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) | |||||||||||||||||||
JOHN PAK 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: | 10-31-2021 |
ITEM 1. REPORTS TO STOCKHOLDERS.
(a) Provided under separate cover.
![image8.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image8.jpg)
Annual Report | |||||
October 31, 2021 | |||||
Balanced Fund | |||||
Investor Class (TWBIX) | |||||
I Class (ABINX) | |||||
R5 Class (ABGNX) |
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 |
![image30.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image30.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2021. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Economic, Earnings Gains Fueled Rally Among Risk-On Assets
Stocks and other risk-on assets rallied for the 12-month period, despite lingering pandemic-related challenges. Upbeat data on U.S. manufacturing, employment and housing, along with central bank and federal government support and positive vaccine developments, helped boost corporate earnings and promote investor optimism. Outside the U.S., most economies recovered, but generally at a slower pace. Virus outbreaks and slower vaccine rollouts, particularly in emerging markets, led to lingering lockdowns in some regions.
As the period progressed, steady economic gains combined with ongoing monetary and fiscal support, rising energy prices and severe supply chain disruptions pushed global interest rates and inflation higher. In the U.S., year-over-year headline inflation climbed to 6.2% in October 2021, the largest 12-month increase in nearly 31 years.
Late in the period, the Federal Reserve (Fed) confirmed it would start tapering its bond buying in November. Yet despite inflation’s surge, the Fed left short-term interest rates unchanged. Central banks in Europe and the U.K. maintained their supportive interest rate and bond-buying programs as inflation ticked higher.
Overall, stocks delivered stellar performance for the 12-month period, highlighted by the S&P 500 Index’s gain of nearly 43%. Assets offering inflation-fighting potential, including real estate investment trusts, fared even better. Meanwhile, global bonds retreated as interest rates rose. However, emerging markets bonds largely advanced, benefiting from risk-on sentiment.
Several Factors Shaping Market Dynamics
The return to pre-pandemic life is progressing, albeit somewhat cautiously due to COVID-19’s lingering effects. As the economy and markets respond to this fluid backdrop, investors will face opportunities and ongoing challenges. Economic growth, inflation, the virus’s trajectory, supply chain normalization and fiscal and monetary policy likely will sway market dynamics.
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,
![image19.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image19.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2021 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |||||||||||||||
Investor Class | TWBIX | 23.34% | 11.41% | 9.74% | — | 10/20/88 | ||||||||||||||
Blended Index | — | 24.02% | 12.67% | 10.99% | — | — | ||||||||||||||
S&P 500 Index | — | 42.91% | 18.91% | 16.20% | — | — | ||||||||||||||
Bloomberg U.S. Aggregate Bond Index | — | -0.48% | 3.09% | 3.00% | — | — | ||||||||||||||
I Class | ABINX | 23.58% | 11.62% | 9.96% | — | 5/1/00 | ||||||||||||||
R5 Class | ABGNX | 23.58% | — | — | 11.31% | 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 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.
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Growth of $10,000 Over 10 Years | ||
$10,000 investment made October 31, 2011 | ||
Performance for other share classes will vary due to differences in fee structure. |
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Value on October 31, 2021 | |||||
Investor Class — $25,351 | |||||
Blended Index — $28,367 | |||||
S&P 500 Index — $44,939 | |||||
Bloomberg U.S. Aggregate Bond Index — $13,437 | |||||
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.
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Portfolio Commentary |
Equity Portfolio Managers: Joseph Reiland, Justin Brown and Robert Bove
As of September 1, 2021, Joseph Reiland, Justin Brown and Robert Bove joined the portfolio management team, replacing Steve Rossi and Guan Wang. This reflects the equity allocation’s transition to the U.S. Sustainable Large Cap Core strategy. The equity allocation retains the S&P 500 Index as its benchmark.
Fixed-Income Portfolio Managers: Bob Gahagan, Charles Tan and Jason Greenblath
Brian Howell left the portfolio management team August 1, 2021. He is retiring, effective December 31, 2021. Jason Greenblath joined the team in his place.
Performance Summary
Balanced returned 23.34%* for the 12 months ended October 31, 2021. By comparison, the fund’s benchmark (a blended index consisting of 60% S&P 500 Index and 40% Bloomberg U.S. Aggregate Bond Index) returned 24.02%. 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.
Within Equities, Communication Services, Financials and Energy Detracted
The equity allocation performed very well in absolute terms but trailed the S&P 500 Index. The largest detractors from relative performance in the equity portfolio were the communication services, financials and energy sectors. In the communication services sector, an overweight to Take-Two Interactive Software, a gaming company, hindered relative returns. The company posted strong results as the pandemic surged in 2020 but shares were volatile as lockdowns were lifted and the economy reopened. We exited this position. An underweight position in The Walt Disney Co. also hampered the fund’s relative performance. The company experienced a surge in revenue from its streaming services late in 2020, which continued into 2021. An underweight position in the interactive media and services industry, especially in Alphabet, parent company of Google, also detracted from performance. Shares performed well on a surge in advertising revenues. We had some exposure to the stock, but less than the benchmark.
Performance in the financials sector was hampered by positioning in the capital markets, banking and insurance industries. The financials sector as a whole benefited from a rebound in the economy, strong financial markets and higher long-term bond yields.
In the energy sector, an underweight position hindered relative returns. An underweight position in the oil, gas and consumable fuels industry was the primary detractor. Shares of companies such as Exxon Mobil and Chevron performed well as prices for crude oil rose sharply from lows hit during the pandemic. The fund took advantage of this and exited its positions in Exxon Mobil and Chevron.
Materials and Health Care Led Equity Gains
The materials sector was the primary contributor to relative performance, reflecting the global economic recovery and increase in commodities prices. Positioning in the metals and mining industry was the primary driver of performance as companies such as Cleveland-Cliffs and Freeport-McMoRan benefited from surging prices for metals such as copper and gold. The fund took advantage of this and exited its positions in these shares. In the containers and packaging
*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
industry, an overweighting of International Paper also contributed. We exited the position in this company.
The health care sector also helped relative performance, driven largely by stock selection in the biotechnology industry, where Moderna was the primary contributor. The company benefited from a surge in revenues due to sales of its COVID-19 vaccine. We locked in profits and exited the position. Selections in the health care providers and services industry also made a significant contribution. Companies in this industry benefited from the reopening of the economy, which resulted in a rise in elective surgeries that had been postponed during the height of the pandemic.
Other top contributors to relative performance for the 12-month period included an underweight position in the utilities sector. Rising bond yields hurt this sector due to its heavy dependence on debt financing and its status as a bond proxy. Elsewhere, selections in the semiconductors and semiconductor equipment industry contributed significantly to returns. Companies in the semiconductor equipment industry, especially Applied Materials and Lam Research, benefited from the shortage of computer chips, which prompted investment in the equipment used to make them. The fund exited its position in Lam Research.
Bond Allocation Limited Performance
Bond returns were limited as yields rose during the year (bond prices and yields move in opposite directions). Late in 2020, the approval of coronavirus vaccines resulted in a shift in sentiment as investors anticipated the lifting of lockdowns and an acceleration of economic growth. In addition, inflation concerns grew during the period due to a stronger economic outlook, loose monetary policy and massive fiscal spending. Inflation concerns and uncertainty about the Federal Reserve’s (Fed) plans to begin reducing its bond purchases weighed further on the market toward the end of the period. Nevertheless, at times bonds benefited from uncertainty when the delta variant of the coronavirus emerged and threatened to interfere with the economic recovery. Rising inflation throughout the economy led the Fed to raise its inflation forecast from 3.4% to 4.2% for 2021 and from 2.1% to 2.2% for 2022.
In that environment, Treasury bonds performed poorly. Investment-grade corporate bonds held up better, benefiting from the profit recovery in corporate America. The high-yield market also produced positive results, buoyed by attractive yields and the prospect of an improvement in the economy.
Outlook
The economic recovery is moderating even as inflation is rising. However, corporate profit growth remains strong and the federal government continues to apply massive fiscal stimulus to the economy. But with the major stock market indices at record highs, we will be on the lookout for volatility if investors’ assumptions about inflation, interest rates and corporate earnings disappoint. In addition, the coronavirus remains a source of uncertainty as we head into the winter months. 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.
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Fund Characteristics |
OCTOBER 31, 2021 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 61.3% | ||||
U.S. Treasury Securities | 15.1% | ||||
Corporate Bonds | 10.7% | ||||
U.S. Government Agency Mortgage-Backed Securities | 4.0% | ||||
Collateralized Loan Obligations | 2.8% | ||||
Collateralized Mortgage Obligations | 2.3% | ||||
Asset-Backed Securities | 2.0% | ||||
Commercial Mortgage-Backed Securities | 0.8% | ||||
Municipal Securities | 0.7% | ||||
Exchange-Traded Funds | 0.4% | ||||
U.S. Government Agency Securities | 0.3% | ||||
Sovereign Governments and Agencies | 0.1% | ||||
Bank Loan Obligations | 0.1% | ||||
Preferred Stocks | —* | ||||
Temporary Cash Investments | 1.2% | ||||
Other Assets and Liabilities | (1.8)% | ||||
*Category is less than 0.05% of total net assets. | |||||
Top Five Common Stocks Industries* | % of net assets | ||||
Software | 6.6% | ||||
Interactive Media and Services | 4.0% | ||||
Semiconductors and Semiconductor Equipment | 3.7% | ||||
Capital Markets | 3.1% | ||||
IT Services | 2.9% |
*Exposure indicated excludes Exchange-Traded Funds. The Schedule of Investments provides additional information on the fund's portfolio holdings.
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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, 2021 to October 31, 2021.
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 5/1/21 | Ending Account Value 10/31/21 | Expenses Paid During Period(1) 5/1/21 - 10/31/21 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,067.80 | $4.69 | 0.90% | ||||||||||
I Class | $1,000 | $1,068.90 | $3.65 | 0.70% | ||||||||||
R5 Class | $1,000 | $1,068.90 | $3.65 | 0.70% | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,020.67 | $4.58 | 0.90% | ||||||||||
I Class | $1,000 | $1,021.68 | $3.57 | 0.70% | ||||||||||
R5 Class | $1,000 | $1,021.68 | $3.57 | 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 365, 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, 2021
Shares/ Principal Amount | Value | |||||||
COMMON STOCKS — 61.3% | ||||||||
Aerospace and Defense — 0.5% | ||||||||
Lockheed Martin Corp. | 16,684 | $ | 5,544,427 | |||||
Air Freight and Logistics — 0.6% | ||||||||
Expeditors International of Washington, Inc. | 3,754 | 462,719 | ||||||
United Parcel Service, Inc., Class B | 31,116 | 6,642,332 | ||||||
7,105,051 | ||||||||
Auto Components — 0.7% | ||||||||
Aptiv plc(1) | 45,189 | 7,812,726 | ||||||
Automobiles — 0.8% | ||||||||
Tesla, Inc.(1) | 8,105 | 9,028,970 | ||||||
Banks — 2.9% | ||||||||
Bank of America Corp. | 225,947 | 10,795,747 | ||||||
JPMorgan Chase & Co. | 74,062 | 12,582,393 | ||||||
Regions Financial Corp. | 366,005 | 8,666,999 | ||||||
32,045,139 | ||||||||
Beverages — 0.9% | ||||||||
PepsiCo, Inc. | 58,529 | 9,458,286 | ||||||
Biotechnology — 0.3% | ||||||||
Amgen, Inc. | 13,080 | 2,707,168 | ||||||
Vertex Pharmaceuticals, Inc.(1) | 6,094 | 1,126,963 | ||||||
3,834,131 | ||||||||
Building Products — 1.1% | ||||||||
Johnson Controls International plc | 111,955 | 8,214,138 | ||||||
Masco Corp. | 59,442 | 3,896,423 | ||||||
12,110,561 | ||||||||
Capital Markets — 3.1% | ||||||||
Ameriprise Financial, Inc. | 15,081 | 4,556,422 | ||||||
BlackRock, Inc. | 6,823 | 6,437,228 | ||||||
Intercontinental Exchange, Inc. | 24,240 | 3,356,270 | ||||||
Morgan Stanley | 114,861 | 11,805,414 | ||||||
S&P Global, Inc. | 17,341 | 8,222,409 | ||||||
34,377,743 | ||||||||
Chemicals — 1.7% | ||||||||
Air Products and Chemicals, Inc. | 10,511 | 3,151,303 | ||||||
Ecolab, Inc. | 12,987 | 2,885,971 | ||||||
Linde plc | 26,483 | 8,453,373 | ||||||
Sherwin-Williams Co. (The) | 13,990 | 4,429,374 | ||||||
18,920,021 | ||||||||
Communications Equipment — 0.7% | ||||||||
Cisco Systems, Inc. | 134,905 | 7,550,633 | ||||||
Consumer Finance — 0.5% | ||||||||
American Express Co. | 32,193 | 5,594,499 | ||||||
Containers and Packaging — 0.4% | ||||||||
Ball Corp. | 46,064 | 4,213,935 | ||||||
Diversified Telecommunication Services — 0.1% | ||||||||
Verizon Communications, Inc. | 25,505 | 1,351,510 |
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Shares/ Principal Amount | Value | |||||||
Electric Utilities — 1.2% | ||||||||
NextEra Energy, Inc. | 150,217 | $ | 12,818,017 | |||||
Electrical Equipment — 0.8% | ||||||||
Eaton Corp. plc | 29,843 | 4,916,933 | ||||||
Rockwell Automation, Inc. | 13,640 | 4,356,616 | ||||||
9,273,549 | ||||||||
Electronic Equipment, Instruments and Components — 1.3% | ||||||||
CDW Corp. | 29,040 | 5,420,316 | ||||||
Cognex Corp. | 36,973 | 3,238,465 | ||||||
Keysight Technologies, Inc.(1) | 35,196 | 6,335,984 | ||||||
14,994,765 | ||||||||
Energy Equipment and Services — 0.6% | ||||||||
Schlumberger NV | 201,189 | 6,490,357 | ||||||
Entertainment — 1.2% | ||||||||
Electronic Arts, Inc. | 20,275 | 2,843,569 | ||||||
Walt Disney Co. (The)(1) | 59,074 | 9,987,641 | ||||||
12,831,210 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 1.3% | ||||||||
Prologis, Inc. | 102,329 | 14,833,612 | ||||||
Food and Staples Retailing — 1.0% | ||||||||
Costco Wholesale Corp. | 8,454 | 4,155,479 | ||||||
Sysco Corp. | 83,680 | 6,434,992 | ||||||
10,590,471 | ||||||||
Food Products — 0.5% | ||||||||
Mondelez International, Inc., Class A | 77,611 | 4,714,092 | ||||||
Vital Farms, Inc.(1) | 25,270 | 414,933 | ||||||
5,129,025 | ||||||||
Health Care Equipment and Supplies — 1.2% | ||||||||
Edwards Lifesciences Corp.(1) | 58,216 | 6,975,441 | ||||||
Medtronic plc | 43,227 | 5,181,188 | ||||||
ResMed, Inc. | 5,679 | 1,493,066 | ||||||
13,649,695 | ||||||||
Health Care Providers and Services — 2.3% | ||||||||
Cigna Corp. | 32,991 | 7,047,207 | ||||||
CVS Health Corp. | 71,107 | 6,348,433 | ||||||
Humana, Inc. | 6,554 | 3,035,551 | ||||||
UnitedHealth Group, Inc. | 20,551 | 9,463,119 | ||||||
25,894,310 | ||||||||
Hotels, Restaurants and Leisure — 1.2% | ||||||||
Booking Holdings, Inc.(1) | 1,820 | 4,405,820 | ||||||
Chipotle Mexican Grill, Inc.(1) | 1,978 | 3,518,921 | ||||||
Expedia Group, Inc.(1) | 31,713 | 5,213,934 | ||||||
13,138,675 | ||||||||
Household Products — 0.9% | ||||||||
Colgate-Palmolive Co. | 36,034 | 2,745,431 | ||||||
Procter & Gamble Co. (The) | 47,866 | 6,844,359 | ||||||
9,589,790 | ||||||||
Industrial Conglomerates — 0.7% | ||||||||
Honeywell International, Inc. | 36,848 | 8,055,710 | ||||||
Insurance — 1.0% | ||||||||
Marsh & McLennan Cos., Inc. | 24,725 | 4,124,130 |
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Shares/ Principal Amount | Value | |||||||
Prudential Financial, Inc. | 29,414 | $ | 3,237,011 | |||||
Travelers Cos., Inc. (The) | 25,042 | 4,028,757 | ||||||
11,389,898 | ||||||||
Interactive Media and Services — 4.0% | ||||||||
Alphabet, Inc., Class A(1) | 10,013 | 29,647,692 | ||||||
Alphabet, Inc., Class C(1) | 2,236 | 6,630,657 | ||||||
Meta Platforms, Inc., Class A(1) | 26,757 | 8,657,762 | ||||||
44,936,111 | ||||||||
Internet and Direct Marketing Retail — 2.3% | ||||||||
Amazon.com, Inc.(1) | 7,680 | 25,900,262 | ||||||
IT Services — 2.9% | ||||||||
Accenture plc, Class A | 23,597 | 8,466,368 | ||||||
Mastercard, Inc., Class A | 23,276 | 7,809,563 | ||||||
PayPal Holdings, Inc.(1) | 35,541 | 8,266,481 | ||||||
Visa, Inc., Class A | 38,297 | 8,110,156 | ||||||
32,652,568 | ||||||||
Life Sciences Tools and Services — 1.3% | ||||||||
Agilent Technologies, Inc. | 44,652 | 7,032,244 | ||||||
Thermo Fisher Scientific, Inc. | 11,518 | 7,291,700 | ||||||
14,323,944 | ||||||||
Machinery — 1.4% | ||||||||
Cummins, Inc. | 21,896 | 5,251,537 | ||||||
Parker-Hannifin Corp. | 20,911 | 6,201,994 | ||||||
Xylem, Inc. | 28,677 | 3,744,929 | ||||||
15,198,460 | ||||||||
Media — 0.3% | ||||||||
Comcast Corp., Class A | 71,466 | 3,675,496 | ||||||
Multiline Retail — 0.3% | ||||||||
Target Corp. | 14,160 | 3,676,219 | ||||||
Oil, Gas and Consumable Fuels — 0.8% | ||||||||
ConocoPhillips | 114,291 | 8,513,537 | ||||||
Personal Products — 0.3% | ||||||||
Estee Lauder Cos., Inc. (The), Class A | 9,787 | 3,174,218 | ||||||
Pharmaceuticals — 2.0% | ||||||||
Bristol-Myers Squibb Co. | 108,301 | 6,324,778 | ||||||
Merck & Co., Inc. | 68,409 | 6,023,412 | ||||||
Novo Nordisk A/S, B Shares | 33,860 | 3,712,914 | ||||||
Zoetis, Inc. | 31,263 | 6,759,061 | ||||||
22,820,165 | ||||||||
Professional Services — 0.1% | ||||||||
IHS Markit Ltd. | 11,290 | 1,475,829 | ||||||
Road and Rail — 0.7% | ||||||||
Norfolk Southern Corp. | 15,066 | 4,415,091 | ||||||
Union Pacific Corp. | 14,069 | 3,396,257 | ||||||
7,811,348 | ||||||||
Semiconductors and Semiconductor Equipment — 3.7% | ||||||||
Advanced Micro Devices, Inc.(1) | 35,173 | 4,228,850 | ||||||
Applied Materials, Inc. | 45,768 | 6,254,197 | ||||||
ASML Holding NV | 8,868 | 7,208,794 | ||||||
NVIDIA Corp. | 62,501 | 15,979,631 | ||||||
Texas Instruments, Inc. | 38,938 | 7,300,096 | ||||||
40,971,568 |
12
Shares/ Principal Amount | Value | |||||||
Software — 6.6% | ||||||||
Adobe, Inc.(1) | 10,308 | $ | 6,703,911 | |||||
Microsoft Corp. | 176,595 | 58,562,434 | ||||||
salesforce.com, Inc.(1) | 16,993 | 5,092,632 | ||||||
ServiceNow, Inc.(1) | 2,426 | 1,692,766 | ||||||
Workday, Inc., Class A(1) | 7,324 | 2,123,813 | ||||||
74,175,556 | ||||||||
Specialty Retail — 1.7% | ||||||||
Home Depot, Inc. (The) | 34,896 | 12,972,239 | ||||||
TJX Cos., Inc. (The) | 64,609 | 4,231,243 | ||||||
Tractor Supply Co. | 10,147 | 2,203,624 | ||||||
19,407,106 | ||||||||
Technology Hardware, Storage and Peripherals — 2.4% | ||||||||
Apple, Inc. | 182,420 | 27,326,516 | ||||||
Textiles, Apparel and Luxury Goods — 1.0% | ||||||||
Deckers Outdoor Corp.(1) | 6,184 | 2,444,597 | ||||||
NIKE, Inc., Class B | 52,613 | 8,801,629 | ||||||
11,246,226 | ||||||||
TOTAL COMMON STOCKS (Cost $541,115,001) | 684,911,845 | |||||||
U.S. TREASURY SECURITIES — 15.1% | ||||||||
U.S. Treasury Bonds, 5.00%, 5/15/37 | $ | 200,000 | 291,418 | |||||
U.S. Treasury Bonds, 4.625%, 2/15/40 | 1,300,000 | 1,860,422 | ||||||
U.S. Treasury Bonds, 1.375%, 11/15/40 | 500,000 | 451,582 | ||||||
U.S. Treasury Bonds, 1.875%, 2/15/41 | 4,600,000 | 4,523,094 | ||||||
U.S. Treasury Bonds, 2.25%, 5/15/41 | 600,000 | 626,438 | ||||||
U.S. Treasury Bonds, 4.375%, 5/15/41 | 1,400,000 | 1,963,117 | ||||||
U.S. Treasury Bonds, 3.125%, 11/15/41 | 1,000,000 | 1,193,906 | ||||||
U.S. Treasury Bonds, 3.00%, 5/15/42 | 1,400,000 | 1,645,383 | ||||||
U.S. Treasury Bonds, 2.75%, 11/15/42 | 2,000,000 | 2,262,656 | ||||||
U.S. Treasury Bonds, 2.875%, 5/15/43 | 1,300,000 | 1,503,023 | ||||||
U.S. Treasury Bonds, 3.125%, 8/15/44 | 500,000 | 604,668 | ||||||
U.S. Treasury Bonds, 3.00%, 11/15/44 | 600,000 | 713,367 | ||||||
U.S. Treasury Bonds, 2.50%, 2/15/45(2) | 1,500,000 | 1,644,434 | ||||||
U.S. Treasury Bonds, 2.75%, 8/15/47 | 200,000 | 232,598 | ||||||
U.S. Treasury Bonds, 3.375%, 11/15/48(2) | 1,800,000 | 2,350,863 | ||||||
U.S. Treasury Bonds, 2.25%, 8/15/49 | 1,300,000 | 1,386,811 | ||||||
U.S. Treasury Bonds, 2.375%, 11/15/49 | 2,400,000 | 2,628,234 | ||||||
U.S. Treasury Bonds, 2.00%, 2/15/50 | 900,000 | 911,127 | ||||||
U.S. Treasury Bonds, 1.875%, 2/15/51 | 1,700,000 | 1,672,906 | ||||||
U.S. Treasury Bonds, 2.375%, 5/15/51 | 3,600,000 | 3,957,750 | ||||||
U.S. Treasury Bonds, 2.00%, 8/15/51 | 2,500,000 | 2,536,328 | ||||||
U.S. Treasury Inflation Indexed Notes, 0.125%, 10/15/25 | 3,162,990 | 3,438,074 | ||||||
U.S. Treasury Inflation Indexed Notes, 0.25%, 7/15/29 | 855,584 | 958,980 | ||||||
U.S. Treasury Inflation Indexed Notes, 0.125%, 7/15/30 | 533,495 | 594,100 | ||||||
U.S. Treasury Inflation Indexed Notes, 0.125%, 7/15/31 | 510,345 | 568,596 | ||||||
U.S. Treasury Notes, 0.50%, 3/15/23 | 7,600,000 | 7,620,930 | ||||||
U.S. Treasury Notes, 0.125%, 3/31/23 | 7,000,000 | 6,981,543 | ||||||
U.S. Treasury Notes, 0.25%, 4/15/23 | 400,000 | 399,594 | ||||||
U.S. Treasury Notes, 0.125%, 5/31/23 | 2,000,000 | 1,992,461 | ||||||
U.S. Treasury Notes, 0.25%, 6/15/23 | 500,000 | 498,994 | ||||||
U.S. Treasury Notes, 0.125%, 8/31/23 | 4,000,000 | 3,977,344 |
13
Shares/ Principal Amount | Value | |||||||
U.S. Treasury Notes, 0.25%, 9/30/23 | $ | 3,500,000 | $ | 3,486,055 | ||||
U.S. Treasury Notes, 0.375%, 10/31/23(3) | 1,000,000 | 997,695 | ||||||
U.S. Treasury Notes, 2.875%, 11/30/23 | 6,600,000 | 6,920,461 | ||||||
U.S. Treasury Notes, 0.125%, 12/15/23 | 1,000,000 | 991,230 | ||||||
U.S. Treasury Notes, 2.375%, 2/29/24 | 1,500,000 | 1,561,582 | ||||||
U.S. Treasury Notes, 0.25%, 3/15/24 | 16,000,000 | 15,862,812 | ||||||
U.S. Treasury Notes, 0.375%, 4/15/24 | 8,500,000 | 8,443,389 | ||||||
U.S. Treasury Notes, 1.125%, 2/28/25 | 8,700,000 | 8,775,105 | ||||||
U.S. Treasury Notes, 0.25%, 5/31/25 | 1,000,000 | 975,664 | ||||||
U.S. Treasury Notes, 0.25%, 8/31/25 | 7,800,000 | 7,578,492 | ||||||
U.S. Treasury Notes, 2.625%, 12/31/25 | 2,200,000 | 2,340,852 | ||||||
U.S. Treasury Notes, 0.50%, 2/28/26 | 4,200,000 | 4,092,539 | ||||||
U.S. Treasury Notes, 0.75%, 5/31/26 | 3,500,000 | 3,438,887 | ||||||
U.S. Treasury Notes, 0.875%, 6/30/26 | 900,000 | 888,328 | ||||||
U.S. Treasury Notes, 0.75%, 8/31/26 | 5,000,000 | 4,900,195 | ||||||
U.S. Treasury Notes, 1.375%, 8/31/26 | 1,400,000 | 1,413,891 | ||||||
U.S. Treasury Notes, 1.625%, 10/31/26 | 100,000 | 102,164 | ||||||
U.S. Treasury Notes, 1.75%, 12/31/26 | 700,000 | 719,045 | ||||||
U.S. Treasury Notes, 1.50%, 1/31/27 | 2,000,000 | 2,028,242 | ||||||
U.S. Treasury Notes, 1.125%, 2/28/27 | 2,700,000 | 2,684,232 | ||||||
U.S. Treasury Notes, 0.625%, 3/31/27 | 10,000,000 | 9,670,508 | ||||||
U.S. Treasury Notes, 0.50%, 6/30/27 | 500,000 | 478,271 | ||||||
U.S. Treasury Notes, 0.50%, 8/31/27 | 1,600,000 | 1,525,719 | ||||||
U.S. Treasury Notes, 0.625%, 12/31/27 | 3,500,000 | 3,344,209 | ||||||
U.S. Treasury Notes, 1.125%, 2/29/28 | 1,000,000 | 984,434 | ||||||
U.S. Treasury Notes, 1.25%, 3/31/28 | 1,700,000 | 1,683,697 | ||||||
U.S. Treasury Notes, 1.25%, 4/30/28 | 5,050,000 | 4,998,612 | ||||||
U.S. Treasury Notes, 1.25%, 6/30/28 | 2,400,000 | 2,370,891 | ||||||
U.S. Treasury Notes, 1.25%, 9/30/28 | 500,000 | 493,164 | ||||||
U.S. Treasury Notes, 1.625%, 5/15/31 | 500,000 | 503,633 | ||||||
U.S. Treasury Notes, 1.25%, 8/15/31 | 2,500,000 | 2,429,688 | ||||||
TOTAL U.S. TREASURY SECURITIES (Cost $166,232,413) | 168,674,427 | |||||||
CORPORATE BONDS — 10.7% | ||||||||
Aerospace and Defense — 0.2% | ||||||||
Boeing Co. (The), 2.20%, 2/4/26 | 420,000 | 420,843 | ||||||
Boeing Co. (The), 3.625%, 2/1/31 | 380,000 | 404,913 | ||||||
Boeing Co. (The), 5.81%, 5/1/50 | 230,000 | 315,745 | ||||||
Raytheon Technologies Corp., 4.125%, 11/16/28 | 570,000 | 646,290 | ||||||
1,787,791 | ||||||||
Air Freight and Logistics† | ||||||||
GXO Logistics, Inc., 2.65%, 7/15/31(4) | 335,000 | 331,695 | ||||||
Airlines — 0.1% | ||||||||
American Airlines 2021-1 Class A Pass Through Trust, 2.875%, 1/11/36(3) | 181,000 | 182,357 | ||||||
British Airways Pass Through Trust, Series 2021-1, Class A, 2.90%, 9/15/36(4) | 220,000 | 222,884 | ||||||
Delta Air Lines, Inc. / SkyMiles IP Ltd., 4.75%, 10/20/28(4) | 568,000 | 631,020 | ||||||
1,036,261 | ||||||||
Automobiles — 0.3% | ||||||||
Ford Motor Credit Co. LLC, 3.10%, 5/4/23 | 700,000 | 712,250 | ||||||
General Motors Co., 5.15%, 4/1/38 | 370,000 | 447,381 |
14
Shares/ Principal Amount | Value | |||||||
General Motors Financial Co., Inc., 2.75%, 6/20/25 | $ | 780,000 | $ | 810,213 | ||||
General Motors Financial Co., Inc., 2.70%, 8/20/27 | 269,000 | 274,725 | ||||||
General Motors Financial Co., Inc., 2.40%, 10/15/28 | 465,000 | 462,331 | ||||||
Toyota Motor Credit Corp., MTN, 1.90%, 4/6/28 | 420,000 | 423,108 | ||||||
3,130,008 | ||||||||
Banks — 1.4% | ||||||||
Banco Santander SA, 2.96%, 3/25/31 | 600,000 | 611,606 | ||||||
Banco Santander SA, VRN, 1.72%, 9/14/27 | 200,000 | 197,060 | ||||||
Bank of America Corp., MTN, VRN, 2.68%, 6/19/41 | 713,000 | 687,830 | ||||||
Bank of America Corp., VRN, 3.42%, 12/20/28 | 265,000 | 283,520 | ||||||
Bank of America Corp., VRN, 2.57%, 10/20/32 | 1,561,000 | 1,565,511 | ||||||
Bank of America Corp., VRN, 2.48%, 9/21/36 | 290,000 | 282,212 | ||||||
Bank of Ireland Group plc, VRN, 2.03%, 9/30/27(4) | 329,000 | 325,043 | ||||||
Barclays plc, 4.84%, 5/9/28 | 375,000 | 418,047 | ||||||
BNP Paribas SA, VRN, 2.16%, 9/15/29(4) | 243,000 | 238,779 | ||||||
BNP Paribas SA, VRN, 4.375%, 3/1/33(4) | 290,000 | 316,930 | ||||||
BPCE SA, 4.50%, 3/15/25(4) | 385,000 | 419,433 | ||||||
Citigroup, Inc., VRN, 0.78%, 10/30/24 | 1,325,000 | 1,322,527 | ||||||
Citigroup, Inc., VRN, 3.52%, 10/27/28 | 858,000 | 922,169 | ||||||
Citigroup, Inc., VRN, 2.52%, 11/3/32(3) | 378,000 | 377,220 | ||||||
Commonwealth Bank of Australia, VRN, 3.61%, 9/12/34(4) | 440,000 | 463,240 | ||||||
DNB Bank ASA, VRN, 1.61%, 3/30/28(4) | 262,000 | 257,507 | ||||||
FNB Corp., 2.20%, 2/24/23 | 460,000 | 465,416 | ||||||
HSBC Holdings plc, VRN, 2.80%, 5/24/32 | 280,000 | 282,089 | ||||||
JPMorgan Chase & Co., VRN, 1.58%, 4/22/27 | 315,000 | 312,102 | ||||||
JPMorgan Chase & Co., VRN, 2.07%, 6/1/29 | 780,000 | 772,574 | ||||||
JPMorgan Chase & Co., VRN, 3.16%, 4/22/42 | 695,000 | 726,246 | ||||||
National Australia Bank Ltd., 2.99%, 5/21/31(4) | 500,000 | 502,784 | ||||||
Royal Bank of Canada, MTN, 2.30%, 11/3/31 | 210,000 | 209,646 | ||||||
Societe Generale SA, VRN, 1.79%, 6/9/27(4) | 500,000 | 492,422 | ||||||
Truist Bank, VRN, 2.64%, 9/17/29 | 275,000 | 285,035 | ||||||
Truist Financial Corp., MTN, VRN, 1.89%, 6/7/29 | 200,000 | 198,008 | ||||||
US Bancorp, VRN, 2.49%, 11/3/36(3) | 425,000 | 423,421 | ||||||
Wells Fargo & Co., MTN, VRN, 2.16%, 2/11/26 | 1,055,000 | 1,079,956 | ||||||
Wells Fargo & Co., VRN, 3.07%, 4/30/41 | 605,000 | 621,971 | ||||||
15,060,304 | ||||||||
Beverages — 0.1% | ||||||||
Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide, Inc., 4.90%, 2/1/46 | 500,000 | 638,604 | ||||||
Anheuser-Busch InBev Worldwide, Inc., 4.75%, 1/23/29 | 630,000 | 739,993 | ||||||
1,378,597 | ||||||||
Biotechnology — 0.2% | ||||||||
AbbVie, Inc., 3.20%, 11/21/29 | 440,000 | 470,485 | ||||||
AbbVie, Inc., 4.40%, 11/6/42 | 240,000 | 288,585 | ||||||
Amgen, Inc., 1.65%, 8/15/28 | 540,000 | 524,881 | ||||||
Gilead Sciences, Inc., 3.65%, 3/1/26 | 840,000 | 911,179 | ||||||
2,195,130 | ||||||||
Building Products† | ||||||||
Lennox International, Inc., 1.70%, 8/1/27 | 140,000 | 137,955 | ||||||
Capital Markets — 1.3% | ||||||||
Bain Capital Specialty Finance, Inc., 2.95%, 3/10/26 | 1,215,000 | 1,225,628 | ||||||
Blackstone Secured Lending Fund, 2.85%, 9/30/28(4) | 285,000 | 279,769 |
15
Shares/ Principal Amount | Value | |||||||
Blue Owl Finance LLC, 3.125%, 6/10/31(4) | $ | 151,000 | $ | 148,581 | ||||
Blue Owl Finance LLC, 4.125%, 10/7/51(4) | 425,000 | 438,766 | ||||||
Deutsche Bank AG, VRN, 3.96%, 11/26/25 | 625,000 | 668,579 | ||||||
Deutsche Bank AG, VRN, 4.30%, 5/24/28 | 200,000 | 207,288 | ||||||
FS KKR Capital Corp., 4.25%, 2/14/25(4) | 303,000 | 319,010 | ||||||
FS KKR Capital Corp., 3.125%, 10/12/28 | 595,000 | 586,723 | ||||||
Goldman Sachs Group, Inc. (The), MTN, VRN, 2.38%, 7/21/32 | 1,126,000 | 1,107,612 | ||||||
Goldman Sachs Group, Inc. (The), VRN, 2.91%, 6/5/23 | 1,315,000 | 1,332,451 | ||||||
Goldman Sachs Group, Inc. (The), VRN, 1.95%, 10/21/27 | 256,000 | 256,344 | ||||||
Goldman Sachs Group, Inc. (The), VRN, 2.91%, 7/21/42 | 435,000 | 434,768 | ||||||
Golub Capital BDC, Inc., 2.05%, 2/15/27 | 282,000 | 274,193 | ||||||
Hercules Capital, Inc., 2.625%, 9/16/26 | 348,000 | 343,017 | ||||||
Main Street Capital Corp., 3.00%, 7/14/26 | 460,000 | 464,541 | ||||||
Morgan Stanley, MTN, VRN, 0.53%, 1/25/24 | 1,335,000 | 1,332,638 | ||||||
Morgan Stanley, MTN, VRN, 2.24%, 7/21/32 | 198,000 | 193,461 | ||||||
Morgan Stanley, VRN, 1.59%, 5/4/27 | 1,163,000 | 1,152,511 | ||||||
Morgan Stanley, VRN, 2.48%, 9/16/36 | 525,000 | 510,452 | ||||||
Owl Rock Core Income Corp., 3.125%, 9/23/26(4) | 735,000 | 718,806 | ||||||
Owl Rock Technology Finance Corp., 6.75%, 6/30/25(4) | 334,000 | 380,265 | ||||||
Owl Rock Technology Finance Corp., 3.75%, 6/17/26(4) | 175,000 | 182,755 | ||||||
Owl Rock Technology Finance Corp., 2.50%, 1/15/27 | 530,000 | 524,952 | ||||||
Prospect Capital Corp., 3.71%, 1/22/26 | 420,000 | 427,994 | ||||||
Prospect Capital Corp., 3.44%, 10/15/28 | 420,000 | 404,227 | ||||||
UBS Group AG, VRN, 1.49%, 8/10/27(4) | 425,000 | 416,503 | ||||||
14,331,834 | ||||||||
Chemicals† | ||||||||
International Flavors & Fragrances, Inc., 1.83%, 10/15/27(4) | 177,000 | 174,748 | ||||||
Westlake Chemical Corp., 2.875%, 8/15/41 | 150,000 | 145,206 | ||||||
319,954 | ||||||||
Commercial Services and Supplies — 0.1% | ||||||||
Republic Services, Inc., 2.30%, 3/1/30 | 358,000 | 361,851 | ||||||
Waste Connections, Inc., 2.60%, 2/1/30 | 120,000 | 123,511 | ||||||
Waste Connections, Inc., 2.95%, 1/15/52 | 231,000 | 230,267 | ||||||
Waste Management, Inc., 2.50%, 11/15/50 | 150,000 | 142,568 | ||||||
858,197 | ||||||||
Construction and Engineering† | ||||||||
Quanta Services, Inc., 2.35%, 1/15/32 | 465,000 | 455,707 | ||||||
Construction Materials† | ||||||||
Eagle Materials, Inc., 2.50%, 7/1/31 | 310,000 | 307,060 | ||||||
Consumer Finance — 0.3% | ||||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust, 3.00%, 10/29/28 | 308,000 | 312,503 | ||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust, 3.30%, 1/30/32 | 545,000 | 555,172 | ||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust, 3.40%, 10/29/33 | 176,000 | 179,346 | ||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust, 3.85%, 10/29/41 | 154,000 | 159,691 | ||||||
Ally Financial, Inc., 2.20%, 11/2/28(3) | 530,000 | 523,624 | ||||||
Avolon Holdings Funding Ltd., 4.25%, 4/15/26(4) | 258,000 | 277,336 | ||||||
Avolon Holdings Funding Ltd., 4.375%, 5/1/26(4) | 14,000 | 15,112 | ||||||
Capital One Financial Corp., VRN, 1.88%, 11/2/27(3) | 645,000 | 643,415 | ||||||
SLM Corp., 3.125%, 11/2/26(3) | 554,000 | 549,845 | ||||||
3,216,044 |
16
Shares/ Principal Amount | Value | |||||||
Containers and Packaging† | ||||||||
Berry Global, Inc., 1.57%, 1/15/26 | $ | 230,000 | $ | 227,494 | ||||
WRKCo, Inc., 3.00%, 9/15/24 | 201,000 | 211,087 | ||||||
438,581 | ||||||||
Diversified Consumer Services — 0.1% | ||||||||
Novant Health, Inc., 3.17%, 11/1/51 | 245,000 | 263,592 | ||||||
Pepperdine University, 3.30%, 12/1/59 | 355,000 | 378,416 | ||||||
642,008 | ||||||||
Diversified Financial Services — 0.2% | ||||||||
Antares Holdings LP, 2.75%, 1/15/27(4) | 256,000 | 253,567 | ||||||
Blackstone Private Credit Fund, 1.75%, 9/15/24(4) | 194,000 | 192,267 | ||||||
Blackstone Private Credit Fund, 2.625%, 12/15/26(4) | 312,000 | 306,264 | ||||||
Block Financial LLC, 3.875%, 8/15/30 | 240,000 | 255,907 | ||||||
GE Capital Funding LLC, 4.40%, 5/15/30 | 300,000 | 350,831 | ||||||
GE Capital International Funding Co. Unlimited Co., 4.42%, 11/15/35 | 420,000 | 511,407 | ||||||
1,870,243 | ||||||||
Diversified Telecommunication Services — 0.4% | ||||||||
AT&T, Inc., 2.55%, 12/1/33 | 622,000 | 604,580 | ||||||
AT&T, Inc., 3.55%, 9/15/55 | 634,000 | 643,140 | ||||||
British Telecommunications plc, 3.25%, 11/8/29(4) | 845,000 | 875,405 | ||||||
Ooredoo International Finance Ltd., 2.625%, 4/8/31(4) | 550,000 | 556,284 | ||||||
Telefonica Emisiones SA, 4.90%, 3/6/48 | 700,000 | 853,078 | ||||||
Verizon Communications, Inc., 4.33%, 9/21/28 | 333,000 | 380,292 | ||||||
Verizon Communications, Inc., 1.75%, 1/20/31 | 445,000 | 420,503 | ||||||
Verizon Communications, Inc., 2.65%, 11/20/40 | 301,000 | 284,818 | ||||||
Verizon Communications, Inc., 2.99%, 10/30/56 | 215,000 | 204,543 | ||||||
4,822,643 | ||||||||
Electric Utilities — 0.7% | ||||||||
AEP Texas, Inc., 2.10%, 7/1/30 | 370,000 | 358,753 | ||||||
Alfa Desarrollo SpA, 4.55%, 9/27/51(4) | 200,000 | 195,713 | ||||||
Baltimore Gas and Electric Co., 2.25%, 6/15/31 | 237,000 | 236,544 | ||||||
Berkshire Hathaway Energy Co., 3.50%, 2/1/25 | 180,000 | 191,923 | ||||||
Comision Federal de Electricidad, 4.68%, 2/9/51(4) | 550,000 | 513,458 | ||||||
Commonwealth Edison Co., 3.20%, 11/15/49 | 355,000 | 377,437 | ||||||
DTE Electric Co., 2.25%, 3/1/30 | 330,000 | 334,021 | ||||||
Duke Energy Carolinas LLC, 2.55%, 4/15/31 | 154,000 | 158,514 | ||||||
Duke Energy Corp., 2.55%, 6/15/31 | 180,000 | 181,012 | ||||||
Duke Energy Florida LLC, 1.75%, 6/15/30 | 370,000 | 357,700 | ||||||
Duke Energy Florida LLC, 3.85%, 11/15/42 | 220,000 | 251,344 | ||||||
Duke Energy Progress LLC, 2.00%, 8/15/31 | 440,000 | 431,528 | ||||||
Duke Energy Progress LLC, 4.15%, 12/1/44 | 335,000 | 399,252 | ||||||
Entergy Arkansas LLC, 2.65%, 6/15/51 | 180,000 | 172,476 | ||||||
Exelon Corp., 4.45%, 4/15/46 | 150,000 | 185,747 | ||||||
Florida Power & Light Co., 4.125%, 2/1/42 | 169,000 | 205,145 | ||||||
Indiana Michigan Power Co., 3.25%, 5/1/51 | 157,000 | 167,862 | ||||||
MidAmerican Energy Co., 4.40%, 10/15/44 | 290,000 | 359,727 | ||||||
NextEra Energy Capital Holdings, Inc., 3.55%, 5/1/27 | 290,000 | 314,727 | ||||||
Northern States Power Co., 3.20%, 4/1/52 | 240,000 | 261,371 | ||||||
Pacific Gas and Electric Co., 4.20%, 6/1/41 | 155,000 | 156,479 | ||||||
PacifiCorp, 3.30%, 3/15/51 | 310,000 | 328,768 | ||||||
PacifiCorp, 2.90%, 6/15/52 | 190,000 | 189,272 |
17
Shares/ Principal Amount | Value | |||||||
Public Service Co. of Colorado, 1.875%, 6/15/31 | $ | 312,000 | $ | 305,233 | ||||
Southern Co. Gas Capital Corp., 1.75%, 1/15/31 | 360,000 | 339,096 | ||||||
Southern Co. Gas Capital Corp., 3.95%, 10/1/46 | 90,000 | 102,246 | ||||||
Xcel Energy, Inc., 3.40%, 6/1/30 | 330,000 | 358,409 | ||||||
7,433,757 | ||||||||
Electrical Equipment† | ||||||||
Rockwell Automation, Inc., 2.80%, 8/15/61 | 156,000 | 155,236 | ||||||
Electronic Equipment, Instruments and Components† | ||||||||
Teledyne Technologies, Inc., 2.25%, 4/1/28 | 290,000 | 291,830 | ||||||
Energy Equipment and Services† | ||||||||
Halliburton Co., 2.92%, 3/1/30 | 300,000 | 310,197 | ||||||
Entertainment† | ||||||||
Netflix, Inc., 3.625%, 6/15/25(4) | 83,000 | 88,353 | ||||||
Netflix, Inc., 4.875%, 4/15/28 | 303,000 | 347,505 | ||||||
435,858 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 0.8% | ||||||||
Broadstone Net Lease LLC, 2.60%, 9/15/31 | 235,000 | 230,670 | ||||||
Corporate Office Properties LP, 2.00%, 1/15/29 | 480,000 | 465,935 | ||||||
Crown Castle International Corp., 3.30%, 7/1/30 | 335,000 | 354,337 | ||||||
EPR Properties, 4.75%, 12/15/26 | 276,000 | 300,069 | ||||||
EPR Properties, 4.95%, 4/15/28 | 735,000 | 805,312 | ||||||
EPR Properties, 3.60%, 11/15/31 | 171,000 | 171,606 | ||||||
GLP Capital LP / GLP Financing II, Inc., 5.375%, 4/15/26 | 370,000 | 417,708 | ||||||
Host Hotels & Resorts LP, 4.00%, 6/15/25 | 430,000 | 457,511 | ||||||
Lexington Realty Trust, 2.375%, 10/1/31 | 590,000 | 568,245 | ||||||
Life Storage LP, 2.40%, 10/15/31 | 585,000 | 578,029 | ||||||
National Health Investors, Inc., 3.00%, 2/1/31 | 885,000 | 851,152 | ||||||
National Retail Properties, Inc., 3.00%, 4/15/52 | 386,000 | 378,712 | ||||||
Office Properties Income Trust, 2.40%, 2/1/27 | 354,000 | 345,372 | ||||||
Omega Healthcare Investors, Inc., 3.375%, 2/1/31 | 239,000 | 242,759 | ||||||
Phillips Edison Grocery Center Operating Partnership I LP, 2.625%, 11/15/31 | 223,000 | 218,655 | ||||||
Physicians Realty LP, 2.625%, 11/1/31 | 531,000 | 530,675 | ||||||
Piedmont Operating Partnership LP, 2.75%, 4/1/32 | 378,000 | 370,483 | ||||||
Rexford Industrial Realty LP, 2.15%, 9/1/31 | 154,000 | 147,489 | ||||||
Sabra Health Care LP, 3.20%, 12/1/31 | 588,000 | 575,824 | ||||||
STORE Capital Corp., 4.625%, 3/15/29 | 163,000 | 183,745 | ||||||
Tanger Properties LP, 2.75%, 9/1/31 | 520,000 | 497,931 | ||||||
8,692,219 | ||||||||
Food and Staples Retailing — 0.1% | ||||||||
Kroger Co. (The), 3.875%, 10/15/46 | 350,000 | 395,581 | ||||||
Sysco Corp., 5.95%, 4/1/30 | 464,000 | 587,664 | ||||||
Walmart, Inc., 1.80%, 9/22/31 | 153,000 | 150,876 | ||||||
1,134,121 | ||||||||
Food Products — 0.1% | ||||||||
JDE Peet's NV, 2.25%, 9/24/31(4) | 475,000 | 464,189 | ||||||
Mondelez International, Inc., 2.75%, 4/13/30 | 452,000 | 471,149 | ||||||
935,338 | ||||||||
Health Care Providers and Services — 0.4% | ||||||||
Centene Corp., 2.45%, 7/15/28 | 560,000 | 558,800 | ||||||
Centene Corp., 3.375%, 2/15/30 | 399,000 | 409,994 | ||||||
CVS Health Corp., 1.75%, 8/21/30 | 310,000 | 295,466 |
18
Shares/ Principal Amount | Value | |||||||
CVS Health Corp., 4.78%, 3/25/38 | $ | 160,000 | $ | 195,936 | ||||
DaVita, Inc., 4.625%, 6/1/30(4) | 215,000 | 216,344 | ||||||
Duke University Health System, Inc., 3.92%, 6/1/47 | 160,000 | 194,544 | ||||||
HCA, Inc., 2.375%, 7/15/31 | 710,000 | 694,348 | ||||||
HCA, Inc., 3.50%, 7/15/51 | 330,000 | 334,946 | ||||||
Humana, Inc., 2.15%, 2/3/32 | 304,000 | 294,333 | ||||||
Kaiser Foundation Hospitals, 3.00%, 6/1/51 | 260,000 | 270,703 | ||||||
Universal Health Services, Inc., 1.65%, 9/1/26(4) | 427,000 | 420,676 | ||||||
Universal Health Services, Inc., 2.65%, 10/15/30(4) | 330,000 | 327,926 | ||||||
4,214,016 | ||||||||
Hotels, Restaurants and Leisure† | ||||||||
Marriott International, Inc., 3.50%, 10/15/32 | 372,000 | 393,753 | ||||||
Household Durables† | ||||||||
D.R. Horton, Inc., 2.50%, 10/15/24 | 310,000 | 322,695 | ||||||
Industrial Conglomerates† | ||||||||
General Electric Co., 4.35%, 5/1/50 | 350,000 | 446,243 | ||||||
Insurance — 0.5% | ||||||||
American International Group, Inc., 6.25%, 5/1/36 | 460,000 | 634,014 | ||||||
American International Group, Inc., 4.50%, 7/16/44 | 355,000 | 434,017 | ||||||
Assured Guaranty US Holdings, Inc., 3.60%, 9/15/51 | 410,000 | 431,051 | ||||||
Athene Global Funding, 1.99%, 8/19/28(4) | 757,000 | 736,806 | ||||||
Athene Global Funding, 2.67%, 6/7/31(4) | 760,000 | 761,868 | ||||||
Brighthouse Financial Global Funding, 2.00%, 6/28/28(4) | 631,000 | 623,181 | ||||||
Equitable Financial Life Global Funding, 1.80%, 3/8/28(4) | 290,000 | 285,299 | ||||||
Global Atlantic Fin Co., 3.125%, 6/15/31(4) | 238,000 | 239,015 | ||||||
Guardian Life Global Funding, 1.625%, 9/16/28(4) | 472,000 | 460,048 | ||||||
Sammons Financial Group, Inc., 3.35%, 4/16/31(4) | 584,000 | 607,576 | ||||||
SBL Holdings, Inc., 5.125%, 11/13/26(4) | 330,000 | 362,841 | ||||||
SBL Holdings, Inc., 5.00%, 2/18/31(4) | 300,000 | 318,655 | ||||||
5,894,371 | ||||||||
Internet and Direct Marketing Retail — 0.1% | ||||||||
Amazon.com, Inc., 2.875%, 5/12/41 | 820,000 | 850,689 | ||||||
Life Sciences Tools and Services — 0.1% | ||||||||
Agilent Technologies, Inc., 2.30%, 3/12/31 | 712,000 | 708,991 | ||||||
Illumina, Inc., 2.55%, 3/23/31 | 527,000 | 528,171 | ||||||
1,237,162 | ||||||||
Machinery† | ||||||||
Cummins, Inc., 2.60%, 9/1/50 | 260,000 | 249,059 | ||||||
Media — 0.4% | ||||||||
Charter Communications Operating LLC / Charter Communications Operating Capital, 4.91%, 7/23/25 | 368,000 | 409,367 | ||||||
Charter Communications Operating LLC / Charter Communications Operating Capital, 3.50%, 6/1/41 | 385,000 | 378,553 | ||||||
Charter Communications Operating LLC / Charter Communications Operating Capital, 5.125%, 7/1/49 | 645,000 | 764,558 | ||||||
Comcast Corp., 3.75%, 4/1/40 | 440,000 | 493,637 | ||||||
Cox Communications, Inc., 2.60%, 6/15/31(4) | 273,000 | 275,674 | ||||||
Discovery Communications LLC, 4.65%, 5/15/50 | 245,000 | 289,186 | ||||||
Grupo Televisa SAB, 5.00%, 5/13/45 | 550,000 | 669,445 | ||||||
Time Warner Cable LLC, 4.50%, 9/15/42 | 615,000 | 673,127 | ||||||
ViacomCBS, Inc., 4.375%, 3/15/43 | 265,000 | 303,433 | ||||||
4,256,980 |
19
Shares/ Principal Amount | Value | |||||||
Metals and Mining — 0.1% | ||||||||
Glencore Funding LLC, 2.625%, 9/23/31(4) | $ | 440,000 | $ | 429,161 | ||||
Steel Dynamics, Inc., 3.45%, 4/15/30 | 215,000 | 231,170 | ||||||
Teck Resources Ltd., 6.25%, 7/15/41 | 390,000 | 522,111 | ||||||
1,182,442 | ||||||||
Multi-Utilities — 0.3% | ||||||||
Ameren Corp., 3.50%, 1/15/31 | 430,000 | 465,854 | ||||||
CenterPoint Energy, Inc., 4.25%, 11/1/28 | 369,000 | 417,680 | ||||||
CenterPoint Energy, Inc., 2.65%, 6/1/31 | 285,000 | 289,938 | ||||||
Dominion Energy, Inc., 2.25%, 8/15/31 | 210,000 | 207,225 | ||||||
Dominion Energy, Inc., 4.90%, 8/1/41 | 270,000 | 339,498 | ||||||
NiSource, Inc., 5.65%, 2/1/45 | 290,000 | 405,485 | ||||||
Sempra Energy, 3.25%, 6/15/27 | 180,000 | 191,848 | ||||||
WEC Energy Group, Inc., 1.375%, 10/15/27 | 490,000 | 477,061 | ||||||
2,794,589 | ||||||||
Oil, Gas and Consumable Fuels — 0.8% | ||||||||
Aker BP ASA, 3.75%, 1/15/30(4) | 440,000 | 470,389 | ||||||
Aker BP ASA, 4.00%, 1/15/31(4) | 160,000 | 173,971 | ||||||
BP Capital Markets America, Inc., 3.06%, 6/17/41 | 250,000 | 252,832 | ||||||
Chevron Corp., 2.00%, 5/11/27 | 240,000 | 244,753 | ||||||
Diamondback Energy, Inc., 3.50%, 12/1/29 | 300,000 | 319,815 | ||||||
Enbridge, Inc., 3.40%, 8/1/51 | 310,000 | 319,421 | ||||||
Energy Transfer LP, 3.60%, 2/1/23 | 160,000 | 164,383 | ||||||
Energy Transfer LP, 4.25%, 3/15/23 | 370,000 | 383,686 | ||||||
Energy Transfer LP, 3.75%, 5/15/30 | 400,000 | 426,567 | ||||||
Energy Transfer LP, 4.90%, 3/15/35 | 270,000 | 307,081 | ||||||
Enterprise Products Operating LLC, 4.85%, 3/15/44 | 460,000 | 557,047 | ||||||
Enterprise Products Operating LLC, 3.30%, 2/15/53 | 220,000 | 220,833 | ||||||
Equinor ASA, 3.25%, 11/18/49 | 230,000 | 249,455 | ||||||
Flex Intermediate Holdco LLC, 3.36%, 6/30/31(4) | 280,000 | 283,621 | ||||||
Galaxy Pipeline Assets Bidco Ltd., 2.94%, 9/30/40(4) | 900,000 | 886,746 | ||||||
Kinder Morgan Energy Partners LP, 6.50%, 9/1/39 | 250,000 | 342,990 | ||||||
Lundin Energy Finance BV, 3.10%, 7/15/31(4) | 220,000 | 221,924 | ||||||
Petroleos Mexicanos, 3.50%, 1/30/23 | 300,000 | 303,525 | ||||||
Petroleos Mexicanos, 6.625%, 6/15/35 | 50,000 | 48,529 | ||||||
Petroleos Mexicanos, 5.50%, 6/27/44 | 230,000 | 187,058 | ||||||
SA Global Sukuk Ltd., 2.69%, 6/17/31(4) | 1,000,000 | 1,003,400 | ||||||
Sabine Pass Liquefaction LLC, 5.625%, 3/1/25 | 640,000 | 718,824 | ||||||
TransCanada PipeLines Ltd., 2.50%, 10/12/31 | 450,000 | 447,169 | ||||||
Transcontinental Gas Pipe Line Co. LLC, 3.25%, 5/15/30 | 250,000 | 265,324 | ||||||
8,799,343 | ||||||||
Paper and Forest Products† | ||||||||
Georgia-Pacific LLC, 2.10%, 4/30/27(4) | 370,000 | 376,302 | ||||||
Pharmaceuticals — 0.1% | ||||||||
Astrazeneca Finance LLC, 1.75%, 5/28/28 | 256,000 | 255,117 | ||||||
Bristol-Myers Squibb Co., 2.55%, 11/13/50 | 337,000 | 322,841 | ||||||
Royalty Pharma plc, 2.20%, 9/2/30 | 235,000 | 227,643 | ||||||
Viatris, Inc., 4.00%, 6/22/50 | 139,000 | 149,228 | ||||||
954,829 | ||||||||
Real Estate Management and Development — 0.1% | ||||||||
Essential Properties LP, 2.95%, 7/15/31 | 460,000 | 459,105 |
20
Shares/ Principal Amount | Value | |||||||
Ontario Teachers' Cadillac Fairview Properties Trust, 2.50%, 10/15/31(4) | $ | 201,000 | $ | 201,576 | ||||
660,681 | ||||||||
Road and Rail — 0.3% | ||||||||
Ashtead Capital, Inc., 1.50%, 8/12/26(4) | 320,000 | 314,185 | ||||||
Burlington Northern Santa Fe LLC, 4.15%, 4/1/45 | 300,000 | 369,290 | ||||||
Burlington Northern Santa Fe LLC, 3.30%, 9/15/51 | 200,000 | 221,953 | ||||||
CSX Corp., 3.25%, 6/1/27 | 390,000 | 419,921 | ||||||
DAE Funding LLC, 1.55%, 8/1/24(4) | 395,000 | 390,161 | ||||||
DAE Funding LLC, 3.375%, 3/20/28(4) | 642,000 | 656,723 | ||||||
Union Pacific Corp., 2.40%, 2/5/30 | 270,000 | 278,003 | ||||||
Union Pacific Corp., MTN, 3.55%, 8/15/39 | 450,000 | 503,541 | ||||||
3,153,777 | ||||||||
Semiconductors and Semiconductor Equipment — 0.2% | ||||||||
Intel Corp., 2.80%, 8/12/41 | 580,000 | 579,433 | ||||||
Microchip Technology, Inc., 4.25%, 9/1/25 | 1,036,000 | 1,077,803 | ||||||
Qorvo, Inc., 4.375%, 10/15/29 | 450,000 | 483,750 | ||||||
Qorvo, Inc., 3.375%, 4/1/31(4) | 227,000 | 234,970 | ||||||
2,375,956 | ||||||||
Software — 0.1% | ||||||||
Autodesk, Inc., 2.40%, 12/15/31 | 321,000 | 315,944 | ||||||
Oracle Corp., 3.60%, 4/1/40 | 645,000 | 673,227 | ||||||
989,171 | ||||||||
Specialty Retail — 0.2% | ||||||||
AutoNation, Inc., 1.95%, 8/1/28 | 307,000 | 299,664 | ||||||
Home Depot, Inc. (The), 3.90%, 6/15/47 | 50,000 | 60,154 | ||||||
Home Depot, Inc. (The), 2.375%, 3/15/51 | 720,000 | 671,622 | ||||||
Lowe's Cos., Inc., 2.625%, 4/1/31 | 690,000 | 705,948 | ||||||
1,737,388 | ||||||||
Technology Hardware, Storage and Peripherals — 0.3% | ||||||||
Apple, Inc., 2.65%, 2/8/51 | 880,000 | 870,362 | ||||||
Dell International LLC / EMC Corp., 4.90%, 10/1/26 | 605,000 | 689,634 | ||||||
Dell International LLC / EMC Corp., 8.10%, 7/15/36 | 289,000 | 438,348 | ||||||
Dell International LLC / EMC Corp., 8.35%, 7/15/46 | 280,000 | 466,032 | ||||||
HP, Inc., 2.65%, 6/17/31(4) | 580,000 | 571,387 | ||||||
Western Digital Corp., 4.75%, 2/15/26 | 753,000 | 828,300 | ||||||
3,864,063 | ||||||||
Thrifts and Mortgage Finance — 0.1% | ||||||||
Nationwide Building Society, VRN, 4.125%, 10/18/32(4) | 595,000 | 642,323 | ||||||
Trading Companies and Distributors† | ||||||||
Aircastle Ltd., 5.25%, 8/11/25(4) | 371,000 | 410,154 | ||||||
Water Utilities† | ||||||||
Essential Utilities, Inc., 2.70%, 4/15/30 | 380,000 | 388,839 | ||||||
Wireless Telecommunication Services — 0.2% | ||||||||
T-Mobile USA, Inc., 4.75%, 2/1/28 | 534,000 | 564,038 | ||||||
T-Mobile USA, Inc., 3.50%, 4/15/31 | 395,000 | 409,321 | ||||||
T-Mobile USA, Inc., 3.40%, 10/15/52(4) | 455,000 | 453,660 | ||||||
Vodafone Group plc, VRN, 4.125%, 6/4/81 | 465,000 | 462,842 | ||||||
1,889,861 | ||||||||
TOTAL CORPORATE BONDS (Cost $118,226,711) | 119,793,254 |
21
Shares/ Principal Amount | Value | |||||||
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES — 4.0% | ||||||||
Adjustable-Rate U.S. Government Agency Mortgage-Backed Securities — 0.1% | ||||||||
FHLMC, VRN, 2.34%, (1-year H15T1Y plus 2.25%), 9/1/35 | $ | 82,527 | $ | 88,326 | ||||
FHLMC, VRN, 2.17%, (12-month LIBOR plus 1.87%), 7/1/36 | 20,766 | 21,970 | ||||||
FHLMC, VRN, 2.20%, (1-year H15T1Y plus 2.14%), 10/1/36 | 79,779 | 85,876 | ||||||
FHLMC, VRN, 2.35%, (1-year H15T1Y plus 2.26%), 4/1/37 | 88,113 | 94,126 | ||||||
FHLMC, VRN, 2.12%, (12-month LIBOR plus 1.86%), 7/1/41 | 73,148 | 77,585 | ||||||
FHLMC, VRN, 2.89%, (12-month LIBOR plus 1.63%), 1/1/44 | 90,069 | 92,959 | ||||||
FHLMC, VRN, 2.62%, (12-month LIBOR plus 1.60%), 6/1/45 | 54,151 | 56,558 | ||||||
FHLMC, VRN, 1.875%, (12-month LIBOR plus 1.63%), 8/1/46 | 154,648 | 160,976 | ||||||
FHLMC, VRN, 3.05%, (12-month LIBOR plus 1.64%), 9/1/47 | 246,008 | 255,090 | ||||||
FNMA, VRN, 1.82%, (6-month LIBOR plus 1.57%), 6/1/35 | 51,875 | 54,075 | ||||||
FNMA, VRN, 1.82%, (6-month LIBOR plus 1.57%), 6/1/35 | 47,876 | 49,900 | ||||||
FNMA, VRN, 2.22%, (1-year H15T1Y plus 2.16%), 3/1/38 | 67,087 | 71,995 | ||||||
FNMA, VRN, 3.20%, (12-month LIBOR plus 1.61%), 3/1/47 | 145,358 | 150,886 | ||||||
FNMA, VRN, 3.10%, (12-month LIBOR plus 1.61%), 4/1/47 | 96,744 | 100,466 | ||||||
FNMA, VRN, 3.24%, (12-month LIBOR plus 1.62%), 5/1/47 | 165,480 | 171,630 | ||||||
1,532,418 | ||||||||
Fixed-Rate U.S. Government Agency Mortgage-Backed Securities — 3.9% | ||||||||
FHLMC, 3.00%, 6/1/51 | 3,201,139 | 3,342,757 | ||||||
FHLMC, 3.00%, 7/1/51 | 2,093,914 | 2,187,246 | ||||||
FHLMC, 2.50%, 8/1/51 | 2,166,129 | 2,226,942 | ||||||
FHLMC, 2.50%, 9/1/51 | 1,647,136 | 1,694,080 | ||||||
FHLMC, 3.50%, 9/1/51 | 587,370 | 621,529 | ||||||
FHLMC, 2.50%, 10/1/51 | 1,647,672 | 1,693,929 | ||||||
FNMA, 3.50%, 3/1/34 | 165,237 | 176,422 | ||||||
FNMA, 4.50%, 9/1/41 | 172,507 | 192,988 | ||||||
FNMA, 3.50%, 5/1/42 | 839,654 | 911,385 | ||||||
FNMA, 3.50%, 6/1/42 | 268,328 | 291,289 | ||||||
FNMA, 3.00%, 6/1/50 | 510,026 | 535,062 | ||||||
FNMA, 2.50%, 6/1/51 | 1,943,221 | 1,998,468 | ||||||
FNMA, 3.00%, 6/1/51 | 196,803 | 208,137 | ||||||
FNMA, 3.50%, 7/1/51 | 3,868,654 | 4,118,724 | ||||||
FNMA, 3.50%, 8/1/51 | 276,490 | 293,667 | ||||||
FNMA, 3.50%, 9/1/51 | 581,744 | 618,328 | ||||||
GNMA, 2.50%, TBA | 4,219,000 | 4,337,247 | ||||||
GNMA, 7.00%, 4/20/26 | 13,295 | 14,511 | ||||||
GNMA, 7.50%, 8/15/26 | 8,869 | 9,770 | ||||||
GNMA, 7.00%, 2/15/28 | 1,734 | 1,740 | ||||||
GNMA, 7.00%, 5/15/31 | 21,417 | 24,778 | ||||||
GNMA, 5.50%, 11/15/32 | 56,173 | 65,328 | ||||||
GNMA, 4.50%, 6/15/41 | 187,436 | 214,873 | ||||||
GNMA, 3.50%, 6/20/42 | 338,537 | 364,364 | ||||||
GNMA, 3.50%, 3/15/46 | 1,462,974 | 1,571,562 | ||||||
GNMA, 3.50%, 6/20/51 | 1,399,537 | 1,467,108 | ||||||
GNMA, 3.00%, 7/20/51 | 515,546 | 535,975 | ||||||
GNMA, 3.00%, 8/20/51 | 519,386 | 541,148 | ||||||
GNMA, 2.50%, 9/20/51 | 1,401,356 | 1,441,540 | ||||||
GNMA, 3.00%, 9/20/51 | 1,044,241 | 1,089,369 | ||||||
UMBS, 2.50%, TBA | 9,900,000 | 10,168,190 | ||||||
42,958,456 | ||||||||
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $44,495,563) | 44,490,874 |
22
Shares/ Principal Amount | Value | |||||||
COLLATERALIZED LOAN OBLIGATIONS — 2.8% | ||||||||
ABPCI Direct Lending Fund CLO IV Ltd., Series 2017-2A, Class BR, VRN, 2.03%, (3-month LIBOR plus 1.90%), 10/27/33(4) | $ | 600,000 | $ | 600,033 | ||||
Aimco CLO Ltd., Series 2019-10A, Class BR, VRN, 1.73%, (3-month LIBOR plus 1.60%), 7/22/32(4) | 1,090,000 | 1,090,543 | ||||||
Anchorage Capital CLO Ltd., Series 2021-19A, Class B1, VRN, 2.01%, (3-month LIBOR plus 1.85%), 10/15/34(4) | 825,000 | 826,203 | ||||||
Anchorage Credit Opportunities CLO Ltd., Series 2019-1A, Class A1, VRN, 2.08%, (3-month LIBOR plus 1.95%), 1/20/32(4) | 800,000 | 801,834 | ||||||
Apidos CLO XXVI, Series 2017-26A, Class BR, VRN, 2.07%, (3-month LIBOR plus 1.95%), 7/18/29(4) | 775,000 | 775,773 | ||||||
ARES LII CLO Ltd., Series 2019-52A, Class BR, VRN, 1.78%, (3-month LIBOR plus 1.65%), 4/22/31(4) | 550,000 | 550,274 | ||||||
ARES LII CLO Ltd., Series 2019-52A, Class CR, VRN, 2.23%, (3-month LIBOR plus 2.10%), 4/22/31(4) | 575,000 | 575,998 | ||||||
Bain Capital Credit CLO Ltd., Series 2019-2A, Class BR, VRN, 1.72%, (3-month LIBOR plus 1.60%), 10/17/32(4) | 625,000 | 624,494 | ||||||
BDS Ltd., Series 2021-FL7, Class C, VRN, 1.79%, (1-month LIBOR plus 1.70%), 6/16/36(4) | 1,125,000 | 1,114,708 | ||||||
Bean Creek CLO Ltd., Series 2015-1A, Class AR, VRN, 1.15%, (3-month LIBOR plus 1.02%), 4/20/31(4) | 575,000 | 575,343 | ||||||
Canyon Capital CLO Ltd., Series 2017-1A, Class BR, VRN, 1.72%, (3-month LIBOR plus 1.60%), 7/15/30(4) | 725,000 | 724,796 | ||||||
Carlyle Global Market Strategies CLO Ltd., Series 2013-1A, Class BRR, VRN, 2.32%, (3-month LIBOR plus 2.20%), 8/14/30(4) | 700,000 | 701,039 | ||||||
CarVal CLO III Ltd., Series 2019-2A, Class BR, VRN, 1.73%, (3-month LIBOR plus 1.60%), 7/20/32(4) | 500,000 | 500,249 | ||||||
Cedar Funding Ltd., Series 2019-10A, Class BR, VRN, 1.73%, (3-month LIBOR plus 1.60%), 10/20/32(4) | 600,000 | 598,733 | ||||||
Cerberus Loan Funding XXXIII LP, Series 2021-3A, Class A, VRN, 1.68%, (3-month LIBOR plus 1.56%), 7/23/33(4) | 800,000 | 801,008 | ||||||
Elmwood CLO II Ltd., Series 2019-2A, Class DR, VRN, 3.13%, (3-month LIBOR plus 3.00%), 4/20/34(4) | 500,000 | 503,209 | ||||||
Elmwood CLO V Ltd., Series 2020-2A, Class BR, VRN, 1.78%, (3-month LIBOR plus 1.65%), 10/20/34(4) | 425,000 | 423,804 | ||||||
Elmwood CLO X Ltd., Series 2021-3A, Class B, VRN, 1.69%, (3-month LIBOR plus 1.60%), 10/20/34(4) | 1,075,000 | 1,072,838 | ||||||
Elmwood CLO X Ltd., Series 2021-3A, Class C, VRN, 2.04%, (3-month LIBOR plus 1.95%), 10/20/34(4) | 625,000 | 624,573 | ||||||
Goldentree Loan Management US CLO Ltd., Series 2019-5A, Class BR, VRN, 1.68%, (3-month LIBOR plus 1.55%), 10/20/32(4) | 1,000,000 | 1,000,000 | ||||||
KKR CLO Ltd., Series 18, Class BR, VRN, 1.72%, (3-month LIBOR plus 1.60%), 7/18/30(4) | 575,000 | 575,004 | ||||||
KKR CLO Ltd., Series 2022A, Class A, VRN, 1.28%, (3-month LIBOR plus 1.15%), 7/20/31(4) | 450,000 | 450,369 | ||||||
KKR CLO Ltd., Series 30A, Class BR, VRN, 2.85%, (3-month LIBOR plus 1.60%), 10/17/31(3)(4) | 1,025,000 | 1,025,000 | ||||||
KREF Ltd., Series 2021-FL2, Class AS, VRN, 1.39%, (1-month LIBOR plus 1.30%), 2/15/39(4) | 800,000 | 799,250 | ||||||
KREF Ltd., Series 2021-FL2, Class B, VRN, 1.74%, (1-month LIBOR plus 1.65%), 2/15/39(4) | 800,000 | 799,110 | ||||||
Madison Park Funding XXI Ltd., Series 2016-21A, Class A2RR, VRN, 1.78%, (3-month LIBOR plus 1.65%), 10/15/32(4) | 525,000 | 525,000 | ||||||
Madison Park Funding XXII Ltd., Series 2016-22A, Class A1R, VRN, 1.38%, (3-month LIBOR plus 1.26%), 1/15/33(4) | 450,000 | 450,406 | ||||||
Madison Park Funding XXXVII Ltd., Series 2019-37A, Class BR, VRN, 1.77%, (3-month LIBOR plus 1.65%), 7/15/33(4) | 1,075,000 | 1,075,535 |
23
Shares/ Principal Amount | Value | |||||||
Magnetite CLO XXXI Ltd., Series 2021-31 A, Class B, VRN, 1.76%, (3-month LIBOR plus 1.65%), 7/15/34(4) | $ | 600,000 | $ | 600,800 | ||||
MF1 Ltd., Series 2021-FL7, Class AS, VRN, 1.54%, (1-month LIBOR plus 1.45%), 10/16/36(4) | 1,350,000 | 1,349,319 | ||||||
Octagon Investment Partners XV Ltd., Series 2013-1A, Class BRR, VRN, 1.63%, (3-month LIBOR plus 1.50%), 7/19/30(4) | 800,000 | 798,607 | ||||||
Parallel Ltd., Series 2019-1A, Class BR, VRN, 1.93%, (3-month LIBOR plus 1.80%), 7/20/32(4) | 825,000 | 823,423 | ||||||
Park Avenue Institutional Advisers CLO Ltd., Series 2018-1A, Class BR, VRN, 2.23%, (3-month LIBOR plus 2.10%), 10/20/31(4) | 750,000 | 747,972 | ||||||
Regata XII Funding Ltd., Series 2019-1A, Class BR, VRN, 1.72%, (3-month LIBOR plus 1.60%), 10/15/32(4) | 750,000 | 748,521 | ||||||
Rockford Tower CLO Ltd., Series 2017-3A, Class A, VRN, 1.32%, (3-month LIBOR plus 1.19%), 10/20/30(4) | 650,000 | 650,326 | ||||||
Sound Point CLO XXII Ltd., Series 2019-1A, Class BR, VRN, 1.83%, (3-month LIBOR plus 1.70%), 1/20/32(4) | 1,350,000 | 1,350,672 | ||||||
THL Credit Wind River CLO Ltd., Series 2013-2A, Class BR2, VRN, 1.69%, (3-month LIBOR plus 1.57%), 10/18/30(4) | 1,150,000 | 1,148,061 | ||||||
THL Credit Wind River CLO Ltd., Series 2019-3A, Class BR, VRN, 1.77%, (3-month LIBOR plus 1.65%), 4/15/31(4) | 850,000 | 850,351 | ||||||
Voya CLO Ltd., Series 2013-2A, Class A1R, VRN, 1.09%, (3-month LIBOR plus 0.97%), 4/25/31(4) | 700,000 | 700,696 | ||||||
Voya CLO Ltd., Series 2016-4A, Class B2R, VRN, 1.68%, (3-month LIBOR plus 1.55%), 7/20/29(4) | 1,100,000 | 1,100,175 | ||||||
TOTAL COLLATERALIZED LOAN OBLIGATIONS (Cost $31,043,680) | 31,054,049 | |||||||
COLLATERALIZED MORTGAGE OBLIGATIONS — 2.3% | ||||||||
Private Sponsor Collateralized Mortgage Obligations — 1.6% | ||||||||
ABN Amro Mortgage Corp., Series 2003-4, Class A4, 5.50%, 3/25/33 | 4,285 | 4,378 | ||||||
Adjustable Rate Mortgage Trust, Series 2004-4, Class 4A1, VRN, 2.53%, 3/25/35 | 101,632 | 103,782 | ||||||
Banc of America Mortgage Trust, Series 2004-E, Class 2A6 SEQ, VRN, 2.79%, 6/25/34 | 70,230 | 72,105 | ||||||
Bellemeade Re Ltd., Series 2019-3A, Class B1, VRN, 2.59%, (1-month LIBOR plus 2.50%), 7/25/29(4) | 400,000 | 400,656 | ||||||
Bellemeade Re Ltd., Series 2019-3A, Class M1C, VRN, 2.04%, (1-month LIBOR plus 1.95%), 7/25/29(4) | 360,000 | 360,518 | ||||||
Bellemeade Re Ltd., Series 2020-2A, Class M1C, VRN, 4.09%, (1-month LIBOR plus 4.00%), 8/26/30(4) | 480,000 | 488,250 | ||||||
Chase Mortgage Finance Corp., Series 2021-CL1, Class M1, VRN, 1.25%, (SOFR plus 1.20%), 2/25/50(4) | 479,874 | 481,138 | ||||||
Citigroup Mortgage Loan Trust, Inc., Series 2004-UST1, Class A5, VRN, 1.94%, 8/25/34 | 220,869 | 227,384 | ||||||
Countrywide Home Loan Mortgage Pass-Through Trust, Series 2005-17, Class 1A11, 5.50%, 9/25/35 | 1,510 | 1,473 | ||||||
Credit Suisse Mortgage Trust, Series 2021-NQM2, Class A2 SEQ, VRN, 1.38%, 2/25/66(4) | 478,336 | 476,741 | ||||||
Credit Suisse Mortgage Trust, Series 2021-NQM3, Class A3 SEQ, VRN, 1.63%, 4/25/66(4) | 362,785 | 362,871 | ||||||
Credit Suisse Mortgage Trust, Series 2021-RPL3, Class A1 SEQ, VRN, 2.00%, 1/25/60(4) | 499,811 | 505,685 | ||||||
Deephaven Residential Mortgage Trust, Series 2021-3, Class A3, VRN, 1.55%, 8/25/66(4) | 391,996 | 390,308 | ||||||
Eagle RE Ltd., Series 2021-1, Class M1C, VRN, 2.75%, (SOFR plus 2.70%), 10/25/33(4) | 525,000 | 533,458 | ||||||
First Horizon Alternative Mortgage Securities Trust, Series 2004-AA4, Class A1, VRN, 2.31%, 10/25/34 | 107,170 | 111,648 |
24
Shares/ Principal Amount | Value | |||||||
GCAT Trust, Series 2021-NQM1, Class A3 SEQ, VRN, 1.15%, 1/25/66(4) | $ | 465,939 | $ | 462,888 | ||||
GSR Mortgage Loan Trust, Series 2004-7, Class 3A1, VRN, 2.16%, 6/25/34 | 25,052 | 25,034 | ||||||
GSR Mortgage Loan Trust, Series 2004-AR5, Class 3A3, VRN, 2.60%, 5/25/34 | 49,837 | 49,219 | ||||||
GSR Mortgage Loan Trust, Series 2005-AR1, Class 3A1, VRN, 2.77%, 1/25/35 | 63,513 | 65,795 | ||||||
Home RE Ltd., Series 2020-1, Class M1B, VRN, 3.34%, (1-month LIBOR plus 3.25%), 10/25/30(4) | 947,973 | 950,721 | ||||||
Home RE Ltd., Series 2021-1 Class M1B, VRN, 1.64%, (1-month LIBOR plus 1.55%), 7/25/33(4) | 360,000 | 358,555 | ||||||
JP Morgan Mortgage Trust, Series 2013-1, Class 2A2 SEQ, VRN, 2.50%, 3/25/43(4) | 23,479 | 23,660 | ||||||
JP Morgan Mortgage Trust, Series 2017-1, Class A2, VRN, 3.48%, 1/25/47(4) | 178,575 | 180,405 | ||||||
JP Morgan Mortgage Trust, Series 2020-3, Class A15, VRN, 3.50%, 8/25/50(4) | 289,881 | 293,811 | ||||||
JP Morgan Mortgage Trust, Series 2021-12, Class A4 SEQ, VRN, 2.50%, 2/25/52(4) | 1,146,539 | 1,163,759 | ||||||
JP Morgan Mortgage Trust, Series 2021-13, Class A3, VRN, 2.50%, 4/25/52(4) | 1,225,000 | 1,230,934 | ||||||
MASTR Adjustable Rate Mortgages Trust, Series 2004-13, Class 3A7, VRN, 2.72%, 11/21/34 | 94,901 | 96,459 | ||||||
Merrill Lynch Mortgage Investors Trust, Series 2005-3, Class 2A, VRN, 2.15%, 11/25/35 | 43,870 | 43,998 | ||||||
Merrill Lynch Mortgage Investors Trust, Series 2005-A2, Class A1, VRN, 2.84%, 2/25/35 | 84,872 | 86,347 | ||||||
Newrez Warehouse Securitization Trust, Series 2021-1, Class A, VRN, 0.84%, (1-month LIBOR plus 0.75%), 5/25/55(4) | 750,000 | 749,979 | ||||||
Oaktown Re V Ltd., Series 2020-2A, Class M1A, VRN, 2.49%, (1-month LIBOR plus 2.40%), 10/25/30(4) | 36,499 | 36,501 | ||||||
Oceanview Mortgage Trust, Series 2021-3, Class A4 SEQ, VRN, 2.50%, 6/25/51(4) | 1,169,664 | 1,190,302 | ||||||
Oceanview Mortgage Trust, Series 2021-5, Class A4 SEQ, VRN, 2.50%, 10/25/51(4) | 1,100,000 | 1,117,965 | ||||||
PRMI Securitization Trust, Series 2021-1, Class A5, VRN, 2.50%, 4/25/51(4) | 923,080 | 915,578 | ||||||
PSMC Trust, Series 2021-1, Class A11 SEQ, VRN, 2.50%, 3/25/51(4) | 668,228 | 680,019 | ||||||
PSMC Trust, Series 2021-2, Class A3 SEQ, VRN, 2.50%, 5/25/51(4) | 396,781 | 403,781 | ||||||
PSMC Trust, Series 2021-3, Class A3 SEQ, VRN, 2.50%, 8/25/51(4) | 1,157,482 | 1,177,905 | ||||||
Sequoia Mortgage Trust, Series 2021-5, Class A4 SEQ, VRN, 2.50%, 7/25/51(4) | 476,426 | 484,532 | ||||||
Sofi Mortgage Trust, Series 2016-1A, Class 1A4 SEQ, VRN, 3.00%, 11/25/46(4) | 55,499 | 56,424 | ||||||
Starwood Mortgage Residential Trust, Series 2020-2, Class B1E, VRN, 3.00%, 4/25/60(4) | 446,000 | 447,078 | ||||||
Structured Adjustable Rate Mortgage Loan Trust, Series 2004-8, Class 2A1, VRN, 2.40%, 7/25/34 | 35,857 | 36,958 | ||||||
Verus Securitization Trust, Series 2021-R2, Class A2, VRN, 1.12%, 2/25/64(4) | 407,477 | 406,883 | ||||||
Verus Securitization Trust, Series 2021-R2, Class A3, VRN, 1.23%, 2/25/64(4) | 465,963 | 465,159 | ||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2021-2, Class A3, VRN, 2.50%, 6/25/51(4) | 859,699 | 874,326 | ||||||
18,595,370 |
25
Shares/ Principal Amount | Value | |||||||
U.S. Government Agency Collateralized Mortgage Obligations — 0.7% | ||||||||
FHLMC, Series 2014-DN3, Class M3, VRN, 4.09%, (1-month LIBOR plus 4.00%), 8/25/24 | $ | 121,681 | $ | 124,736 | ||||
FHLMC, Series 2015-HQ2, Class M3, VRN, 3.34%, (1-month LIBOR plus 3.25%), 5/25/25 | 74,673 | 75,821 | ||||||
FHLMC, Series 2016-DNA2, Class M3, VRN, 4.74%, (1-month LIBOR plus 4.65%), 10/25/28 | 403,797 | 419,196 | ||||||
FHLMC, Series 2019-DNA2, Class M2, VRN, 2.54%, (1-month LIBOR plus 2.45%), 3/25/49(4) | 306,546 | 311,456 | ||||||
FHLMC, Series 2020-DNA3, Class M2, VRN, 3.09%, (1-month LIBOR plus 3.00%), 6/25/50(4) | 139,907 | 140,476 | ||||||
FHLMC, Series 2020-DNA5, Class M2, VRN, 2.85%, (SOFR plus 2.80%), 10/25/50(4) | 633,887 | 641,439 | ||||||
FHLMC, Series 2020-HQA3, Class M2, VRN, 3.69%, (1-month LIBOR plus 3.60%), 7/25/50(4) | 131,920 | 132,906 | ||||||
FHLMC, Series 2021-DNA6, Class M2, VRN, 1.55%, (SOFR plus 1.50%), 10/25/41(4) | 1,715,000 | 1,718,216 | ||||||
FHLMC, Series 5123, Class HI, IO, 5.00%, 1/25/42 | 1,580,376 | 279,597 | ||||||
FHLMC, Series 5146, Class DI, IO, 5.50%, 7/25/39 | 490,765 | 91,786 | ||||||
FNMA, Series 2013-C01, Class M2, VRN, 5.34%, (1-month LIBOR plus 5.25%), 10/25/23 | 649,670 | 676,476 | ||||||
FNMA, Series 2014-C02, Class 2M2, VRN, 2.69%, (1-month LIBOR plus 2.60%), 5/25/24 | 206,409 | 209,922 | ||||||
FNMA, Series 2014-C04, Class 1M2, VRN, 4.99%, (1-month LIBOR plus 4.90%), 11/25/24 | 216,812 | 225,750 | ||||||
FNMA, Series 2015-C04, Class 1M2, VRN, 5.79%, (1-month LIBOR plus 5.70%), 4/25/28 | 475,077 | 503,314 | ||||||
FNMA, Series 2015-C04, Class 2M2, VRN, 5.64%, (1-month LIBOR plus 5.55%), 4/25/28 | 973,238 | 1,021,757 | ||||||
FNMA, Series 2016-C01, Class 2M2, VRN, 7.04%, (1-month LIBOR plus 6.95%), 8/25/28 | 597,103 | 634,108 | ||||||
FNMA, Series 2016-C06, Class 1M2, VRN, 4.34%, (1-month LIBOR plus 4.25%), 4/25/29 | 251,598 | 261,634 | ||||||
FNMA, Series 2017-C03, Class 1M2C, VRN, 3.09%, (1-month LIBOR plus 3.00%), 10/25/29 | 110,000 | 114,167 | ||||||
7,582,757 | ||||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $26,065,904) | 26,178,127 | |||||||
ASSET-BACKED SECURITIES — 2.0% | ||||||||
Blackbird Capital Aircraft, Series 2021-1A, Class A SEQ, 2.44%, 7/15/46(4) | 885,938 | 888,165 | ||||||
CARS-DB5 LP, Series 2021-1A, Class A4 SEQ, 2.76%, 8/15/51(4) | 800,000 | 796,076 | ||||||
Castlelake Aircraft Structured Trust, Series 2017-1R, Class A SEQ, 2.74%, 8/15/41(4) | 732,345 | 729,697 | ||||||
CLI Funding VI LLC, Series 2020-1A, Class A SEQ, 2.08%, 9/18/45(4) | 484,963 | 484,594 | ||||||
DI Issuer LLC, Series 2021-1A, Class A2 SEQ, 3.72%, 9/15/51(4) | 1,900,000 | 1,900,000 | ||||||
FirstKey Homes Trust, Series 2020-SFR2, Class D, 1.97%, 10/19/37(4) | 1,200,000 | 1,181,922 | ||||||
FirstKey Homes Trust, Series 2021-SFR1, Class D, 2.19%, 8/17/38(4) | 950,000 | 937,159 | ||||||
FirstKey Homes Trust, Series 2021-SFR1, Class E1, 2.39%, 8/17/38(4) | 1,100,000 | 1,085,351 | ||||||
Global SC Finance SRL, Series 2021-2A, Class A SEQ, 1.95%, 8/17/41(4) | 1,324,921 | 1,318,750 | ||||||
Goodgreen Trust, Series 2018-1A, Class A, VRN, 3.93%, 10/15/53(4) | 428,954 | 450,929 |
26
Shares/ Principal Amount | Value | |||||||
Goodgreen Trust, Series 2020-1A, Class A SEQ, 2.63%, 4/15/55(4) | $ | 818,771 | $ | 824,754 | ||||
Goodgreen Trust, Series 2021-1A, Class A SEQ, 2.66%, 10/15/56(4) | 563,739 | 562,157 | ||||||
J.G. Wentworth XL LLC, Series 2017-3A, Class B, 5.43%, 2/15/69(4) | 93,000 | 114,536 | ||||||
J.G. Wentworth XXXIX LLC, Series 2017-2A, Class B, 5.09%, 9/17/74(4) | 173,379 | 204,834 | ||||||
J.G. Wentworth XXXVIII LLC, Series 2017-1A, Class B, 5.43%, 8/15/62(4) | 210,884 | 255,122 | ||||||
JG Wentworth XLII LLC, Series 2018-2A, Class B, 4.70%, 10/15/77(4) | 550,000 | 631,664 | ||||||
MAPS Trust, Series 2021-1A, Class A SEQ, 2.52%, 6/15/46(4) | 1,676,942 | 1,671,368 | ||||||
New Economy Assets Phase 1 Sponsor LLC, Series 2021-1, Class A1 SEQ, 1.91%, 10/20/61(4) | 1,625,000 | 1,600,815 | ||||||
New Economy Assets Phase 1 Sponsor LLC, Series 2021-1, Class B1, 2.41%, 10/20/61(4) | 1,925,000 | 1,920,864 | ||||||
Progress Residential Trust, Series 2021-SFR2, Class D, 2.20%, 4/19/38(4) | 600,000 | 593,504 | ||||||
Progress Residential Trust, Series 2021-SFR3, Class C, 2.09%, 5/17/26(4) | 500,000 | 498,272 | ||||||
Progress Residential Trust, Series 2021-SFR8, Class E1, 2.38%, 10/17/38(4) | 900,000 | 887,419 | ||||||
Sierra Timeshare Receivables Funding LLC, Series 2021-1A, Class C, 1.79%, 11/20/37(4) | 421,760 | 419,471 | ||||||
Slam Ltd., Series 2021-1A, Class A SEQ, 2.43%, 6/15/46(4) | 645,293 | 640,500 | ||||||
Taco Bell Funding LLC, Series 2021-1A, Class A23 SEQ, 2.54%, 8/25/51(4) | 525,000 | 528,929 | ||||||
TAL Advantage VII LLC, Series 2020-1A, Class A SEQ, 2.05%, 9/20/45(4) | 487,438 | 487,231 | ||||||
Towd Point Mortgage Trust, Series 2018-2, Class A1, VRN, 3.25%, 3/25/58(4) | 667,110 | 684,814 | ||||||
VSE VOI Mortgage LLC, Series 2016-A, Class A SEQ, 2.54%, 7/20/33(4) | 137,460 | 137,414 | ||||||
VSE VOI Mortgage LLC, Series 2018-A, Class B, 3.72%, 2/20/36(4) | 299,634 | 310,121 | ||||||
TOTAL ASSET-BACKED SECURITIES (Cost $22,841,097) | 22,746,432 | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES — 0.8% | ||||||||
BDS Ltd., Series 2021-FL8, Class C, VRN, 1.63%, (1-month LIBOR plus 1.55%), 1/18/36(4) | 500,000 | 499,659 | ||||||
BDS Ltd., Series 2021-FL8, Class D, VRN, 1.98%, (1-month LIBOR plus 1.90%), 1/18/36(4) | 400,000 | 397,820 | ||||||
BX Commercial Mortgage Trust, Series 2020-VIV2, Class C, VRN, 3.54%, 3/9/44(4) | 975,000 | 1,017,839 | ||||||
BX Commercial Mortgage Trust, Series 2020-VIVA, Class D, VRN, 3.55%, 3/11/44(4) | 1,100,000 | 1,116,963 | ||||||
BX Commercial Mortgage Trust, Series 2021-VOLT, Class F, VRN, 2.49%, (1-month LIBOR plus 2.40%), 9/15/36(4) | 1,200,000 | 1,201,803 | ||||||
BXMT, Ltd., Series 2020-FL2, Class C, VRN, 1.81%, (SOFR plus 1.76%), 2/15/38(4) | 1,090,000 | 1,084,570 | ||||||
OPG Trust, Series 2021-PORT, Class E, VRN, 1.63%, (1-month LIBOR plus 1.53%), 10/15/36(4) | 1,431,000 | 1,419,171 | ||||||
PFP Ltd., Series 2021-8, Class C, VRN, 1.89%, (1-month LIBOR plus 1.80%), 8/9/37(4) | 1,175,000 | 1,172,862 | ||||||
PFP Ltd., Series 2019-5, Class B, VRN, 1.74%, (1-month LIBOR plus 1.65%), 4/14/36(4) | 550,000 | 549,457 | ||||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (Cost $8,494,139) | 8,460,144 |
27
Shares/ Principal Amount | Value | |||||||
MUNICIPAL SECURITIES — 0.7% | ||||||||
Bay Area Toll Authority Rev., 6.92%, 4/1/40 | $ | 295,000 | $ | 447,038 | ||||
California State University Rev., 2.98%, 11/1/51 | 500,000 | 513,590 | ||||||
Foothill-Eastern Transportation Corridor Agency Rev., 4.09%, 1/15/49 | 275,000 | 289,545 | ||||||
Golden State Tobacco Securitization Corp. Rev., 2.75%, 6/1/34 | 660,000 | 665,743 | ||||||
Grand Parkway Transportation Corp. Rev., 3.24%, 10/1/52 | 225,000 | 235,000 | ||||||
Houston GO, 3.96%, 3/1/47 | 120,000 | 142,817 | ||||||
Metropolitan Transportation Authority Rev., 6.69%, 11/15/40 | 105,000 | 149,649 | ||||||
Metropolitan Transportation Authority Rev., 6.81%, 11/15/40 | 60,000 | 86,810 | ||||||
Metropolitan Water Reclamation District of Greater Chicago GO, 5.72%, 12/1/38 | 650,000 | 911,455 | ||||||
Michigan Strategic Fund Rev., (Flint Water Advocacy Fund), 3.23%, 9/1/47 | 570,000 | 583,601 | ||||||
Missouri Highway & Transportation Commission Rev., 5.45%, 5/1/33 | 130,000 | 163,371 | ||||||
New Jersey Turnpike Authority Rev., 7.41%, 1/1/40 | 200,000 | 327,776 | ||||||
New Jersey Turnpike Authority Rev., 7.10%, 1/1/41 | 95,000 | 151,963 | ||||||
New York City GO, 6.27%, 12/1/37 | 95,000 | 138,147 | ||||||
Ohio Turnpike & Infrastructure Commission Rev., 3.22%, 2/15/48 | 330,000 | 341,405 | ||||||
Ohio Water Development Authority Water Pollution Control Loan Fund Rev., 4.88%, 12/1/34 | 110,000 | 129,927 | ||||||
Port Authority of New York & New Jersey Rev., 4.93%, 10/1/51 | 50,000 | 71,558 | ||||||
Regents of the University of California Medical Center Pooled Rev., 3.26%, 5/15/60 | 245,000 | 265,417 | ||||||
Rutgers The State University of New Jersey Rev., 5.67%, 5/1/40 | 300,000 | 407,278 | ||||||
Sacramento Municipal Utility District Rev., 6.16%, 5/15/36 | 210,000 | 291,148 | ||||||
San Francisco Public Utilities Commission Water Rev., 6.00%, 11/1/40 | 105,000 | 144,077 | ||||||
Santa Clara Valley Transportation Authority Rev., 5.88%, 4/1/32 | 120,000 | 148,199 | ||||||
State of California GO, 4.60%, 4/1/38 | 355,000 | 411,897 | ||||||
State of California GO, 7.55%, 4/1/39 | 100,000 | 168,595 | ||||||
State of California GO, 7.30%, 10/1/39 | 160,000 | 254,566 | ||||||
State of California GO, 7.60%, 11/1/40 | 80,000 | 138,899 | ||||||
State of Washington GO, 5.14%, 8/1/40 | 20,000 | 27,485 | ||||||
TOTAL MUNICIPAL SECURITIES (Cost $6,487,418) | 7,606,956 | |||||||
EXCHANGE-TRADED FUNDS — 0.4% | ||||||||
SPDR Bloomberg Barclays Short Term High Yield Bond ETF (Cost $3,885,194) | 143,100 | 3,908,061 | ||||||
U.S. GOVERNMENT AGENCY SECURITIES — 0.3% | ||||||||
FNMA, 0.75%, 10/8/27 | $ | 2,000,000 | 1,929,544 | |||||
FNMA, 6.625%, 11/15/30 | 600,000 | 850,094 | ||||||
Tennessee Valley Authority, 1.50%, 9/15/31 | 300,000 | 295,571 | ||||||
TOTAL U.S. GOVERNMENT AGENCY SECURITIES (Cost $3,017,099) | 3,075,209 | |||||||
SOVEREIGN GOVERNMENTS AND AGENCIES — 0.1% | ||||||||
Chile† | ||||||||
Chile Government International Bond, 3.625%, 10/30/42 | 100,000 | 106,015 | ||||||
Mexico — 0.1% | ||||||||
Mexico Government International Bond, 4.15%, 3/28/27 | 600,000 | 670,707 | ||||||
Peru† | ||||||||
Peruvian Government International Bond, 5.625%, 11/18/50 | 170,000 | 232,162 |
28
Shares/ Principal Amount | Value | |||||||
Philippines† | ||||||||
Philippine Government International Bond, 6.375%, 10/23/34 | $ | 150,000 | $ | 206,492 | ||||
Poland† | ||||||||
Republic of Poland Government International Bond, 3.00%, 3/17/23 | 140,000 | 144,235 | ||||||
South Africa† | ||||||||
Republic of South Africa Government International Bond, 4.67%, 1/17/24 | 110,000 | 117,128 | ||||||
Uruguay† | ||||||||
Uruguay Government International Bond, 4.125%, 11/20/45 | 120,000 | 142,058 | ||||||
TOTAL SOVEREIGN GOVERNMENTS AND AGENCIES (Cost $1,417,182) | 1,618,797 | |||||||
BANK LOAN OBLIGATIONS(5) — 0.1% | ||||||||
Media — 0.1% | ||||||||
DirecTV Financing, LLC, Term Loan, 7/22/27(6) | 855,000 | 856,603 | ||||||
Pharmaceuticals† | ||||||||
Horizon Therapeutics USA Inc., 2021 Term Loan B, 2.50%, (1-month LIBOR plus 2.00%), 3/15/28 | 501,480 | 500,986 | ||||||
TOTAL BANK LOAN OBLIGATIONS (Cost $1,359,207) | 1,357,589 | |||||||
PREFERRED STOCKS† | ||||||||
Banks† | ||||||||
SVB Financial Group, 4.25% (Cost $425,000) | 425,000 | 427,072 | ||||||
TEMPORARY CASH INVESTMENTS — 1.2% | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class (Cost $13,725,310) | 13,725,310 | 13,725,310 | ||||||
TOTAL INVESTMENT SECURITIES — 101.8% (Cost $988,830,918) | 1,138,028,146 | |||||||
OTHER ASSETS AND LIABILITIES — (1.8)% | (20,363,162) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 1,117,664,984 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
EUR | 169,601 | USD | 198,536 | Credit Suisse AG | 12/31/21 | $ | (2,165) | |||||||||||||
EUR | 389,704 | USD | 453,086 | Credit Suisse AG | 12/31/21 | (1,869) | ||||||||||||||
EUR | 131,912 | USD | 152,956 | Credit Suisse AG | 12/31/21 | (223) | ||||||||||||||
EUR | 114,575 | USD | 133,343 | Credit Suisse AG | 12/31/21 | (684) | ||||||||||||||
EUR | 157,540 | USD | 183,163 | Credit Suisse AG | 12/31/21 | (756) | ||||||||||||||
EUR | 195,229 | USD | 227,220 | Credit Suisse AG | 12/31/21 | (1,175) | ||||||||||||||
USD | 6,534,853 | EUR | 5,573,449 | Credit Suisse AG | 12/31/21 | 81,669 | ||||||||||||||
USD | 220,461 | EUR | 190,706 | Credit Suisse AG | 12/31/21 | (347) | ||||||||||||||
USD | 256,333 | EUR | 220,858 | Credit Suisse AG | 12/31/21 | 614 | ||||||||||||||
USD | 147,723 | EUR | 126,635 | Credit Suisse AG | 12/31/21 | 1,099 | ||||||||||||||
USD | 292,487 | EUR | 251,763 | Credit Suisse AG | 12/31/21 | 986 | ||||||||||||||
$ | 77,149 |
29
FUTURES CONTRACTS PURCHASED | ||||||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)^ | ||||||||||
U.S. Treasury 2-Year Notes | 54 | December 2021 | $ | 11,839,500 | $ | (6,105) | ||||||||
U.S. Treasury 5-Year Notes | 87 | December 2021 | 10,592,250 | (84,420) | ||||||||||
U.S. Treasury 10-Year Ultra Notes | 14 | December 2021 | 2,030,437 | 11,785 | ||||||||||
U.S. Treasury Long Bonds | 37 | December 2021 | 5,951,219 | 62,430 | ||||||||||
U.S. Treasury Ultra Bonds | 19 | December 2021 | 3,731,719 | 61,807 | ||||||||||
$ | 34,145,125 | $ | 45,497 |
^Amount represents value and unrealized appreciation (depreciation).
FUTURES CONTRACTS SOLD | ||||||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)^ | ||||||||||
U.S. Treasury 10-Year Notes | 51 | December 2021 | $ | 6,665,859 | $ | (18,946) |
^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) | $ | 271,170 | $ | 270,642 | ||||||||||||
CPURNSA | Receive | 2.34% | 2/5/26 | $ | 2,300,000 | 302 | 154,300 | 154,602 | |||||||||||||||
CPURNSA | Receive | 2.33% | 2/8/26 | $ | 4,000,000 | 524 | 268,824 | 269,348 | |||||||||||||||
CPURNSA | Receive | 2.30% | 2/24/26 | $ | 4,000,000 | 524 | 272,020 | 272,544 | |||||||||||||||
CPURNSA | Receive | 2.40% | 2/9/31 | $ | 2,000,000 | 521 | 142,101 | 142,622 | |||||||||||||||
$ | 1,343 | $ | 1,108,415 | $ | 1,109,758 |
30
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
CPURNSA | - | U.S. Consumer Price Index Urban Consumers Not Seasonally Adjusted Index | ||||||
EUR | - | Euro | ||||||
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 | ||||||
IO | - | Interest Only | ||||||
LIBOR | - | London Interbank Offered Rate | ||||||
MTN | - | Medium Term Note | ||||||
SEQ | - | Sequential Payer | ||||||
SOFR | - | Secured Overnight Financing Rate | ||||||
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 | ||||||
USD | - | United States Dollar | ||||||
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, forward foreign currency exchange contracts, futures contracts and/or swap agreements. At the period end, the aggregate value of securities pledged was $957,055.
(3)When-issued security. The issue price and yield are fixed on the date of the commitment, but payment and delivery are scheduled for a future date.
(4)Security was purchased pursuant to Rule 144A or Section 4(2) 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 $107,231,358, which represented 9.6% of total net assets.
(5)The interest rate on a bank loan obligation adjusts periodically based on a predetermined schedule. Rate or range of rates shown is effective at period end. The maturity date on a bank loan obligation may be less than indicated as a result of contractual or optional prepayments. These prepayments cannot be predicted with certainty.
(6)The interest rate will be determined upon settlement of the bank loan obligation after period end.
See Notes to Financial Statements.
31
Statement of Assets and Liabilities |
OCTOBER 31, 2021 | |||||
Assets | |||||
Investment securities, at value (cost of $988,830,918) | $ | 1,138,028,146 | |||
Cash | 2,359 | ||||
Receivable for investments sold | 1,539,430 | ||||
Receivable for capital shares sold | 147,924 | ||||
Receivable for variation margin on futures contracts | 33,767 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 84,368 | ||||
Dividends and interest receivable | 2,237,592 | ||||
1,142,073,586 | |||||
Liabilities | |||||
Payable for investments purchased | 23,194,016 | ||||
Payable for capital shares redeemed | 365,532 | ||||
Payable for variation margin on swap agreements | 33,343 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 7,219 | ||||
Accrued management fees | 808,492 | ||||
24,408,602 | |||||
Net Assets | $ | 1,117,664,984 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 774,332,188 | |||
Distributable earnings | 343,332,796 | ||||
$ | 1,117,664,984 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $1,002,740,161 | 43,661,755 | $22.97 | ||||||||
I Class, $0.01 Par Value | $107,875,150 | 4,693,536 | $22.98 | ||||||||
R5 Class, $0.01 Par Value | $7,049,673 | 306,765 | $22.98 |
See Notes to Financial Statements.
32
Statement of Operations |
YEAR ENDED OCTOBER 31, 2021 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $8,391) | $ | 9,012,265 | |||
Interest (net of foreign taxes withheld of $41) | 7,570,406 | ||||
16,582,671 | |||||
Expenses: | |||||
Management fees | 9,247,090 | ||||
Directors' fees and expenses | 27,073 | ||||
Other expenses | 7,917 | ||||
9,282,080 | |||||
Net investment income (loss) | 7,300,591 | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 205,662,734 | ||||
Futures contract transactions | 2,184,983 | ||||
Swap agreement transactions | (65,821) | ||||
Foreign currency translation transactions | (11,220) | ||||
207,770,676 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 906,234 | ||||
Forward foreign currency exchange contracts | 77,149 | ||||
Futures contracts | 67,522 | ||||
Swap agreements | 1,145,684 | ||||
2,196,589 | |||||
Net realized and unrealized gain (loss) | 209,967,265 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 217,267,856 |
See Notes to Financial Statements.
33
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2021 AND OCTOBER 31, 2020 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2021 | October 31, 2020 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | 7,300,591 | $ | 9,729,769 | ||||
Net realized gain (loss) | 207,770,676 | 53,394,706 | ||||||
Change in net unrealized appreciation (depreciation) | 2,196,589 | 2,590,228 | ||||||
Net increase (decrease) in net assets resulting from operations | 217,267,856 | 65,714,703 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (51,263,128) | (40,169,645) | ||||||
I Class | (6,239,355) | (3,755,952) | ||||||
R5 Class | (238,351) | (156,553) | ||||||
Decrease in net assets from distributions | (57,740,834) | (44,082,150) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 13,739,758 | 12,514,699 | ||||||
Net increase (decrease) in net assets | 173,266,780 | 34,147,252 | ||||||
Net Assets | ||||||||
Beginning of period | 944,398,204 | 910,250,952 | ||||||
End of period | $ | 1,117,664,984 | $ | 944,398,204 |
See Notes to Financial Statements.
34
Notes to Financial Statements |
OCTOBER 31, 2021
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 (NAV) 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. 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 NAV 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. 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.
35
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 NAV 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.
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.
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 less foreign taxes withheld, if any, 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.
36
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually. The fund may elect to treat a portion of its payment to a redeeming shareholder, which represents the pro rata share of undistributed net investment income and net realized gains, as a distribution for federal income tax purposes (tax equalization).
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc., 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, 2021 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.
37
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 $4,662,771 and $7,639,521, respectively. The effect of interfund transactions on the Statement of Operations was $912,440 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases of investment securities, excluding short-term investments, for the period ended October 31, 2021 totaled $2,387,533,166, of which $619,028,023 represented U.S. Treasury and Government Agency obligations.
Sales of investment securities, excluding short-term investments, for the period ended October 31, 2021 totaled $2,429,344,121, of which $632,945,420 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, 2021 | Year ended October 31, 2020 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 530,000,000 | 530,000,000 | ||||||||||||
Sold | 4,157,746 | $ | 88,713,677 | 4,046,798 | $ | 78,184,412 | ||||||||
Issued in reinvestment of distributions | 2,448,377 | 49,436,486 | 2,048,400 | 39,160,124 | ||||||||||
Redeemed | (5,592,077) | (119,705,514) | (6,997,025) | (132,646,617) | ||||||||||
1,014,046 | 18,444,649 | (901,827) | (15,302,081) | |||||||||||
I Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||||||
Sold | 904,798 | 19,191,359 | 2,500,437 | 47,238,943 | ||||||||||
Issued in reinvestment of distributions | 308,467 | 6,238,096 | 196,097 | 3,754,687 | ||||||||||
Redeemed | (1,561,092) | (32,908,772) | (1,231,351) | (23,595,556) | ||||||||||
(347,827) | (7,479,317) | 1,465,183 | 27,398,074 | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 132,639 | 2,910,360 | 26,145 | 502,174 | ||||||||||
Issued in reinvestment of distributions | 11,751 | 238,351 | 8,180 | 156,553 | ||||||||||
Redeemed | (17,242) | (374,285) | (13,204) | (240,021) | ||||||||||
127,148 | 2,774,426 | 21,121 | 418,706 | |||||||||||
Net increase (decrease) | 793,367 | $ | 13,739,758 | 584,477 | $ | 12,514,699 |
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).
38
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 | $ | 673,990,137 | $ | 10,921,708 | — | ||||||
U.S. Treasury Securities | — | 168,674,427 | — | ||||||||
Corporate Bonds | — | 119,793,254 | — | ||||||||
U.S. Government Agency Mortgage-Backed Securities | — | 44,490,874 | — | ||||||||
Collateralized Loan Obligations | — | 31,054,049 | — | ||||||||
Collateralized Mortgage Obligations | — | 26,178,127 | — | ||||||||
Asset-Backed Securities | — | 22,746,432 | — | ||||||||
Commercial Mortgage-Backed Securities | — | 8,460,144 | — | ||||||||
Municipal Securities | — | 7,606,956 | — | ||||||||
Exchange-Traded Funds | 3,908,061 | — | — | ||||||||
U.S. Government Agency Securities | — | 3,075,209 | — | ||||||||
Sovereign Governments and Agencies | — | 1,618,797 | — | ||||||||
Bank Loan Obligations | — | 1,357,589 | — | ||||||||
Preferred Stocks | — | 427,072 | — | ||||||||
Temporary Cash Investments | 13,725,310 | — | — | ||||||||
$ | 691,623,508 | $ | 446,404,638 | — | |||||||
Other Financial Instruments | |||||||||||
Futures Contracts | $ | 136,022 | — | — | |||||||
Swap Agreements | — | $ | 1,109,758 | — | |||||||
Forward Foreign Currency Exchange Contracts | — | 84,368 | — | ||||||||
$ | 136,022 | $ | 1,194,126 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Futures Contracts | $ | 109,471 | — | — | |||||||
Forward Foreign Currency Exchange Contracts | — | $ | 7,219 | — | |||||||
$ | 109,471 | $ | 7,219 | — |
39
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 $8,866,667.
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 $6,110,913 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 $8,069,795.
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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 $31,437,161 futures contracts purchased and $8,242,622 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 $13,575,000.
Value of Derivative Instruments as of October 31, 2021
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 | $ | 84,368 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 7,219 | ||||||||
Interest Rate Risk | Receivable for variation margin on futures contracts* | 33,767 | Payable for variation margin on futures contracts* | — | ||||||||||
Other Contracts | Receivable for variation margin on swap agreements* | — | Payable for variation margin on swap agreements* | 33,343 | ||||||||||
$ | 118,135 | $ | 40,562 |
*Included in the unrealized appreciation (depreciation) on futures contracts or centrally cleared swap agreements, as applicable, as reported in the Schedule of Investments.
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Effect of Derivative Instruments on the Statement of Operations for the Year Ended October 31, 2021
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 | $ | (136,488) | Change in net unrealized appreciation (depreciation) on swap agreements | — | |||||||||
Equity Price Risk | Net realized gain (loss) on futures contract transactions | 1,970,351 | Change in net unrealized appreciation (depreciation) on futures contracts | $ | 94,605 | |||||||||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | — | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | 77,149 | ||||||||||
Interest Rate Risk | Net realized gain (loss) on futures contract transactions | 214,632 | Change in net unrealized appreciation (depreciation) on futures contracts | (27,083) | ||||||||||
Other Contracts | Net realized gain (loss) on swap agreement transactions | 70,667 | Change in net unrealized appreciation (depreciation) on swap agreements | 1,145,684 | ||||||||||
$ | 2,119,162 | $ | 1,290,355 |
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. However, LIBOR is expected to be phased out and 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.
9. Federal Tax Information
The tax character of distributions paid during the years ended October 31, 2021 and October 31, 2020 were as follows:
2021 | 2020 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 8,419,510 | $ | 13,199,357 | ||||
Long-term capital gains | $ | 49,321,324 | $ | 30,882,793 |
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.
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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 | $ | 990,517,547 | |||
Gross tax appreciation of investments | $ | 159,643,267 | |||
Gross tax depreciation of investments | (12,132,668) | ||||
Net tax appreciation (depreciation) of investments | 147,510,599 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 1,108,415 | ||||
Net tax appreciation (depreciation) | $ | 148,619,014 | |||
Other book-to-tax adjustments | $ | (156,390) | |||
Undistributed ordinary income | $ | 87,967,892 | |||
Accumulated long-term gains | $ | 106,902,280 |
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 | |||||||||||||||||||||||||||||||||||||||||
2021 | $19.73 | 0.14 | 4.30 | 4.44 | (0.17) | (1.03) | (1.20) | $22.97 | 23.34% | 0.90% | 0.67% | 225% | $1,002,740 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||
2021 | $19.74 | 0.19 | 4.29 | 4.48 | (0.21) | (1.03) | (1.24) | $22.98 | 23.58% | 0.70% | 0.87% | 225% | $107,875 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||
2021 | $19.74 | 0.18 | 4.30 | 4.48 | (0.21) | (1.03) | (1.24) | $22.98 | 23.58% | 0.70% | 0.87% | 225% | $7,050 | ||||||||||||||||||||||||||||
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, 2021, 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, 2021, 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, 2021, 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.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
December 15, 2021
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.
Jonathan S.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 | 72 | 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) | 72 | Alleghany Corporation | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 72 | 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) | 72 | None |
47
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) | 72 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 72 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 72 | Onto Innovation Inc. (2019 to 2020); Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 107 | 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; Director, ACC and other ACC subsidiaries | 145 | 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 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 | ||||||
John Pak (1968) | General Counsel and Senior Vice President since 2021 | General Counsel and Senior Vice President, ACC (2021 to present). Also serves as General Counsel and Senior Vice President, ACIM, ACS and ACIS. Chief Legal Officer of Investment and Wealth Management, The Bank of New York Mellon (2014 to 2021) | ||||||
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) |
49
Approval of Management Agreement |
At a meeting held on June 30, 2021, 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 and its affiliates 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 including without limitation portfolio management and trading services, shareholder and intermediary services, compliance and legal services, fund accounting and financial reporting, and fund share distribution;
•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, COVID-19 pandemic response, vendor management practices, and social justice initiatives;
•the Advisor’s business continuity plans and cyber security practices;
•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.
50
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 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 which include 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
•liquidity monitoring and management
•risk management, including cyber security
•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 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
51
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 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.
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 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. In addition, the Board reviewed the Fund’s position relative to the narrower set of its expense group peers. The Board concluded that the management fee paid by the Fund to the Advisor under the
52
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 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. These portfolio holdings are available on the fund's website at americancentury.com and, upon request, by calling 1-800-345-2021. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov.
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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, 2021.
For corporate taxpayers, the fund hereby designates $7,740,458, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2021 as qualified for the corporate dividends received deduction.
The fund hereby designates $54,936,633, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2021.
The fund hereby designates $4,614,219 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2021.
The fund utilized earnings and profits of $10,642,630 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
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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. | ||||||||
©2021 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90968 2112 |
![image8.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image8.jpg)
Annual Report | |||||
October 31, 2021 | |||||
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) |
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 |
![image30.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image30.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2021. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Economic, Earnings Gains Fueled Rally Among Risk-On Assets
Stocks and other risk-on assets rallied for the 12-month period, despite lingering pandemic-related challenges. Upbeat data on U.S. manufacturing, employment and housing, along with central bank and federal government support and positive vaccine developments, helped boost corporate earnings and promote investor optimism. Outside the U.S., most economies recovered, but generally at a slower pace. Virus outbreaks and slower vaccine rollouts, particularly in emerging markets, led to lingering lockdowns in some regions.
As the period progressed, steady economic gains combined with ongoing monetary and fiscal support, rising energy prices and severe supply chain disruptions pushed global interest rates and inflation higher. In the U.S., year-over-year headline inflation climbed to 6.2% in October 2021, the largest 12-month increase in nearly 31 years.
Late in the period, the Federal Reserve (Fed) confirmed it would start tapering its bond buying in November. Yet despite inflation’s surge, the Fed left short-term interest rates unchanged. Central banks in Europe and the U.K. maintained their supportive interest rate and bond-buying programs as inflation ticked higher.
Overall, stocks delivered stellar performance for the 12-month period, highlighted by the S&P 500 Index’s gain of nearly 43%. Assets offering inflation-fighting potential, including real estate investment trusts, fared even better. Meanwhile, global bonds retreated as interest rates rose. However, emerging markets bonds largely advanced, benefiting from risk-on sentiment.
Several Factors Shaping Market Dynamics
The return to pre-pandemic life is progressing, albeit somewhat cautiously due to COVID-19’s lingering effects. As the economy and markets respond to this fluid backdrop, investors will face opportunities and ongoing challenges. Economic growth, inflation, the virus’s trajectory, supply chain normalization and fiscal and monetary policy likely will sway market dynamics.
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,
![image19.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image19.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2021 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |||||||||||||||
Investor Class | TWCGX | 43.66% | 24.51% | 17.86% | — | 6/30/71 | ||||||||||||||
Russell 1000 Growth Index | — | 43.21% | 25.47% | 19.41% | — | — | ||||||||||||||
I Class | TWGIX | 43.95% | 24.76% | 18.10% | — | 6/16/97 | ||||||||||||||
Y Class | AGYWX | 44.13% | — | — | 24.53% | 4/10/17 | ||||||||||||||
A Class | TCRAX | 6/4/97 | ||||||||||||||||||
No sales charge | 43.31% | 24.20% | 17.57% | — | ||||||||||||||||
With sales charge | 35.07% | 22.74% | 16.88% | — | ||||||||||||||||
C Class | TWRCX | 42.23% | 23.28% | 16.69% | — | 3/1/10 | ||||||||||||||
R Class | AGWRX | 42.94% | 23.89% | 17.28% | — | 8/29/03 | ||||||||||||||
R5 Class | AGWUX | 43.96% | — | — | 24.34% | 4/10/17 | ||||||||||||||
R6 Class | AGRDX | 44.15% | 24.95% | — | 18.67% | 7/26/13 |
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. 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.
C Class shares will automatically convert to A Class shares after being held for approximately eight years. C Class average annual returns do not reflect this conversion.
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, 2011 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-bfc65ae27c764b97868a.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/chart-bfc65ae27c764b97868a.jpg)
Value on October 31, 2021 | |||||
Investor Class — $51,803 | |||||
Russell 1000 Growth Index — $59,008 | |||||
Total Annual Fund Operating Expenses | |||||||||||||||||||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | ||||||||||||||||
0.97% | 0.77% | 0.62% | 1.22% | 1.97% | 1.47% | 0.77% | 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: Joe Reiland, Justin Brown and Scott Marolf
Greg Woodhams left the portfolio management team September 1, 2021. He is retiring, effective December 31, 2021. Joe Reiland was named portfolio manager.
Performance Summary
Growth returned 43.66%* for the 12 months ended October 31, 2021, versus the 43.21% return of the fund’s benchmark, the Russell 1000 Growth Index.
U.S. stocks posted strong returns during the reporting period, supported by federal government stimulus and low interest rates. The rollout of COVID-19 vaccines allowed the economy to reopen, and despite concerns about the delta variant, inflationary pressures and supply chain constraints, several market indices ended the 12-month period at record highs. Within the Russell 1000 Growth Index, all sectors posted double-digit gains, led by energy, which surged on demand and limited supply as the economy began to reopen. Materials was the weakest sector.
Stock selection in the communication services and industrials sectors helped drive outperformance relative to the benchmark. Stock decisions in the financials and consumer staples sectors weighed on performance.
Communication Services Stocks Were Top Contributors
Interactive media and services stocks led outperformance in the communication services sector. Alphabet was a major industry contributor. Digital advertising remained a strength for Google’s parent company, driven by sustained e-commerce and reopening activity. Its YouTube business, in particular, was strong as new advertising products across both brand and direct response have been favorably received.
Other top contributors included ASML Holding. This Netherlands-based semiconductor equipment manufacturer outperformed due to strong demand for its extreme ultraviolet lithography technology that allows semiconductor manufacturers to make smaller and more efficient chips. Demand for semiconductors has been strong and manufacturers need new equipment to increase production. NVIDIA, a gaming and artificial intelligence chipmaker, benefited relative performance. NVIDIA reported better-than-expected earnings and offered positive forward guidance based on strength in data center and gaming CPUs.
Microsoft reported strong revenue and earnings growth, and the stock also received a tailwind from large-capitalization software returning to favor. The messaging software company Slack Technologies rose sharply following the announcement that it would be acquired by salesforce.com. As a result of the deal, Slack was eliminated from the portfolio. Not owning Zoom Video Communications helped performance. After benefiting from the pandemic in 2020, investors reallocated capital in 2021 to stocks expected to benefit from the reopening of the economy. Zoom was a victim of the market’s swing, and our lack of exposure was helpful.
Financials Hampered Performance
Stock choices in the insurance industry weighed on relative performance in the financials sector. SelectQuote offers consumers a platform to compare insurance policies. The company and the industry in general have struggled with plan persistency, the percentage of policyholders that continue paying premiums. As a result, SelectQuote offered disappointing guidance for next year.
*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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Elsewhere, underweighting Tesla detracted. The electric carmaker continued to benefit from solid fundamental reports and strong demand for its vehicles. The stock also got a boost when it was added to the S&P 500 Index. Visa underperformed. The digital payments company’s stock lagged on concerns about potential renewed restrictions due to the COVID-19 delta variant, which could reduce travel and cross-border transaction volumes. Splunk offers cloud-based data analysis software that helps companies understand how efficiently their internal operations are running. Investors appeared concerned about increasing competition, and Splunk experienced some leadership changes.
Not owning Moderna detracted. The biotechnology company’s stock surged on excitement around its successful COVID-19 vaccine, booster shots and the potential for annual boosters beyond 2021. While we are impressed by the speed of development and effectiveness of Moderna’s messenger RNA drug development technology, the market seemed to be ascribing quite a bit of long-term value to COVID-19 vaccine revenue, which is highly uncertain. Zendesk, a cloud-based customer support software company, missed revenue and earnings forecasts due to lower revenue from one of its consumption-based products and a greater mix shift to enterprise deals, which have larger, longer-term contracts over time, but recognize less revenue up front. We view this as a positive long-term sign for the business despite the impact to revenue in the near term.
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 communication services. The largest underweight was financials.
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Fund Characteristics |
OCTOBER 31, 2021 | |||||
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)% | ||||
Top Five Industries | % of net assets | ||||
Software | 18.3% | ||||
Interactive Media and Services | 11.4% | ||||
Semiconductors and Semiconductor Equipment | 8.4% | ||||
Technology Hardware, Storage and Peripherals | 8.3% | ||||
Internet and Direct Marketing Retail | 7.9% |
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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, 2021 to October 31, 2021.
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 5/1/21 | Ending Account Value 10/31/21 | Expenses Paid During Period(1) 5/1/21 - 10/31/21 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,151.00 | $5.20 | 0.96% | ||||||||||
I Class | $1,000 | $1,152.30 | $4.12 | 0.76% | ||||||||||
Y Class | $1,000 | $1,152.90 | $3.31 | 0.61% | ||||||||||
A Class | $1,000 | $1,149.60 | $6.56 | 1.21% | ||||||||||
C Class | $1,000 | $1,145.30 | $10.60 | 1.96% | ||||||||||
R Class | $1,000 | $1,148.20 | $7.91 | 1.46% | ||||||||||
R5 Class | $1,000 | $1,152.30 | $4.12 | 0.76% | ||||||||||
R6 Class | $1,000 | $1,153.00 | $3.31 | 0.61% | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,020.37 | $4.89 | 0.96% | ||||||||||
I Class | $1,000 | $1,021.37 | $3.87 | 0.76% | ||||||||||
Y Class | $1,000 | $1,022.13 | $3.11 | 0.61% | ||||||||||
A Class | $1,000 | $1,019.11 | $6.16 | 1.21% | ||||||||||
C Class | $1,000 | $1,015.33 | $9.96 | 1.96% | ||||||||||
R Class | $1,000 | $1,017.85 | $7.43 | 1.46% | ||||||||||
R5 Class | $1,000 | $1,021.37 | $3.87 | 0.76% | ||||||||||
R6 Class | $1,000 | $1,022.13 | $3.11 | 0.61% |
(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 365, 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, 2021
Shares | Value | |||||||
COMMON STOCKS — 99.6% | ||||||||
Air Freight and Logistics — 1.8% | ||||||||
United Parcel Service, Inc., Class B | 1,109,503 | $ | 236,845,605 | |||||
Auto Components — 2.0% | ||||||||
Aptiv plc(1) | 1,544,522 | 267,032,409 | ||||||
Automobiles — 3.8% | ||||||||
Tesla, Inc.(1) | 453,902 | 505,646,828 | ||||||
Beverages — 1.7% | ||||||||
PepsiCo, Inc. | 1,448,444 | 234,068,550 | ||||||
Biotechnology — 1.4% | ||||||||
Amgen, Inc. | 368,658 | 76,301,147 | ||||||
CRISPR Therapeutics AG(1) | 315,752 | 28,837,630 | ||||||
Natera, Inc.(1) | 271,081 | 31,057,750 | ||||||
Vertex Pharmaceuticals, Inc.(1) | 284,799 | 52,667,879 | ||||||
188,864,406 | ||||||||
Building Products — 1.0% | ||||||||
Masco Corp. | 1,006,138 | 65,952,346 | ||||||
Trex Co., Inc.(1) | 655,699 | 69,766,374 | ||||||
135,718,720 | ||||||||
Capital Markets — 1.6% | ||||||||
S&P Global, Inc. | 456,690 | 216,544,130 | ||||||
Chemicals — 0.8% | ||||||||
Air Products and Chemicals, Inc. | 347,864 | 104,293,106 | ||||||
Electrical Equipment — 2.5% | ||||||||
Ballard Power Systems, Inc.(1)(2) | 1,968,502 | 35,669,256 | ||||||
Generac Holdings, Inc.(1) | 249,904 | 124,592,138 | ||||||
Rockwell Automation, Inc. | 568,397 | 181,546,002 | ||||||
341,807,396 | ||||||||
Electronic Equipment, Instruments and Components — 2.2% | ||||||||
CDW Corp. | 419,393 | 78,279,704 | ||||||
Cognex Corp. | 1,180,179 | 103,371,879 | ||||||
Keysight Technologies, Inc.(1) | 662,422 | 119,249,208 | ||||||
300,900,791 | ||||||||
Entertainment — 1.7% | ||||||||
Liberty Media Corp.-Liberty Formula One, Class C(1) | 900,001 | 50,220,056 | ||||||
Take-Two Interactive Software, Inc.(1) | 348,043 | 62,995,783 | ||||||
Walt Disney Co. (The)(1) | 709,297 | 119,920,844 | ||||||
233,136,683 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 1.0% | ||||||||
SBA Communications Corp. | 400,851 | 138,425,876 | ||||||
Food Products — 0.9% | ||||||||
Mondelez International, Inc., Class A | 1,749,518 | 106,265,723 | ||||||
Vital Farms, Inc.(1) | 863,807 | 14,183,711 | ||||||
120,449,434 | ||||||||
Health Care Equipment and Supplies — 2.7% | ||||||||
DexCom, Inc.(1) | 178,424 | 111,195,621 | ||||||
Edwards Lifesciences Corp.(1) | 544,820 | 65,280,332 | ||||||
IDEXX Laboratories, Inc.(1) | 92,996 | 61,948,356 |
10
Shares | Value | |||||||
Intuitive Surgical, Inc.(1) | 361,521 | $ | 130,556,079 | |||||
368,980,388 | ||||||||
Health Care Providers and Services — 1.7% | ||||||||
Guardant Health, Inc.(1) | 163,169 | 19,056,507 | ||||||
UnitedHealth Group, Inc. | 452,104 | 208,180,329 | ||||||
227,236,836 | ||||||||
Hotels, Restaurants and Leisure — 1.2% | ||||||||
Chipotle Mexican Grill, Inc.(1) | 46,360 | 82,475,831 | ||||||
Dutch Bros, Inc., Class A(1) | 305,562 | 23,296,047 | ||||||
Expedia Group, Inc.(1) | 358,770 | 58,985,375 | ||||||
164,757,253 | ||||||||
Household Products — 0.7% | ||||||||
Procter & Gamble Co. (The) | 679,519 | 97,164,422 | ||||||
Insurance — 0.2% | ||||||||
SelectQuote, Inc.(1) | 2,119,105 | 28,162,906 | ||||||
Interactive Media and Services — 11.4% | ||||||||
Alphabet, Inc., Class A(1) | 385,366 | 1,141,037,897 | ||||||
Meta Platforms, Inc., Class A(1) | 903,958 | 292,493,690 | ||||||
Snap, Inc., Class A(1) | 815,202 | 42,863,321 | ||||||
Twitter, Inc.(1) | 964,424 | 51,635,261 | ||||||
1,528,030,169 | ||||||||
Internet and Direct Marketing Retail — 7.9% | ||||||||
Amazon.com, Inc.(1) | 294,237 | 992,293,686 | ||||||
Chewy, Inc., Class A(1)(2) | 920,648 | 69,785,118 | ||||||
1,062,078,804 | ||||||||
IT Services — 7.5% | ||||||||
Okta, Inc.(1) | 225,222 | 55,670,374 | ||||||
PayPal Holdings, Inc.(1) | 1,452,956 | 337,943,036 | ||||||
Shopify, Inc., Class A(1) | 25,756 | 37,777,098 | ||||||
Twilio, Inc., Class A(1) | 142,767 | 41,596,593 | ||||||
Visa, Inc., Class A | 2,556,549 | 541,400,382 | ||||||
1,014,387,483 | ||||||||
Life Sciences Tools and Services — 1.5% | ||||||||
10X Genomics, Inc., Class A(1) | 207,414 | 33,449,656 | ||||||
Agilent Technologies, Inc. | 790,742 | 124,533,957 | ||||||
Repligen Corp.(1) | 130,228 | 37,831,234 | ||||||
195,814,847 | ||||||||
Personal Products — 0.6% | ||||||||
Estee Lauder Cos., Inc. (The), Class A | 244,542 | 79,312,307 | ||||||
Pharmaceuticals — 1.6% | ||||||||
Novo Nordisk A/S, B Shares | 509,071 | 55,822,108 | ||||||
Zoetis, Inc. | 738,824 | 159,733,749 | ||||||
215,555,857 | ||||||||
Road and Rail — 1.1% | ||||||||
Lyft, Inc., Class A(1) | 1,254,825 | 57,558,823 | ||||||
Union Pacific Corp. | 384,246 | 92,756,984 | ||||||
150,315,807 | ||||||||
Semiconductors and Semiconductor Equipment — 8.4% | ||||||||
Advanced Micro Devices, Inc.(1) | 1,878,792 | 225,887,162 | ||||||
Analog Devices, Inc. | 763,597 | 132,476,444 | ||||||
ASML Holding NV(2) | 269,648 | 219,196,752 |
11
Shares/Principal Amount | Value | |||||||
NVIDIA Corp. | 2,143,128 | $ | 547,933,536 | |||||
1,125,493,894 | ||||||||
Software — 18.3% | ||||||||
Datadog, Inc., Class A(1) | 539,262 | 90,083,717 | ||||||
DocuSign, Inc.(1) | 294,429 | 81,936,646 | ||||||
Microsoft Corp. | 5,529,433 | 1,833,670,572 | ||||||
PagerDuty, Inc.(1) | 1,381,477 | 57,676,665 | ||||||
Paycor HCM, Inc.(1) | 432,050 | 14,015,702 | ||||||
salesforce.com, Inc.(1) | 341,284 | 102,279,402 | ||||||
Splunk, Inc.(1) | 501,498 | 82,656,900 | ||||||
Workday, Inc., Class A(1) | 357,466 | 103,657,991 | ||||||
Zendesk, Inc.(1) | 1,012,948 | 103,118,106 | ||||||
2,469,095,701 | ||||||||
Specialty Retail — 2.3% | ||||||||
Home Depot, Inc. (The) | 814,806 | 302,895,982 | ||||||
Technology Hardware, Storage and Peripherals — 8.3% | ||||||||
Apple, Inc. | 7,486,259 | 1,121,441,598 | ||||||
Textiles, Apparel and Luxury Goods — 1.8% | ||||||||
NIKE, Inc., Class B | 1,404,939 | 235,032,245 | ||||||
TOTAL COMMON STOCKS (Cost $5,236,915,174) | 13,409,490,433 | |||||||
TEMPORARY CASH INVESTMENTS — 0.5% | ||||||||
Federal Farm Credit Discount Notes, 0.00%, 11/1/21(3) | $ | 8,000,000 | 8,000,000 | |||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 11/15/26, valued at $12,674,925), in a joint trading account at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $12,411,314) | 12,411,304 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 4.75%, 2/15/41, valued at $42,204,636), at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $41,377,034) | 41,377,000 | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 1,655,708 | 1,655,708 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $63,444,012) | 63,444,012 | |||||||
TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL(4) — 0.3% | ||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (Cost $45,634,735) | 45,634,735 | 45,634,735 | ||||||
TOTAL INVESTMENT SECURITIES — 100.4% (Cost $5,345,993,921) | 13,518,569,180 | |||||||
OTHER ASSETS AND LIABILITIES — (0.4)% | (50,498,071) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 13,468,071,109 |
12
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
EUR | 8,713,887 | USD | 10,200,555 | Credit Suisse AG | 12/31/21 | $ | (111,235) | |||||||||||||
EUR | 12,208,888 | USD | 14,194,541 | Credit Suisse AG | 12/31/21 | (58,557) | ||||||||||||||
EUR | 4,132,602 | USD | 4,791,893 | Credit Suisse AG | 12/31/21 | (6,985) | ||||||||||||||
EUR | 3,589,460 | USD | 4,177,446 | Credit Suisse AG | 12/31/21 | (21,412) | ||||||||||||||
EUR | 4,935,508 | USD | 5,738,244 | Credit Suisse AG | 12/31/21 | (23,697) | ||||||||||||||
EUR | 6,116,251 | USD | 7,118,479 | Credit Suisse AG | 12/31/21 | (36,815) | ||||||||||||||
USD | 203,130,201 | EUR | 172,790,004 | Credit Suisse AG | 12/31/21 | 3,066,380 | ||||||||||||||
USD | 6,123,951 | EUR | 5,218,886 | Credit Suisse AG | 12/31/21 | 81,296 | ||||||||||||||
USD | 6,906,731 | EUR | 5,974,562 | Credit Suisse AG | 12/31/21 | (10,878) | ||||||||||||||
USD | 8,030,540 | EUR | 6,919,157 | Credit Suisse AG | 12/31/21 | 19,237 | ||||||||||||||
USD | 4,627,956 | EUR | 3,967,298 | Credit Suisse AG | 12/31/21 | 34,445 | ||||||||||||||
USD | 4,767,213 | EUR | 4,075,405 | Credit Suisse AG | 12/31/21 | 48,531 | ||||||||||||||
$ | 2,980,310 |
FUTURES CONTRACTS PURCHASED | ||||||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)^ | ||||||||||
NASDAQ 100 E-Mini | 107 | December 2021 | $ | 33,894,390 | $ | 2,776,235 |
^Amount represents value and unrealized appreciation (depreciation).
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 $257,082,522. 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)The rate indicated is the yield to maturity at purchase.
(4)Investment of cash collateral from securities on loan. At the period end, the aggregate value of the collateral held by the fund was $268,663,814, which includes securities collateral of $223,029,079.
See Notes to Financial Statements.
13
Statement of Assets and Liabilities |
OCTOBER 31, 2021 | |||||
Assets | |||||
Investment securities, at value (cost of $5,300,359,186) — including $257,082,522 of securities on loan | $ | 13,472,934,445 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $45,634,735) | 45,634,735 | ||||
Total investment securities, at value (cost of $5,345,993,921) | 13,518,569,180 | ||||
Deposits with broker for futures contracts | 1,819,000 | ||||
Receivable for investments sold | 13,345,917 | ||||
Receivable for capital shares sold | 2,031,249 | ||||
Receivable for variation margin on futures contracts | 524,871 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 3,249,889 | ||||
Dividends and interest receivable | 1,798,025 | ||||
Securities lending receivable | 25,071 | ||||
13,541,363,202 | |||||
Liabilities | |||||
Payable for collateral received for securities on loan | 45,634,735 | ||||
Payable for investments purchased | 13,207,889 | ||||
Payable for capital shares redeemed | 4,333,443 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 269,579 | ||||
Accrued management fees | 9,760,886 | ||||
Distribution and service fees payable | 85,561 | ||||
73,292,093 | |||||
Net Assets | $ | 13,468,071,109 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 4,092,023,055 | |||
Distributable earnings | 9,376,048,054 | ||||
$ | 13,468,071,109 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $10,186,486,082 | 174,934,567 | $58.23 | ||||||||
I Class, $0.01 Par Value | $2,061,818,979 | 34,539,015 | $59.70 | ||||||||
Y Class, $0.01 Par Value | $66,916,037 | 1,117,819 | $59.86 | ||||||||
A Class, $0.01 Par Value | $144,743,158 | 2,595,076 | $55.78* | ||||||||
C Class, $0.01 Par Value | $12,674,358 | 247,725 | $51.16 | ||||||||
R Class, $0.01 Par Value | $114,022,365 | 2,123,597 | $53.69 | ||||||||
R5 Class, $0.01 Par Value | $4,949,668 | 82,832 | $59.76 | ||||||||
R6 Class, $0.01 Par Value | $876,460,462 | 14,664,386 | $59.77 |
*Maximum offering price $59.18 (net asset value divided by 0.9425).
See Notes to Financial Statements.
14
Statement of Operations |
YEAR ENDED OCTOBER 31, 2021 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $427,223) | $ | 72,450,100 | |||
Securities lending, net | 218,354 | ||||
Interest | 18,465 | ||||
72,686,919 | |||||
Expenses: | |||||
Management fees | 109,695,122 | ||||
Distribution and service fees: | |||||
A Class | 313,544 | ||||
C Class | 122,539 | ||||
R Class | 533,621 | ||||
Directors' fees and expenses | 307,769 | ||||
Other expenses | 19,869 | ||||
110,992,464 | |||||
Fees waived(1) | (367,870) | ||||
110,624,594 | |||||
Net investment income (loss) | (37,937,675) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions (Note 4) | 1,348,339,485 | ||||
Forward foreign currency exchange contract transactions | 2,124,750 | ||||
Futures contract transactions | 15,934,905 | ||||
Foreign currency translation transactions | (27,709) | ||||
1,366,371,431 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 2,971,421,235 | ||||
Forward foreign currency exchange contracts | 2,236,205 | ||||
Futures contracts | 2,776,235 | ||||
Translation of assets and liabilities in foreign currencies | (12,903) | ||||
2,976,420,772 | |||||
Net realized and unrealized gain (loss) | 4,342,792,203 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 4,304,854,528 |
(1)Amount consists of $277,876, $56,936, $1,834, $3,905, $343, $3,133, $134 and $23,709 for Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class and R6 Class, respectively.
See Notes to Financial Statements.
15
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2021 AND OCTOBER 31, 2020 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2021 | October 31, 2020 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (37,937,675) | $ | 238,951 | ||||
Net realized gain (loss) | 1,366,371,431 | 599,196,803 | ||||||
Change in net unrealized appreciation (depreciation) | 2,976,420,772 | 1,536,989,906 | ||||||
Net increase (decrease) in net assets resulting from operations | 4,304,854,528 | 2,136,425,660 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (282,536,663) | (480,259,209) | ||||||
I Class | (62,416,300) | (114,436,997) | ||||||
Y Class | (1,866,955) | (4,514,391) | ||||||
A Class | (3,978,341) | (7,229,137) | ||||||
C Class | (543,385) | (744,058) | ||||||
R Class | (3,787,686) | (7,119,319) | ||||||
R5 Class | (15,831) | (42,460) | ||||||
R6 Class | (21,373,938) | (41,181,311) | ||||||
Decrease in net assets from distributions | (376,519,099) | (655,526,882) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (712,757,144) | 728,589,142 | ||||||
Net increase (decrease) in net assets | 3,215,578,285 | 2,209,487,920 | ||||||
Net Assets | ||||||||
Beginning of period | 10,252,492,824 | 8,043,004,904 | ||||||
End of period | $ | 13,468,071,109 | $ | 10,252,492,824 |
See Notes to Financial Statements.
16
Notes to Financial Statements |
OCTOBER 31, 2021
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 (NAV) 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 NAV 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.
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 NAV 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, 2021.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 45,634,735 | — | — | — | $ | 45,634,735 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 45,634,735 |
(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.
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. Effective August 1, 2021, the investment advisor agreed to waive a portion of the fund’s management fee such that the management fee does not exceed 0.95% for Investor Class, A Class, C Class and R Class, 0.75% for I Class and R5 Class, and 0.60% for Y Class and R6 Class. The investment advisor expects this waiver arrangement to continue until July 31, 2022 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, 2021 are as follows:
Effective Annual Management Fee | |||||||||||
Management Fee Schedule Range | Before Waiver | After Waiver | |||||||||
Investor Class | 0.800% to 0.990% | 0.96% | 0.96% | ||||||||
I Class | 0.600% to 0.790% | 0.76% | 0.76% | ||||||||
Y Class | 0.450% to 0.640% | 0.61% | 0.61% | ||||||||
A Class | 0.800% to 0.990% | 0.96% | 0.96% | ||||||||
C Class | 0.800% to 0.990% | 0.96% | 0.96% | ||||||||
R Class | 0.800% to 0.990% | 0.96% | 0.96% | ||||||||
R5 Class | 0.600% to 0.790% | 0.76% | 0.76% | ||||||||
R6 Class | 0.450% to 0.640% | 0.61% | 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, 2021 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.
20
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 $3,320,944 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, 2021 were $2,470,610,649 and $3,567,997,321, respectively.
For the period ended October 31, 2021, the fund incurred net realized gains of $41,171,480 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.
21
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2021 | Year ended October 31, 2020 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 2,100,000,000 | 2,100,000,000 | ||||||||||||
Sold | 5,305,769 | $ | 264,722,721 | 9,314,651 | $ | 343,295,401 | ||||||||
Issued in connection with reorganization (Note 10) | — | — | 33,740,937 | 1,281,095,913 | ||||||||||
Issued in reinvestment of distributions | 5,939,447 | 269,212,365 | 12,608,305 | 463,439,340 | ||||||||||
Redeemed | (18,886,054) | (939,574,506) | (38,931,327) | (1,459,424,248) | ||||||||||
(7,640,838) | (405,639,420) | 16,732,566 | 628,406,406 | |||||||||||
I Class/Shares Authorized | 460,000,000 | 460,000,000 | ||||||||||||
Sold | 5,030,555 | 253,476,557 | 14,389,473 | 554,081,579 | ||||||||||
Issued in connection with reorganization (Note 10) | — | — | 238,480 | 9,244,211 | ||||||||||
Issued in reinvestment of distributions | 1,332,209 | 61,801,158 | 3,019,127 | 113,217,452 | ||||||||||
Redeemed | (11,938,383) | (624,523,946) | (15,353,587) | (606,960,175) | ||||||||||
(5,575,619) | (309,246,231) | 2,293,493 | 69,583,067 | |||||||||||
Y Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 125,001 | 6,382,042 | 153,010 | 5,711,874 | ||||||||||
Issued in reinvestment of distributions | 39,621 | 1,840,784 | 119,002 | 4,461,395 | ||||||||||
Redeemed | (259,242) | (13,213,793) | (524,867) | (19,910,740) | ||||||||||
(94,620) | (4,990,967) | (252,855) | (9,737,471) | |||||||||||
A Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 674,956 | 32,255,963 | 683,766 | 24,686,474 | ||||||||||
Issued in connection with reorganization (Note 10) | — | — | 422,151 | 15,436,291 | ||||||||||
Issued in reinvestment of distributions | 83,670 | 3,641,339 | 164,961 | 5,847,619 | ||||||||||
Redeemed | (704,720) | (33,762,086) | (1,436,368) | (51,778,786) | ||||||||||
53,906 | 2,135,216 | (165,490) | (5,808,402) | |||||||||||
C Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 35,432 | 1,582,981 | 74,102 | 2,515,992 | ||||||||||
Issued in connection with reorganization (Note 10) | — | — | 124,022 | 4,225,593 | ||||||||||
Issued in reinvestment of distributions | 12,972 | 521,225 | 20,026 | 661,725 | ||||||||||
Redeemed | (162,645) | (6,793,871) | (115,923) | (3,918,628) | ||||||||||
(114,241) | (4,689,665) | 102,227 | 3,484,682 | |||||||||||
R Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 242,169 | 11,219,666 | 431,377 | 15,135,430 | ||||||||||
Issued in connection with reorganization (Note 10) | — | — | 461,820 | 16,348,203 | ||||||||||
Issued in reinvestment of distributions | 89,107 | 3,740,945 | 205,542 | 7,043,451 | ||||||||||
Redeemed | (675,841) | (31,093,859) | (1,236,289) | (42,445,952) | ||||||||||
(344,565) | (16,133,248) | (137,550) | (3,918,868) | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 75,078 | 3,866,385 | 999 | 38,826 | ||||||||||
Issued in reinvestment of distributions | 341 | 15,831 | 1,135 | 42,460 | ||||||||||
Redeemed | (2,678) | (146,108) | (6,612) | (240,109) | ||||||||||
72,741 | 3,736,108 | (4,478) | (158,823) | |||||||||||
R6 Class/Shares Authorized | 200,000,000 | 200,000,000 | ||||||||||||
Sold | 3,696,574 | 190,995,553 | 4,275,401 | 166,984,195 | ||||||||||
Issued in reinvestment of distributions | 460,844 | 21,373,938 | 1,098,511 | 41,181,311 | ||||||||||
Redeemed | (3,762,407) | (190,298,428) | (4,210,873) | (161,426,955) | ||||||||||
395,011 | 22,071,063 | 1,163,039 | 46,738,551 | |||||||||||
Net increase (decrease) | (13,248,225) | $ | (712,757,144) | 19,730,952 | $ | 728,589,142 |
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.
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 | $ | 13,134,471,573 | $ | 275,018,860 | — | ||||||
Temporary Cash Investments | 1,655,708 | 61,788,304 | — | ||||||||
Temporary Cash Investments - Securities Lending Collateral | 45,634,735 | — | — | ||||||||
$ | 13,181,762,016 | $ | 336,807,164 | — | |||||||
Other Financial Instruments | |||||||||||
Futures Contracts | $ | 2,776,235 | — | — | |||||||
Forward Foreign Currency Exchange Contracts | — | $ | 3,249,889 | — | |||||||
$ | 2,776,235 | $ | 3,249,889 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 269,579 | — |
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 $39,652,153 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 $232,100,649.
Value of Derivative Instruments as of October 31, 2021
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* | $ | 524,871 | Payable for variation margin on futures contracts* | — | |||||||||
Foreign Currency Risk | Unrealized appreciation on forward foreign currency exchange contracts | 3,249,889 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 269,579 | |||||||||
$ | 3,774,760 | $ | 269,579 |
*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, 2021
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 | $ | 15,934,905 | Change in net unrealized appreciation (depreciation) on futures contracts | $ | 2,776,235 | ||||||||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | 2,124,750 | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | 2,236,205 | ||||||||||
$ | 18,059,655 | $ | 5,012,440 |
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
On December 7, 2021, the fund declared and paid a per-share distribution from net realized gains to shareholders of record on December 6, 2021 of $5.3078 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, 2021 and October 31, 2020 were as follows:
2021 | 2020 | |||||||
Distributions Paid From | ||||||||
Ordinary income | — | $ | 24,642,374 | |||||
Long-term capital gains | $ | 376,519,099 | $ | 630,884,508 |
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 | $ | 5,359,919,929 | |||
Gross tax appreciation of investments | $ | 8,213,286,476 | |||
Gross tax depreciation of investments | (54,637,225) | ||||
Net tax appreciation (depreciation) of investments | 8,158,649,251 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 8,681 | ||||
Net tax appreciation (depreciation) | $ | 8,158,657,932 | |||
Undistributed ordinary income | $ | 79,614,038 | |||
Accumulated long-term gains | $ | 1,137,776,084 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the realization to ordinary income for tax purposes of unrealized gains on investments in passive foreign investment companies.
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.
The reorganization was accomplished by a tax-free exchange of shares. On February 21, 2020, All Cap Growth Fund exchanged its shares for shares of Growth Fund as follows:
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 |
25
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.
26
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $41.94 | (0.18) | 18.03 | 17.85 | — | (1.56) | (1.56) | $58.23 | 43.66% | 0.96% | 0.96% | (0.36)% | (0.36)% | 21% | $10,186,486 | ||||||||||||||||||||||||||||||||
2020 | $35.80 | (0.02) | 9.12 | 9.10 | (0.15) | (2.81) | (2.96) | $41.94 | 26.70% | 0.97% | 0.97% | (0.04)% | (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% | 0.98% | 0.24% | 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% | 0.97% | 0.13% | 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% | 0.98% | 0.26% | 0.26% | 48% | $5,648,965 | ||||||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $42.87 | (0.08) | 18.47 | 18.39 | — | (1.56) | (1.56) | $59.70 | 43.95% | 0.76% | 0.76% | (0.16)% | (0.16)% | 21% | $2,061,819 | ||||||||||||||||||||||||||||||||
2020 | $36.56 | 0.06 | 9.29 | 9.35 | (0.23) | (2.81) | (3.04) | $42.87 | 26.93% | 0.77% | 0.77% | 0.16% | 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% | 0.78% | 0.44% | 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% | 0.77% | 0.33% | 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% | 0.78% | 0.46% | 0.46% | 48% | $1,271,821 |
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) | |||||||||||||||||||||||||||||||||
Y Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $42.93 | (0.01) | 18.50 | 18.49 | — | (1.56) | (1.56) | $59.86 | 44.13% | 0.61% | 0.61% | (0.01)% | (0.01)% | 21% | $66,916 | ||||||||||||||||||||||||||||||||
2020 | $36.61 | 0.13 | 9.30 | 9.43 | (0.30) | (2.81) | (3.11) | $42.93 | 27.15% | 0.62% | 0.62% | 0.31% | 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% | 0.63% | 0.59% | 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% | 0.62% | 0.48% | 0.48% | 38% | $52,601 | ||||||||||||||||||||||||||||||||
2017(3) | $30.93 | 0.08 | 4.53 | 4.61 | — | — | — | $35.54 | 14.90% | 0.63%(4) | 0.63%(4) | 0.43%(4) | 0.43%(4) | 48%(5) | $56,218 | ||||||||||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $40.32 | (0.30) | 17.32 | 17.02 | — | (1.56) | (1.56) | $55.78 | 43.31% | 1.21% | 1.21% | (0.61)% | (0.61)% | 21% | $144,743 | ||||||||||||||||||||||||||||||||
2020 | $34.52 | (0.10) | 8.75 | 8.65 | (0.04) | (2.81) | (2.85) | $40.32 | 26.38% | 1.22% | 1.22% | (0.29)% | (0.29)% | 33% | $102,472 | ||||||||||||||||||||||||||||||||
2019 | $33.82 | —(6) | 4.54 | 4.54 | — | (3.84) | (3.84) | $34.52 | 16.06% | 1.23% | 1.23% | (0.01)% | (0.01)% | 30% | $93,422 | ||||||||||||||||||||||||||||||||
2018 | $33.94 | (0.04) | 3.24 | 3.20 | — | (3.32) | (3.32) | $33.82 | 9.94% | 1.22% | 1.22% | (0.12)% | (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% | 1.23% | 0.01% | 0.01% | 48% | $113,348 | ||||||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $37.37 | (0.59) | 15.94 | 15.35 | — | (1.56) | (1.56) | $51.16 | 42.23% | 1.96% | 1.96% | (1.36)% | (1.36)% | 21% | $12,674 | ||||||||||||||||||||||||||||||||
2020 | $32.37 | (0.37) | 8.18 | 7.81 | — | (2.81) | (2.81) | $37.37 | 25.43% | 1.97% | 1.97% | (1.04)% | (1.04)% | 33% | $13,527 | ||||||||||||||||||||||||||||||||
2019 | $32.18 | (0.23) | 4.26 | 4.03 | — | (3.84) | (3.84) | $32.37 | 15.23% | 1.98% | 1.98% | (0.76)% | (0.76)% | 30% | $8,408 | ||||||||||||||||||||||||||||||||
2018 | $32.67 | (0.29) | 3.12 | 2.83 | — | (3.32) | (3.32) | $32.18 | 9.12% | 1.97% | 1.97% | (0.87)% | (0.87)% | 38% | $9,871 | ||||||||||||||||||||||||||||||||
2017 | $26.97 | (0.21) | 7.20 | 6.99 | — | (1.29) | (1.29) | $32.67 | 26.99% | 1.98% | 1.98% | (0.74)% | (0.74)% | 48% | $9,962 |
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) | |||||||||||||||||||||||||||||||||
R Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $38.96 | (0.40) | 16.69 | 16.29 | — | (1.56) | (1.56) | $53.69 | 42.94% | 1.46% | 1.46% | (0.86)% | (0.86)% | 21% | $114,022 | ||||||||||||||||||||||||||||||||
2020 | $33.50 | (0.19) | 8.49 | 8.30 | (0.03) | (2.81) | (2.84) | $38.96 | 26.07% | 1.47% | 1.47% | (0.54)% | (0.54)% | 33% | $96,170 | ||||||||||||||||||||||||||||||||
2019 | $33.02 | (0.08) | 4.40 | 4.32 | — | (3.84) | (3.84) | $33.50 | 15.78% | 1.48% | 1.48% | (0.26)% | (0.26)% | 30% | $87,302 | ||||||||||||||||||||||||||||||||
2018 | $33.29 | (0.13) | 3.18 | 3.05 | — | (3.32) | (3.32) | $33.02 | 9.66% | 1.47% | 1.47% | (0.37)% | (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% | 1.48% | (0.24)% | (0.24)% | 48% | $104,368 | ||||||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $42.91 | (0.09) | 18.50 | 18.41 | — | (1.56) | (1.56) | $59.76 | 43.96% | 0.76% | 0.76% | (0.16)% | (0.16)% | 21% | $4,950 | ||||||||||||||||||||||||||||||||
2020 | $36.59 | 0.08 | 9.28 | 9.36 | (0.23) | (2.81) | (3.04) | $42.91 | 26.94% | 0.77% | 0.77% | 0.16% | 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% | 0.78% | 0.44% | 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% | 0.77% | 0.33% | 0.33% | 38% | $404 | ||||||||||||||||||||||||||||||||
2017(3) | $30.95 | 0.05 | 4.53 | 4.58 | — | — | — | $35.53 | 14.80% | 0.78%(4) | 0.78%(4) | 0.27%(4) | 0.27%(4) | 48%(5) | $6 | ||||||||||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $42.86 | (0.01) | 18.48 | 18.47 | — | (1.56) | (1.56) | $59.77 | 44.15% | 0.61% | 0.61% | (0.01)% | (0.01)% | 21% | $876,460 | ||||||||||||||||||||||||||||||||
2020 | $36.56 | 0.12 | 9.29 | 9.41 | (0.30) | (2.81) | (3.11) | $42.86 | 27.13% | 0.62% | 0.62% | 0.31% | 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% | 0.63% | 0.59% | 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% | 0.62% | 0.48% | 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% | 0.63% | 0.61% | 0.61% | 48% | $963,039 |
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, 2021, 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, 2021, 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, 2021, 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.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
December 15, 2021
We have served as the auditor of one or more American Century investment companies since 1997.
31
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.
Jonathan S.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 | 72 | 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) | 72 | Alleghany Corporation | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 72 | 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) | 72 | None |
32
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) | 72 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 72 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 72 | Onto Innovation Inc. (2019 to 2020); Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 107 | 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; Director, ACC and other ACC subsidiaries | 145 | 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.
33
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for 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 | ||||||
John Pak (1968) | General Counsel and Senior Vice President since 2021 | General Counsel and Senior Vice President, ACC (2021 to present). Also serves as General Counsel and Senior Vice President, ACIM, ACS and ACIS. Chief Legal Officer of Investment and Wealth Management, The Bank of New York Mellon (2014 to 2021) | ||||||
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) |
34
Approval of Management Agreement |
At a meeting held on June 30, 2021, 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 and its affiliates 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 including without limitation portfolio management and trading services, shareholder and intermediary services, compliance and legal services, fund accounting and financial reporting, and fund share distribution;
•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, COVID-19 pandemic response, vendor management practices, and social justice initiatives;
•the Advisor’s business continuity plans and cyber security practices;
•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 and formed a subcommittee to evaluate the Fund’s competitive market. 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.
35
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 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 which include 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
•liquidity monitoring and management
•risk management, including cyber security
•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.
36
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 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.
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 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 above the median of the total expense ratios of the Fund’s peer expense universe. In addition, the Board reviewed the Fund’s position relative to the narrower set of its expense group peers. The Board and the Advisor agreed to a temporary reduction of the Fund's fee schedule that should have the effect of lowering the Fund's annual unified management fee by approximately 0.02% (e.g., the Investor Class unified fee will be reduced from 0.97% to 0.95%), for at least one year, beginning August 1, 2021. 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.
37
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 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.
38
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. These portfolio holdings are available on the fund's website at americancentury.com and, upon request, by calling 1-800-345-2021. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov.
39
Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates $448,038,724, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2021.
The fund hereby designates $5,826,912 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2021.
The fund utilized earnings and profits of $77,346,537 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. | ||||||||
©2021 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90970 2112 |
![image8.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image8.jpg)
Annual Report | |||||
October 31, 2021 | |||||
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) |
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 |
![image30.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image30.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2021. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Economic, Earnings Gains Fueled Rally Among Risk-On Assets
Stocks and other risk-on assets rallied for the 12-month period, despite lingering pandemic-related challenges. Upbeat data on U.S. manufacturing, employment and housing, along with central bank and federal government support and positive vaccine developments, helped boost corporate earnings and promote investor optimism. Outside the U.S., most economies recovered, but generally at a slower pace. Virus outbreaks and slower vaccine rollouts, particularly in emerging markets, led to lingering lockdowns in some regions.
As the period progressed, steady economic gains combined with ongoing monetary and fiscal support, rising energy prices and severe supply chain disruptions pushed global interest rates and inflation higher. In the U.S., year-over-year headline inflation climbed to 6.2% in October 2021, the largest 12-month increase in nearly 31 years.
Late in the period, the Federal Reserve (Fed) confirmed it would start tapering its bond buying in November. Yet despite inflation’s surge, the Fed left short-term interest rates unchanged. Central banks in Europe and the U.K. maintained their supportive interest rate and bond-buying programs as inflation ticked higher.
Overall, stocks delivered stellar performance for the 12-month period, highlighted by the S&P 500 Index’s gain of nearly 43%. Assets offering inflation-fighting potential, including real estate investment trusts, fared even better. Meanwhile, global bonds retreated as interest rates rose. However, emerging markets bonds largely advanced, benefiting from risk-on sentiment.
Several Factors Shaping Market Dynamics
The return to pre-pandemic life is progressing, albeit somewhat cautiously due to COVID-19’s lingering effects. As the economy and markets respond to this fluid backdrop, investors will face opportunities and ongoing challenges. Economic growth, inflation, the virus’s trajectory, supply chain normalization and fiscal and monetary policy likely will sway market dynamics.
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,
![image19.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image19.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2021 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |||||||||||||||
Investor Class | TWHIX | 40.54% | 21.64% | 15.64% | — | 11/10/87 | ||||||||||||||
Russell Midcap Growth Index | — | 39.43% | 21.89% | 16.84% | — | — | ||||||||||||||
I Class | ATHIX | 40.78% | 21.89% | 15.87% | — | 6/16/97 | ||||||||||||||
Y Class | ATHYX | 40.98% | — | — | 21.90% | 4/10/17 | ||||||||||||||
A Class | ATHAX | 7/11/97 | ||||||||||||||||||
No sales charge | 40.12% | 21.34% | 15.34% | — | ||||||||||||||||
With sales charge | 32.07% | 19.91% | 14.66% | — | ||||||||||||||||
C Class | AHGCX | 39.13% | 20.44% | 14.48% | — | 6/26/01 | ||||||||||||||
R Class | ATHWX | 39.80% | 21.03% | 15.06% | — | 9/28/07 | ||||||||||||||
R5 Class | ATHGX | 40.78% | — | — | 21.71% | 4/10/17 | ||||||||||||||
R6 Class | ATHDX | 40.98% | 22.07% | — | 15.70% | 7/26/13 |
Average annual returns since inception are presented when ten years of performance history is not available.
Extraordinary performance is attributable in part to unusually favorable market conditions and may not be repeated or consistently achieved in the future.
C Class shares will automatically convert to A Class shares after being held for approximately eight years. C Class average annual returns do not reflect this conversion.
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, 2011 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-7ba25f99767941cc8f7a.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/chart-7ba25f99767941cc8f7a.jpg)
Value on October 31, 2021 | |||||
Investor Class — $42,800 | |||||
Russell Midcap Growth Index — $47,478 | |||||
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.
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Portfolio Commentary |
Portfolio Managers: Rob Brookby and Nalin Yogasundram
Performance Summary
Heritage returned 40.54%* for the 12 months ended October 31, 2021, outpacing the 39.43% return of the fund’s benchmark, the Russell Midcap Growth Index.
U.S. stocks posted strong returns during the reporting period, supported by federal government stimulus and low interest rates. The rollout of COVID-19 vaccines allowed the economy to reopen, and despite concerns about the delta variant, inflationary pressures and supply chain constraints, several market indices ended the 12-month period at record highs. Within the Russell Midcap Growth Index, energy was the top-performing sector, benefiting from increased demand as global economies began to return to more-normal conditions amid limited supplies. Consumer staples was the only sector to decline.
The information technology and materials sectors led outperformance relative to the benchmark, due primarily to stock selection. Stock decisions in the health care sector detracted.
Information Technology Led Performance
Stock selection in the software industry helped drive the information technology sector and portfolio outperformance relative to the benchmark. HubSpot provides software that allows small businesses to efficiently run and grow their businesses. It offers innovative solutions, and HubSpot benefited from growth in small business formation coming out of the recession, providing a tailwind of new customer acquisition. Atlassian was a top contributor. This software company provides collaborative tools used by small and midsize companies and increasingly larger companies. As pandemic restrictions eased and workers started returning to the office, Atlassian saw renewed growth for its software, driving strong revenue and earnings. Manhattan Associates provides cloud-based supply chain management software. The company reported better-than-expected quarterly earnings throughout the year. Manhattan Associates benefited from the restrictions due to the pandemic, and we believe the transition to online buying and curbside pickup are secular trends that fit with the company’s strengths.
Cybersecurity firm Palo Alto Networks outperformed as companies beefed up their vigilance because of increasing ransomware and other attacks. Demand for Palo Alto’s firewalls and other cloud-based offerings led to strong earnings, and management raised guidance for next year. In IT services, 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.
Stock selection in the materials sector aided performance. Materials in general benefited from greater demand and firmer pricing due to global supply chain disruptions. Stock decisions in the chemicals industry helped drive outperformance in the sector. Albemarle was a top contributor on demand for lithium, a key ingredient of batteries for electric vehicles.
Health Care Stocks Detracted
Stock choices in the health care sector weighed on performance. Biotechnology company Moderna outperformed after it reported that its COVID-19 vaccine worked well against the virus’s more contagious delta variant. Moderna’s messenger RNA technology is also seen as having potentially
*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
wider applications. Our lack of exposure detracted from relative results. Home health and hospice care provider Amedisys lagged after it offered disappointing forward guidance as the pandemic hurt its ability to hire and retain staff.
Other key detractors included The Boston Beer Co. The beverage company’s stock declined after management reported quarterly earnings that fell short of expectations. Much of the weakness was attributed to greater competition and lower demand in the hard seltzer market, impacting the company’s Truly brand. We eliminated our position. The stock of Las Vegas Sands, an operator of casino resorts in Macau and Singapore, was pressured by possible new dividend regulations in Macau that would be harmful to shareholders and concerns about China’s increasing interference in certain sectors. We eliminated our holding because of these uncertainties.
Splunk also hampered performance. We eliminated this security software stock because the company has had execution problems as it moves from an on-premises to a cloud-based subscription service. Additionally, its sales force experienced some leadership changes. SelectQuote offers consumers a platform to compare insurance policies. SelectQuote and the industry in general have struggled with plan persistency, the percentage of policyholders that continue paying premiums. As a result, SelectQuote offered disappointing guidance for next year. We sold our holding.
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.
As more normal activities resume, we see opportunities in infrastructure build-out, e-commerce, entertainment and other industries. Our key investment themes cross sector boundaries. For example, cybersecurity issues can affect everything from supply chains to meatpacking. Data analytics is important for any enterprise to help control spending and better understand customers.
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Fund Characteristics |
OCTOBER 31, 2021 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 98.6% | ||||
Temporary Cash Investments | 1.5% | ||||
Other Assets and Liabilities | (0.1)% | ||||
Top Five Industries | % of net assets | ||||
Software | 19.1% | ||||
Life Sciences Tools and Services | 5.8% | ||||
Health Care Equipment and Supplies | 5.5% | ||||
IT Services | 5.5% | ||||
Electrical Equipment | 5.3% |
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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, 2021 to October 31, 2021.
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 5/1/21 | Ending Account Value 10/31/21 | Expenses Paid During Period(1) 5/1/21 - 10/31/21 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,098.10 | $5.29 | 1.00% | ||||||||||
I Class | $1,000 | $1,099.10 | $4.23 | 0.80% | ||||||||||
Y Class | $1,000 | $1,099.80 | $3.44 | 0.65% | ||||||||||
A Class | $1,000 | $1,096.10 | $6.60 | 1.25% | ||||||||||
C Class | $1,000 | $1,092.10 | $10.55 | 2.00% | ||||||||||
R Class | $1,000 | $1,095.10 | $7.92 | 1.50% | ||||||||||
R5 Class | $1,000 | $1,098.80 | $4.23 | 0.80% | ||||||||||
R6 Class | $1,000 | $1,099.80 | $3.44 | 0.65% | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,020.16 | $5.09 | 1.00% | ||||||||||
I Class | $1,000 | $1,021.17 | $4.08 | 0.80% | ||||||||||
Y Class | $1,000 | $1,021.93 | $3.31 | 0.65% | ||||||||||
A Class | $1,000 | $1,018.90 | $6.36 | 1.25% | ||||||||||
C Class | $1,000 | $1,015.12 | $10.16 | 2.00% | ||||||||||
R Class | $1,000 | $1,017.64 | $7.63 | 1.50% | ||||||||||
R5 Class | $1,000 | $1,021.17 | $4.08 | 0.80% | ||||||||||
R6 Class | $1,000 | $1,021.93 | $3.31 | 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 365, 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, 2021
Shares | Value | |||||||
COMMON STOCKS — 98.6% | ||||||||
Aerospace and Defense — 0.8% | ||||||||
HEICO Corp. | 391,532 | $ | 54,575,645 | |||||
Auto Components — 1.8% | ||||||||
Aptiv plc(1) | 656,675 | 113,532,541 | ||||||
Beverages — 0.6% | ||||||||
Celsius Holdings, Inc.(1) | 412,988 | 39,861,602 | ||||||
Biotechnology — 3.2% | ||||||||
Alnylam Pharmaceuticals, Inc.(1) | 366,100 | 58,414,916 | ||||||
Horizon Therapeutics plc(1) | 711,406 | 85,304,693 | ||||||
Natera, Inc.(1) | 424,340 | 48,616,634 | ||||||
Turning Point Therapeutics, Inc.(1) | 403,943 | 16,795,950 | ||||||
209,132,193 | ||||||||
Building Products — 2.3% | ||||||||
Trane Technologies plc | 558,498 | 101,049,043 | ||||||
Zurn Water Solutions Corp. | 1,346,505 | 48,851,202 | ||||||
149,900,245 | ||||||||
Capital Markets — 4.7% | ||||||||
LPL Financial Holdings, Inc. | 913,480 | 149,828,990 | ||||||
MarketAxess Holdings, Inc. | 76,065 | 31,085,483 | ||||||
MSCI, Inc. | 180,245 | 119,841,296 | ||||||
300,755,769 | ||||||||
Chemicals — 1.6% | ||||||||
Albemarle Corp. | 186,710 | 46,765,254 | ||||||
Element Solutions, Inc. | 2,465,678 | 55,995,547 | ||||||
102,760,801 | ||||||||
Communications Equipment — 3.6% | ||||||||
Arista Networks, Inc.(1) | 302,307 | 123,852,155 | ||||||
F5 Networks, Inc.(1) | 502,191 | 106,037,629 | ||||||
229,889,784 | ||||||||
Containers and Packaging — 2.6% | ||||||||
Avery Dennison Corp. | 526,866 | 114,709,266 | ||||||
Ball Corp. | 594,223 | 54,359,520 | ||||||
169,068,786 | ||||||||
Electrical Equipment — 5.3% | ||||||||
AMETEK, Inc. | 682,362 | 90,344,729 | ||||||
Generac Holdings, Inc.(1) | 123,705 | 61,674,365 | ||||||
nVent Electric plc | 1,711,449 | 60,670,867 | ||||||
Plug Power, Inc.(1) | 771,927 | 29,541,646 | ||||||
Regal Rexnord Corp. | 358,416 | 54,597,509 | ||||||
Rockwell Automation, Inc. | 145,260 | 46,396,044 | ||||||
343,225,160 | ||||||||
Electronic Equipment, Instruments and Components — 3.8% | ||||||||
Cognex Corp. | 1,150,241 | 100,749,609 | ||||||
Keysight Technologies, Inc.(1) | 788,291 | 141,908,146 | ||||||
242,657,755 | ||||||||
Entertainment — 2.5% | ||||||||
Live Nation Entertainment, Inc.(1) | 476,670 | 48,215,170 |
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Shares | Value | |||||||
ROBLOX Corp., Class A(1) | 241,928 | $ | 20,326,791 | |||||
Roku, Inc.(1) | 253,024 | 77,147,018 | ||||||
Zynga, Inc., Class A(1) | 2,390,455 | 17,641,558 | ||||||
163,330,537 | ||||||||
Health Care Equipment and Supplies — 5.5% | ||||||||
Align Technology, Inc.(1) | 77,891 | 48,632,804 | ||||||
DexCom, Inc.(1) | 190,354 | 118,630,516 | ||||||
IDEXX Laboratories, Inc.(1) | 191,045 | 127,262,716 | ||||||
Teleflex, Inc. | 164,052 | 58,556,721 | ||||||
353,082,757 | ||||||||
Health Care Providers and Services — 1.5% | ||||||||
Amedisys, Inc.(1) | 249,667 | 42,278,610 | ||||||
Encompass Health Corp. | 402,444 | 25,579,341 | ||||||
R1 RCM, Inc.(1) | 1,242,466 | 26,961,512 | ||||||
94,819,463 | ||||||||
Health Care Technology — 1.8% | ||||||||
Veeva Systems, Inc., Class A(1) | 357,647 | 113,377,675 | ||||||
Hotels, Restaurants and Leisure — 3.4% | ||||||||
Chipotle Mexican Grill, Inc.(1) | 46,780 | 83,223,023 | ||||||
Hilton Worldwide Holdings, Inc.(1) | 928,609 | 133,673,266 | ||||||
216,896,289 | ||||||||
Interactive Media and Services — 2.3% | ||||||||
Match Group, Inc.(1) | 603,522 | 90,999,047 | ||||||
Pinterest, Inc., Class A(1) | 1,208,067 | 53,928,111 | ||||||
144,927,158 | ||||||||
Internet and Direct Marketing Retail — 2.1% | ||||||||
Chewy, Inc., Class A(1) | 627,111 | 47,535,014 | ||||||
Etsy, Inc.(1) | 337,146 | 84,519,131 | ||||||
132,054,145 | ||||||||
IT Services — 5.5% | ||||||||
Cloudflare, Inc., Class A(1) | 370,663 | 72,175,499 | ||||||
EPAM Systems, Inc.(1) | 147,354 | 99,204,607 | ||||||
Okta, Inc.(1) | 366,709 | 90,643,131 | ||||||
Square, Inc., Class A(1) | 239,423 | 60,933,153 | ||||||
Twilio, Inc., Class A(1) | 95,757 | 27,899,760 | ||||||
350,856,150 | ||||||||
Leisure Products — 0.6% | ||||||||
Peloton Interactive, Inc., Class A(1) | 419,584 | 38,366,761 | ||||||
Life Sciences Tools and Services — 5.8% | ||||||||
10X Genomics, Inc., Class A(1) | 271,809 | 43,834,638 | ||||||
Agilent Technologies, Inc. | 445,680 | 70,190,143 | ||||||
Bio-Techne Corp. | 164,989 | 86,396,490 | ||||||
Mettler-Toledo International, Inc.(1) | 76,558 | 113,373,211 | ||||||
Repligen Corp.(1) | 208,864 | 60,674,992 | ||||||
374,469,474 | ||||||||
Machinery — 2.5% | ||||||||
Graco, Inc. | 674,083 | 50,677,560 | ||||||
Parker-Hannifin Corp. | 361,056 | 107,085,599 | ||||||
157,763,159 | ||||||||
Professional Services — 3.9% | ||||||||
CoStar Group, Inc.(1) | 650,250 | 55,954,013 | ||||||
Jacobs Engineering Group, Inc. | 667,506 | 93,731,193 |
11
Shares/Principal Amount | Value | |||||||
TransUnion | 338,715 | $ | 39,050,452 | |||||
Verisk Analytics, Inc. | 308,331 | 64,832,759 | ||||||
253,568,417 | ||||||||
Semiconductors and Semiconductor Equipment — 4.6% | ||||||||
Enphase Energy, Inc.(1) | 392,694 | 90,959,711 | ||||||
Marvell Technology, Inc. | 1,575,267 | 107,905,789 | ||||||
Monolithic Power Systems, Inc. | 65,217 | 34,268,925 | ||||||
Skyworks Solutions, Inc. | 381,368 | 63,738,034 | ||||||
296,872,459 | ||||||||
Software — 19.1% | ||||||||
Atlassian Corp. plc, Class A(1) | 257,082 | 117,776,977 | ||||||
Autodesk, Inc.(1) | 209,830 | 66,644,106 | ||||||
Cadence Design Systems, Inc.(1) | 1,178,447 | 204,000,960 | ||||||
Coupa Software, Inc.(1) | 160,039 | 36,440,880 | ||||||
Datadog, Inc., Class A(1) | 401,145 | 67,011,272 | ||||||
DocuSign, Inc.(1) | 456,881 | 127,145,414 | ||||||
HubSpot, Inc.(1) | 190,570 | 154,405,531 | ||||||
Manhattan Associates, Inc.(1) | 798,653 | 144,987,466 | ||||||
Palantir Technologies, Inc., Class A(1) | 3,680,157 | 95,242,463 | ||||||
Palo Alto Networks, Inc.(1) | 418,478 | 213,042,965 | ||||||
1,226,698,034 | ||||||||
Specialty Retail — 4.1% | ||||||||
Burlington Stores, Inc.(1) | 351,347 | 97,073,662 | ||||||
Carvana Co.(1) | 186,576 | 56,566,112 | ||||||
Five Below, Inc.(1) | 175,917 | 34,708,424 | ||||||
Floor & Decor Holdings, Inc., Class A(1) | 576,100 | 78,303,512 | ||||||
266,651,710 | ||||||||
Textiles, Apparel and Luxury Goods — 1.9% | ||||||||
lululemon athletica, Inc.(1) | 269,090 | 125,398,631 | ||||||
Trading Companies and Distributors — 1.2% | ||||||||
W.W. Grainger, Inc. | 160,602 | 74,376,392 | ||||||
TOTAL COMMON STOCKS (Cost $3,948,476,073) | 6,338,869,492 | |||||||
TEMPORARY CASH INVESTMENTS — 1.5% | ||||||||
Federal Farm Credit Discount Notes, 0.00%, 11/1/21(2) | $ | 40,000,000 | 40,000,000 | |||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 11/15/26, valued at $12,062,274), in a joint trading account at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $11,811,404) | 11,811,395 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.25%, 5/15/41, valued at $40,164,623), at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $39,377,033) | 39,377,000 | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 1,575,705 | 1,575,705 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $92,764,100) | 92,764,100 | |||||||
TOTAL INVESTMENT SECURITIES — 100.1% (Cost $4,041,240,173) | 6,431,633,592 | |||||||
OTHER ASSETS AND LIABILITIES — (0.1)% | (4,898,910) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 6,426,734,682 |
12
NOTES TO SCHEDULE OF INVESTMENTS |
(1)Non-income producing.
(2)The rate indicated is the yield to maturity at purchase.
See Notes to Financial Statements.
13
Statement of Assets and Liabilities |
OCTOBER 31, 2021 | |||||
Assets | |||||
Investment securities, at value (cost of $4,041,240,173) | $ | 6,431,633,592 | |||
Receivable for investments sold | 741,076 | ||||
Receivable for capital shares sold | 815,597 | ||||
Dividends and interest receivable | 452,471 | ||||
Securities lending receivable | 542 | ||||
6,433,643,278 | |||||
Liabilities | |||||
Payable for capital shares redeemed | 1,704,031 | ||||
Accrued management fees | 5,096,412 | ||||
Distribution and service fees payable | 108,153 | ||||
6,908,596 | |||||
Net Assets | $ | 6,426,734,682 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 3,409,221,228 | |||
Distributable earnings | 3,017,513,454 | ||||
$ | 6,426,734,682 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $5,307,248,829 | 176,937,673 | $30.00 | ||||||||
I Class, $0.01 Par Value | $413,523,193 | 12,434,258 | $33.26 | ||||||||
Y Class, $0.01 Par Value | $85,720,189 | 2,526,403 | $33.93 | ||||||||
A Class, $0.01 Par Value | $364,851,574 | 13,971,624 | $26.11* | ||||||||
C Class, $0.01 Par Value | $21,836,172 | 1,288,400 | $16.95 | ||||||||
R Class, $0.01 Par Value | $37,752,827 | 1,457,026 | $25.91 | ||||||||
R5 Class, $0.01 Par Value | $972,666 | 29,245 | $33.26 | ||||||||
R6 Class, $0.01 Par Value | $194,829,232 | 5,742,586 | $33.93 |
*Maximum offering price $27.70 (net asset value divided by 0.9425).
See Notes to Financial Statements.
14
Statement of Operations |
YEAR ENDED OCTOBER 31, 2021 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $38,213) | $ | 20,595,876 | |||
Securities lending, net | 14,290 | ||||
Interest | 10,746 | ||||
20,620,912 | |||||
Expenses: | |||||
Management fees | 58,171,858 | ||||
Distribution and service fees: | |||||
A Class | 857,049 | ||||
C Class | 268,390 | ||||
R Class | 178,970 | ||||
Directors' fees and expenses | 152,532 | ||||
Other expenses | 327 | ||||
59,629,126 | |||||
Net investment income (loss) | (39,008,214) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 726,738,007 | ||||
Forward foreign currency exchange contract transactions | 3,774,930 | ||||
Foreign currency translation transactions | (44,237) | ||||
730,468,700 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 1,254,683,296 | ||||
Forward foreign currency exchange contracts | 206,369 | ||||
Translation of assets and liabilities in foreign currencies | (583) | ||||
1,254,889,082 | |||||
Net realized and unrealized gain (loss) | 1,985,357,782 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 1,946,349,568 |
See Notes to Financial Statements.
15
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2021 AND OCTOBER 31, 2020 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2021 | October 31, 2020 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (39,008,214) | $ | (21,722,245) | ||||
Net realized gain (loss) | 730,468,700 | 742,646,637 | ||||||
Change in net unrealized appreciation (depreciation) | 1,254,889,082 | 309,937,844 | ||||||
Net increase (decrease) in net assets resulting from operations | 1,946,349,568 | 1,030,862,236 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (586,342,385) | (393,425,552) | ||||||
I Class | (43,469,882) | (30,338,935) | ||||||
Y Class | (7,086,626) | (5,616,329) | ||||||
A Class | (45,691,761) | (31,178,565) | ||||||
C Class | (7,188,612) | (6,010,954) | ||||||
R Class | (5,053,233) | (3,890,228) | ||||||
R5 Class | (94,815) | (409,601) | ||||||
R6 Class | (19,890,507) | (13,008,625) | ||||||
Decrease in net assets from distributions | (714,817,821) | (483,878,789) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 234,696,206 | (129,879,890) | ||||||
Net increase (decrease) in net assets | 1,466,227,953 | 417,103,557 | ||||||
Net Assets | ||||||||
Beginning of period | 4,960,506,729 | 4,543,403,172 | ||||||
End of period | $ | 6,426,734,682 | $ | 4,960,506,729 |
See Notes to Financial Statements.
16
Notes to Financial Statements |
OCTOBER 31, 2021
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 (NAV) 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 NAV 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.
17
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s NAV 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.
18
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 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% |
19
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, 2021 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 $414,003 and $2,367,237, respectively. The effect of interfund transactions on the Statement of Operations was $306,935 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, 2021 were $2,593,202,441 and $3,176,544,249, respectively.
20
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2021 | Year ended October 31, 2020 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 2,100,000,000 | 2,100,000,000 | ||||||||||||
Sold | 7,069,672 | $ | 190,536,048 | 8,318,301 | $ | 170,505,402 | ||||||||
Issued in reinvestment of distributions | 22,643,103 | 564,891,390 | 18,572,102 | 380,170,938 | ||||||||||
Redeemed | (20,262,521) | (549,716,482) | (29,696,397) | (623,476,372) | ||||||||||
9,450,254 | 205,710,956 | (2,805,994) | (72,800,032) | |||||||||||
I Class/Shares Authorized | 175,000,000 | 175,000,000 | ||||||||||||
Sold | 2,723,934 | 82,538,821 | 3,026,131 | 72,188,642 | ||||||||||
Issued in reinvestment of distributions | 1,510,846 | 41,729,561 | 1,292,245 | 28,868,755 | ||||||||||
Redeemed | (4,129,476) | (124,200,919) | (6,286,808) | (144,634,896) | ||||||||||
105,304 | 67,463 | (1,968,432) | (43,577,499) | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 718,287 | 21,940,985 | 2,100,087 | 50,592,554 | ||||||||||
Issued in reinvestment of distributions | 246,029 | 6,923,247 | 242,850 | 5,507,845 | ||||||||||
Redeemed | (392,997) | (12,068,109) | (1,637,996) | (41,380,807) | ||||||||||
571,319 | 16,796,123 | 704,941 | 14,719,592 | |||||||||||
A Class/Shares Authorized | 170,000,000 | 170,000,000 | ||||||||||||
Sold | 2,270,649 | 53,457,609 | 2,133,477 | 40,359,264 | ||||||||||
Issued in reinvestment of distributions | 1,995,138 | 43,434,155 | 1,643,351 | 29,958,297 | ||||||||||
Redeemed | (3,292,227) | (78,227,401) | (4,216,962) | (78,996,914) | ||||||||||
973,560 | 18,664,363 | (440,134) | (8,679,353) | |||||||||||
C Class/Shares Authorized | 70,000,000 | 70,000,000 | ||||||||||||
Sold | 77,895 | 1,237,207 | 102,610 | 1,363,953 | ||||||||||
Issued in reinvestment of distributions | 503,874 | 7,170,128 | 435,672 | 5,615,807 | ||||||||||
Redeemed | (1,374,461) | (20,969,404) | (1,194,272) | (16,177,174) | ||||||||||
(792,692) | (12,562,069) | (655,990) | (9,197,414) | |||||||||||
R Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 267,540 | 6,273,040 | 308,951 | 5,835,185 | ||||||||||
Issued in reinvestment of distributions | 233,252 | 5,049,747 | 212,437 | 3,864,234 | ||||||||||
Redeemed | (520,917) | (12,173,944) | (719,551) | (13,655,328) | ||||||||||
(20,125) | (851,157) | (198,163) | (3,955,909) | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 1,618 | 48,767 | 45,219 | 1,091,389 | ||||||||||
Issued in reinvestment of distributions | 3,433 | 94,815 | 18,335 | 409,601 | ||||||||||
Redeemed | (26,019) | (795,308) | (169,115) | (3,123,113) | ||||||||||
(20,968) | (651,726) | (105,561) | (1,622,123) | |||||||||||
R6 Class/Shares Authorized | 70,000,000 | 70,000,000 | ||||||||||||
Sold | 1,744,294 | 53,635,470 | 1,630,358 | 37,972,288 | ||||||||||
Issued in reinvestment of distributions | 705,357 | 19,848,742 | 573,408 | 13,004,903 | ||||||||||
Redeemed | (2,188,698) | (65,961,959) | (2,378,050) | (55,744,343) | ||||||||||
260,953 | 7,522,253 | (174,284) | (4,767,152) | |||||||||||
Net increase (decrease) | 10,527,605 | $ | 234,696,206 | (5,643,617) | $ | (129,879,890) |
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 | $ | 6,338,869,492 | — | — | |||||||
Temporary Cash Investments | 1,575,705 | $ | 91,188,395 | — | |||||||
$ | 6,340,445,197 | $ | 91,188,395 | — |
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 $100,441,541.
At period end, the fund did not have any derivative instruments disclosed on the Statement of Assets and Liabilities. For the year ended October 31, 2021, the effect of foreign currency risk derivative instruments on the Statement of Operations was $3,774,930 in net realized gain (loss) on forward foreign currency exchange contract transactions and $206,369 in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
22
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 7, 2021, the fund declared and paid a per-share distribution from net realized gains to shareholders of record on December 6, 2021 of $3.0780 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, 2021 and October 31, 2020 were as follows:
2021 | 2020 | |||||||
Distributions Paid From | ||||||||
Ordinary income | — | — | ||||||
Long-term capital gains | $ | 714,817,821 | $ | 483,878,789 |
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 | $ | 4,046,358,221 | |||
Gross tax appreciation of investments | $ | 2,457,448,994 | |||
Gross tax depreciation of investments | (72,173,623) | ||||
Net tax appreciation (depreciation) of investments | 2,385,275,371 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (388) | ||||
Net tax appreciation (depreciation) | $ | 2,385,274,983 | |||
Undistributed ordinary income | $ | 137,016,912 | |||
Accumulated long-term gains | $ | 495,221,559 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
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 | |||||||||||||||||||||||||||||||||||
2021 | $24.38 | (0.18) | 9.35 | 9.17 | (3.55) | $30.00 | 40.54% | 1.00% | (0.66)% | 44% | $5,307,249 | ||||||||||||||||||||||||
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 | ||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||
2021 | $26.66 | (0.14) | 10.29 | 10.15 | (3.55) | $33.26 | 40.78% | 0.80% | (0.46)% | 44% | $413,523 | ||||||||||||||||||||||||
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 | ||||||||||||||||||||||||
Y Class | |||||||||||||||||||||||||||||||||||
2021 | $27.10 | (0.10) | 10.48 | 10.38 | (3.55) | $33.93 | 40.98% | 0.65% | (0.31)% | 44% | $85,720 | ||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||
2021 | $21.67 | (0.22) | 8.21 | 7.99 | (3.55) | $26.11 | 40.12% | 1.25% | (0.91)% | 44% | $364,852 | ||||||||||||||||||||||||
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 | ||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||
2021 | $15.22 | (0.25) | 5.53 | 5.28 | (3.55) | $16.95 | 39.13% | 2.00% | (1.66)% | 44% | $21,836 | ||||||||||||||||||||||||
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 | ||||||||||||||||||||||||
R Class | |||||||||||||||||||||||||||||||||||
2021 | $21.57 | (0.27) | 8.16 | 7.89 | (3.55) | $25.91 | 39.80% | 1.50% | (1.16)% | 44% | $37,753 | ||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||
2021 | $26.66 | (0.14) | 10.29 | 10.15 | (3.55) | $33.26 | 40.78% | 0.80% | (0.46)% | 44% | $973 | ||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
2021 | $27.10 | (0.09) | 10.47 | 10.38 | (3.55) | $33.93 | 40.98% | 0.65% | (0.31)% | 44% | $194,829 | ||||||||||||||||||||||||
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 |
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, 2021, 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, 2021, 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, 2021, 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.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
December 15, 2021
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.
Jonathan S.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 | 72 | 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) | 72 | Alleghany Corporation | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 72 | 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) | 72 | 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) | 72 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 72 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 72 | Onto Innovation Inc. (2019 to 2020); Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 107 | 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; Director, ACC and other ACC subsidiaries | 145 | 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 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 | ||||||
John Pak (1968) | General Counsel and Senior Vice President since 2021 | General Counsel and Senior Vice President, ACC (2021 to present). Also serves as General Counsel and Senior Vice President, ACIM, ACS and ACIS. Chief Legal Officer of Investment and Wealth Management, The Bank of New York Mellon (2014 to 2021) | ||||||
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 30, 2021, 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 and its affiliates 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 including without limitation portfolio management and trading services, shareholder and intermediary services, compliance and legal services, fund accounting and financial reporting, and fund share distribution;
•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, COVID-19 pandemic response, vendor management practices, and social justice initiatives;
•the Advisor’s business continuity plans and cyber security practices;
•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.
32
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 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 which include 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
•liquidity monitoring and management
•risk management, including cyber security
•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.
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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 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.
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 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. In addition, the Board reviewed the Fund’s position relative to the narrower set of its expense group peers. 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
34
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 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.
35
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. These portfolio holdings are available on the fund's website at americancentury.com and, upon request, by calling 1-800-345-2021. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov.
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Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates $743,683,554, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2021.
The fund hereby designates $7,986,414 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2021.
The fund utilized earnings and profits of $36,852,147 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. | ||||||||
©2021 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90977 2112 |
![image8.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image8.jpg)
Annual Report | |||||
October 31, 2021 | |||||
NT Growth Fund | |||||
G Class (ACLTX) |
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, 2021 | |||||||||||||||||
Average Annual Returns | |||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Inception Date | |||||||||||||
G Class | ACLTX | 44.81% | 25.60% | 18.44% | 5/12/06 | ||||||||||||
Russell 1000 Growth Index | — | 43.21% | 25.47% | 19.41% | — |
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.
Growth of $10,000 Over 10 Years | ||
$10,000 investment made October 31, 2011 |
![chart-cb9609326e8845158c8a.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/chart-cb9609326e8845158c8a.jpg)
Value on October 31, 2021 | |||||
G Class — $54,380 | |||||
Russell 1000 Growth Index — $59,008 | |||||
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.
2
Portfolio Commentary |
Portfolio Managers: Joe Reiland, Justin Brown and Scott Marolf
Greg Woodhams left the portfolio management team September 1, 2021. He is retiring, effective December 31, 2021. Joe Reiland was named portfolio manager.
Performance Summary
NT Growth returned 44.81%* for the 12 months ended October 31, 2021, versus the 43.21% return of the fund’s benchmark, the Russell 1000 Growth Index.
U.S. stocks posted strong returns during the reporting period, supported by federal government stimulus and low interest rates. The rollout of COVID-19 vaccines allowed the economy to reopen, and despite concerns about the delta variant, inflationary pressures and supply chain constraints, several market indices ended the 12-month period at record highs. Within the Russell 1000 Growth Index, all sectors posted double-digit gains, led by energy, which surged on demand and limited supply as the economy began to reopen. Materials was the weakest sector.
Stock selection in the communication services and industrials sectors helped drive outperformance relative to the benchmark. Stock decisions in the financials and consumer staples sectors weighed on performance.
Communication Services Stocks Were Top Contributors
Interactive media and services stocks led outperformance in the communication services sector. Alphabet was a major industry contributor. Digital advertising remained a strength for Google’s parent company, driven by sustained e-commerce and reopening activity. Its YouTube business, in particular, was strong as new advertising products across both brand and direct response have been favorably received.
Other top contributors included ASML Holding. This Netherlands-based semiconductor equipment manufacturer outperformed due to strong demand for its extreme ultraviolet lithography technology that allows semiconductor manufacturers to make smaller and more efficient chips. Demand for semiconductors has been strong and manufacturers need new equipment to increase production. NVIDIA, a gaming and artificial intelligence chipmaker, benefited relative performance. NVIDIA reported better-than-expected earnings and offered positive forward guidance based on strength in data center and gaming CPUs.
Microsoft reported strong revenue and earnings growth, and the stock also received a tailwind from large-capitalization software returning to favor. The messaging software company Slack Technologies rose sharply following the announcement that it would be acquired by salesforce.com. As a result of the deal, Slack was eliminated from the portfolio. Not owning Zoom Video Communications helped performance. After benefiting from the pandemic in 2020, investors reallocated capital in 2021 to stocks expected to benefit from the reopening of the economy. Zoom was a victim of the market’s swing, and our lack of exposure was helpful.
Financials Hampered Performance
Stock choices in the insurance industry weighed on relative performance in the financials sector. SelectQuote offers consumers a platform to compare insurance policies. The company and the industry in general have struggled with plan persistency, the percentage of policyholders that continue paying premiums. As a result, SelectQuote offered disappointing guidance for next year.
*Fund returns would have been lower if a portion of the fees had not been waived.
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Elsewhere, underweighting Tesla detracted. The electric carmaker continued to benefit from solid fundamental reports and strong demand for its vehicles. The stock also got a boost when it was added to the S&P 500 Index. Visa underperformed. The digital payments company’s stock lagged on concerns about potential renewed restrictions due to the COVID-19 delta variant, which could reduce travel and cross-border transaction volumes. Splunk offers cloud-based data analysis software that helps companies understand how efficiently their internal operations are running. Investors appeared concerned about increasing competition, and Splunk experienced some leadership changes.
Not owning Moderna detracted. The biotechnology company’s stock surged on excitement around its successful COVID-19 vaccine, booster shots and the potential for annual boosters beyond 2021. While we are impressed by the speed of development and effectiveness of Moderna’s messenger RNA drug development technology, the market seemed to be ascribing quite a bit of long-term value to COVID-19 vaccine revenue, which is highly uncertain. Zendesk, a cloud-based customer support software company, missed revenue and earnings forecasts due to lower revenue from one of its consumption-based products and a greater mix shift to enterprise deals, which have larger, longer-term contracts over time, but recognize less revenue up front. We view this as a positive long-term sign for the business despite the impact to revenue in the near term.
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 communication services. The largest underweight was financials.
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Fund Characteristics |
OCTOBER 31, 2021 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 97.7% | ||||
Temporary Cash Investments | 2.3% | ||||
Temporary Cash Investments - Securities Lending Collateral | 0.5% | ||||
Other Assets and Liabilities | (0.5)% | ||||
Top Five Industries | % of net assets | ||||
Software | 17.9% | ||||
Interactive Media and Services | 11.1% | ||||
Semiconductors and Semiconductor Equipment | 8.2% | ||||
Technology Hardware, Storage and Peripherals | 8.1% | ||||
Internet and Direct Marketing Retail | 7.6% |
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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, 2021 to October 31, 2021.
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 5/1/21 | Ending Account Value 10/31/21 | Expenses Paid During Period(1) 5/1/21 - 10/31/21 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
G Class | $1,000 | $1,155.70 | $0.05 | 0.01% | ||||||||||
Hypothetical | ||||||||||||||
G Class | $1,000 | $1,025.16 | $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 365, 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.
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Schedule of Investments |
OCTOBER 31, 2021
Shares | Value | |||||||
COMMON STOCKS — 97.7% | ||||||||
Air Freight and Logistics — 1.8% | ||||||||
United Parcel Service, Inc., Class B | 138,861 | $ | 29,642,658 | |||||
Auto Components — 1.9% | ||||||||
Aptiv plc(1) | 189,166 | 32,704,910 | ||||||
Automobiles — 3.8% | ||||||||
Tesla, Inc.(1) | 57,143 | 63,657,302 | ||||||
Beverages — 1.7% | ||||||||
PepsiCo, Inc. | 182,318 | 29,462,589 | ||||||
Biotechnology — 1.4% | ||||||||
Amgen, Inc. | 47,724 | 9,877,436 | ||||||
CRISPR Therapeutics AG(1) | 40,951 | 3,740,055 | ||||||
Natera, Inc.(1) | 28,671 | 3,284,836 | ||||||
Vertex Pharmaceuticals, Inc.(1) | 37,418 | 6,919,711 | ||||||
23,822,038 | ||||||||
Building Products — 1.0% | ||||||||
Masco Corp. | 123,243 | 8,078,579 | ||||||
Trex Co., Inc.(1) | 82,389 | 8,766,189 | ||||||
16,844,768 | ||||||||
Capital Markets — 1.6% | ||||||||
S&P Global, Inc. | 58,222 | 27,606,543 | ||||||
Chemicals — 0.8% | ||||||||
Air Products and Chemicals, Inc. | 43,584 | 13,066,919 | ||||||
Electrical Equipment — 2.5% | ||||||||
Ballard Power Systems, Inc.(1)(2) | 264,369 | 4,790,366 | ||||||
Generac Holdings, Inc.(1) | 30,966 | 15,438,409 | ||||||
Rockwell Automation, Inc. | 68,969 | 22,028,699 | ||||||
42,257,474 | ||||||||
Electronic Equipment, Instruments and Components — 2.2% | ||||||||
CDW Corp. | 51,906 | 9,688,255 | ||||||
Cognex Corp. | 145,083 | 12,707,820 | ||||||
Keysight Technologies, Inc.(1) | 82,769 | 14,900,075 | ||||||
37,296,150 | ||||||||
Entertainment — 1.7% | ||||||||
Liberty Media Corp.-Liberty Formula One, Class C(1) | 109,785 | 6,126,003 | ||||||
Take-Two Interactive Software, Inc.(1) | 42,718 | 7,731,958 | ||||||
Walt Disney Co. (The)(1) | 86,238 | 14,580,259 | ||||||
28,438,220 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 1.0% | ||||||||
SBA Communications Corp. | 50,267 | 17,358,703 | ||||||
Food Products — 0.9% | ||||||||
Mondelez International, Inc., Class A | 219,423 | 13,327,753 | ||||||
Vital Farms, Inc.(1) | 111,836 | 1,836,347 | ||||||
15,164,100 | ||||||||
Health Care Equipment and Supplies — 2.7% | ||||||||
DexCom, Inc.(1) | 22,010 | 13,716,852 | ||||||
Edwards Lifesciences Corp.(1) | 68,379 | 8,193,172 | ||||||
IDEXX Laboratories, Inc.(1) | 11,662 | 7,768,525 |
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Shares | Value | |||||||
Intuitive Surgical, Inc.(1) | 45,201 | $ | 16,323,437 | |||||
46,001,986 | ||||||||
Health Care Providers and Services — 1.6% | ||||||||
Guardant Health, Inc.(1) | 21,377 | 2,496,620 | ||||||
UnitedHealth Group, Inc. | 54,582 | 25,133,373 | ||||||
27,629,993 | ||||||||
Hotels, Restaurants and Leisure — 1.2% | ||||||||
Chipotle Mexican Grill, Inc.(1) | 5,689 | 10,120,902 | ||||||
Dutch Bros, Inc., Class A(1) | 37,204 | 2,836,433 | ||||||
Expedia Group, Inc.(1) | 43,915 | 7,220,065 | ||||||
20,177,400 | ||||||||
Household Products — 0.7% | ||||||||
Procter & Gamble Co. (The) | 85,285 | 12,194,902 | ||||||
Insurance — 0.2% | ||||||||
SelectQuote, Inc.(1) | 274,626 | 3,649,779 | ||||||
Interactive Media and Services — 11.1% | ||||||||
Alphabet, Inc., Class A(1) | 47,167 | 139,657,714 | ||||||
Meta Platforms, Inc., Class A(1) | 113,383 | 36,687,337 | ||||||
Snap, Inc., Class A(1) | 102,342 | 5,381,143 | ||||||
Twitter, Inc.(1) | 119,806 | 6,414,413 | ||||||
188,140,607 | ||||||||
Internet and Direct Marketing Retail — 7.6% | ||||||||
Amazon.com, Inc.(1) | 35,538 | 119,849,417 | ||||||
Chewy, Inc., Class A(1)(2) | 115,373 | 8,745,274 | ||||||
128,594,691 | ||||||||
IT Services — 7.4% | ||||||||
Okta, Inc.(1) | 27,870 | 6,888,906 | ||||||
PayPal Holdings, Inc.(1) | 182,218 | 42,382,085 | ||||||
Shopify, Inc., Class A(1) | 3,224 | 4,728,737 | ||||||
Twilio, Inc., Class A(1) | 17,338 | 5,051,600 | ||||||
Visa, Inc., Class A | 311,048 | 65,870,635 | ||||||
124,921,963 | ||||||||
Life Sciences Tools and Services — 1.5% | ||||||||
10X Genomics, Inc., Class A(1) | 25,968 | 4,187,859 | ||||||
Agilent Technologies, Inc. | 99,000 | 15,591,510 | ||||||
Repligen Corp.(1) | 16,900 | 4,909,450 | ||||||
24,688,819 | ||||||||
Personal Products — 0.6% | ||||||||
Estee Lauder Cos., Inc. (The), Class A | 30,317 | 9,832,713 | ||||||
Pharmaceuticals — 1.6% | ||||||||
Novo Nordisk A/S, B Shares | 62,849 | 6,891,698 | ||||||
Zoetis, Inc. | 88,953 | 19,231,639 | ||||||
26,123,337 | ||||||||
Road and Rail — 1.1% | ||||||||
Lyft, Inc., Class A(1) | 148,551 | 6,814,034 | ||||||
Union Pacific Corp. | 46,642 | 11,259,379 | ||||||
18,073,413 | ||||||||
Semiconductors and Semiconductor Equipment — 8.2% | ||||||||
Advanced Micro Devices, Inc.(1) | 229,105 | 27,545,294 | ||||||
Analog Devices, Inc. | 95,043 | 16,489,010 | ||||||
ASML Holding NV | 34,355 | 27,927,166 | ||||||
NVIDIA Corp. | 262,785 | 67,186,241 | ||||||
139,147,711 |
8
Shares | Value | |||||||
Software — 17.9% | ||||||||
Datadog, Inc., Class A(1) | 67,267 | $ | 11,236,952 | |||||
DocuSign, Inc.(1) | 36,040 | 10,029,572 | ||||||
Microsoft Corp. | 675,757 | 224,094,536 | ||||||
PagerDuty, Inc.(1) | 169,449 | 7,074,496 | ||||||
Paycor HCM, Inc.(1) | 54,169 | 1,757,242 | ||||||
salesforce.com, Inc.(1) | 41,801 | 12,527,342 | ||||||
Splunk, Inc.(1) | 61,251 | 10,095,390 | ||||||
Workday, Inc., Class A(1) | 43,846 | 12,714,463 | ||||||
Zendesk, Inc.(1) | 124,159 | 12,639,386 | ||||||
302,169,379 | ||||||||
Specialty Retail — 2.2% | ||||||||
Home Depot, Inc. (The) | 98,993 | 36,799,658 | ||||||
Technology Hardware, Storage and Peripherals — 8.1% | ||||||||
Apple, Inc. | 910,362 | 136,372,228 | ||||||
Textiles, Apparel and Luxury Goods — 1.7% | ||||||||
NIKE, Inc., Class B | 175,837 | 29,415,772 | ||||||
TOTAL COMMON STOCKS (Cost $768,734,350) | 1,651,256,725 | |||||||
TEMPORARY CASH INVESTMENTS — 2.3% | ||||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 11/15/26, valued at $8,747,593), in a joint trading account at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $8,565,662) | 8,565,655 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 4.75%, 2/15/41, valued at $29,125,190), at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $28,554,024) | 28,554,000 | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 817,998 | 817,998 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $37,937,653) | 37,937,653 | |||||||
TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL(3) — 0.5% | ||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (Cost $8,962,020) | 8,962,020 | 8,962,020 | ||||||
TOTAL INVESTMENT SECURITIES — 100.5% (Cost $815,634,023) | 1,698,156,398 | |||||||
OTHER ASSETS AND LIABILITIES — (0.5)% | (9,136,393) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 1,689,020,005 |
9
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
EUR | 1,077,545 | USD | 1,261,383 | Credit Suisse AG | 12/31/21 | $ | (13,755) | |||||||||||||
EUR | 1,509,730 | USD | 1,755,273 | Credit Suisse AG | 12/31/21 | (7,241) | ||||||||||||||
EUR | 511,031 | USD | 592,557 | Credit Suisse AG | 12/31/21 | (864) | ||||||||||||||
EUR | 443,867 | USD | 516,576 | Credit Suisse AG | 12/31/21 | (2,648) | ||||||||||||||
EUR | 610,317 | USD | 709,582 | Credit Suisse AG | 12/31/21 | (2,930) | ||||||||||||||
EUR | 756,325 | USD | 880,259 | Credit Suisse AG | 12/31/21 | (4,552) | ||||||||||||||
USD | 25,118,738 | EUR | 21,366,920 | Credit Suisse AG | 12/31/21 | 379,183 | ||||||||||||||
USD | 757,277 | EUR | 645,359 | Credit Suisse AG | 12/31/21 | 10,053 | ||||||||||||||
USD | 854,075 | EUR | 738,804 | Credit Suisse AG | 12/31/21 | (1,345) | ||||||||||||||
USD | 993,043 | EUR | 855,611 | Credit Suisse AG | 12/31/21 | 2,379 | ||||||||||||||
USD | 572,285 | EUR | 490,589 | Credit Suisse AG | 12/31/21 | 4,259 | ||||||||||||||
USD | 1,133,108 | EUR | 975,338 | Credit Suisse AG | 12/31/21 | 3,819 | ||||||||||||||
$ | 366,358 |
FUTURES CONTRACTS PURCHASED | ||||||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)^ | ||||||||||
NASDAQ 100 E-Mini | 112 | December 2021 | $ | 35,478,240 | $ | 1,340,123 |
^Amount represents value and unrealized appreciation (depreciation).
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 $12,361,090. 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 $12,552,826, which includes securities collateral of $3,590,806.
See Notes to Financial Statements.
10
Statement of Assets and Liabilities |
OCTOBER 31, 2021 | |||||
Assets | |||||
Investment securities, at value (cost of $806,672,003) — including $12,361,090 of securities on loan | $ | 1,689,194,378 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $8,962,020) | 8,962,020 | ||||
Total investment securities, at value (cost of $815,634,023) | 1,698,156,398 | ||||
Cash | 426,000 | ||||
Deposits with broker for futures contracts | 1,904,000 | ||||
Receivable for investments sold | 1,667,987 | ||||
Receivable for capital shares sold | 268,625 | ||||
Receivable for variation margin on futures contracts | 305,027 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 399,693 | ||||
Dividends and interest receivable | 238,209 | ||||
Securities lending receivable | 3,074 | ||||
1,703,369,013 | |||||
Liabilities | |||||
Payable for collateral received for securities on loan | 8,962,020 | ||||
Payable for investments purchased | 2,512,566 | ||||
Payable for capital shares redeemed | 2,841,087 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 33,335 | ||||
14,349,008 | |||||
Net Assets | $ | 1,689,020,005 | |||
G Class Capital Shares, $0.01 Par Value | |||||
Shares authorized | 780,000,000 | ||||
Shares outstanding | 65,397,130 | ||||
Net Asset Value Per Share | $ | 25.83 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 685,548,155 | |||
Distributable earnings | 1,003,471,850 | ||||
$ | 1,689,020,005 |
See Notes to Financial Statements.
11
Statement of Operations |
YEAR ENDED OCTOBER 31, 2021 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $54,368) | $ | 9,216,871 | |||
Securities lending, net | 49,557 | ||||
Interest | 2,572 | ||||
9,269,000 | |||||
Expenses: | |||||
Management fees | 9,425,042 | ||||
Directors' fees and expenses | 39,136 | ||||
Other expenses | 30,657 | ||||
9,494,835 | |||||
Fees waived | (9,425,042) | ||||
69,793 | |||||
Net investment income (loss) | 9,199,207 | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 112,800,049 | ||||
Forward foreign currency exchange contract transactions | 268,276 | ||||
Futures contract transactions | 1,598,437 | ||||
Foreign currency translation transactions | 3,542 | ||||
114,670,304 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 440,238,459 | ||||
Forward foreign currency exchange contracts | 267,900 | ||||
Futures contracts | 1,340,123 | ||||
Translation of assets and liabilities in foreign currencies | (977) | ||||
441,845,505 | |||||
Net realized and unrealized gain (loss) | 556,515,809 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 565,715,016 |
See Notes to Financial Statements.
12
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2021 AND OCTOBER 31, 2020 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2021 | October 31, 2020 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | 9,199,207 | $ | 8,913,201 | ||||
Net realized gain (loss) | 114,670,304 | 194,190,011 | ||||||
Change in net unrealized appreciation (depreciation) | 441,845,505 | 10,632,746 | ||||||
Net increase (decrease) in net assets resulting from operations | 565,715,016 | 213,735,958 | ||||||
Distributions to Shareholders | ||||||||
From earnings | (156,222,533) | (121,765,935) | ||||||
Capital Share Transactions | ||||||||
Proceeds from shares sold | 195,330,153 | 642,945,523 | ||||||
Proceeds from reinvestment of distributions | 156,222,533 | 121,765,935 | ||||||
Payments for shares redeemed | (354,741,301) | (651,200,701) | ||||||
Net increase (decrease) in net assets from capital share transactions | (3,188,615) | 113,510,757 | ||||||
Net increase (decrease) in net assets | 406,303,868 | 205,480,780 | ||||||
Net Assets | ||||||||
Beginning of period | 1,282,716,137 | 1,077,235,357 | ||||||
End of period | $ | 1,689,020,005 | $ | 1,282,716,137 | ||||
Transactions in Shares of the Fund | ||||||||
Sold | 8,950,142 | 32,808,941 | ||||||
Issued in reinvestment of distributions | 7,826,780 | 7,300,116 | ||||||
Redeemed | (15,527,464) | (35,290,362) | ||||||
Net increase (decrease) in shares of the fund | 1,249,458 | 4,818,695 |
See Notes to Financial Statements.
13
Notes to Financial Statements |
OCTOBER 31, 2021
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 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 (NAV) 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 NAV 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 NAV 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.
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, 2021.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 8,962,020 | — | — | — | $ | 8,962,020 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 8,962,020 |
(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, 53% 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, 2021 was 0.61% before waiver and 0.00% after waiver.
16
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 $527,190 and there were no interfund sales.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended October 31, 2021 were $448,919,987 and $630,343,037, respectively.
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 | $ | 1,616,437,861 | $ | 34,818,864 | — | ||||||
Temporary Cash Investments | 817,998 | 37,119,655 | — | ||||||||
Temporary Cash Investments - Securities Lending Collateral | 8,962,020 | — | — | ||||||||
$ | 1,626,217,879 | $ | 71,938,519 | — | |||||||
Other Financial Instruments | |||||||||||
Futures Contracts | $ | 1,340,123 | — | — | |||||||
Forward Foreign Currency Exchange Contracts | — | $ | 399,693 | — | |||||||
$ | 1,340,123 | $ | 399,693 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 33,335 | — |
17
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 $14,191,742 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 $30,039,280.
Value of Derivative Instruments as of October 31, 2021
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* | $ | 305,027 | Payable for variation margin on futures contracts* | — | |||||||||
Foreign Currency Risk | Unrealized appreciation on forward foreign currency exchange contracts | 399,693 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 33,335 | |||||||||
$ | 704,720 | $ | 33,335 |
*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, 2021
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 | $ | 1,598,437 | Change in net unrealized appreciation (depreciation) on futures contracts | $ | 1,340,123 | ||||||||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | 268,276 | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | 267,900 | ||||||||||
$ | 1,866,713 | $ | 1,608,023 |
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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 7, 2021, the fund declared and paid per-share distributions of $1.8393 and $0.2001 from net realized gains and net investment income, respectively, to shareholders of record on December 6, 2021.
The tax character of distributions paid during the years ended October 31, 2021 and October 31, 2020 were as follows:
2021 | 2020 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 9,439,077 | $ | 16,872,974 | ||||
Long-term capital gains | $ | 146,783,456 | $ | 104,892,961 |
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 | $ | 819,757,297 | |||
Gross tax appreciation of investments | $ | 886,372,509 | |||
Gross tax depreciation of investments | (7,973,408) | ||||
Net tax appreciation (depreciation) of investments | 878,399,101 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 1,306 | ||||
Net tax appreciation (depreciation) | $ | 878,400,407 | |||
Undistributed ordinary income | $ | 53,926,673 | |||
Accumulated long-term gains | $ | 71,144,770 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
9. Corporate Event
On December 2, 2021, the Board of Directors approved an agreement and plan of reorganization (the reorganization), whereby the net assets of the fund will be transferred to Growth Fund, one fund in a series issued by the corporation, in exchange for shares of Growth Fund. The financial statements and performance history of Growth Fund will survive after the reorganization. The reorganization is expected to be completed in 2022.
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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 | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $20.00 | 0.13 | 8.12 | 8.25 | (0.10) | (2.32) | (2.42) | $25.83 | 44.81% | 0.00%(3) | 0.61% | 0.60% | (0.01)% | 30% | $1,689,020 | ||||||||||||||||||||||||||||||||
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 |
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, 2021, 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, 2021, 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, 2021, 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.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
December 15, 2021
We have served as the auditor of one or more American Century investment companies since 1997.
21
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.
Jonathan S.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 | 72 | 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) | 72 | Alleghany Corporation | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 72 | 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) | 72 | 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) | 72 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 72 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 72 | Onto Innovation Inc. (2019 to 2020); Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 107 | 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; Director, ACC and other ACC subsidiaries | 145 | 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 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 | ||||||
John Pak (1968) | General Counsel and Senior Vice President since 2021 | General Counsel and Senior Vice President, ACC (2021 to present). Also serves as General Counsel and Senior Vice President, ACIM, ACS and ACIS. Chief Legal Officer of Investment and Wealth Management, The Bank of New York Mellon (2014 to 2021) | ||||||
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 30, 2021, 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 and its affiliates 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 including without limitation portfolio management and trading services, shareholder and intermediary services, compliance and legal services, fund accounting and financial reporting, and fund share distribution;
•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, COVID-19 pandemic response, vendor management practices, and social justice initiatives;
•the Advisor’s business continuity plans and cyber security practices;
•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 and formed a subcommittee to evaluate the Fund’s competitive market. 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.
25
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 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 which include 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
•liquidity monitoring and management
•risk management, including cyber security
•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.
26
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 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.
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 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 above the median of the total expense ratios of the Fund’s peer expense universe. In addition, the Board reviewed the Fund’s position relative to the narrower set of its expense group peers. The Board and the Advisor agreed to a temporary reduction of the Fund's fee schedule that should have the effect of lowering the Fund's annual unified management fee by approximately 0.02% (e.g., the G Class unified fee will be reduced from 0.62% to 0.60%), for at least one year, beginning August 1, 2021. 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 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. These portfolio holdings are available on the fund's website at americancentury.com and, upon request, by calling 1-800-345-2021. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov.
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, 2021.
For corporate taxpayers, the fund hereby designates $6,889,771, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2021 as qualified for the corporate dividends received deduction.
The fund hereby designates $146,783,456 or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2021.
The fund hereby designates $2,750,374 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2021.
30
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. | ||||||||
©2021 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90986 2112 |
![image8.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image8.jpg)
Annual Report | |||||
October 31, 2021 | |||||
NT Heritage Fund | |||||
G Class (ACLWX) |
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, 2021 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Inception Date | ||||||||||||||||
G Class | ACLWX | 41.75% | 22.54% | 16.01% | 5/12/06 | |||||||||||||||
Russell Midcap Growth Index | — | 39.43% | 21.89% | 16.84% | — |
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.
Growth of $10,000 Over 10 Years | ||
$10,000 investment made October 31, 2011 |
![chart-63ddaaa6d72445d6a06a.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/chart-63ddaaa6d72445d6a06a.jpg)
Value on October 31, 2021 | |||||
G Class — $44,206 | |||||
Russell Midcap Growth Index — $47,478 | |||||
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 41.75%* for the 12 months ended October 31, 2021, outpacing the 39.43% return of the fund’s benchmark, the Russell Midcap Growth Index.
U.S. stocks posted strong returns during the reporting period, supported by federal government stimulus and low interest rates. The rollout of COVID-19 vaccines allowed the economy to reopen, and despite concerns about the delta variant, inflationary pressures and supply chain constraints, several market indices ended the 12-month period at record highs. Within the Russell Midcap Growth Index, energy was the top-performing sector, benefiting from increased demand as global economies began to return to more-normal conditions amid limited supplies. Consumer staples was the only sector to decline.
The information technology and materials sectors led outperformance relative to the benchmark, due primarily to stock selection. Stock decisions in the health care sector detracted.
Information Technology Led Performance
Stock selection in the software industry helped drive the information technology sector and portfolio outperformance relative to the benchmark. HubSpot provides software that allows small businesses to efficiently run and grow their businesses. It offers innovative solutions, and HubSpot benefited from growth in small business formation coming out of the recession, providing a tailwind of new customer acquisition. Atlassian was a top contributor. This software company provides collaborative tools used by small and midsize companies and increasingly larger companies. As pandemic restrictions eased and workers started returning to the office, Atlassian saw renewed growth for its software, driving strong revenue and earnings. Manhattan Associates provides cloud-based supply chain management software. The company reported better-than-expected quarterly earnings throughout the year. Manhattan Associates benefited from the restrictions due to the pandemic, and we believe the transition to online buying and curbside pickup are secular trends that fit with the company’s strengths.
Cybersecurity firm Palo Alto Networks outperformed as companies beefed up their vigilance because of increasing ransomware and other attacks. Demand for Palo Alto’s firewalls and other cloud-based offerings led to strong earnings, and management raised guidance for next year. In IT services, 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.
Stock selection in the materials sector aided performance. Materials in general benefited from greater demand and firmer pricing due to global supply chain disruptions. Stock decisions in the chemicals industry helped drive outperformance in the sector. Albemarle was a top contributor on demand for lithium, a key ingredient of batteries for electric vehicles.
Health Care Stocks Detracted
Stock choices in the health care sector weighed on performance. Biotechnology company Moderna outperformed after it reported that its COVID-19 vaccine worked well against the virus’s more contagious delta variant. Moderna’s messenger RNA technology is also seen as having potentially
*Fund returns would have been lower if a portion of the fees had not been waived.
3
wider applications. Our lack of exposure detracted from relative results. Home health and hospice care provider Amedisys lagged after it offered disappointing forward guidance as the pandemic hurt its ability to hire and retain staff.
Other key detractors included The Boston Beer Co. The beverage company’s stock declined after management reported quarterly earnings that fell short of expectations. Much of the weakness was attributed to greater competition and lower demand in the hard seltzer market, impacting the company’s Truly brand. We eliminated our position. The stock of Las Vegas Sands, an operator of casino resorts in Macau and Singapore, was pressured by possible new dividend regulations in Macau that would be harmful to shareholders and concerns about China’s increasing interference in certain sectors. We eliminated our holding because of these uncertainties.
Splunk also hampered performance. We eliminated this security software stock because the company has had execution problems as it moves from an on-premises to a cloud-based subscription service. Additionally, its sales force experienced some leadership changes. SelectQuote offers consumers a platform to compare insurance policies. SelectQuote and the industry in general have struggled with plan persistency, the percentage of policyholders that continue paying premiums. As a result, SelectQuote offered disappointing guidance for next year. We sold our holding.
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.
As more normal activities resume, we see opportunities in infrastructure build-out, e-commerce, entertainment and other industries. Our key investment themes cross sector boundaries. For example, cybersecurity issues can affect everything from supply chains to meatpacking. Data analytics is important for any enterprise to help control spending and better understand customers.
4
Fund Characteristics |
OCTOBER 31, 2021 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 98.5% | ||||
Temporary Cash Investments | 1.5% | ||||
Temporary Cash Investments - Securities Lending Collateral | 0.5% | ||||
Other Assets and Liabilities | (0.5)% | ||||
Top Five Industries | % of net assets | ||||
Software | 19.0% | ||||
Life Sciences Tools and Services | 5.8% | ||||
Health Care Equipment and Supplies | 5.5% | ||||
IT Services | 5.5% | ||||
Electrical Equipment | 5.3% |
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, 2021 to October 31, 2021.
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 5/1/21 | Ending Account Value 10/31/21 | Expenses Paid During Period(1) 5/1/21 - 10/31/21 | Annualized Expense Ratio(1)(2) | |||||||||||
Actual | ||||||||||||||
G Class | $1,000 | $1,103.30 | $0.00 | 0.00% | ||||||||||
Hypothetical | ||||||||||||||
G Class | $1,000 | $1,025.21 | $0.00 | 0.00% |
(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 365, 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%.
6
Schedule of Investments |
OCTOBER 31, 2021
Shares | Value | |||||||
COMMON STOCKS — 98.5% | ||||||||
Aerospace and Defense — 0.8% | ||||||||
HEICO Corp. | 74,559 | $ | 10,392,779 | |||||
Auto Components — 1.8% | ||||||||
Aptiv plc(1) | 126,506 | 21,871,622 | ||||||
Beverages — 0.6% | ||||||||
Celsius Holdings, Inc.(1) | 78,138 | 7,541,880 | ||||||
Biotechnology — 3.3% | ||||||||
Alnylam Pharmaceuticals, Inc.(1) | 69,674 | 11,117,183 | ||||||
Horizon Therapeutics plc(1) | 139,181 | 16,689,194 | ||||||
Natera, Inc.(1) | 83,431 | 9,558,690 | ||||||
Turning Point Therapeutics, Inc.(1) | 76,427 | 3,177,835 | ||||||
40,542,902 | ||||||||
Building Products — 2.3% | ||||||||
Trane Technologies plc | 107,228 | 19,400,762 | ||||||
Zurn Water Solutions Corp. | 256,488 | 9,305,385 | ||||||
28,706,147 | ||||||||
Capital Markets — 4.7% | ||||||||
LPL Financial Holdings, Inc. | 175,304 | 28,753,362 | ||||||
MarketAxess Holdings, Inc. | 14,597 | 5,965,356 | ||||||
MSCI, Inc. | 34,357 | 22,843,282 | ||||||
57,562,000 | ||||||||
Chemicals — 1.6% | ||||||||
Albemarle Corp. | 36,839 | 9,227,065 | ||||||
Element Solutions, Inc. | 478,992 | 10,877,908 | ||||||
20,104,973 | ||||||||
Communications Equipment — 3.6% | ||||||||
Arista Networks, Inc.(1) | 58,758 | 24,072,565 | ||||||
F5 Networks, Inc.(1) | 95,627 | 20,191,641 | ||||||
44,264,206 | ||||||||
Containers and Packaging — 2.6% | ||||||||
Avery Dennison Corp. | 101,538 | 22,106,853 | ||||||
Ball Corp. | 116,514 | 10,658,701 | ||||||
32,765,554 | ||||||||
Electrical Equipment — 5.3% | ||||||||
AMETEK, Inc. | 131,116 | 17,359,758 | ||||||
Generac Holdings, Inc.(1) | 24,286 | 12,108,028 | ||||||
nVent Electric plc | 329,586 | 11,683,824 | ||||||
Plug Power, Inc.(1) | 148,639 | 5,688,415 | ||||||
Regal Rexnord Corp. | 69,025 | 10,514,578 | ||||||
Rockwell Automation, Inc. | 27,276 | 8,711,954 | ||||||
66,066,557 | ||||||||
Electronic Equipment, Instruments and Components — 3.7% | ||||||||
Cognex Corp. | 219,028 | 19,184,663 | ||||||
Keysight Technologies, Inc.(1) | 150,106 | 27,022,082 | ||||||
46,206,745 | ||||||||
Entertainment — 2.5% | ||||||||
Live Nation Entertainment, Inc.(1) | 93,520 | 9,459,548 |
7
Shares | Value | |||||||
ROBLOX Corp., Class A(1) | 46,298 | $ | 3,889,958 | |||||
Roku, Inc.(1) | 48,365 | 14,746,488 | ||||||
Zynga, Inc., Class A(1) | 457,460 | 3,376,055 | ||||||
31,472,049 | ||||||||
Health Care Equipment and Supplies — 5.5% | ||||||||
Align Technology, Inc.(1) | 14,952 | 9,335,580 | ||||||
DexCom, Inc.(1) | 37,157 | 23,156,614 | ||||||
IDEXX Laboratories, Inc.(1) | 36,535 | 24,337,425 | ||||||
Teleflex, Inc. | 32,450 | 11,582,703 | ||||||
68,412,322 | ||||||||
Health Care Providers and Services — 1.5% | ||||||||
Amedisys, Inc.(1) | 49,579 | 8,395,708 | ||||||
Encompass Health Corp. | 76,176 | 4,841,746 | ||||||
R1 RCM, Inc.(1) | 243,291 | 5,279,415 | ||||||
18,516,869 | ||||||||
Health Care Technology — 1.8% | ||||||||
Veeva Systems, Inc., Class A(1) | 69,410 | 22,003,664 | ||||||
Hotels, Restaurants and Leisure — 3.4% | ||||||||
Chipotle Mexican Grill, Inc.(1) | 8,857 | 15,756,869 | ||||||
Hilton Worldwide Holdings, Inc.(1) | 178,827 | 25,742,146 | ||||||
41,499,015 | ||||||||
Interactive Media and Services — 2.2% | ||||||||
Match Group, Inc.(1) | 114,696 | 17,293,863 | ||||||
Pinterest, Inc., Class A(1) | 229,913 | 10,263,316 | ||||||
27,557,179 | ||||||||
Internet and Direct Marketing Retail — 2.1% | ||||||||
Chewy, Inc., Class A(1)(2) | 119,368 | 9,048,094 | ||||||
Etsy, Inc.(1) | 65,508 | 16,422,201 | ||||||
25,470,295 | ||||||||
IT Services — 5.5% | ||||||||
Cloudflare, Inc., Class A(1) | 70,191 | 13,667,592 | ||||||
EPAM Systems, Inc.(1) | 28,781 | 19,376,520 | ||||||
Okta, Inc.(1) | 69,829 | 17,260,332 | ||||||
Square, Inc., Class A(1) | 47,042 | 11,972,189 | ||||||
Twilio, Inc., Class A(1) | 18,234 | 5,312,658 | ||||||
67,589,291 | ||||||||
Leisure Products — 0.6% | ||||||||
Peloton Interactive, Inc., Class A(1) | 80,801 | 7,388,443 | ||||||
Life Sciences Tools and Services — 5.8% | ||||||||
10X Genomics, Inc., Class A(1) | 52,635 | 8,488,446 | ||||||
Agilent Technologies, Inc. | 86,991 | 13,700,213 | ||||||
Bio-Techne Corp. | 31,400 | 16,442,610 | ||||||
Mettler-Toledo International, Inc.(1) | 14,560 | 21,561,613 | ||||||
Repligen Corp.(1) | 40,601 | 11,794,590 | ||||||
71,987,472 | ||||||||
Machinery — 2.4% | ||||||||
Graco, Inc. | 126,443 | 9,505,985 | ||||||
Parker-Hannifin Corp. | 69,986 | 20,757,148 | ||||||
30,263,133 | ||||||||
Professional Services — 3.9% | ||||||||
CoStar Group, Inc.(1) | 122,710 | 10,559,196 | ||||||
Jacobs Engineering Group, Inc. | 130,196 | 18,282,122 |
8
Shares | Value | |||||||
TransUnion | 63,136 | $ | 7,278,949 | |||||
Verisk Analytics, Inc. | 60,335 | 12,686,641 | ||||||
48,806,908 | ||||||||
Semiconductors and Semiconductor Equipment — 4.7% | ||||||||
Enphase Energy, Inc.(1) | 76,884 | 17,808,641 | ||||||
Marvell Technology, Inc. | 306,282 | 20,980,317 | ||||||
Monolithic Power Systems, Inc. | 12,512 | 6,574,556 | ||||||
Skyworks Solutions, Inc. | 73,165 | 12,228,066 | ||||||
57,591,580 | ||||||||
Software — 19.0% | ||||||||
Atlassian Corp. plc, Class A(1) | 48,953 | 22,426,838 | ||||||
Autodesk, Inc.(1) | 41,370 | 13,139,526 | ||||||
Cadence Design Systems, Inc.(1) | 227,136 | 39,319,513 | ||||||
Coupa Software, Inc.(1) | 30,132 | 6,861,056 | ||||||
Datadog, Inc., Class A(1) | 76,386 | 12,760,281 | ||||||
DocuSign, Inc.(1) | 86,999 | 24,210,952 | ||||||
HubSpot, Inc.(1) | 36,847 | 29,854,545 | ||||||
Manhattan Associates, Inc.(1) | 152,079 | 27,608,422 | ||||||
Palantir Technologies, Inc., Class A(1) | 700,774 | 18,136,031 | ||||||
Palo Alto Networks, Inc.(1) | 80,829 | 41,149,235 | ||||||
235,466,399 | ||||||||
Specialty Retail — 4.1% | ||||||||
Burlington Stores, Inc.(1) | 66,715 | 18,432,688 | ||||||
Carvana Co.(1) | 35,672 | 10,815,037 | ||||||
Five Below, Inc.(1) | 33,877 | 6,683,932 | ||||||
Floor & Decor Holdings, Inc., Class A(1) | 112,048 | 15,229,564 | ||||||
51,161,221 | ||||||||
Textiles, Apparel and Luxury Goods — 2.0% | ||||||||
lululemon athletica, Inc.(1) | 52,015 | 24,239,510 | ||||||
Trading Companies and Distributors — 1.2% | ||||||||
W.W. Grainger, Inc. | 30,861 | 14,292,038 | ||||||
TOTAL COMMON STOCKS (Cost $795,831,714) | 1,219,742,753 | |||||||
TEMPORARY CASH INVESTMENTS — 1.5% | ||||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 11/15/26, valued at $4,087,026), in a joint trading account at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $4,002,024) | 4,002,021 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 1.875%, 2/15/41, valued at $13,606,876), at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $13,340,011) | 13,340,000 | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 533,842 | 533,842 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $17,875,863) | 17,875,863 | |||||||
TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL(3) — 0.5% | ||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (Cost $6,498,918) | 6,498,918 | 6,498,918 | ||||||
TOTAL INVESTMENT SECURITIES — 100.5% (Cost $820,206,495) | 1,244,117,534 | |||||||
OTHER ASSETS AND LIABILITIES — (0.5)% | (6,218,688) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 1,237,898,846 |
9
NOTES TO SCHEDULE OF INVESTMENTS |
(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 $9,048,094. 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 $9,192,481, which includes securities collateral of $2,693,563.
See Notes to Financial Statements.
10
Statement of Assets and Liabilities |
OCTOBER 31, 2021 | |||||
Assets | |||||
Investment securities, at value (cost of $813,707,577) — including $9,048,094 of securities on loan | $ | 1,237,618,616 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $6,498,918) | 6,498,918 | ||||
Total investment securities, at value (cost of $820,206,495) | 1,244,117,534 | ||||
Receivable for investments sold | 173,201 | ||||
Receivable for capital shares sold | 18,808 | ||||
Dividends and interest receivable | 86,856 | ||||
Securities lending receivable | 1,365 | ||||
1,244,397,764 | |||||
Liabilities | |||||
Payable for collateral received for securities on loan | 6,498,918 | ||||
Net Assets | $ | 1,237,898,846 | |||
G Class Capital Shares, $0.01 Par Value | |||||
Shares authorized | 600,000,000 | ||||
Shares outstanding | 68,173,788 | ||||
Net Asset Value Per Share | $ | 18.16 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 704,576,442 | |||
Distributable earnings | 533,322,404 | ||||
$ | 1,237,898,846 |
See Notes to Financial Statements.
11
Statement of Operations |
YEAR ENDED OCTOBER 31, 2021 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $6,207) | $ | 3,823,589 | |||
Securities lending, net | 10,179 | ||||
Interest | 2,297 | ||||
3,836,065 | |||||
Expenses: | |||||
Management fees | 7,276,777 | ||||
Directors' fees and expenses | 28,575 | ||||
Other expenses | 25,303 | ||||
7,330,655 | |||||
Fees waived | (7,276,777) | ||||
53,878 | |||||
Net investment income (loss) | 3,782,187 | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 121,919,892 | ||||
Forward foreign currency exchange contract transactions | 667,486 | ||||
Foreign currency translation transactions | (4,359) | ||||
122,583,019 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 257,036,673 | ||||
Forward foreign currency exchange contracts | 39,152 | ||||
Translation of assets and liabilities in foreign currencies | (69) | ||||
257,075,756 | |||||
Net realized and unrealized gain (loss) | 379,658,775 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 383,440,962 |
See Notes to Financial Statements.
12
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2021 AND OCTOBER 31, 2020 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2021 | October 31, 2020 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | 3,782,187 | $ | 3,400,615 | ||||
Net realized gain (loss) | 122,583,019 | 101,553,526 | ||||||
Change in net unrealized appreciation (depreciation) | 257,075,756 | 52,011,363 | ||||||
Net increase (decrease) in net assets resulting from operations | 383,440,962 | 156,965,504 | ||||||
Distributions to Shareholders | ||||||||
From earnings | (96,345,623) | (81,790,080) | ||||||
Capital Share Transactions | ||||||||
Proceeds from shares sold | 191,957,895 | 470,785,649 | ||||||
Proceeds from reinvestment of distributions | 96,345,623 | 81,790,080 | ||||||
Payments for shares redeemed | (272,817,844) | (294,257,396) | ||||||
Net increase (decrease) in net assets from capital share transactions | 15,485,674 | 258,318,333 | ||||||
Net increase (decrease) in net assets | 302,581,013 | 333,493,757 | ||||||
Net Assets | ||||||||
Beginning of period | 935,317,833 | 601,824,076 | ||||||
End of period | $ | 1,237,898,846 | $ | 935,317,833 | ||||
Transactions in Shares of the Fund | ||||||||
Sold | 11,937,903 | 35,788,482 | ||||||
Issued in reinvestment of distributions | 6,431,617 | 6,931,363 | ||||||
Redeemed | (16,368,826) | (22,986,369) | ||||||
Net increase (decrease) in shares of the fund | 2,000,694 | 19,733,476 |
See Notes to Financial Statements.
13
Notes to Financial Statements |
OCTOBER 31, 2021
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 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 (NAV) 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 NAV 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 NAV 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.
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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).
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.
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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, 2021.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 6,498,918 | — | — | — | $ | 6,498,918 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 6,498,918 |
(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, 50% 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 0.650%. 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, 2021 was 0.000% 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.
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 $168,730 and $563,061, respectively. The effect of interfund transactions on the Statement of Operations was $1,019 in net realized gain (loss) on investment transactions.
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4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended October 31, 2021 were $699,385,278 and $788,944,752, respectively.
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 | $ | 1,219,742,753 | — | — | |||||||
Temporary Cash Investments | 533,842 | $ | 17,342,021 | — | |||||||
Temporary Cash Investments - Securities Lending Collateral | 6,498,918 | — | — | ||||||||
$ | 1,226,775,513 | $ | 17,342,021 | — |
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 $18,849,631.
At period end, the fund did not have any derivative instruments disclosed on the Statement of Assets and Liabilities. For the year ended October 31, 2021, the effect of foreign currency risk derivative instruments on the Statement of Operations was $667,486 in net realized gain (loss) on forward foreign currency exchange contract transactions and $39,152 in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
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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.
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 7, 2021, the fund declared and paid per-share distributions of $1.6482 and $0.0639 from net
realized gains and net investment income, respectively, to shareholders of record on December 6, 2021.
The tax character of distributions paid during the years ended October 31, 2021 and October 31, 2020 were as follows:
2021 | 2020 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 4,956,025 | $ | 2,988,466 | ||||
Long-term capital gains | $ | 91,389,598 | $ | 78,801,614 |
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 | $ | 825,390,603 | |||
Gross tax appreciation of investments | $ | 433,113,201 | |||
Gross tax depreciation of investments | (14,386,270) | ||||
Net tax appreciation (depreciation) of investments | 418,726,931 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (46) | ||||
Net tax appreciation (depreciation) | $ | 418,726,885 | |||
Undistributed ordinary income | $ | 52,561,300 | |||
Accumulated long-term gains | $ | 62,034,219 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
9. Corporate Event
On December 2, 2021, the Board of Directors approved an agreement and plan of reorganization (the reorganization), whereby the net assets of the fund will be transferred to Heritage Fund, one fund in a series issued by the corporation, in exchange for shares of Heritage Fund. The financial statements and performance history of Heritage Fund will survive after the reorganization. The reorganization is expected to be completed in 2022.
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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 | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $14.13 | 0.06 | 5.51 | 5.57 | (0.05) | (1.49) | (1.54) | $18.16 | 41.75% | 0.00%(3) | 0.65% | 0.34% | (0.31)% | 64% | $1,237,899 | ||||||||||||||||||||||||||||||||
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 |
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 Heritage Fund (the “Fund”), one of the funds constituting the American Century Mutual Funds, Inc., as of October 31, 2021, 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, 2021, 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, 2021, 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.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
December 15, 2021
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.
Jonathan S.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 | 72 | 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) | 72 | Alleghany Corporation | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 72 | 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) | 72 | 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) | 72 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 72 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 72 | Onto Innovation Inc. (2019 to 2020); Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 107 | 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; Director, ACC and other ACC subsidiaries | 145 | 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 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 | ||||||
John Pak (1968) | General Counsel and Senior Vice President since 2021 | General Counsel and Senior Vice President, ACC (2021 to present). Also serves as General Counsel and Senior Vice President, ACIM, ACS and ACIS. Chief Legal Officer of Investment and Wealth Management, The Bank of New York Mellon (2014 to 2021) | ||||||
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 30, 2021, 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 and its affiliates 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 including without limitation portfolio management and trading services, shareholder and intermediary services, compliance and legal services, fund accounting and financial reporting, and fund share distribution;
•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, COVID-19 pandemic response, vendor management practices, and social justice initiatives;
•the Advisor’s business continuity plans and cyber security practices;
•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.
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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 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 which include 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
•liquidity monitoring and management
•risk management, including cyber security
•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.
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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 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.
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 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. In addition, the Board reviewed the Fund’s position relative to the narrower set of its expense group peers. 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
26
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 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. These portfolio holdings are available on the fund's website at americancentury.com and, upon request, by calling 1-800-345-2021. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov.
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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, 2021.
For corporate taxpayers, the fund hereby designates $2,757,538, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2021 as qualified for the corporate dividends received deduction.
The fund hereby designates $96,311,885, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2021.
The fund hereby designates $5,648,481 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2021.
The fund utilized earnings and profits of $9,131,746 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
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Notes |
30
Notes |
31
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. | ||||||||
©2021 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90987 2112 |
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Annual Report | |||||
October 31, 2021 | |||||
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) |
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 |
![image30.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image30.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2021. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Economic, Earnings Gains Fueled Rally Among Risk-On Assets
Stocks and other risk-on assets rallied for the 12-month period, despite lingering pandemic-related challenges. Upbeat data on U.S. manufacturing, employment and housing, along with central bank and federal government support and positive vaccine developments, helped boost corporate earnings and promote investor optimism. Outside the U.S., most economies recovered, but generally at a slower pace. Virus outbreaks and slower vaccine rollouts, particularly in emerging markets, led to lingering lockdowns in some regions.
As the period progressed, steady economic gains combined with ongoing monetary and fiscal support, rising energy prices and severe supply chain disruptions pushed global interest rates and inflation higher. In the U.S., year-over-year headline inflation climbed to 6.2% in October 2021, the largest 12-month increase in nearly 31 years.
Late in the period, the Federal Reserve (Fed) confirmed it would start tapering its bond buying in November. Yet despite inflation’s surge, the Fed left short-term interest rates unchanged. Central banks in Europe and the U.K. maintained their supportive interest rate and bond-buying programs as inflation ticked higher.
Overall, stocks delivered stellar performance for the 12-month period, highlighted by the S&P 500 Index’s gain of nearly 43%. Assets offering inflation-fighting potential, including real estate investment trusts, fared even better. Meanwhile, global bonds retreated as interest rates rose. However, emerging markets bonds largely advanced, benefiting from risk-on sentiment.
Several Factors Shaping Market Dynamics
The return to pre-pandemic life is progressing, albeit somewhat cautiously due to COVID-19’s lingering effects. As the economy and markets respond to this fluid backdrop, investors will face opportunities and ongoing challenges. Economic growth, inflation, the virus’s trajectory, supply chain normalization and fiscal and monetary policy likely will sway market dynamics.
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,
![image19.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image19.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2021 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |||||||||||||||
Investor Class | TWCIX | 40.63% | 23.43% | 17.73% | — | 6/30/71 | ||||||||||||||
Russell 1000 Growth Index | — | 43.21% | 25.47% | 19.41% | — | — | ||||||||||||||
I Class | TWSIX | 40.90% | 23.68% | 17.97% | — | 3/13/97 | ||||||||||||||
Y Class | ASLWX | 41.11% | — | — | 23.35% | 4/10/17 | ||||||||||||||
A Class | TWCAX | 8/8/97 | ||||||||||||||||||
No sales charge | 40.26% | 23.12% | 17.44% | — | ||||||||||||||||
With sales charge | 32.20% | 21.67% | 16.74% | — | ||||||||||||||||
C Class | ACSLX | 39.23% | 22.20% | 16.56% | — | 1/31/03 | ||||||||||||||
R Class | ASERX | 39.92% | 22.82% | 17.14% | — | 7/29/05 | ||||||||||||||
R5 Class | ASLGX | 40.91% | — | — | 23.15% | 4/10/17 | ||||||||||||||
R6 Class | ASDEX | 41.11% | 23.86% | — | 18.76% | 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, this 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. Extraordinary performance is attributable in part to unusually favorable market conditions and may not be repeated or consistently achieved in the future.
C Class shares will automatically convert to A Class shares after being held for approximately eight years. C Class average annual returns do not reflect this conversion.
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, 2011 | ||
Performance for other share classes will vary due to differences in fee structure. |
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Value on October 31, 2021 | |||||
Investor Class — $51,223 | |||||
Russell 1000 Growth Index — $59,008 | |||||
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.
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Portfolio Commentary |
Portfolio Managers: Keith Lee, Michael Li and Chris Krantz
Performance Summary
Select returned 40.63%* for the 12 months ended October 31, 2021, lagging the 43.21% return of the fund’s benchmark, the Russell 1000 Growth Index.
U.S. stocks posted strong returns during the reporting period, supported by federal government stimulus and low interest rates. The rollout of COVID-19 vaccines allowed the economy to reopen, and despite concerns about the delta variant, inflationary pressures and supply chain constraints, several market indices ended the 12-month period at record highs. Within the Russell 1000 Growth Index, all sectors posted double-digit gains, led by energy, which surged on demand and limited supply as the economy began to reopen. Materials was the weakest sector.
Stock selection in the information technology and health care sectors detracted from performance relative to the benchmark. Stock choices in the communication services and consumer staples sectors benefited performance.
Information Technology Stocks Led Detractors
IT services holdings helped drive underperformance in the information technology sector, led by Mastercard. The digital payments company’s stock lagged on concerns that the delta variant of COVID-19 might lead to renewed lockdowns that would slow economic growth, impacting consumer spending and travel. Elsewhere in information technology, our lack of exposure to NVIDIA detracted from performance compared with the benchmark. We don’t dispute that NVIDIA has a very strong position in certain chips and applications. But from our perspective, we see greater opportunity in the users of the company’s technology that have exceptionally large addressable markets, such as Alphabet, Meta Platforms (formerly Facebook) and Amazon, among others. Underweighting Microsoft relative to the benchmark also detracted. The software giant reported better-than-expected revenue and earnings, aided by the strong performance of its Azure cloud segment.
Other significant detractors included underweighting Tesla relative to the benchmark. The electric carmaker continued to benefit from solid fundamental reports and strong demand for its vehicles. The stock also got a boost when it was added to the S&P 500 Index. Bristol-Myers Squibb’s stock price fell late in the period along with other large-cap pharmaceutical stocks, largely on concerns about proposed legislation that would lower drug prices. Investors also worried about biosimilar drugs expected to come to market next year.
Communication Services Stocks Aided Relative Performance
Alphabet led contributors in the communication services sector. Digital advertising remained strong for Google’s parent company, driven by sustained e-commerce and reopening activity. Its YouTube business, in particular, produced strong results as new advertising products across both brand and direct response were favorably received.
Other top contributors included Atlassian. This software company provides collaborative tools used by small and midsize companies and increasingly larger companies. As pandemic restrictions eased and workers started returning to the office, Atlassian saw renewed growth for its software, driving strong revenue and earnings. Crowdstrike Holdings, a cloud-based cybersecurity firm, outperformed, helped by a tailwind caused by recent high-profile ransomware attacks. Not owning
*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.
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Zoom Video Communications helped performance compared with the benchmark. After benefiting from the pandemic in 2020, investors reallocated capital in 2021 to stocks that were expected to benefit from the reopening of the economy. Zoom was a victim of the market’s swing, and our lack of exposure was helpful. MSCI, a leading provider of global financial market indices and software, outperformed after posting better-than-expected revenue and earnings. The company has enjoyed high recurring revenue and operating margins, and we think it is positioned for long-term growth thanks to its analytics business and role as a key provider of environment, sustainability and governance data.
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 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 Google parent Alphabet and Meta Platforms, the new name for Facebook. Information technology also ended the period overweight, reflecting what we view as an abundance of high-quality, well-run companies benefiting from powerful secular trends. Industrials was the largest sector underweight.
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Fund Characteristics |
OCTOBER 31, 2021 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 99.5% | ||||
Convertible Bonds | 0.4% | ||||
Temporary Cash Investments | 0.1% | ||||
Other Assets and Liabilities | —* | ||||
*Category is less than 0.05% of total net assets. | |||||
Top Five Industries | % of net assets | ||||
Software | 15.7% | ||||
Interactive Media and Services | 14.0% | ||||
Technology Hardware, Storage and Peripherals | 13.2% | ||||
IT Services | 10.1% | ||||
Semiconductors and Semiconductor Equipment | 7.5% |
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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, 2021 to October 31, 2021.
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 5/1/21 | Ending Account Value 10/31/21 | Expenses Paid During Period(1) 5/1/21 - 10/31/21 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,133.20 | $5.16 | 0.96% | ||||||||||
I Class | $1,000 | $1,134.30 | $4.09 | 0.76% | ||||||||||
Y Class | $1,000 | $1,135.20 | $3.28 | 0.61% | ||||||||||
A Class | $1,000 | $1,131.80 | $6.50 | 1.21% | ||||||||||
C Class | $1,000 | $1,127.50 | $10.51 | 1.96% | ||||||||||
R Class | $1,000 | $1,130.40 | $7.84 | 1.46% | ||||||||||
R5 Class | $1,000 | $1,134.40 | $4.09 | 0.76% | ||||||||||
R6 Class | $1,000 | $1,135.20 | $3.28 | 0.61% | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,020.37 | $4.89 | 0.96% | ||||||||||
I Class | $1,000 | $1,021.37 | $3.87 | 0.76% | ||||||||||
Y Class | $1,000 | $1,022.13 | $3.11 | 0.61% | ||||||||||
A Class | $1,000 | $1,019.11 | $6.16 | 1.21% | ||||||||||
C Class | $1,000 | $1,015.33 | $9.96 | 1.96% | ||||||||||
R Class | $1,000 | $1,017.85 | $7.43 | 1.46% | ||||||||||
R5 Class | $1,000 | $1,021.37 | $3.87 | 0.76% | ||||||||||
R6 Class | $1,000 | $1,022.13 | $3.11 | 0.61% |
(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 365, 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, 2021
Shares | Value | |||||||
COMMON STOCKS — 99.5% | ||||||||
Auto Components — 0.5% | ||||||||
Aptiv plc(1) | 155,600 | $ | 26,901,683 | |||||
Automobiles — 3.8% | ||||||||
Tesla, Inc.(1) | 174,100 | 193,947,400 | ||||||
Beverages — 1.1% | ||||||||
Constellation Brands, Inc., Class A | 194,700 | 42,212,907 | ||||||
Diageo plc | 330,500 | 16,442,933 | ||||||
58,655,840 | ||||||||
Biotechnology — 2.8% | ||||||||
Biogen, Inc.(1) | 201,600 | 53,762,688 | ||||||
Regeneron Pharmaceuticals, Inc.(1) | 139,800 | 89,463,612 | ||||||
143,226,300 | ||||||||
Capital Markets — 1.9% | ||||||||
Moody's Corp. | 71,100 | 28,735,065 | ||||||
MSCI, Inc. | 106,400 | 70,743,232 | ||||||
99,478,297 | ||||||||
Containers and Packaging — 0.6% | ||||||||
Ball Corp. | 314,600 | 28,779,608 | ||||||
Energy Equipment and Services — 0.4% | ||||||||
ChampionX Corp.(1) | 781,400 | 20,496,122 | ||||||
Entertainment — 1.5% | ||||||||
Electronic Arts, Inc. | 253,100 | 35,497,275 | ||||||
Walt Disney Co. (The)(1) | 235,700 | 39,849,799 | ||||||
75,347,074 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 1.3% | ||||||||
American Tower Corp. | 111,800 | 31,524,246 | ||||||
Equinix, Inc. | 41,700 | 34,905,819 | ||||||
66,430,065 | ||||||||
Food and Staples Retailing — 1.3% | ||||||||
Costco Wholesale Corp. | 130,200 | 63,998,508 | ||||||
Health Care Equipment and Supplies — 2.3% | ||||||||
Danaher Corp. | 132,500 | 41,309,525 | ||||||
Penumbra, Inc.(1) | 102,200 | 28,263,410 | ||||||
Stryker Corp. | 177,300 | 47,174,211 | ||||||
116,747,146 | ||||||||
Health Care Providers and Services — 3.3% | ||||||||
UnitedHealth Group, Inc. | 362,400 | 166,874,328 | ||||||
Hotels, Restaurants and Leisure — 0.8% | ||||||||
Airbnb, Inc., Class A(1) | 249,500 | 42,579,670 | ||||||
Industrial Conglomerates — 0.2% | ||||||||
Roper Technologies, Inc. | 26,000 | 12,684,620 | ||||||
Interactive Media and Services — 14.0% | ||||||||
Alphabet, Inc., Class A(1) | 90,600 | 268,259,352 | ||||||
Alphabet, Inc., Class C(1) | 84,900 | 251,763,309 | ||||||
Meta Platforms, Inc., Class A(1) | 609,400 | 197,183,558 | ||||||
717,206,219 | ||||||||
Internet and Direct Marketing Retail — 7.0% | ||||||||
Amazon.com, Inc.(1) | 106,300 | 358,489,309 |
10
Shares/ Principal Amount | Value | |||||||
IT Services — 9.7% | ||||||||
Mastercard, Inc., Class A | 624,100 | $ | 209,398,032 | |||||
PayPal Holdings, Inc.(1) | 806,800 | 187,653,612 | ||||||
Visa, Inc., Class A | 471,300 | 99,807,201 | ||||||
496,858,845 | ||||||||
Machinery — 0.5% | ||||||||
FANUC Corp. | 129,200 | 25,532,645 | ||||||
Personal Products — 0.7% | ||||||||
Estee Lauder Cos., Inc. (The), Class A | 111,100 | 36,033,063 | ||||||
Pharmaceuticals — 1.2% | ||||||||
Bristol-Myers Squibb Co. | 1,077,000 | 62,896,800 | ||||||
Professional Services — 0.8% | ||||||||
IHS Markit Ltd. | 122,700 | 16,039,344 | ||||||
Verisk Analytics, Inc. | 122,000 | 25,652,940 | ||||||
41,692,284 | ||||||||
Road and Rail — 0.4% | ||||||||
Canadian Pacific Railway Ltd. | 272,000 | 21,052,747 | ||||||
Semiconductors and Semiconductor Equipment — 7.5% | ||||||||
Analog Devices, Inc. | 960,449 | 166,628,297 | ||||||
KLA Corp. | 162,100 | 60,424,396 | ||||||
Texas Instruments, Inc. | 551,200 | 103,338,976 | ||||||
Xilinx, Inc. | 291,200 | 52,416,000 | ||||||
382,807,669 | ||||||||
Software — 15.7% | ||||||||
Adobe, Inc.(1) | 62,500 | 40,647,500 | ||||||
Atlassian Corp. plc, Class A(1) | 309,000 | 141,562,170 | ||||||
Crowdstrike Holdings, Inc., Class A(1) | 272,900 | 76,903,220 | ||||||
Microsoft Corp. | 1,181,100 | 391,676,382 | ||||||
salesforce.com, Inc.(1) | 188,000 | 56,341,720 | ||||||
Zendesk, Inc.(1) | 190,100 | 19,352,180 | ||||||
Zscaler, Inc.(1) | 236,200 | 75,314,732 | ||||||
801,797,904 | ||||||||
Specialty Retail — 5.4% | ||||||||
Home Depot, Inc. (The) | 249,600 | 92,786,304 | ||||||
Lowe's Cos., Inc. | 419,200 | 98,017,344 | ||||||
Tractor Supply Co. | 389,400 | 84,565,998 | ||||||
275,369,646 | ||||||||
Technology Hardware, Storage and Peripherals — 13.2% | ||||||||
Apple, Inc. | 4,509,000 | 675,448,200 | ||||||
Textiles, Apparel and Luxury Goods — 1.6% | ||||||||
NIKE, Inc., Class B | 498,200 | 83,343,878 | ||||||
TOTAL COMMON STOCKS (Cost $1,557,479,285) | 5,094,675,870 | |||||||
CONVERTIBLE BONDS — 0.4% | ||||||||
IT Services — 0.4% | ||||||||
Square, Inc., 0.50%, 5/15/23 (Cost $5,358,969) | $ | 5,601,000 | 18,318,771 | |||||
TEMPORARY CASH INVESTMENTS — 0.1% | ||||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 11/15/26, valued at $1,327,848), in a joint trading account at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $1,300,231) | 1,300,230 |
11
Shares | Value | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.25%, 5/15/41, valued at $4,417,718), at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $4,331,004) | $ | 4,331,000 | ||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 173,793 | 173,793 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $5,805,023) | 5,805,023 | |||||||
TOTAL INVESTMENT SECURITIES — 100.0% (Cost $1,568,643,277) | 5,118,799,664 | |||||||
OTHER ASSETS AND LIABILITIES† | (7,463) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 5,118,792,201 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
USD | 12,554,405 | CAD | 15,984,080 | Morgan Stanley | 12/31/21 | $ | (363,116) | |||||||||||||
USD | 421,077 | CAD | 521,696 | Morgan Stanley | 12/31/21 | (531) | ||||||||||||||
USD | 539,885 | CAD | 668,304 | Morgan Stanley | 12/31/21 | (204) | ||||||||||||||
USD | 609,841 | CAD | 753,984 | Morgan Stanley | 12/31/21 | 510 | ||||||||||||||
$ | (363,341) |
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.
See Notes to Financial Statements.
12
Statement of Assets and Liabilities |
OCTOBER 31, 2021 | |||||
Assets | |||||
Investment securities, at value (cost of $1,568,643,277) | $ | 5,118,799,664 | |||
Receivable for investments sold | 2,131,759 | ||||
Receivable for capital shares sold | 785,045 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 510 | ||||
Dividends and interest receivable | 2,223,452 | ||||
Securities lending receivable | 815 | ||||
5,123,941,245 | |||||
Liabilities | |||||
Payable for capital shares redeemed | 829,215 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 363,851 | ||||
Accrued management fees | 3,935,950 | ||||
Distribution and service fees payable | 20,028 | ||||
5,149,044 | |||||
Net Assets | $ | 5,118,792,201 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 1,189,986,924 | |||
Distributable earnings | 3,928,805,277 | ||||
$ | 5,118,792,201 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $4,770,671,573 | 38,435,773 | $124.12 | ||||||||
I Class, $0.01 Par Value | $156,502,412 | 1,229,702 | $127.27 | ||||||||
Y Class, $0.01 Par Value | $103,668,547 | 810,730 | $127.87 | ||||||||
A Class, $0.01 Par Value | $72,805,566 | 607,027 | $119.94* | ||||||||
C Class, $0.01 Par Value | $4,151,375 | 40,540 | $102.40 | ||||||||
R Class, $0.01 Par Value | $4,452,341 | 37,796 | $117.80 | ||||||||
R5 Class, $0.01 Par Value | $12,983 | 102 | $127.28 | ||||||||
R6 Class, $0.01 Par Value | $6,527,404 | 51,114 | $127.70 |
*Maximum offering price $127.26 (net asset value divided by 0.9425).
See Notes to Financial Statements.
13
Statement of Operations |
YEAR ENDED OCTOBER 31, 2021 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $77,219) | $ | 27,063,585 | |||
Interest | 193,585 | ||||
Securities lending, net | 14,171 | ||||
27,271,341 | |||||
Expenses: | |||||
Management fees | 44,430,106 | ||||
Distribution and service fees: | |||||
A Class | 162,608 | ||||
C Class | 44,125 | ||||
R Class | 19,784 | ||||
Directors' fees and expenses | 115,977 | ||||
Other expenses | 4,278 | ||||
44,776,878 | |||||
Fees waived(1) | (1,054,000) | ||||
43,722,878 | |||||
Net investment income (loss) | (16,451,537) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 394,273,975 | ||||
Forward foreign currency exchange contract transactions | (584,387) | ||||
Written options contract transactions | 375,041 | ||||
Foreign currency translation transactions | (1,875) | ||||
394,062,754 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 1,143,394,927 | ||||
Forward foreign currency exchange contracts | (351,694) | ||||
Translation of assets and liabilities in foreign currencies | (6,256) | ||||
1,143,036,977 | |||||
Net realized and unrealized gain (loss) | 1,537,099,731 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 1,520,648,194 |
(1)Amount consists of $983,414, $32,543, $19,804, $15,009, $995, $913, $4 and $1,318 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, 2021 AND OCTOBER 31, 2020 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2021 | October 31, 2020 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (16,451,537) | $ | (5,118,930) | ||||
Net realized gain (loss) | 394,062,754 | 268,341,969 | ||||||
Change in net unrealized appreciation (depreciation) | 1,143,036,977 | 557,360,313 | ||||||
Net increase (decrease) in net assets resulting from operations | 1,520,648,194 | 820,583,352 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (240,030,213) | (167,944,066) | ||||||
I Class | (7,922,820) | (5,704,618) | ||||||
Y Class | (4,985,113) | (2,611,966) | ||||||
A Class | (3,739,458) | (2,383,411) | ||||||
C Class | (416,002) | (346,331) | ||||||
R Class | (245,807) | (178,475) | ||||||
R5 Class | (604) | (394) | ||||||
R6 Class | (271,184) | (158,543) | ||||||
Decrease in net assets from distributions | (257,611,201) | (179,327,804) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (1,114,068) | (42,842,237) | ||||||
Net increase (decrease) in net assets | 1,261,922,925 | 598,413,311 | ||||||
Net Assets | ||||||||
Beginning of period | 3,856,869,276 | 3,258,455,965 | ||||||
End of period | $ | 5,118,792,201 | $ | 3,856,869,276 |
See Notes to Financial Statements.
15
Notes to Financial Statements |
OCTOBER 31, 2021
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 (NAV) 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 NAV 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.
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
16
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 NAV 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. For convertible bonds, the premiums attributable only to the debt instrument are amortized. 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). From November 1, 2020 through July 31, 2021, the investment advisor agreed to waive 0.02% of the fund’s management fee. Effective August 1, 2021, the investment advisor terminated the waiver and agreed to waive a portion of the fund’s management fee such that the management fee does not exceed 0.954% for Investor Class, A Class, C Class and R Class, 0.754% for I Class and R5 Class, and 0.604% for Y Class and R6 Class. The investment advisor expects this waiver arrangement to continue until July 31, 2022 and cannot terminate it prior to such date without the approval of the Board of Directors.
18
The management fee schedule range and the effective annual management fee before and after waiver for each class for the period ended October 31, 2021 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | ||||||||||
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, 2021 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 sales were $1,599,640 and there were no interfund purchases. The effect of interfund transactions on the Statement of Operations was $1,487,559 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, 2021 were $511,054,061 and $790,457,214, respectively.
19
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2021 | Year ended October 31, 2020 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 475,000,000 | 475,000,000 | ||||||||||||
Sold | 892,572 | $ | 96,405,055 | 1,243,588 | $ | 102,506,141 | ||||||||
Issued in reinvestment of distributions | 2,304,332 | 226,851,440 | 2,018,516 | 159,826,128 | ||||||||||
Redeemed | (3,050,748) | (327,630,332) | (3,836,882) | (319,224,605) | ||||||||||
146,156 | (4,373,837) | (574,778) | (56,892,336) | |||||||||||
I Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 241,612 | 26,516,887 | 263,810 | 22,646,467 | ||||||||||
Issued in reinvestment of distributions | 75,030 | 7,559,973 | 67,528 | 5,454,233 | ||||||||||
Redeemed | (336,569) | (36,292,186) | (397,122) | (32,507,442) | ||||||||||
(19,927) | (2,215,326) | (65,784) | (4,406,742) | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 539,904 | 62,766,563 | 372,810 | 32,358,265 | ||||||||||
Issued in reinvestment of distributions | 48,856 | 4,939,354 | 31,872 | 2,578,781 | ||||||||||
Redeemed | (532,009) | (61,052,630) | (224,881) | (20,117,689) | ||||||||||
56,751 | 6,653,287 | 179,801 | 14,819,357 | |||||||||||
A Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 64,313 | 6,610,145 | 150,187 | 12,354,119 | ||||||||||
Issued in reinvestment of distributions | 38,481 | 3,669,198 | 30,503 | 2,349,653 | ||||||||||
Redeemed | (94,091) | (9,834,703) | (130,967) | (10,805,132) | ||||||||||
8,703 | 444,640 | 49,723 | 3,898,640 | |||||||||||
C Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 6,208 | 568,197 | 3,306 | 218,808 | ||||||||||
Issued in reinvestment of distributions | 5,050 | 413,834 | 4,778 | 321,908 | ||||||||||
Redeemed | (38,754) | (3,272,318) | (21,797) | (1,593,266) | ||||||||||
(27,496) | (2,290,287) | (13,713) | (1,052,550) | |||||||||||
R Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 9,167 | 939,879 | 13,166 | 1,067,191 | ||||||||||
Issued in reinvestment of distributions | 2,207 | 206,867 | 2,346 | 178,475 | ||||||||||
Redeemed | (11,240) | (1,143,785) | (17,732) | (1,462,813) | ||||||||||
134 | 2,961 | (2,220) | (217,147) | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Issued in reinvestment of distributions | 6 | 604 | 5 | 394 | ||||||||||
R6 Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 13,479 | 1,430,105 | 24,479 | 2,048,036 | ||||||||||
Issued in reinvestment of distributions | 2,671 | 269,645 | 1,952 | 157,710 | ||||||||||
Redeemed | (9,294) | (1,035,860) | (13,941) | (1,197,599) | ||||||||||
6,856 | 663,890 | 12,490 | 1,008,147 | |||||||||||
Net increase (decrease) | 171,183 | $ | (1,114,068) | (414,476) | $ | (42,842,237) |
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 | $ | 5,031,647,545 | $ | 63,028,325 | — | ||||||
Convertible Bonds | — | 18,318,771 | — | ||||||||
Temporary Cash Investments | 173,793 | 5,631,230 | — | ||||||||
$ | 5,031,821,338 | $ | 86,978,326 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 510 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 363,851 | — |
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 1,622 written options contracts.
21
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 $15,888,489.
Value of Derivative Instruments as of October 31, 2021
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 | $ | 510 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 363,851 |
Effect of Derivative Instruments on the Statement of Operations for the Year Ended October 31, 2021
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 | $ | 375,041 | Change in net unrealized appreciation (depreciation) on written options contracts | — | |||||||||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | (584,387) | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | $ | (351,694) | |||||||||
$ | (209,346) | $ | (351,694) |
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 7, 2021, the fund declared and paid a per-share distribution from net realized gains to shareholders of record on December 6, 2021 of $9.6280 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, 2021 and October 31, 2020 were as follows:
2021 | 2020 | |||||||
Distributions Paid From | ||||||||
Ordinary income | — | $ | 28,200 | |||||
Long-term capital gains | $ | 257,611,201 | $ | 179,299,604 |
22
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 | $ | 1,568,678,719 | |||
Gross tax appreciation of investments | $ | 3,551,463,515 | |||
Gross tax depreciation of investments | (1,342,570) | ||||
Net tax appreciation (depreciation) of investments | 3,550,120,945 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (5,120) | ||||
Net tax appreciation (depreciation) | $ | 3,550,115,825 | |||
Undistributed ordinary income | $ | — | |||
Accumulated long-term gains | $ | 394,628,218 | |||
Late-year ordinary loss deferral | $ | (15,938,766) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the realization for tax purposes of unrealized gains( losses) on certain foreign currency exchange contracts.
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $93.93 | (0.40) | 36.91 | 36.51 | — | (6.32) | (6.32) | $124.12 | 40.63% | 0.97% | 0.99% | (0.37)% | (0.39)% | 11% | $4,770,672 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $95.99 | (0.19) | 37.79 | 37.60 | — | (6.32) | (6.32) | $127.27 | 40.90% | 0.77% | 0.79% | (0.17)% | (0.19)% | 11% | $156,502 | ||||||||||||||||||||||||||||||||
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 |
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) | |||||||||||||||||||||||||||||||||
Y Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $96.28 | (0.03) | 37.94 | 37.91 | — | (6.32) | (6.32) | $127.87 | 41.11% | 0.62% | 0.64% | (0.02)% | (0.04)% | 11% | $103,669 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $91.18 | (0.65) | 35.73 | 35.08 | — | (6.32) | (6.32) | $119.94 | 40.26% | 1.22% | 1.24% | (0.62)% | (0.64)% | 11% | $72,806 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $79.23 | (1.21) | 30.70 | 29.49 | — | (6.32) | (6.32) | $102.40 | 39.23% | 1.97% | 1.99% | (1.37)% | (1.39)% | 11% | $4,151 | ||||||||||||||||||||||||||||||||
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 |
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) | |||||||||||||||||||||||||||||||||
R Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $89.86 | (0.90) | 35.16 | 34.26 | — | (6.32) | (6.32) | $117.80 | 39.92% | 1.47% | 1.49% | (0.87)% | (0.89)% | 11% | $4,452 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $95.99 | (0.18) | 37.79 | 37.61 | — | (6.32) | (6.32) | $127.28 | 40.91% | 0.77% | 0.79% | (0.17)% | (0.19)% | 11% | $13 | ||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $96.16 | (0.02) | 37.88 | 37.86 | — | (6.32) | (6.32) | $127.70 | 41.11% | 0.62% | 0.64% | (0.02)% | (0.04)% | 11% | $6,527 | ||||||||||||||||||||||||||||||||
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 |
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, 2021, 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, 2021, 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, 2021, 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.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
December 15, 2021
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.
Jonathan S.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 | 72 | 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) | 72 | Alleghany Corporation | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 72 | 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) | 72 | 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) | 72 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 72 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 72 | Onto Innovation Inc. (2019 to 2020); Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 107 | 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; Director, ACC and other ACC subsidiaries | 145 | 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 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 | ||||||
John Pak (1968) | General Counsel and Senior Vice President since 2021 | General Counsel and Senior Vice President, ACC (2021 to present). Also serves as General Counsel and Senior Vice President, ACIM, ACS and ACIS. Chief Legal Officer of Investment and Wealth Management, The Bank of New York Mellon (2014 to 2021) | ||||||
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 30, 2021, 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 and its affiliates 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 including without limitation portfolio management and trading services, shareholder and intermediary services, compliance and legal services, fund accounting and financial reporting, and fund share distribution;
•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, COVID-19 pandemic response, vendor management practices, and social justice initiatives;
•the Advisor’s business continuity plans and cyber security practices;
•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 and formed a subcommittee to evaluate the Fund’s competitive market. 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.
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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 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 which include 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
•liquidity monitoring and management
•risk management, including cyber security
•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 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
33
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 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.
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 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 above the median of the total expense ratios of the Fund’s peer expense universe. In addition, the Board reviewed the Fund’s position relative to the narrower set of its expense group peers. The Board and the Advisor agreed to a temporary reduction of the Fund's fee schedule that should have the effect of lowering the Fund's annual unified management fee by approximately 0.036% (e.g., the Investor Class unified fee will be reduced from 0.99% to 0.954%), for at least one
34
year, beginning August 1, 2021. 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 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.
35
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. These portfolio holdings are available on the fund's website at americancentury.com and, upon request, by calling 1-800-345-2021. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov.
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Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates $257,611,201, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2021.
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Notes | ||||||||||||||
38
Notes | ||||||||||||||
39
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. | ||||||||
©2021 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90969 2112 |
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Annual Report | |||||
October 31, 2021 | |||||
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) |
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 |
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Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2021. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Economic, Earnings Gains Fueled Rally Among Risk-On Assets
Stocks and other risk-on assets rallied for the 12-month period, despite lingering pandemic-related challenges. Upbeat data on U.S. manufacturing, employment and housing, along with central bank and federal government support and positive vaccine developments, helped boost corporate earnings and promote investor optimism. Outside the U.S., most economies recovered, but generally at a slower pace. Virus outbreaks and slower vaccine rollouts, particularly in emerging markets, led to lingering lockdowns in some regions.
As the period progressed, steady economic gains combined with ongoing monetary and fiscal support, rising energy prices and severe supply chain disruptions pushed global interest rates and inflation higher. In the U.S., year-over-year headline inflation climbed to 6.2% in October 2021, the largest 12-month increase in nearly 31 years.
Late in the period, the Federal Reserve (Fed) confirmed it would start tapering its bond buying in November. Yet despite inflation’s surge, the Fed left short-term interest rates unchanged. Central banks in Europe and the U.K. maintained their supportive interest rate and bond-buying programs as inflation ticked higher.
Overall, stocks delivered stellar performance for the 12-month period, highlighted by the S&P 500 Index’s gain of nearly 43%. Assets offering inflation-fighting potential, including real estate investment trusts, fared even better. Meanwhile, global bonds retreated as interest rates rose. However, emerging markets bonds largely advanced, benefiting from risk-on sentiment.
Several Factors Shaping Market Dynamics
The return to pre-pandemic life is progressing, albeit somewhat cautiously due to COVID-19’s lingering effects. As the economy and markets respond to this fluid backdrop, investors will face opportunities and ongoing challenges. Economic growth, inflation, the virus’s trajectory, supply chain normalization and fiscal and monetary policy likely will sway market dynamics.
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,
![image19.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image19.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of October 31, 2021 | |||||||||||||||||||||||
Average Annual Returns | |||||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | ||||||||||||||||||
Investor Class | ANOIX | 38.56% | 24.65% | 17.09% | — | 6/1/01 | |||||||||||||||||
Russell 2000 Growth Index | — | 38.45% | 17.89% | 14.56% | — | — | |||||||||||||||||
I Class | ANONX | 38.81% | 24.89% | 17.32% | — | 5/18/07 | |||||||||||||||||
Y Class | ANOYX | 39.02% | — | — | 23.80% | 4/10/17 | |||||||||||||||||
A Class | ANOAX | 1/31/03 | |||||||||||||||||||||
No sales charge | 38.22% | 24.34% | 16.80% | — | |||||||||||||||||||
With sales charge | 30.28% | 22.88% | 16.11% | — | |||||||||||||||||||
C Class | ANOCX | 37.19% | 23.41% | 15.94% | — | 1/31/03 | |||||||||||||||||
R Class | ANORX | 37.88% | 24.02% | 16.52% | — | 9/28/07 | |||||||||||||||||
R5 Class | ANOGX | 38.84% | — | — | 23.62% | 4/10/17 | |||||||||||||||||
R6 Class | ANODX | 39.04% | 25.08% | — | 16.69% | 7/26/13 | |||||||||||||||||
G Class | ANOHX | 40.15% | — | — | 30.16% | 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.
C Class shares will automatically convert to A Class shares after being held for approximately eight years. C Class average annual returns do not reflect this conversion.
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, 2011 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-42f45734a7e34ca2804a.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/chart-42f45734a7e34ca2804a.jpg)
Value on October 31, 2021 | |||||
Investor Class — $48,513 | |||||
Russell 2000 Growth Index — $38,977 | |||||
Total Annual Fund Operating Expenses | ||||||||||||||||||||||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | G Class | ||||||||||||||||||
1.22% | 1.02% | 0.87% | 1.47% | 2.22% | 1.72% | 1.02% | 0.87% | 0.87% |
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: Jackie Wagner and Jeff Hoernemann
Performance Summary
Small Cap Growth returned 38.56%* for the 12 months ended October 31, 2021, versus the 38.45% return of the fund’s benchmark, the Russell 2000 Growth Index.
U.S. stocks posted strong returns during the reporting period, supported by federal government stimulus and low interest rates. The rollout of COVID-19 vaccines allowed the economy to reopen, and despite concerns about the delta variant, inflationary pressures and supply chain constraints, several market indices ended the 12-month period at record highs. Within the Russell 2000 Growth Index, all sectors posted double-digit gains, led by energy, which benefited from strong demand and limited supply as the economy began to reopen. Information technology and consumer discretionary were also strong performers. Health care was the weakest sector.
Stock choices within the consumer discretionary and information technology sectors helped drive outperformance relative to the benchmark. Stock selection in the health care sector detracted.
Consumer Discretionary Stocks Benefited Performance
Stock selection across consumer discretionary industries was helpful, led by the textiles, apparel and luxury goods industry. Crocs was a top contributor in the sector. The manufacturer of footwear and accessories experienced strong demand for its core clog footwear offerings, strong pricing power and high attach rate—add-on products—of higher margin Jibbitz accessories.
Software holdings led performance in the information technology sector. Sprout Social outperformed. The provider of social media management software solutions released new products intended to expand the average revenue per user, and this was evident as its most recent quarterly results surprised to the upside with record new customer additions and an acceleration in average recurring revenue growth. Manhattan Associates provides cloud-based supply chain management software. The company reported better-than-expected quarterly earnings throughout the year. Manhattan Associates benefited from the restrictions due to the pandemic, and we believe the transition to online buying and curbside pickup are secular trends that fit with the company’s strengths. Elsewhere in information technology, Perficient, a consulting and IT services firm, was a top contributor. Demand accelerated for digital transformation services as projects that were delayed due to COVID-19 resumed in 2021.
Other significant contributors included Triumph Bancorp, a niche bank that focuses on the transportation industry. Its 60-branch network generates deposits that are used to fund the growth in its receivables book for transportation companies. Triumph is a leader in the transportation industry payments space, and its TriumphPay solution has experienced rapid adoption.
Health Care Weighed on Performance
Stock decisions in the biotechnology industry hampered performance in the health care sector. ACADIA Pharmaceuticals underperformed. The biopharmaceutical company focused on central nervous system disorders saw the expected label expansion of its lead drug Pimavanserin delayed and eventually rejected by the Food and Drug Administration. Despite breakthrough designation for the drug from the agency, last-minute changes made it likely that the company would need more clinical trials for the drug’s approval in dementia-related psychosis. We eliminated our holding. Eargo manufactures and markets hearing aids for mild to moderate hearing loss. While the
*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
company continued to beat expectations for sales and has compelling new technology, it disclosed that it was being audited and that the audit had turned into a criminal investigation. We eliminated the holding.
Other key detractors included the online education company Chegg, which fell on concerns that fewer students were returning to college this school year. The online insurance broker eHealth is primarily focused on the Medicare Advantage market. The company saw customer churn and lower sales representative productivity that resulted in revenue and earnings well below expectations. The company is significantly restructuring its approach to the market as a result, with uncertain results at this point. We eliminated our holding. Plug Power, a maker of hydrogen fuel cells used in forklifts, benefited from excitement around all forms of alternative energy. The company executed well on the sales of energy systems for small vehicles meant to be operated indoors. We did not own this stock, which appreciated significantly in the period.
Outlook
Small Cap Growth’s investment process focuses on smaller companies demonstrating accelerating, sustainable growth. By focusing on inflection points in a company’s business, we strive to benefit from the market’s inefficiency in evaluating companies that are undergoing changing fundamentals. 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, 2021, consumer discretionary was the largest overweight sector relative to the benchmark. Health care was the largest underweight sector.
6
Fund Characteristics |
OCTOBER 31, 2021 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 98.0% | ||||
Temporary Cash Investments | 2.5% | ||||
Temporary Cash Investments - Securities Lending Collateral | 0.6% | ||||
Other Assets and Liabilities | (1.1)% | ||||
Top Five Industries | % of net assets | ||||
Biotechnology | 11.5% | ||||
Software | 10.6% | ||||
Semiconductors and Semiconductor Equipment | 5.2% | ||||
Health Care Providers and Services | 4.9% | ||||
Hotels, Restaurants and Leisure | 4.5% |
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, 2021 to October 31, 2021.
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 5/1/21 | Ending Account Value 10/31/21 | Expenses Paid During Period(1) 5/1/21 - 10/31/21 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,039.60 | $6.01 | 1.17% | ||||||||||
I Class | $1,000 | $1,040.30 | $4.99 | 0.97% | ||||||||||
Y Class | $1,000 | $1,041.20 | $4.22 | 0.82% | ||||||||||
A Class | $1,000 | $1,038.10 | $7.29 | 1.42% | ||||||||||
C Class | $1,000 | $1,034.70 | $11.13 | 2.17% | ||||||||||
R Class | $1,000 | $1,037.20 | $8.58 | 1.67% | ||||||||||
R5 Class | $1,000 | $1,040.70 | $4.99 | 0.97% | ||||||||||
R6 Class | $1,000 | $1,041.20 | $4.22 | 0.82% | ||||||||||
G Class | $1,000 | $1,045.30 | $0.00 | 0.00%(2) | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,019.31 | $5.96 | 1.17% | ||||||||||
I Class | $1,000 | $1,020.32 | $4.94 | 0.97% | ||||||||||
Y Class | $1,000 | $1,021.07 | $4.18 | 0.82% | ||||||||||
A Class | $1,000 | $1,018.05 | $7.22 | 1.42% | ||||||||||
C Class | $1,000 | $1,014.27 | $11.02 | 2.17% | ||||||||||
R Class | $1,000 | $1,016.79 | $8.49 | 1.67% | ||||||||||
R5 Class | $1,000 | $1,020.32 | $4.94 | 0.97% | ||||||||||
R6 Class | $1,000 | $1,021.07 | $4.18 | 0.82% | ||||||||||
G Class | $1,000 | $1,025.21 | $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 365, 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, 2021
Shares | Value | |||||||
COMMON STOCKS — 98.0% | ||||||||
Aerospace and Defense — 1.1% | ||||||||
Mercury Systems, Inc.(1) | 311,505 | $ | 16,054,968 | |||||
Spirit AeroSystems Holdings, Inc., Class A | 207,839 | 8,581,672 | ||||||
24,636,640 | ||||||||
Auto Components — 0.9% | ||||||||
Fox Factory Holding Corp.(1) | 133,348 | 21,462,361 | ||||||
Banks — 2.3% | ||||||||
Bancorp, Inc. (The)(1) | 450,859 | 13,773,742 | ||||||
Silvergate Capital Corp., Class A(1) | 97,580 | 15,282,980 | ||||||
Triumph Bancorp, Inc.(1) | 203,023 | 23,814,598 | ||||||
52,871,320 | ||||||||
Beverages — 0.5% | ||||||||
MGP Ingredients, Inc. | 170,309 | 10,935,541 | ||||||
Biotechnology — 11.5% | ||||||||
Acceleron Pharma, Inc.(1) | 72,219 | 12,579,105 | ||||||
ADC Therapeutics SA(1) | 377,348 | 10,939,319 | ||||||
Arcutis Biotherapeutics, Inc.(1) | 386,678 | 8,189,840 | ||||||
Arena Pharmaceuticals, Inc.(1) | 127,265 | 7,303,738 | ||||||
Biohaven Pharmaceutical Holding Co. Ltd.(1) | 140,365 | 19,976,747 | ||||||
Blueprint Medicines Corp.(1) | 142,503 | 16,030,163 | ||||||
Bridgebio Pharma, Inc.(1) | 237,394 | 11,722,516 | ||||||
CareDx, Inc.(1) | 175,691 | 8,960,241 | ||||||
Centessa Pharmaceuticals plc, ADR(1) | 398,837 | 6,859,996 | ||||||
Cytokinetics, Inc.(1) | 324,392 | 11,324,525 | ||||||
Deciphera Pharmaceuticals, Inc.(1) | 272,239 | 9,090,060 | ||||||
Erasca, Inc.(1) | 271,000 | 5,360,380 | ||||||
Fate Therapeutics, Inc.(1) | 118,864 | 6,394,883 | ||||||
Global Blood Therapeutics, Inc.(1) | 315,532 | 11,523,229 | ||||||
Halozyme Therapeutics, Inc.(1) | 399,865 | 15,222,861 | ||||||
Heron Therapeutics, Inc.(1) | 302,728 | 3,333,035 | ||||||
Immunovant, Inc.(1) | 230,898 | 1,856,420 | ||||||
Insmed, Inc.(1) | 523,847 | 15,793,987 | ||||||
Intellia Therapeutics, Inc.(1) | 64,273 | 8,547,024 | ||||||
Invitae Corp.(1)(2) | 217,908 | 5,774,562 | ||||||
Iovance Biotherapeutics, Inc.(1) | 138,333 | 3,362,875 | ||||||
KalVista Pharmaceuticals, Inc.(1) | 290,365 | 5,220,763 | ||||||
Karuna Therapeutics, Inc.(1) | 118,208 | 16,594,039 | ||||||
Kinnate Biopharma, Inc.(1)(2) | 191,186 | 4,544,491 | ||||||
Kymera Therapeutics, Inc.(1) | 150,031 | 8,833,825 | ||||||
Natera, Inc.(1) | 144,613 | 16,568,311 | ||||||
Relay Therapeutics, Inc.(1) | 182,741 | 6,076,138 | ||||||
Sigilon Therapeutics, Inc.(1) | 332,160 | 1,790,342 | ||||||
259,773,415 | ||||||||
Building Products — 1.6% | ||||||||
Masonite International Corp.(1) | 162,443 | 19,494,784 | ||||||
Trex Co., Inc.(1) | 160,317 | 17,057,729 | ||||||
36,552,513 |
10
Shares | Value | |||||||
Capital Markets — 1.3% | ||||||||
GCM Grosvenor, Inc., Class A | 800,369 | $ | 9,164,225 | |||||
Open Lending Corp., Class A(1) | 661,673 | 20,855,933 | ||||||
30,020,158 | ||||||||
Chemicals — 1.3% | ||||||||
Diversey Holdings Ltd.(1) | 1,078,465 | 18,765,291 | ||||||
Element Solutions, Inc. | 447,409 | 10,160,658 | ||||||
28,925,949 | ||||||||
Commercial Services and Supplies — 3.7% | ||||||||
Brink's Co. (The) | 343,656 | 23,671,025 | ||||||
Clean Harbors, Inc.(1) | 262,971 | 29,594,757 | ||||||
Driven Brands Holdings, Inc.(1) | 936,860 | 30,419,844 | ||||||
83,685,626 | ||||||||
Construction Materials — 1.3% | ||||||||
Eagle Materials, Inc. | 116,624 | 17,302,337 | ||||||
Summit Materials, Inc., Class A(1) | 374,467 | 13,349,748 | ||||||
30,652,085 | ||||||||
Containers and Packaging — 0.5% | ||||||||
Intertape Polymer Group, Inc. | 533,390 | 12,119,366 | ||||||
Diversified Consumer Services — 1.4% | ||||||||
Chegg, Inc.(1) | 203,024 | 12,067,747 | ||||||
European Wax Center, Inc., Class A(1) | 615,904 | 19,635,019 | ||||||
31,702,766 | ||||||||
Electrical Equipment — 1.0% | ||||||||
Sensata Technologies Holding plc(1) | 410,296 | 22,607,310 | ||||||
Electronic Equipment, Instruments and Components — 1.9% | ||||||||
Fabrinet(1) | 91,727 | 8,805,792 | ||||||
Jabil, Inc. | 150,098 | 8,999,876 | ||||||
National Instruments Corp. | 295,651 | 12,556,298 | ||||||
nLight, Inc.(1) | 436,777 | 12,282,169 | ||||||
42,644,135 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 2.1% | ||||||||
DigitalBridge Group, Inc.(1) | 1,588,970 | 10,646,099 | ||||||
Innovative Industrial Properties, Inc.(2) | 55,874 | 14,699,891 | ||||||
Ryman Hospitality Properties, Inc.(1) | 249,279 | 21,323,325 | ||||||
46,669,315 | ||||||||
Food and Staples Retailing — 0.3% | ||||||||
Grocery Outlet Holding Corp.(1) | 306,215 | 6,794,911 | ||||||
Food Products — 1.3% | ||||||||
Sovos Brands, Inc.(1) | 1,106,775 | 17,885,484 | ||||||
Whole Earth Brands, Inc.(1) | 1,031,071 | 12,506,891 | ||||||
30,392,375 | ||||||||
Health Care Equipment and Supplies — 4.4% | ||||||||
Inari Medical, Inc.(1) | 203,191 | 18,392,849 | ||||||
NeuroPace, Inc.(1) | 478,179 | 7,249,194 | ||||||
Ortho Clinical Diagnostics Holdings plc(1) | 935,705 | 18,498,888 | ||||||
SI-BONE, Inc.(1) | 572,423 | 12,908,139 | ||||||
Silk Road Medical, Inc.(1) | 308,664 | 18,121,663 | ||||||
Tandem Diabetes Care, Inc.(1) | 175,023 | 23,860,886 | ||||||
99,031,619 | ||||||||
Health Care Providers and Services — 4.9% | ||||||||
Covetrus, Inc.(1) | 413,192 | 8,342,347 |
11
Shares | Value | |||||||
Encompass Health Corp. | 190,743 | $ | 12,123,625 | |||||
HealthEquity, Inc.(1) | 347,872 | 23,022,169 | ||||||
Progyny, Inc.(1) | 306,275 | 18,814,473 | ||||||
R1 RCM, Inc.(1) | 1,116,423 | 24,226,379 | ||||||
RadNet, Inc.(1) | 390,223 | 12,132,033 | ||||||
Tenet Healthcare Corp.(1) | 187,886 | 13,463,911 | ||||||
112,124,937 | ||||||||
Health Care Technology — 1.9% | ||||||||
Health Catalyst, Inc.(1) | 443,254 | 23,332,891 | ||||||
OptimizeRx Corp.(1) | 198,370 | 19,182,379 | ||||||
42,515,270 | ||||||||
Hotels, Restaurants and Leisure — 4.5% | ||||||||
Churchill Downs, Inc. | 102,878 | 23,661,940 | ||||||
Planet Fitness, Inc., Class A(1) | 200,882 | 15,980,163 | ||||||
SeaWorld Entertainment, Inc.(1) | 373,058 | 23,689,183 | ||||||
Wingstop, Inc. | 120,829 | 20,839,378 | ||||||
Wyndham Hotels & Resorts, Inc. | 199,618 | 16,861,732 | ||||||
101,032,396 | ||||||||
Household Durables — 1.7% | ||||||||
Lovesac Co. (The)(1) | 248,335 | 19,372,614 | ||||||
Sonos, Inc.(1) | 574,452 | 18,738,624 | ||||||
38,111,238 | ||||||||
Insurance — 3.0% | ||||||||
Goosehead Insurance, Inc., Class A | 96,224 | 13,885,123 | ||||||
Kinsale Capital Group, Inc. | 119,465 | 22,357,875 | ||||||
Palomar Holdings, Inc.(1) | 161,871 | 14,803,103 | ||||||
Ryan Specialty Group Holdings, Inc., Class A(1) | 426,015 | 16,099,107 | ||||||
67,145,208 | ||||||||
Interactive Media and Services — 1.9% | ||||||||
Eventbrite, Inc., Class A(1) | 678,654 | 13,735,957 | ||||||
fuboTV, Inc.(1)(2) | 348,813 | 10,398,116 | ||||||
QuinStreet, Inc.(1) | 1,318,000 | 18,452,000 | ||||||
42,586,073 | ||||||||
Internet and Direct Marketing Retail — 0.6% | ||||||||
Revolve Group, Inc.(1) | 174,036 | 13,059,661 | ||||||
IT Services — 4.0% | ||||||||
DigitalOcean Holdings, Inc.(1) | 226,915 | 22,144,635 | ||||||
I3 Verticals, Inc., Class A(1) | 320,898 | 7,184,906 | ||||||
MAXIMUS, Inc. | 305,769 | 25,858,884 | ||||||
Perficient, Inc.(1) | 162,014 | 20,024,930 | ||||||
Remitly Global, Inc.(1) | 94,140 | 2,882,567 | ||||||
Repay Holdings Corp.(1) | 230,272 | 4,838,015 | ||||||
Thoughtworks Holding, Inc.(1) | 276,044 | 7,974,911 | ||||||
90,908,848 | ||||||||
Leisure Products — 3.0% | ||||||||
Brunswick Corp. | 214,610 | 19,978,045 | ||||||
Callaway Golf Co.(1) | 752,676 | 20,359,886 | ||||||
Hayward Holdings, Inc.(1) | 994,374 | 23,059,533 | ||||||
Solo Brands, Inc., Class A(1) | 258,202 | 4,740,588 | ||||||
68,138,052 | ||||||||
Life Sciences Tools and Services — 0.8% | ||||||||
NeoGenomics, Inc.(1) | 403,529 | 18,562,334 |
12
Shares | Value | |||||||
Machinery — 2.7% | ||||||||
AGCO Corp. | 138,614 | $ | 16,940,017 | |||||
Astec Industries, Inc. | 236,123 | 12,604,246 | ||||||
John Bean Technologies Corp. | 151,907 | 22,444,259 | ||||||
Timken Co. (The) | 139,079 | 9,867,655 | ||||||
61,856,177 | ||||||||
Oil, Gas and Consumable Fuels — 2.3% | ||||||||
Matador Resources Co. | 684,220 | 28,634,607 | ||||||
Whitecap Resources, Inc. | 3,813,979 | 22,897,434 | ||||||
51,532,041 | ||||||||
Pharmaceuticals — 1.5% | ||||||||
Arvinas, Inc.(1) | 117,841 | 10,202,674 | ||||||
Edgewise Therapeutics, Inc.(1)(2) | 272,174 | 4,490,871 | ||||||
Harmony Biosciences Holdings, Inc.(1)(2) | 174,635 | 7,242,114 | ||||||
Reata Pharmaceuticals, Inc., Class A(1) | 59,903 | 5,751,287 | ||||||
Ventyx Biosciences, Inc.(1) | 352,126 | 7,155,200 | ||||||
34,842,146 | ||||||||
Professional Services — 2.6% | ||||||||
ASGN, Inc.(1) | 133,515 | 15,976,405 | ||||||
First Advantage Corp.(1) | 1,092,313 | 20,426,253 | ||||||
Hireright Holdings Corp.(1) | 773,450 | 13,342,013 | ||||||
Sterling Check Corp.(1) | 417,547 | 8,956,383 | ||||||
58,701,054 | ||||||||
Real Estate Management and Development — 2.1% | ||||||||
Altus Group Ltd.(2) | 229,415 | 12,032,424 | ||||||
Colliers International Group, Inc. | 63,331 | 9,206,428 | ||||||
Newmark Group, Inc., Class A | 1,001,974 | 14,909,373 | ||||||
Tricon Residential, Inc. | 860,918 | 12,528,388 | ||||||
48,676,613 | ||||||||
Semiconductors and Semiconductor Equipment — 5.2% | ||||||||
Ichor Holdings Ltd.(1) | 489,793 | 21,413,750 | ||||||
MACOM Technology Solutions Holdings, Inc.(1) | 387,402 | 27,048,407 | ||||||
Onto Innovation, Inc.(1) | 257,163 | 20,369,881 | ||||||
Power Integrations, Inc. | 185,737 | 19,169,916 | ||||||
Semtech Corp.(1) | 362,156 | 30,794,125 | ||||||
118,796,079 | ||||||||
Software — 10.6% | ||||||||
Enfusion, Inc., Class A(1) | 370,810 | 7,649,810 | ||||||
Everbridge, Inc.(1) | 102,350 | 16,305,379 | ||||||
Lightspeed Commerce, Inc.(1) | 88,785 | 8,653,955 | ||||||
Manhattan Associates, Inc.(1) | 186,811 | 33,913,669 | ||||||
Model N, Inc.(1) | 444,213 | 14,396,943 | ||||||
nCino, Inc.(1) | 245,450 | 17,834,397 | ||||||
Paycor HCM, Inc.(1) | 555,355 | 18,015,716 | ||||||
Paylocity Holding Corp.(1) | 95,625 | 29,179,013 | ||||||
SailPoint Technologies Holdings, Inc.(1) | 334,922 | 16,069,558 | ||||||
Sprout Social, Inc., Class A(1) | 240,024 | 30,646,264 | ||||||
SPS Commerce, Inc.(1) | 114,073 | 17,422,369 | ||||||
Tenable Holdings, Inc.(1) | 564,110 | 30,038,857 | ||||||
240,125,930 | ||||||||
Specialty Retail — 2.4% | ||||||||
Arko Corp.(1) | 1,037,949 | 9,953,931 |
13
Shares | Value | |||||||
Leslie's, Inc.(1) | 1,063,595 | $ | 21,995,144 | |||||
National Vision Holdings, Inc.(1) | 365,845 | 22,550,686 | ||||||
54,499,761 | ||||||||
Textiles, Apparel and Luxury Goods — 1.8% | ||||||||
Capri Holdings Ltd.(1) | 173,852 | 9,255,880 | ||||||
Crocs, Inc.(1) | 193,200 | 31,192,140 | ||||||
40,448,020 | ||||||||
Trading Companies and Distributors — 2.1% | ||||||||
Finning International, Inc. | 837,904 | 24,806,725 | ||||||
H&E Equipment Services, Inc. | 329,776 | 14,866,302 | ||||||
NOW, Inc.(1) | 1,153,639 | 8,329,273 | ||||||
48,002,300 | ||||||||
TOTAL COMMON STOCKS (Cost $1,766,932,916) | 2,223,141,543 | |||||||
TEMPORARY CASH INVESTMENTS — 2.5% | ||||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 11/15/26, valued at $13,034,155), in a joint trading account at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $12,763,072) | 12,763,061 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.25% - 4.75%, 2/15/41 - 5/15/41, valued at $43,401,079), at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $42,550,035) | 42,550,000 | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 1,702,502 | 1,702,502 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $57,015,563) | 57,015,563 | |||||||
TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL(3) — 0.6% | ||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (Cost $12,623,373) | 12,623,373 | 12,623,373 | ||||||
TOTAL INVESTMENT SECURITIES — 101.1% (Cost $1,836,571,852) | 2,292,780,479 | |||||||
OTHER ASSETS AND LIABILITIES — (1.1)% | (25,799,268) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 2,266,981,211 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
CAD | 3,536,466 | USD | 2,794,972 | Morgan Stanley | 12/31/21 | $ | 63,019 | |||||||||||||
USD | 74,491,132 | CAD | 94,840,992 | Morgan Stanley | 12/31/21 | (2,154,535) | ||||||||||||||
USD | 1,764,002 | CAD | 2,242,701 | Morgan Stanley | 12/31/21 | (48,434) | ||||||||||||||
USD | 2,086,737 | CAD | 2,626,878 | Morgan Stanley | 12/31/21 | (36,173) | ||||||||||||||
USD | 2,028,911 | CAD | 2,531,140 | Morgan Stanley | 12/31/21 | (16,628) | ||||||||||||||
USD | 2,435,321 | CAD | 3,011,880 | Morgan Stanley | 12/31/21 | 1,273 | ||||||||||||||
USD | 2,224,796 | CAD | 2,753,533 | Morgan Stanley | 12/31/21 | (469) | ||||||||||||||
$ | (2,191,947) |
14
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 $25,882,052. 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 $26,725,287, which includes securities collateral of $14,101,914.
See Notes to Financial Statements.
15
Statement of Assets and Liabilities |
OCTOBER 31, 2021 | |||||
Assets | |||||
Investment securities, at value (cost of $1,823,948,479) — including $25,882,052 of securities on loan | $ | 2,280,157,106 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $12,623,373) | 12,623,373 | ||||
Total investment securities, at value (cost of $1,836,571,852) | 2,292,780,479 | ||||
Receivable for investments sold | 14,310,354 | ||||
Receivable for capital shares sold | 5,646,522 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 64,292 | ||||
Dividends and interest receivable | 67,156 | ||||
Securities lending receivable | 12,699 | ||||
2,312,881,502 | |||||
Liabilities | |||||
Payable for collateral received for securities on loan | 12,623,373 | ||||
Payable for investments purchased | 28,357,586 | ||||
Payable for capital shares redeemed | 1,045,879 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 2,256,239 | ||||
Accrued management fees | 1,575,372 | ||||
Distribution and service fees payable | 41,842 | ||||
45,900,291 | |||||
Net Assets | $ | 2,266,981,211 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 1,444,464,064 | |||
Distributable earnings | 822,517,147 | ||||
$ | 2,266,981,211 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $716,869,062 | 26,240,077 | $27.32 | ||||||||
I Class, $0.01 Par Value | $464,632,084 | 16,377,581 | $28.37 | ||||||||
Y Class, $0.01 Par Value | $202,168,971 | 7,011,485 | $28.83 | ||||||||
A Class, $0.01 Par Value | $134,366,733 | 5,193,452 | $25.87* | ||||||||
C Class, $0.01 Par Value | $10,587,338 | 479,576 | $22.08 | ||||||||
R Class, $0.01 Par Value | $12,689,755 | 510,894 | $24.84 | ||||||||
R5 Class, $0.01 Par Value | $6,395,861 | 225,297 | $28.39 | ||||||||
R6 Class, $0.01 Par Value | $337,131,608 | 11,696,717 | $28.82 | ||||||||
G Class, $0.01 Par Value | $382,139,799 | 12,938,790 | $29.53 |
*Maximum offering price $27.45 (net asset value divided by 0.9425).
See Notes to Financial Statements.
16
Statement of Operations |
YEAR ENDED OCTOBER 31, 2021 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $153,694) | $ | 6,009,694 | |||
Securities lending, net | 902,248 | ||||
Interest | 8,035 | ||||
6,919,977 | |||||
Expenses: | |||||
Management fees | 19,796,250 | ||||
Distribution and service fees: | |||||
A Class | 312,718 | ||||
C Class | 82,795 | ||||
R Class | 57,447 | ||||
Directors' fees and expenses | 50,172 | ||||
Other expenses | 755 | ||||
20,300,137 | |||||
Fees waived - G Class | (2,839,327) | ||||
17,460,810 | |||||
Net investment income (loss) | (10,540,833) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 441,364,820 | ||||
Forward foreign currency exchange contract transactions | (1,141,286) | ||||
Foreign currency translation transactions | (43,249) | ||||
440,180,285 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 168,080,246 | ||||
Forward foreign currency exchange contracts | (2,146,982) | ||||
Translation of assets and liabilities in foreign currencies | 6,557 | ||||
165,939,821 | |||||
Net realized and unrealized gain (loss) | 606,120,106 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 595,579,273 |
See Notes to Financial Statements.
17
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2021 AND OCTOBER 31, 2020 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2021 | October 31, 2020 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (10,540,833) | $ | (6,420,221) | ||||
Net realized gain (loss) | 440,180,285 | 182,275,922 | ||||||
Change in net unrealized appreciation (depreciation) | 165,939,821 | 161,853,294 | ||||||
Net increase (decrease) in net assets resulting from operations | 595,579,273 | 337,708,995 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (62,781,510) | (25,227,608) | ||||||
I Class | (43,474,342) | (16,816,143) | ||||||
Y Class | (15,461,227) | (535,213) | ||||||
A Class | (12,881,120) | (4,721,985) | ||||||
C Class | (823,392) | (312,537) | ||||||
R Class | (1,137,082) | (381,103) | ||||||
R5 Class | (1,134) | (395) | ||||||
R6 Class | (14,189,017) | (2,829,940) | ||||||
G Class | (31,492,935) | (9,051,157) | ||||||
Decrease in net assets from distributions | (182,241,759) | (59,876,081) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 353,243,408 | 369,858,485 | ||||||
Net increase (decrease) in net assets | 766,580,922 | 647,691,399 | ||||||
Net Assets | ||||||||
Beginning of period | 1,500,400,289 | 852,708,890 | ||||||
End of period | $ | 2,266,981,211 | $ | 1,500,400,289 |
See Notes to Financial Statements.
18
Notes to Financial Statements |
OCTOBER 31, 2021
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.
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 (NAV) 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 NAV 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.
19
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s NAV 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.
20
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, 2021.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 12,623,373 | — | — | — | $ | 12,623,373 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 12,623,373 |
(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, 13% of the shares of the fund.
21
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, 2021 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | |||||||
Investor Class | 1.100% to 1.500% | 1.17% | ||||||
I Class | 0.900% to 1.300% | 0.97% | ||||||
Y Class | 0.750% to 1.150% | 0.82% | ||||||
A Class | 1.100% to 1.500% | 1.17% | ||||||
C Class | 1.100% to 1.500% | 1.17% | ||||||
R Class | 1.100% to 1.500% | 1.17% | ||||||
R5 Class | 0.900% to 1.300% | 0.97% | ||||||
R6 Class | 0.750% to 1.150% | 0.82% | ||||||
G Class | 0.750% to 1.150% | 0.00%(1) |
(1)Effective annual management fee before waiver was 0.82%.
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, 2021 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 $2,006,480 and $2,519,047, respectively. The effect of interfund transactions on the Statement of Operations was $100,296 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, 2021 were $2,009,695,229 and $1,866,344,988, respectively.
22
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2021 | Year ended October 31, 2020 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 335,000,000 | 335,000,000 | ||||||||||||
Sold | 5,201,148 | $ | 132,383,799 | 9,921,702 | $ | 179,032,931 | ||||||||
Issued in reinvestment of distributions | 2,479,907 | 58,274,650 | 1,317,045 | 23,588,268 | ||||||||||
Redeemed | (5,592,502) | (141,184,376) | (9,495,829) | (181,400,499) | ||||||||||
2,088,553 | 49,474,073 | 1,742,918 | 21,220,700 | |||||||||||
I Class/Shares Authorized | 210,000,000 | 210,000,000 | ||||||||||||
Sold | 8,344,806 | 219,598,270 | 14,257,641 | 281,464,270 | ||||||||||
Issued in reinvestment of distributions | 1,708,377 | 41,616,070 | 161,247 | 2,976,627 | ||||||||||
Redeemed | (7,651,690) | (206,252,981) | (17,359,714) | (315,563,803) | ||||||||||
2,401,493 | 54,961,359 | (2,940,826) | (31,122,906) | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 2,146,541 | 58,617,976 | 6,761,561 | 126,431,953 | ||||||||||
Issued in reinvestment of distributions | 125,315 | 3,097,792 | 28,652 | 535,213 | ||||||||||
Redeemed | (949,794) | (25,673,469) | (1,451,198) | (30,110,005) | ||||||||||
1,322,062 | 36,042,299 | 5,339,015 | 96,857,161 | |||||||||||
A Class/Shares Authorized | 70,000,000 | 70,000,000 | ||||||||||||
Sold | 893,567 | 21,725,400 | 635,430 | 10,992,905 | ||||||||||
Issued in reinvestment of distributions | 557,328 | 12,428,385 | 267,760 | 4,586,734 | ||||||||||
Redeemed | (933,351) | (22,599,792) | (990,674) | (17,325,103) | ||||||||||
517,544 | 11,553,993 | (87,484) | (1,745,464) | |||||||||||
C Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 256,593 | 5,394,290 | 75,490 | 1,255,719 | ||||||||||
Issued in reinvestment of distributions | 42,909 | 822,132 | 18,317 | 276,405 | ||||||||||
Redeemed | (108,201) | (2,217,451) | (126,131) | (1,977,877) | ||||||||||
191,301 | 3,998,971 | (32,324) | (445,753) | |||||||||||
R Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 203,005 | 4,752,618 | 215,915 | 3,705,057 | ||||||||||
Issued in reinvestment of distributions | 51,236 | 1,097,821 | 22,612 | 375,133 | ||||||||||
Redeemed | (161,724) | (3,809,826) | (193,648) | (3,188,549) | ||||||||||
92,517 | 2,040,613 | 44,879 | 891,641 | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 265,537 | 6,981,382 | — | — | ||||||||||
Issued in reinvestment of distributions | 47 | 1,134 | 22 | 395 | ||||||||||
Redeemed | (40,704) | (1,098,894) | — | — | ||||||||||
224,880 | 5,883,622 | 22 | 395 | |||||||||||
R6 Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||||||
Sold | 9,462,609 | 256,807,769 | 3,584,510 | 69,966,478 | ||||||||||
Issued in reinvestment of distributions | 574,222 | 14,189,017 | 151,577 | 2,829,940 | ||||||||||
Redeemed | (3,069,413) | (83,050,016) | (1,680,729) | (33,221,028) | ||||||||||
6,967,418 | 187,946,770 | 2,055,358 | 39,575,390 | |||||||||||
G Class/Shares Authorized | 140,000,000 | 140,000,000 | ||||||||||||
Sold | 1,374,992 | 38,113,576 | 16,326,187 | 329,098,341 | ||||||||||
Issued in reinvestment of distributions | 1,252,702 | 31,492,935 | 481,445 | 9,051,157 | ||||||||||
Redeemed | (2,531,086) | (68,264,803) | (4,419,358) | (93,522,177) | ||||||||||
96,608 | 1,341,708 | 12,388,274 | 244,627,321 | |||||||||||
Net increase (decrease) | 13,902,376 | $ | 353,243,408 | 18,509,832 | $ | 369,858,485 |
23
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 | $ | 2,130,103,251 | $ | 93,038,292 | — | ||||||
Temporary Cash Investments | 1,702,502 | 55,313,061 | — | ||||||||
Temporary Cash Investments - Securities Lending Collateral | 12,623,373 | — | — | ||||||||
$ | 2,144,429,126 | $ | 148,351,353 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 64,292 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 2,256,239 | — |
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 $68,952,543.
24
The value of foreign currency risk derivative instruments as of October 31, 2021, is disclosed on the Statement of Assets and Liabilities as an asset of $64,292 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $2,256,239 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended October 31, 2021, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(1,141,286) in net realized gain (loss) on forward foreign currency exchange contract transactions and $(2,146,982) 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 7, 2021, the fund declared and paid a per-share distribution from net realized gains to shareholders of record on December 6, 2021 of $4.6123 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, 2021 and October 31, 2020 were as follows:
2021 | 2020 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 35,338,601 | — | |||||
Long-term capital gains | $ | 146,903,158 | $ | 59,876,081 |
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 $36,314,014 and distributable earnings $(36,314,014).
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 | $ | 1,846,463,316 | |||
Gross tax appreciation of investments | $ | 534,196,920 | |||
Gross tax depreciation of investments | (87,879,757) | ||||
Net tax appreciation (depreciation) of investments | 446,317,163 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (198) | ||||
Net tax appreciation (depreciation) | $ | 446,316,965 | |||
Undistributed ordinary income | $ | 169,172,381 | |||
Accumulated long-term gains | $ | 207,027,801 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
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: | 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 | 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 | |||||||||||||||||||||||||||||||||||||||||
2021 | $22.00 | (0.21) | 8.25 | 8.04 | (2.72) | $27.32 | 38.56% | 1.17% | 1.17% | (0.82)% | (0.82)% | 96% | $716,869 | ||||||||||||||||||||||||||||
2020 | $17.54 | (0.15) | 5.61 | 5.46 | (1.00) | $22.00 | 32.43% | 1.22% | 1.22% | (0.81)% | (0.81)% | 141% | $531,353 | ||||||||||||||||||||||||||||
2019 | $18.08 | (0.12) | 1.91 | 1.79 | (2.33) | $17.54 | 13.00% | 1.28% | 1.28% | (0.70)% | (0.70)% | 92% | $392,956 | ||||||||||||||||||||||||||||
2018 | $16.70 | (0.17) | 1.65 | 1.48 | (0.10) | $18.08 | 8.89% | 1.27% | 1.27% | (0.93)% | (0.93)% | 116% | $386,455 | ||||||||||||||||||||||||||||
2017 | $12.96 | (0.13) | 4.45 | 4.32 | (0.58) | $16.70 | 33.36% | 1.36% | 1.36% | (0.83)% | (0.83)% | 70% | $361,029 | ||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||
2021 | $22.71 | (0.17) | 8.55 | 8.38 | (2.72) | $28.37 | 38.81% | 0.97% | 0.97% | (0.62)% | (0.62)% | 96% | $464,632 | ||||||||||||||||||||||||||||
2020 | $18.04 | (0.11) | 5.78 | 5.67 | (1.00) | $22.71 | 32.76% | 1.02% | 1.02% | (0.61)% | (0.61)% | 141% | $317,466 | ||||||||||||||||||||||||||||
2019 | $18.50 | (0.09) | 1.96 | 1.87 | (2.33) | $18.04 | 13.16% | 1.08% | 1.08% | (0.50)% | (0.50)% | 92% | $305,249 | ||||||||||||||||||||||||||||
2018 | $17.04 | (0.14) | 1.70 | 1.56 | (0.10) | $18.50 | 9.18% | 1.07% | 1.07% | (0.73)% | (0.73)% | 116% | $371,030 | ||||||||||||||||||||||||||||
2017 | $13.20 | (0.09) | 4.51 | 4.42 | (0.58) | $17.04 | 33.51% | 1.16% | 1.16% | (0.63)% | (0.63)% | 70% | $219,881 |
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 | 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) | |||||||||||||||||||||||||||||
Y Class | |||||||||||||||||||||||||||||||||||||||||
2021 | $23.02 | (0.13) | 8.66 | 8.53 | (2.72) | $28.83 | 39.02% | 0.82% | 0.82% | (0.47)% | (0.47)% | 96% | $202,169 | ||||||||||||||||||||||||||||
2020 | $18.24 | (0.10) | 5.88 | 5.78 | (1.00) | $23.02 | 32.96% | 0.87% | 0.87% | (0.46)% | (0.46)% | 141% | $130,958 | ||||||||||||||||||||||||||||
2019 | $18.65 | (0.06) | 1.98 | 1.92 | (2.33) | $18.24 | 13.34% | 0.93% | 0.93% | (0.35)% | (0.35)% | 92% | $6,392 | ||||||||||||||||||||||||||||
2018 | $17.16 | (0.07) | 1.66 | 1.59 | (0.10) | $18.65 | 9.29% | 0.92% | 0.92% | (0.58)% | (0.58)% | 116% | $1,778 | ||||||||||||||||||||||||||||
2017(3) | $15.34 | (0.06) | 2.46 | 2.40 | (0.58) | $17.16 | 15.67% | 1.01%(4) | 1.01%(4) | (0.61)%(4) | (0.61)%(4) | 70%(5) | $6 | ||||||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||||||||
2021 | $21.00 | (0.26) | 7.85 | 7.59 | (2.72) | $25.87 | 38.22% | 1.42% | 1.42% | (1.07)% | (1.07)% | 96% | $134,367 | ||||||||||||||||||||||||||||
2020 | $16.82 | (0.19) | 5.37 | 5.18 | (1.00) | $21.00 | 32.14% | 1.47% | 1.47% | (1.06)% | (1.06)% | 141% | $98,200 | ||||||||||||||||||||||||||||
2019 | $17.49 | (0.16) | 1.82 | 1.66 | (2.33) | $16.82 | 12.72% | 1.53% | 1.53% | (0.95)% | (0.95)% | 92% | $80,127 | ||||||||||||||||||||||||||||
2018 | $16.19 | (0.21) | 1.61 | 1.40 | (0.10) | $17.49 | 8.61% | 1.52% | 1.52% | (1.18)% | (1.18)% | 116% | $77,764 | ||||||||||||||||||||||||||||
2017 | $12.61 | (0.16) | 4.32 | 4.16 | (0.58) | $16.19 | 33.02% | 1.61% | 1.61% | (1.08)% | (1.08)% | 70% | $80,654 | ||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||
2021 | $18.38 | (0.38) | 6.80 | 6.42 | (2.72) | $22.08 | 37.19% | 2.17% | 2.17% | (1.82)% | (1.82)% | 96% | $10,587 | ||||||||||||||||||||||||||||
2020 | $14.94 | (0.28) | 4.72 | 4.44 | (1.00) | $18.38 | 31.18% | 2.22% | 2.22% | (1.81)% | (1.81)% | 141% | $5,298 | ||||||||||||||||||||||||||||
2019 | $15.92 | (0.25) | 1.60 | 1.35 | (2.33) | $14.94 | 11.84% | 2.28% | 2.28% | (1.70)% | (1.70)% | 92% | $4,790 | ||||||||||||||||||||||||||||
2018 | $14.86 | (0.32) | 1.48 | 1.16 | (0.10) | $15.92 | 7.83% | 2.27% | 2.27% | (1.93)% | (1.93)% | 116% | $6,227 | ||||||||||||||||||||||||||||
2017 | $11.70 | (0.25) | 3.99 | 3.74 | (0.58) | $14.86 | 31.99% | 2.36% | 2.36% | (1.83)% | (1.83)% | 70% | $9,958 |
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 | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||||||||||||||||||||||||||||
R Class | |||||||||||||||||||||||||||||||||||||||||
2021 | $20.30 | (0.31) | 7.57 | 7.26 | (2.72) | $24.84 | 37.88% | 1.67% | 1.67% | (1.32)% | (1.32)% | 96% | $12,690 | ||||||||||||||||||||||||||||
2020 | $16.33 | (0.23) | 5.20 | 4.97 | (1.00) | $20.30 | 31.80% | 1.72% | 1.72% | (1.31)% | (1.31)% | 141% | $8,492 | ||||||||||||||||||||||||||||
2019 | $17.09 | (0.19) | 1.76 | 1.57 | (2.33) | $16.33 | 12.39% | 1.78% | 1.78% | (1.20)% | (1.20)% | 92% | $6,099 | ||||||||||||||||||||||||||||
2018 | $15.86 | (0.25) | 1.58 | 1.33 | (0.10) | $17.09 | 8.41% | 1.77% | 1.77% | (1.43)% | (1.43)% | 116% | $5,687 | ||||||||||||||||||||||||||||
2017 | $12.40 | (0.19) | 4.23 | 4.04 | (0.58) | $15.86 | 32.61% | 1.86% | 1.86% | (1.33)% | (1.33)% | 70% | $3,761 | ||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||
2021 | $22.73 | (0.18) | 8.56 | 8.38 | (2.72) | $28.39 | 38.84% | 0.97% | 0.97% | (0.62)% | (0.62)% | 96% | $6,396 | ||||||||||||||||||||||||||||
2020 | $18.05 | (0.12) | 5.80 | 5.68 | (1.00) | $22.73 | 32.74% | 1.02% | 1.02% | (0.61)% | (0.61)% | 141% | $9 | ||||||||||||||||||||||||||||
2019 | $18.51 | (0.08) | 1.95 | 1.87 | (2.33) | $18.05 | 13.21% | 1.08% | 1.08% | (0.50)% | (0.50)% | 92% | $7 | ||||||||||||||||||||||||||||
2018 | $17.05 | (0.14) | 1.70 | 1.56 | (0.10) | $18.51 | 9.12% | 1.07% | 1.07% | (0.73)% | (0.73)% | 116% | $7 | ||||||||||||||||||||||||||||
2017(3) | $15.26 | (0.07) | 2.44 | 2.37 | (0.58) | $17.05 | 15.56% | 1.16%(4) | 1.16%(4) | (0.76)%(4) | (0.76)%(4) | 70%(5) | $6 | ||||||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||||||||
2021 | $23.01 | (0.13) | 8.66 | 8.53 | (2.72) | $28.82 | 39.04% | 0.82% | 0.82% | (0.47)% | (0.47)% | 96% | $337,132 | ||||||||||||||||||||||||||||
2020 | $18.24 | (0.09) | 5.86 | 5.77 | (1.00) | $23.01 | 32.91% | 0.87% | 0.87% | (0.46)% | (0.46)% | 141% | $108,820 | ||||||||||||||||||||||||||||
2019 | $18.65 | (0.06) | 1.98 | 1.92 | (2.33) | $18.24 | 13.40% | 0.93% | 0.93% | (0.35)% | (0.35)% | 92% | $48,763 | ||||||||||||||||||||||||||||
2018 | $17.15 | (0.11) | 1.71 | 1.60 | (0.10) | $18.65 | 9.30% | 0.92% | 0.92% | (0.58)% | (0.58)% | 116% | $39,687 | ||||||||||||||||||||||||||||
2017 | $13.26 | (0.08) | 4.55 | 4.47 | (0.58) | $17.15 | 33.74% | 1.01% | 1.01% | (0.48)% | (0.48)% | 70% | $28,077 |
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 | 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 | |||||||||||||||||||||||||||||||||||||||||
2021 | $23.35 | 0.10 | 8.80 | 8.90 | (2.72) | $29.53 | 40.15% | 0.00%(6) | 0.82% | 0.35% | (0.47)% | 96% | $382,140 | ||||||||||||||||||||||||||||
2020 | $18.34 | 0.08 | 5.93 | 6.01 | (1.00) | $23.35 | 34.09% | 0.01% | 0.87% | 0.40% | (0.46)% | 141% | $299,803 | ||||||||||||||||||||||||||||
2019(7) | $17.43 | 0.05 | 0.86 | 0.91 | — | $18.34 | 5.22% | 0.00%(4)(6) | 0.93%(4) | 0.52%(4) | (0.41)%(4) | 92%(8) | $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)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)Ratio 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.
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, 2021, 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, 2021, 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, 2021, 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.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
December 15, 2021
We have served as the auditor of one or more American Century investment companies since 1997.
30
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.
Jonathan S.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 | 72 | 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) | 72 | Alleghany Corporation | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 72 | 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) | 72 | 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) | 72 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 72 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 72 | Onto Innovation Inc. (2019 to 2020); Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 107 | 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; Director, ACC and other ACC subsidiaries | 145 | 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.
32
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for 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 | ||||||
John Pak (1968) | General Counsel and Senior Vice President since 2021 | General Counsel and Senior Vice President, ACC (2021 to present). Also serves as General Counsel and Senior Vice President, ACIM, ACS and ACIS. Chief Legal Officer of Investment and Wealth Management, The Bank of New York Mellon (2014 to 2021) | ||||||
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 30, 2021, 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 and its affiliates 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 including without limitation portfolio management and trading services, shareholder and intermediary services, compliance and legal services, fund accounting and financial reporting, and fund share distribution;
•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, COVID-19 pandemic response, vendor management practices, and social justice initiatives;
•the Advisor’s business continuity plans and cyber security practices;
•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.
34
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 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 which include 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
•liquidity monitoring and management
•risk management, including cyber security
•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.
35
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 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.
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 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. In addition, the Board reviewed the Fund’s position relative to the narrower set of its expense group peers. 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.
36
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 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. These portfolio holdings are available on the fund's website at americancentury.com and, upon request, by calling 1-800-345-2021. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov.
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, 2021.
For corporate taxpayers, the fund hereby designates $7,006,884, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2021 as qualified for the corporate dividends received deduction.
The fund hereby designates $166,508,196, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2021.
The fund hereby designates $52,047,577 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2021.
The fund utilized earnings and profits of $36,314,014 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
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. | ||||||||
©2021 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90978 2112 |
![image8.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image8.jpg)
Annual Report | |||||
October 31, 2021 | |||||
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) |
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 |
![image30.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image30.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2021. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Economic, Earnings Gains Fueled Rally Among Risk-On Assets
Stocks and other risk-on assets rallied for the 12-month period, despite lingering pandemic-related challenges. Upbeat data on U.S. manufacturing, employment and housing, along with central bank and federal government support and positive vaccine developments, helped boost corporate earnings and promote investor optimism. Outside the U.S., most economies recovered, but generally at a slower pace. Virus outbreaks and slower vaccine rollouts, particularly in emerging markets, led to lingering lockdowns in some regions.
As the period progressed, steady economic gains combined with ongoing monetary and fiscal support, rising energy prices and severe supply chain disruptions pushed global interest rates and inflation higher. In the U.S., year-over-year headline inflation climbed to 6.2% in October 2021, the largest 12-month increase in nearly 31 years.
Late in the period, the Federal Reserve (Fed) confirmed it would start tapering its bond buying in November. Yet despite inflation’s surge, the Fed left short-term interest rates unchanged. Central banks in Europe and the U.K. maintained their supportive interest rate and bond-buying programs as inflation ticked higher.
Overall, stocks delivered stellar performance for the 12-month period, highlighted by the S&P 500 Index’s gain of nearly 43%. Assets offering inflation-fighting potential, including real estate investment trusts, fared even better. Meanwhile, global bonds retreated as interest rates rose. However, emerging markets bonds largely advanced, benefiting from risk-on sentiment.
Several Factors Shaping Market Dynamics
The return to pre-pandemic life is progressing, albeit somewhat cautiously due to COVID-19’s lingering effects. As the economy and markets respond to this fluid backdrop, investors will face opportunities and ongoing challenges. Economic growth, inflation, the virus’s trajectory, supply chain normalization and fiscal and monetary policy likely will sway market dynamics.
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,
![image19.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image19.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of October 31, 2021 | |||||||||||||||||||||||
Average Annual Returns | |||||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | ||||||||||||||||||
Investor Class | AFDIX | 43.50% | 20.13% | 16.11% | — | 7/29/05 | |||||||||||||||||
S&P 500 Index | — | 42.91% | 18.91% | 16.20% | — | — | |||||||||||||||||
I Class | AFEIX | 43.78% | 20.38% | 16.34% | — | 7/29/05 | |||||||||||||||||
Y Class | AFYDX | 44.01% | — | — | 19.96% | 4/10/17 | |||||||||||||||||
A Class | AFDAX | 11/30/04 | |||||||||||||||||||||
No sales charge | 43.13% | 19.84% | 15.83% | — | |||||||||||||||||||
With sales charge | 34.90% | 18.43% | 15.14% | — | |||||||||||||||||||
C Class | AFDCX | 42.08% | 18.95% | 14.96% | — | 11/30/04 | |||||||||||||||||
R Class | AFDRX | 42.78% | 19.54% | 15.53% | — | 7/29/05 | |||||||||||||||||
R5 Class | AFDGX | 43.78% | — | — | 19.78% | 4/10/17 | |||||||||||||||||
R6 Class | AFEDX | 44.03% | — | — | 24.23% | 4/1/19 | |||||||||||||||||
G Class | AFEGX | 44.61% | — | — | 24.77% | 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. Extraordinary performance is attributable in part to unusually favorable market conditions and may not be repeated or consistently achieved in the future.
C Class shares will automatically convert to A Class shares after being held for approximately eight years. C Class average annual returns do not reflect this conversion.
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, 2011 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-b2b198fad5c14ee58b6a.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/chart-b2b198fad5c14ee58b6a.jpg)
Value on October 31, 2021 | |||||
Investor Class — $44,576 | |||||
S&P 500 Index — $44,939 | |||||
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 | ||||||||||||||||||
0.79% | 0.59% | 0.44% | 1.04% | 1.79% | 1.29% | 0.59% | 0.44% | 0.44% |
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: Justin Brown, Joe Reiland and Rob Bove
Greg Woodhams left the portfolio management team September 1, 2021. He is retiring, effective December 31, 2021.
Performance Summary
Sustainable Equity returned 43.50%* for the 12 months ended October 31, 2021, outpacing the 42.91% return of the fund’s benchmark, the S&P 500 Index.
U.S. stocks posted strong returns during the reporting period, supported by federal government stimulus and low interest rates. The rollout of COVID-19 vaccines allowed the economy to reopen, and despite concerns about the delta variant, inflationary pressures and supply chain constraints, several market indices ended the 12-month period at record highs. Within the S&P 500 Index, all sectors posted strong gains, led by energy, which surged on demand and limited supply as the economy began to reopen. Utilities was the weakest sector.
Stock selection in the information technology and communication services sectors helped drive outperformance relative to the benchmark. Stock choices in the materials sector and an underweight allocation to energy detracted.
Information Technology Led Performance
In the information technology sector, stock choices in the semiconductors and semiconductor equipment industry benefited relative performance. ASML Holding, a Netherlands-based semiconductor equipment manufacturer, outperformed due to strong demand for its extreme ultraviolet lithography technology that allows semiconductor manufacturers to make smaller and more efficient chips. Demand for semiconductors has been strong and manufacturers need new equipment to increase production. Other top contributors in the sector included NVIDIA, a gaming and artificial intelligence chipmaker. NVIDIA reported better-than-expected earnings and offered positive forward guidance based on strength in data center and gaming central processing units. Microsoft reported strong revenue and earnings growth, and the stock also received a tailwind from large-capitalization software returning to favor.
Elsewhere, Morgan Stanley’s stock was helped by improving sentiment for financials due to positive vaccine news, recovery hopes and rising interest rates. The recent acquisitions of E-Trade Financial and Eaton Vance are shifting the business toward more wealth and asset management, which we think should be beneficial. ConocoPhillips was a top contributor. The oil giant’s stock price jumped on the announcement that it would buy Royal Dutch Shell’s Permian Basin assets. ConocoPhillips also announced a significant dividend increase.
Materials Stocks Detracted
Stock selection in the materials sector weighed on performance relative to the benchmark. Packaging company Ball was a significant detractor in the sector. While demand for aluminum cans remained strong, the company lagged the broader market earlier in the reporting period on concerns about increasing competition and more recently on supply chain disruptions.
Underweighting Tesla detracted. The electric carmaker continued to benefit from solid fundamental reports and strong demand for its vehicles. The stock also got a boost when it was added to the S&P 500 Index. NextEra Energy underperformed. The company has an attractive renewable energy business but also has a utility segment, and utilities broadly underperformed as they
*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
typically do in a rising rate environment. There was also a notable pullback in clean energy stocks after a very strong year in 2020.
Not owning Exxon Mobil detracted as the oil and gas company benefited from higher oil prices amid increased demand and limited supply. Defense contractor Lockheed Martin lagged despite posting better-than-expected earnings. Investors focused on fewer sales, especially its F-35 fighter, and the company offered disappointing guidance.
Outlook
The portfolio invests in a blend of large value and large growth stocks. We seek to outperform the S&P 500 Index 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 with environmental, social and governance (ESG) metrics.
As of October 31, 2021, 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.
When portfolio managers incorporate Environmental, Social and Governance (ESG) factors into an investment strategy, they consider those issues in conjunction with traditional financial analysis. Therefore, ESG factors may limit the investment opportunities available, and the portfolio may perform differently than those that do not incorporate ESG factors. Portfolio managers have ultimate discretion in how ESG issues may impact a portfolio’s holdings, and depending on their analysis, investment decisions may not be affected by ESG factors.
6
Fund Characteristics |
OCTOBER 31, 2021 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 96.8% | ||||
Temporary Cash Investments | 3.0% | ||||
Other Assets and Liabilities | 0.2% | ||||
Top Five Industries | % of net assets | ||||
Software | 10.5% | ||||
Interactive Media and Services | 6.4% | ||||
Semiconductors and Semiconductor Equipment | 5.7% | ||||
Capital Markets | 4.9% | ||||
IT Services | 4.7% |
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, 2021 to October 31, 2021.
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 5/1/21 | Ending Account Value 10/31/21 | Expenses Paid During Period(1) 5/1/21 - 10/31/21 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,124.20 | $4.23 | 0.79% | ||||||||||
I Class | $1,000 | $1,125.60 | $3.16 | 0.59% | ||||||||||
Y Class | $1,000 | $1,126.30 | $2.36 | 0.44% | ||||||||||
A Class | $1,000 | $1,122.90 | $5.56 | 1.04% | ||||||||||
C Class | $1,000 | $1,119.00 | $9.56 | 1.79% | ||||||||||
R Class | $1,000 | $1,121.60 | $6.90 | 1.29% | ||||||||||
R5 Class | $1,000 | $1,125.50 | $3.16 | 0.59% | ||||||||||
R6 Class | $1,000 | $1,126.50 | $2.36 | 0.44% | ||||||||||
G Class | $1,000 | $1,128.80 | $0.00 | 0.00%(2) | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,021.22 | $4.02 | 0.79% | ||||||||||
I Class | $1,000 | $1,022.23 | $3.01 | 0.59% | ||||||||||
Y Class | $1,000 | $1,022.99 | $2.24 | 0.44% | ||||||||||
A Class | $1,000 | $1,019.96 | $5.30 | 1.04% | ||||||||||
C Class | $1,000 | $1,016.18 | $9.10 | 1.79% | ||||||||||
R Class | $1,000 | $1,018.70 | $6.56 | 1.29% | ||||||||||
R5 Class | $1,000 | $1,022.23 | $3.01 | 0.59% | ||||||||||
R6 Class | $1,000 | $1,022.99 | $2.24 | 0.44% | ||||||||||
G Class | $1,000 | $1,025.21 | $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 365, 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, 2021
Shares | Value | |||||||
COMMON STOCKS — 96.8% | ||||||||
Aerospace and Defense — 0.8% | ||||||||
Lockheed Martin Corp. | 89,367 | $ | 29,698,441 | |||||
Air Freight and Logistics — 1.0% | ||||||||
Expeditors International of Washington, Inc. | 20,109 | 2,478,635 | ||||||
United Parcel Service, Inc., Class B | 175,611 | 37,487,680 | ||||||
39,966,315 | ||||||||
Auto Components — 1.1% | ||||||||
Aptiv plc(1) | 242,050 | 41,848,024 | ||||||
Automobiles — 1.3% | ||||||||
Tesla, Inc.(1) | 45,105 | 50,246,970 | ||||||
Banks — 4.6% | ||||||||
Bank of America Corp. | 1,257,085 | 60,063,521 | ||||||
JPMorgan Chase & Co. | 412,054 | 70,003,854 | ||||||
Regions Financial Corp. | 2,036,813 | 48,231,732 | ||||||
178,299,107 | ||||||||
Beverages — 1.4% | ||||||||
PepsiCo, Inc. | 325,637 | 52,622,939 | ||||||
Biotechnology — 0.6% | ||||||||
Amgen, Inc. | 72,788 | 15,064,932 | ||||||
Vertex Pharmaceuticals, Inc.(1) | 33,914 | 6,271,716 | ||||||
21,336,648 | ||||||||
Building Products — 1.7% | ||||||||
Johnson Controls International plc | 622,880 | 45,700,706 | ||||||
Masco Corp. | 318,390 | 20,870,464 | ||||||
66,571,170 | ||||||||
Capital Markets — 4.9% | ||||||||
Ameriprise Financial, Inc. | 80,779 | 24,405,759 | ||||||
BlackRock, Inc. | 38,532 | 36,353,401 | ||||||
Intercontinental Exchange, Inc. | 129,838 | 17,977,369 | ||||||
Morgan Stanley | 639,044 | 65,680,942 | ||||||
S&P Global, Inc. | 92,885 | 44,042,352 | ||||||
188,459,823 | ||||||||
Chemicals — 2.6% | ||||||||
Air Products and Chemicals, Inc. | 56,303 | 16,880,202 | ||||||
Ecolab, Inc. | 69,562 | 15,458,068 | ||||||
Linde plc | 141,853 | 45,279,477 | ||||||
Sherwin-Williams Co. (The) | 74,934 | 23,724,854 | ||||||
101,342,601 | ||||||||
Communications Equipment — 1.1% | ||||||||
Cisco Systems, Inc. | 722,600 | 40,443,922 | ||||||
Consumer Finance — 0.8% | ||||||||
American Express Co. | 179,152 | 31,133,035 | ||||||
Containers and Packaging — 0.6% | ||||||||
Ball Corp. | 246,732 | 22,571,043 | ||||||
Diversified Telecommunication Services — 0.2% | ||||||||
Verizon Communications, Inc. | 141,935 | 7,521,136 | ||||||
Electric Utilities — 1.8% | ||||||||
NextEra Energy, Inc. | 835,753 | 71,314,803 |
10
Shares | Value | |||||||
Electrical Equipment — 1.3% | ||||||||
Eaton Corp. plc | 159,852 | $ | 26,337,215 | |||||
Rockwell Automation, Inc. | 73,062 | 23,336,003 | ||||||
49,673,218 | ||||||||
Electronic Equipment, Instruments and Components — 2.1% | ||||||||
CDW Corp. | 155,546 | 29,032,661 | ||||||
Cognex Corp. | 198,041 | 17,346,411 | ||||||
Keysight Technologies, Inc.(1) | 188,524 | 33,938,091 | ||||||
80,317,163 | ||||||||
Energy Equipment and Services — 0.9% | ||||||||
Schlumberger NV | 1,119,612 | 36,118,683 | ||||||
Entertainment — 1.8% | ||||||||
Electronic Arts, Inc. | 108,600 | 15,231,150 | ||||||
Walt Disney Co. (The)(1) | 328,667 | 55,567,730 | ||||||
70,798,880 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 2.1% | ||||||||
Prologis, Inc. | 569,321 | 82,528,772 | ||||||
Food and Staples Retailing — 1.5% | ||||||||
Costco Wholesale Corp. | 45,284 | 22,258,898 | ||||||
Sysco Corp. | 465,677 | 35,810,561 | ||||||
58,069,459 | ||||||||
Food Products — 0.7% | ||||||||
Mondelez International, Inc., Class A | 415,712 | 25,250,347 | ||||||
Vital Farms, Inc.(1) | 135,355 | 2,222,529 | ||||||
27,472,876 | ||||||||
Health Care Equipment and Supplies — 1.9% | ||||||||
Edwards Lifesciences Corp.(1) | 311,823 | 37,362,632 | ||||||
Medtronic plc | 231,537 | 27,752,025 | ||||||
ResMed, Inc. | 30,421 | 7,997,985 | ||||||
73,112,642 | ||||||||
Health Care Providers and Services — 3.6% | ||||||||
Cigna Corp. | 176,711 | 37,747,237 | ||||||
CVS Health Corp. | 380,876 | 34,004,609 | ||||||
Humana, Inc. | 35,107 | 16,260,158 | ||||||
UnitedHealth Group, Inc. | 114,338 | 52,649,219 | ||||||
140,661,223 | ||||||||
Hotels, Restaurants and Leisure — 1.8% | ||||||||
Booking Holdings, Inc.(1) | 9,747 | 23,595,342 | ||||||
Chipotle Mexican Grill, Inc.(1) | 10,594 | 18,847,044 | ||||||
Expedia Group, Inc.(1) | 169,868 | 27,927,998 | ||||||
70,370,384 | ||||||||
Household Products — 1.4% | ||||||||
Colgate-Palmolive Co. | 193,008 | 14,705,280 | ||||||
Procter & Gamble Co. (The) | 268,875 | 38,446,436 | ||||||
53,151,716 | ||||||||
Industrial Conglomerates — 1.2% | ||||||||
Honeywell International, Inc. | 205,009 | 44,819,068 | ||||||
Insurance — 1.6% | ||||||||
Marsh & McLennan Cos., Inc. | 137,593 | 22,950,512 | ||||||
Prudential Financial, Inc. | 157,551 | 17,338,488 | ||||||
Travelers Cos., Inc. (The) | 134,134 | 21,579,478 | ||||||
61,868,478 |
11
Shares | Value | |||||||
Interactive Media and Services — 6.4% | ||||||||
Alphabet, Inc., Class A(1) | 67,080 | $ | 198,618,514 | |||||
Meta Platforms, Inc., Class A(1) | 148,865 | 48,168,248 | ||||||
246,786,762 | ||||||||
Internet and Direct Marketing Retail — 3.6% | ||||||||
Amazon.com, Inc.(1) | 41,667 | 140,519,041 | ||||||
IT Services — 4.7% | ||||||||
Accenture plc, Class A | 131,283 | 47,103,028 | ||||||
Mastercard, Inc., Class A | 129,500 | 43,449,840 | ||||||
PayPal Holdings, Inc.(1) | 197,737 | 45,991,649 | ||||||
Visa, Inc., Class A | 213,068 | 45,121,410 | ||||||
181,665,927 | ||||||||
Life Sciences Tools and Services — 2.1% | ||||||||
Agilent Technologies, Inc. | 250,628 | 39,471,404 | ||||||
Thermo Fisher Scientific, Inc. | 64,714 | 40,968,492 | ||||||
80,439,896 | ||||||||
Machinery — 2.1% | ||||||||
Cummins, Inc. | 117,282 | 28,128,915 | ||||||
Parker-Hannifin Corp. | 112,009 | 33,220,749 | ||||||
Xylem, Inc. | 153,606 | 20,059,408 | ||||||
81,409,072 | ||||||||
Media — 0.5% | ||||||||
Comcast Corp., Class A | 382,795 | 19,687,147 | ||||||
Multiline Retail — 0.5% | ||||||||
Target Corp. | 75,846 | 19,691,139 | ||||||
Oil, Gas and Consumable Fuels — 1.2% | ||||||||
ConocoPhillips | 635,873 | 47,366,180 | ||||||
Personal Products — 0.4% | ||||||||
Estee Lauder Cos., Inc. (The), Class A | 52,424 | 17,002,676 | ||||||
Pharmaceuticals — 3.2% | ||||||||
Bristol-Myers Squibb Co. | 580,099 | 33,877,782 | ||||||
Merck & Co., Inc. | 366,421 | 32,263,369 | ||||||
Novo Nordisk A/S, B Shares | 188,432 | 20,662,484 | ||||||
Zoetis, Inc. | 167,457 | 36,204,203 | ||||||
123,007,838 | ||||||||
Professional Services — 0.2% | ||||||||
IHS Markit Ltd. | 60,473 | 7,905,031 | ||||||
Road and Rail — 1.1% | ||||||||
Norfolk Southern Corp. | 80,697 | 23,648,256 | ||||||
Union Pacific Corp. | 75,359 | 18,191,662 | ||||||
41,839,918 | ||||||||
Semiconductors and Semiconductor Equipment — 5.7% | ||||||||
Advanced Micro Devices, Inc.(1) | 188,401 | 22,651,452 | ||||||
Applied Materials, Inc. | 245,150 | 33,499,748 | ||||||
ASML Holding NV | 47,501 | 38,613,544 | ||||||
NVIDIA Corp. | 342,806 | 87,645,210 | ||||||
Texas Instruments, Inc. | 208,563 | 39,101,391 | ||||||
221,511,345 | ||||||||
Software — 10.5% | ||||||||
Adobe, Inc.(1) | 58,054 | 37,756,000 | ||||||
Microsoft Corp. | 963,579 | 319,542,068 | ||||||
salesforce.com, Inc.(1) | 91,019 | 27,277,484 |
12
Shares/Principal Amount | Value | |||||||
ServiceNow, Inc.(1) | 13,500 | $ | 9,419,760 | |||||
Workday, Inc., Class A(1) | 39,229 | 11,375,625 | ||||||
405,370,937 | ||||||||
Specialty Retail — 2.8% | ||||||||
Home Depot, Inc. (The) | 194,151 | 72,173,693 | ||||||
TJX Cos., Inc. (The) | 346,067 | 22,663,928 | ||||||
Tractor Supply Co. | 54,350 | 11,803,189 | ||||||
106,640,810 | ||||||||
Technology Hardware, Storage and Peripherals — 3.8% | ||||||||
Apple, Inc. | 989,439 | 148,217,962 | ||||||
Textiles, Apparel and Luxury Goods — 1.6% | ||||||||
Deckers Outdoor Corp.(1) | 33,122 | 13,093,458 | ||||||
NIKE, Inc., Class B | 292,720 | 48,969,129 | ||||||
62,062,587 | ||||||||
TOTAL COMMON STOCKS (Cost $2,324,717,128) | 3,743,462,807 | |||||||
TEMPORARY CASH INVESTMENTS — 3.0% | ||||||||
Federal Farm Credit Discount Notes, 0.00%, 11/1/21(2) | $ | 25,000,000 | 25,000,000 | |||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 11/15/26, valued at $21,140,635), in a joint trading account at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $20,700,955) | 20,700,938 | |||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 1.875% - 4.75%, 2/15/41, valued at $70,395,517), at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $69,015,058) | 69,015,000 | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 2,270,124 | 2,270,124 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $116,986,062) | 116,986,062 | |||||||
TOTAL INVESTMENT SECURITIES — 99.8% (Cost $2,441,703,190) | 3,860,448,869 | |||||||
OTHER ASSETS AND LIABILITIES — 0.2% | 6,147,882 | |||||||
TOTAL NET ASSETS — 100.0% | $ | 3,866,596,751 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
EUR | 706,577 | USD | 819,301 | Credit Suisse AG | 12/31/21 | $ | (1,194) | |||||||||||||
EUR | 613,713 | USD | 714,245 | Credit Suisse AG | 12/31/21 | (3,661) | ||||||||||||||
EUR | 843,855 | USD | 981,104 | Credit Suisse AG | 12/31/21 | (4,052) | ||||||||||||||
EUR | 1,045,735 | USD | 1,217,092 | Credit Suisse AG | 12/31/21 | (6,294) | ||||||||||||||
EUR | 880,194 | USD | 1,030,362 | Credit Suisse AG | 12/31/21 | (11,236) | ||||||||||||||
EUR | 2,087,431 | USD | 2,426,931 | Credit Suisse AG | 12/31/21 | (10,012) | ||||||||||||||
USD | 1,180,888 | EUR | 1,021,509 | Credit Suisse AG | 12/31/21 | (1,860) | ||||||||||||||
USD | 1,373,033 | EUR | 1,183,012 | Credit Suisse AG | 12/31/21 | 3,289 | ||||||||||||||
USD | 791,271 | EUR | 678,314 | Credit Suisse AG | 12/31/21 | 5,889 | ||||||||||||||
USD | 1,566,694 | EUR | 1,348,553 | Credit Suisse AG | 12/31/21 | 5,280 | ||||||||||||||
USD | 34,056,457 | EUR | 28,969,672 | Credit Suisse AG | 12/31/21 | 514,104 | ||||||||||||||
USD | 1,007,301 | EUR | 855,968 | Credit Suisse AG | 12/31/21 | 16,224 | ||||||||||||||
$ | 506,477 |
13
FUTURES CONTRACTS PURCHASED | ||||||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)^ | ||||||||||
S&P 500 E-Mini | 494 | December 2021 | $ | 113,545,900 | $ | 3,702,966 |
^Amount represents value and unrealized appreciation (depreciation).
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
EUR | - | Euro | ||||||
USD | - | United States Dollar |
(1)Non-income producing.
(2)The rate indicated is the yield to maturity at purchase.
See Notes to Financial Statements.
14
Statement of Assets and Liabilities |
OCTOBER 31, 2021 | |||||
Assets | |||||
Investment securities, at value (cost of $2,441,703,190) | $ | 3,860,448,869 | |||
Cash | 491,235 | ||||
Deposits with broker for futures contracts | 5,681,000 | ||||
Receivable for capital shares sold | 1,130,869 | ||||
Receivable for variation margin on futures contracts | 234,650 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 544,786 | ||||
Dividends and interest receivable | 2,896,603 | ||||
Securities lending receivable | 166 | ||||
3,871,428,178 | |||||
Liabilities | |||||
Payable for capital shares redeemed | 3,889,611 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 38,309 | ||||
Accrued management fees | 864,692 | ||||
Distribution and service fees payable | 38,815 | ||||
4,831,427 | |||||
Net Assets | $ | 3,866,596,751 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 2,407,963,792 | |||
Distributable earnings | 1,458,632,959 | ||||
$ | 3,866,596,751 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $835,452,971 | 17,382,672 | $48.06 | ||||||||
I Class, $0.01 Par Value | $469,839,886 | 9,741,803 | $48.23 | ||||||||
Y Class, $0.01 Par Value | $18,938,841 | 391,953 | $48.32 | ||||||||
A Class, $0.01 Par Value | $97,032,288 | 2,031,191 | $47.77* | ||||||||
C Class, $0.01 Par Value | $14,426,783 | 313,727 | $45.99 | ||||||||
R Class, $0.01 Par Value | $18,043,585 | 381,241 | $47.33 | ||||||||
R5 Class, $0.01 Par Value | $5,819,264 | 120,587 | $48.26 | ||||||||
R6 Class, $0.01 Par Value | $46,680,788 | 965,164 | $48.37 | ||||||||
G Class, $0.01 Par Value | $2,360,362,345 | 48,626,147 | $48.54 |
*Maximum offering price $50.68 (net asset value divided by 0.9425).
See Notes to Financial Statements.
15
Statement of Operations |
YEAR ENDED OCTOBER 31, 2021 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $67,087) | $ | 42,604,208 | |||
Interest | 16,045 | ||||
Securities lending, net | 1,915 | ||||
42,622,168 | |||||
Expenses: | |||||
Management fees | 18,496,142 | ||||
Distribution and service fees: | |||||
A Class | 198,815 | ||||
C Class | 120,085 | ||||
R Class | 66,040 | ||||
Directors' fees and expenses | 86,263 | ||||
Other expenses | 21,017 | ||||
18,988,362 | |||||
Fees waived - G Class | (9,440,368) | ||||
9,547,994 | |||||
Net investment income (loss) | 33,074,174 | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 104,264,355 | ||||
Forward foreign currency exchange contract transactions | 562,137 | ||||
Futures contract transactions | 16,994,019 | ||||
Foreign currency translation transactions | (8,287) | ||||
121,812,224 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 1,045,331,990 | ||||
Forward foreign currency exchange contracts | 405,316 | ||||
Futures contracts | 5,986,860 | ||||
Translation of assets and liabilities in foreign currencies | (935) | ||||
1,051,723,231 | |||||
Net realized and unrealized gain (loss) | 1,173,535,455 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 1,206,609,629 |
See Notes to Financial Statements.
16
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2021 AND OCTOBER 31, 2020 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2021 | October 31, 2020 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | 33,074,174 | $ | 28,320,276 | ||||
Net realized gain (loss) | 121,812,224 | (112,981,612) | ||||||
Change in net unrealized appreciation (depreciation) | 1,051,723,231 | 281,635,809 | ||||||
Net increase (decrease) in net assets resulting from operations | 1,206,609,629 | 196,974,473 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (2,859,800) | (3,259,073) | ||||||
I Class | (1,771,656) | (962,442) | ||||||
Y Class | (77,746) | (510,247) | ||||||
A Class | (103,188) | (364,241) | ||||||
C Class | — | (67,854) | ||||||
R Class | — | (31,560) | ||||||
R5 Class | (21,739) | (11,626) | ||||||
R6 Class | (59,111) | (18,679) | ||||||
G Class | (23,737,820) | (14,189,132) | ||||||
Decrease in net assets from distributions | (28,631,060) | (19,414,854) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (43,906,130) | 1,707,601,522 | ||||||
Net increase (decrease) in net assets | 1,134,072,439 | 1,885,161,141 | ||||||
Net Assets | ||||||||
Beginning of period | 2,732,524,312 | 847,363,171 | ||||||
End of period | $ | 3,866,596,751 | $ | 2,732,524,312 |
See Notes to Financial Statements.
17
Notes to Financial Statements |
OCTOBER 31, 2021
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 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.
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 (NAV) 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 NAV 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.
18
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 NAV 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.
19
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.
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, 45% of the shares of the fund. Related parties do not invest in the fund for the purpose of exercising management or control.
20
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, 2021 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | |||||||
Investor Class | 0.750% to 0.790% | 0.79% | ||||||
I Class | 0.550% to 0.590% | 0.59% | ||||||
Y Class | 0.400% to 0.440% | 0.44% | ||||||
A Class | 0.750% to 0.790% | 0.79% | ||||||
C Class | 0.750% to 0.790% | 0.79% | ||||||
R Class | 0.750% to 0.790% | 0.79% | ||||||
R5 Class | 0.550% to 0.590% | 0.59% | ||||||
R6 Class | 0.400% to 0.440% | 0.44% | ||||||
G Class | 0.400% to 0.440% | 0.00%(1) |
(1)Effective annual management fee before waiver was 0.44%.
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, 2021 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. There were no interfund transactions during the period.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended October 31, 2021 were $601,965,108 and $654,904,367, respectively.
21
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2021 | Year ended October 31, 2020 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 230,000,000 | 230,000,000 | ||||||||||||
Sold | 2,943,466 | $ | 119,867,395 | 17,239,793 | $ | 543,096,618 | ||||||||
Issued in reinvestment of distributions | 74,177 | 2,795,217 | 100,919 | 3,228,400 | ||||||||||
Redeemed | (3,342,394) | (138,556,743) | (3,521,917) | (109,408,579) | ||||||||||
(324,751) | (15,894,131) | 13,818,795 | 436,916,439 | |||||||||||
I Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||||||
Sold | 4,571,811 | 189,617,073 | 5,143,550 | 162,491,745 | ||||||||||
Issued in reinvestment of distributions | 43,915 | 1,657,803 | 26,744 | 857,150 | ||||||||||
Redeemed | (2,155,752) | (91,287,995) | (1,372,675) | (42,143,506) | ||||||||||
2,459,974 | 99,986,881 | 3,797,619 | 121,205,389 | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 202,749 | 8,486,726 | 817,327 | 25,138,027 | ||||||||||
Issued in reinvestment of distributions | 2,039 | 77,027 | 15,895 | 509,737 | ||||||||||
Redeemed | (52,839) | (2,276,009) | (2,263,503) | (74,266,512) | ||||||||||
151,949 | 6,287,744 | (1,430,281) | (48,618,748) | |||||||||||
A Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||||||
Sold | 656,928 | 26,696,842 | 333,847 | 10,430,358 | ||||||||||
Issued in reinvestment of distributions | 2,368 | 88,920 | 10,059 | 320,586 | ||||||||||
Redeemed | (262,551) | (10,817,846) | (501,546) | (15,535,923) | ||||||||||
396,745 | 15,967,916 | (157,640) | (4,784,979) | |||||||||||
C Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 111,500 | 4,558,582 | 89,054 | 2,800,693 | ||||||||||
Issued in reinvestment of distributions | — | — | 1,854 | 57,571 | ||||||||||
Redeemed | (112,229) | (4,368,283) | (119,796) | (3,670,138) | ||||||||||
(729) | 190,299 | (28,888) | (811,874) | |||||||||||
R Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 208,379 | 8,474,299 | 215,132 | 6,842,044 | ||||||||||
Issued in reinvestment of distributions | — | — | 997 | 31,560 | ||||||||||
Redeemed | (99,077) | (3,852,366) | (92,477) | (2,693,315) | ||||||||||
109,302 | 4,621,933 | 123,652 | 4,180,289 | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 48,027 | 1,988,519 | 58,252 | 1,990,201 | ||||||||||
Issued in reinvestment of distributions | 344 | 12,998 | 350 | 11,238 | ||||||||||
Redeemed | (22,394) | (924,057) | (7,052) | (207,323) | ||||||||||
25,977 | 1,077,460 | 51,550 | 1,794,116 | |||||||||||
R6 Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||||||
Sold | 1,386,839 | 58,488,762 | 250,249 | 7,873,896 | ||||||||||
Issued in reinvestment of distributions | 1,563 | 59,111 | 582 | 18,679 | ||||||||||
Redeemed | (575,395) | (23,155,920) | (228,865) | (7,676,224) | ||||||||||
813,007 | 35,391,953 | 21,966 | 216,351 | |||||||||||
G Class/Shares Authorized | 525,000,000 | 525,000,000 | ||||||||||||
Sold | 3,978,313 | 167,298,284 | 48,405,679 | 1,575,927,164 | ||||||||||
Issued in reinvestment of distributions | 627,985 | 23,737,820 | 442,167 | 14,189,132 | ||||||||||
Redeemed | (9,001,254) | (382,572,289) | (12,070,100) | (392,611,757) | ||||||||||
(4,394,956) | (191,536,185) | 36,777,746 | 1,197,504,539 | |||||||||||
Net increase (decrease) | (763,482) | $ | (43,906,130) | 52,974,519 | $ | 1,707,601,522 |
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.
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 | $ | 3,684,186,779 | $ | 59,276,028 | — | ||||||
Temporary Cash Investments | 2,270,124 | 114,715,938 | — | ||||||||
$ | 3,686,456,903 | $ | 173,991,966 | — | |||||||
Other Financial Instruments | |||||||||||
Futures Contracts | $ | 3,702,966 | — | — | |||||||
Forward Foreign Currency Exchange Contracts | — | $ | 544,786 | — | |||||||
$ | 3,702,966 | $ | 544,786 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 38,309 | — |
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 $56,671,056 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 $36,528,399.
Value of Derivative Instruments as of October 31, 2021
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* | $ | 234,650 | Payable for variation margin on futures contracts* | — | |||||||||
Foreign Currency Risk | Unrealized appreciation on forward foreign currency exchange contracts | 544,786 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 38,309 | |||||||||
$ | 779,436 | $ | 38,309 |
*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, 2021
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 | $ | 16,994,019 | Change in net unrealized appreciation (depreciation) on futures contracts | $ | 5,986,860 | ||||||||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | 562,137 | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | 405,316 | ||||||||||
$ | 17,556,156 | $ | 6,392,176 |
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
On December 7, 2021, the fund declared and paid a per-share distribution from net realized gains to
shareholders of record on December 6, 2021 of $0.9622 for the Investor Class, I Class, Y Class, A Class, C
Class, R Class, R5 Class, R6 Class and G Class.
On December 7,2021, the fund declared and paid the following per-share distributions from net investment income to shareholders of record on December 6, 2021:
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | G Class | ||||||||||||||||||
$0.1914 | $0.2870 | $0.3587 | $0.0718 | — | — | $0.2870 | $0.3587 | $0.5692 |
The tax character of distributions paid during the years ended October 31, 2021 and October 31, 2020 were as follows:
2021 | 2020 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 28,631,060 | $ | 7,163,302 | ||||
Long-term capital gains | — | $ | 12,251,552 |
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 | $ | 2,464,862,452 | |||
Gross tax appreciation of investments | $ | 1,403,690,412 | |||
Gross tax depreciation of investments | (8,103,995) | ||||
Net tax appreciation (depreciation) of investments | 1,395,586,417 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 365 | ||||
Net tax appreciation (depreciation) | $ | 1,395,586,782 | |||
Undistributed ordinary income | $ | 27,923,499 | |||
Accumulated long-term gains | $ | 74,774,757 | |||
Accumulated short-term capital losses | $ | (39,652,079) |
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. As a result of a shift in ownership of the fund, the utilization of these capital losses in any given year are limited. Any remaining accumulated gains after application of this limitation will be distributed to shareholders.
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $33.63 | 0.19 | 14.40 | 14.59 | (0.16) | — | (0.16) | $48.06 | 43.50% | 0.79% | 0.79% | 0.46% | 0.46% | 18% | $835,453 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $33.75 | 0.27 | 14.44 | 14.71 | (0.23) | — | (0.23) | $48.23 | 43.78% | 0.59% | 0.59% | 0.66% | 0.66% | 18% | $469,840 | ||||||||||||||||||||||||||||||||
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 |
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) | |||||||||||||||||||||||||||||||||
Y Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $33.81 | 0.34 | 14.46 | 14.80 | (0.29) | — | (0.29) | $48.32 | 44.01% | 0.44% | 0.44% | 0.81% | 0.81% | 18% | $18,939 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $33.43 | 0.08 | 14.32 | 14.40 | (0.06) | — | (0.06) | $47.77 | 43.13% | 1.04% | 1.04% | 0.21% | 0.21% | 18% | $97,032 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $32.37 | (0.22) | 13.84 | 13.62 | — | — | — | $45.99 | 42.08% | 1.79% | 1.79% | (0.54)% | (0.54)% | 18% | $14,427 | ||||||||||||||||||||||||||||||||
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 |
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) | |||||||||||||||||||||||||||||||||
R Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $33.15 | (0.02) | 14.20 | 14.18 | — | — | — | $47.33 | 42.78% | 1.29% | 1.29% | (0.04)% | (0.04)% | 18% | $18,044 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $33.77 | 0.27 | 14.45 | 14.72 | (0.23) | — | (0.23) | $48.26 | 43.78% | 0.59% | 0.59% | 0.66% | 0.66% | 18% | $5,819 | ||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $33.84 | 0.32 | 14.50 | 14.82 | (0.29) | — | (0.29) | $48.37 | 44.03% | 0.44% | 0.44% | 0.81% | 0.81% | 18% | $46,681 | ||||||||||||||||||||||||||||||||
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(6) | $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%(7) | $3,979 | ||||||||||||||||||||||||||||||||
G Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $33.97 | 0.53 | 14.49 | 15.02 | (0.45) | — | (0.45) | $48.54 | 44.61% | 0.00%(8) | 0.44% | 1.25% | 0.81% | 18% | $2,360,362 | ||||||||||||||||||||||||||||||||
2020 | $30.64 | 0.54 | 3.18 | 3.72 | (0.19) | (0.20) | (0.39) | $33.97 | 12.21% | 0.00%(8) | 0.48% | 1.67% | 1.19% | 36% | $1,800,919 | ||||||||||||||||||||||||||||||||
2019(6) | $28.05 | 0.37 | 2.22 | 2.59 | — | — | — | $30.64 | 9.23% | 0.00%(4)(8) | 0.49%(4) | 2.04%(4) | 1.55%(4) | 33%(7) | $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)April 1, 2019 (commencement of sale) through October 31, 2019.
(7)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2019.
(8)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, 2021, 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, 2021, 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, 2021, 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.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
December 15, 2021
We have served as the auditor of one or more American Century investment companies since 1997.
30
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.
Jonathan S.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 | 72 | 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) | 72 | Alleghany Corporation | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 72 | 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) | 72 | None |
31
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) | 72 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 72 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 72 | Onto Innovation Inc. (2019 to 2020); Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 107 | 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; Director, ACC and other ACC subsidiaries | 145 | 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.
32
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for 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 | ||||||
John Pak (1968) | General Counsel and Senior Vice President since 2021 | General Counsel and Senior Vice President, ACC (2021 to present). Also serves as General Counsel and Senior Vice President, ACIM, ACS and ACIS. Chief Legal Officer of Investment and Wealth Management, The Bank of New York Mellon (2014 to 2021) | ||||||
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 30, 2021, 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 and its affiliates 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 including without limitation portfolio management and trading services, shareholder and intermediary services, compliance and legal services, fund accounting and financial reporting, and fund share distribution;
•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, COVID-19 pandemic response, vendor management practices, and social justice initiatives;
•the Advisor’s business continuity plans and cyber security practices;
•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.
34
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 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 which include 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
•liquidity monitoring and management
•risk management, including cyber security
•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.
35
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 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.
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 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. In addition, the Board reviewed the Fund’s position relative to the narrower set of its expense group peers. 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.
36
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 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. These portfolio holdings are available on the fund's website at americancentury.com and, upon request, by calling 1-800-345-2021. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov.
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, 2021.
For corporate taxpayers, the fund hereby designates $28,631,060, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2021 as qualified for the corporate dividends received deduction.
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. | ||||||||
©2021 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90971 2112 |
![image8.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image8.jpg)
Annual Report | |||||
October 31, 2021 | |||||
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) |
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 |
![image30.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image30.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended October 31, 2021. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
Economic, Earnings Gains Fueled Rally Among Risk-On Assets
Stocks and other risk-on assets rallied for the 12-month period, despite lingering pandemic-related challenges. Upbeat data on U.S. manufacturing, employment and housing, along with central bank and federal government support and positive vaccine developments, helped boost corporate earnings and promote investor optimism. Outside the U.S., most economies recovered, but generally at a slower pace. Virus outbreaks and slower vaccine rollouts, particularly in emerging markets, led to lingering lockdowns in some regions.
As the period progressed, steady economic gains combined with ongoing monetary and fiscal support, rising energy prices and severe supply chain disruptions pushed global interest rates and inflation higher. In the U.S., year-over-year headline inflation climbed to 6.2% in October 2021, the largest 12-month increase in nearly 31 years.
Late in the period, the Federal Reserve (Fed) confirmed it would start tapering its bond buying in November. Yet despite inflation’s surge, the Fed left short-term interest rates unchanged. Central banks in Europe and the U.K. maintained their supportive interest rate and bond-buying programs as inflation ticked higher.
Overall, stocks delivered stellar performance for the 12-month period, highlighted by the S&P 500 Index’s gain of nearly 43%. Assets offering inflation-fighting potential, including real estate investment trusts, fared even better. Meanwhile, global bonds retreated as interest rates rose. However, emerging markets bonds largely advanced, benefiting from risk-on sentiment.
Several Factors Shaping Market Dynamics
The return to pre-pandemic life is progressing, albeit somewhat cautiously due to COVID-19’s lingering effects. As the economy and markets respond to this fluid backdrop, investors will face opportunities and ongoing challenges. Economic growth, inflation, the virus’s trajectory, supply chain normalization and fiscal and monetary policy likely will sway market dynamics.
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,
![image19.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/image19.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2021 | |||||||||||||||||||||||
Average Annual Returns | |||||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | ||||||||||||||||||
Investor Class | TWCUX | 44.70% | 27.39% | 19.87% | — | 11/2/81 | |||||||||||||||||
Russell 1000 Growth Index | — | 43.21% | 25.47% | 19.41% | — | — | |||||||||||||||||
S&P 500 Index | — | 42.91% | 18.91% | 16.20% | — | — | |||||||||||||||||
I Class | TWUIX | 45.00% | 27.65% | 20.11% | — | 11/14/96 | |||||||||||||||||
Y Class | AULYX | 45.21% | — | — | 27.72% | 4/10/17 | |||||||||||||||||
A Class | TWUAX | 10/2/96 | |||||||||||||||||||||
No sales charge | 44.35% | 27.08% | 19.57% | — | |||||||||||||||||||
With sales charge | 36.06% | 25.58% | 18.86% | — | |||||||||||||||||||
C Class | TWCCX | 43.28% | 26.12% | 18.68% | — | 10/29/01 | |||||||||||||||||
R Class | AULRX | 44.00% | 26.75% | 19.27% | — | 8/29/03 | |||||||||||||||||
R5 Class | AULGX | 45.00% | — | — | 27.53% | 4/10/17 | |||||||||||||||||
R6 Class | AULDX | 45.22% | 27.84% | — | 20.82% | 7/26/13 | |||||||||||||||||
G Class | AULNX | 46.08% | — | — | 38.37% | 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.
C Class shares will automatically convert to A Class shares after being held for approximately eight years. C Class average annual returns do not reflect this conversion.
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, 2011 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-87f91034d7f944f8beda.jpg](https://capedge.com/proxy/N-CSR/0000100334-21-000124/chart-87f91034d7f944f8beda.jpg)
Value on October 31, 2021 | |||||
Investor Class — $61,320 | |||||
Russell 1000 Growth Index — $59,008 | |||||
S&P 500 Index — $44,939 | |||||
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 | ||||||||||||||||||
0.97% | 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 44.70%* for the 12 months ended October 31, 2021, outpacing the 43.21% return of the fund’s benchmark, the Russell 1000 Growth Index.
U.S. stocks posted strong returns during the reporting period, supported by federal government stimulus and low interest rates. The rollout of COVID-19 vaccines allowed the economy to reopen, and despite concerns about the delta variant, inflationary pressures and supply chain constraints, several market indices ended the 12-month period at record highs. Within the Russell 1000 Growth Index, all sectors posted double-digit gains, led by energy, which surged on demand and limited supply as the economy began to reopen. Materials was the weakest sector.
Stock selection in the consumer discretionary sector contributed most to outperformance relative to the benchmark. Stock decisions in the information technology sector detracted.
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. Tesla continued to meet its production goals despite the supply chain constraints. The stock was added to the S&P 500 Index, which gave it a further boost. We view Tesla as an innovative, early stage technology company whose superior products offer advantages over competitors that should help ensure attractive growth well into the future.
Other top contributors included Alphabet. Google’s parent company reported revenue and earnings well above expectations on a strong rebound in advertising spending. Revenue from its YouTube business was especially strong. MSCI, a leading provider of global financial market indices and software, outperformed after posting better-than-expected revenue and earnings. The company enjoyed high recurring revenues and operating margins, and we think it is positioned for long-term growth thanks to its analytics business and role as a key provider of environmental, sustainability and governance data. Square, an early stage mobile payments company, reported better-than-expected earnings. The company benefited from optimism about continued growth trends in its Cash App business, while its merchant-based business showed signs of stabilizing after being negatively impacted by customer shutdowns stemming from COVID-19 restrictions.
We think EOG Resources, a leading U.S. oil and gas exploration and production firm, has created a durable competitive advantage through the use of technology to more efficiently develop production assets. EOG reported strong revenue and earnings growth as rising demand for oil pushed prices higher and led to a rally in the energy sector. Intuitive Surgical was another top contributor. The maker of robotic surgery systems posted revenue and earnings that beat expectations. The company reported strong growth in installations of its da Vinci system amid renewed growth in elective procedures as the pandemic eased.
Information Technology Holdings Detracted
Stock selection in the software industry hampered relative performance in the information technology sector. Underweighting Microsoft relative to the benchmark detracted. The software
*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
giant reported better-than-expected revenue and earnings, aided by the strong performance of its Azure cloud segment. An overweight position in salesforce.com, a leader in enterprise digital transformation, detracted from performance compared with the benchmark. The company has grown organically and through acquisitions, having produced solid results. The stock performed well in absolute terms but rose less than the benchmark.
Elsewhere in information technology, our lack of exposure to NVIDIA detracted from performance compared with the benchmark. We don’t dispute that NVIDIA has a very strong position in certain chips and applications. But from our perspective, we see greater opportunity in the users of the company’s technology that have exceptionally large addressable markets, such as Alphabet, Tesla, Meta Platforms (formerly Facebook) and Amazon, among others.
In IT services, Mastercard and Visa detracted. The credit card companies’ stocks lagged on concerns that the delta variant of COVID-19 might lead to renewed lockdowns that would slow economic growth, impacting consumer spending and travel.
Not owning Moderna detracted from relative performance. The biotechnology company’s stock surged on excitement around its successful COVID-19 vaccine, booster shots and the potential for annual boosters beyond 2021. While we are impressed by the speed of development and effectiveness of Moderna’s messenger RNA drug development technology, the market seemed to be ascribing much long-term value to COVID-19 vaccine revenue, which is highly uncertain in relation to the pandemic.
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 attractive, well-run companies as a result of the application of that philosophy and process. As of October 31, 2021, communication services and health care were the portfolio’s largest overweight allocations relative to the benchmark. Industrials and information technology were the largest underweight sectors.
6
Fund Characteristics |
OCTOBER 31, 2021 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 99.8% | ||||
Temporary Cash Investments | 0.1% | ||||
Other Assets and Liabilities | 0.1% | ||||
Top Five Industries | % of net assets | ||||
IT Services | 14.8% | ||||
Interactive Media and Services | 12.4% | ||||
Technology Hardware, Storage and Peripherals | 11.9% | ||||
Software | 11.0% | ||||
Internet and Direct Marketing Retail | 6.6% |
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, 2021 to October 31, 2021.
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 5/1/21 | Ending Account Value 10/31/21 | Expenses Paid During Period(1) 5/1/21 - 10/31/21 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $1,139.80 | $5.07 | 0.94% | ||||||||||
I Class | $1,000 | $1,140.90 | $3.99 | 0.74% | ||||||||||
Y Class | $1,000 | $1,141.70 | $3.18 | 0.59% | ||||||||||
A Class | $1,000 | $1,138.40 | $6.41 | 1.19% | ||||||||||
C Class | $1,000 | $1,134.00 | $10.43 | 1.94% | ||||||||||
R Class | $1,000 | $1,136.90 | $7.76 | 1.44% | ||||||||||
R5 Class | $1,000 | $1,140.80 | $3.99 | 0.74% | ||||||||||
R6 Class | $1,000 | $1,141.80 | $3.19 | 0.59% | ||||||||||
G Class | $1,000 | $1,145.10 | $0.00 | 0.00%(2) | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,020.47 | $4.79 | 0.94% | ||||||||||
I Class | $1,000 | $1,021.48 | $3.77 | 0.74% | ||||||||||
Y Class | $1,000 | $1,022.23 | $3.01 | 0.59% | ||||||||||
A Class | $1,000 | $1,019.21 | $6.06 | 1.19% | ||||||||||
C Class | $1,000 | $1,015.43 | $9.86 | 1.94% | ||||||||||
R Class | $1,000 | $1,017.95 | $7.32 | 1.44% | ||||||||||
R5 Class | $1,000 | $1,021.48 | $3.77 | 0.74% | ||||||||||
R6 Class | $1,000 | $1,022.23 | $3.01 | 0.59% | ||||||||||
G Class | $1,000 | $1,025.21 | $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 365, 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, 2021
Shares | Value | |||||||
COMMON STOCKS — 99.8% | ||||||||
Automobiles — 5.5% | ||||||||
Tesla, Inc.(1) | 1,087,000 | $ | 1,210,918,000 | |||||
Banks — 1.1% | ||||||||
JPMorgan Chase & Co. | 1,032,435 | 175,400,382 | ||||||
U.S. Bancorp | 998,000 | 60,249,260 | ||||||
235,649,642 | ||||||||
Beverages — 0.9% | ||||||||
Constellation Brands, Inc., Class A | 936,673 | 203,080,073 | ||||||
Biotechnology — 2.3% | ||||||||
Biogen, Inc.(1) | 488,000 | 130,139,840 | ||||||
Regeneron Pharmaceuticals, Inc.(1) | 599,000 | 383,324,060 | ||||||
513,463,900 | ||||||||
Capital Markets — 1.6% | ||||||||
MSCI, Inc. | 537,000 | 357,040,560 | ||||||
Chemicals — 0.2% | ||||||||
Ecolab, Inc. | 239,000 | 53,110,580 | ||||||
Commercial Services and Supplies — 0.5% | ||||||||
Copart, Inc.(1) | 682,000 | 105,907,780 | ||||||
Electrical Equipment — 1.1% | ||||||||
Acuity Brands, Inc. | 710,000 | 145,855,300 | ||||||
Rockwell Automation, Inc. | 275,000 | 87,835,000 | ||||||
233,690,300 | ||||||||
Electronic Equipment, Instruments and Components — 0.6% | ||||||||
Cognex Corp. | 657,000 | 57,546,630 | ||||||
Keyence Corp. | 127,900 | 77,202,323 | ||||||
134,748,953 | ||||||||
Entertainment — 2.9% | ||||||||
Netflix, Inc.(1) | 560,000 | 386,573,600 | ||||||
Roku, Inc.(1) | 310,000 | 94,519,000 | ||||||
Walt Disney Co. (The)(1) | 959,000 | 162,138,130 | ||||||
643,230,730 | ||||||||
Food and Staples Retailing — 1.8% | ||||||||
Costco Wholesale Corp. | 802,820 | 394,618,143 | ||||||
Health Care Equipment and Supplies — 6.1% | ||||||||
ABIOMED, Inc.(1) | 90,000 | 29,883,600 | ||||||
DexCom, Inc.(1) | 217,000 | 135,236,570 | ||||||
Edwards Lifesciences Corp.(1) | 2,108,000 | 252,580,560 | ||||||
IDEXX Laboratories, Inc.(1) | 313,000 | 208,501,820 | ||||||
Insulet Corp.(1) | 183,000 | 56,733,660 | ||||||
Intuitive Surgical, Inc.(1) | 1,826,430 | 659,578,666 | ||||||
1,342,514,876 | ||||||||
Health Care Providers and Services — 2.9% | ||||||||
Guardant Health, Inc.(1) | 287,000 | 33,518,730 | ||||||
UnitedHealth Group, Inc. | 1,336,000 | 615,187,920 | ||||||
648,706,650 | ||||||||
Hotels, Restaurants and Leisure — 2.7% | ||||||||
Chipotle Mexican Grill, Inc.(1) | 205,000 | 364,701,150 |
10
Shares | Value | |||||||
Starbucks Corp. | 1,190,000 | $ | 126,223,300 | |||||
Wingstop, Inc. | 676,000 | 116,589,720 | ||||||
607,514,170 | ||||||||
Household Products — 0.4% | ||||||||
Colgate-Palmolive Co. | 1,252,000 | 95,389,880 | ||||||
Interactive Media and Services — 12.4% | ||||||||
Alphabet, Inc., Class A(1) | 288,955 | 855,572,639 | ||||||
Alphabet, Inc., Class C(1) | 343,000 | 1,017,135,630 | ||||||
Meta Platforms, Inc., Class A(1) | 2,676,000 | 865,873,320 | ||||||
2,738,581,589 | ||||||||
Internet and Direct Marketing Retail — 6.6% | ||||||||
Amazon.com, Inc.(1) | 436,294 | 1,471,370,974 | ||||||
IT Services — 14.8% | ||||||||
Adyen NV(1) | 122,000 | 368,111,716 | ||||||
Mastercard, Inc., Class A | 2,308,875 | 774,673,740 | ||||||
Okta, Inc.(1) | 446,000 | 110,242,280 | ||||||
PayPal Holdings, Inc.(1) | 2,528,716 | 588,154,054 | ||||||
Shopify, Inc., Class A(1) | 220,453 | 323,345,029 | ||||||
Square, Inc., Class A(1) | 1,415,000 | 360,117,500 | ||||||
Visa, Inc., Class A | 3,519,000 | 745,218,630 | ||||||
3,269,862,949 | ||||||||
Machinery — 1.5% | ||||||||
Donaldson Co., Inc. | 704,557 | 42,280,466 | ||||||
Nordson Corp. | 322,200 | 81,906,462 | ||||||
Westinghouse Air Brake Technologies Corp. | 1,365,607 | 123,901,523 | ||||||
Yaskawa Electric Corp. | 1,951,800 | 84,536,475 | ||||||
332,624,926 | ||||||||
Oil, Gas and Consumable Fuels — 0.6% | ||||||||
EOG Resources, Inc. | 1,513,000 | 139,891,980 | ||||||
Personal Products — 1.4% | ||||||||
Estee Lauder Cos., Inc. (The), Class A | 961,000 | 311,681,130 | ||||||
Road and Rail — 0.8% | ||||||||
J.B. Hunt Transport Services, Inc. | 879,000 | 173,330,010 | ||||||
Semiconductors and Semiconductor Equipment — 4.8% | ||||||||
Analog Devices, Inc. | 1,258,000 | 218,250,420 | ||||||
Applied Materials, Inc. | 2,816,000 | 384,806,400 | ||||||
Xilinx, Inc. | 2,595,000 | 467,100,000 | ||||||
1,070,156,820 | ||||||||
Software — 11.0% | ||||||||
DocuSign, Inc.(1) | 1,465,000 | 407,694,850 | ||||||
Microsoft Corp. | 4,520,765 | 1,499,176,089 | ||||||
Paycom Software, Inc.(1) | 312,000 | 170,929,200 | ||||||
salesforce.com, Inc.(1) | 716,000 | 214,578,040 | ||||||
Zscaler, Inc.(1) | 491,000 | 156,560,260 | ||||||
2,448,938,439 | ||||||||
Technology Hardware, Storage and Peripherals — 11.9% | ||||||||
Apple, Inc. | 17,597,356 | 2,636,083,929 | ||||||
Textiles, Apparel and Luxury Goods — 3.4% | ||||||||
lululemon athletica, Inc.(1) | 803,000 | 374,206,030 | ||||||
NIKE, Inc., Class B | 2,302,000 | 385,101,580 | ||||||
759,307,610 | ||||||||
TOTAL COMMON STOCKS (Cost $4,981,639,012) | 22,131,414,593 |
11
Shares | Value | |||||||
TEMPORARY CASH INVESTMENTS — 0.1% | ||||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 11/15/26, valued at $7,271,973), in a joint trading account at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $7,120,732) | $ | 7,120,726 | ||||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 4.75%, 2/15/41, valued at $24,210,776), at 0.01%, dated 10/29/21, due 11/1/21 (Delivery value $23,736,020) | 23,736,000 | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 949,206 | 949,206 | ||||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $31,805,932) | 31,805,932 | |||||||
TOTAL INVESTMENT SECURITIES — 99.9% (Cost $5,013,444,944) | 22,163,220,525 | |||||||
OTHER ASSETS AND LIABILITIES — 0.1% | 13,534,450 | |||||||
TOTAL NET ASSETS — 100.0% | $ | 22,176,754,975 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
EUR | 13,679,250 | USD | 15,904,043 | Credit Suisse AG | 12/31/21 | $ | (65,610) | |||||||||||||
EUR | 6,780,150 | USD | 7,880,039 | Credit Suisse AG | 12/31/21 | (29,685) | ||||||||||||||
EUR | 6,542,250 | USD | 7,571,156 | Credit Suisse AG | 12/31/21 | 3,747 | ||||||||||||||
USD | 249,188,519 | EUR | 211,968,900 | Credit Suisse AG | 12/31/21 | 3,761,660 | ||||||||||||||
USD | 7,820,739 | EUR | 6,740,500 | Credit Suisse AG | 12/31/21 | 16,294 | ||||||||||||||
USD | 10,170,142 | EUR | 8,762,650 | Credit Suisse AG | 12/31/21 | 24,363 | ||||||||||||||
USD | 9,460,169 | EUR | 8,128,250 | Credit Suisse AG | 12/31/21 | 48,926 | ||||||||||||||
JPY | 477,496,950 | USD | 4,284,098 | Bank of America N.A. | 12/30/21 | (91,370) | ||||||||||||||
JPY | 399,317,100 | USD | 3,568,237 | Bank of America N.A. | 12/30/21 | (61,978) | ||||||||||||||
JPY | 397,460,350 | USD | 3,501,916 | Bank of America N.A. | 12/30/21 | (11,961) | ||||||||||||||
USD | 68,375,701 | JPY | 7,489,122,200 | Bank of America N.A. | 12/30/21 | 2,616,435 | ||||||||||||||
$ | 6,210,821 |
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
EUR | - | Euro | ||||||
JPY | - | Japanese Yen | ||||||
USD | - | United States Dollar |
(1)Non-income producing.
See Notes to Financial Statements.
12
Statement of Assets and Liabilities |
OCTOBER 31, 2021 | |||||
Assets | |||||
Investment securities, at value (cost of $5,013,444,944) | $ | 22,163,220,525 | |||
Receivable for investments sold | 20,471,873 | ||||
Receivable for capital shares sold | 4,342,710 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 6,471,425 | ||||
Dividends and interest receivable | 3,836,623 | ||||
Securities lending receivable | 1,501 | ||||
22,198,344,657 | |||||
Liabilities | |||||
Payable for capital shares redeemed | 4,653,818 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 260,604 | ||||
Accrued management fees | 16,578,277 | ||||
Distribution and service fees payable | 96,983 | ||||
21,589,682 | |||||
Net Assets | $ | 22,176,754,975 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 3,716,502,184 | |||
Distributable earnings | 18,460,252,791 | ||||
$ | 22,176,754,975 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $20,198,764,603 | 216,325,905 | $93.37 | ||||||||
I Class, $0.01 Par Value | $841,255,360 | 8,609,026 | $97.72 | ||||||||
Y Class, $0.01 Par Value | $3,098,742 | 31,504 | $98.36 | ||||||||
A Class, $0.01 Par Value | $256,161,414 | 2,911,422 | $87.98* | ||||||||
C Class, $0.01 Par Value | $34,751,066 | 491,246 | $70.74 | ||||||||
R Class, $0.01 Par Value | $41,560,901 | 491,154 | $84.62 | ||||||||
R5 Class, $0.01 Par Value | $370,605 | 3,790 | $97.78 | ||||||||
R6 Class, $0.01 Par Value | $800,781,925 | 8,150,857 | $98.25 | ||||||||
G Class, $0.01 Par Value | $10,359 | 104 | $99.61 |
*Maximum offering price $93.35 (net asset value divided by 0.9425).
See Notes to Financial Statements.
13
Statement of Operations |
YEAR ENDED OCTOBER 31, 2021 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $91,632) | $ | 94,292,394 | |||
Interest | 11,724 | ||||
Securities lending, net | 2,681 | ||||
94,306,799 | |||||
Expenses: | |||||
Management fees | 181,782,838 | ||||
Distribution and service fees: | |||||
A Class | 526,308 | ||||
C Class | 301,442 | ||||
R Class | 175,586 | ||||
Directors' fees and expenses | 497,373 | ||||
Other expenses | 2,010 | ||||
183,285,557 | |||||
Fees waived(1) | (235,683) | ||||
183,049,874 | |||||
Net investment income (loss) | (88,743,075) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 1,435,979,502 | ||||
Forward foreign currency exchange contract transactions | 7,192,579 | ||||
Foreign currency translation transactions | 54,747 | ||||
1,443,226,828 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | 5,638,549,516 | ||||
Forward foreign currency exchange contracts | 5,990,909 | ||||
Translation of assets and liabilities in foreign currencies | (20,190) | ||||
5,644,520,235 | |||||
Net realized and unrealized gain (loss) | 7,087,747,063 | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 6,999,003,988 |
(1)Amount consists of $214,945, $8,885, $32, $2,678, $367, $438, $4, $8,280 and $54 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.
14
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2021 AND OCTOBER 31, 2020 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2021 | October 31, 2020 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (88,743,075) | $ | (48,823,135) | ||||
Net realized gain (loss) | 1,443,226,828 | 523,675,440 | ||||||
Change in net unrealized appreciation (depreciation) | 5,644,520,235 | 3,983,065,119 | ||||||
Net increase (decrease) in net assets resulting from operations | 6,999,003,988 | 4,457,917,424 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (467,326,500) | (497,939,761) | ||||||
I Class | (17,883,963) | (15,792,365) | ||||||
Y Class | (63,933) | (53,531) | ||||||
A Class | (5,531,503) | (5,351,781) | ||||||
C Class | (1,020,550) | (935,790) | ||||||
R Class | (950,777) | (850,029) | ||||||
R5 Class | (8,037) | (4,210) | ||||||
R6 Class | (16,143,769) | (16,454,953) | ||||||
G Class | (216) | (217) | ||||||
Decrease in net assets from distributions | (508,929,248) | (537,382,637) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (280,882,692) | (240,034,647) | ||||||
Net increase (decrease) in net assets | 6,209,192,048 | 3,680,500,140 | ||||||
Net Assets | ||||||||
Beginning of period | 15,967,562,927 | 12,287,062,787 | ||||||
End of period | $ | 22,176,754,975 | $ | 15,967,562,927 |
See Notes to Financial Statements.
15
Notes to Financial Statements |
OCTOBER 31, 2021
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.
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 (NAV) 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 NAV 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 NAV 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). Effective August 1, 2021, the investment advisor agreed to waive a portion of the fund’s management fee such that the management fee does not exceed 0.938% for Investor Class, A Class, C Class and R Class, 0.738% for I Class and R5 Class, and 0.588% for Y Class and R6 Class. The investment advisor expects this waiver arrangement to continue until July 31, 2022 and cannot terminate it prior to such date without the approval of the Board of Directors. 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 before and after waiver for each class for the period ended October 31, 2021 are as follows:
Effective Annual Management Fee | |||||||||||
Management Fee Schedule Range | Before Waiver | After Waiver | |||||||||
Investor Class | 0.800% to 0.990% | 0.95% | 0.95% | ||||||||
I Class | 0.600% to 0.790% | 0.75% | 0.75% | ||||||||
Y Class | 0.450% to 0.640% | 0.60% | 0.60% | ||||||||
A Class | 0.800% to 0.990% | 0.95% | 0.95% | ||||||||
C Class | 0.800% to 0.990% | 0.95% | 0.95% | ||||||||
R Class | 0.800% to 0.990% | 0.95% | 0.95% | ||||||||
R5 Class | 0.600% to 0.790% | 0.75% | 0.75% | ||||||||
R6 Class | 0.450% to 0.640% | 0.60% | 0.60% | ||||||||
G Class | 0.450% to 0.640% | 0.60% | 0.00% |
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, 2021 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. There were no interfund transactions during the period.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended October 31, 2021 were $1,487,255,142 and $2,394,469,317, respectively.
19
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2021 | Year ended October 31, 2020 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 3,000,000,000 | 3,000,000,000 | ||||||||||||
Sold | 7,547,892 | $ | 605,584,773 | 10,005,335 | $ | 565,084,480 | ||||||||
Issued in reinvestment of distributions | 5,974,884 | 441,487,528 | 9,306,297 | 478,901,904 | ||||||||||
Redeemed | (17,884,083) | (1,445,704,546) | (23,598,620) | (1,325,972,063) | ||||||||||
(4,361,307) | (398,632,245) | (4,286,988) | (281,985,679) | |||||||||||
I Class/Shares Authorized | 120,000,000 | 120,000,000 | ||||||||||||
Sold | 2,267,799 | 193,001,088 | 3,516,331 | 210,134,766 | ||||||||||
Issued in reinvestment of distributions | 199,466 | 15,400,784 | 257,034 | 13,774,479 | ||||||||||
Redeemed | (2,356,115) | (195,101,975) | (2,262,344) | (130,239,567) | ||||||||||
111,150 | 13,299,897 | 1,511,021 | 93,669,678 | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 7,722 | 620,293 | 7,598 | 435,257 | ||||||||||
Issued in reinvestment of distributions | 519 | 40,282 | 534 | 28,722 | ||||||||||
Redeemed | (1,275) | (107,897) | (7,612) | (457,476) | ||||||||||
6,966 | 552,678 | 520 | 6,503 | |||||||||||
A Class/Shares Authorized | 60,000,000 | 60,000,000 | ||||||||||||
Sold | 776,974 | 59,920,322 | 873,790 | 47,417,147 | ||||||||||
Issued in reinvestment of distributions | 74,944 | 5,231,113 | 103,252 | 5,038,693 | ||||||||||
Redeemed | (610,136) | (45,317,012) | (747,854) | (39,456,212) | ||||||||||
241,782 | 19,834,423 | 229,188 | 12,999,628 | |||||||||||
C Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 121,827 | 7,492,607 | 194,165 | 8,625,235 | ||||||||||
Issued in reinvestment of distributions | 15,854 | 895,771 | 20,036 | 802,646 | ||||||||||
Redeemed | (121,137) | (7,314,579) | (160,091) | (7,166,955) | ||||||||||
16,544 | 1,073,799 | 54,110 | 2,260,926 | |||||||||||
R Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 209,513 | 15,189,667 | 246,296 | 13,528,987 | ||||||||||
Issued in reinvestment of distributions | 14,033 | 944,041 | 17,503 | 826,153 | ||||||||||
Redeemed | (173,293) | (12,606,839) | (195,157) | (10,614,721) | ||||||||||
50,253 | 3,526,869 | 68,642 | 3,740,419 | |||||||||||
R5 Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 576 | 47,459 | 1,897 | 120,588 | ||||||||||
Issued in reinvestment of distributions | 38 | 2,899 | 45 | 2,404 | ||||||||||
Redeemed | (545) | (43,991) | (28) | (1,589) | ||||||||||
69 | 6,367 | 1,914 | 121,403 | |||||||||||
R6 Class/Shares Authorized | 110,000,000 | 110,000,000 | ||||||||||||
Sold | 3,631,693 | 313,904,796 | 2,682,757 | 161,316,501 | ||||||||||
Issued in reinvestment of distributions | 205,433 | 15,925,151 | 304,162 | 16,339,604 | ||||||||||
Redeemed | (3,016,020) | (250,374,643) | (4,473,539) | (248,503,847) | ||||||||||
821,106 | 79,455,304 | (1,486,620) | (70,847,742) | |||||||||||
G Class/Shares Authorized | 80,000,000 | 80,000,000 | ||||||||||||
Issued in reinvestment of distributions | 2 | 216 | 4 | 217 | ||||||||||
Net increase (decrease) | (3,113,435) | $ | (280,882,692) | (3,908,209) | $ | (240,034,647) |
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 | $ | 21,601,564,079 | $ | 529,850,514 | — | ||||||
Temporary Cash Investments | 949,206 | 30,856,726 | — | ||||||||
$ | 21,602,513,285 | $ | 560,707,240 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 6,471,425 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 260,604 | — |
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 $245,965,800.
21
The value of foreign currency risk derivative instruments as of October 31, 2021, is disclosed on the Statement of Assets and Liabilities as an asset of $6,471,425 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $260,604 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended October 31, 2021, the effect of foreign currency risk derivative instruments on the Statement of Operations was $7,192,579 in net realized gain (loss) on forward foreign currency exchange contract transactions and $5,990,909 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 7, 2021, the fund declared and paid a per-share distribution from net realized gains to shareholders of record on December 6, 2021 of $5.9406 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, 2021 and October 31, 2020 were as follows:
2021 | 2020 | |||||||
Distributions Paid From | ||||||||
Ordinary income | — | — | ||||||
Long-term capital gains | $ | 508,929,248 | $ | 537,382,637 |
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 | $ | 5,022,224,596 | |||
Gross tax appreciation of investments | $ | 17,167,883,533 | |||
Gross tax depreciation of investments | (26,887,604) | ||||
Net tax appreciation (depreciation) of investments | 17,140,995,929 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (18,832) | ||||
Net tax appreciation (depreciation) | $ | 17,140,977,097 | |||
Undistributed ordinary income | — | ||||
Accumulated long-term gains | $ | 1,405,938,756 | |||
Late-year ordinary loss deferral | $ | (86,663,062) |
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 | 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 | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $66.38 | (0.38) | 29.49 | 29.11 | — | (2.12) | (2.12) | $93.37 | 44.70% | 0.95% | 0.95% | (0.47)% | (0.47)% | 8% | $20,198,765 | ||||||||||||||||||||||||||||||||
2020 | $50.27 | (0.21) | 18.55 | 18.34 | — | (2.23) | (2.23) | $66.38 | 37.77% | 0.97% | 0.97% | (0.36)% | (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% | 0.97% | (0.13)% | (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% | 0.97% | (0.12)% | (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% | 0.98% | 0.17% | 0.17% | 16% | $9,593,102 | ||||||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $69.25 | (0.23) | 30.82 | 30.59 | — | (2.12) | (2.12) | $97.72 | 45.00% | 0.75% | 0.75% | (0.27)% | (0.27)% | 8% | $841,255 | ||||||||||||||||||||||||||||||||
2020 | $52.25 | (0.10) | 19.33 | 19.23 | — | (2.23) | (2.23) | $69.25 | 38.05% | 0.77% | 0.77% | (0.16)% | (0.16)% | 6% | $588,451 | ||||||||||||||||||||||||||||||||
2019 | $49.39 | 0.03 | 6.16 | 6.19 | — | (3.33) | (3.33) | $52.25 | 14.05% | 0.77% | 0.77% | 0.07% | 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% | 0.77% | 0.08% | 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% | 0.78% | 0.37% | 0.37% | 16% | $322,059 |
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) | |||||||||||||||||||||||||||||||||
Y Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $69.59 | (0.11) | 31.00 | 30.89 | — | (2.12) | (2.12) | $98.36 | 45.21% | 0.60% | 0.60% | (0.12)% | (0.12)% | 8% | $3,099 | ||||||||||||||||||||||||||||||||
2020 | $52.42 | (0.01) | 19.41 | 19.40 | — | (2.23) | (2.23) | $69.59 | 38.26% | 0.62% | 0.62% | (0.01)% | (0.01)% | 6% | $1,708 | ||||||||||||||||||||||||||||||||
2019 | $49.47 | 0.10 | 6.18 | 6.28 | — | (3.33) | (3.33) | $52.42 | 14.22% | 0.62% | 0.62% | 0.22% | 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% | 0.62% | 0.23% | 0.23% | 17% | $944 | ||||||||||||||||||||||||||||||||
2017(3) | $39.40 | 0.10 | 6.57 | 6.67 | — | — | — | $46.07 | 16.93% | 0.63%(4) | 0.63%(4) | 0.43%(4) | 0.43%(4) | 16%(5) | $6 | ||||||||||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $62.81 | (0.56) | 27.85 | 27.29 | — | (2.12) | (2.12) | $87.98 | 44.35% | 1.20% | 1.20% | (0.72)% | (0.72)% | 8% | $256,161 | ||||||||||||||||||||||||||||||||
2020 | $47.79 | (0.34) | 17.59 | 17.25 | — | (2.23) | (2.23) | $62.81 | 37.43% | 1.22% | 1.22% | (0.61)% | (0.61)% | 6% | $167,682 | ||||||||||||||||||||||||||||||||
2019 | $45.67 | (0.17) | 5.62 | 5.45 | — | (3.33) | (3.33) | $47.79 | 13.54% | 1.22% | 1.22% | (0.38)% | (0.38)% | 13% | $116,630 | ||||||||||||||||||||||||||||||||
2018 | $42.80 | (0.17) | 5.58 | 5.41 | — | (2.54) | (2.54) | $45.67 | 13.15% | 1.22% | 1.22% | (0.37)% | (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% | 1.23% | (0.08)% | (0.08)% | 16% | $83,130 | ||||||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $51.23 | (0.91) | 22.54 | 21.63 | — | (2.12) | (2.12) | $70.74 | 43.28% | 1.95% | 1.95% | (1.47)% | (1.47)% | 8% | $34,751 | ||||||||||||||||||||||||||||||||
2020 | $39.65 | (0.62) | 14.43 | 13.81 | — | (2.23) | (2.23) | $51.23 | 36.39% | 1.97% | 1.97% | (1.36)% | (1.36)% | 6% | $24,320 | ||||||||||||||||||||||||||||||||
2019 | $38.77 | (0.43) | 4.64 | 4.21 | — | (3.33) | (3.33) | $39.65 | 12.69% | 1.97% | 1.97% | (1.13)% | (1.13)% | 13% | $16,676 | ||||||||||||||||||||||||||||||||
2018 | $36.96 | (0.45) | 4.80 | 4.35 | — | (2.54) | (2.54) | $38.77 | 12.32% | 1.97% | 1.97% | (1.12)% | (1.12)% | 17% | $10,700 | ||||||||||||||||||||||||||||||||
2017 | $30.17 | (0.28) | 8.67 | 8.39 | — | (1.60) | (1.60) | $36.96 | 29.12% | 1.98% | 1.98% | (0.83)% | (0.83)% | 16% | $5,359 |
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) | |||||||||||||||||||||||||||||||||
R Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $60.62 | (0.72) | 26.84 | 26.12 | — | (2.12) | (2.12) | $84.62 | 44.00% | 1.45% | 1.45% | (0.97)% | (0.97)% | 8% | $41,561 | ||||||||||||||||||||||||||||||||
2020 | $46.31 | (0.46) | 17.00 | 16.54 | — | (2.23) | (2.23) | $60.62 | 37.08% | 1.47% | 1.47% | (0.86)% | (0.86)% | 6% | $26,729 | ||||||||||||||||||||||||||||||||
2019 | $44.47 | (0.28) | 5.45 | 5.17 | — | (3.33) | (3.33) | $46.31 | 13.26% | 1.47% | 1.47% | (0.63)% | (0.63)% | 13% | $17,240 | ||||||||||||||||||||||||||||||||
2018 | $41.84 | (0.28) | 5.45 | 5.17 | — | (2.54) | (2.54) | $44.47 | 12.87% | 1.47% | 1.47% | (0.62)% | (0.62)% | 17% | $15,137 | ||||||||||||||||||||||||||||||||
2017 | $33.79 | (0.12) | 9.77 | 9.65 | — | (1.60) | (1.60) | $41.84 | 29.75% | 1.48% | 1.48% | (0.33)% | (0.33)% | 16% | $11,345 | ||||||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $69.29 | (0.23) | 30.84 | 30.61 | — | (2.12) | (2.12) | $97.78 | 45.00% | 0.75% | 0.75% | (0.27)% | (0.27)% | 8% | $371 | ||||||||||||||||||||||||||||||||
2020 | $52.28 | (0.12) | 19.36 | 19.24 | — | (2.23) | (2.23) | $69.29 | 38.05% | 0.77% | 0.77% | (0.16)% | (0.16)% | 6% | $258 | ||||||||||||||||||||||||||||||||
2019 | $49.42 | 0.01 | 6.18 | 6.19 | — | (3.33) | (3.33) | $52.28 | 14.04% | 0.77% | 0.77% | 0.07% | 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% | 0.77% | 0.08% | 0.08% | 17% | $7 | ||||||||||||||||||||||||||||||||
2017(3) | $39.41 | 0.07 | 6.56 | 6.63 | — | — | — | $46.04 | 16.82% | 0.78%(4) | 0.78%(4) | 0.28%(4) | 0.28%(4) | 16%(5) | $6 | ||||||||||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $69.51 | (0.11) | 30.97 | 30.86 | — | (2.12) | (2.12) | $98.25 | 45.22% | 0.60% | 0.60% | (0.12)% | (0.12)% | 8% | $800,782 | ||||||||||||||||||||||||||||||||
2020 | $52.36 | —(6) | 19.38 | 19.38 | — | (2.23) | (2.23) | $69.51 | 38.26% | 0.62% | 0.62% | (0.01)% | (0.01)% | 6% | $509,484 | ||||||||||||||||||||||||||||||||
2019 | $49.42 | 0.10 | 6.17 | 6.27 | — | (3.33) | (3.33) | $52.36 | 14.22% | 0.62% | 0.62% | 0.22% | 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% | 0.62% | 0.23% | 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% | 0.63% | 0.52% | 0.52% | 16% | $233,309 |
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2021 | $70.04 | 0.42 | 31.27 | 31.69 | — | (2.12) | (2.12) | $99.61 | 46.08% | 0.00%(7) | 0.60% | 0.48% | (0.12)% | 8% | $10 | ||||||||||||||||||||||||||||||||
2020 | $52.44 | 0.37 | 19.46 | 19.83 | — | (2.23) | (2.23) | $70.04 | 39.09% | 0.01% | 0.62% | 0.60% | (0.01)% | 6% | $7 | ||||||||||||||||||||||||||||||||
2019(8) | $51.28 | 0.10 | 1.06 | 1.16 | — | — | — | $52.44 | 2.26% | 0.00%(4)(7) | 0.62%(4) | 0.78%(4) | 0.16%(4) | 13%(9) | $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)Ratio was less than 0.005%.
(8)August 1, 2019 (commencement of sale) through October 31, 2019.
(9)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, 2021, 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, 2021, 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, 2021, 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.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
December 15, 2021
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.
Jonathan S.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 | 72 | 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) | 72 | Alleghany Corporation | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 72 | 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) | 72 | 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) | 72 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 72 | None | ||||||||||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 72 | Onto Innovation Inc. (2019 to 2020); Rudolph Technologies, Inc. (2006 to 2019) | ||||||||||||
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 107 | 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; Director, ACC and other ACC subsidiaries | 145 | 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 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 | ||||||
John Pak (1968) | General Counsel and Senior Vice President since 2021 | General Counsel and Senior Vice President, ACC (2021 to present). Also serves as General Counsel and Senior Vice President, ACIM, ACS and ACIS. Chief Legal Officer of Investment and Wealth Management, The Bank of New York Mellon (2014 to 2021) | ||||||
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 30, 2021, 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 and its affiliates 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 including without limitation portfolio management and trading services, shareholder and intermediary services, compliance and legal services, fund accounting and financial reporting, and fund share distribution;
•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, COVID-19 pandemic response, vendor management practices, and social justice initiatives;
•the Advisor’s business continuity plans and cyber security practices;
•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 and formed a subcommittee to evaluate the Fund’s competitive market. 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.
31
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 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 which include 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
•liquidity monitoring and management
•risk management, including cyber security
•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.
32
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 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.
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 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 above the median of the total expense ratios of the Fund’s peer expense universe. In addition, the Board reviewed the Fund’s position relative to the narrower set of its expense group peers. The Board and the Advisor agreed to a temporary reduction of the Fund's fee schedule that should have the effect of lowering the Fund's annual unified management fee by approximately 0.032% (e.g., the Investor Class unified fee will be reduced from 0.97% to 0.938%), for at least one year, beginning August 1, 2021. 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.
33
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 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.
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. These portfolio holdings are available on the fund's website at americancentury.com and, upon request, by calling 1-800-345-2021. The fund’s Form N-PORT reports are available on the SEC’s website at sec.gov.
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Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates $508,929,248, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2021.
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Contact Us | americancentury.com | |||||||
Automated Information Line | 1-800-345-8765 | |||||||
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |||||||
Investors Using Advisors | 1-800-378-9878 | |||||||
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |||||||
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |||||||
Telecommunications Relay Service for the Deaf | 711 | |||||||
American Century 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. | ||||||||
©2021 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90975 2112 |
(b) None.
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, Chris H. Cheesman, Lynn M. Jenkins and Barry Fink 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 2020: $199,255
FY 2021: $162,200
(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 2020: $0
FY 2021: $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 2020: $0
FY 2021: $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 2020: $0
FY 2021: $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 2020: $0
FY 2021: $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 2020: $0
FY 2021: $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 2020: $0
FY 2021: $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 2020: $0
FY 2021: $2,832,126
(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 29, 2021 |
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 29, 2021 |
By: | /s/ R. Wes Campbell | |||||||
Name: | R. Wes Campbell | |||||||
Title: | Treasurer and | |||||||
Chief Financial Officer | ||||||||
(principal financial officer) | ||||||||
Date: | December 29, 2021 |