||||
Pharmaceuticals — 0.3% | ||||||||
AstraZeneca plc, 1.375%, 8/6/30 | 200,000 | 194,449 | ||||||
Bristol-Myers Squibb Co., 3.25%, 8/15/22 | 190,000 | 199,822 | ||||||
Bristol-Myers Squibb Co., 3.625%, 5/15/24 | 300,000 | 329,156 | ||||||
Royalty Pharma plc, 1.75%, 9/2/27(3) | 498,000 | 495,256 | ||||||
Royalty Pharma plc, 2.20%, 9/2/30(3) | 400,000 | 394,037 | ||||||
Upjohn, Inc., 2.70%, 6/22/30(3) | 687,000 | 709,835 | ||||||
Upjohn, Inc., 4.00%, 6/22/50(3) | 129,000 | 135,753 | ||||||
2,458,308 | ||||||||
Road and Rail — 0.3% | ||||||||
Ashtead Capital, Inc., 4.125%, 8/15/25(3) | 400,000 | 411,828 | ||||||
Burlington Northern Santa Fe LLC, 4.95%, 9/15/41 | 50,000 | 65,738 | ||||||
Burlington Northern Santa Fe LLC, 4.15%, 4/1/45 | 690,000 | 841,694 | ||||||
CSX Corp., 3.25%, 6/1/27 | 380,000 | 424,928 | ||||||
Norfolk Southern Corp., 3.05%, 5/15/50 | 200,000 | 206,797 | ||||||
Union Pacific Corp., 2.40%, 2/5/30 | 270,000 | 287,739 | ||||||
Union Pacific Corp., 3.60%, 9/15/37 | 200,000 | 225,767 | ||||||
Union Pacific Corp., MTN, 3.55%, 8/15/39 | 140,000 | 156,884 | ||||||
2,621,375 | ||||||||
Semiconductors and Semiconductor Equipment — 0.1% | ||||||||
Broadcom Corp. / Broadcom Cayman Finance Ltd., 3.125%, 1/15/25 | 126,000 | 134,729 | ||||||
Broadcom, Inc., 3.15%, 11/15/25 | 420,000 | 453,286 | ||||||
Microchip Technology, Inc., 2.67%, 9/1/23(3) | 400,000 | 415,323 | ||||||
Texas Instruments, Inc., 1.75%, 5/4/30 | 210,000 | 214,546 | ||||||
1,217,884 | ||||||||
Software — 0.1% | ||||||||
Microsoft Corp., 2.53%, 6/1/50 | 415,000 | 422,415 | ||||||
Oracle Corp., 4.00%, 7/15/46 | 520,000 | 601,057 | ||||||
1,023,472 | ||||||||
Specialty Retail — 0.1% | ||||||||
Home Depot, Inc. (The), 2.50%, 4/15/27 | 280,000 | 303,362 | ||||||
Home Depot, Inc. (The), 3.90%, 6/15/47 | 50,000 | 60,457 | ||||||
Home Depot, Inc. (The), 3.35%, 4/15/50 | 479,000 | 543,027 | ||||||
Lowe's Cos., Inc., 1.30%, 4/15/28 | 391,000 | 387,411 | ||||||
1,294,257 | ||||||||
Technology Hardware, Storage and Peripherals — 0.3% | ||||||||
Apple, Inc., 2.55%, 8/20/60 | 460,000 | 442,456 | ||||||
Dell International LLC / EMC Corp., 5.45%, 6/15/23(3) | 501,000 | 551,584 | ||||||
EMC Corp., 3.375%, 6/1/23 | 710,000 | 725,655 | ||||||
Hewlett Packard Enterprise Co., 1.45%, 4/1/24 | 395,000 | 402,425 | ||||||
Seagate HDD Cayman, 4.875%, 3/1/24 | 150,000 | 164,347 | ||||||
Seagate HDD Cayman, 4.75%, 1/1/25 | 325,000 | 357,717 | ||||||
2,644,184 | ||||||||
Trading Companies and Distributors — 0.1% | ||||||||
Air Lease Corp., MTN, 2.875%, 1/15/26 | 270,000 | 267,771 | ||||||
Aircastle Ltd., 5.25%, 8/11/25(3) | 555,000 | 551,300 | ||||||
819,071 |
23
Shares/ Principal Amount | Value | |||||||
Water Utilities — 0.1% | ||||||||
Essential Utilities, Inc., 2.70%, 4/15/30 | $ | 470,000 | $ | 497,766 | ||||
Wireless Telecommunication Services — 0.1% | ||||||||
T-Mobile USA, Inc., 2.55%, 2/15/31(3) | 385,000 | 392,304 | ||||||
T-Mobile USA, Inc., 3.30%, 2/15/51(3) | 200,000 | 193,432 | ||||||
Vodafone Group plc, 4.375%, 2/19/43 | 190,000 | 224,960 | ||||||
810,696 | ||||||||
TOTAL CORPORATE BONDS (Cost $102,951,127) | 106,547,843 | |||||||
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES — 10.1% | ||||||||
Adjustable-Rate U.S. Government Agency Mortgage-Backed Securities — 0.3% | ||||||||
FHLMC, VRN, 3.39%, (1-year H15T1Y plus 2.25%), 9/1/35 | 109,056 | 115,497 | ||||||
FHLMC, VRN, 3.20%, (12-month LIBOR plus 1.87%), 7/1/36 | 27,357 | 28,937 | ||||||
FHLMC, VRN, 2.41%, (1-year H15T1Y plus 2.14%), 10/1/36 | 97,502 | 102,657 | ||||||
FHLMC, VRN, 3.46%, (1-year H15T1Y plus 2.26%), 4/1/37 | 104,164 | 110,086 | ||||||
FHLMC, VRN, 3.63%, (12-month LIBOR plus 1.80%), 2/1/38 | 39,463 | 41,703 | ||||||
FHLMC, VRN, 3.80%, (12-month LIBOR plus 1.82%), 6/1/38 | 29,749 | 31,455 | ||||||
FHLMC, VRN, 2.78%, (12-month LIBOR plus 1.76%), 9/1/40 | 20,935 | 21,840 | ||||||
FHLMC, VRN, 3.65%, (12-month LIBOR plus 1.88%), 5/1/41 | 15,632 | 16,481 | ||||||
FHLMC, VRN, 3.23%, (12-month LIBOR plus 1.86%), 7/1/41 | 110,746 | 116,703 | ||||||
FHLMC, VRN, 3.64%, (12-month LIBOR plus 1.64%), 2/1/43 | 15,795 | 16,208 | ||||||
FHLMC, VRN, 2.50%, (12-month LIBOR plus 1.62%), 6/1/43 | 422 | 425 | ||||||
FHLMC, VRN, 2.83%, (12-month LIBOR plus 1.65%), 6/1/43 | 8,278 | 8,344 | ||||||
FHLMC, VRN, 2.84%, (12-month LIBOR plus 1.63%), 1/1/44 | 172,417 | 179,066 | ||||||
FHLMC, VRN, 2.59%, (12-month LIBOR plus 1.60%), 6/1/45 | 124,863 | 130,056 | ||||||
FHLMC, VRN, 2.35%, (12-month LIBOR plus 1.63%), 8/1/46 | 299,182 | 311,099 | ||||||
FHLMC, VRN, 3.07%, (12-month LIBOR plus 1.64%), 9/1/47 | 431,344 | 449,833 | ||||||
FNMA, VRN, 2.47%, (6-month LIBOR plus 1.57%), 6/1/35 | 69,469 | 72,161 | ||||||
FNMA, VRN, 2.57%, (6-month LIBOR plus 1.57%), 6/1/35 | 79,761 | 82,847 | ||||||
FNMA, VRN, 2.99%, (1-year H15T1Y plus 2.16%), 3/1/38 | 82,420 | 86,883 | ||||||
FNMA, VRN, 3.69%, (12-month LIBOR plus 1.69%), 1/1/40 | 9,410 | 9,824 | ||||||
FNMA, VRN, 3.81%, (12-month LIBOR plus 1.85%), 3/1/40 | 13,487 | 14,162 | ||||||
FNMA, VRN, 2.63%, (12-month LIBOR plus 1.77%), 10/1/40 | 26,891 | 27,892 | ||||||
FNMA, VRN, 3.12%, (12-month LIBOR plus 1.57%), 3/1/43 | 54,962 | 56,910 | ||||||
FNMA, VRN, 3.18%, (12-month LIBOR plus 1.61%), 3/1/47 | 348,181 | 363,189 | ||||||
FNMA, VRN, 3.14%, (12-month LIBOR plus 1.61%), 4/1/47 | 209,281 | 218,446 | ||||||
FNMA, VRN, 3.24%, (12-month LIBOR plus 1.62%), 5/1/47 | 279,599 | 291,668 | ||||||
2,904,372 | ||||||||
Fixed-Rate U.S. Government Agency Mortgage-Backed Securities — 9.8% | ||||||||
FHLMC, 6.50%, 1/1/28 | 6,779 | 7,574 | ||||||
FHLMC, 5.50%, 12/1/33 | 63,324 | 73,248 | ||||||
FHLMC, 5.00%, 7/1/35 | 551,165 | 635,810 | ||||||
FHLMC, 5.50%, 1/1/38 | 49,461 | 57,643 | ||||||
FHLMC, 6.00%, 8/1/38 | 32,572 | 37,858 | ||||||
FHLMC, 3.50%, 12/1/47 | 402,655 | 428,729 | ||||||
FNMA, 6.50%, 1/1/29 | 11,549 | 13,137 | ||||||
FNMA, 7.50%, 7/1/29 | 17,858 | 18,562 | ||||||
FNMA, 7.50%, 9/1/30 | 7,186 | 8,435 | ||||||
FNMA, 5.00%, 7/1/31 | 284,076 | 319,999 | ||||||
FNMA, 6.50%, 9/1/31 | 10,589 | 11,825 | ||||||
FNMA, 7.00%, 9/1/31 | 3,369 | 3,587 |
24
Shares/ Principal Amount | Value | |||||||
FNMA, 6.50%, 1/1/32 | $ | 12,464 | $ | 14,275 | ||||
FNMA, 6.50%, 8/1/32 | 12,474 | 14,235 | ||||||
FNMA, 5.50%, 6/1/33 | 41,256 | 48,495 | ||||||
FNMA, 5.50%, 7/1/33 | 59,672 | 70,133 | ||||||
FNMA, 5.50%, 8/1/33 | 127,711 | 150,336 | ||||||
FNMA, 5.50%, 9/1/33 | 79,557 | 93,770 | ||||||
FNMA, 5.00%, 11/1/33 | 205,525 | 236,816 | ||||||
FNMA, 3.50%, 3/1/34 | 251,744 | 269,215 | ||||||
FNMA, 5.00%, 4/1/35 | 268,471 | 309,341 | ||||||
FNMA, 5.00%, 2/1/36 | 171,496 | 197,843 | ||||||
FNMA, 5.50%, 4/1/36 | 63,032 | 73,845 | ||||||
FNMA, 5.50%, 5/1/36 | 122,589 | 143,664 | ||||||
FNMA, 5.00%, 11/1/36 | 455,622 | 525,845 | ||||||
FNMA, 5.50%, 2/1/37 | 32,707 | 38,089 | ||||||
FNMA, 6.00%, 7/1/37 | 255,890 | 299,860 | ||||||
FNMA, 6.50%, 8/1/37 | 21,323 | 24,690 | ||||||
FNMA, 5.50%, 7/1/39 | 206,882 | 242,353 | ||||||
FNMA, 5.00%, 4/1/40 | 489,735 | 565,375 | ||||||
FNMA, 5.00%, 6/1/40 | 390,812 | 451,021 | ||||||
FNMA, 4.50%, 8/1/40 | 595,983 | 669,788 | ||||||
FNMA, 4.50%, 9/1/40 | 1,268,582 | 1,426,663 | ||||||
FNMA, 3.50%, 1/1/41 | 725,952 | 785,508 | ||||||
FNMA, 4.00%, 1/1/41 | 634,715 | 716,379 | ||||||
FNMA, 4.00%, 5/1/41 | 653,436 | 719,838 | ||||||
FNMA, 4.50%, 9/1/41 | 1,188,516 | 1,337,796 | ||||||
FNMA, 4.50%, 9/1/41 | 259,498 | 292,039 | ||||||
FNMA, 4.00%, 1/1/42 | 495,081 | 545,473 | ||||||
FNMA, 3.50%, 5/1/42 | 1,089,177 | 1,191,705 | ||||||
FNMA, 3.50%, 6/1/42 | 366,627 | 405,302 | ||||||
FNMA, 6.50%, 8/1/47 | 7,725 | 8,349 | ||||||
FNMA, 6.50%, 9/1/47 | 15,586 | 16,796 | ||||||
FNMA, 6.50%, 9/1/47 | 751 | 811 | ||||||
FNMA, 6.50%, 9/1/47 | 8,226 | 8,867 | ||||||
FNMA, 3.50%, 3/1/48 | 1,114,226 | 1,181,255 | ||||||
FNMA, 4.00%, 6/1/48 | 3,020,228 | 3,234,583 | ||||||
FNMA, 4.50%, 7/1/48 | 837,300 | 907,406 | ||||||
FNMA, 4.00%, 8/1/48 | 2,462,756 | 2,632,224 | ||||||
FNMA, 3.50%, 4/1/49 | 735,857 | 775,517 | ||||||
FNMA, 4.00%, 6/1/49 | 4,819,451 | 5,143,280 | ||||||
FNMA, 3.50%, 9/1/49 | 1,554,308 | 1,640,448 | ||||||
FNMA, 3.00%, 12/1/49 | 2,164,636 | 2,264,317 | ||||||
FNMA, 3.00%, 3/1/50 | 3,397,250 | 3,556,612 | ||||||
FNMA, 3.00%, 3/1/50 | 1,397,275 | 1,461,090 | ||||||
FNMA, 3.00%, 6/1/50 | 8,068,979 | 8,463,098 | ||||||
FNMA, 3.00%, 6/1/50 | 769,938 | 805,512 | ||||||
FNMA, 3.00%, 6/1/50 | 695,017 | 727,200 | ||||||
FNMA, 3.00%, 6/1/50 | 953,603 | 1,003,752 | ||||||
FNMA, 3.00%, 8/1/50 | 2,841,183 | 2,983,136 | ||||||
GNMA, 2.50%, TBA | 3,500,000 | 3,665,703 | ||||||
GNMA, 3.00%, TBA | 3,500,000 | 3,652,852 | ||||||
GNMA, 7.00%, 4/20/26 | 18,669 | 20,915 |
25
Shares/ Principal Amount | Value | |||||||
GNMA, 7.50%, 8/15/26 | $ | 12,217 | $ | 13,804 | ||||
GNMA, 7.00%, 2/15/28 | 3,704 | 3,718 | ||||||
GNMA, 7.50%, 2/15/28 | 2,826 | 2,837 | ||||||
GNMA, 7.00%, 12/15/28 | 5,606 | 5,628 | ||||||
GNMA, 7.00%, 5/15/31 | 26,157 | 31,093 | ||||||
GNMA, 5.50%, 11/15/32 | 79,136 | 91,754 | ||||||
GNMA, 4.50%, 5/20/41 | 229,802 | 255,891 | ||||||
GNMA, 4.50%, 6/15/41 | 277,894 | 314,288 | ||||||
GNMA, 3.50%, 6/20/42 | 503,581 | 547,034 | ||||||
GNMA, 4.50%, 11/20/43 | 311,746 | 347,393 | ||||||
GNMA, 3.50%, 3/15/46 | 2,100,916 | 2,238,477 | ||||||
GNMA, 2.50%, 7/20/46 | 576,470 | 609,441 | ||||||
GNMA, 3.00%, 4/20/50 | 5,326,963 | 5,575,188 | ||||||
UMBS, 2.00%, TBA | 12,050,000 | 12,424,209 | ||||||
UMBS, 2.50%, TBA | 3,820,000 | 3,980,410 | ||||||
UMBS, 3.00%, TBA | 1,000,000 | 1,045,234 | ||||||
UMBS, 3.50%, TBA | 7,400,000 | 7,815,238 | ||||||
92,931,459 | ||||||||
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $94,290,220) | 95,835,831 | |||||||
COLLATERALIZED MORTGAGE OBLIGATIONS — 2.8% | ||||||||
Private Sponsor Collateralized Mortgage Obligations — 1.5% | ||||||||
ABN Amro Mortgage Corp., Series 2003-4, Class A4, 5.50%, 3/25/33 | 9,284 | 9,701 | ||||||
Adjustable Rate Mortgage Trust, Series 2004-4, Class 4A1, VRN, 3.21%, 3/25/35 | 137,741 | 140,129 | ||||||
Agate Bay Mortgage Loan Trust, Series 2016-3, Class A3, VRN, 3.50%, 8/25/46(3) | 179,780 | 184,910 | ||||||
Arroyo Mortgage Trust, Series 2018-1, Class A2, VRN, 4.02%, 4/25/48(3) | 1,495,966 | 1,516,477 | ||||||
Banc of America Mortgage Trust, Series 2004-E, Class 2A6 SEQ, VRN, 3.60%, 6/25/34 | 93,823 | 91,960 | ||||||
Citigroup Mortgage Loan Trust, Inc., Series 2004-UST1, Class A5, VRN, 2.37%, 8/25/34 | 263,977 | 263,109 | ||||||
Connecticut Avenue Securities Trust, Series 2020-R02, Class 2M2, VRN, 2.15%, (1-month LIBOR plus 2.00%), 1/25/40(3) | 600,000 | 585,374 | ||||||
Connecticut Avenue Securities Trust, Series 2020-SBT1, Class 2M2, VRN, 3.80%, (1-month LIBOR plus 3.65%), 2/25/40(3) | 600,000 | 574,350 | ||||||
Countrywide Home Loan Mortgage Pass-Through Trust, Series 2005-17, Class 1A11, 5.50%, 9/25/35 | 2,186 | 1,949 | ||||||
Credit Suisse Mortgage Trust, Series 2017-HL2, Class A3 SEQ, VRN, 3.50%, 10/25/47(3) | 151,919 | 152,799 | ||||||
Credit Suisse Mortgage Trust, Series 2019-AFC1, Class A1, VRN, 2.57%, 7/25/49(3) | 445,786 | 454,908 | ||||||
Credit Suisse Mortgage Trust, Series 2020-AFC1, Class A1, VRN, 2.24%, 2/25/50(3) | 394,752 | 400,193 | ||||||
Credit Suisse Mortgage Trust, Series 2020-NQM1, Class A1, 1.21%, 5/25/65(3) | 2,000,000 | 2,003,059 | ||||||
Credit Suisse Mortgage Trust, Series 2020-NQM1, Class A2, 1.41%, 5/25/65(3) | 1,163,175 | 1,164,959 | ||||||
First Horizon Alternative Mortgage Securities Trust, Series 2004-AA4, Class A1, VRN, 2.41%, 10/25/34 | 157,252 | 157,931 | ||||||
Galton Funding Mortgage Trust, Series 2020-H1, Class A1 SEQ, VRN, 2.31%, 1/25/60(3) | 626,882 | 638,269 |
26
Shares/ Principal Amount | Value | |||||||
GSR Mortgage Loan Trust, Series 2004-7, Class 3A1, VRN, 2.82%, 6/25/34 | $ | 39,631 | $ | 38,822 | ||||
GSR Mortgage Loan Trust, Series 2004-AR5, Class 3A3, VRN, 3.88%, 5/25/34 | 64,577 | 62,410 | ||||||
GSR Mortgage Loan Trust, Series 2005-AR1, Class 3A1, VRN, 3.29%, 1/25/35 | 98,591 | 98,552 | ||||||
Home RE Ltd., Series 2020-1, Class M1B, VRN, 3.39%, (1-month LIBOR plus 3.25%), 10/25/30(3) | 950,000 | 951,187 | ||||||
JPMorgan Mortgage Trust, Series 2013-1, Class 2A2 SEQ, VRN, 2.50%, 3/25/43(3) | 36,043 | 36,424 | ||||||
JPMorgan Mortgage Trust, Series 2017-1, Class A2, VRN, 3.50%, 1/25/47(3) | 424,329 | 436,182 | ||||||
MASTR Adjustable Rate Mortgages Trust, Series 2004-13, Class 3A7, VRN, 3.19%, 11/21/34 | 121,892 | 123,990 | ||||||
Merrill Lynch Mortgage Investors Trust, Series 2005-3, Class 2A, VRN, 2.91%, 11/25/35 | 71,269 | 69,536 | ||||||
Merrill Lynch Mortgage Investors Trust, Series 2005-A2, Class A1, VRN, 3.79%, 2/25/35 | 108,511 | 111,974 | ||||||
New Residential Mortgage Loan Trust, Series 2017-1A, Class A1, VRN, 4.00%, 2/25/57(3) | 844,651 | 917,658 | ||||||
New Residential Mortgage Loan Trust, Series 2019-NQM2, Class A1 SEQ, VRN, 3.60%, 4/25/49(3) | 586,355 | 593,819 | ||||||
Oaktown Re V Ltd., Series 2020-2A, Class M1A, VRN, 2.54%, (1-month LIBOR plus 2.40%), 10/25/30(3) | 520,000 | 520,975 | ||||||
Sequoia Mortgage Trust, Series 2017-CH1, Class A1, VRN, 4.00%, 8/25/47(3) | 345,167 | 357,842 | ||||||
Sequoia Mortgage Trust, Series 2018-CH2, Class A12 SEQ, VRN, 4.00%, 6/25/48(3) | 403,571 | 405,899 | ||||||
Sofi Mortgage Trust, Series 2016-1A, Class 1A4 SEQ, VRN, 3.00%, 11/25/46(3) | 169,571 | 173,303 | ||||||
Starwood Mortgage Residential Trust, Series 2020-2, Class A1 SEQ, VRN, 2.72%, 4/25/60(3) | 855,964 | 860,376 | ||||||
Structured Adjustable Rate Mortgage Loan Trust, Series 2004-8, Class 2A1, VRN, 2.95%, 7/25/34 | 58,365 | 58,689 | ||||||
14,157,715 | ||||||||
U.S. Government Agency Collateralized Mortgage Obligations — 1.3% | ||||||||
FHLMC, Series 2013-DN2, Class M2, VRN, 4.40%, (1-month LIBOR plus 4.25%), 11/25/23 | 590,191 | 543,650 | ||||||
FHLMC, Series 2014-DN2, Class M3, VRN, 3.75%, (1-month LIBOR plus 3.60%), 4/25/24 | 649,843 | 616,646 | ||||||
FHLMC, Series 2014-HQ3, Class M3, VRN, 4.90%, (1-month LIBOR plus 4.75%), 10/25/24 | 232,240 | 235,630 | ||||||
FHLMC, Series 2015-DNA3, Class M3F, VRN, 3.85%, (1-month LIBOR plus 3.70%), 4/25/28 | 314,718 | 324,566 | ||||||
FHLMC, Series 2015-HQ2, Class M3, VRN, 3.40%, (1-month LIBOR plus 3.25%), 5/25/25 | 180,000 | 183,074 | ||||||
FHLMC, Series 2016-DNA1, Class M3, VRN, 5.70%, (1-month LIBOR plus 5.55%), 7/25/28 | 920,948 | 972,269 | ||||||
FHLMC, Series 2016-DNA2, Class M3, VRN, 4.80%, (1-month LIBOR plus 4.65%), 10/25/28 | 470,198 | 490,446 | ||||||
FHLMC, Series 2016-DNA3, Class M3, VRN, 5.15%, (1-month LIBOR plus 5.00%), 12/25/28 | 803,262 | 845,574 | ||||||
FHLMC, Series 2016-HQA4, Class M3, VRN, 4.05%, (1-month LIBOR plus 3.90%), 4/25/29 | 537,043 | 557,531 | ||||||
FHLMC, Series 2017-DNA1, Class M2, VRN, 3.40%, (1-month LIBOR plus 3.25%), 7/25/29 | 822,509 | 849,622 | ||||||
FHLMC, Series 2017-DNA2, Class M2, VRN, 3.60%, (1-month LIBOR plus 3.45%), 10/25/29 | 220,000 | 227,136 |
27
Shares/ Principal Amount | Value | |||||||
FHLMC, Series 2018-HQA2, Class M2, VRN, 2.45%, (1-month LIBOR plus 2.30%), 10/25/48(3) | $ | 150,000 | $ | 146,462 | ||||
FHLMC, Series 2019-DNA2, Class M2, VRN, 2.60%, (1-month LIBOR plus 2.45%), 3/25/49(3) | 306,546 | 302,981 | ||||||
FHLMC, Series 2019-DNA3, Class M2, VRN, 2.20%, (1-month LIBOR plus 2.05%), 7/25/49(3) | 422,912 | 416,203 | ||||||
FNMA, Series 2014-C02, Class 1M2, VRN, 2.75%, (1-month LIBOR plus 2.60%), 5/25/24 | 273,631 | 242,085 | ||||||
FNMA, Series 2014-C02, Class 2M2, VRN, 2.75%, (1-month LIBOR plus 2.60%), 5/25/24 | 396,779 | 389,707 | ||||||
FNMA, Series 2014-C03, Class 2M2, VRN, 3.05%, (1-month LIBOR plus 2.90%), 7/25/24 | 491,568 | 491,165 | ||||||
FNMA, Series 2014-C04, Class 1M2, VRN, 5.05%, (1-month LIBOR plus 4.90%), 11/25/24 | 355,839 | 370,288 | ||||||
FNMA, Series 2014-C04, Class 2M2, VRN, 5.15%, (1-month LIBOR plus 5.00%), 11/25/24 | 139,867 | 143,546 | ||||||
FNMA, Series 2015-C03, Class 1M2, VRN, 5.15%, (1-month LIBOR plus 5.00%), 7/25/25 | 945,638 | 966,384 | ||||||
FNMA, Series 2015-C03, Class 2M2, VRN, 5.15%, (1-month LIBOR plus 5.00%), 7/25/25 | 288,574 | 296,143 | ||||||
FNMA, Series 2015-C04, Class 1M2, VRN, 5.85%, (1-month LIBOR plus 5.70%), 4/25/28 | 492,219 | 523,444 | ||||||
FNMA, Series 2015-C04, Class 2M2, VRN, 5.70%, (1-month LIBOR plus 5.55%), 4/25/28 | 403,294 | 424,916 | ||||||
FNMA, Series 2016-C01, Class 2M2, VRN, 7.10%, (1-month LIBOR plus 6.95%), 8/25/28 | 631,313 | 682,375 | ||||||
FNMA, Series 2016-C04, Class 1M2, VRN, 4.40%, (1-month LIBOR plus 4.25%), 1/25/29 | 529,581 | 549,441 | ||||||
FNMA, Series 2016-C06, Class 1M2, VRN, 4.40%, (1-month LIBOR plus 4.25%), 4/25/29 | 262,251 | 272,248 | ||||||
12,063,532 | ||||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $25,888,073) | 26,221,247 | |||||||
COLLATERALIZED LOAN OBLIGATIONS — 1.8% | ||||||||
Anchorage Credit Opportunities CLO 1 Ltd., Series 2019-1A, Class A1, VRN, 2.17%, (3-month LIBOR plus 1.95%), 1/20/32(3) | 700,000 | 692,882 | ||||||
Ares XLI CLO Ltd., Series 2016-41A, Class AR, VRN, 1.44%, (3-month LIBOR plus 1.20%), 1/15/29(3) | 375,000 | 374,480 | ||||||
Bean Creek CLO Ltd., Series 2015-1A, Class AR, VRN, 1.24%, (3-month LIBOR plus 1.02%), 4/20/31(3) | 750,000 | 739,374 | ||||||
CBAM Ltd., Series 2019-9A, Class A, VRN, 1.52%, (3-month LIBOR plus 1.28%), 2/12/30(3) | 650,000 | 647,804 | ||||||
CIFC Funding Ltd., Series 2013-3RA, Class A1, VRN, 1.19%, (3-month LIBOR plus 0.98%), 4/24/31(3) | 450,000 | 444,555 | ||||||
Dryden 64 CLO Ltd., Series 2018-64A, Class A, VRN, 1.19%, (3-month LIBOR plus 0.97%), 4/18/31(3) | 550,000 | 542,368 | ||||||
Elmwood CLO IV Ltd., Series 2020-1A, Class A, VRN, 1.48%, (3-month LIBOR plus 1.24%), 4/15/33(3) | 1,150,000 | 1,141,249 | ||||||
Goldentree Loan Opportunities X Ltd., Series 2015-10A, Class AR, VRN, 1.34%, (3-month LIBOR plus 1.12%), 7/20/31(3) | 1,000,000 | 993,925 | ||||||
Kayne CLO 6 Ltd., Series 2019-6A, Class A1, VRN, 1.60%, (3-month LIBOR plus 1.38%), 1/20/33(3) | 650,000 | 651,131 | ||||||
KKR CLO Ltd., Series 2022A, Class A, VRN, 1.37%, (3-month LIBOR plus 1.15%), 7/20/31(3) | 550,000 | 542,753 | ||||||
KKR CLO Ltd., Series 2030A, Class A1, VRN, 1.74%, (3-month LIBOR plus 1.50%), 10/17/31(3) | 875,000 | 873,440 |
28
Shares/ Principal Amount | Value | |||||||
Madison Park Funding XXII Ltd., Series 2016-22A, Class A1R, VRN, 1.50%, (3-month LIBOR plus 1.26%), 1/15/33(3) | $ | 1,000,000 | $ | 988,245 | ||||
Magnetite VIII Ltd., Series 2014-8A, Class AR2, VRN, 1.22%, (3-month LIBOR plus 0.98%), 4/15/31(3) | 750,000 | 743,753 | ||||||
Octagon Investment Partners 45 Ltd., Series 2019-1A, Class A, VRN, 1.57%, (3-month LIBOR plus 1.33%), 10/15/32(3) | 750,000 | 748,263 | ||||||
Parallel Ltd., Series 2020-1A, Class A1, VRN, 1.98%, (3-month LIBOR plus 1.83%), 7/20/31(3) | 1,100,000 | 1,104,269 | ||||||
Rockford Tower CLO Ltd., Series 2017-3A, Class A, VRN, 1.41%, (3-month LIBOR plus 1.19%), 10/20/30(3) | 650,000 | 648,132 | ||||||
Rockford Tower CLO Ltd., Series 2019-2A, Class A, VRN, 1.58%, (3-month LIBOR plus 1.33%), 8/20/32(3) | 750,000 | 746,329 | ||||||
Silver Creek CLO Ltd., Series 2014-1A, Class AR, VRN, 1.46%, (3-month LIBOR plus 1.24%), 7/20/30(3) | 1,050,000 | 1,046,704 | ||||||
Sounds Point CLO IV-R Ltd., Series 2013-3RA, Class A, VRN, 1.37%, (3-month LIBOR plus 1.15%), 4/18/31(3) | 885,000 | 875,717 | ||||||
Symphony CLO XXII Ltd., Series 2020-22A, Class A1A, VRN, 1.51%, (3-month LIBOR plus 1.29%), 4/18/33(3) | 500,000 | 498,576 | ||||||
Treman Park CLO Ltd., Series 2015-1A, Class ARR, VRN, 1.29%, (3-month LIBOR plus 1.07%), 10/20/28(3) | 750,000 | 747,580 | ||||||
Voya CLO Ltd., Series 2013-2A, Class A1R, VRN, 1.18%, (3-month LIBOR plus 0.97%), 4/25/31(3) | 900,000 | 891,040 | ||||||
TOTAL COLLATERALIZED LOAN OBLIGATIONS (Cost $16,717,749) | 16,682,569 | |||||||
ASSET-BACKED SECURITIES — 1.4% | ||||||||
BRE Grand Islander Timeshare Issuer LLC, Series 2017-1A, Class A SEQ, 2.94%, 5/25/29(3) | 442,822 | 450,072 | ||||||
FirstKey Homes Trust, Series 2020-SFR2, Class D, 1.97%, 10/19/37(3) | 1,200,000 | 1,199,757 | ||||||
Goodgreen, Series 2018-1A, Class A, VRN, 3.93%, 10/15/53(3) | 544,264 | 581,021 | ||||||
Goodgreen, Series 2020-1A, Class A SEQ, 2.63%, 4/15/55(3) | 990,076 | 992,852 | ||||||
Hilton Grand Vacations Trust, Series 2018-AA, Class B, 3.70%, 2/25/32(3) | 1,053,103 | 1,091,880 | ||||||
MVW Owner Trust, Series 2014-1A, Class A SEQ, 2.25%, 9/22/31(3) | 90,977 | 91,192 | ||||||
MVW Owner Trust, Series 2015-1A, Class A SEQ, 2.52%, 12/20/32(3) | 95,738 | 96,164 | ||||||
MVW Owner Trust, Series 2016-1A, Class A SEQ, 2.25%, 12/20/33(3) | 150,066 | 150,544 | ||||||
MVW Owner Trust, Series 2017-1A, Class A SEQ, 2.42%, 12/20/34(3) | 347,600 | 354,570 | ||||||
MVW Owner Trust, Series 2018-1A, Class A SEQ, 3.45%, 1/21/36(3) | 461,350 | 478,650 | ||||||
Progress Residential Trust, Series 2018-SFR3, Class A SEQ, 3.88%, 10/17/35(3) | 998,955 | 1,026,719 | ||||||
Progress Residential Trust, Series 2018-SFR3, Class B, 4.08%, 10/17/35(3) | 2,550,000 | 2,622,367 | ||||||
Progress Residential Trust, Series 2019-SFR3, Class A SEQ, 2.27%, 9/17/36(3) | 1,145,440 | 1,169,003 | ||||||
Sierra Timeshare Receivables Funding LLC, Series 2018-2A, Class A SEQ, 3.50%, 6/20/35(3) | 342,228 | 355,853 | ||||||
Sierra Timeshare Receivables Funding LLC, Series 2019-2A, Class A SEQ, 2.59%, 5/20/36(3) | 534,752 | 549,687 | ||||||
Towd Point Mortgage Trust, Series 2017-6, Class A1, VRN, 2.75%, 10/25/57(3) | 346,875 | 358,221 |
29
Shares/ Principal Amount | Value | |||||||
Towd Point Mortgage Trust, Series 2018-1, Class A1 SEQ, VRN, 3.00%, 1/25/58(3) | $ | 291,929 | $ | 304,966 | ||||
Towd Point Mortgage Trust, Series 2018-4, Class A1, VRN, 3.00%, 6/25/58(3) | 265,238 | 283,440 | ||||||
US Airways Pass-Through Trust, Series 2013-1, Class A, 3.95%, 5/15/27 | 104,849 | 86,406 | ||||||
VSE VOI Mortgage LLC, Series 2016-A, Class A SEQ, 2.54%, 7/20/33(3) | 225,608 | 227,044 | ||||||
VSE VOI Mortgage LLC, Series 2018-A, Class B, 3.72%, 2/20/36(3) | 457,517 | 473,499 | ||||||
TOTAL ASSET-BACKED SECURITIES (Cost $12,627,591) | 12,943,907 | |||||||
MUNICIPAL SECURITIES — 0.7% | ||||||||
Bay Area Toll Authority Rev., 6.92%, 4/1/40 | 295,000 | 451,332 | ||||||
California State University Rev., 2.98%, 11/1/51 | 500,000 | 514,440 | ||||||
Energy Northwest Rev., (Bonneville Power Administration), 5.00%, 7/1/39 | 285,000 | 370,928 | ||||||
Foothill-Eastern Transportation Corridor Agency Rev., 4.09%, 1/15/49 | 275,000 | 287,601 | ||||||
Grand Parkway Transportation Corp. Rev., 3.24%, 10/1/52 | 225,000 | 227,513 | ||||||
Houston GO, 3.96%, 3/1/47 | 120,000 | 143,766 | ||||||
Metropolitan Transportation Authority Rev., 6.69%, 11/15/40 | 105,000 | 124,752 | ||||||
Metropolitan Transportation Authority Rev., 6.81%, 11/15/40 | 60,000 | 72,034 | ||||||
Metropolitan Water Reclamation District of Greater Chicago GO, 5.72%, 12/1/38 | 650,000 | 903,390 | ||||||
Missouri Highway & Transportation Commission Rev., 5.45%, 5/1/33 | 130,000 | 169,827 | ||||||
New Jersey Turnpike Authority Rev., 7.41%, 1/1/40 | 200,000 | 328,120 | ||||||
New Jersey Turnpike Authority Rev., 7.10%, 1/1/41 | 95,000 | 151,595 | ||||||
New York City GO, 6.27%, 12/1/37 | 95,000 | 139,613 | ||||||
Ohio Turnpike & Infrastructure Commission Rev., 3.22%, 2/15/48 | 330,000 | 333,033 | ||||||
Ohio Water Development Authority Water Pollution Control Loan Fund Rev., 4.88%, 12/1/34 | 110,000 | 132,880 | ||||||
Port Authority of New York & New Jersey Rev., 4.93%, 10/1/51 | 50,000 | 65,316 | ||||||
Regents of the University of California Medical Center Pooled Rev., 3.26%, 5/15/60 | 185,000 | 186,965 | ||||||
Rutgers The State University of New Jersey Rev., 5.67%, 5/1/40 | 300,000 | 398,448 | ||||||
Sacramento Municipal Utility District Rev., 6.16%, 5/15/36 | 210,000 | 295,709 | ||||||
San Francisco Public Utilities Commission Water Rev., 6.00%, 11/1/40 | 105,000 | 145,219 | ||||||
Santa Clara Valley Transportation Authority Rev., 5.88%, 4/1/32 | 120,000 | 153,150 | ||||||
State of California GO, 4.60%, 4/1/38 | 355,000 | 417,093 | ||||||
State of California GO, 7.55%, 4/1/39 | 100,000 | 171,998 | ||||||
State of California GO, 7.30%, 10/1/39 | 160,000 | 258,859 | ||||||
State of California GO, 7.60%, 11/1/40 | 80,000 | 141,862 | ||||||
State of Washington GO, 5.14%, 8/1/40 | 20,000 | 28,614 | ||||||
University of Texas System (The) Rev., 5.00%, 8/15/40 | 215,000 | 317,637 | ||||||
TOTAL MUNICIPAL SECURITIES (Cost $5,873,705) | 6,931,694 | |||||||
U.S. GOVERNMENT AGENCY SECURITIES — 0.5% | ||||||||
FHLMC, 0.375%, 9/23/25 | 1,900,000 | 1,887,280 | ||||||
FNMA, 2.125%, 4/24/26 | 270,000 | 293,320 | ||||||
FNMA, 0.75%, 10/8/27 | 2,000,000 | 1,987,290 | ||||||
FNMA, 6.625%, 11/15/30 | 600,000 | 909,407 | ||||||
TOTAL U.S. GOVERNMENT AGENCY SECURITIES (Cost $4,890,634) | 5,077,297 |
30
Shares/ Principal Amount | Value | |||||||
SOVEREIGN GOVERNMENTS AND AGENCIES — 0.3% | ||||||||
Chile† | ||||||||
Chile Government International Bond, 3.25%, 9/14/21 | $ | 100,000 | $ | 102,151 | ||||
Chile Government International Bond, 3.625%, 10/30/42 | 100,000 | 112,600 | ||||||
214,751 | ||||||||
Colombia — 0.1% | ||||||||
Colombia Government International Bond, 4.375%, 7/12/21 | 310,000 | 317,767 | ||||||
Mexico — 0.1% | ||||||||
Mexico Government International Bond, 4.15%, 3/28/27 | 600,000 | 669,375 | ||||||
Peru† | ||||||||
Peruvian Government International Bond, 5.625%, 11/18/50 | 170,000 | 270,945 | ||||||
Philippines — 0.1% | ||||||||
Philippine Government International Bond, 4.00%, 1/15/21 | 300,000 | 301,459 | ||||||
Philippine Government International Bond, 6.375%, 10/23/34 | 150,000 | 217,508 | ||||||
518,967 | ||||||||
Poland† | ||||||||
Republic of Poland Government International Bond, 5.125%, 4/21/21 | 140,000 | 143,337 | ||||||
Republic of Poland Government International Bond, 3.00%, 3/17/23 | 140,000 | 148,644 | ||||||
291,981 | ||||||||
South Africa† | ||||||||
Republic of South Africa Government International Bond, 4.67%, 1/17/24 | 110,000 | 114,828 | ||||||
Uruguay† | ||||||||
Uruguay Government International Bond, 4.125%, 11/20/45 | 120,000 | 143,700 | ||||||
TOTAL SOVEREIGN GOVERNMENTS AND AGENCIES (Cost $2,269,826) | 2,542,314 | |||||||
PREFERRED STOCKS — 0.1% | ||||||||
Banks — 0.1% | ||||||||
JPMorgan Chase & Co., 4.60% | 552,000 | 544,962 | ||||||
Capital Markets† | ||||||||
Morgan Stanley, 3.85% | 515,000 | 495,678 | ||||||
TOTAL PREFERRED STOCKS (Cost $996,009) | 1,040,640 | |||||||
TEMPORARY CASH INVESTMENTS — 1.2% | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class (Cost $11,317,841) | 11,317,841 | 11,317,841 | ||||||
TOTAL INVESTMENT SECURITIES — 103.0% (Cost $824,090,512) | 972,381,506 | |||||||
OTHER ASSETS AND LIABILITIES — (3.0)% | (27,983,302) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 944,398,204 |
31
FUTURES CONTRACTS PURCHASED | ||||||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)^ | ||||||||||
S&P 500 E-Mini | 49 | December 2020 | $ | 7,998,515 | $ | (94,605) | ||||||||
U.S. Treasury 10-Year Notes | 30 | December 2020 | 4,146,562 | (34,193) | ||||||||||
U.S. Treasury 2-Year Notes | 5 | December 2020 | 1,104,219 | (167) | ||||||||||
U.S. Treasury 5-Year Notes | 22 | December 2020 | 2,763,234 | (7,831) | ||||||||||
U.S. Treasury Long Bonds | 2 | December 2020 | 344,938 | (8,192) | ||||||||||
U.S. Treasury Ultra Bonds | 11 | December 2020 | 2,365,000 | (61,712) | ||||||||||
$ | 18,722,468 | $ | (206,700) |
FUTURES CONTRACTS SOLD | ||||||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)^ | ||||||||||
U.S. Treasury 10-Year Ultra Notes | 73 | December 2020 | $ | 11,481,531 | $ | 165,729 |
^Amount represents value and unrealized appreciation (depreciation).
CENTRALLY CLEARED TOTAL RETURN SWAP AGREEMENTS | |||||||||||||||||||||||
Floating Rate Index | Pay/Receive Floating Rate Index at Termination | Fixed Rate | Termination Date | Notional Amount | Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Value | ||||||||||||||||
CPURNSA | Receive | 1.78% | 8/5/24 | $ | 3,500,000 | $ | (528) | $ | (37,269) | $ | (37,797) |
32
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
CPURNSA | - | U.S. Consumer Price Index Urban Consumers Not Seasonally Adjusted Index | ||||||
FHLMC | - | Federal Home Loan Mortgage Corporation | ||||||
FNMA | - | Federal National Mortgage Association | ||||||
GNMA | - | Government National Mortgage Association | ||||||
GO | - | General Obligation | ||||||
H15T1Y | - | Constant Maturity U.S. Treasury Note Yield Curve Rate Index | ||||||
LIBOR | - | London Interbank Offered Rate | ||||||
MTN | - | Medium Term Note | ||||||
SEQ | - | Sequential Payer | ||||||
TBA | - | To-Be-Announced. Security was purchased on a forward commitment basis with an approximate principal amount and maturity date. Actual principal amount and maturity date will be determined upon settlement. | ||||||
UMBS | - | Uniform Mortgage-Backed Securities | ||||||
VRN | - | Variable Rate Note. The rate adjusts periodically based upon the terms set forth in the security’s offering documents. The rate shown is effective at the period end and the reference rate and spread, if any, is indicated. The security's effective maturity date may be shorter than the final maturity date shown. |
†Category is less than 0.05% of total net assets.
(1)Non-income producing.
(2)Security, or a portion thereof, has been pledged at the custodian bank or with a broker for collateral requirements on forward commitments, futures contracts and/or swap agreements. At the period end, the aggregate value of securities pledged was $586,274.
(3)Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration, normally to qualified institutional investors. The aggregate value of these securities at the period end was $63,392,025, which represented 6.7% of total net assets.
See Notes to Financial Statements.
33
Statement of Assets and Liabilities |
OCTOBER 31, 2020 | |||||
Assets | |||||
Investment securities, at value (cost of $824,090,512) | $ | 972,381,506 | |||
Cash | 3,885 | ||||
Deposits with broker for futures contracts | 588,000 | ||||
Receivable for investments sold | 13,726,561 | ||||
Receivable for capital shares sold | 715,519 | ||||
Receivable for variation margin on futures contracts | 11,844 | ||||
Receivable for variation margin on swap agreements | 5,886 | ||||
Dividends and interest receivable | 2,526,379 | ||||
989,959,580 | |||||
Liabilities | |||||
Payable for investments purchased | 43,621,104 | ||||
Payable for capital shares redeemed | 1,022,876 | ||||
Payable for variation margin on futures contracts | 189,749 | ||||
Payable for variation margin on swap agreements | 1,782 | ||||
Accrued management fees | 725,865 | ||||
45,561,376 | |||||
Net Assets | $ | 944,398,204 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 749,949,800 | |||
Distributable earnings | 194,448,404 | ||||
$ | 944,398,204 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $841,328,378 | 42,647,709 | $19.73 | ||||||||
I Class, $0.01 Par Value | $99,524,377 | 5,041,363 | $19.74 | ||||||||
R5 Class, $0.01 Par Value | $3,545,449 | 179,617 | $19.74 |
See Notes to Financial Statements.
34
Statement of Operations |
YEAR ENDED OCTOBER 31, 2020 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $689) | $ | 9,257,131 | |||
Interest | 8,673,947 | ||||
17,931,078 | |||||
Expenses: | |||||
Management fees | 8,163,813 | ||||
Directors' fees and expenses | 29,948 | ||||
Other expenses | 7,548 | ||||
8,201,309 | |||||
Net investment income (loss) | 9,729,769 | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 49,148,714 | ||||
Futures contract transactions | 2,455,318 | ||||
Swap agreement transactions | 1,790,674 | ||||
53,394,706 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 2,645,261 | ||||
Futures contracts | (50,492) | ||||
Swap agreements | (4,541) | ||||
2,590,228 | |||||
Net realized and unrealized gain (loss) | 55,984,934 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 65,714,703 |
See Notes to Financial Statements.
35
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2020 AND OCTOBER 31, 2019 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2020 | October 31, 2019 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | 9,729,769 | $ | 14,020,828 | ||||
Net realized gain (loss) | 53,394,706 | 32,088,158 | ||||||
Change in net unrealized appreciation (depreciation) | 2,590,228 | 52,232,418 | ||||||
Net increase (decrease) in net assets resulting from operations | 65,714,703 | 98,341,404 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (40,169,645) | (56,693,821) | ||||||
I Class | (3,755,952) | (4,432,562) | ||||||
R5 Class | (156,553) | (189,961) | ||||||
Decrease in net assets from distributions | (44,082,150) | (61,316,344) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 12,514,699 | 10,455,267 | ||||||
Net increase (decrease) in net assets | 34,147,252 | 47,480,327 | ||||||
Net Assets | ||||||||
Beginning of period | 910,250,952 | 862,770,625 | ||||||
End of period | $ | 944,398,204 | $ | 910,250,952 |
See Notes to Financial Statements.
36
Notes to Financial Statements |
OCTOBER 31, 2020
1. Organization
American Century Mutual Funds, 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. Balanced Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek long-term capital growth and current income by investing approximately 60% of its assets in equity securities and the remainder in bonds and other fixed-income securities. The fund offers the Investor Class, I Class and R5 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.
Fixed income securities 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. Corporate bonds, U.S. Treasury and Government Agency securities, convertible bonds, bank loan obligations, municipal securities, and sovereign governments and agencies are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information. Mortgage-related and asset-backed securities are valued based on models that consider trade data, prepayment and default projections, benchmark yield and spread data and estimated cash flows of each tranche of the issuer. Collateralized loan obligations are valued based on discounted cash flow models that consider trade and economic data, prepayment assumptions and default projections.
Hybrid securities 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. Preferred stocks and convertible preferred stocks with perpetual maturities are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, 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. Exchange-traded futures contracts are valued at the settlement price as provided by the appropriate exchange. Swap agreements are valued at an evaluated mean as provided by independent pricing services or independent brokers.
37
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. 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 paydown gain (loss) and accretion of discounts and amortization of premiums. Inflation adjustments related to inflation-linked debt securities are reflected as interest income.
Forward Commitments — The fund may engage in securities transactions on a forward commitment basis. In these transactions, the securities’ prices and yields are fixed on the date of the commitment. The fund may sell a to-be-announced (TBA) security and at the same time make a commitment to purchase the same security at a future date at a specified price. Conversely, the fund may purchase a TBA security and at the same time make a commitment to sell the same security at a future date at a specified price. These types of transactions are known as “TBA roll” transactions and are accounted for as purchases and sales. The fund will segregate cash, cash equivalents or other appropriate liquid securities on its records in amounts sufficient to meet the purchase price.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover certain types of investment securities and other financial instruments. 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 collateral requirements.
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.
38
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., 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 ACIM will pay all expenses of managing and operating the fund, except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class. 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 use very similar investment teams and strategies (strategy assets).
The management fee schedule range and the effective annual management fee for each class for the period ended October 31, 2020 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | |||||||
Investor Class | 0.800% to 0.900% | 0.90% | ||||||
I Class | 0.600% to 0.700% | 0.70% | ||||||
R5 Class | 0.600% to 0.700% | 0.70% |
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.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $33,338,077 and $19,270,223, respectively. The effect of interfund transactions on the Statement of Operations was $1,451,267 in net realized gain (loss) on investment transactions.
39
4. Investment Transactions
Purchases of investment securities, excluding short-term investments, for the period ended October 31, 2020 totaled $1,526,847,714, of which $554,653,116 represented U.S. Treasury and Government Agency obligations.
Sales of investment securities, excluding short-term investments, for the period ended October 31, 2020 totaled $1,503,317,756, of which $512,700,617 represented U.S. Treasury and Government Agency obligations.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2020 | Year ended October 31, 2019 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 530,000,000 | 530,000,000 | ||||||||||||
Sold | 4,046,798 | $ | 78,184,412 | 3,650,691 | $ | 67,082,586 | ||||||||
Issued in reinvestment of distributions | 2,048,400 | 39,160,124 | 3,226,922 | 55,463,226 | ||||||||||
Redeemed | (6,997,025) | (132,646,617) | (6,358,619) | (116,495,515) | ||||||||||
(901,827) | (15,302,081) | 518,994 | 6,050,297 | |||||||||||
I Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||||||
Sold | 2,500,437 | 47,238,943 | 852,801 | 15,760,666 | ||||||||||
Issued in reinvestment of distributions | 196,097 | 3,754,687 | 257,104 | 4,432,356 | ||||||||||
Redeemed | (1,231,351) | (23,595,556) | (878,313) | (16,141,605) | ||||||||||
1,465,183 | 27,398,074 | 231,592 | 4,051,417 | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 26,145 | 502,174 | 12,932 | 239,892 | ||||||||||
Issued in reinvestment of distributions | 8,180 | 156,553 | 11,020 | 189,961 | ||||||||||
Redeemed | (13,204) | (240,021) | (4,163) | (76,300) | ||||||||||
21,121 | 418,706 | 19,789 | 353,553 | |||||||||||
Net increase (decrease) | 584,477 | $ | 12,514,699 | 770,375 | $ | 10,455,267 |
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.
40
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 | $ | 557,742,242 | — | — | |||||||
U.S. Treasury Securities | — | $ | 129,498,081 | — | |||||||
Corporate Bonds | — | 106,547,843 | — | ||||||||
U.S. Government Agency Mortgage-Backed Securities | — | 95,835,831 | — | ||||||||
Collateralized Mortgage Obligations | — | 26,221,247 | — | ||||||||
Collateralized Loan Obligations | — | 16,682,569 | — | ||||||||
Asset-Backed Securities | — | 12,943,907 | — | ||||||||
Municipal Securities | — | 6,931,694 | — | ||||||||
U.S. Government Agency Securities | — | 5,077,297 | — | ||||||||
Sovereign Governments and Agencies | — | 2,542,314 | — | ||||||||
Preferred Stocks | — | 1,040,640 | — | ||||||||
Temporary Cash Investments | 11,317,841 | — | — | ||||||||
$ | 569,060,083 | $ | 403,321,423 | — | |||||||
Other Financial Instruments | |||||||||||
Futures Contracts | $ | 165,729 | — | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Futures Contracts | $ | 206,700 | — | — | |||||||
Swap Agreements | — | $ | 37,797 | — | |||||||
$ | 206,700 | $ | 37,797 | — |
7. Derivative Instruments
Credit Risk — The fund is subject to credit risk in the normal course of pursuing its investment objectives. The value of a bond generally declines as the credit quality of its issuer declines. Credit default swap agreements enable a fund to buy/sell protection against a credit event of a specific issuer or index. A fund may attempt to enhance returns by selling protection or attempt to mitigate credit risk by buying protection. The buyer/seller of credit protection against a security or basket of securities may pay/receive an up-front or periodic payment to compensate for/against potential default events. Changes in value, including the periodic amounts of interest to be paid or received on swap agreements, are recorded as unrealized appreciation (depreciation) on swap agreements. Upon entering into a centrally cleared swap, a fund is required to deposit cash or securities (initial margin) with a financial intermediary in an amount equal to a certain percentage of the notional amount. 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 value and is a component of unrealized gains and losses. Realized gain or loss is recorded upon receipt or payment of a periodic settlement or termination of swap agreements. Net realized and unrealized gains or losses occurring during the holding period of swap agreements are a component of net realized gain (loss) on swap agreement transactions and change in net unrealized appreciation (depreciation) on swap agreements, respectively. The risks of entering into swap agreements include the possible lack of liquidity, failure of the counterparty to meet its obligations, and that there may be unfavorable changes in the underlying investments or instruments. The fund's average notional amount held during the period was $12,686,250.
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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. The fund's average notional exposure to equity price risk derivative instruments held during the period was $15,538,919 futures contracts purchased.
Interest Rate Risk — The fund is subject to interest rate risk in the normal course of pursuing its investment objectives. The value of bonds generally declines as interest rates rise. A fund may enter into futures contracts based on a bond index or a specific underlying security. 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 will segregate cash, cash equivalents or other appropriate liquid securities on its records in amounts sufficient to meet requirements. 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 futures 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. The fund's average notional exposure to interest rate risk derivative instruments held during the period was $11,029,456 futures contracts purchased and $7,647,740 futures contracts sold.
Other Contracts — A fund may enter into total return swap agreements in order to attempt to obtain or preserve a particular return or spread at a lower cost than obtaining a return or spread through purchases and/or sales of instruments in other markets or gain exposure to certain markets in the most economical way possible. A fund will segregate cash, cash equivalents or other appropriate liquid securities on its records in amounts sufficient to meet requirements. Changes in value, including the periodic amounts of interest to be paid or received on swap agreements, are recorded as unrealized appreciation (depreciation) on swap agreements. Upon entering into a centrally cleared swap, a fund is required to deposit cash or securities (initial margin) with a financial intermediary in an amount equal to a certain percentage of the notional amount. 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 value and is a component of unrealized gains and losses. Realized gain or loss is recorded upon receipt or payment of a periodic settlement or termination of swap agreements. Net realized and unrealized gains or losses occurring during the holding period of swap agreements are a component of net realized gain (loss) on swap agreement transactions and change in net unrealized appreciation (depreciation) on swap agreements, respectively. The risks of entering into swap agreements include the possible lack of liquidity, failure of the counterparty to meet its obligations, and that there may be unfavorable changes in the underlying investments or instruments, including inflationary risk. The fund's average notional amount held during the period was $3,750,000.
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Value of Derivative Instruments as of October 31, 2020
Asset Derivatives | Liability Derivatives | |||||||||||||
Type of Risk Exposure | Location on Statement of Assets and Liabilities | Value | Location on Statement of Assets and Liabilities | Value | ||||||||||
Credit Risk | Receivable for variation margin on swap agreements* | $ | 5,886 | Payable for variation margin on swap agreements* | — | |||||||||
Equity Price Risk | Receivable for variation margin on futures contracts* | — | Payable for variation margin on futures contracts* | $ | 189,749 | |||||||||
Interest Rate Risk | Receivable for variation margin on futures contracts* | 11,844 | Payable for variation margin on futures contracts* | — | ||||||||||
Other Contracts | Receivable for variation margin on swap agreements* | — | Payable for variation margin on swap agreements* | 1,782 | ||||||||||
$ | 17,730 | $ | 191,531 |
*Included in the unrealized appreciation (depreciation) on futures contracts or centrally cleared swap agreements, as applicable, as reported in the Schedule of Investments.
Effect of Derivative Instruments on the Statement of Operations for the Year Ended October 31, 2020
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 | ||||||||||
Credit Risk | Net realized gain (loss) on swap agreement transactions | $ | 1,744,488 | Change in net unrealized appreciation (depreciation) on swap agreements | — | |||||||||
Equity Price Risk | Net realized gain (loss) on futures contract transactions | 2,092,402 | Change in net unrealized appreciation (depreciation) on futures contracts | $ | (172,328) | |||||||||
Interest Rate Risk | Net realized gain (loss) on futures contract transactions | 362,916 | Change in net unrealized appreciation (depreciation) on futures contracts | 121,836 | ||||||||||
Other Contracts | Net realized gain (loss) on swap agreement transactions | 46,186 | Change in net unrealized appreciation (depreciation) on swap agreements | (4,541) | ||||||||||
$ | 4,245,992 | $ | (55,033) |
8. Risk Factors
The value of the fund’s shares will go up and down, sometimes rapidly or unpredictably, based on the performance of the securities owned by the fund and other factors generally affecting the securities market. Market risks, including political, regulatory, economic and social developments, can affect the value of the fund’s investments. Natural disasters, public health emergencies, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse long-term effects on world economies and markets generally.
The fund may invest in instruments that have variable or floating coupon rates based on the London Interbank Offered Rate (LIBOR). LIBOR is a benchmark interest rate intended to be representative of the rate at which certain major international banks lend to one another over short-terms. LIBOR will be phased out by the end of 2021. Uncertainty remains regarding a replacement rate or rates for LIBOR. The transition process may lead to increased volatility or illiquidity in markets for instruments that rely on LIBOR. This could result in a change to the value of such instruments.
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.
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9. Federal Tax Information
The tax character of distributions paid during the years ended October 31, 2020 and October 31, 2019 were as follows:
2020 | 2019 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 13,199,357 | $ | 23,646,494 | ||||
Long-term capital gains | $ | 30,882,793 | $ | 37,669,850 |
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 period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 827,748,786 | |||
Gross tax appreciation of investments | $ | 157,525,440 | |||
Gross tax depreciation of investments | (12,892,720) | ||||
Net tax appreciation (depreciation) of investments | 144,632,720 | ||||
Net tax appreciation (depreciation) on derivatives | (37,088) | ||||
Net tax appreciation (depreciation) | $ | 144,595,632 | |||
Other book-to-tax adjustments | $ | (147,604) | |||
Undistributed ordinary income | $ | 679,052 | |||
Accumulated long-term gains | $ | 49,321,324 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales. Other book-to-tax adjustments are attributable primarily to the tax deferral of losses on straddle positions.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 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 | |||||||||||||||||||||||||||||||||||||||||
2020 | $19.25 | 0.20 | 1.22 | 1.42 | (0.25) | (0.69) | (0.94) | $19.73 | 7.54% | 0.90% | 1.03% | 165% | $841,328 | ||||||||||||||||||||||||||||
2019 | $18.55 | 0.29 | 1.73 | 2.02 | (0.29) | (1.03) | (1.32) | $19.25 | 11.82% | 0.90% | 1.58% | 101% | $838,309 | ||||||||||||||||||||||||||||
2018 | $19.31 | 0.25 | 0.09 | 0.34 | (0.25) | (0.85) | (1.10) | $18.55 | 1.72% | 0.90% | 1.32% | 115% | $798,120 | ||||||||||||||||||||||||||||
2017 | $17.39 | 0.26 | 2.10 | 2.36 | (0.28) | (0.16) | (0.44) | $19.31 | 13.78% | 0.91% | 1.44% | 112% | $814,569 | ||||||||||||||||||||||||||||
2016 | $17.91 | 0.25 | 0.26 | 0.51 | (0.26) | (0.77) | (1.03) | $17.39 | 3.14% | 0.90% | 1.44% | 104% | $754,957 | ||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $19.26 | 0.23 | 1.23 | 1.46 | (0.29) | (0.69) | (0.98) | $19.74 | 7.75% | 0.70% | 1.23% | 165% | $99,524 | ||||||||||||||||||||||||||||
2019 | $18.56 | 0.33 | 1.72 | 2.05 | (0.32) | (1.03) | (1.35) | $19.26 | 12.04% | 0.70% | 1.78% | 101% | $68,889 | ||||||||||||||||||||||||||||
2018 | $19.32 | 0.29 | 0.09 | 0.38 | (0.29) | (0.85) | (1.14) | $18.56 | 1.92% | 0.70% | 1.52% | 115% | $62,077 | ||||||||||||||||||||||||||||
2017 | $17.40 | 0.30 | 2.09 | 2.39 | (0.31) | (0.16) | (0.47) | $19.32 | 13.99% | 0.71% | 1.64% | 112% | $73,385 | ||||||||||||||||||||||||||||
2016 | $17.92 | 0.28 | 0.27 | 0.55 | (0.30) | (0.77) | (1.07) | $17.40 | 3.35% | 0.70% | 1.64% | 104% | $58,915 | ||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $19.26 | 0.24 | 1.22 | 1.46 | (0.29) | (0.69) | (0.98) | $19.74 | 7.75% | 0.70% | 1.23% | 165% | $3,545 | ||||||||||||||||||||||||||||
2019 | $18.56 | 0.33 | 1.72 | 2.05 | (0.32) | (1.03) | (1.35) | $19.26 | 12.04% | 0.70% | 1.78% | 101% | $3,053 | ||||||||||||||||||||||||||||
2018 | $19.32 | 0.30 | 0.08 | 0.38 | (0.29) | (0.85) | (1.14) | $18.56 | 1.93% | 0.70% | 1.52% | 115% | $2,574 | ||||||||||||||||||||||||||||
2017(3) | $18.18 | 0.17 | 1.14 | 1.31 | (0.17) | — | (0.17) | $19.32 | 7.21% | 0.71%(4) | 1.66%(4) | 112%(5) | $5 |
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)April 10, 2017 (commencement of sale) through October 31, 2017.
(4)Annualized.
(5)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2017.
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the Shareholders and the Board of Directors of American Century Mutual Funds, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Balanced Fund (the “Fund”), one of the funds constituting the American Century Mutual Funds, Inc., as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of Balanced Fund of the American Century Mutual Funds, Inc. as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
December 16, 2020
We have served as the auditor of one or more American Century investment companies since 1997.
47
Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 62 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 62 | None | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 62 | None | ||||||||||||
Rajesh K. Gupta (1960) | Director | Since 2019 | Partner Emeritus, SeaCrest Investment Management and SeaCrest Wealth Management (2019 to Present); Chief Executive Officer and Chief Investment Officer, SeaCrest Investment Management (2006 to 2019); Chief Executive Officer and Chief Investment Officer, SeaCrest Wealth Management (2008 to 2019) | 62 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Lynn Jenkins (1963) | Director | Since 2019 | Consultant, LJ Strategies (2019 to present); United States Representative, U.S. House of Representatives (2009 to 2018) | 62 | MGP Ingredients, Inc. | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 62 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 62 | Onto Innovation Inc.; Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 87 | None | ||||||||||||
Interested Director | |||||||||||||||||
Jonathan S. Thomas (1963) | Director | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 125 | None |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
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Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for each of the 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years | ||||||
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries | ||||||
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Vice President, ACS, (2020 to present); Investment Operations and Investment Accounting, ACS (2000 to present) | ||||||
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS | ||||||
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS | ||||||
C. Jean Wade (1964) | Vice President since 2012 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) | ||||||
Robert J. Leach (1966) | Vice President since 2006 | Vice President, ACS (2000 to present) | ||||||
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS | ||||||
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
50
Approval of Management Agreement |
At a meeting held on June 24, 2020, the Fund’s Board of Directors (the "Board") 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 continual 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 and to be provided to the Fund;
•the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis;
•the Fund’s investment performance, including data comparing the Fund's performance 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 compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans;
•the Advisor’s business continuity plans and specifically its response to the COVID-19 pandemic;
•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;
•services provided and charges to the Advisor's other investment management clients;
•acquired fund fees and expenses;
•payments and practices in connection with financial intermediaries holding shares of the Fund and the services provided by intermediaries in connection therewith; and
•possible collateral benefits to the Advisor from the management of the Fund.
The Board held two meetings to consider the renewal. The independent Directors also met in private session three times to review and discuss the information provided in response to their request. The independent Directors held active discussions with the Advisor regarding the renewal of the management agreement, requesting supplemental information, and reviewing information provided by the Advisor in response thereto. The independent Directors 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 in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or
51
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 without limitation 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 Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
•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 amounts paid by the Fund under Rule 12b-1 plans)
The Board noted that many of these services have expanded over time in terms of both 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, provides oversight of the investment performance process. It 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 investment performance information during the management agreement renewal 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 below 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 its various committees, 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, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio
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valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
COVID-19 Response. During 2020, much of the world experienced unprecedented change and challenges from the impacts of the rapidly evolving, worldwide spread of the COVID-19 virus. The Board evaluated the Advisor’s response to the COVID-19 pandemic and its impact on service to the Fund. The Board found that Fund shareholders have continued to receive the Advisor’s investment management and other services without disruption, and Advisor personnel have demonstrated great resiliency in providing those services. The Board, directly and through its Audit Committee, continues to monitor the impact of the pandemic and the response of each of the Fund’s service providers.
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, to the extent they exist, through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business, infrastructure, investment capabilities and initiatives 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, expenses attributable to short sales, taxes, interest, extraordinary expenses, 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 Investment Company 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.
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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 Board 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 and services provided in response thereto. 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 Directors reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 Plan and that all such payments by the Advisor were made from the Advisor’s resources and reasonable profits. The Board found such payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the possible 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. To the extent there are potential collateral benefits, the board has been advised and has taken this into consideration in its review of the management contract with the Fund. 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 may receive 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 retirement accounts 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 and change your withholding percentage for future distributions.
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.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they 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 American Century Investments’ website at americancentury.com/proxy 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 americancentury.com/proxy. 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 as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov. 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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Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified dividend income for
the fiscal year ended October 31, 2020.
For corporate taxpayers, the fund hereby designates $8,713,623, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2020 as qualified for the corporate dividends received deduction.
The fund hereby designates $35,208,176, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2020.
The fund hereby designates $1,230,969 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2020.
The fund utilized earnings and profits of $4,325,383 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
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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 Mutual Funds, 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. | ||||||||
©2020 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90968 2012 |
![image81.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image81.jpg)
Annual Report | |||||
October 31, 2020 | |||||
Growth Fund | |||||
Investor Class (TWCGX) | |||||
I Class (TWGIX) | |||||
Y Class (AGYWX) | |||||
A Class (TCRAX) | |||||
C Class (TWRCX) | |||||
R Class (AGWRX) | |||||
R5 Class (AGWUX) | |||||
R6 Class (AGRDX) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | |||||
Performance | |||||
Portfolio Commentary | |||||
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 | |||||
Report of Independent Registered Public Accounting Firm | |||||
Management | |||||
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 |
![image181.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image181.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2020. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Pandemic Disrupted Economic, Market Courses
Market sentiment began the period relatively upbeat. A dovish Federal Reserve (Fed), modest inflation, improving economic and earnings data, and progress on U.S.-China trade policy helped boost global growth outlooks. Against this backdrop, riskier assets generally remained in favor.
However, beginning in late February, the COVID-19 outbreak rapidly spread worldwide, halting most U.S. and global economic activity and triggering a deep worldwide recession. Global stocks and credit-sensitive assets sold off sharply, while U.S. Treasury yields plunged to record lows amid soaring demand. Quick and aggressive action from the Fed and other central banks and federal governments helped stabilize and restore confidence in the financial markets. By summer, declining coronavirus infection and death rates in many regions and the reopening of economies were positive influences. By the end of the reporting period, most data suggested an economic recovery was underway. But, at the same time, COVID-19 infection rates were rising in the U.S. and Europe, prompting new lockdown measures in some European countries.
Overall, the broad U.S. stock market overcame the effects of the early 2020 sell-off to deliver a solid gain for the 12-month period. Growth stocks rallied and significantly outperformed value stocks, which generally declined. Global bond returns were broadly positive, as yields declined.
Science Helps Steer the Return to Normal
The return to pre-pandemic life will take time and patience, but we are confident we will get there. The first COVID-19 vaccine is on track for approval by year-end, and medical professionals continue to fine-tune virus treatment protocols. In the meantime, investors likely will face periods of outbreak-related disruptions, economic and political uncertainty, and heightened market volatility. These influences can be unsettling, but they tend to be temporary.
We appreciate your confidence in us during these extraordinary times. Our firm has a long history of helping clients weather unpredictable markets, and we’re confident we will continue to meet today’s challenges.
Sincerely,
![image191.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image191.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2020 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |||||||||||||||
Investor Class | TWCGX | 26.70% | 15.89% | 14.57% | — | 6/30/71 | ||||||||||||||
Russell 1000 Growth Index | — | 29.22% | 17.30% | 16.29% | — | — | ||||||||||||||
I Class | TWGIX | 26.93% | 16.13% | 14.80% | — | 6/16/97 | ||||||||||||||
Y Class | AGYWX | 27.15% | — | — | 19.52% | 4/10/17 | ||||||||||||||
A Class | TCRAX | 6/4/97 | ||||||||||||||||||
No sales charge | 26.38% | 15.61% | 14.29% | — | ||||||||||||||||
With sales charge | 19.10% | 14.25% | 13.61% | — | ||||||||||||||||
C Class | TWRCX | 25.43% | 14.75% | 13.43% | — | 3/1/10 | ||||||||||||||
R Class | AGWRX | 26.07% | 15.32% | 14.00% | — | 8/29/03 | ||||||||||||||
R5 Class | AGWUX | 26.94% | — | — | 19.33% | 4/10/17 | ||||||||||||||
R6 Class | AGRDX | 27.13% | 16.31% | — | 15.54% | 7/26/13 |
Average annual returns since inception are presented when ten years of performance history is not available.
Although the fund’s actual inception date was October 31, 1958, the Investor Class inception date corresponds with the investment advisor’s implementation of its current investment philosophy and practices.
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.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. 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.
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Growth of $10,000 Over 10 Years | ||
$10,000 investment made October 31, 2010 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-9707926ff40f49caa6e1.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/chart-9707926ff40f49caa6e1.jpg)
Value on October 31, 2020 | |||||
Investor Class — $39,014 | |||||
Russell 1000 Growth Index — $45,290 | |||||
Total Annual Fund Operating Expenses | |||||||||||||||||||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | ||||||||||||||||
0.98% | 0.78% | 0.63% | 1.23% | 1.98% | 1.48% | 0.78% | 0.63% |
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. Total returns for periods less than one year are not annualized. 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.
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Portfolio Commentary |
Portfolio Managers: Gregory Woodhams, Justin Brown and Scott Marolf
Senior financial analyst Scott Marolf was added to the fund’s portfolio management team in February of 2020.
Performance Summary
Growth returned 26.70%* for the 12 months ended October 31, 2020, lagging the 29.22% return of the fund’s benchmark, the Russell 1000 Growth Index.
U.S. stocks delivered strong returns during the reporting period, which was marked by extreme volatility. Stocks initially rose to all-time highs in February, before the COVID-19 pandemic and measures to combat it led to the first recession and bear market in stocks since the 2008-09 financial crisis. Massive monetary and fiscal stimulus helped support the economy and markets, and stocks recovered the ground lost earlier. Within the Russell 1000 Growth Index, all sectors posted gains except for energy, which struggled with the declining price of oil amid falling demand, and industrials, which declined modestly on concerns about global economic weakness. Consumer discretionary and information technology led the benchmark’s performance.
Stock selection in the health care, communication services and consumer discretionary sectors detracted from fund performance relative to the benchmark. Stock decisions in the industrials and information technology sectors benefited relative performance, as did underweighting industrials.
Health Care and Communication Services Stocks Led Detractors
Stock selection in the health care equipment and supplies industry weighed on relative performance in the health care sector. The industry felt the effects of stay-at-home mandates due to the pandemic as hospitals and individuals postponed voluntary procedures. In the communication services sector, entertainment companies such as The Walt Disney Co. also struggled. Disney was forced to close its theme parks. The company’s weakness was exacerbated by the impact of delayed movie releases and a lack of live sports on its ESPN network. We maintained a position in Disney based on its growth in streaming and an eventual recovery in its cyclical media and theme park assets.
Significant detractors included Tesla. We were underweight the electric car company relative to the benchmark, and the stock outperformed due to solid fundamental reports and strong demand for its vehicles. Retail investors also reacted positively to the announcement of a five-for-one stock split. Visa underperformed after the payments company reported declining revenues due primarily to weakness in cross-border transactions as a result of pandemic-related travel restrictions. We maintained a position in Visa based on our favorable view on payment networks. We were also underweight Apple, which detracted from performance. The consumer electronics company delivered solid results with strength in most work-from-home categories, including iPads and Macs, as well as solid growth in services. Also, the company split its stock four-for-one to make the equity more appealing to retail investors.
Dow was a significant detractor. The chemicals company faced the perfect storm of lower global gross domestic product having an impact on polyethylene demand and significantly lower oil prices diminishing Dow’s relative feedstock cost advantage. We eliminated our holding. The stock of multibrand restaurant owner Darden Restaurants fell sharply due to the social distancing restrictions implemented to fight the pandemic. We eliminated Darden on our belief it will take longer for some restaurants to fully recovery from the pandemic.
*All fund returns referenced in this commentary are for Investor Class shares. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund’s benchmark, other share classes may not. See page 3 for returns for all share classes.
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Industrials Aided Performance
Stock decisions among aerospace and defense companies and an underweight allocation to the industry benefited relative performance in the industrials sector. Our lighter exposure to The Boeing Co. aided results as the airplane manufacturer and defense contractor was hurt by the sharply reduced air travel, which curtailed demand for its planes. It also faced continuing difficulties with safety issues with its 737 MAX airplane. We eliminated Boeing during the first quarter of 2020.
In the information technology sector, stock selection in IT services helped performance, as did an overweight allocation to semiconductors and semiconductor equipment. Cloud computing firm Fastly was a key contributor. The company provides a variety of services, including a content delivery network that allows companies to cache data and other content that can then be retrieved by end users. Fastly benefited from the stay-at-home environment. PayPal Holdings outperformed. The payment services company reported better-than-expected earnings, helped by increased use of digital payments during the pandemic. Chipmaker NVIDIA reported solid results and guidance due to strength in its data center and gaming businesses. The data center business is being driven by the launch of new products that are based on a new architecture and a leading process node, which is driving better price/performance per chip. The company also announced the proposed acquisition of ARM Holdings, which has the ability to broaden NVIDIA’s reach in semiconductors. Microsoft was a key contributor. The software giant was buoyed by the breadth of its businesses, its transition to a subscription model and strength in its cloud division.
Other top contributors included Amazon. The retailer continued to benefit from the shift of consumer spending trends toward online purchasing. This is especially important for Amazon’s progress with consumables, including grocery and fresh foods, which has been a slower area of progress. Amazon could also benefit from potential rising demand for more cloud usage.
Outlook
We believe stock selection—rather than sector allocation or market timing via the use of cash—is the most efficient means of generating superior risk-adjusted returns. As a result of this approach, the portfolio’s sector and industry selection, as well as capitalization range allocations, are primarily due to identifying what we believe to be superior individual securities.
At period-end, our largest sector allocation relative to the benchmark was information technology. The largest underweight was health care.
6
Fund Characteristics |
OCTOBER 31, 2020 | |||||
Top Ten Holdings | % of net assets | ||||
Microsoft Corp. | 12.0% | ||||
Amazon.com, Inc. | 9.6% | ||||
Apple, Inc. | 8.9% | ||||
Alphabet, Inc., Class A | 6.7% | ||||
Visa, Inc., Class A | 4.4% | ||||
NVIDIA Corp. | 3.5% | ||||
PayPal Holdings, Inc. | 3.4% | ||||
Facebook, Inc., Class A | 2.8% | ||||
Procter & Gamble Co. (The) | 2.3% | ||||
UnitedHealth Group, Inc. | 2.1% | ||||
Top Five Industries | % of net assets | ||||
Software | 17.9% | ||||
Internet and Direct Marketing Retail | 10.8% | ||||
Interactive Media and Services | 10.2% | ||||
IT Services | 9.1% | ||||
Technology Hardware, Storage and Peripherals | 8.9% | ||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 100.0% | ||||
Temporary Cash Investments | 0.2% | ||||
Temporary Cash Investments - Securities Lending Collateral | 0.4% | ||||
Other Assets and Liabilities | (0.6)% |
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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 May 1, 2020 to October 31, 2020.
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 I Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not through a financial intermediary or employer-sponsored retirement plan account), American Century Investments may charge you a $25.00 annual 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 $25.00 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.
8
Beginning Account Value 5/1/20 | Ending Account Value 10/31/20 | Expenses Paid During Period(1) 5/1/20 - 10/31/20 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,187.50 | $5.33 | 0.97% | ||||||||||
I Class | $1,000 | $1,188.90 | $4.24 | 0.77% | ||||||||||
Y Class | $1,000 | $1,189.90 | $3.41 | 0.62% | ||||||||||
A Class | $1,000 | $1,186.20 | $6.70 | 1.22% | ||||||||||
C Class | $1,000 | $1,181.80 | $10.80 | 1.97% | ||||||||||
R Class | $1,000 | $1,184.60 | $8.07 | 1.47% | ||||||||||
R5 Class | $1,000 | $1,189.00 | $4.24 | 0.77% | ||||||||||
R6 Class | $1,000 | $1,189.90 | $3.41 | 0.62% | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,020.26 | $4.93 | 0.97% | ||||||||||
I Class | $1,000 | $1,021.27 | $3.91 | 0.77% | ||||||||||
Y Class | $1,000 | $1,022.02 | $3.15 | 0.62% | ||||||||||
A Class | $1,000 | $1,019.00 | $6.19 | 1.22% | ||||||||||
C Class | $1,000 | $1,015.23 | $9.98 | 1.97% | ||||||||||
R Class | $1,000 | $1,017.75 | $7.46 | 1.47% | ||||||||||
R5 Class | $1,000 | $1,021.27 | $3.91 | 0.77% | ||||||||||
R6 Class | $1,000 | $1,022.02 | $3.15 | 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 184, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses.
9
Schedule of Investments |
OCTOBER 31, 2020
Shares | Value | |||||||
COMMON STOCKS — 100.0% | ||||||||
Aerospace and Defense — 1.0% | ||||||||
Lockheed Martin Corp. | 299,600 | $ | 104,898,948 | |||||
Auto Components — 1.2% | ||||||||
Aptiv plc | 1,234,222 | 119,090,081 | ||||||
Automobiles — 0.7% | ||||||||
Tesla, Inc.(1) | 177,660 | 68,939,186 | ||||||
Biotechnology — 3.4% | ||||||||
Amgen, Inc. | 878,298 | 190,537,968 | ||||||
CRISPR Therapeutics AG(1) | 528,089 | 48,489,132 | ||||||
Vertex Pharmaceuticals, Inc.(1) | 530,105 | 110,452,678 | ||||||
349,479,778 | ||||||||
Building Products — 1.2% | ||||||||
Masco Corp. | 1,872,880 | 100,386,368 | ||||||
Trex Co., Inc.(1) | 323,214 | 22,476,302 | ||||||
122,862,670 | ||||||||
Capital Markets — 1.4% | ||||||||
S&P Global, Inc. | 447,603 | 144,454,916 | ||||||
Electrical Equipment — 1.5% | ||||||||
Ballard Power Systems, Inc.(1)(2) | 2,146,702 | 31,706,789 | ||||||
Generac Holdings, Inc.(1) | 163,783 | 34,418,997 | ||||||
Rockwell Automation, Inc. | 377,360 | 89,479,603 | ||||||
155,605,389 | ||||||||
Electronic Equipment, Instruments and Components — 1.8% | ||||||||
CDW Corp. | 370,386 | 45,409,324 | ||||||
Cognex Corp. | 886,161 | 58,398,010 | ||||||
Keysight Technologies, Inc.(1) | 731,988 | 76,763,581 | ||||||
180,570,915 | ||||||||
Entertainment — 1.6% | ||||||||
Liberty Media Corp.-Liberty Formula One, Class C(1) | 928,783 | 33,556,930 | ||||||
Take-Two Interactive Software, Inc.(1) | 506,287 | 78,433,982 | ||||||
Walt Disney Co. (The) | 442,973 | 53,710,476 | ||||||
165,701,388 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 1.5% | ||||||||
SBA Communications Corp. | 541,026 | 157,097,720 | ||||||
Food Products — 1.6% | ||||||||
Beyond Meat, Inc.(1) | 172,327 | 24,544,535 | ||||||
Mondelez International, Inc., Class A | 2,344,921 | 124,562,203 | ||||||
Vital Farms, Inc.(1) | 424,727 | 14,678,565 | ||||||
163,785,303 | ||||||||
Health Care Equipment and Supplies — 2.4% | ||||||||
DexCom, Inc.(1) | 164,224 | 52,482,706 | ||||||
Edwards Lifesciences Corp.(1) | 602,095 | 43,164,191 | ||||||
IDEXX Laboratories, Inc.(1) | 95,648 | 40,633,183 | ||||||
Insulet Corp.(1) | 106,438 | 23,655,846 | ||||||
Intuitive Surgical, Inc.(1) | 134,818 | 89,934,391 | ||||||
249,870,317 |
10
Shares | Value | |||||||
Health Care Providers and Services — 2.5% | ||||||||
Quest Diagnostics, Inc. | 296,567 | $ | 36,222,693 | |||||
UnitedHealth Group, Inc. | 708,540 | 216,203,896 | ||||||
252,426,589 | ||||||||
Health Care Technology — 0.7% | ||||||||
Teladoc Health, Inc.(1)(2) | 227,274 | 44,650,250 | ||||||
Veeva Systems, Inc., Class A(1) | 99,231 | 26,797,332 | ||||||
71,447,582 | ||||||||
Hotels, Restaurants and Leisure — 1.5% | ||||||||
Chipotle Mexican Grill, Inc.(1) | 73,841 | 88,718,485 | ||||||
Domino's Pizza, Inc. | 184,202 | 69,687,300 | ||||||
158,405,785 | ||||||||
Household Products — 2.3% | ||||||||
Procter & Gamble Co. (The) | 1,750,735 | 240,025,768 | ||||||
Insurance — 0.8% | ||||||||
Progressive Corp. (The) | 714,781 | 65,688,374 | ||||||
Root, Inc., Class A(1) | 336,596 | 8,068,206 | ||||||
SelectQuote, Inc.(1) | 690,817 | 11,895,869 | ||||||
85,652,449 | ||||||||
Interactive Media and Services — 10.2% | ||||||||
Alphabet, Inc., Class A(1) | 427,980 | 691,662,758 | ||||||
Facebook, Inc., Class A(1) | 1,103,804 | 290,421,870 | ||||||
Twitter, Inc.(1) | 1,565,969 | 64,768,478 | ||||||
1,046,853,106 | ||||||||
Internet and Direct Marketing Retail — 10.8% | ||||||||
Amazon.com, Inc.(1) | 323,461 | 982,076,115 | ||||||
Chewy, Inc., Class A(1)(2) | 1,160,388 | 71,479,901 | ||||||
Expedia Group, Inc. | 512,764 | 48,276,731 | ||||||
1,101,832,747 | ||||||||
IT Services — 9.1% | ||||||||
Fastly, Inc., Class A(1)(2) | 611,453 | 38,833,380 | ||||||
Okta, Inc.(1) | 145,190 | 30,465,218 | ||||||
PayPal Holdings, Inc.(1) | 1,881,715 | 350,243,613 | ||||||
Snowflake, Inc., Class A(1) | 1,119 | 279,772 | ||||||
Twilio, Inc., Class A(1) | 112,538 | 31,394,726 | ||||||
VeriSign, Inc.(1) | 164,539 | 31,377,587 | ||||||
Visa, Inc., Class A | 2,478,887 | 450,438,557 | ||||||
933,032,853 | ||||||||
Life Sciences Tools and Services — 0.9% | ||||||||
Adaptive Biotechnologies Corp.(1) | 802,071 | 36,959,432 | ||||||
Agilent Technologies, Inc. | 324,193 | 33,096,863 | ||||||
Repligen Corp.(1) | 103,549 | 17,248,157 | ||||||
87,304,452 | ||||||||
Machinery — 0.4% | ||||||||
Cummins, Inc. | 178,859 | 39,329,305 | ||||||
Personal Products — 0.6% | ||||||||
Estee Lauder Cos., Inc. (The), Class A | 265,930 | 58,414,184 | ||||||
Pharmaceuticals — 2.5% | ||||||||
Merck & Co., Inc. | 1,025,831 | 77,152,750 | ||||||
Novo Nordisk A/S, B Shares | 1,690,462 | 108,108,035 | ||||||
Zoetis, Inc. | 446,733 | 70,829,517 | ||||||
256,090,302 |
11
Shares | Value | |||||||
Road and Rail — 1.0% | ||||||||
Lyft, Inc., Class A(1) | 872,422 | $ | 19,917,394 | |||||
Union Pacific Corp. | 478,721 | 84,824,574 | ||||||
104,741,968 | ||||||||
Semiconductors and Semiconductor Equipment — 7.8% | ||||||||
Advanced Micro Devices, Inc.(1) | 1,284,331 | 96,697,281 | ||||||
Analog Devices, Inc. | 535,744 | 63,501,736 | ||||||
ASML Holding NV | 418,290 | 152,071,291 | ||||||
Broadcom, Inc. | 373,076 | 130,438,562 | ||||||
NVIDIA Corp. | 710,758 | 356,345,631 | ||||||
799,054,501 | ||||||||
Software — 17.9% | ||||||||
Datadog, Inc., Class A(1) | 428,746 | 38,908,699 | ||||||
DocuSign, Inc.(1) | 142,950 | 28,911,638 | ||||||
JFrog Ltd.(1) | 2,886 | 209,033 | ||||||
Microsoft Corp. | 6,089,505 | 1,232,942,077 | ||||||
PagerDuty, Inc.(1)(2) | 1,731,888 | 46,934,165 | ||||||
salesforce.com, Inc.(1) | 740,380 | 171,968,063 | ||||||
Slack Technologies, Inc., Class A(1) | 2,715,586 | 69,464,690 | ||||||
Splunk, Inc.(1) | 517,536 | 102,492,829 | ||||||
Workday, Inc., Class A(1) | 140,947 | 29,615,784 | ||||||
Zendesk, Inc.(1) | 989,682 | 109,795,321 | ||||||
1,831,242,299 | ||||||||
Specialty Retail — 1.1% | ||||||||
Home Depot, Inc. (The) | 184,100 | 49,101,311 | ||||||
TJX Cos., Inc. (The) | 1,308,516 | 66,472,613 | ||||||
115,573,924 | ||||||||
Technology Hardware, Storage and Peripherals — 8.9% | ||||||||
Apple, Inc. | 8,398,795 | 914,292,824 | ||||||
Textiles, Apparel and Luxury Goods — 1.7% | ||||||||
NIKE, Inc., Class B | 1,477,541 | 177,423,123 | ||||||
TOTAL COMMON STOCKS (Cost $5,054,346,348) | 10,255,500,372 | |||||||
TEMPORARY CASH INVESTMENTS — 0.2% | ||||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.50% - 3.375%, 6/30/21 - 11/15/48, valued at $4,863,049), in a joint trading account at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $4,784,532) | 4,784,508 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 0.125%, 7/15/30, valued at $8,502,792), at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $8,336,042) | 8,336,000 | |||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $13,120,508) | 13,120,508 | |||||||
TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL(3) — 0.4% | ||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (Cost $45,480,168) | 45,480,168 | 45,480,168 | ||||||
TOTAL INVESTMENT SECURITIES — 100.6% (Cost $5,112,947,024) | 10,314,101,048 | |||||||
OTHER ASSETS AND LIABILITIES — (0.6)% | (61,608,224) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 10,252,492,824 |
12
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
EUR | 3,355,596 | USD | 3,938,769 | Credit Suisse AG | 12/31/20 | $ | (24,977) | |||||||||||||
EUR | 3,205,916 | USD | 3,807,221 | Credit Suisse AG | 12/31/20 | (68,009) | ||||||||||||||
EUR | 3,847,099 | USD | 4,556,935 | Credit Suisse AG | 12/31/20 | (69,881) | ||||||||||||||
USD | 131,405,172 | EUR | 111,948,519 | Credit Suisse AG | 12/31/20 | 834,300 | ||||||||||||||
USD | 4,028,172 | EUR | 3,431,365 | Credit Suisse AG | 12/31/20 | 26,008 | ||||||||||||||
USD | 6,117,943 | EUR | 5,205,377 | Credit Suisse AG | 12/31/20 | 46,664 | ||||||||||||||
$ | 744,105 |
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
EUR | - | Euro | ||||||
USD | - | United States Dollar |
(1)Non-income producing.
(2)Security, or a portion thereof, is on loan. At the period end, the aggregate value of securities on loan was $96,342,699. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers.
(3)Investment of cash collateral from securities on loan. At the period end, the aggregate value of the collateral held by the fund was $104,215,411, which includes securities collateral of $58,735,243.
See Notes to Financial Statements.
13
Statement of Assets and Liabilities |
OCTOBER 31, 2020 | |||||
Assets | |||||
Investment securities, at value (cost of $5,067,466,856) — including $96,342,699 of securities on loan | $ | 10,268,620,880 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $45,480,168) | 45,480,168 | ||||
Total investment securities, at value (cost of $5,112,947,024) | 10,314,101,048 | ||||
Cash | 3,982 | ||||
Receivable for investments sold | 24,389,033 | ||||
Receivable for capital shares sold | 2,233,847 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 906,972 | ||||
Dividends and interest receivable | 2,335,316 | ||||
Securities lending receivable | 53,611 | ||||
10,344,023,809 | |||||
Liabilities | |||||
Payable for collateral received for securities on loan | 45,480,168 | ||||
Payable for investments purchased | 7,105,222 | ||||
Payable for capital shares redeemed | 30,264,941 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 162,867 | ||||
Accrued management fees | 8,439,091 | ||||
Distribution and service fees payable | 78,696 | ||||
91,530,985 | |||||
Net Assets | $ | 10,252,492,824 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 4,686,285,919 | |||
Distributable earnings | 5,566,206,905 | ||||
$ | 10,252,492,824 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $7,656,430,242 | 182,575,405 | $41.94 | ||||||||
I Class, $0.01 Par Value | $1,719,814,040 | 40,114,634 | $42.87 | ||||||||
Y Class, $0.01 Par Value | $52,045,800 | 1,212,439 | $42.93 | ||||||||
A Class, $0.01 Par Value | $102,471,636 | 2,541,170 | $40.32* | ||||||||
C Class, $0.01 Par Value | $13,527,401 | 361,966 | $37.37 | ||||||||
R Class, $0.01 Par Value | $96,170,421 | 2,468,162 | $38.96 | ||||||||
R5 Class, $0.01 Par Value | $433,055 | 10,091 | $42.91 | ||||||||
R6 Class, $0.01 Par Value | $611,600,229 | 14,269,375 | $42.86 |
*Maximum offering price $42.78 (net asset value divided by 0.9425).
See Notes to Financial Statements.
14
Statement of Operations |
YEAR ENDED OCTOBER 31, 2020 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $577,249) | $ | 86,320,362 | |||
Securities lending, net | 714,238 | ||||
Interest | 500,448 | ||||
87,535,048 | |||||
Expenses: | |||||
Management fees | 86,155,014 | ||||
Distribution and service fees: | |||||
A Class | 249,749 | ||||
C Class | 116,628 | ||||
R Class | 461,912 | ||||
Directors' fees and expenses | 300,125 | ||||
Other expenses | 12,669 | ||||
87,296,097 | |||||
Net investment income (loss) | 238,951 | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions (Note 4) | 593,469,427 | ||||
Forward foreign currency exchange contract transactions | (5,567,078) | ||||
Futures contract transactions | 11,298,722 | ||||
Foreign currency translation transactions | (4,268) | ||||
599,196,803 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 1,537,275,177 | ||||
Forward foreign currency exchange contracts | 1,123,274 | ||||
Futures contracts | (1,432,221) | ||||
Translation of assets and liabilities in foreign currencies | 23,676 | ||||
1,536,989,906 | |||||
Net realized and unrealized gain (loss) | 2,136,186,709 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 2,136,425,660 |
See Notes to Financial Statements.
15
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2020 AND OCTOBER 31, 2019 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2020 | October 31, 2019 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | 238,951 | $ | 22,124,570 | ||||
Net realized gain (loss) | 599,196,803 | 457,660,058 | ||||||
Change in net unrealized appreciation (depreciation) | 1,536,989,906 | 661,567,516 | ||||||
Net increase (decrease) in net assets resulting from operations | 2,136,425,660 | 1,141,352,144 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (480,259,209) | (620,549,413) | ||||||
I Class | (114,436,997) | (135,799,946) | ||||||
Y Class | (4,514,391) | (5,869,002) | ||||||
A Class | (7,229,137) | (11,268,612) | ||||||
C Class | (744,058) | (1,173,312) | ||||||
R Class | (7,119,319) | (11,498,287) | ||||||
R5 Class | (42,460) | (45,748) | ||||||
R6 Class | (41,181,311) | (48,975,743) | ||||||
Decrease in net assets from distributions | (655,526,882) | (835,180,063) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 728,589,142 | (221,312,359) | ||||||
Net increase (decrease) in net assets | 2,209,487,920 | 84,859,722 | ||||||
Net Assets | ||||||||
Beginning of period | 8,043,004,904 | 7,958,145,182 | ||||||
End of period | $ | 10,252,492,824 | $ | 8,043,004,904 | ||||
See Notes to Financial Statements.
16
Notes to Financial Statements |
OCTOBER 31, 2020
1. Organization
American Century Mutual Funds, 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. Growth Fund (the fund) is one fund in a series issued by the corporation. The fund's investment objective is to seek long-term capital growth.
The fund offers the Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class and 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.
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 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. U.S. Treasury and Government Agency securities are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, 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 exchange. 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 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.
17
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. 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 lending income is net of fees and rebates earned by the lending agent for its services.
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 American Century Investment Management, Inc. (ACIM) (the investment advisor) 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 certain types of investment securities and other financial instruments. 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 collateral requirements.
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 and 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.
Securities Lending — Securities are lent to qualified financial institutions and brokers. State Street Bank & Trust Co. serves as securities lending agent to the fund pursuant to a Securities Lending Agreement. The lending of securities exposes the fund to risks such as: the borrowers may fail to return the loaned securities, the borrowers may not be able to provide additional collateral, the fund may experience delays in recovery of the loaned securities or delays in access to collateral, or the fund may experience losses related to the investment collateral. To minimize certain risks, loan counterparties pledge collateral in the form of cash and/or securities. The lending agent has agreed to indemnify the fund in the case of default of any securities borrowed. Cash collateral received is invested in the State Street Navigator Securities Lending Government Money Market Portfolio, a money market mutual fund registered under the 1940 Act. The loans may also be secured by U.S. government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. By lending securities, the fund seeks to increase its net investment income through the receipt of interest and fees. Such income is reflected separately within the Statement of Operations. The value of loaned securities and related collateral outstanding at period end, if any, are shown on a gross basis within the Schedule of Investments and Statement of Assets and Liabilities.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged, and the remaining contractual maturity of those transactions as of October 31, 2020.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 45,480,168 | — | — | — | $ | 45,480,168 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 45,480,168 |
(1)Amount represents the payable for cash collateral received for securities on loan. This will generally be in the Overnight and Continuous column as the securities are typically callable on demand.
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.
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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 ACIM will pay all expenses of managing and operating the fund, except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), extraordinary expenses, 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. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class. 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 use very similar investment teams and strategies (strategy assets). The strategy assets of the fund also include the assets of NT Growth Fund, one fund in a series issued by the corporation.
The management fee schedule range and the effective annual management fee for each class for the period ended October 31, 2020 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | |||||||
Investor Class | 0.800% to 0.990% | 0.97% | ||||||
I Class | 0.600% to 0.790% | 0.77% | ||||||
Y Class | 0.450% to 0.640% | 0.62% | ||||||
A Class | 0.800% to 0.990% | 0.97% | ||||||
C Class | 0.800% to 0.990% | 0.97% | ||||||
R Class | 0.800% to 0.990% | 0.97% | ||||||
R5 Class | 0.600% to 0.790% | 0.77% | ||||||
R6 Class | 0.450% to 0.640% | 0.62% |
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 period ended October 31, 2020 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.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $5,791,151 and $5,504,008, respectively. The effect of interfund transactions on the Statement of Operations was $951,221 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments and in kind transactions, for the period ended October 31, 2020 were $3,083,934,281 and $4,171,327,811, respectively.
For the period ended October 31, 2020, the fund incurred net realized gains of $9,756,480 from redemptions in kind. A redemption in kind occurs when a fund delivers securities into its portfolio in lieu of cash as payment to a redeeming shareholder.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2020 | Year ended October 31, 2019 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 2,100,000,000 | 2,100,000,000 | ||||||||||||
Sold | 9,314,651 | $ | 343,295,401 | 6,174,389 | $ | 204,624,318 | ||||||||
Issued in connection with reorganization (Note 10) | 33,740,937 | 1,281,095,913 | — | — | ||||||||||
Issued in reinvestment of distributions | 12,608,305 | 463,439,340 | 20,752,173 | 599,737,810 | ||||||||||
Redeemed | (38,931,327) | (1,459,424,248) | (22,142,478) | (738,868,587) | ||||||||||
16,732,566 | 628,406,406 | 4,784,084 | 65,493,541 | |||||||||||
I Class/Shares Authorized | 460,000,000 | 460,000,000 | ||||||||||||
Sold | 14,389,473 | 554,081,579 | 8,201,339 | 284,251,396 | ||||||||||
Issued in connection with reorganization (Note 10) | 238,480 | 9,244,211 | — | — | ||||||||||
Issued in reinvestment of distributions | 3,019,127 | 113,217,452 | 4,549,653 | 134,032,787 | ||||||||||
Redeemed | (15,353,587) | (606,960,175) | (9,493,140) | (319,770,751) | ||||||||||
2,293,493 | 69,583,067 | 3,257,852 | 98,513,432 | |||||||||||
Y Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 153,010 | 5,711,874 | 193,293 | 6,309,777 | ||||||||||
Issued in reinvestment of distributions | 119,002 | 4,461,395 | 197,540 | 5,819,520 | ||||||||||
Redeemed | (524,867) | (19,910,740) | (401,561) | (13,473,502) | ||||||||||
(252,855) | (9,737,471) | (10,728) | (1,344,205) | |||||||||||
A Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 683,766 | 24,686,474 | 583,026 | 18,601,566 | ||||||||||
Issued in connection with reorganization (Note 10) | 422,151 | 15,436,291 | — | — | ||||||||||
Issued in reinvestment of distributions | 164,961 | 5,847,619 | 335,059 | 9,354,848 | ||||||||||
Redeemed | (1,436,368) | (51,778,786) | (1,260,515) | (40,816,895) | ||||||||||
(165,490) | (5,808,402) | (342,430) | (12,860,481) | |||||||||||
C Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 74,102 | 2,515,992 | 63,391 | 1,766,765 | ||||||||||
Issued in connection with reorganization (Note 10) | 124,022 | 4,225,593 | — | — | ||||||||||
Issued in reinvestment of distributions | 20,026 | 661,725 | 39,522 | 1,041,792 | ||||||||||
Redeemed | (115,923) | (3,918,628) | (149,895) | (4,554,998) | ||||||||||
102,227 | 3,484,682 | (46,982) | (1,746,441) | |||||||||||
R Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 431,377 | 15,135,430 | 339,606 | 10,447,195 | ||||||||||
Issued in connection with reorganization (Note 10) | 461,820 | 16,348,203 | — | — | ||||||||||
Issued in reinvestment of distributions | 205,542 | 7,043,451 | 417,329 | 11,334,663 | ||||||||||
Redeemed | (1,236,289) | (42,445,952) | (1,207,308) | (36,468,093) | ||||||||||
(137,550) | (3,918,868) | (450,373) | (14,686,235) | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 999 | 38,826 | 2,974 | 101,028 | ||||||||||
Issued in reinvestment of distributions | 1,135 | 42,460 | 1,552 | 45,748 | ||||||||||
Redeemed | (6,612) | (240,109) | (1,305) | (44,020) | ||||||||||
(4,478) | (158,823) | 3,221 | 102,756 | |||||||||||
R6 Class/Shares Authorized | 200,000,000 | 200,000,000 | ||||||||||||
Sold | 4,275,401 | 166,984,195 | 3,277,264 | 109,281,671 | ||||||||||
Issued in reinvestment of distributions | 1,098,511 | 41,181,311 | 1,664,709 | 48,975,743 | ||||||||||
Redeemed | (4,210,873) | (161,426,955) | (15,267,638) | (513,042,140) | ||||||||||
1,163,039 | 46,738,551 | (10,325,665) | (354,784,726) | |||||||||||
Net increase (decrease) | 19,730,952 | $ | 728,589,142 | (3,131,021) | $ | (221,312,359) |
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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.
Level 1 | Level 2 | Level 3 | |||||||||
Assets | |||||||||||
Investment Securities | |||||||||||
Common Stocks | $ | 9,995,321,046 | $ | 260,179,326 | — | ||||||
Temporary Cash Investments | — | 13,120,508 | — | ||||||||
Temporary Cash Investments - Securities Lending Collateral | 45,480,168 | — | — | ||||||||
$ | 10,040,801,214 | $ | 273,299,834 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 906,972 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 162,867 | — |
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. The fund's average notional exposure to equity price risk derivative instruments held during the period was $48,721,867 futures contracts purchased.
22
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 settlement 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 forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, 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 $147,997,212.
Value of Derivative Instruments as of October 31, 2020
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 | $ | 906,972 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 162,867 |
Effect of Derivative Instruments on the Statement of Operations for the Year Ended October 31, 2020
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 | $ | 11,298,722 | Change in net unrealized appreciation (depreciation) on futures contracts | $ | (1,432,221) | ||||||||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | (5,567,078) | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | 1,123,274 | ||||||||||
$ | 5,731,644 | $ | (308,947) |
8. Risk Factors
The value of the fund’s shares will go up and down, sometimes rapidly or unpredictably, based on the performance of the securities owned by the fund and other factors generally affecting the securities market. Market risks, including political, regulatory, economic and social developments, can affect the value of the fund’s investments. Natural disasters, public health emergencies, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse long-term effects on world economies and markets generally.
9. Federal Tax Information
On December 8, 2020, the fund declared and paid a per-share distribution from net realized gains to shareholders of record on December 7, 2020 of $1.5632 for the Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class and R6 Class.
2020 | 2019 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 24,642,374 | $ | 83,919,008 | ||||
Long-term capital gains | $ | 630,884,508 | $ | 751,261,055 |
23
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 period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 5,119,257,182 | |||
Gross tax appreciation of investments | $ | 5,282,269,176 | |||
Gross tax depreciation of investments | (87,425,310) | ||||
Net tax appreciation (depreciation) of investments | 5,194,843,866 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 21,584 | ||||
Net tax appreciation (depreciation) | $ | 5,194,865,450 | |||
Undistributed ordinary income | — | ||||
Accumulated long-term gains | $ | 376,496,713 | |||
Late-year ordinary loss deferral | $ | (5,155,258) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Loss deferrals 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.
10. Reorganization
On September 11, 2019, the Board of Directors approved an agreement and plan of reorganization (the reorganization), whereby the net assets of All Cap Growth Fund, one fund in a series issued by the corporation, were transferred to Growth Fund in exchange for shares of Growth Fund. The purpose of the transaction was to combine two funds with substantially similar investment objectives and strategies. The financial statements and performance history of Growth Fund survived after the reorganization. The reorganization was effective at the close of the NYSE on February 21, 2020.
Original Fund/Class | Shares Exchanged | New Fund/Class | Shares Received | ||||||||
All Cap Growth Fund – Investor Class | 36,344,493 | Growth Fund – Investor Class | 33,740,937 | ||||||||
All Cap Growth Fund – I Class | 256,052 | Growth Fund – I Class | 238,480 | ||||||||
All Cap Growth Fund – A Class | 451,934 | Growth Fund – A Class | 422,151 | ||||||||
All Cap Growth Fund – C Class | 137,457 | Growth Fund – C Class | 124,022 | ||||||||
All Cap Growth Fund – R Class | 495,557 | Growth Fund – R Class | 461,820 |
The net assets of All Cap Growth Fund and Growth Fund immediately before the reorganization were $1,326,350,211 and $8,778,658,792, respectively. All Cap Growth Fund's unrealized appreciation of $530,451,716 was combined with that of Growth Fund. Immediately after the reorganization, the combined net assets were $10,105,009,003.
Assuming the reorganization had been completed on November 1, 2019, the beginning of the annual reporting period, the pro forma results of operations for the period ended October 31, 2020 are as follows:
Net investment income (loss) | $ | 1,186,943 | |||
Net realized and unrealized gain (loss) | 2,308,332,754 | ||||
Net increase (decrease) in net assets resulting from operations | $ | 2,309,519,697 |
Because the combined investment portfolios have been managed as a single integrated portfolio since the reorganization was completed, it is not practicable to separate the amounts of revenue and earnings of All Cap Growth Fund that have been included in the fund’s Statement of Operations since February 21, 2020.
24
Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 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 | |||||||||||||||||||||||||||||||||||||||||
2020 | $35.80 | (0.02) | 9.12 | 9.10 | (0.15) | (2.81) | (2.96) | $41.94 | 26.70% | 0.97% | (0.04)% | 33% | $7,656,430 | ||||||||||||||||||||||||||||
2019 | $34.94 | 0.08 | 4.70 | 4.78 | (0.08) | (3.84) | (3.92) | $35.80 | 16.35% | 0.98% | 0.24% | 30% | $5,937,959 | ||||||||||||||||||||||||||||
2018 | $34.93 | 0.04 | 3.35 | 3.39 | (0.06) | (3.32) | (3.38) | $34.94 | 10.22% | 0.97% | 0.13% | 38% | $5,627,171 | ||||||||||||||||||||||||||||
2017 | $28.64 | 0.08 | 7.67 | 7.75 | (0.17) | (1.29) | (1.46) | $34.93 | 28.26% | 0.98% | 0.26% | 48% | $5,648,965 | ||||||||||||||||||||||||||||
2016 | $30.57 | 0.16 | (0.08) | 0.08 | (0.10) | (1.91) | (2.01) | $28.64 | 0.40% | 0.98% | 0.57% | 36% | $5,122,550 | ||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $36.56 | 0.06 | 9.29 | 9.35 | (0.23) | (2.81) | (3.04) | $42.87 | 26.93% | 0.77% | 0.16% | 33% | $1,719,814 | ||||||||||||||||||||||||||||
2019 | $35.59 | 0.15 | 4.81 | 4.96 | (0.15) | (3.84) | (3.99) | $36.56 | 16.62% | 0.78% | 0.44% | 30% | $1,382,618 | ||||||||||||||||||||||||||||
2018 | $35.52 | 0.12 | 3.40 | 3.52 | (0.13) | (3.32) | (3.45) | $35.59 | 10.46% | 0.77% | 0.33% | 38% | $1,230,065 | ||||||||||||||||||||||||||||
2017 | $29.11 | 0.15 | 7.78 | 7.93 | (0.23) | (1.29) | (1.52) | $35.52 | 28.48% | 0.78% | 0.46% | 48% | $1,271,821 | ||||||||||||||||||||||||||||
2016 | $31.03 | 0.23 | (0.08) | 0.15 | (0.16) | (1.91) | (2.07) | $29.11 | 0.64% | 0.78% | 0.77% | 36% | $1,297,685 |
For a Share Outstanding Throughout the Years Ended October 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) | |||||||||||||||||||||||||||||
Y Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $36.61 | 0.13 | 9.30 | 9.43 | (0.30) | (2.81) | (3.11) | $42.93 | 27.15% | 0.62% | 0.31% | 33% | $52,046 | ||||||||||||||||||||||||||||
2019 | $35.64 | 0.20 | 4.81 | 5.01 | (0.20) | (3.84) | (4.04) | $36.61 | 16.78% | 0.63% | 0.59% | 30% | $53,641 | ||||||||||||||||||||||||||||
2018 | $35.54 | 0.17 | 3.40 | 3.57 | (0.15) | (3.32) | (3.47) | $35.64 | 10.61% | 0.62% | 0.48% | 38% | $52,601 | ||||||||||||||||||||||||||||
2017(3) | $30.93 | 0.08 | 4.53 | 4.61 | — | — | — | $35.54 | 14.90% | 0.63%(4) | 0.43%(4) | 48%(5) | $56,218 | ||||||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $34.52 | (0.10) | 8.75 | 8.65 | (0.04) | (2.81) | (2.85) | $40.32 | 26.38% | 1.22% | (0.29)% | 33% | $102,472 | ||||||||||||||||||||||||||||
2019 | $33.82 | —(6) | 4.54 | 4.54 | — | (3.84) | (3.84) | $34.52 | 16.06% | 1.23% | (0.01)% | 30% | $93,422 | ||||||||||||||||||||||||||||
2018 | $33.94 | (0.04) | 3.24 | 3.20 | — | (3.32) | (3.32) | $33.82 | 9.94% | 1.22% | (0.12)% | 38% | $103,115 | ||||||||||||||||||||||||||||
2017 | $27.86 | 0.01 | 7.46 | 7.47 | (0.10) | (1.29) | (1.39) | $33.94 | 27.95% | 1.23% | 0.01% | 48% | $113,348 | ||||||||||||||||||||||||||||
2016 | $29.78 | 0.10 | (0.08) | 0.02 | (0.03) | (1.91) | (1.94) | $27.86 | 0.18% | 1.23% | 0.32% | 36% | $147,133 | ||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $32.37 | (0.37) | 8.18 | 7.81 | — | (2.81) | (2.81) | $37.37 | 25.43% | 1.97% | (1.04)% | 33% | $13,527 | ||||||||||||||||||||||||||||
2019 | $32.18 | (0.23) | 4.26 | 4.03 | — | (3.84) | (3.84) | $32.37 | 15.23% | 1.98% | (0.76)% | 30% | $8,408 | ||||||||||||||||||||||||||||
2018 | $32.67 | (0.29) | 3.12 | 2.83 | — | (3.32) | (3.32) | $32.18 | 9.12% | 1.97% | (0.87)% | 38% | $9,871 | ||||||||||||||||||||||||||||
2017 | $26.97 | (0.21) | 7.20 | 6.99 | — | (1.29) | (1.29) | $32.67 | 26.99% | 1.98% | (0.74)% | 48% | $9,962 | ||||||||||||||||||||||||||||
2016 | $29.08 | (0.11) | (0.09) | (0.20) | — | (1.91) | (1.91) | $26.97 | (0.58)% | 1.98% | (0.43)% | 36% | $9,379 |
For a Share Outstanding Throughout the Years Ended October 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 | |||||||||||||||||||||||||||||||||||||||||
2020 | $33.50 | (0.19) | 8.49 | 8.30 | (0.03) | (2.81) | (2.84) | $38.96 | 26.07% | 1.47% | (0.54)% | 33% | $96,170 | ||||||||||||||||||||||||||||
2019 | $33.02 | (0.08) | 4.40 | 4.32 | — | (3.84) | (3.84) | $33.50 | 15.78% | 1.48% | (0.26)% | 30% | $87,302 | ||||||||||||||||||||||||||||
2018 | $33.29 | (0.13) | 3.18 | 3.05 | — | (3.32) | (3.32) | $33.02 | 9.66% | 1.47% | (0.37)% | 38% | $100,915 | ||||||||||||||||||||||||||||
2017 | $27.35 | (0.07) | 7.32 | 7.25 | (0.02) | (1.29) | (1.31) | $33.29 | 27.62% | 1.48% | (0.24)% | 48% | $104,368 | ||||||||||||||||||||||||||||
2016 | $29.31 | 0.02 | (0.07) | (0.05) | — | (1.91) | (1.91) | $27.35 | (0.06)% | 1.48% | 0.07% | 36% | $96,415 | ||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $36.59 | 0.08 | 9.28 | 9.36 | (0.23) | (2.81) | (3.04) | $42.91 | 26.94% | 0.77% | 0.16% | 33% | $433 | ||||||||||||||||||||||||||||
2019 | $35.62 | 0.15 | 4.81 | 4.96 | (0.15) | (3.84) | (3.99) | $36.59 | 16.61% | 0.78% | 0.44% | 30% | $533 | ||||||||||||||||||||||||||||
2018 | $35.53 | 0.12 | 3.40 | 3.52 | (0.11) | (3.32) | (3.43) | $35.62 | 10.45% | 0.77% | 0.33% | 38% | $404 | ||||||||||||||||||||||||||||
2017(3) | $30.95 | 0.05 | 4.53 | 4.58 | — | — | — | $35.53 | 14.80% | 0.78%(4) | 0.27%(4) | 48%(5) | $6 | ||||||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $36.56 | 0.12 | 9.29 | 9.41 | (0.30) | (2.81) | (3.11) | $42.86 | 27.13% | 0.62% | 0.31% | 33% | $611,600 | ||||||||||||||||||||||||||||
2019 | $35.59 | 0.21 | 4.80 | 5.01 | (0.20) | (3.84) | (4.04) | $36.56 | 16.81% | 0.63% | 0.59% | 30% | $479,123 | ||||||||||||||||||||||||||||
2018 | $35.53 | 0.17 | 3.40 | 3.57 | (0.19) | (3.32) | (3.51) | $35.59 | 10.60% | 0.62% | 0.48% | 38% | $834,003 | ||||||||||||||||||||||||||||
2017 | $29.11 | 0.18 | 7.80 | 7.98 | (0.27) | (1.29) | (1.56) | $35.53 | 28.71% | 0.63% | 0.61% | 48% | $963,039 | ||||||||||||||||||||||||||||
2016 | $31.04 | 0.26 | (0.07) | 0.19 | (0.21) | (1.91) | (2.12) | $29.11 | 0.76% | 0.63% | 0.92% | 36% | $390,201 |
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)April 10, 2017 (commencement of sale) through October 31, 2017.
(4)Annualized.
(5)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2017.
(6)Per-share amount was less than $0.005.
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the Shareholders and the Board of Directors of American Century Mutual Funds, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Growth Fund (the “Fund”), one of the funds constituting the American Century Mutual Funds, Inc., as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of Growth Fund of the American Century Mutual Funds, Inc. as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
December 16, 2020
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 62 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 62 | None | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 62 | None | ||||||||||||
Rajesh K. Gupta (1960) | Director | Since 2019 | Partner Emeritus, SeaCrest Investment Management and SeaCrest Wealth Management (2019 to Present); Chief Executive Officer and Chief Investment Officer, SeaCrest Investment Management (2006 to 2019); Chief Executive Officer and Chief Investment Officer, SeaCrest Wealth Management (2008 to 2019) | 62 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Lynn Jenkins (1963) | Director | Since 2019 | Consultant, LJ Strategies (2019 to present); United States Representative, U.S. House of Representatives (2009 to 2018) | 62 | MGP Ingredients, Inc. | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 62 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 62 | Onto Innovation Inc.; Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 87 | None | ||||||||||||
Interested Director | |||||||||||||||||
Jonathan S. Thomas (1963) | Director | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 125 | None |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
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Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for each of the 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years | ||||||
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries | ||||||
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Vice President, ACS, (2020 to present); Investment Operations and Investment Accounting, ACS (2000 to present) | ||||||
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS | ||||||
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS | ||||||
C. Jean Wade (1964) | Vice President since 2012 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) | ||||||
Robert J. Leach (1966) | Vice President since 2006 | Vice President, ACS (2000 to present) | ||||||
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS | ||||||
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
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Approval of Management Agreement |
At a meeting held on June 24, 2020, the Fund’s Board of Directors (the "Board") 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 continual 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 and to be provided to the Fund;
•the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis;
•the Fund’s investment performance, including data comparing the Fund's performance 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 compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans;
•the Advisor’s business continuity plans and specifically its response to the COVID-19 pandemic;
•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;
•services provided and charges to the Advisor's other investment management clients;
•acquired fund fees and expenses;
•payments and practices in connection with financial intermediaries holding shares of the Fund and the services provided by intermediaries in connection therewith; and
•possible collateral benefits to the Advisor from the management of the Fund.
The Board held two meetings to consider the renewal. The independent Directors also met in private session three times to review and discuss the information provided in response to their request. The independent Directors held active discussions with the Advisor regarding the renewal of the management agreement, requesting supplemental information, and reviewing information provided by the Advisor in response thereto. The independent Directors 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 in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or
33
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 without limitation 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 Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
•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 amounts paid by the Fund under Rule 12b-1 plans)
The Board noted that many of these services have expanded over time in terms of both 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, provides oversight of the investment performance process. It 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 investment performance information during the management agreement renewal 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-, and five-year periods and below its benchmark for the ten-year period 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 its various committees, 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, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio
34
valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
COVID-19 Response. During 2020, much of the world experienced unprecedented change and challenges from the impacts of the rapidly evolving, worldwide spread of the COVID-19 virus. The Board evaluated the Advisor’s response to the COVID-19 pandemic and its impact on service to the Fund. The Board found that Fund shareholders have continued to receive the Advisor’s investment management and other services without disruption, and Advisor personnel have demonstrated great resiliency in providing those services. The Board, directly and through its Audit Committee, continues to monitor the impact of the pandemic and the response of each of the Fund’s service providers.
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, to the extent they exist, through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business, infrastructure, investment capabilities and initiatives 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, expenses attributable to short sales, taxes, interest, extraordinary expenses, 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 Investment Company 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
35
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 Board 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 and services provided in response thereto. 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 Directors reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 Plan and that all such payments by the Advisor were made from the Advisor’s resources and reasonable profits. The Board found such payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the possible 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. To the extent there are potential collateral benefits, the board has been advised and has taken this into consideration in its review of the management contract with the Fund. 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 may receive 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.
36
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts 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 and change your withholding percentage for future distributions.
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.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they 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 American Century Investments’ website at americancentury.com/proxy 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 americancentury.com/proxy. 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 as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov. 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.
37
Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified dividend income for the fiscal year ended October 31, 2020.
For corporate taxpayers, the fund hereby designates $24,642,374, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2020 as qualified for the corporate dividends received deduction.
The fund hereby designates $641,420,862, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2020.
The fund utilized earnings and profits of $10,536,354 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
38
Notes |
39
Notes |
40
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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 Mutual Funds, 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. | ||||||||
©2020 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90970 2012 |
![image81.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image81.jpg)
Annual Report | |||||
October 31, 2020 | |||||
Heritage Fund | |||||
Investor Class (TWHIX) | |||||
I Class (ATHIX) | |||||
Y Class (ATHYX) | |||||
A Class (ATHAX) | |||||
C Class (AHGCX) | |||||
R Class (ATHWX) | |||||
R5 Class (ATHGX) | |||||
R6 Class (ATHDX) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | |||||
Performance | |||||
Portfolio Commentary | |||||
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 | |||||
Report of Independent Registered Public Accounting Firm | |||||
Management | |||||
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 |
![image181.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image181.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2020. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Pandemic Disrupted Economic, Market Courses
Market sentiment began the period relatively upbeat. A dovish Federal Reserve (Fed), modest inflation, improving economic and earnings data, and progress on U.S.-China trade policy helped boost global growth outlooks. Against this backdrop, riskier assets generally remained in favor.
However, beginning in late February, the COVID-19 outbreak rapidly spread worldwide, halting most U.S. and global economic activity and triggering a deep worldwide recession. Global stocks and credit-sensitive assets sold off sharply, while U.S. Treasury yields plunged to record lows amid soaring demand. Quick and aggressive action from the Fed and other central banks and federal governments helped stabilize and restore confidence in the financial markets. By summer, declining coronavirus infection and death rates in many regions and the reopening of economies were positive influences. By the end of the reporting period, most data suggested an economic recovery was underway. But, at the same time, COVID-19 infection rates were rising in the U.S. and Europe, prompting new lockdown measures in some European countries.
Overall, the broad U.S. stock market overcame the effects of the early 2020 sell-off to deliver a solid gain for the 12-month period. Growth stocks rallied and significantly outperformed value stocks, which generally declined. Global bond returns were broadly positive, as yields declined.
Science Helps Steer the Return to Normal
The return to pre-pandemic life will take time and patience, but we are confident we will get there. The first COVID-19 vaccine is on track for approval by year-end, and medical professionals continue to fine-tune virus treatment protocols. In the meantime, investors likely will face periods of outbreak-related disruptions, economic and political uncertainty, and heightened market volatility. These influences can be unsettling, but they tend to be temporary.
We appreciate your confidence in us during these extraordinary times. Our firm has a long history of helping clients weather unpredictable markets, and we’re confident we will continue to meet today’s challenges.
Sincerely,
![image191.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image191.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2020 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |||||||||||||||
Investor Class | TWHIX | 25.00% | 13.12% | 12.50% | — | 11/10/87 | ||||||||||||||
Russell Midcap Growth Index | — | 21.14% | 14.14% | 14.11% | — | — | ||||||||||||||
I Class | ATHIX | 25.25% | 13.35% | 12.73% | — | 6/16/97 | ||||||||||||||
Y Class | ATHYX | 25.43% | — | — | 17.02% | 4/10/17 | ||||||||||||||
A Class | ATHAX | 7/11/97 | ||||||||||||||||||
No sales charge | 24.73% | 12.84% | 12.23% | — | ||||||||||||||||
With sales charge | 17.53% | 11.51% | 11.57% | — | ||||||||||||||||
C Class | AHGCX | 23.73% | 11.99% | 11.38% | — | 6/26/01 | ||||||||||||||
R Class | ATHWX | 24.37% | 12.56% | 11.95% | — | 9/28/07 | ||||||||||||||
R5 Class | ATHGX | 25.25% | — | — | 16.84% | 4/10/17 | ||||||||||||||
R6 Class | ATHDX | 25.43% | 13.52% | — | 12.59% | 7/26/13 |
Average annual returns since inception are presented when ten years of performance history is not available.
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.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. 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
Growth of $10,000 Over 10 Years | ||
$10,000 investment made October 31, 2010 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-59eb2326b4984b9b8c61.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/chart-59eb2326b4984b9b8c61.jpg)
Value on October 31, 2020 | |||||
Investor Class — $32,514 | |||||
Russell Midcap Growth Index — $37,485 | |||||
Total Annual Fund Operating Expenses | |||||||||||||||||||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | ||||||||||||||||
1.01% | 0.81% | 0.66% | 1.26% | 2.01% | 1.51% | 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. Total returns for periods less than one year are not annualized. 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.
4
Portfolio Commentary |
Portfolio Managers: Rob Brookby and Nalin Yogasundram
Performance Summary
Heritage returned 25.00%* for the 12 months ended October 31, 2020, outpacing the 21.14% return of the fund’s benchmark, the Russell Midcap Growth Index.
U.S. stocks delivered strong returns during the reporting period, which was marked by extreme volatility. Stocks initially rose to all-time highs in February, before the COVID-19 pandemic and measures to combat it led to the first recession and bear market in stocks since the 2008-09 financial crisis. Massive monetary and fiscal stimulus helped support the economy and markets, and stocks recovered the ground lost earlier. Within the Russell Midcap Growth Index, health care and information technology were the top-performing sectors. Energy posted a significant loss as oversupply and declining oil prices weighed on the sector.
The information technology and health care sectors led outperformance relative to the benchmark, due primarily to stock selection. Stock decisions in the communication services and consumer discretionary sectors detracted.
Information Technology Led Performance
Stock selection among IT services companies led performance in the information technology sector, which was far and away the fund’s top-performing sector relative to the benchmark. Square was a significant contributor. The payments company outperformed as its main businesses—small retailers and peer to peer—both benefited from the stay-at-home restrictions. Coffee shops and restaurants have had to adjust to new business models, and individuals are increasingly using digital payments. We see these as secular trends that have been accelerated by the pandemic. Twilio was another top contributor. The company’s software allows developers to create apps that communicate with one another. In addition to its apps that support travel industries, its software enables apps that allow videoconferencing between doctors and patients, which has taken hold during the pandemic’s stay-at-home mandates.
Advanced Micro Devices aided performance. The chipmaker beat earnings expectations as it benefited from increased semiconductor demand for gaming as well as missteps by its large competitor Intel. Another top contributor, RingCentral, helps companies move their telecommunications into the cloud, providing features such as voice, video, data and call forwarding of business calls to mobile phones. We think the company has a long-term tailwind but was also seen as a beneficiary of the work-from-home environment during the pandemic.
Other significant contributors included Immunomedics, whose stock price climbed following Gilead Sciences’ announcement that it would acquire the maker of cancer drugs. As a result of the deal, Immunomedics was eliminated. Peloton Interactive, a leader in home fitness, benefited from the stay-at-home environment created by COVID-19. We think the trend will continue after the pandemic, and Peloton is expanding its offerings into lower-priced treadmills and bikes.
Communication Services Stocks Detracted
Stock selection among entertainment and interactive media and services companies weighed on relative performance. Companies such as Live Nation Entertainment fell as the pandemic curtailed live events. We eliminated our holding. We eliminated Pinterest during the fourth quarter of 2019
*All fund returns referenced in this commentary are for Investor Class shares. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund’s benchmark, other share classes may not. See page 3 for returns for all share classes.
5
and so were underweight the social media stock relative to the benchmark over the course of the fiscal year. This hampered performance as Pinterest posted strong earnings and user growth.
Underweighting internet and direct marketing retail stocks hurt performance in the consumer discretionary sector as stay-at-home mandates gave a boost to the industry. Stock choices among distributors also detracted. LKQ, a provider of aftermarket automobile parts, declined as shelter-in-place restrictions in the U.S. and Europe caused people to drive fewer miles. We think this is a near-term issue and that, as restrictions are lifted, miles driven will increase, aided by low gasoline prices and ongoing weakness in air travel.
Other significant detractors included DocuSign, which was underweight relative to the benchmark. The cloud-based electronic signature company outperformed as it benefited from increased demand for its services because of social distancing mandates. Another detractor was Japan-based Shiseido, a skin care and cosmetics maker that primarily sells in duty-free shops in China and Japan. The pandemic hurt the travel industry, but we saw a pickup in China and took the opportunity to add to our position. SelectQuote, an online direct-to-consumer insurance broker, has exposure to life insurance, home and automobile insurance, and senior health insurance through Medicare Advantage. The stock lagged on concerns about profitability under competitive pressures as Walmart enters the field.
Outlook
Our process uses a combined top-down, bottom-up fundamental framework aimed at identifying mid-cap companies producing attractive, sustainable growth. We seek to reduce unintended, nonfundamental risks and align the portfolio with fundamental, company-specific risks that we believe will be rewarded over time. As a result of this approach, our sector and industry allocations reflect where we are finding opportunities at a given time.
Consumer discretionary ended the period as the portfolio’s largest overweight relative to the benchmark. Communication services ended as the largest underweight sector.
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Fund Characteristics |
OCTOBER 31, 2020 | |||||
Top Ten Holdings | % of net assets | ||||
Cadence Design Systems, Inc. | 3.1% | ||||
Xilinx, Inc. | 2.6% | ||||
Cognex Corp. | 2.4% | ||||
Twilio, Inc., Class A | 2.2% | ||||
Veeva Systems, Inc., Class A | 2.2% | ||||
Splunk, Inc. | 2.1% | ||||
Align Technology, Inc. | 2.1% | ||||
Skyworks Solutions, Inc. | 2.0% | ||||
Square, Inc., Class A | 2.0% | ||||
Teleflex, Inc. | 1.9% | ||||
Top Five Industries | % of net assets | ||||
Software | 16.5% | ||||
Semiconductors and Semiconductor Equipment | 8.4% | ||||
Health Care Equipment and Supplies | 7.5% | ||||
IT Services | 4.2% | ||||
Electronic Equipment, Instruments and Components | 4.2% | ||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 99.6% | ||||
Temporary Cash Investments | 0.5% | ||||
Temporary Cash Investments - Securities Lending Collateral | 0.3% | ||||
Other Assets and Liabilities | (0.4)% |
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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 May 1, 2020 to October 31, 2020.
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 I Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not through a financial intermediary or employer-sponsored retirement plan account), American Century Investments may charge you a $25.00 annual 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 $25.00 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.
8
Beginning Account Value 5/1/20 | Ending Account Value 10/31/20 | Expenses Paid During Period(1) 5/1/20 - 10/31/20 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,275.10 | $5.72 | 1.00% | ||||||||||
I Class | $1,000 | $1,276.80 | $4.58 | 0.80% | ||||||||||
Y Class | $1,000 | $1,277.70 | $3.72 | 0.65% | ||||||||||
A Class | $1,000 | $1,274.00 | $7.15 | 1.25% | ||||||||||
C Class | $1,000 | $1,269.40 | $11.41 | 2.00% | ||||||||||
R Class | $1,000 | $1,272.60 | $8.57 | 1.50% | ||||||||||
R5 Class | $1,000 | $1,276.80 | $4.58 | 0.80% | ||||||||||
R6 Class | $1,000 | $1,277.70 | $3.72 | 0.65% | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,020.11 | $5.08 | 1.00% | ||||||||||
I Class | $1,000 | $1,021.12 | $4.06 | 0.80% | ||||||||||
Y Class | $1,000 | $1,021.87 | $3.30 | 0.65% | ||||||||||
A Class | $1,000 | $1,018.85 | $6.34 | 1.25% | ||||||||||
C Class | $1,000 | $1,015.08 | $10.13 | 2.00% | ||||||||||
R Class | $1,000 | $1,017.60 | $7.61 | 1.50% | ||||||||||
R5 Class | $1,000 | $1,021.12 | $4.06 | 0.80% | ||||||||||
R6 Class | $1,000 | $1,021.87 | $3.30 | 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 184, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses.
9
Schedule of Investments |
OCTOBER 31, 2020
Shares | Value | |||||||
COMMON STOCKS — 99.6% | ||||||||
Auto Components — 1.1% | ||||||||
Aptiv plc | 548,341 | $ | 52,909,423 | |||||
Beverages — 1.3% | ||||||||
Boston Beer Co., Inc. (The), Class A(1) | 64,024 | 66,532,460 | ||||||
Biotechnology — 3.8% | ||||||||
ACADIA Pharmaceuticals, Inc.(1) | 742,131 | 34,471,985 | ||||||
Alnylam Pharmaceuticals, Inc.(1) | 386,684 | 47,550,532 | ||||||
Argenx SE, ADR(1) | 135,792 | 33,694,069 | ||||||
Seagen, Inc.(1) | 274,497 | 45,786,100 | ||||||
Turning Point Therapeutics, Inc.(1) | 297,013 | 27,381,628 | ||||||
188,884,314 | ||||||||
Building Products — 2.9% | ||||||||
Fortune Brands Home & Security, Inc. | 886,939 | 71,726,757 | ||||||
Trane Technologies plc | 532,039 | 70,628,177 | ||||||
142,354,934 | ||||||||
Capital Markets — 3.8% | ||||||||
LPL Financial Holdings, Inc. | 646,613 | 51,683,777 | ||||||
MarketAxess Holdings, Inc. | 112,440 | 60,588,294 | ||||||
MSCI, Inc. | 213,928 | 74,840,572 | ||||||
187,112,643 | ||||||||
Chemicals — 0.5% | ||||||||
Albemarle Corp. | 261,001 | 24,327,903 | ||||||
Communications Equipment — 2.2% | ||||||||
Arista Networks, Inc.(1) | 206,219 | 43,079,149 | ||||||
F5 Networks, Inc.(1) | 508,345 | 67,579,384 | ||||||
110,658,533 | ||||||||
Containers and Packaging — 3.0% | ||||||||
Avery Dennison Corp. | 508,086 | 70,314,022 | ||||||
Ball Corp. | 888,881 | 79,110,409 | ||||||
149,424,431 | ||||||||
Distributors — 0.8% | ||||||||
LKQ Corp.(1) | 1,249,055 | 39,957,269 | ||||||
Diversified Consumer Services — 0.3% | ||||||||
Chegg, Inc.(1) | 177,955 | 13,069,015 | ||||||
Electrical Equipment — 4.1% | ||||||||
AMETEK, Inc. | 705,961 | 69,325,370 | ||||||
Generac Holdings, Inc.(1) | 100,382 | 21,095,277 | ||||||
nVent Electric plc | 1,945,529 | 35,116,799 | ||||||
Rockwell Automation, Inc. | 145,260 | 34,444,051 | ||||||
Sensata Technologies Holding plc(1) | 1,026,930 | 44,887,111 | ||||||
204,868,608 | ||||||||
Electronic Equipment, Instruments and Components — 4.2% | ||||||||
Cognex Corp. | 1,843,079 | 121,458,906 | ||||||
Keysight Technologies, Inc.(1) | 842,690 | 88,372,900 | ||||||
209,831,806 | ||||||||
Entertainment — 2.4% | ||||||||
Roku, Inc.(1) | 302,956 | 61,318,294 |
10
Shares | Value | |||||||
Zynga, Inc., Class A(1) | 6,679,904 | $ | 60,052,337 | |||||
121,370,631 | ||||||||
Health Care Equipment and Supplies — 7.5% | ||||||||
Align Technology, Inc.(1) | 241,133 | 102,741,949 | ||||||
DexCom, Inc.(1) | 123,252 | 39,388,874 | ||||||
IDEXX Laboratories, Inc.(1) | 149,685 | 63,589,182 | ||||||
Masimo Corp.(1) | 319,593 | 71,531,305 | ||||||
Teleflex, Inc. | 296,019 | 94,202,126 | ||||||
371,453,436 | ||||||||
Health Care Providers and Services — 3.2% | ||||||||
Amedisys, Inc.(1) | 286,804 | 74,282,236 | ||||||
Encompass Health Corp. | 1,350,345 | 82,789,652 | ||||||
157,071,888 | ||||||||
Health Care Technology — 3.1% | ||||||||
Teladoc Health, Inc.(1)(2) | 229,093 | 45,007,611 | ||||||
Veeva Systems, Inc., Class A(1) | 410,086 | 110,743,724 | ||||||
155,751,335 | ||||||||
Hotels, Restaurants and Leisure — 3.0% | ||||||||
Chipotle Mexican Grill, Inc.(1) | 78,032 | 93,753,887 | ||||||
Las Vegas Sands Corp. | 1,144,443 | 55,001,931 | ||||||
148,755,818 | ||||||||
Household Durables — 1.2% | ||||||||
D.R. Horton, Inc. | 919,446 | 61,428,187 | ||||||
Insurance — 0.7% | ||||||||
SelectQuote, Inc.(1) | 1,961,668 | 33,779,923 | ||||||
Interactive Media and Services — 1.6% | ||||||||
Match Group, Inc.(1) | 678,858 | 79,277,037 | ||||||
Internet and Direct Marketing Retail — 1.4% | ||||||||
Chewy, Inc., Class A(1) | 570,725 | 35,156,660 | ||||||
Wayfair, Inc., Class A(1) | 138,916 | 34,455,336 | ||||||
69,611,996 | ||||||||
IT Services — 4.2% | ||||||||
Square, Inc., Class A(1) | 638,062 | 98,823,043 | ||||||
Twilio, Inc., Class A(1) | 399,749 | 111,517,978 | ||||||
210,341,021 | ||||||||
Leisure Products — 1.0% | ||||||||
Peloton Interactive, Inc., Class A(1) | 440,119 | 48,505,515 | ||||||
Life Sciences Tools and Services — 2.7% | ||||||||
Mettler-Toledo International, Inc.(1) | 93,371 | 93,175,855 | ||||||
Repligen Corp.(1) | 244,420 | 40,713,039 | ||||||
133,888,894 | ||||||||
Machinery — 2.7% | ||||||||
Graco, Inc. | 938,634 | 58,101,445 | ||||||
Parker-Hannifin Corp. | 361,056 | 75,229,628 | ||||||
133,331,073 | ||||||||
Personal Products — 1.3% | ||||||||
Shiseido Co. Ltd. | 1,065,300 | 65,946,706 | ||||||
Pharmaceuticals — 1.9% | ||||||||
Horizon Therapeutics plc(1) | 756,248 | 56,665,663 | ||||||
Jazz Pharmaceuticals plc(1) | 244,220 | 35,192,102 | ||||||
91,857,765 | ||||||||
Professional Services — 2.3% | ||||||||
CoStar Group, Inc.(1) | 54,579 | 44,951,810 |
11
Shares | Value | |||||||
Verisk Analytics, Inc. | 391,958 | $ | 69,756,765 | |||||
114,708,575 | ||||||||
Road and Rail — 0.8% | ||||||||
J.B. Hunt Transport Services, Inc. | 343,656 | 41,836,681 | ||||||
Semiconductors and Semiconductor Equipment — 8.4% | ||||||||
Advanced Micro Devices, Inc.(1) | 558,036 | 42,014,531 | ||||||
Marvell Technology Group Ltd. | 1,886,045 | 70,745,548 | ||||||
Skyworks Solutions, Inc. | 701,744 | 99,149,410 | ||||||
Teradyne, Inc. | 829,780 | 72,896,173 | ||||||
Xilinx, Inc. | 1,089,902 | 129,360,468 | ||||||
414,166,130 | ||||||||
Software — 16.5% | ||||||||
Atlassian Corp. plc, Class A(1) | 218,384 | 41,846,742 | ||||||
Cadence Design Systems, Inc.(1) | 1,398,765 | 152,982,928 | ||||||
Coupa Software, Inc.(1) | 174,866 | 46,811,628 | ||||||
DocuSign, Inc.(1) | 325,299 | 65,791,723 | ||||||
Envestnet, Inc.(1) | 543,914 | 41,739,960 | ||||||
HubSpot, Inc.(1) | 255,058 | 73,984,674 | ||||||
Manhattan Associates, Inc.(1) | 951,904 | 81,387,792 | ||||||
Palo Alto Networks, Inc.(1) | 365,626 | 80,872,815 | ||||||
RingCentral, Inc., Class A(1) | 255,188 | 65,925,268 | ||||||
Slack Technologies, Inc., Class A(1) | 2,388,917 | 61,108,497 | ||||||
Splunk, Inc.(1) | 526,759 | 104,319,353 | ||||||
816,771,380 | ||||||||
Specialty Retail — 3.4% | ||||||||
Burlington Stores, Inc.(1) | 360,250 | 69,737,195 | ||||||
Five Below, Inc.(1) | 352,465 | 46,997,683 | ||||||
Lithia Motors, Inc., Class A | 218,921 | 50,257,694 | ||||||
166,992,572 | ||||||||
Textiles, Apparel and Luxury Goods — 1.5% | ||||||||
lululemon athletica, Inc.(1) | 236,456 | 75,498,036 | ||||||
Trading Companies and Distributors — 0.8% | ||||||||
W.W. Grainger, Inc. | 112,546 | 39,393,351 | ||||||
TOTAL COMMON STOCKS (Cost $3,805,959,166) | 4,941,669,289 | |||||||
TEMPORARY CASH INVESTMENTS — 0.5% | ||||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.50% - 3.375%, 6/30/21 - 11/15/48, valued at $9,737,759), in a joint trading account at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $9,580,536) | 9,580,488 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 0.125%, 7/15/30, valued at $17,029,928), at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $16,696,083) | 16,696,000 | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 708 | 708 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $26,277,196) | 26,277,196 | |||||||
TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL(3) — 0.3% | ||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (Cost $12,856,261) | 12,856,261 | 12,856,261 | ||||||
TOTAL INVESTMENT SECURITIES — 100.4% (Cost $3,845,092,623) | 4,980,802,746 | |||||||
OTHER ASSETS AND LIABILITIES — (0.4)% | (20,296,017) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 4,960,506,729 |
12
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
JPY | 164,908,440 | USD | 1,565,107 | Bank of America N.A. | 12/30/20 | $ | 11,401 | |||||||||||||
JPY | 304,888,860 | USD | 2,917,471 | Bank of America N.A. | 12/30/20 | (2,765) | ||||||||||||||
USD | 57,473,652 | JPY | 6,029,704,530 | Bank of America N.A. | 12/30/20 | (169,698) | ||||||||||||||
USD | 2,724,057 | JPY | 287,631,000 | Bank of America N.A. | 12/30/20 | (25,665) | ||||||||||||||
USD | 1,334,084 | JPY | 140,939,190 | Bank of America N.A. | 12/30/20 | (13,280) | ||||||||||||||
USD | 1,441,220 | JPY | 151,485,660 | Bank of America N.A. | 12/30/20 | (6,967) | ||||||||||||||
USD | 2,172,886 | JPY | 227,228,490 | Bank of America N.A. | 12/30/20 | 605 | ||||||||||||||
$ | (206,369) |
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
ADR | - | American Depositary Receipt | ||||||
JPY | - | Japanese Yen | ||||||
USD | - | United States Dollar |
(1)Non-income producing.
(2)Security, or a portion thereof, is on loan. At the period end, the aggregate value of securities on loan was $12,597,212. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers.
(3)Investment of cash collateral from securities on loan. At the period end, the aggregate value of the collateral held by the fund was $12,856,261.
See Notes to Financial Statements.
13
Statement of Assets and Liabilities |
OCTOBER 31, 2020 | |||||
Assets | |||||
Investment securities, at value (cost of $3,832,236,362) — including $12,597,212 of securities on loan | $ | 4,967,946,485 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $12,856,261) | 12,856,261 | ||||
Total investment securities, at value (cost of $3,845,092,623) | 4,980,802,746 | ||||
Receivable for investments sold | 4,707,368 | ||||
Receivable for capital shares sold | 1,315,062 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 12,006 | ||||
Dividends and interest receivable | 511,977 | ||||
Securities lending receivable | 7,515 | ||||
4,987,356,674 | |||||
Liabilities | |||||
Payable for collateral received for securities on loan | 12,856,261 | ||||
Payable for investments purchased | 4,839,017 | ||||
Payable for capital shares redeemed | 4,542,372 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 218,375 | ||||
Accrued management fees | 4,288,730 | ||||
Distribution and service fees payable | 105,190 | ||||
26,849,945 | |||||
Net Assets | $ | 4,960,506,729 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 3,137,672,875 | |||
Distributable earnings | 1,822,833,854 | ||||
$ | 4,960,506,729 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $4,083,843,478 | 167,487,419 | $24.38 | ||||||||
I Class, $0.01 Par Value | $328,635,896 | 12,328,954 | $26.66 | ||||||||
Y Class, $0.01 Par Value | $52,977,545 | 1,955,084 | $27.10 | ||||||||
A Class, $0.01 Par Value | $281,636,680 | 12,998,064 | $21.67* | ||||||||
C Class, $0.01 Par Value | $31,676,544 | 2,081,092 | $15.22 | ||||||||
R Class, $0.01 Par Value | $31,861,687 | 1,477,151 | $21.57 | ||||||||
R5 Class, $0.01 Par Value | $1,338,561 | 50,213 | $26.66 | ||||||||
R6 Class, $0.01 Par Value | $148,536,338 | 5,481,633 | $27.10 |
*Maximum offering price $22.99 (net asset value divided by 0.9425).
See Notes to Financial Statements.
14
Statement of Operations |
YEAR ENDED OCTOBER 31, 2020 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $28,307) | $ | 24,023,423 | |||
Interest | 287,447 | ||||
Securities lending, net | 32,927 | ||||
24,343,797 | |||||
Expenses: | |||||
Management fees | 44,748,645 | ||||
Distribution and service fees: | |||||
A Class | 660,263 | ||||
C Class | 345,144 | ||||
R Class | 159,983 | ||||
Directors' fees and expenses | 148,549 | ||||
Other expenses | 3,458 | ||||
46,066,042 | |||||
Net investment income (loss) | (21,722,245) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 743,725,789 | ||||
Forward foreign currency exchange contract transactions | (1,057,145) | ||||
Foreign currency translation transactions | (22,007) | ||||
742,646,637 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 310,240,150 | ||||
Forward foreign currency exchange contracts | (302,500) | ||||
Translation of assets and liabilities in foreign currencies | 194 | ||||
309,937,844 | |||||
Net realized and unrealized gain (loss) | 1,052,584,481 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 1,030,862,236 |
See Notes to Financial Statements.
15
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2020 AND OCTOBER 31, 2019 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2020 | October 31, 2019 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (21,722,245) | $ | (17,330,407) | ||||
Net realized gain (loss) | 742,646,637 | 519,001,944 | ||||||
Change in net unrealized appreciation (depreciation) | 309,937,844 | 196,321,808 | ||||||
Net increase (decrease) in net assets resulting from operations | 1,030,862,236 | 697,993,345 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (393,425,552) | (679,904,197) | ||||||
I Class | (30,338,935) | (41,064,427) | ||||||
Y Class | (5,616,329) | (1,986,316) | ||||||
A Class | (31,178,565) | (53,942,496) | ||||||
C Class | (6,010,954) | (13,662,155) | ||||||
R Class | (3,890,228) | (6,464,936) | ||||||
R5 Class | (409,601) | (529,611) | ||||||
R6 Class | (13,008,625) | (22,767,081) | ||||||
Decrease in net assets from distributions | (483,878,789) | (820,321,219) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (129,879,890) | 119,035,175 | ||||||
Net increase (decrease) in net assets | 417,103,557 | (3,292,699) | ||||||
Net Assets | ||||||||
Beginning of period | 4,543,403,172 | 4,546,695,871 | ||||||
End of period | $ | 4,960,506,729 | $ | 4,543,403,172 | ||||
See Notes to Financial Statements.
16
Notes to Financial Statements |
OCTOBER 31, 2020
1. Organization
American Century Mutual Funds, 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. Heritage Fund (the fund) is one fund in a series issued by the corporation. The fund's investment objective is to seek long-term capital growth.
The fund offers the Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class and 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.
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 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. U.S. Treasury and Government Agency securities are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, 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.
17
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. 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 lending income is net of fees and rebates earned by the lending agent for its services.
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 American Century Investment Management, Inc. (ACIM) (the investment advisor) 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 certain types of investment securities and other financial instruments. 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 collateral requirements.
18
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 and 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.
Securities Lending — Securities are lent to qualified financial institutions and brokers. State Street Bank & Trust Co. serves as securities lending agent to the fund pursuant to a Securities Lending Agreement. The lending of securities exposes the fund to risks such as: the borrowers may fail to return the loaned securities, the borrowers may not be able to provide additional collateral, the fund may experience delays in recovery of the loaned securities or delays in access to collateral, or the fund may experience losses related to the investment collateral. To minimize certain risks, loan counterparties pledge collateral in the form of cash and/or securities. The lending agent has agreed to indemnify the fund in the case of default of any securities borrowed. Cash collateral received is invested in the State Street Navigator Securities Lending Government Money Market Portfolio, a money market mutual fund registered under the 1940 Act. The loans may also be secured by U.S. government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. By lending securities, the fund seeks to increase its net investment income through the receipt of interest and fees. Such income is reflected separately within the Statement of Operations. The value of loaned securities and related collateral outstanding at period end, if any, are shown on a gross basis within the Schedule of Investments and Statement of Assets and Liabilities.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged, and the remaining contractual maturity of those transactions as of October 31, 2020.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 12,856,261 | — | — | — | $ | 12,856,261 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 12,856,261 |
(1)Amount represents the payable for cash collateral received for securities on loan. This will generally be in the Overnight and Continuous column as the securities are typically callable on demand.
19
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. own, in aggregate, 5% of the shares of the fund.
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 ACIM will pay all expenses of managing and operating the fund, except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), extraordinary expenses, 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. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class.
The annual management fee for each class is as follows:
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | ||||||||||||||||
1.000% | 0.800% | 0.650% | 1.000% | 1.000% | 1.000% | 0.800% | 0.650% |
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 period ended October 31, 2020 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.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $942,759 and $10,534,618, respectively. The effect of interfund transactions on the Statement of Operations was $8,033,372 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended October 31, 2020 were $3,847,869,301 and $4,431,315,317, respectively.
20
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2020 | Year ended October 31, 2019 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 2,100,000,000 | 2,100,000,000 | ||||||||||||
Sold | 8,318,301 | $ | 170,505,402 | 8,881,792 | $ | 183,562,881 | ||||||||
Issued in reinvestment of distributions | 18,572,102 | 380,170,938 | 38,287,328 | 660,456,399 | ||||||||||
Redeemed | (29,696,397) | (623,476,372) | (40,207,691) | (832,873,931) | ||||||||||
(2,805,994) | (72,800,032) | 6,961,429 | 11,145,349 | |||||||||||
I Class/Shares Authorized | 175,000,000 | 175,000,000 | ||||||||||||
Sold | 3,026,131 | 72,188,642 | 8,282,472 | 187,142,858 | ||||||||||
Issued in reinvestment of distributions | 1,292,245 | 28,868,755 | 2,030,579 | 37,809,381 | ||||||||||
Redeemed | (6,286,808) | (144,634,896) | (6,042,339) | (132,802,177) | ||||||||||
(1,968,432) | (43,577,499) | 4,270,712 | 92,150,062 | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 2,100,087 | 50,592,554 | 879,608 | 20,066,401 | ||||||||||
Issued in reinvestment of distributions | 242,850 | 5,507,845 | 88,190 | 1,662,380 | ||||||||||
Redeemed | (1,637,996) | (41,380,807) | (106,938) | (2,450,380) | ||||||||||
704,941 | 14,719,592 | 860,860 | 19,278,401 | |||||||||||
A Class/Shares Authorized | 170,000,000 | 170,000,000 | ||||||||||||
Sold | 2,133,477 | 40,359,264 | 2,764,436 | 52,092,399 | ||||||||||
Issued in reinvestment of distributions | 1,643,351 | 29,958,297 | 3,291,370 | 51,312,456 | ||||||||||
Redeemed | (4,216,962) | (78,996,914) | (5,543,255) | (103,070,801) | ||||||||||
(440,134) | (8,679,353) | 512,551 | 334,054 | |||||||||||
C Class/Shares Authorized | 70,000,000 | 70,000,000 | ||||||||||||
Sold | 102,610 | 1,363,953 | 219,280 | 2,780,542 | ||||||||||
Issued in reinvestment of distributions | 435,672 | 5,615,807 | 1,097,917 | 12,768,775 | ||||||||||
Redeemed | (1,194,272) | (16,177,174) | (1,930,896) | (27,011,815) | ||||||||||
(655,990) | (9,197,414) | (613,699) | (11,462,498) | |||||||||||
R Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 308,951 | 5,835,185 | 346,118 | 6,576,154 | ||||||||||
Issued in reinvestment of distributions | 212,437 | 3,864,234 | 408,317 | 6,369,746 | ||||||||||
Redeemed | (719,551) | (13,655,328) | (594,071) | (11,067,893) | ||||||||||
(198,163) | (3,955,909) | 160,364 | 1,878,007 | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 45,219 | 1,091,389 | 21,011 | 467,950 | ||||||||||
Issued in reinvestment of distributions | 18,335 | 409,601 | 28,443 | 529,611 | ||||||||||
Redeemed | (169,115) | (3,123,113) | (17,479) | (385,887) | ||||||||||
(105,561) | (1,622,123) | 31,975 | 611,674 | |||||||||||
R6 Class/Shares Authorized | 70,000,000 | 70,000,000 | ||||||||||||
Sold | 1,630,358 | 37,972,288 | 1,574,058 | 35,568,182 | ||||||||||
Issued in reinvestment of distributions | 573,408 | 13,004,903 | 1,207,802 | 22,767,071 | ||||||||||
Redeemed | (2,378,050) | (55,744,343) | (2,453,088) | (53,235,127) | ||||||||||
(174,284) | (4,767,152) | 328,772 | 5,100,126 | |||||||||||
Net increase (decrease) | (5,643,617) | $ | (129,879,890) | 12,512,964 | $ | 119,035,175 |
21
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.
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 | $ | 4,875,722,583 | $ | 65,946,706 | — | ||||||
Temporary Cash Investments | 708 | 26,276,488 | — | ||||||||
Temporary Cash Investments - Securities Lending Collateral | 12,856,261 | — | — | ||||||||
$ | 4,888,579,552 | $ | 92,223,194 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 12,006 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 218,375 | — |
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 settlement 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 forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, 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 $52,182,270.
22
The value of foreign currency risk derivative instruments as of October 31, 2020, is disclosed on the Statement of Assets and Liabilities as an asset of $12,006 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $218,375 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended October 31, 2020, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(1,057,145) in net realized gain (loss) on forward foreign currency exchange contract transactions and $(302,500) in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
8. Risk Factors
The value of the fund’s shares will go up and down, sometimes rapidly or unpredictably, based on the performance of the securities owned by the fund and other factors generally affecting the securities market. Market risks, including political, regulatory, economic and social developments, can affect the value of the fund’s investments. Natural disasters, public health emergencies, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse long-term effects on world economies and markets generally.
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
On December 8, 2020, the fund declared and paid a per-share distribution from net realized gains to
shareholders of record on December 7, 2020 of $3.5469 for the Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class and R6 Class.
The tax character of distributions paid during the years ended October 31,2020 and October 31, 2019 were as follows:
2020 | 2019 | |||||||
Distributions Paid From | ||||||||
Ordinary income | — | $ | 83,304,333 | |||||
Long-term capital gains | $ | 483,878,789 | $ | 737,016,886 |
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 period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 3,849,935,204 | |||
Gross tax appreciation of investments | $ | 1,250,442,580 | |||
Gross tax depreciation of investments | (119,575,038) | ||||
Net tax appreciation (depreciation) of investments | 1,130,867,542 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 194 | ||||
Net tax appreciation (depreciation) | $ | 1,130,867,736 | |||
Undistributed ordinary income | — | ||||
Accumulated long-term gains | $ | 714,811,654 | |||
Late-year ordinary loss deferral | $ | (22,845,536) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Loss deferrals 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.
23
Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 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 | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||||||||||||||||||||||||
Investor Class | |||||||||||||||||||||||||||||||||||
2020 | $21.74 | (0.10) | 5.09 | 4.99 | (2.35) | $24.38 | 25.00% | 1.00% | (0.47)% | 85% | $4,083,843 | ||||||||||||||||||||||||
2019 | $23.19 | (0.08) | 2.95 | 2.87 | (4.32) | $21.74 | 17.22% | 1.00% | (0.38)% | 82% | $3,702,699 | ||||||||||||||||||||||||
2018 | $23.67 | (0.07) | 1.70 | 1.63 | (2.11) | $23.19 | 7.16% | 1.00% | (0.30)% | 85% | $3,787,202 | ||||||||||||||||||||||||
2017 | $21.28 | (0.03) | 4.18 | 4.15 | (1.76) | $23.67 | 20.77% | 1.01% | (0.15)% | 56% | $4,083,669 | ||||||||||||||||||||||||
2016 | $24.59 | (0.05) | (0.53) | (0.58) | (2.73) | $21.28 | (2.26)% | 1.00% | (0.21)% | 62% | $3,823,112 | ||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||
2020 | $23.52 | (0.06) | 5.55 | 5.49 | (2.35) | $26.66 | 25.25% | 0.80% | (0.27)% | 85% | $328,636 | ||||||||||||||||||||||||
2019 | $24.66 | (0.04) | 3.22 | 3.18 | (4.32) | $23.52 | 17.50% | 0.80% | (0.18)% | 82% | $336,242 | ||||||||||||||||||||||||
2018 | $25.00 | (0.03) | 1.80 | 1.77 | (2.11) | $24.66 | 7.35% | 0.80% | (0.10)% | 85% | $247,267 | ||||||||||||||||||||||||
2017 | $22.34 | —(3) | 4.42 | 4.42 | (1.76) | $25.00 | 21.01% | 0.81% | 0.05% | 56% | $262,095 | ||||||||||||||||||||||||
2016 | $25.62 | —(3) | (0.55) | (0.55) | (2.73) | $22.34 | (2.07)% | 0.80% | (0.01)% | 62% | $155,695 |
For a Share Outstanding Throughout the Years Ended October 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 | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||||||||||||||||||||||||
Y Class | |||||||||||||||||||||||||||||||||||
2020 | $23.84 | (0.03) | 5.64 | 5.61 | (2.35) | $27.10 | 25.43% | 0.65% | (0.12)% | 85% | $52,978 | ||||||||||||||||||||||||
2019 | $24.90 | (0.01) | 3.27 | 3.26 | (4.32) | $23.84 | 17.68% | 0.65% | (0.03)% | 82% | $29,803 | ||||||||||||||||||||||||
2018 | $25.19 | —(3) | 1.82 | 1.82 | (2.11) | $24.90 | 7.51% | 0.65% | 0.05% | 85% | $9,694 | ||||||||||||||||||||||||
2017(4) | $22.84 | 0.02 | 2.33 | 2.35 | — | $25.19 | 10.29% | 0.66%(5) | 0.12%(5) | 56%(6) | $6 | ||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||
2020 | $19.61 | (0.14) | 4.55 | 4.41 | (2.35) | $21.67 | 24.73% | 1.25% | (0.72)% | 85% | $281,637 | ||||||||||||||||||||||||
2019 | $21.42 | (0.12) | 2.63 | 2.51 | (4.32) | $19.61 | 16.91% | 1.25% | (0.63)% | 82% | $263,578 | ||||||||||||||||||||||||
2018 | $22.07 | (0.12) | 1.58 | 1.46 | (2.11) | $21.42 | 6.89% | 1.25% | (0.55)% | 85% | $276,813 | ||||||||||||||||||||||||
2017 | $20.00 | (0.08) | 3.91 | 3.83 | (1.76) | $22.07 | 20.48% | 1.26% | (0.40)% | 56% | $353,039 | ||||||||||||||||||||||||
2016 | $23.33 | (0.09) | (0.51) | (0.60) | (2.73) | $20.00 | (2.53)% | 1.25% | (0.46)% | 62% | $570,298 | ||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||
2020 | $14.54 | (0.20) | 3.23 | 3.03 | (2.35) | $15.22 | 23.73% | 2.00% | (1.47)% | 85% | $31,677 | ||||||||||||||||||||||||
2019 | $17.18 | (0.19) | 1.87 | 1.68 | (4.32) | $14.54 | 16.06% | 2.00% | (1.38)% | 82% | $39,794 | ||||||||||||||||||||||||
2018 | $18.22 | (0.23) | 1.30 | 1.07 | (2.11) | $17.18 | 6.13% | 2.00% | (1.30)% | 85% | $57,552 | ||||||||||||||||||||||||
2017 | $16.92 | (0.19) | 3.25 | 3.06 | (1.76) | $18.22 | 19.58% | 2.01% | (1.15)% | 56% | $88,629 | ||||||||||||||||||||||||
2016 | $20.31 | (0.21) | (0.45) | (0.66) | (2.73) | $16.92 | (3.29)% | 2.00% | (1.21)% | 62% | $103,292 |
For a Share Outstanding Throughout the Years Ended October 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 | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||||||||||||||||||||||||
R Class | |||||||||||||||||||||||||||||||||||
2020 | $19.58 | (0.18) | 4.52 | 4.34 | (2.35) | $21.57 | 24.37% | 1.50% | (0.97)% | 85% | $31,862 | ||||||||||||||||||||||||
2019 | $21.43 | (0.17) | 2.64 | 2.47 | (4.32) | $19.58 | 16.66% | 1.50% | (0.88)% | 82% | $32,803 | ||||||||||||||||||||||||
2018 | $22.13 | (0.18) | 1.59 | 1.41 | (2.11) | $21.43 | 6.62% | 1.50% | (0.80)% | 85% | $32,464 | ||||||||||||||||||||||||
2017 | $20.10 | (0.13) | 3.92 | 3.79 | (1.76) | $22.13 | 20.16% | 1.51% | (0.65)% | 56% | $39,033 | ||||||||||||||||||||||||
2016 | $23.48 | (0.15) | (0.50) | (0.65) | (2.73) | $20.10 | (2.75)% | 1.50% | (0.71)% | 62% | $43,875 | ||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||
2020 | $23.52 | (0.04) | 5.53 | 5.49 | (2.35) | $26.66 | 25.25% | 0.80% | (0.27)% | 85% | $1,339 | ||||||||||||||||||||||||
2019 | $24.66 | (0.04) | 3.22 | 3.18 | (4.32) | $23.52 | 17.50% | 0.80% | (0.18)% | 82% | $3,663 | ||||||||||||||||||||||||
2018 | $25.00 | (0.04) | 1.81 | 1.77 | (2.11) | $24.66 | 7.35% | 0.80% | (0.10)% | 85% | $3,053 | ||||||||||||||||||||||||
2017(4) | $22.69 | —(3) | 2.31 | 2.31 | — | $25.00 | 10.18% | 0.81%(5) | (0.03)%(5) | 56%(6) | $114 | ||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||
2020 | $23.84 | (0.03) | 5.64 | 5.61 | (2.35) | $27.10 | 25.43% | 0.65% | (0.12)% | 85% | $148,536 | ||||||||||||||||||||||||
2019 | $24.90 | (0.01) | 3.27 | 3.26 | (4.32) | $23.84 | 17.68% | 0.65% | (0.03)% | 82% | $134,822 | ||||||||||||||||||||||||
2018 | $25.19 | 0.02 | 1.80 | 1.82 | (2.11) | $24.90 | 7.51% | 0.65% | 0.05% | 85% | $132,651 | ||||||||||||||||||||||||
2017 | $22.46 | 0.04 | 4.45 | 4.49 | (1.76) | $25.19 | 21.22% | 0.66% | 0.20% | 56% | $186,335 | ||||||||||||||||||||||||
2016 | $25.72 | 0.03 | (0.56) | (0.53) | (2.73) | $22.46 | (1.93)% | 0.65% | 0.14% | 62% | $123,681 |
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)Per-share amount was less than $0.005.
(4)April 10, 2017 (commencement of sale) through October 31, 2017.
(5)Annualized.
(6)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2017.
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the Shareholders and the Board of Directors of American Century Mutual Funds, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Heritage Fund (the “Fund”), one of the funds constituting the American Century Mutual Funds, Inc., as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of Heritage Fund of the American Century Mutual Funds, Inc. as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
December 16, 2020
We have served as the auditor of one or more American Century investment companies since 1997.
28
Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 62 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 62 | None | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 62 | None | ||||||||||||
Rajesh K. Gupta (1960) | Director | Since 2019 | Partner Emeritus, SeaCrest Investment Management and SeaCrest Wealth Management (2019 to Present); Chief Executive Officer and Chief Investment Officer, SeaCrest Investment Management (2006 to 2019); Chief Executive Officer and Chief Investment Officer, SeaCrest Wealth Management (2008 to 2019) | 62 | None |
29
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Lynn Jenkins (1963) | Director | Since 2019 | Consultant, LJ Strategies (2019 to present); United States Representative, U.S. House of Representatives (2009 to 2018) | 62 | MGP Ingredients, Inc. | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 62 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 62 | Onto Innovation Inc.; Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 87 | None | ||||||||||||
Interested Director | |||||||||||||||||
Jonathan S. Thomas (1963) | Director | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 125 | None |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
30
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for each of the 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years | ||||||
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries | ||||||
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Vice President, ACS, (2020 to present); Investment Operations and Investment Accounting, ACS (2000 to present) | ||||||
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS | ||||||
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS | ||||||
C. Jean Wade (1964) | Vice President since 2012 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) | ||||||
Robert J. Leach (1966) | Vice President since 2006 | Vice President, ACS (2000 to present) | ||||||
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS | ||||||
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
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Approval of Management Agreement |
At a meeting held on June 24, 2020, the Fund’s Board of Directors (the "Board") 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 continual 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 and to be provided to the Fund;
•the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis;
•the Fund’s investment performance, including data comparing the Fund's performance 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 compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans;
•the Advisor’s business continuity plans and specifically its response to the COVID-19 pandemic;
•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;
•services provided and charges to the Advisor's other investment management clients;
•acquired fund fees and expenses;
•payments and practices in connection with financial intermediaries holding shares of the Fund and the services provided by intermediaries in connection therewith; and
•possible collateral benefits to the Advisor from the management of the Fund.
The Board held two meetings to consider the renewal. The independent Directors also met in private session three times to review and discuss the information provided in response to their request. The independent Directors held active discussions with the Advisor regarding the renewal of the management agreement, requesting supplemental information, and reviewing information provided by the Advisor in response thereto. The independent Directors 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 in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or
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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 without limitation 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 Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
•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 amounts paid by the Fund under Rule 12b-1 plans)
The Board noted that many of these services have expanded over time in terms of both 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, provides oversight of the investment performance process. It 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 investment performance information during the management agreement renewal 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 five-year period and below its benchmark for the three- and ten-year periods reviewed by the Board. The Board discussed the Fund's performance with the Advisor, including steps being taken to address underperformance, 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 its various committees, 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
33
provided, staffing levels, shareholder satisfaction, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
COVID-19 Response. During 2020, much of the world experienced unprecedented change and challenges from the impacts of the rapidly evolving, worldwide spread of the COVID-19 virus. The Board evaluated the Advisor’s response to the COVID-19 pandemic and its impact on service to the Fund. The Board found that Fund shareholders have continued to receive the Advisor’s investment management and other services without disruption, and Advisor personnel have demonstrated great resiliency in providing those services. The Board, directly and through its Audit Committee, continues to monitor the impact of the pandemic and the response of each of the Fund’s service providers.
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, to the extent they exist, through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business, infrastructure, investment capabilities and initiatives 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, expenses attributable to short sales, taxes, interest, extraordinary expenses, 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 Investment Company 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. 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.
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Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board 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 and services provided in response thereto. 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 Directors reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 Plan and that all such payments by the Advisor were made from the Advisor’s resources and reasonable profits. The Board found such payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the possible 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. To the extent there are potential collateral benefits, the board has been advised and has taken this into consideration in its review of the management contract with the Fund. 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 may receive 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.
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 retirement accounts 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 and change your withholding percentage for future distributions.
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.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they 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 American Century Investments’ website at americancentury.com/proxy 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 americancentury.com/proxy. 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 as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov. 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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Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates $511,302,077, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2020.
The fund utilized earnings and profits of $27,423,288 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
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Notes |
38
Notes |
39
Notes |
40
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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 Mutual Funds, 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. | ||||||||
©2020 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90977 2012 |
![image81.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image81.jpg)
Annual Report | |||||
October 31, 2020 | |||||
NT Growth Fund | |||||
G Class (ACLTX) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
Performance | |||||
Portfolio Commentary | |||||
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 | |||||
Report of Independent Registered Public Accounting Firm | |||||
Management | |||||
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.
Performance |
Total Returns as of October 31, 2020 | |||||||||||||||||
Average Annual Returns | |||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Inception Date | |||||||||||||
G Class | ACLTX | 27.44% | 16.74% | 15.07% | 5/12/06 | ||||||||||||
Russell 1000 Growth Index | — | 29.22% | 17.30% | 16.29% | — |
Fund returns would have been lower if a portion of the fees had not been waived.
Growth of $10,000 Over 10 Years | ||
$10,000 investment made October 31, 2010 |
![chart-cf9a89846f4b44f6a291.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/chart-cf9a89846f4b44f6a291.jpg)
Value on October 31, 2020 | |||||
G Class — $40,737 | |||||
Russell 1000 Growth Index — $45,290 | |||||
Ending value of G Class would have been lower if a portion of the fees had not been waived.
Total Annual Fund Operating Expenses | |||||
G Class | 0.63% |
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. Total returns for periods less than one year are not annualized. 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.
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Portfolio Commentary |
Portfolio Managers: Gregory Woodhams, Justin Brown and Scott Marolf
Senior financial analyst Scott Marolf was added to the fund’s portfolio management team in February of 2020.
Performance Summary
NT Growth returned 27.44%* for the 12 months ended October 31, 2020, lagging the 29.22% return of the fund’s benchmark, the Russell 1000 Growth Index.
U.S. stocks delivered strong returns during the reporting period, which was marked by extreme volatility. Stocks initially rose to all-time highs in February, before the COVID-19 pandemic and measures to combat it led to the first recession and bear market in stocks since the 2008-09 financial crisis. Massive monetary and fiscal stimulus helped support the economy and markets, and stocks recovered the ground lost earlier. Within the Russell 1000 Growth Index, all sectors posted gains except for energy, which struggled with the declining price of oil amid falling demand, and industrials, which declined modestly on concerns about global economic weakness. Consumer discretionary and information technology led the benchmark’s performance.
Stock selection in the health care, consumer discretionary and communication services sectors detracted from fund performance relative to the benchmark. Stock decisions in the industrials and information technology sectors benefited relative performance, as did underweighting industrials.
Health Care and Communication Services Stocks Led Detractors
Stock selection in the health care equipment and supplies industry weighed on relative performance in the health care sector. The industry felt the effects of stay-at-home mandates due to the pandemic as hospitals and individuals postponed voluntary procedures. In the consumer discretionary sector, our underweight to Tesla relative to the benchmark detracted. The electric car company’s stock outperformed due to solid fundamental reports and strong demand for its vehicles. Retail investors also reacted positively to the announcement of a five-for-one stock split.
In the communication services sector, entertainment companies such as The Walt Disney Co. struggled. Disney was forced to close its theme parks. The company’s weakness was exacerbated by the impact of delayed movie releases and a lack of live sports on its ESPN network. We maintained a position in Disney based on its growth in streaming and an eventual recovery in its cyclical media and theme park assets.
Elsewhere, Visa underperformed after the payments company reported declining revenues due primarily to weakness in cross-border transactions as a result of pandemic-related travel restrictions. We maintained a position in Visa based on our favorable view on payment networks. We were also underweight Apple, which detracted from performance. The consumer electronics company delivered solid results with strength in most work-from-home categories, including iPads and Macs, as well as solid growth in services. Also, the company split its stock four-for-one to make the equity more appealing to retail investors.
Dow was a significant detractor. The chemicals company faced the perfect storm of lower global gross domestic product having an impact on polyethylene demand and significantly lower oil prices diminishing Dow’s relative feedstock cost advantage. We eliminated our holding. The stock of multibrand restaurant owner Darden Restaurants fell sharply due to the social distancing restrictions implemented to fight the pandemic. We eliminated Darden on our belief it will take longer for some restaurants to fully recovery from the pandemic.
*Fund returns would have been lower if a portion of the fees had not been waived.
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Industrials Aided Performance
Stock decisions among aerospace and defense companies and an underweight allocation to the industry benefited relative performance in the industrials sector. Our lighter exposure to The Boeing Co. aided results as the airplane manufacturer and defense contractor was hurt by the sharply reduced air travel, which curtailed demand for its planes. It also faced continuing difficulties with safety issues with its 737 MAX airplane. We eliminated Boeing during the first quarter of 2020.
In the information technology sector, stock selection in IT services helped performance, as did an overweight allocation to semiconductors and semiconductor equipment. Cloud computing firm Fastly was a key contributor. The company provides a variety of services, including a content delivery network that allows companies to cache data and other content that can then be retrieved by end users. Fastly benefited from the stay-at-home environment. PayPal Holdings outperformed. The payment services company reported better-than-expected earnings, helped by increased use of digital payments during the pandemic. Chipmaker NVIDIA reported solid results and guidance due to strength in its data center and gaming businesses. The data center business is being driven by the launch of new products that are based on a new architecture and a leading process node, which is driving better price/performance per chip. The company also announced the proposed acquisition of ARM Holdings, which has the ability to broaden NVIDIA’s reach in semiconductors. Microsoft was a key contributor. The software giant was buoyed by the breadth of its businesses, its transition to a subscription model and strength in its cloud division.
Other top contributors included Amazon. The retailer continued to benefit from the shift of consumer spending trends toward online purchasing. This is especially important for Amazon’s progress with consumables, including grocery and fresh foods, which has been a slower area of progress. Amazon could also benefit from potential rising demand for more cloud usage.
Outlook
We believe stock selection—rather than sector allocation or market timing via the use of cash—is the most efficient means of generating superior risk-adjusted returns. As a result of this approach, the portfolio’s sector and industry selection, as well as capitalization range allocations, are primarily due to identifying what we believe to be superior individual securities.
At period-end, our largest sector allocation relative to the benchmark was information technology. The largest underweight was health care.
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Fund Characteristics |
OCTOBER 31, 2020 | |||||
Top Ten Holdings | % of net assets | ||||
Microsoft Corp. | 11.8% | ||||
Amazon.com, Inc. | 9.6% | ||||
Apple, Inc. | 8.8% | ||||
Alphabet, Inc., Class A | 6.9% | ||||
Visa, Inc., Class A | 4.4% | ||||
NVIDIA Corp. | 3.5% | ||||
PayPal Holdings, Inc. | 3.4% | ||||
Facebook, Inc., Class A | 2.8% | ||||
Procter & Gamble Co. (The) | 2.3% | ||||
UnitedHealth Group, Inc. | 2.1% | ||||
Top Five Industries | % of net assets | ||||
Software | 17.6% | ||||
Internet and Direct Marketing Retail | 10.8% | ||||
Interactive Media and Services | 10.3% | ||||
IT Services | 9.1% | ||||
Technology Hardware, Storage and Peripherals | 8.8% | ||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 99.7% | ||||
Temporary Cash Investments | 0.2% | ||||
Temporary Cash Investments - Securities Lending Collateral | 1.2% | ||||
Other Assets and Liabilities | (1.1)% |
5
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 May 1, 2020 to October 31, 2020.
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 5/1/20 | Ending Account Value 10/31/20 | Expenses Paid During Period(1) 5/1/20 - 10/31/20 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
G Class | $1,000 | $1,193.30 | $0.06 | 0.01% | ||||||||||
Hypothetical | ||||||||||||||
G Class | $1,000 | $1,025.09 | $0.05 | 0.01% |
(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 184, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses.
6
Schedule of Investments |
OCTOBER 31, 2020
Shares | Value | |||||||
COMMON STOCKS — 99.7% | ||||||||
Aerospace and Defense — 1.0% | ||||||||
Lockheed Martin Corp. | 37,792 | $ | 13,232,113 | |||||
Auto Components — 1.2% | ||||||||
Aptiv plc | 153,563 | 14,817,294 | ||||||
Automobiles — 0.7% | ||||||||
Tesla, Inc.(1) | 22,290 | 8,649,412 | ||||||
Biotechnology — 3.4% | ||||||||
Amgen, Inc. | 110,308 | 23,930,217 | ||||||
CRISPR Therapeutics AG(1)(2) | 65,708 | 6,033,309 | ||||||
Vertex Pharmaceuticals, Inc.(1) | 66,381 | 13,831,145 | ||||||
43,794,671 | ||||||||
Building Products — 1.2% | ||||||||
Masco Corp. | 233,735 | 12,528,196 | ||||||
Trex Co., Inc.(1) | 41,298 | 2,871,863 | ||||||
15,400,059 | ||||||||
Capital Markets — 1.4% | ||||||||
S&P Global, Inc. | 55,228 | 17,823,732 | ||||||
Electrical Equipment — 1.5% | ||||||||
Ballard Power Systems, Inc.(1)(2) | 274,292 | 4,051,293 | ||||||
Generac Holdings, Inc.(1) | 20,927 | 4,397,809 | ||||||
Rockwell Automation, Inc. | 48,342 | 11,462,855 | ||||||
19,911,957 | ||||||||
Electronic Equipment, Instruments and Components — 1.8% | ||||||||
CDW Corp. | 46,172 | 5,660,687 | ||||||
Cognex Corp. | 110,331 | 7,270,813 | ||||||
Keysight Technologies, Inc.(1) | 94,843 | 9,946,186 | ||||||
22,877,686 | ||||||||
Entertainment — 1.6% | ||||||||
Liberty Media Corp.-Liberty Formula One, Class C(1) | 119,422 | 4,314,717 | ||||||
Take-Two Interactive Software, Inc.(1) | 62,918 | 9,747,256 | ||||||
Walt Disney Co. (The) | 56,143 | 6,807,339 | ||||||
20,869,312 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 1.5% | ||||||||
SBA Communications Corp. | 67,123 | 19,490,506 | ||||||
Food Products — 1.6% | ||||||||
Beyond Meat, Inc.(1) | 22,289 | 3,174,622 | ||||||
Mondelez International, Inc., Class A | 294,391 | 15,638,050 | ||||||
Vital Farms, Inc.(1) | 50,068 | 1,730,350 | ||||||
20,543,022 | ||||||||
Health Care Equipment and Supplies — 2.4% | ||||||||
DexCom, Inc.(1) | 18,613 | 5,948,343 | ||||||
Edwards Lifesciences Corp.(1) | 76,937 | 5,515,614 | ||||||
IDEXX Laboratories, Inc.(1) | 11,853 | 5,035,391 | ||||||
Insulet Corp.(1) | 13,573 | 3,016,599 | ||||||
Intuitive Surgical, Inc.(1) | 17,229 | 11,493,121 | ||||||
31,009,068 |
7
Shares | Value | |||||||
Health Care Providers and Services — 2.5% | ||||||||
Quest Diagnostics, Inc. | 38,340 | $ | 4,682,848 | |||||
UnitedHealth Group, Inc. | 88,118 | 26,888,326 | ||||||
31,571,174 | ||||||||
Health Care Technology — 0.7% | ||||||||
Teladoc Health, Inc.(1)(2) | 28,620 | 5,622,685 | ||||||
Veeva Systems, Inc., Class A(1) | 12,778 | 3,450,699 | ||||||
9,073,384 | ||||||||
Hotels, Restaurants and Leisure — 1.5% | ||||||||
Chipotle Mexican Grill, Inc.(1) | 9,229 | 11,088,459 | ||||||
Domino's Pizza, Inc. | 23,289 | 8,810,694 | ||||||
19,899,153 | ||||||||
Household Products — 2.3% | ||||||||
Procter & Gamble Co. (The) | 217,975 | 29,884,373 | ||||||
Insurance — 0.8% | ||||||||
Progressive Corp. (The) | 91,507 | 8,409,493 | ||||||
Root, Inc., Class A(1) | 36,800 | 882,096 | ||||||
SelectQuote, Inc.(1) | 89,844 | 1,547,114 | ||||||
10,838,703 | ||||||||
Interactive Media and Services — 10.3% | ||||||||
Alphabet, Inc., Class A(1) | 54,407 | 87,927,697 | ||||||
Facebook, Inc., Class A(1) | 137,329 | 36,132,633 | ||||||
Twitter, Inc.(1) | 198,132 | 8,194,739 | ||||||
132,255,069 | ||||||||
Internet and Direct Marketing Retail — 10.8% | ||||||||
Amazon.com, Inc.(1) | 40,516 | 123,012,653 | ||||||
Chewy, Inc., Class A(1)(2) | 146,627 | 9,032,223 | ||||||
Expedia Group, Inc. | 64,850 | 6,105,628 | ||||||
138,150,504 | ||||||||
IT Services — 9.1% | ||||||||
Fastly, Inc., Class A(1)(2) | 78,642 | 4,994,553 | ||||||
Okta, Inc.(1) | 18,447 | 3,870,734 | ||||||
PayPal Holdings, Inc.(1) | 233,857 | 43,527,803 | ||||||
Snowflake, Inc., Class A(1) | 138 | 34,503 | ||||||
Twilio, Inc., Class A(1) | 14,315 | 3,993,456 | ||||||
VeriSign, Inc.(1) | 21,257 | 4,053,710 | ||||||
Visa, Inc., Class A | 308,166 | 55,996,844 | ||||||
116,471,603 | ||||||||
Life Sciences Tools and Services — 0.9% | ||||||||
Adaptive Biotechnologies Corp.(1) | 104,451 | 4,813,102 | ||||||
Agilent Technologies, Inc. | 42,616 | 4,350,668 | ||||||
Repligen Corp.(1) | 12,916 | 2,151,418 | ||||||
11,315,188 | ||||||||
Machinery — 0.4% | ||||||||
Cummins, Inc. | 20,604 | 4,530,614 | ||||||
Personal Products — 0.6% | ||||||||
Estee Lauder Cos., Inc. (The), Class A | 34,111 | 7,492,822 | ||||||
Pharmaceuticals — 2.5% | ||||||||
Merck & Co., Inc. | 128,022 | 9,628,535 | ||||||
Novo Nordisk A/S, B Shares | 210,318 | 13,450,208 | ||||||
Zoetis, Inc. | 55,201 | 8,752,118 | ||||||
31,830,861 |
8
Shares | Value | |||||||
Road and Rail — 1.0% | ||||||||
Lyft, Inc., Class A(1) | 115,417 | $ | 2,634,970 | |||||
Union Pacific Corp. | 59,588 | 10,558,398 | ||||||
13,193,368 | ||||||||
Semiconductors and Semiconductor Equipment — 7.8% | ||||||||
Advanced Micro Devices, Inc.(1) | 160,104 | 12,054,230 | ||||||
Analog Devices, Inc. | 62,855 | 7,450,203 | ||||||
ASML Holding NV | 52,600 | 19,122,977 | ||||||
Broadcom, Inc. | 47,207 | 16,504,984 | ||||||
NVIDIA Corp. | 89,562 | 44,902,804 | ||||||
100,035,198 | ||||||||
Software — 17.6% | ||||||||
Datadog, Inc., Class A(1) | 53,843 | 4,886,252 | ||||||
DocuSign, Inc.(1) | 18,231 | 3,687,220 | ||||||
JFrog Ltd.(1) | 355 | 25,713 | ||||||
Microsoft Corp. | 749,768 | 151,805,527 | ||||||
PagerDuty, Inc.(1)(2) | 217,227 | 5,886,852 | ||||||
salesforce.com, Inc.(1) | 92,032 | 21,376,273 | ||||||
Slack Technologies, Inc., Class A(1) | 338,599 | 8,661,362 | ||||||
Splunk, Inc.(1) | 63,334 | 12,542,665 | ||||||
Workday, Inc., Class A(1) | 18,610 | 3,910,333 | ||||||
Zendesk, Inc.(1) | 122,993 | 13,644,843 | ||||||
226,427,040 | ||||||||
Specialty Retail — 1.1% | ||||||||
Home Depot, Inc. (The) | 23,305 | 6,215,677 | ||||||
TJX Cos., Inc. (The) | 161,819 | 8,220,405 | ||||||
14,436,082 | ||||||||
Technology Hardware, Storage and Peripherals — 8.8% | ||||||||
Apple, Inc. | 1,031,748 | 112,316,087 | ||||||
Textiles, Apparel and Luxury Goods — 1.7% | ||||||||
NIKE, Inc., Class B | 179,286 | 21,528,663 | ||||||
TOTAL COMMON STOCKS (Cost $837,384,802) | 1,279,668,718 | |||||||
TEMPORARY CASH INVESTMENTS — 0.2% | ||||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.50% - 3.375%, 6/30/21 - 11/15/48, valued at $925,834), in a joint trading account at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $910,886) | 910,881 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 3.625%, 2/15/44, valued at $1,617,856), at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $1,586,008) | 1,586,000 | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 99 | 99 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $2,496,980) | 2,496,980 | |||||||
TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL(3) — 1.2% | ||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (Cost $15,064,521) | 15,064,521 | 15,064,521 | ||||||
TOTAL INVESTMENT SECURITIES — 101.1% (Cost $854,946,303) | 1,297,230,219 | |||||||
OTHER ASSETS AND LIABILITIES — (1.1)% | (14,514,082) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 1,282,716,137 |
9
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
EUR | 677,357 | USD | 795,075 | Credit Suisse AG | 12/31/20 | $ | (5,042) | |||||||||||||
EUR | 402,390 | USD | 477,863 | Credit Suisse AG | 12/31/20 | (8,536) | ||||||||||||||
EUR | 482,868 | USD | 571,963 | Credit Suisse AG | 12/31/20 | (8,771) | ||||||||||||||
USD | 16,187,640 | EUR | 13,790,800 | Credit Suisse AG | 12/31/20 | 102,776 | ||||||||||||||
USD | 514,281 | EUR | 438,158 | Credit Suisse AG | 12/31/20 | 3,237 | ||||||||||||||
USD | 520,812 | EUR | 440,394 | Credit Suisse AG | 12/31/20 | 7,160 | ||||||||||||||
USD | 849,815 | EUR | 722,067 | Credit Suisse AG | 12/31/20 | 7,634 | ||||||||||||||
$ | 98,458 |
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
EUR | - | Euro | ||||||
USD | - | United States Dollar |
(1)Non-income producing.
(2)Security, or a portion thereof, is on loan. At the period end, the aggregate value of securities on loan was $29,565,239. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers.
(3)Investment of cash collateral from securities on loan. At the period end, the aggregate value of the collateral held by the fund was $31,772,212, which includes securities collateral of $16,707,691.
See Notes to Financial Statements.
10
Statement of Assets and Liabilities |
OCTOBER 31, 2020 | |||||
Assets | |||||
Investment securities, at value (cost of $839,881,782) — including $29,565,239 of securities on loan | $ | 1,282,165,698 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $15,064,521) | 15,064,521 | ||||
Total investment securities, at value (cost of $854,946,303) | 1,297,230,219 | ||||
Receivable for investments sold | 942,051 | ||||
Receivable for capital shares sold | 636 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 120,807 | ||||
Dividends and interest receivable | 284,887 | ||||
Securities lending receivable | 11,488 | ||||
1,298,590,088 | |||||
Liabilities | |||||
Payable for collateral received for securities on loan | 15,064,521 | ||||
Payable for investments purchased | 786,524 | ||||
Payable for capital shares redeemed | 557 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 22,349 | ||||
15,873,951 | |||||
Net Assets | $ | 1,282,716,137 | |||
G Class Capital Shares, $0.01 Par Value | |||||
Shares authorized | 780,000,000 | ||||
Shares outstanding | 64,147,672 | ||||
Net Asset Value Per Share | $ | 20.00 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 688,736,770 | |||
Distributable earnings | 593,979,367 | ||||
$ | 1,282,716,137 |
See Notes to Financial Statements.
11
Statement of Operations |
YEAR ENDED OCTOBER 31, 2020 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $59,352) | $ | 8,765,781 | |||
Interest | 120,178 | ||||
Securities lending, net | 99,827 | ||||
8,985,786 | |||||
Expenses: | |||||
Management fees | 6,004,545 | ||||
Directors' fees and expenses | 31,908 | ||||
Other expenses | 40,677 | ||||
6,077,130 | |||||
Fees waived | (6,004,545) | ||||
72,585 | |||||
Net investment income (loss) | 8,913,201 | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 192,462,267 | ||||
Forward foreign currency exchange contract transactions | (433,606) | ||||
Futures contract transactions | 2,159,756 | ||||
Foreign currency translation transactions | 1,594 | ||||
194,190,011 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 10,657,655 | ||||
Forward foreign currency exchange contracts | 163,582 | ||||
Futures contracts | (191,844) | ||||
Translation of assets and liabilities in foreign currencies | 3,353 | ||||
10,632,746 | |||||
Net realized and unrealized gain (loss) | 204,822,757 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 213,735,958 |
See Notes to Financial Statements.
12
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2020 AND OCTOBER 31, 2019 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2020 | October 31, 2019 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | 8,913,201 | $ | 13,258,376 | ||||
Net realized gain (loss) | 194,190,011 | 117,578,603 | ||||||
Change in net unrealized appreciation (depreciation) | 10,632,746 | 56,285,542 | ||||||
Net increase (decrease) in net assets resulting from operations | 213,735,958 | 187,122,521 | ||||||
Distributions to Shareholders | ||||||||
From earnings | (121,765,935) | (183,752,693) | ||||||
Capital Share Transactions | ||||||||
Proceeds from shares sold | 642,945,523 | 131,041,452 | ||||||
Proceeds from reinvestment of distributions | 121,765,935 | 183,752,693 | ||||||
Payments for shares redeemed | (651,200,701) | (400,315,276) | ||||||
Net increase (decrease) in net assets from capital share transactions | 113,510,757 | (85,521,131) | ||||||
Net increase (decrease) in net assets | 205,480,780 | (82,151,303) | ||||||
Net Assets | ||||||||
Beginning of period | 1,077,235,357 | 1,159,386,660 | ||||||
End of period | $ | 1,282,716,137 | $ | 1,077,235,357 | ||||
Transactions in Shares of the Fund | ||||||||
Sold | 32,808,941 | 7,637,963 | ||||||
Issued in reinvestment of distributions | 7,300,116 | 12,655,144 | ||||||
Redeemed | (35,290,362) | (23,336,412) | ||||||
Net increase (decrease) in shares of the fund | 4,818,695 | (3,043,305) | ||||||
See Notes to Financial Statements.
13
Notes to Financial Statements |
OCTOBER 31, 2020
1. Organization
American Century Mutual Funds, 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 Growth Fund (the fund) is one fund in a series issued by the corporation. The fund's investment objective is to seek long-term capital growth. The fund is not permitted to invest in securities issued by companies assigned the Global Industry Classification Standard or the Bloomberg Industry Classification Standard for the tobacco industry. The fund offers the G 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.
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 exchange. 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 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.
14
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. 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 lending income is net of fees and rebates earned by the lending agent for its services.
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 American Century Investment Management, Inc. (ACIM) (the investment advisor) 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 certain types of investment securities and other financial instruments. 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 collateral requirements.
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.
15
Distributions to Shareholders — Distributions from net investment income and 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.
Securities Lending — Securities are lent to qualified financial institutions and brokers. State Street Bank & Trust Co. serves as securities lending agent to the fund pursuant to a Securities Lending Agreement. The lending of securities exposes the fund to risks such as: the borrowers may fail to return the loaned securities, the borrowers may not be able to provide additional collateral, the fund may experience delays in recovery of the loaned securities or delays in access to collateral, or the fund may experience losses related to the investment collateral. To minimize certain risks, loan counterparties pledge collateral in the form of cash and/or securities. The lending agent has agreed to indemnify the fund in the case of default of any securities borrowed. Cash collateral received is invested in the State Street Navigator Securities Lending Government Money Market Portfolio, a money market mutual fund registered under the 1940 Act. The loans may also be secured by U.S. government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. By lending securities, the fund seeks to increase its net investment income through the receipt of interest and fees. Such income is reflected separately within the Statement of Operations. The value of loaned securities and related collateral outstanding at period end, if any, are shown on a gross basis within the Schedule of Investments and Statement of Assets and Liabilities.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged, and the remaining contractual maturity of those transactions as of October 31, 2020.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 15,064,521 | — | — | — | $ | 15,064,521 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 15,064,521 |
(1)Amount represents the payable for cash collateral received for securities on loan. This will generally be in the Overnight and Continuous column as the securities are typically callable on demand.
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, 57% 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). The agreement provides that ACIM will pay all expenses of managing and operating the fund, except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses. The fee is computed and accrued daily based on the daily net assets of the fund 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 use very similar investment teams and strategies (strategy assets). The strategy assets of the fund also include the assets of Growth Fund, one fund in a series issued by the corporation. The management fee schedule ranges from 0.450% to 0.640%. The investment advisor agreed to waive the fund's management fee in its entirety. The investment advisor expects this waiver to remain in effect permanently and cannot terminate it without the approval of the Board of Directors. The effective annual management fee for the period ended October 31, 2020 was 0.62% before waiver and 0.00% after waiver.
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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.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $703,032 and $641,618, respectively. The effect of interfund transactions on the Statement of Operations was $(149,244) in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments and in kind transactions, for the period ended October 31, 2020 were $396,463,476 and $935,959,191, respectively.
On July 22, 2020, the fund received investment securities valued at $571,173,873 from a purchase in kind from other products managed by the fund’s investment advisor. A purchase in kind occurs when a fund receives securities into its portfolio in lieu of cash as payment from a purchasing shareholder.
5. 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.
Level 1 | Level 2 | Level 3 | |||||||||
Assets | |||||||||||
Investment Securities | |||||||||||
Common Stocks | $ | 1,247,095,533 | $ | 32,573,185 | — | ||||||
Temporary Cash Investments | 99 | 2,496,881 | — | ||||||||
Temporary Cash Investments - Securities Lending Collateral | 15,064,521 | — | — | ||||||||
$ | 1,262,160,153 | $ | 35,070,066 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 120,807 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 22,349 | — |
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6. Derivative Instruments
Equity Price Risk — The fund is subject to equity price risk in the normal course of pursuing its investment objectives. A fund may enter into futures contracts based on an equity index in order to manage its exposure to changes in market conditions. A fund may purchase futures contracts to gain exposure to increases in market value or sell futures contracts to protect against a decline in market value. Upon entering into a futures contract, a fund is required to deposit either cash or securities in an amount equal to a certain percentage of the contract value (initial margin). Subsequent payments (variation margin) are made or received daily, in cash, by a fund. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. A fund recognizes a realized gain or loss when the 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. The fund's average notional exposure to equity price risk derivative instruments held during the period was $24,005,676 futures contracts purchased.
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 settlement 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 forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, 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 $16,388,568.
Value of Derivative Instruments as of October 31, 2020
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 | $ | 120,807 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 22,349 |
Effect of Derivative Instruments on the Statement of Operations for the Year Ended October 31, 2020
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 | $ | 2,159,756 | Change in net unrealized appreciation (depreciation) on futures contracts | $ | (191,844) | ||||||||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | (433,606) | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | 163,582 | ||||||||||
$ | 1,726,150 | $ | (28,262) |
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7. Risk Factors
The value of the fund’s shares will go up and down, sometimes rapidly or unpredictably, based on the performance of the securities owned by the fund and other factors generally affecting the securities market. Market risks, including political, regulatory, economic and social developments, can affect the value of the fund’s investments. Natural disasters, public health emergencies, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse long-term effects on world economies and markets generally.
The fund is owned by a relatively small number of shareholders, and in the event such shareholders redeem, the ongoing operations of the fund may be at risk.
8. Federal Tax Information
On December 8, 2020, the fund declared and paid per-share distributions of $2.3161 and $0.1036 from net realized gains and net investment income, respectively to shareholders of record on December 7, 2020.
2020 | 2019 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 16,872,974 | $ | 30,194,756 | ||||
Long-term capital gains | $ | 104,892,961 | $ | 153,557,937 |
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.
The reclassifications, which are primarily due to tax equalization, were made to capital $43,958,771 and distributable earnings $(43,958,771).
As of period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 857,845,519 | |||
Gross tax appreciation of investments | $ | 452,530,797 | |||
Gross tax depreciation of investments | (13,146,097) | ||||
Net tax appreciation (depreciation) of investments | 439,384,700 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 2,283 | ||||
Net tax appreciation (depreciation) | $ | 439,386,983 | |||
Undistributed ordinary income | $ | 7,815,156 | |||
Accumulated long-term gains | $ | 146,777,228 |
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 October 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) | |||||||||||||||||||||||||||||||||
G Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $18.16 | 0.17 | 4.29 | 4.46 | (0.27) | (2.35) | (2.62) | $20.00 | 27.44% | 0.01% | 0.63% | 0.92% | 0.30% | 40% | $1,282,716 | ||||||||||||||||||||||||||||||||
2019 | $18.59 | 0.20 | 2.41 | 2.61 | (0.22) | (2.82) | (3.04) | $18.16 | 18.16% | 0.00%(3) | 0.63% | 1.20% | 0.57% | 43% | $1,077,235 | ||||||||||||||||||||||||||||||||
2018 | $18.38 | 0.20 | 1.80 | 2.00 | (0.13) | (1.66) | (1.79) | $18.59 | 11.50% | 0.00%(3) | 0.62% | 1.09% | 0.47% | 53% | $1,159,387 | ||||||||||||||||||||||||||||||||
2017 | $14.62 | 0.11 | 4.00 | 4.11 | (0.12) | (0.23) | (0.35) | $18.38 | 28.64% | 0.56% | 0.74% | 0.67% | 0.49% | 64% | $1,364,741 | ||||||||||||||||||||||||||||||||
2016 | $15.57 | 0.11 | (0.06) | 0.05 | (0.07) | (0.93) | (1.00) | $14.62 | 0.49% | 0.78% | 0.78% | 0.74% | 0.74% | 60% | $1,104,817 |
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)Ratio was less than 0.005%.
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the Shareholders and the Board of Directors of American Century Mutual Funds, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of NT Growth Fund (the “Fund”), one of the funds constituting the American Century Mutual Funds, Inc., as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of NT Growth Fund of the American Century Mutual Funds, Inc. as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
December 16, 2020
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 62 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 62 | None | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 62 | None | ||||||||||||
Rajesh K. Gupta (1960) | Director | Since 2019 | Partner Emeritus, SeaCrest Investment Management and SeaCrest Wealth Management (2019 to Present); Chief Executive Officer and Chief Investment Officer, SeaCrest Investment Management (2006 to 2019); Chief Executive Officer and Chief Investment Officer, SeaCrest Wealth Management (2008 to 2019) | 62 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Lynn Jenkins (1963) | Director | Since 2019 | Consultant, LJ Strategies (2019 to present); United States Representative, U.S. House of Representatives (2009 to 2018) | 62 | MGP Ingredients, Inc. | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 62 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 62 | Onto Innovation Inc.; Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 87 | None | ||||||||||||
Interested Director | |||||||||||||||||
Jonathan S. Thomas (1963) | Director | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 125 | None |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
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Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for each of the 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years | ||||||
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries | ||||||
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Vice President, ACS, (2020 to present); Investment Operations and Investment Accounting, ACS (2000 to present) | ||||||
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS | ||||||
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS | ||||||
C. Jean Wade (1964) | Vice President since 2012 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) | ||||||
Robert J. Leach (1966) | Vice President since 2006 | Vice President, ACS (2000 to present) | ||||||
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS | ||||||
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
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Approval of Management Agreement |
At a meeting held on June 24, 2020, the Fund’s Board of Directors (the "Board") 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 continual 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 and to be provided to the Fund;
•the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis;
•the Fund’s investment performance, including data comparing the Fund's performance 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 compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans;
•the Advisor’s business continuity plans and specifically its response to the COVID-19 pandemic;
•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;
•services provided and charges to the Advisor's other investment management clients;
•acquired fund fees and expenses;
•payments and practices in connection with financial intermediaries holding shares of the Fund and the services provided by intermediaries in connection therewith; and
•possible collateral benefits to the Advisor from the management of the Fund.
The Board held two meetings to consider the renewal. The independent Directors also met in private session three times to review and discuss the information provided in response to their request. The independent Directors held active discussions with the Advisor regarding the renewal of the management agreement, requesting supplemental information, and reviewing information provided by the Advisor in response thereto. The independent Directors 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 in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or
25
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 without limitation 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 Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
•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 amounts paid by the Fund under Rule 12b-1 plans)
The Board noted that many of these services have expanded over time in terms of both 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, provides oversight of the investment performance process. It 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 investment performance information during the management agreement renewal 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-, and five-year periods and below its benchmark for the ten-year period 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 its various committees, 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, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio
26
valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
COVID-19 Response. During 2020, much of the world experienced unprecedented change and challenges from the impacts of the rapidly evolving, worldwide spread of the COVID-19 virus. The Board evaluated the Advisor’s response to the COVID-19 pandemic and its impact on service to the Fund. The Board found that Fund shareholders have continued to receive the Advisor’s investment management and other services without disruption, and Advisor personnel have demonstrated great resiliency in providing those services. The Board, directly and through its Audit Committee, continues to monitor the impact of the pandemic and the response of each of the Fund’s service providers.
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, to the extent they exist, through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business, infrastructure, investment capabilities and initiatives 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, expenses attributable to short sales, taxes, interest, extraordinary expenses, 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 Investment Company 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
27
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 Board 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 and services provided in response thereto. 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 Directors reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 Plan and that all such payments by the Advisor were made from the Advisor’s resources and reasonable profits. The Board found such payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the possible 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. To the extent there are potential collateral benefits, the board has been advised and has taken this into consideration in its review of the management contract with the Fund. 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 may receive 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.
28
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts 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 and change your withholding percentage for future distributions.
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.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they 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 American Century Investments’ website at americancentury.com/proxy 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 americancentury.com/proxy. 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 as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov. 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.
29
Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified dividend income for the fiscal year ended October 31, 2020.
For corporate taxpayers, the fund hereby designates $10,986,642, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2020 as qualified for the corporate dividends received deduction.
The fund hereby designates $147,693,058, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2020.
The fund hereby designates $4,508,710 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2020.
The fund utilized earnings and profits of $43,958,771 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
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 Mutual Funds, 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. | ||||||||
©2020 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90986 2012 |
![image81.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image81.jpg)
Annual Report | |||||
October 31, 2020 | |||||
NT Heritage Fund | |||||
G Class (ACLWX) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
Performance | |||||
Portfolio Commentary | |||||
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 | |||||
Report of Independent Registered Public Accounting Firm | |||||
Management | |||||
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.
Performance |
Total Returns as of October 31, 2020 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Inception Date | ||||||||||||||||
G Class | ACLWX | 25.77% | 13.81% | 12.72% | 5/12/06 | |||||||||||||||
Russell Midcap Growth Index | — | 21.14% | 14.14% | 14.11% | — |
Fund returns would have been lower if a portion of the fees had not been waived.
Growth of $10,000 Over 10 Years | ||
$10,000 investment made October 31, 2010 |
![chart-d47a8074c70846d5b651.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/chart-d47a8074c70846d5b651.jpg)
Value on October 31, 2020 | |||||
G Class — $33,135 | |||||
Russell Midcap Growth Index — $37,485 | |||||
Ending value of G Class would have been lower if a portion of the fees had not been waived.
Total Annual Fund Operating Expenses | |||||
G Class | 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. Total returns for periods less than one year are not annualized. 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
Portfolio Commentary |
Portfolio Managers: Rob Brookby and Nalin Yogasundram
Performance Summary
NT Heritage returned 25.77%* for the 12 months ended October 31, 2020, outpacing the 21.14% return of the fund’s benchmark, the Russell Midcap Growth Index.
U.S. stocks delivered strong returns during the reporting period, which was marked by extreme volatility. Stocks initially rose to all-time highs in February, before the COVID-19 pandemic and measures to combat it led to the first recession and bear market in stocks since the 2008-09 financial crisis. Massive monetary and fiscal stimulus helped support the economy and markets, and stocks recovered the ground lost earlier. Within the Russell Midcap Growth Index, health care and information technology were the top-performing sectors. Energy posted a significant loss as oversupply and declining oil prices weighed on the sector.
The information technology and health care sectors led outperformance relative to the benchmark due to stock selection. Stock decisions in the communication services and consumer discretionary sectors detracted.
Information Technology Led Performance
Stock selection among IT services companies led performance in the information technology sector, which was far and away the fund’s top-performing sector relative to the benchmark. Square was a significant contributor. The payments company outperformed as its main businesses—small retailers and peer to peer—both benefited from the stay-at-home restrictions. Coffee shops and restaurants have had to adjust to new business models, and individuals are increasingly using digital payments. We see these as secular trends that have been accelerated by the pandemic. Twilio was another top contributor. The company’s software allows developers to create apps that communicate with one another. In addition to its apps that support travel industries, its software enables apps that allow videoconferencing between doctors and patients, which has taken hold during the pandemic’s stay-at-home mandates.
Advanced Micro Devices aided performance. The chipmaker beat earnings expectations as it benefited from increased semiconductor demand for gaming as well as missteps by its large competitor Intel. Another top contributor, RingCentral, helps companies move their telecommunications into the cloud, providing features such as voice, video, data and call forwarding of business calls to mobile phones. We think the company has a long-term tailwind but was also seen as a beneficiary of the work-from-home environment during the pandemic.
Other significant contributors included Immunomedics, whose stock price climbed following Gilead Sciences’ announcement that it would acquire the maker of cancer drugs. As a result of the deal, Immunomedics was eliminated. Peloton Interactive, a leader in home fitness, benefited from the stay-at-home environment created by COVID-19. We think the trend will continue after the pandemic, and Peloton is expanding its offerings into lower-priced treadmills and bikes.
Communication Services Stocks Detracted
Stock selection among interactive media and services and entertainment companies weighed on relative performance. Companies such as Live Nation Entertainment fell as the pandemic curtailed live events. We eliminated our holding. We eliminated Pinterest during the fourth quarter of 2019
*Fund returns would have been lower if a portion of the fees had not been waived.
3
and so were underweight the social media stock relative to the benchmark over the course of the fiscal year. This hampered performance as Pinterest posted strong earnings and user growth.
Underweighting internet and direct marketing retail stocks hurt performance in the consumer discretionary sector as stay-at-home mandates gave a boost to the industry. Stock choices among distributors also detracted. LKQ, a provider of aftermarket automobile parts, declined as shelter-in-place restrictions in the U.S. and Europe caused people to drive fewer miles. We think this is a near-term issue and that, as restrictions are lifted, miles driven will increase, aided by low gasoline prices and ongoing weakness in air travel.
Other significant detractors included DocuSign, which was underweight relative to the benchmark. The cloud-based electronic signature company outperformed as it benefited from increased demand for its services because of social distancing mandates. Another detractor was Japan-based Shiseido, a skin care and cosmetics maker that primarily sells in duty-free shops in China and Japan. The pandemic hurt the travel industry, but we saw a pickup in China and took the opportunity to add to our position. SelectQuote, an online direct-to-consumer insurance broker, has exposure to life insurance, home and automobile insurance, and senior health insurance through Medicare Advantage. The stock lagged on concerns about profitability under competitive pressures as Walmart enters the field.
Outlook
Our process uses a combined top-down, bottom-up fundamental framework aimed at identifying mid-cap companies producing attractive, sustainable growth. We seek to reduce unintended, nonfundamental risks and align the portfolio with fundamental, company-specific risks that we believe will be rewarded over time. As a result of this approach, our sector and industry allocations reflect where we are finding opportunities at a given time.
Consumer discretionary ended the period as the portfolio’s largest overweight relative to the benchmark. Communication services ended as the largest underweight sector.
4
Fund Characteristics |
OCTOBER 31, 2020 | |||||
Top Ten Holdings | % of net assets | ||||
Cadence Design Systems, Inc. | 3.1% | ||||
Xilinx, Inc. | 2.6% | ||||
Cognex Corp. | 2.5% | ||||
Veeva Systems, Inc., Class A | 2.2% | ||||
Twilio, Inc., Class A | 2.2% | ||||
Splunk, Inc. | 2.1% | ||||
Align Technology, Inc. | 2.1% | ||||
Square, Inc., Class A | 2.0% | ||||
Skyworks Solutions, Inc. | 2.0% | ||||
Teleflex, Inc. | 1.9% | ||||
Top Five Industries | % of net assets | ||||
Software | 16.5% | ||||
Semiconductors and Semiconductor Equipment | 8.3% | ||||
Health Care Equipment and Supplies | 7.5% | ||||
Electronic Equipment, Instruments and Components | 4.2% | ||||
IT Services | 4.2% | ||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 99.5% | ||||
Temporary Cash Investments | 0.5% | ||||
Temporary Cash Investments - Securities Lending Collateral | 0.7% | ||||
Other Assets and Liabilities | (0.7)% |
5
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 May 1, 2020 to October 31, 2020.
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 5/1/20 | Ending Account Value 10/31/20 | Expenses Paid During Period(1) 5/1/20 - 10/31/20 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
G Class | $1,000 | $1,278.70 | $0.06 | 0.01% | ||||||||||
Hypothetical | ||||||||||||||
G Class | $1,000 | $1,025.09 | $0.05 | 0.01% |
(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 184, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses.
6
Schedule of Investments |
OCTOBER 31, 2020
Shares | Value | |||||||
COMMON STOCKS — 99.5% | ||||||||
Auto Components — 1.1% | ||||||||
Aptiv plc | 102,697 | $ | 9,909,234 | |||||
Beverages — 1.3% | ||||||||
Boston Beer Co., Inc. (The), Class A(1) | 11,864 | 12,328,832 | ||||||
Biotechnology — 3.8% | ||||||||
ACADIA Pharmaceuticals, Inc.(1) | 137,382 | 6,381,394 | ||||||
Alnylam Pharmaceuticals, Inc.(1) | 71,682 | 8,814,735 | ||||||
Argenx SE, ADR(1) | 25,583 | 6,347,910 | ||||||
Seagen, Inc.(1) | 52,918 | 8,826,722 | ||||||
Turning Point Therapeutics, Inc.(1) | 57,525 | 5,303,230 | ||||||
35,673,991 | ||||||||
Building Products — 2.9% | ||||||||
Fortune Brands Home & Security, Inc. | 168,296 | 13,610,098 | ||||||
Trane Technologies plc | 99,966 | 13,270,486 | ||||||
26,880,584 | ||||||||
Capital Markets — 3.7% | ||||||||
LPL Financial Holdings, Inc. | 119,308 | 9,536,288 | ||||||
MarketAxess Holdings, Inc. | 21,303 | 11,479,122 | ||||||
MSCI, Inc. | 39,606 | 13,855,763 | ||||||
34,871,173 | ||||||||
Chemicals — 0.5% | ||||||||
Albemarle Corp. | 51,096 | 4,762,658 | ||||||
Communications Equipment — 2.2% | ||||||||
Arista Networks, Inc.(1) | 38,469 | 8,036,174 | ||||||
F5 Networks, Inc.(1) | 96,392 | 12,814,353 | ||||||
20,850,527 | ||||||||
Containers and Packaging — 3.0% | ||||||||
Avery Dennison Corp. | 96,188 | 13,311,457 | ||||||
Ball Corp. | 168,707 | 15,014,923 | ||||||
28,326,380 | ||||||||
Distributors — 0.8% | ||||||||
LKQ Corp.(1) | 234,579 | 7,504,182 | ||||||
Diversified Consumer Services — 0.3% | ||||||||
Chegg, Inc.(1) | 33,684 | 2,473,753 | ||||||
Electrical Equipment — 4.1% | ||||||||
AMETEK, Inc. | 131,036 | 12,867,735 | ||||||
Generac Holdings, Inc.(1) | 18,900 | 3,971,835 | ||||||
nVent Electric plc | 380,545 | 6,868,838 | ||||||
Rockwell Automation, Inc. | 27,352 | 6,485,706 | ||||||
Sensata Technologies Holding plc(1) | 195,476 | 8,544,256 | ||||||
38,738,370 | ||||||||
Electronic Equipment, Instruments and Components — 4.2% | ||||||||
Cognex Corp. | 347,831 | 22,922,063 | ||||||
Keysight Technologies, Inc.(1) | 158,759 | 16,649,056 | ||||||
39,571,119 | ||||||||
Entertainment — 2.5% | ||||||||
Roku, Inc.(1) | 57,037 | 11,544,289 |
7
Shares | Value | |||||||
Zynga, Inc., Class A(1) | 1,270,048 | $ | 11,417,731 | |||||
22,962,020 | ||||||||
Health Care Equipment and Supplies — 7.5% | ||||||||
Align Technology, Inc.(1) | 45,138 | 19,232,399 | ||||||
DexCom, Inc.(1) | 22,582 | 7,216,756 | ||||||
IDEXX Laboratories, Inc.(1) | 28,857 | 12,259,031 | ||||||
Masimo Corp.(1) | 59,703 | 13,362,725 | ||||||
Teleflex, Inc. | 55,761 | 17,744,823 | ||||||
69,815,734 | ||||||||
Health Care Providers and Services — 3.2% | ||||||||
Amedisys, Inc.(1) | 54,887 | 14,215,733 | ||||||
Encompass Health Corp. | 255,730 | 15,678,806 | ||||||
29,894,539 | ||||||||
Health Care Technology — 3.1% | ||||||||
Teladoc Health, Inc.(1)(2) | 42,166 | 8,283,932 | ||||||
Veeva Systems, Inc., Class A(1) | 77,574 | 20,948,859 | ||||||
29,232,791 | ||||||||
Hotels, Restaurants and Leisure — 2.9% | ||||||||
Chipotle Mexican Grill, Inc.(1) | 14,284 | 17,161,940 | ||||||
Las Vegas Sands Corp. | 215,493 | 10,356,594 | ||||||
27,518,534 | ||||||||
Household Durables — 1.3% | ||||||||
D.R. Horton, Inc. | 174,721 | 11,673,110 | ||||||
Insurance — 0.7% | ||||||||
SelectQuote, Inc.(1) | 371,977 | 6,405,444 | ||||||
Interactive Media and Services — 1.6% | ||||||||
Match Group, Inc.(1) | 125,989 | 14,712,995 | ||||||
Internet and Direct Marketing Retail — 1.4% | ||||||||
Chewy, Inc., Class A(1)(2) | 107,613 | 6,628,961 | ||||||
Wayfair, Inc., Class A(1) | 25,605 | 6,350,808 | ||||||
12,979,769 | ||||||||
IT Services — 4.2% | ||||||||
Square, Inc., Class A(1) | 120,549 | 18,670,629 | ||||||
Twilio, Inc., Class A(1) | 74,405 | 20,756,763 | ||||||
39,427,392 | ||||||||
Leisure Products — 1.0% | ||||||||
Peloton Interactive, Inc., Class A(1) | 84,495 | 9,312,194 | ||||||
Life Sciences Tools and Services — 2.7% | ||||||||
Mettler-Toledo International, Inc.(1) | 17,665 | 17,628,080 | ||||||
Repligen Corp.(1) | 45,646 | 7,603,254 | ||||||
25,231,334 | ||||||||
Machinery — 2.7% | ||||||||
Graco, Inc. | 175,966 | 10,892,295 | ||||||
Parker-Hannifin Corp. | 68,997 | 14,376,215 | ||||||
25,268,510 | ||||||||
Personal Products — 1.3% | ||||||||
Shiseido Co. Ltd. | 201,700 | 12,486,108 | ||||||
Pharmaceuticals — 1.9% | ||||||||
Horizon Therapeutics plc(1) | 140,023 | 10,491,924 | ||||||
Jazz Pharmaceuticals plc(1) | 47,252 | 6,809,013 | ||||||
17,300,937 | ||||||||
Professional Services — 2.3% | ||||||||
CoStar Group, Inc.(1) | 10,279 | 8,465,887 |
8
Shares | Value | |||||||
Verisk Analytics, Inc. | 74,600 | $ | 13,276,562 | |||||
21,742,449 | ||||||||
Road and Rail — 0.8% | ||||||||
J.B. Hunt Transport Services, Inc. | 63,554 | 7,737,064 | ||||||
Semiconductors and Semiconductor Equipment — 8.3% | ||||||||
Advanced Micro Devices, Inc.(1) | 103,722 | 7,809,229 | ||||||
Marvell Technology Group Ltd. | 349,102 | 13,094,816 | ||||||
Skyworks Solutions, Inc. | 131,863 | 18,630,923 | ||||||
Teradyne, Inc. | 157,275 | 13,816,609 | ||||||
Xilinx, Inc. | 205,211 | 24,356,494 | ||||||
77,708,071 | ||||||||
Software — 16.5% | ||||||||
Atlassian Corp. plc, Class A(1) | 41,193 | 7,893,403 | ||||||
Cadence Design Systems, Inc.(1) | 263,223 | 28,788,700 | ||||||
Coupa Software, Inc.(1) | 32,984 | 8,829,817 | ||||||
DocuSign, Inc.(1) | 61,772 | 12,493,387 | ||||||
Envestnet, Inc.(1) | 100,599 | 7,719,967 | ||||||
HubSpot, Inc.(1) | 48,687 | 14,122,638 | ||||||
Manhattan Associates, Inc.(1) | 177,865 | 15,207,457 | ||||||
Palo Alto Networks, Inc.(1) | 69,025 | 15,267,640 | ||||||
RingCentral, Inc., Class A(1) | 48,722 | 12,586,841 | ||||||
Slack Technologies, Inc., Class A(1) | 455,708 | 11,657,011 | ||||||
Splunk, Inc.(1) | 99,359 | 19,677,056 | ||||||
154,243,917 | ||||||||
Specialty Retail — 3.4% | ||||||||
Burlington Stores, Inc.(1) | 68,617 | 13,282,879 | ||||||
Five Below, Inc.(1) | 65,204 | 8,694,301 | ||||||
Lithia Motors, Inc., Class A | 41,496 | 9,526,237 | ||||||
31,503,417 | ||||||||
Textiles, Apparel and Luxury Goods — 1.5% | ||||||||
lululemon athletica, Inc.(1) | 43,831 | 13,994,800 | ||||||
Trading Companies and Distributors — 0.8% | ||||||||
W.W. Grainger, Inc. | 21,296 | 7,454,026 | ||||||
TOTAL COMMON STOCKS (Cost $763,621,592) | 930,495,958 | |||||||
TEMPORARY CASH INVESTMENTS — 0.5% | ||||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.50% - 3.375%, 6/30/21 - 11/15/48, valued at $1,768,181), in a joint trading account at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $1,739,632) | 1,739,623 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 3.625%, 2/15/44, valued at $3,091,689), at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $3,031,015) | 3,031,000 | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 189 | 189 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $4,770,812) | 4,770,812 | |||||||
TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL(3) — 0.7% | ||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (Cost $6,515,019) | 6,515,019 | 6,515,019 | ||||||
TOTAL INVESTMENT SECURITIES — 100.7% (Cost $774,907,423) | 941,781,789 | |||||||
OTHER ASSETS AND LIABILITIES — (0.7)% | (6,463,956) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 935,317,833 |
9
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
JPY | 32,477,040 | USD | 308,232 | Bank of America N.A. | 12/30/20 | $ | 2,245 | |||||||||||||
JPY | 33,873,750 | USD | 324,137 | Bank of America N.A. | 12/30/20 | (307) | ||||||||||||||
USD | 11,318,851 | JPY | 1,187,488,980 | Bank of America N.A. | 12/30/20 | (33,420) | ||||||||||||||
USD | 536,475 | JPY | 56,646,000 | Bank of America N.A. | 12/30/20 | (5,055) | ||||||||||||||
USD | 262,734 | JPY | 27,756,540 | Bank of America N.A. | 12/30/20 | (2,615) | ||||||||||||||
$ | (39,152) |
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
ADR | - | American Depositary Receipt | ||||||
JPY | - | Japanese Yen | ||||||
USD | - | United States Dollar |
(1)Non-income producing.
(2)Security, or a portion thereof, is on loan. At the period end, the aggregate value of securities on loan was $8,954,851. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers.
(3)Investment of cash collateral from securities on loan. At the period end, the aggregate value of the collateral held by the fund was $9,473,581, which includes securities collateral of $2,958,562.
See Notes to Financial Statements.
10
Statement of Assets and Liabilities |
OCTOBER 31, 2020 | |||||
Assets | |||||
Investment securities, at value (cost of $768,392,404) — including $8,954,851 of securities on loan | $ | 935,266,770 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $6,515,019) | 6,515,019 | ||||
Total investment securities, at value (cost of $774,907,423) | 941,781,789 | ||||
Receivable for investments sold | 899,645 | ||||
Receivable for capital shares sold | 744 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 2,245 | ||||
Dividends and interest receivable | 98,255 | ||||
Securities lending receivable | 2,714 | ||||
$ | 942,785,392 | ||||
Liabilities | |||||
Payable for collateral received for securities on loan | 6,515,019 | ||||
Payable for investments purchased | 911,078 | ||||
Payable for capital shares redeemed | 65 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 41,397 | ||||
7,467,559 | |||||
Net Assets | $ | 935,317,833 | |||
G Class Capital Shares, $0.01 Par Value | |||||
Shares authorized | 600,000,000 | ||||
Shares outstanding | 66,173,094 | ||||
Net Asset Value Per Share | $ | 14.13 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 679,959,022 | |||
Distributable earnings | 255,358,811 | ||||
$ | 935,317,833 |
See Notes to Financial Statements.
11
Statement of Operations |
YEAR ENDED OCTOBER 31, 2020 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $3,542) | $ | 3,396,451 | |||
Interest | 35,004 | ||||
Securities lending, net | 8,669 | ||||
3,440,124 | |||||
Expenses: | |||||
Management fees | 4,383,893 | ||||
Directors' fees and expenses | 22,086 | ||||
Other expenses | 17,423 | ||||
4,423,402 | |||||
Fees waived | (4,383,893) | ||||
39,509 | |||||
Net investment income (loss) | 3,400,615 | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 101,754,998 | ||||
Forward foreign currency exchange contract transactions | (200,297) | ||||
Foreign currency translation transactions | (1,175) | ||||
101,553,526 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 52,062,972 | ||||
Forward foreign currency exchange contracts | (51,632) | ||||
Translation of assets and liabilities in foreign currencies | 23 | ||||
52,011,363 | |||||
Net realized and unrealized gain (loss) | 153,564,889 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 156,965,504 |
See Notes to Financial Statements.
12
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2020 AND OCTOBER 31, 2019 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2020 | October 31, 2019 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | 3,400,615 | $ | 3,852,250 | ||||
Net realized gain (loss) | 101,553,526 | 80,423,875 | ||||||
Change in net unrealized appreciation (depreciation) | 52,011,363 | 20,173,100 | ||||||
Net increase (decrease) in net assets resulting from operations | 156,965,504 | 104,449,225 | ||||||
Distributions to Shareholders | ||||||||
From earnings | (81,790,080) | (142,583,485) | ||||||
Capital Share Transactions | ||||||||
Proceeds from shares sold | 470,785,649 | 49,849,275 | ||||||
Proceeds from reinvestment of distributions | 81,790,080 | 142,583,485 | ||||||
Payments for shares redeemed | (294,257,396) | (244,279,493) | ||||||
Net increase (decrease) in net assets from capital share transactions | 258,318,333 | (51,846,733) | ||||||
Net increase (decrease) in net assets | 333,493,757 | (89,980,993) | ||||||
Net Assets | ||||||||
Beginning of period | 601,824,076 | 691,805,069 | ||||||
End of period | $ | 935,317,833 | $ | 601,824,076 | ||||
Transactions in Shares of the Fund | ||||||||
Sold | 35,788,482 | 4,017,174 | ||||||
Issued in reinvestment of distributions | 6,931,363 | 13,992,491 | ||||||
Redeemed | (22,986,369) | (19,173,722) | ||||||
Net increase (decrease) in shares of the fund | 19,733,476 | (1,164,057) |
See Notes to Financial Statements.
13
Notes to Financial Statements |
OCTOBER 31, 2020
1. Organization
American Century Mutual Funds, 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 Heritage Fund (the fund) is one fund in a series issued by the corporation. The fund's investment objective is to seek long-term capital growth. The fund is not permitted to invest in securities issued by companies assigned the Global Industry Classification Standard or the Bloomberg Industry Classification Standard for the tobacco industry. The fund offers the G 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.
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 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
14
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. 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 lending income is net of fees and rebates earned by the lending agent for its services.
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 American Century Investment Management, Inc. (ACIM) (the investment advisor) 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 certain types of investment securities and other financial instruments. 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 collateral requirements.
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.
Distributions to Shareholders — Distributions from net investment income and 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).
15
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.
Securities Lending — Securities are lent to qualified financial institutions and brokers. State Street Bank & Trust Co. serves as securities lending agent to the fund pursuant to a Securities Lending Agreement. The lending of securities exposes the fund to risks such as: the borrowers may fail to return the loaned securities, the borrowers may not be able to provide additional collateral, the fund may experience delays in recovery of the loaned securities or delays in access to collateral, or the fund may experience losses related to the investment collateral. To minimize certain risks, loan counterparties pledge collateral in the form of cash and/or securities. The lending agent has agreed to indemnify the fund in the case of default of any securities borrowed. Cash collateral received is invested in the State Street Navigator Securities Lending Government Money Market Portfolio, a money market mutual fund registered under the 1940 Act. The loans may also be secured by U.S. government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. By lending securities, the fund seeks to increase its net investment income through the receipt of interest and fees. Such income is reflected separately within the Statement of Operations. The value of loaned securities and related collateral outstanding at period end, if any, are shown on a gross basis within the Schedule of Investments and Statement of Assets and Liabilities.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged, and the remaining contractual maturity of those transactions as of October 31, 2020.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 6,515,019 | — | — | — | $ | 6,515,019 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 6,515,019 |
(1)Amount represents the payable for cash collateral received for securities on loan. This will generally be in the Overnight and Continuous column as the securities are typically callable on demand.
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, 55% 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). The agreement provides that ACIM will pay all expenses of managing and operating the fund, except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses. The fee is computed and accrued daily based on the daily net assets of the fund and paid monthly in arrears. The annual management fee is 0.65%. The investment advisor agreed to waive the fund's management fee in its entirety. The investment advisor expects this waiver to remain in effect permanently and cannot terminate it without the approval of the Board of Directors. The annual management fee for the period ended October 31, 2020 was 0.00% after waiver.
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.
16
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $604,985 and $2,345,535, respectively. The effect of interfund transactions on the Statement of Operations was $384,674 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments and in kind transactions, for the period ended October 31, 2020 were $619,188,041 and $842,313,556, respectively.
On July 22, 2020, the fund received investment securities valued at $409,456,297 from a purchase in kind from other products managed by the fund's investment advisor. A purchase in kind occurs when a fund receives securities into its portfolio in lieu of cash as payment from a purchasing shareholder.
5. 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.
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 | $ | 918,009,850 | $ | 12,486,108 | — | ||||||
Temporary Cash Investments | 189 | 4,770,623 | — | ||||||||
Temporary Cash Investments - Securities Lending Collateral | 6,515,019 | — | — | ||||||||
$ | 924,525,058 | $ | 17,256,731 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 2,245 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 41,397 | — |
17
6. 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 settlement 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 forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, 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 $8,239,079.
The value of foreign currency risk derivative instruments as of October 31, 2020, is disclosed on the Statement of Assets and Liabilities as an asset of $2,245 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $41,397 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended October 31, 2020, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(200,297) in net realized gain (loss) on forward foreign currency exchange contract transactions and $(51,632) in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
7. Risk Factors
The value of the fund’s shares will go up and down, sometimes rapidly or unpredictably, based on the performance of the securities owned by the fund and other factors generally affecting the securities market. Market risks, including political, regulatory, economic and social developments, can affect the value of the fund’s investments. Natural disasters, public health emergencies, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse long-term effects on world economies and markets generally.
The fund is owned by a relatively small number of shareholders, and in the event such shareholders redeem, the ongoing operations of the fund may be at risk.
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.
8. Federal Tax Information
On December 8, 2020, the fund declared and paid per-share distributions of $1.4906 and $0.0510 from net
realized gains and net investment income, respectively to shareholders of record on December 7, 2020.
The tax character of distributions paid during the years ended October 31, 2020 and October 31, 2019 were as follows:
2020 | 2019 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 2,988,466 | $ | 23,908,173 | ||||
Long-term capital gains | $ | 78,801,614 | $ | 118,675,312 |
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.
The reclassifications, which are primarily due to tax equalization, were made to capital $10,582,984 and
distributable earnings $(10,582,984).
18
As of period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 782,269,275 | |||
Gross tax appreciation of investments | $ | 177,004,696 | |||
Gross tax depreciation of investments | (17,492,182) | ||||
Net tax appreciation (depreciation) of investments | 159,512,514 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 23 | ||||
Net tax appreciation (depreciation) | $ | 159,512,537 | |||
Undistributed ordinary income | $ | 4,462,077 | |||
Accumulated long-term gains | $ | 91,384,197 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
19
Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 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) | |||||||||||||||||||||||||||||||||
G Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $12.96 | 0.06 | 2.93 | 2.99 | (0.07) | (1.75) | (1.82) | $14.13 | 25.77% | 0.01% | 0.66% | 0.50% | (0.15)% | 91% | $935,318 | ||||||||||||||||||||||||||||||||
2019 | $14.53 | 0.08 | 1.66 | 1.74 | (0.12) | (3.19) | (3.31) | $12.96 | 18.18% | 0.01% | 0.66% | 0.62% | (0.03)% | 92% | $601,824 | ||||||||||||||||||||||||||||||||
2018 | $14.41 | 0.10 | 1.05 | 1.15 | (0.05) | (0.98) | (1.03) | $14.53 | 8.19% | 0.00%(3) | 0.65% | 0.71% | 0.06% | 90% | $691,805 | ||||||||||||||||||||||||||||||||
2017 | $12.31 | 0.04 | 2.50 | 2.54 | — | (0.44) | (0.44) | $14.41 | 21.29% | 0.58% | 0.76% | 0.27% | 0.09% | 67% | $822,910 | ||||||||||||||||||||||||||||||||
2016 | $13.65 | —(4) | (0.28) | (0.28) | — | (1.06) | (1.06) | $12.31 | (2.01)% | 0.80% | 0.80% | (0.02)% | (0.02)% | 73% | $649,951 |
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)Ratio was less than 0.005%.
(4)Per-share amount was less than $0.005.
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the Shareholders and the Board of Directors of American Century Mutual Funds, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of NT Heritage Fund (the “Fund”), one of the funds constituting the American Century Mutual Funds, Inc., as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of NT Heritage Fund of the American Century Mutual Funds, Inc. as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
December 16, 2020
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 62 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 62 | None | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 62 | None | ||||||||||||
Rajesh K. Gupta (1960) | Director | Since 2019 | Partner Emeritus, SeaCrest Investment Management and SeaCrest Wealth Management (2019 to Present); Chief Executive Officer and Chief Investment Officer, SeaCrest Investment Management (2006 to 2019); Chief Executive Officer and Chief Investment Officer, SeaCrest Wealth Management (2008 to 2019) | 62 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Lynn Jenkins (1963) | Director | Since 2019 | Consultant, LJ Strategies (2019 to present); United States Representative, U.S. House of Representatives (2009 to 2018) | 62 | MGP Ingredients, Inc. | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 62 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 62 | Onto Innovation Inc.; Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 87 | None | ||||||||||||
Interested Director | |||||||||||||||||
Jonathan S. Thomas (1963) | Director | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 125 | None |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
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Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for each of the 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years | ||||||
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries | ||||||
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Vice President, ACS, (2020 to present); Investment Operations and Investment Accounting, ACS (2000 to present) | ||||||
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS | ||||||
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS | ||||||
C. Jean Wade (1964) | Vice President since 2012 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) | ||||||
Robert J. Leach (1966) | Vice President since 2006 | Vice President, ACS (2000 to present) | ||||||
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS | ||||||
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
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Approval of Management Agreement |
At a meeting held on June 24, 2020, the Fund’s Board of Directors (the "Board") 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 continual 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 and to be provided to the Fund;
•the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis;
•the Fund’s investment performance, including data comparing the Fund's performance 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 compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans;
•the Advisor’s business continuity plans and specifically its response to the COVID-19 pandemic;
•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;
•services provided and charges to the Advisor's other investment management clients;
•acquired fund fees and expenses;
•payments and practices in connection with financial intermediaries holding shares of the Fund and the services provided by intermediaries in connection therewith; and
•possible collateral benefits to the Advisor from the management of the Fund.
The Board held two meetings to consider the renewal. The independent Directors also met in private session three times to review and discuss the information provided in response to their request. The independent Directors held active discussions with the Advisor regarding the renewal of the management agreement, requesting supplemental information, and reviewing information provided by the Advisor in response thereto. The independent Directors 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 in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or
25
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 without limitation 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 Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
•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 amounts paid by the Fund under Rule 12b-1 plans)
The Board noted that many of these services have expanded over time in terms of both 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, provides oversight of the investment performance process. It 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 investment performance information during the management agreement renewal 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 below its benchmark for the three-, five-, and ten-year periods reviewed by the Board. The Board discussed the Fund's performance with the Advisor, including steps being taken to address underperformance, 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 its various committees, 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
26
provided, staffing levels, shareholder satisfaction, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
COVID-19 Response. During 2020, much of the world experienced unprecedented change and challenges from the impacts of the rapidly evolving, worldwide spread of the COVID-19 virus. The Board evaluated the Advisor’s response to the COVID-19 pandemic and its impact on service to the Fund. The Board found that Fund shareholders have continued to receive the Advisor’s investment management and other services without disruption, and Advisor personnel have demonstrated great resiliency in providing those services. The Board, directly and through its Audit Committee, continues to monitor the impact of the pandemic and the response of each of the Fund’s service providers.
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, to the extent they exist, through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business, infrastructure, investment capabilities and initiatives 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, expenses attributable to short sales, taxes, interest, extraordinary expenses, 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 Investment Company 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. 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.
27
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board 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 and services provided in response thereto. 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 Directors reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 Plan and that all such payments by the Advisor were made from the Advisor’s resources and reasonable profits. The Board found such payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the possible 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. To the extent there are potential collateral benefits, the board has been advised and has taken this into consideration in its review of the management contract with the Fund. 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 may receive 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.
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.
28
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts 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 and change your withholding percentage for future distributions.
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.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they 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 American Century Investments’ website at americancentury.com/proxy 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 americancentury.com/proxy. 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 as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov. 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.
29
Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified dividend income for the fiscal year ended October 31, 2020.
For corporate taxpayers, the fund hereby designates $2,170,721, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2020 as qualified for the corporate dividends received deduction.
The fund hereby designates $88,891,558, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2020.
The fund hereby designates $195,059 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2020.
The fund utilized earnings and profits of $10,582,984 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
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Notes |
31
Notes |
32
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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 Mutual Funds, 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. | ||||||||
©2020 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90987 2012 |
![image81.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image81.jpg)
Annual Report | |||||
October 31, 2020 | |||||
Select Fund | |||||
Investor Class (TWCIX) | |||||
I Class (TWSIX) | |||||
Y Class (ASLWX) | |||||
A Class (TWCAX) | |||||
C Class (ACSLX) | |||||
R Class (ASERX) | |||||
R5 Class (ASLGX) | |||||
R6 Class (ASDEX) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | |||||
Performance | |||||
Portfolio Commentary | |||||
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 | |||||
Report of Independent Registered Public Accounting Firm | |||||
Management | |||||
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 |
![image181.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image181.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2020. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Pandemic Disrupted Economic, Market Courses
Market sentiment began the period relatively upbeat. A dovish Federal Reserve (Fed), modest inflation, improving economic and earnings data, and progress on U.S.-China trade policy helped boost global growth outlooks. Against this backdrop, riskier assets generally remained in favor.
However, beginning in late February, the COVID-19 outbreak rapidly spread worldwide, halting most U.S. and global economic activity and triggering a deep worldwide recession. Global stocks and credit-sensitive assets sold off sharply, while U.S. Treasury yields plunged to record lows amid soaring demand. Quick and aggressive action from the Fed and other central banks and federal governments helped stabilize and restore confidence in the financial markets. By summer, declining coronavirus infection and death rates in many regions and the reopening of economies were positive influences. By the end of the reporting period, most data suggested an economic recovery was underway. But, at the same time, COVID-19 infection rates were rising in the U.S. and Europe, prompting new lockdown measures in some European countries.
Overall, the broad U.S. stock market overcame the effects of the early 2020 sell-off to deliver a solid gain for the 12-month period. Growth stocks rallied and significantly outperformed value stocks, which generally declined. Global bond returns were broadly positive, as yields declined.
Science Helps Steer the Return to Normal
The return to pre-pandemic life will take time and patience, but we are confident we will get there. The first COVID-19 vaccine is on track for approval by year-end, and medical professionals continue to fine-tune virus treatment protocols. In the meantime, investors likely will face periods of outbreak-related disruptions, economic and political uncertainty, and heightened market volatility. These influences can be unsettling, but they tend to be temporary.
We appreciate your confidence in us during these extraordinary times. Our firm has a long history of helping clients weather unpredictable markets, and we’re confident we will continue to meet today’s challenges.
Sincerely,
![image191.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image191.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of October 31, 2020 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |||||||||||||||
Investor Class | TWCIX | 26.10% | 15.52% | 14.93% | — | 6/30/71 | ||||||||||||||
Russell 1000 Growth Index | — | 29.22% | 17.30% | 16.29% | — | — | ||||||||||||||
I Class | TWSIX | 26.35% | 15.75% | 15.16% | — | 3/13/97 | ||||||||||||||
Y Class | ASLWX | 26.55% | — | — | 18.78% | 4/10/17 | ||||||||||||||
A Class | TWCAX | 8/8/97 | ||||||||||||||||||
No sales charge | 25.79% | 15.23% | 14.64% | — | ||||||||||||||||
With sales charge | 18.56% | 13.87% | 13.97% | — | ||||||||||||||||
C Class | ACSLX | 24.85% | 14.37% | 13.79% | — | 1/31/03 | ||||||||||||||
R Class | ASERX | 25.48% | 14.95% | 14.36% | — | 7/29/05 | ||||||||||||||
R5 Class | ASLGX | 26.34% | — | — | 18.58% | 4/10/17 | ||||||||||||||
R6 Class | ASDEX | 26.54% | 15.92% | — | 15.97% | 7/26/13 |
Average annual returns since inception are presented when ten years of performance history is not available.
Although the fund’s actual inception date was October 31,1958, the Investor Class inception date corresponds with the investment advisor’s implementation of its current investment philosophy and practices.
Fund returns would have been lower if a portion of the fees had not been waived.
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.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. 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
Growth of $10,000 Over 10 Years | ||
$10,000 investment made October 31, 2010 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-51e0c2a5c86a486fab41.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/chart-51e0c2a5c86a486fab41.jpg)
Value on October 31, 2020 | |||||
Investor Class — $40,247 | |||||
Russell 1000 Growth Index — $45,290 | |||||
Ending value of Investor Class would have been lower if a portion of the fees had not been waived.
Total Annual Fund Operating Expenses | |||||||||||||||||||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | ||||||||||||||||
0.99% | 0.79% | 0.64% | 1.24% | 1.99% | 1.49% | 0.79% | 0.64% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. 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.
4
Portfolio Commentary |
Portfolio Managers: Keith Lee, Michael Li and Chris Krantz
Performance Summary
Select returned 26.10%* for the 12 months ended October 31, 2020, lagging the 29.22% return of the fund’s benchmark, the Russell 1000 Growth Index.
U.S. stocks delivered strong returns during the reporting period, which was marked by extreme volatility. Stocks initially rose to all-time highs in February, before the COVID-19 pandemic and measures to combat it led to the first recession and bear market in stocks since the 2008-09 financial crisis. Massive monetary and fiscal stimulus helped support the economy and markets, and stocks recovered the ground lost earlier. Within the Russell 1000 Growth Index, consumer discretionary and information technology led the benchmark’s performance. At the other end of the spectrum, the energy sector struggled with the declining price of oil amid a sharp slowdown in economic growth and falling energy demand.
Stock selection and an underweight allocation to information technology stocks relative to the benchmark detracted from performance. Stock choices in the consumer discretionary sector also weighed on relative performance. Positioning in the industrials and health care sectors benefited relative performance the most.
Information Technology Stocks Led Detractors
In the information technology sector, stock selection in the semiconductors and semiconductor equipment industry detracted the most from performance compared with the benchmark. We did not own several stocks in the industry that performed well, including chipmaker NVIDIA, which is a benchmark component. The company reported strong quarterly results and raised guidance due to strength in its data center and gaming businesses. Among IT services stocks, digital payments company Mastercard underperformed as transaction volumes declined along with economic activity. Revenues declined further because of weakness in cross-border transactions as a result of pandemic-related travel restrictions.
Elsewhere, our lighter relative exposure to Tesla hampered performance as the electric car company outperformed. Tesla benefited from solid fundamental reports and strong demand for its vehicles. The company reported better-than-expected production numbers, successfully launched the Model Y and announced plans to ramp up production of its commercial Tesla Semi. We had some exposure to the stock, but less than the benchmark. The stock of The TJX Cos. underperformed as the off-price retailer temporarily closed its stores due to the pandemic. We like the long-term prospects for TJX as traditional mall retailers close their shops and consumers look for value. Our holding of The Walt Disney Co. detracted on concerns that the pandemic would significantly impact the global entertainment company. Disney closed its amusement parks in line with social distancing mandates.
Industrials Stocks Aided Relative Performance
A key contribution to performance compared with the benchmark came from avoiding many poor-performing stocks in the aerospace and defense industry. Elsewhere in the industrials sector, stock decisions in the industrial conglomerates and road and rail industries also contributed positively.
*All fund returns referenced in this commentary are for Investor Class shares. Fund returns would have been lower if a portion of the fees had not been waived. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund’s benchmark, other share classes may not. See page 3 for returns for all share classes.
5
Among leading individual contributors to performance was PayPal Holdings. The stock price of the leader in online payments benefited from the increasing demand for digital transactions, a secular trend that has been aided by stay-at-home restrictions during the pandemic.
Regeneron Pharmaceuticals was another major contributor to relative performance. The biotechnology company is engaged in the discovery and development of medicines for the treatment of serious diseases, and it maintains one of the world’s most comprehensive genetic databases. Regeneron’s treatment for COVID-19 patients showed benefits for patients in late-stage clinical trials. Not owning benchmark component Merck & Co. also helped relative performance. Merck lagged other pharmaceutical companies because its prescribing trends were more affected by a downturn in doctor visits and elective procedures during the height of the COVID-19-related shutdowns.
Elsewhere, Apple’s stock price outperformed as growth in its services and wearable devices has taken the pressure off of iPhone sales as the driver of earnings. It also benefited relative performance to avoid benchmark components The Coca-Cola Co. and PepsiCo. These large beverage companies saw decreased demand due to the pandemic, which curtailed restaurant visits and live events, significant sources of revenue.
Outlook
We remain confident in our belief that high-quality companies with a capability for sustained long-term growth can outperform over time. Our portfolio positioning reflects where we are finding stocks of what we believe are attractive, well-run mature growth companies as a result of the application of that philosophy and process.
At the end of the reporting period, our largest sector overweight relative to the benchmark was communication services. The sector encompasses entertainment and communication stocks, including large portfolio holdings Facebook and Google parent Alphabet. Health care was the largest sector underweight. We view growth opportunities in the health care space as highly bifurcated. We have no exposure to life sciences tools and services and health care technology but are notably overweight in health care providers and services. Information technology ended the period underweight. However, information technology remains the largest sector allocation on an absolute basis, reflecting an abundance of what we view as high-quality, well-run companies benefiting from powerful secular trends.
6
Fund Characteristics |
OCTOBER 31, 2020 | |||||
Top Ten Holdings | % of net assets | ||||
Apple, Inc. | 12.9% | ||||
Alphabet, Inc.* | 9.2% | ||||
Amazon.com, Inc. | 8.4% | ||||
Microsoft Corp. | 6.2% | ||||
Mastercard, Inc., Class A | 5.0% | ||||
PayPal Holdings, Inc. | 4.5% | ||||
Facebook, Inc., Class A | 4.4% | ||||
UnitedHealth Group, Inc. | 3.9% | ||||
salesforce.com, Inc. | 3.0% | ||||
Visa, Inc., Class A | 2.2% | ||||
*Includes all classes of the issuer held by the fund. | |||||
Top Five Industries | % of net assets | ||||
Software | 14.3% | ||||
Interactive Media and Services | 13.6% | ||||
Technology Hardware, Storage and Peripherals | 12.9% | ||||
IT Services | 12.0% | ||||
Internet and Direct Marketing Retail | 8.4% | ||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 99.2% | ||||
Convertible Bonds | 0.7% | ||||
Rights | —* | ||||
Total Equity Exposure | 99.9% | ||||
Temporary Cash Investments | 0.1% | ||||
Other Assets and Liabilities | —* |
*Category is less than 0.05% of total net assets.
7
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 May 1, 2020 to October 31, 2020.
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 I Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not through a financial intermediary or employer-sponsored retirement plan account), American Century Investments may charge you a $25.00 annual 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 $25.00 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.
8
Beginning Account Value 5/1/20 | Ending Account Value 10/31/20 | Expenses Paid During Period(1) 5/1/20 - 10/31/20 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,187.90 | $5.33 | 0.97% | ||||||||||
I Class | $1,000 | $1,189.20 | $4.24 | 0.77% | ||||||||||
Y Class | $1,000 | $1,190.10 | $3.41 | 0.62% | ||||||||||
A Class | $1,000 | $1,186.50 | $6.71 | 1.22% | ||||||||||
C Class | $1,000 | $1,181.90 | $10.80 | 1.97% | ||||||||||
R Class | $1,000 | $1,185.00 | $8.07 | 1.47% | ||||||||||
R5 Class | $1,000 | $1,189.20 | $4.24 | 0.77% | ||||||||||
R6 Class | $1,000 | $1,190.10 | $3.41 | 0.62% | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,020.26 | $4.93 | 0.97% | ||||||||||
I Class | $1,000 | $1,021.27 | $3.91 | 0.77% | ||||||||||
Y Class | $1,000 | $1,022.02 | $3.15 | 0.62% | ||||||||||
A Class | $1,000 | $1,019.00 | $6.19 | 1.22% | ||||||||||
C Class | $1,000 | $1,015.23 | $9.98 | 1.97% | ||||||||||
R Class | $1,000 | $1,017.75 | $7.46 | 1.47% | ||||||||||
R5 Class | $1,000 | $1,021.27 | $3.91 | 0.77% | ||||||||||
R6 Class | $1,000 | $1,022.02 | $3.15 | 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 184, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses.
9
Schedule of Investments |
OCTOBER 31, 2020
Shares | Value | |||||||
COMMON STOCKS — 99.2% | ||||||||
Aerospace and Defense — 0.7% | ||||||||
Mercury Systems, Inc.(1) | 388,800 | $ | 26,780,544 | |||||
Auto Components — 0.4% | ||||||||
Aptiv plc | 155,600 | 15,013,844 | ||||||
Automobiles — 0.8% | ||||||||
Tesla, Inc.(1) | 82,000 | 31,819,280 | ||||||
Beverages — 0.9% | ||||||||
Constellation Brands, Inc., Class A | 152,700 | 25,230,621 | ||||||
Diageo plc | 330,500 | 10,690,785 | ||||||
35,921,406 | ||||||||
Biotechnology — 3.2% | ||||||||
Biogen, Inc.(1) | 193,100 | 48,674,717 | ||||||
Regeneron Pharmaceuticals, Inc.(1) | 110,500 | 60,063,380 | ||||||
Vertex Pharmaceuticals, Inc.(1) | 70,500 | 14,689,380 | ||||||
123,427,477 | ||||||||
Capital Markets — 1.4% | ||||||||
Moody's Corp. | 71,100 | 18,692,190 | ||||||
MSCI, Inc. | 101,000 | 35,333,840 | ||||||
54,026,030 | ||||||||
Chemicals — 0.7% | ||||||||
Sherwin-Williams Co. (The) | 37,500 | 25,799,250 | ||||||
Containers and Packaging — 1.2% | ||||||||
Ball Corp. | 500,600 | 44,553,400 | ||||||
Entertainment — 2.0% | ||||||||
Electronic Arts, Inc.(1) | 394,300 | 47,248,969 | ||||||
Walt Disney Co. (The) | 238,300 | 28,893,875 | ||||||
76,142,844 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 2.7% | ||||||||
American Tower Corp. | 208,600 | 47,904,990 | ||||||
Equinix, Inc. | 78,600 | 57,475,464 | ||||||
105,380,454 | ||||||||
Food and Staples Retailing — 1.2% | ||||||||
Costco Wholesale Corp. | 130,200 | 46,562,124 | ||||||
Health Care Equipment and Supplies — 2.9% | ||||||||
Boston Scientific Corp.(1) | 124,300 | 4,259,761 | ||||||
Danaher Corp. | 140,000 | 32,135,600 | ||||||
Penumbra, Inc.(1) | 129,300 | 33,751,179 | ||||||
Stryker Corp. | 212,800 | 42,987,728 | ||||||
113,134,268 | ||||||||
Health Care Providers and Services — 3.9% | ||||||||
UnitedHealth Group, Inc. | 497,600 | 151,837,664 | ||||||
Industrial Conglomerates — 0.6% | ||||||||
Roper Technologies, Inc. | 58,300 | 21,649,122 | ||||||
Interactive Media and Services — 13.6% | ||||||||
Alphabet, Inc., Class A(1) | 90,600 | 146,419,566 | ||||||
Alphabet, Inc., Class C(1) | 129,100 | 209,272,391 |
10
Shares | Value | |||||||
Facebook, Inc., Class A(1) | 647,600 | $ | 170,390,036 | |||||
526,081,993 | ||||||||
Internet and Direct Marketing Retail — 8.4% | ||||||||
Amazon.com, Inc.(1) | 106,300 | 322,742,745 | ||||||
IT Services — 11.7% | ||||||||
Mastercard, Inc., Class A | 674,500 | 194,687,680 | ||||||
PayPal Holdings, Inc.(1) | 926,300 | 172,412,219 | ||||||
Visa, Inc., Class A | 459,900 | 83,568,429 | ||||||
450,668,328 | ||||||||
Machinery — 0.6% | ||||||||
FANUC Corp. | 115,300 | 24,507,092 | ||||||
Personal Products — 0.8% | ||||||||
Estee Lauder Cos., Inc. (The), Class A | 143,500 | 31,521,210 | ||||||
Pharmaceuticals — 1.7% | ||||||||
Bristol-Myers Squibb Co. | 1,109,200 | 64,832,740 | ||||||
Professional Services — 3.1% | ||||||||
IHS Markit Ltd. | 783,900 | 63,393,993 | ||||||
Verisk Analytics, Inc. | 312,100 | 55,544,437 | ||||||
118,938,430 | ||||||||
Road and Rail — 0.4% | ||||||||
Canadian Pacific Railway Ltd. | 56,800 | 16,973,919 | ||||||
Semiconductors and Semiconductor Equipment — 4.5% | ||||||||
Analog Devices, Inc. | 448,700 | 53,184,411 | ||||||
KLA Corp. | 70,100 | 13,822,318 | ||||||
Maxim Integrated Products, Inc. | 812,300 | 56,576,695 | ||||||
Texas Instruments, Inc. | 352,800 | 51,011,352 | ||||||
174,594,776 | ||||||||
Software — 13.9% | ||||||||
Adobe, Inc.(1) | 45,400 | 20,298,340 | ||||||
Atlassian Corp. plc, Class A(1) | 367,400 | 70,401,188 | ||||||
Crowdstrike Holdings, Inc., Class A(1) | 191,000 | 23,653,440 | ||||||
Microsoft Corp. | 1,181,100 | 239,137,317 | ||||||
Proofpoint, Inc.(1) | 165,000 | 15,797,100 | ||||||
salesforce.com, Inc.(1) | 504,600 | 117,203,442 | ||||||
Zendesk, Inc.(1) | 461,100 | 51,154,434 | ||||||
537,645,261 | ||||||||
Specialty Retail — 3.4% | ||||||||
Home Depot, Inc. (The) | 167,300 | 44,620,583 | ||||||
Lowe's Cos., Inc. | 307,800 | 48,663,180 | ||||||
TJX Cos., Inc. (The) | 718,500 | 36,499,800 | ||||||
129,783,563 | ||||||||
Technology Hardware, Storage and Peripherals — 12.9% | ||||||||
Apple, Inc. | 4,558,000 | 496,183,880 | ||||||
Textiles, Apparel and Luxury Goods — 1.6% | ||||||||
NIKE, Inc., Class B | 498,200 | 59,823,856 | ||||||
TOTAL COMMON STOCKS (Cost $1,426,828,655) | 3,826,345,500 |
11
Shares/Principal Amount | Value | |||||||
CONVERTIBLE BONDS — 0.7% | ||||||||
IT Services — 0.3% | ||||||||
Square, Inc., 0.50%, 5/15/23 | $ | 5,601,000 | $ | 11,595,131 | ||||
Software — 0.4% | ||||||||
PagerDuty, Inc., 1.25%, 7/1/25(2) | 15,622,000 | 15,902,598 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $20,694,718) | 27,497,729 | |||||||
RIGHTS† | ||||||||
Pharmaceuticals† | ||||||||
Bristol-Myers Squibb Co.(1) (Cost $832,404) | 390,800 | 1,274,008 | ||||||
TEMPORARY CASH INVESTMENTS — 0.1% | ||||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.50% - 3.375%, 6/30/21 - 11/15/48, valued at $787,871), in a joint trading account at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $775,150) | 775,146 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 3.625%, 2/15/44, valued at $1,376,046), at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $1,349,007) | 1,349,000 | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 89 | 89 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $2,124,235) | 2,124,235 | |||||||
TOTAL INVESTMENT SECURITIES — 100.0% (Cost $1,450,480,012) | 3,857,241,472 | |||||||
OTHER ASSETS AND LIABILITIES† | (372,196) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 3,856,869,276 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
CAD | 661,209 | USD | 502,876 | Morgan Stanley | 12/31/20 | $ | (6,412) | |||||||||||||
USD | 392,668 | CAD | 519,663 | Morgan Stanley | 12/31/20 | 2,483 | ||||||||||||||
USD | 367,616 | CAD | 486,662 | Morgan Stanley | 12/31/20 | 2,209 | ||||||||||||||
USD | 11,868,194 | CAD | 15,819,709 | Morgan Stanley | 12/31/20 | (9,927) | ||||||||||||||
$ | (11,647) |
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
CAD | - | Canadian Dollar | ||||||
USD | - | United States Dollar |
†Category is less than 0.05% of total net assets.
(1)Non-income producing.
(2)Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration, normally to qualified institutional investors. The aggregate value of these securities at the period end was $15,902,598, which represented 0.4% of total net assets.
See Notes to Financial Statements.
12
Statement of Assets and Liabilities |
OCTOBER 31, 2020 | |||||
Assets | |||||
Investment securities, at value (cost of $1,450,480,012) | $ | 3,857,241,472 | |||
Receivable for investments sold | 5,029,239 | ||||
Receivable for capital shares sold | 671,593 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 4,692 | ||||
Dividends and interest receivable | 1,718,887 | ||||
3,864,665,883 | |||||
Liabilities | |||||
Payable for investments purchased | 1,985,028 | ||||
Payable for capital shares redeemed | 2,489,286 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 16,339 | ||||
Accrued management fees | 3,287,357 | ||||
Distribution and service fees payable | 18,597 | ||||
7,796,607 | |||||
Net Assets | $ | 3,856,869,276 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 1,197,462,515 | |||
Distributable earnings | 2,659,406,761 | ||||
$ | 3,856,869,276 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $3,596,722,207 | 38,289,617 | $93.93 | ||||||||
I Class, $0.01 Par Value | $119,954,185 | 1,249,629 | $95.99 | ||||||||
Y Class, $0.01 Par Value | $72,595,149 | 753,979 | $96.28 | ||||||||
A Class, $0.01 Par Value | $54,557,816 | 598,324 | $91.18* | ||||||||
C Class, $0.01 Par Value | $5,390,335 | 68,036 | $79.23 | ||||||||
R Class, $0.01 Par Value | $3,384,358 | 37,662 | $89.86 | ||||||||
R5 Class, $0.01 Par Value | $9,215 | 96 | $95.99 | ||||||||
R6 Class, $0.01 Par Value | $4,256,011 | 44,258 | $96.16 |
*Maximum offering price $96.74 (net asset value divided by 0.9425).
See Notes to Financial Statements.
13
Statement of Operations |
YEAR ENDED OCTOBER 31, 2020 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $60,352) | $ | 29,204,115 | |||
Interest | 220,450 | ||||
Securities Lending, net | 53,994 | ||||
29,478,559 | |||||
Expenses: | |||||
Management fees | 34,999,463 | ||||
Distribution and service fees: | |||||
A Class | 124,929 | ||||
C Class | 56,881 | ||||
R Class | 16,762 | ||||
Directors' fees and expenses | 114,845 | ||||
Other expenses | 1,091 | ||||
35,313,971 | |||||
Fees waived(1) | (716,482) | ||||
34,597,489 | |||||
Net investment income (loss) | (5,118,930) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 267,330,014 | ||||
Forward foreign currency exchange contract transactions | 163,865 | ||||
Written options contract transactions | 888,402 | ||||
Foreign currency translation transactions | (40,312) | ||||
268,341,969 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 557,295,358 | ||||
Forward foreign currency exchange contracts | 84,581 | ||||
Written options contracts | (20,820) | ||||
Translation of assets and liabilities in foreign currencies | 1,194 | ||||
557,360,313 | |||||
Net realized and unrealized gain (loss) | 825,702,282 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 820,583,352 |
(1)Amount consists of $668,866, $22,847, $12,216, $9,994, $1,138, $670, $1 and $750 for Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class and R6 Class, respectively.
See Notes to Financial Statements.
14
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2020 AND OCTOBER 31, 2019 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2020 | October 31, 2019 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (5,118,930) | $ | 20,145 | ||||
Net realized gain (loss) | 268,341,969 | 179,904,572 | ||||||
Change in net unrealized appreciation (depreciation) | 557,360,313 | 274,093,557 | ||||||
Net increase (decrease) in net assets resulting from operations | 820,583,352 | 454,018,274 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (167,944,066) | (213,120,945) | ||||||
I Class | (5,704,618) | (5,385,005) | ||||||
Y Class | (2,611,966) | (1,027,005) | ||||||
A Class | (2,383,411) | (3,006,841) | ||||||
C Class | (346,331) | (473,987) | ||||||
R Class | (178,475) | (180,464) | ||||||
R5 Class | (394) | (476) | ||||||
R6 Class | (158,543) | (145,270) | ||||||
Decrease in net assets from distributions | (179,327,804) | (223,339,993) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (42,842,237) | 57,161,383 | ||||||
Net increase (decrease) in net assets | 598,413,311 | 287,839,664 | ||||||
Net Assets | ||||||||
Beginning of period | 3,258,455,965 | 2,970,616,301 | ||||||
End of period | $ | 3,856,869,276 | $ | 3,258,455,965 | ||||
See Notes to Financial Statements.
15
Notes to Financial Statements |
OCTOBER 31, 2020
1. Organization
American Century Mutual Funds, 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. Select Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek long-term capital growth.
The fund offers the Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class and 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.
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 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. Convertible bonds are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, 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. Exchange-traded options contracts are valued at a mean as provided by independent pricing services. 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.
16
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. 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 lending income is net of fees and rebates earned by the lending agent for its services.
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 American Century Investment Management, Inc. (ACIM) (the investment advisor) 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 certain types of investment securities and other financial instruments. 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 collateral requirements.
17
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 and 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.
Securities Lending — Securities are lent to qualified financial institutions and brokers. State Street Bank & Trust Co. serves as securities lending agent to the fund pursuant to a Securities Lending Agreement. The lending of securities exposes the fund to risks such as: the borrowers may fail to return the loaned securities, the borrowers may not be able to provide additional collateral, the fund may experience delays in recovery of the loaned securities or delays in access to collateral, or the fund may experience losses related to the investment collateral. To minimize certain risks, loan counterparties pledge collateral in the form of cash and/or securities. The lending agent has agreed to indemnify the fund in the case of default of any securities borrowed. Cash collateral received is invested in the State Street Navigator Securities Lending Government Money Market Portfolio, a money market mutual fund registered under the 1940 Act. The loans may also be secured by U.S. government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. By lending securities, the fund seeks to increase its net investment income through the receipt of interest and fees. Such income is reflected separately within the Statement of Operations. The value of loaned securities and related collateral outstanding at period end, if any, are shown on a gross basis within the Schedule of Investments and Statement of Assets and Liabilities.
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 ACIM will pay all expenses of managing and operating the fund, except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), extraordinary expenses, 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. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class. 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 use very similar investment teams and
18
strategies (strategy assets). During the period ended October 31, 2020, the investment advisor agreed to waive 0.02% of the fund's management fee. The investment advisor expects this waiver to continue until July 31, 2021 and cannot terminate it prior to such date without the approval of the Board of Directors.
The management fee schedule range and the effective annual management fee before and after waiver for each class for the period ended October 31, 2020 are as follows:
Management Fee | Effective Annual Management Fee | ||||||||||
Schedule Range | Before Waiver | After Waiver | |||||||||
Investor Class | 0.800% to 0.990% | 0.99% | 0.97% | ||||||||
I Class | 0.600% to 0.790% | 0.79% | 0.77% | ||||||||
Y Class | 0.450% to 0.640% | 0.64% | 0.62% | ||||||||
A Class | 0.800% to 0.990% | 0.99% | 0.97% | ||||||||
C Class | 0.800% to 0.990% | 0.99% | 0.97% | ||||||||
R Class | 0.800% to 0.990% | 0.99% | 0.97% | ||||||||
R5 Class | 0.600% to 0.790% | 0.79% | 0.77% | ||||||||
R6 Class | 0.450% to 0.640% | 0.64% | 0.62% |
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 period ended October 31, 2020 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.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $21,891 and $4,001,132, respectively. The effect of interfund transactions on the Statement of Operations was $730,243 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended October 31, 2020 were $576,208,800 and $778,268,797, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2020 | Year ended October 31, 2019 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 475,000,000 | 475,000,000 | ||||||||||||
Sold | 1,243,588 | $ | 102,506,141 | 800,738 | $ | 57,669,376 | ||||||||
Issued in reinvestment of distributions | 2,018,516 | 159,826,128 | 3,227,630 | 203,857,091 | ||||||||||
Redeemed | (3,836,882) | (319,224,605) | (3,621,970) | (261,065,622) | ||||||||||
(574,778) | (56,892,336) | 406,398 | 460,845 | |||||||||||
I Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 263,810 | 22,646,467 | 647,839 | 49,485,276 | ||||||||||
Issued in reinvestment of distributions | 67,528 | 5,454,233 | 78,144 | 5,019,942 | ||||||||||
Redeemed | (397,122) | (32,507,442) | (356,766) | (26,327,849) | ||||||||||
(65,784) | (4,406,742) | 369,217 | 28,177,369 | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 372,810 | 32,358,265 | 431,529 | 32,202,180 | ||||||||||
Issued in reinvestment of distributions | 31,872 | 2,578,781 | 15,293 | 982,580 | ||||||||||
Redeemed | (224,881) | (20,117,689) | (66,043) | (4,978,500) | ||||||||||
179,801 | 14,819,357 | 380,779 | 28,206,260 | |||||||||||
A Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 150,187 | 12,354,119 | 60,310 | 4,251,171 | ||||||||||
Issued in reinvestment of distributions | 30,503 | 2,349,653 | 48,212 | 2,974,205 | ||||||||||
Redeemed | (130,967) | (10,805,132) | (106,841) | (7,576,575) | ||||||||||
49,723 | 3,898,640 | 1,681 | (351,199) | |||||||||||
C Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 3,306 | 218,808 | 9,195 | 550,593 | ||||||||||
Issued in reinvestment of distributions | 4,778 | 321,908 | 8,020 | 439,266 | ||||||||||
Redeemed | (21,797) | (1,593,266) | (23,445) | (1,502,183) | ||||||||||
(13,713) | (1,052,550) | (6,230) | (512,324) | |||||||||||
R Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 13,166 | 1,067,191 | 11,175 | 787,619 | ||||||||||
Issued in reinvestment of distributions | 2,346 | 178,475 | 2,952 | 180,464 | ||||||||||
Redeemed | (17,732) | (1,462,813) | (5,809) | (414,285) | ||||||||||
(2,220) | (217,147) | 8,318 | 553,798 | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Issued in reinvestment of distributions | 5 | 394 | 8 | 476 | ||||||||||
R6 Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 24,479 | 2,048,036 | 12,413 | 902,406 | ||||||||||
Issued in reinvestment of distributions | 1,952 | 157,710 | 2,252 | 144,508 | ||||||||||
Redeemed | (13,941) | (1,197,599) | (5,652) | (420,756) | ||||||||||
12,490 | 1,008,147 | 9,013 | 626,158 | |||||||||||
Net increase (decrease) | (414,476) | $ | (42,842,237) | 1,169,184 | $ | 57,161,383 |
20
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.
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 | $ | 3,774,173,704 | $ | 52,171,796 | — | ||||||
Convertible Bonds | — | 27,497,729 | — | ||||||||
Rights | 1,274,008 | — | — | ||||||||
Temporary Cash Investments | 89 | 2,124,146 | — | ||||||||
$ | 3,775,447,801 | $ | 81,793,671 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 4,692 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 16,339 | — |
21
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 options contracts based on an equity index or specific security in order to manage its exposure to changes in market conditions. The risks of entering into equity price risk derivative instruments include the possible lack of liquidity, failure of the counterparty to meet its obligations, and that there may be unfavorable changes in the underlying investments or instruments. A fund may purchase or write an option contract to protect against declines in market value on the underlying index or security. A purchased option contract provides the fund a right, but not an obligation, to buy (call) or sell (put) an equity-related asset at a specified exercise price within a certain period or on a specific date. A written option contract holds the corresponding obligation to sell (call writing) or buy (put writing) the underlying equity-related asset if the purchaser exercises the option contract. The buyer pays the seller an initial purchase price (premium) for this right. Option contracts purchased by a fund are accounted for in the same manner as marketable portfolio securities. The premium received by a fund for option contracts written is recorded as a liability and valued daily. The proceeds from securities sold through the exercise of option contracts are decreased by the premium paid to purchase the option contracts. A fund may recognize a realized gain or loss when the option contract is closed, exercised or expires. Net realized and unrealized gains or losses occurring during the holding period of purchased options contracts 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 gains or losses occurring during the holding period of written options contracts are a component of net realized gain (loss) on written options contract transactions and change in net unrealized appreciation (depreciation) on written options contracts, respectively. The fund’s average exposure to equity price risk derivative instruments held during the period was 713 written options contracts.
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 settlement 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 forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, 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 $18,219,002.
Value of Derivative Instruments as of October 31, 2020
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 | $ | 4,692 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 16,339 |
22
Effect of Derivative Instruments on the Statement of Operations for the Year Ended October 31, 2020
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 written options contract transactions | $ | 888,402 | Change in net unrealized appreciation (depreciation) on written options contracts | $ | (20,820) | ||||||||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | 163,865 | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | 84,581 | ||||||||||
$ | 1,052,267 | $ | 63,761 |
8. Risk Factors
The value of the fund’s shares will go up and down, sometimes rapidly or unpredictably, based on the performance of the securities owned by the fund and other factors generally affecting the securities market. Market risks, including political, regulatory, economic and social developments, can affect the value of the fund’s investments. Natural disasters, public health emergencies, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse long-term effects on world economies and markets generally.
9. Federal Tax Information
On December 8, 2020, the fund declared and paid a per-share distribution from net realized gains to
shareholders of record on December 7, 2020 of $6.3212 for the Investor Class, I Class, Y Class, A Class,
C Class, R Class, R5 Class and R6 Class.
C Class, R Class, R5 Class and R6 Class.
The tax character of distributions paid during the years ended October 31, 2020 and October 31, 2019 were as follows:
2020 | 2019 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 28,200 | $ | 1,537,114 | ||||
Long-term capital gains | $ | 179,299,604 | $ | 221,802,879 |
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 period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 1,450,515,454 | |||
Gross tax appreciation of investments | $ | 2,421,591,472 | |||
Gross tax depreciation of investments | (14,865,454) | ||||
Net tax appreciation (depreciation) of investments | 2,406,726,018 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 1,136 | ||||
Net tax appreciation (depreciation) | $ | 2,406,727,154 | |||
Undistributed ordinary income | $ | — | |||
Accumulated long-term gains | $ | 257,590,403 | |||
Late-year ordinary loss deferral | $ | (4,910,796) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Loss deferrals 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.
23
Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 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 | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $78.58 | (0.13) | 19.83 | 19.70 | — | (4.35) | (4.35) | $93.93 | 26.10% | 0.97% | 0.99% | (0.15)% | (0.17)% | 16% | $3,596,722 | ||||||||||||||||||||||||||||||||
2019 | $73.74 | —(3) | 10.42 | 10.42 | (0.03) | (5.55) | (5.58) | $78.58 | 15.98% | 0.97% | 0.99% | 0.00%(4) | (0.02)% | 17% | $3,054,007 | ||||||||||||||||||||||||||||||||
2018 | $71.92 | 0.04 | 6.20 | 6.24 | (0.21) | (4.21) | (4.42) | $73.74 | 8.94% | 0.97% | 0.99% | 0.06% | 0.04% | 22% | $2,835,970 | ||||||||||||||||||||||||||||||||
2017 | $58.32 | 0.21 | 15.59 | 15.80 | (0.22) | (1.98) | (2.20) | $71.92 | 27.93% | 0.99% | 1.00% | 0.33% | 0.32% | 19% | $2,753,729 | ||||||||||||||||||||||||||||||||
2016 | $61.57 | 0.20 | 0.30 | 0.50 | (0.25) | (3.50) | (3.75) | $58.32 | 0.98% | 0.99% | 0.99% | 0.36% | 0.36% | 16% | $2,287,797 | ||||||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $80.06 | 0.05 | 20.23 | 20.28 | — | (4.35) | (4.35) | $95.99 | 26.35% | 0.77% | 0.79% | 0.05% | 0.03% | 16% | $119,954 | ||||||||||||||||||||||||||||||||
2019 | $75.02 | 0.13 | 10.63 | 10.76 | (0.17) | (5.55) | (5.72) | $80.06 | 16.22% | 0.77% | 0.79% | 0.20% | 0.18% | 17% | $105,310 | ||||||||||||||||||||||||||||||||
2018 | $73.11 | 0.19 | 6.29 | 6.48 | (0.36) | (4.21) | (4.57) | $75.02 | 9.15% | 0.77% | 0.79% | 0.26% | 0.24% | 22% | $70,986 | ||||||||||||||||||||||||||||||||
2017 | $59.25 | 0.31 | 15.87 | 16.18 | (0.34) | (1.98) | (2.32) | $73.11 | 28.20% | 0.79% | 0.80% | 0.53% | 0.52% | 19% | $60,895 | ||||||||||||||||||||||||||||||||
2016 | $62.49 | 0.32 | 0.31 | 0.63 | (0.37) | (3.50) | (3.87) | $59.25 | 1.19% | 0.79% | 0.79% | 0.56% | 0.56% | 16% | $28,061 | ||||||||||||||||||||||||||||||||
Y Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $80.17 | 0.16 | 20.30 | 20.46 | — | (4.35) | (4.35) | $96.28 | 26.55% | 0.62% | 0.64% | 0.20% | 0.18% | 16% | $72,595 | ||||||||||||||||||||||||||||||||
2019 | $75.13 | 0.22 | 10.64 | 10.86 | (0.27) | (5.55) | (5.82) | $80.17 | 16.38% | 0.62% | 0.64% | 0.35% | 0.33% | 17% | $46,034 | ||||||||||||||||||||||||||||||||
2018 | $73.13 | 0.28 | 6.33 | 6.61 | (0.40) | (4.21) | (4.61) | $75.13 | 9.34% | 0.62% | 0.64% | 0.41% | 0.39% | 22% | $14,529 | ||||||||||||||||||||||||||||||||
2017(5) | $63.80 | 0.22 | 9.11 | 9.33 | — | — | — | $73.13 | 14.62% | 0.64%(6) | 0.65%(6) | 0.59%(6) | 0.58%(6) | 19%(7) | $6 |
For a Share Outstanding Throughout the Years Ended October 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 | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $76.58 | (0.33) | 19.28 | 18.95 | — | (4.35) | (4.35) | $91.18 | 25.79% | 1.22% | 1.24% | (0.40)% | (0.42)% | 16% | $54,558 | ||||||||||||||||||||||||||||||||
2019 | $72.15 | (0.18) | 10.16 | 9.98 | — | (5.55) | (5.55) | $76.58 | 15.69% | 1.22% | 1.24% | (0.25)% | (0.27)% | 17% | $42,013 | ||||||||||||||||||||||||||||||||
2018 | $70.45 | (0.14) | 6.07 | 5.93 | (0.02) | (4.21) | (4.23) | $72.15 | 8.67% | 1.22% | 1.24% | (0.19)% | (0.21)% | 22% | $39,459 | ||||||||||||||||||||||||||||||||
2017 | $57.16 | 0.05 | 15.29 | 15.34 | (0.07) | (1.98) | (2.05) | $70.45 | 27.63% | 1.24% | 1.25% | 0.08% | 0.07% | 19% | $40,345 | ||||||||||||||||||||||||||||||||
2016 | $60.41 | 0.06 | 0.29 | 0.35 | (0.10) | (3.50) | (3.60) | $57.16 | 0.73% | 1.24% | 1.24% | 0.11% | 0.11% | 16% | $36,723 | ||||||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $67.55 | (0.82) | 16.85 | 16.03 | — | (4.35) | (4.35) | $79.23 | 24.85% | 1.97% | 1.99% | (1.15)% | (1.17)% | 16% | $5,390 | ||||||||||||||||||||||||||||||||
2019 | $64.79 | (0.63) | 8.94 | 8.31 | — | (5.55) | (5.55) | $67.55 | 14.82% | 1.97% | 1.99% | (1.00)% | (1.02)% | 17% | $5,523 | ||||||||||||||||||||||||||||||||
2018 | $64.11 | (0.62) | 5.51 | 4.89 | — | (4.21) | (4.21) | $64.79 | 7.86% | 1.97% | 1.99% | (0.94)% | (0.96)% | 22% | $5,700 | ||||||||||||||||||||||||||||||||
2017 | $52.51 | (0.39) | 13.97 | 13.58 | — | (1.98) | (1.98) | $64.11 | 26.66% | 1.99% | 2.00% | (0.67)% | (0.68)% | 19% | $5,668 | ||||||||||||||||||||||||||||||||
2016 | $56.09 | (0.33) | 0.25 | (0.08) | — | (3.50) | (3.50) | $52.51 | (0.02)% | 1.99% | 1.99% | (0.64)% | (0.64)% | 16% | $4,570 | ||||||||||||||||||||||||||||||||
R Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $75.71 | (0.53) | 19.03 | 18.50 | — | (4.35) | (4.35) | $89.86 | 25.48% | 1.47% | 1.49% | (0.65)% | (0.67)% | 16% | $3,384 | ||||||||||||||||||||||||||||||||
2019 | $71.56 | (0.36) | 10.06 | 9.70 | — | (5.55) | (5.55) | $75.71 | 15.40% | 1.47% | 1.49% | (0.50)% | (0.52)% | 17% | $3,019 | ||||||||||||||||||||||||||||||||
2018 | $70.05 | (0.30) | 6.02 | 5.72 | — | (4.21) | (4.21) | $71.56 | 8.41% | 1.47% | 1.49% | (0.44)% | (0.46)% | 22% | $2,259 | ||||||||||||||||||||||||||||||||
2017 | $56.92 | (0.11) | 15.22 | 15.11 | — | (1.98) | (1.98) | $70.05 | 27.30% | 1.49% | 1.50% | (0.17)% | (0.18)% | 19% | $3,518 | ||||||||||||||||||||||||||||||||
2016 | $60.21 | (0.08) | 0.29 | 0.21 | — | (3.50) | (3.50) | $56.92 | 0.49% | 1.49% | 1.49% | (0.14)% | (0.14)% | 16% | $2,814 |
For a Share Outstanding Throughout the Years Ended October 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) | |||||||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $80.07 | 0.03 | 20.24 | 20.27 | — | (4.35) | (4.35) | $95.99 | 26.34% | 0.77% | 0.79% | 0.05% | 0.03% | 16% | $9 | ||||||||||||||||||||||||||||||||
2019 | $75.04 | 0.13 | 10.62 | 10.75 | (0.17) | (5.55) | (5.72) | $80.07 | 16.20% | 0.77% | 0.79% | 0.20% | 0.18% | 17% | $7 | ||||||||||||||||||||||||||||||||
2018 | $73.10 | 0.18 | 6.28 | 6.46 | (0.31) | (4.21) | (4.52) | $75.04 | 9.13% | 0.77% | 0.79% | 0.26% | 0.24% | 22% | $6 | ||||||||||||||||||||||||||||||||
2017(5) | $63.83 | 0.17 | 9.10 | 9.27 | — | — | — | $73.10 | 14.52% | 0.79%(6) | 0.80%(6) | 0.44%(6) | 0.43%(6) | 19%(7) | $6 | ||||||||||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $80.08 | 0.16 | 20.27 | 20.43 | — | (4.35) | (4.35) | $96.16 | 26.54% | 0.62% | 0.64% | 0.20% | 0.18% | 16% | $4,256 | ||||||||||||||||||||||||||||||||
2019 | $75.05 | 0.25 | 10.60 | 10.85 | (0.27) | (5.55) | (5.82) | $80.08 | 16.39% | 0.62% | 0.64% | 0.35% | 0.33% | 17% | $2,544 | ||||||||||||||||||||||||||||||||
2018 | $73.13 | 0.31 | 6.29 | 6.60 | (0.47) | (4.21) | (4.68) | $75.05 | 9.33% | 0.62% | 0.64% | 0.41% | 0.39% | 22% | $1,708 | ||||||||||||||||||||||||||||||||
2017 | $59.27 | 0.51 | 15.76 | 16.27 | (0.43) | (1.98) | (2.41) | $73.13 | 28.38% | 0.64% | 0.65% | 0.68% | 0.67% | 19% | $1,519 | ||||||||||||||||||||||||||||||||
2016 | $62.51 | 0.41 | 0.31 | 0.72 | (0.46) | (3.50) | (3.96) | $59.27 | 1.35% | 0.64% | 0.64% | 0.71% | 0.71% | 16% | $7,959 |
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)Amount is less than $0.005.
(4)Ratio was less than 0.005%.
(5)April 10, 2017 (commencement of sale) through October 31, 2017.
(6)Annualized.
(7)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2017.
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the Shareholders and the Board of Directors of American Century Mutual Funds, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Select Fund (the “Fund”), one of the funds constituting the American Century Mutual Funds, Inc., as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of Select Fund of the American Century Mutual Funds, Inc. as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
December 16, 2020
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 62 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 62 | None | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 62 | None | ||||||||||||
Rajesh K. Gupta (1960) | Director | Since 2019 | Partner Emeritus, SeaCrest Investment Management and SeaCrest Wealth Management (2019 to Present); Chief Executive Officer and Chief Investment Officer, SeaCrest Investment Management (2006 to 2019); Chief Executive Officer and Chief Investment Officer, SeaCrest Wealth Management (2008 to 2019) | 62 | None |
29
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Lynn Jenkins (1963) | Director | Since 2019 | Consultant, LJ Strategies (2019 to present); United States Representative, U.S. House of Representatives (2009 to 2018) | 62 | MGP Ingredients, Inc. | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 62 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 62 | Onto Innovation Inc.; Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 87 | None | ||||||||||||
Interested Director | |||||||||||||||||
Jonathan S. Thomas (1963) | Director | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 125 | None |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
30
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for each of the 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years | ||||||
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries | ||||||
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Vice President, ACS, (2020 to present); Investment Operations and Investment Accounting, ACS (2000 to present) | ||||||
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS | ||||||
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS | ||||||
C. Jean Wade (1964) | Vice President since 2012 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) | ||||||
Robert J. Leach (1966) | Vice President since 2006 | Vice President, ACS (2000 to present) | ||||||
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS | ||||||
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
31
Approval of Management Agreement |
At a meeting held on June 24, 2020, the Fund’s Board of Directors (the "Board") 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 continual 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 and to be provided to the Fund;
•the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis;
•the Fund’s investment performance, including data comparing the Fund's performance 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 compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans;
•the Advisor’s business continuity plans and specifically its response to the COVID-19 pandemic;
•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;
•services provided and charges to the Advisor's other investment management clients;
•acquired fund fees and expenses;
•payments and practices in connection with financial intermediaries holding shares of the Fund and the services provided by intermediaries in connection therewith; and
•possible collateral benefits to the Advisor from the management of the Fund.
The Board held two meetings to consider the renewal. The independent Directors also met in private session three times to review and discuss the information provided in response to their request. The independent Directors held active discussions with the Advisor regarding the renewal of the management agreement, requesting supplemental information, and reviewing information provided by the Advisor in response thereto. The independent Directors 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 in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or
32
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 without limitation 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 Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
•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 amounts paid by the Fund under Rule 12b-1 plans)
The Board noted that many of these services have expanded over time in terms of both 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, provides oversight of the investment performance process. It 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 investment performance information during the management agreement renewal 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 five-year periods and below its benchmark for the three- 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 its various committees, 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, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio
33
valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
COVID-19 Response. During 2020, much of the world experienced unprecedented change and challenges from the impacts of the rapidly evolving, worldwide spread of the COVID-19 virus. The Board evaluated the Advisor’s response to the COVID-19 pandemic and its impact on service to the Fund. The Board found that Fund shareholders have continued to receive the Advisor’s investment management and other services without disruption, and Advisor personnel have demonstrated great resiliency in providing those services. The Board, directly and through its Audit Committee, continues to monitor the impact of the pandemic and the response of each of the Fund’s service providers.
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, to the extent they exist, through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business, infrastructure, investment capabilities and initiatives 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, expenses attributable to short sales, taxes, interest, extraordinary expenses, 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 Investment Company 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
34
and was within the range of its peer expense group. The Board and the Advisor agreed to a temporary reduction of the Fund's annual unified management fee of 0.02% (e.g., the Investor Class unified fee will be reduced from 0.99% to 0.97%) for at least one year, beginning August 1, 2020. 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 Board 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 and services provided in response thereto. 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 Directors reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 Plan and that all such payments by the Advisor were made from the Advisor’s resources and reasonable profits. The Board found such payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the possible 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. To the extent there are potential collateral benefits, the board has been advised and has taken this into consideration in its review of the management contract with the Fund. 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 may receive 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 retirement accounts 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 and change your withholding percentage for future distributions.
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.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they 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 American Century Investments’ website at americancentury.com/proxy 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 americancentury.com/proxy. 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 as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov. 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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Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified dividend income for the fiscal year ended October 31, 2020.
For corporate taxpayers, the fund hereby designates $28,200, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2020 as qualified for the corporate dividends received deduction.
The fund hereby designates $189,757,172, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2020.
The fund utilized earnings and profits of $10,457,568 distributed to shareholders on redemption of shares as part of the dividends paid deduction ( tax equalization).
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Notes |
38
Notes |
39
Notes |
40
![]() | ||||||||
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 Mutual Funds, 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. | ||||||||
©2020 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90969 2012 |
![image81.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image81.jpg)
Annual Report | |||||
October 31, 2020 | |||||
Small Cap Growth Fund | |||||
Investor Class (ANOIX) | |||||
I Class (ANONX) | |||||
Y Class (ANOYX) | |||||
A Class (ANOAX) | |||||
C Class (ANOCX) | |||||
R Class (ANORX) | |||||
R5 Class (ANOGX) | |||||
R6 Class (ANODX) | |||||
G Class (ANOHX) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | |||||
Performance | |||||
Portfolio Commentary | |||||
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 | |||||
Report of Independent Registered Public Accounting Firm | |||||
Management | |||||
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 |
![image181.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image181.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2020. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Pandemic Disrupted Economic, Market Courses
Market sentiment began the period relatively upbeat. A dovish Federal Reserve (Fed), modest inflation, improving economic and earnings data, and progress on U.S.-China trade policy helped boost global growth outlooks. Against this backdrop, riskier assets generally remained in favor.
However, beginning in late February, the COVID-19 outbreak rapidly spread worldwide, halting most U.S. and global economic activity and triggering a deep worldwide recession. Global stocks and credit-sensitive assets sold off sharply, while U.S. Treasury yields plunged to record lows amid soaring demand. Quick and aggressive action from the Fed and other central banks and federal governments helped stabilize and restore confidence in the financial markets. By summer, declining coronavirus infection and death rates in many regions and the reopening of economies were positive influences. By the end of the reporting period, most data suggested an economic recovery was underway. But, at the same time, COVID-19 infection rates were rising in the U.S. and Europe, prompting new lockdown measures in some European countries.
Overall, the broad U.S. stock market overcame the effects of the early 2020 sell-off to deliver a solid gain for the 12-month period. Growth stocks rallied and significantly outperformed value stocks, which generally declined. Global bond returns were broadly positive, as yields declined.
Science Helps Steer the Return to Normal
The return to pre-pandemic life will take time and patience, but we are confident we will get there. The first COVID-19 vaccine is on track for approval by year-end, and medical professionals continue to fine-tune virus treatment protocols. In the meantime, investors likely will face periods of outbreak-related disruptions, economic and political uncertainty, and heightened market volatility. These influences can be unsettling, but they tend to be temporary.
We appreciate your confidence in us during these extraordinary times. Our firm has a long history of helping clients weather unpredictable markets, and we’re confident we will continue to meet today’s challenges.
Sincerely,
![image191.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image191.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2020 | |||||||||||||||||||||||
Average Annual Returns | |||||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | ||||||||||||||||||
Investor Class | ANOIX | 32.43% | 16.59% | 14.23% | — | 6/1/01 | |||||||||||||||||
Russell 2000 Growth Index | — | 13.37% | 10.35% | 11.94% | — | — | |||||||||||||||||
I Class | ANONX | 32.76% | 16.83% | 14.46% | — | 5/18/07 | |||||||||||||||||
Y Class | ANOYX | 32.96% | — | — | 19.84% | 4/10/17 | |||||||||||||||||
A Class | ANOAX | 1/31/03 | |||||||||||||||||||||
No sales charge | 32.14% | 16.30% | 13.96% | — | |||||||||||||||||||
With sales charge | 24.51% | 14.93% | 13.28% | — | |||||||||||||||||||
C Class | ANOCX | 31.18% | 15.45% | 13.09% | — | 1/31/03 | |||||||||||||||||
R Class | ANORX | 31.80% | 16.02% | 13.67% | — | 9/28/07 | |||||||||||||||||
R5 Class | ANOGX | 32.74% | — | — | 19.66% | 4/10/17 | |||||||||||||||||
R6 Class | ANODX | 32.91% | 17.01% | — | 13.91% | 7/26/13 | |||||||||||||||||
G Class | ANOHX | 34.09% | — | — | 24.23% | 4/1/19 |
Average annual returns since inception are presented when ten years of performance history is not available.
G Class returns would have been lower if a portion of the fees had not been waived. Extraordinary performance is attributable in part to unusually favorable market conditions and may not be repeated or consistently achieved in the future.
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.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. 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.
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Growth of $10,000 Over 10 Years | ||
$10,000 investment made October 31, 2010 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-0cdc1dedbdf34eb08061.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/chart-0cdc1dedbdf34eb08061.jpg)
Value on October 31, 2020 | |||||
Investor Class — $37,879 | |||||
Russell 2000 Growth Index — $30,922 | |||||
Total Annual Fund Operating Expenses | ||||||||||||||||||||||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | G Class | ||||||||||||||||||
1.28% | 1.08% | 0.93% | 1.53% | 2.28% | 1.78% | 1.08% | 0.93% | 0.93% |
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. Total returns for periods less than one year are not annualized. 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.
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Portfolio Commentary |
Portfolio Managers: Jackie Wagner and Jeff Hoernemann
Performance Summary
Small Cap Growth returned 32.43%* for the 12 months ended October 31, 2020, outpacing the 13.37% return of the fund’s benchmark, the Russell 2000 Growth Index.
U.S. stocks delivered strong returns during the reporting period, which was marked by extreme volatility. Stocks initially rose to all-time highs in February, before the COVID-19 pandemic and measures to combat it led to the first recession and bear market in stocks since the 2008-09 financial crisis. Massive monetary and fiscal stimulus helped support the economy and markets, and stocks recovered the ground lost earlier. Within the Russell 2000 Growth Index, health care stocks posted the best returns, followed by information technology and consumer discretionary. Energy stocks registered significant losses as the price of oil declined amid falling demand.
Stock choices within the health care and information technology sectors helped drive outperformance relative to the benchmark. Stock selection in the consumer staples and energy sectors detracted.
Health Care Stocks Benefited Performance
Stock selection across health care industries was helpful, led by biotechnology and pharmaceuticals. Immunomedics was a top contributor. The biopharmaceutical company agreed to be acquired by Gilead Sciences, reflecting the value of its oncology program, which has multiple potential further indications. The holding was eliminated as a result of the deal. Early in the year, Teladoc Health, the top provider of telehealth services, reported results and guidance ahead of expectations. As the pandemic took hold, the company saw rapidly accelerating demand for its services as providers sought out socially distanced care. Catalent, a contract manufacturer of pharmaceutical and biologic products, was another top contributor in the health care sector. We sold our holdings of Teladoc and Catalent as their capitalization sizes grew beyond the fund’s small-cap parameters.
Other significant contributors included Chegg. This provider of products and services to students continued to post better-than-expected results. The company benefited from strong subscription growth, operating expense leverage and from its acquisition of Thinkful. The acceleration of at-home/online learning due to COVID-19 boosted adoption trends and allowed the company to capitalize on cross-selling opportunities. Palomar Holdings helped performance. This property and casualty insurance company is mostly exposed to earthquakes and other catastrophes such as wind and flood. Gross written premium growth remained strong, driven by demand for quake insurance. Pricing growth also accelerated.
As a small-cap fund, we occasionally invest in initial public offerings (IPOs). During the period, our IPOs were modest positive contributors.
Consumer Staples Weighed on Performance
Stock selection among personal products companies and an underweight allocation to the industry led relative underperformance in the consumer staples sector. Underweighting beverages stocks also hampered performance. Meal replacement company Medifast underperformed. Margins and
margin guidance for the company did not meet lofty expectations over several quarters. The company also significantly missed expectations for forward guidance. We eliminated the holding.
*All fund returns referenced in this commentary are for Investor Class shares. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund’s benchmark, other share classes may not. See page 3 for returns for all share classes.
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Stock choices in the energy sector detracted. Callon Petroleum, an energy exploration and production company, was severely impacted by plummeting crude oil prices. Demand destruction driven by strict social distancing policies implemented around the world as the coronavirus spread was exacerbated by an oil price war that led to an oil glut. We eliminated our holding.
Other significant detractors included Everbridge, a provider of software applications that automate the delivery of critical information to help keep people safe and businesses running. Although Everbridge posted strong results, billings came up short of expectations. Not owning benchmark component Quidel detracted as the diagnostics equipment and test maker won approval for a point-of-care coronavirus antigen test. The Brink’s Co.’s cash management business was significantly impacted by retail and restaurant closures due to pandemic concerns. Its Latin America exposure put the company in a position of slower recovery relative to European and U.S. companies. Although Essential Properties Realty Trust’s results were in line with expectations and the company reaffirmed its guidance for the year, the stock underperformed due to the quality of the company’s end customers, which leaves it exposed to lower-quality properties. The holding was eliminated.
Outlook
Small Cap Growth’s investment process focuses on smaller companies with accelerating growth rates and share-price momentum. We believe that active investments in such companies will generate outperformance over time compared with the Russell 2000 Growth Index.
The portfolio positioning remains largely stock specific, with few thematic trends. As of October 31, 2020, financials was the largest overweight sector relative to the benchmark. Health care was the largest underweight sector.
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Fund Characteristics |
OCTOBER 31, 2020 | |||||
Top Ten Holdings | % of net assets | ||||
Chegg, Inc. | 1.6% | ||||
Natera, Inc. | 1.4% | ||||
R1 RCM, Inc. | 1.4% | ||||
NMI Holdings, Inc., Class A | 1.3% | ||||
Crocs, Inc. | 1.3% | ||||
FirstService Corp. | 1.3% | ||||
Five9, Inc. | 1.3% | ||||
National Vision Holdings, Inc. | 1.2% | ||||
Churchill Downs, Inc. | 1.2% | ||||
Envestnet, Inc. | 1.2% | ||||
Top Five Industries | % of net assets | ||||
Biotechnology | 16.9% | ||||
Software | 9.3% | ||||
Health Care Providers and Services | 5.9% | ||||
Health Care Equipment and Supplies | 4.6% | ||||
Semiconductors and Semiconductor Equipment | 4.5% | ||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 98.1% | ||||
Temporary Cash Investments | 2.3% | ||||
Temporary Cash Investments - Securities Lending Collateral | 1.2% | ||||
Other Assets and Liabilities | (1.6)% |
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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 May 1, 2020 to October 31, 2020.
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 I Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not through a financial intermediary or employer-sponsored retirement plan account), American Century Investments may charge you a $25.00 annual 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 $25.00 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.
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Beginning Account Value 5/1/20 | Ending Account Value 10/31/20 | Expenses Paid During Period(1) 5/1/20 - 10/31/20 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,322.10 | $7.06 | 1.21% | ||||||||||
I Class | $1,000 | $1,324.00 | $5.90 | 1.01% | ||||||||||
Y Class | $1,000 | $1,325.30 | $5.03 | 0.86% | ||||||||||
A Class | $1,000 | $1,320.80 | $8.52 | 1.46% | ||||||||||
C Class | $1,000 | $1,315.70 | $12.86 | 2.21% | ||||||||||
R Class | $1,000 | $1,319.00 | $9.97 | 1.71% | ||||||||||
R5 Class | $1,000 | $1,323.80 | $5.90 | 1.01% | ||||||||||
R6 Class | $1,000 | $1,324.70 | $5.03 | 0.86% | ||||||||||
G Class | $1,000 | $1,330.50 | $0.06 | 0.01% | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,019.05 | $6.14 | 1.21% | ||||||||||
I Class | $1,000 | $1,020.06 | $5.13 | 1.01% | ||||||||||
Y Class | $1,000 | $1,020.81 | $4.37 | 0.86% | ||||||||||
A Class | $1,000 | $1,017.80 | $7.41 | 1.46% | ||||||||||
C Class | $1,000 | $1,014.03 | $11.19 | 2.21% | ||||||||||
R Class | $1,000 | $1,016.54 | $8.67 | 1.71% | ||||||||||
R5 Class | $1,000 | $1,020.06 | $5.13 | 1.01% | ||||||||||
R6 Class | $1,000 | $1,020.81 | $4.37 | 0.86% | ||||||||||
G Class | $1,000 | $1,025.09 | $0.05 | 0.01% |
(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 184, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses.
9
Schedule of Investments |
OCTOBER 31, 2020
Shares | Value | |||||||
COMMON STOCKS — 98.1% | ||||||||
Aerospace and Defense — 2.9% | ||||||||
AAR Corp. | 142,398 | $ | 2,771,065 | |||||
Aerojet Rocketdyne Holdings, Inc.(1) | 439,475 | 14,247,780 | ||||||
CAE, Inc. | 530,316 | 9,063,496 | ||||||
Kratos Defense & Security Solutions, Inc.(1) | 745,651 | 14,085,347 | ||||||
Mercury Systems, Inc.(1) | 59,196 | 4,077,420 | ||||||
44,245,108 | ||||||||
Airlines — 0.7% | ||||||||
Alaska Air Group, Inc. | 263,219 | 9,973,368 | ||||||
Auto Components — 1.1% | ||||||||
LCI Industries | 151,007 | 16,559,428 | ||||||
Biotechnology — 16.9% | ||||||||
ACADIA Pharmaceuticals, Inc.(1) | 213,458 | 9,915,124 | ||||||
Acceleron Pharma, Inc.(1) | 108,667 | 11,364,395 | ||||||
ADC Therapeutics SA(1) | 315,020 | 9,037,924 | ||||||
Amarin Corp. plc, ADR(1)(2) | 285,179 | 1,385,970 | ||||||
Amicus Therapeutics, Inc.(1) | 745,416 | 13,290,767 | ||||||
Arcutis Biotherapeutics, Inc.(1) | 279,196 | 4,975,273 | ||||||
Arena Pharmaceuticals, Inc.(1) | 112,789 | 9,668,273 | ||||||
Biohaven Pharmaceutical Holding Co. Ltd.(1) | 174,156 | 13,490,124 | ||||||
Blueprint Medicines Corp.(1) | 146,710 | 15,005,499 | ||||||
Bridgebio Pharma, Inc.(1)(2) | 233,920 | 8,977,850 | ||||||
ChemoCentryx, Inc.(1) | 156,220 | 7,498,560 | ||||||
Deciphera Pharmaceuticals, Inc.(1) | 201,845 | 11,721,139 | ||||||
FibroGen, Inc.(1) | 263,014 | 10,094,477 | ||||||
Flexion Therapeutics, Inc.(1) | 617,459 | 7,403,333 | ||||||
Generation Bio Co.(1) | 114,551 | 2,959,998 | ||||||
Global Blood Therapeutics, Inc.(1) | 117,516 | 6,214,246 | ||||||
Halozyme Therapeutics, Inc.(1) | 400,950 | 11,226,600 | ||||||
Heron Therapeutics, Inc.(1) | 291,597 | 4,755,947 | ||||||
Insmed, Inc.(1) | 454,820 | 14,981,771 | ||||||
Iovance Biotherapeutics, Inc.(1) | 116,322 | 4,150,369 | ||||||
Karuna Therapeutics, Inc.(1) | 129,982 | 10,553,238 | ||||||
Kymera Therapeutics, Inc.(1) | 140,480 | 5,055,875 | ||||||
Mirati Therapeutics, Inc.(1) | 56,590 | 12,287,953 | ||||||
Natera, Inc.(1) | 320,496 | 21,556,561 | ||||||
Relay Therapeutics, Inc.(1) | 114,648 | 4,235,097 | ||||||
Ultragenyx Pharmaceutical, Inc.(1) | 137,824 | 13,851,312 | ||||||
Viela Bio, Inc.(1)(2) | 245,830 | 7,844,435 | ||||||
253,502,110 | ||||||||
Building Products — 3.2% | ||||||||
American Woodmark Corp.(1) | 106,641 | 8,809,613 | ||||||
Builders FirstSource, Inc.(1) | 442,408 | 13,404,963 | ||||||
Masonite International Corp.(1) | 164,584 | 14,483,392 | ||||||
Trex Co., Inc.(1) | 164,360 | 11,429,594 | ||||||
48,127,562 |
10
Shares | Value | |||||||
Capital Markets — 1.6% | ||||||||
Hamilton Lane, Inc., Class A | 246,429 | $ | 17,176,101 | |||||
TMX Group Ltd. | 67,513 | 6,560,259 | ||||||
23,736,360 | ||||||||
Chemicals — 0.6% | ||||||||
H.B. Fuller Co. | 185,285 | 8,384,146 | ||||||
Commercial Services and Supplies — 1.8% | ||||||||
Brink's Co. (The) | 335,355 | 14,363,254 | ||||||
Clean Harbors, Inc.(1) | 247,978 | 13,135,395 | ||||||
27,498,649 | ||||||||
Communications Equipment — 0.2% | ||||||||
Lumentum Holdings, Inc.(1) | 39,080 | 3,231,525 | ||||||
Construction Materials — 0.6% | ||||||||
Summit Materials, Inc., Class A(1) | 472,834 | 8,364,433 | ||||||
Containers and Packaging — 0.9% | ||||||||
Berry Global Group, Inc.(1) | 276,526 | 12,894,407 | ||||||
Diversified Consumer Services — 1.6% | ||||||||
Chegg, Inc.(1) | 322,632 | 23,694,094 | ||||||
Electrical Equipment — 1.0% | ||||||||
Array Technologies, Inc.(1) | 174,373 | 6,425,645 | ||||||
Sensata Technologies Holding plc(1) | 192,820 | 8,428,162 | ||||||
14,853,807 | ||||||||
Electronic Equipment, Instruments and Components — 2.8% | ||||||||
Jabil, Inc. | 324,134 | 10,741,801 | ||||||
Littelfuse, Inc. | 81,856 | 16,202,577 | ||||||
nLight, Inc.(1) | 161,792 | 3,436,462 | ||||||
SYNNEX Corp. | 90,144 | 11,866,556 | ||||||
42,247,396 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 1.4% | ||||||||
Global Medical REIT, Inc. | 857,701 | 10,661,224 | ||||||
Innovative Industrial Properties, Inc. | 47,061 | 5,488,724 | ||||||
Rexford Industrial Realty, Inc. | 108,345 | 5,033,709 | ||||||
21,183,657 | ||||||||
Food and Staples Retailing — 1.0% | ||||||||
Grocery Outlet Holding Corp.(1) | 219,284 | 9,652,882 | ||||||
Sprouts Farmers Market, Inc.(1) | 297,119 | 5,660,117 | ||||||
15,312,999 | ||||||||
Food Products — 0.6% | ||||||||
Whole Earth Brands, Inc.(1) | 1,147,541 | 9,398,361 | ||||||
Health Care Equipment and Supplies — 4.6% | ||||||||
Acutus Medical, Inc.(1) | 280,759 | 6,420,958 | ||||||
Eargo, Inc.(1) | 191,445 | 6,633,569 | ||||||
Globus Medical, Inc., Class A(1) | 196,751 | 10,254,662 | ||||||
ICU Medical, Inc.(1) | 55,612 | 9,887,258 | ||||||
Inari Medical, Inc.(1) | 36,410 | 2,410,342 | ||||||
OrthoPediatrics Corp.(1) | 141,358 | 6,304,567 | ||||||
Silk Road Medical, Inc.(1) | 248,828 | 15,078,977 | ||||||
Tandem Diabetes Care, Inc.(1) | 113,883 | 12,413,247 | ||||||
69,403,580 | ||||||||
Health Care Providers and Services — 5.9% | ||||||||
Acadia Healthcare Co., Inc.(1) | 249,040 | 8,878,276 | ||||||
AMN Healthcare Services, Inc.(1) | 205,132 | 13,391,017 |
11
Shares | Value | |||||||
Encompass Health Corp. | 196,606 | $ | 12,053,914 | |||||
HealthEquity, Inc.(1) | 273,264 | 14,070,363 | ||||||
Option Care Health, Inc.(1) | 883,354 | 11,775,109 | ||||||
R1 RCM, Inc.(1) | 1,173,476 | 21,028,690 | ||||||
RadNet, Inc.(1) | 470,349 | 6,824,764 | ||||||
88,022,133 | ||||||||
Health Care Technology — 1.4% | ||||||||
Health Catalyst, Inc.(1)(2) | 397,607 | 13,709,489 | ||||||
Phreesia, Inc.(1) | 191,687 | 7,086,669 | ||||||
20,796,158 | ||||||||
Hotels, Restaurants and Leisure — 3.5% | ||||||||
Brinker International, Inc. | 322,002 | 14,019,967 | ||||||
Churchill Downs, Inc. | 118,829 | 17,723,345 | ||||||
Planet Fitness, Inc., Class A(1) | 144,683 | 8,575,362 | ||||||
Wingstop, Inc. | 100,394 | 11,678,834 | ||||||
51,997,508 | ||||||||
Household Durables — 1.1% | ||||||||
TopBuild Corp.(1) | 113,251 | 17,351,186 | ||||||
Household Products — 0.6% | ||||||||
Reynolds Consumer Products, Inc. | 312,786 | 8,833,077 | ||||||
Independent Power and Renewable Electricity Producers — 0.6% | ||||||||
Innergex Renewable Energy, Inc. | 500,660 | 9,026,385 | ||||||
Insurance — 4.5% | ||||||||
BRP Group, Inc., Class A(1) | 611,630 | 15,596,565 | ||||||
eHealth, Inc.(1) | 198,314 | 13,308,853 | ||||||
Goosehead Insurance, Inc., Class A | 114,199 | 13,993,945 | ||||||
Kinsale Capital Group, Inc. | 65,348 | 12,250,790 | ||||||
Lemonade, Inc.(1)(2) | 113,328 | 5,699,265 | ||||||
Palomar Holdings, Inc.(1) | 68,897 | 6,143,545 | ||||||
66,992,963 | ||||||||
Interactive Media and Services — 1.1% | ||||||||
EverQuote, Inc., Class A(1) | 231,963 | 7,768,441 | ||||||
QuinStreet, Inc.(1) | 573,226 | 9,174,482 | ||||||
16,942,923 | ||||||||
Internet and Direct Marketing Retail — 0.2% | ||||||||
Leslie's, Inc.(1) | 109,652 | 2,409,054 | ||||||
IT Services — 3.4% | ||||||||
Globant SA(1) | 64,396 | 11,630,562 | ||||||
I3 Verticals, Inc., Class A(1) | 607,754 | 12,537,965 | ||||||
Nuvei Corp.(1) | 247,858 | 9,210,403 | ||||||
Repay Holdings Corp.(1) | 775,009 | 17,460,953 | ||||||
50,839,883 | ||||||||
Leisure Products — 1.5% | ||||||||
Brunswick Corp. | 217,089 | 13,830,740 | ||||||
Callaway Golf Co. | 522,716 | 8,096,871 | ||||||
21,927,611 | ||||||||
Life Sciences Tools and Services — 1.9% | ||||||||
NeoGenomics, Inc.(1) | 396,643 | 15,560,305 | ||||||
PRA Health Sciences, Inc.(1) | 139,436 | 13,586,644 | ||||||
29,146,949 | ||||||||
Machinery — 2.1% | ||||||||
Evoqua Water Technologies Corp.(1) | 717,096 | 16,443,011 |
12
Shares | Value | |||||||
Navistar International Corp.(1) | 342,085 | $ | 14,747,285 | |||||
31,190,296 | ||||||||
Mortgage Real Estate Investment Trusts (REITs) — 0.7% | ||||||||
Hannon Armstrong Sustainable Infrastructure Capital, Inc. | 236,204 | 9,885,137 | ||||||
Personal Products — 0.4% | ||||||||
elf Beauty, Inc.(1) | 302,236 | 6,126,324 | ||||||
Pharmaceuticals — 1.8% | ||||||||
Axsome Therapeutics, Inc.(1) | 123,801 | 8,209,244 | ||||||
Harmony Biosciences Holdings, Inc.(1) | 109,908 | 4,275,421 | ||||||
Horizon Therapeutics plc(1) | 129,311 | 9,689,273 | ||||||
Optinose, Inc.(1)(2) | 264,670 | 846,944 | ||||||
Reata Pharmaceuticals, Inc., Class A(1) | 31,811 | 3,712,662 | ||||||
26,733,544 | ||||||||
Professional Services — 1.1% | ||||||||
ASGN, Inc.(1) | 133,497 | 8,901,580 | ||||||
Korn Ferry | 253,378 | 7,649,482 | ||||||
16,551,062 | ||||||||
Real Estate Management and Development — 2.7% | ||||||||
Altus Group Ltd. | 164,309 | 6,722,573 | ||||||
FirstService Corp. | 144,165 | 19,331,289 | ||||||
Redfin Corp.(1) | 341,031 | 14,244,865 | ||||||
40,298,727 | ||||||||
Semiconductors and Semiconductor Equipment — 4.5% | ||||||||
Allegro MicroSystems, Inc.(1) | 195,969 | 3,586,233 | ||||||
Entegris, Inc. | 75,653 | 5,656,575 | ||||||
Inphi Corp.(1) | 26,450 | 3,696,652 | ||||||
MKS Instruments, Inc. | 69,728 | 7,557,818 | ||||||
PDF Solutions, Inc.(1) | 414,254 | 7,763,120 | ||||||
Power Integrations, Inc. | 256,180 | 15,424,598 | ||||||
Semtech Corp.(1) | 307,135 | 16,858,640 | ||||||
SiTime Corp.(1) | 91,817 | 7,665,801 | ||||||
68,209,437 | ||||||||
Software — 9.3% | ||||||||
Envestnet, Inc.(1) | 227,912 | 17,489,967 | ||||||
Everbridge, Inc.(1) | 107,792 | 11,284,744 | ||||||
Five9, Inc.(1) | 124,919 | 18,952,711 | ||||||
Manhattan Associates, Inc.(1) | 143,133 | 12,237,871 | ||||||
Model N, Inc.(1) | 434,622 | 15,311,733 | ||||||
nCino, Inc.(1) | 205,607 | 14,499,406 | ||||||
Paylocity Holding Corp.(1) | 66,783 | 12,389,582 | ||||||
Rapid7, Inc.(1) | 155,172 | 9,609,802 | ||||||
RealPage, Inc.(1) | 203,845 | 11,352,128 | ||||||
SailPoint Technologies Holdings, Inc.(1) | 358,376 | 14,876,188 | ||||||
Vertex, Inc., Class A(1) | 86,407 | 2,094,506 | ||||||
140,098,638 | ||||||||
Specialty Retail — 2.8% | ||||||||
Lithia Motors, Inc., Class A | 69,291 | 15,907,135 | ||||||
National Vision Holdings, Inc.(1) | 442,466 | 17,844,653 | ||||||
Vroom, Inc.(1) | 200,229 | 8,229,412 | ||||||
41,981,200 | ||||||||
Textiles, Apparel and Luxury Goods — 1.3% | ||||||||
Crocs, Inc.(1) | 376,644 | 19,709,780 |
13
Shares | Value | |||||||
Thrifts and Mortgage Finance — 1.3% | ||||||||
NMI Holdings, Inc., Class A(1) | 927,816 | $ | 19,938,766 | |||||
Trading Companies and Distributors — 0.9% | ||||||||
Applied Industrial Technologies, Inc. | 231,395 | 14,126,665 | ||||||
TOTAL COMMON STOCKS (Cost $1,183,618,015) | 1,471,746,396 | |||||||
TEMPORARY CASH INVESTMENTS — 2.3% | ||||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.50% - 3.375%, 6/30/21 - 11/15/48, valued at $12,823,371), in a joint trading account at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $12,616,329) | 12,616,266 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 0.125%, 7/15/30, valued at $22,426,837), at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $21,987,110) | 21,987,000 | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 1,069 | 1,069 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $34,604,335) | 34,604,335 | |||||||
TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL(3) — 1.2% | ||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (Cost $17,308,437) | 17,308,437 | 17,308,437 | ||||||
TOTAL INVESTMENT SECURITIES — 101.6% (Cost $1,235,530,787) | 1,523,659,168 | |||||||
OTHER ASSETS AND LIABILITIES — (1.6)% | (23,258,879) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 1,500,400,289 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
CAD | 1,655,461 | USD | 1,239,906 | Morgan Stanley | 12/31/20 | $ | 3,085 | |||||||||||||
CAD | 11,185,167 | USD | 8,403,986 | Morgan Stanley | 12/31/20 | (5,680) | ||||||||||||||
USD | 46,529,581 | CAD | 62,021,606 | Morgan Stanley | 12/31/20 | (38,917) | ||||||||||||||
USD | 1,232,714 | CAD | 1,649,623 | Morgan Stanley | 12/31/20 | (5,894) | ||||||||||||||
USD | 1,106,081 | CAD | 1,469,741 | Morgan Stanley | 12/31/20 | 2,536 | ||||||||||||||
USD | 1,351,629 | CAD | 1,791,631 | Morgan Stanley | 12/31/20 | 6,395 | ||||||||||||||
USD | 4,261,860 | CAD | 5,684,742 | Morgan Stanley | 12/31/20 | (6,490) | ||||||||||||||
$ | (44,965) |
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
ADR | - | American Depositary Receipt | ||||||
CAD | - | Canadian Dollar | ||||||
USD | - | United States Dollar |
(1)Non-income producing.
(2)Security, or a portion thereof, is on loan. At the period end, the aggregate value of securities on loan was $17,644,902. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers.
(3)Investment of cash collateral from securities on loan. At the period end, the aggregate value of the collateral held by the fund was $18,090,942, which includes securities collateral of $782,505.
See Notes to Financial Statements.
14
Statement of Assets and Liabilities |
OCTOBER 31, 2020 | |||||
Assets | |||||
Investment securities, at value (cost of $1,218,222,350) — including $17,644,902 of securities on loan | $ | 1,506,350,731 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $17,308,437) | 17,308,437 | ||||
Total investment securities, at value (cost of $1,235,530,787) | 1,523,659,168 | ||||
Receivable for investments sold | 18,297,082 | ||||
Receivable for capital shares sold | 846,842 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 12,016 | ||||
Dividends and interest receivable | 6,167 | ||||
Securities lending receivable | 82,993 | ||||
1,542,904,268 | |||||
Liabilities | |||||
Payable for collateral received for securities on loan | 17,308,437 | ||||
Payable for investments purchased | 22,925,331 | ||||
Payable for capital shares redeemed | 1,064,455 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 56,981 | ||||
Accrued management fees | 1,118,787 | ||||
Distribution and service fees payable | 29,988 | ||||
42,503,979 | |||||
Net Assets | $ | 1,500,400,289 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 1,054,906,642 | |||
Distributable earnings | 445,493,647 | ||||
$ | 1,500,400,289 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $531,353,305 | 24,151,524 | $22.00 | ||||||||
I Class, $0.01 Par Value | $317,466,348 | 13,976,088 | $22.71 | ||||||||
Y Class, $0.01 Par Value | $130,957,763 | 5,689,423 | $23.02 | ||||||||
A Class, $0.01 Par Value | $98,200,216 | 4,675,908 | $21.00* | ||||||||
C Class, $0.01 Par Value | $5,297,689 | 288,275 | $18.38 | ||||||||
R Class, $0.01 Par Value | $8,492,235 | 418,377 | $20.30 | ||||||||
R5 Class, $0.01 Par Value | $9,477 | 417 | $22.73 | ||||||||
R6 Class, $0.01 Par Value | $108,820,003 | 4,729,299 | $23.01 | ||||||||
G Class, $0.01 Par Value | $299,803,253 | 12,842,182 | $23.35 |
*Maximum offering price $22.28 (net asset value divided by 0.9425).
See Notes to Financial Statements.
15
Statement of Operations |
YEAR ENDED OCTOBER 31, 2020 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $101,912) | $ | 4,510,929 | |||
Securities lending, net | 300,211 | ||||
Interest | 135,020 | ||||
4,946,160 | |||||
Expenses: | |||||
Management fees | 12,723,236 | ||||
Distribution and service fees: | |||||
A Class | 215,627 | ||||
C Class | 47,432 | ||||
R Class | 36,175 | ||||
Directors' fees and expenses | 37,893 | ||||
Other expenses | 116 | ||||
13,060,479 | |||||
Fees waived - G Class | (1,694,098) | ||||
11,366,381 | |||||
Net investment income (loss) | (6,420,221) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 182,124,370 | ||||
Forward foreign currency exchange contract transactions | 152,963 | ||||
Foreign currency translation transactions | (1,411) | ||||
182,275,922 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 161,838,619 | ||||
Forward foreign currency exchange contracts | 21,434 | ||||
Translation of assets and liabilities in foreign currencies | (6,759) | ||||
161,853,294 | |||||
Net realized and unrealized gain (loss) | 344,129,216 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 337,708,995 |
See Notes to Financial Statements.
16
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2020 AND OCTOBER 31, 2019 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2020 | October 31, 2019 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (6,420,221) | $ | (5,373,421) | ||||
Net realized gain (loss) | 182,275,922 | 59,472,982 | ||||||
Change in net unrealized appreciation (depreciation) | 161,853,294 | 40,650,541 | ||||||
Net increase (decrease) in net assets resulting from operations | 337,708,995 | 94,750,102 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (25,227,608) | (48,639,063) | ||||||
I Class | (16,816,143) | (45,335,165) | ||||||
Y Class | (535,213) | (276,649) | ||||||
A Class | (4,721,985) | (10,279,016) | ||||||
C Class | (312,537) | (867,837) | ||||||
R Class | (381,103) | (773,910) | ||||||
R5 Class | (395) | (905) | ||||||
R6 Class | (2,829,940) | (4,560,472) | ||||||
G Class | (9,051,157) | — | ||||||
Decrease in net assets from distributions | (59,876,081) | (110,733,017) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 369,858,485 | (19,942,776) | ||||||
Net increase (decrease) in net assets | 647,691,399 | (35,925,691) | ||||||
Net Assets | ||||||||
Beginning of period | 852,708,890 | 888,634,581 | ||||||
End of period | $ | 1,500,400,289 | $ | 852,708,890 | ||||
See Notes to Financial Statements.
17
Notes to Financial Statements |
OCTOBER 31, 2020
1. Organization
American Century Mutual Funds, 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 Growth Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek long-term capital growth.
The fund offers the Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class, R6 Class and G 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. Sale of the G Class commenced on April 1, 2019.
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.
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 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.
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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. 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 lending income is net of fees and rebates earned by the lending agent for its services.
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 American Century Investment Management, Inc. (ACIM) (the investment advisor) 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 certain types of investment securities and other financial instruments. 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 collateral requirements.
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 and 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.
Securities Lending — Securities are lent to qualified financial institutions and brokers. State Street Bank & Trust Co. serves as securities lending agent to the fund pursuant to a Securities Lending Agreement. The lending of securities exposes the fund to risks such as: the borrowers may fail to return the loaned securities, the borrowers may not be able to provide additional collateral, the fund may experience delays in recovery of the loaned securities or delays in access to collateral, or the fund may experience losses related to the investment collateral. To minimize certain risks, loan counterparties pledge collateral in the form of cash and/or securities. The lending agent has agreed to indemnify the fund in the case of default of any securities borrowed. Cash collateral received is invested in the State Street Navigator Securities Lending Government Money Market Portfolio, a money market mutual fund registered under the 1940 Act. The loans may also be secured by U.S. government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. By lending securities, the fund seeks to increase its net investment income through the receipt of interest and fees. Such income is reflected separately within the Statement of Operations. The value of loaned securities and related collateral outstanding at period end, if any, are shown on a gross basis within the Schedule of Investments and Statement of Assets and Liabilities.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged, and the remaining contractual maturity of those transactions as of October 31, 2020.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 17,308,437 | — | — | — | $ | 17,308,437 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 17,308,437 |
(1)Amount represents the payable for cash collateral received for securities on loan. This will generally be in the Overnight and Continuous column as the securities are typically callable on demand.
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. own, in aggregate, 16% of the shares of the fund.
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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 ACIM will pay all expenses of managing and operating the fund, except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), extraordinary expenses, 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. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class. 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 use very similar investment teams and strategies (strategy assets). The investment advisor agreed to waive the G Class's management fee in its entirety. The investment advisor expects this waiver to remain in effect permanently and cannot terminate it without the approval of the Board of Directors.
The management fee schedule range and the effective annual management fee for each class for the period ended October 31, 2020 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | |||||||
Investor Class | 1.100% to 1.500% | 1.21% | ||||||
I Class | 0.900% to 1.300% | 1.01% | ||||||
Y Class | 0.750% to 1.150% | 0.86% | ||||||
A Class | 1.100% to 1.500% | 1.21% | ||||||
C Class | 1.100% to 1.500% | 1.21% | ||||||
R Class | 1.100% to 1.500% | 1.21% | ||||||
R5 Class | 0.900% to 1.300% | 1.01% | ||||||
R6 Class | 0.750% to 1.150% | 0.86% | ||||||
G Class | 0.750% to 1.150% | 0.00%(1) |
(1)Effective annual management fee before waiver was 0.86%.
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 period ended October 31, 2020 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.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $12,972,887 and $1,628,000, respectively. The effect of interfund transactions on the Statement of Operations was $142,719 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments and in kind transactions, for the period ended October 31, 2020 were $1,807,926,013 and $1,648,435,828, respectively.
On August 13, 2020, the fund received investment securities valued at $133,320,673 from a purchase in kind from other products managed by the fund’s investment advisor. A purchase in kind occurs when a fund receives securities into its portfolio in lieu of cash as payment from a purchasing shareholder.
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5. Capital Share Transactions
Year ended October 31, 2020 | Year ended October 31, 2019(1) | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 335,000,000 | 335,000,000 | ||||||||||||
Sold | 9,921,702 | $ | 179,032,931 | 2,845,255 | $ | 48,155,202 | ||||||||
Issued in reinvestment of distributions | 1,317,045 | 23,588,268 | 3,224,826 | 45,566,788 | ||||||||||
Redeemed | (9,495,829) | (181,400,499) | (5,030,701) | (84,023,120) | ||||||||||
1,742,918 | 21,220,700 | 1,039,380 | 9,698,870 | |||||||||||
I Class/Shares Authorized | 210,000,000 | 210,000,000 | ||||||||||||
Sold | 14,257,641 | 281,464,270 | 2,861,828 | 48,997,525 | ||||||||||
Issued in reinvestment of distributions | 161,247 | 2,976,627 | 322,168 | 4,674,658 | ||||||||||
Redeemed | (17,359,714) | (315,563,803) | (6,320,416) | (107,127,487) | ||||||||||
(2,940,826) | (31,122,906) | (3,136,420) | (53,455,304) | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 6,761,561 | 126,431,953 | 250,309 | 4,433,763 | ||||||||||
Issued in reinvestment of distributions | 28,652 | 535,213 | 18,884 | 276,649 | ||||||||||
Redeemed | (1,451,198) | (30,110,005) | (14,128) | (249,802) | ||||||||||
5,339,015 | 96,857,161 | 255,065 | 4,460,610 | |||||||||||
A Class/Shares Authorized | 70,000,000 | 70,000,000 | ||||||||||||
Sold | 635,430 | 10,992,905 | 732,140 | 11,663,863 | ||||||||||
Issued in reinvestment of distributions | 267,760 | 4,586,734 | 722,004 | 9,804,810 | ||||||||||
Redeemed | (990,674) | (17,325,103) | (1,137,418) | (18,386,791) | ||||||||||
(87,484) | (1,745,464) | 316,726 | 3,081,882 | |||||||||||
C Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 75,490 | 1,255,719 | 48,287 | 670,563 | ||||||||||
Issued in reinvestment of distributions | 18,317 | 276,405 | 61,607 | 747,908 | ||||||||||
Redeemed | (126,131) | (1,977,877) | (180,322) | (2,539,818) | ||||||||||
(32,324) | (445,753) | (70,428) | (1,121,347) | |||||||||||
R Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 215,915 | 3,705,057 | 151,546 | 2,348,495 | ||||||||||
Issued in reinvestment of distributions | 22,612 | 375,133 | 57,798 | 763,516 | ||||||||||
Redeemed | (193,648) | (3,188,549) | (168,574) | (2,650,675) | ||||||||||
44,879 | 891,641 | 40,770 | 461,336 | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | — | — | 1,498 | 25,253 | ||||||||||
Issued in reinvestment of distributions | 22 | 395 | 62 | 905 | ||||||||||
Redeemed | — | — | (1,553) | (26,878) | ||||||||||
22 | 395 | 7 | (720) | |||||||||||
R6 Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||||||
Sold | 3,584,510 | 69,966,478 | 1,013,445 | 17,944,892 | ||||||||||
Issued in reinvestment of distributions | 151,577 | 2,829,940 | 311,295 | 4,560,472 | ||||||||||
Redeemed | (1,680,729) | (33,221,028) | (779,079) | (13,919,920) | ||||||||||
2,055,358 | 39,575,390 | 545,661 | 8,585,444 | |||||||||||
G Class/Shares Authorized | 140,000,000 | 140,000,000 | ||||||||||||
Sold | 16,326,187 | 329,098,341 | 458,459 | 8,429,061 | ||||||||||
Issued in reinvestment of distributions | 481,445 | 9,051,157 | — | — | ||||||||||
Redeemed | (4,419,358) | (93,522,177) | (4,551) | (82,608) | ||||||||||
12,388,274 | 244,627,321 | 453,908 | 8,346,453 | |||||||||||
Net increase (decrease) | 18,509,832 | $ | 369,858,485 | (555,331) | $ | (19,942,776) |
(1)April 1, 2019 (commencement of sale) through October 31, 2019 for the G Class.
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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.
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 | $ | 1,411,831,991 | $ | 59,914,405 | — | ||||||
Temporary Cash Investments | 1,069 | 34,603,266 | — | ||||||||
Temporary Cash Investments - Securities Lending Collateral | 17,308,437 | — | — | ||||||||
$ | 1,429,141,497 | $ | 94,517,671 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 12,016 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 56,981 | — |
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 settlement 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 forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, 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 $38,771,910.
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The value of foreign currency risk derivative instruments as of October 31, 2020, is disclosed on the Statement of Assets and Liabilities as an asset of $12,016 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $56,981 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended October 31, 2020, the effect of foreign currency risk derivative instruments on the Statement of Operations was $152,963 in net realized gain (loss) on forward foreign currency exchange contract transactions and $21,434 in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
8. Risk Factors
The value of the fund’s shares will go up and down, sometimes rapidly or unpredictably, based on the performance of the securities owned by the fund and other factors generally affecting the securities market. Market risks, including political, regulatory, economic and social developments, can affect the value of the fund’s investments. Natural disasters, public health emergencies, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse long-term effects on world economies and markets generally.
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.
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.
9. Federal Tax Information
On December 8, 2020, the fund declared and paid a per-share distribution from net realized gains to shareholders of record on December 7, 2020 of $2.7205 for the Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class, R6 Class and G Class.
The tax character of distributions paid during the years ended October 31, 2020 and October 31, 2019 were as follows:
2020 | 2019 | |||||||
Distributions Paid From | ||||||||
Ordinary income | — | $ | 21,323,960 | |||||
Long-term capital gains | $ | 59,876,081 | $ | 89,409,057 |
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 period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 1,253,127,307 | |||
Gross tax appreciation of investments | $ | 324,104,356 | |||
Gross tax depreciation of investments | (53,572,495) | ||||
Net tax appreciation (depreciation) of investments | 270,531,861 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (6,755) | ||||
Net tax appreciation (depreciation) | $ | 270,525,106 | |||
Undistributed ordinary income | $ | 28,065,383 | |||
Accumulated long-term gains | $ | 146,903,158 |
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 October 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 | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||||||||||||||||||||||||
Investor Class | |||||||||||||||||||||||||||||||||||
2020 | $17.54 | (0.15) | 5.61 | 5.46 | (1.00) | $22.00 | 32.43% | 1.22% | (0.81)% | 141% | $531,353 | ||||||||||||||||||||||||
2019 | $18.08 | (0.12) | 1.91 | 1.79 | (2.33) | $17.54 | 13.00% | 1.28% | (0.70)% | 92% | $392,956 | ||||||||||||||||||||||||
2018 | $16.70 | (0.17) | 1.65 | 1.48 | (0.10) | $18.08 | 8.89% | 1.27% | (0.93)% | 116% | $386,455 | ||||||||||||||||||||||||
2017 | $12.96 | (0.13) | 4.45 | 4.32 | (0.58) | $16.70 | 33.36% | 1.36% | (0.83)% | 70% | $361,029 | ||||||||||||||||||||||||
2016 | $13.06 | (0.10) | —(3) | (0.10) | — | $12.96 | (0.77)% | 1.36% | (0.83)% | 130% | $133,140 | ||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||
2020 | $18.04 | (0.11) | 5.78 | 5.67 | (1.00) | $22.71 | 32.76% | 1.02% | (0.61)% | 141% | $317,466 | ||||||||||||||||||||||||
2019 | $18.50 | (0.09) | 1.96 | 1.87 | (2.33) | $18.04 | 13.16% | 1.08% | (0.50)% | 92% | $305,249 | ||||||||||||||||||||||||
2018 | $17.04 | (0.14) | 1.70 | 1.56 | (0.10) | $18.50 | 9.18% | 1.07% | (0.73)% | 116% | $371,030 | ||||||||||||||||||||||||
2017 | $13.20 | (0.09) | 4.51 | 4.42 | (0.58) | $17.04 | 33.51% | 1.16% | (0.63)% | 70% | $219,881 | ||||||||||||||||||||||||
2016 | $13.27 | (0.08) | 0.01 | (0.07) | — | $13.20 | (0.53)% | 1.16% | (0.63)% | 130% | $269,094 | ||||||||||||||||||||||||
Y Class | |||||||||||||||||||||||||||||||||||
2020 | $18.24 | (0.10) | 5.88 | 5.78 | (1.00) | $23.02 | 32.96% | 0.87% | (0.46)% | 141% | $130,958 | ||||||||||||||||||||||||
2019 | $18.65 | (0.06) | 1.98 | 1.92 | (2.33) | $18.24 | 13.34% | 0.93% | (0.35)% | 92% | $6,392 | ||||||||||||||||||||||||
2018 | $17.16 | (0.07) | 1.66 | 1.59 | (0.10) | $18.65 | 9.29% | 0.92% | (0.58)% | 116% | $1,778 | ||||||||||||||||||||||||
2017(4) | $15.34 | (0.06) | 2.46 | 2.40 | (0.58) | $17.16 | 15.67% | 1.01%(5) | (0.61)%(5) | 70%(6) | $6 |
For a Share Outstanding Throughout the Years Ended October 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 | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||
2020 | $16.82 | (0.19) | 5.37 | 5.18 | (1.00) | $21.00 | 32.14% | 1.47% | (1.06)% | 141% | $98,200 | ||||||||||||||||||||||||
2019 | $17.49 | (0.16) | 1.82 | 1.66 | (2.33) | $16.82 | 12.72% | 1.53% | (0.95)% | 92% | $80,127 | ||||||||||||||||||||||||
2018 | $16.19 | (0.21) | 1.61 | 1.40 | (0.10) | $17.49 | 8.61% | 1.52% | (1.18)% | 116% | $77,764 | ||||||||||||||||||||||||
2017 | $12.61 | (0.16) | 4.32 | 4.16 | (0.58) | $16.19 | 33.02% | 1.61% | (1.08)% | 70% | $80,654 | ||||||||||||||||||||||||
2016 | $12.74 | (0.13) | —(3) | (0.13) | — | $12.61 | (1.02)% | 1.61% | (1.08)% | 130% | $86,651 | ||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||
2020 | $14.94 | (0.28) | 4.72 | 4.44 | (1.00) | $18.38 | 31.18% | 2.22% | (1.81)% | 141% | $5,298 | ||||||||||||||||||||||||
2019 | $15.92 | (0.25) | 1.60 | 1.35 | (2.33) | $14.94 | 11.84% | 2.28% | (1.70)% | 92% | $4,790 | ||||||||||||||||||||||||
2018 | $14.86 | (0.32) | 1.48 | 1.16 | (0.10) | $15.92 | 7.83% | 2.27% | (1.93)% | 116% | $6,227 | ||||||||||||||||||||||||
2017 | $11.70 | (0.25) | 3.99 | 3.74 | (0.58) | $14.86 | 31.99% | 2.36% | (1.83)% | 70% | $9,958 | ||||||||||||||||||||||||
2016 | $11.91 | (0.21) | —(3) | (0.21) | — | $11.70 | (1.68)% | 2.36% | (1.83)% | 130% | $9,146 | ||||||||||||||||||||||||
R Class | |||||||||||||||||||||||||||||||||||
2020 | $16.33 | (0.23) | 5.20 | 4.97 | (1.00) | $20.30 | 31.80% | 1.72% | (1.31)% | 141% | $8,492 | ||||||||||||||||||||||||
2019 | $17.09 | (0.19) | 1.76 | 1.57 | (2.33) | $16.33 | 12.39% | 1.78% | (1.20)% | 92% | $6,099 | ||||||||||||||||||||||||
2018 | $15.86 | (0.25) | 1.58 | 1.33 | (0.10) | $17.09 | 8.41% | 1.77% | (1.43)% | 116% | $5,687 | ||||||||||||||||||||||||
2017 | $12.40 | (0.19) | 4.23 | 4.04 | (0.58) | $15.86 | 32.61% | 1.86% | (1.33)% | 70% | $3,761 | ||||||||||||||||||||||||
2016 | $12.55 | (0.16) | 0.01 | (0.15) | — | $12.40 | (1.20)% | 1.86% | (1.33)% | 130% | $2,672 |
For a Share Outstanding Throughout the Years Ended October 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 | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||
2020 | $18.05 | (0.12) | 5.80 | 5.68 | (1.00) | $22.73 | 32.74% | 1.02% | (0.61)% | 141% | $9 | ||||||||||||||||||||||||
2019 | $18.51 | (0.08) | 1.95 | 1.87 | (2.33) | $18.05 | 13.21% | 1.08% | (0.50)% | 92% | $7 | ||||||||||||||||||||||||
2018 | $17.05 | (0.14) | 1.70 | 1.56 | (0.10) | $18.51 | 9.12% | 1.07% | (0.73)% | 116% | $7 | ||||||||||||||||||||||||
2017(4) | $15.26 | (0.07) | 2.44 | 2.37 | (0.58) | $17.05 | 15.56% | 1.16%(5) | (0.76)%(5) | 70%(6) | $6 | ||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||
2020 | $18.24 | (0.09) | 5.86 | 5.77 | (1.00) | $23.01 | 32.91% | 0.87% | (0.46)% | 141% | $108,820 | ||||||||||||||||||||||||
2019 | $18.65 | (0.06) | 1.98 | 1.92 | (2.33) | $18.24 | 13.40% | 0.93% | (0.35)% | 92% | $48,763 | ||||||||||||||||||||||||
2018 | $17.15 | (0.11) | 1.71 | 1.60 | (0.10) | $18.65 | 9.30% | 0.92% | (0.58)% | 116% | $39,687 | ||||||||||||||||||||||||
2017 | $13.26 | (0.08) | 4.55 | 4.47 | (0.58) | $17.15 | 33.74% | 1.01% | (0.48)% | 70% | $28,077 | ||||||||||||||||||||||||
2016 | $13.31 | (0.06) | 0.01 | (0.05) | — | $13.26 | (0.38)% | 1.01% | (0.48)% | 130% | $25,992 | ||||||||||||||||||||||||
G Class | |||||||||||||||||||||||||||||||||||
2020 | $18.34 | 0.08 | 5.93 | 6.01 | (1.00) | $23.35 | 34.09% | 0.01%(7) | 0.40%(7) | 141% | $299,803 | ||||||||||||||||||||||||
2019(8) | $17.43 | 0.05 | 0.86 | 0.91 | — | $18.34 | 5.22% | 0.00%(5)(9)(10) | 0.52%(5)(10) | 92%(11) | $8,326 |
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)Per-share amount was less than $0.005.
(4)April 10, 2017 (commencement of sale) through October 31, 2017.
(5)Annualized.
(6)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2017.
(7)The ratio of operating expenses to average net assets before expense waiver and the ratio of net investment income (loss) to average net assets before expense waiver was 0.87% and (0.46)%, respectively.
(8)April 1, 2019 (commencement of sale) through October 31, 2019.
(9)Ratio was less than 0.005%.
(10)The annualized ratio of operating expenses to average net assets before expense waiver and the annualized ratio of net investment income (loss) to average net assets before expense waiver was 0.93% and (0.41)%, respectively.
(11)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2019.
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the Shareholders and the Board of Directors of American Century Mutual Funds, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Small Cap Growth Fund (the “Fund”), one of the funds constituting the American Century Mutual Funds, Inc., as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of Small Cap Growth Fund of the American Century Mutual Funds, Inc. as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
December 16, 2020
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 62 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 62 | None | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 62 | None | ||||||||||||
Rajesh K. Gupta (1960) | Director | Since 2019 | Partner Emeritus, SeaCrest Investment Management and SeaCrest Wealth Management (2019 to Present); Chief Executive Officer and Chief Investment Officer, SeaCrest Investment Management (2006 to 2019); Chief Executive Officer and Chief Investment Officer, SeaCrest Wealth Management (2008 to 2019) | 62 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Lynn Jenkins (1963) | Director | Since 2019 | Consultant, LJ Strategies (2019 to present); United States Representative, U.S. House of Representatives (2009 to 2018) | 62 | MGP Ingredients, Inc. | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 62 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 62 | Onto Innovation Inc.; Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 87 | None | ||||||||||||
Interested Director | |||||||||||||||||
Jonathan S. Thomas (1963) | Director | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 125 | None |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
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Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for each of the 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years | ||||||
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries | ||||||
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Vice President, ACS, (2020 to present); Investment Operations and Investment Accounting, ACS (2000 to present) | ||||||
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS | ||||||
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS | ||||||
C. Jean Wade (1964) | Vice President since 2012 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) | ||||||
Robert J. Leach (1966) | Vice President since 2006 | Vice President, ACS (2000 to present) | ||||||
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS | ||||||
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
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Approval of Management Agreement |
At a meeting held on June 24, 2020, the Fund’s Board of Directors (the "Board") 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 continual 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 and to be provided to the Fund;
•the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis;
•the Fund’s investment performance, including data comparing the Fund's performance 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 compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans;
•the Advisor’s business continuity plans and specifically its response to the COVID-19 pandemic;
•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;
•services provided and charges to the Advisor's other investment management clients;
•acquired fund fees and expenses;
•payments and practices in connection with financial intermediaries holding shares of the Fund and the services provided by intermediaries in connection therewith; and
•possible collateral benefits to the Advisor from the management of the Fund.
The Board held two meetings to consider the renewal. The independent Directors also met in private session three times to review and discuss the information provided in response to their request. The independent Directors held active discussions with the Advisor regarding the renewal of the management agreement, requesting supplemental information, and reviewing information provided by the Advisor in response thereto. The independent Directors 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 in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or
33
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 without limitation 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 Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
•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 amounts paid by the Fund under Rule 12b-1 plans)
The Board noted that many of these services have expanded over time in terms of both 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, provides oversight of the investment performance process. It 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 investment performance information during the management agreement renewal 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 its various committees, 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, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio
34
valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
COVID-19 Response. During 2020, much of the world experienced unprecedented change and challenges from the impacts of the rapidly evolving, worldwide spread of the COVID-19 virus. The Board evaluated the Advisor’s response to the COVID-19 pandemic and its impact on service to the Fund. The Board found that Fund shareholders have continued to receive the Advisor’s investment management and other services without disruption, and Advisor personnel have demonstrated great resiliency in providing those services. The Board, directly and through its Audit Committee, continues to monitor the impact of the pandemic and the response of each of the Fund’s service providers.
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, to the extent they exist, through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business, infrastructure, investment capabilities and initiatives 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, expenses attributable to short sales, taxes, interest, extraordinary expenses, 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 Investment Company 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
35
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 Board 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 and services provided in response thereto. 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 Directors reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 Plan and that all such payments by the Advisor were made from the Advisor’s resources and reasonable profits. The Board found such payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the possible 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. To the extent there are potential collateral benefits, the board has been advised and has taken this into consideration in its review of the management contract with the Fund. 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 may receive 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.
36
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts 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 and change your withholding percentage for future distributions.
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.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they 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 American Century Investments’ website at americancentury.com/proxy 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 americancentury.com/proxy. 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 as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov. 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.
37
Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates $66,099,273, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2020.
The fund hereby designates $1,173,649 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2020.
The fund utilized earnings and profits of $7,396,841 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
38
Notes |
39
Notes |
40
![]() | ||||||||
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 Mutual Funds, 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. | ||||||||
©2020 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90978 2012 |
![image81.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image81.jpg)
Annual Report | |||||
October 31, 2020 | |||||
Sustainable Equity Fund | |||||
Investor Class (AFDIX) | |||||
I Class (AFEIX) | |||||
Y Class (AFYDX) | |||||
A Class (AFDAX) | |||||
C Class (AFDCX) | |||||
R Class (AFDRX) | |||||
R5 Class (AFDGX) | |||||
R6 Class (AFEDX) | |||||
G Class (AFEGX) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President's Letter | |||||
Performance | |||||
Portfolio Commentary | |||||
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 | |||||
Report of Independent Registered Public Accounting Firm | |||||
Management | |||||
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 |
![image181.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image181.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2020. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Pandemic Disrupted Economic, Market Courses
Market sentiment began the period relatively upbeat. A dovish Federal Reserve (Fed), modest inflation, improving economic and earnings data, and progress on U.S.-China trade policy helped boost global growth outlooks. Against this backdrop, riskier assets generally remained in favor.
However, beginning in late February, the COVID-19 outbreak rapidly spread worldwide, halting most U.S. and global economic activity and triggering a deep worldwide recession. Global stocks and credit-sensitive assets sold off sharply, while U.S. Treasury yields plunged to record lows amid soaring demand. Quick and aggressive action from the Fed and other central banks and federal governments helped stabilize and restore confidence in the financial markets. By summer, declining coronavirus infection and death rates in many regions and the reopening of economies were positive influences. By the end of the reporting period, most data suggested an economic recovery was underway. But, at the same time, COVID-19 infection rates were rising in the U.S. and Europe, prompting new lockdown measures in some European countries.
Overall, the broad U.S. stock market overcame the effects of the early 2020 sell-off to deliver a solid gain for the 12-month period. Growth stocks rallied and significantly outperformed value stocks, which generally declined. Global bond returns were broadly positive, as yields declined.
Science Helps Steer the Return to Normal
The return to pre-pandemic life will take time and patience, but we are confident we will get there. The first COVID-19 vaccine is on track for approval by year-end, and medical professionals continue to fine-tune virus treatment protocols. In the meantime, investors likely will face periods of outbreak-related disruptions, economic and political uncertainty, and heightened market volatility. These influences can be unsettling, but they tend to be temporary.
We appreciate your confidence in us during these extraordinary times. Our firm has a long history of helping clients weather unpredictable markets, and we’re confident we will continue to meet today’s challenges.
Sincerely,
![image191.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image191.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of October 31, 2020 | |||||||||||||||||||||||
Average Annual Returns | |||||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | ||||||||||||||||||
Investor Class | AFDIX | 11.33% | 11.98% | 13.03% | — | 7/29/05 | |||||||||||||||||
S&P 500 Index | — | 9.71% | 11.70% | 13.00% | — | — | |||||||||||||||||
I Class | AFEIX | 11.55% | 12.21% | 13.27% | — | 7/29/05 | |||||||||||||||||
Y Class | AFYDX | 11.70% | — | — | 13.96% | 4/10/17 | |||||||||||||||||
A Class | AFDAX | 11/30/04 | |||||||||||||||||||||
No sales charge | 11.07% | 11.71% | 12.76% | — | |||||||||||||||||||
With sales charge | 4.68% | 10.40% | 12.09% | — | |||||||||||||||||||
C Class | AFDCX | 10.22% | 10.87% | 11.92% | — | 11/30/04 | |||||||||||||||||
R Class | AFDRX | 10.77% | 11.42% | 12.47% | — | 7/29/05 | |||||||||||||||||
R5 Class | AFDGX | 11.55% | — | — | 13.79% | 4/10/17 | |||||||||||||||||
R6 Class | AFEDX | 11.70% | — | — | 13.18% | 4/1/19 | |||||||||||||||||
G Class | AFEGX | 12.21% | — | — | 13.69% | 4/1/19 |
Average annual returns since inception are presented when ten years of performance history is not available.
Fund returns would have been lower if a portion of the fees had not been waived.
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.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. 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
Growth of $10,000 Over 10 Years | ||
$10,000 investment made October 31, 2010 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-210fb57f00e94df88c81.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/chart-210fb57f00e94df88c81.jpg)
Value on October 31, 2020 | |||||
Investor Class — $34,084 | |||||
S&P 500 Index — $33,987 | |||||
Ending value of Investor Class would have been lower if a portion of the fees had not been waived.
Total Annual Fund Operating Expenses | ||||||||||||||||||||||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | G Class | ||||||||||||||||||
0.80% | 0.60% | 0.45% | 1.05% | 1.80% | 1.30% | 0.60% | 0.45% | 0.45% |
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. Total returns for periods less than one year are not annualized. 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.
4
Portfolio Commentary |
Portfolio Managers: Greg Woodhams, Justin Brown, Joe Reiland and Rob Bove
Performance Summary
Sustainable Equity returned 11.33%* for the 12 months ended October 31, 2020, outpacing the 9.71% return of the fund’s benchmark, the S&P 500 Index.
U.S. stocks delivered strong returns during the reporting period, which was marked by extreme volatility. Stocks initially rose to all-time highs in February, before the COVID-19 pandemic and measures to combat it led to the first recession and bear market in stocks since the 2008-09 financial crisis. Massive monetary and fiscal stimulus helped support the economy and markets, and stocks recovered the ground lost earlier. Within the S&P 500 Index, information technology and consumer discretionary stocks posted the largest gains. The energy sector fell sharply amid weakening demand and a notable decline in oil prices.
Stock selection in the real estate and information technology sectors helped drive outperformance relative to the benchmark. An overweight allocation to information technology was also helpful. Stock decisions in the health care and energy sectors detracted.
Real Estate and Information Technology Led Performance
Stock selection in the real estate sector was a top contributor. A leading source of strength was Prologis, an equity real estate investment trust (REIT) that owns primarily logistics and distribution center properties, which benefited from the surge in e-commerce. REITs were also supported by low interest rates as the Federal Reserve provided stimulus to the pandemic-stricken economy.
In the information technology sector, stock choices in the IT services industry led relative performance. The stock price of PayPal Holdings, the leader in online payments, benefited from the increasing demand for digital transactions, a secular trend that has been aided by stay-at-home restrictions during the pandemic. In the software industry, Microsoft was a top contributor, buoyed by the breadth of its businesses, its transition to a subscription model and strength in its cloud division. NVIDIA reported positive results and raised guidance due to strong demand for its chips used in data centers and gaming. The data center business is being driven by the launch of new products that are based on a new architecture and a leading process node, which is driving better price and performance per chip.
Elsewhere, not owning two oil companies that are components of the benchmark helped relative performance. Exxon Mobil faltered along with the sector as reduced energy demand and low prices weighed on revenues. Investors worried about the sustainability of its dividend, and the stock was removed from the Dow Jones Industrial Average at the end of August. Not owning Chevron helped relative performance due to lower-than-expected earnings amid falling oil prices. This was another victim of economic weakness resulting from a surge in COVID-19 cases and uncertainty about the pace of the recovery.
Health Care Stocks Detracted
Overall stock selection in the health care sector detracted, mostly driven by choices in the health care equipment and supplies industry. The pandemic hurt several health care segments. Medical device makers in particular were hampered by fewer elective procedures because of the pandemic.
*All fund returns referenced in this commentary are for Investor Class shares. Fund returns would have been lower had a portion of the fees not been waived. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund’s benchmark, other share classes may not. See page 3 for returns for all share classes.
5
The energy sector especially felt the impact of the pandemic. Plunging oil prices and weak demand as the global economy shut down caused most energy stocks to fall, including ONEOK, a diversified energy company with a large stake in pipelines. We eliminated ONEOK as the energy sector is likely to see considerable weakness due to uncertainty around the timing and magnitude of an eventual economic recovery. ConocoPhillips also detracted. The oil giant’s stock fell after the company reported disappointing results due to declining oil prices and low production. Phillips 66 was another casualty. The economic slowdown caused by the pandemic resulted in reduced demand for refined oil, which hurt that segment of Phillips 66’s business. Profit margins and earnings fell along with demand for gasoline, jet fuel and related products.
Among other notable individual detractors from relative returns, Bank of America underperformed as interest rates fell to zero. In addition, slower economic growth and high unemployment were expected to lead to credit losses and slow new-loan generation. The travel industry was also hit hard by the pandemic. Royal Caribbean Cruises was a significant detractor. Sailings were canceled, and those revenues likely won’t come back anytime soon, even after the worst of the virus has passed. Fares will also likely have to be lower across the industry to drive bookings in the foreseeable future. We eliminated our holding.
Outlook
The portfolio invests in a blend of large value and large growth stocks, while seeking to outperform the S&P 500 Index with a comparable dividend yield without taking on significant additional risk. We believe that companies exhibiting both improving business fundamentals and sustainable corporate behaviors will outperform over time. We use a quantitative model that combines fundamental measures of a stock’s value and growth potential. We then integrate our view of the company’s financial improvement with multiple sources of environmental, social and governance data.
As of October 31, 2020, the portfolio’s largest overweight position relative to the benchmark was in the industrials sector. Communication services ended the period as the largest underweight sector.
A strategy or emphasis on environmental, social and governance factors (ESG) may limit the investment opportunities available to a portfolio. Therefore, the portfolio may underperform or perform differently than other portfolios that do not have an ESG investment focus. A portfolio's ESG investment focus may also result in the portfolio investing in securities or industry sectors that perform differently or maintain a different risk profile than the market generally or compared to underlying holdings that are not screened for ESG standards.
6
Fund Characteristics |
October 31, 2020 | |||||
Top Ten Holdings | % of net assets | ||||
Microsoft Corp. | 7.0% | ||||
Apple, Inc. | 6.2% | ||||
Amazon.com, Inc. | 4.8% | ||||
Alphabet, Inc., Class A | 3.7% | ||||
Procter & Gamble Co. (The) | 2.2% | ||||
Prologis, Inc. | 2.2% | ||||
NextEra Energy, Inc. | 2.2% | ||||
Facebook, Inc., Class A | 2.1% | ||||
Home Depot, Inc. (The) | 2.0% | ||||
NVIDIA Corp. | 1.8% | ||||
Top Five Industries | % of net assets | ||||
Software | 8.9% | ||||
Technology Hardware, Storage and Peripherals | 6.2% | ||||
Interactive Media and Services | 5.8% | ||||
Internet and Direct Marketing Retail | 5.4% | ||||
IT Services | 5.3% | ||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 96.9% | ||||
Temporary Cash Investments | 2.8% | ||||
Other Assets and Liabilities | 0.3% |
7
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 May 1, 2020 to October 31, 2020.
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 I Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not through a financial intermediary or employer-sponsored retirement plan account), American Century Investments may charge you a $25.00 annual 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 $25.00 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.
8
Beginning Account Value 5/1/20 | Ending Account Value 10/31/20 | Expenses Paid During Period(1) 5/1/20 - 10/31/20 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,141.90 | $4.25 | 0.79% | ||||||||||
I Class | $1,000 | $1,143.30 | $3.18 | 0.59% | ||||||||||
Y Class | $1,000 | $1,143.80 | $2.37 | 0.44% | ||||||||||
A Class | $1,000 | $1,140.60 | $5.60 | 1.04% | ||||||||||
C Class | $1,000 | $1,136.20 | $9.61 | 1.79% | ||||||||||
R Class | $1,000 | $1,139.20 | $6.94 | 1.29% | ||||||||||
R5 Class | $1,000 | $1,143.20 | $3.18 | 0.59% | ||||||||||
R6 Class | $1,000 | $1,144.00 | $2.37 | 0.44% | ||||||||||
G Class | $1,000 | $1,146.90 | $0.00 | 0.00%(2) | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,021.17 | $4.01 | 0.79% | ||||||||||
I Class | $1,000 | $1,022.17 | $3.00 | 0.59% | ||||||||||
Y Class | $1,000 | $1,022.93 | $2.24 | 0.44% | ||||||||||
A Class | $1,000 | $1,019.91 | $5.28 | 1.04% | ||||||||||
C Class | $1,000 | $1,016.14 | $9.07 | 1.79% | ||||||||||
R Class | $1,000 | $1,018.65 | $6.55 | 1.29% | ||||||||||
R5 Class | $1,000 | $1,022.17 | $3.00 | 0.59% | ||||||||||
R6 Class | $1,000 | $1,022.93 | $2.24 | 0.44% | ||||||||||
G Class | $1,000 | $1,025.14 | $0.00 | 0.00%(2) |
(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 184, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses.
(2)Other expenses, which include directors' fees and expenses, did not exceed 0.005%.
9
Schedule of Investments |
OCTOBER 31, 2020
Shares | Value | |||||||
COMMON STOCKS — 96.9% | ||||||||
Aerospace and Defense — 0.9% | ||||||||
Lockheed Martin Corp. | 70,746 | $ | 24,770,297 | |||||
Air Freight and Logistics — 0.4% | ||||||||
Expeditors International of Washington, Inc. | 129,022 | 11,401,674 | ||||||
Auto Components — 0.9% | ||||||||
Aptiv plc | 247,418 | 23,873,363 | ||||||
Banks — 3.4% | ||||||||
Bank of America Corp. | 1,657,238 | 39,276,541 | ||||||
JPMorgan Chase & Co. | 375,234 | 36,787,941 | ||||||
Regions Financial Corp. | 1,276,032 | 16,971,226 | ||||||
93,035,708 | ||||||||
Beverages — 1.5% | ||||||||
PepsiCo, Inc. | 300,068 | 39,996,064 | ||||||
Biotechnology — 2.3% | ||||||||
AbbVie, Inc. | 282,759 | 24,062,791 | ||||||
Amgen, Inc. | 138,678 | 30,084,805 | ||||||
Vertex Pharmaceuticals, Inc.(1) | 47,771 | 9,953,566 | ||||||
64,101,162 | ||||||||
Building Products — 1.8% | ||||||||
Johnson Controls International plc | 610,256 | 25,758,906 | ||||||
Masco Corp. | 415,366 | 22,263,617 | ||||||
48,022,523 | ||||||||
Capital Markets — 4.0% | ||||||||
Ameriprise Financial, Inc. | 74,804 | 12,030,728 | ||||||
BlackRock, Inc. | 37,449 | 22,439,815 | ||||||
Intercontinental Exchange, Inc. | 166,185 | 15,687,864 | ||||||
Morgan Stanley | 601,753 | 28,974,407 | ||||||
S&P Global, Inc. | 97,170 | 31,359,674 | ||||||
110,492,488 | ||||||||
Chemicals — 2.8% | ||||||||
Air Products and Chemicals, Inc. | 48,647 | 13,438,247 | ||||||
Ecolab, Inc. | 74,424 | 13,663,502 | ||||||
Linde plc | 130,378 | 28,727,489 | ||||||
Sherwin-Williams Co. (The) | 28,141 | 19,360,445 | ||||||
75,189,683 | ||||||||
Communications Equipment — 0.6% | ||||||||
Cisco Systems, Inc. | 491,800 | 17,655,620 | ||||||
Consumer Finance — 0.5% | ||||||||
American Express Co. | 161,071 | 14,696,118 | ||||||
Containers and Packaging — 0.8% | ||||||||
Ball Corp. | 234,935 | 20,909,215 | ||||||
Diversified Telecommunication Services — 1.2% | ||||||||
Verizon Communications, Inc. | 583,057 | 33,228,418 | ||||||
Electric Utilities — 2.2% | ||||||||
NextEra Energy, Inc. | 821,648 | 60,152,850 | ||||||
Electrical Equipment — 0.5% | ||||||||
Eaton Corp. plc | 138,330 | 14,357,271 |
10
Shares | Value | |||||||
Electronic Equipment, Instruments and Components — 1.5% | ||||||||
CDW Corp. | 56,823 | $ | 6,966,500 | |||||
Cognex Corp. | 181,929 | 11,989,121 | ||||||
Keysight Technologies, Inc.(1) | 197,220 | 20,682,461 | ||||||
39,638,082 | ||||||||
Entertainment — 1.5% | ||||||||
Activision Blizzard, Inc. | 198,629 | 15,042,174 | ||||||
Walt Disney Co. (The) | 222,632 | 26,994,130 | ||||||
42,036,304 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 3.0% | ||||||||
Prologis, Inc. | 609,826 | 60,494,739 | ||||||
SBA Communications Corp. | 70,766 | 20,548,324 | ||||||
81,043,063 | ||||||||
Food and Staples Retailing — 1.3% | ||||||||
Costco Wholesale Corp. | 47,372 | 16,941,174 | ||||||
Sysco Corp. | 311,315 | 17,218,833 | ||||||
34,160,007 | ||||||||
Food Products — 0.9% | ||||||||
Beyond Meat, Inc.(1) | 7,080 | 1,008,404 | ||||||
Mondelez International, Inc., Class A | 380,309 | 20,202,014 | ||||||
Vital Farms, Inc.(1) | 101,130 | 3,495,053 | ||||||
24,705,471 | ||||||||
Health Care Equipment and Supplies — 2.0% | ||||||||
Baxter International, Inc. | 71,661 | 5,558,744 | ||||||
Edwards Lifesciences Corp.(1) | 268,729 | 19,265,182 | ||||||
Medtronic plc | 222,924 | 22,419,467 | ||||||
ResMed, Inc. | 31,823 | 6,108,106 | ||||||
53,351,499 | ||||||||
Health Care Providers and Services — 3.0% | ||||||||
Cigna Corp. | 73,597 | 12,288,491 | ||||||
CVS Health Corp. | 348,341 | 19,538,447 | ||||||
Humana, Inc. | 36,726 | 14,663,957 | ||||||
UnitedHealth Group, Inc. | 119,612 | 36,498,406 | ||||||
82,989,301 | ||||||||
Hotels, Restaurants and Leisure — 0.5% | ||||||||
Chipotle Mexican Grill, Inc.(1) | 12,268 | 14,739,757 | ||||||
Household Products — 2.8% | ||||||||
Colgate-Palmolive Co. | 201,909 | 15,928,601 | ||||||
Procter & Gamble Co. (The) | 445,587 | 61,089,978 | ||||||
77,018,579 | ||||||||
Industrial Conglomerates — 1.2% | ||||||||
Honeywell International, Inc. | 195,219 | 32,201,374 | ||||||
Insurance — 1.3% | ||||||||
Aflac, Inc. | 154,333 | 5,239,605 | ||||||
Marsh & McLennan Cos., Inc. | 105,345 | 10,898,994 | ||||||
Progressive Corp. (The) | 91,322 | 8,392,492 | ||||||
Prudential Financial, Inc. | 86,240 | 5,521,085 | ||||||
Travelers Cos., Inc. (The) | 53,522 | 6,460,640 | ||||||
36,512,816 | ||||||||
Interactive Media and Services — 5.8% | ||||||||
Alphabet, Inc., Class A(1) | 62,638 | 101,229,898 | ||||||
Facebook, Inc., Class A(1) | 220,558 | 58,031,016 | ||||||
159,260,914 |
11
Shares | Value | |||||||
Internet and Direct Marketing Retail — 5.4% | ||||||||
Amazon.com, Inc.(1) | 43,589 | $ | 132,342,742 | |||||
Expedia Group, Inc. | 170,447 | 16,047,585 | ||||||
148,390,327 | ||||||||
IT Services — 5.3% | ||||||||
Accenture plc, Class A | 135,273 | 29,342,067 | ||||||
Mastercard, Inc., Class A | 119,003 | 34,349,026 | ||||||
PayPal Holdings, Inc.(1) | 229,324 | 42,684,076 | ||||||
Visa, Inc., Class A | 204,603 | 37,178,411 | ||||||
143,553,580 | ||||||||
Life Sciences Tools and Services — 2.2% | ||||||||
Agilent Technologies, Inc. | 219,872 | 22,446,733 | ||||||
Thermo Fisher Scientific, Inc. | 82,034 | 38,811,926 | ||||||
61,258,659 | ||||||||
Machinery — 1.8% | ||||||||
Cummins, Inc. | 114,756 | 25,233,697 | ||||||
Parker-Hannifin Corp. | 114,642 | 23,886,807 | ||||||
49,120,504 | ||||||||
Media — 0.7% | ||||||||
Comcast Corp., Class A | 464,464 | 19,618,959 | ||||||
Multiline Retail — 0.4% | ||||||||
Target Corp. | 79,345 | 12,077,896 | ||||||
Oil, Gas and Consumable Fuels — 0.9% | ||||||||
ConocoPhillips | 576,848 | 16,509,390 | ||||||
Phillips 66 | 162,555 | 7,584,816 | ||||||
24,094,206 | ||||||||
Personal Products — 0.4% | ||||||||
Estee Lauder Cos., Inc. (The), Class A | 53,898 | 11,839,235 | ||||||
Pharmaceuticals — 3.5% | ||||||||
Bristol-Myers Squibb Co. | 492,596 | 28,792,236 | ||||||
Merck & Co., Inc. | 450,541 | 33,885,189 | ||||||
Novo Nordisk A/S, B Shares | 244,487 | 15,635,376 | ||||||
Zoetis, Inc. | 107,738 | 17,081,860 | ||||||
95,394,661 | ||||||||
Professional Services — 0.9% | ||||||||
IHS Markit Ltd. | 292,635 | 23,665,392 | ||||||
Road and Rail — 1.8% | ||||||||
Norfolk Southern Corp. | 95,016 | 19,869,746 | ||||||
Union Pacific Corp. | 161,113 | 28,547,612 | ||||||
48,417,358 | ||||||||
Semiconductors and Semiconductor Equipment — 5.0% | ||||||||
Advanced Micro Devices, Inc.(1) | 197,091 | 14,838,981 | ||||||
Applied Materials, Inc. | 187,182 | 11,086,790 | ||||||
ASML Holding NV | 54,044 | 19,647,950 | ||||||
Broadcom, Inc. | 53,302 | 18,635,978 | ||||||
NVIDIA Corp. | 98,449 | 49,358,391 | ||||||
Texas Instruments, Inc. | 156,934 | 22,691,087 | ||||||
136,259,177 | ||||||||
Software — 8.9% | ||||||||
Adobe, Inc.(1) | 56,655 | 25,330,451 | ||||||
Microsoft Corp. | 949,103 | 192,164,884 | ||||||
salesforce.com, Inc.(1) | 107,093 | 24,874,491 | ||||||
242,369,826 |
12
Shares | Value | |||||||
Specialty Retail — 3.0% | ||||||||
Home Depot, Inc. (The) | 208,967 | $ | 55,733,588 | |||||
TJX Cos., Inc. (The) | 501,961 | 25,499,619 | ||||||
81,233,207 | ||||||||
Technology Hardware, Storage and Peripherals — 6.2% | ||||||||
Apple, Inc. | 1,553,214 | 169,082,876 | ||||||
Textiles, Apparel and Luxury Goods — 1.9% | ||||||||
NIKE, Inc., Class B | 317,928 | 38,176,794 | ||||||
VF Corp. | 189,700 | 12,747,840 | ||||||
50,924,634 | ||||||||
TOTAL COMMON STOCKS (Cost $2,273,426,429) | 2,646,840,118 | |||||||
TEMPORARY CASH INVESTMENTS — 2.8% | ||||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.50% - 3.375%, 6/30/21 - 11/15/48, valued at $28,245,093), in a joint trading account at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $27,789,056) | 27,788,917 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 0.125%, 7/15/30, valued at $49,397,645), at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $48,429,242) | 48,429,000 | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 2,312 | 2,312 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $76,220,229) | 76,220,229 | |||||||
TOTAL INVESTMENT SECURITIES — 99.7% (Cost $2,349,646,658) | 2,723,060,347 | |||||||
OTHER ASSETS AND LIABILITIES — 0.3% | 9,463,965 | |||||||
TOTAL NET ASSETS — 100.0% | $ | 2,732,524,312 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
EUR | 695,952 | USD | 816,902 | Credit Suisse AG | 12/31/20 | $ | (5,180) | |||||||||||||
EUR | 413,437 | USD | 490,981 | Credit Suisse AG | 12/31/20 | (8,771) | ||||||||||||||
EUR | 496,124 | USD | 587,665 | Credit Suisse AG | 12/31/20 | (9,012) | ||||||||||||||
USD | 16,632,031 | EUR | 14,169,391 | Credit Suisse AG | 12/31/20 | 105,598 | ||||||||||||||
USD | 528,399 | EUR | 450,187 | Credit Suisse AG | 12/31/20 | 3,325 | ||||||||||||||
USD | 535,110 | EUR | 452,483 | Credit Suisse AG | 12/31/20 | 7,357 | ||||||||||||||
USD | 873,144 | EUR | 741,889 | Credit Suisse AG | 12/31/20 | 7,844 | ||||||||||||||
$ | 101,161 |
FUTURES CONTRACTS PURCHASED | ||||||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)^ | ||||||||||
S&P 500 E-Mini | 449 | December 2020 | $ | 73,292,515 | $ | (2,283,894) |
^Amount represents value and unrealized appreciation (depreciation).
13
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
EUR | - | Euro | ||||||
USD | - | United States Dollar |
(1)Non-income producing.
See Notes to Financial Statements.
14
Statement of Assets and Liabilities |
OCTOBER 31, 2020 | |||||
Assets | |||||
Investment securities, at value (cost of $2,349,646,658) | $ | 2,723,060,347 | |||
Deposits with broker for futures contracts | 5,388,000 | ||||
Receivable for capital shares sold | 3,387,271 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 124,124 | ||||
Dividends and interest receivable | 2,982,544 | ||||
2,734,942,286 | |||||
Liabilities | |||||
Payable for capital shares redeemed | 713,148 | ||||
Payable for variation margin on futures contracts | 1,059,040 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 22,963 | ||||
Accrued management fees | 597,943 | ||||
Distribution and service fees payable | 24,880 | ||||
2,417,974 | |||||
Net Assets | $ | 2,732,524,312 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 2,451,869,922 | |||
Distributable earnings | 280,654,390 | ||||
$ | 2,732,524,312 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $595,556,710 | 17,707,423 | $33.63 | ||||||||
I Class, $0.01 Par Value | $245,758,736 | 7,281,829 | $33.75 | ||||||||
Y Class, $0.01 Par Value | $8,115,118 | 240,004 | $33.81 | ||||||||
A Class, $0.01 Par Value | $54,637,872 | 1,634,446 | $33.43* | ||||||||
C Class, $0.01 Par Value | $10,178,219 | 314,456 | $32.37 | ||||||||
R Class, $0.01 Par Value | $9,014,143 | 271,939 | $33.15 | ||||||||
R5 Class, $0.01 Par Value | $3,194,889 | 94,610 | $33.77 | ||||||||
R6 Class, $0.01 Par Value | $5,149,675 | 152,157 | $33.84 | ||||||||
G Class, $0.01 Par Value | $1,800,918,950 | 53,021,103 | $33.97 |
*Maximum offering price $35.47 (net asset value divided by 0.9425).
See Notes to Financial Statements.
15
Statement of Operations |
YEAR ENDED OCTOBER 31, 2020 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $62,619) | $ | 34,347,338 | |||
Interest | 187,541 | ||||
Securities lending, net | 5,449 | ||||
34,540,328 | |||||
Expenses: | |||||
Management fees | 12,113,725 | ||||
Distribution and service fees: | |||||
A Class | 136,241 | ||||
C Class | 97,519 | ||||
R Class | 32,240 | ||||
Directors' fees and expenses | 65,600 | ||||
Other expenses | 20,415 | ||||
12,465,740 | |||||
Fees waived(1) | (6,245,688) | ||||
6,220,052 | |||||
Net investment income (loss) | 28,320,276 | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | (104,596,255) | ||||
Forward foreign currency exchange contract transactions | (614,166) | ||||
Futures contract transactions | (7,766,381) | ||||
Foreign currency translation transactions | (4,810) | ||||
(112,981,612) | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 283,791,380 | ||||
Forward foreign currency exchange contracts | 128,688 | ||||
Futures contracts | (2,283,894) | ||||
Translation of assets and liabilities in foreign currencies | (365) | ||||
281,635,809 | |||||
Net realized and unrealized gain (loss) | 168,654,197 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 196,974,473 |
(1)Amount consists of $185,152, $52,538, $20,216, $19,997, $3,608, $2,165, $541, $1,301 and $5,960,170 for Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class, R6 Class and G Class, respectively.
See Notes to Financial Statements.
16
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2020 AND OCTOBER 31, 2019 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2020 | October 31, 2019 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | 28,320,276 | $ | 3,393,891 | ||||
Net realized gain (loss) | (112,981,612) | 14,582,318 | ||||||
Change in net unrealized appreciation (depreciation) | 281,635,809 | 26,832,590 | ||||||
Net increase (decrease) in net assets resulting from operations | 196,974,473 | 44,808,799 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (3,259,073) | (9,479,446) | ||||||
I Class | (962,442) | (2,679,164) | ||||||
Y Class | (510,247) | (1,208,845) | ||||||
A Class | (364,241) | (3,252,169) | ||||||
C Class | (67,854) | (629,682) | ||||||
R Class | (31,560) | (210,019) | ||||||
R5 Class | (11,626) | (93,131) | ||||||
R6 Class | (18,679) | — | ||||||
G Class | (14,189,132) | — | ||||||
Decrease in net assets from distributions | (19,414,854) | (17,552,456) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 1,707,601,522 | 558,177,061 | ||||||
Net increase (decrease) in net assets | 1,885,161,141 | 585,433,404 | ||||||
Net Assets | ||||||||
Beginning of period | 847,363,171 | 261,929,767 | ||||||
End of period | $ | 2,732,524,312 | $ | 847,363,171 |
See Notes to Financial Statements.
17
Notes to Financial Statements |
OCTOBER 31, 2020
1. Organization
American Century Mutual Funds, 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. Sustainable Equity Fund (the fund) is one fund in a series issued by the corporation. 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 or the Bloomberg Industry Classification Standard for the tobacco industry.
The fund offers the Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class, R6 Class and G 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. Sale of the R6 Class and G Class commenced on April 1, 2019.
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.
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 exchange. 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 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.
18
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. 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 lending income is net of fees and rebates earned by the lending agent for its services.
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 American Century Investment Management, Inc. (ACIM) (the investment advisor) 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 certain types of investment securities and other financial instruments. 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 collateral requirements.
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.
19
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 and 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.
Securities Lending — Securities are lent to qualified financial institutions and brokers. State Street Bank & Trust Co. serves as securities lending agent to the fund pursuant to a Securities Lending Agreement. The lending of securities exposes the fund to risks such as: the borrowers may fail to return the loaned securities, the borrowers may not be able to provide additional collateral, the fund may experience delays in recovery of the loaned securities or delays in access to collateral, or the fund may experience losses related to the investment collateral. To minimize certain risks, loan counterparties pledge collateral in the form of cash and/or securities. The lending agent has agreed to indemnify the fund in the case of default of any securities borrowed. Cash collateral received is invested in the State Street Navigator Securities Lending Government Money Market Portfolio, a money market mutual fund registered under the 1940 Act. The loans may also be secured by U.S. government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. By lending securities, the fund seeks to increase its net investment income through the receipt of interest and fees. Such income is reflected separately within the Statement of Operations. The value of loaned securities and related collateral outstanding at period end, if any, are shown on a gross basis within the Schedule of Investments and Statement of Assets and Liabilities.
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. own, in aggregate, 52% 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 ACIM will pay all expenses of managing and operating the fund, except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), extraordinary expenses, 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. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class. 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 use very similar investment teams and strategies (strategy assets). From November 1, 2019 through July 31, 2020, the investment advisor agreed to waive 0.05% of the fund’s management fee. Effective August 1, 2020, the investment advisor terminated the waiver and decreased the annual management fee by 0.05%. The investment advisor agreed to waive the G Class’s management fee in its entirety. The investment advisor expects this waiver to remain in effect permanently and cannot terminate it without the approval of the Board of Directors.
20
The management fee schedule range and the effective annual management fee before and after waiver for each class for the period ended October 31, 2020 are as follows:
Effective Annual Management Fee | |||||||||||
Management Fee Schedule Range* | Before Waiver | After Waiver | |||||||||
Investor Class | 0.750% to 0.790% | 0.83% | 0.79% | ||||||||
I Class | 0.550% to 0.590% | 0.63% | 0.59% | ||||||||
Y Class | 0.400% to 0.440% | 0.48% | 0.44% | ||||||||
A Class | 0.750% to 0.790% | 0.83% | 0.79% | ||||||||
C Class | 0.750% to 0.790% | 0.83% | 0.79% | ||||||||
R Class | 0.750% to 0.790% | 0.83% | 0.79% | ||||||||
R5 Class | 0.550% to 0.590% | 0.63% | 0.59% | ||||||||
R6 Class | 0.400% to 0.440% | 0.48% | 0.44% | ||||||||
G Class | 0.400% to 0.440% | 0.48% | 0.00% |
*Prior to August 1, 2020, the management fee schedule range was 0.800% to 0.840% for Investor Class, A Class, C Class and R Class, 0.600% to 0.640% for I Class and R5 Class, 0.450% to 0.490% for Y Class, R6 Class and G 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 period ended October 31, 2020 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.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases were $9,165,216 and there were no interfund sales.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments and in kind transactions, for the period ended October 31, 2020 were $1,575,488,143 and $725,148,983, respectively.
On July 22, 2020, the fund received investment securities valued at $774,285,429 from a purchase in kind from other products managed by the fund’s investment advisor. A purchase in kind occurs when a fund receives securities into its portfolio in lieu of cash as payment from a purchasing shareholder.
21
5. Capital Share Transactions
Year ended October 31, 2020 | Year ended October 31, 2019(1) | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 230,000,000 | 230,000,000 | ||||||||||||
Sold | 17,239,793 | $ | 543,096,618 | 1,478,661 | $ | 42,448,717 | ||||||||
Issued in reinvestment of distributions | 100,919 | 3,228,400 | 373,564 | 9,230,761 | ||||||||||
Redeemed | (3,521,917) | (109,408,579) | (3,033,709) | (85,434,146) | ||||||||||
13,818,795 | 436,916,439 | (1,181,484) | (33,754,668) | |||||||||||
I Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||||||
Sold | 5,143,550 | 162,491,745 | 2,840,717 | 80,856,818 | ||||||||||
Issued in reinvestment of distributions | 26,744 | 857,150 | 88,125 | 2,181,089 | ||||||||||
Redeemed | (1,372,675) | (42,143,506) | (795,266) | (22,113,079) | ||||||||||
3,797,619 | 121,205,389 | 2,133,576 | 60,924,828 | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 817,327 | 25,138,027 | 1,298,628 | 36,812,959 | ||||||||||
Issued in reinvestment of distributions | 15,895 | 509,737 | 48,822 | 1,208,845 | ||||||||||
Redeemed | (2,263,503) | (74,266,512) | (188,570) | (5,485,398) | ||||||||||
(1,430,281) | (48,618,748) | 1,158,880 | 32,536,406 | |||||||||||
A Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||||||
Sold | 333,847 | 10,430,358 | 279,004 | 7,723,840 | ||||||||||
Issued in reinvestment of distributions | 10,059 | 320,586 | 113,811 | 2,808,849 | ||||||||||
Redeemed | (501,546) | (15,535,923) | (398,221) | (11,099,073) | ||||||||||
(157,640) | (4,784,979) | (5,406) | (566,384) | |||||||||||
C Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 89,054 | 2,800,693 | 71,758 | 1,908,443 | ||||||||||
Issued in reinvestment of distributions | 1,854 | 57,571 | 22,210 | 538,156 | ||||||||||
Redeemed | (119,796) | (3,670,138) | (160,965) | (4,368,416) | ||||||||||
(28,888) | (811,874) | (66,997) | (1,921,817) | |||||||||||
R Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 215,132 | 6,842,044 | 65,244 | 1,825,976 | ||||||||||
Issued in reinvestment of distributions | 997 | 31,560 | 8,544 | 210,019 | ||||||||||
Redeemed | (92,477) | (2,693,315) | (40,894) | (1,140,492) | ||||||||||
123,652 | 4,180,289 | 32,894 | 895,503 | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 58,252 | 1,990,201 | 3,133 | 89,963 | ||||||||||
Issued in reinvestment of distributions | 350 | 11,238 | 3,761 | 93,131 | ||||||||||
Redeemed | (7,052) | (207,323) | (11,350) | (311,587) | ||||||||||
51,550 | 1,794,116 | (4,456) | (128,493) | |||||||||||
R6 Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||||||
Sold | 250,249 | 7,873,896 | 154,326 | 4,599,937 | ||||||||||
Issued in reinvestment of distributions | 582 | 18,679 | — | — | ||||||||||
Redeemed | (228,865) | (7,676,224) | (24,135) | (733,659) | ||||||||||
21,966 | 216,351 | 130,191 | 3,866,278 | |||||||||||
G Class/Shares Authorized | 525,000,000 | 525,000,000 | ||||||||||||
Sold | 48,405,679 | 1,575,927,164 | 16,265,238 | 496,972,039 | ||||||||||
Issued in reinvestment of distributions | 442,167 | 14,189,132 | — | — | ||||||||||
Redeemed | (12,070,100) | (392,611,757) | (21,881) | (646,631) | ||||||||||
36,777,746 | 1,197,504,539 | 16,243,357 | 496,325,408 | |||||||||||
Net increase (decrease) | 52,974,519 | $ | 1,707,601,522 | 18,440,555 | $ | 558,177,061 |
(1)April 1, 2019 (commencement of sale) through October 31, 2019 for the R6 Class and G Class.
22
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.
Level 1 | Level 2 | Level 3 | |||||||||
Assets | |||||||||||
Investment Securities | |||||||||||
Common Stocks | $ | 2,611,556,792 | $ | 35,283,326 | — | ||||||
Temporary Cash Investments | 2,312 | 76,217,917 | — | ||||||||
$ | 2,611,559,104 | $ | 111,501,243 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 124,124 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Futures Contracts | $ | 2,283,894 | — | — | |||||||
Forward Foreign Currency Exchange Contracts | — | $ | 22,963 | — | |||||||
$ | 2,283,894 | $ | 22,963 | — |
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. The fund's average notional exposure to equity price risk derivative instruments held during the period was $22,559,689 futures contracts purchased.
23
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 settlement 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 forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, 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 $18,095,531.
Value of Derivative Instruments as of October 31, 2020
Asset Derivatives | Liability Derivatives | |||||||||||||
Type of Risk Exposure | Location on Statement of Assets and Liabilities | Value | Location on Statement of Assets and Liabilities | Value | ||||||||||
Equity Price Risk | Receivable for variation margin on futures contracts* | — | Payable for variation margin on futures contracts* | $ | 1,059,040 | |||||||||
Foreign Currency Risk | Unrealized appreciation on forward foreign currency exchange contracts | $ | 124,124 | Unrealized depreciation on forward foreign currency exchange contracts | 22,963 | |||||||||
$ | 124,124 | $ | 1,082,003 |
* Included in the unrealized appreciation (depreciation) on futures contracts, as reported in the Schedule of Investments.
Effect of Derivative Instruments on the Statement of Operations for the Year Ended October 31, 2020
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 | $ | (7,766,381) | Change in net unrealized appreciation (depreciation) on futures contracts | $ | (2,283,894) | ||||||||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | (614,166) | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | 128,688 | ||||||||||
$ | (8,380,547) | $ | (2,155,206) |
8. Risk Factors
The value of the fund’s shares will go up and down, sometimes rapidly or unpredictably, based on the performance of the securities owned by the fund and other factors generally affecting the securities market. Market risks, including political, regulatory, economic and social developments, can affect the value of the fund’s investments. Natural disasters, public health emergencies, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse long-term effects on world economies and markets generally.
24
9. Federal Tax Information
income to shareholders of record on December 7, 2020:
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | G Class | ||||||||||||||||||
$0.1559 | $0.2314 | $0.2881 | $0.0614 | — | — | $0.2314 | $0.2881 | $0.4543 |
The tax character of distributions paid during the years ended October 31, 2020 and October 31, 2019 were as follows:
2020 | 2019 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 7,163,302 | $ | 2,630,877 | ||||
Long-term capital gains | $ | 12,251,552 | $ | 14,921,579 |
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 period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 2,375,197,191 | |||
Gross tax appreciation of investments | $ | 402,484,485 | |||
Gross tax depreciation of investments | (54,621,329) | ||||
Net tax appreciation (depreciation) of investments | 347,863,156 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 1,300 | ||||
Net tax appreciation (depreciation) | $ | 347,864,456 | |||
Undistributed ordinary income | $ | 22,952,967 | |||
Accumulated short-term capital losses | $ | (86,617,491) | |||
Accumulated long-term capital losses | $ | (3,545,542) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Accumulated capital losses represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers may be carried forward for an unlimited period. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations.
25
Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 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 | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $30.40 | 0.28 | 3.15 | 3.43 | — | (0.20) | (0.20) | $33.63 | 11.33% | 0.79% | 0.83% | 0.88% | 0.84% | 36% | $595,557 | ||||||||||||||||||||||||||||||||
2019 | $28.19 | 0.33 | 3.77 | 4.10 | (0.22) | (1.67) | (1.89) | $30.40 | 16.10% | 0.80% | 0.84% | 1.14% | 1.10% | 33% | $118,225 | ||||||||||||||||||||||||||||||||
2018 | $27.22 | 0.26 | 1.52 | 1.78 | (0.20) | (0.61) | (0.81) | $28.19 | 6.60% | 0.95% | 0.95% | 0.91% | 0.91% | 41% | $142,923 | ||||||||||||||||||||||||||||||||
2017 | $21.75 | 0.23 | 5.51 | 5.74 | (0.27) | — | (0.27) | $27.22 | 26.61% | 1.00% | 1.00% | 0.95% | 0.95% | 18% | $135,315 | ||||||||||||||||||||||||||||||||
2016 | $21.77 | 0.25 | (0.04) | 0.21 | (0.23) | — | (0.23) | $21.75 | 0.99% | 0.99% | 0.99% | 1.18% | 1.18% | 71% | $87,865 | ||||||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $30.50 | 0.35 | 3.16 | 3.51 | (0.06) | (0.20) | (0.26) | $33.75 | 11.55% | 0.59% | 0.63% | 1.08% | 1.04% | 36% | $245,759 | ||||||||||||||||||||||||||||||||
2019 | $28.27 | 0.37 | 3.81 | 4.18 | (0.28) | (1.67) | (1.95) | $30.50 | 16.37% | 0.60% | 0.64% | 1.34% | 1.30% | 33% | $106,268 | ||||||||||||||||||||||||||||||||
2018 | $27.30 | 0.33 | 1.51 | 1.84 | (0.26) | (0.61) | (0.87) | $28.27 | 6.80% | 0.75% | 0.75% | 1.11% | 1.11% | 41% | $38,188 | ||||||||||||||||||||||||||||||||
2017 | $21.81 | 0.27 | 5.53 | 5.80 | (0.31) | — | (0.31) | $27.30 | 26.88% | 0.80% | 0.80% | 1.15% | 1.15% | 18% | $19,776 | ||||||||||||||||||||||||||||||||
2016 | $21.84 | 0.29 | (0.05) | 0.24 | (0.27) | — | (0.27) | $21.81 | 1.19% | 0.79% | 0.79% | 1.38% | 1.38% | 71% | $5,637 | ||||||||||||||||||||||||||||||||
Y Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $30.56 | 0.43 | 3.12 | 3.55 | (0.10) | (0.20) | (0.30) | $33.81 | 11.70% | 0.44% | 0.48% | 1.23% | 1.19% | 36% | $8,115 | ||||||||||||||||||||||||||||||||
2019 | $28.32 | 0.41 | 3.82 | 4.23 | (0.32) | (1.67) | (1.99) | $30.56 | 16.56% | 0.45% | 0.49% | 1.49% | 1.45% | 33% | $51,037 | ||||||||||||||||||||||||||||||||
2018 | $27.33 | 0.36 | 1.52 | 1.88 | (0.28) | (0.61) | (0.89) | $28.32 | 6.93% | 0.60% | 0.60% | 1.26% | 1.26% | 41% | $14,485 | ||||||||||||||||||||||||||||||||
2017(3) | $23.89 | 0.16 | 3.28 | 3.44 | — | — | — | $27.33 | 14.40% | 0.65%(4) | 0.65%(4) | 1.10%(4) | 1.10%(4) | 18%(5) | $383 |
For a Share Outstanding Throughout the Years Ended October 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 | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $30.29 | 0.21 | 3.13 | 3.34 | — | (0.20) | (0.20) | $33.43 | 11.07% | 1.04% | 1.08% | 0.63% | 0.59% | 36% | $54,638 | ||||||||||||||||||||||||||||||||
2019 | $28.09 | 0.25 | 3.78 | 4.03 | (0.16) | (1.67) | (1.83) | $30.29 | 15.81% | 1.05% | 1.09% | 0.89% | 0.85% | 33% | $54,290 | ||||||||||||||||||||||||||||||||
2018 | $27.13 | 0.19 | 1.51 | 1.70 | (0.13) | (0.61) | (0.74) | $28.09 | 6.31% | 1.20% | 1.20% | 0.66% | 0.66% | 41% | $50,489 | ||||||||||||||||||||||||||||||||
2017 | $21.67 | 0.17 | 5.50 | 5.67 | (0.21) | — | (0.21) | $27.13 | 26.34% | 1.25% | 1.25% | 0.70% | 0.70% | 18% | $51,396 | ||||||||||||||||||||||||||||||||
2016 | $21.69 | 0.20 | (0.05) | 0.15 | (0.17) | — | (0.17) | $21.67 | 0.74% | 1.24% | 1.24% | 0.93% | 0.93% | 71% | $97,012 | ||||||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $29.56 | (0.02) | 3.03 | 3.01 | — | (0.20) | (0.20) | $32.37 | 10.22% | 1.79% | 1.83% | (0.12)% | (0.16)% | 36% | $10,178 | ||||||||||||||||||||||||||||||||
2019 | $27.48 | 0.04 | 3.71 | 3.75 | — | (1.67) | (1.67) | $29.56 | 14.98% | 1.80% | 1.84% | 0.14% | 0.10% | 33% | $10,149 | ||||||||||||||||||||||||||||||||
2018 | $26.63 | (0.03) | 1.49 | 1.46 | — | (0.61) | (0.61) | $27.48 | 5.51% | 1.95% | 1.95% | (0.09)% | (0.09)% | 41% | $11,277 | ||||||||||||||||||||||||||||||||
2017 | $21.27 | (0.01) | 5.41 | 5.40 | (0.04) | — | (0.04) | $26.63 | 25.40% | 2.00% | 2.00% | (0.05)% | (0.05)% | 18% | $17,904 | ||||||||||||||||||||||||||||||||
2016 | $21.29 | 0.04 | (0.04) | —(6) | (0.02) | — | (0.02) | $21.27 | (0.02)% | 1.99% | 1.99% | 0.18% | 0.18% | 71% | $18,640 | ||||||||||||||||||||||||||||||||
R Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $30.12 | 0.12 | 3.11 | 3.23 | — | (0.20) | (0.20) | $33.15 | 10.77% | 1.29% | 1.33% | 0.38% | 0.34% | 36% | $9,014 | ||||||||||||||||||||||||||||||||
2019 | $27.93 | 0.18 | 3.77 | 3.95 | (0.09) | (1.67) | (1.76) | $30.12 | 15.56% | 1.30% | 1.34% | 0.64% | 0.60% | 33% | $4,466 | ||||||||||||||||||||||||||||||||
2018 | $26.98 | 0.11 | 1.51 | 1.62 | (0.06) | (0.61) | (0.67) | $27.93 | 6.04% | 1.45% | 1.45% | 0.41% | 0.41% | 41% | $3,223 | ||||||||||||||||||||||||||||||||
2017 | $21.55 | 0.11 | 5.47 | 5.58 | (0.15) | — | (0.15) | $26.98 | 26.03% | 1.50% | 1.50% | 0.45% | 0.45% | 18% | $3,910 | ||||||||||||||||||||||||||||||||
2016 | $21.58 | 0.14 | (0.05) | 0.09 | (0.12) | — | (0.12) | $21.55 | 0.44% | 1.49% | 1.49% | 0.68% | 0.68% | 71% | $4,090 |
For a Share Outstanding Throughout the Years Ended October 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) | |||||||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $30.52 | 0.34 | 3.17 | 3.51 | (0.06) | (0.20) | (0.26) | $33.77 | 11.55% | 0.59% | 0.63% | 1.08% | 1.04% | 36% | $3,195 | ||||||||||||||||||||||||||||||||
2019 | $28.29 | 0.38 | 3.80 | 4.18 | (0.28) | (1.67) | (1.95) | $30.52 | 16.36% | 0.60% | 0.64% | 1.34% | 1.30% | 33% | $1,314 | ||||||||||||||||||||||||||||||||
2018 | $27.30 | 0.32 | 1.52 | 1.84 | (0.24) | (0.61) | (0.85) | $28.29 | 6.82% | 0.75% | 0.75% | 1.11% | 1.11% | 41% | $1,344 | ||||||||||||||||||||||||||||||||
2017(3) | $23.89 | 0.15 | 3.26 | 3.41 | — | — | — | $27.30 | 14.27% | 0.80%(4) | 0.80%(4) | 1.07%(4) | 1.07%(4) | 18%(5) | $6 | ||||||||||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $30.56 | 0.39 | 3.17 | 3.56 | (0.08) | (0.20) | (0.28) | $33.84 | 11.70% | 0.44% | 0.48% | 1.23% | 1.19% | 36% | $5,150 | ||||||||||||||||||||||||||||||||
2019(7) | $28.05 | 0.21 | 2.30 | 2.51 | — | — | — | $30.56 | 8.95% | 0.44%(4) | 0.49%(4) | 1.18%(4) | 1.13%(4) | 33%(8) | $3,979 | ||||||||||||||||||||||||||||||||
G Class | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | $30.64 | 0.54 | 3.18 | 3.72 | (0.19) | (0.20) | (0.39) | $33.97 | 12.21% | 0.00%(9) | 0.48% | 1.67% | 1.19% | 36% | $1,800,919 | ||||||||||||||||||||||||||||||||
2019(7) | $28.05 | 0.37 | 2.22 | 2.59 | — | — | — | $30.64 | 9.23% | 0.00%(4)(9) | 0.49%(4) | 2.04%(4) | 1.55%(4) | 33%(8) | $497,635 |
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)April 10, 2017 (commencement of sale) through October 31, 2017.
(4)Annualized.
(5)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2017.
(6)Per-share amount was less than $0.005.
(7)April 1, 2019 (commencement of sale) through October 31, 2019.
(8)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2019.
(9)Ratio was less than 0.005%.
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the Shareholders and the Board of Directors of American Century Mutual Funds, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of
investments, of Sustainable Equity Fund (the “Fund”), one of the funds constituting the American Century Mutual Funds, Inc., as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of Sustainable Equity Fund of the American Century Mutual Funds, Inc. as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
December 16, 2020
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 62 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 62 | None | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 62 | None | ||||||||||||
Rajesh K. Gupta (1960) | Director | Since 2019 | Partner Emeritus, SeaCrest Investment Management and SeaCrest Wealth Management (2019 to Present); Chief Executive Officer and Chief Investment Officer, SeaCrest Investment Management (2006 to 2019); Chief Executive Officer and Chief Investment Officer, SeaCrest Wealth Management (2008 to 2019) | 62 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Lynn Jenkins (1963) | Director | Since 2019 | Consultant, LJ Strategies (2019 to present); United States Representative, U.S. House of Representatives (2009 to 2018) | 62 | MGP Ingredients, Inc. | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 62 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 62 | Onto Innovation Inc.; Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 87 | None | ||||||||||||
Interested Director | |||||||||||||||||
Jonathan S. Thomas (1963) | Director | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 125 | None |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
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Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for each of the 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years | ||||||
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries | ||||||
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Vice President, ACS, (2020 to present); Investment Operations and Investment Accounting, ACS (2000 to present) | ||||||
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS | ||||||
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS | ||||||
C. Jean Wade (1964) | Vice President since 2012 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) | ||||||
Robert J. Leach (1966) | Vice President since 2006 | Vice President, ACS (2000 to present) | ||||||
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS | ||||||
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
33
Approval of Management Agreement |
At a meeting held on June 24, 2020, the Fund’s Board of Directors (the "Board") 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 continual 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 and to be provided to the Fund;
•the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis;
•the Fund’s investment performance, including data comparing the Fund's performance 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 compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans;
•the Advisor’s business continuity plans and specifically its response to the COVID-19 pandemic;
•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;
•services provided and charges to the Advisor's other investment management clients;
•acquired fund fees and expenses;
•payments and practices in connection with financial intermediaries holding shares of the Fund and the services provided by intermediaries in connection therewith; and
•possible collateral benefits to the Advisor from the management of the Fund.
The Board held two meetings to consider the renewal. The independent Directors also met in private session three times to review and discuss the information provided in response to their request. The independent Directors held active discussions with the Advisor regarding the renewal of the management agreement, requesting supplemental information, and reviewing information provided by the Advisor in response thereto. The independent Directors 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 in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or
34
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 without limitation 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 Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
•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 amounts paid by the Fund under Rule 12b-1 plans)
The Board noted that many of these services have expanded over time in terms of both 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, provides oversight of the investment performance process. It 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 investment performance information during the management agreement renewal 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 its various committees, 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, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio
35
valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
COVID-19 Response. During 2020, much of the world experienced unprecedented change and challenges from the impacts of the rapidly evolving, worldwide spread of the COVID-19 virus. The Board evaluated the Advisor’s response to the COVID-19 pandemic and its impact on service to the Fund. The Board found that Fund shareholders have continued to receive the Advisor’s investment management and other services without disruption, and Advisor personnel have demonstrated great resiliency in providing those services. The Board, directly and through its Audit Committee, continues to monitor the impact of the pandemic and the response of each of the Fund’s service providers.
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, to the extent they exist, through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business, infrastructure, investment capabilities and initiatives 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, expenses attributable to short sales, taxes, interest, extraordinary expenses, 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 Investment Company 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.
36
The Board and the Advisor agreed to a permanent change to the Fund's fee schedule that should have the effect of lowering the Fund's annual unified management fee by approximately 0.05% (e.g., the Investor Class unified fee will be reduced from 0.84% to 0.79%), beginning August 1, 2020. 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 Board 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 and services provided in response thereto. 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 Directors reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 Plan and that all such payments by the Advisor were made from the Advisor’s resources and reasonable profits. The Board found such payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the possible 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. To the extent there are potential collateral benefits, the board has been advised and has taken this into consideration in its review of the management contract with the Fund. 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 may receive 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.
37
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts 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 and change your withholding percentage for future distributions.
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.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they 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 American Century Investments’ website at americancentury.com/proxy 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 americancentury.com/proxy. 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 as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov. 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.
38
Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified dividend income for the fiscal year ended October 31, 2020.
For corporate taxpayers, the fund hereby designates $7,163,302, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2020 as qualified for the corporate dividends received deduction.
The fund hereby designates $12,251,552, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2020.
39
Notes |
40
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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 Mutual Funds, 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. | ||||||||
©2020 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90971 2012 |
![image81.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image81.jpg)
Annual Report | |||||
October 31, 2020 | |||||
Ultra® Fund | |||||
Investor Class (TWCUX) | |||||
I Class (TWUIX) | |||||
Y Class (AULYX) | |||||
A Class (TWUAX) | |||||
C Class (TWCCX) | |||||
R Class (AULRX) | |||||
R5 Class (AULGX) | |||||
R6 Class (AULDX) | |||||
G Class (AULNX) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | |||||
Performance | |||||
Portfolio Commentary | |||||
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 | |||||
Report of Independent Registered Public Accounting Firm | |||||
Management | |||||
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 |
![image181.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image181.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2020. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Pandemic Disrupted Economic, Market Courses
Market sentiment began the period relatively upbeat. A dovish Federal Reserve (Fed), modest inflation, improving economic and earnings data, and progress on U.S.-China trade policy helped boost global growth outlooks. Against this backdrop, riskier assets generally remained in favor.
However, beginning in late February, the COVID-19 outbreak rapidly spread worldwide, halting most U.S. and global economic activity and triggering a deep worldwide recession. Global stocks and credit-sensitive assets sold off sharply, while U.S. Treasury yields plunged to record lows amid soaring demand. Quick and aggressive action from the Fed and other central banks and federal governments helped stabilize and restore confidence in the financial markets. By summer, declining coronavirus infection and death rates in many regions and the reopening of economies were positive influences. By the end of the reporting period, most data suggested an economic recovery was underway. But, at the same time, COVID-19 infection rates were rising in the U.S. and Europe, prompting new lockdown measures in some European countries.
Overall, the broad U.S. stock market overcame the effects of the early 2020 sell-off to deliver a solid gain for the 12-month period. Growth stocks rallied and significantly outperformed value stocks, which generally declined. Global bond returns were broadly positive, as yields declined.
Science Helps Steer the Return to Normal
The return to pre-pandemic life will take time and patience, but we are confident we will get there. The first COVID-19 vaccine is on track for approval by year-end, and medical professionals continue to fine-tune virus treatment protocols. In the meantime, investors likely will face periods of outbreak-related disruptions, economic and political uncertainty, and heightened market volatility. These influences can be unsettling, but they tend to be temporary.
We appreciate your confidence in us during these extraordinary times. Our firm has a long history of helping clients weather unpredictable markets, and we’re confident we will continue to meet today’s challenges.
Sincerely,
![image191.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/image191.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of October 31, 2020 | |||||||||||||||||||||||
Average Annual Returns | |||||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | ||||||||||||||||||
Investor Class | TWCUX | 37.77% | 18.30% | 16.69% | — | 11/2/81 | |||||||||||||||||
Russell 1000 Growth Index | — | 29.22% | 17.30% | 16.29% | — | — | |||||||||||||||||
S&P 500 Index | — | 9.71% | 11.70% | 13.00% | — | — | |||||||||||||||||
I Class | TWUIX | 38.05% | 18.53% | 16.93% | — | 11/14/96 | |||||||||||||||||
Y Class | AULYX | 38.26% | — | — | 23.20% | 4/10/17 | |||||||||||||||||
A Class | TWUAX | 10/2/96 | |||||||||||||||||||||
No sales charge | 37.43% | 18.00% | 16.40% | — | |||||||||||||||||||
With sales charge | 29.52% | 16.62% | 15.71% | — | |||||||||||||||||||
C Class | TWCCX | 36.39% | 17.12% | 15.53% | — | 10/29/01 | |||||||||||||||||
R Class | AULRX | 37.08% | 17.70% | 16.11% | — | 8/29/03 | |||||||||||||||||
R5 Class | AULGX | 38.05% | — | — | 23.01% | 4/10/17 | |||||||||||||||||
R6 Class | AULDX | 38.26% | 18.71% | — | 17.81% | 7/26/13 | |||||||||||||||||
G Class | AULNX | 39.09% | — | — | 32.50% | 8/1/19 |
Average annual returns since inception are presented when ten years of performance history is not available.
Fund returns would have been lower if a portion of the fees had not been waived. Extraordinary performance is attributable in part to unusually favorable market conditions and may not be repeated or consistently achieved in the future.
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.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. 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
Growth of $10,000 Over 10 Years | ||
$10,000 investment made October 31, 2010 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-98139deec8d247359c31.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000002/chart-98139deec8d247359c31.jpg)
Value on October 31, 2020 | |||||
Investor Class — $46,863 | |||||
Russell 1000 Growth Index — $45,290 | |||||
S&P 500 Index — $33,987 | |||||
Total Annual Fund Operating Expenses | ||||||||||||||||||||||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | G Class | ||||||||||||||||||
0.97% | 0.77% | 0.62% | 1.22% | 1.97% | 1.47% | 0.77% | 0.62% | 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. Total returns for periods less than one year are not annualized. 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.
4
Portfolio Commentary |
Portfolio Managers: Keith Lee, Michael Li and Jeff Bourke
Performance Summary
Ultra returned 37.77%* for the 12 months ended October 31, 2020, outpacing the 29.22% return of the fund’s benchmark, the Russell 1000 Growth Index.
U.S. stocks delivered strong returns during the reporting period, which was marked by extreme volatility. Stocks initially rose to all-time highs in February, before the COVID-19 pandemic and measures to combat it led to the first recession and bear market in stocks since the 2008-09 financial crisis. Massive monetary and fiscal stimulus helped support the economy and markets, and stocks recovered the ground lost earlier. Within the Russell 1000 Growth Index, consumer discretionary and information technology led the benchmark’s performance. At the other end of the spectrum, the energy sector struggled with the declining price of oil amid a sharp slowdown in economic growth and falling energy demand.
Stock selection in the consumer discretionary sector contributed most to outperformance relative to the benchmark. Stock decisions in the information technology sector were also helpful. An overweight allocation to energy detracted fractionally from relative performance.
Consumer Discretionary Stocks Were Top Contributors
The automobiles industry led outperformance in the consumer discretionary sector. The leading contribution to relative performance came from electric car company Tesla, which benefited from solid fundamental reports and strong demand for its vehicles. The company reported better-than-expected production numbers, successfully launched the Model Y and announced plans to ramp up production of its commercial Tesla Semi.
In the information technology sector, DocuSign was a key contributor. The cloud-based electronic signature company outperformed as e-signatures and digital document management have become increasingly mainstream. The stock is benefiting from a secular trend toward spending on productivity-enhancement tools. Canada-based e-commerce firm Shopify outperformed after reporting record earnings. The company also announced a partnership with Walmart, which could boost sales. Square was a top performer on optimism about continued growth trends in its cash app business and its merchant-based business showing signs of stabilizing after being negatively impacted by the COVID-19 virus.
Regeneron Pharmaceuticals was another major contributor to outperformance. The biotechnology company is engaged in the discovery and development of medicines for the treatment of serious diseases, and it maintains one of the world’s most comprehensive genetic databases. Regeneron’s treatment for COVID-19 patients showed benefits in late-stage clinical trials.
Energy Holdings Detracted Fractionally from Performance
We have only one holding in the energy sector. EOG Resources detracted as the stock price of this leading oil and gas exploration and production company fell along with the price of crude oil amid weakening demand due to the pandemic.
*All fund returns referenced in this commentary are for Investor Class shares. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund’s benchmark, other share classes may not. See page 3 for returns for all share classes.
5
Elsewhere, among other individual detractors from relative performance was chipmaker NVIDIA. We did not own the stock, which is a benchmark component. The company reported strong results and raised guidance due to strength in its data center and gaming businesses. Digital payment companies Mastercard and Visa underperformed as transaction volumes declined along with economic activity. Revenues declined further because of weakness in cross-border transactions as a result of pandemic-related travel restrictions.
The stock of The TJX Cos. underperformed as the off-price retailer temporarily closed its stores due to the pandemic. We like the long-term prospects for TJX as traditional mall retailers close their shops and consumers look for value.
Outlook
We remain confident in our belief that high-quality companies with a capability for sustained long-term growth can outperform over time. Our portfolio positioning reflects where we are finding stocks of what we believe are attractive, well-run companies as a result of the application of that philosophy and process.
As of October 31, 2020, the largest sector overweights relative to the benchmark were in the communication services and consumer discretionary sectors. The communication services sector encompasses entertainment and communication stocks, including large portfolio holdings Facebook and Google parent Alphabet. We believe our consumer discretionary companies with dominant global brands or which are leveraging technology to drive expansion offer attractive, sustainable growth going forward. In particular, we see many companies in the sector benefiting from digital transformation and online growth of their business.
The portfolio’s largest underweight was in the health care sector. Although the portfolio has lighter exposure than the benchmark, we believe that many segments of the health care industry are primed for a golden age of innovation and positive social impact. Indeed, we think select companies in the sector are uniquely positioned to address a number of profound social and medical problems. The sector’s rapid, effective response to the pandemic is important proof of this concept. Our information technology holdings were modestly underweight relative to the benchmark. However, the sector represented our largest absolute position. We continued to find an abundance of what we believe are high-quality, well-run companies benefiting from powerful secular trends.
6
Fund Characteristics |
OCTOBER 31, 2020 | |||||
Top Ten Holdings | % of net assets | ||||
Apple, Inc. | 12.0% | ||||
Amazon.com, Inc. | 8.3% | ||||
Alphabet, Inc.* | 6.5% | ||||
Microsoft Corp. | 5.7% | ||||
Facebook, Inc., Class A | 4.5% | ||||
Mastercard, Inc., Class A | 4.3% | ||||
Visa, Inc., Class A | 4.1% | ||||
salesforce.com, Inc. | 3.6% | ||||
UnitedHealth Group, Inc. | 3.3% | ||||
Tesla, Inc. | 3.1% | ||||
*Includes all classes of the issuer held by the fund. | |||||
Top Five Industries | % of net assets | ||||
IT Services | 14.9% | ||||
Software | 13.7% | ||||
Technology Hardware, Storage and Peripherals | 12.0% | ||||
Interactive Media and Services | 11.9% | ||||
Internet and Direct Marketing Retail | 8.3% | ||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 100.0% | ||||
Temporary Cash Investments | —* | ||||
Other Assets and Liabilities | —* |
*Category is less than 0.05% of total net assets.
7
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 May 1, 2020 to October 31, 2020.
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 I Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not through a financial intermediary or employer-sponsored retirement plan account), American Century Investments may charge you a $25.00 annual 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 $25.00 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.
8
Beginning Account Value 5/1/20 | Ending Account Value 10/31/20 | Expenses Paid During Period(1) 5/1/20 - 10/31/20 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,263.40 | $5.46 | 0.96% | ||||||||||
I Class | $1,000 | $1,264.80 | $4.33 | 0.76% | ||||||||||
Y Class | $1,000 | $1,265.70 | $3.47 | 0.61% | ||||||||||
A Class | $1,000 | $1,261.80 | $6.88 | 1.21% | ||||||||||
C Class | $1,000 | $1,257.20 | $11.12 | 1.96% | ||||||||||
R Class | $1,000 | $1,260.30 | $8.30 | 1.46% | ||||||||||
R5 Class | $1,000 | $1,264.60 | $4.33 | 0.76% | ||||||||||
R6 Class | $1,000 | $1,265.70 | $3.47 | 0.61% | ||||||||||
G Class | $1,000 | $1,269.50 | $0.00 | 0.00%(2) | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,020.31 | $4.88 | 0.96% | ||||||||||
I Class | $1,000 | $1,021.32 | $3.86 | 0.76% | ||||||||||
Y Class | $1,000 | $1,022.07 | $3.10 | 0.61% | ||||||||||
A Class | $1,000 | $1,019.05 | $6.14 | 1.21% | ||||||||||
C Class | $1,000 | $1,015.28 | $9.93 | 1.96% | ||||||||||
R Class | $1,000 | $1,017.80 | $7.41 | 1.46% | ||||||||||
R5 Class | $1,000 | $1,021.32 | $3.86 | 0.76% | ||||||||||
R6 Class | $1,000 | $1,022.07 | $3.10 | 0.61% | ||||||||||
G Class | $1,000 | $1,025.14 | $0.00 | 0.00%(2) |
(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 184, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses.
(2)Other expenses, which include directors' fees and expenses, did not exceed 0.005%.
9
Schedule of Investments |
OCTOBER 31, 2020
Shares | Value | |||||||
COMMON STOCKS — 100.0% | ||||||||
Automobiles — 3.1% | ||||||||
Tesla, Inc.(1) | 1,260,000 | $ | 488,930,400 | |||||
Banks — 0.9% | ||||||||
JPMorgan Chase & Co. | 1,032,435 | 101,219,927 | ||||||
U.S. Bancorp | 1,116,000 | 43,468,200 | ||||||
144,688,127 | ||||||||
Beverages — 1.0% | ||||||||
Constellation Brands, Inc., Class A | 936,673 | 154,766,480 | ||||||
Biotechnology — 2.7% | ||||||||
Biogen, Inc.(1) | 424,944 | 107,115,634 | ||||||
Ionis Pharmaceuticals, Inc.(1) | 731,088 | 34,324,582 | ||||||
Regeneron Pharmaceuticals, Inc.(1) | 537,000 | 291,891,720 | ||||||
433,331,936 | ||||||||
Capital Markets — 1.1% | ||||||||
MSCI, Inc. | 491,778 | 172,043,615 | ||||||
Chemicals — 0.6% | ||||||||
Ecolab, Inc. | 496,000 | 91,060,640 | ||||||
Commercial Services and Supplies — 0.4% | ||||||||
Copart, Inc.(1) | 508,736 | 56,144,105 | ||||||
Electrical Equipment — 0.6% | ||||||||
Acuity Brands, Inc. | 409,000 | 36,458,260 | ||||||
Rockwell Automation, Inc. | 275,000 | 65,208,000 | ||||||
101,666,260 | ||||||||
Electronic Equipment, Instruments and Components — 0.7% | ||||||||
Cognex Corp. | 700,000 | 46,130,000 | ||||||
Keyence Corp. | 127,900 | 57,999,220 | ||||||
104,129,220 | ||||||||
Entertainment — 2.7% | ||||||||
Netflix, Inc.(1) | 536,667 | 255,313,959 | ||||||
Roku, Inc.(1) | 284,000 | 57,481,600 | ||||||
Walt Disney Co. (The) | 1,035,000 | 125,493,750 | ||||||
438,289,309 | ||||||||
Food and Staples Retailing — 1.8% | ||||||||
Costco Wholesale Corp. | 802,820 | 287,104,488 | ||||||
Health Care Equipment and Supplies — 5.3% | ||||||||
ABIOMED, Inc.(1) | 103,743 | 26,130,787 | ||||||
DexCom, Inc.(1) | 237,000 | 75,740,460 | ||||||
Edwards Lifesciences Corp.(1) | 2,238,438 | 160,473,620 | ||||||
IDEXX Laboratories, Inc.(1) | 313,000 | 132,968,660 | ||||||
Intuitive Surgical, Inc.(1) | 608,810 | 406,124,975 | ||||||
Tandem Diabetes Care, Inc.(1) | 380,056 | 41,426,104 | ||||||
842,864,606 | ||||||||
Health Care Providers and Services — 3.3% | ||||||||
UnitedHealth Group, Inc. | 1,728,000 | 527,281,920 | ||||||
Hotels, Restaurants and Leisure — 3.4% | ||||||||
Chipotle Mexican Grill, Inc.(1) | 242,398 | 291,236,349 | ||||||
Starbucks Corp. | 2,189,000 | 190,355,440 |
10
Shares | Value | |||||||
Wingstop, Inc. | 592,000 | $ | 68,867,360 | |||||
550,459,149 | ||||||||
Household Products — 0.8% | ||||||||
Colgate-Palmolive Co. | 1,677,000 | 132,298,530 | ||||||
Interactive Media and Services — 11.9% | ||||||||
Alphabet, Inc., Class A(1) | 288,955 | 466,983,065 | ||||||
Alphabet, Inc., Class C(1) | 351,787 | 570,250,245 | ||||||
Facebook, Inc., Class A(1) | 2,746,176 | 722,546,367 | ||||||
Tencent Holdings Ltd. | 1,877,000 | 143,977,961 | ||||||
1,903,757,638 | ||||||||
Internet and Direct Marketing Retail — 8.3% | ||||||||
Amazon.com, Inc.(1) | 436,294 | 1,324,654,028 | ||||||
IT Services — 14.9% | ||||||||
Adyen NV(1) | 55,000 | 92,810,829 | ||||||
Mastercard, Inc., Class A | 2,392,700 | 690,628,928 | ||||||
PayPal Holdings, Inc.(1) | 2,528,716 | 470,669,909 | ||||||
Shopify, Inc., Class A(1) | 220,453 | 204,013,820 | ||||||
Square, Inc., Class A(1) | 1,742,670 | 269,904,729 | ||||||
Visa, Inc., Class A | 3,592,544 | 652,801,170 | ||||||
2,380,829,385 | ||||||||
Machinery — 1.6% | ||||||||
Donaldson Co., Inc. | 704,557 | 33,466,458 | ||||||
Nordson Corp. | 322,200 | 62,323,146 | ||||||
Westinghouse Air Brake Technologies Corp. | 1,365,607 | 80,980,495 | ||||||
Yaskawa Electric Corp. | 1,951,800 | 75,950,501 | ||||||
252,720,600 | ||||||||
Oil, Gas and Consumable Fuels — 0.2% | ||||||||
EOG Resources, Inc. | 847,000 | 29,001,280 | ||||||
Personal Products — 1.3% | ||||||||
Estee Lauder Cos., Inc. (The), Class A | 961,000 | 211,093,260 | ||||||
Road and Rail — 0.9% | ||||||||
J.B. Hunt Transport Services, Inc. | 1,205,000 | 146,696,700 | ||||||
Semiconductors and Semiconductor Equipment — 2.3% | ||||||||
Analog Devices, Inc. | 1,258,000 | 149,110,740 | ||||||
Applied Materials, Inc. | 1,566,108 | 92,760,577 | ||||||
Xilinx, Inc. | 1,090,291 | 129,406,639 | ||||||
371,277,956 | ||||||||
Software — 13.7% | ||||||||
DocuSign, Inc.(1) | 1,465,000 | 296,296,250 | ||||||
Fair Isaac Corp.(1) | 179,000 | 70,069,550 | ||||||
Microsoft Corp. | 4,520,765 | 915,319,289 | ||||||
Paycom Software, Inc.(1) | 312,000 | 113,596,080 | ||||||
salesforce.com, Inc.(1) | 2,508,766 | 582,711,079 | ||||||
Splunk, Inc.(1) | 373,000 | 73,868,920 | ||||||
Zoom Video Communications, Inc., Class A(1) | 284,000 | 130,898,440 | ||||||
2,182,759,608 | ||||||||
Specialty Retail — 2.3% | ||||||||
Ross Stores, Inc. | 1,430,729 | 121,855,189 | ||||||
TJX Cos., Inc. (The) | 4,939,724 | 250,937,979 | ||||||
372,793,168 | ||||||||
Technology Hardware, Storage and Peripherals — 12.0% | ||||||||
Apple, Inc. | 17,668,492 | 1,923,392,039 |
11
Shares | Value | |||||||
Textiles, Apparel and Luxury Goods — 2.2% | ||||||||
lululemon athletica, Inc.(1) | 208,482 | $ | 66,566,218 | |||||
NIKE, Inc., Class B | 2,302,000 | 276,424,160 | ||||||
342,990,378 | ||||||||
TOTAL COMMON STOCKS (Cost $4,455,798,760) | 15,967,024,825 | |||||||
TEMPORARY CASH INVESTMENTS† | ||||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.50% - 3.375%, 6/30/21 - 11/15/48, valued at $1,208,998), in a joint trading account at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $1,189,478) | 1,189,472 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 3.625%, 2/15/44, valued at $2,112,532), at 0.06%, dated 10/30/20, due 11/2/20 (Delivery value $2,071,010) | 2,071,000 | |||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $3,260,472) | 3,260,472 | |||||||
TOTAL INVESTMENT SECURITIES — 100.0% (Cost $4,459,059,232) | 15,970,285,297 | |||||||
OTHER ASSETS AND LIABILITIES† | (2,722,370) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 15,967,562,927 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
EUR | 2,109,250 | USD | 2,475,819 | Credit Suisse AG | 12/31/20 | $ | (15,700) | |||||||||||||
EUR | 1,859,000 | USD | 2,210,555 | Credit Suisse AG | 12/31/20 | (42,315) | ||||||||||||||
EUR | 1,859,000 | USD | 2,202,008 | Credit Suisse AG | 12/31/20 | (33,768) | ||||||||||||||
USD | 63,910,182 | EUR | 54,447,250 | Credit Suisse AG | 12/31/20 | 405,770 | ||||||||||||||
USD | 2,149,882 | EUR | 1,841,125 | Credit Suisse AG | 12/31/20 | 2,490 | ||||||||||||||
USD | 2,334,081 | EUR | 1,984,125 | Credit Suisse AG | 12/31/20 | 19,902 | ||||||||||||||
USD | 3,107,445 | EUR | 2,627,625 | Credit Suisse AG | 12/31/20 | 42,721 | ||||||||||||||
USD | 45,209,238 | JPY | 4,743,014,150 | Bank of America N.A. | 12/30/20 | (133,486) | ||||||||||||||
USD | 2,727,655 | JPY | 288,011,150 | Bank of America N.A. | 12/30/20 | (25,702) | ||||||||||||||
$ | 219,912 |
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
EUR | - | Euro | ||||||
JPY | - | Japanese Yen | ||||||
USD | - | United States Dollar |
† Category is less than 0.05% of total net assets.
(1)Non-income producing.
See Notes to Financial Statements.
12
Statement of Assets and Liabilities |
OCTOBER 31, 2020 | |||||
Assets | |||||
Investment securities, at value (cost of $4,459,059,232) | $ | 15,970,285,297 | |||
Receivable for investments sold | 15,585,497 | ||||
Receivable for capital shares sold | 6,080,728 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 470,883 | ||||
Dividends and interest receivable | 3,562,297 | ||||
Securities lending receivable | 19,201 | ||||
15,996,003,903 | |||||
Liabilities | |||||
Disbursements in excess of demand deposit cash | 117 | ||||
Payable for capital shares redeemed | 14,625,738 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 250,971 | ||||
Accrued management fees | 13,491,823 | ||||
Distribution and service fees payable | 72,327 | ||||
28,440,976 | |||||
Net Assets | $ | 15,967,562,927 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 4,010,075,511 | |||
Distributable earnings | 11,957,487,416 | ||||
$ | 15,967,562,927 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $14,648,924,593 | 220,687,212 | $66.38 | ||||||||
I Class, $0.01 Par Value | $588,450,910 | 8,497,876 | $69.25 | ||||||||
Y Class, $0.01 Par Value | $1,707,541 | 24,538 | $69.59 | ||||||||
A Class, $0.01 Par Value | $167,682,336 | 2,669,640 | $62.81* | ||||||||
C Class, $0.01 Par Value | $24,319,704 | 474,702 | $51.23 | ||||||||
R Class, $0.01 Par Value | $26,729,177 | 440,901 | $60.62 | ||||||||
R5 Class, $0.01 Par Value | $257,846 | 3,721 | $69.29 | ||||||||
R6 Class, $0.01 Par Value | $509,483,676 | 7,329,751 | $69.51 | ||||||||
G Class, $0.01 Par Value | $7,144 | 102 | $70.04 |
*Maximum offering price $66.64 (net asset value divided by 0.9425).
See Notes to Financial Statements.
13
Statement of Operations |
YEAR ENDED OCTOBER 31, 2020 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $92,608) | $ | 85,123,109 | |||
Interest | 292,923 | ||||
Securities lending, net | 19,201 | ||||
85,435,233 | |||||
Expenses: | |||||
Management fees | 133,143,519 | ||||
Distribution and service fees: | |||||
A Class | 348,326 | ||||
C Class | 205,353 | ||||
R Class | 109,874 | ||||
Directors' fees and expenses | 450,125 | ||||
Other expenses | 1,208 | ||||
134,258,405 | |||||
Fees waived - G Class | (37) | ||||
134,258,368 | |||||
Net investment income (loss) | (48,823,135) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions (Note 4) | 525,996,155 | ||||
Forward foreign currency exchange contract transactions | (2,337,508) | ||||
Foreign currency translation transactions | 16,793 | ||||
523,675,440 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 3,982,877,671 | ||||
Forward foreign currency exchange contracts | 180,160 | ||||
Translation of assets and liabilities in foreign currencies | 7,288 | ||||
3,983,065,119 | |||||
Net realized and unrealized gain (loss) | 4,506,740,559 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 4,457,917,424 |
See Notes to Financial Statements.
14
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2020 AND OCTOBER 31, 2019 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2020 | October 31, 2019 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (48,823,135) | $ | (14,151,682) | ||||
Net realized gain (loss) | 523,675,440 | 652,663,454 | ||||||
Change in net unrealized appreciation (depreciation) | 3,983,065,119 | 899,393,859 | ||||||
Net increase (decrease) in net assets resulting from operations | 4,457,917,424 | 1,537,905,631 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (497,939,761) | (730,083,401) | ||||||
I Class | (15,792,365) | (28,348,100) | ||||||
Y Class | (53,531) | (76,346) | ||||||
A Class | (5,351,781) | (7,623,683) | ||||||
C Class | (935,790) | (947,855) | ||||||
R Class | (850,029) | (1,360,937) | ||||||
R5 Class | (4,210) | (448) | ||||||
R6 Class | (16,454,953) | (25,190,411) | ||||||
G Class | (217) | — | ||||||
Decrease in net assets from distributions | (537,382,637) | (793,631,181) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (240,034,647) | 116,179,202 | ||||||
Net increase (decrease) in net assets | 3,680,500,140 | 860,453,652 | ||||||
Net Assets | ||||||||
Beginning of period | 12,287,062,787 | 11,426,609,135 | ||||||
End of period | $ | 15,967,562,927 | $ | 12,287,062,787 | ||||
See Notes to Financial Statements.
15
Notes to Financial Statements |
OCTOBER 31, 2020
1. Organization
American Century Mutual Funds, 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. Ultra Fund (the fund) is one fund in a series issued by the corporation. The fund's investment objective is to seek long-term capital growth.
The fund offers the Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class, R6 Class and G 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. Sale of the G Class commenced on August 1, 2019.
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 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. U.S. Treasury and Government Agency securities are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, 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 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.
16
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. 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 lending income is net of fees and rebates earned by the lending agent for its services.
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 American Century Investment Management, Inc. (ACIM) (the investment advisor) 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 certain types of investment securities and other financial instruments. 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 collateral requirements.
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.
17
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 and 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.
Securities Lending — Securities are lent to qualified financial institutions and brokers. State Street Bank & Trust Co. serves as securities lending agent to the fund pursuant to a Securities Lending Agreement. The lending of securities exposes the fund to risks such as: the borrowers may fail to return the loaned securities, the borrowers may not be able to provide additional collateral, the fund may experience delays in recovery of the loaned securities or delays in access to collateral, or the fund may experience losses related to the investment collateral. To minimize certain risks, loan counterparties pledge collateral in the form of cash and/or securities. The lending agent has agreed to indemnify the fund in the case of default of any securities borrowed. Cash collateral received is invested in the State Street Navigator Securities Lending Government Money Market Portfolio, a money market mutual fund registered under the 1940 Act. The loans may also be secured by U.S. government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. By lending securities, the fund seeks to increase its net investment income through the receipt of interest and fees. Such income is reflected separately within the Statement of Operations. The value of loaned securities and related collateral outstanding at period end, if any, are shown on a gross basis within the Schedule of Investments and Statement of Assets and Liabilities.
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 ACIM will pay all expenses of managing and operating the fund, except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), extraordinary expenses, 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. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class. 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 use very similar investment teams and strategies (strategy assets). The investment advisor agreed to waive the G Class's management fee in its entirety. The investment advisor expects this waiver to remain in effect permanently and cannot terminate it without the approval of the Board of Directors.
18
The management fee schedule range and the effective annual management fee for each class for the period ended October 31, 2020 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | |||||||
Investor Class | 0.800% to 0.990% | 0.96% | ||||||
I Class | 0.600% to 0.790% | 0.76% | ||||||
Y Class | 0.450% to 0.640% | 0.61% | ||||||
A Class | 0.800% to 0.990% | 0.96% | ||||||
C Class | 0.800% to 0.990% | 0.96% | ||||||
R Class | 0.800% to 0.990% | 0.96% | ||||||
R5 Class | 0.600% to 0.790% | 0.76% | ||||||
R6 Class | 0.450% to 0.640% | 0.61% | ||||||
G Class | 0.450% to 0.640% | 0.00%(1) |
(1)Effective annual management fee before waiver was 0.61%.
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 period ended October 31, 2020 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.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $6,986,160 and $5,529,333, respectively. The effect of interfund transactions on the Statement of Operations was $(370,185) in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments and in kind transactions, for the period ended October 31, 2020 were $812,029,510 and $1,484,842,878, respectively.
For the period ended October 31, 2020, the fund incurred net realized gains of $13,227,780 from redemptions in kind. A redemption in kind occurs when a fund delivers securities from its portfolio in lieu of cash as payment to a redeeming shareholder.
19
5. Capital Share Transactions
Year ended October 31, 2020 | Year ended October 31, 2019(1) | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 3,000,000,000 | 3,000,000,000 | ||||||||||||
Sold | 10,005,335 | $ | 565,084,480 | 7,271,579 | $ | 338,362,927 | ||||||||
Issued in reinvestment of distributions | 9,306,297 | 478,901,904 | 17,133,838 | 704,543,764 | ||||||||||
Redeemed | (23,598,620) | (1,325,972,063) | (19,883,790) | (933,688,053) | ||||||||||
(4,286,988) | (281,985,679) | 4,521,627 | 109,218,638 | |||||||||||
I Class/Shares Authorized | 120,000,000 | 120,000,000 | ||||||||||||
Sold | 3,516,331 | 210,134,766 | 3,624,881 | 178,398,381 | ||||||||||
Issued in reinvestment of distributions | 257,034 | 13,774,479 | 611,707 | 26,101,541 | ||||||||||
Redeemed | (2,262,344) | (130,239,567) | (5,408,439) | (271,836,094) | ||||||||||
1,511,021 | 93,669,678 | (1,171,851) | (67,336,172) | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 7,598 | 435,257 | 5,158 | 249,374 | ||||||||||
Issued in reinvestment of distributions | 534 | 28,722 | 918 | 39,247 | ||||||||||
Redeemed | (7,612) | (457,476) | (1,132) | (51,484) | ||||||||||
520 | 6,503 | 4,944 | 237,137 | |||||||||||
A Class/Shares Authorized | 60,000,000 | 60,000,000 | ||||||||||||
Sold | 873,790 | 47,417,147 | 639,406 | 28,146,102 | ||||||||||
Issued in reinvestment of distributions | 103,252 | 5,038,693 | 182,881 | 7,165,291 | ||||||||||
Redeemed | (747,854) | (39,456,212) | (632,688) | (28,166,501) | ||||||||||
229,188 | 12,999,628 | 189,599 | 7,144,892 | |||||||||||
C Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 194,165 | 8,625,235 | 211,178 | 7,569,450 | ||||||||||
Issued in reinvestment of distributions | 20,036 | 802,646 | 26,806 | 877,102 | ||||||||||
Redeemed | (160,091) | (7,166,955) | (93,382) | (3,442,472) | ||||||||||
54,110 | 2,260,926 | 144,602 | 5,004,080 | |||||||||||
R Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 246,296 | 13,528,987 | 197,063 | 8,482,452 | ||||||||||
Issued in reinvestment of distributions | 17,503 | 826,153 | 34,308 | 1,305,420 | ||||||||||
Redeemed | (195,157) | (10,614,721) | (199,457) | (8,334,487) | ||||||||||
68,642 | 3,740,419 | 31,914 | 1,453,385 | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 1,897 | 120,588 | 2,002 | 94,159 | ||||||||||
Issued in reinvestment of distributions | 45 | 2,404 | 10 | 448 | ||||||||||
Redeemed | (28) | (1,589) | (339) | (16,599) | ||||||||||
1,914 | 121,403 | 1,673 | 78,008 | |||||||||||
R6 Class/Shares Authorized | 110,000,000 | 110,000,000 | ||||||||||||
Sold | 2,682,757 | 161,316,501 | 2,436,356 | 117,344,335 | ||||||||||
Issued in reinvestment of distributions | 304,162 | 16,339,604 | 587,616 | 25,097,065 | ||||||||||
Redeemed | (4,473,539) | (248,503,847) | (1,676,518) | (82,067,166) | ||||||||||
(1,486,620) | (70,847,742) | 1,347,454 | 60,374,234 | |||||||||||
G Class/Shares Authorized | 80,000,000 | 80,000,000 | ||||||||||||
Sold | — | — | 98 | 5,000 | ||||||||||
Issued in reinvestment of distributions | 4 | 217 | — | — | ||||||||||
4 | 217 | 98 | 5,000 | |||||||||||
Net increase (decrease) | (3,908,209) | $ | (240,034,647) | 5,070,060 | $ | 116,179,202 |
(1)August 1, 2019 (commencement of sale) through October 31, 2019 for the G Class.
20
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.
Level 1 | Level 2 | Level 3 | |||||||||
Assets | |||||||||||
Investment Securities | |||||||||||
Common Stocks | $ | 15,596,286,314 | $ | 370,738,511 | — | ||||||
Temporary Cash Investments | — | 3,260,472 | — | ||||||||
$ | 15,596,286,314 | $ | 373,998,983 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 470,883 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 250,971 | — |
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 settlement 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 forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, 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 $76,100,205.
21
The value of foreign currency risk derivative instruments as of October 31, 2020, is disclosed on the Statement of Assets and Liabilities as an asset of $470,883 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $250,971 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended October 31, 2020, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(2,337,508) in net realized gain (loss) on forward foreign currency exchange contract transactions and $180,160 in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
8. Risk Factors
The value of the fund’s shares will go up and down, sometimes rapidly or unpredictably, based on the performance of the securities owned by the fund and other factors generally affecting the securities market. Market risks, including political, regulatory, economic and social developments, can affect the value of the fund’s investments. Natural disasters, public health emergencies, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse long-term effects on world economies and markets generally.
9. Federal Tax Information
On December 8, 2020, the fund declared and paid a per-share distribution from net realized gains to shareholders of record on December 7, 2020 of $2.1247 for the Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class, R6 Class and G Class.
The tax character of distributions paid during the years ended October 31, 2020 and October 31, 2019 were as follows:
2020 | 2019 | |||||||
Distributions Paid From | ||||||||
Ordinary income | — | $ | 1,545,620 | |||||
Long-term capital gains | $ | 537,382,637 | $ | 792,085,561 |
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 period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 4,471,976,122 | |||
Gross tax appreciation of investments | $ | 11,564,877,638 | |||
Gross tax depreciation of investments | (66,568,463) | ||||
Net tax appreciation (depreciation) of investments | 11,498,309,175 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 1,358 | ||||
Net tax appreciation (depreciation) | $ | 11,498,310,533 | |||
Undistributed ordinary income | — | ||||
Accumulated long-term gains | $ | 508,947,551 | |||
Late-year ordinary loss deferral | $ | (49,770,668) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Loss deferrals 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.
22
Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 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 | |||||||||||||||||||||||||||||||||||||||||
2020 | $50.27 | (0.21) | 18.55 | 18.34 | — | (2.23) | (2.23) | $66.38 | 37.77% | 0.97% | (0.36)% | 6% | $14,648,925 | ||||||||||||||||||||||||||||
2019 | $47.74 | (0.06) | 5.92 | 5.86 | — | (3.33) | (3.33) | $50.27 | 13.83% | 0.97% | (0.13)% | 13% | $11,308,500 | ||||||||||||||||||||||||||||
2018 | $44.59 | (0.06) | 5.82 | 5.76 | (0.07) | (2.54) | (2.61) | $47.74 | 13.44% | 0.97% | (0.12)% | 17% | $10,524,969 | ||||||||||||||||||||||||||||
2017 | $35.83 | 0.07 | 10.39 | 10.46 | (0.10) | (1.60) | (1.70) | $44.59 | 30.42% | 0.98% | 0.17% | 16% | $9,593,102 | ||||||||||||||||||||||||||||
2016 | $37.81 | 0.06 | (0.14) | (0.08) | (0.08) | (1.82) | (1.90) | $35.83 | (0.06)% | 0.98% | 0.19% | 18% | $7,790,085 | ||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $52.25 | (0.10) | 19.33 | 19.23 | — | (2.23) | (2.23) | $69.25 | 38.05% | 0.77% | (0.16)% | 6% | $588,451 | ||||||||||||||||||||||||||||
2019 | $49.39 | 0.03 | 6.16 | 6.19 | — | (3.33) | (3.33) | $52.25 | 14.05% | 0.77% | 0.07% | 13% | $365,036 | ||||||||||||||||||||||||||||
2018 | $46.04 | 0.03 | 6.02 | 6.05 | (0.16) | (2.54) | (2.70) | $49.39 | 13.68% | 0.77% | 0.08% | 17% | $402,938 | ||||||||||||||||||||||||||||
2017 | $36.95 | 0.14 | 10.73 | 10.87 | (0.18) | (1.60) | (1.78) | $46.04 | 30.66% | 0.78% | 0.37% | 16% | $322,059 | ||||||||||||||||||||||||||||
2016 | $38.93 | 0.14 | (0.14) | — | (0.16) | (1.82) | (1.98) | $36.95 | 0.14% | 0.78% | 0.39% | 18% | $198,930 | ||||||||||||||||||||||||||||
Y Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $52.42 | (0.01) | 19.41 | 19.40 | — | (2.23) | (2.23) | $69.59 | 38.26% | 0.62% | (0.01)% | 6% | $1,708 | ||||||||||||||||||||||||||||
2019 | $49.47 | 0.10 | 6.18 | 6.28 | — | (3.33) | (3.33) | $52.42 | 14.22% | 0.62% | 0.22% | 13% | $1,259 | ||||||||||||||||||||||||||||
2018 | $46.07 | 0.11 | 6.02 | 6.13 | (0.19) | (2.54) | (2.73) | $49.47 | 13.85% | 0.62% | 0.23% | 17% | $944 | ||||||||||||||||||||||||||||
2017(3) | $39.40 | 0.10 | 6.57 | 6.67 | — | — | — | $46.07 | 16.93% | 0.63%(4) | 0.43%(4) | 16%(5) | $6 |
For a Share Outstanding Throughout the Years Ended October 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 | |||||||||||||||||||||||||||||||||||||||||
2020 | $47.79 | (0.34) | 17.59 | 17.25 | — | (2.23) | (2.23) | $62.81 | 37.43% | 1.22% | (0.61)% | 6% | $167,682 | ||||||||||||||||||||||||||||
2019 | $45.67 | (0.17) | 5.62 | 5.45 | — | (3.33) | (3.33) | $47.79 | 13.54% | 1.22% | (0.38)% | 13% | $116,630 | ||||||||||||||||||||||||||||
2018 | $42.80 | (0.17) | 5.58 | 5.41 | — | (2.54) | (2.54) | $45.67 | 13.15% | 1.22% | (0.37)% | 17% | $102,806 | ||||||||||||||||||||||||||||
2017 | $34.45 | (0.04) | 10.00 | 9.96 | (0.01) | (1.60) | (1.61) | $42.80 | 30.10% | 1.23% | (0.08)% | 16% | $83,130 | ||||||||||||||||||||||||||||
2016 | $36.43 | (0.02) | (0.14) | (0.16) | — | (1.82) | (1.82) | $34.45 | (0.31)% | 1.23% | (0.06)% | 18% | $58,829 | ||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $39.65 | (0.62) | 14.43 | 13.81 | — | (2.23) | (2.23) | $51.23 | 36.39% | 1.97% | (1.36)% | 6% | $24,320 | ||||||||||||||||||||||||||||
2019 | $38.77 | (0.43) | 4.64 | 4.21 | — | (3.33) | (3.33) | $39.65 | 12.69% | 1.97% | (1.13)% | 13% | $16,676 | ||||||||||||||||||||||||||||
2018 | $36.96 | (0.45) | 4.80 | 4.35 | — | (2.54) | (2.54) | $38.77 | 12.32% | 1.97% | (1.12)% | 17% | $10,700 | ||||||||||||||||||||||||||||
2017 | $30.17 | (0.28) | 8.67 | 8.39 | — | (1.60) | (1.60) | $36.96 | 29.12% | 1.98% | (0.83)% | 16% | $5,359 | ||||||||||||||||||||||||||||
2016 | $32.36 | (0.25) | (0.12) | (0.37) | — | (1.82) | (1.82) | $30.17 | (1.03)% | 1.98% | (0.81)% | 18% | $3,306 | ||||||||||||||||||||||||||||
R Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $46.31 | (0.46) | 17.00 | 16.54 | — | (2.23) | (2.23) | $60.62 | 37.08% | 1.47% | (0.86)% | 6% | $26,729 | ||||||||||||||||||||||||||||
2019 | $44.47 | (0.28) | 5.45 | 5.17 | — | (3.33) | (3.33) | $46.31 | 13.26% | 1.47% | (0.63)% | 13% | $17,240 | ||||||||||||||||||||||||||||
2018 | $41.84 | (0.28) | 5.45 | 5.17 | — | (2.54) | (2.54) | $44.47 | 12.87% | 1.47% | (0.62)% | 17% | $15,137 | ||||||||||||||||||||||||||||
2017 | $33.79 | (0.12) | 9.77 | 9.65 | — | (1.60) | (1.60) | $41.84 | 29.75% | 1.48% | (0.33)% | 16% | $11,345 | ||||||||||||||||||||||||||||
2016 | $35.85 | (0.10) | (0.14) | (0.24) | — | (1.82) | (1.82) | $33.79 | (0.55)% | 1.48% | (0.31)% | 18% | $9,066 |
For a Share Outstanding Throughout the Years Ended October 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) | |||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $52.28 | (0.12) | 19.36 | 19.24 | — | (2.23) | (2.23) | $69.29 | 38.05% | 0.77% | (0.16)% | 6% | $258 | ||||||||||||||||||||||||||||
2019 | $49.42 | 0.01 | 6.18 | 6.19 | — | (3.33) | (3.33) | $52.28 | 14.04% | 0.77% | 0.07% | 13% | $94 | ||||||||||||||||||||||||||||
2018 | $46.04 | 0.04 | 6.02 | 6.06 | (0.14) | (2.54) | (2.68) | $49.42 | 13.69% | 0.77% | 0.08% | 17% | $7 | ||||||||||||||||||||||||||||
2017(3) | $39.41 | 0.07 | 6.56 | 6.63 | — | — | — | $46.04 | 16.82% | 0.78%(4) | 0.28%(4) | 16%(5) | $6 | ||||||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $52.36 | —(6) | 19.38 | 19.38 | — | (2.23) | (2.23) | $69.51 | 38.26% | 0.62% | (0.01)% | 6% | $509,484 | ||||||||||||||||||||||||||||
2019 | $49.42 | 0.10 | 6.17 | 6.27 | — | (3.33) | (3.33) | $52.36 | 14.22% | 0.62% | 0.22% | 13% | $461,623 | ||||||||||||||||||||||||||||
2018 | $46.07 | 0.10 | 6.02 | 6.12 | (0.23) | (2.54) | (2.77) | $49.42 | 13.85% | 0.62% | 0.23% | 17% | $369,109 | ||||||||||||||||||||||||||||
2017 | $36.97 | 0.18 | 10.75 | 10.93 | (0.23) | (1.60) | (1.83) | $46.07 | 30.86% | 0.63% | 0.52% | 16% | $233,309 | ||||||||||||||||||||||||||||
2016 | $38.95 | 0.17 | (0.12) | 0.05 | (0.21) | (1.82) | (2.03) | $36.97 | 0.29% | 0.63% | 0.54% | 18% | $83,367 | ||||||||||||||||||||||||||||
G Class | |||||||||||||||||||||||||||||||||||||||||
2020 | $52.44 | 0.37 | 19.46 | 19.83 | — | (2.23) | (2.23) | $70.04 | 39.09% | 0.01%(7) | 0.60%(7) | 6% | $7 | ||||||||||||||||||||||||||||
2019(8) | $51.28 | 0.10 | 1.06 | 1.16 | — | — | — | $52.44 | 2.26% | 0.00%(4)(9)(10) | 0.78%(4)(10) | 13%(11) | $5 |
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)April 10, 2017 (commencement of sale) through October 31, 2017.
(4)Annualized.
(5)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2017.
(6)Per-share amount was less than $0.005.
(7)The ratio of operating expenses to average net assets before expense waiver and the ratio of net investment income (loss) to average net assets before expense waiver was 0.62% and (0.01)%, respectively.
(8)August 1, 2019 (commencement of sale) through October 31, 2019.
(9)Ratio was less than 0.005%.
(10)The annualized ratio of operating expenses to average net assets before expense waiver and the annualized ratio of net investment income (loss) to average net assets before expense waiver was 0.62% and 0.16%, respectively.
(11)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2019.
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the Shareholders and the Board of Directors of American Century Mutual Funds, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Ultra® Fund (the “Fund”), one of the funds constituting the American Century Mutual Funds, Inc., as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of Ultra® Fund of the American Century Mutual Funds, Inc. as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
December 16, 2020
We have served as the auditor of one or more American Century investment companies since 1997.
27
Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 62 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 62 | None | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 62 | None | ||||||||||||
Rajesh K. Gupta (1960) | Director | Since 2019 | Partner Emeritus, SeaCrest Investment Management and SeaCrest Wealth Management (2019 to Present); Chief Executive Officer and Chief Investment Officer, SeaCrest Investment Management (2006 to 2019); Chief Executive Officer and Chief Investment Officer, SeaCrest Wealth Management (2008 to 2019) | 62 | None |
28
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years | ||||||||||||
Independent Directors | |||||||||||||||||
Lynn Jenkins (1963) | Director | Since 2019 | Consultant, LJ Strategies (2019 to present); United States Representative, U.S. House of Representatives (2009 to 2018) | 62 | MGP Ingredients, Inc. | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 62 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 62 | Onto Innovation Inc.; Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 87 | None | ||||||||||||
Interested Director | |||||||||||||||||
Jonathan S. Thomas (1963) | Director | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 125 | None |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
29
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for each of the 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years | ||||||
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries | ||||||
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Vice President, ACS, (2020 to present); Investment Operations and Investment Accounting, ACS (2000 to present) | ||||||
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS | ||||||
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS | ||||||
C. Jean Wade (1964) | Vice President since 2012 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) | ||||||
Robert J. Leach (1966) | Vice President since 2006 | Vice President, ACS (2000 to present) | ||||||
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS | ||||||
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
30
Approval of Management Agreement |
At a meeting held on June 24, 2020, the Fund’s Board of Directors (the "Board") 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 continual 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 and to be provided to the Fund;
•the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis;
•the Fund’s investment performance, including data comparing the Fund's performance 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 compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans;
•the Advisor’s business continuity plans and specifically its response to the COVID-19 pandemic;
•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;
•services provided and charges to the Advisor's other investment management clients;
•acquired fund fees and expenses;
•payments and practices in connection with financial intermediaries holding shares of the Fund and the services provided by intermediaries in connection therewith; and
•possible collateral benefits to the Advisor from the management of the Fund.
The Board held two meetings to consider the renewal. The independent Directors also met in private session three times to review and discuss the information provided in response to their request. The independent Directors held active discussions with the Advisor regarding the renewal of the management agreement, requesting supplemental information, and reviewing information provided by the Advisor in response thereto. The independent Directors 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 in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or
31
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 without limitation 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 Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
•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 amounts paid by the Fund under Rule 12b-1 plans)
The Board noted that many of these services have expanded over time in terms of both 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, provides oversight of the investment performance process. It 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 investment performance information during the management agreement renewal 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 three-, five-, and ten-year periods and below its benchmark for the one-year period 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 its various committees, 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, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio
32
valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
COVID-19 Response. During 2020, much of the world experienced unprecedented change and challenges from the impacts of the rapidly evolving, worldwide spread of the COVID-19 virus. The Board evaluated the Advisor’s response to the COVID-19 pandemic and its impact on service to the Fund. The Board found that Fund shareholders have continued to receive the Advisor’s investment management and other services without disruption, and Advisor personnel have demonstrated great resiliency in providing those services. The Board, directly and through its Audit Committee, continues to monitor the impact of the pandemic and the response of each of the Fund’s service providers.
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, to the extent they exist, through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business, infrastructure, investment capabilities and initiatives 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, expenses attributable to short sales, taxes, interest, extraordinary expenses, 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 Investment Company 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
33
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 Board 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 and services provided in response thereto. 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 Directors reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 Plan and that all such payments by the Advisor were made from the Advisor’s resources and reasonable profits. The Board found such payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the possible 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. To the extent there are potential collateral benefits, the board has been advised and has taken this into consideration in its review of the management contract with the Fund. 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 may receive 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.
34
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts 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 and change your withholding percentage for future distributions.
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.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they 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 American Century Investments’ website at americancentury.com/proxy 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 americancentury.com/proxy. 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 as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov. 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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Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates $537,382,637, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2020.
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Notes |
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Notes |
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Notes |
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Notes |
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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 Mutual Funds, 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. | ||||||||
©2020 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90975 2012 |
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a Code of Ethics for Senior Financial Officers that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions.
(b) No response required.
(c) None.
(d) None.
(e) Not applicable.
(f) The registrant’s Code of Ethics for Senior Financial Officers was filed as Exhibit 12 (a)(1) to American Century Asset Allocation Portfolios, Inc.’s Annual Certified Shareholder Report on Form N-CSR, File No. 811-21591, on September 29, 2005, and is incorporated herein by reference.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant’s board has determined that the registrant has at least one audit committee financial expert serving on its audit committee.
(a)(2) John R. Whitten, Thomas Bunn, Chris H. Cheesman and Lynn M. Jenkins are the registrant’s designated audit committee financial experts. They are “independent” as defined in Item 3 of Form N-CSR.
(a)(3) Not applicable.
(b) No response required.
(c) No response required.
(d) No response required.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees.
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were as follows:
FY 2019: $261,180
FY 2020: $199,255
(b) Audit-Related Fees.
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were as follows:
For services rendered to the registrant:
FY 2019: $0
FY 2020: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X (relating to certain engagements for non-audit services with the registrant’s investment adviser and its affiliates):
FY 2019: $0
FY 2020: $0
(c) Tax Fees.
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were as follows:
For services rendered to the registrant:
FY 2019: $0
FY 2020: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X (relating to certain engagements for non-audit services with the registrant’s investment adviser and its affiliates):
FY 2019: $0
FY 2020: $0
(d) All Other Fees.
The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were as follows:
For services rendered to the registrant:
FY 2019: $0
FY 2020: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X (relating to certain engagements for non-audit services with the registrant’s investment adviser and its affiliates):
FY 2019: $0
FY 2020: $0
(e)(1) In accordance with paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation S-X, before the accountant is engaged by the registrant to render audit or non-audit services, the engagement is approved by the registrant’s audit committee. Pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, the registrant’s audit committee also pre-approves its accountant’s engagements for non-audit services with the registrant’s investment adviser, its parent company, and any entity controlled by, or under common control with the investment adviser that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant.
(e)(2) All services described in each of paragraphs (b) through (d) of this Item were pre-approved before the engagement by the registrant’s audit committee pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation S-X. Consequently, none of such services were required to be approved by the audit committee pursuant to paragraph (c)(7)(i)(C).
(f) The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than 50%.
(g) The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant were as follows:
FY 2019: $119,500
FY 2020: $0
(h) The registrant’s investment adviser and accountant have notified the registrant’s audit committee of all non-audit services that were rendered by the registrant’s accountant to the registrant’s investment adviser, its parent company, and any entity controlled by, or under common control with the investment adviser that provides services to the registrant, which services were not required to be pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The notification provided to the registrant’s audit committee included sufficient details regarding such services to allow the registrant’s audit committee to consider the continuing independence of its principal accountant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) The schedule of investments is included as part of the report to stockholders filed under Item 1 of this Form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the reporting period, there were no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the 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. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 13. EXHIBITS.
(a)(1) Registrant’s Code of Ethics for Senior Financial Officers, which is the subject of the disclosure required by Item 2 of Form N-CSR, was filed as Exhibit 12(a)(1) to American Century Asset Allocation Portfolios, Inc.’s Certified Shareholder Report on Form N-CSR, File No. 811-21591, on September 29, 2005.
(a)(2) Separate certifications by the registrant’s principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are filed and attached hereto as EX-99.CERT.
(a)(3) Not applicable.
(a)(4) 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 Mutual Funds, Inc. | ||||||||||
By: | /s/ Patrick Bannigan | ||||||||||
Name: | Patrick Bannigan | ||||||||||
Title: | President | ||||||||||
Date: | December 30, 2020 |
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/ Patrick Bannigan | |||||||
Name: | Patrick Bannigan | |||||||
Title: | President | |||||||
(principal executive officer) | ||||||||
Date: | December 30, 2020 |
By: | /s/ R. Wes Campbell | |||||||
Name: | R. Wes Campbell | |||||||
Title: | Treasurer and | |||||||
Chief Financial Officer | ||||||||
(principal financial officer) | ||||||||
Date: | December 30, 2020 |