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: | 10-31-2022 |
ITEM 1. REPORTS TO STOCKHOLDERS.
(a) Provided under separate cover.
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Annual Report | |||||
October 31, 2022 | |||||
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 | |||||
Proxy Voting Results | |||||
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 ending October 31, 2022. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
High Inflation, Rising Rates, Volatility Challenged Investors
The broad economic and investment backdrops grew knottier as the fiscal year progressed. Challenges began to surface early in the period, as the Federal Reserve (Fed) and other central banks finally admitted inflation was entrenched rather than transitory. Investors grew more cautious amid growing expectations for less accommodative monetary policy in the new year.
By early 2022, inflation soared to levels last seen in the early 1980s. Massive fiscal and monetary support unleashed during the pandemic was partly to blame. In addition, escalating energy prices, supply chain breakdowns, labor market shortages and Russia’s invasion of Ukraine further aggravated the inflation backdrop.
The Fed responded to surging inflation with a rate hike in March, three months after the Bank of England (BofE) launched its tightening campaign. Through October, the Fed lifted rates a total of 3 percentage points, while the BofE hiked 2.9 percentage points. The European Central Bank (ECB) waited until July to start tightening. Facing record-high inflation, the ECB raised rates 2 percentage points through October.
In addition to fostering recession risk, the combination of elevated inflation and hawkish central banks helped push bond yields sharply higher and stock prices significantly lower. Amid persistent market unrest, most stock, bond and real estate indices ended the 12-month period with steep losses. While U.S. stock returns were broadly negative, growth stocks significantly underperformed their value stock peers.
Staying Disciplined in Uncertain Times
We expect market volatility to linger as investors navigate a complex environment of high inflation, rising interest rates and economic uncertainty. In addition, Russia’s invasion of Ukraine complicates an increasingly tense geopolitical backdrop and threatens global energy markets. We will continue to monitor this evolving situation and what it broadly means for investors across asset classes.
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,
![image27.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image27.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2022 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |||||||||||||||
Investor Class | TWBIX | -16.94% | 4.62% | 6.60% | — | 10/20/88 | ||||||||||||||
Blended Index | — | -14.73% | 6.30% | 8.07% | — | — | ||||||||||||||
S&P 500 Index | — | -14.61% | 10.44% | 12.78% | — | — | ||||||||||||||
Bloomberg U.S. Aggregate Bond Index | — | -15.68% | -0.54% | 0.74% | — | — | ||||||||||||||
I Class | ABINX | -16.76% | 4.82% | 6.82% | — | 5/1/00 | ||||||||||||||
R5 Class | ABGNX | -16.76% | 4.83% | — | 5.64% | 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, 2012 | ||
Performance for other share classes will vary due to differences in fee structure. |
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Value on October 31, 2022 | |||||
Investor Class — $18,950 | |||||
Blended Index — $21,735 | |||||
S&P 500 Index — $33,308 | |||||
Bloomberg U.S. Aggregate Bond Index — $10,764 | |||||
Total Annual Fund Operating Expenses | ||||||||
Investor Class | I Class | R5 Class | ||||||
0.90% | 0.70% | 0.70% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. 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
Fixed-Income Portfolio Managers: Bob Gahagan, Charles Tan and Jason Greenblath
Performance Summary
Balanced returned -16.94%* for the 12 months ended October 31, 2022. 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 -14.73%.
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. Unfortunately, however, fixed-income markets endured one of the worst stretches on record during the fiscal year due to concerns about surging inflation and aggressive tightening of Federal Reserve (Fed) policy. In that environment, both the equity and fixed-income portions of the portfolio declined in absolute terms and underperformed their benchmarks.
Information Technology Hampered Equity Performance
Significant detractors in the information technology sector included Apple, which beat analysts’ expectations on both revenues and earnings. Our underweight allocation to the consumer electronics giant hurt relative performance. PayPal Holdings delivered quarterly results and forward guidance below expectations, with deceleration in key metrics. We eliminated our position in the digital payments company due to lower engagement trends following the pandemic, as well as management’s poor execution on margins and several growth initiatives. Microsoft was hurt by foreign exchange headwinds, COVID-19-related shutdowns in China that limited personal computer (PC) inventory and a deterioration in PC demand.
Aptiv, an Ireland-based automotive technology supplier, underperformed following Russia’s invasion of Ukraine on concerns about production disruptions, higher commodity costs, continued supply chain constraints and negative impacts to European automobile demand. Not owning Exxon Mobil and Chevron detracted from performance compared with the benchmark as their stocks rose on higher fossil fuel prices following Russia’s invasion of Ukraine.
Communication Services Stocks Benefited Equity Performance
During the period, we eliminated the stock of Facebook’s parent Meta Platforms, which has been hurt more than other digital advertising platforms by both Apple iOS platform changes and TikTok competition. The fund’s resulting underweight helped performance in the communication services sector as the stock fell sharply. Not owning Netflix also benefited relative performance. The streaming video service announced more layoffs amid weak subscriber growth. An expected renormalization of subscriber growth following the gains of the pandemic has not materialized.
Elsewhere, our holding of ConocoPhillips was a top contributor. This is consistent with our process, which uses a proprietary multifactor model that considers a company's financial metrics and environmental, social and governance (ESG) characteristics. Rather than exclude certain sectors entirely, our process seeks to identify the most attractive companies within their respective sectors. Our approach led us to overweight positions in select energy companies. The oil giant reported solid quarterly earnings and increased its 2022 capital return guidance by 50%. The management
*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
team continues to demonstrate strong execution and capital return discipline. Schlumberger, the Netherlands-based oil field services company, benefited from the jump in fossil fuel prices stemming from Russia’s invasion in Ukraine, which disrupted energy markets by calling into question global supply chains, with an acute focus on Europe.
In addition, managed care companies, including Cigna, benefited from what many investors perceive to be their defensive profile, meaning they are believed to be relatively insulated from both rising prices and recession risk. Our research also indicates that Cigna’s pharmacy benefit division may benefit from new biosimilar pharmaceutical launches in the coming years. Defense contractor Lockheed Martin was another solid contributor. The defense group experienced relative outperformance as investors rotated to lower growth and more defensive names. Russia’s invasion of Ukraine sparked additional outperformance for the stock on expectations that rising geopolitical tensions will lead to higher global defense spending.
Bonds Also Endured Difficult Performance
Inflation surged to a four-decade high during the period, and the Fed raised rates at the fastest pace since the early 1980s. In those conditions, bond yields surged and prices fell. The benchmark 10-year Treasury yield began the period at 1.55% and ended the fiscal year at 4.10%, according to Fed data. As a result, fixed-income markets endured one of the worst stretches of performance on record, and all sectors declined. Reflecting the rapid increase in prices and demand for inflation protection, inflation-linked securities held up better than nominal Treasury bonds; corporate bonds finished somewhere in between, as measured by the Bloomberg bond indices. In that environment, the fixed-income portion of the portfolio declined in absolute terms and underperformed its benchmark.
Outlook
War, inflation and recession risk all suggest difficult, volatile conditions ahead. Markets will continue to deal with the contrasting risks of rising inflation and interest rates, even as the global economy teeters on the verge of recession. The ongoing war in Ukraine also highlights political and economic risks at present. COVID-19, war and tariffs also continue to disrupt global supply chains, putting further upward pressure on prices. 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.
Of course, we understand it can be frustrating when stocks and bonds fall together, but investors should recall that these sorts of balanced portfolios have performed very well over time on both an absolute and risk-adjusted basis. We prefer to think this is a temporary speed bump and that diversification remains the best way to maximize risk-adjusted returns over time.
An investment strategy that focuses on ESG factors seeks to invest, under normal market conditions, in securities that meet certain ESG criteria or standards in an effort to promote sustainable characteristics, in addition to seeking superior, long-term, risk-adjusted returns. This investment focus may limit the investment opportunities available to a portfolio. Therefore, the portfolio may underperform or perform differently than other portfolios that do not have an ESG investment focus.
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Fund Characteristics |
OCTOBER 31, 2022 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 61.5% | ||||
U.S. Treasury Securities | 11.4% | ||||
Corporate Bonds | 9.6% | ||||
U.S. Government Agency Mortgage-Backed Securities | 8.7% | ||||
Collateralized Loan Obligations | 2.6% | ||||
Asset-Backed Securities | 2.5% | ||||
Collateralized Mortgage Obligations | 1.6% | ||||
Commercial Mortgage-Backed Securities | 0.7% | ||||
Municipal Securities | 0.6% | ||||
U.S. Government Agency Securities | 0.3% | ||||
Sovereign Governments and Agencies | 0.1% | ||||
Exchange-Traded Funds | 0.1% | ||||
Bank Loan Obligations | 0.1% | ||||
Short-Term Investments | 1.5% | ||||
Other Assets and Liabilities | (1.3)% | ||||
Top Five Common Stocks Industries* | % of net assets | ||||
Software | 5.5% | ||||
Health Care Providers and Services | 3.6% | ||||
Technology Hardware, Storage and Peripherals | 3.0% | ||||
Semiconductors and Semiconductor Equipment | 2.8% | ||||
Pharmaceuticals | 2.8% |
*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, 2022 to October 31, 2022.
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 mutual 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 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 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 5/1/22 | Ending Account Value 10/31/22 | Expenses Paid During Period(1) 5/1/22 - 10/31/22 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $938.70 | $4.50 | 0.92% | ||||||||||
I Class | $1,000 | $939.60 | $3.52 | 0.72% | ||||||||||
R5 Class | $1,000 | $939.60 | $3.52 | 0.72% | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,020.57 | $4.69 | 0.92% | ||||||||||
I Class | $1,000 | $1,021.58 | $3.67 | 0.72% | ||||||||||
R5 Class | $1,000 | $1,021.58 | $3.67 | 0.72% |
(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, 2022
Shares/ Principal Amount | Value | |||||||
COMMON STOCKS — 61.5% | ||||||||
Aerospace and Defense — 0.9% | ||||||||
Lockheed Martin Corp. | 14,643 | $ | 7,126,455 | |||||
Air Freight and Logistics — 0.5% | ||||||||
United Parcel Service, Inc., Class B | 25,298 | 4,244,245 | ||||||
Auto Components — 0.4% | ||||||||
Aptiv PLC(1) | 40,600 | 3,697,442 | ||||||
Automobiles — 0.9% | ||||||||
Tesla, Inc.(1) | 31,935 | 7,266,490 | ||||||
Banks — 2.1% | ||||||||
Bank of America Corp. | 51,623 | 1,860,493 | ||||||
JPMorgan Chase & Co. | 62,630 | 7,883,865 | ||||||
Regions Financial Corp. | 334,736 | 7,347,455 | ||||||
17,091,813 | ||||||||
Beverages — 1.1% | ||||||||
PepsiCo, Inc. | 52,519 | 9,536,400 | ||||||
Biotechnology — 1.6% | ||||||||
AbbVie, Inc. | 43,677 | 6,394,313 | ||||||
Amgen, Inc. | 13,245 | 3,580,786 | ||||||
Vertex Pharmaceuticals, Inc.(1) | 9,439 | 2,944,968 | ||||||
12,920,067 | ||||||||
Building Products — 1.0% | ||||||||
Johnson Controls International PLC | 101,421 | 5,866,191 | ||||||
Masco Corp. | 52,802 | 2,443,148 | ||||||
8,309,339 | ||||||||
Capital Markets — 2.7% | ||||||||
Ameriprise Financial, Inc. | 13,154 | 4,066,165 | ||||||
BlackRock, Inc. | 7,524 | 4,859,827 | ||||||
Intercontinental Exchange, Inc. | 26,961 | 2,576,663 | ||||||
Morgan Stanley | 100,014 | 8,218,150 | ||||||
S&P Global, Inc. | 9,201 | 2,955,821 | ||||||
22,676,626 | ||||||||
Chemicals — 1.4% | ||||||||
Air Products and Chemicals, Inc. | 11,206 | 2,805,982 | ||||||
Ecolab, Inc. | 15,310 | 2,404,742 | ||||||
Linde PLC | 22,975 | 6,831,616 | ||||||
12,042,340 | ||||||||
Communications Equipment — 1.2% | ||||||||
Cisco Systems, Inc. | 215,188 | 9,775,991 | ||||||
Consumer Finance — 0.3% | ||||||||
American Express Co. | 18,652 | 2,768,889 | ||||||
Containers and Packaging — 0.3% | ||||||||
Ball Corp. | 52,283 | 2,582,257 | ||||||
Diversified Telecommunication Services — 0.6% | ||||||||
Verizon Communications, Inc. | 138,953 | 5,192,674 | ||||||
Electric Utilities — 1.3% | ||||||||
NextEra Energy, Inc. | 134,363 | 10,413,132 |
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Shares/ Principal Amount | Value | |||||||
Electrical Equipment — 0.8% | ||||||||
Eaton Corp. PLC | 26,279 | $ | 3,943,689 | |||||
Generac Holdings, Inc.(1) | 6,580 | 762,688 | ||||||
Rockwell Automation, Inc. | 8,276 | 2,112,863 | ||||||
6,819,240 | ||||||||
Electronic Equipment, Instruments and Components — 1.4% | ||||||||
CDW Corp. | 28,767 | 4,971,225 | ||||||
Cognex Corp. | 22,152 | 1,024,087 | ||||||
Keysight Technologies, Inc.(1) | 30,511 | 5,313,491 | ||||||
11,308,803 | ||||||||
Energy Equipment and Services — 1.5% | ||||||||
Schlumberger NV | 241,127 | 12,545,838 | ||||||
Entertainment — 0.9% | ||||||||
Electronic Arts, Inc. | 17,904 | 2,255,188 | ||||||
Liberty Media Corp.-Liberty Formula One, Class C(1) | 20,109 | 1,160,892 | ||||||
Walt Disney Co.(1) | 40,637 | 4,329,466 | ||||||
7,745,546 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 1.3% | ||||||||
Prologis, Inc. | 96,642 | 10,703,101 | ||||||
Food and Staples Retailing — 1.7% | ||||||||
Costco Wholesale Corp. | 7,134 | 3,577,701 | ||||||
Kroger Co. | 75,667 | 3,578,293 | ||||||
Sysco Corp. | 76,915 | 6,657,762 | ||||||
13,813,756 | ||||||||
Food Products — 0.5% | ||||||||
Mondelez International, Inc., Class A | 68,629 | 4,219,311 | ||||||
Vital Farms, Inc.(1) | 25,270 | 334,575 | ||||||
4,553,886 | ||||||||
Health Care Equipment and Supplies — 0.7% | ||||||||
Edwards Lifesciences Corp.(1) | 54,222 | 3,927,299 | ||||||
Medtronic PLC | 9,368 | 818,201 | ||||||
ResMed, Inc. | 5,108 | 1,142,609 | ||||||
5,888,109 | ||||||||
Health Care Providers and Services — 3.6% | ||||||||
Cigna Corp. | 29,026 | 9,377,140 | ||||||
CVS Health Corp. | 63,799 | 6,041,765 | ||||||
Humana, Inc. | 5,779 | 3,225,144 | ||||||
UnitedHealth Group, Inc. | 20,720 | 11,502,708 | ||||||
30,146,757 | ||||||||
Hotels, Restaurants and Leisure — 0.6% | ||||||||
Booking Holdings, Inc.(1) | 1,352 | 2,527,537 | ||||||
Chipotle Mexican Grill, Inc.(1) | 855 | 1,281,072 | ||||||
Expedia Group, Inc.(1) | 12,801 | 1,196,510 | ||||||
5,005,119 | ||||||||
Household Products — 1.0% | ||||||||
Colgate-Palmolive Co. | 32,152 | 2,374,104 | ||||||
Procter & Gamble Co. | 44,159 | 5,946,892 | ||||||
8,320,996 | ||||||||
Industrial Conglomerates — 0.6% | ||||||||
Honeywell International, Inc. | 25,045 | 5,109,681 |
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Shares/ Principal Amount | Value | |||||||
Insurance — 1.5% | ||||||||
Marsh & McLennan Cos., Inc. | 26,755 | $ | 4,320,665 | |||||
Prudential Financial, Inc. | 39,577 | 4,163,105 | ||||||
Travelers Cos., Inc. | 21,676 | 3,998,355 | ||||||
12,482,125 | ||||||||
Interactive Media and Services — 2.6% | ||||||||
Alphabet, Inc., Class A(1) | 220,720 | 20,860,247 | ||||||
Alphabet, Inc., Class C(1) | 12,978 | 1,228,498 | ||||||
22,088,745 | ||||||||
Internet and Direct Marketing Retail — 1.6% | ||||||||
Amazon.com, Inc.(1) | 132,115 | 13,533,861 | ||||||
IT Services — 2.7% | ||||||||
Accenture PLC, Class A | 21,547 | 6,117,193 | ||||||
Mastercard, Inc., Class A | 19,230 | 6,310,902 | ||||||
Visa, Inc., Class A | 46,821 | 9,699,438 | ||||||
22,127,533 | ||||||||
Life Sciences Tools and Services — 1.3% | ||||||||
Agilent Technologies, Inc. | 41,066 | 5,681,481 | ||||||
Thermo Fisher Scientific, Inc. | 10,605 | 5,450,652 | ||||||
11,132,133 | ||||||||
Machinery — 1.4% | ||||||||
Cummins, Inc. | 19,361 | 4,733,958 | ||||||
Deere & Co. | 5,823 | 2,304,860 | ||||||
Parker-Hannifin Corp. | 6,524 | 1,896,005 | ||||||
Xylem, Inc. | 26,205 | 2,684,178 | ||||||
11,619,001 | ||||||||
Multiline Retail — 0.3% | ||||||||
Target Corp. | 13,523 | 2,221,153 | ||||||
Oil, Gas and Consumable Fuels — 1.7% | ||||||||
ConocoPhillips | 112,132 | 14,138,724 | ||||||
Personal Products — 0.1% | ||||||||
Estee Lauder Cos., Inc., Class A | 5,776 | 1,158,030 | ||||||
Pharmaceuticals — 2.8% | ||||||||
Bristol-Myers Squibb Co. | 103,231 | 7,997,306 | ||||||
Eli Lilly & Co. | 6,130 | 2,219,612 | ||||||
Merck & Co., Inc. | 51,746 | 5,236,695 | ||||||
Novo Nordisk A/S, B Shares | 30,871 | 3,356,642 | ||||||
Zoetis, Inc. | 27,468 | 4,141,625 | ||||||
22,951,880 | ||||||||
Road and Rail — 0.8% | ||||||||
Norfolk Southern Corp. | 13,273 | 3,027,173 | ||||||
Uber Technologies, Inc.(1) | 35,454 | 942,013 | ||||||
Union Pacific Corp. | 12,574 | 2,478,838 | ||||||
6,448,024 | ||||||||
Semiconductors and Semiconductor Equipment — 2.8% | ||||||||
Advanced Micro Devices, Inc.(1) | 44,076 | 2,647,205 | ||||||
Analog Devices, Inc. | 37,194 | 5,304,608 | ||||||
Applied Materials, Inc. | 52,342 | 4,621,275 | ||||||
ASML Holding NV | 6,280 | 2,945,864 | ||||||
GLOBALFOUNDRIES, Inc.(1) | 22,030 | 1,249,101 | ||||||
NVIDIA Corp. | 48,772 | 6,582,757 | ||||||
23,350,810 |
12
Shares/ Principal Amount | Value | |||||||
Software — 5.5% | ||||||||
Adobe, Inc.(1) | 3,782 | $ | 1,204,567 | |||||
Cadence Design Systems, Inc.(1) | 14,549 | 2,202,573 | ||||||
Microsoft Corp. | 158,838 | 36,871,065 | ||||||
Salesforce, Inc.(1) | 21,021 | 3,417,804 | ||||||
ServiceNow, Inc.(1) | 3,182 | 1,338,795 | ||||||
Workday, Inc., Class A(1) | 6,793 | 1,058,485 | ||||||
46,093,289 | ||||||||
Specialty Retail — 1.9% | ||||||||
Home Depot, Inc. | 30,425 | 9,009,755 | ||||||
TJX Cos., Inc. | 71,842 | 5,179,808 | ||||||
Tractor Supply Co. | 8,742 | 1,921,230 | ||||||
16,110,793 | ||||||||
Technology Hardware, Storage and Peripherals — 3.0% | ||||||||
Apple, Inc. | 164,653 | 25,247,891 | ||||||
Textiles, Apparel and Luxury Goods — 0.6% | ||||||||
Deckers Outdoor Corp.(1) | 6,235 | 2,181,813 | ||||||
NIKE, Inc., Class B | 29,094 | 2,696,432 | ||||||
4,878,245 | ||||||||
TOTAL COMMON STOCKS (Cost $469,103,524) | 513,187,229 | |||||||
U.S. TREASURY SECURITIES — 11.4% | ||||||||
U.S. Treasury Bonds, 5.00%, 5/15/37 | $ | 200,000 | 217,480 | |||||
U.S. Treasury Bonds, 4.625%, 2/15/40 | 1,300,000 | 1,352,508 | ||||||
U.S. Treasury Bonds, 1.375%, 11/15/40 | 200,000 | 123,641 | ||||||
U.S. Treasury Bonds, 2.25%, 5/15/41 | 500,000 | 360,771 | ||||||
U.S. Treasury Bonds, 4.375%, 5/15/41 | 1,400,000 | 1,403,254 | ||||||
U.S. Treasury Bonds, 3.75%, 8/15/41 | 300,000 | 275,232 | ||||||
U.S. Treasury Bonds, 2.00%, 11/15/41 | 1,800,000 | 1,227,937 | ||||||
U.S. Treasury Bonds, 3.125%, 11/15/41 | 1,000,000 | 830,391 | ||||||
U.S. Treasury Bonds, 3.00%, 5/15/42 | 1,400,000 | 1,135,477 | ||||||
U.S. Treasury Bonds, 3.25%, 5/15/42 | 3,200,000 | 2,706,500 | ||||||
U.S. Treasury Bonds, 3.375%, 8/15/42 | 3,500,000 | 3,020,391 | ||||||
U.S. Treasury Bonds, 2.75%, 11/15/42 | 1,700,000 | 1,310,992 | ||||||
U.S. Treasury Bonds, 2.875%, 5/15/43 | 1,300,000 | 1,019,992 | ||||||
U.S. Treasury Bonds, 3.75%, 11/15/43 | 600,000 | 542,156 | ||||||
U.S. Treasury Bonds, 3.125%, 8/15/44 | 500,000 | 405,195 | ||||||
U.S. Treasury Bonds, 3.00%, 11/15/44 | 600,000 | 474,973 | ||||||
U.S. Treasury Bonds, 2.50%, 2/15/45 | 1,500,000 | 1,080,352 | ||||||
U.S. Treasury Bonds, 3.00%, 2/15/48 | 300,000 | 237,012 | ||||||
U.S. Treasury Bonds, 3.375%, 11/15/48 | 1,460,000 | 1,247,986 | ||||||
U.S. Treasury Bonds, 2.875%, 5/15/49 | 800,000 | 623,453 | ||||||
U.S. Treasury Bonds, 2.25%, 8/15/49 | 1,500,000 | 1,020,498 | ||||||
U.S. Treasury Bonds, 2.375%, 11/15/49 | 2,400,000 | 1,678,969 | ||||||
U.S. Treasury Bonds, 2.375%, 5/15/51 | 2,400,000 | 1,662,891 | ||||||
U.S. Treasury Bonds, 2.00%, 8/15/51 | 1,500,000 | 945,527 | ||||||
U.S. Treasury Bonds, 1.875%, 11/15/51 | 63,000 | 38,402 | ||||||
U.S. Treasury Bonds, 2.25%, 2/15/52 | 300,000 | 201,281 | ||||||
U.S. Treasury Bonds, 2.875%, 5/15/52 | 2,400,000 | 1,863,375 | ||||||
U.S. Treasury Notes, 1.50%, 2/15/25(2) | 1,500,000 | 1,402,793 | ||||||
U.S. Treasury Notes, 1.75%, 3/15/25 | 7,000,000 | 6,576,992 | ||||||
U.S. Treasury Notes, 2.875%, 6/15/25 | 2,500,000 | 2,403,516 |
13
Shares/ Principal Amount | Value | |||||||
U.S. Treasury Notes, 2.75%, 6/30/25 | $ | 2,400,000 | $ | 2,299,687 | ||||
U.S. Treasury Notes, 3.00%, 7/15/25 | 4,500,000 | 4,334,678 | ||||||
U.S. Treasury Notes, 0.25%, 8/31/25 | 4,000,000 | 3,558,594 | ||||||
U.S. Treasury Notes, 3.50%, 9/15/25 | 4,200,000 | 4,094,672 | ||||||
U.S. Treasury Notes, 4.25%, 10/15/25 | 700,000 | 696,336 | ||||||
U.S. Treasury Notes, 2.625%, 12/31/25 | 200,000 | 189,477 | ||||||
U.S. Treasury Notes, 1.625%, 10/31/26 | 100,000 | 90,078 | ||||||
U.S. Treasury Notes, 1.75%, 12/31/26 | 700,000 | 632,270 | ||||||
U.S. Treasury Notes, 1.875%, 2/28/27 | 3,000,000 | 2,714,648 | ||||||
U.S. Treasury Notes, 2.75%, 4/30/27 | 1,000,000 | 937,266 | ||||||
U.S. Treasury Notes, 2.625%, 5/31/27 | 11,000,000 | 10,254,922 | ||||||
U.S. Treasury Notes, 4.125%, 9/30/27 | 2,400,000 | 2,387,156 | ||||||
U.S. Treasury Notes, 0.625%, 12/31/27 | 3,500,000 | 2,915,801 | ||||||
U.S. Treasury Notes, 1.125%, 2/29/28 | 1,000,000 | 851,328 | ||||||
U.S. Treasury Notes, 1.25%, 3/31/28 | 1,700,000 | 1,453,633 | ||||||
U.S. Treasury Notes, 1.25%, 4/30/28 | 3,600,000 | 3,071,672 | ||||||
U.S. Treasury Notes, 1.875%, 2/28/29 | 1,500,000 | 1,305,527 | ||||||
U.S. Treasury Notes, 2.875%, 4/30/29 | 2,500,000 | 2,309,277 | ||||||
U.S. Treasury Notes, 3.25%, 6/30/29 | 1,300,000 | 1,227,789 | ||||||
U.S. Treasury Notes, 2.625%, 7/31/29 | 1,000,000 | 908,066 | ||||||
U.S. Treasury Notes, 3.125%, 8/31/29 | 2,700,000 | 2,530,617 | ||||||
U.S. Treasury Notes, 3.875%, 9/30/29 | 2,500,000 | 2,455,859 | ||||||
U.S. Treasury Notes, 2.875%, 5/15/32 | 6,600,000 | 5,981,250 | ||||||
U.S. Treasury Notes, 2.75%, 8/15/32 | 500,000 | 447,500 | ||||||
TOTAL U.S. TREASURY SECURITIES (Cost $105,860,674) | 95,038,040 | |||||||
CORPORATE BONDS — 9.6% | ||||||||
Aerospace and Defense — 0.1% | ||||||||
Lockheed Martin Corp., 5.25%, 1/15/33 | 191,000 | 191,727 | ||||||
Raytheon Technologies Corp., 4.125%, 11/16/28 | 570,000 | 531,071 | ||||||
Raytheon Technologies Corp., 3.125%, 7/1/50 | 200,000 | 131,756 | ||||||
854,554 | ||||||||
Air Freight and Logistics† | ||||||||
GXO Logistics, Inc., 2.65%, 7/15/31 | 335,000 | 239,501 | ||||||
Airlines — 0.1% | ||||||||
British Airways 2021-1 Class A Pass Through Trust, 2.90%, 9/15/36(3) | 95,301 | 76,193 | ||||||
Delta Air Lines, Inc. / SkyMiles IP Ltd., 4.75%, 10/20/28(3) | 318,000 | 296,043 | ||||||
Mileage Plus Holdings LLC / Mileage Plus Intellectual Property Assets Ltd., 6.50%, 6/20/27(3) | 621,907 | 615,632 | ||||||
987,868 | ||||||||
Auto Components† | ||||||||
Aptiv PLC, 3.10%, 12/1/51 | 290,000 | 162,223 | ||||||
Automobiles — 0.2% | ||||||||
General Motors Co., 5.15%, 4/1/38 | 191,000 | 155,737 | ||||||
General Motors Financial Co., Inc., 2.75%, 6/20/25 | 780,000 | 718,150 | ||||||
General Motors Financial Co., Inc., 2.40%, 10/15/28 | 315,000 | 248,510 | ||||||
Toyota Motor Credit Corp., 1.90%, 4/6/28 | 420,000 | 355,666 | ||||||
1,478,063 | ||||||||
Banks — 1.4% | ||||||||
Banco Santander SA, VRN, 1.72%, 9/14/27 | 400,000 | 326,711 | ||||||
Banco Santander SA, VRN, 4.18%, 3/24/28 | 200,000 | 176,440 |
14
Shares/ Principal Amount | Value | |||||||
Bank of America Corp., VRN, 3.38%, 4/2/26 | $ | 400,000 | $ | 376,001 | ||||
Bank of America Corp., VRN, 2.55%, 2/4/28 | 51,000 | 44,162 | ||||||
Bank of America Corp., VRN, 3.42%, 12/20/28 | 1,512,000 | 1,335,803 | ||||||
Bank of America Corp., VRN, 2.88%, 10/22/30 | 701,000 | 571,530 | ||||||
Bank of America Corp., VRN, 4.57%, 4/27/33 | 200,000 | 177,518 | ||||||
Bank of America Corp., VRN, 5.02%, 7/22/33 | 248,000 | 227,723 | ||||||
Bank of America Corp., VRN, 2.48%, 9/21/36 | 345,000 | 246,923 | ||||||
Bank of Ireland Group PLC, VRN, 2.03%, 9/30/27(3) | 129,000 | 105,009 | ||||||
Citigroup, Inc., VRN, 0.78%, 10/30/24 | 89,000 | 84,168 | ||||||
Citigroup, Inc., VRN, 3.07%, 2/24/28 | 481,000 | 424,422 | ||||||
Citigroup, Inc., VRN, 3.67%, 7/24/28 | 100,000 | 89,774 | ||||||
Citigroup, Inc., VRN, 3.52%, 10/27/28 | 514,000 | 456,202 | ||||||
Citigroup, Inc., VRN, 3.79%, 3/17/33 | 110,000 | 91,256 | ||||||
Commonwealth Bank of Australia, VRN, 3.61%, 9/12/34(3) | 440,000 | 353,985 | ||||||
FNB Corp., 2.20%, 2/24/23 | 460,000 | 454,897 | ||||||
HSBC Holdings PLC, VRN, 0.73%, 8/17/24 | 320,000 | 303,492 | ||||||
HSBC Holdings PLC, VRN, 7.39%, 11/3/28(4) | 315,000 | 315,486 | ||||||
HSBC Holdings PLC, VRN, 2.80%, 5/24/32 | 280,000 | 200,886 | ||||||
HSBC Holdings PLC, VRN, 5.40%, 8/11/33 | 200,000 | 173,681 | ||||||
JPMorgan Chase & Co., VRN, 1.58%, 4/22/27 | 315,000 | 271,106 | ||||||
JPMorgan Chase & Co., VRN, 2.95%, 2/24/28 | 770,000 | 678,104 | ||||||
JPMorgan Chase & Co., VRN, 2.07%, 6/1/29 | 642,000 | 519,410 | ||||||
JPMorgan Chase & Co., VRN, 2.52%, 4/22/31 | 1,178,000 | 930,231 | ||||||
National Australia Bank Ltd., 2.33%, 8/21/30(3) | 278,000 | 201,968 | ||||||
Royal Bank of Canada, 6.00%, 11/1/27 | 465,000 | 467,983 | ||||||
Toronto-Dominion Bank, 2.00%, 9/10/31 | 279,000 | 207,093 | ||||||
Toronto-Dominion Bank, 2.45%, 1/12/32 | 290,000 | 220,333 | ||||||
Toronto-Dominion Bank, 4.46%, 6/8/32 | 163,000 | 146,658 | ||||||
Truist Financial Corp., VRN, 4.12%, 6/6/28 | 148,000 | 137,000 | ||||||
US Bancorp, VRN, 5.85%, 10/21/33 | 305,000 | 304,240 | ||||||
Wells Fargo & Co., VRN, 4.54%, 8/15/26 | 220,000 | 211,768 | ||||||
Wells Fargo & Co., VRN, 3.35%, 3/2/33 | 234,000 | 188,860 | ||||||
Wells Fargo & Co., VRN, 3.07%, 4/30/41 | 605,000 | 410,943 | ||||||
Wells Fargo & Co., VRN, 4.61%, 4/25/53 | 171,000 | 136,648 | ||||||
11,568,414 | ||||||||
Beverages — 0.2% | ||||||||
Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide, Inc., 4.90%, 2/1/46 | 500,000 | 429,479 | ||||||
Anheuser-Busch InBev Worldwide, Inc., 4.75%, 1/23/29 | 630,000 | 613,329 | ||||||
Keurig Dr Pepper, Inc., 4.05%, 4/15/32 | 175,000 | 153,417 | ||||||
PepsiCo, Inc., 3.90%, 7/18/32 | 131,000 | 121,444 | ||||||
1,317,669 | ||||||||
Biotechnology — 0.3% | ||||||||
AbbVie, Inc., 3.20%, 11/21/29 | 770,000 | 673,657 | ||||||
AbbVie, Inc., 4.40%, 11/6/42 | 515,000 | 421,386 | ||||||
Amgen, Inc., 4.05%, 8/18/29 | 820,000 | 757,630 | ||||||
CSL Finance PLC, 4.25%, 4/27/32(3) | 257,000 | 232,627 | ||||||
2,085,300 | ||||||||
Building Products† | ||||||||
Fortune Brands Home & Security, Inc., 4.50%, 3/25/52 | 180,000 | 119,092 | ||||||
Capital Markets — 1.0% | ||||||||
Bank of New York Mellon Corp., VRN, 5.83%, 10/25/33 | 330,000 | 330,744 |
15
Shares/ Principal Amount | Value | |||||||
CME Group, Inc., 2.65%, 3/15/32 | $ | 435,000 | $ | 350,401 | ||||
Deutsche Bank AG, 5.37%, 9/9/27 | 475,000 | 450,827 | ||||||
Deutsche Bank AG, VRN, 4.30%, 5/24/28 | 200,000 | 183,069 | ||||||
FS KKR Capital Corp., 4.25%, 2/14/25(3) | 121,000 | 112,335 | ||||||
Goldman Sachs Group, Inc., VRN, 1.76%, 1/24/25 | 580,000 | 548,290 | ||||||
Goldman Sachs Group, Inc., VRN, 1.95%, 10/21/27 | 714,000 | 607,108 | ||||||
Goldman Sachs Group, Inc., VRN, 2.64%, 2/24/28 | 710,000 | 614,180 | ||||||
Goldman Sachs Group, Inc., VRN, 3.81%, 4/23/29 | 94,000 | 83,482 | ||||||
Goldman Sachs Group, Inc., VRN, 3.10%, 2/24/33 | 200,000 | 156,844 | ||||||
Golub Capital BDC, Inc., 2.50%, 8/24/26 | 168,000 | 139,956 | ||||||
Moody's Corp., 2.55%, 8/18/60 | 275,000 | 141,338 | ||||||
Morgan Stanley, VRN, 0.53%, 1/25/24 | 1,163,000 | 1,145,661 | ||||||
Morgan Stanley, VRN, 1.16%, 10/21/25 | 699,000 | 633,803 | ||||||
Morgan Stanley, VRN, 2.63%, 2/18/26 | 999,000 | 926,444 | ||||||
Morgan Stanley, VRN, 2.70%, 1/22/31 | 385,000 | 308,697 | ||||||
Morgan Stanley, VRN, 2.51%, 10/20/32 | 285,000 | 214,857 | ||||||
Morgan Stanley, VRN, 6.34%, 10/18/33 | 355,000 | 360,424 | ||||||
Morgan Stanley, VRN, 2.48%, 9/16/36 | 156,000 | 110,619 | ||||||
Owl Rock Capital Corp., 3.40%, 7/15/26 | 72,000 | 61,408 | ||||||
OWL Rock Core Income Corp., 3.125%, 9/23/26 | 183,000 | 153,078 | ||||||
UBS Group AG, VRN, 1.49%, 8/10/27(3) | 634,000 | 522,873 | ||||||
8,156,438 | ||||||||
Chemicals — 0.1% | ||||||||
CF Industries, Inc., 5.15%, 3/15/34 | 330,000 | 298,197 | ||||||
CF Industries, Inc., 4.95%, 6/1/43 | 240,000 | 192,082 | ||||||
490,279 | ||||||||
Commercial Services and Supplies — 0.1% | ||||||||
Republic Services, Inc., 2.30%, 3/1/30 | 358,000 | 293,074 | ||||||
Waste Connections, Inc., 3.20%, 6/1/32 | 370,000 | 308,782 | ||||||
Waste Management, Inc., 2.50%, 11/15/50 | 150,000 | 87,502 | ||||||
689,358 | ||||||||
Construction and Engineering† | ||||||||
Quanta Services, Inc., 2.35%, 1/15/32 | 465,000 | 336,176 | ||||||
Construction Materials† | ||||||||
Eagle Materials, Inc., 2.50%, 7/1/31 | 310,000 | 227,919 | ||||||
Martin Marietta Materials, Inc., 2.40%, 7/15/31 | 195,000 | 149,628 | ||||||
377,547 | ||||||||
Consumer Finance† | ||||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust, 1.65%, 10/29/24 | 162,000 | 147,112 | ||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust, 3.00%, 10/29/28 | 172,000 | 139,077 | ||||||
Avolon Holdings Funding Ltd., 4.375%, 5/1/26(3) | 31,000 | 27,276 | ||||||
313,465 | ||||||||
Containers and Packaging — 0.1% | ||||||||
Sonoco Products Co., 2.25%, 2/1/27 | 447,000 | 392,138 | ||||||
WRKCo, Inc., 3.00%, 9/15/24 | 201,000 | 190,969 | ||||||
583,107 | ||||||||
Diversified Consumer Services† | ||||||||
Novant Health, Inc., 3.17%, 11/1/51 | 245,000 | 156,634 | ||||||
Pepperdine University, 3.30%, 12/1/59 | 355,000 | 214,051 | ||||||
370,685 |
16
Shares/ Principal Amount | Value | |||||||
Diversified Financial Services — 0.3% | ||||||||
Antares Holdings LP, 2.75%, 1/15/27(3) | $ | 256,000 | $ | 202,475 | ||||
Block Financial LLC, 3.875%, 8/15/30 | 456,000 | 383,509 | ||||||
Capital One Financial Corp., VRN, 4.99%, 7/24/26 | 146,000 | 140,366 | ||||||
Corebridge Financial, Inc., VRN, 6.875%, 12/15/52(3) | 300,000 | 271,018 | ||||||
GE Capital International Funding Co. Unlimited Co., 4.42%, 11/15/35 | 600,000 | 530,169 | ||||||
PG&E Energy Recovery Funding LLC, 2.82%, 7/15/48 | 775,000 | 511,525 | ||||||
UBS Group AG, VRN, 4.75%, 5/12/28(3) | 75,000 | 68,784 | ||||||
2,107,846 | ||||||||
Diversified Telecommunication Services — 0.3% | ||||||||
AT&T, Inc., 4.35%, 3/1/29 | 321,000 | 298,630 | ||||||
AT&T, Inc., 4.50%, 5/15/35 | 357,000 | 308,153 | ||||||
AT&T, Inc., 4.90%, 8/15/37 | 386,000 | 338,341 | ||||||
AT&T, Inc., 4.55%, 3/9/49 | 444,000 | 346,720 | ||||||
AT&T, Inc., 3.55%, 9/15/55 | 180,000 | 114,937 | ||||||
Ooredoo International Finance Ltd., 2.625%, 4/8/31(3) | 550,000 | 454,324 | ||||||
Telefonica Emisiones SA, 4.90%, 3/6/48 | 285,000 | 203,748 | ||||||
Verizon Communications, Inc., 4.33%, 9/21/28 | 333,000 | 312,503 | ||||||
Verizon Communications, Inc., 4.27%, 1/15/36 | 545,000 | 458,831 | ||||||
2,836,187 | ||||||||
Electric Utilities — 0.7% | ||||||||
AEP Texas, Inc., 2.10%, 7/1/30 | 370,000 | 285,314 | ||||||
Baltimore Gas and Electric Co., 2.25%, 6/15/31 | 237,000 | 187,133 | ||||||
Baltimore Gas and Electric Co., 4.55%, 6/1/52 | 158,000 | 129,617 | ||||||
CenterPoint Energy Houston Electric LLC, 4.45%, 10/1/32 | 370,000 | 347,189 | ||||||
Commonwealth Edison Co., 3.20%, 11/15/49 | 355,000 | 236,002 | ||||||
Duke Energy Carolinas LLC, 2.55%, 4/15/31 | 154,000 | 124,842 | ||||||
Duke Energy Corp., 2.55%, 6/15/31 | 180,000 | 141,226 | ||||||
Duke Energy Corp., 5.00%, 8/15/52 | 230,000 | 190,752 | ||||||
Duke Energy Florida LLC, 1.75%, 6/15/30 | 370,000 | 285,380 | ||||||
Duke Energy Florida LLC, 3.85%, 11/15/42 | 220,000 | 166,166 | ||||||
Duke Energy Progress LLC, 2.00%, 8/15/31 | 440,000 | 336,417 | ||||||
Duke Energy Progress LLC, 4.15%, 12/1/44 | 335,000 | 261,283 | ||||||
Entergy Arkansas LLC, 2.65%, 6/15/51 | 180,000 | 102,366 | ||||||
Exelon Corp., 4.45%, 4/15/46 | 150,000 | 117,921 | ||||||
Exelon Corp., 4.10%, 3/15/52(3) | 80,000 | 58,996 | ||||||
Florida Power & Light Co., 2.45%, 2/3/32 | 231,000 | 186,163 | ||||||
Florida Power & Light Co., 4.125%, 2/1/42 | 169,000 | 137,474 | ||||||
MidAmerican Energy Co., 4.40%, 10/15/44 | 290,000 | 238,303 | ||||||
NextEra Energy Capital Holdings, Inc., 5.00%, 7/15/32 | 345,000 | 328,172 | ||||||
Northern States Power Co., 3.20%, 4/1/52 | 240,000 | 159,695 | ||||||
Pacific Gas and Electric Co., 4.20%, 6/1/41 | 155,000 | 109,301 | ||||||
PacifiCorp, 3.30%, 3/15/51 | 310,000 | 204,576 | ||||||
PECO Energy Co., 4.375%, 8/15/52 | 330,000 | 268,190 | ||||||
Public Service Co. of Colorado, 1.875%, 6/15/31 | 312,000 | 241,054 | ||||||
Public Service Electric and Gas Co., 3.10%, 3/15/32 | 283,000 | 237,909 | ||||||
Southern Co. Gas Capital Corp., 1.75%, 1/15/31 | 370,000 | 272,201 | ||||||
Union Electric Co., 3.90%, 4/1/52 | 238,000 | 179,511 | ||||||
Xcel Energy, Inc., 3.40%, 6/1/30 | 330,000 | 284,026 | ||||||
Xcel Energy, Inc., 4.60%, 6/1/32 | 136,000 | 125,413 | ||||||
5,942,592 |
17
Shares/ Principal Amount | Value | |||||||
Energy Equipment and Services† | ||||||||
Schlumberger Investment SA, 2.65%, 6/26/30 | $ | 340,000 | $ | 284,373 | ||||
Entertainment — 0.1% | ||||||||
Netflix, Inc., 4.875%, 4/15/28 | 323,000 | 307,021 | ||||||
Warnermedia Holdings, Inc., 3.76%, 3/15/27(3) | 248,000 | 220,762 | ||||||
Warnermedia Holdings, Inc., 5.05%, 3/15/42(3) | 158,000 | 115,856 | ||||||
Warnermedia Holdings, Inc., 5.14%, 3/15/52(3) | 172,000 | 120,338 | ||||||
763,977 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 0.3% | ||||||||
Alexandria Real Estate Equities, Inc., 4.50%, 7/30/29 | 40,000 | 36,591 | ||||||
American Tower Corp., 3.95%, 3/15/29 | 355,000 | 314,515 | ||||||
Broadstone Net Lease LLC, 2.60%, 9/15/31 | 175,000 | 126,509 | ||||||
Corporate Office Properties LP, 2.00%, 1/15/29 | 206,000 | 153,909 | ||||||
Crown Castle, Inc., 3.65%, 9/1/27 | 256,000 | 231,701 | ||||||
EPR Properties, 4.75%, 12/15/26 | 191,000 | 164,642 | ||||||
EPR Properties, 4.95%, 4/15/28 | 241,000 | 198,087 | ||||||
GLP Capital LP / GLP Financing II, Inc., 5.375%, 4/15/26 | 420,000 | 401,440 | ||||||
National Retail Properties, Inc., 4.80%, 10/15/48 | 270,000 | 212,905 | ||||||
Phillips Edison Grocery Center Operating Partnership I LP, 2.625%, 11/15/31 | 201,000 | 144,076 | ||||||
Realty Income Corp., 5.625%, 10/13/32 | 278,000 | 271,943 | ||||||
SBA Tower Trust, 3.45%, 3/15/48(3) | 648,000 | 641,735 | ||||||
2,898,053 | ||||||||
Food and Staples Retailing — 0.1% | ||||||||
Sysco Corp., 5.95%, 4/1/30 | 464,000 | 474,531 | ||||||
Food Products — 0.1% | ||||||||
JDE Peet's NV, 2.25%, 9/24/31(3) | 475,000 | 342,979 | ||||||
Kraft Heinz Foods Co., 5.00%, 6/4/42 | 379,000 | 328,532 | ||||||
Mondelez International, Inc., 2.75%, 4/13/30 | 208,000 | 173,227 | ||||||
844,738 | ||||||||
Health Care Equipment and Supplies — 0.2% | ||||||||
Baxter International, Inc., 1.92%, 2/1/27 | 510,000 | 438,742 | ||||||
Baxter International, Inc., 2.54%, 2/1/32 | 720,000 | 549,523 | ||||||
Becton Dickinson and Co., 4.30%, 8/22/32 | 150,000 | 135,872 | ||||||
Zimmer Biomet Holdings, Inc., 1.45%, 11/22/24 | 900,000 | 830,427 | ||||||
1,954,564 | ||||||||
Health Care Providers and Services — 0.6% | ||||||||
Centene Corp., 2.45%, 7/15/28 | 560,000 | 461,446 | ||||||
Centene Corp., 4.625%, 12/15/29 | 244,000 | 221,220 | ||||||
Centene Corp., 3.375%, 2/15/30 | 399,000 | 332,068 | ||||||
CVS Health Corp., 4.78%, 3/25/38 | 160,000 | 139,189 | ||||||
CVS Health Corp., 5.05%, 3/25/48 | 220,000 | 187,285 | ||||||
Duke University Health System, Inc., 3.92%, 6/1/47 | 160,000 | 121,378 | ||||||
HCA, Inc., 2.375%, 7/15/31 | 235,000 | 175,447 | ||||||
Humana, Inc., 2.15%, 2/3/32 | 1,144,000 | 861,644 | ||||||
Kaiser Foundation Hospitals, 3.00%, 6/1/51 | 260,000 | 161,016 | ||||||
Roche Holdings, Inc., 2.61%, 12/13/51(3) | 440,000 | 275,041 | ||||||
UnitedHealth Group, Inc., 5.35%, 2/15/33 | 780,000 | 783,113 | ||||||
UnitedHealth Group, Inc., 5.875%, 2/15/53 | 250,000 | 255,497 | ||||||
Universal Health Services, Inc., 1.65%, 9/1/26(3) | 427,000 | 358,181 | ||||||
Universal Health Services, Inc., 2.65%, 10/15/30(3) | 330,000 | 247,224 | ||||||
4,579,749 |
18
Shares/ Principal Amount | Value | |||||||
Hotels, Restaurants and Leisure† | ||||||||
Marriott International, Inc., 3.50%, 10/15/32 | $ | 212,000 | $ | 169,608 | ||||
Household Durables — 0.1% | ||||||||
D.R. Horton, Inc., 2.50%, 10/15/24 | 310,000 | 292,352 | ||||||
Safehold Operating Partnership LP, 2.85%, 1/15/32 | 338,000 | 247,464 | ||||||
539,816 | ||||||||
Household Products — 0.1% | ||||||||
Clorox Co., 4.60%, 5/1/32 | 684,000 | 635,062 | ||||||
Insurance — 0.1% | ||||||||
American International Group, Inc., 6.25%, 5/1/36 | 305,000 | 308,204 | ||||||
Athene Global Funding, 1.99%, 8/19/28(3) | 326,000 | 256,857 | ||||||
Sammons Financial Group, Inc., 4.75%, 4/8/32(3) | 167,000 | 134,034 | ||||||
SBL Holdings, Inc., 5.125%, 11/13/26(3) | 254,000 | 217,538 | ||||||
916,633 | ||||||||
Interactive Media and Services† | ||||||||
Meta Platforms, Inc., 3.85%, 8/15/32(3) | 117,000 | 99,679 | ||||||
Internet and Direct Marketing Retail — 0.1% | ||||||||
Amazon.com, Inc., 3.60%, 4/13/32 | 530,000 | 475,091 | ||||||
IT Services† | ||||||||
Fiserv, Inc., 2.65%, 6/1/30 | 345,000 | 279,511 | ||||||
Life Sciences Tools and Services — 0.1% | ||||||||
Danaher Corp., 2.80%, 12/10/51 | 320,000 | 199,617 | ||||||
Illumina, Inc., 2.55%, 3/23/31 | 413,000 | 315,647 | ||||||
515,264 | ||||||||
Machinery — 0.1% | ||||||||
John Deere Capital Corp., 4.85%, 10/11/29 | 150,000 | 147,620 | ||||||
John Deere Capital Corp., 4.35%, 9/15/32 | 460,000 | 432,445 | ||||||
580,065 | ||||||||
Media — 0.2% | ||||||||
Charter Communications Operating LLC / Charter Communications Operating Capital, 5.125%, 7/1/49 | 275,000 | 203,304 | ||||||
Comcast Corp., 5.50%, 11/15/32(4) | 155,000 | 154,442 | ||||||
Comcast Corp., 5.65%, 6/15/35 | 127,000 | 124,924 | ||||||
Comcast Corp., 6.50%, 11/15/35 | 205,000 | 215,830 | ||||||
Comcast Corp., 3.75%, 4/1/40 | 440,000 | 339,478 | ||||||
Comcast Corp., 2.94%, 11/1/56 | 285,000 | 165,200 | ||||||
Paramount Global, 4.95%, 1/15/31 | 175,000 | 152,945 | ||||||
Paramount Global, 4.375%, 3/15/43 | 145,000 | 97,843 | ||||||
Time Warner Cable LLC, 4.50%, 9/15/42 | 440,000 | 301,174 | ||||||
1,755,140 | ||||||||
Metals and Mining — 0.1% | ||||||||
Glencore Funding LLC, 2.625%, 9/23/31(3) | 440,000 | 330,412 | ||||||
Nucor Corp., 3.125%, 4/1/32 | 207,000 | 167,953 | ||||||
South32 Treasury Ltd., 4.35%, 4/14/32(3) | 340,000 | 284,971 | ||||||
783,336 | ||||||||
Multi-Utilities — 0.2% | ||||||||
Ameren Corp., 3.50%, 1/15/31 | 430,000 | 365,458 | ||||||
Ameren Illinois Co., 3.85%, 9/1/32 | 177,000 | 157,571 | ||||||
CenterPoint Energy, Inc., 2.65%, 6/1/31 | 285,000 | 226,008 | ||||||
Dominion Energy, Inc., 4.90%, 8/1/41 | 270,000 | 228,493 | ||||||
Dominion Energy, Inc., 4.85%, 8/15/52 | 220,000 | 181,079 | ||||||
Sempra Energy, 3.25%, 6/15/27 | 180,000 | 162,916 |
19
Shares/ Principal Amount | Value | |||||||
WEC Energy Group, Inc., 1.375%, 10/15/27 | $ | 490,000 | $ | 402,862 | ||||
1,724,387 | ||||||||
Multiline Retail — 0.1% | ||||||||
Target Corp., 4.50%, 9/15/32 | 403,000 | 380,493 | ||||||
Target Corp., 3.90%, 11/15/47 | 30,000 | 23,312 | ||||||
403,805 | ||||||||
Oil, Gas and Consumable Fuels — 0.8% | ||||||||
Aker BP ASA, 3.75%, 1/15/30(3) | 440,000 | 374,699 | ||||||
Aker BP ASA, 4.00%, 1/15/31(3) | 160,000 | 135,863 | ||||||
BP Capital Markets America, Inc., 3.06%, 6/17/41 | 250,000 | 175,256 | ||||||
Cenovus Energy, Inc., 2.65%, 1/15/32 | 280,000 | 216,234 | ||||||
Continental Resources, Inc., 2.27%, 11/15/26(3) | 310,000 | 264,241 | ||||||
Diamondback Energy, Inc., 6.25%, 3/15/33 | 320,000 | 321,619 | ||||||
Enbridge, Inc., 3.40%, 8/1/51 | 130,000 | 84,369 | ||||||
Energy Transfer LP, 3.60%, 2/1/23 | 160,000 | 159,403 | ||||||
Energy Transfer LP, 4.25%, 3/15/23 | 370,000 | 368,124 | ||||||
Energy Transfer LP, 3.75%, 5/15/30 | 400,000 | 340,451 | ||||||
Energy Transfer LP, 4.90%, 3/15/35 | 270,000 | 225,235 | ||||||
Enterprise Products Operating LLC, 4.85%, 3/15/44 | 460,000 | 379,088 | ||||||
Enterprise Products Operating LLC, 3.30%, 2/15/53 | 220,000 | 138,027 | ||||||
Equinor ASA, 3.25%, 11/18/49 | 230,000 | 159,280 | ||||||
Galaxy Pipeline Assets Bidco Ltd., 2.94%, 9/30/40(3) | 869,877 | 655,203 | ||||||
Kinder Morgan Energy Partners LP, 6.50%, 9/1/39 | 250,000 | 236,979 | ||||||
MPLX LP, 2.65%, 8/15/30 | 300,000 | 236,506 | ||||||
Petroleos Mexicanos, 3.50%, 1/30/23 | 300,000 | 297,856 | ||||||
Petroleos Mexicanos, 6.625%, 6/15/35 | 50,000 | 34,807 | ||||||
SA Global Sukuk Ltd., 2.69%, 6/17/31(3) | 1,000,000 | 820,253 | ||||||
Sabine Pass Liquefaction LLC, 5.625%, 3/1/25 | 520,000 | 518,116 | ||||||
Shell International Finance BV, 2.375%, 11/7/29 | 320,000 | 270,063 | ||||||
6,411,672 | ||||||||
Paper and Forest Products† | ||||||||
Georgia-Pacific LLC, 2.10%, 4/30/27(3) | 370,000 | 325,343 | ||||||
Personal Products† | ||||||||
GSK Consumer Healthcare Capital US LLC, 4.00%, 3/24/52(3) | 275,000 | 197,652 | ||||||
Pharmaceuticals — 0.2% | ||||||||
Bristol-Myers Squibb Co., 2.95%, 3/15/32 | 427,000 | 361,649 | ||||||
Bristol-Myers Squibb Co., 2.55%, 11/13/50 | 337,000 | 202,483 | ||||||
Merck & Co., Inc., 1.70%, 6/10/27 | 330,000 | 287,747 | ||||||
Utah Acquisition Sub, Inc., 3.95%, 6/15/26 | 840,000 | 765,719 | ||||||
Viatris, Inc., 4.00%, 6/22/50 | 91,000 | 52,900 | ||||||
1,670,498 | ||||||||
Real Estate Management and Development† | ||||||||
Essential Properties LP, 2.95%, 7/15/31 | 316,000 | 225,163 | ||||||
Road and Rail — 0.2% | ||||||||
Ashtead Capital, Inc., 5.50%, 8/11/32(3) | 304,000 | 275,209 | ||||||
Burlington Northern Santa Fe LLC, 4.15%, 4/1/45 | 300,000 | 239,976 | ||||||
Burlington Northern Santa Fe LLC, 3.30%, 9/15/51 | 200,000 | 136,813 | ||||||
CSX Corp., 4.10%, 11/15/32 | 270,000 | 243,303 | ||||||
DAE Funding LLC, 1.55%, 8/1/24(3) | 195,000 | 176,966 | ||||||
Norfolk Southern Corp., 4.55%, 6/1/53 | 200,000 | 163,073 | ||||||
Union Pacific Corp., 3.55%, 8/15/39 | 450,000 | 350,520 | ||||||
1,585,860 |
20
Shares/ Principal Amount | Value | |||||||
Semiconductors and Semiconductor Equipment — 0.1% | ||||||||
Broadcom, Inc., 4.00%, 4/15/29(3) | $ | 273,000 | $ | 239,707 | ||||
Broadcom, Inc., 4.93%, 5/15/37(3) | 295,000 | 243,722 | ||||||
Intel Corp., 4.90%, 8/5/52 | 220,000 | 181,773 | ||||||
Intel Corp., 3.20%, 8/12/61 | 443,000 | 256,002 | ||||||
Micron Technology, Inc., 6.75%, 11/1/29 | 200,000 | 200,316 | ||||||
1,121,520 | ||||||||
Software — 0.1% | ||||||||
Oracle Corp., 3.90%, 5/15/35 | 165,000 | 127,926 | ||||||
Oracle Corp., 3.85%, 7/15/36 | 122,000 | 91,484 | ||||||
Oracle Corp., 3.60%, 4/1/40 | 395,000 | 267,910 | ||||||
487,320 | ||||||||
Specialty Retail — 0.3% | ||||||||
Dick's Sporting Goods, Inc., 3.15%, 1/15/32 | 495,000 | 376,294 | ||||||
Home Depot, Inc., 4.50%, 9/15/32 | 680,000 | 645,167 | ||||||
Home Depot, Inc., 3.90%, 6/15/47 | 710,000 | 545,419 | ||||||
Lowe's Cos., Inc., 2.625%, 4/1/31 | 690,000 | 553,069 | ||||||
Lowe's Cos., Inc., 4.25%, 4/1/52 | 710,000 | 528,818 | ||||||
O'Reilly Automotive, Inc., 4.70%, 6/15/32 | 253,000 | 236,830 | ||||||
2,885,597 | ||||||||
Technology Hardware, Storage and Peripherals — 0.1% | ||||||||
Apple, Inc., 3.25%, 8/8/29 | 645,000 | 586,770 | ||||||
Dell International LLC / EMC Corp., 8.10%, 7/15/36 | 111,000 | 117,776 | ||||||
704,546 | ||||||||
Trading Companies and Distributors† | ||||||||
Aircastle Ltd., 5.25%, 8/11/25(3) | 221,000 | 206,859 | ||||||
Water Utilities — 0.1% | ||||||||
American Water Capital Corp., 4.45%, 6/1/32 | 480,000 | 442,921 | ||||||
Essential Utilities, Inc., 2.70%, 4/15/30 | 380,000 | 309,095 | ||||||
752,016 | ||||||||
Wireless Telecommunication Services — 0.2% | ||||||||
T-Mobile USA, Inc., 4.75%, 2/1/28 | 844,000 | 800,112 | ||||||
T-Mobile USA, Inc., 3.375%, 4/15/29 | 625,000 | 541,941 | ||||||
T-Mobile USA, Inc., 4.375%, 4/15/40 | 280,000 | 228,576 | ||||||
Vodafone Group PLC, VRN, 4.125%, 6/4/81 | 465,000 | 330,964 | ||||||
1,901,593 | ||||||||
TOTAL CORPORATE BONDS (Cost $95,143,632) | 80,169,385 | |||||||
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES — 8.7% | ||||||||
Adjustable-Rate U.S. Government Agency Mortgage-Backed Securities — 0.1% | ||||||||
FHLMC, VRN, 3.04%, (1-year H15T1Y plus 2.25%), 9/1/35 | 61,092 | 61,938 | ||||||
FHLMC, VRN, 3.25%, (12-month LIBOR plus 1.87%), 7/1/36 | 16,075 | 16,195 | ||||||
FHLMC, VRN, 4.08%, (1-year H15T1Y plus 2.14%), 10/1/36 | 60,379 | 61,504 | ||||||
FHLMC, VRN, 3.06%, (1-year H15T1Y plus 2.26%), 4/1/37 | 66,531 | 67,320 | ||||||
FHLMC, VRN, 3.67%, (12-month LIBOR plus 1.87%), 7/1/41 | 40,639 | 41,110 | ||||||
FHLMC, VRN, 2.95%, (12-month LIBOR plus 1.63%), 1/1/44 | 67,082 | 66,497 | ||||||
FHLMC, VRN, 3.54%, (12-month LIBOR plus 1.60%), 6/1/45 | 32,719 | 32,721 | ||||||
FHLMC, VRN, 3.77%, (12-month LIBOR plus 1.63%), 8/1/46 | 89,583 | 89,551 | ||||||
FHLMC, VRN, 3.11%, (12-month LIBOR plus 1.64%), 9/1/47 | 159,764 | 156,518 | ||||||
FNMA, VRN, 3.18%, (6-month LIBOR plus 1.57%), 6/1/35 | 31,167 | 31,805 | ||||||
FNMA, VRN, 3.29%, (6-month LIBOR plus 1.57%), 6/1/35 | 28,444 | 29,026 | ||||||
FNMA, VRN, 3.51%, (1-year H15T1Y plus 2.15%), 3/1/38 | 60,173 | 61,227 |
21
Shares/ Principal Amount | Value | |||||||
FNMA, VRN, 3.18%, (12-month LIBOR plus 1.61%), 3/1/47 | $ | 106,526 | $ | 101,019 | ||||
FNMA, VRN, 3.12%, (12-month LIBOR plus 1.61%), 4/1/47 | 57,484 | 54,597 | ||||||
FNMA, VRN, 3.19%, (12-month LIBOR plus 1.62%), 5/1/47 | 86,561 | 85,015 | ||||||
956,043 | ||||||||
Fixed-Rate U.S. Government Agency Mortgage-Backed Securities — 8.6% | ||||||||
FHLMC, 2.50%, 3/1/42 | 1,511,781 | 1,278,306 | ||||||
FHLMC, 3.00%, 1/1/50 | 1,760,759 | 1,508,670 | ||||||
FHLMC, 3.50%, 5/1/50 | 322,357 | 286,376 | ||||||
FHLMC, 2.50%, 5/1/51 | 2,117,481 | 1,752,432 | ||||||
FHLMC, 3.50%, 5/1/51 | 2,090,193 | 1,860,672 | ||||||
FHLMC, 3.00%, 7/1/51 | 1,155,245 | 997,426 | ||||||
FHLMC, 3.00%, 7/1/51 | 812,081 | 694,495 | ||||||
FHLMC, 2.00%, 8/1/51 | 1,733,733 | 1,373,555 | ||||||
FHLMC, 2.50%, 8/1/51 | 1,921,606 | 1,581,791 | ||||||
FHLMC, 4.00%, 8/1/51 | 770,293 | 707,621 | ||||||
FHLMC, 2.50%, 10/1/51 | 1,040,145 | 860,676 | ||||||
FHLMC, 3.00%, 12/1/51 | 1,207,430 | 1,032,044 | ||||||
FHLMC, 3.50%, 5/1/52 | 1,456,513 | 1,287,088 | ||||||
FHLMC, 4.00%, 5/1/52 | 1,276,182 | 1,162,986 | ||||||
FHLMC, 4.00%, 5/1/52 | 1,655,425 | 1,508,354 | ||||||
FHLMC, 5.00%, 7/1/52 | 758,971 | 737,342 | ||||||
UMBS, 6.00%, TBA | 3,617,000 | 3,635,478 | ||||||
FNMA, 3.50%, 3/1/34 | 109,988 | 103,832 | ||||||
FNMA, 2.00%, 5/1/36 | 976,529 | 859,737 | ||||||
FNMA, 2.00%, 6/1/36 | 3,227,211 | 2,841,167 | ||||||
FNMA, 2.00%, 1/1/37 | 1,245,470 | 1,096,509 | ||||||
FNMA, 2.00%, 1/1/37 | 486,474 | 427,089 | ||||||
FNMA, 4.50%, 9/1/41 | 145,152 | 140,187 | ||||||
FNMA, 2.50%, 3/1/42 | 1,420,702 | 1,201,295 | ||||||
FNMA, 3.50%, 5/1/42 | 693,710 | 630,065 | ||||||
FNMA, 2.50%, 6/1/42 | 1,198,596 | 1,013,604 | ||||||
FNMA, 3.50%, 6/1/42 | 235,554 | 213,941 | ||||||
FNMA, 3.00%, 6/1/50 | 2,328,201 | 1,995,522 | ||||||
FNMA, 3.00%, 6/1/51 | 153,401 | 132,887 | ||||||
FNMA, 2.50%, 12/1/51 | 1,375,057 | 1,130,750 | ||||||
FNMA, 2.50%, 12/1/51 | 1,168,713 | 961,741 | ||||||
FNMA, 3.00%, 2/1/52 | 1,192,653 | 1,019,756 | ||||||
FNMA, 2.00%, 3/1/52 | 3,110,408 | 2,471,553 | ||||||
FNMA, 2.50%, 3/1/52 | 1,450,908 | 1,195,263 | ||||||
FNMA, 3.00%, 3/1/52 | 2,544,066 | 2,183,976 | ||||||
FNMA, 3.50%, 4/1/52 | 778,398 | 685,779 | ||||||
FNMA, 4.00%, 4/1/52 | 1,554,671 | 1,420,841 | ||||||
FNMA, 4.00%, 4/1/52 | 521,908 | 476,243 | ||||||
FNMA, 4.00%, 4/1/52 | 736,465 | 672,336 | ||||||
FNMA, 3.00%, 5/1/52 | 1,233,146 | 1,061,484 | ||||||
FNMA, 3.50%, 5/1/52 | 1,856,070 | 1,652,155 | ||||||
FNMA, 3.00%, 6/1/52 | 551,969 | 475,128 | ||||||
FNMA, 4.50%, 7/1/52 | 1,588,057 | 1,493,669 | ||||||
FNMA, 5.00%, 8/1/52 | 3,607,351 | 3,488,490 | ||||||
FNMA, 5.00%, 9/1/52 | 1,054,975 | 1,022,192 | ||||||
FNMA, 5.00%, 10/1/52 | 1,682,000 | 1,625,996 |
22
Shares/ Principal Amount | Value | |||||||
FNMA, 5.50%, 10/1/52 | $ | 1,797,884 | $ | 1,777,576 | ||||
GNMA, 7.00%, 4/20/26 | 8,884 | 8,999 | ||||||
GNMA, 7.50%, 8/15/26 | 5,971 | 6,075 | ||||||
GNMA, 7.00%, 5/15/31 | 17,436 | 18,094 | ||||||
GNMA, 5.50%, 11/15/32 | 41,863 | 43,800 | ||||||
GNMA, 4.50%, 6/15/41 | 156,649 | 153,296 | ||||||
GNMA, 3.50%, 6/20/42 | 272,180 | 250,538 | ||||||
GNMA, 3.50%, 3/15/46 | 1,275,075 | 1,173,764 | ||||||
GNMA, 3.00%, 4/20/50 | 586,246 | 516,316 | ||||||
GNMA, 3.00%, 5/20/50 | 597,527 | 525,943 | ||||||
GNMA, 3.00%, 6/20/50 | 894,669 | 790,489 | ||||||
GNMA, 3.00%, 7/20/50 | 1,578,612 | 1,388,683 | ||||||
GNMA, 2.00%, 10/20/50 | 4,811,655 | 3,983,951 | ||||||
GNMA, 2.50%, 11/20/50 | 2,103,364 | 1,771,863 | ||||||
GNMA, 2.50%, 2/20/51 | 1,494,661 | 1,272,944 | ||||||
GNMA, 3.50%, 6/20/51 | 1,030,619 | 933,589 | ||||||
GNMA, 2.50%, 9/20/51 | 1,264,313 | 1,075,761 | ||||||
71,650,180 | ||||||||
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $78,739,724) | 72,606,223 | |||||||
COLLATERALIZED LOAN OBLIGATIONS — 2.6% | ||||||||
ABPCI Direct Lending Fund CLO IV Ltd., Series 2017-2A, Class BR, VRN, 6.26%, (3-month LIBOR plus 1.90%), 10/27/33(3) | 600,000 | 548,915 | ||||||
AIMCO CLO Ltd., Series 2019-10A, Class BR, VRN, 5.92%, (3-month LIBOR plus 1.60%), 7/22/32(3) | 740,000 | 687,898 | ||||||
Arbor Realty Commercial Real Estate Notes Ltd., Series 2019-FL2, Class A, VRN, 4.69%, (1-month SOFR plus 1.31%), 9/15/34(3) | 526,849 | 523,335 | ||||||
ARES LII CLO Ltd., Series 2019-52A, Class BR, VRN, 5.97%, (3-month LIBOR plus 1.65%), 4/22/31(3) | 550,000 | 510,727 | ||||||
Ares XL CLO Ltd., Series 2016-40A, Class BRR, VRN, 5.88%, (3-month LIBOR plus 1.80%), 1/15/29(3) | 500,000 | 467,042 | ||||||
BDS Ltd., Series 2021-FL7, Class C, VRN, 5.14%, (1-month LIBOR plus 1.70%), 6/16/36(3) | 1,125,000 | 1,070,856 | ||||||
BDS Ltd., Series 2021-FL8, Class C, VRN, 4.99%, (1-month LIBOR plus 1.55%), 1/18/36(3) | 500,000 | 471,920 | ||||||
BDS Ltd., Series 2021-FL8, Class D, VRN, 5.34%, (1-month LIBOR plus 1.90%), 1/18/36(3) | 400,000 | 376,407 | ||||||
Bean Creek CLO Ltd., Series 2015-1A, Class AR, VRN, 5.26%, (3-month LIBOR plus 1.02%), 4/20/31(3) | 575,000 | 560,175 | ||||||
BXMT Ltd., Series 2020-FL2, Class C, VRN, 5.14%, (1-month SOFR plus 1.76%), 2/15/38(3) | 1,090,000 | 1,039,000 | ||||||
Canyon Capital CLO Ltd., Series 2017-1A, Class BR, VRN, 5.68%, (3-month LIBOR plus 1.60%), 7/15/30(3) | 350,000 | 329,338 | ||||||
Carlyle Global Market Strategies CLO Ltd., Series 2013-1A, Class BRR, VRN, 5.11%, (3-month LIBOR plus 2.20%), 8/14/30(3) | 450,000 | 423,259 | ||||||
CarVal CLO III Ltd., Series 2019-2A, Class BR, VRN, 5.84%, (3-month LIBOR plus 1.60%), 7/20/32(3) | 500,000 | 474,694 | ||||||
Cedar Funding X CLO Ltd., Series 2019-10A, Class BR, VRN, 5.84%, (3-month LIBOR plus 1.60%), 10/20/32(3) | 450,000 | 417,441 | ||||||
Cerberus Loan Funding XXXIII LP, Series 2021-3A, Class A, VRN, 5.64%, (3-month LIBOR plus 1.56%), 7/23/33(3) | 800,000 | 762,351 | ||||||
Cerberus Loan Funding XXXVI LP, Series 2021-6A, Class A, VRN, 5.48%, (3-month LIBOR plus 1.40%), 11/22/33(3) | 375,251 | 372,353 | ||||||
CFIP CLO Ltd., Series 2014-1A, Class AR, VRN, 5.26%, (3-month LIBOR plus 1.32%), 7/13/29(3) | 474,830 | 469,078 |
23
Shares/ Principal Amount | Value | |||||||
FS Rialto Issuer LLC, Series 2022-FL6, Class A SEQ, VRN, 6.05%, (1-month SOFR plus 2.58%), 8/17/37(3) | $ | 566,000 | $ | 560,598 | ||||
KKR CLO Ltd., Series 2018, Class BR, VRN, 5.79%, (3-month LIBOR plus 1.60%), 7/18/30(3) | 575,000 | 548,826 | ||||||
KKR CLO Ltd., Series 2022A, Class A, VRN, 5.39%, (3-month LIBOR plus 1.15%), 7/20/31(3) | 450,000 | 436,850 | ||||||
KKR CLO Ltd., Series 2030A, Class BR, VRN, 5.68%, (3-month LIBOR plus 1.60%), 10/17/31(3) | 725,000 | 679,096 | ||||||
KREF Ltd., Series 2021-FL2, Class B, VRN, 5.06%, (1-month LIBOR plus 1.65%), 2/15/39(3) | 800,000 | 747,078 | ||||||
Madison Park Funding XXXVII Ltd., Series 2019-37A, Class BR, VRN, 5.73%, (3-month LIBOR plus 1.65%), 7/15/33(3) | 1,075,000 | 1,007,819 | ||||||
MF1 Ltd., Series 2021-FL7, Class AS, VRN, 4.89%, (1-month LIBOR plus 1.45%), 10/16/36(3) | 1,075,000 | 1,028,845 | ||||||
Octagon Investment Partners XV Ltd., Series 2013-1A, Class BRR, VRN, 5.73%, (3-month LIBOR plus 1.50%), 7/19/30(3) | 800,000 | 751,803 | ||||||
Palmer Square Loan Funding Ltd., Series 2022-2A, Class A2, VRN, 5.76%, (3-month SOFR plus 1.90%), 10/15/30(3) | 550,000 | 529,230 | ||||||
Parallel Ltd., Series 2019-1A, Class BR, VRN, 6.04%, (3-month LIBOR plus 1.80%), 7/20/32(3) | 825,000 | 768,394 | ||||||
Park Avenue Institutional Advisers CLO Ltd., Series 2018-1A, Class BR, VRN, 6.34%, (3-month LIBOR plus 2.10%), 10/20/31(3) | 750,000 | 684,322 | ||||||
PFP Ltd., Series 2021-8, Class C, VRN, 5.21%, (1-month LIBOR plus 1.80%), 8/9/37(3) | 807,000 | 776,201 | ||||||
Sound Point CLO XXII Ltd., Series 2019-1A, Class BR, VRN, 5.94%, (3-month LIBOR plus 1.70%), 1/20/32(3) | 750,000 | 697,444 | ||||||
TCW CLO Ltd., Series 2018-1A, Class BR, VRN, 6.01%, (3-month LIBOR plus 1.65%), 4/25/31(3) | 725,000 | 685,954 | ||||||
THL Credit Wind River CLO Ltd., Series 2013-2A, Class BR2, VRN, 5.76%, (3-month LIBOR plus 1.57%), 10/18/30(3) | 1,150,000 | 1,088,790 | ||||||
TSTAT Ltd., Series 2022-1A, Class B, VRN, 5.82%, (3-month SOFR plus 3.27%), 7/20/31(3) | 500,000 | 495,429 | ||||||
Wellfleet CLO Ltd., Series 2022-1A, Class B1, VRN, 6.21%, (3-month SOFR plus 2.35%), 4/15/34(3) | 400,000 | 378,900 | ||||||
TOTAL COLLATERALIZED LOAN OBLIGATIONS (Cost $22,503,196) | 21,370,368 | |||||||
ASSET-BACKED SECURITIES — 2.5% | ||||||||
Aaset Trust, Series 2021-2A, Class A SEQ, 2.80%, 1/15/47(3) | 1,496,490 | 1,169,159 | ||||||
Aligned Data Centers Issuer LLC, Series 2021-1A, Class B, 2.48%, 8/15/46(3) | 642,000 | 533,958 | ||||||
Applebee's Funding LLC / IHOP Funding LLC, Series 2019-1A, Class A2I SEQ, 4.19%, 6/5/49(3) | 826,650 | 780,857 | ||||||
Applebee's Funding LLC / IHOP Funding LLC, Series 2019-1A, Class A2II SEQ, 4.72%, 6/5/49(3) | 878,130 | 787,955 | ||||||
Blackbird Capital Aircraft, Series 2021-1A, Class A SEQ, 2.44%, 7/15/46(3) | 783,666 | 627,223 | ||||||
Castlelake Aircraft Structured Trust, Series 2017-1R, Class A SEQ, 2.74%, 8/15/41(3) | 564,759 | 489,924 | ||||||
Clsec Holdings 22t LLC, Series 2021-1, Class B, 3.46%, 5/11/37(3) | 1,506,361 | 1,269,939 | ||||||
Credit Acceptance Auto Loan Trust, Series 2022-3A, Class B, 7.52%, 12/15/32(3)(4) | 700,000 | 699,893 | ||||||
DI Issuer LLC, Series 2021-1A, Class A2 SEQ, 3.72%, 9/15/51(3) | 1,900,000 | 1,656,790 | ||||||
Edgeconnex Data Centers Issuer LLC, Series 2022-1, Class A2 SEQ, 4.25%, 3/25/52(3) | 943,260 | 846,946 | ||||||
FirstKey Homes Trust, Series 2021-SFR1, Class D, 2.19%, 8/17/38(3) | 950,000 | 782,380 | ||||||
FirstKey Homes Trust, Series 2021-SFR1, Class E1, 2.39%, 8/17/38(3) | 1,100,000 | 905,328 |
24
Shares/ Principal Amount | Value | |||||||
Flexential Issuer, Series 2021-1A, Class A2 SEQ, 3.25%, 11/27/51(3) | $ | 1,150,000 | $ | 985,109 | ||||
Goodgreen Trust, Series 2018-1A, Class A, VRN, 3.93%, 10/15/53(3) | 340,821 | 309,688 | ||||||
Goodgreen Trust, Series 2020-1A, Class A SEQ, 2.63%, 4/15/55(3) | 636,966 | 514,952 | ||||||
Goodgreen Trust, Series 2021-1A, Class A SEQ, 2.66%, 10/15/56(3) | 447,579 | 391,325 | ||||||
J.G. Wentworth XL LLC, Series 2017-3A, Class B, 5.43%, 2/15/69(3) | 88,326 | 83,691 | ||||||
J.G. Wentworth XLII LLC, Series 2018-2A, Class B, 4.70%, 10/15/77(3) | 550,000 | 477,062 | ||||||
J.G. Wentworth XXXIX LLC, Series 2017-2A, Class B, 5.09%, 9/17/74(3) | 164,160 | 148,292 | ||||||
J.G. Wentworth XXXVIII LLC, Series 2017-1A, Class B, 5.43%, 8/15/62(3) | 198,191 | 183,418 | ||||||
Lunar Structured Aircraft Portfolio Notes, Series 2021-1, Class A SEQ, 2.64%, 10/15/46(3) | 1,128,018 | 902,315 | ||||||
MAPS Trust, Series 2021-1A, Class A SEQ, 2.52%, 6/15/46(3) | 1,515,013 | 1,215,076 | ||||||
Navigator Aircraft ABS Ltd., Series 2021-1, Class A SEQ, 2.77%, 11/15/46(3) | 1,125,000 | 928,628 | ||||||
New Economy Assets Phase 1 Sponsor LLC, Series 2021-1, Class A1 SEQ, 1.91%, 10/20/61(3) | 1,095,000 | 919,393 | ||||||
New Economy Assets Phase 1 Sponsor LLC, Series 2021-1, Class B1, 2.41%, 10/20/61(3) | 1,925,000 | 1,564,274 | ||||||
Progress Residential Trust, Series 2021-SFR3, Class C, 2.09%, 5/17/26(3) | 500,000 | 423,416 | ||||||
Progress Residential Trust, Series 2021-SFR8, Class E1, 2.38%, 10/17/38(3) | 450,000 | 369,466 | ||||||
Sierra Timeshare Receivables Funding LLC, Series 2021-1A, Class C, 1.79%, 11/20/37(3) | 251,433 | 229,307 | ||||||
Slam Ltd., Series 2021-1A, Class A SEQ, 2.43%, 6/15/46(3) | 604,105 | 494,777 | ||||||
VSE VOI Mortgage LLC, Series 2018-A, Class B, 3.72%, 2/20/36(3) | 195,344 | 188,214 | ||||||
TOTAL ASSET-BACKED SECURITIES (Cost $24,789,061) | 20,878,755 | |||||||
COLLATERALIZED MORTGAGE OBLIGATIONS — 1.6% | ||||||||
Private Sponsor Collateralized Mortgage Obligations — 1.3% | ||||||||
ABN Amro Mortgage Corp., Series 2003-4, Class A4, 5.50%, 3/25/33 | 3,254 | 2,844 | ||||||
Adjustable Rate Mortgage Trust, Series 2004-4, Class 4A1, VRN, 3.42%, 3/25/35 | 78,097 | 76,702 | ||||||
Banc of America Mortgage Trust, Series 2004-E, Class 2A6 SEQ, VRN, 3.59%, 6/25/34 | 56,236 | 53,524 | ||||||
Bellemeade Re Ltd., Series 2019-3A, Class B1, VRN, 6.09%, (1-month LIBOR plus 2.50%), 7/25/29(3) | 400,000 | 393,791 | ||||||
Bellemeade Re Ltd., Series 2019-3A, Class M1C, VRN, 5.54%, (1-month LIBOR plus 1.95%), 7/25/29(3) | 360,000 | 356,005 | ||||||
Bellemeade Re Ltd., Series 2020-2A, Class M1C, VRN, 7.59%, (1-month LIBOR plus 4.00%), 8/26/30(3) | 56,584 | 56,649 | ||||||
Chase Mortgage Finance Corp., Series 2021-CL1, Class M1, VRN, 4.20%, (30-day average SOFR plus 1.20%), 2/25/50(3) | 346,616 | 295,334 | ||||||
CHNGE Mortgage Trust, Series 2022-1 Class A1 SEQ, VRN, 3.01%, 1/25/67(3) | 715,190 | 636,815 | ||||||
Citigroup Mortgage Loan Trust, Inc., Series 2004-UST1, Class A5, VRN, 3.71%, 8/25/34 | 170,824 | 163,761 | ||||||
Countrywide Home Loan Mortgage Pass-Through Trust, Series 2005-17, Class 1A11, 5.50%, 9/25/35 | 1,083 | 964 | ||||||
Credit Suisse Mortgage Trust, Series 2021-NQM2, Class A2 SEQ, VRN, 1.38%, 2/25/66(3) | 295,210 | 250,476 |
25
Shares/ Principal Amount | Value | |||||||
Credit Suisse Mortgage Trust, Series 2021-RPL3, Class A1 SEQ, VRN, 2.00%, 1/25/60(3) | $ | 395,715 | $ | 342,536 | ||||
Credit Suisse Mortgage Trust, Series 2022-NQM2, Class A3 SEQ, VRN, 4.00%, 2/25/67(3) | 600,000 | 452,485 | ||||||
Deephaven Residential Mortgage Trust, Series 2020-2, Class M1, VRN, 4.11%, 5/25/65(3) | 525,000 | 486,857 | ||||||
Deephaven Residential Mortgage Trust, Series 2021-3, Class A3, VRN, 1.55%, 8/25/66(3) | 288,015 | 230,848 | ||||||
Eagle RE Ltd., Series 2021-1, Class M1C, VRN, 5.70%, (30-day average SOFR plus 2.70%), 10/25/33(3) | 525,000 | 522,327 | ||||||
First Horizon Alternative Mortgage Securities Trust, Series 2004-AA4, Class A1, VRN, 4.01%, 10/25/34 | 68,912 | 68,058 | ||||||
GCAT Trust, Series 2021-CM2, Class A1 SEQ, VRN, 2.35%, 8/25/66(3) | 1,098,548 | 1,025,663 | ||||||
GCAT Trust, Series 2021-NQM1, Class A3 SEQ, VRN, 1.15%, 1/25/66(3) | 244,610 | 205,031 | ||||||
GSR Mortgage Loan Trust, Series 2004-5, Class 3A3, VRN, 2.78%, 5/25/34 | 39,587 | 36,544 | ||||||
GSR Mortgage Loan Trust, Series 2004-7, Class 3A1, VRN, 3.16%, 6/25/34 | 16,932 | 15,103 | ||||||
GSR Mortgage Loan Trust, Series 2005-AR1, Class 3A1, VRN, 3.46%, 1/25/35 | 47,932 | 45,226 | ||||||
Home RE Ltd., Series 2021-1, Class M1B, VRN, 5.14%, (1-month LIBOR plus 1.55%), 7/25/33(3) | 303,969 | 302,054 | ||||||
Home RE Ltd., Series 2022-1, Class M1A, VRN, 5.85%, (30-day average SOFR plus 2.85%), 10/25/34(3) | 425,000 | 415,745 | ||||||
JP Morgan Mortgage Trust, Series 2017-1, Class A2, VRN, 3.45%, 1/25/47(3) | 129,998 | 111,564 | ||||||
JP Morgan Mortgage Trust, Series 2020-3, Class A15, VRN, 3.50%, 8/25/50(3) | 188,009 | 163,005 | ||||||
JP Morgan Mortgage Trust, Series 2022-4, Class A3, VRN, 3.00%, 10/25/52(3) | 386,747 | 311,252 | ||||||
JP Morgan Mortgage Trust, Series 2022-LTV1, Class A3 SEQ, VRN, 3.52%, 7/25/52(3) | 605,848 | 472,977 | ||||||
MASTR Adjustable Rate Mortgages Trust, Series 2004-13, Class 3A7, VRN, 3.88%, 11/21/34 | 68,851 | 63,976 | ||||||
Merrill Lynch Mortgage Investors Trust, Series 2005-3, Class 2A, VRN, 3.00%, 11/25/35 | 33,281 | 31,297 | ||||||
Merrill Lynch Mortgage Investors Trust, Series 2005-A2, Class A1, VRN, 2.77%, 2/25/35 | 67,016 | 62,667 | ||||||
MFA Trust, Series 2021-INV2, Class A3 SEQ, VRN, 2.26%, 11/25/56(3) | 754,568 | 600,859 | ||||||
MFA Trust, Series 2022-INV1, Class A1 SEQ, VRN, 3.91%, 4/25/66(3) | 469,137 | 437,919 | ||||||
NewRez Warehouse Securitization Trust, Series 2021-1, Class A, VRN, 4.34%, (1-month LIBOR plus 0.75%), 5/25/55(3) | 750,000 | 735,579 | ||||||
PRMI Securitization Trust, Series 2021-1, Class A5, VRN, 2.50%, 4/25/51(3) | 855,646 | 643,841 | ||||||
Sofi Mortgage Trust, Series 2016-1A, Class 1A4 SEQ, VRN, 3.00%, 11/25/46(3) | 39,988 | 36,225 | ||||||
Starwood Mortgage Residential Trust, Series 2020-2, Class B1E, VRN, 3.00%, 4/25/60(3) | 446,000 | 444,408 | ||||||
Structured Adjustable Rate Mortgage Loan Trust, Series 2004-8, Class 2A1, VRN, 3.64%, 7/25/34 | 26,204 | 25,260 | ||||||
Verus Securitization Trust, Series 2021-R2, Class A2, VRN, 1.12%, 2/25/64(3) | 241,349 | 221,097 | ||||||
Verus Securitization Trust, Series 2021-R2, Class A3, VRN, 1.23%, 2/25/64(3) | 275,991 | 253,301 | ||||||
11,050,569 |
26
Shares/ Principal Amount | Value | |||||||
U.S. Government Agency Collateralized Mortgage Obligations — 0.3% | ||||||||
FHLMC, Series 2020-DNA5, Class M2, VRN, 5.80%, (30-day average SOFR plus 2.80%), 10/25/50(3) | $ | 313,679 | $ | 313,797 | ||||
FHLMC, Series 2020-HQA3, Class M2, VRN, 7.19%, (1-month LIBOR plus 3.60%), 7/25/50(3) | 3,499 | 3,499 | ||||||
FNMA, Series 2013-C01, Class M2, VRN, 8.84%, (1-month LIBOR plus 5.25%), 10/25/23 | 458,104 | 467,065 | ||||||
FNMA, Series 2014-C02, Class 2M2, VRN, 6.19%, (1-month LIBOR plus 2.60%), 5/25/24 | 129,005 | 128,583 | ||||||
FNMA, Series 2014-C04, Class 1M2, VRN, 8.49%, (1-month LIBOR plus 4.90%), 11/25/24 | 155,099 | 159,494 | ||||||
FNMA, Series 2015-C04, Class 1M2, VRN, 9.29%, (1-month LIBOR plus 5.70%), 4/25/28 | 347,593 | 366,476 | ||||||
FNMA, Series 2015-C04, Class 2M2, VRN, 9.14%, (1-month LIBOR plus 5.55%), 4/25/28 | 691,849 | 709,784 | ||||||
FNMA, Series 2017-C03, Class 1M2C, VRN, 6.59%, (1-month LIBOR plus 3.00%), 10/25/29 | 110,000 | 109,986 | ||||||
2,258,684 | ||||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $14,584,624) | 13,309,253 | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES — 0.7% | ||||||||
BX Commercial Mortgage Trust, Series 2020-VIV2, Class C, VRN, 3.54%, 3/9/44(3) | 537,839 | 401,974 | ||||||
BX Commercial Mortgage Trust, Series 2020-VIVA, Class D, VRN, 3.55%, 3/11/44(3) | 775,000 | 564,327 | ||||||
BX Commercial Mortgage Trust, Series 2021-VOLT, Class F, VRN, 5.81%, (1-month LIBOR plus 2.40%), 9/15/36(3) | 1,200,000 | 1,096,747 | ||||||
ELP Commercial Mortgage Trust, Series 2021-ELP, Class E, VRN, 5.53%, (1-month LIBOR plus 2.12%), 11/15/38(3) | 1,497,000 | 1,373,296 | ||||||
MHP Trust, Series 2022-MHIL, Class D, VRN, 4.99%, (1-month SOFR plus 1.61%), 1/15/27(3) | 436,275 | 404,934 | ||||||
OPG Trust, Series 2021-PORT, Class E, VRN, 4.94%, (1-month LIBOR plus 1.53%), 10/15/36(3) | 980,770 | 890,631 | ||||||
WMRK Commercial Mortgage Trust, Series 2022-WMRK, Class A, VRN, 6.29%, (1-month SOFR plus 2.79%), 11/15/27(3)(4) | 794,000 | 788,038 | ||||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (Cost $6,234,029) | 5,519,947 | |||||||
MUNICIPAL SECURITIES — 0.6% | ||||||||
Bay Area Toll Authority Rev., 6.92%, 4/1/40 | 295,000 | 332,229 | ||||||
California State University Rev., 2.98%, 11/1/51 | 500,000 | 325,675 | ||||||
Foothill-Eastern Transportation Corridor Agency Rev., 4.09%, 1/15/49 | 275,000 | 186,330 | ||||||
Golden State Tobacco Securitization Corp. Rev., 2.75%, 6/1/34 | 660,000 | 507,535 | ||||||
Houston GO, 3.96%, 3/1/47 | 120,000 | 96,146 | ||||||
Metropolitan Transportation Authority Rev., 6.69%, 11/15/40 | 105,000 | 105,262 | ||||||
Metropolitan Transportation Authority Rev., 6.81%, 11/15/40 | 60,000 | 61,377 | ||||||
Metropolitan Water Reclamation District of Greater Chicago GO, 5.72%, 12/1/38 | 650,000 | 678,151 | ||||||
Michigan Strategic Fund Rev., (Flint Water Advocacy Fund), 3.23%, 9/1/47 | 570,000 | 387,779 | ||||||
Missouri Highway & Transportation Commission Rev., 5.45%, 5/1/33 | 130,000 | 129,923 | ||||||
New Jersey Turnpike Authority Rev., 7.41%, 1/1/40 | 200,000 | 235,410 | ||||||
New Jersey Turnpike Authority Rev., 7.10%, 1/1/41 | 95,000 | 108,787 | ||||||
New York City GO, 6.27%, 12/1/37 | 95,000 | 101,077 | ||||||
Ohio Turnpike & Infrastructure Commission Rev., 3.22%, 2/15/48 | 330,000 | 227,518 | ||||||
Ohio Water Development Authority Water Pollution Control Loan Fund Rev., 4.88%, 12/1/34 | 110,000 | 108,035 |
27
Shares/ Principal Amount | Value | |||||||
Port Authority of New York & New Jersey Rev., 4.93%, 10/1/51 | $ | 50,000 | $ | 45,504 | ||||
Regents of the University of California Medical Center Pooled Rev., 3.26%, 5/15/60 | 245,000 | 149,441 | ||||||
Rutgers The State University of New Jersey Rev., 5.67%, 5/1/40 | 300,000 | 298,113 | ||||||
Sacramento Municipal Utility District Rev., 6.16%, 5/15/36 | 210,000 | 224,080 | ||||||
San Francisco Public Utilities Commission Water Rev., 6.00%, 11/1/40 | 105,000 | 108,320 | ||||||
Santa Clara Valley Transportation Authority Rev., 5.88%, 4/1/32 | 120,000 | 122,921 | ||||||
State of California GO, 4.60%, 4/1/38 | 355,000 | 320,385 | ||||||
State of California GO, 7.55%, 4/1/39 | 100,000 | 119,961 | ||||||
State of California GO, 7.30%, 10/1/39 | 160,000 | 185,009 | ||||||
State of California GO, 7.60%, 11/1/40 | 80,000 | 96,899 | ||||||
State of Washington GO, 5.14%, 8/1/40 | 20,000 | 19,362 | ||||||
University of California Rev., 3.07%, 5/15/51 | 330,000 | 200,216 | ||||||
TOTAL MUNICIPAL SECURITIES (Cost $6,498,325) | 5,481,445 | |||||||
U.S. GOVERNMENT AGENCY SECURITIES — 0.3% | ||||||||
FNMA, 0.75%, 10/8/27 | 2,000,000 | 1,685,141 | ||||||
FNMA, 6.625%, 11/15/30 | 400,000 | 457,528 | ||||||
Tennessee Valley Authority, 1.50%, 9/15/31 | 300,000 | 230,118 | ||||||
TOTAL U.S. GOVERNMENT AGENCY SECURITIES (Cost $2,770,137) | 2,372,787 | |||||||
SOVEREIGN GOVERNMENTS AND AGENCIES — 0.1% | ||||||||
Chile† | ||||||||
Chile Government International Bond, 3.625%, 10/30/42 | 100,000 | 70,113 | ||||||
Mexico — 0.1% | ||||||||
Mexico Government International Bond, 4.15%, 3/28/27 | 600,000 | 573,563 | ||||||
Peru† | ||||||||
Peruvian Government International Bond, 5.625%, 11/18/50 | 170,000 | 156,201 | ||||||
Philippines† | ||||||||
Philippine Government International Bond, 6.375%, 10/23/34 | 150,000 | 155,398 | ||||||
Poland† | ||||||||
Republic of Poland Government International Bond, 3.00%, 3/17/23 | 140,000 | 139,195 | ||||||
South Africa† | ||||||||
Republic of South Africa Government International Bond, 4.67%, 1/17/24 | 110,000 | 108,427 | ||||||
Uruguay† | ||||||||
Uruguay Government International Bond, 4.125%, 11/20/45 | 120,000 | 102,050 | ||||||
TOTAL SOVEREIGN GOVERNMENTS AND AGENCIES (Cost $1,417,271) | 1,304,947 | |||||||
EXCHANGE-TRADED FUNDS — 0.1% | ||||||||
SPDR S&P 500 ETF Trust (Cost $958,988) | 2,589 | 999,898 | ||||||
BANK LOAN OBLIGATIONS(5) — 0.1% | ||||||||
Media† | ||||||||
DirecTV Financing, LLC, Term Loan, 8.75%, (1-month LIBOR plus 5.00%), 8/2/27 | $ | 21,239 | 20,294 | |||||
Pharmaceuticals — 0.1% | ||||||||
Horizon Therapeutics USA Inc., 2021 Term Loan B2, 5.38%, (1-month LIBOR plus 1.75%), 3/15/28 | 496,440 | 487,134 | ||||||
TOTAL BANK LOAN OBLIGATIONS (Cost $518,206) | 507,428 |
28
Shares/ Principal Amount | Value | |||||||
SHORT-TERM INVESTMENTS — 1.5% | ||||||||
Money Market Funds — 1.5% | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class (Cost $11,996,876) | 11,996,876 | $ | 11,996,876 | |||||
TOTAL INVESTMENT SECURITIES — 101.3% (Cost $841,118,267) | 844,742,581 | |||||||
OTHER ASSETS AND LIABILITIES — (1.3)% | (10,487,795) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 834,254,786 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
EUR | 81,938 | USD | 80,694 | JPMorgan Chase Bank N.A. | 12/30/22 | $ | 688 | |||||||||||||
EUR | 115,301 | USD | 112,421 | JPMorgan Chase Bank N.A. | 12/30/22 | 2,097 | ||||||||||||||
EUR | 77,935 | USD | 76,579 | JPMorgan Chase Bank N.A. | 12/30/22 | 827 | ||||||||||||||
EUR | 94,750 | USD | 92,240 | JPMorgan Chase Bank N.A. | 12/30/22 | 1,866 | ||||||||||||||
EUR | 93,148 | USD | 92,142 | JPMorgan Chase Bank N.A. | 12/30/22 | 374 | ||||||||||||||
EUR | 67,526 | USD | 67,376 | JPMorgan Chase Bank N.A. | 12/30/22 | (309) | ||||||||||||||
USD | 2,345,629 | EUR | 2,387,421 | JPMorgan Chase Bank N.A. | 12/30/22 | (25,578) | ||||||||||||||
USD | 195,665 | EUR | 197,239 | JPMorgan Chase Bank N.A. | 12/30/22 | (234) | ||||||||||||||
USD | 205,402 | EUR | 208,449 | JPMorgan Chase Bank N.A. | 12/30/22 | (1,632) | ||||||||||||||
USD | 83,405 | EUR | 84,340 | JPMorgan Chase Bank N.A. | 12/30/22 | (363) | ||||||||||||||
USD | 136,935 | EUR | 136,920 | JPMorgan Chase Bank N.A. | 12/30/22 | 945 | ||||||||||||||
USD | 97,492 | EUR | 96,351 | JPMorgan Chase Bank N.A. | 12/30/22 | 1,796 | ||||||||||||||
$ | (19,523) |
FUTURES CONTRACTS PURCHASED | ||||||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)^ | ||||||||||
U.S. Treasury 2-Year Notes | 46 | December 2022 | $ | 9,401,609 | $ | 772 | ||||||||
U.S. Treasury 5-Year Notes | 21 | December 2022 | 2,238,469 | 12,311 | ||||||||||
U.S. Treasury 10-Year Ultra Notes | 58 | December 2022 | 6,727,094 | (99,816) | ||||||||||
U.S. Treasury Long Bonds | 5 | December 2022 | 602,500 | (5,041) | ||||||||||
U.S. Treasury Ultra Bonds | 17 | December 2022 | 2,170,156 | (59,739) | ||||||||||
$ | 21,139,828 | $ | (151,513) |
^Amount represents value and unrealized appreciation (depreciation).
29
CENTRALLY CLEARED CREDIT DEFAULT SWAP AGREEMENTS | |||||||||||||||||||||||
Reference Entity | Type | Fixed Rate Received (Paid) Quarterly | Termination Date | Notional Amount | Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Value^ | ||||||||||||||||
Markit CDX North America High Yield Index Series 38 | Buy | (5.00)% | 6/20/27 | $ | 6,336,000 | $ | (6,110) | $ | (85,429) | $ | (91,539) | ||||||||||||
Markit CDX North America High Yield Index Series 39 | Buy | (5.00)% | 12/20/27 | $ | 3,220,000 | 14,438 | (12,156) | 2,282 | |||||||||||||||
$ | 8,328 | $ | (97,585) | $ | (89,257) |
^The value for credit default swap agreements serves as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability or profit at the period end. Increasing values in absolute terms when compared to the notional amount of the credit default swap agreement represent a deterioration of the referenced entity's credit soundness and an increased likelihood or risk of a credit event occurring as defined in the agreement.
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 | 2.90% | 10/11/23 | $ | 1,450,000 | $ | 473 | $ | 3,088 | $ | 3,561 | ||||||||||||
CPURNSA | Receive | 2.97% | 10/14/23 | $ | 2,150,000 | 479 | 3,719 | 4,198 | |||||||||||||||
CPURNSA | Receive | 2.97% | 10/14/23 | $ | 2,150,000 | 478 | 3,719 | 4,197 | |||||||||||||||
$ | 1,430 | $ | 10,526 | $ | 11,956 |
30
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
CDX | - | Credit Derivatives Indexes | ||||||
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 | ||||||
LIBOR | - | London Interbank Offered Rate | ||||||
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 $1,380,348.
(3)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 $69,651,871, which represented 8.3% of total net assets.
(4)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.
(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.
See Notes to Financial Statements.
31
Statement of Assets and Liabilities |
OCTOBER 31, 2022 | |||||
Assets | |||||
Investment securities, at value (cost of $841,118,267) | $ | 844,742,581 | |||
Cash | 9,281 | ||||
Receivable for investments sold | 4,634,476 | ||||
Receivable for capital shares sold | 505,744 | ||||
Receivable for variation margin on swap agreements | 64,454 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 8,593 | ||||
Interest and dividends receivable | 2,490,830 | ||||
852,455,959 | |||||
Liabilities | |||||
Payable for investments purchased | 16,970,977 | ||||
Payable for capital shares redeemed | 442,605 | ||||
Payable for variation margin on futures contracts | 111,352 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 28,116 | ||||
Accrued management fees | 611,468 | ||||
Accrued other expenses | 36,655 | ||||
18,201,173 | |||||
Net Assets | $ | 834,254,786 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 876,811,378 | |||
Distributable earnings | (42,556,592) | ||||
$ | 834,254,786 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Investor Class, $0.01 Par Value | $758,467,728 | 48,603,588 | $15.61 | ||||||||
I Class, $0.01 Par Value | $74,219,822 | 4,751,663 | $15.62 | ||||||||
R5 Class, $0.01 Par Value | $1,567,236 | 100,362 | $15.62 |
See Notes to Financial Statements.
32
Statement of Operations |
YEAR ENDED OCTOBER 31, 2022 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Interest (net of foreign taxes withheld of $28) | $ | 10,173,710 | |||
Dividends (net of foreign taxes withheld of $16,746) | 8,368,487 | ||||
18,542,197 | |||||
Expenses: | |||||
Management fees | 8,528,045 | ||||
Directors' fees and expenses | 25,800 | ||||
Other expenses | 58,788 | ||||
8,612,633 | |||||
Net investment income (loss) | 9,929,564 | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | (45,851,559) | ||||
Forward foreign currency exchange contract transactions | 794,583 | ||||
Futures contract transactions | (2,357,352) | ||||
Swap agreement transactions | 1,695,654 | ||||
Foreign currency translation transactions | 626 | ||||
(45,718,048) | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | (145,572,914) | ||||
Forward foreign currency exchange contracts | (96,672) | ||||
Futures contracts | (178,064) | ||||
Swap agreements | (1,195,474) | ||||
Translation of assets and liabilities in foreign currencies | (498) | ||||
(147,043,622) | |||||
Net realized and unrealized gain (loss) | (192,761,670) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (182,832,106) |
See Notes to Financial Statements.
33
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2022 AND OCTOBER 31, 2021 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2022 | October 31, 2021 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | 9,929,564 | $ | 7,300,591 | ||||
Net realized gain (loss) | (45,718,048) | 207,770,676 | ||||||
Change in net unrealized appreciation (depreciation) | (147,043,622) | 2,196,589 | ||||||
Net increase (decrease) in net assets resulting from operations | (182,832,106) | 217,267,856 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (182,013,217) | (51,263,128) | ||||||
I Class | (19,755,430) | (6,239,355) | ||||||
R5 Class | (1,288,948) | (238,351) | ||||||
Decrease in net assets from distributions | (203,057,595) | (57,740,834) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 102,479,503 | 13,739,758 | ||||||
Net increase (decrease) in net assets | (283,410,198) | 173,266,780 | ||||||
Net Assets | ||||||||
Beginning of period | 1,117,664,984 | 944,398,204 | ||||||
End of period | $ | 834,254,786 | $ | 1,117,664,984 |
See Notes to Financial Statements.
34
Notes to Financial Statements |
OCTOBER 31, 2022
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 value of investments of the fund is determined by American Century Investment Management, Inc. (ACIM) (the investment advisor), as the valuation designee, pursuant to its valuation policies and procedures. The Board of Directors oversees the valuation designee and reviews its valuation policies and procedures at least annually.
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.
35
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.
If the valuation designee determines that the market price for a portfolio security is not readily available or is believed by the valuation designee to be unreliable, such security is valued at fair value as determined in good faith by the valuation designee, in accordance with its policies and procedures. Circumstances that may cause the fund to determine that market quotations are not available or reliable include, but are not limited to: when there is a significant event subsequent to the market quotation; trading in a security has been halted during the trading day; or trading in a security is insufficient or did not take place due to a closure or holiday.
The valuation designee 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; regulatory news, 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 valuation designee also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that it deems appropriate. The valuation designee 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. 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.
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.
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), as well as exchange-traded funds managed by the investment advisor, 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, 2022 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% |
37
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 of investment securities, excluding short-term investments, for the period ended October 31, 2022 totaled $912,843,668, of which $655,712,650 represented U.S. Treasury and Government Agency obligations.
Sales of investment securities, excluding short-term investments, for the period ended October 31, 2022 totaled $1,012,957,448, of which $670,512,082 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, 2022 | Year ended October 31, 2021 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 530,000,000 | 530,000,000 | ||||||||||||
Sold | 3,005,843 | $ | 55,164,090 | 4,157,746 | $ | 88,713,677 | ||||||||
Issued in reinvestment of distributions | 9,390,770 | 177,010,306 | 2,448,377 | 49,436,486 | ||||||||||
Redeemed | (7,454,780) | (129,723,101) | (5,592,077) | (119,705,514) | ||||||||||
4,941,833 | 102,451,295 | 1,014,046 | 18,444,649 | |||||||||||
I Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||||||
Sold | 655,830 | 11,760,961 | 904,798 | 19,191,359 | ||||||||||
Issued in reinvestment of distributions | 1,047,229 | 19,742,816 | 308,467 | 6,238,096 | ||||||||||
Redeemed | (1,644,932) | (28,254,238) | (1,561,092) | (32,908,772) | ||||||||||
58,127 | 3,249,539 | (347,827) | (7,479,317) | |||||||||||
R5 Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||||||
Sold | 28,087 | 525,838 | 132,639 | 2,910,360 | ||||||||||
Issued in reinvestment of distributions | 68,140 | 1,288,948 | 11,751 | 238,351 | ||||||||||
Redeemed | (302,630) | (5,036,117) | (17,242) | (374,285) | ||||||||||
(206,403) | (3,221,331) | 127,148 | 2,774,426 | |||||||||||
Net increase (decrease) | 4,793,557 | $ | 102,479,503 | 793,367 | $ | 13,739,758 |
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 | $ | 506,884,723 | $ | 6,302,506 | — | ||||||
U.S. Treasury Securities | — | 95,038,040 | — | ||||||||
Corporate Bonds | — | 80,169,385 | — | ||||||||
U.S. Government Agency Mortgage-Backed Securities | — | 72,606,223 | — | ||||||||
Collateralized Loan Obligations | — | 21,370,368 | — | ||||||||
Asset-Backed Securities | — | 20,878,755 | — | ||||||||
Collateralized Mortgage Obligations | — | 13,309,253 | — | ||||||||
Commercial Mortgage-Backed Securities | — | 5,519,947 | — | ||||||||
Municipal Securities | — | 5,481,445 | — | ||||||||
U.S. Government Agency Securities | — | 2,372,787 | — | ||||||||
Sovereign Governments and Agencies | — | 1,304,947 | — | ||||||||
Exchange-Traded Funds | 999,898 | — | — | ||||||||
Bank Loan Obligations | — | 507,428 | — | ||||||||
Short-Term Investments | 11,996,876 | — | — | ||||||||
$ | 519,881,497 | $ | 324,861,084 | — | |||||||
Other Financial Instruments | |||||||||||
Futures Contracts | $ | 13,083 | — | — | |||||||
Swap Agreements | — | $ | 14,238 | — | |||||||
Forward Foreign Currency Exchange Contracts | — | 8,593 | — | ||||||||
$ | 13,083 | $ | 22,831 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Futures Contracts | $ | 164,596 | — | — | |||||||
Swap Agreements | — | $ | 91,539 | — | |||||||
Forward Foreign Currency Exchange Contracts | — | 28,116 | — | ||||||||
$ | 164,596 | $ | 119,655 | — |
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 $10,755,275.
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 $6,213,923.
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 $20,143,516 futures contracts purchased and $7,677,490 futures contracts sold.
40
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 $13,350,000.
Value of Derivative Instruments as of October 31, 2022
Asset Derivatives | Liability Derivatives | |||||||||||||
Type of Risk Exposure | Location on Statement of Assets and Liabilities | Value | Location on Statement of Assets and Liabilities | Value | ||||||||||
Credit Risk | Receivable for variation margin on swap agreements* | $ | 63,766 | Payable for variation margin on swap agreements* | — | |||||||||
Foreign Currency Risk | Unrealized appreciation on forward foreign currency exchange contracts | 8,593 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 28,116 | |||||||||
Interest Rate Risk | Receivable for variation margin on futures contracts* | — | Payable for variation margin on futures contracts* | 111,352 | ||||||||||
Other Contracts | Receivable for variation margin on swap agreements* | 688 | Payable for variation margin on swap agreements* | — | ||||||||||
$ | 73,047 | $ | 139,468 |
*Included in the unrealized appreciation (depreciation) on futures contracts or centrally cleared swap agreements, as applicable, as reported in the Schedule of Investments.
Effect of Derivative Instruments on the Statement of Operations for the Year Ended October 31, 2022
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 | $ | 267,483 | Change in net unrealized appreciation (depreciation) on swap agreements | $ | (97,585) | ||||||||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | 794,583 | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | (96,672) | ||||||||||
Interest Rate Risk | Net realized gain (loss) on futures contract transactions | (2,357,352) | Change in net unrealized appreciation (depreciation) on futures contracts | (178,064) | ||||||||||
Other Contracts | Net realized gain (loss) on swap agreement transactions | 1,428,171 | Change in net unrealized appreciation (depreciation) on swap agreements | (1,097,889) | ||||||||||
$ | 132,885 | $ | (1,470,210) |
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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, war, 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. Financial institutions have started the process of phasing out LIBOR and the transition process to a replacement rate 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 or a change in the cost of temporary borrowing for the fund.
9. Federal Tax Information
The tax character of distributions paid during the years ended October 31, 2022 and October 31, 2021 were as follows:
2022 | 2021 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 96,155,315 | $ | 8,419,510 | ||||
Long-term capital gains | $ | 106,902,280 | $ | 49,321,324 |
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 | $ | 844,030,159 | |||
Gross tax appreciation of investments | $ | 97,428,362 | |||
Gross tax depreciation of investments | (96,715,940) | ||||
Net tax appreciation (depreciation) of investments | 712,422 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (32,220) | ||||
Net tax appreciation (depreciation) | $ | 680,202 | |||
Undistributed ordinary income | $ | 2,263,120 | |||
Accumulated short-term capital losses | $ | (42,032,109) | |||
Accumulated long-term capital losses | $ | (3,467,805) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Accumulated capital losses represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers may be carried forward for an unlimited period. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations.
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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 | |||||||||||||||||||||||||||||||||||||||||
2022 | $22.97 | 0.18 | (3.38) | (3.20) | (0.15) | (4.01) | (4.16) | $15.61 | (16.94)% | 0.91% | 1.00% | 94% | $758,468 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||
2022 | $22.98 | 0.21 | (3.37) | (3.16) | (0.19) | (4.01) | (4.20) | $15.62 | (16.76)% | 0.71% | 1.20% | 94% | $74,220 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||
2022 | $22.98 | 0.19 | (3.35) | (3.16) | (0.19) | (4.01) | (4.20) | $15.62 | (16.76)% | 0.71% | 1.20% | 94% | $1,567 | ||||||||||||||||||||||||||||
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 |
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.
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, 2022, 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, 2022, 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, 2022, 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 16, 2022
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 on 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 | 64 | None | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 64 | Alleghany Corporation (2021 to 2022) | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 64 | 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) | 64 | 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) | 64 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director and Board Chair | Since 2011 (Board Chair since 2022) | Retired | 64 | None | ||||||||||||
Stephen E. Yates (1948) | Director | Since 2012 | Retired | 108 | 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 | 142 | 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 29, 2022, 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 of 1940 (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, 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 data and information compiled by the Advisor and certain independent data providers concerning the Fund. 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 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 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 an appropriate benchmark(s) and peer group of other mutual funds with similar investment objectives and strategies;
•the cost of owning the Fund compared to the cost of owning similarly-managed funds;
•the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans, generally, and with respect to the ongoing impact of the COVID-19 pandemic response, heightened areas of interest in the mutual fund industry and recent geopolitical issues;
•the Advisor’s business continuity plans, vendor management practices, 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 four meetings to consider the renewal. The independent Directors also met in private session multiple 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.
49
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, without limitation, the following:
•constructing and designing the Fund
•portfolio research and security selection
•initial capitalization/funding
•securities trading
•Fund administration
•custody of Fund assets
•daily valuation of the Fund’s portfolio
•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 principal investment 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 Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any actions being taken to improve performance, and may conduct special reviews until performance improves. The Fund’s performance was above its benchmark for the one-year period and below its benchmark for the three-, five-, and ten-year periods reviewed by the Board. The Board discussed the Fund's performance with the Advisor, including steps being taken to address underperformance, and was
50
satisfied with the efforts being undertaken by the Advisor.The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through its various committees, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services 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 fee structure, and through reinvestment in its business, infrastructure, investment capabilities and initiatives to provide shareholders enhanced and expanded 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 securities transaction expenses, 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 Investment Company Act Rule 12b-1. 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
51
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 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.
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 terms of the management agreement are fair and reasonable and that the management fee charged to the Fund is reasonable in light of the services provided and that the management agreement between the Fund and the Advisor should be renewed for an additional one-year period.
52
Proxy Voting Results |
A special meeting of shareholders was held on October 13, 2022, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect five directors to the Board of Directors of American Century Mutual Funds, Inc.:
Affirmative | Withhold | ||||||||||
Brian Bulatao | $ | 24,005,100,401 | $ | 1,121,808,198 | |||||||
Chris H. Cheesman | $ | 24,198,214,355 | $ | 928,694,244 | |||||||
Rajesh K. Gupta | $ | 24,143,807,378 | $ | 983,101,221 | |||||||
Lynn M. Jenkins | $ | 24,034,830,602 | $ | 1,092,077,997 | |||||||
Gary C. Meltzer | $ | 24,134,760,750 | $ | 992,147,849 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Thomas W. Bunn, Barry Fink, Jan M. Lewis, and Stephen E. Yates.
53
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.
54
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, 2022.
For corporate taxpayers, the fund hereby designates $7,431,517 or up to the maximum amount
allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2022 as
qualified for the corporate dividends received deduction.
The fund hereby designates $106,902,280, or up to the maximum amount allowable, as long-term
capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2022.
The fund hereby designates $87,843,863 as qualified short-term capital gain distributions for
purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2022.
55
Notes |
56
![]() | ||||||||
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. | ||||||||
©2022 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90968 2212 |
![image25.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image25.jpg)
Annual Report | |||||
October 31, 2022 | |||||
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) | |||||
G Class (ACIHX) |
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 | |||||
Proxy Voting Results | |||||
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 |
![image22.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image22.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ending October 31, 2022. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
High Inflation, Rising Rates, Volatility Challenged Investors
The broad economic and investment backdrops grew knottier as the fiscal year progressed. Challenges began to surface early in the period, as the Federal Reserve (Fed) and other central banks finally admitted inflation was entrenched rather than transitory. Investors grew more cautious amid growing expectations for less accommodative monetary policy in the new year.
By early 2022, inflation soared to levels last seen in the early 1980s. Massive fiscal and monetary support unleashed during the pandemic was partly to blame. In addition, escalating energy prices, supply chain breakdowns, labor market shortages and Russia’s invasion of Ukraine further aggravated the inflation backdrop.
The Fed responded to surging inflation with a rate hike in March, three months after the Bank of England (BofE) launched its tightening campaign. Through October, the Fed lifted rates a total of 3 percentage points, while the BofE hiked 2.9 percentage points. The European Central Bank (ECB) waited until July to start tightening. Facing record-high inflation, the ECB raised rates 2 percentage points through October.
In addition to fostering recession risk, the combination of elevated inflation and hawkish central banks helped push bond yields sharply higher and stock prices significantly lower. Amid persistent market unrest, most stock, bond and real estate indices ended the 12-month period with steep losses. While U.S. stock returns were broadly negative, growth stocks significantly underperformed their value stock peers.
Staying Disciplined in Uncertain Times
We expect market volatility to linger as investors navigate a complex environment of high inflation, rising interest rates and economic uncertainty. In addition, Russia’s invasion of Ukraine complicates an increasingly tense geopolitical backdrop and threatens global energy markets. We will continue to monitor this evolving situation and what it broadly means for investors across asset classes.
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,
![image27.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image27.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of October 31, 2022 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |||||||||||||||
Investor Class | TWCGX | -28.26% | 10.86% | 12.88% | — | 6/30/71 | ||||||||||||||
Russell 1000 Growth Index | — | -24.60% | 12.58% | 14.68% | — | — | ||||||||||||||
I Class | TWGIX | -28.14% | 11.08% | 13.10% | — | 6/16/97 | ||||||||||||||
Y Class | AGYWX | -28.02% | 11.25% | — | 12.84% | 4/10/17 | ||||||||||||||
A Class | TCRAX | 6/4/97 | ||||||||||||||||||
No sales charge | -28.46% | 10.58% | 12.60% | — | ||||||||||||||||
With sales charge | -32.57% | 9.27% | 11.92% | — | ||||||||||||||||
C Class | TWRCX | -28.97% | 9.76% | 11.75% | — | 3/1/10 | ||||||||||||||
R Class | AGWRX | -28.62% | 10.31% | 12.32% | — | 8/29/03 | ||||||||||||||
R5 Class | AGWUX | -28.12% | 11.09% | — | 12.67% | 4/10/17 | ||||||||||||||
R6 Class | AGRDX | -28.01% | 11.25% | — | 12.44% | 7/26/13 | ||||||||||||||
G Class | ACIHX | — | — | — | -17.41% | 3/1/22 |
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. 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.
3
Growth of $10,000 Over 10 Years | ||
$10,000 investment made October 31, 2012 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-e9dd5da36e7e4578ab3.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/chart-e9dd5da36e7e4578ab3.jpg)
Value on October 31, 2022 | |||||
Investor Class — $33,583 | |||||
Russell 1000 Growth Index — $39,370 | |||||
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 | ||||||||||||||||||
0.96% | 0.76% | 0.61% | 1.21% | 1.96% | 1.46% | 0.76% | 0.61% | 0.61% |
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
Performance Summary
Growth returned -28.26%* for the 12 months ended October 31, 2022, versus the -24.60% return of the fund’s benchmark, the Russell 1000 Growth Index.
U.S. stocks fell sharply over the past 12 months, with the heaviest losses coming from late 2021 through midyear 2022. The downturn began amid a combination of factors—the new omicron variant of COVID-19, rising inflation, the Federal Reserve signaling interest rate increases—that led to investors moving to more defensive positioning. The market action was marked by a rotation out of the highest-growth stocks and pandemic winners into either lower growth or more traditional cyclical value stocks. Market declines intensified after Russia invaded Ukraine, exacerbating already stretched supply chains and leading to soaring oil prices that helped drive inflation to four-decade highs. Within the Russell 1000 Growth Index, energy was by far the top-performing sector, benefiting from rising prices due to increased demand amid limited supplies. Consumer staples and utilities posted modest gains, while all other sectors recorded double-digit losses.
Stock selection in the information technology and industrials sectors helped drive underperformance relative to the benchmark. Stock decisions in the communication services sector led positive contributors.
Information Technology Hampered Performance
Significant detractors in the information technology sector included PayPal Holdings. The digital payments company delivered quarterly results and forward guidance below expectations, with deceleration in key metrics. We eliminated our position due to lower engagement trends following the pandemic, as well as management’s poor execution on margins and several growth initiatives. Apple beat analysts’ expectations on both revenues and earnings, and our underweight allocation to the consumer electronics giant hurt relative performance.
Holdings in the industrials sector detracted. Late in our reporting period, Generac Holdings fell sharply after management reduced its guidance for revenue and earnings. The maker of generators and other power products cited the bankruptcy of a major client and warranty issues as reasons for the disappointing guidance.
Other detractors included underweight allocations to AbbVie and Eli Lilly & Co. Although we initiated positions in these companies during the period, we were underweight overall, which hampered relative performance. The stock of AbbVie outperformed as the market favored more defensive large-capitalization pharmaceuticals stocks. We like AbbVie even though its bestselling drug Humira loses patent protection in 2023. AbbVie has no additional patent cliffs on the horizon through the rest of the decade. Eli Lilly’s strength came from strong data for the pharmaceutical company’s drug Tirzepatide for obesity. Our holding of Aptiv, a Dublin-based automobile technology solutions provider, underperformed following Russia’s invasion of Ukraine on concerns about production disruptions, higher commodity costs, continued supply chain constraints and negative impacts to European automobile demand.
*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
Communication Services Stocks Were Top Contributors
Not owning Netflix benefited relative performance in the communication services sector. The streaming video service announced another round of layoffs amid weak subscriber growth. An
expected renormalization of subscriber growth following the early gains of the pandemic has not materialized. During the period, we eliminated the stock of Facebook’s parent Meta Platforms, which has been hurt more by both Apple iOS platform changes and TikTok competition than other digital advertising platforms. The fund’s resulting underweight helped relative performance as the stock fell sharply.
In the health care sector, UnitedHealth Group recorded solid quarterly results and modestly increased its earnings guidance. However, the health insurer’s stock’s outperformance was driven more by its defensive profile and being more insulated from the impact of inflation and stronger U.S. dollar. Vertex Pharmaceuticals is an innovative biotechnology company creating transformative medicines. The company beat expectations on revenues and has strong cash flows powered by its cystic fibrosis treatment. It is making meaningful progress on a number of different indications, including sickle cell anemia and diabetes.
Elsewhere, Visa was a top contributor. The digital payments company delivered solid results as cross-border travel improved significantly. In addition, the stock is viewed as defensive, particularly in an inflationary environment. Adobe’s stock fell sharply after it announced an acquisition. Investors appeared to believe the software company was overpaying for the purchase. Our lack of exposure to Adobe benefited relative performance.
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.
War, inflation and recession risk all suggest difficult, volatile conditions ahead. Markets will continue to deal with the contrasting risks of rising inflation and interest rates, even as the global economy teeters on the verge of recession. The ongoing war in Ukraine also highlights political and economic risks at present. COVID-19, war and tariffs all are disrupting global supply chains, putting further upward pressure on prices. Nevertheless, we continue to believe that well-run businesses in strong positions with respect to their competition are best able to navigate current conditions.
At period-end, our largest sector allocations relative to the benchmark were in health care and communication services. The largest underweight was financials.
6
Fund Characteristics |
OCTOBER 31, 2022 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 99.3% | ||||
Short-Term Investments | 1.0% | ||||
Other Assets and Liabilities | (0.3)% | ||||
Top Five Industries | % of net assets | ||||
Software | 16.2% | ||||
Technology Hardware, Storage and Peripherals | 10.7% | ||||
IT Services | 7.5% | ||||
Interactive Media and Services | 7.1% | ||||
Semiconductors and Semiconductor Equipment | 6.5% |
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, 2022 to October 31, 2022.
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 mutual 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 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 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 5/1/22 | Ending Account Value 10/31/22 | Expenses Paid During Period(1) 5/1/22 - 10/31/22 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $892.60 | $4.58 | 0.96% | ||||||||||
I Class | $1,000 | $893.10 | $3.63 | 0.76% | ||||||||||
Y Class | $1,000 | $893.80 | $2.91 | 0.61% | ||||||||||
A Class | $1,000 | $891.20 | $5.77 | 1.21% | ||||||||||
C Class | $1,000 | $887.90 | $9.33 | 1.96% | ||||||||||
R Class | $1,000 | $890.20 | $6.96 | 1.46% | ||||||||||
R5 Class | $1,000 | $893.40 | $3.63 | 0.76% | ||||||||||
R6 Class | $1,000 | $894.00 | $2.91 | 0.61% | ||||||||||
G Class | $1,000 | $896.70 | $0.05 | 0.01% | ||||||||||
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% | ||||||||||
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.
9
Schedule of Investments |
OCTOBER 31, 2022
Shares | Value | |||||||
COMMON STOCKS — 99.3% | ||||||||
Aerospace and Defense — 2.1% | ||||||||
Lockheed Martin Corp. | 461,999 | $ | 224,845,673 | |||||
Air Freight and Logistics — 1.1% | ||||||||
United Parcel Service, Inc., Class B | 703,730 | 118,064,782 | ||||||
Auto Components — 0.6% | ||||||||
Aptiv PLC(1) | 677,950 | 61,740,906 | ||||||
Automobiles — 2.9% | ||||||||
Tesla, Inc.(1) | 1,349,651 | 307,099,588 | ||||||
Beverages — 1.8% | ||||||||
PepsiCo, Inc. | 1,082,272 | 196,518,950 | ||||||
Biotechnology — 3.8% | ||||||||
AbbVie, Inc. | 1,836,205 | 268,820,412 | ||||||
Vertex Pharmaceuticals, Inc.(1) | 446,051 | 139,167,912 | ||||||
407,988,324 | ||||||||
Building Products — 0.5% | ||||||||
Masco Corp. | 467,750 | 21,642,793 | ||||||
Trex Co., Inc.(1) | 575,369 | 27,669,495 | ||||||
49,312,288 | ||||||||
Capital Markets — 0.8% | ||||||||
S&P Global, Inc. | 260,881 | 83,808,021 | ||||||
Chemicals — 1.1% | ||||||||
Air Products and Chemicals, Inc. | 451,137 | 112,964,705 | ||||||
Electrical Equipment — 1.2% | ||||||||
Generac Holdings, Inc.(1) | 449,168 | 52,063,063 | ||||||
Rockwell Automation, Inc. | 291,294 | 74,367,358 | ||||||
126,430,421 | ||||||||
Electronic Equipment, Instruments and Components — 2.1% | ||||||||
CDW Corp. | 482,542 | 83,388,083 | ||||||
Cognex Corp. | 742,238 | 34,313,663 | ||||||
Keysight Technologies, Inc.(1) | 613,550 | 106,849,732 | ||||||
224,551,478 | ||||||||
Energy Equipment and Services — 1.0% | ||||||||
Schlumberger NV | 1,992,594 | 103,674,666 | ||||||
Entertainment — 1.9% | ||||||||
Liberty Media Corp.-Liberty Formula One, Class C(1) | 916,797 | 52,926,691 | ||||||
Take-Two Interactive Software, Inc.(1) | 340,629 | 40,357,724 | ||||||
Walt Disney Co.(1) | 1,065,965 | 113,567,911 | ||||||
206,852,326 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 0.8% | ||||||||
Prologis, Inc. | 275,073 | 30,464,335 | ||||||
SBA Communications Corp. | 189,386 | 51,115,281 | ||||||
81,579,616 | ||||||||
Food and Staples Retailing — 0.6% | ||||||||
Sysco Corp. | 710,195 | 61,474,479 | ||||||
Food Products — 0.9% | ||||||||
Mondelez International, Inc., Class A | 1,335,299 | 82,094,183 | ||||||
Vital Farms, Inc.(1) | 975,643 | 12,917,513 | ||||||
95,011,696 |
10
Shares | Value | |||||||
Health Care Equipment and Supplies — 2.4% | ||||||||
DexCom, Inc.(1) | 532,533 | $ | 64,319,336 | |||||
Edwards Lifesciences Corp.(1) | 897,947 | 65,038,301 | ||||||
IDEXX Laboratories, Inc.(1) | 134,695 | 48,447,097 | ||||||
Intuitive Surgical, Inc.(1) | 306,523 | 75,548,724 | ||||||
253,353,458 | ||||||||
Health Care Providers and Services — 4.4% | ||||||||
Cigna Corp. | 358,226 | 115,728,492 | ||||||
UnitedHealth Group, Inc. | 628,069 | 348,672,505 | ||||||
464,400,997 | ||||||||
Hotels, Restaurants and Leisure — 1.9% | ||||||||
Airbnb, Inc., Class A(1) | 733,685 | 78,438,264 | ||||||
Chipotle Mexican Grill, Inc.(1) | 54,206 | 81,218,476 | ||||||
Dutch Bros, Inc., Class A(1)(2) | 286,275 | 10,566,410 | ||||||
Expedia Group, Inc.(1) | 336,590 | 31,461,067 | ||||||
201,684,217 | ||||||||
Household Products — 1.4% | ||||||||
Procter & Gamble Co. | 1,098,225 | 147,897,961 | ||||||
Insurance — 0.6% | ||||||||
Progressive Corp. | 510,682 | 65,571,569 | ||||||
Interactive Media and Services — 7.1% | ||||||||
Alphabet, Inc., Class A(1) | 7,968,642 | 753,116,355 | ||||||
Internet and Direct Marketing Retail — 5.9% | ||||||||
Amazon.com, Inc.(1) | 6,176,411 | 632,711,543 | ||||||
IT Services — 7.5% | ||||||||
Accenture PLC, Class A | 518,491 | 147,199,595 | ||||||
Mastercard, Inc., Class A | 206,732 | 67,845,308 | ||||||
Okta, Inc.(1) | 556,442 | 31,227,525 | ||||||
Twilio, Inc., Class A(1) | 504,841 | 37,545,025 | ||||||
Visa, Inc., Class A | 2,477,612 | 513,262,102 | ||||||
797,079,555 | ||||||||
Life Sciences Tools and Services — 0.9% | ||||||||
Agilent Technologies, Inc. | 553,003 | 76,507,965 | ||||||
Repligen Corp.(1) | 106,878 | 19,504,166 | ||||||
96,012,131 | ||||||||
Oil, Gas and Consumable Fuels — 0.7% | ||||||||
ConocoPhillips | 616,340 | 77,714,311 | ||||||
Personal Products — 0.6% | ||||||||
Estee Lauder Cos., Inc., Class A | 338,422 | 67,850,227 | ||||||
Pharmaceuticals — 3.2% | ||||||||
Eli Lilly & Co. | 443,930 | 160,742,614 | ||||||
Novo Nordisk A/S, B Shares | 837,776 | 91,092,431 | ||||||
Zoetis, Inc. | 625,120 | 94,255,594 | ||||||
346,090,639 | ||||||||
Road and Rail — 1.9% | ||||||||
Uber Technologies, Inc.(1) | 2,785,710 | 74,016,315 | ||||||
Union Pacific Corp. | 640,918 | 126,350,574 | ||||||
200,366,889 | ||||||||
Semiconductors and Semiconductor Equipment — 6.5% | ||||||||
Advanced Micro Devices, Inc.(1) | 2,709,301 | 162,720,618 | ||||||
Analog Devices, Inc. | 675,934 | 96,401,707 |
11
Shares | Value | |||||||
Applied Materials, Inc. | 824,251 | $ | 72,773,121 | |||||
ASML Holding NV | 229,873 | 107,830,344 | ||||||
GLOBALFOUNDRIES, Inc.(1)(2) | 423,057 | 23,987,332 | ||||||
NVIDIA Corp. | 1,661,056 | 224,192,728 | ||||||
687,905,850 | ||||||||
Software — 16.2% | ||||||||
Cadence Design Systems, Inc.(1) | 471,612 | 71,397,341 | ||||||
Crowdstrike Holdings, Inc., Class A(1) | 337,526 | 54,409,191 | ||||||
Datadog, Inc., Class A(1) | 478,699 | 38,540,057 | ||||||
Microsoft Corp. | 5,649,787 | 1,311,485,056 | ||||||
PagerDuty, Inc.(1) | 1,550,926 | 38,680,095 | ||||||
Paycor HCM, Inc.(1) | 486,219 | 14,815,093 | ||||||
Salesforce, Inc.(1) | 453,620 | 73,754,076 | ||||||
Splunk, Inc.(1) | 562,749 | 46,770,069 | ||||||
Workday, Inc., Class A(1) | 442,420 | 68,937,884 | ||||||
1,718,788,862 | ||||||||
Specialty Retail — 2.7% | ||||||||
Home Depot, Inc. | 447,798 | 132,606,422 | ||||||
Ross Stores, Inc. | 419,123 | 40,105,880 | ||||||
TJX Cos., Inc. | 1,608,705 | 115,987,630 | ||||||
288,699,932 | ||||||||
Technology Hardware, Storage and Peripherals — 10.7% | ||||||||
Apple, Inc. | 7,435,597 | 1,140,174,444 | ||||||
Textiles, Apparel and Luxury Goods — 1.5% | ||||||||
Deckers Outdoor Corp.(1) | 134,476 | 47,057,187 | ||||||
NIKE, Inc., Class B | 1,227,143 | 113,731,613 | ||||||
160,788,800 | ||||||||
TOTAL COMMON STOCKS (Cost $6,167,640,703) | 10,562,125,659 | |||||||
SHORT-TERM INVESTMENTS — 1.0% | ||||||||
Money Market Funds — 0.3% | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 132,703 | 132,703 | ||||||
State Street Navigator Securities Lending Government Money Market Portfolio(3) | 27,822,544 | 27,822,544 | ||||||
27,955,247 | ||||||||
Repurchase Agreements — 0.7% | ||||||||
BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.125% - 3.125%, 8/15/23 - 8/15/42, valued at $14,985,392), in a joint trading account at 2.95%, dated 10/31/22, due 11/1/22 (Delivery value $14,695,910) | 14,694,706 | |||||||
Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 1.625%, 2/15/26, valued at $64,272,254), at 3.00%, dated 10/31/22, due 11/1/22 (Delivery value $63,017,251) | 63,012,000 | |||||||
77,706,706 | ||||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $105,661,953) | 105,661,953 | |||||||
TOTAL INVESTMENT SECURITIES — 100.3% (Cost $6,273,302,656) | 10,667,787,612 | |||||||
OTHER ASSETS AND LIABILITIES — (0.3)% | (27,719,474) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 10,640,068,138 |
12
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
EUR | 2,999,268 | USD | 2,953,706 | JPMorgan Chase Bank N.A. | 12/30/22 | $ | 25,192 | |||||||||||||
EUR | 4,220,468 | USD | 4,115,049 | JPMorgan Chase Bank N.A. | 12/30/22 | 76,756 | ||||||||||||||
EUR | 2,852,724 | USD | 2,803,081 | JPMorgan Chase Bank N.A. | 12/30/22 | 30,269 | ||||||||||||||
EUR | 3,468,209 | USD | 3,376,364 | JPMorgan Chase Bank N.A. | 12/30/22 | 68,291 | ||||||||||||||
EUR | 3,409,591 | USD | 3,372,768 | JPMorgan Chase Bank N.A. | 12/30/22 | 13,667 | ||||||||||||||
EUR | 2,471,709 | USD | 2,466,225 | JPMorgan Chase Bank N.A. | 12/30/22 | (11,302) | ||||||||||||||
USD | 85,859,348 | EUR | 87,389,094 | JPMorgan Chase Bank N.A. | 12/30/22 | (936,246) | ||||||||||||||
USD | 7,162,116 | EUR | 7,219,736 | JPMorgan Chase Bank N.A. | 12/30/22 | (8,588) | ||||||||||||||
USD | 7,518,516 | EUR | 7,630,060 | JPMorgan Chase Bank N.A. | 12/30/22 | (59,725) | ||||||||||||||
USD | 3,052,945 | EUR | 3,087,194 | JPMorgan Chase Bank N.A. | 12/30/22 | (13,283) | ||||||||||||||
USD | 5,012,372 | EUR | 5,011,806 | JPMorgan Chase Bank N.A. | 12/30/22 | 34,604 | ||||||||||||||
USD | 3,568,602 | EUR | 3,526,827 | JPMorgan Chase Bank N.A. | 12/30/22 | 65,728 | ||||||||||||||
$ | (714,637) |
FUTURES CONTRACTS PURCHASED | ||||||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)^ | ||||||||||
S&P 500 E-Mini | 168 | December 2022 | $ | 32,617,200 | $ | (1,320,394) |
^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 $27,200,635. 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 $27,822,544.
See Notes to Financial Statements.
13
Statement of Assets and Liabilities |
OCTOBER 31, 2022 | |||||
Assets | |||||
Investment securities, at value (cost of $6,245,480,112) — including $27,200,635 of securities on loan | $ | 10,639,965,068 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $27,822,544) | 27,822,544 | ||||
Total investment securities, at value (cost of $6,273,302,656) | 10,667,787,612 | ||||
Deposits with broker for futures contracts | 1,680,000 | ||||
Receivable for investments sold | 10,644,190 | ||||
Receivable for capital shares sold | 5,100,813 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 314,507 | ||||
Dividends and interest receivable | 5,626,369 | ||||
Securities lending receivable | 73,984 | ||||
10,691,227,475 | |||||
Liabilities | |||||
Payable for collateral received for securities on loan | 27,822,544 | ||||
Payable for investments purchased | 10,785,400 | ||||
Payable for capital shares redeemed | 4,006,601 | ||||
Payable for variation margin on futures contracts | 237,300 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 1,029,144 | ||||
Accrued management fees | 6,804,980 | ||||
Distribution and service fees payable | 58,335 | ||||
Accrued other expenses | 415,033 | ||||
51,159,337 | |||||
Net Assets | $ | 10,640,068,138 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 6,044,946,940 | |||
Distributable earnings | 4,595,121,198 | ||||
$ | 10,640,068,138 |
Net Assets | Shares Outstanding | Net Asset Value Per Share* | |||||||||
Investor Class, $0.01 Par Value | $6,859,911,560 | 184,280,766 | $37.23 | ||||||||
I Class, $0.01 Par Value | $1,418,403,686 | 36,981,855 | $38.35 | ||||||||
Y Class, $0.01 Par Value | $45,448,261 | 1,179,447 | $38.53 | ||||||||
A Class, $0.01 Par Value | $100,331,686 | 2,836,281 | $35.37 | ||||||||
C Class, $0.01 Par Value | $9,097,264 | 285,823 | $31.83 | ||||||||
R Class, $0.01 Par Value | $72,437,330 | 2,143,358 | $33.80 | ||||||||
R5 Class, $0.01 Par Value | $2,471,221 | 64,360 | $38.40 | ||||||||
R6 Class, $0.01 Par Value | $879,964,308 | 22,876,471 | $38.47 | ||||||||
G Class, $0.01 Par Value | $1,252,002,822 | 32,419,251 | $38.62 |
*Maximum offering price per share was equal to the net asset value per share for all share classes, except Class A, for which the maximum offering price per share was $37.53 (net asset value divided by 0.9425). A contingent deferred sales charge may be imposed on redemptions of Class A and Class C.
See Notes to Financial Statements.
14
Statement of Operations |
YEAR ENDED OCTOBER 31, 2022 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $482,277) | $ | 86,744,240 | |||
Securities lending, net | 3,534,114 | ||||
Interest | 860,315 | ||||
91,138,669 | |||||
Expenses: | |||||
Management fees | 106,061,561 | ||||
Distribution and service fees: | |||||
A Class | 298,670 | ||||
C Class | 107,851 | ||||
R Class | 444,213 | ||||
Directors' fees and expenses | 320,278 | ||||
Other expenses | 549,492 | ||||
107,782,065 | |||||
Fees waived(1) | (7,011,878) | ||||
100,770,187 | |||||
Net investment income (loss) | (9,631,518) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 465,407,531 | ||||
Forward foreign currency exchange contract transactions | 27,920,343 | ||||
Futures contract transactions | (7,473,732) | ||||
Foreign currency translation transactions | (106,263) | ||||
485,747,879 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | (4,510,363,645) | ||||
Forward foreign currency exchange contracts | (3,694,947) | ||||
Futures contracts | (4,096,629) | ||||
Translation of assets and liabilities in foreign currencies | (64,215) | ||||
(4,518,219,436) | |||||
Net realized and unrealized gain (loss) | (4,032,471,557) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (4,042,103,075) |
(1)Amount consists of $1,567,706, $321,794, $10,496, $22,582, $2,035, $16,600, $614, $166,533 and $4,903,518 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.
15
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2022 AND OCTOBER 31, 2021 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2022 | October 31, 2021 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (9,631,518) | $ | (37,937,675) | ||||
Net realized gain (loss) | 485,747,879 | 1,366,371,431 | ||||||
Change in net unrealized appreciation (depreciation) | (4,518,219,436) | 2,976,420,772 | ||||||
Net increase (decrease) in net assets resulting from operations | (4,042,103,075) | 4,304,854,528 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (1,115,919,430) | (282,536,663) | ||||||
I Class | (218,489,765) | (62,416,300) | ||||||
Y Class | (6,859,773) | (1,866,955) | ||||||
A Class | (16,507,216) | (3,978,341) | ||||||
C Class | (1,609,267) | (543,385) | ||||||
R Class | (13,326,719) | (3,787,686) | ||||||
R5 Class | (495,405) | (15,831) | ||||||
R6 Class | (94,719,581) | (21,373,938) | ||||||
G Class | (53) | — | ||||||
Decrease in net assets from distributions | (1,467,927,209) | (376,519,099) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 2,682,027,313 | (712,757,144) | ||||||
Net increase (decrease) in net assets | (2,828,002,971) | 3,215,578,285 | ||||||
Net Assets | ||||||||
Beginning of period | 13,468,071,109 | 10,252,492,824 | ||||||
End of period | $ | 10,640,068,138 | $ | 13,468,071,109 |
See Notes to Financial Statements.
16
Notes to Financial Statements |
OCTOBER 31, 2022
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, R6 Class and G Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. Sale of the G Class commenced on March 1, 2022.
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 value of investments of the fund is determined by American Century Investment Management, Inc. (ACIM) (the investment advisor), as the valuation designee, pursuant to its valuation policies and procedures. The Board of Directors oversees the valuation designee and reviews its valuation policies and procedures at least annually.
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.
If the valuation designee determines that the market price for a portfolio security is not readily available or is believed by the valuation designee to be unreliable, such security is valued at fair value as determined in good faith by the valuation designee, in accordance with its policies and procedures. Circumstances that may cause the fund to determine that market quotations are not available or reliable include, but are not limited to: when there is a significant event subsequent to the market quotation; trading in a security has been halted during the trading day; or trading in a security is insufficient or did not take place due to a closure or holiday.
17
The valuation designee 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; regulatory news, 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 valuation designee also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that it deems appropriate. The valuation designee 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 ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover 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.
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, 2022.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 27,822,544 | — | — | — | $ | 27,822,544 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 27,822,544 |
(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, 8% of the shares of the fund.
19
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), as well as exchange-traded funds managed by the investment advisor, that use very similar investment teams and strategies (strategy assets). Prior to the fund's acquisition of NT Growth Fund, the strategy assets of the fund also included the assets of NT Growth Fund. From November 1, 2021 through July 31, 2022, the investment advisor agreed to waive a portion of the fund's management fee such that the management fee did 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. Effective August 1, 2022, the investment advisor agreed to waive a portion of the fund's management fee such that the management fee does not exceed 0.936% for Investor Class, A Class, C Class and R Class, 0.736% for I Class and R5 Class, and 0.586% for Y Class and R6 Class. The investment advisor expects this waiver arrangement to continue until July 31, 2023 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.
The management fee schedule range and the effective annual management fee before and after waiver for each class for the period ended October 31, 2022 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | ||||||||||
Before Waiver | After Waiver | ||||||||||
Investor Class | 0.800% to 0.990% | 0.97% | 0.95% | ||||||||
I Class | 0.600% to 0.790% | 0.77% | 0.75% | ||||||||
Y Class | 0.450% to 0.640% | 0.62% | 0.60% | ||||||||
A Class | 0.800% to 0.990% | 0.97% | 0.95% | ||||||||
C Class | 0.800% to 0.990% | 0.97% | 0.95% | ||||||||
R Class | 0.800% to 0.990% | 0.97% | 0.95% | ||||||||
R5 Class | 0.600% to 0.790% | 0.77% | 0.75% | ||||||||
R6 Class | 0.450% to 0.640% | 0.62% | 0.60% | ||||||||
G Class | 0.450% to 0.640% | 0.62% | 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, 2022 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 $2,516,544 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, 2022 were $2,973,214,103 and $3,310,952,046, respectively.
21
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2022(1) | Year ended October 31, 2021 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 2,100,000,000 | 2,100,000,000 | ||||||||||||
Sold | 6,391,740 | $ | 297,390,697 | 5,305,769 | $ | 264,722,721 | ||||||||
Issued in reinvestment of distributions | 20,434,759 | 1,074,423,880 | 5,939,447 | 269,212,365 | ||||||||||
Redeemed | (17,480,300) | (782,195,190) | (18,886,054) | (939,574,506) | ||||||||||
9,346,199 | 589,619,387 | (7,640,838) | (405,639,420) | |||||||||||
I Class/Shares Authorized | 460,000,000 | 460,000,000 | ||||||||||||
Sold | 5,934,225 | 266,630,922 | 5,030,555 | 253,476,557 | ||||||||||
Issued in reinvestment of distributions | 4,000,612 | 216,189,001 | 1,332,209 | 61,801,158 | ||||||||||
Redeemed | (7,491,997) | (347,687,734) | (11,938,383) | (624,523,946) | ||||||||||
2,442,840 | 135,132,189 | (5,575,619) | (309,246,231) | |||||||||||
Y Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 225,208 | 10,058,408 | 125,001 | 6,382,042 | ||||||||||
Issued in reinvestment of distributions | 124,070 | 6,727,246 | 39,621 | 1,840,784 | ||||||||||
Redeemed | (287,650) | (13,390,946) | (259,242) | (13,213,793) | ||||||||||
61,628 | 3,394,708 | (94,620) | (4,990,967) | |||||||||||
A Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 631,470 | 26,719,672 | 674,956 | 32,255,963 | ||||||||||
Issued in reinvestment of distributions | 302,755 | 15,172,225 | 83,670 | 3,641,339 | ||||||||||
Redeemed | (693,020) | (29,569,792) | (704,720) | (33,762,086) | ||||||||||
241,205 | 12,322,105 | 53,906 | 2,135,216 | |||||||||||
C Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||||||
Sold | 116,881 | 4,505,694 | 35,432 | 1,582,981 | ||||||||||
Issued in reinvestment of distributions | 33,783 | 1,532,167 | 12,972 | 521,225 | ||||||||||
Redeemed | (112,566) | (4,159,173) | (162,645) | (6,793,871) | ||||||||||
38,098 | 1,878,688 | (114,241) | (4,689,665) | |||||||||||
R Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 319,143 | 12,981,909 | 242,169 | 11,219,666 | ||||||||||
Issued in reinvestment of distributions | 277,158 | 13,325,583 | 89,107 | 3,740,945 | ||||||||||
Redeemed | (576,540) | (24,349,882) | (675,841) | (31,093,859) | ||||||||||
19,761 | 1,957,610 | (344,565) | (16,133,248) | |||||||||||
R5 Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||||||
Sold | 3,880 | 180,466 | 75,078 | 3,866,385 | ||||||||||
Issued in reinvestment of distributions | 8,690 | 471,376 | 341 | 15,831 | ||||||||||
Redeemed | (31,042) | (1,503,613) | (2,678) | (146,108) | ||||||||||
(18,472) | (851,771) | 72,741 | 3,736,108 | |||||||||||
R6 Class/Shares Authorized | 200,000,000 | 200,000,000 | ||||||||||||
Sold | 9,854,771 | 425,174,120 | 3,696,574 | 190,995,553 | ||||||||||
Issued in reinvestment of distributions | 1,749,733 | 94,651,353 | 460,844 | 21,373,938 | ||||||||||
Redeemed | (3,392,419) | (153,693,823) | (3,762,407) | (190,298,428) | ||||||||||
8,212,085 | 366,131,650 | 395,011 | 22,071,063 | |||||||||||
G Class/Shares Authorized | 780,000,000 | N/A | ||||||||||||
Sold | 3,787,174 | 153,740,082 | ||||||||||||
Issued in connection with reorganization (Note 10) | 31,393,184 | 1,540,737,439 | ||||||||||||
Issued in reinvestment of distributions | 1 | 53 | ||||||||||||
Redeemed | (2,761,108) | (122,034,827) | ||||||||||||
32,419,251 | 1,572,442,747 | |||||||||||||
Net increase (decrease) | 52,762,595 | $ | 2,682,027,313 | (13,248,225) | $ | (712,757,144) |
(1)March 1, 2022 (commencement of sale) through October 31, 2022 for the G Class.
22
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
•Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments.
•Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars.
•Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions).
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
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 | $ | 10,363,202,884 | $ | 198,922,775 | — | ||||||
Short-Term Investments | 27,955,247 | 77,706,706 | — | ||||||||
$ | 10,391,158,131 | $ | 276,629,481 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 314,507 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Futures Contracts | $ | 1,320,394 | — | — | |||||||
Forward Foreign Currency Exchange Contracts | — | $ | 1,029,144 | — | |||||||
$ | 1,320,394 | $ | 1,029,144 | — |
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 $55,293,367 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 $197,408,941.
Value of Derivative Instruments as of October 31, 2022
Asset Derivatives | Liability Derivatives | |||||||||||||
Type of Risk Exposure | Location on Statement of Assets and Liabilities | Value | Location on Statement of Assets and Liabilities | Value | ||||||||||
Equity Price Risk | Receivable for variation margin on futures contracts* | — | Payable for variation margin on futures contracts* | $ | 237,300 | |||||||||
Foreign Currency Risk | Unrealized appreciation on forward foreign currency exchange contracts | $ | 314,507 | Unrealized depreciation on forward foreign currency exchange contracts | 1,029,144 | |||||||||
$ | 314,507 | $ | 1,266,444 |
*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, 2022
Net Realized Gain (Loss) | Change in Net Unrealized Appreciation (Depreciation) | |||||||||||||
Type of Risk Exposure | Location on Statement of Operations | Value | Location on Statement of Operations | Value | ||||||||||
Equity Price Risk | Net realized gain (loss) on futures contract transactions | $ | (7,473,732) | Change in net unrealized appreciation (depreciation) on futures contracts | $ | (4,096,629) | ||||||||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | 27,920,343 | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | (3,694,947) | ||||||||||
$ | 20,446,611 | $ | (7,791,576) |
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, war, 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
The tax character of distributions paid during the years ended October 31, 2022 and October 31, 2021 were as follows:
2022 | 2021 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 79,614,038 | — | |||||
Long-term capital gains | $ | 1,388,313,171 | $ | 376,519,099 |
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 | $ | 6,282,327,176 | |||
Gross tax appreciation of investments | $ | 4,870,237,906 | |||
Gross tax depreciation of investments | (484,777,470) | ||||
Net tax appreciation (depreciation) of investments | 4,385,460,436 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (59,089) | ||||
Net tax appreciation (depreciation) | $ | 4,385,401,347 | |||
Undistributed ordinary income | $ | 8,199,839 | |||
Accumulated long-term gains | $ | 201,520,012 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
10. Reorganization
On December 2, 2021, the Board of Directors approved an agreement and plan of reorganization (the reorganization), whereby the net assets of NT 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 March 25, 2022.
The reorganization was accomplished by a tax-free exchange of shares. On March 25, 2022, NT Growth Fund exchanged its shares for shares of Growth Fund as follows:
Original Fund/Class | Shares Exchanged | New Fund/Class | Shares Received | ||||||||
NT Growth Fund – G Class | 71,233,354 | Growth Fund – G Class | 31,393,184 |
The net assets of NT Growth Fund and Growth Fund immediately before the reorganization were $1,540,737,439 and $12,083,608,261, respectively. NT Growth Fund's unrealized appreciation of $732,269,787 was combined with that of Growth Fund. Immediately after the reorganization, the combined net assets were $13,624,345,700.
Assuming the reorganization had been completed on November 1, 2021, the beginning of the annual reporting period, the pro forma results of operations for the period ended October 31, 2022 are as follows:
Net investment income (loss) | $ | (5,465,166) | |||
Net realized and unrealized gain (loss) | (4,163,440,617) | ||||
Net increase (decrease) in net assets resulting from operations | $ | (4,168,905,783) |
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 NT Growth Fund that have been included in the fund’s Statement of Operations since March 25, 2022.
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $58.23 | (0.09) | (14.59) | (14.68) | — | (6.32) | (6.32) | $37.23 | (28.26)% | 0.95% | 0.97% | (0.19)% | (0.21)% | 25% | $6,859,912 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $59.70 | —(3) | (15.03) | (15.03) | — | (6.32) | (6.32) | $38.35 | (28.14)% | 0.75% | 0.77% | 0.01% | (0.01)% | 25% | $1,418,404 | ||||||||||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $59.86 | 0.07 | (15.08) | (15.01) | — | (6.32) | (6.32) | $38.53 | (28.02)% | 0.60% | 0.62% | 0.16% | 0.14% | 25% | $45,448 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $55.78 | (0.19) | (13.90) | (14.09) | — | (6.32) | (6.32) | $35.37 | (28.46)% | 1.20% | 1.22% | (0.44)% | (0.46)% | 25% | $100,332 | ||||||||||||||||||||||||||||||||
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 | —(3) | 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 | ||||||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $51.16 | (0.46) | (12.55) | (13.01) | — | (6.32) | (6.32) | $31.83 | (28.97)% | 1.95% | 1.97% | (1.19)% | (1.21)% | 25% | $9,097 | ||||||||||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $53.69 | (0.29) | (13.28) | (13.57) | — | (6.32) | (6.32) | $33.80 | (28.62)% | 1.45% | 1.47% | (0.69)% | (0.71)% | 25% | $72,437 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $59.76 | (0.01) | (15.03) | (15.04) | — | (6.32) | (6.32) | $38.40 | (28.12)% | 0.75% | 0.77% | 0.01% | (0.01)% | 25% | $2,471 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $59.77 | 0.07 | (15.05) | (14.98) | — | (6.32) | (6.32) | $38.47 | (28.01)% | 0.60% | 0.62% | 0.16% | 0.14% | 25% | $879,964 | ||||||||||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022(4) | $47.73 | 0.23 | (8.33) | (8.10) | — | (1.01) | (1.01) | $38.62 | (17.41)% | 0.00%(5)(6) | 0.62%(5) | 0.82%(5) | 0.20%(5) | 25%(7) | $1,252,003 |
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)March 1, 2022 (commencement of sale) through October 31, 2022.
(5)Annualized.
(6)Ratio was less than 0.005%.
(7)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2022.
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, 2022, 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, 2022, 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, 2022, 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 16, 2022
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 on 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 | 64 | None | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 64 | Alleghany Corporation (2021 to 2022) | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 64 | 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) | 64 | 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) | 64 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director and Board Chair | Since 2011 (Board Chair since 2022) | Retired | 64 | None | ||||||||||||
Stephen E. Yates (1948) | Director | Since 2012 | Retired | 108 | 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 | 142 | 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) |
33
Approval of Management Agreement |
At a meeting held on June 29, 2022, 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 of 1940 (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, 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 data and information compiled by the Advisor and certain independent data providers concerning the Fund. 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 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 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 an appropriate benchmark(s) and peer group of other mutual funds with similar investment objectives and strategies;
•the cost of owning the Fund compared to the cost of owning similarly-managed funds;
•the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans, generally, and with respect to the ongoing impact of the COVID-19 pandemic response, heightened areas of interest in the mutual fund industry and recent geopolitical issues;
•the Advisor’s business continuity plans, vendor management practices, 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 four meetings to consider the renewal. The independent Directors also met in private session multiple 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, without limitation, the following:
•constructing and designing the Fund
•portfolio research and security selection
•initial capitalization/funding
•securities trading
•Fund administration
•custody of Fund assets
•daily valuation of the Fund’s portfolio
•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 principal investment 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 Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any actions being taken to improve performance, and may conduct special reviews until performance improves. The Fund’s performance was above its benchmark for the one- and five-year periods and below its benchmark for the three- and ten-year periods reviewed by the Board. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
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 fee structure, and through reinvestment in its business, infrastructure, investment capabilities and initiatives to provide shareholders enhanced and expanded 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. Assets of various classes of the same Fund or similarly-managed products are combined with the assets of the Fund to help achieve those breakpoints.
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 securities transaction expenses, 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 Investment Company Act Rule 12b-1. 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 annual unified management fee such that the Investor Class management
36
fee not exceed 0.936% for at least one year beginning August 1, 2022. 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.
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 terms of the management agreement are fair and reasonable and that the management fee charged to the Fund is reasonable in light of the services provided and that the management agreement between the Fund and the Advisor should be renewed for an additional one-year period.
37
Proxy Voting Results |
A special meeting of shareholders was held on October 13, 2022, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect five directors to the Board of Directors of American Century Mutual Funds, Inc.:
Affirmative | Withhold | ||||||||||
Brian Bulatao | $ | 24,005,100,401 | $ | 1,121,808,198 | |||||||
Chris H. Cheesman | $ | 24,198,214,355 | $ | 928,694,244 | |||||||
Rajesh K. Gupta | $ | 24,143,807,378 | $ | 983,101,221 | |||||||
Lynn M. Jenkins | $ | 24,034,830,602 | $ | 1,092,077,997 | |||||||
Gary C. Meltzer | $ | 24,134,760,750 | $ | 992,147,849 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Thomas W. Bunn, Barry Fink, Jan M. Lewis, and Stephen E. Yates.
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 up to the maximum amount allowable as qualified dividend income for the fiscal year ended October 31, 2022.
For corporate taxpayers, the fund hereby designates $68,890,287, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2022 as qualified for the corporate dividends received deduction.
The fund hereby designates $1,388,313,171, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2022.
The fund hereby designates $79,614,038 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2022.
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. | ||||||||
©2022 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90970 2212 |
![image25.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image25.jpg)
Annual Report | |||||
October 31, 2022 | |||||
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) | |||||
G Class (ACILX) |
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 | |||||
Proxy Voting Results | |||||
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 |
![image22.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image22.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ending October 31, 2022. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
High Inflation, Rising Rates, Volatility Challenged Investors
The broad economic and investment backdrops grew knottier as the fiscal year progressed. Challenges began to surface early in the period, as the Federal Reserve (Fed) and other central banks finally admitted inflation was entrenched rather than transitory. Investors grew more cautious amid growing expectations for less accommodative monetary policy in the new year.
By early 2022, inflation soared to levels last seen in the early 1980s. Massive fiscal and monetary support unleashed during the pandemic was partly to blame. In addition, escalating energy prices, supply chain breakdowns, labor market shortages and Russia’s invasion of Ukraine further aggravated the inflation backdrop.
The Fed responded to surging inflation with a rate hike in March, three months after the Bank of England (BofE) launched its tightening campaign. Through October, the Fed lifted rates a total of 3 percentage points, while the BofE hiked 2.9 percentage points. The European Central Bank (ECB) waited until July to start tightening. Facing record-high inflation, the ECB raised rates 2 percentage points through October.
In addition to fostering recession risk, the combination of elevated inflation and hawkish central banks helped push bond yields sharply higher and stock prices significantly lower. Amid persistent market unrest, most stock, bond and real estate indices ended the 12-month period with steep losses. While U.S. stock returns were broadly negative, growth stocks significantly underperformed their value stock peers.
Staying Disciplined in Uncertain Times
We expect market volatility to linger as investors navigate a complex environment of high inflation, rising interest rates and economic uncertainty. In addition, Russia’s invasion of Ukraine complicates an increasingly tense geopolitical backdrop and threatens global energy markets. We will continue to monitor this evolving situation and what it broadly means for investors across asset classes.
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,
![image27.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image27.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of October 31, 2022 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |||||||||||||||
Investor Class | TWHIX | -30.66% | 8.88% | 10.49% | — | 11/10/87 | ||||||||||||||
Russell Midcap Growth Index | — | -28.94% | 8.66% | 11.95% | — | — | ||||||||||||||
I Class | ATHIX | -30.49% | 9.10% | 10.72% | — | 6/16/97 | ||||||||||||||
Y Class | ATHYX | -30.38% | 9.27% | — | 10.22% | 4/10/17 | ||||||||||||||
A Class | ATHAX | 7/11/97 | ||||||||||||||||||
No sales charge | -30.80% | 8.61% | 10.22% | — | ||||||||||||||||
With sales charge | -34.78% | 7.32% | 9.56% | — | ||||||||||||||||
C Class | AHGCX | -31.31% | 7.81% | 9.39% | — | 6/26/01 | ||||||||||||||
R Class | ATHWX | -30.98% | 8.34% | 9.94% | — | 9/28/07 | ||||||||||||||
R5 Class | ATHGX | -30.50% | 9.10% | — | 10.05% | 4/10/17 | ||||||||||||||
R6 Class | ATHDX | -30.38% | 9.27% | — | 9.53% | 7/26/13 | ||||||||||||||
G Class | ACILX | — | — | — | -12.57% | 3/1/22 |
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.
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, 2012 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-ffa1f2f0f59846ebbf1.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/chart-ffa1f2f0f59846ebbf1.jpg)
Value on October 31, 2022 | |||||
Investor Class — $27,125 | |||||
Russell Midcap Growth Index — $30,927 | |||||
Total Annual Fund Operating Expenses | ||||||||||||||||||||||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | G Class | ||||||||||||||||||
1.00% | 0.80% | 0.65% | 1.25% | 2.00% | 1.50% | 0.80% | 0.65% | 0.65% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
4
Portfolio Commentary |
Portfolio Managers: Rob Brookby and Nalin Yogasundram
Performance Summary
Heritage returned -30.66%* for the 12 months ended October 31, 2022, versus the -28.94% return of the fund’s benchmark, the Russell Midcap Growth Index.
U.S. stocks fell sharply over the past 12 months, with the heaviest losses coming from late 2021 through midyear 2022. The downturn began amid a combination of factors—the new omicron variant of COVID-19, rising inflation, the Federal Reserve signaling interest rate increases—that led to investors moving to more defensive positioning. The market action was marked by a rotation out of the highest-growth stocks and pandemic winners into either lower growth or more traditional cyclical value stocks. Market declines intensified after Russia invaded Ukraine, exacerbating already stretched supply chains and leading to soaring oil prices that helped drive inflation to four-decade highs. Within the Russell Midcap Growth Index, energy was by far the top-performing sector, benefiting from rising prices and increased demand amid limited supplies. Utilities and consumer staples held up better than other sectors, all of which posted double-digit losses.
The energy sector helped drive the fund’s underperformance relative to the benchmark, due to our underweight allocation. Stock selection in the information technology sector also detracted. Stock decisions in the financials and health care sectors led contributors.
Energy Detracted From Performance
The energy sector was the top performer over the 12-month period, and our underweight hampered relative performance. For example, we did not own benchmark component Cheniere Energy, a liquefied natural gas producer that benefited from the crisis in European energy security as a consequence of the war in Ukraine.
Block was a significant detractor in the information technology sector. The small- and micro-merchant digital payments company suffered during the growth sell-off as rising interest rates and recessionary fears weighed on the stock. Additionally, Block’s focus on the blockchain technology that enables cryptocurrencies hurt the stock as crypto prices fell. We eliminated our holding. Australia-based Atlassian is a software company that provides collaborative tools used by small and midsize companies. Atlassian’s stock price declined along with other high-growth technology stocks as investors rotated to value holdings amid rising rates and geopolitical concerns. We eliminated our position. DocuSign develops software for online signatures and document management. It was a beneficiary of the pandemic-driven work-from-home environment but offered weak guidance as that tailwind subsided. We believe in the long-term adoption of electronic signature and a more efficient document workflow that DocuSign offers.
Elsewhere,the online dating company Match Group reported quarterly earnings and guidance that were below expectations, causing a sharp sell-off. The problem related primarily to Tinder, its biggest dating app. With a new CEO at Match and a recently replaced Tinder management team, investors wondered whether Tinder is fixable and whether the online dating category is more saturated than previously thought.
Seagen was a new holding during the year. As a result, we were underweight the biotechnology company for the 12-month period. Our lighter relative exposure detracted as the stock was a strong performer. We like Seagen, which is focused on monoclonal antibody treatments for cancer and has several approved drugs with strong efficacy in areas of high unmet needs.
*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
Financials and Health Care Stocks Benefited Performance
Rising interest rates were helpful for segments of the financials sector. LPL Financial Holdings is the largest broker-dealer in the country with more than 20,000 advisors. It benefited from the rise in short-term rates because its large cash sweep assets allow it to earn a spread on rate increases.
In health care, Sarepta Therapeutics was a top contributor. The biotechnology company’s management announced its intent to file for accelerated approval for its gene therapy that treats a rare neuromuscular disease. Investors had anticipated a regular approval, which would have a longer timeline. Neurocrine Biosciences outperformed, boosted by strong sales of its lead drug, Ingrezza. Neurocrine focuses on neurological, endocrine and psychiatric disorders and benefited from patients returning to in-person doctor visits as the pandemic restrictions eased.
Other significant contributors included Arista Networks. The company sells networking equipment for large data centers and profited from the start of another investment cycle by companies such as Microsoft and Meta Platforms, which need to catch up to outsize internet data traffic during the pandemic and to prepare for their next leg of growth. Palo Alto Networks is a cybersecurity software provider that has transformed into a cloud-based platform of next-generation cybersecurity products. On top of a strong environment for its products, Palo Alto said it expects greater free cash flow generation now that the heavy lift in its transformation is over. Celsius Holdings is a beverage company that offers calorie-burning drinks. It reported strong quarterly results driven by distribution gains in mass retail, convenience stores and clubs. Celsius also announced a distribution partnership with PepsiCo that could substantially accelerate its distribution gains and also provide it with access to the food service channel.
Outlook
Our process uses a combined top-down, bottom-up fundamental framework aimed at identifying mid-capitalization 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.
The past year was difficult for growth stocks, but we want to reassure you that we retain high conviction in our investment process and portfolio holdings. We acknowledge the challenging environment and are closely monitoring the fundamentals of our investments. But our long-term focus also leads us to look through the short-term noise. Looking ahead, we continue to see opportunities in infrastructure build-out, e-commerce, entertainment and other industries. Our key 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. Decarbonization, automation and advances in health care are accelerating their importance in the longer-term investment landscape.
6
Fund Characteristics |
OCTOBER 31, 2022 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 99.6% | ||||
Short-Term Investments | 1.0% | ||||
Other Assets and Liabilities | (0.6)% | ||||
Top Five Industries | % of net assets | ||||
Software | 11.2% | ||||
Hotels, Restaurants and Leisure | 7.5% | ||||
Life Sciences Tools and Services | 7.0% | ||||
Biotechnology | 5.7% | ||||
Electrical Equipment | 5.1% |
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, 2022 to October 31, 2022.
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 mutual 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 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 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 5/1/22 | Ending Account Value 10/31/22 | Expenses Paid During Period(1) 5/1/22 - 10/31/22 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $953.90 | $4.97 | 1.01% | ||||||||||
I Class | $1,000 | $955.30 | $3.99 | 0.81% | ||||||||||
Y Class | $1,000 | $955.90 | $3.25 | 0.66% | ||||||||||
A Class | $1,000 | $952.60 | $6.20 | 1.26% | ||||||||||
C Class | $1,000 | $949.80 | $9.88 | 2.01% | ||||||||||
R Class | $1,000 | $951.50 | $7.43 | 1.51% | ||||||||||
R5 Class | $1,000 | $954.90 | $3.99 | 0.81% | ||||||||||
R6 Class | $1,000 | $955.90 | $3.25 | 0.66% | ||||||||||
G Class | $1,000 | $959.00 | $0.05 | 0.01% | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,020.11 | $5.14 | 1.01% | ||||||||||
I Class | $1,000 | $1,021.12 | $4.13 | 0.81% | ||||||||||
Y Class | $1,000 | $1,021.88 | $3.36 | 0.66% | ||||||||||
A Class | $1,000 | $1,018.85 | $6.41 | 1.26% | ||||||||||
C Class | $1,000 | $1,015.07 | $10.21 | 2.01% | ||||||||||
R Class | $1,000 | $1,017.59 | $7.68 | 1.51% | ||||||||||
R5 Class | $1,000 | $1,021.12 | $4.13 | 0.81% | ||||||||||
R6 Class | $1,000 | $1,021.88 | $3.36 | 0.66% | ||||||||||
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.
9
Schedule of Investments |
OCTOBER 31, 2022
Shares | Value | |||||||
COMMON STOCKS — 99.6% | ||||||||
Aerospace and Defense — 3.6% | ||||||||
CAE, Inc.(1) | 1,364,410 | $ | 26,039,314 | |||||
Curtiss-Wright Corp. | 512,183 | 85,959,673 | ||||||
HEICO Corp. | 413,962 | 67,326,780 | ||||||
179,325,767 | ||||||||
Auto Components — 0.8% | ||||||||
Aptiv PLC(1) | 419,738 | 38,225,540 | ||||||
Banks — 0.7% | ||||||||
SVB Financial Group(1) | 146,241 | 33,775,821 | ||||||
Beverages — 1.7% | ||||||||
Celsius Holdings, Inc.(1) | 920,515 | 83,840,506 | ||||||
Biotechnology — 5.7% | ||||||||
Alnylam Pharmaceuticals, Inc.(1) | 272,876 | 56,556,280 | ||||||
Horizon Therapeutics PLC(1) | 897,065 | 55,905,091 | ||||||
Neurocrine Biosciences, Inc.(1) | 602,785 | 69,392,609 | ||||||
Sarepta Therapeutics, Inc.(1) | 539,078 | 61,465,673 | ||||||
Seagen, Inc.(1) | 336,900 | 42,840,204 | ||||||
286,159,857 | ||||||||
Building Products — 2.3% | ||||||||
Trane Technologies PLC | 604,766 | 96,538,797 | ||||||
Zurn Elkay Water Solutions Corp. | 779,258 | 18,304,770 | ||||||
114,843,567 | ||||||||
Capital Markets — 4.8% | ||||||||
Ares Management Corp., Class A | 670,178 | 50,819,598 | ||||||
LPL Financial Holdings, Inc. | 397,977 | 101,742,820 | ||||||
MSCI, Inc. | 190,121 | 89,140,132 | ||||||
241,702,550 | ||||||||
Chemicals — 2.3% | ||||||||
Albemarle Corp. | 64,751 | 18,121,862 | ||||||
Avient Corp. | 1,128,065 | 38,906,962 | ||||||
Element Solutions, Inc. | 3,378,933 | 58,117,648 | ||||||
115,146,472 | ||||||||
Commercial Services and Supplies — 1.3% | ||||||||
Republic Services, Inc. | 490,716 | 65,078,756 | ||||||
Communications Equipment — 3.0% | ||||||||
Arista Networks, Inc.(1) | 1,226,362 | 148,218,111 | ||||||
Containers and Packaging — 1.3% | ||||||||
Avery Dennison Corp. | 373,631 | 63,349,136 | ||||||
Electrical Equipment — 5.1% | ||||||||
AMETEK, Inc. | 773,709 | 100,319,109 | ||||||
Eaton Corp. PLC | 171,671 | 25,762,667 | ||||||
nVent Electric PLC | 1,277,322 | 46,622,253 | ||||||
Plug Power, Inc.(1)(2) | 943,510 | 15,077,290 | ||||||
Regal Rexnord Corp. | 547,604 | 69,293,810 | ||||||
257,075,129 | ||||||||
Electronic Equipment, Instruments and Components — 3.9% | ||||||||
Cognex Corp. | 1,295,862 | 59,907,700 |
10
Shares | Value | |||||||
Keysight Technologies, Inc.(1) | 779,818 | $ | 135,805,305 | |||||
195,713,005 | ||||||||
Entertainment — 1.9% | ||||||||
Live Nation Entertainment, Inc.(1) | 478,062 | 38,058,516 | ||||||
ROBLOX Corp., Class A(1) | 346,403 | 15,498,070 | ||||||
Spotify Technology SA(1) | 501,422 | 40,404,585 | ||||||
93,961,171 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 0.9% | ||||||||
Rexford Industrial Realty, Inc. | 841,987 | 46,545,041 | ||||||
Food Products — 3.2% | ||||||||
Hershey Co. | 678,195 | 161,932,620 | ||||||
Health Care Equipment and Supplies — 4.4% | ||||||||
DexCom, Inc.(1) | 1,005,701 | 121,468,567 | ||||||
IDEXX Laboratories, Inc.(1) | 272,581 | 98,041,934 | ||||||
219,510,501 | ||||||||
Health Care Providers and Services — 0.5% | ||||||||
R1 RCM, Inc.(1) | 1,302,793 | 23,007,324 | ||||||
Health Care Technology — 1.5% | ||||||||
Veeva Systems, Inc., Class A(1) | 436,223 | 73,259,291 | ||||||
Hotels, Restaurants and Leisure — 7.5% | ||||||||
Airbnb, Inc., Class A(1) | 758,057 | 81,043,874 | ||||||
Chipotle Mexican Grill, Inc.(1) | 91,576 | 137,211,068 | ||||||
Hilton Worldwide Holdings, Inc. | 1,184,393 | 160,200,997 | ||||||
378,455,939 | ||||||||
Interactive Media and Services — 0.9% | ||||||||
Match Group, Inc.(1) | 1,040,600 | 44,953,920 | ||||||
Internet and Direct Marketing Retail — 0.9% | ||||||||
Chewy, Inc., Class A(1)(2) | 769,770 | 29,813,192 | ||||||
Etsy, Inc.(1) | 186,859 | 17,547,929 | ||||||
47,361,121 | ||||||||
IT Services — 3.5% | ||||||||
Cloudflare, Inc., Class A(1) | 1,347,240 | 75,876,557 | ||||||
EPAM Systems, Inc.(1) | 278,191 | 97,366,850 | ||||||
173,243,407 | ||||||||
Life Sciences Tools and Services — 7.0% | ||||||||
Agilent Technologies, Inc. | 585,356 | 80,984,003 | ||||||
Avantor, Inc.(1) | 2,061,414 | 41,578,720 | ||||||
Bio-Techne Corp. | 190,884 | 56,551,294 | ||||||
IQVIA Holdings, Inc.(1) | 495,545 | 103,900,920 | ||||||
Mettler-Toledo International, Inc.(1) | 55,563 | 70,283,306 | ||||||
353,298,243 | ||||||||
Machinery — 2.1% | ||||||||
Graco, Inc. | 704,690 | 49,032,330 | ||||||
Parker-Hannifin Corp. | 188,199 | 54,694,394 | ||||||
103,726,724 | ||||||||
Media — 1.4% | ||||||||
Trade Desk, Inc., Class A(1) | 1,327,645 | 70,683,820 | ||||||
Oil, Gas and Consumable Fuels — 3.1% | ||||||||
Excelerate Energy, Inc., Class A | 1,013,179 | 27,984,004 | ||||||
Hess Corp. | 896,374 | 126,460,444 | ||||||
154,444,448 | ||||||||
Pharmaceuticals — 0.6% | ||||||||
Catalent, Inc.(1) | 470,202 | 30,906,377 |
11
Shares | Value | |||||||
Professional Services — 3.0% | ||||||||
Jacobs Solutions, Inc. | 715,311 | $ | 82,418,133 | |||||
Verisk Analytics, Inc. | 376,473 | 68,830,559 | ||||||
151,248,692 | ||||||||
Road and Rail — 1.9% | ||||||||
Lyft, Inc., Class A(1) | 1,475,254 | 21,597,719 | ||||||
Norfolk Southern Corp. | 318,804 | 72,709,628 | ||||||
94,307,347 | ||||||||
Semiconductors and Semiconductor Equipment — 4.5% | ||||||||
Enphase Energy, Inc.(1) | 283,876 | 87,149,932 | ||||||
Marvell Technology, Inc. | 741,966 | 29,441,211 | ||||||
Monolithic Power Systems, Inc. | 166,743 | 56,600,911 | ||||||
Teradyne, Inc. | 631,315 | 51,357,475 | ||||||
224,549,529 | ||||||||
Software — 11.2% | ||||||||
Cadence Design Systems, Inc.(1) | 1,176,460 | 178,104,280 | ||||||
Datadog, Inc., Class A(1) | 864,574 | 69,606,853 | ||||||
DocuSign, Inc.(1) | 324,081 | 15,653,112 | ||||||
HubSpot, Inc.(1) | 246,818 | 73,196,346 | ||||||
Manhattan Associates, Inc.(1) | 808,727 | 98,397,814 | ||||||
Palo Alto Networks, Inc.(1) | 736,934 | 126,450,505 | ||||||
561,408,910 | ||||||||
Specialty Retail — 0.9% | ||||||||
Burlington Stores, Inc.(1) | 171,050 | 24,453,308 | ||||||
Five Below, Inc.(1) | 160,607 | 23,504,834 | ||||||
47,958,142 | ||||||||
Textiles, Apparel and Luxury Goods — 2.2% | ||||||||
lululemon athletica, Inc.(1) | 328,905 | 108,222,901 | ||||||
TOTAL COMMON STOCKS (Cost $4,446,846,351) | 4,985,439,685 | |||||||
SHORT-TERM INVESTMENTS — 1.0% | ||||||||
Money Market Funds — 0.7% | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 25,374 | 25,374 | ||||||
State Street Navigator Securities Lending Government Money Market Portfolio(3) | 37,051,810 | 37,051,810 | ||||||
37,077,184 | ||||||||
Repurchase Agreements — 0.3% | ||||||||
BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.125% - 3.125%, 8/15/23 - 8/15/42, valued at $2,865,261), in a joint trading account at 2.95%, dated 10/31/22, due 11/1/22 (Delivery value $2,809,911) | 2,809,681 | |||||||
Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 3.625%, 8/15/43, valued at $12,286,938), at 3.00%, dated 10/31/22, due 11/1/22 (Delivery value $12,047,004) | 12,046,000 | |||||||
14,855,681 | ||||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $51,932,865) | 51,932,865 | |||||||
TOTAL INVESTMENT SECURITIES — 100.6% (Cost $4,498,779,216) | 5,037,372,550 | |||||||
OTHER ASSETS AND LIABILITIES — (0.6)% | (30,920,541) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 5,006,452,009 |
12
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
CAD | 1,620,919 | USD | 1,180,542 | Goldman Sachs & Co. | 12/30/22 | $ | 10,157 | |||||||||||||
CAD | 724,502 | USD | 531,829 | Goldman Sachs & Co. | 12/30/22 | 377 | ||||||||||||||
USD | 20,461,296 | CAD | 27,604,743 | Goldman Sachs & Co. | 12/30/22 | 183,337 | ||||||||||||||
USD | 559,119 | CAD | 761,341 | Goldman Sachs & Co. | 12/30/22 | (149) | ||||||||||||||
USD | 1,470,592 | CAD | 2,001,589 | Goldman Sachs & Co. | 12/30/22 | 260 | ||||||||||||||
USD | 498,994 | CAD | 687,663 | Goldman Sachs & Co. | 12/30/22 | (6,151) | ||||||||||||||
USD | 627,091 | CAD | 859,578 | Goldman Sachs & Co. | 12/30/22 | (4,340) | ||||||||||||||
USD | 833,373 | CAD | 1,129,731 | Goldman Sachs & Co. | 12/30/22 | 3,492 | ||||||||||||||
USD | 858,087 | CAD | 1,166,571 | Goldman Sachs & Co. | 12/30/22 | 1,144 | ||||||||||||||
$ | 188,127 |
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
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 $44,890,482. 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 $46,308,225, which includes securities collateral of $9,256,415.
See Notes to Financial Statements.
13
Statement of Assets and Liabilities |
OCTOBER 31, 2022 | |||||
Assets | |||||
Investment securities, at value (cost of $4,461,727,406) — including $44,890,482 of securities on loan | $ | 5,000,320,740 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $37,051,810) | 37,051,810 | ||||
Total investment securities, at value (cost of $4,498,779,216) | 5,037,372,550 | ||||
Receivable for investments sold | 33,715,795 | ||||
Receivable for capital shares sold | 1,263,022 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 198,767 | ||||
Dividends and interest receivable | 372,905 | ||||
Securities lending receivable | 6,127 | ||||
5,072,929,166 | |||||
Liabilities | |||||
Payable for collateral received for securities on loan | 37,051,810 | ||||
Payable for investments purchased | 24,369,837 | ||||
Payable for capital shares redeemed | 1,620,950 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 10,640 | ||||
Accrued management fees | 3,243,000 | ||||
Distribution and service fees payable | 62,890 | ||||
Accrued other expenses | 118,030 | ||||
66,477,157 | |||||
Net Assets | $ | 5,006,452,009 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 4,499,628,467 | |||
Distributable earnings | 506,823,542 | ||||
$ | 5,006,452,009 |
Net Assets | Shares Outstanding | Net Asset Value Per Share* | |||||||||
Investor Class, $0.01 Par Value | $3,369,474,318 | 182,884,330 | $18.42 | ||||||||
I Class, $0.01 Par Value | $231,708,221 | 11,177,954 | $20.73 | ||||||||
Y Class, $0.01 Par Value | $62,416,144 | 2,940,127 | $21.23 | ||||||||
A Class, $0.01 Par Value | $218,573,060 | 13,928,408 | $15.69 | ||||||||
C Class, $0.01 Par Value | $10,288,690 | 1,109,063 | $9.28 | ||||||||
R Class, $0.01 Par Value | $22,854,844 | 1,473,337 | $15.51 | ||||||||
R5 Class, $0.01 Par Value | $370,710 | 17,881 | $20.73 | ||||||||
R6 Class, $0.01 Par Value | $154,825,353 | 7,293,688 | $21.23 | ||||||||
G Class, $0.01 Par Value | $935,940,669 | 43,916,372 | $21.31 |
*Maximum offering price per share was equal to the net asset value per share for all share classes, except Class A, for which the maximum offering price per share was $16.65 (net asset value divided by 0.9425). A contingent deferred sales charge may be imposed on redemptions of Class A and Class C.
See Notes to Financial Statements.
14
Statement of Operations |
YEAR ENDED OCTOBER 31, 2022 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends | $ | 20,027,912 | |||
Interest | 575,133 | ||||
Securities lending, net | 75,259 | ||||
20,678,304 | |||||
Expenses: | |||||
Management fees | 50,197,160 | ||||
Distribution and service fees: | |||||
A Class | 660,556 | ||||
C Class | 139,418 | ||||
R Class | 138,078 | ||||
Directors' fees and expenses | 144,836 | ||||
Other expenses | 155,859 | ||||
51,435,907 | |||||
Fees waived - G Class | (3,779,579) | ||||
47,656,328 | |||||
Net investment income (loss) | (26,978,024) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 24,579,283 | ||||
Forward foreign currency exchange contract transactions | 1,002,458 | ||||
Foreign currency translation transactions | (6,541) | ||||
25,575,200 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | (2,065,447,545) | ||||
Forward foreign currency exchange contracts | 188,127 | ||||
Translation of assets and liabilities in foreign currencies | 487 | ||||
(2,065,258,931) | |||||
Net realized and unrealized gain (loss) | (2,039,683,731) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (2,066,661,755) |
See Notes to Financial Statements.
15
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2022 AND OCTOBER 31, 2021 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2022 | October 31, 2021 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (26,978,024) | $ | (39,008,214) | ||||
Net realized gain (loss) | 25,575,200 | 730,468,700 | ||||||
Change in net unrealized appreciation (depreciation) | (2,065,258,931) | 1,254,889,082 | ||||||
Net increase (decrease) in net assets resulting from operations | (2,066,661,755) | 1,946,349,568 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (547,949,693) | (586,342,385) | ||||||
I Class | (38,407,013) | (43,469,882) | ||||||
Y Class | (7,958,731) | (7,086,626) | ||||||
A Class | (42,842,616) | (45,691,761) | ||||||
C Class | (3,844,904) | (7,188,612) | ||||||
R Class | (4,516,028) | (5,053,233) | ||||||
R5 Class | (89,193) | (94,815) | ||||||
R6 Class | (19,749,500) | (19,890,507) | ||||||
G Class | (17) | — | ||||||
From tax return of capital: | ||||||||
Investor Class | (26,689,361) | — | ||||||
I Class | (1,870,717) | — | ||||||
Y Class | (387,652) | — | ||||||
A Class | (2,086,765) | — | ||||||
C Class | (187,276) | — | ||||||
R Class | (219,965) | — | ||||||
R5 Class | (4,344) | — | ||||||
R6 Class | (961,952) | — | ||||||
G Class | (1) | — | ||||||
Decrease in net assets from distributions | (697,765,728) | (714,817,821) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 1,344,144,810 | 234,696,206 | ||||||
Net increase (decrease) in net assets | (1,420,282,673) | 1,466,227,953 | ||||||
Net Assets | ||||||||
Beginning of period | 6,426,734,682 | 4,960,506,729 | ||||||
End of period | $ | 5,006,452,009 | $ | 6,426,734,682 |
See Notes to Financial Statements.
16
Notes to Financial Statements |
OCTOBER 31, 2022
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, R6 Class and G Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. Sale of the G Class commenced on March 1, 2022.
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 value of investments of the fund is determined by American Century Investment Management, Inc. (ACIM) (the investment advisor), as the valuation designee, pursuant to its valuation policies and procedures. The Board of Directors oversees the valuation designee and reviews its valuation policies and procedures at least annually.
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 valuation designee determines that the market price for a portfolio security is not readily available or is believed by the valuation designee to be unreliable, such security is valued at fair value as determined in good faith by the valuation designee, in accordance with its policies and procedures. Circumstances that may cause the fund to determine that market quotations are not available or reliable include, but are not limited to: when there is a significant event subsequent to the market quotation; trading in a security has been halted during the trading day; or trading in a security is insufficient or did not take place due to a closure or holiday.
17
The valuation designee 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; regulatory news, 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 valuation designee also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that it deems appropriate. The valuation designee 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 ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover 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.
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, 2022.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 37,051,810 | — | — | — | $ | 37,051,810 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 37,051,810 |
(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, 12% of the shares of the fund.
19
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 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 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 | G Class(1) | ||||||||||||||||||
1.00% | 0.80% | 0.65% | 1.00% | 1.00% | 1.00% | 0.80% | 0.65% | 0.00% |
(1)Annual management fee before waiver was 0.65%.
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, 2022 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, 2022 were $2,527,487,906 and $2,936,114,375, respectively.
20
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2022(1) | Year ended October 31, 2021 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 2,100,000,000 | 2,100,000,000 | ||||||||||||
Sold | 5,450,159 | $ | 117,591,534 | 7,069,672 | $ | 190,536,048 | ||||||||
Issued in reinvestment of distributions | 21,908,157 | 555,645,736 | 22,643,103 | 564,891,390 | ||||||||||
Redeemed | (21,411,659) | (453,757,160) | (20,262,521) | (549,716,482) | ||||||||||
5,946,657 | 219,480,110 | 9,450,254 | 205,710,956 | |||||||||||
I Class/Shares Authorized | 175,000,000 | 175,000,000 | ||||||||||||
Sold | 2,286,889 | 53,737,981 | 2,723,934 | 82,538,821 | ||||||||||
Issued in reinvestment of distributions | 1,350,856 | 38,443,277 | 1,510,846 | 41,729,561 | ||||||||||
Redeemed | (4,894,049) | (111,937,246) | (4,129,476) | (124,200,919) | ||||||||||
(1,256,304) | (19,755,988) | 105,304 | 67,463 | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 773,501 | 18,473,033 | 718,287 | 21,940,985 | ||||||||||
Issued in reinvestment of distributions | 281,698 | 8,188,472 | 246,029 | 6,923,247 | ||||||||||
Redeemed | (641,475) | (14,996,714) | (392,997) | (12,068,109) | ||||||||||
413,724 | 11,664,791 | 571,319 | 16,796,123 | |||||||||||
A Class/Shares Authorized | 170,000,000 | 170,000,000 | ||||||||||||
Sold | 1,566,938 | 27,642,868 | 2,270,649 | 53,457,609 | ||||||||||
Issued in reinvestment of distributions | 1,998,593 | 43,327,936 | 1,995,138 | 43,434,155 | ||||||||||
Redeemed | (3,608,747) | (64,855,097) | (3,292,227) | (78,227,401) | ||||||||||
(43,216) | 6,115,707 | 973,560 | 18,664,363 | |||||||||||
C Class/Shares Authorized | 40,000,000 | 70,000,000 | ||||||||||||
Sold | 35,190 | 368,852 | 77,895 | 1,237,207 | ||||||||||
Issued in reinvestment of distributions | 309,641 | 4,016,798 | 503,874 | 7,170,128 | ||||||||||
Redeemed | (524,168) | (5,884,153) | (1,374,461) | (20,969,404) | ||||||||||
(179,337) | (1,498,503) | (792,692) | (12,562,069) | |||||||||||
R Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 193,183 | 3,472,000 | 267,540 | 6,273,040 | ||||||||||
Issued in reinvestment of distributions | 220,330 | 4,731,864 | 233,252 | 5,049,747 | ||||||||||
Redeemed | (397,202) | (7,139,270) | (520,917) | (12,173,944) | ||||||||||
16,311 | 1,064,594 | (20,125) | (851,157) | |||||||||||
R5 Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||||||
Sold | 1,746 | 41,396 | 1,618 | 48,767 | ||||||||||
Issued in reinvestment of distributions | 3,272 | 93,537 | 3,433 | 94,815 | ||||||||||
Redeemed | (16,382) | (428,965) | (26,019) | (795,308) | ||||||||||
(11,364) | (294,032) | (20,968) | (651,726) | |||||||||||
R6 Class/Shares Authorized | 70,000,000 | 70,000,000 | ||||||||||||
Sold | 2,340,269 | 59,207,062 | 1,744,294 | 53,635,470 | ||||||||||
Issued in reinvestment of distributions | 710,311 | 20,669,761 | 705,357 | 19,848,742 | ||||||||||
Redeemed | (1,499,478) | (36,291,908) | (2,188,698) | (65,961,959) | ||||||||||
1,551,102 | 43,584,915 | 260,953 | 7,522,253 | |||||||||||
G Class/Shares Authorized | 600,000,000 | N/A | ||||||||||||
Sold | 4,284,233 | 87,885,057 | ||||||||||||
Issued in connection with reorganization (Note 10) | 44,533,666 | 1,106,922,147 | ||||||||||||
Issued in reinvestment of distributions | 1 | 18 | ||||||||||||
Redeemed | (4,901,528) | (111,024,006) | ||||||||||||
43,916,372 | 1,083,783,216 | |||||||||||||
Net increase (decrease) | 50,353,945 | $ | 1,344,144,810 | 10,527,605 | $ | 234,696,206 |
(1)March 1, 2022 (commencement of sale) through October 31, 2022 for the G Class.
21
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
•Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments.
•Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars.
•Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions).
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | |||||||||
Assets | |||||||||||
Investment Securities | |||||||||||
Common Stocks | $ | 4,959,400,371 | $ | 26,039,314 | — | ||||||
Short-Term Investments | 37,077,184 | 14,855,681 | — | ||||||||
$ | 4,996,477,555 | $ | 40,894,995 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 198,767 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 10,640 | — |
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 $30,344,057.
22
The value of foreign currency risk derivative instruments as of October 31, 2022, is disclosed on the Statement of Assets and Liabilities as an asset of $198,767 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $10,640 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended October 31, 2022, the effect of foreign currency risk derivative instruments on the Statement of Operations was $1,002,458 in net realized gain (loss) on forward foreign currency exchange contract transactions and $188,127 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, war, 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 common stocks of small companies. Because of this, the fund may be subject to greater risk and market fluctuations than a fund investing solely in larger, more established companies.
9. Federal Tax Information
The tax character of distributions paid during the years ended October 31, 2022 and October 31, 2021 were as follows:
2022 | 2021 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 161,008,056 | — | |||||
Long-term capital gains | $ | 504,349,639 | $ | 714,817,821 | ||||
Tax return of capital | $ | 32,408,033 | — |
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 | $ | 4,508,589,684 | |||
Gross tax appreciation of investments | $ | 1,159,819,979 | |||
Gross tax depreciation of investments | (631,037,113) | ||||
Net tax appreciation (depreciation) of investments | 528,782,866 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | — | ||||
Net tax appreciation (depreciation) | $ | 528,782,866 | |||
Undistributed ordinary income | — | ||||
Accumulated short-term capital losses | $ | (2,091,033) | |||
Late-year ordinary loss deferral | $ | (19,868,291) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Accumulated capital losses represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers may be carried forward for an unlimited period. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations.
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
10. Reorganization
On December 2, 2021, the Board of Directors approved an agreement and plan of reorganization (the reorganization), whereby the net assets of NT Heritage Fund, one fund in a series issued by the corporation, were transferred to Heritage Fund in exchange for shares of Heritage 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 Heritage Fund survived after the reorganization. The reorganization was effective at the close of the NYSE on March 25, 2022.
The reorganization was accomplished by a tax-free exchange of shares. On March 25, 2022, NT Heritage Fund exchanged its shares for shares of Heritage Fund as follows:
Original Fund/Class | Shares Exchanged | New Fund/Class | Shares Received | ||||||||
NT Heritage Fund – G Class | 82,805,306 | Heritage Fund – G Class | 44,533,666 |
The net assets of NT Heritage Fund and Heritage Fund immediately before the reorganization were $1,106,922,147 and $5,030,214,398, respectively. NT Heritage Fund's unrealized appreciation of $213,647,362 was combined with that of Heritage Fund. Immediately after the reorganization, the combined net assets were $6,137,136,545.
Assuming the reorganization had been completed on November 1, 2021, the beginning of the annual reporting period, the pro forma results of operations for the period ended October 31, 2022 are as follows:
Net investment income (loss) | $ | (25,569,877) | |||
Net realized and unrealized gain (loss) | (2,266,997,913) | ||||
Net increase (decrease) in net assets resulting from operations | $ | (2,292,567,790) |
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 NT Heritage Fund that have been included in the fund’s Statement of Operations since March 25, 2022.
24
Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||||||||||||||||||||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Realized Gains | Tax Return of Capital | 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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $30.00 | (0.13) | (8.19) | (8.32) | (3.12) | (0.14) | (3.26) | $18.42 | (30.66)% | 1.01% | 1.01% | (0.62)% | (0.62)% | 47% | $3,369,474 | ||||||||||||||||||||||||||||||||
2021 | $24.38 | (0.18) | 9.35 | 9.17 | (3.55) | — | (3.55) | $30.00 | 40.54% | 1.00% | 1.00% | (0.66)% | (0.66)% | 44% | $5,307,249 | ||||||||||||||||||||||||||||||||
2020 | $21.74 | (0.10) | 5.09 | 4.99 | (2.35) | — | (2.35) | $24.38 | 25.00% | 1.00% | 1.00% | (0.47)% | (0.47)% | 85% | $4,083,843 | ||||||||||||||||||||||||||||||||
2019 | $23.19 | (0.08) | 2.95 | 2.87 | (4.32) | — | (4.32) | $21.74 | 17.22% | 1.00% | 1.00% | (0.38)% | (0.38)% | 82% | $3,702,699 | ||||||||||||||||||||||||||||||||
2018 | $23.67 | (0.07) | 1.70 | 1.63 | (2.11) | — | (2.11) | $23.19 | 7.16% | 1.00% | 1.00% | (0.30)% | (0.30)% | 85% | $3,787,202 | ||||||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $33.26 | (0.10) | (9.17) | (9.27) | (3.12) | (0.14) | (3.26) | $20.73 | (30.49)% | 0.81% | 0.81% | (0.42)% | (0.42)% | 47% | $231,708 | ||||||||||||||||||||||||||||||||
2021 | $26.66 | (0.14) | 10.29 | 10.15 | (3.55) | — | (3.55) | $33.26 | 40.78% | 0.80% | 0.80% | (0.46)% | (0.46)% | 44% | $413,523 | ||||||||||||||||||||||||||||||||
2020 | $23.52 | (0.06) | 5.55 | 5.49 | (2.35) | — | (2.35) | $26.66 | 25.25% | 0.80% | 0.80% | (0.27)% | (0.27)% | 85% | $328,636 | ||||||||||||||||||||||||||||||||
2019 | $24.66 | (0.04) | 3.22 | 3.18 | (4.32) | — | (4.32) | $23.52 | 17.50% | 0.80% | 0.80% | (0.18)% | (0.18)% | 82% | $336,242 | ||||||||||||||||||||||||||||||||
2018 | $25.00 | (0.03) | 1.80 | 1.77 | (2.11) | — | (2.11) | $24.66 | 7.35% | 0.80% | 0.80% | (0.10)% | (0.10)% | 85% | $247,267 | ||||||||||||||||||||||||||||||||
Y Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $33.93 | (0.07) | (9.37) | (9.44) | (3.12) | (0.14) | (3.26) | $21.23 | (30.38)% | 0.66% | 0.66% | (0.27)% | (0.27)% | 47% | $62,416 | ||||||||||||||||||||||||||||||||
2021 | $27.10 | (0.10) | 10.48 | 10.38 | (3.55) | — | (3.55) | $33.93 | 40.98% | 0.65% | 0.65% | (0.31)% | (0.31)% | 44% | $85,720 | ||||||||||||||||||||||||||||||||
2020 | $23.84 | (0.03) | 5.64 | 5.61 | (2.35) | — | (2.35) | $27.10 | 25.43% | 0.65% | 0.65% | (0.12)% | (0.12)% | 85% | $52,978 | ||||||||||||||||||||||||||||||||
2019 | $24.90 | (0.01) | 3.27 | 3.26 | (4.32) | — | (4.32) | $23.84 | 17.68% | 0.65% | 0.65% | (0.03)% | (0.03)% | 82% | $29,803 | ||||||||||||||||||||||||||||||||
2018 | $25.19 | —(3) | 1.82 | 1.82 | (2.11) | — | (2.11) | $24.90 | 7.51% | 0.65% | 0.65% | 0.05% | 0.05% | 85% | $9,694 |
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 Realized Gains | Tax Return of Capital | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||||||||||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $26.11 | (0.16) | (7.00) | (7.16) | (3.12) | (0.14) | (3.26) | $15.69 | (30.80)% | 1.26% | 1.26% | (0.87)% | (0.87)% | 47% | $218,573 | ||||||||||||||||||||||||||||||||
2021 | $21.67 | (0.22) | 8.21 | 7.99 | (3.55) | — | (3.55) | $26.11 | 40.12% | 1.25% | 1.25% | (0.91)% | (0.91)% | 44% | $364,852 | ||||||||||||||||||||||||||||||||
2020 | $19.61 | (0.14) | 4.55 | 4.41 | (2.35) | — | (2.35) | $21.67 | 24.73% | 1.25% | 1.25% | (0.72)% | (0.72)% | 85% | $281,637 | ||||||||||||||||||||||||||||||||
2019 | $21.42 | (0.12) | 2.63 | 2.51 | (4.32) | — | (4.32) | $19.61 | 16.91% | 1.25% | 1.25% | (0.63)% | (0.63)% | 82% | $263,578 | ||||||||||||||||||||||||||||||||
2018 | $22.07 | (0.12) | 1.58 | 1.46 | (2.11) | — | (2.11) | $21.42 | 6.89% | 1.25% | 1.25% | (0.55)% | (0.55)% | 85% | $276,813 | ||||||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $16.95 | (0.18) | (4.23) | (4.41) | (3.12) | (0.14) | (3.26) | $9.28 | (31.31)% | 2.01% | 2.01% | (1.62)% | (1.62)% | 47% | $10,289 | ||||||||||||||||||||||||||||||||
2021 | $15.22 | (0.25) | 5.53 | 5.28 | (3.55) | — | (3.55) | $16.95 | 39.13% | 2.00% | 2.00% | (1.66)% | (1.66)% | 44% | $21,836 | ||||||||||||||||||||||||||||||||
2020 | $14.54 | (0.20) | 3.23 | 3.03 | (2.35) | — | (2.35) | $15.22 | 23.73% | 2.00% | 2.00% | (1.47)% | (1.47)% | 85% | $31,677 | ||||||||||||||||||||||||||||||||
2019 | $17.18 | (0.19) | 1.87 | 1.68 | (4.32) | — | (4.32) | $14.54 | 16.06% | 2.00% | 2.00% | (1.38)% | (1.38)% | 82% | $39,794 | ||||||||||||||||||||||||||||||||
2018 | $18.22 | (0.23) | 1.30 | 1.07 | (2.11) | — | (2.11) | $17.18 | 6.13% | 2.00% | 2.00% | (1.30)% | (1.30)% | 85% | $57,552 | ||||||||||||||||||||||||||||||||
R Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $25.91 | (0.20) | (6.94) | (7.14) | (3.12) | (0.14) | (3.26) | $15.51 | (30.98)% | 1.51% | 1.51% | (1.12)% | (1.12)% | 47% | $22,855 | ||||||||||||||||||||||||||||||||
2021 | $21.57 | (0.27) | 8.16 | 7.89 | (3.55) | — | (3.55) | $25.91 | 39.80% | 1.50% | 1.50% | (1.16)% | (1.16)% | 44% | $37,753 | ||||||||||||||||||||||||||||||||
2020 | $19.58 | (0.18) | 4.52 | 4.34 | (2.35) | — | (2.35) | $21.57 | 24.37% | 1.50% | 1.50% | (0.97)% | (0.97)% | 85% | $31,862 | ||||||||||||||||||||||||||||||||
2019 | $21.43 | (0.17) | 2.64 | 2.47 | (4.32) | — | (4.32) | $19.58 | 16.66% | 1.50% | 1.50% | (0.88)% | (0.88)% | 82% | $32,803 | ||||||||||||||||||||||||||||||||
2018 | $22.13 | (0.18) | 1.59 | 1.41 | (2.11) | — | (2.11) | $21.43 | 6.62% | 1.50% | 1.50% | (0.80)% | (0.80)% | 85% | $32,464 |
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 Realized Gains | Tax Return of Capital | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||||||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $33.26 | (0.11) | (9.16) | (9.27) | (3.12) | (0.14) | (3.26) | $20.73 | (30.50)% | 0.81% | 0.81% | (0.42)% | (0.42)% | 47% | $371 | ||||||||||||||||||||||||||||||||
2021 | $26.66 | (0.14) | 10.29 | 10.15 | (3.55) | — | (3.55) | $33.26 | 40.78% | 0.80% | 0.80% | (0.46)% | (0.46)% | 44% | $973 | ||||||||||||||||||||||||||||||||
2020 | $23.52 | (0.04) | 5.53 | 5.49 | (2.35) | — | (2.35) | $26.66 | 25.25% | 0.80% | 0.80% | (0.27)% | (0.27)% | 85% | $1,339 | ||||||||||||||||||||||||||||||||
2019 | $24.66 | (0.04) | 3.22 | 3.18 | (4.32) | — | (4.32) | $23.52 | 17.50% | 0.80% | 0.80% | (0.18)% | (0.18)% | 82% | $3,663 | ||||||||||||||||||||||||||||||||
2018 | $25.00 | (0.04) | 1.81 | 1.77 | (2.11) | — | (2.11) | $24.66 | 7.35% | 0.80% | 0.80% | (0.10)% | (0.10)% | 85% | $3,053 | ||||||||||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $33.93 | (0.07) | (9.37) | (9.44) | (3.12) | (0.14) | (3.26) | $21.23 | (30.38)% | 0.66% | 0.66% | (0.27)% | (0.27)% | 47% | $154,825 | ||||||||||||||||||||||||||||||||
2021 | $27.10 | (0.09) | 10.47 | 10.38 | (3.55) | — | (3.55) | $33.93 | 40.98% | 0.65% | 0.65% | (0.31)% | (0.31)% | 44% | $194,829 | ||||||||||||||||||||||||||||||||
2020 | $23.84 | (0.03) | 5.64 | 5.61 | (2.35) | — | (2.35) | $27.10 | 25.43% | 0.65% | 0.65% | (0.12)% | (0.12)% | 85% | $148,536 | ||||||||||||||||||||||||||||||||
2019 | $24.90 | (0.01) | 3.27 | 3.26 | (4.32) | — | (4.32) | $23.84 | 17.68% | 0.65% | 0.65% | (0.03)% | (0.03)% | 82% | $134,822 | ||||||||||||||||||||||||||||||||
2018 | $25.19 | 0.02 | 1.80 | 1.82 | (2.11) | — | (2.11) | $24.90 | 7.51% | 0.65% | 0.65% | 0.05% | 0.05% | 85% | $132,651 | ||||||||||||||||||||||||||||||||
G Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022(4) | $24.55 | 0.06 | (3.12) | (3.06) | (0.04) | (0.14) | (0.18) | $21.31 | (12.57)% | 0.01%(5) | 0.66%(5) | 0.43%(5) | (0.22)%(5) | 47%(6) | $935,941 |
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)March 1, 2022 (commencement of sale) through October 31, 2022.
(5)Annualized.
(6)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2022.
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, 2022, 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, 2022, 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, 2022, 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 16, 2022
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 on 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 | 64 | None | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 64 | Alleghany Corporation (2021 to 2022) | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 64 | 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) | 64 | 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) | 64 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director and Board Chair | Since 2011 (Board Chair since 2022) | Retired | 64 | None | ||||||||||||
Stephen E. Yates (1948) | Director | Since 2012 | Retired | 108 | 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 | 142 | 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 29, 2022, 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 of 1940 (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, 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 data and information compiled by the Advisor and certain independent data providers concerning the Fund. 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 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 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 an appropriate benchmark(s) and peer group of other mutual funds with similar investment objectives and strategies;
•the cost of owning the Fund compared to the cost of owning similarly-managed funds;
•the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans, generally, and with respect to the ongoing impact of the COVID-19 pandemic response, heightened areas of interest in the mutual fund industry and recent geopolitical issues;
•the Advisor’s business continuity plans, vendor management practices, 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 four meetings to consider the renewal. The independent Directors also met in private session multiple 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, without limitation, the following:
•constructing and designing the Fund
•portfolio research and security selection
•initial capitalization/funding
•securities trading
•Fund administration
•custody of Fund assets
•daily valuation of the Fund’s portfolio
•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 principal investment 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 Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any actions being taken to improve performance, and may conduct special reviews until performance improves. The Fund’s performance was above its benchmark for the three-, five-, and ten-year periods and below its benchmark for the one-year period reviewed by the Board. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
34
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 fee structure, and through reinvestment in its business, infrastructure, investment capabilities and initiatives to provide shareholders enhanced and expanded 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 securities transaction expenses, 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 Investment Company Act Rule 12b-1. 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,
35
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.
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 terms of the management agreement are fair and reasonable and that the management fee charged to the Fund is reasonable in light of the services provided and that the management agreement between the Fund and the Advisor should be renewed for an additional one-year period.
36
Proxy Voting Results |
A special meeting of shareholders was held on October 13, 2022, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect five directors to the Board of Directors of American Century Mutual Funds, Inc.:
Affirmative | Withhold | ||||||||||
Brian Bulatao | $ | 24,005,100,401 | $ | 1,121,808,198 | |||||||
Chris H. Cheesman | $ | 24,198,214,355 | $ | 928,694,244 | |||||||
Rajesh K. Gupta | $ | 24,143,807,378 | $ | 983,101,221 | |||||||
Lynn M. Jenkins | $ | 24,034,830,602 | $ | 1,092,077,997 | |||||||
Gary C. Meltzer | $ | 24,134,760,750 | $ | 992,147,849 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Thomas W. Bunn, Barry Fink, Jan M. Lewis, and Stephen E. Yates.
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, 2022.
For corporate taxpayers, the fund hereby designates $34,391,607, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2022 as qualified for the corporate dividends received deduction.
The fund hereby designates $161,008,056 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2022.
The fund hereby designates $504,349,639, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2022.
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. | ||||||||
©2022 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90977 2212 |
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Annual Report | |||||
October 31, 2022 | |||||
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 | |||||
Proxy Voting Results | |||||
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 ending October 31, 2022. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
High Inflation, Rising Rates, Volatility Challenged Investors
The broad economic and investment backdrops grew knottier as the fiscal year progressed. Challenges began to surface early in the period, as the Federal Reserve (Fed) and other central banks finally admitted inflation was entrenched rather than transitory. Investors grew more cautious amid growing expectations for less accommodative monetary policy in the new year.
By early 2022, inflation soared to levels last seen in the early 1980s. Massive fiscal and monetary support unleashed during the pandemic was partly to blame. In addition, escalating energy prices, supply chain breakdowns, labor market shortages and Russia’s invasion of Ukraine further aggravated the inflation backdrop.
The Fed responded to surging inflation with a rate hike in March, three months after the Bank of England (BofE) launched its tightening campaign. Through October, the Fed lifted rates a total of 3 percentage points, while the BofE hiked 2.9 percentage points. The European Central Bank (ECB) waited until July to start tightening. Facing record-high inflation, the ECB raised rates 2 percentage points through October.
In addition to fostering recession risk, the combination of elevated inflation and hawkish central banks helped push bond yields sharply higher and stock prices significantly lower. Amid persistent market unrest, most stock, bond and real estate indices ended the 12-month period with steep losses. While U.S. stock returns were broadly negative, growth stocks significantly underperformed their value stock peers.
Staying Disciplined in Uncertain Times
We expect market volatility to linger as investors navigate a complex environment of high inflation, rising interest rates and economic uncertainty. In addition, Russia’s invasion of Ukraine complicates an increasingly tense geopolitical backdrop and threatens global energy markets. We will continue to monitor this evolving situation and what it broadly means for investors across asset classes.
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,
![image27.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image27.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2022 | ||||||||||||||||||||
Average Annual Returns | ||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |||||||||||||||
Investor Class | TWCIX | -23.66% | 11.33% | 13.37% | — | 6/30/71 | ||||||||||||||
Russell 1000 Growth Index | — | -24.60% | 12.58% | 14.68% | — | — | ||||||||||||||
I Class | TWSIX | -23.51% | 11.55% | 13.60% | — | 3/13/97 | ||||||||||||||
Y Class | ASLWX | -23.39% | 11.73% | — | 13.23% | 4/10/17 | ||||||||||||||
A Class | TWCAX | 8/8/97 | ||||||||||||||||||
No sales charge | -23.85% | 11.05% | 13.09% | — | ||||||||||||||||
With sales charge | -28.23% | 9.74% | 12.41% | — | ||||||||||||||||
C Class | ACSLX | -24.42% | 10.22% | 12.23% | — | 1/31/03 | ||||||||||||||
R Class | ASERX | -24.04% | 10.78% | 12.81% | — | 7/29/05 | ||||||||||||||
R5 Class | ASLGX | -23.51% | 11.54% | — | 13.04% | 4/10/17 | ||||||||||||||
R6 Class | ASDEX | -23.39% | 11.72% | — | 13.27% | 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.
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, 2012 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-6a44cde949704a69a56.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/chart-6a44cde949704a69a56.jpg)
Value on October 31, 2022 | |||||
Investor Class — $35,070 | |||||
Russell 1000 Growth Index — $39,370 | |||||
Ending value of Investor Class would have been lower if a portion of the fees had not been waived.
Total Annual Fund Operating Expenses | |||||||||||||||||||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | ||||||||||||||||
0.99% | 0.79% | 0.64% | 1.24% | 1.99% | 1.49% | 0.79% | 0.64% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
4
Portfolio Commentary |
Portfolio Managers: Keith Lee, Michael Li and Chris Krantz
Performance Summary
Select returned -23.66%* for the 12 months ended October 31, 2022, outperforming the -24.60% return of the fund’s benchmark, the Russell 1000 Growth Index.
U.S. stocks fell sharply over the past 12 months, with the heaviest losses coming from late 2021 through midyear 2022. The downturn began amid a combination of factors—the new omicron variant of COVID-19, rising inflation, the Federal Reserve signaling interest rate increases—that led to investors moving to more defensive positioning. The market action was marked by a rotation out of the highest-growth stocks and pandemic winners into either lower growth or more traditional cyclical value stocks. Market declines intensified after Russia invaded Ukraine, exacerbating already stretched supply chains and leading to soaring oil prices that helped drive inflation to four-decade highs. Within the Russell 1000 Growth Index, energy was by far the top-performing sector, benefiting from rising prices and increased demand amid limited supplies. Consumer staples and utilities posted modest gains, while all other sectors recorded double-digit losses.
Stock selection in the health care and information technology sectors helped drive outperformance relative to the benchmark. An underweight allocation to industrials detracted, as did positioning in the consumer staples sector.
Health Care Stocks Were Top Contributors
In the health care sector, UnitedHealth Group recorded solid quarterly results and modestly increased its earnings guidance. We believe it is the leading disruptor of the health care delivery model in the U.S. by working to change incentives and lower costs in the sector using prevention-based care. Bristol-Myers Squibb benefited from investors’ preference for more defensive, dividend-paying large-capitalization pharmaceuticals. We like this science-driven biopharmaceutical company that has a good track record of blockbuster drug development. The company’s revenue and earnings growth have been strong. Regeneron Pharmaceuticals reported better-than-expected revenue and earnings in August. In September, it announced strong trial results for Eylea, its drug for wet age-related macular degeneration. In addition, Regeneron recently released positive clinical trial data for particularly hard-to-treat prostate cancer. Vertex Pharmaceuticals is an innovative biotechnology company creating transformative medicines. The company beat expectations on revenues and has strong cash flows powered by its cystic fibrosis treatment. It is making meaningful progress on a number of different indications, including sickle cell anemia and diabetes.
Other top contributors included Apple. The consumer electronics giant continued to see solid demand for its products and services and beat analysts’ revenue and earnings expectations. Mastercard outperformed after the digital payments company reported better-than-expected quarterly revenue and earnings. Mastercard attributed the strength to resilient consumer spending and recovering cross-border travel. Not owning Netflix benefited relative performance. The streaming video service announced more layoffs amid weak subscriber growth. An expected renormalization of subscriber growth following the gains of the pandemic has not materialized.
Industrials Stocks Hampered Relative Performance
We had no exposure to several industries in the industrials sector, including aerospace and defense stocks. The industry benefited from anticipation of increased defense spending in the
*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
wake of Russia’s invasion of Ukraine. Stock selection and an underweight allocation hurt relative
performance in the consumer staples sector. We did not own several beverage and food product companies that outperformed.
Elsewhere, PayPal Holdings delivered quarterly and 2022 guidance below expectations, with deceleration in key metrics. This digital payments company announced a pivot in its strategy to focus less on user growth and more on engagement, which creates uncertainty around its long-term growth rate. The stock of Atlassian, a project management software provider, declined along with other high-growth technology stocks as investors rotated to value holdings amid rising rates and geopolitical concerns. We continue to believe the company offers a very attractive product in terms of value and pricing relative to usage.
Other detractors included Eli Lilly & Co. and AbbVie. Eli Lilly’s strength came from strong data for the pharmaceutical company’s drug Tirzepatide for diabetes and potentially also obesity. AbbVie’s stock price benefited from investors looking for relatively safer havens. Our lack of exposure to these benchmark components detracted from relative performance. In addition, Google’s parent Alphabet detracted. Management reported results in line with lowered expectations given recent economic weakness. Its cloud and search units were strong, but YouTube revenues slowed sharply. Nevertheless, the company’s advertising business has proven to be more resilient than other platforms amid economic weakness and digital privacy initiatives.
Outlook
War, inflation and recession risk all suggest difficult, volatile conditions ahead. Markets will continue to deal with the contrasting risks of rising inflation and interest rates, even as the global economy teeters on the verge of recession. 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 stable 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 holding Google’s parent Alphabet. While the stock faces macroeconomic challenges, we believe it is attractively priced with a compelling risk/reward profile going forward. Industrials was the largest sector underweight.
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Fund Characteristics |
OCTOBER 31, 2022 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 97.5% | ||||
Convertible Bonds | 0.4% | ||||
Short-Term Investments | 2.8% | ||||
Other Assets and Liabilities | (0.7)% | ||||
Top Five Industries | % of net assets | ||||
Technology Hardware, Storage and Peripherals | 15.9% | ||||
Software | 10.5% | ||||
Interactive Media and Services | 8.7% | ||||
IT Services | 7.8% | ||||
Semiconductors and Semiconductor Equipment | 7.4% |
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Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from May 1, 2022 to October 31, 2022.
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 mutual 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 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 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 5/1/22 | Ending Account Value 10/31/22 | Expenses Paid During Period(1) 5/1/22 - 10/31/22 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $912.30 | $4.63 | 0.96% | ||||||||||
I Class | $1,000 | $913.30 | $3.67 | 0.76% | ||||||||||
Y Class | $1,000 | $914.00 | $2.94 | 0.61% | ||||||||||
A Class | $1,000 | $911.30 | $5.83 | 1.21% | ||||||||||
C Class | $1,000 | $907.80 | $9.43 | 1.96% | ||||||||||
R Class | $1,000 | $910.10 | $7.03 | 1.46% | ||||||||||
R5 Class | $1,000 | $913.20 | $3.66 | 0.76% | ||||||||||
R6 Class | $1,000 | $914.00 | $2.94 | 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, 2022
Shares/Principal Amount | Value | |||||||
COMMON STOCKS — 97.5% | ||||||||
Automobiles — 3.8% | ||||||||
Tesla, Inc.(1) | 621,100 | $ | 141,325,094 | |||||
Beverages — 2.9% | ||||||||
Constellation Brands, Inc., Class A | 290,400 | 71,752,032 | ||||||
Diageo PLC | 874,500 | 35,987,827 | ||||||
107,739,859 | ||||||||
Biotechnology — 5.7% | ||||||||
Biogen, Inc.(1) | 216,400 | 61,336,416 | ||||||
Regeneron Pharmaceuticals, Inc.(1) | 108,200 | 81,014,750 | ||||||
Vertex Pharmaceuticals, Inc.(1) | 222,200 | 69,326,400 | ||||||
211,677,566 | ||||||||
Capital Markets — 1.5% | ||||||||
MSCI, Inc. | 94,100 | 44,119,726 | ||||||
S&P Global, Inc. | 40,500 | 13,010,625 | ||||||
57,130,351 | ||||||||
Energy Equipment and Services — 1.1% | ||||||||
ChampionX Corp. | 1,395,500 | 39,939,210 | ||||||
Entertainment — 1.6% | ||||||||
Electronic Arts, Inc. | 184,800 | 23,277,408 | ||||||
Walt Disney Co.(1) | 337,300 | 35,935,942 | ||||||
59,213,350 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 0.6% | ||||||||
Equinix, Inc. | 36,400 | 20,618,416 | ||||||
Food and Staples Retailing — 1.8% | ||||||||
Costco Wholesale Corp. | 130,200 | 65,295,300 | ||||||
Health Care Equipment and Supplies — 0.6% | ||||||||
Penumbra, Inc.(1) | 131,100 | 22,479,717 | ||||||
Health Care Providers and Services — 4.7% | ||||||||
UnitedHealth Group, Inc. | 316,300 | 175,593,945 | ||||||
Hotels, Restaurants and Leisure — 1.0% | ||||||||
Airbnb, Inc., Class A(1) | 359,900 | 38,476,909 | ||||||
Interactive Media and Services — 8.7% | ||||||||
Alphabet, Inc., Class A(1) | 1,656,400 | 156,546,364 | ||||||
Alphabet, Inc., Class C(1) | 1,600,000 | 151,456,000 | ||||||
Meta Platforms, Inc., Class A(1) | 185,400 | 17,271,864 | ||||||
325,274,228 | ||||||||
Internet and Direct Marketing Retail — 5.9% | ||||||||
Amazon.com, Inc.(1) | 2,126,000 | 217,787,440 | ||||||
IT Services — 7.7% | ||||||||
Mastercard, Inc., Class A | 506,600 | 166,255,988 | ||||||
PayPal Holdings, Inc.(1) | 358,500 | 29,963,430 | ||||||
Visa, Inc., Class A | 445,100 | 92,206,916 | ||||||
288,426,334 | ||||||||
Life Sciences Tools and Services — 1.8% | ||||||||
Danaher Corp. | 264,700 | 66,617,049 | ||||||
Machinery — 3.4% | ||||||||
FANUC Corp. | 153,200 | 20,046,468 |
10
Shares/Principal Amount | Value | |||||||
Graco, Inc. | 906,600 | $ | 63,081,228 | |||||
Otis Worldwide Corp. | 620,500 | 43,832,120 | ||||||
126,959,816 | ||||||||
Oil, Gas and Consumable Fuels — 0.6% | ||||||||
Sitio Royalties Corp.(2) | 807,300 | 22,895,028 | ||||||
Personal Products — 0.5% | ||||||||
Estee Lauder Cos., Inc., Class A | 87,100 | 17,462,679 | ||||||
Pharmaceuticals — 1.8% | ||||||||
Bristol-Myers Squibb Co. | 859,100 | 66,554,477 | ||||||
Professional Services — 0.4% | ||||||||
Verisk Analytics, Inc. | 90,800 | 16,600,964 | ||||||
Road and Rail — 0.5% | ||||||||
Canadian Pacific Railway Ltd. | 232,000 | 17,295,056 | ||||||
Semiconductors and Semiconductor Equipment — 7.4% | ||||||||
Advanced Micro Devices, Inc.(1) | 289,400 | 17,381,364 | ||||||
Analog Devices, Inc. | 543,400 | 77,499,708 | ||||||
KLA Corp. | 142,900 | 45,220,705 | ||||||
NVIDIA Corp. | 497,100 | 67,093,587 | ||||||
Texas Instruments, Inc. | 423,500 | 68,026,805 | ||||||
275,222,169 | ||||||||
Software — 10.5% | ||||||||
Adobe, Inc.(1) | 104,200 | 33,187,700 | ||||||
Atlassian Corp., Class A(1) | 215,400 | 43,668,042 | ||||||
Crowdstrike Holdings, Inc., Class A(1) | 126,000 | 20,311,200 | ||||||
Microsoft Corp. | 1,070,000 | 248,379,100 | ||||||
Roper Technologies, Inc. | 26,000 | 10,778,040 | ||||||
Salesforce, Inc.(1) | 118,300 | 19,234,397 | ||||||
Zscaler, Inc.(1) | 95,500 | 14,716,550 | ||||||
390,275,029 | ||||||||
Specialty Retail — 5.9% | ||||||||
Home Depot, Inc. | 236,500 | 70,034,745 | ||||||
Lowe's Cos., Inc. | 399,700 | 77,921,515 | ||||||
TJX Cos., Inc. | 151,500 | 10,923,150 | ||||||
Tractor Supply Co. | 278,200 | 61,140,014 | ||||||
220,019,424 | ||||||||
Technology Hardware, Storage and Peripherals — 15.9% | ||||||||
Apple, Inc. | 3,868,400 | 593,180,456 | ||||||
Textiles, Apparel and Luxury Goods — 1.2% | ||||||||
NIKE, Inc., Class B | 498,200 | 46,173,176 | ||||||
TOTAL COMMON STOCKS (Cost $1,596,855,365) | 3,630,233,042 | |||||||
CONVERTIBLE BONDS — 0.4% | ||||||||
Biotechnology — 0.3% | ||||||||
Ascendis Pharma A/S, 2.25%, 4/1/28(3) | $ | 10,437,000 | 10,260,615 | |||||
IT Services — 0.1% | ||||||||
Block, Inc., 0.50%, 5/15/23 | 5,601,000 | 5,885,251 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $15,951,918) | 16,145,866 | |||||||
SHORT-TERM INVESTMENTS — 2.8% | ||||||||
Money Market Funds — 0.6% | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 140,317 | 140,317 |
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Shares/Principal Amount | Value | |||||||
State Street Navigator Securities Lending Government Money Market Portfolio(4) | 22,104,322 | $ | 22,104,322 | |||||
22,244,639 | ||||||||
Repurchase Agreements — 2.2% | ||||||||
BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.125% - 3.125%, 8/15/23 - 8/15/42, valued at $15,845,134), in a joint trading account at 2.95%, dated 10/31/22, due 11/1/22 (Delivery value $15,539,043) | 15,537,770 | |||||||
Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 0.75% - 1.50%, 5/31/26 - 11/30/28, valued at $67,957,526), at 3.00%, dated 10/31/22, due 11/1/22 (Delivery value $66,630,552) | 66,625,000 | |||||||
82,162,770 | ||||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $104,407,409) | 104,407,409 | |||||||
TOTAL INVESTMENT SECURITIES — 100.7% (Cost $1,717,214,692) | 3,750,786,317 | |||||||
OTHER ASSETS AND LIABILITIES — (0.7)% | (27,165,670) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 3,723,620,647 |
WRITTEN OPTIONS CONTRACTS | |||||||||||||||||||||||
Reference Entity | Contracts | Type | Exercise Price | Expiration Date | Underlying Notional Amount | Premiums Received | Value | ||||||||||||||||
Apple, Inc. | 1,200 | Call | $ | 165.00 | 11/18/22 | $ | 18,400,800 | $ | (209,828) | $ | (97,200) |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
CAD | 474,208 | USD | 348,252 | Goldman Sachs & Co. | 12/30/22 | $ | 93 | |||||||||||||
CAD | 552,160 | USD | 401,488 | Goldman Sachs & Co. | 12/30/22 | 4,119 | ||||||||||||||
USD | 11,635,281 | CAD | 15,684,592 | Goldman Sachs & Co. | 12/30/22 | 113,656 | ||||||||||||||
USD | 496,360 | CAD | 675,584 | Goldman Sachs & Co. | 12/30/22 | 88 | ||||||||||||||
USD | 364,104 | CAD | 496,944 | Goldman Sachs & Co. | 12/30/22 | (943) | ||||||||||||||
USD | 359,199 | CAD | 495,320 | Morgan Stanley | 12/30/22 | (4,655) | ||||||||||||||
$ | 112,358 |
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
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 $22,895,028. 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)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 $10,260,615, which represented 0.3% of total net assets.
(4)Investment of cash collateral from securities on loan. At the period end, the aggregate value of the collateral held by the fund was $23,380,795, which includes securities collateral of $1,276,473.
See Notes to Financial Statements.
12
Statement of Assets and Liabilities |
OCTOBER 31, 2022 | |||||
Assets | |||||
Investment securities, at value (cost of $1,695,110,370) — including $22,895,028 of securities on loan | $ | 3,728,681,995 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $22,104,322) | 22,104,322 | ||||
Total investment securities, at value (cost of $1,717,214,692) | 3,750,786,317 | ||||
Foreign currency holdings, at value (cost of $27,537) | 27,502 | ||||
Receivable for capital shares sold | 277,403 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 117,956 | ||||
Dividends and interest receivable | 2,286,806 | ||||
Securities lending receivable | 17,080 | ||||
3,753,513,064 | |||||
Liabilities | |||||
Written options, at value (premiums received $209,828) | 97,200 | ||||
Payable for collateral received for securities on loan | 22,104,322 | ||||
Payable for investments purchased | 2,950,921 | ||||
Payable for capital shares redeemed | 1,762,194 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 5,598 | ||||
Accrued management fees | 2,847,570 | ||||
Distribution and service fees payable | 14,461 | ||||
Accrued other expenses | 110,151 | ||||
29,892,417 | |||||
Net Assets | $ | 3,723,620,647 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 1,371,360,358 | |||
Distributable earnings | 2,352,260,289 | ||||
$ | 3,723,620,647 |
Net Assets | Shares Outstanding | Net Asset Value Per Share* | |||||||||
Investor Class, $0.01 Par Value | $3,417,397,868 | 39,054,046 | $87.50 | ||||||||
I Class, $0.01 Par Value | $120,050,571 | 1,332,566 | $90.09 | ||||||||
Y Class, $0.01 Par Value | $68,908,147 | 759,834 | $90.69 | ||||||||
A Class, $0.01 Par Value | $51,336,418 | 610,438 | $84.10 | ||||||||
C Class, $0.01 Par Value | $2,598,170 | 37,005 | $70.21 | ||||||||
R Class, $0.01 Par Value | $3,638,862 | 44,235 | $82.26 | ||||||||
R5 Class, $0.01 Par Value | $9,910 | 110 | $90.09 | ||||||||
R6 Class, $0.01 Par Value | $59,680,701 | 659,027 | $90.56 |
*Maximum offering price per share was equal to the net asset value per share for all share classes, except Class A, for which the maximum offering price per share was $89.23 (net asset value divided by 0.9425). A contingent deferred sales charge may be imposed on redemptions of Class A and Class C.
See Notes to Financial Statements.
13
Statement of Operations |
YEAR ENDED OCTOBER 31, 2022 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $75,603) | $ | 28,479,432 | |||
Interest | 790,121 | ||||
Securities lending, net | 33,025 | ||||
29,302,578 | |||||
Expenses: | |||||
Management fees | 42,170,311 | ||||
Distribution and service fees: | |||||
A Class | 152,274 | ||||
C Class | 34,123 | ||||
R Class | 19,748 | ||||
Directors' fees and expenses | 115,286 | ||||
Other expenses | 144,230 | ||||
42,635,972 | |||||
Fees waived(1) | (1,614,656) | ||||
41,021,316 | |||||
Net investment income (loss) | (11,718,738) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 341,820,284 | ||||
Forward foreign currency exchange contract transactions | 797,309 | ||||
Written options contract transactions | 899,842 | ||||
Foreign currency translation transactions | (64,244) | ||||
343,453,191 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | (1,516,584,762) | ||||
Forward foreign currency exchange contracts | 475,699 | ||||
Written options contracts | 112,628 | ||||
Translation of assets and liabilities in foreign currencies | (5,412) | ||||
(1,516,001,847) | |||||
Net realized and unrealized gain (loss) | (1,172,548,656) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (1,184,267,394) |
(1)Amount consists of $1,497,633, $51,322, $32,730, $22,673, $1,256, $1,480, $4 and $7,558 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, 2022 AND OCTOBER 31, 2021 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2022 | October 31, 2021 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (11,718,738) | $ | (16,451,537) | ||||
Net realized gain (loss) | 343,453,191 | 394,062,754 | ||||||
Change in net unrealized appreciation (depreciation) | (1,516,001,847) | 1,143,036,977 | ||||||
Net increase (decrease) in net assets resulting from operations | (1,184,267,394) | 1,520,648,194 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (367,899,374) | (240,030,213) | ||||||
I Class | (11,838,751) | (7,922,820) | ||||||
Y Class | (7,876,454) | (4,985,113) | ||||||
A Class | (5,779,062) | (3,739,458) | ||||||
C Class | (386,505) | (416,002) | ||||||
R Class | (370,140) | (245,807) | ||||||
R5 Class | (978) | (604) | ||||||
R6 Class | (492,899) | (271,184) | ||||||
Decrease in net assets from distributions | (394,644,163) | (257,611,201) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 183,740,003 | (1,114,068) | ||||||
Net increase (decrease) in net assets | (1,395,171,554) | 1,261,922,925 | ||||||
Net Assets | ||||||||
Beginning of period | 5,118,792,201 | 3,856,869,276 | ||||||
End of period | $ | 3,723,620,647 | $ | 5,118,792,201 |
See Notes to Financial Statements.
15
Notes to Financial Statements |
OCTOBER 31, 2022
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 value of investments of the fund is determined by American Century Investment Management, Inc. (ACIM) (the investment advisor), as the valuation designee, pursuant to its valuation policies and procedures. The Board of Directors oversees the valuation designee and reviews its valuation policies and procedures at least annually.
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 valuation designee determines that the market price for a portfolio security is not readily available or is believed by the valuation designee to be unreliable, such security is valued at fair value as determined in good faith by the valuation designee, in accordance with its policies and procedures. Circumstances that may cause the fund to determine that market quotations are not available or reliable include, but are not limited to: when there is a significant event subsequent to the market quotation; trading in a security has been halted during the trading day; or trading in a security is insufficient or did not take place due to a closure or holiday.
16
The valuation designee 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; regulatory news, 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 valuation designee also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that it deems appropriate. The valuation designee 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 ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover 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. 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, 2022.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 22,104,322 | — | — | — | $ | 22,104,322 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 22,104,322 |
(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.
18
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), as well as exchange-traded funds managed by the investment advisor, that use very similar investment teams and strategies (strategy assets). From November 1, 2021 through July 31, 2022, the investment advisor agreed to waive a portion of the fund's management fee such that the management fee did 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. Effective August 1, 2022, the investment advisor agreed to waive a portion of the fund's management fee such that the management fee does not exceed 0.937% for Investor Class, A Class, C Class and R Class, 0.737% for I Class and R5 Class, and 0.587% for Y Class and R6 Class. The investment advisor expects this waiver arrangement to continue until July 31, 2023 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, 2022 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | ||||||||||
Before Waiver | After Waiver | ||||||||||
Investor Class | 0.800% to 0.990% | 0.99% | 0.95% | ||||||||
I Class | 0.600% to 0.790% | 0.79% | 0.75% | ||||||||
Y Class | 0.450% to 0.640% | 0.64% | 0.60% | ||||||||
A Class | 0.800% to 0.990% | 0.99% | 0.95% | ||||||||
C Class | 0.800% to 0.990% | 0.99% | 0.95% | ||||||||
R Class | 0.800% to 0.990% | 0.99% | 0.95% | ||||||||
R5 Class | 0.600% to 0.790% | 0.79% | 0.75% | ||||||||
R6 Class | 0.450% to 0.640% | 0.64% | 0.60% |
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, 2022 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.
19
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended October 31, 2022 were $644,711,709 and $936,446,572, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2022 | Year ended October 31, 2021 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 475,000,000 | 475,000,000 | ||||||||||||
Sold | 961,456 | $ | 97,839,389 | 892,572 | $ | 96,405,055 | ||||||||
Issued in reinvestment of distributions | 3,012,004 | 350,115,324 | 2,304,332 | 226,851,440 | ||||||||||
Redeemed | (3,355,187) | (334,401,604) | (3,050,748) | (327,630,332) | ||||||||||
618,273 | 113,553,109 | 146,156 | (4,373,837) | |||||||||||
I Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||||||
Sold | 290,331 | 29,975,712 | 241,612 | 26,516,887 | ||||||||||
Issued in reinvestment of distributions | 94,457 | 11,283,831 | 75,030 | 7,559,973 | ||||||||||
Redeemed | (281,924) | (28,747,163) | (336,569) | (36,292,186) | ||||||||||
102,864 | 12,512,380 | (19,927) | (2,215,326) | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 195,249 | 20,961,209 | 539,904 | 62,766,563 | ||||||||||
Issued in reinvestment of distributions | 65,028 | 7,809,242 | 48,856 | 4,939,354 | ||||||||||
Redeemed | (311,173) | (32,029,898) | (532,009) | (61,052,630) | ||||||||||
(50,896) | (3,259,447) | 56,751 | 6,653,287 | |||||||||||
A Class/Shares Authorized | 30,000,000 | 40,000,000 | ||||||||||||
Sold | 63,203 | 6,035,283 | 64,313 | 6,610,145 | ||||||||||
Issued in reinvestment of distributions | 50,370 | 5,639,954 | 38,481 | 3,669,198 | ||||||||||
Redeemed | (110,162) | (10,511,367) | (94,091) | (9,834,703) | ||||||||||
3,411 | 1,163,870 | 8,703 | 444,640 | |||||||||||
C Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||||||
Sold | 4,731 | 394,505 | 6,208 | 568,197 | ||||||||||
Issued in reinvestment of distributions | 4,031 | 379,383 | 5,050 | 413,834 | ||||||||||
Redeemed | (12,297) | (943,621) | (38,754) | (3,272,318) | ||||||||||
(3,535) | (169,733) | (27,496) | (2,290,287) | |||||||||||
R Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||||||
Sold | 11,613 | 1,074,576 | 9,167 | 939,879 | ||||||||||
Issued in reinvestment of distributions | 3,372 | 370,140 | 2,207 | 206,867 | ||||||||||
Redeemed | (8,546) | (800,152) | (11,240) | (1,143,785) | ||||||||||
6,439 | 644,564 | 134 | 2,961 | |||||||||||
R5 Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||||||
Issued in reinvestment of distributions | 8 | 978 | 6 | 604 | ||||||||||
R6 Class/Shares Authorized | 30,000,000 | 40,000,000 | ||||||||||||
Sold | 626,176 | 61,006,124 | 13,479 | 1,430,105 | ||||||||||
Issued in reinvestment of distributions | 4,066 | 487,636 | 2,671 | 269,645 | ||||||||||
Redeemed | (22,329) | (2,199,478) | (9,294) | (1,035,860) | ||||||||||
607,913 | 59,294,282 | 6,856 | 663,890 | |||||||||||
Net increase (decrease) | 1,284,477 | $ | 183,740,003 | 171,183 | $ | (1,114,068) |
20
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
•Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments.
•Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars.
•Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions).
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | |||||||||
Assets | |||||||||||
Investment Securities | |||||||||||
Common Stocks | $ | 3,556,903,691 | $ | 73,329,351 | — | ||||||
Convertible Bonds | — | 16,145,866 | — | ||||||||
Short-Term Investments | 22,244,639 | 82,162,770 | — | ||||||||
$ | 3,579,148,330 | $ | 171,637,987 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 117,956 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 5,598 | — | |||||||
Written Options Contracts | $ | 97,200 | — | — | |||||||
$ | 97,200 | $ | 5,598 | — |
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 1,138 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 $15,095,088.
Value of Derivative Instruments as of October 31, 2022
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 | Written Options | — | Written Options | $ | 97,200 | |||||||||
Foreign Currency Risk | Unrealized appreciation on forward foreign currency exchange contracts | $ | 117,956 | Unrealized depreciation on forward foreign currency exchange contracts | 5,598 | |||||||||
$ | 117,956 | $ | 102,798 |
Effect of Derivative Instruments on the Statement of Operations for the Year Ended October 31, 2022
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 | $ | 899,842 | Change in net unrealized appreciation (depreciation) on written options contracts | $ | 112,628 | ||||||||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | 797,309 | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | 475,699 | ||||||||||
$ | 1,697,151 | $ | 588,327 |
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, war, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse long-term effects on world economies and markets generally.
22
9. Federal Tax Information
The tax character of distributions paid during the years ended October 31, 2022 and October 31, 2021 were a
s follows:
2022 | 2021 | |||||||
Distributions Paid From | ||||||||
Ordinary income | — | — | ||||||
Long-term capital gains | $ | 394,644,163 | $ | 257,611,201 |
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 | $ | 1,717,214,773 | |||
Gross tax appreciation of investments | $ | 2,129,018,201 | |||
Gross tax depreciation of investments | (95,446,657) | ||||
Net tax appreciation (depreciation) of investments | 2,033,571,544 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 102,096 | ||||
Net tax appreciation (depreciation) | $ | 2,033,673,640 | |||
Undistributed ordinary income | — | ||||
Accumulated long-term gains | $ | 327,123,888 | |||
Late-year ordinary loss deferral | $ | (8,537,239) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the realization for tax purposes of unrealized gain (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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $124.12 | (0.28) | (26.71) | (26.99) | — | (9.63) | (9.63) | $87.50 | (23.66)% | 0.96% | 1.00% | (0.28)% | (0.32)% | 15% | $3,417,398 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $127.27 | (0.08) | (27.47) | (27.55) | — | (9.63) | (9.63) | $90.09 | (23.51)% | 0.76% | 0.80% | (0.08)% | (0.12)% | 15% | $120,051 | ||||||||||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $127.87 | 0.07 | (27.62) | (27.55) | — | (9.63) | (9.63) | $90.69 | (23.39)% | 0.61% | 0.65% | 0.07% | 0.03% | 15% | $68,908 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $119.94 | (0.51) | (25.70) | (26.21) | — | (9.63) | (9.63) | $84.10 | (23.85)% | 1.21% | 1.25% | (0.53)% | (0.57)% | 15% | $51,336 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $102.40 | (1.05) | (21.51) | (22.56) | — | (9.63) | (9.63) | $70.21 | (24.42)% | 1.96% | 2.00% | (1.28)% | (1.32)% | 15% | $2,598 | ||||||||||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $117.80 | (0.74) | (25.17) | (25.91) | — | (9.63) | (9.63) | $82.26 | (24.04)% | 1.46% | 1.50% | (0.78)% | (0.82)% | 15% | $3,639 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $127.28 | (0.08) | (27.48) | (27.56) | — | (9.63) | (9.63) | $90.09 | (23.51)% | 0.76% | 0.80% | (0.08)% | (0.12)% | 15% | $10 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $127.70 | 0.06 | (27.57) | (27.51) | — | (9.63) | (9.63) | $90.56 | (23.39)% | 0.61% | 0.65% | 0.07% | 0.03% | 15% | $59,681 | ||||||||||||||||||||||||||||||||
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 |
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%.
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, 2022, 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, 2022, 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, 2022, 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 16, 2022
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 on 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 | 64 | None | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 64 | Alleghany Corporation (2021 to 2022) | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 64 | 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) | 64 | 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) | 64 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director and Board Chair | Since 2011 (Board Chair since 2022) | Retired | 64 | None | ||||||||||||
Stephen E. Yates (1948) | Director | Since 2012 | Retired | 108 | 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 | 142 | 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 29, 2022, 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 of 1940 (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, 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 data and information compiled by the Advisor and certain independent data providers concerning the Fund. 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 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 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 an appropriate benchmark(s) and peer group of other mutual funds with similar investment objectives and strategies;
•the cost of owning the Fund compared to the cost of owning similarly-managed funds;
•the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans, generally, and with respect to the ongoing impact of the COVID-19 pandemic response, heightened areas of interest in the mutual fund industry and recent geopolitical issues;
•the Advisor’s business continuity plans, vendor management practices, 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 four meetings to consider the renewal. The independent Directors also met in private session multiple 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, without limitation, the following:
•constructing and designing the Fund
•portfolio research and security selection
•initial capitalization/funding
•securities trading
•Fund administration
•custody of Fund assets
•daily valuation of the Fund’s portfolio
•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 principal investment 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 Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any actions being taken to improve performance, and may conduct special reviews until performance improves. 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
33
Advisor. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through its various committees, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services 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 fee structure, and through reinvestment in its business, infrastructure, investment capabilities and initiatives to provide shareholders enhanced and expanded 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. Assets of various classes of the same Fund or similarly-managed products are combined with the assets of the Fund to help achieve those breakpoints.
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 securities transaction expenses, 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 Investment Company Act Rule 12b-1. 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
34
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 annual unified management fee such that the Investor Class management fee not exceed 0.937% for at least one year beginning August 1, 2022. 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.
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 terms of the management agreement are fair and reasonable and that the management fee charged to the Fund is reasonable in light of the services provided and that the management agreement between the Fund and the Advisor should be renewed for an additional one-year period.
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Proxy Voting Results |
A special meeting of shareholders was held on October 13, 2022, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect five directors to the Board of Directors of American Century Mutual Funds, Inc.:
Affirmative | Withhold | ||||||||||
Brian Bulatao | $ | 24,005,100,401 | $ | 1,121,808,198 | |||||||
Chris H. Cheesman | $ | 24,198,214,355 | $ | 928,694,244 | |||||||
Rajesh K. Gupta | $ | 24,143,807,378 | $ | 983,101,221 | |||||||
Lynn M. Jenkins | $ | 24,034,830,602 | $ | 1,092,077,997 | |||||||
Gary C. Meltzer | $ | 24,134,760,750 | $ | 992,147,849 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Thomas W. Bunn, Barry Fink, Jan M. Lewis, and Stephen E. Yates.
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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 $410,189,095, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2022.
The fund utilized earnings and profits of $15,544,932 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
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Notes |
39
Notes |
40
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Contact Us | americancentury.com | |||||||
Automated Information Line | 1-800-345-8765 | |||||||
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |||||||
Investors Using Advisors | 1-800-378-9878 | |||||||
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |||||||
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |||||||
Telecommunications Relay Service for the Deaf | 711 | |||||||
American Century Mutual Funds, Inc. | ||||||||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||||||||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||||||||
©2022 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90969 2212 |
![image25.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image25.jpg)
Annual Report | |||||
October 31, 2022 | |||||
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 | |||||
Proxy Voting Results | |||||
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 |
![image22.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image22.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ending October 31, 2022. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
High Inflation, Rising Rates, Volatility Challenged Investors
The broad economic and investment backdrops grew knottier as the fiscal year progressed. Challenges began to surface early in the period, as the Federal Reserve (Fed) and other central banks finally admitted inflation was entrenched rather than transitory. Investors grew more cautious amid growing expectations for less accommodative monetary policy in the new year.
By early 2022, inflation soared to levels last seen in the early 1980s. Massive fiscal and monetary support unleashed during the pandemic was partly to blame. In addition, escalating energy prices, supply chain breakdowns, labor market shortages and Russia’s invasion of Ukraine further aggravated the inflation backdrop.
The Fed responded to surging inflation with a rate hike in March, three months after the Bank of England (BofE) launched its tightening campaign. Through October, the Fed lifted rates a total of 3 percentage points, while the BofE hiked 2.9 percentage points. The European Central Bank (ECB) waited until July to start tightening. Facing record-high inflation, the ECB raised rates 2 percentage points through October.
In addition to fostering recession risk, the combination of elevated inflation and hawkish central banks helped push bond yields sharply higher and stock prices significantly lower. Amid persistent market unrest, most stock, bond and real estate indices ended the 12-month period with steep losses. While U.S. stock returns were broadly negative, growth stocks significantly underperformed their value stock peers.
Staying Disciplined in Uncertain Times
We expect market volatility to linger as investors navigate a complex environment of high inflation, rising interest rates and economic uncertainty. In addition, Russia’s invasion of Ukraine complicates an increasingly tense geopolitical backdrop and threatens global energy markets. We will continue to monitor this evolving situation and what it broadly means for investors across asset classes.
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,
![image27.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image27.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2022 | |||||||||||||||||||||||
Average Annual Returns | |||||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | ||||||||||||||||||
Investor Class | ANOIX | -26.71% | 10.60% | 12.54% | — | 6/1/01 | |||||||||||||||||
Russell 2000 Growth Index | — | -26.02% | 5.17% | 10.14% | — | — | |||||||||||||||||
I Class | ANONX | -26.59% | 10.82% | 12.77% | — | 5/18/07 | |||||||||||||||||
Y Class | ANOYX | -26.45% | 10.99% | — | 12.74% | 4/10/17 | |||||||||||||||||
A Class | ANOAX | 1/31/03 | |||||||||||||||||||||
No sales charge | -26.89% | 10.33% | 12.27% | — | |||||||||||||||||||
With sales charge | -31.09% | 9.02% | 11.60% | — | |||||||||||||||||||
C Class | ANOCX | -27.44% | 9.50% | 11.42% | — | 1/31/03 | |||||||||||||||||
R Class | ANORX | -27.12% | 10.04% | 11.99% | — | 9/28/07 | |||||||||||||||||
R5 Class | ANOGX | -26.56% | 10.83% | — | 12.57% | 4/10/17 | |||||||||||||||||
R6 Class | ANODX | -26.46% | 10.99% | — | 11.02% | 7/26/13 | |||||||||||||||||
G Class | ANOHX | -25.84% | — | — | 11.26% | 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.
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, 2012 | ||
Performance for other share classes will vary due to differences in fee structure. |
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Value on October 31, 2022 | |||||
Investor Class — $32,601 | |||||
Russell 2000 Growth Index — $26,284 | |||||
Total Annual Fund Operating Expenses | ||||||||||||||||||||||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class | G Class | ||||||||||||||||||
1.17% | 0.97% | 0.82% | 1.42% | 2.17% | 1.67% | 0.97% | 0.82% | 0.82% |
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 -26.71%* for the 12 months ended October 31, 2022, versus the -26.02% return of the fund’s benchmark, the Russell 2000 Growth Index.
U.S. stocks fell sharply over the past 12 months, with the heaviest losses coming from late 2021 through midyear 2022. The downturn began amid a combination of factors—the new omicron variant of COVID-19, rising inflation, the Federal Reserve signaling interest rate increases—that led to investors moving to more defensive positioning. The market action was marked by a rotation out of the highest-growth stocks and pandemic winners into either higher earnings yield or more traditional cyclical value stocks. Market declines intensified after Russia invaded Ukraine, exacerbating already stretched supply chains and leading to soaring oil prices that helped drive inflation to four-decade highs. Within the Russell 2000 Growth Index, energy was by far the top-performing sector, benefiting from rising prices due to increased demand amid limited supplies. No other sector registered a gain.
Stock choices within the consumer discretionary sector hampered performance relative to the benchmark, as did an underweight allocation to energy. Stock selection in the information technology sector was the leading contributor.
Consumer Discretionary Weighed on Performance
Stock choices in the specialty retail and auto components industries detracted from relative performance in the consumer discretionary sector. Not owning energy equipment and services stocks hurt performance in the energy sector.
Individual detractors came from a variety of sectors. Health care technology company Optimize Rx saw a significant drop in marketing spending by pharmaceutical customers on its digital platform. The company blamed a slowdown in Food and Drug Administration approvals of novel branded drugs. We eliminated the holding. Tandem Diabetes Care declined during the market sell-off as investors shunned growth stocks with high valuations in favor of value-oriented holdings. We sold this maker of insulin pumps and related supplies. Tandem did not meet our expectations for new user growth and its base of pump users upgrading their devices. Health Catalyst, a data storage and analytics company, also declined along with other high-growth stocks as investors took profits after Health Catalyst reached a record high in mid-2021. Additionally, delays in customer decision making caused management to lower guidance. We sold our holding of Health Catalyst.
Goosehead Insurance, an insurance agency broker-dealer, experienced growth hiccups. First, it surprised the market by announcing increased investments that drew down earnings expectations; then, the rise in mortgage interest rates resulted in pressure on conversion activity; finally, it announced that the new CFO would be the founder’s son, which drew governance concerns. We eliminated the stock. Diversey Holdings produces and sells hygiene, infection prevention and cleaning products. Quarterly results were mixed, with most of the weakness since its initial public offering on cost headwinds and dislocations due to weather events, the COVID-19 omicron variant, oil price explosion and a weak Europe, where Diversey has an outsize portion of revenues. Tough year‐over‐year comparisons due to pantry loading during the height of the pandemic also created problems.
Cargurus operates an online automotive marketplace. Quarterly earnings missed and guidance disappointed. There are ongoing low inventory/higher rates headwinds that are creating challenges for the traditional consumer business. In addition, the company saw weaker fleet buying activity
amid heavy concentration of rental car dealer exposure in the CarOffer dealer-to-dealer marketplace segment. We eliminated the stock.
*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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Information Technology Was The Top Contributor
Stock choices in the software industry were especially helpful in the information technology sector. In IT services, the stock price of data center operator Switch rose on rumors that the company might be exploring strategic alternatives and potential offers. In May, DigitalBridge Group announced it was acquiring Switch.
In health care, stock decisions in the biotechnology industry led outperformance. Global Blood Therapeutics, a maker and developer of therapies for blood disorders, announced that it would be acquired by Pfizer for its sickle cell anemia therapies currently on the market and in development. The holding was eliminated as a result of the purchase.
Other top contributors included Matador Resources. This oil exploration and production company benefited from the rapid increase in crude oil prices driven by rising demand against flat supply and shrinking excess capacity. Matador reported earnings in excess of expectations and issued strong guidance for the year ahead. Oil exploration and production company Whitecap Resources similarly benefited from the rapid increase in crude oil prices. In addition, the company increased its reserves and raised its dividend significantly.
Our holding of Intertape Polymer Group, a maker of acrylic tape and other packaging products, outperformed and was eliminated after it announced that it would be acquired by a private equity investor. Kinsale Capital Group’s earnings came in better than expected. The provider of excess and surplus insurance benefited from strong submission activity and a hard market that is driving higher realized pricing. Kinsale is helped by its modern technology that allows it to properly model for loss trends and maintain a low expense ratio.
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 past year has been difficult for stocks, especially growth stocks. At the end of the period, we had positioned the portfolio defensively given our view of decelerating economic growth amid global macro headwinds, a tightening monetary policy cycle and difficult year-over-year comparisons. Our sector positioning relative to the benchmark remains narrow, with few thematic trends. We maintained modest overweights in health care and consumer staples and underweights in energy and materials.
6
Fund Characteristics |
OCTOBER 31, 2022 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 97.3% | ||||
Short-Term Investments | 4.9% | ||||
Other Assets and Liabilities | (2.2)% | ||||
Top Five Industries | % of net assets | ||||
Software | 10.1% | ||||
Biotechnology | 8.2% | ||||
Health Care Providers and Services | 6.7% | ||||
Oil, Gas and Consumable Fuels | 5.5% | ||||
Health Care Equipment and Supplies | 5.5% |
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, 2022 to October 31, 2022.
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 mutual 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 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 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 5/1/22 | Ending Account Value 10/31/22 | Expenses Paid During Period(1) 5/1/22 - 10/31/22 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $963.20 | $5.84 | 1.18% | ||||||||||
I Class | $1,000 | $963.70 | $4.85 | 0.98% | ||||||||||
Y Class | $1,000 | $964.50 | $4.11 | 0.83% | ||||||||||
A Class | $1,000 | $961.90 | $7.07 | 1.43% | ||||||||||
C Class | $1,000 | $958.60 | $10.76 | 2.18% | ||||||||||
R Class | $1,000 | $959.80 | $8.30 | 1.68% | ||||||||||
R5 Class | $1,000 | $963.80 | $4.85 | 0.98% | ||||||||||
R6 Class | $1,000 | $964.50 | $4.11 | 0.83% | ||||||||||
G Class | $1,000 | $968.30 | $0.05 | 0.01% | ||||||||||
Hypothetical | ||||||||||||||
Investor Class | $1,000 | $1,019.26 | $6.01 | 1.18% | ||||||||||
I Class | $1,000 | $1,020.27 | $4.99 | 0.98% | ||||||||||
Y Class | $1,000 | $1,021.02 | $4.23 | 0.83% | ||||||||||
A Class | $1,000 | $1,018.00 | $7.27 | 1.43% | ||||||||||
C Class | $1,000 | $1,014.22 | $11.07 | 2.18% | ||||||||||
R Class | $1,000 | $1,016.74 | $8.54 | 1.68% | ||||||||||
R5 Class | $1,000 | $1,020.27 | $4.99 | 0.98% | ||||||||||
R6 Class | $1,000 | $1,021.02 | $4.23 | 0.83% | ||||||||||
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.
9
Schedule of Investments |
OCTOBER 31, 2022
Shares | Value | |||||||
COMMON STOCKS — 97.3% | ||||||||
Aerospace and Defense — 2.6% | ||||||||
Aerojet Rocketdyne Holdings, Inc.(1) | 310,309 | $ | 15,034,471 | |||||
CAE, Inc.(1) | 891,197 | 17,008,201 | ||||||
Mercury Systems, Inc.(1) | 431,493 | 20,884,261 | ||||||
52,926,933 | ||||||||
Auto Components — 1.1% | ||||||||
Fox Factory Holding Corp.(1) | 265,598 | 23,332,784 | ||||||
Banks — 1.7% | ||||||||
Bancorp, Inc.(1) | 416,091 | 11,475,790 | ||||||
Commerce Bancshares, Inc. | 189,462 | 13,421,488 | ||||||
Silvergate Capital Corp., Class A(1) | 183,278 | 10,402,859 | ||||||
35,300,137 | ||||||||
Beverages — 1.9% | ||||||||
Duckhorn Portfolio, Inc.(1) | 955,076 | 13,963,211 | ||||||
MGP Ingredients, Inc. | 220,204 | 24,673,858 | ||||||
38,637,069 | ||||||||
Biotechnology — 8.2% | ||||||||
ADC Therapeutics SA(1)(2) | 407,550 | 1,809,522 | ||||||
Apellis Pharmaceuticals, Inc.(1) | 207,517 | 12,552,703 | ||||||
Arcus Biosciences, Inc.(1) | 92,525 | 2,357,537 | ||||||
Arcutis Biotherapeutics, Inc.(1) | 531,734 | 9,401,057 | ||||||
Biohaven Ltd.(1) | 380,310 | 6,301,737 | ||||||
Blueprint Medicines Corp.(1) | 185,104 | 9,595,791 | ||||||
Celldex Therapeutics, Inc.(1) | 177,201 | 6,225,071 | ||||||
Centessa Pharmaceuticals PLC, ADR(1)(2) | 464,785 | 1,845,197 | ||||||
Cerevel Therapeutics Holdings, Inc.(1) | 230,393 | 6,441,788 | ||||||
Cytokinetics, Inc.(1) | 422,994 | 18,467,918 | ||||||
Fate Therapeutics, Inc.(1) | 296,061 | 6,193,596 | ||||||
Halozyme Therapeutics, Inc.(1) | 506,663 | 24,223,558 | ||||||
Insmed, Inc.(1) | 596,642 | 10,333,840 | ||||||
Intellia Therapeutics, Inc.(1) | 103,689 | 5,472,705 | ||||||
KalVista Pharmaceuticals, Inc.(1) | 471,389 | 2,389,942 | ||||||
Karuna Therapeutics, Inc.(1) | 62,226 | 13,648,651 | ||||||
Kinnate Biopharma, Inc.(1)(2) | 288,156 | 2,429,155 | ||||||
Kymera Therapeutics, Inc.(1) | 131,636 | 3,993,836 | ||||||
Natera, Inc.(1) | 440,538 | 20,687,665 | ||||||
Relay Therapeutics, Inc.(1) | 197,367 | 4,385,495 | ||||||
168,756,764 | ||||||||
Building Products — 1.5% | ||||||||
AZEK Co., Inc.(1) | 672,367 | 11,773,146 | ||||||
Hayward Holdings, Inc.(1)(2) | 1,268,050 | 11,729,463 | ||||||
Trex Co., Inc.(1) | 147,558 | 7,096,064 | ||||||
30,598,673 | ||||||||
Capital Markets — 0.8% | ||||||||
StepStone Group, Inc., Class A | 540,500 | 15,955,560 | ||||||
Chemicals — 0.6% | ||||||||
Diversey Holdings Ltd.(1) | 2,129,909 | 11,501,509 |
10
Shares | Value | |||||||
Commercial Services and Supplies — 3.3% | ||||||||
Clean Harbors, Inc.(1) | 245,121 | $ | 30,017,518 | |||||
Driven Brands Holdings, Inc.(1) | 1,157,041 | 37,002,171 | ||||||
67,019,689 | ||||||||
Communications Equipment — 0.6% | ||||||||
Extreme Networks, Inc.(1) | 728,106 | 13,062,222 | ||||||
Construction and Engineering — 1.3% | ||||||||
Construction Partners, Inc., Class A(1) | 838,273 | 26,103,821 | ||||||
Construction Materials — 1.3% | ||||||||
Eagle Materials, Inc. | 87,395 | 10,689,283 | ||||||
Summit Materials, Inc., Class A(1) | 634,329 | 16,714,569 | ||||||
27,403,852 | ||||||||
Containers and Packaging — 1.3% | ||||||||
AptarGroup, Inc. | 88,409 | 8,765,752 | ||||||
Graphic Packaging Holding Co. | 761,289 | 17,479,196 | ||||||
26,244,948 | ||||||||
Diversified Consumer Services — 0.5% | ||||||||
European Wax Center, Inc., Class A | 661,843 | 9,517,302 | ||||||
Electric Utilities — 0.6% | ||||||||
IDACORP, Inc. | 109,162 | 11,429,261 | ||||||
Electrical Equipment — 0.8% | ||||||||
Sensata Technologies Holding PLC | 400,638 | 16,109,654 | ||||||
Electronic Equipment, Instruments and Components — 2.4% | ||||||||
Fabrinet(1) | 67,834 | 7,760,209 | ||||||
Jabil, Inc. | 391,784 | 25,172,122 | ||||||
National Instruments Corp. | 437,315 | 16,696,687 | ||||||
49,629,018 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 0.8% | ||||||||
Ryman Hospitality Properties, Inc. | 185,755 | 16,517,335 | ||||||
Food and Staples Retailing — 2.1% | ||||||||
BJ's Wholesale Club Holdings, Inc.(1) | 313,839 | 24,291,139 | ||||||
Grocery Outlet Holding Corp.(1) | 545,999 | 18,875,185 | ||||||
43,166,324 | ||||||||
Food Products — 2.6% | ||||||||
Freshpet, Inc.(1)(2) | 367,395 | 21,657,935 | ||||||
Sovos Brands, Inc.(1) | 1,227,745 | 17,016,546 | ||||||
SunOpta, Inc.(1) | 1,259,237 | 14,141,232 | ||||||
52,815,713 | ||||||||
Health Care Equipment and Supplies — 5.5% | ||||||||
Establishment Labs Holdings, Inc.(1)(2) | 232,991 | 13,138,363 | ||||||
Inari Medical, Inc.(1) | 309,369 | 23,799,757 | ||||||
Lantheus Holdings, Inc.(1) | 282,659 | 20,913,939 | ||||||
NeuroPace, Inc.(1)(2) | 226,557 | 679,671 | ||||||
SI-BONE, Inc.(1) | 997,511 | 19,391,614 | ||||||
Silk Road Medical, Inc.(1) | 483,822 | 21,326,874 | ||||||
TransMedics Group, Inc.(1) | 281,511 | 13,574,460 | ||||||
112,824,678 | ||||||||
Health Care Providers and Services — 6.7% | ||||||||
Acadia Healthcare Co., Inc.(1) | 261,149 | 21,231,414 | ||||||
Amedisys, Inc.(1) | 81,289 | 7,932,993 | ||||||
Encompass Health Corp. | 212,191 | 11,551,678 |
11
Shares | Value | |||||||
Ensign Group, Inc. | 222,352 | $ | 19,962,763 | |||||
HealthEquity, Inc.(1) | 403,657 | 31,448,917 | ||||||
Progyny, Inc.(1) | 311,462 | 13,850,715 | ||||||
R1 RCM, Inc.(1) | 1,249,097 | 22,059,053 | ||||||
Tenet Healthcare Corp.(1) | 222,127 | 9,853,554 | ||||||
137,891,087 | ||||||||
Health Care Technology — 1.5% | ||||||||
Evolent Health, Inc., Class A(1) | 635,613 | 20,218,850 | ||||||
Schrodinger, Inc.(1) | 405,562 | 9,721,321 | ||||||
29,940,171 | ||||||||
Hotels, Restaurants and Leisure — 4.0% | ||||||||
Churchill Downs, Inc. | 119,894 | 24,927,162 | ||||||
Planet Fitness, Inc., Class A(1) | 452,759 | 29,646,659 | ||||||
Wingstop, Inc. | 167,705 | 26,562,795 | ||||||
81,136,616 | ||||||||
Insurance — 3.2% | ||||||||
Kinsale Capital Group, Inc. | 105,409 | 33,221,755 | ||||||
RLI Corp. | 169,133 | 21,999,129 | ||||||
Selective Insurance Group, Inc. | 116,215 | 11,398,367 | ||||||
66,619,251 | ||||||||
Interactive Media and Services — 1.6% | ||||||||
Bumble, Inc., Class A(1) | 412,051 | 10,466,095 | ||||||
Eventbrite, Inc., Class A(1) | 1,250,327 | 8,214,648 | ||||||
QuinStreet, Inc.(1) | 1,290,221 | 14,721,422 | ||||||
33,402,165 | ||||||||
IT Services — 1.4% | ||||||||
Perficient, Inc.(1) | 159,561 | 10,685,800 | ||||||
Switch, Inc., Class A | 560,985 | 19,101,539 | ||||||
29,787,339 | ||||||||
Leisure Products — 1.8% | ||||||||
Brunswick Corp. | 285,988 | 20,210,772 | ||||||
Topgolf Callaway Brands Corp.(1) | 862,286 | 16,141,994 | ||||||
36,352,766 | ||||||||
Life Sciences Tools and Services — 1.1% | ||||||||
CryoPort, Inc.(1) | 412,649 | 11,455,136 | ||||||
MaxCyte, Inc.(1)(2) | 1,513,490 | 10,473,351 | ||||||
21,928,487 | ||||||||
Machinery — 4.0% | ||||||||
AGCO Corp. | 103,690 | 12,875,187 | ||||||
Astec Industries, Inc. | 374,386 | 16,341,949 | ||||||
ATS Automation Tooling Systems, Inc.(1) | 737,931 | 23,345,562 | ||||||
John Bean Technologies Corp. | 197,247 | 17,988,926 | ||||||
Mueller Water Products, Inc., Class A | 940,131 | 10,999,533 | ||||||
81,551,157 | ||||||||
Multiline Retail — 1.0% | ||||||||
Ollie's Bargain Outlet Holdings, Inc.(1) | 369,196 | 20,674,976 | ||||||
Oil, Gas and Consumable Fuels — 5.5% | ||||||||
Kosmos Energy Ltd.(1) | 5,354,837 | 34,752,892 | ||||||
Matador Resources Co. | 662,744 | 44,039,339 | ||||||
Whitecap Resources, Inc.(2) | 4,471,148 | 34,657,263 | ||||||
113,449,494 |
12
Shares | Value | |||||||
Pharmaceuticals — 2.3% | ||||||||
Arvinas, Inc.(1) | 167,296 | $ | 8,316,284 | |||||
Edgewise Therapeutics, Inc.(1)(2) | 453,680 | 4,314,497 | ||||||
Harmony Biosciences Holdings, Inc.(1) | 231,407 | 12,033,164 | ||||||
Intra-Cellular Therapies, Inc.(1) | 290,114 | 13,249,507 | ||||||
Ventyx Biosciences, Inc.(1) | 269,571 | 8,726,013 | ||||||
46,639,465 | ||||||||
Real Estate Management and Development — 1.6% | ||||||||
Altus Group Ltd.(2) | 440,567 | 15,655,190 | ||||||
DigitalBridge Group, Inc. | 714,587 | 9,146,714 | ||||||
Tricon Residential, Inc. (Toronto) | 839,370 | 7,073,048 | ||||||
31,874,952 | ||||||||
Road and Rail — 0.4% | ||||||||
Saia, Inc.(1) | 45,641 | 9,076,169 | ||||||
Semiconductors and Semiconductor Equipment — 3.6% | ||||||||
Ambarella, Inc.(1) | 101,371 | 5,548,035 | ||||||
Lattice Semiconductor Corp.(1) | 491,956 | 23,864,785 | ||||||
MACOM Technology Solutions Holdings, Inc.(1) | 218,140 | 12,623,762 | ||||||
Onto Innovation, Inc.(1) | 263,713 | 17,626,577 | ||||||
Power Integrations, Inc. | 201,045 | 13,411,712 | ||||||
73,074,871 | ||||||||
Software — 10.1% | ||||||||
Box, Inc., Class A(1) | 841,228 | 24,437,673 | ||||||
Five9, Inc.(1) | 167,830 | 10,113,436 | ||||||
JFrog Ltd.(1) | 878,182 | 22,305,823 | ||||||
Manhattan Associates, Inc.(1) | 193,997 | 23,603,615 | ||||||
nCino, Inc.(1)(2) | 547,100 | 17,222,708 | ||||||
Paycor HCM, Inc.(1) | 701,529 | 21,375,589 | ||||||
Paylocity Holding Corp.(1) | 122,801 | 28,464,044 | ||||||
Sprout Social, Inc., Class A(1) | 185,025 | 11,162,558 | ||||||
SPS Commerce, Inc.(1) | 190,591 | 24,113,573 | ||||||
Tenable Holdings, Inc.(1) | 601,357 | 24,439,149 | ||||||
207,238,168 | ||||||||
Specialty Retail — 0.6% | ||||||||
Leslie's, Inc.(1)(2) | 828,958 | 11,638,570 | ||||||
Technology Hardware, Storage and Peripherals — 1.0% | ||||||||
Pure Storage, Inc., Class A(1) | 657,599 | 20,293,505 | ||||||
Textiles, Apparel and Luxury Goods — 1.0% | ||||||||
Crocs, Inc.(1) | 279,803 | 19,796,062 | ||||||
Trading Companies and Distributors — 2.3% | ||||||||
H&E Equipment Services, Inc. | 568,366 | 21,461,500 | ||||||
MRC Global, Inc.(1) | 1,036,273 | 10,393,818 | ||||||
NOW, Inc.(1) | 1,265,224 | 16,106,302 | ||||||
47,961,620 | ||||||||
Water Utilities — 1.1% | ||||||||
SJW Group | 324,634 | 22,945,131 | ||||||
TOTAL COMMON STOCKS (Cost $1,989,977,861) | 1,992,125,268 | |||||||
SHORT-TERM INVESTMENTS — 4.9% | ||||||||
Money Market Funds — 2.4% | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 88,975 | 88,975 |
13
Shares | Value | |||||||
State Street Navigator Securities Lending Government Money Market Portfolio(3) | 48,513,040 | $ | 48,513,040 | |||||
48,602,015 | ||||||||
Repurchase Agreements — 2.5% | ||||||||
BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.125% - 3.125%, 8/15/23 - 8/15/42, valued at $10,048,053), in a joint trading account at 2.95%, dated 10/31/22, due 11/1/22 (Delivery value $9,853,949) | 9,853,141 | |||||||
Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 1.50%, 11/30/28, valued at $43,095,052), at 3.00%, dated 10/31/22, due 11/1/22 (Delivery value $42,253,521) | 42,250,000 | |||||||
52,103,141 | ||||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $100,705,156) | 100,705,156 | |||||||
TOTAL INVESTMENT SECURITIES — 102.2% (Cost $2,090,683,017) | 2,092,830,424 | |||||||
OTHER ASSETS AND LIABILITIES — (2.2)% | (45,066,384) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 2,047,764,040 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
CAD | 3,929,067 | USD | 2,895,526 | Goldman Sachs & Co. | 12/30/22 | $ | (9,303) | |||||||||||||
CAD | 4,365,776 | USD | 3,179,665 | Goldman Sachs & Co. | 12/30/22 | 27,357 | ||||||||||||||
CAD | 2,503,311 | USD | 1,824,458 | Goldman Sachs & Co. | 12/30/22 | 14,431 | ||||||||||||||
USD | 80,086,009 | CAD | 107,957,542 | Goldman Sachs & Co. | 12/30/22 | 782,297 | ||||||||||||||
USD | 2,957,534 | CAD | 4,050,018 | Goldman Sachs & Co. | 12/30/22 | (17,537) | ||||||||||||||
USD | 2,000,349 | CAD | 2,700,501 | Goldman Sachs & Co. | 12/30/22 | 16,608 | ||||||||||||||
USD | 3,440,956 | CAD | 4,683,406 | Goldman Sachs & Co. | 12/30/22 | 608 | ||||||||||||||
USD | 3,217,858 | CAD | 4,465,869 | Goldman Sachs & Co. | 12/30/22 | (62,691) | ||||||||||||||
USD | 2,027,786 | CAD | 2,783,442 | Goldman Sachs & Co. | 12/30/22 | (16,882) | ||||||||||||||
USD | 2,308,676 | CAD | 3,129,671 | Goldman Sachs & Co. | 12/30/22 | 9,675 | ||||||||||||||
$ | 744,563 |
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 $50,811,960. 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 $53,084,944, which includes securities collateral of $4,571,904.
See Notes to Financial Statements.
14
Statement of Assets and Liabilities |
OCTOBER 31, 2022 | |||||
Assets | |||||
Investment securities, at value (cost of $2,042,169,977) — including $50,811,960 of securities on loan | $ | 2,044,317,384 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $48,513,040) | 48,513,040 | ||||
Total investment securities, at value (cost of $2,090,683,017) | 2,092,830,424 | ||||
Receivable for investments sold | 11,060,057 | ||||
Receivable for capital shares sold | 1,916,995 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 850,976 | ||||
Dividends and interest receivable | 147,981 | ||||
Securities lending receivable | 19,614 | ||||
2,106,826,047 | |||||
Liabilities | |||||
Payable for collateral received for securities on loan | 48,513,040 | ||||
Payable for investments purchased | 7,120,479 | ||||
Payable for capital shares redeemed | 1,848,290 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 106,413 | ||||
Accrued management fees | 1,425,310 | ||||
Distribution and service fees payable | 29,502 | ||||
Accrued other expenses | 18,973 | ||||
59,062,007 | |||||
Net Assets | $ | 2,047,764,040 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 2,223,893,208 | |||
Distributable earnings | (176,129,168) | ||||
$ | 2,047,764,040 |
Net Assets | Shares Outstanding | Net Asset Value Per Share* | |||||||||
Investor Class, $0.01 Par Value | $636,148,873 | 38,603,593 | $16.48 | ||||||||
I Class, $0.01 Par Value | $440,618,006 | 25,495,091 | $17.28 | ||||||||
Y Class, $0.01 Par Value | $144,975,394 | 8,214,206 | $17.65 | ||||||||
A Class, $0.01 Par Value | $91,898,213 | 5,976,342 | $15.38 | ||||||||
C Class, $0.01 Par Value | $8,889,198 | 710,857 | $12.50 | ||||||||
R Class, $0.01 Par Value | $9,009,565 | 617,772 | $14.58 | ||||||||
R5 Class, $0.01 Par Value | $2,211,203 | 127,853 | $17.29 | ||||||||
R6 Class, $0.01 Par Value | $417,197,350 | 23,647,922 | $17.64 | ||||||||
G Class, $0.01 Par Value | $296,816,238 | 16,203,141 | $18.32 |
*Maximum offering price per share was equal to the net asset value per share for all share classes, except Class A, for which the maximum offering price per share was $16.32 (net asset value divided by 0.9425). A contingent deferred sales charge may be imposed on redemptions of Class A and Class C.
See Notes to Financial Statements.
15
Statement of Operations |
YEAR ENDED OCTOBER 31, 2022 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $254,621) | $ | 10,461,675 | |||
Interest | 539,988 | ||||
Securities lending, net | 157,332 | ||||
11,158,995 | |||||
Expenses: | |||||
Management fees | 19,498,653 | ||||
Distribution and service fees: | |||||
A Class | 258,154 | ||||
C Class | 89,085 | ||||
R Class | 49,693 | ||||
Directors' fees and expenses | 52,674 | ||||
Other expenses | 26,031 | ||||
19,974,290 | |||||
Fees waived - G Class | (2,612,250) | ||||
17,362,040 | |||||
Net investment income (loss) | (6,203,045) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | (170,525,905) | ||||
Forward foreign currency exchange contract transactions | 5,424,803 | ||||
Foreign currency translation transactions | (13,931) | ||||
(165,115,033) | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | (454,061,220) | ||||
Forward foreign currency exchange contracts | 2,936,510 | ||||
Translation of assets and liabilities in foreign currencies | (483) | ||||
(451,125,193) | |||||
Net realized and unrealized gain (loss) | (616,240,226) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (622,443,271) |
See Notes to Financial Statements.
16
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2022 AND OCTOBER 31, 2021 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2022 | October 31, 2021 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (6,203,045) | $ | (10,540,833) | ||||
Net realized gain (loss) | (165,115,033) | 440,180,285 | ||||||
Change in net unrealized appreciation (depreciation) | (451,125,193) | 165,939,821 | ||||||
Net increase (decrease) in net assets resulting from operations | (622,443,271) | 595,579,273 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (122,931,535) | (62,781,510) | ||||||
I Class | (76,314,465) | (43,474,342) | ||||||
Y Class | (30,096,913) | (15,461,227) | ||||||
A Class | (23,815,635) | (12,881,120) | ||||||
C Class | (2,264,825) | (823,392) | ||||||
R Class | (2,347,192) | (1,137,082) | ||||||
R5 Class | (1,046,109) | (1,134) | ||||||
R6 Class | (56,730,478) | (14,189,017) | ||||||
G Class | (60,650,367) | (31,492,935) | ||||||
Decrease in net assets from distributions | (376,197,519) | (182,241,759) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 779,423,619 | 353,243,408 | ||||||
Net increase (decrease) in net assets | (219,217,171) | 766,580,922 | ||||||
Net Assets | ||||||||
Beginning of period | 2,266,981,211 | 1,500,400,289 | ||||||
End of period | $ | 2,047,764,040 | $ | 2,266,981,211 |
See Notes to Financial Statements.
17
Notes to Financial Statements |
OCTOBER 31, 2022
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 value of investments of the fund is determined by American Century Investment Management, Inc. (ACIM) (the investment advisor), as the valuation designee, pursuant to its valuation policies and procedures. The Board of Directors oversees the valuation designee and reviews its valuation policies and procedures at least annually.
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 valuation designee determines that the market price for a portfolio security is not readily available or is believed by the valuation designee to be unreliable, such security is valued at fair value as determined in good faith by the valuation designee, in accordance with its policies and procedures. Circumstances that may cause the fund to determine that market quotations are not available or reliable include, but are not limited to: when there is a significant event subsequent to the market quotation; trading in a security has been halted during the trading day; or trading in a security is insufficient or did not take place due to a closure or holiday.
18
The valuation designee 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; regulatory news, 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 valuation designee also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that it deems appropriate. The valuation designee 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 ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover certain types of investment securities and other financial instruments. ACIM monitors, on a daily basis, the securities segregated to ensure the fund designates a sufficient amount of liquid assets, marked-to-market daily. The fund may also receive assets or be required to pledge assets at the custodian bank or with a broker for collateral requirements.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
19
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income and net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
Securities Lending — Securities are lent to qualified financial institutions and brokers. State Street Bank & Trust Co. serves as securities lending agent to the fund pursuant to a Securities Lending Agreement. The lending of securities exposes the fund to risks such as: the borrowers may fail to return the loaned securities, the borrowers may not be able to provide additional collateral, the fund may experience delays in recovery of the loaned securities or delays in access to collateral, or the fund may experience losses related to the investment collateral. To minimize certain risks, loan counterparties pledge collateral in the form of cash and/or securities. The lending agent has agreed to indemnify the fund in the case of default of any securities borrowed. Cash collateral received is invested in the State Street Navigator Securities Lending Government Money Market Portfolio, a money market mutual fund registered under the 1940 Act. The loans may also be secured by U.S. government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. By lending securities, the fund seeks to increase its net investment income through the receipt of interest and fees. Such income is reflected separately within the Statement of Operations. The value of loaned securities and related collateral outstanding at period end, if any, are shown on a gross basis within the Schedule of Investments and Statement of Assets and Liabilities.
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, 2022.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 48,513,040 | — | — | — | $ | 48,513,040 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 48,513,040 |
(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, 10% of the shares of the fund.
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), as well as exchange-traded funds managed by the investment advisor, 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, 2022 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, 2022 are detailed in the Statement of Operations.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases were $442,445 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, 2022 were $1,668,785,046 and $1,197,484,221, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2022 | Year ended October 31, 2021 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 335,000,000 | 335,000,000 | ||||||||||||
Sold | 13,339,669 | $ | 232,213,257 | 5,201,148 | $ | 132,383,799 | ||||||||
Issued in reinvestment of distributions | 5,388,578 | 115,638,892 | 2,479,907 | 58,274,650 | ||||||||||
Redeemed | (6,364,731) | (113,460,104) | (5,592,502) | (141,184,376) | ||||||||||
12,363,516 | 234,392,045 | 2,088,553 | 49,474,073 | |||||||||||
I Class/Shares Authorized | 210,000,000 | 210,000,000 | ||||||||||||
Sold | 13,495,288 | 251,882,616 | 8,344,806 | 219,598,270 | ||||||||||
Issued in reinvestment of distributions | 3,285,206 | 73,818,580 | 1,708,377 | 41,616,070 | ||||||||||
Redeemed | (7,662,984) | (142,163,256) | (7,651,690) | (206,252,981) | ||||||||||
9,117,510 | 183,537,940 | 2,401,493 | 54,961,359 | |||||||||||
Y Class/Shares Authorized | 45,000,000 | 30,000,000 | ||||||||||||
Sold | 5,727,995 | 120,183,758 | 2,146,541 | 58,617,976 | ||||||||||
Issued in reinvestment of distributions | 312,106 | 7,150,342 | 125,315 | 3,097,792 | ||||||||||
Redeemed | (4,837,380) | (93,841,274) | (949,794) | (25,673,469) | ||||||||||
1,202,721 | 33,492,826 | 1,322,062 | 36,042,299 | |||||||||||
A Class/Shares Authorized | 70,000,000 | 70,000,000 | ||||||||||||
Sold | 716,199 | 12,279,729 | 893,567 | 21,725,400 | ||||||||||
Issued in reinvestment of distributions | 1,153,265 | 23,146,028 | 557,328 | 12,428,385 | ||||||||||
Redeemed | (1,086,574) | (19,044,576) | (933,351) | (22,599,792) | ||||||||||
782,890 | 16,381,181 | 517,544 | 11,553,993 | |||||||||||
C Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||||||
Sold | 248,066 | 3,481,441 | 256,593 | 5,394,290 | ||||||||||
Issued in reinvestment of distributions | 137,205 | 2,254,281 | 42,909 | 822,132 | ||||||||||
Redeemed | (153,990) | (2,101,776) | (108,201) | (2,217,451) | ||||||||||
231,281 | 3,633,946 | 191,301 | 3,998,971 | |||||||||||
R Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 179,162 | 2,864,123 | 203,005 | 4,752,618 | ||||||||||
Issued in reinvestment of distributions | 122,925 | 2,345,411 | 51,236 | 1,097,821 | ||||||||||
Redeemed | (195,209) | (3,158,172) | (161,724) | (3,809,826) | ||||||||||
106,878 | 2,051,362 | 92,517 | 2,040,613 | |||||||||||
R5 Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||||||
Sold | 274,361 | 5,403,546 | 265,537 | 6,981,382 | ||||||||||
Issued in reinvestment of distributions | 46,535 | 1,046,109 | 47 | 1,134 | ||||||||||
Redeemed | (418,340) | (7,132,576) | (40,704) | (1,098,894) | ||||||||||
(97,444) | (682,921) | 224,880 | 5,883,622 | |||||||||||
R6 Class/Shares Authorized | 80,000,000 | 50,000,000 | ||||||||||||
Sold | 14,132,982 | 265,555,653 | 9,462,609 | 256,807,769 | ||||||||||
Issued in reinvestment of distributions | 2,448,923 | 56,080,343 | 574,222 | 14,189,017 | ||||||||||
Redeemed | (4,630,700) | (89,487,995) | (3,069,413) | (83,050,016) | ||||||||||
11,951,205 | 232,148,001 | 6,967,418 | 187,946,770 | |||||||||||
G Class/Shares Authorized | 140,000,000 | 140,000,000 | ||||||||||||
Sold | 1,674,311 | 37,100,478 | 1,374,992 | 38,113,576 | ||||||||||
Issued in reinvestment of distributions | 2,568,842 | 60,650,367 | 1,252,702 | 31,492,935 | ||||||||||
Redeemed | (978,802) | (23,281,606) | (2,531,086) | (68,264,803) | ||||||||||
3,264,351 | 74,469,239 | 96,608 | 1,341,708 | |||||||||||
Net increase (decrease) | 38,922,908 | $ | 779,423,619 | 13,902,376 | $ | 353,243,408 |
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 | $ | 1,894,386,004 | $ | 97,739,264 | — | ||||||
Short-Term Investments | 48,602,015 | 52,103,141 | — | ||||||||
$ | 1,942,988,019 | $ | 149,842,405 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 850,976 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 106,413 | — |
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 $102,361,739.
23
The value of foreign currency risk derivative instruments as of October 31, 2022, is disclosed on the Statement of Assets and Liabilities as an asset of $850,976 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $106,413 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended October 31, 2022, the effect of foreign currency risk derivative instruments on the Statement of Operations was $5,424,803 in net realized gain (loss) on forward foreign currency exchange contract transactions and $2,936,510 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, war, 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.
There are certain risks involved in investing in foreign securities. These risks include those resulting from political events (such as civil unrest, national elections and imposition of exchange controls), social and economic events (such as labor strikes and rising inflation), and natural disasters. Securities of foreign issuers may be less liquid and more volatile.
9. Federal Tax Information
The tax character of distributions paid during the years ended October 31, 2022 and October 31, 2021 were as follows:
2022 | 2021 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 169,173,414 | $ | 35,338,601 | ||||
Long-term capital gains | $ | 207,024,105 | $ | 146,903,158 |
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 | $ | 2,103,919,986 | |||
Gross tax appreciation of investments | $ | 250,889,024 | |||
Gross tax depreciation of investments | (261,978,586) | ||||
Net tax appreciation (depreciation) of investments | (11,089,562) | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (681) | ||||
Net tax appreciation (depreciation) | $ | (11,090,243) | |||
Undistributed ordinary income | $ | 2,125,269 | |||
Accumulated short-term capital losses | $ | (154,138,887) | |||
Accumulated long-term capital losses | $ | (13,025,307) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Accumulated capital losses represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers may be carried forward for an unlimited period. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations.
24
Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||||||||||||||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||||||||||||||||||||||||||
Income From Investment Operations: | 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 | |||||||||||||||||||||||||||||||||||||||||
2022 | $27.32 | (0.11) | (6.12) | (6.23) | (4.61) | $16.48 | (26.71)% | 1.17% | 1.17% | (0.61)% | (0.61)% | 61% | $636,149 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||
2022 | $28.37 | (0.08) | (6.40) | (6.48) | (4.61) | $17.28 | (26.59)% | 0.97% | 0.97% | (0.41)% | (0.41)% | 61% | $440,618 | ||||||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||||||||
2022 | $28.83 | (0.05) | (6.52) | (6.57) | (4.61) | $17.65 | (26.45)% | 0.82% | 0.82% | (0.26)% | (0.26)% | 61% | $144,975 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||||||||
2022 | $25.87 | (0.15) | (5.73) | (5.88) | (4.61) | $15.38 | (26.89)% | 1.42% | 1.42% | (0.86)% | (0.86)% | 61% | $91,898 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||
2022 | $22.08 | (0.23) | (4.74) | (4.97) | (4.61) | $12.50 | (27.44)% | 2.17% | 2.17% | (1.61)% | (1.61)% | 61% | $8,889 | ||||||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||||||||
2022 | $24.84 | (0.18) | (5.47) | (5.65) | (4.61) | $14.58 | (27.12)% | 1.67% | 1.67% | (1.11)% | (1.11)% | 61% | $9,010 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||
2022 | $28.39 | (0.07) | (6.42) | (6.49) | (4.61) | $17.29 | (26.56)% | 0.97% | 0.97% | (0.41)% | (0.41)% | 61% | $2,211 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||||||||
2022 | $28.82 | (0.05) | (6.52) | (6.57) | (4.61) | $17.64 | (26.46)% | 0.82% | 0.82% | (0.26)% | (0.26)% | 61% | $417,197 | ||||||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||||||||
2022 | $29.53 | 0.11 | (6.71) | (6.60) | (4.61) | $18.32 | (25.84)% | 0.00%(3) | 0.82% | 0.56% | (0.26)% | 61% | $296,816 | ||||||||||||||||||||||||||||
2021 | $23.35 | 0.10 | 8.80 | 8.90 | (2.72) | $29.53 | 40.15% | 0.00%(3) | 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(4) | $17.43 | 0.05 | 0.86 | 0.91 | — | $18.34 | 5.22% | 0.00%(3)(5) | 0.93%(5) | 0.52%(5) | (0.41)%(5) | 92%(6) | $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)Ratio was less than 0.005%.
(4)April 1, 2019 (commencement of sale) through October 31, 2019.
(5)Annualized.
(6)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, 2022, 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, 2022, 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, 2022, 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 16, 2022
We have served as the auditor of one or more American Century investment companies since 1997.
29
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 on 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 | 64 | None | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 64 | Alleghany Corporation (2021 to 2022) | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 64 | 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) | 64 | None |
30
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) | 64 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director and Board Chair | Since 2011 (Board Chair since 2022) | Retired | 64 | None | ||||||||||||
Stephen E. Yates (1948) | Director | Since 2012 | Retired | 108 | 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 | 142 | 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.
31
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) |
32
Approval of Management Agreement |
At a meeting held on June 29, 2022, 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 of 1940 (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, 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 data and information compiled by the Advisor and certain independent data providers concerning the Fund. 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 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 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 an appropriate benchmark(s) and peer group of other mutual funds with similar investment objectives and strategies;
•the cost of owning the Fund compared to the cost of owning similarly-managed funds;
•the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans, generally, and with respect to the ongoing impact of the COVID-19 pandemic response, heightened areas of interest in the mutual fund industry and recent geopolitical issues;
•the Advisor’s business continuity plans, vendor management practices, 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 four meetings to consider the renewal. The independent Directors also met in private session multiple 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.
33
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, without limitation, the following:
•constructing and designing the Fund
•portfolio research and security selection
•initial capitalization/funding
•securities trading
•Fund administration
•custody of Fund assets
•daily valuation of the Fund’s portfolio
•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 principal investment 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 Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any actions being taken to improve performance, and may conduct special reviews until performance improves. 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.
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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 fee structure, and through reinvestment in its business, infrastructure, investment capabilities and initiatives to provide shareholders enhanced and expanded 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. Assets of various classes of the same Fund or similarly-managed products are combined with the assets of the Fund to help achieve those breakpoints.
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 securities transaction expenses, 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 Investment Company Act Rule 12b-1. 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.
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Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board also requested and received information from the Advisor concerning the nature of the services, fees, costs, and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Payments to Intermediaries. The Directors also requested and received a description of payments made to intermediaries by the Fund and the Advisor and services provided in response thereto. These payments include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Directors reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 Plan and that all such payments by the Advisor were made from the Advisor’s resources and reasonable profits.
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 terms of the management agreement are fair and reasonable and that the management fee charged to the Fund is reasonable in light of the services provided and that the management agreement between the Fund and the Advisor should be renewed for an additional one-year period.
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Proxy Voting Results |
A special meeting of shareholders was held on October 13, 2022, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect five directors to the Board of Directors of American Century Mutual Funds, Inc.:
Affirmative | Withhold | ||||||||||
Brian Bulatao | $ | 24,005,100,401 | $ | 1,121,808,198 | |||||||
Chris H. Cheesman | $ | 24,198,214,355 | $ | 928,694,244 | |||||||
Rajesh K. Gupta | $ | 24,143,807,378 | $ | 983,101,221 | |||||||
Lynn M. Jenkins | $ | 24,034,830,602 | $ | 1,092,077,997 | |||||||
Gary C. Meltzer | $ | 24,134,760,750 | $ | 992,147,849 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Thomas W. Bunn, Barry Fink, Jan M. Lewis, and Stephen E. Yates.
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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, 2022.
For corporate taxpayers, the fund hereby designates $2,862, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2022 as qualified for the corporate dividends received deduction.
The fund hereby designates $207,024,105, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2022.
The fund hereby designates $169,170,552 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2022.
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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. | ||||||||
©2022 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90978 2212 |
![image25.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image25.jpg)
Annual Report | |||||
October 31, 2022 | |||||
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 | |||||
Proxy Voting Results | |||||
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 |
![image22.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image22.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ending October 31, 2022. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
High Inflation, Rising Rates, Volatility Challenged Investors
The broad economic and investment backdrops grew knottier as the fiscal year progressed. Challenges began to surface early in the period, as the Federal Reserve (Fed) and other central banks finally admitted inflation was entrenched rather than transitory. Investors grew more cautious amid growing expectations for less accommodative monetary policy in the new year.
By early 2022, inflation soared to levels last seen in the early 1980s. Massive fiscal and monetary support unleashed during the pandemic was partly to blame. In addition, escalating energy prices, supply chain breakdowns, labor market shortages and Russia’s invasion of Ukraine further aggravated the inflation backdrop.
The Fed responded to surging inflation with a rate hike in March, three months after the Bank of England (BofE) launched its tightening campaign. Through October, the Fed lifted rates a total of 3 percentage points, while the BofE hiked 2.9 percentage points. The European Central Bank (ECB) waited until July to start tightening. Facing record-high inflation, the ECB raised rates 2 percentage points through October.
In addition to fostering recession risk, the combination of elevated inflation and hawkish central banks helped push bond yields sharply higher and stock prices significantly lower. Amid persistent market unrest, most stock, bond and real estate indices ended the 12-month period with steep losses. While U.S. stock returns were broadly negative, growth stocks significantly underperformed their value stock peers.
Staying Disciplined in Uncertain Times
We expect market volatility to linger as investors navigate a complex environment of high inflation, rising interest rates and economic uncertainty. In addition, Russia’s invasion of Ukraine complicates an increasingly tense geopolitical backdrop and threatens global energy markets. We will continue to monitor this evolving situation and what it broadly means for investors across asset classes.
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,
![image27.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image27.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2022 | |||||||||||||||||||||||
Average Annual Returns | |||||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | ||||||||||||||||||
Investor Class | AFDIX | -17.29% | 10.34% | 12.29% | — | 7/29/05 | |||||||||||||||||
S&P 500 Index | — | -14.61% | 10.44% | 12.78% | — | — | |||||||||||||||||
I Class | AFEIX | -17.13% | 10.56% | 12.51% | — | 7/29/05 | |||||||||||||||||
Y Class | AFYDX | -17.01% | 10.72% | — | 12.27% | 4/10/17 | |||||||||||||||||
A Class | AFDAX | 11/30/04 | |||||||||||||||||||||
No sales charge | -17.50% | 10.06% | 12.01% | — | |||||||||||||||||||
With sales charge | -22.24% | 8.75% | 11.34% | — | |||||||||||||||||||
C Class | AFDCX | -18.12% | 9.23% | 11.16% | — | 11/30/04 | |||||||||||||||||
R Class | AFDRX | -17.71% | 9.78% | 11.73% | — | 7/29/05 | |||||||||||||||||
R5 Class | AFDGX | -17.14% | 10.56% | — | 12.10% | 4/10/17 | |||||||||||||||||
R6 Class | AFEDX | -17.02% | — | — | 11.01% | 4/1/19 | |||||||||||||||||
G Class | AFEGX | -16.63% | — | — | 11.50% | 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.
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, 2012 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-d14c64db04b84d83bb7.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/chart-d14c64db04b84d83bb7.jpg)
Value on October 31, 2022 | |||||
Investor Class — $31,878 | |||||
S&P 500 Index — $33,308 | |||||
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.
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Portfolio Commentary |
Portfolio Managers: Justin Brown, Joe Reiland and Rob Bove
Performance Summary
Sustainable Equity returned -17.29%* for the 12 months ended October 31, 2022, versus the -14.61% return of the fund’s benchmark, the S&P 500 Index.
U.S. stocks fell sharply over the past 12 months, with the heaviest losses coming from late 2021 through midyear 2022. The downturn began amid a combination of factors—the new omicron variant of COVID-19, rising inflation, the Federal Reserve signaling interest rate increases—that led to investors moving to more defensive positioning. The market action was marked by a rotation out of the highest-growth stocks and pandemic winners into either lower growth or more traditional cyclical value stocks. Market declines intensified after Russia invaded Ukraine, exacerbating already stretched supply chains and leading to soaring oil prices that helped drive inflation to four-decade highs. Within the S&P 500 Index, energy was by far the top-performing sector, benefiting from rising prices and increased demand amid limited supplies. Consumer staples, utilities and health care posted modest gains, while all other sectors recorded losses.
Stock selection in the information technology and consumer discretionary sectors helped drive underperformance relative to the benchmark. An underweight allocation and stock decisions in communication services benefited performance. Stock selection in health care was also positive.
Information Technology Hampered Performance
Significant detractors in the information technology sector included Apple, which beat analysts’ expectations on both revenues and earnings. Our underweight allocation to the consumer electronics giant hurt relative performance. PayPal Holdings delivered quarterly results and forward guidance below expectations, with deceleration in key metrics. We eliminated our position in the digital payments company due to lower engagement trends following the pandemic, as well as management’s poor execution on margins and several growth initiatives. Microsoft was hurt by foreign exchange headwinds, COVID-19-related shutdowns in China that limited personal computer (PC) inventory and a deterioration in PC demand.
Aptiv, an Ireland-based automotive technology supplier, underperformed following Russia’s invasion of Ukraine on concerns about production disruptions, higher commodity costs, continued supply chain constraints and negative impacts to European automobile demand. Not owning Exxon Mobil and Chevron detracted from performance compared with the benchmark as their stocks rose on higher fossil fuel prices following Russia’s invasion of Ukraine.
Communication Services Stocks Benefited Performance
During the period, we eliminated the stock of Facebook’s parent Meta Platforms, which has been hurt more than other digital advertising platforms by both Apple iOS platform changes and TikTok competition. The fund’s resulting underweight helped performance in the communication services sector as the stock fell sharply. Not owning Netflix benefited relative performance. The streaming video service announced another round of layoffs amid weak subscriber growth. An expected renormalization of subscriber growth following the early gains of the pandemic has not materialized.
Elsewhere, our holding of ConocoPhillips was a top contributor. This is consistent with our process, which uses a proprietary multifactor model that considers a company's financial metrics and environmental, social and governance (ESG) characteristics. Rather than exclude certain sectors entirely, our process seeks to identify the most attractive companies within their respective sectors. Our approach led us to overweight positions in select energy companies. The oil giant reported
*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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solid quarterly earnings and increased its 2022 capital return guidance by 50%. The management team continues to demonstrate strong execution and capital return discipline. Schlumberger, the Netherlands-based oil field services company, benefited from the jump in fossil fuel prices stemming from Russia’s invasion in Ukraine, which disrupted energy markets by calling into question global supply chains, with an acute focus on Europe.
In addition, managed care companies, including Cigna, benefited from what many investors perceive to be their defensive profile, meaning they are believed to be relatively insulated from both rising prices and recession risk. Our research also indicates that Cigna’s pharmacy benefit division may benefit from new biosimilar pharmaceutical launches in the coming years. Defense contractor Lockheed Martin was another solid contributor. The defense group experienced relative outperformance as investors rotated to lower growth and more defensive names. Russia’s invasion of Ukraine sparked additional outperformance for the stock on expectations that rising geopolitical tensions will lead to higher global defense spending.
Outlook
The portfolio invests in a blend of large-value and large-growth stocks. We seek to outperform the S&P 500 Index, while maintaining a comparable dividend yield and without taking on significant additional risk. We believe that companies exhibiting both improving business fundamentals and sustainable corporate behaviors will outperform over time. As opposed to avoiding certain sectors entirely, we seek to invest in the most attractive companies within all sectors. We use a quantitative model that combines fundamental measures of a stock’s value and growth potential. We then integrate our view of the company’s financial improvement with multiple sources of environmental, social and governance data.
War, inflation and recession risk all suggest difficult, volatile conditions ahead. Markets will continue to deal with the contrasting risks of rising inflation and interest rates, even as the global economy teeters on the verge of recession. The ongoing war in Ukraine also highlights political and economic risks at present. COVID-19, war and tariffs all are disrupting global supply chains, putting further upward pressure on prices. Nevertheless, we continue to believe that well-run businesses in strong positions with respect to their competition and sustainability practices are best able to navigate current conditions. As of October 31, 2022, the portfolio’s largest overweight position relative to the benchmark was in the industrials sector. Utilities ended the period as the largest underweight sector.
An investment strategy that focuses on ESG factors seeks to invest, under normal market conditions, in securities that meet certain ESG criteria or standards in an effort to promote sustainable characteristics, in addition to seeking superior, long-term, risk-adjusted returns. This investment focus may limit the investment opportunities available to a portfolio. Therefore, the portfolio may underperform or perform differently than other portfolios that do not have an ESG investment focus.
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Fund Characteristics |
OCTOBER 31, 2022 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 99.2% | ||||
Short-Term Investments | 0.7% | ||||
Other Assets and Liabilities | 0.1% | ||||
Top Five Industries | % of net assets | ||||
Software | 8.9% | ||||
Health Care Providers and Services | 5.9% | ||||
Technology Hardware, Storage and Peripherals | 4.9% | ||||
Semiconductors and Semiconductor Equipment | 4.5% | ||||
Pharmaceuticals | 4.4% |
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Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from May 1, 2022 to October 31, 2022.
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 mutual 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 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 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 5/1/22 | Ending Account Value 10/31/22 | Expenses Paid During Period(1) 5/1/22 - 10/31/22 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $951.20 | $3.89 | 0.79% | ||||||||||
I Class | $1,000 | $952.10 | $2.90 | 0.59% | ||||||||||
Y Class | $1,000 | $952.60 | $2.17 | 0.44% | ||||||||||
A Class | $1,000 | $950.00 | $5.11 | 1.04% | ||||||||||
C Class | $1,000 | $946.40 | $8.78 | 1.79% | ||||||||||
R Class | $1,000 | $948.80 | $6.34 | 1.29% | ||||||||||
R5 Class | $1,000 | $952.10 | $2.90 | 0.59% | ||||||||||
R6 Class | $1,000 | $952.70 | $2.17 | 0.44% | ||||||||||
G Class | $1,000 | $954.90 | $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, 2022
Shares | Value | |||||||
COMMON STOCKS — 99.2% | ||||||||
Aerospace and Defense — 1.4% | ||||||||
Lockheed Martin Corp. | 84,757 | $ | 41,249,537 | |||||
Air Freight and Logistics — 0.8% | ||||||||
United Parcel Service, Inc., Class B | 148,065 | 24,840,865 | ||||||
Auto Components — 0.7% | ||||||||
Aptiv PLC(1) | 234,335 | 21,340,888 | ||||||
Automobiles — 1.4% | ||||||||
Tesla, Inc.(1) | 187,224 | 42,600,949 | ||||||
Banks — 3.3% | ||||||||
Bank of America Corp. | 295,566 | 10,652,199 | ||||||
JPMorgan Chase & Co. | 362,490 | 45,630,241 | ||||||
Regions Financial Corp. | 1,971,886 | 43,282,898 | ||||||
99,565,338 | ||||||||
Beverages — 1.9% | ||||||||
PepsiCo, Inc. | 312,372 | 56,720,508 | ||||||
Biotechnology — 2.5% | ||||||||
AbbVie, Inc. | 256,559 | 37,560,238 | ||||||
Amgen, Inc. | 77,521 | 20,957,802 | ||||||
Vertex Pharmaceuticals, Inc.(1) | 55,209 | 17,225,208 | ||||||
75,743,248 | ||||||||
Building Products — 1.6% | ||||||||
Johnson Controls International PLC | 590,758 | 34,169,443 | ||||||
Masco Corp. | 300,159 | 13,888,357 | ||||||
48,057,800 | ||||||||
Capital Markets — 4.4% | ||||||||
Ameriprise Financial, Inc. | 76,613 | 23,682,611 | ||||||
BlackRock, Inc. | 44,095 | 28,481,401 | ||||||
Intercontinental Exchange, Inc. | 155,263 | 14,838,485 | ||||||
Morgan Stanley | 586,963 | 48,230,750 | ||||||
S&P Global, Inc. | 53,850 | 17,299,312 | ||||||
132,532,559 | ||||||||
Chemicals — 2.3% | ||||||||
Air Products and Chemicals, Inc. | 65,590 | 16,423,736 | ||||||
Ecolab, Inc. | 87,028 | 13,669,488 | ||||||
Linde PLC | 134,537 | 40,004,577 | ||||||
70,097,801 | ||||||||
Communications Equipment — 1.9% | ||||||||
Cisco Systems, Inc. | 1,262,009 | 57,333,069 | ||||||
Consumer Finance — 0.5% | ||||||||
American Express Co. | 106,790 | 15,852,975 | ||||||
Containers and Packaging — 0.5% | ||||||||
Ball Corp. | 307,453 | 15,185,104 | ||||||
Diversified Telecommunication Services — 1.0% | ||||||||
Verizon Communications, Inc. | 811,492 | 30,325,456 | ||||||
Electric Utilities — 2.0% | ||||||||
NextEra Energy, Inc. | 792,652 | 61,430,530 |
10
Shares | Value | |||||||
Electrical Equipment — 1.3% | ||||||||
Eaton Corp. PLC | 154,756 | $ | 23,224,233 | |||||
Generac Holdings, Inc.(1) | 37,739 | 4,374,327 | ||||||
Rockwell Automation, Inc. | 47,045 | 12,010,589 | ||||||
39,609,149 | ||||||||
Electronic Equipment, Instruments and Components — 2.2% | ||||||||
CDW Corp. | 168,724 | 29,157,195 | ||||||
Cognex Corp. | 126,928 | 5,867,881 | ||||||
Keysight Technologies, Inc.(1) | 178,802 | 31,138,368 | ||||||
66,163,444 | ||||||||
Energy Equipment and Services — 2.4% | ||||||||
Schlumberger NV | 1,414,217 | 73,581,710 | ||||||
Entertainment — 1.5% | ||||||||
Electronic Arts, Inc. | 102,999 | 12,973,754 | ||||||
Liberty Media Corp.-Liberty Formula One, Class C(1) | 117,693 | 6,794,417 | ||||||
Walt Disney Co.(1) | 238,013 | 25,357,905 | ||||||
45,126,076 | ||||||||
Equity Real Estate Investment Trusts (REITs) — 2.1% | ||||||||
Prologis, Inc. | 565,438 | 62,622,258 | ||||||
Food and Staples Retailing — 2.7% | ||||||||
Costco Wholesale Corp. | 41,166 | 20,644,749 | ||||||
Kroger Co. | 438,604 | 20,741,583 | ||||||
Sysco Corp. | 450,833 | 39,024,105 | ||||||
80,410,437 | ||||||||
Food Products — 0.9% | ||||||||
Mondelez International, Inc., Class A | 396,179 | 24,357,085 | ||||||
Vital Farms, Inc.(1) | 119,515 | 1,582,378 | ||||||
25,939,463 | ||||||||
Health Care Equipment and Supplies — 1.1% | ||||||||
Edwards Lifesciences Corp.(1) | 317,331 | 22,984,285 | ||||||
Medtronic PLC | 53,686 | 4,688,935 | ||||||
ResMed, Inc. | 29,451 | 6,587,894 | ||||||
34,261,114 | ||||||||
Health Care Providers and Services — 5.9% | ||||||||
Cigna Corp. | 171,078 | 55,268,459 | ||||||
CVS Health Corp. | 368,735 | 34,919,205 | ||||||
Humana, Inc. | 33,989 | 18,968,581 | ||||||
UnitedHealth Group, Inc. | 121,190 | 67,278,628 | ||||||
176,434,873 | ||||||||
Hotels, Restaurants and Leisure — 1.0% | ||||||||
Booking Holdings, Inc.(1) | 7,907 | 14,781,979 | ||||||
Chipotle Mexican Grill, Inc.(1) | 4,733 | 7,091,596 | ||||||
Expedia Group, Inc.(1) | 75,990 | 7,102,785 | ||||||
28,976,360 | ||||||||
Household Products — 1.6% | ||||||||
Colgate-Palmolive Co. | 183,054 | 13,516,707 | ||||||
Procter & Gamble Co. | 257,922 | 34,734,356 | ||||||
48,251,063 | ||||||||
Industrial Conglomerates — 1.0% | ||||||||
Honeywell International, Inc. | 147,086 | 30,008,486 | ||||||
Insurance — 2.4% | ||||||||
Marsh & McLennan Cos., Inc. | 156,596 | 25,288,688 |
11
Shares | Value | |||||||
Prudential Financial, Inc. | 231,200 | $ | 24,319,928 | |||||
Travelers Cos., Inc. | 127,217 | 23,466,448 | ||||||
73,075,064 | ||||||||
Interactive Media and Services — 4.3% | ||||||||
Alphabet, Inc., Class A(1) | 1,372,084 | 129,675,659 | ||||||
Internet and Direct Marketing Retail — 2.6% | ||||||||
Amazon.com, Inc.(1) | 777,224 | 79,618,827 | ||||||
IT Services — 4.3% | ||||||||
Accenture PLC, Class A | 124,512 | 35,348,957 | ||||||
Mastercard, Inc., Class A | 112,097 | 36,787,994 | ||||||
Visa, Inc., Class A | 274,833 | 56,934,404 | ||||||
129,071,355 | ||||||||
Life Sciences Tools and Services — 2.1% | ||||||||
Agilent Technologies, Inc. | 237,704 | 32,886,348 | ||||||
Thermo Fisher Scientific, Inc. | 61,377 | 31,545,937 | ||||||
64,432,285 | ||||||||
Machinery — 2.2% | ||||||||
Cummins, Inc. | 113,543 | 27,762,399 | ||||||
Deere & Co. | 33,732 | 13,351,800 | ||||||
Parker-Hannifin Corp. | 38,416 | 11,164,458 | ||||||
Xylem, Inc. | 148,709 | 15,232,263 | ||||||
67,510,920 | ||||||||
Multiline Retail — 0.4% | ||||||||
Target Corp. | 78,308 | 12,862,089 | ||||||
Oil, Gas and Consumable Fuels — 2.8% | ||||||||
ConocoPhillips | 656,298 | 82,752,615 | ||||||
Personal Products — 0.2% | ||||||||
Estee Lauder Cos., Inc., Class A | 33,104 | 6,637,021 | ||||||
Pharmaceuticals — 4.4% | ||||||||
Bristol-Myers Squibb Co. | 604,200 | 46,807,374 | ||||||
Eli Lilly & Co. | 35,876 | 12,990,341 | ||||||
Merck & Co., Inc. | 302,863 | 30,649,736 | ||||||
Novo Nordisk A/S, B Shares | 178,714 | 19,431,796 | ||||||
Zoetis, Inc. | 158,821 | 23,947,030 | ||||||
133,826,277 | ||||||||
Road and Rail — 1.3% | ||||||||
Norfolk Southern Corp. | 78,123 | 17,817,512 | ||||||
Uber Technologies, Inc.(1) | 203,056 | 5,395,198 | ||||||
Union Pacific Corp. | 72,956 | 14,382,546 | ||||||
37,595,256 | ||||||||
Semiconductors and Semiconductor Equipment — 4.5% | ||||||||
Advanced Micro Devices, Inc.(1) | 257,973 | 15,493,858 | ||||||
Analog Devices, Inc. | 215,395 | 30,719,635 | ||||||
Applied Materials, Inc. | 306,568 | 27,066,889 | ||||||
ASML Holding NV | 35,966 | 16,871,168 | ||||||
GLOBALFOUNDRIES, Inc.(1) | 128,744 | 7,299,785 | ||||||
NVIDIA Corp. | 286,498 | 38,668,635 | ||||||
136,119,970 | ||||||||
Software — 8.9% | ||||||||
Adobe, Inc.(1) | 22,102 | 7,039,487 | ||||||
Cadence Design Systems, Inc.(1) | 83,300 | 12,610,787 | ||||||
Microsoft Corp. | 931,706 | 216,276,914 |
12
Shares | Value | |||||||
Salesforce, Inc.(1) | 120,395 | $ | 19,575,023 | |||||
ServiceNow, Inc.(1) | 18,322 | 7,708,798 | ||||||
Workday, Inc., Class A(1) | 37,205 | 5,797,283 | ||||||
269,008,292 | ||||||||
Specialty Retail — 3.1% | ||||||||
Home Depot, Inc. | 178,955 | 52,993,944 | ||||||
TJX Cos., Inc. | 419,540 | 30,248,834 | ||||||
Tractor Supply Co. | 51,546 | 11,328,265 | ||||||
94,571,043 | ||||||||
Technology Hardware, Storage and Peripherals — 4.9% | ||||||||
Apple, Inc. | 967,833 | 148,407,512 | ||||||
Textiles, Apparel and Luxury Goods — 0.9% | ||||||||
Deckers Outdoor Corp.(1) | 36,495 | 12,770,695 | ||||||
NIKE, Inc., Class B | 166,741 | 15,453,556 | ||||||
28,224,251 | ||||||||
TOTAL COMMON STOCKS (Cost $2,293,132,926) | 2,997,649,496 | |||||||
SHORT-TERM INVESTMENTS — 0.7% | ||||||||
Money Market Funds† | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 36,749 | 36,749 | ||||||
Repurchase Agreements — 0.7% | ||||||||
BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.125% - 3.125%, 8/15/23 - 8/15/42, valued at $4,149,891), in a joint trading account at 2.95%, dated 10/31/22, due 11/1/22 (Delivery value $4,069,725) | 4,069,392 | |||||||
Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 4.75%, 2/15/41, valued at $17,793,947), at 3.00%, dated 10/31/22, due 11/1/22 (Delivery value $17,446,454) | 17,445,000 | |||||||
21,514,392 | ||||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $21,551,141) | 21,551,141 | |||||||
TOTAL INVESTMENT SECURITIES — 99.9% (Cost $2,314,684,067) | 3,019,200,637 | |||||||
OTHER ASSETS AND LIABILITIES — 0.1% | 1,890,200 | |||||||
TOTAL NET ASSETS — 100.0% | $ | 3,021,090,837 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
EUR | 469,266 | USD | 462,138 | JPMorgan Chase Bank N.A. | 12/30/22 | $ | 3,942 | |||||||||||||
EUR | 660,336 | USD | 643,842 | JPMorgan Chase Bank N.A. | 12/30/22 | 12,009 | ||||||||||||||
EUR | 446,338 | USD | 438,571 | JPMorgan Chase Bank N.A. | 12/30/22 | 4,736 | ||||||||||||||
EUR | 542,637 | USD | 528,267 | JPMorgan Chase Bank N.A. | 12/30/22 | 10,685 | ||||||||||||||
EUR | 533,466 | USD | 527,704 | JPMorgan Chase Bank N.A. | 12/30/22 | 2,138 | ||||||||||||||
EUR | 386,724 | USD | 385,866 | JPMorgan Chase Bank N.A. | 12/30/22 | (1,768) | ||||||||||||||
USD | 13,433,580 | EUR | 13,672,924 | JPMorgan Chase Bank N.A. | 12/30/22 | (146,485) | ||||||||||||||
USD | 1,120,587 | EUR | 1,129,602 | JPMorgan Chase Bank N.A. | 12/30/22 | (1,344) | ||||||||||||||
USD | 1,176,349 | EUR | 1,193,801 | JPMorgan Chase Bank N.A. | 12/30/22 | (9,345) | ||||||||||||||
USD | 477,665 | EUR | 483,023 | JPMorgan Chase Bank N.A. | 12/30/22 | (2,078) | ||||||||||||||
USD | 784,237 | EUR | 784,149 | JPMorgan Chase Bank N.A. | 12/30/22 | 5,414 | ||||||||||||||
USD | 558,345 | EUR | 551,808 | JPMorgan Chase Bank N.A. | 12/30/22 | 10,284 | ||||||||||||||
$ | (111,812) |
13
FUTURES CONTRACTS PURCHASED | ||||||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)^ | ||||||||||
S&P 500 E-Mini | 79 | December 2022 | $ | 15,337,850 | $ | (975,389) |
^Amount represents value and unrealized appreciation (depreciation).
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
EUR | - | Euro | ||||||
USD | - | United States Dollar |
†Category is less than 0.05% of total net assets.
(1)Non-income producing.
See Notes to Financial Statements.
14
Statement of Assets and Liabilities |
OCTOBER 31, 2022 | |||||
Assets | |||||
Investment securities, at value (cost of $2,314,684,067) | $ | 3,019,200,637 | |||
Deposits with broker for futures contracts | 790,000 | ||||
Receivable for capital shares sold | 628,440 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 49,208 | ||||
Dividends and interest receivable | 2,852,241 | ||||
3,023,520,526 | |||||
Liabilities | |||||
Payable for capital shares redeemed | 1,416,488 | ||||
Payable for variation margin on futures contracts | 111,588 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 161,020 | ||||
Accrued management fees | 698,282 | ||||
Distribution and service fees payable | 31,780 | ||||
Accrued other expenses | 10,531 | ||||
2,429,689 | |||||
Net Assets | $ | 3,021,090,837 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 2,298,104,939 | |||
Distributable earnings | 722,985,898 | ||||
$ | 3,021,090,837 |
Net Assets | Shares Outstanding | Net Asset Value Per Share* | |||||||||
Investor Class, $0.01 Par Value | $624,265,669 | 16,085,067 | $38.81 | ||||||||
I Class, $0.01 Par Value | $401,398,186 | 10,305,689 | $38.95 | ||||||||
Y Class, $0.01 Par Value | $18,949,427 | 485,588 | $39.02 | ||||||||
A Class, $0.01 Par Value | $83,808,190 | 2,172,894 | $38.57 | ||||||||
C Class, $0.01 Par Value | $10,635,885 | 288,416 | $36.88 | ||||||||
R Class, $0.01 Par Value | $15,124,141 | 396,250 | $38.17 | ||||||||
R5 Class, $0.01 Par Value | $6,067,632 | 155,688 | $38.97 | ||||||||
R6 Class, $0.01 Par Value | $58,803,611 | 1,505,348 | $39.06 | ||||||||
G Class, $0.01 Par Value | $1,802,038,096 | 45,959,880 | $39.21 |
*Maximum offering price per share was equal to the net asset value per share for all share classes, except Class A, for which the maximum offering price per share was $40.92 (net asset value divided by 0.9425). A contingent deferred sales charge may be imposed on redemptions of Class A and Class C.
See Notes to Financial Statements.
15
Statement of Operations |
YEAR ENDED OCTOBER 31, 2022 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $93,707) | $ | 47,415,822 | |||
Interest | 293,585 | ||||
Securities lending, net | 8,183 | ||||
47,717,590 | |||||
Expenses: | |||||
Management fees | 18,471,628 | ||||
Distribution and service fees: | |||||
A Class | 228,737 | ||||
C Class | 124,262 | ||||
R Class | 81,743 | ||||
Directors' fees and expenses | 89,943 | ||||
Other expenses | 29,731 | ||||
19,026,044 | |||||
Fees waived - G Class | (8,801,650) | ||||
10,224,394 | |||||
Net investment income (loss) | 37,493,196 | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 50,480,582 | ||||
Forward foreign currency exchange contract transactions | 4,598,038 | ||||
Futures contract transactions | (516,150) | ||||
Foreign currency translation transactions | 1,117 | ||||
54,563,587 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | (714,229,109) | ||||
Forward foreign currency exchange contracts | (618,289) | ||||
Futures contracts | (4,678,355) | ||||
Translation of assets and liabilities in foreign currencies | (13,772) | ||||
(719,539,525) | |||||
Net realized and unrealized gain (loss) | (664,975,938) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (627,482,742) |
See Notes to Financial Statements.
16
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2022 AND OCTOBER 31, 2021 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2022 | October 31, 2021 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | 37,493,196 | $ | 33,074,174 | ||||
Net realized gain (loss) | 54,563,587 | 121,812,224 | ||||||
Change in net unrealized appreciation (depreciation) | (719,539,525) | 1,051,723,231 | ||||||
Net increase (decrease) in net assets resulting from operations | (627,482,742) | 1,206,609,629 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (18,997,998) | (2,859,800) | ||||||
I Class | (12,504,157) | (1,771,656) | ||||||
Y Class | (523,036) | (77,746) | ||||||
A Class | (2,155,985) | (103,188) | ||||||
C Class | (301,327) | — | ||||||
R Class | (345,587) | — | ||||||
R5 Class | (152,501) | (21,739) | ||||||
R6 Class | (1,671,016) | (59,111) | ||||||
G Class | (71,512,712) | (23,737,820) | ||||||
Decrease in net assets from distributions | (108,164,319) | (28,631,060) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (109,858,853) | (43,906,130) | ||||||
Net increase (decrease) in net assets | (845,505,914) | 1,134,072,439 | ||||||
Net Assets | ||||||||
Beginning of period | 3,866,596,751 | 2,732,524,312 | ||||||
End of period | $ | 3,021,090,837 | $ | 3,866,596,751 |
See Notes to Financial Statements.
17
Notes to Financial Statements |
OCTOBER 31, 2022
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 value of investments of the fund is determined by American Century Investment Management, Inc. (ACIM) (the investment advisor), as the valuation designee, pursuant to its valuation policies and procedures. The Board of Directors oversees the valuation designee and reviews its valuation policies and procedures at least annually.
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.
If the valuation designee determines that the market price for a portfolio security is not readily available or is believed by the valuation designee to be unreliable, such security is valued at fair value as determined in good faith by the valuation designee, in accordance with its policies and procedures. Circumstances that may cause the fund to determine that market quotations are not available or reliable include, but are not limited to: when there is a significant event subsequent to the market quotation; trading in a security has been halted during the trading day; or trading in a security is insufficient or did not take place due to a closure or holiday.
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The valuation designee 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; regulatory news, 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 valuation designee also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that it deems appropriate. The valuation designee 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 ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover certain types of investment securities and other financial instruments. ACIM monitors, on a daily basis, the securities segregated to ensure the fund designates a sufficient amount of liquid assets, marked-to-market daily. The fund may also receive assets or be required to pledge assets at the custodian bank or with a broker for collateral requirements.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
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Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income and net realized gains, if any, are generally declared and paid annually.
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, 42% of the shares of the fund. Related parties do not invest in the fund for the purpose of exercising management or control.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that ACIM will pay all expenses of managing and operating the fund, except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), extraordinary expenses, and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund's assets, which do not vary by class. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund's assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts), as well as exchange-traded funds managed by the investment advisor, 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.
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The management fee schedule range and the effective annual management fee for each class for the period ended October 31, 2022 are as follows:
Management Fee Schedule Range* | Effective Annual Management Fee | |||||||
Investor Class | 0.740% to 0.790% | 0.79% | ||||||
I Class | 0.540% to 0.590% | 0.59% | ||||||
Y Class | 0.390% to 0.440% | 0.44% | ||||||
A Class | 0.740% to 0.790% | 0.79% | ||||||
C Class | 0.740% to 0.790% | 0.79% | ||||||
R Class | 0.740% to 0.790% | 0.79% | ||||||
R5 Class | 0.540% to 0.590% | 0.59% | ||||||
R6 Class | 0.390% to 0.440% | 0.44% | ||||||
G Class | 0.390% to 0.440% | 0.00%(1) |
*Prior to August 1, 2022, the management fee schedule range was 0.750% to 0.790% for Investor Class, A Class, C Class and R Class, 0.550% to 0.590% for I Class and R5 Class and 0.400% to 0.440% for Y Class, R6 Class and G Class.
(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, 2022 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, 2022 were $487,808,305 and $569,855,020, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2022 | Year ended October 31, 2021 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 230,000,000 | 230,000,000 | ||||||||||||
Sold | 2,153,769 | $ | 94,682,130 | 2,943,466 | $ | 119,867,395 | ||||||||
Issued in reinvestment of distributions | 392,775 | 18,727,551 | 74,177 | 2,795,217 | ||||||||||
Redeemed | (3,844,149) | (166,180,504) | (3,342,394) | (138,556,743) | ||||||||||
(1,297,605) | (52,770,823) | (324,751) | (15,894,131) | |||||||||||
I Class/Shares Authorized | 60,000,000 | 50,000,000 | ||||||||||||
Sold | 4,104,054 | 178,948,732 | 4,571,811 | 189,617,073 | ||||||||||
Issued in reinvestment of distributions | 246,421 | 11,771,507 | 43,915 | 1,657,803 | ||||||||||
Redeemed | (3,786,589) | (156,033,845) | (2,155,752) | (91,287,995) | ||||||||||
563,886 | 34,686,394 | 2,459,974 | 99,986,881 | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 158,367 | 6,693,832 | 202,749 | 8,486,726 | ||||||||||
Issued in reinvestment of distributions | 10,875 | 519,740 | 2,039 | 77,027 | ||||||||||
Redeemed | (75,607) | (3,218,336) | (52,839) | (2,276,009) | ||||||||||
93,635 | 3,995,236 | 151,949 | 6,287,744 | |||||||||||
A Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||||||
Sold | 437,345 | 19,088,308 | 656,928 | 26,696,842 | ||||||||||
Issued in reinvestment of distributions | 39,834 | 1,891,744 | 2,368 | 88,920 | ||||||||||
Redeemed | (335,476) | (13,891,180) | (262,551) | (10,817,846) | ||||||||||
141,703 | 7,088,872 | 396,745 | 15,967,916 | |||||||||||
C Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||||||
Sold | 45,289 | 1,874,998 | 111,500 | 4,558,582 | ||||||||||
Issued in reinvestment of distributions | 5,567 | 254,494 | — | — | ||||||||||
Redeemed | (76,167) | (3,059,799) | (112,229) | (4,368,283) | ||||||||||
(25,311) | (930,307) | (729) | 190,299 | |||||||||||
R Class/Shares Authorized | 25,000,000 | 30,000,000 | ||||||||||||
Sold | 152,944 | 6,572,356 | 208,379 | 8,474,299 | ||||||||||
Issued in reinvestment of distributions | 7,335 | 345,587 | — | — | ||||||||||
Redeemed | (145,270) | (6,282,968) | (99,077) | (3,852,366) | ||||||||||
15,009 | 634,975 | 109,302 | 4,621,933 | |||||||||||
R5 Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||||||
Sold | 71,614 | 3,061,514 | 48,027 | 1,988,519 | ||||||||||
Issued in reinvestment of distributions | 2,292 | 109,528 | 344 | 12,998 | ||||||||||
Redeemed | (38,805) | (1,582,623) | (22,394) | (924,057) | ||||||||||
35,101 | 1,588,419 | 25,977 | 1,077,460 | |||||||||||
R6 Class/Shares Authorized | 30,000,000 | 50,000,000 | ||||||||||||
Sold | 1,359,287 | 58,850,417 | 1,386,839 | 58,488,762 | ||||||||||
Issued in reinvestment of distributions | 34,929 | 1,671,016 | 1,563 | 59,111 | ||||||||||
Redeemed | (854,032) | (34,400,294) | (575,395) | (23,155,920) | ||||||||||
540,184 | 26,121,139 | 813,007 | 35,391,953 | |||||||||||
G Class/Shares Authorized | 525,000,000 | 525,000,000 | ||||||||||||
Sold | 3,532,127 | 143,877,234 | 3,978,313 | 167,298,284 | ||||||||||
Issued in reinvestment of distributions | 1,495,144 | 71,512,712 | 627,985 | 23,737,820 | ||||||||||
Redeemed | (7,693,538) | (345,662,704) | (9,001,254) | (382,572,289) | ||||||||||
(2,666,267) | (130,272,758) | (4,394,956) | (191,536,185) | |||||||||||
Net increase (decrease) | (2,599,665) | $ | (109,858,853) | (763,482) | $ | (43,906,130) |
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6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
•Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments.
•Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars.
•Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions).
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | |||||||||
Assets | |||||||||||
Investment Securities | |||||||||||
Common Stocks | $ | 2,961,346,532 | $ | 36,302,964 | — | ||||||
Short-Term Investments | 36,749 | 21,514,392 | — | ||||||||
$ | 2,961,383,281 | $ | 57,817,356 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 49,208 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Futures Contracts | $ | 975,389 | — | — | |||||||
Forward Foreign Currency Exchange Contracts | — | $ | 161,020 | — | |||||||
$ | 975,389 | $ | 161,020 | — |
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 $34,724,864 futures contracts purchased.
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Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon 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 $34,917,368.
Value of Derivative Instruments as of October 31, 2022
Asset Derivatives | Liability Derivatives | |||||||||||||
Type of Risk Exposure | Location on Statement of Assets and Liabilities | Value | Location on Statement of Assets and Liabilities | Value | ||||||||||
Equity Price Risk | Receivable for variation margin on futures contracts* | — | Payable for variation margin on futures contracts* | $ | 111,588 | |||||||||
Foreign Currency Risk | Unrealized appreciation on forward foreign currency exchange contracts | $ | 49,208 | Unrealized depreciation on forward foreign currency exchange contracts | 161,020 | |||||||||
$ | 49,208 | $ | 272,608 |
*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, 2022
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 | $ | (516,150) | Change in net unrealized appreciation (depreciation) on futures contracts | $ | (4,678,355) | ||||||||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | 4,598,038 | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | (618,289) | ||||||||||
$ | 4,081,888 | $ | (5,296,644) |
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, war, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse long-term effects on world economies and markets generally.
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9. Federal Tax Information
The tax character of distributions paid during the years ended October 31, 2022 and October 31, 2021 were as follows:
2022 | 2021 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $ | 33,385,674 | $ | 28,631,060 | ||||
Long-term capital gains | $ | 74,778,645 | — |
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 | $ | 2,335,346,497 | |||
Gross tax appreciation of investments | $ | 773,917,952 | |||
Gross tax depreciation of investments | (90,063,812) | ||||
Net tax appreciation (depreciation) of investments | 683,854,140 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (13,408) | ||||
Net tax appreciation (depreciation) | $ | 683,840,732 | |||
Undistributed ordinary income | $ | 36,029,546 | |||
Accumulated long-term gains | $ | 3,115,620 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||||||||||||||||||||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||||||||||||||||||||||||||||||||
Investor Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $48.06 | 0.26 | (8.36) | (8.10) | (0.19) | (0.96) | (1.15) | $38.81 | (17.29)% | 0.79% | 0.79% | 0.62% | 0.62% | 15% | $624,266 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $48.23 | 0.35 | (8.38) | (8.03) | (0.29) | (0.96) | (1.25) | $38.95 | (17.13)% | 0.59% | 0.59% | 0.82% | 0.82% | 15% | $401,398 | ||||||||||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $48.32 | 0.42 | (8.40) | (7.98) | (0.36) | (0.96) | (1.32) | $39.02 | (17.01)% | 0.44% | 0.44% | 0.97% | 0.97% | 15% | $18,949 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $47.77 | 0.16 | (8.33) | (8.17) | (0.07) | (0.96) | (1.03) | $38.57 | (17.50)% | 1.04% | 1.04% | 0.37% | 0.37% | 15% | $83,808 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $45.99 | (0.16) | (7.99) | (8.15) | — | (0.96) | (0.96) | $36.88 | (18.12)% | 1.79% | 1.79% | (0.38)% | (0.38)% | 15% | $10,636 | ||||||||||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $47.33 | 0.05 | (8.25) | (8.20) | — | (0.96) | (0.96) | $38.17 | (17.71)% | 1.29% | 1.29% | 0.12% | 0.12% | 15% | $15,124 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $48.26 | 0.35 | (8.39) | (8.04) | (0.29) | (0.96) | (1.25) | $38.97 | (17.14)% | 0.59% | 0.59% | 0.82% | 0.82% | 15% | $6,068 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $48.37 | 0.42 | (8.41) | (7.99) | (0.36) | (0.96) | (1.32) | $39.06 | (17.02)% | 0.44% | 0.44% | 0.97% | 0.97% | 15% | $58,804 | ||||||||||||||||||||||||||||||||
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(3) | $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%(5) | $3,979 |
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $48.54 | 0.60 | (8.40) | (7.80) | (0.57) | (0.96) | (1.53) | $39.21 | (16.63)% | 0.00%(6) | 0.44% | 1.41% | 0.97% | 15% | $1,802,038 | ||||||||||||||||||||||||||||||||
2021 | $33.97 | 0.53 | 14.49 | 15.02 | (0.45) | — | (0.45) | $48.54 | 44.61% | 0.00%(6) | 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%(6) | 0.48% | 1.67% | 1.19% | 36% | $1,800,919 | ||||||||||||||||||||||||||||||||
2019(3) | $28.05 | 0.37 | 2.22 | 2.59 | — | — | — | $30.64 | 9.23% | 0.00%(4)(6) | 0.49%(4) | 2.04%(4) | 1.55%(4) | 33%(5) | $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 1, 2019 (commencement of sale) through October 31, 2019.
(4)Annualized.
(5)Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2019.
(6)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, 2022, 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, 2022, 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, 2022, 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 16, 2022
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 on 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 | 64 | None | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 64 | Alleghany Corporation (2021 to 2022) | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 64 | 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) | 64 | 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) | 64 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director and Board Chair | Since 2011 (Board Chair since 2022) | Retired | 64 | None | ||||||||||||
Stephen E. Yates (1948) | Director | Since 2012 | Retired | 108 | 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 | 142 | 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 29, 2022, 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 of 1940 (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, 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 data and information compiled by the Advisor and certain independent data providers concerning the Fund. 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 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 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 an appropriate benchmark(s) and peer group of other mutual funds with similar investment objectives and strategies;
•the cost of owning the Fund compared to the cost of owning similarly-managed funds;
•the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans, generally, and with respect to the ongoing impact of the COVID-19 pandemic response, heightened areas of interest in the mutual fund industry and recent geopolitical issues;
•the Advisor’s business continuity plans, vendor management practices, 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 four meetings to consider the renewal. The independent Directors also met in private session multiple 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, without limitation, the following:
•constructing and designing the Fund
•portfolio research and security selection
•initial capitalization/funding
•securities trading
•Fund administration
•custody of Fund assets
•daily valuation of the Fund’s portfolio
•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 principal investment 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 Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any actions being taken to improve performance, and may conduct special reviews until performance improves. 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 fee structure, and through reinvestment in its business, infrastructure, investment capabilities and initiatives to provide shareholders enhanced and expanded 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 securities transaction expenses, 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 Investment Company Act Rule 12b-1. 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 and the Advisor agreed to a permanent change to the Fund's breakpoint fee schedule adding 0.025% reductions on net assets over $5 billion and $10 billion, respectively, beginning August 1, 2022. 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.
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 terms of the management agreement are fair and reasonable and that the management fee charged to the Fund is reasonable in light of the services provided and that the management agreement between the Fund and the Advisor should be renewed for an additional one-year period.
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Proxy Voting Results |
A special meeting of shareholders was held on October 13, 2022, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect five directors to the Board of Directors of American Century Mutual Funds, Inc.:
Affirmative | Withhold | ||||||||||
Brian Bulatao | $ | 24,005,100,401 | $ | 1,121,808,198 | |||||||
Chris H. Cheesman | $ | 24,198,214,355 | $ | 928,694,244 | |||||||
Rajesh K. Gupta | $ | 24,143,807,378 | $ | 983,101,221 | |||||||
Lynn M. Jenkins | $ | 24,034,830,602 | $ | 1,092,077,997 | |||||||
Gary C. Meltzer | $ | 24,134,760,750 | $ | 992,147,849 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Thomas W. Bunn, Barry Fink, Jan M. Lewis, and Stephen E. Yates.
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 up to the maximum amount allowable as qualified dividend income for the fiscal year ended October 31, 2022.
For corporate taxpayers, the fund hereby designates $33,385,674, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2022 as qualified for the corporate dividends received deduction.
The fund hereby designates $74,778,645, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2022.
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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. | ||||||||
©2022 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90971 2212 |
![image25.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image25.jpg)
Annual Report | |||||
October 31, 2022 | |||||
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 | |||||
Proxy Voting Results | |||||
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 |
![image22.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image22.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ending October 31, 2022. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment insights, please visit americancentury.com.
High Inflation, Rising Rates, Volatility Challenged Investors
The broad economic and investment backdrops grew knottier as the fiscal year progressed. Challenges began to surface early in the period, as the Federal Reserve (Fed) and other central banks finally admitted inflation was entrenched rather than transitory. Investors grew more cautious amid growing expectations for less accommodative monetary policy in the new year.
By early 2022, inflation soared to levels last seen in the early 1980s. Massive fiscal and monetary support unleashed during the pandemic was partly to blame. In addition, escalating energy prices, supply chain breakdowns, labor market shortages and Russia’s invasion of Ukraine further aggravated the inflation backdrop.
The Fed responded to surging inflation with a rate hike in March, three months after the Bank of England (BofE) launched its tightening campaign. Through October, the Fed lifted rates a total of 3 percentage points, while the BofE hiked 2.9 percentage points. The European Central Bank (ECB) waited until July to start tightening. Facing record-high inflation, the ECB raised rates 2 percentage points through October.
In addition to fostering recession risk, the combination of elevated inflation and hawkish central banks helped push bond yields sharply higher and stock prices significantly lower. Amid persistent market unrest, most stock, bond and real estate indices ended the 12-month period with steep losses. While U.S. stock returns were broadly negative, growth stocks significantly underperformed their value stock peers.
Staying Disciplined in Uncertain Times
We expect market volatility to linger as investors navigate a complex environment of high inflation, rising interest rates and economic uncertainty. In addition, Russia’s invasion of Ukraine complicates an increasingly tense geopolitical backdrop and threatens global energy markets. We will continue to monitor this evolving situation and what it broadly means for investors across asset classes.
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,
![image27.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/image27.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2022 | |||||||||||||||||||||||
Average Annual Returns | |||||||||||||||||||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | ||||||||||||||||||
Investor Class | TWCUX | -28.50% | 12.98% | 14.87% | — | 11/2/81 | |||||||||||||||||
Russell 1000 Growth Index | — | -24.60% | 12.58% | 14.68% | — | — | |||||||||||||||||
S&P 500 Index | — | -14.61% | 10.44% | 12.78% | — | — | |||||||||||||||||
I Class | TWUIX | -28.36% | 13.21% | 15.09% | — | 11/14/96 | |||||||||||||||||
Y Class | AULYX | -28.25% | 13.37% | — | 15.14% | 4/10/17 | |||||||||||||||||
A Class | TWUAX | 10/2/96 | |||||||||||||||||||||
No sales charge | -28.69% | 12.69% | 14.58% | — | |||||||||||||||||||
With sales charge | -32.79% | 11.36% | 13.89% | — | |||||||||||||||||||
C Class | TWCCX | -29.22% | 11.84% | 13.71% | — | 10/29/01 | |||||||||||||||||
R Class | AULRX | -28.86% | 12.41% | 14.29% | — | 8/29/03 | |||||||||||||||||
R5 Class | AULGX | -28.35% | 13.21% | — | 14.97% | 4/10/17 | |||||||||||||||||
R6 Class | AULDX | -28.26% | 13.37% | — | 14.22% | 7/26/13 | |||||||||||||||||
G Class | AULNX | -27.84% | — | — | 13.27% | 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.
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, 2012 | ||
Performance for other share classes will vary due to differences in fee structure. |
![chart-8044d21f056540b0955.jpg](https://capedge.com/proxy/N-CSR/0000100334-22-000089/chart-8044d21f056540b0955.jpg)
Value on October 31, 2022 | |||||
Investor Class — $39,984 | |||||
Russell 1000 Growth Index — $39,370 | |||||
S&P 500 Index — $33,308 | |||||
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 | ||||||||||||||||||
0.95% | 0.75% | 0.60% | 1.20% | 1.95% | 1.45% | 0.75% | 0.60% | 0.60% |
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 -28.50%* for the 12 months ended October 31, 2022, trailing the -24.60% return of the fund’s benchmark, the Russell 1000 Growth Index.
U.S. stocks fell sharply over the past 12 months, with the heaviest losses coming from late 2021 through midyear 2022. The downturn began amid a combination of factors—the new omicron variant of COVID-19, rising inflation, the Federal Reserve signaling interest rate increases—that led to investors moving to more defensive positioning. The market action was marked by a rotation out of the highest-growth stocks and pandemic winners into either lower growth or more traditional value stocks. Market declines intensified after Russia invaded Ukraine, exacerbating already stretched supply chains and leading to soaring oil prices that helped drive inflation to four-decade highs. Within the Russell 1000 Growth Index, energy was by far the top-performing sector, benefiting from rising prices and increased demand amid limited supplies. Consumer staples and utilities posted modest gains, while all other sectors recorded double-digit losses.
Stock selection in the information technology sector detracted from performance relative to the benchmark. Positioning in the health care and energy sectors benefited relative performance.
Information Technology Hampered Performance
IT services holdings were key detractors. The stock price of Shopify, a Canada-based e-commerce platform, fell sharply after the company warned of slowing revenues. The stock initially suffered amid the transition away from pandemic-era high-growth stocks. More recently, worries that inflation and recession will hurt consumer spending weighed further on the stock. The small- and micro-merchant digital payments company Block, a darling during the pandemic, suffered during the growth sell-off as first rising interest rates and later recessionary fears weighed on the stock. Additionally, Block’s focus on the blockchain technology that enables cryptocurrencies hurt the stock as crypto prices fell. PayPal Holdings lagged after offering disappointing guidance for three consecutive quarters. We eliminated the digital payments company because we were concerned about management’s ability to communicate forward guidance and business prospects.
Elsewhere in information technology, DocuSign’s stock soared during the height of the pandemic but fell sharply as the work-from-home environment waned and investors shifted away from high-growth stocks. We continue to view the digital signature company as a key part of the ongoing enterprise digital transformation.
Two pharmaceuticals stocks weighed on performance. AbbVie’s stock price benefited from investors looking for relatively safer havens. Not owning AbbVie detracted from performance compared with the benchmark. Eli Lilly & Co. benefited from positive clinical trial data and Food and Drug Administration approval for a key new diabetes drug. Eli Lilly’s new diabetes treatment also showed tremendous efficacy in addressing obesity and is being validated in a separate clinical trial as a stand-alone obesity treatment. In addition, the stock rose following positive clinical trial data for a competitor’s Alzheimer’s drug, which is supportive of Eli Lilly’s own approach. We initiated a position in the stock during the period but were underweight for the 12 months overall, which hurt relative performance. We think Eli Lilly is an innovative company with a broad pipeline of potential blockbuster drugs, reflecting the company’s strong history of research and development and commercial execution. Recent launches position the company to have among the strongest growth profiles of large pharmaceutical companies.
*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
Health Care Holdings Benefited Performance
A pair of health care stocks were top contributors. UnitedHealth Group, the world’s largest health insurer, reported better-than-expected earnings, largely driven by its Optum division, which is focused on delivering prevention-based care and compensating physicians based on the health of the patient rather than for each service or treatment provided. Regeneron Pharmaceuticals reported better-than-expected revenue and earnings, and it announced strong trial results for Eylea, its drug for wet age-related macular degeneration. In addition, Regeneron recently released positive clinical trial data for particularly hard-to-treat prostate cancer.
Other significant contributors included EOG Resources, an innovative low-cost oil and gas exploration and production firm benefiting from rising oil prices. EOG reported strong free cash flows and announced that it would be returning profits to shareholders through its already robust dividend payouts.
Several information technology holdings were strong contributors, including Apple. The consumer electronics giant continued to see solid demand for its products and services, driving revenue and earnings above expectations. Apple also was helped by improving market sentiment for larger-capitalization, stable growth stocks. The digital payments companies Visa and Mastercard were other sources of strength. Both companies have established strong competitive moats and are positioned for long runways of growth powered by the secular shift to digital payments around the globe. Visa and Mastercard both reported solid financial results bolstered by a recovery in retail spending and cross-border transactions.
Outlook
While this is a difficult period for growth equities, we retain high conviction in our investment process and portfolio holdings. We acknowledge the challenging environment and are closely monitoring the fundamentals of our investments, but our long-term focus also leads us to look through the short-term noise. Indeed, we believe many enduring secular growth trends will persist. These include a shift to electric vehicles, aging global demographics intersecting with advancements in health care, companies shifting more of their expenditures to technology to drive productivity gains and increased digitization of transactions, among many others. As such, we think this period can create attractive opportunities for long-term investors willing to be patient with companies that we believe are poised to grow over time.
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, 2022, health care, communication services and consumer discretionary were the portfolio’s largest overweight allocations relative to the benchmark. Industrials, real estate and financials were the largest underweight sectors.
6
Fund Characteristics |
OCTOBER 31, 2022 | |||||
Types of Investments in Portfolio | % of net assets | ||||
Common Stocks | 98.6% | ||||
Short-Term Investments | 1.5% | ||||
Other Assets and Liabilities | (0.1)% | ||||
Top Five Industries | % of net assets | ||||
Technology Hardware, Storage and Peripherals | 15.9% | ||||
IT Services | 11.2% | ||||
Software | 8.5% | ||||
Interactive Media and Services | 7.6% | ||||
Health Care Equipment and Supplies | 6.1% |
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, 2022 to October 31, 2022.
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 mutual 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 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 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 5/1/22 | Ending Account Value 10/31/22 | Expenses Paid During Period(1) 5/1/22 - 10/31/22 | Annualized Expense Ratio(1) | |||||||||||
Actual | ||||||||||||||
Investor Class | $1,000 | $906.60 | $4.52 | 0.94% | ||||||||||
I Class | $1,000 | $907.50 | $3.56 | 0.74% | ||||||||||
Y Class | $1,000 | $908.20 | $2.84 | 0.59% | ||||||||||
A Class | $1,000 | $905.60 | $5.72 | 1.19% | ||||||||||
C Class | $1,000 | $902.00 | $9.30 | 1.94% | ||||||||||
R Class | $1,000 | $904.50 | $6.91 | 1.44% | ||||||||||
R5 Class | $1,000 | $907.60 | $3.56 | 0.74% | ||||||||||
R6 Class | $1,000 | $908.10 | $2.84 | 0.59% | ||||||||||
G Class | $1,000 | $910.80 | $0.05 | 0.01% | ||||||||||
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 | $1,025.16 | $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.
9
Schedule of Investments |
OCTOBER 31, 2022
Shares/ Principal Amount | Value | |||||||
COMMON STOCKS — 98.6% | ||||||||
Automobiles — 4.5% | ||||||||
Tesla, Inc.(1) | 3,127,662 | $ | 711,668,212 | |||||
Banks — 0.3% | ||||||||
JPMorgan Chase & Co. | 433,982 | 54,629,654 | ||||||
Beverages — 2.0% | ||||||||
Constellation Brands, Inc., Class A | 1,263,000 | 312,062,040 | ||||||
Biotechnology — 3.7% | ||||||||
Genmab A/S(1) | 351,000 | 135,207,849 | ||||||
Regeneron Pharmaceuticals, Inc.(1) | 597,598 | 447,451,502 | ||||||
582,659,351 | ||||||||
Building Products — 0.9% | ||||||||
Advanced Drainage Systems, Inc. | 1,279,000 | 148,210,520 | ||||||
Capital Markets — 1.3% | ||||||||
MSCI, Inc. | 428,994 | 201,138,127 | ||||||
Chemicals — 0.4% | ||||||||
Ecolab, Inc. | 390,000 | 61,257,300 | ||||||
Commercial Services and Supplies — 0.5% | ||||||||
Copart, Inc.(1) | 680,404 | 78,260,068 | ||||||
Distributors — 0.6% | ||||||||
Pool Corp. | 315,000 | 95,832,450 | ||||||
Electrical Equipment — 0.9% | ||||||||
Acuity Brands, Inc. | 757,223 | 139,003,426 | ||||||
Electronic Equipment, Instruments and Components — 0.5% | ||||||||
Cognex Corp. | 655,462 | 30,302,008 | ||||||
Keyence Corp. | 127,600 | 48,113,500 | ||||||
78,415,508 | ||||||||
Entertainment — 1.4% | ||||||||
Netflix, Inc.(1) | 396,000 | 115,584,480 | ||||||
Walt Disney Co.(1) | 956,755 | 101,932,678 | ||||||
217,517,158 | ||||||||
Food and Staples Retailing — 2.2% | ||||||||
Costco Wholesale Corp. | 676,413 | 339,221,120 | ||||||
Health Care Equipment and Supplies — 6.1% | ||||||||
ABIOMED, Inc.(1) | 281,340 | 70,920,187 | ||||||
DexCom, Inc.(1) | 1,460,000 | 176,338,800 | ||||||
Edwards Lifesciences Corp.(1) | 2,059,000 | 149,133,370 | ||||||
IDEXX Laboratories, Inc.(1) | 357,162 | 128,464,028 | ||||||
Insulet Corp.(1) | 242,000 | 62,632,020 | ||||||
Intuitive Surgical, Inc.(1) | 1,468,134 | 361,850,987 | ||||||
949,339,392 | ||||||||
Health Care Providers and Services — 4.7% | ||||||||
UnitedHealth Group, Inc. | 1,332,873 | 739,944,446 | ||||||
Hotels, Restaurants and Leisure — 3.1% | ||||||||
Chipotle Mexican Grill, Inc.(1) | 222,478 | 333,345,462 | ||||||
Wingstop, Inc.(2) | 977,706 | 154,858,853 | ||||||
488,204,315 |
10
Shares/ Principal Amount | Value | |||||||
Household Durables — 0.1% | ||||||||
Sonos, Inc.(1) | 979,000 | $ | 15,781,480 | |||||
Interactive Media and Services — 7.6% | ||||||||
Alphabet, Inc., Class A(1) | 5,765,580 | 544,904,966 | ||||||
Alphabet, Inc., Class C(1) | 6,325,160 | 598,739,645 | ||||||
Meta Platforms, Inc., Class A(1) | 474,886 | 44,240,380 | ||||||
1,187,884,991 | ||||||||
Internet and Direct Marketing Retail — 5.7% | ||||||||
Amazon.com, Inc.(1) | 8,705,451 | 891,786,400 | ||||||
IT Services — 11.2% | ||||||||
Adyen NV(1) | 121,715 | 173,760,186 | ||||||
Block, Inc.(1) | 1,155,000 | 69,380,850 | ||||||
Mastercard, Inc., Class A | 2,251,496 | 738,895,957 | ||||||
Okta, Inc.(1) | 294,000 | 16,499,280 | ||||||
Shopify, Inc., Class A(1) | 1,184,000 | 40,528,320 | ||||||
Visa, Inc., Class A | 3,426,958 | 709,928,619 | ||||||
1,748,993,212 | ||||||||
Life Sciences Tools and Services — 1.2% | ||||||||
Maravai LifeSciences Holdings, Inc., Class A(1) | 3,512,000 | 58,299,200 | ||||||
Waters Corp.(1) | 455,000 | 136,122,350 | ||||||
194,421,550 | ||||||||
Machinery — 2.2% | ||||||||
Donaldson Co., Inc. | 951,750 | 54,678,038 | ||||||
Nordson Corp. | 548,000 | 123,300,000 | ||||||
Westinghouse Air Brake Technologies Corp. | 1,216,147 | 113,442,192 | ||||||
Yaskawa Electric Corp. | 1,947,200 | 53,916,585 | ||||||
345,336,815 | ||||||||
Oil, Gas and Consumable Fuels — 1.9% | ||||||||
EOG Resources, Inc. | 2,124,016 | 289,970,664 | ||||||
Personal Products — 0.5% | ||||||||
Estee Lauder Cos., Inc., Class A | 406,000 | 81,398,940 | ||||||
Pharmaceuticals — 0.4% | ||||||||
Eli Lilly & Co. | 154,000 | 55,761,860 | ||||||
Road and Rail — 1.0% | ||||||||
J.B. Hunt Transport Services, Inc. | 952,765 | 162,989,509 | ||||||
Semiconductors and Semiconductor Equipment — 5.8% | ||||||||
Advanced Micro Devices, Inc.(1) | 2,438,000 | 146,426,280 | ||||||
Analog Devices, Inc. | 1,255,055 | 178,995,944 | ||||||
Applied Materials, Inc. | 2,156,000 | 190,353,240 | ||||||
ASML Holding NV | 222,478 | 104,361,448 | ||||||
NVIDIA Corp. | 2,100,000 | 283,437,000 | ||||||
903,573,912 | ||||||||
Software — 8.5% | ||||||||
DocuSign, Inc.(1) | 1,461,571 | 70,593,879 | ||||||
Microsoft Corp. | 4,090,401 | 949,504,784 | ||||||
Paycom Software, Inc.(1) | 425,003 | 147,051,038 | ||||||
Salesforce, Inc.(1) | 446,952 | 72,669,926 | ||||||
Zscaler, Inc.(1) | 542,000 | 83,522,200 | ||||||
1,323,341,827 | ||||||||
Technology Hardware, Storage and Peripherals — 15.9% | ||||||||
Apple, Inc. | 16,242,687 | 2,490,653,625 |
11
Shares/ Principal Amount | Value | |||||||
Textiles, Apparel and Luxury Goods — 3.5% | ||||||||
lululemon athletica, Inc.(1) | 1,009,631 | $ | 332,208,984 | |||||
NIKE, Inc., Class B | 2,296,611 | 212,849,908 | ||||||
545,058,892 | ||||||||
TOTAL COMMON STOCKS (Cost $5,552,343,734) | 15,434,316,764 | |||||||
SHORT-TERM INVESTMENTS — 1.5% | ||||||||
Discount Notes(3) — 0.4% | ||||||||
Federal Home Loan Bank Discount Notes, 2.76%, 11/1/22 | $ | 69,637,000 | 69,637,000 | |||||
Money Market Funds† | ||||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 285,540 | 285,540 | ||||||
State Street Navigator Securities Lending Government Money Market Portfolio(4) | 226,450 | 226,450 | ||||||
511,990 | ||||||||
Repurchase Agreements — 1.1% | ||||||||
BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 0.125% - 3.125%, 8/15/23 - 8/15/42, valued at $32,244,312), in a joint trading account at 2.95%, dated 10/31/22, due 11/1/22 (Delivery value $31,621,428) | 31,618,837 | |||||||
Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 1.625%, 11/15/50, valued at $138,291,643), at 3.00%, dated 10/31/22, due 11/1/22 (Delivery value $135,591,298) | 135,580,000 | |||||||
167,198,837 | ||||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $237,347,827) | 237,347,827 | |||||||
TOTAL INVESTMENT SECURITIES — 100.1% (Cost $5,789,691,561) | 15,671,664,591 | |||||||
OTHER ASSETS AND LIABILITIES — (0.1)% | (10,783,998) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 15,660,880,593 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
EUR | 6,898,806 | USD | 6,726,488 | JPMorgan Chase Bank N.A. | 12/30/22 | $ | 125,465 | |||||||||||||
EUR | 3,765,862 | USD | 3,700,329 | JPMorgan Chase Bank N.A. | 12/30/22 | 39,958 | ||||||||||||||
EUR | 3,306,997 | USD | 3,258,652 | JPMorgan Chase Bank N.A. | 12/30/22 | 25,886 | ||||||||||||||
USD | 99,058,916 | EUR | 100,823,837 | JPMorgan Chase Bank N.A. | 12/30/22 | (1,080,180) | ||||||||||||||
USD | 10,375,497 | EUR | 10,458,970 | JPMorgan Chase Bank N.A. | 12/30/22 | (12,441) | ||||||||||||||
USD | 7,520,509 | EUR | 7,595,016 | JPMorgan Chase Bank N.A. | 12/30/22 | (22,926) | ||||||||||||||
USD | 8,533,529 | EUR | 8,433,632 | JPMorgan Chase Bank N.A. | 12/30/22 | 157,173 | ||||||||||||||
USD | 35,885,897 | JPY | 5,145,176,400 | Bank of America N.A. | 12/30/22 | 1,019,870 | ||||||||||||||
$ | 252,805 |
12
NOTES TO SCHEDULE OF INVESTMENTS | ||||||||
EUR | - | Euro | ||||||
JPY | - | Japanese Yen | ||||||
USD | - | United States Dollar |
†Category is less than 0.05% of total net assets.
(1)Non-income producing.
(2)Security, or a portion thereof, is on loan. At the period end, the aggregate value of securities on loan was $221,746. 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 for non-interest bearing securities. For interest bearing securities, the stated coupon rate is shown.
(4)Investment of cash collateral from securities on loan. At the period end, the aggregate value of the collateral held by the fund was $226,450.
See Notes to Financial Statements.
13
Statement of Assets and Liabilities |
OCTOBER 31, 2022 | |||||
Assets | |||||
Investment securities, at value (cost of $5,789,465,111) — including $221,746 of securities on loan | $ | 15,671,438,141 | |||
Investment made with cash collateral received for securities on loan, at value (cost of $226,450) | 226,450 | ||||
Total investment securities, at value (cost of $5,789,691,561) | 15,671,664,591 | ||||
Receivable for capital shares sold | 4,594,380 | ||||
Unrealized appreciation on forward foreign currency exchange contracts | 1,368,352 | ||||
Dividends and interest receivable | 2,317,732 | ||||
Securities lending receivable | 778 | ||||
15,679,945,833 | |||||
Liabilities | |||||
Payable for collateral received for securities on loan | 226,450 | ||||
Payable for capital shares redeemed | 5,662,401 | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 1,115,547 | ||||
Accrued management fees | 11,584,253 | ||||
Distribution and service fees payable | 71,391 | ||||
Accrued other expenses | 405,198 | ||||
19,065,240 | |||||
Net Assets | $ | 15,660,880,593 | |||
Net Assets Consist of: | |||||
Capital (par value and paid-in surplus) | $ | 4,825,642,058 | |||
Distributable earnings | 10,835,238,535 | ||||
$ | 15,660,880,593 |
Net Assets | Shares Outstanding | Net Asset Value Per Share* | |||||||||
Investor Class, $0.01 Par Value | $13,781,357,540 | 220,514,321 | $62.50 | ||||||||
I Class, $0.01 Par Value | $727,643,472 | 11,069,200 | $65.74 | ||||||||
Y Class, $0.01 Par Value | $3,382,559 | 51,022 | $66.30 | ||||||||
A Class, $0.01 Par Value | $170,818,611 | 2,920,096 | $58.50 | ||||||||
C Class, $0.01 Par Value | $25,027,562 | 545,841 | $45.85 | ||||||||
R Class, $0.01 Par Value | $38,415,671 | 686,541 | $55.96 | ||||||||
R5 Class, $0.01 Par Value | $32,996,454 | 501,572 | $65.79 | ||||||||
R6 Class, $0.01 Par Value | $881,006,642 | 13,305,458 | $66.21 | ||||||||
G Class, $0.01 Par Value | $232,082 | 3,433 | $67.60 |
*Maximum offering price per share was equal to the net asset value per share for all share classes, except Class A, for which the maximum offering price per share was $62.07 (net asset value divided by 0.9425). A contingent deferred sales charge may be imposed on redemptions of Class A and Class C.
See Notes to Financial Statements.
14
Statement of Operations |
YEAR ENDED OCTOBER 31, 2022 | |||||
Investment Income (Loss) | |||||
Income: | |||||
Dividends (net of foreign taxes withheld of $237,489) | $ | 94,654,476 | |||
Interest | 1,928,045 | ||||
Securities lending, net | 36,310 | ||||
96,618,831 | |||||
Expenses: | |||||
Management fees | 168,550,723 | ||||
Distribution and service fees: | |||||
A Class | 506,818 | ||||
C Class | 289,308 | ||||
R Class | 186,007 | ||||
Directors' fees and expenses | 483,662 | ||||
Other expenses | 526,132 | ||||
170,542,650 | |||||
Fees waived(1) | (2,512,502) | ||||
168,030,148 | |||||
Net investment income (loss) | (71,411,317) | ||||
Realized and Unrealized Gain (Loss) | |||||
Net realized gain (loss) on: | |||||
Investment transactions | 1,045,485,061 | ||||
Forward foreign currency exchange contract transactions | 45,000,557 | ||||
Foreign currency translation transactions | (378,319) | ||||
1,090,107,299 | |||||
Change in net unrealized appreciation (depreciation) on: | |||||
Investments | (7,267,802,551) | ||||
Forward foreign currency exchange contracts | (5,958,016) | ||||
Translation of assets and liabilities in foreign currencies | (12,933) | ||||
(7,273,773,500) | |||||
Net realized and unrealized gain (loss) | (6,183,666,201) | ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (6,255,077,518) |
(1)Amount consists of $2,248,334, $109,533, $445, $27,538, $4,003, $5,426, $1,372, $115,658 and $193 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.
15
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2022 AND OCTOBER 31, 2021 | ||||||||
Increase (Decrease) in Net Assets | October 31, 2022 | October 31, 2021 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | (71,411,317) | $ | (88,743,075) | ||||
Net realized gain (loss) | 1,090,107,299 | 1,443,226,828 | ||||||
Change in net unrealized appreciation (depreciation) | (7,273,773,500) | 5,644,520,235 | ||||||
Net increase (decrease) in net assets resulting from operations | (6,255,077,518) | 6,999,003,988 | ||||||
Distributions to Shareholders | ||||||||
From earnings: | ||||||||
Investor Class | (1,280,659,962) | (467,326,500) | ||||||
I Class | (52,994,662) | (17,883,963) | ||||||
Y Class | (187,141) | (63,933) | ||||||
A Class | (17,349,829) | (5,531,503) | ||||||
C Class | (2,961,708) | (1,020,550) | ||||||
R Class | (2,905,579) | (950,777) | ||||||
R5 Class | (22,646) | (8,037) | ||||||
R6 Class | (48,932,667) | (16,143,769) | ||||||
G Class | (620) | (216) | ||||||
Decrease in net assets from distributions | (1,406,014,814) | (508,929,248) | ||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 1,145,217,950 | (280,882,692) | ||||||
Net increase (decrease) in net assets | (6,515,874,382) | 6,209,192,048 | ||||||
Net Assets | ||||||||
Beginning of period | 22,176,754,975 | 15,967,562,927 | ||||||
End of period | $ | 15,660,880,593 | $ | 22,176,754,975 |
See Notes to Financial Statements.
16
Notes to Financial Statements |
OCTOBER 31, 2022
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 value of investments of the fund is determined by American Century Investment Management, Inc. (ACIM) (the investment advisor), as the valuation designee, pursuant to its valuation policies and procedures. The Board of Directors oversees the valuation designee and reviews its valuation policies and procedures at least annually.
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 valuation designee determines that the market price for a portfolio security is not readily available or is believed by the valuation designee to be unreliable, such security is valued at fair value as determined in good faith by the valuation designee, in accordance with its policies and procedures. Circumstances that may cause the fund to determine that market quotations are not available or reliable include, but are not limited to: when there is a significant event subsequent to the market quotation; trading in a security has been halted during the trading day; or trading in a security is insufficient or did not take place due to a closure or holiday.
17
The valuation designee 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; regulatory news, 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 valuation designee also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that it deems appropriate. The valuation designee 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 ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover 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.
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, 2022.
Remaining Contractual Maturity of Agreements | |||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | |||||||||||||
Securities Lending Transactions(1) | |||||||||||||||||
Common Stocks | $ | 226,450 | — | — | — | $ | 226,450 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 226,450 |
(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.
19
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), as well as exchange-traded funds managed by the investment advisor, that use very similar investment teams and strategies (strategy assets). From November 1, 2021 through July 31, 2022, the investment advisor agreed to waive a portion of the fund's management fee such that the management fee did 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. Effective August 1, 2022, the investment advisor agreed to waive a portion of the fund's management fee such that the management fee does not exceed 0.928% for Investor Class, A Class, C Class and R Class, 0.728% for I Class and R5 Class, and 0.578% for Y Class and R6 Class. The investment advisor expects this waiver arrangement to continue until July 31, 2023 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.
The management fee schedule range and the effective annual management fee before and after waiver for each class for the period ended October 31, 2022 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | ||||||||||
Before Waiver | After Waiver | ||||||||||
Investor Class | 0.800% to 0.990% | 0.95% | 0.94% | ||||||||
I Class | 0.600% to 0.790% | 0.75% | 0.74% | ||||||||
Y Class | 0.450% to 0.640% | 0.60% | 0.59% | ||||||||
A Class | 0.800% to 0.990% | 0.95% | 0.94% | ||||||||
C Class | 0.800% to 0.990% | 0.95% | 0.94% | ||||||||
R Class | 0.800% to 0.990% | 0.95% | 0.94% | ||||||||
R5 Class | 0.600% to 0.790% | 0.75% | 0.74% | ||||||||
R6 Class | 0.450% to 0.640% | 0.60% | 0.59% | ||||||||
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, 2022 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 sales were $2,478,185 and there were no interfund purchases. The effect of interfund transactions on the Statement of Operations was $974,642 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments and in kind transactions, for the period ended October 31, 2022 were $2,303,459,481 and $2,741,764,550, respectively.
For the period ended October 31, 2022, the fund incurred net realized gains of $26,490,683 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, 2022 | Year ended October 31, 2021 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Investor Class/Shares Authorized | 3,000,000,000 | 3,000,000,000 | ||||||||||||
Sold | 8,135,056 | $ | 598,685,724 | 7,547,892 | $ | 605,584,773 | ||||||||
Issued in reinvestment of distributions | 14,055,454 | 1,225,916,765 | 5,974,884 | 441,487,528 | ||||||||||
Redeemed | (18,002,094) | (1,314,146,186) | (17,884,083) | (1,445,704,546) | ||||||||||
4,188,416 | 510,456,303 | (4,361,307) | (398,632,245) | |||||||||||
I Class/Shares Authorized | 120,000,000 | 120,000,000 | ||||||||||||
Sold | 4,448,913 | 343,822,287 | 2,267,799 | 193,001,088 | ||||||||||
Issued in reinvestment of distributions | 526,979 | 48,255,456 | 199,466 | 15,400,784 | ||||||||||
Redeemed | (2,515,718) | (190,427,803) | (2,356,115) | (195,101,975) | ||||||||||
2,460,174 | 201,649,940 | 111,150 | 13,299,897 | |||||||||||
Y Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 19,261 | 1,498,589 | 7,722 | 620,293 | ||||||||||
Issued in reinvestment of distributions | 1,273 | 117,405 | 519 | 40,282 | ||||||||||
Redeemed | (1,016) | (87,262) | (1,275) | (107,897) | ||||||||||
19,518 | 1,528,732 | 6,966 | 552,678 | |||||||||||
A Class/Shares Authorized | 60,000,000 | 60,000,000 | ||||||||||||
Sold | 783,879 | 54,250,243 | 776,974 | 59,920,322 | ||||||||||
Issued in reinvestment of distributions | 202,249 | 16,548,087 | 74,944 | 5,231,113 | ||||||||||
Redeemed | (977,454) | (67,216,794) | (610,136) | (45,317,012) | ||||||||||
8,674 | 3,581,536 | 241,782 | 19,834,423 | |||||||||||
C Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||||||
Sold | 158,031 | 8,597,018 | 121,827 | 7,492,607 | ||||||||||
Issued in reinvestment of distributions | 39,175 | 2,529,562 | 15,854 | 895,771 | ||||||||||
Redeemed | (142,611) | (7,653,360) | (121,137) | (7,314,579) | ||||||||||
54,595 | 3,473,220 | 16,544 | 1,073,799 | |||||||||||
R Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||||||
Sold | 288,585 | 18,499,188 | 209,513 | 15,189,667 | ||||||||||
Issued in reinvestment of distributions | 37,039 | 2,905,336 | 14,033 | 944,041 | ||||||||||
Redeemed | (130,237) | (8,695,824) | (173,293) | (12,606,839) | ||||||||||
195,387 | 12,708,700 | 50,253 | 3,526,869 | |||||||||||
R5 Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||||||
Sold | 515,024 | 36,057,190 | 576 | 47,459 | ||||||||||
Issued in reinvestment of distributions | 80 | 7,330 | 38 | 2,899 | ||||||||||
Redeemed | (17,322) | (1,131,238) | (545) | (43,991) | ||||||||||
497,782 | 34,933,282 | 69 | 6,367 | |||||||||||
R6 Class/Shares Authorized | 110,000,000 | 110,000,000 | ||||||||||||
Sold | 7,411,532 | 533,392,489 | 3,631,693 | 313,904,796 | ||||||||||
Issued in reinvestment of distributions | 525,013 | 48,359,000 | 205,433 | 15,925,151 | ||||||||||
Redeemed | (2,781,944) | (205,088,810) | (3,016,020) | (250,374,643) | ||||||||||
5,154,601 | 376,662,679 | 821,106 | 79,455,304 | |||||||||||
G Class/Shares Authorized | 80,000,000 | 80,000,000 | ||||||||||||
Sold | 3,322 | 222,941 | — | — | ||||||||||
Issued in reinvestment of distributions | 7 | 620 | 2 | 216 | ||||||||||
Redeemed | — | (3) | — | — | ||||||||||
3,329 | 223,558 | — | — | |||||||||||
Net increase (decrease) | 12,582,476 | $ | 1,145,217,950 | (3,113,435) | $ | (280,882,692) |
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 | $ | 14,918,957,196 | $ | 515,359,568 | — | ||||||
Short-Term Investments | 511,990 | 236,835,837 | — | ||||||||
$ | 14,919,469,186 | $ | 752,195,405 | — | |||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 1,368,352 | — | |||||||
Liabilities | |||||||||||
Other Financial Instruments | |||||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 1,115,547 | — |
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 $273,990,327.
23
The value of foreign currency risk derivative instruments as of October 31, 2022, is disclosed on the Statement of Assets and Liabilities as an asset of $1,368,352 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $1,115,547 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended October 31, 2022, the effect of foreign currency risk derivative instruments on the Statement of Operations was $45,000,557 in net realized gain (loss) on forward foreign currency exchange contract transactions and $(5,958,016) 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, war, 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
The tax character of distributions paid during the years ended October 31, 2022 and October 31, 2021 were as follows:
2022 | 2021 | |||||||
Distributions Paid From | ||||||||
Ordinary income | — | — | ||||||
Long-term capital gains | $ | 1,406,014,814 | $ | 508,929,248 |
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 | $ | 5,797,351,143 | |||
Gross tax appreciation of investments | $ | 10,315,613,341 | |||
Gross tax depreciation of investments | (441,299,893) | ||||
Net tax appreciation (depreciation) of investments | 9,874,313,448 | ||||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (31,764) | ||||
Net tax appreciation (depreciation) | $ | 9,874,281,684 | |||
Undistributed ordinary income | — | ||||
Accumulated long-term gains | $ | 1,017,831,842 | |||
Late-year ordinary loss deferral | $ | (56,874,991) |
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.
24
Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||||||||||||||||||||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | 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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $93.37 | (0.30) | (24.63) | (24.93) | — | (5.94) | (5.94) | $62.50 | (28.50)% | 0.94% | 0.95% | (0.42)% | (0.43)% | 13% | $13,781,358 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
I Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $97.72 | (0.16) | (25.88) | (26.04) | — | (5.94) | (5.94) | $65.74 | (28.36)% | 0.74% | 0.75% | (0.22)% | (0.23)% | 13% | $727,643 | ||||||||||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $98.36 | (0.04) | (26.08) | (26.12) | — | (5.94) | (5.94) | $66.30 | (28.25)% | 0.59% | 0.60% | (0.07)% | (0.08)% | 13% | $3,383 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
A Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $87.98 | (0.46) | (23.08) | (23.54) | — | (5.94) | (5.94) | $58.50 | (28.69)% | 1.19% | 1.20% | (0.67)% | (0.68)% | 13% | $170,819 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
C Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $70.74 | (0.76) | (18.19) | (18.95) | — | (5.94) | (5.94) | $45.85 | (29.22)% | 1.94% | 1.95% | (1.42)% | (1.43)% | 13% | $25,028 | ||||||||||||||||||||||||||||||||
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 |
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $84.62 | (0.59) | (22.13) | (22.72) | — | (5.94) | (5.94) | $55.96 | (28.86)% | 1.44% | 1.45% | (0.92)% | (0.93)% | 13% | $38,416 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
R5 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $97.78 | (0.12) | (25.93) | (26.05) | — | (5.94) | (5.94) | $65.79 | (28.35)% | 0.74% | 0.75% | (0.22)% | (0.23)% | 13% | $32,996 | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
R6 Class | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $98.25 | (0.05) | (26.05) | (26.10) | — | (5.94) | (5.94) | $66.21 | (28.26)% | 0.59% | 0.60% | (0.07)% | (0.08)% | 13% | $881,007 | ||||||||||||||||||||||||||||||||
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 | —(3) | 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 |
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 | |||||||||||||||||||||||||||||||||||||||||||||||
2022 | $99.61 | 0.23 | (26.30) | (26.07) | — | (5.94) | (5.94) | $67.60 | (27.84)% | 0.00%(4) | 0.60% | 0.52% | (0.08)% | 13% | $232 | ||||||||||||||||||||||||||||||||
2021 | $70.04 | 0.42 | 31.27 | 31.69 | — | (2.12) | (2.12) | $99.61 | 46.08% | 0.00%(4) | 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(5) | $51.28 | 0.10 | 1.06 | 1.16 | — | — | — | $52.44 | 2.26% | 0.00%(4)(6) | 0.62%(6) | 0.78%(6) | 0.16%(6) | 13%(7) | $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)Per-share amount was less than $0.005.
(4)Ratio was less than 0.005%.
(5)August 1, 2019 (commencement of sale) through October 31, 2019.
(6)Annualized.
(7)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, 2022, 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, 2022, 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, 2022, 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 16, 2022
We have served as the auditor of one or more American Century investment companies since 1997.
29
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 on 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 | 64 | None | ||||||||||||
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 64 | Alleghany Corporation (2021 to 2022) | ||||||||||||
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 64 | 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) | 64 | None |
30
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) | 64 | MGP Ingredients, Inc. (2019 to 2021) | ||||||||||||
Jan M. Lewis (1957) | Director and Board Chair | Since 2011 (Board Chair since 2022) | Retired | 64 | None | ||||||||||||
Stephen E. Yates (1948) | Director | Since 2012 | Retired | 108 | 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 | 142 | 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) |
32
Approval of Management Agreement |
At a meeting held on June 29, 2022, 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 of 1940 (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, 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 data and information compiled by the Advisor and certain independent data providers concerning the Fund. 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 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 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 an appropriate benchmark(s) and peer group of other mutual funds with similar investment objectives and strategies;
•the cost of owning the Fund compared to the cost of owning similarly-managed funds;
•the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers;
•the Advisor’s strategic plans, generally, and with respect to the ongoing impact of the COVID-19 pandemic response, heightened areas of interest in the mutual fund industry and recent geopolitical issues;
•the Advisor’s business continuity plans, vendor management practices, 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 four meetings to consider the renewal. The independent Directors also met in private session multiple 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.
33
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, without limitation, the following:
•constructing and designing the Fund
•portfolio research and security selection
•initial capitalization/funding
•securities trading
•Fund administration
•custody of Fund assets
•daily valuation of the Fund’s portfolio
•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 principal investment 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 Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any actions being taken to improve performance, and may conduct special reviews until performance improves. The Fund’s performance was above its benchmark for the three-, five-, and ten-year periods and below its benchmark for the one-year period reviewed by the Board. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
34
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 fee structure, and through reinvestment in its business, infrastructure, investment capabilities and initiatives to provide shareholders enhanced and expanded 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. Assets of various classes of the same Fund or similarly-managed products are combined with the assets of the Fund to help achieve those breakpoints.
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 securities transaction expenses, 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 Investment Company Act Rule 12b-1. 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
35
reduction of the Fund's annual unified management fee such that the Investor Class management fee not exceed 0.928% for at least one year beginning August 1, 2022. 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.
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 terms of the management agreement are fair and reasonable and that the management fee charged to the Fund is reasonable in light of the services provided and that the management agreement between the Fund and the Advisor should be renewed for an additional one-year period.
36
Proxy Voting Results |
A special meeting of shareholders was held on October 13, 2022, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect five directors to the Board of Directors of American Century Mutual Funds, Inc.:
Affirmative | Withhold | ||||||||||
Brian Bulatao | $ | 24,005,100,401 | $ | 1,121,808,198 | |||||||
Chris H. Cheesman | $ | 24,198,214,355 | $ | 928,694,244 | |||||||
Rajesh K. Gupta | $ | 24,143,807,378 | $ | 983,101,221 | |||||||
Lynn M. Jenkins | $ | 24,034,830,602 | $ | 1,092,077,997 | |||||||
Gary C. Meltzer | $ | 24,134,760,750 | $ | 992,147,849 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Thomas W. Bunn, Barry Fink, Jan M. Lewis, and Stephen E. Yates.
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 $1,406,014,814, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2022.
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. | ||||||||
©2022 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90975 2212 |
(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) 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 2021: $162,200
FY 2022: $126,100
(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 2021: $0
FY 2022: $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 2021: $0
FY 2022: $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 2021: $0
FY 2022: $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 2021: $0
FY 2022: $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 2021: $0
FY 2022: $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 2021: $0
FY 2022: $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 2021: $2,832,126
FY 2022: $50,000
(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, 2022 |
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, 2022 |
By: | /s/ R. Wes Campbell | |||||||
Name: | R. Wes Campbell | |||||||
Title: | Treasurer and | |||||||
Chief Financial Officer | ||||||||
(principal financial officer) | ||||||||
Date: | December 29, 2022 |