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 | 811-21861 | |||||
AMERICAN CENTURY GROWTH FUNDS, INC. | ||||||
(Exact name of registrant as specified in charter) | ||||||
4500 MAIN STREET, KANSAS CITY, MISSOURI | 64111 | |||||
(Address of principal executive offices) | (Zip Code) | |||||
CHARLES A. ETHERINGTON 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111 | ||||||
(Name and address of agent for service) | ||||||
Registrant’s telephone number, including area code: | 816-531-5575 | |||||
Date of fiscal year end: | 07-31 | |||||
Date of reporting period: | 07-31-2011 |
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT JULY 31, 2011
Legacy Focused Large Cap Fund |
President’s Letter | 2 |
Independent Chairman’s Letter | 3 |
Market Perspective | 4 |
Performance | 5 |
Portfolio Commentary | 7 |
Fund Characteristics | 9 |
Shareholder Fee Example | 10 |
Schedule of Investments | 12 |
Statement of Assets and Liabilities | 13 |
Statement of Operations | 14 |
Statement of Changes in Net Assets | 15 |
Notes to Financial Statements | 16 |
Financial Highlights | 21 |
Report of Independent Registered Public Accounting Firm | 25 |
Management | 26 |
Approval of Management Agreement | 29 |
Additional Information | 34 |
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.
Dear Investor:
Thank you for reviewing this annual report for the period ended July 31, 2011. Our report offers investment performance and portfolio information, presented with the expert perspective and commentary of our portfolio management team.
This report remains one of our most important vehicles for conveying information about investment performance, as well as the market factors and strategies that affect fund returns. For additional, updated information on fund performance, portfolio strategy, and the investment markets, we encourage you to visit our website, americancentury.com. Click on the “Fund Performance” and “Insights & News” headings at the top of our Individual Investors site.
Reporting Period Perspective: “Risk Rally” Ended, Economic Growth Lost Momentum
Benefiting from optimism, risk appetites, expanding corporate earnings, and other investment conditions that may prove difficult to sustain, global stock and high-yield corporate bond markets produced above-average returns for the 12 months ended July 31, 2011. Meanwhile, high-quality bonds lagged. Conditions shifted significantly during the last three months of the fiscal year—not enough to fully change the “risk was rewarded” theme of the period, but certainly enough to suggest greater caution ahead.
Broad stock market indices generally gained 15–30% during the period as monetary and fiscal intervention in 2010 stimulated growth and fueled investor optimism about economic and financial market conditions in 2011 and 2012. Most notably, the U.S. Federal Reserve launched its second round of quantitative easing (QE2), involving the purchase of U.S. government securities. This was designed to increase the money supply and encourage investors to purchase potentially higher-risk/higher-return assets, such as stocks.
Anticipation of QE2 and its potential impact, along with robust corporate earnings growth, helped trigger a “risk rally” that extended from August 2010 through April 2011. But the rally ran out of steam in May and June of 2011 as QE2 ended, the European debt crisis returned to prominence, and other debt and global economic challenges emerged. Concerns about fiscal austerity measures in debt-ridden countries revived recession fears and deflated global equity market returns. We appreciate your continued trust in us during these uncertain times.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Dear Fellow Shareholders,
With an existing vacancy and several directors approaching retirement age over the next few years, your American Century Investments Kansas City-based mutual fund board of directors recently addressed board succession planning. The board developed a succession plan and conducted an extensive search that yielded two new members who joined the board in 2011.
As part of the planning process, the board referred to the criteria for potential new directors set forth in its director nomination policy adopted in 2009. A nomination process generated more than 20 candidates whose credentials were reviewed by the board’s Governance Committee. Six candidates were selected by the committee for telephone interviews. Three were then chosen for in person interviews.
The committee recommended, and the full board approved, the addition of Jan Lewis, currently the President and Chief Executive Officer of Catholic Charities of Northeast Kansas, to fill the vacant board seat and the addition as an advisory director of Stephen E. Yates, who recently retired as Executive Vice President, Technology and Operations at Keycorp of Cleveland, Ohio. Mr. Yates will serve in an advisory capacity for 12-18 months before becoming an active director. Both of these additions bring operating management experience and unique perspectives to our various tasks.
We look forward to the contributions of our new directors to our efforts as shareholder representatives and thank the Governance Committee for their thorough search process.
If you have comments, suggestions or questions send them to me at dhpratt@fundboardchair.com.
Best regards,
Don Pratt
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By David Hollond, Chief Investment Officer,
U.S. Growth Equity — Mid & Small Cap
Stocks Gained as Economy Improved
The U.S. stock market generated solid results for the 12-month period ended July 31, 2011, with broad equity markets gaining more than 20%. Driving the rally was growing investor confidence in U.S. economic recovery, although that confidence eroded somewhat in the final months of the period.
After a bumpy start stemming from an uncertain economic outlook, the equity market began a steady rise in September 2010, as improving data apparently quelled investor concerns of a “double-dip” recession (a return to recession after a brief period of recovery). Notably, employment growth figures turned positive after 2½ years of persistent job losses, and the manufacturing sector showed renewed signs of life. A second round of the Federal Reserve’s quantitative easing program and an extension of expiring tax breaks through 2012 further reassured markets that a promising economic recovery was underway.
New challenges in early 2011 included political unrest in the Middle East and Africa, as well as a devastating earthquake and tsunami in Japan. Nevertheless, equities gained ground until May, when evidence of a slowdown in economic activity and renewed concerns surrounding sovereign debt in Europe weighed on investor confidence. As a result, markets declined modestly in the following months. As the reporting period came to a close, both chambers of Congress debated over a bill to raise the federal debt ceiling and reduce government spending, and stocks pulled back amid heightened levels of volatility.
As the table below illustrates, mid- and small-cap shares generated the strongest returns, outpacing large-cap issues. Growth stocks outperformed value across all market capitalizations, particularly among smaller companies. Every sector of the market delivered positive results, led by energy, which benefited from rising prices. The industrials and materials sectors also performed well, while the financials sector was the laggard for the reporting period.
Market Index Total Returns | ||||
For the 12 months ended July 31, 2011 | ||||
U.S. Stocks | ||||
Russell 1000 Index (Large-Cap) | 20.68 | % | ||
Russell Midcap Index | 24.51 | % | ||
Russell 2000 Index (Small-Cap) | 23.92 | % | ||
Foreign Stocks | ||||
MSCI EAFE (Europe, Australasia, Far East) Index | 17.17 | % | ||
MSCI Emerging Markets Index | 17.45 | % |
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Total Returns as of July 31, 2011 | |||||
Average Annual Returns | |||||
Ticker Symbol | 1 year | 5 years | Since Inception | Inception Date | |
Investor Class | ACFOX | 18.07% | 2.35% | 2.49% | 5/31/06 |
S&P 500 Index | — | 19.65% | 2.39% | 2.47% | — |
Institutional Class | ACFSX | 18.36% | 2.57% | 2.71% | 5/31/06 |
Advisor Class | ACFDX | 17.78% | 2.08% | 2.23% | 5/31/06 |
R Class | ACFCX | 17.49% | 1.84% | 1.97% | 5/31/06 |
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The fund is considered nondiversified, which may subject the fund to risk because a price change in any one security may have a greater impact than would be the case if the fund were diversified. The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors. International investing involves special risks, such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. 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. Returns for the index are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not.
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Growth of $10,000 Over Life of Class |
$10,000 investment made May 31, 2006 |
*From 5/31/06, the Investor Class’s inception date. Not annualized.
Total Annual Fund Operating Expenses | |||
Investor Class | Institutional Class | Advisor Class | R Class |
1.11% | 0.91% | 1.36% | 1.61% |
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. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The fund is considered nondiversified, which may subject the fund to risk because a price change in any one security may have a greater impact than would be the case if the fund were diversified. The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors. International investing involves special risks, such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. 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. Returns for the index are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not.
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Portfolio Managers: John T. Small Jr. and Stephen Pool
Performance Summary
Legacy Focused Large Cap returned 18.07%* for the 12 months ended July 31, 2011, lagging the 19.65% return of the portfolio’s benchmark, the S&P 500 Index.
As discussed in the Market Perspective on page 4, U.S. stock indices generally delivered solid returns during the reporting period amid signs of improving economic conditions and investor sentiment, although those factors faltered late in the period. In an environment of changing and volatile market conditions, Legacy Focused Large Cap’s management team remained focused on the fundamental business prospects of its portfolio investments.
Legacy Focused Large Cap delivered positive returns for the reporting period and derived positive results from every sector in which it invested, but its performance lagged that of its benchmark. The majority of the relative underperformance was attributable to stock decisions in the health care, information technology, and consumer discretionary sectors. Holdings in the materials, financials, and consumer staples sectors partially offset those relative losses.
Health Care Led Underperformance, but Some Positions Contributed
Although the health care sector contributed positively to absolute returns, it was the largest source of relative underperformance for Legacy Focused Large Cap. Notable detractors within the pharmaceuticals industry included Novartis AG. The company’s share price declined while held in the portfolio due to concerns about health care reform, although it delivered positive returns in the benchmark for the entire period. Select positions within the health care equipment and the biotechnology industries also weighed on relative performance.
Elsewhere in the sector, though, an overweight position in United Health Group, Inc. added substantially to relative gains. The company delivered solid earnings growth due largely to better medical cost trends and an increase in members.
Information Technology, Consumer Discretionary Detracted
Within the information technology sector, a position in SanDisk detracted from absolute and relative performance. The maker of flash memory card products experienced a profit decline during the reporting period as rising costs crimped margins. Semiconductor company Broadcom also curbed absolute and relative performance. The provider of semiconductors for wired and wireless communications delivered gains in the benchmark as its earnings exceeded analysts’ expectations during the reporting period, but its share price declined for the period it was held in the portfolio.
Although the information technology sector as a whole detracted from relative performance, some holdings contributed. In the internet software industry, Legacy Focused Large Cap maintained a stake in Baidu Inc., China’s dominant internet search engine. The company contributed substantially to performance, achieving solid earnings growth as a result of market share gains and increased revenue per customer.
*All fund returns referenced in this commentary are for Investor Class shares.
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In the consumer discretionary sector, Legacy Focused Large Cap’s stock choices in the specialty retail industry hurt relative performance. A position in big box electronics chain Best Buy proved detrimental as the company delivered earnings that fell below analysts’ expectations. Overweight positions within the multiline retail and the hotels, restaurants and leisure industry groups also trimmed relative results.
Materials, Financials, Consumer Staples Contributed
The materials sector was the largest source of relative outperformance for Legacy Focused Large Cap. Within the sector, key holdings within the chemicals industry group included Agrium, a supplier of agricultural products and services. The company’s share price outperformed as commodity prices climbed during the reporting period, increasing demand for agricultural products. Overweight positions within the metals and mining industry also helped relative returns as these companies benefited from higher commodities prices.
Effective stock decisions across the financials sector added to relative and absolute gains, particularly within the capital markets industry group. Within the consumer staples sector, tobacco company Lorillard contributed to relative performance as it benefited from increased unit sales volume and higher average prices.
Some Energy Holdings Helped
Although the energy sector overall was a drag on Legacy Focused Large Cap’s relative performance, some holdings within the sector contributed significantly to both absolute and relative gains. Notably, Williams Companies was the largest single contributor to positive results. The natural gas company exceeded analysts’ expectations and swung to a profit in 2011 as natural gas prices climbed.
Outlook
We remain cautiously optimistic in our market outlook. Although markets delivered solid results in the past 12 months, we continue to look for more meaningful and sustainable improvements in economic conditions. Regardless of conditions, Legacy Focused Large Cap employs financial acceleration and price momentum screens to identify investment opportunities in any given economic environment. As always, it will employ a quantitative model to exploit large-cap investment opportunities across the growth and value spectrums.
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JULY 31, 2011 | |
Top Ten Holdings | % of net assets |
International Business Machines Corp. | 4.7% |
AutoZone, Inc. | 4.2% |
McDonald’s Corp. | 4.1% |
Lorillard, Inc. | 4.0% |
Chevron Corp. | 4.0% |
Walgreen Co. | 3.9% |
Eli Lilly & Co. | 3.9% |
PPG Industries, Inc. | 3.9% |
Philip Morris International, Inc. | 3.8% |
Wal-Mart Stores, Inc. | 3.6% |
Top Five Industries | % of net assets |
Oil, Gas & Consumable Fuels | 14.2% |
Health Care Providers & Services | 9.9% |
Tobacco | 7.8% |
Food & Staples Retailing | 7.5% |
Pharmaceuticals | 6.9% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 82.7% |
Foreign Common Stocks(1) | 17.3% |
Total Common Stocks | 100.0% |
Temporary Cash Investments | —(2) |
Other Assets and Liabilities | —(2) |
(1) | Includes depositary shares, dual listed securities and foreign ordinary shares. |
(2) | Category is less than 0.05% of total net assets. |
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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 February 1, 2011 to July 31, 2011.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. 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.
10
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 2/1/11 | Ending Account Value 7/31/11 | Expenses Paid During Period* 2/1/11 – 7/31/11 | Annualized Expense Ratio* | |
Actual | ||||
Investor Class | $1,000 | $1,034.00 | $5.55 | 1.10% |
Institutional Class | $1,000 | $1,034.80 | $4.54 | 0.90% |
Advisor Class | $1,000 | $1,032.20 | $6.80 | 1.35% |
R Class | $1,000 | $1,031.40 | $8.06 | 1.60% |
Hypothetical | ||||
Investor Class | $1,000 | $1,019.34 | $5.51 | 1.10% |
Institutional Class | $1,000 | $1,020.33 | $4.51 | 0.90% |
Advisor Class | $1,000 | $1,018.10 | $6.76 | 1.35% |
R Class | $1,000 | $1,016.86 | $8.00 | 1.60% |
* | 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 181, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. |
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Shares | Value | |
Common Stocks — 100.0% | ||
AEROSPACE & DEFENSE — 3.3% | ||
Lockheed Martin Corp. | 3,565 | $ 269,977 |
AUTO COMPONENTS — 2.8% | ||
Magna International, Inc. | 4,740 | 231,170 |
BEVERAGES — 3.2% | ||
Dr Pepper Snapple Group, Inc. | 6,961 | 262,847 |
CAPITAL MARKETS — 3.3% | ||
Ameriprise Financial, Inc. | 4,875 | 263,737 |
CHEMICALS — 3.9% | ||
PPG Industries, Inc. | 3,698 | 311,372 |
DIVERSIFIED TELECOMMUNICATION SERVICES — 6.4% | ||
Telecomunicacoes de Sao Paulo SA ADR | 7,075 | 224,419 |
TELUS Corp. | 5,510 | 290,212 |
514,631 | ||
ELECTRIC UTILITIES — 1.2% | ||
NV Energy, Inc. | 6,500 | 96,460 |
FOOD & STAPLES RETAILING — 7.5% | ||
Walgreen Co. | 8,166 | 318,801 |
Wal-Mart Stores, Inc. | 5,519 | 290,906 |
609,707 | ||
HEALTH CARE PROVIDERS & SERVICES — 9.9% | ||
AmerisourceBergen Corp. | 7,080 | 271,235 |
Humana, Inc. | 3,468 | 258,643 |
UnitedHealth Group, Inc. | 5,404 | 268,201 |
798,079 | ||
HOTELS, RESTAURANTS & LEISURE — 4.1% | ||
McDonald’s Corp. | 3,854 | 333,294 |
INSURANCE — 4.9% | ||
Prudential plc ADR | 5,468 | 123,139 |
Travelers Cos., Inc. (The) | 4,893 | 269,751 |
392,890 | ||
IT SERVICES — 4.7% | ||
International Business Machines Corp. | 2,078 | 377,884 |
MEDIA — 3.6% | ||
Omnicom Group, Inc. | 6,150 | 288,558 |
METALS & MINING — 1.6% | ||
Freeport-McMoRan Copper & Gold, Inc. | 2,418 | 128,057 |
OIL, GAS & CONSUMABLE FUELS — 14.2% | ||
Chevron Corp. | 3,124 | 324,959 |
Enterprise Products Partners LP | 6,992 | 290,797 |
Marathon Oil Corp. | 8,085 | 250,392 |
YPF SA ADR | 6,698 | 285,134 |
1,151,282 | ||
PHARMACEUTICALS — 6.9% | ||
Eli Lilly & Co. | 8,151 | 312,183 |
Novo Nordisk A/S ADR | 2,030 | 247,701 |
559,884 | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 6.5% | ||
Analog Devices, Inc. | 7,652 | 263,229 |
Texas Instruments, Inc. | 8,730 | 259,717 |
522,946 | ||
SPECIALTY RETAIL — 4.2% | ||
AutoZone, Inc.(1) | 1,197 | 341,684 |
TOBACCO — 7.8% | ||
Lorillard, Inc. | 3,069 | 325,989 |
Philip Morris International, Inc. | 4,314 | 307,028 |
633,017 | ||
TOTAL COMMON STOCKS(Cost $7,686,833) | 8,087,476 | |
Temporary Cash Investments(2) | ||
JPMorgan U.S. Treasury Plus Money Market Fund Agency Shares (Cost $3,693) | 3,693 | 3,693 |
TOTAL INVESTMENT SECURITIES — 100.0%(Cost $7,690,526) | 8,091,169 | |
OTHER ASSETS AND LIABILITIES(2) | (3,742) | |
TOTAL NET ASSETS — 100.0% | $8,087,427 |
Geographic Diversification | |
(as a % of net assets) | |
United States | 82.7% |
Canada | 6.4% |
Argentina | 3.5% |
Denmark | 3.1% |
Brazil | 2.8% |
United Kingdom | 1.5% |
Cash and Equivalents* | — |
* | Includes temporary cash investments and other assets and liabilities. Category is less than 0.05% of total net assets. |
Notes to Schedule of Investments
ADR = American Depositary Receipt
(1) | Non-income producing. |
(2) | Ctegory is less than 0.05% of total net assets. |
See Notes to Financial Statements.
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JULY 31, 2011 | ||||
Assets | ||||
Investment securities, at value (cost of $7,690,526) | $8,091,169 | |||
Receivable for capital shares sold | 457 | |||
Dividends and interest receivable | 6,979 | |||
8,098,605 | ||||
Liabilities | ||||
Payable for capital shares redeemed | 3,199 | |||
Accrued management fees | 7,884 | |||
Distribution and service fees payable | 95 | |||
11,178 | ||||
Net Assets | $8,087,427 | |||
Net Assets Consist of: | ||||
Capital (par value and paid-in surplus) | $19,979,838 | |||
Undistributed net investment income | 86,631 | |||
Accumulated net realized loss | (12,379,685 | ) | ||
Net unrealized appreciation | 400,643 | |||
$8,087,427 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Investor Class, $0.01 Par Value | $7,638,260 | 717,014 | $10.65 | |||||||||
Institutional Class, $0.01 Par Value | $32,696 | 3,059 | $10.69 | |||||||||
Advisor Class, $0.01 Par Value | $398,701 | 37,675 | $10.58 | |||||||||
R Class, $0.01 Par Value | $17,770 | 1,690 | $10.51 |
See Notes to Financial Statements.
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YEAR ENDED JULY 31, 2011 | ||||
Investment Income (Loss) | ||||
Income: | ||||
Dividends (net of foreign taxes withheld of $480) | $199,873 | |||
Interest | 55 | |||
199,928 | ||||
Expenses: | ||||
Management fees | 102,116 | |||
Distribution and service fees: | ||||
Advisor Class | 359 | |||
R Class | 86 | |||
Directors’ fees and expenses | 359 | |||
Other expenses | 782 | |||
103,702 | ||||
Net investment income (loss) | 96,226 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on investment transactions | 1,896,740 | |||
Change in net unrealized appreciation (depreciation) on investments | (339,899 | ) | ||
Net realized and unrealized gain (loss) | 1,556,841 | |||
Net Increase (Decrease) in Net Assets Resulting from Operations | $1,653,067 |
See Notes to Financial Statements.
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YEARS ENDED JULY 31, 2011 AND JULY 31, 2010 | ||||||||
Increase (Decrease) in Net Assets | 2011 | 2010 | ||||||
Operations | ||||||||
Net investment income (loss) | $96,226 | $150,138 | ||||||
Net realized gain (loss) | 1,896,740 | 3,001,258 | ||||||
Change in net unrealized appreciation (depreciation) | (339,899 | ) | (1,707,089 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 1,653,067 | 1,444,307 | ||||||
Distributions to Shareholders | ||||||||
From net investment income: | ||||||||
Investor Class | (135,139 | ) | (4,406 | ) | ||||
Institutional Class | (480 | ) | (99 | ) | ||||
Advisor Class | (873 | ) | — | |||||
R Class | (155 | ) | — | |||||
Decrease in net assets from distributions | (136,647 | ) | (4,505 | ) | ||||
�� | ||||||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions | (3,819,241 | ) | (4,837,158 | ) | ||||
Net increase (decrease) in net assets | (2,302,821 | ) | (3,397,356 | ) | ||||
Net Assets | ||||||||
Beginning of period | 10,390,248 | 13,787,604 | ||||||
End of period | $8,087,427 | $10,390,248 | ||||||
Undistributed net investment income | $86,631 | $136,554 |
See Notes to Financial Statements.
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JULY 31, 2011
1. Organization
American Century Growth 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. Legacy Focused Large Cap Fund (the fund) is one fund in a series issued by the corporation. The fund is nondiversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. The fund pursues its objective by investing primarily in stocks of large-sized market capitalization companies.
The fund is authorized to issue the Investor Class, the Institutional Class, the Advisor Class and the R Class. The share classes differ principally in their respective distribution and shareholder servicing expenses and arrangements. The Institutional Class is made available to institutional shareholders or through financial intermediaries whose clients do not require the same level of shareholder and administrative services as shareholders of other classes. As a result, the Institutional Class is charged a lower unified management fee.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share as of 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.
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 typically valued at the closing price on the exchange where primarily traded or as of 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 is used. Depending on local convention or regulation, 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. In its determination of fair value, the fund may review several factors including: market information specific to a security; news developments in U.S. and foreign markets; the performance of particular U.S. and foreign securities, indices, comparable securities, American Depositary Receipts, Exchange-Traded Funds, and other relevant market indicators.
Debt securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors, trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, and other relevant market information on the same or comparable securities.
Investments in open-end management investment companies are valued at the reported net asset value per share.
If the fund determines that the market price for a portfolio security is not readily available or the valuation methods mentioned above do not reflect a security’s fair value, such security is valued as determined in good faith by the Board of Directors or its designee, in accordance with procedures adopted by the Board of Directors. Circumstances that may cause the fund to use these procedures to value a security include, but are not limited to: a security has been declared in default; trading in a security has been halted during the trading day; there is a foreign market holiday and no trading occurred; or an event occurred between the close of a foreign exchange and the NYSE that may affect the value of a security.
16
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
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. The fund is no longer subject to examination by tax authorities for years prior to 2008. 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. Accordingly, no provision has been made for federal or state income taxes.
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.
3. Fees and Transactions with Related Parties
Management Fees — The corporation has entered into a management agreement with American Century Investment Management, Inc. (ACIM), under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The annual management fee schedule ranges from 0.80% to 1.10% for the Investor Class, Advisor Class and R Class. The Institutional Class is 0.20% less at each point within the range. The effective annual management fee for each class for the year ended July 31, 2011 was 1.10% for the Investor Class, Advisor Class and R Class and 0.90% for the Institutional Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the Advisor Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the Advisor Class will pay American Century Investment Services, Inc. (ACIS) an annual distribution and service fee of 0.25%. 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 year ended July 31, 2011 are detailed in the Statement of Operations.
17
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, ACIS, and the corporation’s transfer agent, American Century Services, LLC.
The fund is eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund has a mutual funds services agreement with J.P. Morgan Investor Services Co. (JPMIS). JPMorgan Chase Bank (JPMCB) is a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). Prior to August 31, 2011, JPM was an equity investor in ACC. The services provided to the fund by JPMIM, JPMIS and JPMCB terminated on July 31, 2011.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the year ended July 31, 2011 were $24,939,856 and $28,518,382, respectively.
5. Capital Share Transactions
The corporation is authorized to issue 3,000,000,000 shares. Transactions in shares of the fund were as follows:
Year ended July 31, 2011 | Year ended July 31, 2010 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Investor Class | ||||||||||||||||
Sold | 122,346 | $1,256,135 | 223,642 | $2,035,437 | ||||||||||||
Issued in reinvestment of distributions | 12,844 | 128,053 | 450 | 4,273 | ||||||||||||
Redeemed | (541,337 | ) | (5,522,983 | ) | (736,295 | ) | (6,781,022 | ) | ||||||||
(406,147 | ) | (4,138,795 | ) | (512,203 | ) | (4,741,312 | ) | |||||||||
Institutional Class | ||||||||||||||||
Sold | 243 | 2,501 | 1,597 | 14,965 | ||||||||||||
Issued in reinvestment of distributions | 48 | 480 | 10 | 99 | ||||||||||||
Redeemed | (967 | ) | (9,731 | ) | (1,750 | ) | (15,638 | ) | ||||||||
(676 | ) | (6,750 | ) | (143 | ) | (574 | ) | |||||||||
Advisor Class | ||||||||||||||||
Sold | 32,467 | 348,801 | — | — | ||||||||||||
Issued in reinvestment of distributions | 68 | 677 | — | — | ||||||||||||
Redeemed | (2,289 | ) | (22,367 | ) | (10,263 | ) | (95,418 | ) | ||||||||
30,246 | 327,111 | (10,263 | ) | (95,418 | ) | |||||||||||
R Class | ||||||||||||||||
Sold | — | — | 15 | 146 | ||||||||||||
Issued in reinvestment of distributions | 16 | 155 | — | — | ||||||||||||
Redeemed | (100 | ) | (962 | ) | — | — | ||||||||||
(84 | ) | (807 | ) | 15 | 146 | |||||||||||
Net increase (decrease) | (376,661 | ) | $(3,819,241 | ) | (522,594 | ) | $(4,837,158 | ) |
18
6. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions 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 as follows:
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical securities; |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or |
• | 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 | ||||||||||
Investment Securities | ||||||||||||
Domestic Common Stocks | $6,685,701 | — | — | |||||||||
Foreign Common Stocks | 1,401,775 | — | — | |||||||||
Temporary Cash Investments | 3,693 | — | — | |||||||||
Total Value of Investment Securities | $8,091,169 | — | — |
7. Risk Factors
The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social, and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions.
The fund is considered nondiversified which may subject the fund to risk because a price change in any one security may have a greater impact than would be the case if the fund were diversified.
19
8. Federal Tax Information
The tax character of distributions paid during the years ended July 31, 2011 and July 31, 2010 were as follows:
2011 | 2010 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $136,647 | $4,505 | ||||||
Long-term capital gains | — | — |
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 July 31, 2011, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $7,682,229 | |||
Gross tax appreciation of investments | $595,592 | |||
Gross tax depreciation of investments | (186,652 | ) | ||
Net tax appreciation (depreciation) of investments | $408,940 | |||
Undistributed ordinary income | $86,631 | |||
Accumulated capital losses | $(12,387,982 | ) |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
The accumulated capital losses represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. Capital loss carryovers of $(8,046,764) and $(4,341,218) expire in 2017 and 2018, respectively.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused.
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Investor Class | ||||||||||||||||||||
For a Share Outstanding Throughout the Years Ended July 31 | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per-Share Data | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $9.15 | $8.31 | $12.03 | $12.51 | $10.11 | |||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net Investment Income (Loss)(1) | 0.11 | 0.11 | 0.06 | 0.02 | 0.12 | |||||||||||||||
Net Realized and Unrealized Gain (Loss) | 1.53 | 0.73 | (3.78 | ) | 0.15 | 2.34 | ||||||||||||||
Total From Investment Operations | 1.64 | 0.84 | (3.72 | ) | 0.17 | 2.46 | ||||||||||||||
Distributions | ||||||||||||||||||||
From Net Investment Income | (0.14 | ) | — | (2) | — | (0.07 | ) | (0.06 | ) | |||||||||||
From Net Realized Gains | — | — | — | (0.46 | ) | — | ||||||||||||||
From Tax Return of Capital | — | — | — | (0.12 | ) | — | ||||||||||||||
Total Distributions | (0.14 | ) | — | (2) | — | (0.65 | ) | (0.06 | ) | |||||||||||
Net Asset Value, End of Period | $10.65 | $9.15 | $8.31 | $12.03 | $12.51 | |||||||||||||||
Total Return(3) | 18.07 | % | 10.14 | % | (30.92 | )% | 0.49 | % | 24.44 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Ratio of Operating Expenses to Average Net Assets | 1.11 | % | 1.11 | % | 1.11 | % | 1.11 | % | 1.10 | % | ||||||||||
Ratio of Net Investment Income (Loss) to Average Net Assets | 1.04 | % | 1.19 | % | 0.65 | % | 0.13 | % | 1.24 | % | ||||||||||
Portfolio Turnover Rate | 271 | % | 242 | % | 305 | % | 188 | % | 255 | % | ||||||||||
Net Assets, End of Period (in thousands) | $7,638 | $10,272 | $13,594 | $35,334 | $8,614 |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Per-share amount was less than $0.005. |
(3) | 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.
21
Institutional Class | ||||||||||||||||||||
For a Share Outstanding Throughout the Years Ended July 31 | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per-Share Data | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $9.18 | $8.34 | $12.04 | $12.53 | $10.11 | |||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net Investment Income (Loss)(1) | 0.13 | 0.13 | 0.06 | 0.06 | 0.18 | |||||||||||||||
Net Realized and Unrealized Gain (Loss) | 1.54 | 0.73 | (3.76 | ) | 0.13 | 2.31 | ||||||||||||||
Total From Investment Operations | 1.67 | 0.86 | (3.70 | ) | 0.19 | 2.49 | ||||||||||||||
Distributions | ||||||||||||||||||||
From Net Investment Income | (0.16 | ) | (0.02 | ) | — | (0.08 | ) | (0.07 | ) | |||||||||||
From Net Realized Gains | — | — | — | (0.46 | ) | — | ||||||||||||||
From Tax Return of Capital | — | — | — | (0.14 | ) | — | ||||||||||||||
Total Distributions | (0.16 | ) | (0.02 | ) | — | (0.68 | ) | (0.07 | ) | |||||||||||
Net Asset Value, End of Period | $10.69 | $9.18 | $8.34 | $12.04 | $12.53 | |||||||||||||||
Total Return(2) | 18.36 | % | 10.33 | % | (30.73 | )% | 0.61 | % | 24.78 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Ratio of Operating Expenses to Average Net Assets | 0.91 | % | 0.91 | % | 0.91 | % | 0.91 | % | 0.90 | % | ||||||||||
Ratio of Net Investment Income (Loss) to Average Net Assets | 1.24 | % | 1.39 | % | 0.85 | % | 0.33 | % | 1.44 | % | ||||||||||
Portfolio Turnover Rate | 271 | % | 242 | % | 305 | % | 188 | % | 255 | % | ||||||||||
Net Assets, End of Period (in thousands) | $33 | $34 | $32 | $3,751 | $3,561 |
(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.
22
Advisor Class | ||||||||||||||||||||
For a Share Outstanding Throughout the Years Ended July 31 | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per-Share Data | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $9.09 | $8.28 | $12.01 | $12.49 | $10.11 | |||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net Investment Income (Loss)(1) | 0.06 | 0.08 | 0.03 | (0.01 | ) | 0.10 | ||||||||||||||
Net Realized and Unrealized Gain (Loss) | 1.55 | 0.73 | (3.76 | ) | 0.14 | 2.33 | ||||||||||||||
Total From Investment Operations | 1.61 | 0.81 | (3.73 | ) | 0.13 | 2.43 | ||||||||||||||
Distributions | ||||||||||||||||||||
From Net Investment Income | (0.12 | ) | — | — | (0.05 | ) | (0.05 | ) | ||||||||||||
From Net Realized Gains | — | — | — | (0.46 | ) | — | ||||||||||||||
From Tax Return of Capital | — | — | — | (0.10 | ) | — | ||||||||||||||
Total Distributions | (0.12 | ) | — | — | (0.61 | ) | (0.05 | ) | ||||||||||||
Net Asset Value, End of Period | $10.58 | $9.09 | $8.28 | $12.01 | $12.49 | |||||||||||||||
Total Return(2) | 17.78 | % | 9.78 | % | (31.06 | )% | 0.24 | % | 24.07 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Ratio of Operating Expenses to Average Net Assets | 1.36 | % | 1.36 | % | 1.36 | % | 1.36 | % | 1.35 | % | ||||||||||
Ratio of Net Investment Income (Loss) to Average Net Assets | 0.79 | % | 0.94 | % | 0.40 | % | (0.12 | )% | 0.99 | % | ||||||||||
Portfolio Turnover Rate | 271 | % | 242 | % | 305 | % | 188 | % | 255 | % | ||||||||||
Net Assets, End of Period (in thousands) | $399 | $68 | $146 | $945 | $960 |
(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.
23
R Class | ||||||||||||||||||||
For a Share Outstanding Throughout the Years Ended July 31 | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per-Share Data | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $9.03 | $8.24 | $11.99 | $12.47 | $10.10 | |||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net Investment Income (Loss)(1) | 0.05 | 0.06 | — | (2) | 0.01 | 0.07 | ||||||||||||||
Net Realized and Unrealized Gain (Loss) | 1.52 | 0.73 | (3.75 | ) | 0.08 | �� | 2.33 | |||||||||||||
Total From Investment Operations | 1.57 | 0.79 | (3.75 | ) | 0.09 | 2.40 | ||||||||||||||
Distributions | ||||||||||||||||||||
From Net Investment Income | (0.09 | ) | — | — | (0.04 | ) | (0.03 | ) | ||||||||||||
From Net Realized Gains | — | — | — | (0.46 | ) | — | ||||||||||||||
From Tax Return of Capital | — | — | — | (0.07 | ) | — | ||||||||||||||
Total Distributions | (0.09 | ) | — | — | (0.57 | ) | (0.03 | ) | ||||||||||||
Net Asset Value, End of Period | $10.51 | $9.03 | $8.24 | $11.99 | $12.47 | |||||||||||||||
Total Return(3) | 17.49 | % | 9.59 | % | (31.28 | )% | (0.02 | )% | 23.82 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Ratio of Operating Expenses to Average Net Assets | 1.61 | % | 1.61 | % | 1.61 | % | 1.61 | % | 1.60 | % | ||||||||||
Ratio of Net Investment Income (Loss) to Average Net Assets | 0.54 | % | 0.69 | % | 0.15 | % | (0.37 | )% | 0.74 | % | ||||||||||
Portfolio Turnover Rate | 271 | % | 242 | % | 305 | % | 188 | % | 255 | % | ||||||||||
Net Assets, End of Period (in thousands) | $18 | $16 | $14 | $64 | $938 |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Per-share amount was less than $0.005. |
(3) | 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.
24
To the Shareholders and Board of Directors of
American Century Growth Funds, Inc.:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Legacy Focused Large Cap Fund, one of the funds constituting American Century Growth Funds, Inc. (the “Corporation”) as of July 31, 2011, and 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, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Corporation is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2011, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Legacy Focused Large Cap Fund of American Century Growth Funds, Inc. as of July 31, 2011, 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.
Deloitte & Touche LLP
Kansas City, Missouri
September 20, 2011
25
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 mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors), is 72. However, the mandatory retirement age for an individual director may be extended with the approval of the remaining independent directors.
Mr. Thomas is the only director who 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; that is, they have never been 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). The directors serve in this capacity for seven (in the case of Mr. Thomas, 15) registered investment companies in the American Century Investments family of funds.
The following 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 A. Brown (1940) | Director | Since 1980 | Managing Member, Associated Investments, LLC (real estate investment company); Brown Cascade Properties, LLC (real estate investment company) (2001 to 2009) | 64 | None |
Andrea C. Hall (1945) | Director | Since 1997 | Retired as advisor to the President, Midwest Research Institute (not-for-profit research organization) (June 2006) | 64 | None |
Jan M. Lewis (1957) | Director | Since 2011 | President and Chief Executive Officer, Catholic Charities of Northeast Kansas (human services organization)(2006 to present); President, BUCON, Inc. (full-service design-build construction company) (2004 to 2006) | 64 | None |
James A. Olson (1942) | Director | Since 2007 | Member, Plaza Belmont LLC (private equity fund manager); Chief Financial Officer, Plaza Belmont LLC (September 1999 to September 2006) | 64 | Saia, Inc. and Entertainment Properties Trust |
26
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 |
Donald H. Pratt (1937) | Director and Chairman of the Board | Since 1995 (Chairman since 2005) | Chairman and Chief Executive Officer, Western Investments, Inc. (real estate company) | 64 | None |
M. Jeannine Strandjord (1945) | Director | Since 1994 | Retired | 64 | DST Systems Inc., Euronet Worldwide Inc., and Charming Shoppes, Inc. |
John R. Whitten (1946) | Director | Since 2008 | Project Consultant, Celanese Corp. (industrial chemical company) | 64 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Advisory Director | Since 2011 | Retired; Executive Vice President, Technology & Operations, KeyCorp. (computer services)(2004 to 2010) | 64 | Applied Industrial Technology (2001 to 21010) |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director and President | Since 2007 | President and Chief Executive Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC (February 2006 to February 2007); Executive Vice President, ACC (November 2005 to February 2007). Also serves as: Chief Executive Officer and Manager, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 104 | None |
27
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for each of the 15 investment companies in the American Century family of funds, unless otherwise noted. 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 |
Jonathan S. Thomas (1963) | Director and President since 2007 | President and Chief Executive Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC (February 2006 to February 2007); Executive Vice President, ACC (November 2005 to February 2007). Also serves as: Chief Executive Officer and Manager, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries |
Barry Fink (1955) | Executive Vice President since 2007 | Chief Operating Officer and Executive Vice President, ACC (September 2007 to present); President, ACS (October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007); Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as: Manager, ACS and Director, ACC and certain ACC subsidiaries |
Maryanne L. Roepke (1956) | Chief Compliance Officer since 2006 and Senior Vice President since 2000 | Chief Compliance Officer, American Century funds, ACIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995 to August 2006); and Treasurer and Chief Financial Officer, various American Century funds (July 2000 to August 2006). Also serves as: Senior Vice President, ACS |
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (February 1994 to present); Vice President, ACC (November 2005 to present), General Counsel, ACC (March 2007 to present); Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
Robert J. Leach (1966) | Vice President, Treasurer and Chief Financial Officer since 2006 | Vice President, ACS (February 2000 to present); and Controller, various American Century funds (1997 to September 2006) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (January 1994 to present); Associate General Counsel, ACC (January 2001 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (June 2003 to present) |
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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At a meeting held on June 9, 2011, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s independent directors (the “Directors”) each year.
As a part of the approval process, the Board requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis throughout the year and included, but was not limited to the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
• | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
• | the investment performance of the fund, including data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | data comparing the cost of owning the Fund to the cost of owning similar funds; |
• | the Advisor’s compliance policies, procedures, and regulatory experience; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
• | data comparing services provided and charges to other investment management clients of the Advisor; and |
• | consideration of collateral benefits derived by the Advisor from the management of the Fund and any potential economies of scale relating thereto. |
In keeping with its practice, the Board held two in-person meetings and one telephonic meeting to review and discuss the information provided. The Directors also had the benefit of the advice of independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
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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 under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
• | constructing and designing the Fund |
• | portfolio research and security selection |
• | initial capitalization/funding |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different
30
time horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Taking all these factors into consideration, the Board found the investment management services provided by the Advisor to the Fund to meet or exceed industry standards. More detailed information about the Fund’s performance can be found in the Performance and Portfolio Commentary sections of this report.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. The financial information regarding the Advisor is considered in evaluating the Advisor’s financial condition, ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
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Comparison to Other Funds’ Fees. The management agreement provides that the Fund pay the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider and comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit 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, however, that the assets of those other clients are not material to the analysis and, where applicable, may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
32
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, concluded that the management agreement between the Fund and the Advisor is fair and reasonable in light of the services provided and should be renewed.
33
Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans 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. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election.
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. State taxes will be withheld from your distribution in accordance with the respective state rules.
Proxy Voting Guidelines
American Century Investment Management, Inc., the fund’s investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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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 July 31, 2011.
For corporate taxpayers, the fund hereby designates $136,647, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended July 31, 2011 as qualified for the corporate dividends received deduction.
35
36
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 Device for the Deaf | 1-800-634-4113 |
American Century Growth 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.
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
CL-ANN-72768 1109
ANNUAL REPORT JULY 31, 2011
Legacy Large Cap Fund |
President’s Letter | 2 |
Independent Chairman’s Letter | 3 |
Market Perspective | 4 |
Performance | 5 |
Portfolio Commentary | 6 |
Fund Characteristics | 8 |
Shareholder Fee Example | 9 |
Schedule of Investments | 11 |
Statement of Assets and Liabilities | 13 |
Statement of Operations | 14 |
Statement of Changes in Net Assets | 15 |
Notes to Financial Statements | 16 |
Financial Highlights | 21 |
Report of Independent Registered Public Accounting Firm | 25 |
Management | 26 |
Approval of Management Agreement | 29 |
Additional Information | 34 |
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.
Dear Investor:
Thank you for reviewing this annual report for the period ended July 31, 2011. Our report offers investment performance and portfolio information, presented with the expert perspective and commentary of our portfolio management team.
This report remains one of our most important vehicles for conveying information about investment performance, as well as the market factors and strategies that affect fund returns. For additional, updated information on fund performance, portfolio strategy, and the investment markets, we encourage you to visit our website, americancentury.com. Click on the “Fund Performance” and “Insights & News” headings at the top of our Individual Investors site.
Reporting Period Perspective: “Risk Rally” Ended, Economic Growth Lost Momentum
Benefiting from optimism, risk appetites, expanding corporate earnings, and other investment conditions that may prove difficult to sustain, global stock and high-yield corporate bond markets produced above-average returns for the 12 months ended July 31, 2011. Meanwhile, high-quality bonds lagged. Conditions shifted significantly during the last three months of the fiscal year—not enough to fully change the “risk was rewarded” theme of the period, but certainly enough to suggest greater caution ahead.
Broad stock market indices generally gained 15–30% during the period as monetary and fiscal intervention in 2010 stimulated growth and fueled investor optimism about economic and financial market conditions in 2011 and 2012. Most notably, the U.S. Federal Reserve launched its second round of quantitative easing (QE2), involving the purchase of U.S. government securities. This was designed to increase the money supply and encourage investors to purchase potentially higher-risk/higher-return assets, such as stocks.
Anticipation of QE2 and its potential impact, along with robust corporate earnings growth, helped trigger a “risk rally” that extended from August 2010 through April 2011. But the rally ran out of steam in May and June of 2011 as QE2 ended, the European debt crisis returned to prominence, and other debt and global economic challenges emerged. Concerns about fiscal austerity measures in debt-ridden countries revived recession fears and deflated global equity market returns. We appreciate your continued trust in us during these uncertain times.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Dear Fellow Shareholders,
With an existing vacancy and several directors approaching retirement age over the next few years, your American Century Investments Kansas City-based mutual fund board of directors recently addressed board succession planning. The board developed a succession plan and conducted an extensive search that yielded two new members who joined the board in 2011.
As part of the planning process, the board referred to the criteria for potential new directors set forth in its director nomination policy adopted in 2009. A nomination process generated more than 20 candidates whose credentials were reviewed by the board’s Governance Committee. Six candidates were selected by the committee for telephone interviews. Three were then chosen for in person interviews.
The committee recommended, and the full board approved, the addition of Jan Lewis, currently the President and Chief Executive Officer of Catholic Charities of Northeast Kansas, to fill the vacant board seat and the addition as an advisory director of Stephen E. Yates, who recently retired as Executive Vice President, Technology and Operations at Keycorp of Cleveland, Ohio. Mr. Yates will serve in an advisory capacity for 12–18 months before becoming an active director. Both of these additions bring operating management experience and unique perspectives to our various tasks.
We look forward to the contributions of our new directors to our efforts as shareholder representatives and thank the Governance Committee for their thorough search process.
If you have comments, suggestions or questions send them to me at dhpratt@fundboardchair.com.
Best regards,
Don Pratt
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By David Hollond, Chief Investment Officer,
U.S. Growth Equity — Mid & Small Cap
Stocks Gained as Economy Improved
The U.S. stock market generated solid results for the 12-month period ended July 31, 2011, with broad equity markets gaining more than 20%. Driving the rally was growing investor confidence in U.S. economic recovery, although that confidence eroded somewhat in the final months of the period.
After a bumpy start stemming from an uncertain economic outlook, the equity market began a steady rise in September 2010, as improving data apparently quelled investor concerns of a “double-dip” recession (a return to recession after a brief period of recovery). Notably, employment growth figures turned positive after 2 ½ years of persistent job losses, and the manufacturing sector showed renewed signs of life. A second round of the Federal Reserve’s quantitative easing program and an extension of expiring tax breaks through 2012 further reassured markets that a promising economic recovery was underway.
New challenges in early 2011 included political unrest in the Middle East and Africa, as well as a devastating earthquake and tsunami in Japan. Nevertheless, equities gained ground until May, when evidence of a slowdown in economic activity and renewed concerns surrounding sovereign debt in Europe weighed on investor confidence. As a result, markets declined modestly in the following months. As the reporting period came to a close, both chambers of Congress debated over a bill to raise the federal debt ceiling and reduce government spending, and stocks pulled back amid heightened levels of volatility.
As the table below illustrates, mid- and small-cap shares generated the strongest returns, outpacing large-cap issues. Growth stocks outperformed value across all market capitalizations, particularly among smaller companies. Every sector of the market delivered positive results, led by energy, which benefited from rising prices. The industrials and materials sectors also performed well, while the financials sector was the laggard for the reporting period.
Market Index Total Returns | ||||
For the 12 months ended July 31, 2011 | ||||
U.S. Stocks | ||||
Russell 1000 Index (Large-Cap) | 20.68 | % | ||
Russell Midcap Index | 24.51 | % | ||
Russell 2000 Index (Small-Cap) | 23.92 | % | ||
Foreign Stocks | ||||
MSCI EAFE (Europe, Australasia, Far East) Index | 17.17 | % | ||
MSCI Emerging Markets Index | 17.45 | % |
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Total Returns as of July 31, 2011 | |||||
Average Annual Returns | |||||
Ticker Symbol | 1 year | 5 years | Since Inception | Inception Date | |
Investor Class | ACGOX | 21.69% | 2.52% | 2.74% | 5/31/06 |
S&P 500 Index | — | 19.65% | 2.39% | 2.47% | — |
Russell 1000 Growth Index | — | 24.76% | 5.52% | 4.87% | — |
Institutional Class | ACGHX | 21.86% | 2.73% | 2.93% | 5/31/06 |
Advisor Class | ACGDX | 21.34% | 2.29% | 2.49% | 5/31/06 |
R Class | ACGEX | 21.02% | 2.01% | 2.22% | 5/31/06 |
Growth of $10,000 Over Life of Class |
$10,000 investment made May 31, 2006 |
*From 5/31/06, the Investor Class’s inception date. Not annualized.
Total Annual Fund Operating Expenses | |||
Investor Class | Institutional Class | Advisor Class | R Class |
1.11% | 0.91% | 1.36% | 1.61% |
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. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors. International investing involves special risks, such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. 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. Returns for the indices are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not.
5
Portfolio Managers: John T. Small Jr. and Stephen Pool
Performance Summary
Legacy Large Cap returned 21.69%* for the 12 months ended July 31, 2011, lagging the 24.76% return of the Russell 1000 Growth Index, but outperforming the 19.65% return of the S&P 500 Index.
As discussed in the Market Perspective on page 4, U.S. stock indices generally delivered solid returns during the reporting period amid signs of improving economic conditions and investor sentiment, although those factors faltered late in the period. In an environment of changing and volatile market conditions, Legacy Large Cap’s management team remained focused on the fundamental business prospects of its portfolio investments.
Although Legacy Large Cap delivered positive returns for the reporting period, its performance lagged that of the Russell 1000 Growth Index. The majority of the relative underperformance was attributable to stock decisions in the information technology, financials, and consumer discretionary sectors. Holdings in the industrials, materials, and telecommunications services sectors partially offset those relative losses.
Information Technology Led Underperformance
The information technology sector contributed positively to absolute returns for Legacy Large Cap, but was the largest source of relative underperformance. Two positions in the computers and peripherals industry, in particular, curbed relative returns. The portfolio held a stake in personal computer maker Apple, Inc. Although the company delivered strong earnings due to solid sales growth in its iPhone and iPad devices during the period, the position underperformed its benchmark returns for the time it was held in the portfolio. A position in SanDisk detracted from absolute and relative performance. The maker of flash memory card products experienced a profit decline during the reporting period as rising costs crimped margins.
Also in the sector, a handful of detrimental positions in the semiconductor, IT services, and software industries trimmed relative performance.
Although the information technology sector as a whole detracted from relative performance, some holdings contributed. In the internet software industry, Legacy Large Cap maintained a stake in Baidu, Inc., China’s dominant internet search engine. The company contributed substantially to performance, achieving solid earnings growth as a result of market share gains and increased revenue per customer.
Financials and Consumer Discretionary Detracted
Within the financials sector, the portfolio held several detrimental positions in the insurance industry. Notably, insurer American International Group registered a sharp decline in first quarter 2011 earnings as it declared a $3.3 billion charge to eliminate debt. Elsewhere in the financials sector, Legacy Large Cap held positions in the consumer finance and commercial banks industry groups that weighed on relative performance.
*All fund returns referenced in this commentary are for Investor Class shares.
6
In the consumer discretionary sector, Legacy Large Cap’s stock choices in the specialty retail industry collectively detracted from relative performance. Detractors included big box electronics chain Best Buy, which delivered earnings that fell below analysts’ expectations. The portfolio also held detrimental positions in the hotels, restaurants, and leisure industry and the auto components industry.
Industrials, Materials, Telecommunications Contributed
The industrials sector was a source of relative outperformance. As commodity prices climbed during the reporting period, companies in the sector outperformed the broader Russell 1000 Growth Index. Legacy Large Cap benefited from overweight stakes in the sector, particularly within the machinery industry. An overweight position in road and rail company Union Pacific Corp. also contributed to relative gains.
Similarly, holdings in the materials sector as a group benefited from a rise in commodity prices during the period. In the telecommunications services sector, the portfolio held several positions in the diversified telecommunications group that added to relative performance, largely due to increasing demand in emerging markets.
Some Health Care Holdings Contributed
Legacy Large Cap was rewarded for its overweight allocation to the health care sector. Within the sector, an overweight position in UnitedHealth Group, Inc. added substantially to relative gains. The company delivered solid earnings growth due largely to better medical cost trends and an increase in members.
Outlook
We remain cautiously optimistic in our market outlook. Despite volatile conditions, markets have performed positively in the past year. Nonetheless, we continue to look for more meaningful improvements in economic conditions. Regardless of conditions, Legacy Large Cap employs financial acceleration and price momentum screens to identify investment opportunities in any given economic environment. As always, it will employ a quantitative model to exploit large-cap investment opportunities across the growth and value spectrums.
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JULY 31, 2011 | |
Top Ten Holdings | % of net assets |
UnitedHealth Group, Inc. | 3.2% |
Dover Corp. | 2.8% |
International Business Machines Corp. | 2.8% |
Lorillard, Inc. | 2.7% |
Texas Instruments, Inc. | 2.6% |
AutoZone, Inc. | 2.6% |
McKesson Corp. | 2.5% |
Chevron Corp. | 2.5% |
Coca-Cola Co. (The) | 2.5% |
Telecomunicacoes de Sao Paulo SA ADR | 2.5% |
Top Five Industries | % of net assets |
Oil, Gas & Consumable Fuels | 11.7% |
IT Services | 9.0% |
Semiconductors & Semiconductor Equipment | 8.4% |
Health Care Providers & Services | 8.0% |
Food & Staples Retailing | 7.0% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 77.2% |
Foreign Common Stocks* | 24.0% |
Total Common Stocks | 101.2% |
Other Assets and Liabilities | (1.2)% |
* | Includes depositary shares, dual listed securities and foreign ordinary shares. |
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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 February 1, 2011 to July 31, 2011.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. 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.
9
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 2/1/11 | Ending Account Value 7/31/11 | Expenses Paid During Period* 2/1/11 – 7/31/11 | Annualized Expense Ratio* | |
Actual | ||||
Investor Class | $1,000 | $1,046.30 | $5.58 | 1.10% |
Institutional Class | $1,000 | $1,046.20 | $4.57 | 0.90% |
Advisor Class | $1,000 | $1,045.50 | $6.85 | 1.35% |
R Class | $1,000 | $1,043.60 | $8.11 | 1.60% |
Hypothetical | ||||
Investor Class | $1,000 | $1,019.34 | $5.51 | 1.10% |
Institutional Class | $1,000 | $1,020.33 | $4.51 | 0.90% |
Advisor Class | $1,000 | $1,018.10 | $6.76 | 1.35% |
R Class | $1,000 | $1,016.86 | $8.00 | 1.60% |
* | 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 181, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. |
10
JULY 31, 2011
Shares | Value | |
Common Stocks — 101.2% | ||
AEROSPACE & DEFENSE — 4.3% | ||
Lockheed Martin Corp. | 1,816 | $ 137,526 |
Raytheon Co. | 2,836 | 126,854 |
264,380 | ||
AUTO COMPONENTS — 0.4% | ||
Magna International, Inc. | 450 | 21,947 |
BEVERAGES — 2.5% | ||
Coca-Cola Co. (The) | 2,280 | 155,063 |
BIOTECHNOLOGY — 1.9% | ||
Pharmasset, Inc.(1) | 980 | 118,952 |
CHEMICALS — 2.8% | ||
E.I. du Pont de Nemours & Co. | 987 | 50,752 |
LyondellBasell Industries NV, Class A | 3,061 | 120,787 |
171,539 | ||
DIVERSIFIED TELECOMMUNICATION SERVICES — 4.7% | ||
Telecomunicacoes de Sao Paulo SA ADR | 4,887 | 155,015 |
TELUS Corp. | 2,531 | 133,308 |
288,323 | ||
ELECTRIC UTILITIES — 1.4% | ||
Companhia Energetica de Minas Gerais ADR | 4,474 | 86,348 |
FOOD & STAPLES RETAILING — 7.0% | ||
Costco Wholesale Corp. | 1,905 | 149,066 |
Walgreen Co. | 3,453 | 134,805 |
Wal-Mart Stores, Inc. | 2,732 | 144,004 |
427,875 | ||
FOOD PRODUCTS — 2.4% | ||
Green Mountain Coffee Roasters, Inc.(1) | 1,421 | 147,713 |
GAS UTILITIES — 0.2% | ||
UGI Corp. | 328 | 9,938 |
HEALTH CARE EQUIPMENT & SUPPLIES — 2.3% | ||
Becton, Dickinson & Co. | 1,687 | 141,050 |
HEALTH CARE PROVIDERS & SERVICES — 8.0% | ||
Cardinal Health, Inc. | 3,260 | 142,657 |
McKesson Corp. | 1,923 | 155,994 |
UnitedHealth Group, Inc. | 3,916 | 194,351 |
493,002 | ||
HOTELS, RESTAURANTS & LEISURE — 2.9% | ||
McDonald’s Corp. | 1,770 | 153,070 |
Yum! Brands, Inc. | 438 | 23,135 |
176,205 | ||
INSURANCE — 3.2% | ||
Chubb Corp. (The) | 2,184 | 136,456 |
Travelers Cos., Inc. (The) | 1,057 | 58,273 |
194,729 | ||
INTERNET & CATALOG RETAIL — 0.9% | ||
priceline.com, Inc.(1) | 100 | 53,765 |
IT SERVICES — 9.0% | ||
Accenture plc, Class A | 2,331 | 137,855 |
Broadridge Financial Solutions, Inc. | 1,409 | 32,492 |
Infosys Ltd. ADR | 1,311 | 81,570 |
International Business Machines Corp. | 943 | 171,485 |
Western Union Co. (The) | 6,521 | 126,573 |
549,975 | ||
MACHINERY — 2.8% | ||
Dover Corp. | 2,857 | 172,763 |
MEDIA — 2.1% | ||
Cablevision Systems Corp., Class A | 520 | 12,667 |
Omnicom Group, Inc. | 2,018 | 94,685 |
Pearson plc ADR | 1,006 | 19,164 |
126,516 | ||
METALS & MINING — 2.9% | ||
Freeport-McMoRan Copper & Gold, Inc. | 2,856 | 151,254 |
Rio Tinto plc ADR | 330 | 23,423 |
174,677 | ||
MULTILINE RETAIL — 0.5% | ||
Kohl’s Corp. | 525 | 28,723 |
MULTI-UTILITIES — 0.1% | ||
DTE Energy Co. | 123 | 6,130 |
OFFICE ELECTRONICS — 2.3% | ||
Canon, Inc. ADR | 2,932 | 141,674 |
OIL, GAS & CONSUMABLE FUELS — 11.7% | ||
Chevron Corp. | 1,492 | 155,198 |
ConocoPhillips | 2,094 | 150,747 |
Enterprise Products Partners LP | 3,144 | 130,759 |
Marathon Oil Corp. | 4,028 | 124,747 |
NuStar Energy LP | 610 | 38,436 |
YPF SA ADR | 2,723 | 115,918 |
715,805 | ||
PHARMACEUTICALS — 3.5% | ||
AstraZeneca plc ADR | 107 | 5,190 |
Eli Lilly & Co. | 2,321 | 88,894 |
Novo Nordisk A/S ADR | 979 | 119,458 |
213,542 |
11
Shares | Value |
ROAD & RAIL — 0.8% | ||
Union Pacific Corp. | 499 | $ 51,138 |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 8.4% | ||
Analog Devices, Inc. | 3,408 | 117,235 |
ASML Holding NV New York Shares | 1,060 | 37,789 |
Intel Corp. | 2,961 | 66,119 |
Taiwan Semiconductor Manufacturing Co. Ltd. ADR | 10,838 | 133,958 |
Texas Instruments, Inc. | 5,296 | 157,556 |
512,657 | ||
SOFTWARE — 3.2% | ||
Check Point Software Technologies Ltd.(1) | 722 | 41,623 |
Fortinet, Inc.(1) | 2,490 | 50,597 |
Oracle Corp. | 3,440 | 105,195 |
197,415 | ||
SPECIALTY RETAIL — 2.6% | ||
AutoZone, Inc.(1) | 551 | 157,283 |
TOBACCO — 4.9% | ||
Lorillard, Inc. | 1,561 | 165,809 |
Philip Morris International, Inc. | 1,926 | 137,074 |
302,883 | ||
WIRELESS TELECOMMUNICATION SERVICES — 1.5% | ||
NTT DoCoMo, Inc. ADR | 5,055 | 93,720 |
TOTAL INVESTMENT SECURITIES — 101.2%(Cost $5,689,807) | 6,195,730 | |
OTHER ASSETS AND LIABILITIES — (1.2)% | (70,977) | |
TOTAL NET ASSETS — 100.0% | $6,124,753 |
Geographic Diversification | |
(as a % of net assets) | |
United States | 77.2% |
Brazil | 3.9% |
Japan | 3.8% |
Netherlands | 2.6% |
Canada | 2.5% |
Ireland | 2.3% |
Taiwan (Republic of China) | 2.2% |
Denmark | 2.0% |
Argentina | 1.9% |
India | 1.3% |
United Kingdom | 0.8% |
Israel | 0.7% |
Other Assets and Liabilities | (1.2)% |
Notes to Schedule of Investments
ADR = American Depositary Receipt
(1) | Non-income producing. |
See Notes to Financial Statements.
12
JULY 31, 2011 | ||||
Assets | ||||
Investment securities, at value (cost of $5,689,807) | $6,195,730 | |||
Receivable for capital shares sold | 785 | |||
Dividends and interest receivable | 8,395 | |||
6,204,910 | ||||
Liabilities | ||||
Disbursements in excess of demand deposit cash | 73,585 | |||
Payable for capital shares redeemed | 514 | |||
Accrued management fees | 5,981 | |||
Distribution and service fees payable | 77 | |||
80,157 | ||||
Net Assets | $6,124,753 | |||
Net Assets Consist of: | ||||
Capital (par value and paid-in surplus) | $8,750,249 | |||
Undistributed net investment income | 48,016 | |||
Accumulated net realized loss | (3,179,435 | ) | ||
Net unrealized appreciation | 505,923 | |||
$6,124,753 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Investor Class, $0.01 Par Value | $5,742,234 | 540,540 | $10.62 | |||||||||
Institutional Class, $0.01 Par Value | $64,042 | 6,012 | $10.65 | |||||||||
Advisor Class, $0.01 Par Value | $291,899 | 27,601 | $10.58 | |||||||||
R Class, $0.01 Par Value | $26,578 | 2,523 | $10.53 |
See Notes to Financial Statements.
13
YEAR ENDED JULY 31, 2011 | ||||
Investment Income (Loss) | ||||
Income: | ||||
Dividends (net of foreign taxes withheld of $95) | $160,476 | |||
Interest | 53 | |||
160,529 | ||||
Expenses: | ||||
Management fees | 74,843 | |||
Distribution and service fees: | ||||
Advisor Class | 805 | |||
R Class | 1,862 | |||
Directors’ fees and expenses | 292 | |||
Other expenses | 726 | |||
78,528 | ||||
Net investment income (loss) | 82,001 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on investment transactions | 1,641,256 | |||
Change in net unrealized appreciation (depreciation) on investments | (334,143 | ) | ||
Net realized and unrealized gain (loss) | 1,307,113 | |||
Net Increase (Decrease) in Net Assets Resulting from Operations | $1,389,114 |
See Notes to Financial Statements.
14
YEARS ENDED JULY 31, 2011 AND JULY 31, 2010 | ||||||||
Increase (Decrease) in Net Assets | 2011 | 2010 | ||||||
Operations | ||||||||
Net investment income (loss) | $82,001 | $71,641 | ||||||
Net realized gain (loss) | 1,641,256 | 1,118,669 | ||||||
Change in net unrealized appreciation (depreciation) | (334,143 | ) | (476,093 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 1,389,114 | 714,217 | ||||||
Distributions to Shareholders | ||||||||
From net investment income: | ||||||||
Investor Class | (54,847 | ) | (70,574 | ) | ||||
Institutional Class | (5,170 | ) | (4,710 | ) | ||||
Advisor Class | (2,369 | ) | (1,987 | ) | ||||
R Class | (2,170 | ) | (1,880 | ) | ||||
Decrease in net assets from distributions | (64,556 | ) | (79,151 | ) | ||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions | (2,255,712 | ) | (2,921,474 | ) | ||||
Net increase (decrease) in net assets | (931,154 | ) | (2,286,408 | ) | ||||
Net Assets | ||||||||
Beginning of period | 7,055,907 | 9,342,315 | ||||||
End of period | $6,124,753 | $7,055,907 | ||||||
Undistributed net investment income | $48,016 | $64,463 |
See Notes to Financial Statements.
15
JULY 31, 2011
1. Organization
American Century Growth 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. Legacy Large Cap Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. The fund pursues its objective by investing primarily in stocks of large-sized market capitalization companies.
The fund is authorized to issue the Investor Class, the Institutional Class, the Advisor Class and the R Class. The share classes differ principally in their respective distribution and shareholder servicing expenses and arrangements. The Institutional Class is made available to institutional shareholders or through financial intermediaries whose clients do not require the same level of shareholder and administrative services as shareholders of other classes. As a result, the Institutional Class is charged a lower unified management fee.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share as of 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.
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 typically valued at the closing price on the exchange where primarily traded or as of 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 is used. Depending on local convention or regulation, 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. In its determination of fair value, the fund may review several factors including: market information specific to a security; news developments in U.S. and foreign markets; the performance of particular U.S. and foreign securities, indices, comparable securities, American Depositary Receipts, Exchange-Traded Funds, and other relevant market indicators.
Debt securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors, trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, and other relevant market information on the same or comparable securities.
Investments in open-end management investment companies are valued at the reported net asset value per share.
If the fund determines that the market price for a portfolio security is not readily available or the valuation methods mentioned above do not reflect a security’s fair value, such security is valued as determined in good faith by the Board of Directors or its designee, in accordance with procedures adopted by the Board of Directors. Circumstances that may cause the fund to use these procedures to value a security include, but are not limited to: a security has been declared in default; trading in a security has been halted during the trading day; there is a foreign market holiday and no trading occurred; or an event occurred between the close of a foreign exchange and the NYSE that may affect the value of a security.
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Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund estimates the components of distributions received that may be considered nontaxable distributions or capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
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. The fund is no longer subject to examination by tax authorities for years prior to 2008. 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. Accordingly, no provision has been made for federal or state income taxes.
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.
3. Fees and Transactions with Related Parties
Management Fees — The corporation has entered into a management agreement with American Century Investment Management, Inc. (ACIM) (the investment advisor), under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The annual management fee schedule ranges from 0.80% to 1.10% for the Investor Class, Advisor Class and R Class. The Institutional Class is 0.20% less at each point within the range. The effective annual management fee for each class for the year ended July 31, 2011 was 1.10% for the Investor Class, Advisor Class and R Class and 0.90% for the Institutional Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the Advisor Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the Advisor Class will pay American Century Investment Services, Inc. (ACIS) an annual distribution and service fee of 0.25%. 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
17
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 year ended July 31, 2011 are detailed in the Statement of Operations.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, ACIS, and the corporation’s transfer agent, American Century Services, LLC.
The fund is eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund has a mutual funds services agreement with J.P. Morgan Investor Services Co. (JPMIS). JPMorgan Chase Bank (JPMCB) is a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). Prior to August 31, 2011, JPM was an equity investor in ACC. The services provided to the fund by JPMIM, JPMIS and JPMCB terminated on July 31, 2011.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the year ended July 31, 2011 were $13,134,427 and $15,144,375, respectively.
5. Capital Share Transactions
The corporation is authorized to issue 3,000,000,000 shares. Transactions in shares of the fund were as follows:
Year ended July 31, 2011 | Year ended July 31, 2010 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Investor Class | ||||||||||||||||
Sold | 74,738 | $748,777 | 117,375 | $1,047,090 | ||||||||||||
Issued in reinvestment of distributions | 5,286 | 52,277 | 7,267 | 66,276 | ||||||||||||
Redeemed | (209,029 | ) | (2,034,204 | ) | (384,933 | ) | (3,431,672 | ) | ||||||||
(129,005 | ) | (1,233,150 | ) | (260,291 | ) | (2,318,306 | ) | |||||||||
Institutional Class | ||||||||||||||||
Sold | — | — | 1,638 | 14,965 | ||||||||||||
Issued in reinvestment of distributions | 522 | 5,170 | 515 | 4,710 | ||||||||||||
Redeemed | (39,823 | ) | (433,436 | ) | (40,887 | ) | (377,955 | ) | ||||||||
(39,301 | ) | (428,266 | ) | (38,734 | ) | (358,280 | ) | |||||||||
Advisor Class | ||||||||||||||||
Sold | 4,966 | 53,901 | 17,496 | 152,915 | ||||||||||||
Issued in reinvestment of distributions | 240 | 2,369 | 218 | 1,987 | ||||||||||||
Redeemed | (14,448 | ) | (146,078 | ) | (14,584 | ) | (127,009 | ) | ||||||||
(9,242 | ) | (89,808 | ) | 3,130 | 27,893 | |||||||||||
R Class | ||||||||||||||||
Sold | 228 | 2,377 | 6 | 50 | ||||||||||||
Issued in reinvestment of distributions | 220 | 2,170 | 207 | 1,880 | ||||||||||||
Redeemed | (47,228 | ) | (509,035 | ) | (30,024 | ) | (274,711 | ) | ||||||||
(46,780 | ) | (504,488 | ) | (29,811 | ) | (272,781 | ) | |||||||||
Net increase (decrease) | (224,328 | ) | $(2,255,712 | ) | (325,706 | ) | $(2,921,474 | ) |
18
6. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions 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 as follows:
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical securities; |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or |
• | 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 | ||||||||||
Investment Securities | ||||||||||||
Domestic Common Stocks | $4,726,983 | — | — | |||||||||
Foreign Common Stocks | 1,468,747 | — | — | |||||||||
Total Value of Investment Securities | $6,195,730 | — | — |
7. Risk Factors
The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social, and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions.
8. Federal Tax Information
The tax character of distributions paid during the years ended July 31, 2011 and July 31, 2010 were as follows:
2011 | 2010 | |||||||
Distributions Paid From | ||||||||
Ordinary income | $64,556 | $79,151 | ||||||
Long-term capital gains | — | — |
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.
19
As of July 31, 2011, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $5,687,249 | |||
Gross tax appreciation of investments | $569,501 | |||
Gross tax depreciation of investments | (61,020 | ) | ||
Net tax appreciation (depreciation) of investments | $508,481 | |||
Undistributed ordinary income | $48,016 | |||
Accumulated capital losses | $(3,181,993 | ) |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
The accumulated capital losses represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. Capital loss carryovers of $(1,773,472) and $(1,408,521) expire in 2017 and 2018, respectively.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused.
20
Investor Class | ||||||||||||||||||||
For a Share Outstanding Throughout the Years Ended July 31 | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per-Share Data | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $8.81 | $8.30 | $11.60 | $11.90 | $10.15 | |||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net Investment Income (Loss)(1) | 0.12 | 0.08 | 0.07 | 0.01 | 0.08 | |||||||||||||||
Net Realized and Unrealized Gain (Loss) | 1.78 | 0.51 | (3.37 | ) | 0.41 | 1.73 | ||||||||||||||
Total From Investment Operations | 1.90 | 0.59 | (3.30 | ) | 0.42 | 1.81 | ||||||||||||||
Distributions | ||||||||||||||||||||
From Net Investment Income | (0.09 | ) | (0.08 | ) | — | (0.03 | ) | (0.06 | ) | |||||||||||
From Net Realized Gains | — | — | — | (0.61 | ) | — | ||||||||||||||
From Tax Return of Capital | — | — | — | (0.08 | ) | — | ||||||||||||||
Total Distributions | (0.09 | ) | (0.08 | ) | — | (0.72 | ) | (0.06 | ) | |||||||||||
Net Asset Value, End of Period | $10.62 | $8.81 | $8.30 | $11.60 | $11.90 | |||||||||||||||
Total Return(2) | 21.69 | % | 7.13 | % | (28.45 | )% | 3.07 | % | 17.83 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Ratio of Operating Expenses to Average Net Assets | 1.11 | % | 1.11 | % | 1.10 | % | 1.11 | % | 1.10 | % | ||||||||||
Ratio of Net Investment Income (Loss) to Average Net Assets | 1.23 | % | 0.86 | % | 0.83 | % | 0.10 | % | 0.72 | % | ||||||||||
Portfolio Turnover Rate | 194 | % | 163 | % | 283 | % | 175 | % | 246 | % | ||||||||||
Net Assets, End of Period (in thousands) | $5,742 | $5,901 | $7,714 | $13,487 | $5,887 |
(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.
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Institutional Class | ||||||||||||||||||||
For a Share Outstanding Throughout the Years Ended July 31 | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per-Share Data | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $8.84 | $8.32 | $11.61 | $11.92 | $10.15 | |||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net Investment Income (Loss)(1) | 0.13 | 0.09 | 0.08 | 0.04 | 0.10 | |||||||||||||||
Net Realized and Unrealized Gain (Loss) | 1.79 | 0.53 | (3.37 | ) | 0.40 | 1.74 | ||||||||||||||
Total From Investment Operations | 1.92 | 0.62 | (3.29 | ) | 0.44 | 1.84 | ||||||||||||||
Distributions | ||||||||||||||||||||
From Net Investment Income | (0.11 | ) | (0.10 | ) | — | (0.04 | ) | (0.07 | ) | |||||||||||
From Net Realized Gains | — | — | — | (0.61 | ) | — | ||||||||||||||
From Tax Return of Capital | — | — | — | (0.10 | ) | — | ||||||||||||||
Total Distributions | (0.11 | ) | (0.10 | ) | — | (0.75 | ) | (0.07 | ) | |||||||||||
Net Asset Value, End of Period | $10.65 | $8.84 | $8.32 | $11.61 | $11.92 | |||||||||||||||
Total Return(2) | 21.86 | % | 7.45 | % | (28.34 | )% | 3.19 | % | 18.16 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Ratio of Operating Expenses to Average Net Assets | 0.91 | % | 0.91 | % | 0.90 | % | 0.91 | % | 0.90 | % | ||||||||||
Ratio of Net Investment Income (Loss) to Average Net Assets | 1.43 | % | 1.06 | % | 1.03 | % | 0.30 | % | 0.92 | % | ||||||||||
Portfolio Turnover Rate | 194 | % | 163 | % | 283 | % | 175 | % | 246 | % | ||||||||||
Net Assets, End of Period (in thousands) | $64 | $401 | $699 | $947 | $899 |
(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.
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Advisor Class | ||||||||||||||||||||
For a Share Outstanding Throughout the Years Ended July 31 | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per-Share Data | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $8.78 | $8.26 | $11.58 | $11.88 | $10.14 | |||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net Investment Income (Loss)(1) | 0.10 | 0.05 | 0.04 | (0.02 | ) | 0.05 | ||||||||||||||
Net Realized and Unrealized Gain (Loss) | 1.77 | 0.53 | (3.36 | ) | 0.41 | 1.73 | ||||||||||||||
Total From Investment Operations | 1.87 | 0.58 | (3.32 | ) | 0.39 | 1.78 | ||||||||||||||
Distributions | ||||||||||||||||||||
From Net Investment Income | (0.07 | ) | (0.06 | ) | — | (0.02 | ) | (0.04 | ) | |||||||||||
From Net Realized Gains | — | — | — | (0.61 | ) | — | ||||||||||||||
From Tax Return of Capital | — | — | — | (0.06 | ) | — | ||||||||||||||
Total Distributions | (0.07 | ) | (0.06 | ) | — | (0.69 | ) | (0.04 | ) | |||||||||||
Net Asset Value, End of Period | $10.58 | $8.78 | $8.26 | $11.58 | $11.88 | |||||||||||||||
Total Return(2) | 21.34 | % | 7.01 | % | (28.67 | )% | 2.81 | % | 17.59 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Ratio of Operating Expenses to Average Net Assets | 1.36 | % | 1.36 | % | 1.35 | % | 1.36 | % | 1.35 | % | ||||||||||
Ratio of Net Investment Income (Loss) to Average Net Assets | 0.98 | % | 0.61 | % | 0.58 | % | (0.15 | )% | 0.47 | % | ||||||||||
Portfolio Turnover Rate | 194 | % | 163 | % | 283 | % | 175 | % | 246 | % | ||||||||||
Net Assets, End of Period (in thousands) | $292 | $323 | $278 | $1,304 | $895 |
(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.
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R Class | ||||||||||||||||||||
For a Share Outstanding Throughout the Years Ended July 31 | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per-Share Data | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $8.74 | $8.23 | $11.56 | $11.87 | $10.14 | |||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net Investment Income (Loss)(1) | 0.06 | 0.03 | 0.03 | (0.05 | ) | 0.02 | ||||||||||||||
Net Realized and Unrealized Gain (Loss) | 1.77 | 0.52 | (3.36 | ) | 0.40 | 1.73 | ||||||||||||||
Total From Investment Operations | 1.83 | 0.55 | (3.33 | ) | 0.35 | 1.75 | ||||||||||||||
Distributions | ||||||||||||||||||||
From Net Investment Income | (0.04 | ) | (0.04 | ) | — | (0.02 | ) | (0.02 | ) | |||||||||||
From Net Realized Gains | — | — | — | (0.61 | ) | — | ||||||||||||||
From Tax Return of Capital | — | — | — | (0.03 | ) | — | ||||||||||||||
Total Distributions | (0.04 | ) | (0.04 | ) | — | (0.66 | ) | (0.02 | ) | |||||||||||
Net Asset Value, End of Period | $10.53 | $8.74 | $8.23 | $11.56 | $11.87 | |||||||||||||||
Total Return(2) | 21.02 | % | 6.64 | % | (28.81 | )% | 2.47 | % | 17.33 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Ratio of Operating Expenses to Average Net Assets | 1.61 | % | 1.61 | % | 1.60 | % | 1.61 | % | 1.60 | % | ||||||||||
Ratio of Net Investment Income (Loss) to Average Net Assets | 0.73 | % | 0.36 | % | 0.33 | % | (0.40 | )% | 0.22 | % | ||||||||||
Portfolio Turnover Rate | 194 | % | 163 | % | 283 | % | 175 | % | 246 | % | ||||||||||
Net Assets, End of Period (in thousands) | $27 | $431 | $651 | $915 | $903 |
(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.
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To the Shareholders and Board of Directors of
American Century Growth Funds, Inc.:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Legacy Large Cap Fund, one of the funds constituting American Century Growth Funds, Inc. (the “Corporation”) as of July 31, 2011, and 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, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Corporation is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2011, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Legacy Large Cap Fund of American Century Growth Funds, Inc. as of July 31, 2011, 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.
Deloitte & Touche LLP
Kansas City, Missouri
September 20, 2011
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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 mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors), is 72. However, the mandatory retirement age for an individual director may be extended with the approval of the remaining independent directors.
Mr. Thomas is the only director who 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; that is, they have never been 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). The directors serve in this capacity for seven (in the case of Mr. Thomas, 15) registered investment companies in the American Century Investments family of funds.
The following 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 5Years |
Independent Directors | |||||
Thomas A. Brown (1940) | Director | Since 1980 | Managing Member, Associated Investments, LLC (real estate investment company); Brown Cascade Properties, LLC (real estate investment company) (2001 to 2009) | 64 | None |
Andrea C. Hall (1945) | Director | Since 1997 | Retired as advisor to the President, Midwest Research Institute (not-for-profit research organization) (June 2006) | 64 | None |
Jan M. Lewis (1957) | Director | Since 2011 | President and Chief Executive Officer, Catholic Charities of Northeast Kansas (human services organization) (2006 to present); President, BUCON, Inc. (full-service design-build construction company) (2004 to 2006) | 64 | None |
James A. Olson (1942) | Director | Since 2007 | Member, Plaza Belmont LLC (private equity fund manager); Chief Financial Officer, Plaza Belmont LLC (September 1999 to September 2006) | 64 | Saia, Inc. and Entertainment Properties Trust |
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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 5Years |
Independent Directors |
Donald H. Pratt (1937) | Director and Chairman of the Board | Since 1995 (Chairman since 2005) | Chairman and Chief Executive Officer, Western Investments, Inc. (real estate company) | 64 | None |
M. Jeannine Strandjord (1945) | Director | Since 1994 | Retired | 64 | DST Systems Inc., Euronet Worldwide Inc., and Charming Shoppes, Inc. |
John R. Whitten (1946) | Director | Since 2008 | Project Consultant, Celanese Corp. (industrial chemical company) | 64 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Advisory Director | Since 2011 | Retired; Executive Vice President, Technology & Operations, KeyCorp. (computer services) (2004 to 2010) | 64 | Applied Industrial Technology (2001 to 21010) |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director and President | Since 2007 | President and Chief Executive Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC (February 2006 to February 2007); Executive Vice President, ACC (November 2005 to February 2007). Also serves as: Chief Executive Officer and Manager, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 104 | None |
27
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for each of the 15 investment companies in the American Century family of funds, unless otherwise noted. 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 |
Jonathan S. Thomas (1963) | Director and President since 2007 | President and Chief Executive Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC (February 2006 to February 2007); Executive Vice President, ACC (November 2005 to February 2007). Also serves as: Chief Executive Officer and Manager, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries |
Barry Fink (1955) | Executive Vice President since 2007 | Chief Operating Officer and Executive Vice President, ACC (September 2007 to present); President, ACS (October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007); Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as: Manager, ACS and Director, ACC and certain ACC subsidiaries |
Maryanne L. Roepke (1956) | Chief Compliance Officer since 2006 and Senior Vice President since 2000 | Chief Compliance Officer, American Century funds, ACIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995 to August 2006); and Treasurer and Chief Financial Officer, various American Century funds (July 2000 to August 2006). Also serves as: Senior Vice President, ACS |
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (February 1994 to present); Vice President, ACC (November 2005 to present), General Counsel, ACC (March 2007 to present); Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
Robert J. Leach (1966) | Vice President, Treasurer and Chief Financial Officer since 2006 | Vice President, ACS (February 2000 to present); and Controller, various American Century funds (1997 to September 2006) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (January 1994 to present); Associate General Counsel, ACC (January 2001 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (June 2003 to present) |
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.
28
At a meeting held on June 9, 2011, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s independent directors (the “Directors”) each year.
As a part of the approval process, the Board requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis throughout the year and included, but was not limited to the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
• | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
• | the investment performance of the fund, including data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | data comparing the cost of owning the Fund to the cost of owning similar funds; |
• | the Advisor’s compliance policies, procedures, and regulatory experience; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
• | data comparing services provided and charges to other investment management clients of the Advisor; and |
• | consideration of collateral benefits derived by the Advisor from the management of the Fund and any potential economies of scale relating thereto. |
In keeping with its practice, the Board held two in-person meetings and one telephonic meeting to review and discuss the information provided. The Directors also had the benefit of the advice of independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
29
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 under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
• | constructing and designing the Fund |
• | portfolio research and security selection |
• | initial capitalization/funding |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time
30
horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Taking all these factors into consideration, the Board found the investment management services provided by the Advisor to the Fund to meet or exceed industry standards. More detailed information about the Fund’s performance can be found in the Performance and Portfolio Commentary sections of this report.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. The financial information regarding the Advisor is considered in evaluating the Advisor’s financial condition, ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
31
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pay the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider and comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit 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, however, that the assets of those other clients are not material to the analysis and, where applicable, may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
32
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, concluded that the management agreement between the Fund and the Advisor is fair and reasonable in light of the services provided and should be renewed.
33
Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans 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. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election.
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. State taxes will be withheld from your distribution in accordance with the respective state rules.
Proxy Voting Guidelines
American Century Investment Management, Inc., the fund’s investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
34
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 July 31, 2011.
For corporate taxpayers, the fund hereby designates $64,556, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended July 31, 2011 as qualified for the corporate dividends received deduction.
35
36
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 Device for the Deaf | 1-800-634-4113 |
American Century Growth 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.
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
CL-ANN-72769 1109
ANNUAL REPORT JULY 31, 2011
Legacy Multi Cap Fund |
President’s Letter | 2 |
Independent Chairman’s Letter | 3 |
Market Perspective | 4 |
Performance | 5 |
Portfolio Commentary | 6 |
Fund Characteristics | 8 |
Shareholder Fee Example | 9 |
Schedule of Investments | 11 |
Statement of Assets and Liabilities | 14 |
Statement of Operations | 15 |
Statement of Changes in Net Assets | 16 |
Notes to Financial Statements | 17 |
Financial Highlights | 22 |
Report of Independent Registered Public Accounting Firm | 26 |
Management | 27 |
Approval of Management Agreement | 30 |
Additional Information | 35 |
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.
Dear Investor:
Thank you for reviewing this annual report for the period ended July 31, 2011. Our report offers investment performance and portfolio information, presented with the expert perspective and commentary of our portfolio management team.
This report remains one of our most important vehicles for conveying information about investment performance, as well as the market factors and strategies that affect fund returns. For additional, updated information on fund performance, portfolio strategy, and the investment markets, we encourage you to visit our website, americancentury.com. Click on the “Fund Performance” and “Insights & News” headings at the top of our Individual Investors site.
Reporting Period Perspective: “Risk Rally” Ended, Economic Growth Lost Momentum
Benefiting from optimism, risk appetites, expanding corporate earnings, and other investment conditions that may prove difficult to sustain, global stock and high-yield corporate bond markets produced above-average returns for the 12 months ended July 31, 2011. Meanwhile, high-quality bonds lagged. Conditions shifted significantly during the last three months of the fiscal year—not enough to fully change the “risk was rewarded” theme of the period, but certainly enough to suggest greater caution ahead.
Broad stock market indices generally gained 15–30% during the period as monetary and fiscal intervention in 2010 stimulated growth and fueled investor optimism about economic and financial market conditions in 2011 and 2012. Most notably, the U.S. Federal Reserve launched its second round of quantitative easing (QE2), involving the purchase of U.S. government securities. This was designed to increase the money supply and encourage investors to purchase potentially higher-risk/higher-return assets, such as stocks.
Anticipation of QE2 and its potential impact, along with robust corporate earnings growth, helped trigger a “risk rally” that extended from August 2010 through April 2011. But the rally ran out of steam in May and June of 2011 as QE2 ended, the European debt crisis returned to prominence, and other debt and global economic challenges emerged. Concerns about fiscal austerity measures in debt-ridden countries revived recession fears and deflated global equity market returns. We appreciate your continued trust in us during these uncertain times.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Dear Fellow Shareholders,
With an existing vacancy and several directors approaching retirement age over the next few years, your American Century Investments Kansas City-based mutual fund board of directors recently addressed board succession planning. The board developed a succession plan and conducted an extensive search that yielded two new members who joined the board in 2011.
As part of the planning process, the board referred to the criteria for potential new directors set forth in its director nomination policy adopted in 2009. A nomination process generated more than 20 candidates whose credentials were reviewed by the board’s Governance Committee. Six candidates were selected by the committee for telephone interviews. Three were then chosen for in person interviews.
The committee recommended, and the full board approved, the addition of Jan Lewis, currently the President and Chief Executive Officer of Catholic Charities of Northeast Kansas, to fill the vacant board seat and the addition as an advisory director of Stephen E. Yates, who recently retired as Executive Vice President, Technology and Operations at Keycorp of Cleveland, Ohio. Mr. Yates will serve in an advisory capacity for 12–18 months before becoming an active director. Both of these additions bring operating management experience and unique perspectives to our various tasks.
We look forward to the contributions of our new directors to our efforts as shareholder representatives and thank the Governance Committee for their thorough search process.
If you have comments, suggestions or questions send them to me at dhpratt@fundboardchair.com.
Best regards,
Don Pratt
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By David Hollond, Chief Investment Officer,
U.S. Growth Equity — Mid & Small Cap
Stocks Gained as Economy Improved
The U.S. stock market generated solid results for the 12-month period ended July 31, 2011, with broad equity markets gaining more than 20%. Driving the rally was growing investor confidence in U.S. economic recovery, although that confidence eroded somewhat in the final months of the period.
After a bumpy start stemming from an uncertain economic outlook, the equity market began a steady rise in September 2010, as improving data apparently quelled investor concerns of a “double-dip” recession (a return to recession after a brief period of recovery). Notably, employment growth figures turned positive after 2 ½ years of persistent job losses, and the manufacturing sector showed renewed signs of life. A second round of the Federal Reserve’s quantitative easing program and an extension of expiring tax breaks through 2012 further reassured markets that a promising economic recovery was underway.
New challenges in early 2011 included political unrest in the Middle East and Africa, as well as a devastating earthquake and tsunami in Japan. Nevertheless, equities gained ground until May, when evidence of a slowdown in economic activity and renewed concerns surrounding sovereign debt in Europe weighed on investor confidence. As a result, markets declined modestly in the following months. As the reporting period came to a close, both chambers of Congress debated over a bill to raise the federal debt ceiling and reduce government spending, and stocks pulled back amid heightened levels of volatility.
As the table below illustrates, mid- and small-cap shares generated the strongest returns, outpacing large-cap issues. Growth stocks outperformed value across all market capitalizations, particularly among smaller companies. Every sector of the market delivered positive results, led by energy, which benefited from rising prices. The industrials and materials sectors also performed well, while the financials sector was the laggard for the reporting period.
Market Index Total Returns | ||||
For the 12 months ended July 31, 2011 | ||||
U.S. Stocks | ||||
Russell 1000 Index (Large-Cap) | 20.68 | % | ||
Russell Midcap Index | 24.51 | % | ||
Russell 2000 Index (Small-Cap) | 23.92 | % | ||
Foreign Stocks | ||||
MSCI EAFE (Europe, Australasia, Far East) Index | 17.17 | % | ||
MSCI Emerging Markets Index | 17.45 | % |
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Total Returns as of July 31, 2011 | |||||
Average Annual Returns | |||||
Ticker Symbol | 1 year | 5 years | Since Inception | Inception Date | |
Investor Class | ACMNX | 24.71% | 2.48% | 2.28% | 5/31/06 |
Russell 3000 Index | — | 20.94% | 2.89% | 2.82% | — |
Institutional Class | ACMHX | 24.91% | 2.69% | 2.48% | 5/31/06 |
Advisor Class | ACMFX | 24.31% | 2.19% | 2.00% | 5/31/06 |
R Class | ACMEX | 24.04% | 1.92% | 1.72% | 5/31/06 |
Growth of $10,000 Over Life of Class |
$10,000 investment made May 31, 2006 |
*From 5/31/06, the Investor Class’s inception date. Not annualized.
Total Annual Fund Operating Expenses | |||
Investor Class | Institutional Class | Advisor Class | R Class |
1.16% | 0.96% | 1.41% | 1.66% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. Historically, small company stocks have been more volatile than the stocks of larger, more established companies. The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors. International investing involves special risks, such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. 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. Returns for the index are provided for comparison. The fund’s total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not.
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Portfolio Managers: John T. Small Jr. and Stephen Pool
Performance Summary
Legacy Multi Cap returned 24.71%* for the 12 months ended July 31, 2011, outperforming its benchmark, the Russell 3000 Index, which returned 20.94%.
As discussed in the Market Perspective on page 4, U.S. stock indices generally delivered solid returns during the reporting period amid signs of improving economic conditions and investor sentiment, although those factors faltered late in the period. In an environment of changing and volatile market conditions, Legacy Multi Cap’s management team remained focused on the fundamental business prospects of its portfolio investments.
Legacy Multi Cap delivered solid results for the reporting period and derived positive returns from every major industry sector in which it invested. Within the portfolio, stock selection in the consumer discretionary, industrials, and consumer staples sectors all contributed meaningfully to outperformance relative to the benchmark. Holdings in the energy and telecommunications services sectors partially offset those relative gains.
Consumer Discretionary Led Relative Gains
The consumer discretionary sector was a key source of outperformance relative to the benchmark. Within the auto components industry, an overweight stake in automotive supplier TRW Automotive Holdings Corp. helped absolute and relative returns. The company, which makes safety electronics and airbags, delivered solid earnings as a result of strong demand from China and a federal mandate requiring side airbags for all U.S.-made passenger vehicles by 2012.
Also in the consumer discretionary sector, the portfolio benefited from a stake in priceline.com. The internet-based travel company benefited not only from secular growth of internet-based, do-it-yourself businesses, but also cyclical growth—travel volumes increased as the economy emerged from the global economic recession. In addition, priceline has succeeded in gaining market share from competitors, and has enjoyed growth overseas—many European and Asian markets are behind the U.S. in this secular transformation of the travel industry.
Within the textiles and luxury goods industry group, the portfolio was rewarded for a substantial overweight stake in Deckers Outdoor. The maker of Ugg brand footwear experienced a 95% share price gain in the benchmark for the period as demand climbed, particularly within its U.S. market.
Industrials, Consumer Staples Contributed
The industrials sector was also a key source of outperformance relative to the benchmark. A stake in Joy Global, which makes equipment used in resource extraction, contributed meaningfully to relative gains. The company’s earnings growth and backlog were supported by demand resulting from two key trends. First, record-high prices for coal and other commodities translated into a significant increase in mining activity underway, as new mines came on line and miners
*All fund returns referenced in this commentary are for Investor Class shares.
6
looked to extract additional output from existing operations. Additionally, demand for new equipment in China grew as the country worked to improve the safety and productivity of mines. The company is well positioned to benefit from these trends because there are few providers of this specialized equipment in the world.
Within the consumer staples sector, Legacy Multi Cap benefited from a position in food manufacturer and distributor B&G Foods. The company’s increased revenues in the reporting period were due largely to a shift to higher margin products.
Energy, Telecommunications Services Lagged
Holdings in the energy sector weighed on relative performance. Within the oil, gas, and consumable fuels industry group, the portfolio held positions in several natural gas producers, including EXCO Resources, that underperformed for the reporting period.
The telecommunications services sector was also a source of relative underperformance for Legacy Multi Cap. Here, the portfolio held detrimental positions in several wireless telecommunications companies that lagged benchmark returns.
Information Technology Detracted, but Some Holdings Helped
The information technology sector overall underperformed relative to the benchmark. However, a meaningful overweight position in Isilon Systems represented the largest single contribution to relative returns. Isilon, which designs and markets clustered storage systems for storing and managing file-based data, saw its share price gain as it agreed to be acquired by data storage company EMC during the period.
Outlook
We remain cautiously optimistic in our market outlook. Despite market volatility, markets delivered solid performance during the reporting period. However, we continue to look for more meaningful improvements in economic conditions. Regardless of economic and market conditions, Legacy Multi Cap employs financial acceleration and price momentum characteristics to identify investment opportunities in any given economic environment. As always, it will employ a quantitative model to exploit investment opportunities across the growth and value spectrum.
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JULY 31, 2011 | |
Top Ten Holdings | % of net assets |
Wal-Mart Stores, Inc. | 2.0% |
NuStar Energy LP | 1.9% |
Pinnacle West Capital Corp. | 1.7% |
Humana, Inc. | 1.5% |
AutoZone, Inc. | 1.5% |
UnitedHealth Group, Inc. | 1.4% |
B&G Foods, Inc. | 1.4% |
McDonald’s Corp. | 1.2% |
International Business Machines Corp. | 1.2% |
Eli Lilly & Co. | 1.2% |
Top Five Industries | % of net assets |
Oil, Gas & Consumable Fuels | 17.1% |
Food & Staples Retailing | 8.5% |
Health Care Providers & Services | 7.6% |
Insurance | 5.9% |
Pharmaceuticals | 5.2% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 84.5% |
Foreign Common Stocks* | 17.5% |
Total Common Stocks | 102.0% |
Other Assets and Liabilities | (2.0)% |
* | Includes depositary shares, dual listed securities and foreign ordinary shares. |
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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 February 1, 2011 to July 31, 2011.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. 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.
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Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 2/1/11 | Ending Account Value 7/31/11 | Expenses Paid During Period* 2/1/11 – 7/31/11 | Annualized Expense Ratio* | |
Actual | ||||
Investor Class | $1,000 | $1,051.10 | $5.90 | 1.16% |
Institutional Class | $1,000 | $1,051.70 | $4.88 | 0.96% |
Advisor Class | $1,000 | $1,048.60 | $7.16 | 1.41% |
R Class | $1,000 | $1,048.10 | $8.43 | 1.66% |
Hypothetical | ||||
Investor Class | $1,000 | $1,019.04 | $5.81 | 1.16% |
Institutional Class | $1,000 | $1,020.03 | $4.81 | 0.96% |
Advisor Class | $1,000 | $1,017.80 | $7.05 | 1.41% |
R Class | $1,000 | $1,016.56 | $8.30 | 1.66% |
* | 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 181, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. |
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JULY 31, 2011
Shares | Value | |
Common Stocks — 102.0% | ||
AEROSPACE & DEFENSE — 2.8% | ||
L-3 Communications Holdings, Inc. | 822 | $ 65,037 |
Lockheed Martin Corp. | 1,190 | 90,119 |
Raytheon Co. | 1,794 | 80,245 |
235,401 | ||
BEVERAGES — 2.1% | ||
Coca-Cola Co. (The) | 1,373 | 93,378 |
Dr Pepper Snapple Group, Inc. | 2,258 | 85,262 |
178,640 | ||
CHEMICALS — 1.0% | ||
Valspar Corp. | 2,598 | 85,396 |
COMMERCIAL SERVICES & SUPPLIES — 2.1% | ||
Higher One Holdings, Inc.(1) | 4,682 | 92,938 |
Pitney Bowes, Inc. | 3,884 | 83,700 |
Waste Management, Inc. | 117 | 3,684 |
180,322 | ||
COMMUNICATIONS EQUIPMENT — 1.0% | ||
Comtech Telecommunications Corp. | 2,980 | 80,311 |
Nokia Oyj ADR | 797 | 4,623 |
84,934 | ||
COMPUTERS & PERIPHERALS — 0.1% | ||
Diebold, Inc. | 199 | 6,018 |
CONTAINERS & PACKAGING — 0.6% | ||
Greif, Inc., Class A | 835 | 50,977 |
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.5% | ||
TELUS Corp. | 1,805 | 95,070 |
Windstream Corp. | 3,034 | 37,045 |
132,115 | ||
ELECTRIC UTILITIES — 2.5% | ||
Northeast Utilities | 105 | 3,570 |
NV Energy, Inc. | 4,255 | 63,144 |
Pinnacle West Capital Corp. | 3,400 | 143,990 |
210,704 | ||
FOOD & STAPLES RETAILING — 8.5% | ||
Casey’s General Stores, Inc. | 1,950 | 87,750 |
Costco Wholesale Corp. | 1,257 | 98,360 |
CVS Caremark Corp. | 2,440 | 88,694 |
Kroger Co. (The) | 3,901 | 97,018 |
Safeway, Inc. | 4,355 | 87,840 |
Walgreen Co. | 2,320 | 90,573 |
Wal-Mart Stores, Inc. | 3,256 | 171,624 |
721,859 | ||
FOOD PRODUCTS — 2.6% | ||
B&G Foods, Inc. | 6,499 | 122,116 |
Hormel Foods Corp. | 183 | 5,302 |
Unilever plc ADR | 2,990 | 95,859 |
223,277 | ||
GAS UTILITIES — 2.0% | ||
Atmos Energy Corp. | 2,402 | 80,299 |
UGI Corp. | 2,860 | 86,658 |
166,957 | ||
HEALTH CARE EQUIPMENT & SUPPLIES — 2.0% | ||
Baxter International, Inc. | 1,469 | 85,452 |
Becton, Dickinson & Co. | 1,069 | 89,379 |
174,831 | ||
HEALTH CARE PROVIDERS & SERVICES — 7.6% | ||
AmerisourceBergen Corp. | 2,461 | 94,281 |
BioScrip, Inc.(1) | 4,266 | 30,630 |
Cardinal Health, Inc. | 2,228 | 97,497 |
Humana, Inc. | 1,720 | 128,277 |
LifePoint Hospitals, Inc.(1) | 2,371 | 87,964 |
McKesson Corp. | 1,107 | 89,800 |
UnitedHealth Group, Inc. | 2,474 | 122,785 |
651,234 | ||
HOTELS, RESTAURANTS & LEISURE — 2.1% | ||
Choice Hotels International, Inc. | 2,462 | 75,066 |
McDonald’s Corp. | 1,195 | 103,344 |
178,410 | ||
HOUSEHOLD DURABLES — 0.4% | ||
Garmin Ltd. | 993 | 32,402 |
INDUSTRIAL CONGLOMERATES — 1.0% | ||
General Electric Co. | 4,579 | 82,010 |
INSURANCE — 5.9% | ||
Allied World Assurance Co. Holdings AG | 1,297 | 70,622 |
Alterra Capital Holdings Ltd. | 4,016 | 87,509 |
Maiden Holdings Ltd. | 9,780 | 90,660 |
Montpelier Re Holdings Ltd. | 4,284 | 73,942 |
PartnerRe Ltd. | 1,325 | 88,536 |
Progressive Corp. (The) | 359 | 7,065 |
Torchmark Corp. | 2,172 | 87,727 |
506,061 | ||
INTERNET & CATALOG RETAIL — 1.1% | ||
HSN, Inc.(1) | 2,865 | 93,657 |
INTERNET SOFTWARE & SERVICES — 0.8% | ||
j2 Global Communications, Inc.(1) | 2,494 | 66,690 |
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Shares | Value |
IT SERVICES — 4.1% | ||
Broadridge Financial Solutions, Inc. | 2,271 | $ 52,369 |
DST Systems, Inc. | 1,957 | 100,179 |
Fidelity National Information Services, Inc. | 329 | 9,877 |
International Business Machines Corp. | 564 | 102,563 |
ManTech International Corp., Class A | 2,169 | 88,495 |
353,483 | ||
MEDIA — 1.6% | ||
Cablevision Systems Corp., Class A | 3,506 | 85,406 |
Charter Communications, Inc., Class A(1) | 1,000 | 54,000 |
139,406 | ||
MULTILINE RETAIL — 1.1% | ||
Kohl’s Corp. | 1,759 | 96,235 |
MULTI-UTILITIES — 2.6% | ||
CenterPoint Energy, Inc. | 1,545 | 30,251 |
CMS Energy Corp. | 4,573 | 87,527 |
DTE Energy Co. | 1,779 | 88,665 |
NiSource, Inc. | 422 | 8,495 |
TECO Energy, Inc. | 481 | 8,913 |
223,851 | ||
OFFICE ELECTRONICS — 0.4% | ||
Canon, Inc. ADR | 701 | 33,872 |
OIL, GAS & CONSUMABLE FUELS — 17.1% | ||
Buckeye Partners LP | 1,461 | 91,955 |
Chevron Corp. | 914 | 95,074 |
ConocoPhillips | 30 | 2,160 |
Crosstex Energy LP | 1,883 | 32,162 |
El Paso Pipeline Partners LP | 213 | 7,493 |
Energy Transfer Equity LP | 2,014 | 83,239 |
Enterprise Products Partners LP | 2,256 | 93,827 |
EXCO Resources, Inc. | 4,538 | 72,199 |
Genesis Energy, LP | 3,524 | 91,201 |
Magellan Midstream Partners LP | 1,512 | 89,238 |
Marathon Oil Corp. | 2,847 | 88,172 |
NuStar Energy LP | 2,615 | 164,771 |
Plains All American Pipeline LP | 1,473 | 91,591 |
Plains Exploration & Production Co.(1) | 74 | 2,887 |
Sunoco Logistics Partners LP | 1,054 | 90,401 |
Targa Resources Partners LP | 2,855 | 98,298 |
TC PipeLines LP | 2,010 | 89,365 |
Teekay Offshore Partners LP | 3,044 | 87,089 |
YPF SA ADR | 2,100 | 89,397 |
1,460,519 | ||
PHARMACEUTICALS — 5.2% | ||
Abbott Laboratories | 1,797 | 92,222 |
AstraZeneca plc ADR | 1,988 | 96,438 |
Eli Lilly & Co. | 2,647 | 101,380 |
Novo Nordisk A/S ADR | 767 | 93,589 |
Pfizer, Inc. | 3,344 | 64,339 |
447,968 | ||
REAL ESTATE INVESTMENT TRUSTS (REITs) — 5.0% | ||
MFA Financial, Inc. | 11,288 | 84,547 |
Piedmont Office Realty Trust, Inc., Class A | 3,051 | 62,698 |
Rayonier, Inc. | 1,569 | 101,122 |
Realty Income Corp. | 2,739 | 88,908 |
Ventas, Inc. | 1,657 | 89,694 |
426,969 | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 5.0% | ||
Analog Devices, Inc. | 1,869 | 64,294 |
Intel Corp. | 4,437 | 99,078 |
Microchip Technology, Inc. | 2,451 | 82,721 |
Taiwan Semiconductor Manufacturing Co. Ltd. ADR | 7,500 | 92,700 |
Texas Instruments, Inc. | 2,899 | 86,245 |
425,038 | ||
SOFTWARE — 1.1% | ||
Giant Interative Group, Inc. ADR | 11,964 | 92,003 |
SPECIALTY RETAIL — 4.0% | ||
Aeropostale, Inc.(1) | 4,761 | 80,223 |
AutoZone, Inc.(1) | 447 | 127,596 |
Children’s Place Retail Stores, Inc. (The)(1) | 1,934 | 93,451 |
O’Reilly Automotive, Inc.(1) | 287 | 17,076 |
PetSmart, Inc. | 603 | 25,941 |
344,287 | ||
THRIFTS & MORTGAGE FINANCE — 0.9% | ||
New York Community Bancorp., Inc. | 5,915 | 80,030 |
TOBACCO — 2.2% | ||
Imperial Tobacco Group plc ADR | 1,282 | 88,702 |
Philip Morris International, Inc. | 1,349 | 96,008 |
184,710 |
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Shares | Value |
WIRELESS TELECOMMUNICATION SERVICES — 4.0% | ||
Cellcom Israel Ltd. | 3,289 | $ 86,600 |
NTT DoCoMo, Inc. ADR | 5,278 | 97,854 |
Telephone & Data Systems, Inc. | 2,681 | 76,033 |
United States Cellular Corp.(1) | 1,859 | 82,149 |
342,636 | ||
TOTAL INVESTMENT SECURITIES — 102.0%(Cost $8,634,718) | 8,712,902 | |
OTHER ASSETS AND LIABILITIES — (2.0)% | (174,365) | |
TOTAL NET ASSETS — 100.0% | $8,538,537 |
��
Geographic Diversification | |
(as a % of net assets) | |
United States | 84.5% |
Bermuda | 4.0% |
United Kingdom | 3.3% |
Japan | 1.5% |
Switzerland | 1.2% |
Canada | 1.1% |
Denmark | 1.1% |
Taiwan (Republic of China) | 1.1% |
People’s Republic of China | 1.1% |
Argentina | 1.0% |
Bahamas | 1.0% |
Israel | 1.0% |
Finland | 0.1% |
Other Assets and Liabilities | (2.0)% |
Notes to Schedule of Investments
ADR = American Depositary Receipt
(1) | Non-income producing. |
See Notes to Financial Statements.
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JULY 31, 2011 | ||||
Assets | ||||
Investment securities, at value (cost of $8,634,718) | $8,712,902 | |||
Receivable for capital shares sold | 484 | |||
Dividends and interest receivable | 18,840 | |||
8,732,226 | ||||
Liabilities | ||||
Disbursements in excess of demand deposit cash | 32,302 | |||
Payable for capital shares redeemed | 152,509 | |||
Accrued management fees | 8,762 | |||
Distribution and service fees payable | 116 | |||
193,689 | ||||
Net Assets | $8,538,537 | |||
Net Assets Consist of: | ||||
Capital (par value and paid-in surplus) | $17,386,208 | |||
Undistributed net investment income | 101,820 | |||
Accumulated net realized loss | (9,027,675 | ) | ||
Net unrealized appreciation | 78,184 | |||
$8,538,537 |
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Investor Class, $0.01 Par Value | $8,040,857 | 737,819 | $10.90 | |||||||||
Institutional Class, $0.01 Par Value | $33,024 | 3,009 | $10.98 | |||||||||
Advisor Class, $0.01 Par Value | $392,688 | 36,389 | $10.79 | |||||||||
R Class, $0.01 Par Value | $71,968 | 6,737 | $10.68 |
See Notes to Financial Statements.
14
YEAR ENDED JULY 31, 2011 | ||||
Investment Income (Loss) | ||||
Income: | ||||
Dividends (net of foreign taxes withheld of $866) | $198,040 | |||
Interest | 76 | |||
198,116 | ||||
Expenses: | ||||
Management fees | 98,425 | |||
Distribution and service fees: | ||||
Advisor Class | 1,006 | |||
R Class | 334 | |||
Directors’ fees and expenses | 347 | |||
Other expenses | 989 | |||
101,101 | ||||
Net investment income (loss) | 97,015 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on investment transactions | 2,722,609 | |||
Change in net unrealized appreciation (depreciation) on investments | (1,001,623 | ) | ||
Net realized and unrealized gain (loss) | 1,720,986 | |||
Net Increase (Decrease) in Net Assets Resulting from Operations | $1,818,001 |
See Notes to Financial Statements.
15
YEARS ENDED JULY 31, 2011 AND JULY 31, 2010 | ||||||||
Increase (Decrease) in Net Assets | 2011 | 2010 | ||||||
Operations | ||||||||
Net investment income (loss) | $97,015 | $44,927 | ||||||
Net realized gain (loss) | 2,722,609 | 4,657,610 | ||||||
Change in net unrealized appreciation (depreciation) | (1,001,623 | ) | (2,731,618 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 1,818,001 | 1,970,919 | ||||||
Distributions to Shareholders | ||||||||
From net investment income: | ||||||||
Investor Class | — | (291,770 | ) | |||||
Institutional Class | — | (482 | ) | |||||
Advisor Class | — | (8,616 | ) | |||||
R Class | — | (423 | ) | |||||
Decrease in net assets from distributions | — | (301,291 | ) | |||||
Capital Share Transactions | ||||||||
Net increase (decrease) in net assets from capital share transactions | (1,046,956 | ) | (17,778,083 | ) | ||||
Net increase (decrease) in net assets | 771,045 | (16,108,455 | ) | |||||
Net Assets | ||||||||
Beginning of period | 7,767,492 | 23,875,947 | ||||||
End of period | $8,538,537 | $7,767,492 | ||||||
Undistributed net investment income | $101,820 | — |
See Notes to Financial Statements.
16
JULY 31, 2011
1. Organization
American Century Growth 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. Legacy Multi Cap Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified as defined under the 1940 Act. The fund’s investment objective is to seek long-term capital growth. The fund pursues its objective by investing in small-, medium- and large-sized market capitalization companies.
The fund is authorized to issue the Investor Class, the Institutional Class, the Advisor Class and the R Class. The share classes differ principally in their respective distribution and shareholder servicing expenses and arrangements. The Institutional Class is made available to institutional shareholders or through financial intermediaries whose clients do not require the same level of shareholder and administrative services as shareholders of other classes. As a result, the Institutional Class is charged a lower unified management fee.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share as of 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.
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 typically valued at the closing price on the exchange where primarily traded or as of 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 is used. Depending on local convention or regulation, 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. In its determination of fair value, the fund may review several factors including: market information specific to a security; news developments in U.S. and foreign markets; the performance of particular U.S. and foreign securities, indices, comparable securities, American Depositary Receipts, Exchange-Traded Funds, and other relevant market indicators.
Debt securities maturing within 60 days at the time of purchase may be valued at cost, plus or minus any amortized discount or premium or at the evaluated mean as provided by an independent pricing service. Evaluated mean prices are commonly derived through utilization of market models, which may consider, among other factors, trade data, quotations from dealers and active market makers, relevant yield curve and spread data, related sector levels, creditworthiness, and other relevant market information on the same or comparable securities.
Investments in open-end management investment companies are valued at the reported net asset value per share.
If the fund determines that the market price for a portfolio security is not readily available or the valuation methods mentioned above do not reflect a security’s fair value, such security is valued as determined in good faith by the Board of Directors or its designee, in accordance with procedures adopted by the Board of Directors. Circumstances that may cause the fund to use these procedures to value a security include, but are not limited to: a security has been declared in default; trading in a security has been halted during the trading day; there is a foreign market holiday and no trading occurred; or an event occurred between the close of a foreign exchange and the NYSE that may affect the value of a security.
17
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 capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund estimates the components of distributions received that may be considered nontaxable distributions or capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
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. The fund is no longer subject to examination by tax authorities for years prior to 2008. 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. Accordingly, no provision has been made for federal or state income taxes.
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.
3. Fees and Transactions with Related Parties
Management Fees — The corporation has entered into a management agreement with American Century Investment Management, Inc. (ACIM) (the investment advisor), under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that have very similar investment teams and investment strategies (strategy assets). The annual management fee schedule ranges from 0.85% to 1.15% for the Investor Class, Advisor Class and R Class. The Institutional Class is 0.20% less at each point within the range. The effective annual management fee for each class for the year ended July 31, 2011 was 1.15% for the Investor Class, Advisor Class and R Class and 0.95% for the Institutional Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the Advisor Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the Advisor Class will pay American Century Investment Services, Inc. (ACIS) an annual distribution and service fee of 0.25%. 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
18
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 year ended July 31, 2011 are detailed in the Statement of Operations.
Other Expenses — The fund’s total other expenses include the fees and expenses of the fund’s independent directors and their legal counsel, interest, and other miscellaneous expenses. A portion of these expenses was due to nonrecurring expenses paid by the fund. The impact of total other expenses to the ratio of operating expenses to average net assets was 0.02% for the year ended July 31, 2011.
Related Parties — Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC), the parent of the corporation’s investment advisor, ACIM, the distributor of the corporation, ACIS, and the corporation’s transfer agent, American Century Services, LLC.
The fund is eligible to invest in a money market fund for temporary purposes, which is managed by J.P. Morgan Investment Management, Inc. (JPMIM). The fund has a mutual funds services agreement with J.P. Morgan Investor Services Co. (JPMIS). JPMorgan Chase Bank (JPMCB) is a custodian of the fund. JPMIM, JPMIS and JPMCB are wholly owned subsidiaries of JPMorgan Chase & Co. (JPM). Prior to August 31, 2011, JPM was an equity investor in ACC. The services provided to the fund by JPMIM, JPMIS and JPMCB terminated on July 31, 2011.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the year ended July 31, 2011 were $20,663,912 and $21,132,014, respectively.
5. Capital Share Transactions
The corporation is authorized to issue 3,000,000,000 shares. Transactions in shares of the fund were as follows:
Year ended July 31, 2011 | Year ended July 31, 2010 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Investor Class | ||||||||||||||||
Sold | 225,951 | $2,343,620 | 238,562 | $2,054,802 | ||||||||||||
Issued in reinvestment of distributions | — | — | 12,661 | 109,010 | ||||||||||||
Redeemed | (321,297 | ) | (3,297,168 | ) | (2,336,460 | ) | (19,158,326 | ) | ||||||||
(95,346 | ) | (953,548 | ) | (2,085,237 | ) | (16,994,514 | ) | |||||||||
Institutional Class | ||||||||||||||||
Sold | 379 | 4,001 | 1,055 | 10,000 | ||||||||||||
Issued in reinvestment of distributions | — | — | 56 | 482 | ||||||||||||
Redeemed | — | — | (2,000 | ) | (16,140 | ) | ||||||||||
379 | 4,001 | (889 | ) | (5,658 | ) | |||||||||||
Advisor Class | ||||||||||||||||
Sold | 12,306 | 123,176 | 35,320 | 286,515 | ||||||||||||
Issued in reinvestment of distributions | — | — | 1,007 | 8,616 | ||||||||||||
Redeemed | (22,666 | ) | (223,162 | ) | (129,442 | ) | (1,082,326 | ) | ||||||||
(10,360 | ) | (99,986 | ) | (93,115 | ) | (787,195 | ) | |||||||||
R Class | ||||||||||||||||
Sold | 1,223 | 11,963 | 1,656 | 14,054 | ||||||||||||
Issued in reinvestment of distributions | — | — | 50 | 423 | ||||||||||||
Redeemed | (950 | ) | (9,386 | ) | (619 | ) | (5,193 | ) | ||||||||
273 | 2,577 | 1,087 | 9,284 | |||||||||||||
Net increase (decrease) | (105,054 | ) | $(1,046,956 | ) | (2,178,154 | ) | $(17,778,083 | ) |
19
6. Fair Value Measurements
The fund’s securities valuation process is based on several considerations and may use multiple inputs to determine the fair value of the positions 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 as follows:
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical securities; |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for similar securities, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.); or |
• | 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 | ||||||||||
Investment Securities | ||||||||||||
Domestic Common Stocks | $7,215,435 | — | — | |||||||||
Foreign Common Stocks | 1,497,467 | — | — | |||||||||
Total Value of Investment Securities | $8,712,902 | — | — |
7. Risk Factors
The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social, and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions.
The fund invests in common stocks of small companies. Because of this, the fund may be subject to greater risk and market fluctuations than a fund investing in larger, more established companies.
8. Federal Tax Information
The tax character of distributions paid during the years ended July 31, 2011 and July 31, 2010 were as follows:
2011 | 2010 | |||||||
Distributions Paid From | ||||||||
Ordinary income | — | $301,291 | ||||||
Long-term capital gains | — | — |
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.
20
As of July 31, 2011, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $8,615,092 | |||
Gross tax appreciation of investments | $444,906 | |||
Gross tax depreciation of investments | (347,096 | ) | ||
Net tax appreciation (depreciation) of investments | $97,810 | |||
Undistributed ordinary income | $101,820 | |||
Accumulated capital losses | $(9,047,301 | ) |
The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
The accumulated capital losses represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations. Capital loss carryovers of $(8,347,940) and $(699,361) expire in 2017 and 2018, respectively.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused.
21
Investor Class | ||||||||||||||||||||
For a Share Outstanding Throughout the Years Ended July 31 | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per-Share Data | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $8.74 | $7.79 | $11.72 | $12.60 | $9.94 | |||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net Investment Income (Loss)(1) | 0.12 | 0.02 | 0.11 | (0.02 | ) | (0.02 | ) | |||||||||||||
Net Realized and Unrealized Gain (Loss) | 2.04 | 1.05 | (4.04 | ) | (0.69 | ) | 2.72 | |||||||||||||
Total From Investment Operations | 2.16 | 1.07 | (3.93 | ) | (0.71 | ) | 2.70 | |||||||||||||
Distributions | ||||||||||||||||||||
From Net Investment Income | — | (0.12 | ) | — | — | (0.04 | ) | |||||||||||||
From Net Realized Gains | — | — | — | (0.17 | ) | — | ||||||||||||||
Total Distributions | — | (0.12 | ) | — | (0.17 | ) | (0.04 | ) | ||||||||||||
Net Asset Value, End of Period | $10.90 | $8.74 | $7.79 | $11.72 | $12.60 | |||||||||||||||
Total Return(2) | 24.71 | % | 13.75 | % | (33.53 | )% | (5.78 | )% | 27.21 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Ratio of Operating Expenses to Average Net Assets | 1.17 | % | 1.16 | % | 1.15 | % | 1.16 | % | 1.15 | % | ||||||||||
Ratio of Net Investment Income (Loss) to Average Net Assets | 1.14 | % | 0.22 | % | 1.42 | % | (0.17 | )% | (0.16 | )% | ||||||||||
Portfolio Turnover Rate | 246 | % | 235 | % | 267 | % | 173 | % | 230 | % | ||||||||||
Net Assets, End of Period (in thousands) | $8,041 | $7,283 | $22,726 | $35,392 | $36,240 |
(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.
22
Institutional Class | ||||||||||||||||||||
For a Share Outstanding Throughout the Years Ended July 31 | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per-Share Data | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $8.79 | $7.83 | $11.76 | $12.61 | $9.94 | |||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net Investment Income (Loss)(1) | 0.14 | 0.04 | 0.12 | (0.01 | ) | 0.02 | ||||||||||||||
Net Realized and Unrealized Gain (Loss) | 2.05 | 1.06 | (4.05 | ) | (0.67 | ) | 2.70 | |||||||||||||
Total From Investment Operations | 2.19 | 1.10 | (3.93 | ) | (0.68 | ) | 2.72 | |||||||||||||
Distributions | ||||||||||||||||||||
From Net Investment Income | — | (0.14 | ) | — | — | (0.05 | ) | |||||||||||||
From Net Realized Gains | — | — | — | (0.17 | ) | — | ||||||||||||||
Total Distributions | — | (0.14 | ) | — | (0.17 | ) | (0.05 | ) | ||||||||||||
Net Asset Value, End of Period | $10.98 | $8.79 | $7.83 | $11.76 | $12.61 | |||||||||||||||
Total Return(2) | 24.91 | % | 14.04 | % | (33.42 | )% | (5.53 | )% | 27.45 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Ratio of Operating Expenses to Average Net Assets | 0.97 | % | 0.96 | % | 0.95 | % | 0.96 | % | 0.95 | % | ||||||||||
Ratio of Net Investment Income (Loss) to Average Net Assets | 1.34 | % | 0.42 | % | 1.62 | % | 0.03 | % | 0.04 | % | ||||||||||
Portfolio Turnover Rate | 246 | % | 235 | % | 267 | % | 173 | % | 230 | % | ||||||||||
Net Assets, End of Period (in thousands) | $33 | $23 | $28 | $27 | $633 |
(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.
23
Advisor Class | ||||||||||||||||||||
For a Share Outstanding Throughout the Years Ended July 31 | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per-Share Data | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $8.68 | $7.73 | $11.67 | $12.58 | $9.94 | |||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net Investment Income (Loss)(1) | 0.09 | — | (2) | 0.07 | (0.05 | ) | (0.03 | ) | ||||||||||||
Net Realized and Unrealized Gain (Loss) | 2.02 | 1.05 | (4.01 | ) | (0.69 | ) | 2.69 | |||||||||||||
Total From Investment Operations | 2.11 | 1.05 | (3.94 | ) | (0.74 | ) | 2.66 | |||||||||||||
Distributions | ||||||||||||||||||||
From Net Investment Income | — | (0.10 | ) | — | — | (0.02 | ) | |||||||||||||
From Net Realized Gains | — | — | — | (0.17 | ) | — | ||||||||||||||
Total Distributions | — | (0.10 | ) | — | (0.17 | ) | (0.02 | ) | ||||||||||||
Net Asset Value, End of Period | $10.79 | $8.68 | $7.73 | $11.67 | $12.58 | |||||||||||||||
Total Return(3) | 24.31 | % | 13.57 | % | (33.76 | )% | (6.03 | )% | 26.83 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Ratio of Operating Expenses to Average Net Assets | 1.42 | % | 1.41 | % | 1.40 | % | 1.41 | % | 1.40 | % | ||||||||||
Ratio of Net Investment Income (Loss) to Average Net Assets | 0.89 | % | (0.03 | )% | 1.17 | % | (0.42 | )% | (0.41 | )% | ||||||||||
Portfolio Turnover Rate | 246 | % | 235 | % | 267 | % | 173 | % | 230 | % | ||||||||||
Net Assets, End of Period (in thousands) | $393 | $406 | $1,081 | $751 | $853 |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Per-share amount was less than $0.005. |
(3) | 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.
24
R Class | ||||||||||||||||||||
For a Share Outstanding Throughout the Years Ended July 31 | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per-Share Data | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $8.61 | $7.67 | $11.61 | $12.56 | $9.93 | |||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net Investment Income (Loss)(1) | 0.07 | (0.03 | ) | 0.07 | (0.08 | ) | (0.06 | ) | ||||||||||||
Net Realized and Unrealized Gain (Loss) | 2.00 | 1.05 | (4.01 | ) | (0.70 | ) | 2.70 | |||||||||||||
Total From Investment Operations | 2.07 | 1.02 | (3.94 | ) | (0.78 | ) | 2.64 | |||||||||||||
Distributions | ||||||||||||||||||||
From Net Investment Income | — | (0.08 | ) | — | — | (0.01 | ) | |||||||||||||
From Net Realized Gains | — | — | — | (0.17 | ) | — | ||||||||||||||
Total Distributions | — | (0.08 | ) | — | (0.17 | ) | (0.01 | ) | ||||||||||||
Net Asset Value, End of Period | $10.68 | $8.61 | $7.67 | $11.61 | $12.56 | |||||||||||||||
Total Return(2) | 24.04 | % | 13.25 | % | (33.94 | )% | (6.36 | )% | 26.58 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Ratio of Operating Expenses to Average Net Assets | 1.67 | % | 1.66 | % | 1.65 | % | 1.66 | % | 1.65 | % | ||||||||||
Ratio of Net Investment Income (Loss) to Average Net Assets | 0.64 | % | (0.28 | )% | 0.92 | % | (0.67 | )% | (0.66 | )% | ||||||||||
Portfolio Turnover Rate | 246 | % | 235 | % | 267 | % | 173 | % | 230 | % | ||||||||||
Net Assets, End of Period (in thousands) | $72 | $56 | $41 | $65 | $641 |
(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.
25
To the Shareholders and Board of Directors of
American Century Growth Funds, Inc.:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Legacy Multi Cap Fund, one of the funds constituting American Century Growth Funds, Inc. (the “Corporation”) as of July 31, 2011, and 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, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Corporation is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2011, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Legacy Multi Cap Fund of American Century Growth Funds, Inc. as of July 31, 2011, 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.
Deloitte & Touche LLP
Kansas City, Missouri
September 20, 2011
26
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 mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors), is 72. However, the mandatory retirement age for an individual director may be extended with the approval of the remaining independent directors.
Mr. Thomas is the only director who 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; that is, they have never been 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). The directors serve in this capacity for seven (in the case of Mr. Thomas, 15) registered investment companies in the American Century Investments family of funds.
The following 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 5Years |
Independent Directors | |||||
Thomas A. Brown (1940) | Director | Since 1980 | Managing Member, Associated Investments, LLC (real estate investment company); Brown Cascade Properties, LLC (real estate investment company) (2001 to 2009) | 64 | None |
Andrea C. Hall (1945) | Director | Since 1997 | Retired as advisor to the President, Midwest Research Institute (not-for-profit research organization) (June 2006) | 64 | None |
Jan M. Lewis (1957) | Director | Since 2011 | President and Chief Executive Officer, Catholic Charities of Northeast Kansas (human services organization) (2006 to present); President, BUCON, Inc. (full-service design-build construction company) (2004 to 2006) | 64 | None |
James A. Olson (1942) | Director | Since 2007 | Member, Plaza Belmont LLC (private equity fund manager); Chief Financial Officer, Plaza Belmont LLC (September 1999 to September 2006) | 64 | Saia, Inc. and Entertainment Properties Trust |
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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 5Years |
Independent Directors |
Donald H. Pratt (1937) | Director and Chairman of the Board | Since 1995 (Chairman since 2005) | Chairman and Chief Executive Officer, Western Investments, Inc. (real estate company) | 64 | None |
M. Jeannine Strandjord (1945) | Director | Since 1994 | Retired | 64 | DST Systems Inc., Euronet Worldwide Inc., and Charming Shoppes, Inc. |
John R. Whitten (1946) | Director | Since 2008 | Project Consultant, Celanese Corp. (industrial chemical company) | 64 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Advisory Director | Since 2011 | Retired; Executive Vice President, Technology & Operations, KeyCorp. (computer services) (2004 to 2010) | 64 | Applied Industrial Technology (2001 to 21010) |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director and President | Since 2007 | President and Chief Executive Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC (February 2006 to February 2007); Executive Vice President, ACC (November 2005 to February 2007). Also serves as: Chief Executive Officer and Manager, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 104 | None |
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Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for each of the 15 investment companies in the American Century family of funds, unless otherwise noted. 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 |
Jonathan S. Thomas (1963) | Director and President since 2007 | President and Chief Executive Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC (February 2006 to February 2007); Executive Vice President, ACC (November 2005 to February 2007). Also serves as: Chief Executive Officer and Manager, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries |
Barry Fink (1955) | Executive Vice President since 2007 | Chief Operating Officer and Executive Vice President, ACC (September 2007 to present); President, ACS (October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007); Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as: Manager, ACS and Director, ACC and certain ACC subsidiaries |
Maryanne L. Roepke (1956) | Chief Compliance Officer since 2006 and Senior Vice President since 2000 | Chief Compliance Officer, American Century funds, ACIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995 to August 2006); and Treasurer and Chief Financial Officer, various American Century funds (July 2000 to August 2006). Also serves as: Senior Vice President, ACS |
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (February 1994 to present); Vice President, ACC (November 2005 to present), General Counsel, ACC (March 2007 to present); Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
Robert J. Leach (1966) | Vice President, Treasurer and Chief Financial Officer since 2006 | Vice President, ACS (February 2000 to present); and Controller, various American Century funds (1997 to September 2006) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (January 1994 to present); Associate General Counsel, ACC (January 2001 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (June 2003 to present) |
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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At a meeting held on June 9, 2011, the Fund’s Board of Directors unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s independent directors (the “Directors”) each year.
As a part of the approval process, the Board requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis throughout the year and included, but was not limited to the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided by the Advisor to the Fund; |
• | the wide range of other programs and services the Advisor provides to the Fund and its shareholders on a routine and non-routine basis; |
• | the investment performance of the fund, including data comparing the Fund’s performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | data comparing the cost of owning the Fund to the cost of owning similar funds; |
• | the Advisor’s compliance policies, procedures, and regulatory experience; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
• | data comparing services provided and charges to other investment management clients of the Advisor; and |
• | consideration of collateral benefits derived by the Advisor from the management of the Fund and any potential economies of scale relating thereto. |
In keeping with its practice, the Board held two in-person meetings and one telephonic meeting to review and discuss the information provided. The Directors also had the benefit of the advice of independent counsel throughout the period.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel, and evaluated such information for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including the following:
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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 under the management agreement, the Advisor provides or arranges at its own expense a wide variety of services including:
• | constructing and designing the Fund |
• | portfolio research and security selection |
• | initial capitalization/funding |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time
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horizons. The Directors also review detailed performance information during the management agreement approval process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. Taking all these factors into consideration, the Board found the investment management services provided by the Advisor to the Fund to meet or exceed industry standards. More detailed information about the Fund’s performance can be found in the Performance and Portfolio Commentary sections of this report.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the Advisor. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund, its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. The financial information regarding the Advisor is considered in evaluating the Advisor’s financial condition, ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
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Comparison to Other Funds’ Fees. The management agreement provides that the Fund pay the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider and comparing the Fund’s unified fee to the total expense ratio of other funds in the Fund’s peer group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Board also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that the Advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit 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, however, that the assets of those other clients are not material to the analysis and, where applicable, may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
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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, concluded that the management agreement between the Fund and the Advisor is fair and reasonable in light of the services provided and should be renewed.
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Retirement Account Information
As required by law, distributions you receive from certain IRAs, or 403(b), 457 and qualified plans 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. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election.
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. State taxes will be withheld from your distribution in accordance with the respective state rules.
Proxy Voting Guidelines
American Century Investment Management, Inc., the fund’s investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the fund. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the “About Us” page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Contact Us | americancentury.com |
Automated Information Line | 1-800-345-8765 |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 |
Investors Using Advisors | 1-800-378-9878 |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 |
Telecommunications Device for the Deaf | 1-800-634-4113 |
American Century Growth 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.
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
CL-ANN-72770 1109
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) | M. Jeannine Strandjord, James A. Olson and Andrea C. Hall 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 2010: $42,012
FY 2011: $46,458
(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 2010: $0 FY 2011: $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 2010: $0 FY 2011: $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 2010: $0
FY 2011: $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 2010: $0
FY 2011: $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 2010: $0 FY 2011: $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 2010: $0 FY 2011: $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 2010: $60,027
FY 2011: $64,047
(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 registrant's second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. |
ITEM 12. EXHIBITS.
(a)(1) | 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. |
(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 GROWTH FUNDS, INC. | |||
By: | /s/ Jonathan S. Thomas | |||
Name: | Jonathan S. Thomas | |||
Title: | President | |||
Date: | September 29, 2011 | |||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Jonathan S. Thomas | ||
Name: | Jonathan S. Thomas | ||
Title: | President | ||
(principal executive officer) | |||
Date: | September 29, 2011 |
By: | /s/ Robert J. Leach | ||
Name: | Robert J. Leach | ||
Title: | Vice President, Treasurer, and | ||
Chief Financial Officer | |||
(principal financial officer) | |||
Date: | September 29, 2011 |