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 | 811-23305 | |||||
AMERICAN CENTURY ETF TRUST | ||||||
(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: | 08-31 | |||||
Date of reporting period: | 08-31-2019 |
ITEM 1. REPORTS TO STOCKHOLDERS.
![acietfslockupblacka11.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/acietfslockupblacka11.jpg)
Annual Report | |
August 31, 2019 | |
American Century® Diversified Corporate Bond ETF (KORP) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | ||
Performance | ||
Portfolio Commentary | ||
Fund Characteristics | ||
Frequency Distributions of Premiums and Discounts | ||
Shareholder Fee Example | ||
Schedule of Investments | ||
Statement of Assets and Liabilities | ||
Statement of Operations | ||
Statement of Changes in Net Assets | ||
Notes to Financial Statements | ||
Financial Highlights | ||
Report of Independent Registered Public Accounting Firm | ||
Management | ||
Approval of Management Agreement | ||
Additional Information | 31 |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
![jthomasrev0514a66.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/jthomasrev0514a66.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended August 31, 2019. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional investment and market insights, we encourage you to visit our website, americancenturyetfs.com.
Backdrop Favored Bonds
Most broad U.S. fixed-income indices ended the period with robust returns, bolstered by a sharp decline in U.S. Treasury yields. However, U.S. and other developed markets stocks delivered notably weaker results, largely due to a global sell-off among equities in late 2018. Although most stock indices rebounded strongly in 2019, their late-2018 losses weighed on results for the entire reporting period.
Fed’s Flip Fueled Investor Optimism
In the final months of 2018, mounting concerns about slowing global economic and earnings growth, tariffs and Federal Reserve (Fed) policy soured investor sentiment, driving global stocks lower. After raising rates in September, the Fed hiked again in December and delivered a surprisingly bullish rate-hike outlook, which intensified the sell-off among stocks and other riskier assets. Meanwhile, the risk-off climate sparked a flight to quality, which drove Treasury yields lower and benefited bonds.
A key policy pivot from the Fed helped improve equity investor sentiment beginning in early 2019. The central bank abruptly ended its rate-hike campaign and adopted a dovish tone amid weaker global growth and inflation. Additionally, investors’ worst-case fears about trade and corporate earnings generally eased, which also aided stocks. At the same time, government bond yields continued to fall on moderating global growth data, muted inflation and accommodative central bank policy in the U.S., Europe and Japan. By July, concerns about global economic risks prompted the Fed to cut short-term interest rates for the first time in 10 years. This backdrop supported continued gains for fixed-income and other interest rate-sensitive assets.
Looking ahead, we expect volatility to remain a formidable factor as investors react to global growth data, trade issues, central bank policy and geopolitical developments. We believe this scenario underscores the importance of using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a16.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/image48a16.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of August 31, 2019 | |||
Average Annual Returns | |||
1 year | Since Inception | Inception Date | |
Net Asset Value | 8.70% | 4.74% | 1/11/2018 |
Market Price | 8.77% | 4.90% | 1/11/2018 |
Bloomberg Barclays U.S. Intermediate Corporate Bond Index | 9.55% | 5.52% | — |
Market price is determined using the bid/ask midpoint at 4:00 p.m. Eastern time, when the net asset value (NAV) is typically calculated. Market performance does not represent the returns you would receive if you traded shares at other times. NAV prices are used to calculate market price performance prior to the date when the fund first traded on the New York Stock Exchange.
Growth of $10,000 Over Life of Fund |
$10,000 investment made January 11, 2018 |
![chart-b0244a16815b5405af3a04.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/chart-b0244a16815b5405af3a04.jpg)
Value on August 31, 2019 | |
Net Asset Value — $10,786 | |
Bloomberg Barclays U.S. Intermediate Corporate Bond Index — $10,918 | |
Total Annual Fund Operating Expenses |
0.29% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-6488 or visit americancenturyetfs.com. For additional information about the fund, please consult the prospectus.
3
Portfolio Commentary |
Portfolio Managers: Charles Tan, Jason Greenblath, Jeffrey Houston, Gavin Fleischman and Le Tran
Effective June 28, 2019, Charles Tan and Jason Greenblath joined the fund’s portfolio management team. Kevin Akioka, formerly a portfolio manager on the team, left the firm June 12, 2019.
Fund Strategy
American Century Diversified Corporate Bond ETF seeks to offer enhanced return potential versus passive capitalization-weighted corporate bond portfolios. The fund employs a holistic approach, emphasizing investment-grade credits, while dynamically allocating a portion of the portfolio to high-yield securities. The fund integrates fundamental and quantitative analysis in a systematically managed portfolio that strives to balance interest-rate risk and credit risk. The fund seeks to maintain a duration range of three to seven years, which we believe should mitigate interest-rate risk without sacrificing yield.
The fund is an actively managed ETF that does not seek to replicate the performance of a specific index. To determine whether to buy or sell a security, we consider several factors, including fund requirements and standards, economic conditions, alternative investments, interest rates and various credit metrics.
Performance Review
The fund returned 8.77% on a market price basis for the fiscal year ended August 31, 2019. On a net asset value (NAV) basis, the fund returned 8.70%. For the same time period, the Bloomberg Barclays U.S. Intermediate Corporate Bond Index, the fund’s benchmark index, returned 9.55%. The fund’s NAV and market price returns reflect fees and operating expenses, while the index return does not.
High-Yield Bonds and Energy Sector Exposure Weighed on Results
Overall, our allocation to high-yield corporate bonds detracted from performance, as interest rates declined and longer-duration securities outperformed. High-yield bond prices fell late in 2018 amid emerging recession fears, escalating trade tensions and risk-off investing. However, investor sentiment started to shift in early 2019 as recession fears faded. The Federal Reserve (Fed) abruptly ended its rate-tightening campaign and adopted a dovish stance. While a recession seemed unlikely, global growth and inflation continued to moderate. This, combined with expectations for Fed rate cuts, continued to drive Treasury yields lower, which sparked a rally among investment-grade corporates. Compared with high-yield bonds, investment-grade corporates typically are more sensitive to changes in interest rates.
In May 2019, high-yield valuations approached the richer end of our fair value target, and we reduced our exposure synthetically through a credit default swap. In our view, market prices did not appropriately reflect escalating trade tensions between the U.S. and China. At the end of the reporting period, approximately 5% of the portfolio was allocated to high-yield issues, and the synthetic hedge reduced the exposure further to 1% of the portfolio.
Among investment-grade corporates, security selection in the energy sector weighed on results. Though our overweight allocation to energy issues aided portfolio performance, specific energy-related credits in the refining and midstream industries underperformed and detracted from returns.
Duration Detracted
Early in the period, we maintained a relatively short duration due to the rising-rate environment. We began increasing duration in early 2019, as the Fed became more dovish. We also viewed
4
heightened trade tensions with China as an obstacle for economic growth, which encouraged us to increase duration further. However, the fund’s duration remained slightly shorter than that of the benchmark, which weighed on results.
Falling Yields and Tighter Credit Spreads Aided Performance
Although Treasury yields declined sharply for the 12-month period, they started the period on the upswing. In addition to rising rates, heightened volatility and credit-spread widening characterized the final months of 2018. Meanwhile, the Fed continued to tighten monetary policy, hiking the federal funds rate target in September and December.
Sentiment shifted dramatically in early 2019, as the Fed halted its rate-hike campaign amid moderating global growth and inflation. Credit spreads recovered as investors began to anticipate easing monetary policy from the Fed. Treasury yields, which started declining in late 2018, continued to fall through the end of the reporting period, which contributed to price appreciation among corporate bonds.
Within the portfolio, our allocation to investment-grade corporate bonds with BBB credit ratings (the lowest credit rating category in the investment-grade bond universe) contributed to performance. Lower-rated investment-grade bonds generally outperformed higher-credit-quality securities.
Portfolio Positioning
Going forward, we will continue to rely on our combined quantitative and fundamental analysis to uncover attractive opportunities in the investment-grade corporate bond market. The global trends of easing monetary policy and lower interest rates should drive continued search for yield and income among investors.
The fund’s allocation to high-yield bonds ended the period significantly below its long-term average allocation of 15%, given current market dynamics. Specifically, we believe credit spreads remain more richly priced within the high-yield corporate bond sector. Accordingly, we will continue to carefully evaluate credits, selecting securities we believe offer attractive risk/reward characteristics. We will continue to monitor valuations in the sector, seeking to add exposure when spreads widen and selectively sell high-yield securities when valuations become richer.
In an environment with a multitude of exogenous risks, the economic growth picture remains uncertain. We will continue to manage the fund’s duration in a defensive manner, given the recent steep decline in interest rates.
5
Fund Characteristics |
AUGUST 31, 2019 |
Portfolio at a Glance | |
Weighted Average Life to Maturity | 4.9 years |
Average Duration (Effective) | 4.3 years |
Types of Investments in Portfolio | % of net assets |
Corporate Bonds | 97.2% |
Temporary Cash Investments | 1.8% |
Other Assets and Liabilities | 1.0% |
6
Frequency Distributions of Premiums and Discounts |
The Frequency Distribution of Premiums and Discounts chart is provided to show the frequency at which the market price for the fund was at a premium or discount to the daily net asset value (NAV). Shareholders may pay more than NAV when they buy fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented reflect past performance. Past performance is no guarantee of future results. The following table represents the period January 16, 2018 (commencement of trading) through August 31, 2019.
Premium/Discount Range (%) | Number of Days Market Price Above or Equal to NAV | Number of Days Market Price Below NAV |
0% - 0.49% | 380 | 2 |
0.50% - 0.99% | 28 | — |
1.00% - 1.99% | — | — |
> 2.00% | — | — |
Total | 408 | 2 |
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Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including brokerage commissions paid on purchases and sales of fund shares; and (2) ongoing costs, including management 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 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 March 1, 2019 to August 31, 2019.
Actual Expenses
The table provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of fund shares. 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 3/1/19 | Ending Account Value 8/31/19 | Expenses Paid During Period(1) 3/1/19 - 8/31/19 | Annualized Expense Ratio(1) | |
Actual | $1,000 | $1,065.60 | $1.87 | 0.36% |
Hypothetical | $1,000 | $1,023.39 | $1.84 | 0.36% |
(1) | Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 184, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
8
Schedule of Investments |
AUGUST 31, 2019
Principal Amount | Value | |||||
CORPORATE BONDS — 97.2% | ||||||
Airlines — 0.6% | ||||||
Delta Air Lines, Inc., 3.80%, 4/19/23 | $ | 350,000 | $ | 364,403 | ||
Auto Components — 0.8% | ||||||
Lear Corp., 3.80%, 9/15/27 | 500,000 | 504,715 | ||||
Automobiles — 1.2% | ||||||
Ally Financial, Inc., 4.625%, 5/19/22 | 275,000 | 290,125 | ||||
General Motors Co., 4.875%, 10/2/23 | 450,000 | 484,380 | ||||
774,505 | ||||||
Banks — 17.3% | ||||||
Bank of America Corp., VRN, 3.00%, 12/20/23 | 1,700,000 | 1,745,548 | ||||
Capital One Financial Corp., 3.50%, 6/15/23 | 1,325,000 | 1,384,756 | ||||
CIT Group, Inc., 5.00%, 8/1/23 | 275,000 | 299,063 | ||||
Citigroup, Inc., 4.05%, 7/30/22 | 1,500,000 | 1,573,679 | ||||
Huntington Bancshares, Inc., 2.30%, 1/14/22 | 1,325,000 | 1,331,698 | ||||
KeyCorp, MTN, 4.15%, 10/29/25 | 950,000 | 1,045,249 | ||||
Regions Financial Corp., 2.75%, 8/14/22 | 1,325,000 | 1,348,801 | ||||
SunTrust Bank, 2.45%, 8/1/22 | 1,000,000 | 1,012,103 | ||||
Wells Fargo & Co., 4.125%, 8/15/23 | 1,300,000 | 1,388,431 | ||||
11,129,328 | ||||||
Beverages — 1.6% | ||||||
Constellation Brands, Inc., 3.20%, 2/15/23 | 575,000 | 593,646 | ||||
Keurig Dr Pepper, Inc., 4.06%, 5/25/23 | 400,000 | 425,054 | ||||
1,018,700 | ||||||
Biotechnology — 1.4% | ||||||
Biogen, Inc., 3.625%, 9/15/22 | 544,000 | 567,087 | ||||
Celgene Corp., 2.875%, 8/15/20 | 320,000 | 321,982 | ||||
889,069 | ||||||
Building Products — 0.5% | ||||||
Masco Corp., 4.375%, 4/1/26 | 325,000 | 351,012 | ||||
Chemicals — 3.6% | ||||||
Albemarle Corp., 4.15%, 12/1/24 | 350,000 | 375,590 | ||||
Celanese US Holdings LLC, 4.625%, 11/15/22 | 351,000 | 374,019 | ||||
Dow Chemical Co. (The), 3.00%, 11/15/22 | 475,000 | 485,349 | ||||
LYB International Finance BV, 4.00%, 7/15/23 | 625,000 | 665,317 | ||||
Westlake Chemical Corp., 3.60%, 8/15/26 | 400,000 | 415,858 | ||||
2,316,133 | ||||||
Construction Materials — 0.6% | ||||||
Vulcan Materials Co., 4.50%, 4/1/25 | 351,000 | 380,523 | ||||
Consumer Finance — 7.7% | ||||||
American Express Co., 2.50%, 8/1/22 | 1,325,000 | 1,344,102 | ||||
Block Financial LLC, 5.50%, 11/1/22 | 450,000 | 482,230 | ||||
Discover Financial Services, 3.85%, 11/21/22 | 1,325,000 | 1,390,715 |
9
Principal Amount | Value | |||||
S&P Global, Inc., 4.00%, 6/15/25 | $ | 375,000 | $ | 412,983 | ||
Synchrony Financial, 3.75%, 8/15/21 | 1,325,000 | 1,355,265 | ||||
4,985,295 | ||||||
Containers and Packaging — 0.8% | ||||||
Berry Global, Inc., 5.125%, 7/15/23 | 250,000 | 257,188 | ||||
Berry Global, Inc., 4.875%, 7/15/26(1) | 250,000 | 263,125 | ||||
520,313 | ||||||
Diversified Financial Services — 7.1% | ||||||
Goldman Sachs Group, Inc. (The), VRN, 2.91%, 6/5/23 | 1,325,000 | 1,348,881 | ||||
JPMorgan Chase & Co., 3.375%, 5/1/23 | 1,600,000 | 1,659,061 | ||||
Morgan Stanley, MTN, 4.10%, 5/22/23 | 1,500,000 | 1,589,451 | ||||
4,597,393 | ||||||
Diversified Telecommunication Services — 1.9% | ||||||
AT&T, Inc., 3.40%, 5/15/25 | 500,000 | 525,579 | ||||
Verizon Communications, Inc., 5.15%, 9/15/23 | 625,000 | 702,943 | ||||
1,228,522 | ||||||
Electric Utilities — 2.5% | ||||||
Duke Energy Corp., 2.65%, 9/1/26 | 500,000 | 506,425 | ||||
Edison International, 4.125%, 3/15/28 | 525,000 | 548,441 | ||||
Exelon Corp., 3.50%, 6/1/22 | 550,000 | 566,479 | ||||
1,621,345 | ||||||
Entertainment — 2.9% | ||||||
Activision Blizzard, Inc., 2.30%, 9/15/21 | 950,000 | 950,588 | ||||
Netflix, Inc., 4.875%, 4/15/28 | 250,000 | 262,188 | ||||
Thomson Reuters Corp., 3.35%, 5/15/26 | 600,000 | 624,782 | ||||
1,837,558 | ||||||
Equity Real Estate Investment Trusts (REITs) — 2.7% | ||||||
American Tower Corp., 3.50%, 1/31/23 | 925,000 | 963,381 | ||||
Boston Properties LP, 2.75%, 10/1/26 | 400,000 | 406,795 | ||||
SITE Centers Corp., 3.625%, 2/1/25 | 375,000 | 387,189 | ||||
1,757,365 | ||||||
Food and Staples Retailing — 0.7% | ||||||
Dollar General Corp., 4.15%, 11/1/25 | 400,000 | 436,481 | ||||
Food Products — 1.5% | ||||||
Conagra Brands, Inc., 3.20%, 1/25/23 | 550,000 | 561,150 | ||||
Kraft Heinz Foods Co., 4.00%, 6/15/23 | 375,000 | 389,935 | ||||
951,085 | ||||||
Gas Utilities — 4.3% | ||||||
Enterprise Products Operating LLC, 3.75%, 2/15/25 | 700,000 | 751,005 | ||||
EQM Midstream Partners LP, 4.125%, 12/1/26 | 725,000 | 692,596 | ||||
ONEOK, Inc., 4.00%, 7/13/27 | 700,000 | 736,998 | ||||
Plains All American Pipeline LP / PAA Finance Corp., 3.60%, 11/1/24 | 550,000 | 565,437 | ||||
2,746,036 | ||||||
Health Care Providers and Services — 3.9% | ||||||
Acadia Healthcare Co., Inc., 5.625%, 2/15/23 | 300,000 | 307,872 | ||||
AmerisourceBergen Corp., 3.50%, 11/15/21 | 575,000 | 589,037 | ||||
Anthem, Inc., 3.30%, 1/15/23 | 350,000 | 361,735 |
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Principal Amount | Value | |||||
DaVita, Inc., 5.125%, 7/15/24 | $ | 250,000 | $ | 254,928 | ||
Express Scripts Holding Co., 3.05%, 11/30/22 | 600,000 | 614,984 | ||||
Universal Health Services, Inc., 4.75%, 8/1/22(1) | 375,000 | 380,205 | ||||
2,508,761 | ||||||
Hotels, Restaurants and Leisure — 0.6% | ||||||
Hyatt Hotels Corp., 4.85%, 3/15/26 | 375,000 | 416,058 | ||||
Household Durables — 0.8% | ||||||
DR Horton, Inc., 4.75%, 2/15/23 | 475,000 | 508,737 | ||||
Independent Power and Renewable Electricity Producers — 0.5% | ||||||
NRG Energy, Inc., 5.75%, 1/15/28 | 275,000 | 297,344 | ||||
Industrial Conglomerates — 1.0% | ||||||
Hasbro, Inc., 3.50%, 9/15/27 | 625,000 | 638,097 | ||||
Insurance — 2.2% | ||||||
Allstate Corp. (The), VRN, 5.75%, 8/15/53 | 325,000 | 346,619 | ||||
American International Group, Inc., 4.875%, 6/1/22 | 325,000 | 348,220 | ||||
Prudential Financial, Inc., VRN, 5.625%, 6/15/43 | 325,000 | 348,876 | ||||
Voya Financial, Inc., 3.65%, 6/15/26 | 375,000 | 398,409 | ||||
1,442,124 | ||||||
Internet and Direct Marketing Retail — 0.8% | ||||||
Expedia Group, Inc., 3.80%, 2/15/28 | 500,000 | 530,226 | ||||
Media — 1.9% | ||||||
CCO Holdings LLC / CCO Holdings Capital Corp., 5.00%, 2/1/28(1) | 250,000 | 263,125 | ||||
Charter Communications Operating LLC / Charter Communications Operating Capital, 4.91%, 7/23/25 | 400,000 | 442,413 | ||||
Comcast Corp., 3.30%, 2/1/27 | 500,000 | 532,745 | ||||
1,238,283 | ||||||
Metals and Mining — 2.4% | ||||||
Kinross Gold Corp., 4.50%, 7/15/27 | 700,000 | 735,000 | ||||
Newmont Goldcorp Corp., 3.50%, 3/15/22 | 375,000 | 385,041 | ||||
Southern Copper Corp., 3.875%, 4/23/25 | 375,000 | 393,976 | ||||
1,514,017 | ||||||
Multi-Utilities — 2.5% | ||||||
Enel Americas SA, 4.00%, 10/25/26 | 550,000 | 575,305 | ||||
NextEra Energy Capital Holdings, Inc., 3.55%, 5/1/27 | 500,000 | 534,911 | ||||
PSEG Power LLC, 3.00%, 6/15/21 | 500,000 | 506,248 | ||||
1,616,464 | ||||||
Oil, Gas and Consumable Fuels — 8.3% | ||||||
Cenovus Energy, Inc., 3.00%, 8/15/22 | 725,000 | 732,245 | ||||
Cimarex Energy Co., 3.90%, 5/15/27 | 700,000 | 716,864 | ||||
Concho Resources, Inc., 4.375%, 1/15/25 | 656,000 | 680,541 | ||||
Diamondback Energy, Inc., 4.75%, 11/1/24 | 300,000 | 310,125 | ||||
HollyFrontier Corp., 5.875%, 4/1/26 | 650,000 | 723,957 | ||||
Marathon Oil Corp., 4.40%, 7/15/27 | 600,000 | 646,778 | ||||
Pioneer Natural Resources Co., 3.95%, 7/15/22 | 500,000 | 522,270 | ||||
Suburban Propane Partners LP / Suburban Energy Finance Corp., 5.50%, 6/1/24 | 250,000 | 255,000 | ||||
Valero Energy Corp., 7.50%, 4/15/32 | 525,000 | 728,260 | ||||
5,316,040 |
11
Principal Amount/Shares | Value | |||||
Paper and Forest Products — 0.6% | ||||||
Fibria Overseas Finance Ltd., 5.50%, 1/17/27 | $ | 350,000 | $ | 378,875 | ||
Pharmaceuticals — 2.1% | ||||||
AbbVie, Inc., 3.20%, 5/14/26 | 400,000 | 409,693 | ||||
Teva Pharmaceutical Finance Netherlands III BV, 2.20%, 7/21/21 | 300,000 | 282,000 | ||||
Zoetis, Inc., 4.50%, 11/13/25 | 600,000 | 669,364 | ||||
1,361,057 | ||||||
Semiconductors and Semiconductor Equipment — 1.8% | ||||||
Broadcom Corp. / Broadcom Cayman Finance Ltd., 2.65%, 1/15/23 | 575,000 | 574,628 | ||||
KLA Corp., 4.10%, 3/15/29 | 525,000 | 582,530 | ||||
1,157,158 | ||||||
Software — 1.7% | ||||||
Citrix Systems, Inc., 4.50%, 12/1/27 | 519,000 | 559,856 | ||||
VMware, Inc., 3.90%, 8/21/27 | 525,000 | 537,571 | ||||
1,097,427 | ||||||
Specialty Retail — 1.1% | ||||||
Best Buy Co., Inc., 5.50%, 3/15/21 | 450,000 | 468,300 | ||||
United Rentals North America, Inc., 4.625%, 10/15/25 | 250,000 | 258,050 | ||||
726,350 | ||||||
Technology Hardware, Storage and Peripherals — 2.3% | ||||||
Apple, Inc., 2.45%, 8/4/26 | 500,000 | 511,816 | ||||
Dell International LLC / EMC Corp., 4.00%, 7/15/24(1) | 350,000 | 366,096 | ||||
Seagate HDD Cayman, 4.875%, 3/1/24 | 550,000 | 575,983 | ||||
1,453,895 | ||||||
Textiles, Apparel and Luxury Goods — 0.8% | ||||||
Tapestry, Inc., 4.25%, 4/1/25 | 500,000 | 518,035 | ||||
Trading Companies and Distributors — 0.8% | ||||||
International Lease Finance Corp., 5.875%, 8/15/22 | 450,000 | 494,410 | ||||
Wireless Telecommunication Services — 1.4% | ||||||
Rogers Communications, Inc., 3.00%, 3/15/23 | 875,000 | 900,541 | ||||
TOTAL CORPORATE BONDS (Cost $60,319,606) | 62,523,680 | |||||
TEMPORARY CASH INVESTMENTS — 1.8% | ||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class (Cost $1,162,785) | 1,162,785 | 1,162,785 | ||||
TOTAL INVESTMENT SECURITIES — 99.0% (Cost $61,482,391) | 63,686,465 | |||||
OTHER ASSETS AND LIABILITIES — 1.0% | 647,509 | |||||
TOTAL NET ASSETS — 100.0% | $ | 64,333,974 |
FUTURES CONTRACTS PURCHASED | ||||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Underlying Contract Value | Unrealized Appreciation (Depreciation) | |||||||
U.S. Treasury 10-Year Notes | 29 | December 2019 | $ | 2,900,000 | $ | 3,819,844 | $ | (2,784 | ) |
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CENTRALLY CLEARED CREDIT DEFAULT SWAP AGREEMENTS | |||||||||||||||
Reference Entity | Type | Fixed Rate Received (Paid) | Termination Date | Notional Amount | Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Value^ | ||||||||
Markit CDX North America High Yield Index Series 32 | Buy | (5.00)% | 6/20/24 | $ | 2,772,000 | $ | (169,652 | ) | $ | (42,017 | ) | $ | (211,669 | ) |
^The value for credit default swap agreements serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability or profit at the period end. Increasing values in absolute terms when compared to the notional amount of the credit default swap agreement represent a deterioration of the referenced entity's credit soundness and an increased likelihood or risk of a credit event occurring as defined in the agreement.
NOTES TO SCHEDULE OF INVESTMENTS | ||
CDX | - | Credit Derivatives Indexes |
MTN | - | Medium Term Note |
VRN | - | Variable Rate Note. The rate adjusts periodically based upon the terms set forth in the security’s offering documents. The rate shown is effective at the period end and the reference rate and spread, if any, is indicated. |
(1) | Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration, normally to qualified institutional investors. The aggregate value of these securities at the period end was $1,272,551, which represented 2.0% of total net assets. |
See Notes to Financial Statements.
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Statement of Assets and Liabilities |
AUGUST 31, 2019 | |||
Assets | |||
Investment securities, at value (cost of $61,482,391) | $ | 63,686,465 | |
Deposits with broker for futures contracts and swap agreements | 124,973 | ||
Receivable for variation margin on futures contracts | 2,719 | ||
Interest receivable | 535,940 | ||
64,350,097 | |||
Liabilities | |||
Payable for variation margin on swap agreements | 362 | ||
Accrued management fees | 15,761 | ||
16,123 | |||
Net Assets | $ | 64,333,974 | |
Shares outstanding (unlimited number of shares authorized) | 1,252,000 | ||
Net Asset Value Per Share | $ | 51.38 | |
Net Assets Consist of: | |||
Capital paid in | $ | 61,893,355 | |
Distributable earnings | 2,440,619 | ||
$ | 64,333,974 |
See Notes to Financial Statements.
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Statement of Operations |
YEAR ENDED AUGUST 31, 2019 | |||
Investment Income (Loss) | |||
Income: | |||
Interest | $ | 1,493,371 | |
Expenses: | |||
Management fees | 156,455 | ||
Other expenses | 136 | ||
156,591 | |||
Net investment income (loss) | 1,336,780 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 93,838 | ||
Futures contract transactions | 135,293 | ||
Swap agreement transactions | (96,379 | ) | |
132,752 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | 2,492,720 | ||
Futures contracts | (2,784 | ) | |
Swap agreements | (42,017 | ) | |
2,447,919 | |||
Net realized and unrealized gain (loss) | 2,580,671 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 3,917,451 |
See Notes to Financial Statements.
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Statement of Changes in Net Assets |
YEAR ENDED AUGUST 31, 2019 AND PERIOD ENDED AUGUST 31, 2018 | ||||||
Increase (Decrease) in Net Assets | August 31, 2019 | August 31, 2018(1) | ||||
Operations | ||||||
Net investment income (loss) | $ | 1,336,780 | $ | 241,720 | ||
Net realized gain (loss) | 132,752 | (65,609 | ) | |||
Change in net unrealized appreciation (depreciation) | 2,447,919 | (288,646 | ) | |||
Net increase (decrease) in net assets resulting from operations | 3,917,451 | (112,535 | ) | |||
Distributions to Shareholders | ||||||
From earnings | (1,157,153 | ) | (207,144 | ) | ||
Capital Share Transactions | ||||||
Proceeds from shares sold | 49,282,909 | 12,610,446 | ||||
Net increase (decrease) in net assets | 52,043,207 | 12,290,767 | ||||
Net Assets | ||||||
Beginning of period | 12,290,767 | — | ||||
End of period | $ | 64,333,974 | $ | 12,290,767 | ||
Transactions in Shares of the Fund | ||||||
Sold | 1,000,000 | 252,000 |
(1) | January 11, 2018 (fund inception) through August 31, 2018. |
See Notes to Financial Statements.
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Notes to Financial Statements |
AUGUST 31, 2019
1. Organization
American Century ETF Trust (the trust) was registered as a Delaware statutory trust in 2017 and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. American Century Diversified Corporate Bond ETF (the fund) is one fund in a series issued by the trust. The fund's investment objective is to seek to provide current income. Shares of the fund are listed for trading on the NYSE Arca, Inc. The fund incepted on January 11, 2018.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Trustees has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Fixed income securities are valued at the evaluated mean as provided by independent pricing services or at the mean of the most recent bid and asked prices as provided by investment dealers. Corporate bonds are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Exchange-traded futures contracts are valued at the settlement price as provided by the appropriate exchange. Swap agreements are valued at an evaluated mean as provided by independent pricing services or independent brokers.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Trustees or its delegate, in accordance with policies and procedures adopted by the Board of Trustees. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region.
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 — Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
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Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover certain types of investment securities and other financial instruments. American Century Investment Management, Inc. (ACIM) (the investment advisor) monitors, on a daily basis, the securities segregated to ensure the fund designates a sufficient amount of liquid assets, marked-to-market daily. The fund may also receive assets or be required to pledge assets at the custodian bank or with a broker for collateral requirements.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid monthly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and trustees of the trust are also officers and/or directors of American Century Companies, Inc. (ACC). The trust's investment advisor, ACIM, and the trust’s administrator, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The trust has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee). The agreement provides that all expenses of managing and operating the fund, except brokerage and other transaction fees and expenses relating to the acquisition and disposition of portfolio securities, acquired fund fees and expenses, interest, taxes, litigation expenses, extraordinary expenses and expenses incurred in connection with the provision of shareholder and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act, if any, will be paid by ACIM. The fee is computed and accrued daily based on the daily net assets of the fund and paid monthly in arrears. The annual management fee is 0.29%. Prior to June 14, 2019, the annual management fee was 0.45%. The effective annual management fee for the period ended August 31, 2019 was 0.39%.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments and in-kind transactions, for the period ended August 31, 2019 were $23,289,423 and $13,376,847, respectively.
Securities received in-kind through subscriptions for the period ended August 31, 2019 were $38,320,528. There were no securities delivered in-kind through redemptions during the period.
5. Capital Share Transactions
The fund’s shares may only be purchased and sold on a national securities exchange through a broker-dealer. The price of the fund’s shares is based on market price, and because ETF shares trade at market prices rather than net asset value (NAV), shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The fund issues and redeems shares that have been aggregated into blocks of 50,000 shares or multiples thereof (Creation Units) to authorized participants who have entered into agreements with the fund's distributor. The fund may issue and redeem Creation Units in return for a basket of securities (and an amount of cash) or entirely for cash. Investors transacting in Creation Units for cash may also pay an additional variable charge to compensate the fund for certain transaction costs and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in proceeds from shares sold in the Statement of Changes in Net Assets.
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6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Corporate Bonds | — | $ | 62,523,680 | — | ||||
Temporary Cash Investments | $ | 1,162,785 | — | — | ||||
$ | 1,162,785 | $ | 62,523,680 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Futures Contracts | $ | 2,784 | — | — | ||||
Swap Agreements | — | $ | 211,669 | — | ||||
$ | 2,784 | $ | 211,669 | — |
7. Derivative Instruments
Credit Risk — The fund is subject to credit risk in the normal course of pursuing its investment objectives. The value of a bond generally declines as the credit quality of its issuer declines. Credit default swap agreements enable a fund to buy/sell protection against a credit event of a specific issuer or index. A fund may attempt to enhance returns by selling protection or attempt to mitigate credit risk by buying protection. The buyer/seller of credit protection against a security or basket of securities may pay/receive an up-front or periodic payment to compensate for/against potential default events. Changes in value, including the periodic amounts of interest to be paid or received on swap agreements, are recorded as unrealized appreciation (depreciation) on swap agreements. Upon entering into a centrally cleared swap, a fund is required to deposit cash or securities (initial margin) with a financial intermediary in an amount equal to a certain percentage of the notional amount. Subsequent payments (variation margin) are made or received daily, in cash, by a fund. The variation margin is equal to the daily change in the value and is a component of unrealized gains and losses. Realized gain or loss is recorded upon receipt or payment of a periodic settlement or termination of swap agreements. Net realized and unrealized gains or losses occurring during the holding period of swap agreements are a component of net realized gain (loss) on swap agreement transactions and change in net unrealized appreciation (depreciation) on swap agreements, respectively. The risks of entering into swap agreements include the possible lack of liquidity, failure of the counterparty to meet its obligations, and that there may be unfavorable changes in the underlying investments or instruments. The fund's average notional amount held during the period was $3,436,000.
Interest Rate Risk — The fund is subject to interest rate risk in the normal course of pursuing its investment objectives. The value of bonds generally declines as interest rates rise. A fund may enter into futures contracts based on a bond index or a specific underlying security. A fund may purchase futures contracts to gain
19
exposure to increases in market value or sell futures contracts to protect against a decline in market value. Upon entering into a futures contract, a fund will segregate cash, cash equivalents or other appropriate liquid securities on its records in amounts sufficient to meet requirements. Subsequent payments (variation margin) are made or received daily, in cash, by a fund. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. A fund recognizes a realized gain or loss when the futures contract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of net realized gain (loss) on futures contract transactions and change in net unrealized appreciation (depreciation) on futures contracts, respectively. One of the risks of entering into futures contracts is the possibility that the change in value of the contract may not correlate with the changes in value of the underlying securities. The fund's average notional exposure to interest rate risk derivative instruments held during the period was $2,300,000 futures contracts purchased and $1,116,667 futures contracts sold.
Value of Derivative Instruments as of August 31, 2019
Asset Derivatives | Liability Derivatives | |||||||
Type of Risk Exposure | Location on Statement of Assets and Liabilities | Value | Location on Statement of Assets and Liabilities | Value | ||||
Credit Risk | Receivable for variation margin on swap agreements* | — | Payable for variation margin on swap agreements* | $ | 362 | |||
Interest Rate Risk | Receivable for variation margin on futures contracts* | $ | 2,719 | Payable for variation margin on futures contracts* | — | |||
$ | 2,719 | $ | 362 |
* Included in the unrealized appreciation (depreciation) on futures contracts or centrally cleared swap agreements, as applicable, as reported in the Schedule of Investments.
Effect of Derivative Instruments on the Statement of Operations for the Year Ended August 31, 2019
Net Realized Gain (Loss) | Change in Net Unrealized Appreciation (Depreciation) | |||||||
Type of Risk Exposure | Location on Statement of Operations | Value | Location on Statement of Operations | Value | ||||
Credit Risk | Net realized gain (loss) on swap agreement transactions | $ | (96,379 | ) | Change in net unrealized appreciation (depreciation) on swap agreements | $ | (42,017 | ) |
Interest Rate Risk | Net realized gain (loss) on futures contract transactions | 135,293 | Change in net unrealized appreciation (depreciation) on futures contracts | (2,784 | ) | |||
$ | 38,914 | $ | (44,801 | ) |
8. Federal Tax Information
The tax character of distributions paid during the year ended August 31, 2019 and the period January 11, 2018 (fund inception) through August 31, 2018 were as follows:
2019 | 2018 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 1,157,153 | $ | 207,144 | ||
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.
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As of period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 61,483,950 | |
Gross tax appreciation of investments | $ | 2,208,306 | |
Gross tax depreciation of investments | (5,791 | ) | |
Net tax appreciation (depreciation) of investments | 2,202,515 | ||
Net tax appreciation (depreciation) on derivatives | (14,463 | ) | |
Net tax appreciation (depreciation) | $ | 2,188,052 | |
Undistributed ordinary income | $ | 199,517 | |
Accumulated long-term capital gains | $ | 53,050 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to unsettled interest on swap agreements.
9. Recently Issued Accounting Standards
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2017-08, “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities” (ASU 2017-08). ASU 2017-08 amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management is currently evaluating the impact that adopting ASU 2017-08 will have on the financial statements.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended August 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | ||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Distributions From Net Investment Income | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate(3) | Net Assets, End of Period (in thousands) | |||
2019 | $48.77 | 1.67 | 2.48 | 4.15 | (1.54) | $51.38 | 8.70% | 0.39% | 3.37% | 35% | $64,334 | ||
2018(4) | $50.00 | 0.96 | (1.37) | (0.41) | (0.82) | $48.77 | (0.77)% | 0.45%(5) | 3.09%(5) | 38% | $12,291 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day. Total returns for periods less than one year are not annualized. |
(3) | Excludes securities received or delivered in-kind. |
(4) | January 11, 2018 (fund inception) through August 31, 2018. |
(5) | Annualized. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Trustees of American Century ETF Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of American Century Diversified Corporate Bond ETF, one of the funds constituting the American Century ETF Trust (the “Fund”), as of August 31, 2019, the related statement of operations for the year then ended, the statements of changes in net assets and the financial highlights for the year ended August 31, 2019 and the period from January 11, 2018 (fund inception) through August 31, 2018, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of August 31, 2019, and the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year ended August 31, 2019 and the period from January 11, 2018 (fund inception) through August 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2019, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
October 18, 2019
We have served as the auditor of one or more American Century investment companies since 1997.
23
Management |
The Board of Trustees
The individuals listed below serve as trustees of the funds. Each trustee will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for trustees who are not “interested persons,” as that term is defined in the Investment Company Act (independent trustees). Trustees who are not also officers of the trust shall retire by December 31st of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other trustees are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The following trustees also serve in this capacity for a number of other registered investment companies in the American Century Investments family of funds: Jonathan S. Thomas, 15; Ronald J. Gilson, 8; and Stephen E. Yates, 7.
The following table presents additional information about the trustees. The mailing address for each trustee other than Jonathan S. Thomas is 330 Madison Avenue, New York, New York 10017. The mailing address for Jonathan S. Thomas 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 Trustee | Other Directorships Held During Past 5 Years |
Independent Trustees | |||||
Reginald M. Browne (1968) | Trustee and Chairman of the Board | Since 2017 (Chairman since 2019) | Principal, GTS Securities (automated capital markets trading firm)(2019 to present); Senior Managing Director, Co Global Head-ETF Group, Cantor Fitzgerald (financial services firm)(2013 to 2019) | 5 | None |
Ronald J. Gilson (1946) | Trustee | Since 2017 | Charles J. Meyers Professor of Law and Business, Emeritus, Stanford Law School (1979 to 2016); Marc and Eva Stern Professor of Law and Business, Columbia University School of Law (1992 to present) | 49 | None |
Barry A. Mendelson (1958) | Trustee | Since 2017 | Retired; Consultant regarding ETF and mutual fund matters (2015 to 2016); Principal and Senior Counsel, The Vanguard Group (investment management)(1998 to 2014) | 5 | None |
Stephen E. Yates (1948) | Trustee | Since 2017 | Retired | 72 | None |
24
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 Trustee | Other Directorships Held During Past 5 Years |
Interested Trustees | |||||
Jonathan S. Thomas (1963) | Trustee | Since 2017 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 116 | BioMed Valley Discoveries, Inc. |
The Statement of Additional Information has additional information about the fund's trustees and is available without charge, upon request, by calling 1-800-345-6488.
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Officers
The following table presents certain information about the executive officers of the funds. Each officer, except Edward Rosenberg, serves as an officer for each of the 16 investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present); Chief Operating Officer, ACC (2012 to 2015). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries |
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Investment Operations and Investment Accounting, ACS (2000 to present) |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2017 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS |
Charles A. Etherington (1957) | General Counsel and Vice President since 2017 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
Cleo Chang (1977) | Vice President since 2019 | Senior Vice President, ACIM (2015 to present); Chief Investment Officer, Wilshire Funds Management (2005 to 2015) |
David H. Reinmiller (1963) | Vice President since 2017 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS |
Edward Rosenberg (1973) | Vice President since 2017 | Senior Vice President, ACIM (2017 to present); Senior Vice President, Flexshares Head of ETF Capital Markets, Northern Trust (2012 to 2017) |
C. Jean Wade (1964) | Vice President since 2017 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) |
Ward D. Stauffer (1960) | Secretary since 2019 | Attorney, ACS (2003 to present) |
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Approval of Management Agreement |
At a meeting held on June 13, 2019, the Fund’s Board of Trustees (the "Board") unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Trustees”), including a majority of the independent Trustees, each year.
Prior to its consideration of the renewal of the management agreement, the Trustees 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 Audit Committee on a continual basis and the information received was supplemental to the extensive information that the Board and its Audit Committee receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management and other services provided and to be provided to the Fund; |
• | the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis; |
• | the investment performance of the Fund, including data comparing the Fund's performance to appropriate benchmarks; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers; |
• | 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; |
• | strategic plans of the Advisor; |
• | any economies of scale associated with the Advisor’s management of the Fund and other accounts; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
The Trustees held one in-person meeting to review and discuss the information provided. The independent Trustees also held active discussions with the Advisor regarding the renewal of the management agreement. The independent Trustees had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Trustees considered all of the information provided by the Advisor, the independent data providers, and independent counsel in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Trustees did not identify any single factor as being all-important or controlling, and each Trustee may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including without limitation the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the
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Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
• | portfolio research and security selection |
• | 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 (except amounts paid by the Fund under Rule 12b-1 plans) |
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, 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 Trustees 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 provides oversight of the investment performance process. It regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks over different time horizons. The Trustees also review investment performance information during the management agreement renewal process. If performance concerns are identified, the Board discusses with the Advisor the reasons for such results and any efforts being undertaken to improve performance. The Fund’s performance reviewed by the Board was below its benchmark. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides or arranges for a comprehensive package of services to the Fund. The Board, directly and through its Audit Committee, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Trustees have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to the Fund and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
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Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, expenses attributable to short sales, taxes, interest, extraordinary expenses, and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the Investment Company Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was slightly above the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. At the request of the Advisor, the Board approved a permanent management fee reduction for the Fund from 0.45% per year to 0.29%. 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 Trustees also requested information from the Advisor concerning the nature of the services, fees, costs, and profitability of its advisory services to funds or other advisory clients managed similarly to the Fund. The Advisor informed the Trustees that, as of March 31, 2019, it did not provide services to any other investment companies or comparable accounts that were managed similarly to the Fund.
Payments to Intermediaries. The Trustees also requested a description of payments made to intermediaries by the Fund and the Advisor and services provided in response thereto. These payments could include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Advisor informed the Trustees that, other than compensation to the Fund’s distributor and transfer agent, the Advisor was not then making payments to intermediaries related to fund distribution or shareholder services.
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 funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the
29
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 Trustees. As a result of this process, the Board, including all of the independent Trustees, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
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Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund are available without charge, upon request, by calling 1-800-345-6488. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q or as an exhibit to its reports on Form N-PORT. The fund's Forms N-Q and Form N-PORT reports are available on the SEC’s website at sec.gov.
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Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
For nonresident alien shareholders, the fund hereby designates $1,055,135, or up to the maximum amount allowable, of ordinary income distributions as qualified interest income for the fiscal year ended August 31, 2019.
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Contact Us | americancenturyetfs.com | |
American Century Sales Representatives, Financial Professionals, Broker Dealers, Insurance Companies, Banks and Trust Companies | 1-833-ACI-ETFS | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century ETF Trust | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
Distributor: Foreside Fund Services, LLC - Distributor, not affiliated with American Century Investment Services, Inc. | ||
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. | ||
©2019 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-95461 1910 |
![acietfslockupblacka11.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/acietfslockupblacka11.jpg)
Annual Report | |
August 31, 2019 | |
American Century® Diversified Municipal Bond ETF (TAXF) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | |
Performance | |
Portfolio Commentary | |
Fund Characteristics | |
Frequency Distributions of Premiums and Discounts | |
Shareholder Fee Example | |
Schedule of Investments | |
Statement of Assets and Liabilities | |
Statement of Operations | |
Statement of Changes in Net Assets | |
Notes to Financial Statements | |
Financial Highlights | |
Report of Independent Registered Public Accounting Firm | |
Management | |
Approval of Management Agreement | |
Additional Information |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
![jthomasrev0514a66.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/jthomasrev0514a66.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended August 31, 2019. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional investment and market insights, we encourage you to visit our website, americancenturyetfs.com.
Backdrop Favored Bonds
Most broad U.S. fixed-income indices ended the period with robust returns, bolstered by a sharp decline in U.S. Treasury yields. However, U.S. and other developed markets stocks delivered notably weaker results, largely due to a global sell-off among equities in late 2018. Although most stock indices rebounded strongly in 2019, their late-2018 losses weighed on results for the entire reporting period.
Fed’s Flip Fueled Investor Optimism
In the final months of 2018, mounting concerns about slowing global economic and earnings growth, tariffs and Federal Reserve (Fed) policy soured investor sentiment, driving global stocks lower. After raising rates in September, the Fed hiked again in December and delivered a surprisingly bullish rate-hike outlook, which intensified the sell-off among stocks and other riskier assets. Meanwhile, the risk-off climate sparked a flight to quality, which drove Treasury yields lower and benefited bonds.
A key policy pivot from the Fed helped improve equity investor sentiment beginning in early 2019. The central bank abruptly ended its rate-hike campaign and adopted a dovish tone amid weaker global growth and inflation. Additionally, investors’ worst-case fears about trade and corporate earnings generally eased, which also aided stocks. At the same time, government bond yields continued to fall on moderating global growth data, muted inflation and accommodative central bank policy in the U.S., Europe and Japan. By July, concerns about global economic risks prompted the Fed to cut short-term interest rates for the first time in 10 years. This backdrop supported continued gains for fixed-income and other interest rate-sensitive assets.
Looking ahead, we expect volatility to remain a formidable factor as investors react to global growth data, trade issues, central bank policy and geopolitical developments. We believe this scenario underscores the importance of using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a16.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/image48a16.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of August 31, 2019 | ||
Since Inception | Inception Date | |
Net Asset Value | 9.42% | 9/10/2018 |
Market Price | 9.48% | 9/10/2018 |
S&P National AMT-Free Municipal Bond Index | 8.88% | — |
Market price is determined using the bid/ask midpoint at 4:00 p.m. Eastern time, when the net asset value (NAV) is typically calculated. Market performance does not represent the returns you would receive if you traded shares at other times. NAV prices are used to calculate market price performance prior to the date when the fund first traded on the New York Stock Exchange.
Growth of $10,000 Over Life of Fund |
$10,000 investment made September 10, 2018 |
![chart-0db9a12f8226be0c1a8a04.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/chart-0db9a12f8226be0c1a8a04.jpg)
Value on August 31, 2019 | |
Net Asset Value — $10,942 | |
S&P National AMT-Free Municipal Bond Index — $10,888 | |
Total Annual Fund Operating Expenses |
0.29% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-6488 or visit americancenturyetfs.com. For additional information about the fund, please consult the prospectus.
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Portfolio Commentary |
Portfolio Managers: Steven Permut, Joseph Gotelli and Alan Kruss
Fund Strategy
American Century Diversified Municipal Bond ETF seeks to provide consistent tax-free income. As an actively managed ETF that does not seek to replicate the performance of a specific index, the fund employs a research-driven process to select holdings. The fund draws from across the municipal bond (muni) universe and adjusts exposure depending on prevailing market conditions. We dynamically allocate holdings to investment-grade issues and may include an allocation to high-yield issues when the risk/reward balance is attractive. In selecting securities, we employ an active, time-tested process designed to identify attractive issues with low default risk, aiming to align risk exposures with our highest-conviction ideas.
Performance Review
For the period from the fund’s inception on September 10, 2018, through the fund’s fiscal year-end on August 31, 2019, the fund returned 9.48%* on a market price basis. On a net asset value (NAV) basis, the fund returned 9.42%. For the same time period, the S&P National AMT-Free Municipal Bond Index, the fund’s benchmark index, returned 8.88%. The fund’s NAV and market price returns reflect fees and operating expenses, while the index return does not.
Declining Rates and Duration Positioning Aided Performance
Although Treasury yields declined sharply for the 12-month period, they started the period on the upswing. Additionally, the Federal Reserve (Fed) continued to tighten monetary policy, hiking the federal funds rate target in September and December. Sentiment shifted dramatically in early 2019, as the Fed halted its rate-hike campaign amid moderating global growth and inflation. By July, global growth and inflation concerns prompted the Fed to cut its short-term rate target by 25 basis points, the Fed’s first easing move in 10 years. Treasury yields, which started declining in late 2018, continued to fall through the end of the reporting period.
These dynamics, combined with a favorable supply/demand backdrop in the muni sector and solid fundamentals, aided the fund’s performance. Muni yields generally tracked Treasury yields lower, contributing to price appreciation among munis.
The fund’s duration positioning, which was longer than the benchmark’s, aided relative performance. Early in the reporting period, our duration stance detracted from performance, as Treasury yields climbed higher. However, yields quickly reversed course and ended the reporting period significantly lower than they were in late 2018. In this declining-rate environment, longer-duration securities and strategies outperformed shorter-duration securities and strategies.
Lower-Quality Securities, Sector Selections Contributed to Returns
Throughout the reporting period, we maintained an overweight position relative to the benchmark in lower-quality investment-grade munis. We also maintained a significant allocation to high-yield munis, which are not represented in the benchmark. At the end of the period, approximately 21% of the fund was invested in below-investment-grade munis.
* Total returns for periods less than one year are not annualized.
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Early in the period, our high-yield allocation weighed on results, as risk-on investing remained out
of favor. However, the high-yield sector rebounded in 2019, and our allocation was a significant contributor to performance. Similarly, our overweight to lower-quality investment-grade munis (those with BBB credit ratings) aided fund performance.
Solid returns across several muni sectors also contributed to fund performance. Specifically, our holdings in the special tax, corporate-backed, hospital and tobacco settlement sectors, which are not represented in the benchmark, posted strong total returns. In addition, fund holdings in state general obligation bonds aided performance.
Portfolio Positioning
Going forward, we will continue to rely on our research-driven process to uncover attractive opportunities across the muni market. The global trends of easing monetary policy and lower interest rates should drive continued search for yield and income among investors. We expect current muni market fundamentals and the prevailing interest rate environment will continue to support the broad asset class.
In terms of sector positioning, we will continue to look for opportunities in several non-benchmark sectors, including special tax, corporate-backed and hospitals. In terms of quality, we expect to maintain a notable weighting in high-yield munis. The extent of our position will depend on high-yield valuation levels and our identification of security-specific opportunities. We also expect to maintain the fund’s duration range slightly longer than that of the benchmark.
5
Fund Characteristics |
AUGUST 31, 2019 |
Portfolio at a Glance | |
Weighted Average Life to Maturity | 12.4 years |
Average Duration (Modified) | 5.4 years |
Top Five States and Territories | % of net assets |
Illinois | 14.6% |
New Jersey | 8.3% |
Florida | 8.2% |
Arizona | 7.8% |
Washington | 6.0% |
Top Five Sectors | % of fund investments |
General Obligation (GO) - State | 17% |
Corporate Municipal | 14% |
Special Tax | 13% |
Toll Facilities | 7% |
Hospital | 7% |
Types of Investments in Portfolio | % of net assets |
Municipal Securities | 98.9% |
Temporary Cash Investments | 0.1% |
Other Assets and Liabilities | 1.0% |
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Frequency Distributions of Premiums and Discounts |
The Frequency Distribution of Premiums and Discounts chart is provided to show the frequency at which the market price for the fund was at a premium or discount to the daily net asset value (NAV). Shareholders may pay more than NAV when they buy fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented reflect past performance. Past performance is no guarantee of future results. The following table represents the period September 12, 2018 (commencement of trading) through August 31, 2019.
Premium/Discount Range (%) | Number of Days Market Price Above or Equal to NAV | Number of Days Market Price Below NAV |
0% - 0.49% | 204 | 40 |
0.50% - 0.99% | — | — |
1.00% - 1.99% | — | — |
> 2.00% | — | — |
Total | 204 | 40 |
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Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including brokerage commissions paid on purchases and sales of fund shares; and (2) ongoing costs, including management 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 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 March 1, 2019 to August 31, 2019.
Actual Expenses
The table provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of fund shares. 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 3/1/19 | Ending Account Value 8/31/19 | Expenses Paid During Period(1) 3/1/19 - 8/31/19 | Annualized Expense Ratio(1) | |
Actual | $1,000 | $1,073.90 | $1.52 | 0.29% |
Hypothetical | $1,000 | $1,023.74 | $1.48 | 0.29% |
(1) | Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 184, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
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Schedule of Investments |
AUGUST 31, 2019
Principal Amount | Value | |||||
MUNICIPAL SECURITIES — 98.9% | ||||||
Alabama — 4.2% | ||||||
Black Belt Energy Gas District Rev., VRDN, 4.00%, 12/1/23 | $ | 535,000 | $ | 584,627 | ||
Southeast Alabama Gas Supply District Rev., VRDN, 4.00%, 4/1/24 | 395,000 | 433,710 | ||||
Tuscaloosa County Industrial Development Authority Rev., (Hunt Refining Co.), 5.25%, 5/1/44(1) | 100,000 | 115,652 | ||||
1,133,989 | ||||||
Arizona — 7.8% | ||||||
Arizona Department of Transportation State Highway Fund Rev., 5.00%, 7/1/29 | 120,000 | 141,537 | ||||
Arizona Industrial Development Authority Rev., (Provident Group-NCCU Properties LLC), 5.00%, 6/1/27 (BAM) | 400,000 | 494,952 | ||||
Industrial Development Authority of the City of Phoenix Rev., (Leman Academy of Excellence Obligated Group), 5.00%, 7/1/54(1) | 60,000 | 61,667 | ||||
Salt River Project Agricultural Improvement & Power District Rev., 5.00%, 1/1/38 | 750,000 | 945,060 | ||||
Tempe Industrial Development Authority Rev., (Mirabella at ASU, Inc.), 4.00%, 10/1/23(1) | 440,000 | 445,641 | ||||
2,088,857 | ||||||
California — 4.2% | ||||||
California School Finance Authority Rev., (Inspire Charter Schools Obligated Group), 3.00%, 7/15/20(1) | 500,000 | 500,920 | ||||
California Statewide Communities Development Authority Rev., (Loma Linda University Medical Center Obligated Group), 5.25%, 12/1/38(1) | 240,000 | 288,722 | ||||
Golden State Tobacco Securitization Corp. Rev., 5.00%, 6/1/47 | 100,000 | 102,566 | ||||
Golden State Tobacco Securitization Corp. Rev., 5.25%, 6/1/47 | 100,000 | 103,235 | ||||
Morongo Band of Mission Indians Rev., 5.00%, 10/1/42(1) | 100,000 | 113,909 | ||||
1,109,352 | ||||||
Colorado — 1.6% | ||||||
City & County of Denver Rev., (United Airlines, Inc.), 5.00%, 10/1/32 | 180,000 | 198,436 | ||||
Colorado Health Facilities Authority Rev., (Frasier Meadows Manor, Inc.), 5.00%, 5/15/23 | 100,000 | 110,826 | ||||
Denver Urban Renewal Authority Tax Allocation, 5.25%, 12/1/39(1) | 100,000 | 107,526 | ||||
416,788 | ||||||
Connecticut — 3.6% | ||||||
State of Connecticut GO, 5.00%, 4/15/34 | 750,000 | 947,752 | ||||
Florida — 8.2% | ||||||
Florida Development Finance Corp. Rev., (Virgin Trains USA Florida LLC), VRDN, 6.50%, 1/1/29(1) | 100,000 | 95,379 | ||||
Greater Orlando Aviation Authority Rev., 5.00%, 10/1/33 | 180,000 | 221,726 | ||||
Lake County Rev., (Educational Charter Foundation of Florida, Inc.), 5.00%, 1/15/39(1) | 550,000 | 605,275 | ||||
Miami-Dade County Expressway Authority Rev., 5.00%, 7/1/30 | 585,000 | 676,184 | ||||
Pinellas County Industrial Development Authority Rev., (Drs. Kiran & Pallavi Patel 2017 Foundation for Global Understanding, Inc.), 5.00%, 7/1/39 | 125,000 | 147,414 |
9
Principal Amount | Value | |||||
State of Florida GO, 5.00%, 6/1/21 | $ | 420,000 | $ | 448,627 | ||
2,194,605 | ||||||
Hawaii — 1.1% | ||||||
City & County Honolulu Wastewater System Rev., 4.00%, 7/1/32 | 250,000 | 282,488 | ||||
Illinois — 14.6% | ||||||
Chicago GO, 5.00%, 1/1/40 | 280,000 | 287,120 | ||||
Chicago GO, 5.50%, 1/1/49 | 200,000 | 237,534 | ||||
Chicago Board of Education GO, 5.00%, 12/1/34 | 280,000 | 319,987 | ||||
Chicago Board of Education GO, 5.00%, 12/1/42 | 60,000 | 63,487 | ||||
Illinois Finance Authority Rev., (State of Illinois Water Revolving Fund - Clean Water Program), 5.00%, 7/1/33 | 750,000 | 974,475 | ||||
Illinois State Toll Highway Authority Rev., 5.00%, 1/1/37 | 325,000 | 384,059 | ||||
State of Illinois GO, 5.00%, 11/1/21 | 440,000 | 467,038 | ||||
State of Illinois GO, 5.00%, 11/1/29 | 180,000 | 209,883 | ||||
State of Illinois GO, 5.00%, 10/1/30 | 600,000 | 711,150 | ||||
State of Illinois GO, 5.00%, 10/1/33 | 200,000 | 234,676 | ||||
3,889,409 | ||||||
Iowa — 1.2% | ||||||
Iowa Finance Authority Rev., (Iowa Fertilizer Co. LLC), 3.125%, 12/1/22 | 100,000 | 101,695 | ||||
Iowa Finance Authority Rev., (Lifespace Communities, Inc. Obligated Group), 5.00%, 5/15/48 | 200,000 | 229,018 | ||||
330,713 | ||||||
Kentucky — 2.5% | ||||||
Kentucky Bond Development Corp. Rev., 5.00%, 9/1/38 | 250,000 | 308,518 | ||||
Kentucky Public Energy Authority Rev., VRDN, 4.00%, 1/1/25 | 315,000 | 353,143 | ||||
661,661 | ||||||
Louisiana — 3.0% | ||||||
New Orleans Aviation Board Rev., (Parking Facilities Corp.), 5.00%, 10/1/48 (AGM) | 250,000 | 302,472 | ||||
Shreveport Water & Sewer Rev., 4.00%, 12/1/44 (AGM) | 450,000 | 506,106 | ||||
808,578 | ||||||
Maryland — 4.0% | ||||||
State of Maryland GO, 5.00%, 8/1/27 | 650,000 | 839,631 | ||||
State of Maryland Department of Transportation Rev., 5.00%, 2/1/22 | 200,000 | 218,816 | ||||
1,058,447 | ||||||
Michigan — 2.6% | ||||||
Detroit Downtown Development Authority Tax Allocation, 5.00%, 7/1/23 (AGM) | 350,000 | 395,626 | ||||
Michigan Finance Authority Rev., (Trinity Health Corp. Obligated Group), 5.00%, 12/1/47 | 280,000 | 306,704 | ||||
702,330 | ||||||
Nebraska — 0.8% | ||||||
Omaha Public Power District Rev., 5.00%, 2/1/23 | 200,000 | 226,312 | ||||
Nevada — 2.1% | ||||||
Clark County Department of Aviation Rev., 5.00%, 7/1/21 | 140,000 | 149,520 | ||||
State of Nevada Highway Improvement Rev., 4.00%, 12/1/33 | 350,000 | 408,986 | ||||
558,506 |
10
Principal Amount | Value | |||||
New Jersey — 8.3% | ||||||
New Jersey Economic Development Authority Rev., 5.50%, 6/15/30 | $ | 260,000 | $ | 315,778 | ||
New Jersey Transportation Trust Fund Authority Rev., 5.00%, 6/15/22 | 440,000 | 482,451 | ||||
New Jersey Transportation Trust Fund Authority Rev., 5.00%, 12/15/28 | 250,000 | 313,020 | ||||
New Jersey Transportation Trust Fund Authority Rev., 5.00%, 12/15/32 | 350,000 | 424,791 | ||||
New Jersey Transportation Trust Fund Authority Rev., 5.00%, 12/15/33 | 150,000 | 181,296 | ||||
New Jersey Turnpike Authority Rev., 5.00%, 1/1/48 | 150,000 | 186,558 | ||||
Tobacco Settlement Financing Corp. Rev., 5.00%, 6/1/46 | 280,000 | 313,617 | ||||
2,217,511 | ||||||
New Mexico — 2.6% | ||||||
New Mexico Hospital Equipment Loan Council Rev., (Haverland Carter Lifestyle Obligated Group), 2.25%, 7/1/23 | 100,000 | 100,231 | ||||
New Mexico Municipal Energy Acquisition Authority Rev., VRDN, 5.00%, 5/1/25 (LIQ FAC: Royal Bank of Canada) | 500,000 | 592,410 | ||||
692,641 | ||||||
New York — 4.9% | ||||||
New York Liberty Development Corp. Rev., (3 World Trade Center LLC), 5.00%, 11/15/44(1) | 180,000 | 199,942 | ||||
New York Liberty Development Corp. Rev., (Goldman Sachs Headquarters LLC), 5.25%, 10/1/35 | 290,000 | 403,706 | ||||
New York Transportation Development Corp. Rev., (American Airlines, Inc.), 5.00%, 8/1/26 (GA: American Airlines Group) | 655,000 | 694,326 | ||||
1,297,974 | ||||||
North Carolina — 1.2% | ||||||
State of North Carolina Rev., 5.00%, 3/1/34 | 250,000 | 321,035 | ||||
Ohio — 2.9% | ||||||
Buckeye Tobacco Settlement Financing Authority Rev., 5.125%, 6/1/24 | 245,000 | 245,005 | ||||
Cuyahoga County Rev., (MetroHealth System), 5.00%, 2/15/42 | 360,000 | 413,305 | ||||
Ohio Higher Educational Facility Commission Rev., (Cleveland Institute of Art), 5.50%, 12/1/53 | 100,000 | 112,972 | ||||
771,282 | ||||||
Oregon — 0.4% | ||||||
Clackamas County Hospital Facility Authority Rev., (Willamette View, Inc.), 5.00%, 11/15/47 | 100,000 | 114,952 | ||||
Pennsylvania — 3.9% | ||||||
Commonwealth Financing Authority Rev., 5.00%, 6/1/25 | 35,000 | 41,745 | ||||
Pennsylvania GO, 5.00%, 7/1/20 | 400,000 | 412,904 | ||||
Pennsylvania Turnpike Commission Rev., 5.00%, 12/1/46 | 180,000 | 212,029 | ||||
School District of Philadelphia GO, 5.00%, 9/1/20 | 350,000 | 362,859 | ||||
1,029,537 | ||||||
Tennessee — 0.4% | ||||||
Tennessee Energy Acquisition Corp. Rev., VRDN, 4.00%, 11/1/25 | 85,000 | 95,561 | ||||
Texas — 5.1% | ||||||
Arlington Higher Education Finance Corp. Rev., (Great Hearts America - Texas), 4.00%, 8/15/32 (PSF-GTD) | 100,000 | 118,701 | ||||
Clifton Higher Education Finance Corp. Rev., (International American Education Federation, Inc.), 6.125%, 8/15/48 | 50,000 | 56,362 |
11
Principal Amount/Shares | Value | |||||
New Hope Cultural Education Facilities Finance Corp. Rev., (CHF-Collegiate Housing Island Campus LLC), 5.00%, 4/1/27 | $ | 40,000 | $ | 44,129 | ||
North Texas Tollway Authority Rev., (North Texas Tollway System), 5.00%, 1/1/26 | 420,000 | 486,809 | ||||
University of Texas System Rev., 5.00%, 8/15/34 | 500,000 | 658,990 | ||||
1,364,991 | ||||||
Virginia — 0.8% | ||||||
Peninsula Town Center Community Development Authority Special Assessment, 5.00%, 9/1/45(1) | 200,000 | 223,212 | ||||
Washington — 6.0% | ||||||
Energy Northwest Rev., (Bonneville Power Administration), 5.00%, 7/1/35 | 365,000 | 475,660 | ||||
State of Washington GO, 5.25%, 2/1/22 | 375,000 | 412,504 | ||||
Washington Health Care Facilities Authority Rev., (Providence State Joseph Health Obligated Group), 5.00%, 10/1/33 | 650,000 | 719,596 | ||||
1,607,760 | ||||||
Wisconsin — 0.9% | ||||||
Public Finance Authority Rev., (Bancroft Neurohealth Obligated Group), 5.125%, 6/1/48(1) | 25,000 | 26,906 | ||||
Public Finance Authority Rev., (CHF-Wilmington LLC), 5.00%, 7/1/31 (AGM) | 75,000 | 92,786 | ||||
Public Finance Authority Rev., (Guilford College), 5.00%, 1/1/38 | 105,000 | 120,414 | ||||
240,106 | ||||||
TOTAL MUNICIPAL SECURITIES (Cost $25,151,796) | 26,386,349 | |||||
TEMPORARY CASH INVESTMENTS — 0.1% | ||||||
Morgan Stanley Institutional Liquidity Funds Tax-Exempt Portfolio, Institutional Share Class (Cost $35,773) | 35,773 | 35,773 | ||||
TOTAL INVESTMENT SECURITIES — 99.0% (Cost $25,187,569) | 26,422,122 | |||||
OTHER ASSETS AND LIABILITIES — 1.0% | 261,493 | |||||
TOTAL NET ASSETS — 100.0% | $ | 26,683,615 |
NOTES TO SCHEDULE OF INVESTMENTS | ||
AGM | - | Assured Guaranty Municipal Corporation |
BAM | - | Build America Mutual Assurance Company |
GA | - | Guaranty Agreement |
GO | - | General Obligation |
LIQ FAC | - | Liquidity Facilities |
PSF-GTD | - | Permanent School Fund Guaranteed |
VRDN | - | Variable Rate Demand Note. The instrument may be payable upon demand and adjusts periodically based upon the terms set forth in the security's offering documents. The rate shown is effective at the period end and the reference rate and spread, if any, is indicated. The date of the demand feature is disclosed. |
(1) | Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration, normally to qualified institutional investors. The aggregate value of these securities at the period end was $2,784,751, which represented 10.4% of total net assets. |
See Notes to Financial Statements.
12
Statement of Assets and Liabilities |
AUGUST 31, 2019 | |||
Assets | |||
Investment securities, at value (cost of $25,187,569) | $ | 26,422,122 | |
Interest receivable | 268,024 | ||
26,690,146 | |||
Liabilities | |||
Accrued management fees | 6,531 | ||
Net Assets | $ | 26,683,615 | |
Shares outstanding (unlimited number of shares authorized) | 500,000 | ||
Net Asset Value Per Share | $ | 53.37 | |
Net Assets Consist of: | |||
Capital paid in | $ | 25,403,826 | |
Distributable earnings | 1,279,789 | ||
$ | 26,683,615 |
See Notes to Financial Statements.
13
Statement of Operations |
FOR THE PERIOD ENDED AUGUST 31, 2019(1) | |||
Investment Income (Loss) | |||
Income: | |||
Interest | $ | 492,976 | |
Expenses: | |||
Management fees | 47,265 | ||
Net investment income (loss) | 445,711 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | (2,963 | ) | |
Futures contract transactions | (9,502 | ) | |
(12,465 | ) | ||
Change in net unrealized appreciation (depreciation) on investments | 1,234,553 | ||
Net realized and unrealized gain (loss) | 1,222,088 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 1,667,799 |
(1) | September 10, 2018 (fund inception) through August 31, 2019. |
See Notes to Financial Statements.
14
Statement of Changes in Net Assets |
PERIOD ENDED AUGUST 31, 2019(1) | |||
Increase (Decrease) in Net Assets | |||
Operations | |||
Net investment income (loss) | $ | 445,711 | |
Net realized gain (loss) | (12,465 | ) | |
Change in net unrealized appreciation (depreciation) | 1,234,553 | ||
Net increase (decrease) in net assets resulting from operations | 1,667,799 | ||
Distributions to Shareholders | |||
From earnings | (388,010 | ) | |
Capital Share Transactions | |||
Proceeds from shares sold | 25,403,826 | ||
Net increase (decrease) in net assets | 26,683,615 | ||
Net Assets | |||
End of period | $ | 26,683,615 | |
Transactions in Shares of the Fund | |||
Sold | 500,000 |
(1) | September 10, 2018 (fund inception) through August 31, 2019. |
See Notes to Financial Statements.
15
Notes to Financial Statements |
AUGUST 31, 2019
1. Organization
American Century ETF Trust (the trust) was registered as a Delaware statutory trust in 2017 and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. American Century Diversified Municipal Bond ETF (the fund) is one fund in a series issued by the trust. The fund's investment objective is to seek current income that is exempt from federal income tax. Shares of the fund are listed for trading on the NYSE Arca, Inc. The fund incepted on September 10, 2018.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Trustees has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Fixed income securities are valued at the evaluated mean as provided by independent pricing services or at the mean of the most recent bid and asked prices as provided by investment dealers. Municipal securities are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Exchange-traded futures contracts are valued at the settlement price as provided by the appropriate exchange.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Trustees or its delegate, in accordance with policies and procedures adopted by the Board of Trustees. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region.
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 — Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
16
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover certain types of investment securities and other financial instruments. American Century Investment Management, Inc. (ACIM) (the investment advisor) monitors, on a daily basis, the securities segregated to ensure the fund designates a sufficient amount of liquid assets, marked-to-market daily. The fund may also receive assets or be required to pledge assets at the custodian bank or with a broker for collateral requirements.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid monthly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and trustees of the trust are also officers and/or directors of American Century Companies, Inc. (ACC). The trust's investment advisor, ACIM, and the trust’s administrator, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The trust has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee). The agreement provides that all expenses of managing and operating the fund, except brokerage and other transaction fees and expenses relating to the acquisition and disposition of portfolio securities, acquired fund fees and expenses, interest, taxes, litigation expenses, extraordinary expenses and expenses incurred in connection with the provision of shareholder and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act, if any, will be paid by ACIM. The fee is computed and accrued daily based on the daily net assets of the fund and paid monthly in arrears. The annual management fee is 0.29%.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments and in-kind transactions, for the period ended August 31, 2019 were $18,995,164 and $3,012,681, respectively.
Securities received in-kind through subscriptions for the period ended August 31, 2019 were $9,375,268. There were no securities delivered in-kind through redemptions during the period.
5. Capital Share Transactions
The fund’s shares may only be purchased and sold on a national securities exchange through a broker-dealer. The price of the fund’s shares is based on market price, and because ETF shares trade at market prices rather than net asset value (NAV), shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The fund issues and redeems shares that have been aggregated into blocks of 50,000 shares or multiples thereof (Creation Units) to authorized participants who have entered into agreements with the fund's distributor. The fund may issue and redeem Creation Units in return for a basket of securities (and an amount of cash) or entirely for cash. Investors transacting in Creation Units for cash may also pay an additional variable charge to compensate the fund for certain transaction costs and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in proceeds from shares sold in the Statement of Changes in Net Assets.
17
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Municipal Securities | — | $ | 26,386,349 | — | ||||
Temporary Cash Investments | $ | 35,773 | — | — | ||||
$ | 35,773 | $ | 26,386,349 | — |
7. Derivative Instruments
Interest Rate Risk — The fund is subject to interest rate risk in the normal course of pursuing its investment objectives. The value of bonds generally declines as interest rates rise. A fund may enter into futures contracts based on a bond index or a specific underlying security. A fund may purchase futures contracts to gain exposure to increases in market value or sell futures contracts to protect against a decline in market value. Upon entering into a futures contract, a fund will segregate cash, cash equivalents or other appropriate liquid securities on its records in amounts sufficient to meet requirements. Subsequent payments (variation margin) are made or received daily, in cash, by a fund. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. A fund recognizes a realized gain or loss when the futures contract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of net realized gain (loss) on futures contract transactions and change in net unrealized appreciation (depreciation) on futures contracts, respectively. One of the risks of entering into futures contracts is the possibility that the change in value of the contract may not correlate with the changes in value of the underlying securities. The fund's average notional exposure to interest rate risk derivative instruments held during the period was $200,000 futures contracts sold.
At period end, the fund did not have any derivative instruments disclosed on the Statement of Assets and Liabilities. For the period from September 10, 2018 (fund inception) through August 31, 2019, the effect of interest rate risk derivative instruments on the Statement of Operations was $(9,502) in net realized gain loss on futures contract transactions.
18
8. Federal Tax Information
The tax character of distributions paid during the period September 10, 2018 (fund inception) through August 31, 2019 were as follows:
2019 | |||
Distributions Paid From | |||
Exempt income | $ | 388,010 |
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 25,187,581 | |
Gross tax appreciation of investments | $ | 1,234,541 | |
Gross tax depreciation of investments | — | ||
Net tax appreciation (depreciation) of investments | $ | 1,234,541 | |
Undistributed exempt income | $ | 57,701 | |
Accumulated short-term capital losses | $ | (6,752 | ) |
Accumulated long-term capital losses | $ | (5,701 | ) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Accumulated capital losses represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers may be carried forward for an unlimited period. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations.
9. Recently Issued Accounting Standards
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2017-08, “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities” (ASU 2017-08). ASU 2017-08 amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management is currently evaluating the impact that adopting ASU 2017-08 will have on the financial statements.
19
Financial Highlights |
For a Share Outstanding Throughout the Period Indicated | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | ||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Distributions From Net Investment Income | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate(3) | Net Assets, End of Period (in thousands) | |||
2019(4) | $50.00 | 1.36 | 3.26 | 4.62 | (1.25) | $53.37 | 9.42% | 0.29%(5) | 2.74%(5) | 19% | $26,684 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day. Total returns for periods less than one year are not annualized. |
(3) | Excludes securities received or delivered in-kind. |
(4) | September 10, 2018 (fund inception) through August 31, 2019. |
(5) | Annualized. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Trustees of American Century ETF Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of American Century Diversified Municipal Bond ETF, one of the funds constituting the American Century ETF Trust (the “Fund”), as of August 31, 2019, and the related statements of operations, changes in net assets, and the financial highlights for the period from September 10, 2018 (fund inception) through August 31, 2019, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of August 31, 2019, and the results of its operations, the changes in its net assets, and the financial highlights for the period from September 10, 2018 (fund inception) through August 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2019, by correspondence with the custodian and brokers. We believe that our audit provides a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
October 18, 2019
We have served as the auditor of one or more American Century investment companies since 1997.
21
Management |
The Board of Trustees
The individuals listed below serve as trustees of the funds. Each trustee will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for trustees who are not “interested persons,” as that term is defined in the Investment Company Act (independent trustees). Trustees who are not also officers of the trust shall retire by December 31st of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other trustees are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The following trustees also serve in this capacity for a number of other registered investment companies in the American Century Investments family of funds: Jonathan S. Thomas, 15; Ronald J. Gilson, 8; and Stephen E. Yates, 7.
The following table presents additional information about the trustees. The mailing address for each trustee other than Jonathan S. Thomas is 330 Madison Avenue, New York, New York 10017. The mailing address for Jonathan S. Thomas 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 Trustee | Other Directorships Held During Past 5 Years |
Independent Trustees | |||||
Reginald M. Browne (1968) | Trustee and Chairman of the Board | Since 2017 (Chairman since 2019) | Principal, GTS Securities (automated capital markets trading firm)(2019 to present); Senior Managing Director, Co Global Head-ETF Group, Cantor Fitzgerald (financial services firm)(2013 to 2019) | 5 | None |
Ronald J. Gilson (1946) | Trustee | Since 2017 | Charles J. Meyers Professor of Law and Business, Emeritus, Stanford Law School (1979 to 2016); Marc and Eva Stern Professor of Law and Business, Columbia University School of Law (1992 to present) | 49 | None |
Barry A. Mendelson (1958) | Trustee | Since 2017 | Retired; Consultant regarding ETF and mutual fund matters (2015 to 2016); Principal and Senior Counsel, The Vanguard Group (investment management)(1998 to 2014) | 5 | None |
Stephen E. Yates (1948) | Trustee | Since 2017 | Retired | 72 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Trustee | Other Directorships Held During Past 5 Years |
Interested Trustees | |||||
Jonathan S. Thomas (1963) | Trustee | Since 2017 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 116 | BioMed Valley Discoveries, Inc. |
The Statement of Additional Information has additional information about the fund's trustees and is available without charge, upon request, by calling 1-800-345-6488.
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Officers
The following table presents certain information about the executive officers of the funds. Each officer, except Edward Rosenberg, serves as an officer for each of the 16 investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present); Chief Operating Officer, ACC (2012 to 2015). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries |
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Investment Operations and Investment Accounting, ACS (2000 to present) |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2017 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS |
Charles A. Etherington (1957) | General Counsel and Vice President since 2017 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
Cleo Chang (1977) | Vice President since 2019 | Senior Vice President, ACIM (2015 to present); Chief Investment Officer, Wilshire Funds Management (2005 to 2015) |
David H. Reinmiller (1963) | Vice President since 2017 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS |
Edward Rosenberg (1973) | Vice President since 2017 | Senior Vice President, ACIM (2017 to present); Senior Vice President, Flexshares Head of ETF Capital Markets, Northern Trust (2012 to 2017) |
C. Jean Wade (1964) | Vice President since 2017 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) |
Ward D. Stauffer (1960) | Secretary since 2019 | Attorney, ACS (2003 to present) |
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Approval of Management Agreement |
At a meeting held on June 13, 2019, the Fund’s Board of Trustees (the "Board") unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Trustees”), including a majority of the independent Trustees, each year.
Prior to its consideration of the renewal of the management agreement, the Trustees 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 Audit Committee on a continual basis and the information received was supplemental to the extensive information that the Board and its Audit Committee receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management and other services provided and to be provided to the Fund; |
• | the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis; |
• | the investment performance of the Fund, including data comparing the Fund's performance to appropriate benchmarks; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers; |
• | 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; |
• | strategic plans of the Advisor; |
• | any economies of scale associated with the Advisor’s management of the Fund and other accounts; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
The Trustees held one in-person meeting to review and discuss the information provided. The independent Trustees also held active discussions with the Advisor regarding the renewal of the management agreement. The independent Trustees had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Trustees considered all of the information provided by the Advisor, the independent data providers, and independent counsel in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Trustees did not identify any single factor as being all-important or controlling, and each Trustee may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including without limitation the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the
25
Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
• | portfolio research and security selection |
• | 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 (except amounts paid by the Fund under Rule 12b-1 plans) |
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, 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 Trustees 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 provides oversight of the investment performance process. It regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks over different time horizons. The Trustees also review investment performance information during the management agreement renewal process. If performance concerns are identified, the Board discusses with the Advisor the reasons for such results and any efforts being undertaken to improve performance. The Fund’s performance reviewed by the Board was below its benchmark. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides or arranges for a comprehensive package of services to the Fund. The Board, directly and through its Audit Committee, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Trustees have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to the Fund and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
26
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, expenses attributable to short sales, taxes, interest, extraordinary expenses, and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the Investment Company Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was below the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Trustees also requested information from the Advisor concerning the nature of the services, fees, costs, and profitability of its advisory services to funds or other advisory clients managed similarly to the Fund. The Advisor informed the Trustees that, as of March 31, 2019, it did not provide services to any other investment companies or comparable accounts that were managed similarly to the Fund.
Payments to Intermediaries. The Trustees also requested a description of payments made to intermediaries by the Fund and the Advisor and services provided in response thereto. These payments could include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Advisor informed the Trustees that, other than compensation to the Fund’s distributor and transfer agent, the Advisor was not then making payments to intermediaries related to fund distribution or shareholder services.
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 funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that
27
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 Trustees. As a result of this process, the Board, including all of the independent Trustees, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
28
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund are available without charge, upon request, by calling 1-800-345-6488. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q or as an exhibit to its reports on Form N-PORT. The fund's Forms N-Q and Form N-PORT reports are available on the SEC’s website at sec.gov.
29
Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund designates $388,010 as exempt interest dividends for the fiscal year ended August 31, 2019.
30
Notes |
31
Notes |
32
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Contact Us | americancenturyetfs.com | |
American Century Sales Representatives, Financial Professionals, Broker Dealers, Insurance Companies, Banks and Trust Companies | 1-833-ACI-ETFS | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century ETF Trust | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
Distributor: Foreside Fund Services, LLC - Distributor, not affiliated with American Century Investment Services, Inc. | ||
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. | ||
©2019 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-95462 1910 |
![acietfslockupblacka11.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/acietfslockupblacka11.jpg)
Annual Report | |
August 31, 2019 | |
American Century® STOXX® U.S. Quality Growth ETF (QGRO) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | |
Performance | |
Portfolio Commentary | |
Fund Characteristics | |
Frequency Distributions of Premiums and Discounts | |
Shareholder Fee Example | |
Schedule of Investments | |
Statement of Assets and Liabilities | |
Statement of Operations | |
Statement of Changes in Net Assets | |
Notes to Financial Statements | |
Financial Highlights | |
Report of Independent Registered Public Accounting Firm | |
Management | |
Approval of Management Agreement | |
Additional Information |
The iSTOXX American Century USA Quality Growth Index is the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland (“STOXX”), Deutsche Börse Group or their licensors, which is used under license. American Century STOXX U.S. Quality Growth ETF is neither sponsored nor promoted, distributed or in any other manner supported by STOXX, Deutsche Börse Group or their licensors, research partners or data providers and STOXX, Deutsche Börse Group and their licensors, research partners or data providers do not give any warranty, and exclude any liability (whether in negligence or otherwise) with respect thereto generally or specifically in relation to any errors, omissions or interruptions in the iSTOXX American Century USA Quality Growth Index or its data.
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
![jthomasrev0514a66.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/jthomasrev0514a66.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended August 31, 2019. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional investment and market insights, we encourage you to visit our website, americancenturyetfs.com.
Backdrop Favored Bonds
Most broad U.S. fixed-income indices ended the period with robust returns, bolstered by a sharp decline in U.S. Treasury yields. However, U.S. and other developed markets stocks delivered notably weaker results, largely due to a global sell-off among equities in late 2018. Although most stock indices rebounded strongly in 2019, their late-2018 losses weighed on results for the entire reporting period.
Fed’s Flip Fueled Investor Optimism
In the final months of 2018, mounting concerns about slowing global economic and earnings growth, tariffs and Federal Reserve (Fed) policy soured investor sentiment, driving global stocks lower. After raising rates in September, the Fed hiked again in December and delivered a surprisingly bullish rate-hike outlook, which intensified the sell-off among stocks and other riskier assets. Meanwhile, the risk-off climate sparked a flight to quality, which drove Treasury yields lower and benefited bonds.
A key policy pivot from the Fed helped improve equity investor sentiment beginning in early 2019. The central bank abruptly ended its rate-hike campaign and adopted a dovish tone amid weaker global growth and inflation. Additionally, investors’ worst-case fears about trade and corporate earnings generally eased, which also aided stocks. At the same time, government bond yields continued to fall on moderating global growth data, muted inflation and accommodative central bank policy in the U.S., Europe and Japan. By July, concerns about global economic risks prompted the Fed to cut short-term interest rates for the first time in 10 years. This backdrop supported continued gains for fixed-income and other interest rate-sensitive assets.
Looking ahead, we expect volatility to remain a formidable factor as investors react to global growth data, trade issues, central bank policy and geopolitical developments. We believe this scenario underscores the importance of using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a16.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/image48a16.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of August 31, 2019 | ||
Since Inception | Inception Date | |
Net Asset Value | 4.57% | 9/10/2018 |
Market Price | 4.57% | 9/10/2018 |
iSTOXX® American Century USA Quality Growth Index | 4.86% | — |
Market price is determined using the bid/ask midpoint at 4:00 p.m. Eastern time, when the net asset value (NAV) is typically calculated. Market performance does not represent the returns you would receive if you traded shares at other times. NAV prices are used to calculate market price performance prior to the date when the fund first traded on the New York Stock Exchange.
Growth of $10,000 Over Life of Fund |
$10,000 investment made September 10, 2018 |
![chart-25559e247240056130da04.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/chart-25559e247240056130da04.jpg)
Value on August 31, 2019 | |
Net Asset Value — $10,457 | |
iSTOXX® American Century USA Quality Growth Index — $10,486 | |
Total Annual Fund Operating Expenses |
0.29% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-6488 or visit americancenturyetfs.com. For additional information about the fund, please consult the prospectus.
3
Portfolio Commentary |
Portfolio Managers: Peruvemba Satish and Rene Casis
Fund Strategy
American Century STOXX® U.S. Quality Growth ETF seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the iSTOXX® American Century USA Quality Growth Index (the underlying index). Under normal market conditions, the fund invests at least 80% of its assets in the component securities of the underlying index.
The STOXX® USA 900 Index, which consists of the 900 largest publicly traded U.S. equity securities, defines the universe we use to create the underlying index. The index is designed to measure the performance of securities in the universe and identify those that exhibit higher growth and quality characteristics relative to their peers. Though component securities of the underlying index may change from time to time, the index typically consists of 150 to 250 securities.
Performance Review
For the period from American Century STOXX® U.S. Quality Growth ETF’s inception on September 10, 2018, through the fund’s fiscal year-end on August 31, 2019, the fund returned 4.57%* on a market price basis. On a net asset value (NAV) basis, the fund returned 4.57%. For the same time period, the underlying index returned 4.86%. The fund fully replicated the underlying index’s components during the reporting period. The fund’s NAV and market price returns reflect fees and operating expenses, while the index return does not.
For the same time period, the fund underperformed market-capitalization-weighted growth strategies, as measured by the Russell 1000 Growth Index (growth index), which returned 5.70%. The growth index is an unmanaged index generally representative of the performance of U.S. large-cap growth stocks. The fund’s underperformance versus the growth index was largely due to the different compositions of the fund and the growth index. Specifically, the fund tracks the underlying index, which is designed to measure the performance of securities in the universe and identify those that exhibit higher growth and quality characteristics relative to their peers. This approach led to underperformance versus the growth index, which selects and weights growth stocks based on market capitalization.
From a broad perspective, stock selection in the information technology, health care, energy and consumer staples sectors detracted from performance versus the growth index. An overweight allocation to energy and an underweight to real estate also hampered performance. Stock choices in the consumer discretionary and financials sectors benefited the fund’s relative performance, as did an allocation to utilities, which are not represented in the growth index.
The fund’s allocation closed the year with bias toward high growth with a 65% weight in high growth and 35% weight in stable growth. The model went to equal weighting in April but reverted to high growth in May. Allocations are rebalanced monthly, based on a strategy informed by recent risk-adjusted performance.
*Total returns for periods less than one year are not annualized.
4
Fund Characteristics |
AUGUST 31, 2019 |
Top Ten Holdings | % of net assets |
Intuit, Inc. | 3.6% |
Vertex Pharmaceuticals, Inc. | 3.4% |
Amazon.com, Inc. | 2.4% |
Zoetis, Inc. | 2.4% |
Adobe, Inc. | 2.3% |
American Tower Corp. | 2.3% |
ServiceNow, Inc. | 2.2% |
IDEXX Laboratories, Inc. | 2.1% |
Align Technology, Inc. | 2.1% |
Fortinet, Inc. | 1.9% |
Top Five Industries | % of net assets |
Software | 21.4% |
IT Services | 7.6% |
Semiconductors and Semiconductor Equipment | 7.3% |
Biotechnology | 6.8% |
Health Care Equipment and Supplies | 5.4% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 99.8% |
Temporary Cash Investments | 0.1% |
Other Assets and Liabilities | 0.1% |
5
Frequency Distributions of Premiums and Discounts |
The Frequency Distribution of Premiums and Discounts chart is provided to show the frequency at which the market price for the fund was at a premium or discount to the daily net asset value (NAV). Shareholders may pay more than NAV when they buy fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented reflect past performance. Past performance is no guarantee of future results. The following table represents the period September 12, 2018 (commencement of trading) through August 31, 2019.
Premium/Discount Range (%) | Number of Days Market Price Above or Equal to NAV | Number of Days Market Price Below NAV |
0% - 0.49% | 178 | 66 |
0.50% - 0.99% | — | — |
1.00% - 1.99% | — | — |
> 2.00% | — | — |
Total | 178 | 66 |
6
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including brokerage commissions paid on purchases and sales of fund shares; and (2) ongoing costs, including management 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 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 March 1, 2019 to August 31, 2019.
Actual Expenses
The table provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of fund shares. 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 3/1/19 | Ending Account Value 8/31/19 | Expenses Paid During Period(1) 3/1/19 - 8/31/19 | Annualized Expense Ratio(1) | |
Actual | $1,000 | $1,055.50 | $1.50 | 0.29% |
Hypothetical | $1,000 | $1,023.74 | $1.48 | 0.29% |
(1) | Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 184, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
7
Schedule of Investments |
AUGUST 31, 2019
Shares | Value | |||
COMMON STOCKS — 99.8% | ||||
Aerospace and Defense — 0.2% | ||||
HEICO Corp., Class A | 315 | $ | 34,763 | |
Air Freight and Logistics — 1.3% | ||||
CH Robinson Worldwide, Inc. | 1,848 | 156,138 | ||
Expeditors International of Washington, Inc. | 273 | 19,410 | ||
XPO Logistics, Inc.(1) | 1,659 | 117,557 | ||
293,105 | ||||
Airlines — 3.2% | ||||
Alaska Air Group, Inc. | 336 | 20,066 | ||
Delta Air Lines, Inc. | 4,074 | 235,722 | ||
JetBlue Airways Corp.(1) | 1,113 | 19,277 | ||
Southwest Airlines Co. | 4,536 | 237,323 | ||
United Airlines Holdings, Inc.(1) | 2,289 | 192,986 | ||
705,374 | ||||
Beverages — 0.3% | ||||
Monster Beverage Corp.(1) | 966 | 56,675 | ||
Biotechnology — 6.8% | ||||
Biogen, Inc.(1) | 1,197 | 263,041 | ||
Exelixis, Inc.(1) | 7,644 | 151,734 | ||
Incyte Corp.(1) | 420 | 34,364 | ||
Ionis Pharmaceuticals, Inc.(1) | 525 | 33,185 | ||
Neurocrine Biosciences, Inc.(1) | 357 | 35,493 | ||
Regeneron Pharmaceuticals, Inc.(1) | 798 | 231,460 | ||
Vertex Pharmaceuticals, Inc.(1) | 4,095 | 737,182 | ||
1,486,459 | ||||
Building Products — 0.3% | ||||
Allegion plc | 210 | 20,217 | ||
Armstrong World Industries, Inc. | 378 | 36,088 | ||
Masco Corp. | 483 | 19,672 | ||
75,977 | ||||
Capital Markets — 4.4% | ||||
Eaton Vance Corp. | 483 | 20,827 | ||
FactSet Research Systems, Inc. | 63 | 17,142 | ||
LPL Financial Holdings, Inc. | 1,533 | 114,898 | ||
MarketAxess Holdings, Inc. | 903 | 359,051 | ||
Moody's Corp. | 252 | 54,326 | ||
MSCI, Inc. | 1,617 | 379,397 | ||
SEI Investments Co. | 357 | 20,531 | ||
966,172 | ||||
Chemicals — 0.7% | ||||
Air Products & Chemicals, Inc. | 168 | 37,955 | ||
Celanese Corp. | 189 | 21,427 |
8
Shares | Value | |||
Ecolab, Inc. | 168 | $ | 34,660 | |
Scotts Miracle-Gro Co. (The) | 525 | 55,818 | ||
149,860 | ||||
Commercial Services and Supplies — 0.3% | ||||
Cintas Corp. | 126 | 33,239 | ||
Copart, Inc.(1) | 483 | 36,413 | ||
69,652 | ||||
Communications Equipment — 1.4% | ||||
Arista Networks, Inc.(1) | 1,218 | 276,023 | ||
Ciena Corp.(1) | 483 | 19,770 | ||
Cisco Systems, Inc. | 378 | 17,694 | ||
313,487 | ||||
Construction Materials — 0.9% | ||||
Martin Marietta Materials, Inc. | 147 | 37,304 | ||
Vulcan Materials Co. | 1,176 | 166,110 | ||
203,414 | ||||
Diversified Consumer Services — 0.2% | ||||
Bright Horizons Family Solutions, Inc.(1) | 210 | 34,660 | ||
Electric Utilities — 1.1% | ||||
Evergy, Inc. | 1,449 | 94,185 | ||
IDACORP, Inc. | 336 | 36,896 | ||
NextEra Energy, Inc. | 168 | 36,806 | ||
Portland General Electric Co. | 1,470 | 83,628 | ||
251,515 | ||||
Electrical Equipment — 0.2% | ||||
Acuity Brands, Inc. | 168 | 21,069 | ||
Rockwell Automation, Inc. | 126 | 19,251 | ||
40,320 | ||||
Electronic Equipment, Instruments and Components — 0.4% | ||||
CDW Corp. | 483 | 55,787 | ||
TE Connectivity Ltd. | 210 | 19,156 | ||
Zebra Technologies Corp., Class A(1) | 105 | 21,528 | ||
96,471 | ||||
Entertainment — 0.4% | ||||
Electronic Arts, Inc.(1) | 210 | 19,672 | ||
Take-Two Interactive Software, Inc.(1) | 273 | 36,028 | ||
Zynga, Inc., Class A(1) | 6,342 | 36,213 | ||
91,913 | ||||
Equity Real Estate Investment Trusts (REITs) — 2.7% | ||||
American Tower Corp. | 2,163 | 497,901 | ||
Crown Castle International Corp. | 231 | 33,534 | ||
Equinix, Inc. | 63 | 35,046 | ||
Lamar Advertising Co., Class A | 252 | 19,316 | ||
585,797 | ||||
Food and Staples Retailing — 0.3% | ||||
Performance Food Group Co.(1) | 1,176 | 55,025 |
9
Shares | Value | |||
Sysco Corp. | 252 | $ | 18,731 | |
73,756 | ||||
Health Care Equipment and Supplies — 5.4% | ||||
ABIOMED, Inc.(1) | 294 | 56,762 | ||
Align Technology, Inc.(1) | 2,499 | 457,592 | ||
Edwards Lifesciences Corp.(1) | 168 | 37,269 | ||
IDEXX Laboratories, Inc.(1) | 1,596 | 462,425 | ||
Integra LifeSciences Holdings Corp.(1) | 588 | 35,292 | ||
Intuitive Surgical, Inc.(1) | 63 | 32,214 | ||
Masimo Corp.(1) | 231 | 35,401 | ||
Stryker Corp. | 168 | 37,071 | ||
West Pharmaceutical Services, Inc. | 252 | 36,656 | ||
1,190,682 | ||||
Health Care Providers and Services — 0.9% | ||||
Chemed Corp. | 126 | 54,108 | ||
Encompass Health Corp. | 315 | 19,149 | ||
HCA Healthcare, Inc. | 168 | 20,194 | ||
HealthEquity, Inc.(1) | 1,218 | 72,301 | ||
Humana, Inc. | 126 | 35,684 | ||
201,436 | ||||
Health Care Technology — 1.7% | ||||
Cerner Corp. | 273 | 18,812 | ||
Veeva Systems, Inc., Class A(1) | 2,184 | 350,270 | ||
369,082 | ||||
Hotels, Restaurants and Leisure — 3.6% | ||||
Chipotle Mexican Grill, Inc.(1) | 405 | 339,560 | ||
Darden Restaurants, Inc. | 168 | 20,325 | ||
Hilton Worldwide Holdings, Inc. | 378 | 34,916 | ||
Planet Fitness, Inc., Class A(1) | 525 | 37,070 | ||
Starbucks Corp. | 3,150 | 304,164 | ||
Texas Roadhouse, Inc. | 378 | 19,452 | ||
Wendy's Co. (The) | 1,659 | 36,498 | ||
791,985 | ||||
Household Durables — 0.1% | ||||
NVR, Inc.(1) | 6 | 21,594 | ||
Industrial Conglomerates — 0.1% | ||||
Carlisle Cos., Inc. | 147 | 21,309 | ||
Insurance — 0.2% | ||||
Aon plc | 189 | 36,827 | ||
Interactive Media and Services — 2.5% | ||||
Alphabet, Inc., Class C(1) | 105 | 124,750 | ||
Facebook, Inc., Class A(1) | 1,680 | 311,926 | ||
IAC/InterActiveCorp(1) | 210 | 53,474 | ||
Twitter, Inc.(1) | 1,323 | 56,426 | ||
546,576 | ||||
Internet and Direct Marketing Retail — 4.8% | ||||
Amazon.com, Inc.(1) | 292 | 518,677 |
10
Shares | Value | |||
Booking Holdings, Inc.(1) | 10 | $ | 19,664 | |
eBay, Inc. | 5,817 | 234,367 | ||
Etsy, Inc.(1) | 4,326 | 228,369 | ||
Expedia Group, Inc. | 420 | 54,642 | ||
1,055,719 | ||||
IT Services — 7.6% | ||||
Accenture plc, Class A | 105 | 20,808 | ||
Akamai Technologies, Inc.(1) | 210 | 18,717 | ||
Automatic Data Processing, Inc. | 210 | 35,666 | ||
Booz Allen Hamilton Holding Corp. | 735 | 55,500 | ||
EPAM Systems, Inc.(1) | 1,512 | 289,291 | ||
Euronet Worldwide, Inc.(1) | 231 | 35,375 | ||
FleetCor Technologies, Inc.(1) | 126 | 37,599 | ||
Global Payments, Inc. | 231 | 38,341 | ||
Leidos Holdings, Inc. | 231 | 20,180 | ||
MasterCard, Inc., Class A | 924 | 259,986 | ||
MAXIMUS, Inc. | 252 | 19,389 | ||
Pagseguro Digital Ltd., Class A(1) | 714 | 35,672 | ||
PayPal Holdings, Inc.(1) | 336 | 36,641 | ||
Square, Inc., Class A(1) | 6,783 | 419,461 | ||
Visa, Inc., Class A | 756 | 136,700 | ||
Wix.com Ltd.(1) | 1,449 | 203,222 | ||
1,662,548 | ||||
Leisure Products — 0.2% | ||||
Hasbro, Inc. | 336 | 37,118 | ||
Life Sciences Tools and Services — 1.5% | ||||
Bio-Rad Laboratories, Inc., Class A(1) | 630 | 212,757 | ||
Illumina, Inc.(1) | 126 | 35,449 | ||
Mettler-Toledo International, Inc.(1) | 63 | 41,378 | ||
PRA Health Sciences, Inc.(1) | 378 | 37,361 | ||
326,945 | ||||
Machinery — 0.9% | ||||
AGCO Corp. | 294 | 20,321 | ||
Allison Transmission Holdings, Inc. | 1,785 | 79,308 | ||
Crane Co. | 252 | 19,213 | ||
Graco, Inc. | 441 | 20,096 | ||
Illinois Tool Works, Inc. | 126 | 18,882 | ||
Lincoln Electric Holdings, Inc. | 231 | 19,071 | ||
Oshkosh Corp. | 294 | 20,660 | ||
197,551 | ||||
Media — 0.2% | ||||
Cable One, Inc. | 28 | 36,333 | ||
Metals and Mining — 0.2% | ||||
Royal Gold, Inc. | 273 | 36,413 | ||
Multi-Utilities — 0.2% | ||||
WEC Energy Group, Inc. | 378 | 36,201 |
11
Shares | Value | |||
Multiline Retail — 0.3% | ||||
Ollie's Bargain Outlet Holdings, Inc.(1) | 903 | $ | 50,071 | |
Target Corp. | 189 | 20,231 | ||
70,302 | ||||
Oil, Gas and Consumable Fuels — 1.7% | ||||
Chevron Corp. | 819 | 96,413 | ||
EOG Resources, Inc. | 756 | 56,088 | ||
Exxon Mobil Corp. | 798 | 54,647 | ||
ONEOK, Inc. | 2,352 | 167,650 | ||
374,798 | ||||
Personal Products — 0.2% | ||||
Estee Lauder Cos., Inc. (The), Class A | 168 | 33,262 | ||
Pharmaceuticals — 4.0% | ||||
Bristol-Myers Squibb Co. | 3,864 | 185,742 | ||
Catalent, Inc.(1) | 651 | 34,334 | ||
Eli Lilly & Co. | 1,155 | 130,480 | ||
Merck & Co., Inc. | 231 | 19,975 | ||
Zoetis, Inc. | 4,095 | 517,690 | ||
888,221 | ||||
Professional Services — 0.9% | ||||
CoStar Group, Inc.(1) | 63 | 38,737 | ||
Insperity, Inc. | 1,134 | 112,334 | ||
Robert Half International, Inc. | 357 | 19,089 | ||
TransUnion | 420 | 35,133 | ||
205,293 | ||||
Real Estate Management and Development — 0.1% | ||||
CBRE Group, Inc., Class A(1) | 378 | 19,758 | ||
Road and Rail — 0.8% | ||||
Landstar System, Inc. | 357 | 39,813 | ||
Old Dominion Freight Line, Inc. | 882 | 144,436 | ||
184,249 | ||||
Semiconductors and Semiconductor Equipment — 7.3% | ||||
Applied Materials, Inc. | 5,040 | 242,021 | ||
Cree, Inc.(1) | 819 | 35,160 | ||
Entegris, Inc. | 1,323 | 56,664 | ||
First Solar, Inc.(1) | 567 | 35,194 | ||
KLA Corp. | 126 | 18,635 | ||
Lam Research Corp. | 1,134 | 238,718 | ||
Maxim Integrated Products, Inc. | 357 | 19,471 | ||
Mellanox Technologies Ltd.(1) | 1,050 | 112,403 | ||
Micron Technology, Inc.(1) | 441 | 19,964 | ||
Monolithic Power Systems, Inc. | 231 | 34,779 | ||
NVIDIA Corp. | 336 | 56,283 | ||
QUALCOMM, Inc. | 252 | 19,598 | ||
Skyworks Solutions, Inc. | 252 | 18,968 | ||
Teradyne, Inc. | 2,919 | 154,620 | ||
Texas Instruments, Inc. | 1,953 | 241,684 |
12
Shares | Value | |||
Universal Display Corp. | 1,386 | $ | 284,781 | |
Xilinx, Inc. | 189 | 19,667 | ||
1,608,610 | ||||
Software — 21.4% | ||||
Adobe, Inc.(1) | 1,785 | 507,850 | ||
Alteryx, Inc., Class A(1) | 252 | 35,897 | ||
Aspen Technology, Inc.(1) | 147 | 19,580 | ||
Atlassian Corp. plc, Class A(1) | 2,478 | 333,316 | ||
Cadence Design Systems, Inc.(1) | 273 | 18,695 | ||
Check Point Software Technologies Ltd.(1) | 189 | 20,355 | ||
Citrix Systems, Inc. | 1,659 | 154,254 | ||
Coupa Software, Inc.(1) | 1,470 | 204,227 | ||
CyberArk Software Ltd.(1) | 609 | 68,415 | ||
Dropbox, Inc., Class A(1) | 2,016 | 36,087 | ||
Fair Isaac Corp.(1) | 105 | 37,036 | ||
Fortinet, Inc.(1) | 5,376 | 425,672 | ||
HubSpot, Inc.(1) | 1,050 | 209,664 | ||
Intuit, Inc. | 2,709 | 781,167 | ||
Microsoft Corp. | 399 | 55,006 | ||
Oracle Corp. (New York) | 357 | 18,586 | ||
Palo Alto Networks, Inc.(1) | 168 | 34,208 | ||
Paycom Software, Inc.(1) | 1,134 | 283,636 | ||
Proofpoint, Inc.(1) | 1,848 | 209,951 | ||
RealPage, Inc.(1) | 567 | 36,101 | ||
RingCentral, Inc., Class A(1) | 273 | 38,529 | ||
salesforce.com, Inc.(1) | 2,058 | 321,192 | ||
ServiceNow, Inc.(1) | 1,869 | 489,379 | ||
Trade Desk, Inc. (The), Class A(1) | 1,134 | 278,703 | ||
Tyler Technologies, Inc.(1) | 147 | 37,711 | ||
VMware, Inc., Class A | 147 | 20,792 | ||
Workday, Inc., Class A(1) | 189 | 33,506 | ||
4,709,515 | ||||
Specialty Retail — 3.4% | ||||
Best Buy Co., Inc. | 1,701 | 108,269 | ||
Burlington Stores, Inc.(1) | 315 | 63,784 | ||
Five Below, Inc.(1) | 1,239 | 152,236 | ||
Home Depot, Inc. (The) | 84 | 19,144 | ||
Lowe's Cos., Inc. | 189 | 21,206 | ||
O'Reilly Automotive, Inc.(1) | 147 | 56,413 | ||
Ross Stores, Inc. | 189 | 20,036 | ||
TJX Cos., Inc. (The) | 357 | 19,624 | ||
Tractor Supply Co. | 189 | 19,255 | ||
Ulta Beauty, Inc.(1) | 1,134 | 269,586 | ||
749,553 | ||||
Technology Hardware, Storage and Peripherals — 0.8% | ||||
Apple, Inc. | 84 | 17,534 |
13
Shares | Value | |||
NetApp, Inc. | 3,276 | $ | 157,445 | |
174,979 | ||||
Textiles, Apparel and Luxury Goods — 2.6% | ||||
Carter's, Inc. | 210 | 19,211 | ||
Deckers Outdoor Corp.(1) | 231 | 34,061 | ||
Lululemon Athletica, Inc.(1) | 2,058 | 380,051 | ||
NIKE, Inc., Class B | 672 | 56,784 | ||
Skechers U.S.A., Inc., Class A(1) | 1,260 | 39,891 | ||
Under Armour, Inc., Class A(1) | 1,974 | 36,736 | ||
566,734 | ||||
Trading Companies and Distributors — 0.9% | ||||
W.W. Grainger, Inc. | 714 | 195,386 | ||
Water Utilities — 0.2% | ||||
American Water Works Co., Inc. | 294 | 37,432 | ||
TOTAL COMMON STOCKS (Cost $20,234,546) | 21,915,781 | |||
TEMPORARY CASH INVESTMENTS — 0.1% | ||||
State Street Institutional U.S. Government Money Market Fund, Premier Class (Cost $31,720) | 31,720 | 31,720 | ||
TOTAL INVESTMENT SECURITIES — 99.9% (Cost $20,266,266) | 21,947,501 | |||
OTHER ASSETS AND LIABILITIES — 0.1% | 16,765 | |||
TOTAL NET ASSETS — 100.0% | $ | 21,964,266 |
NOTES TO SCHEDULE OF INVESTMENTS |
(1) | Non-income producing. |
See Notes to Financial Statements.
14
Statement of Assets and Liabilities |
AUGUST 31, 2019 | |||
Assets | |||
Investment securities, at value (cost of $20,266,266) | $ | 21,947,501 | |
Receivable for investments sold | 7,477,157 | ||
Dividends and interest receivable | 12,920 | ||
29,437,578 | |||
Liabilities | |||
Payable for investments purchased | 7,468,127 | ||
Accrued management fees | 5,185 | ||
7,473,312 | |||
Net Assets | $ | 21,964,266 | |
Shares outstanding (unlimited number of shares authorized) | 525,000 | ||
Net Asset Value Per Share | $ | 41.84 | |
Net Assets Consist of: | |||
Capital paid in | $ | 20,682,293 | |
Distributable earnings | 1,281,973 | ||
$ | 21,964,266 |
See Notes to Financial Statements.
15
Statement of Operations |
FOR THE PERIOD ENDED AUGUST 31, 2019(1) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $9) | $ | 103,439 | |
Interest | 548 | ||
103,987 | |||
Expenses: | |||
Management fees | 39,245 | ||
Net investment income (loss) | 64,742 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on investment transactions | (415,519 | ) | |
Change in net unrealized appreciation (depreciation) on investments | 1,681,235 | ||
Net realized and unrealized gain (loss) | 1,265,716 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 1,330,458 |
(1) | September 10, 2018 (fund inception) through August 31, 2019. |
See Notes to Financial Statements.
16
Statement of Changes in Net Assets |
PERIOD ENDED AUGUST 31, 2019(1) | |||
Increase (Decrease) in Net Assets | |||
Operations | |||
Net investment income (loss) | $ | 64,742 | |
Net realized gain (loss) | (415,519 | ) | |
Change in net unrealized appreciation (depreciation) | 1,681,235 | ||
Net increase (decrease) in net assets resulting from operations | 1,330,458 | ||
Distributions to Shareholders | |||
From earnings | (48,485 | ) | |
Capital Share Transactions | |||
Proceeds from shares sold | 20,682,293 | ||
Net increase (decrease) in net assets | 21,964,266 | ||
Net Assets | |||
End of period | $ | 21,964,266 | |
Transactions in Shares of the Fund | |||
Sold | 525,000 |
(1) | September 10, 2018 (fund inception) through August 31, 2019. |
See Notes to Financial Statements.
17
Notes to Financial Statements |
AUGUST 31, 2019
1. Organization
American Century ETF Trust (the trust) was registered as a Delaware statutory trust in 2017 and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. American Century STOXX® U.S. Quality Growth ETF (the fund) is one fund in a series issued by the trust. The fund's investment objective is to seek to provide investment results that closely correspond, before fees and expenses, to the performance of the iSTOXX® American Century USA Quality Growth Index. Shares of the fund are listed for trading on the NYSE Arca, Inc. The fund incepted on September 10, 2018.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Trustees has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price.
Open-end management investment companies are valued at the reported net asset value per share.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Trustees or its delegate, in accordance with policies and procedures adopted by the Board of Trustees. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region.
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.
18
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and trustees of the trust are also officers and/or directors of American Century Companies, Inc. (ACC). The trust's investment advisor, American Century Investment Management, Inc. (ACIM), and the trust’s administrator, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The trust has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee). The agreement provides that all expenses of managing and operating the fund, except brokerage and other transaction fees and expenses relating to the acquisition and disposition of portfolio securities, acquired fund fees and expenses, interest, taxes, litigation expenses, extraordinary expenses and expenses incurred in connection with the provision of shareholder and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act, if any, will be paid by ACIM. The fee is computed and accrued daily based on the daily net assets of the fund and paid monthly in arrears. The annual management fee is 0.29%.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments and in-kind transactions, for the period ended August 31, 2019 were $26,436,027 and $26,145,608, respectively.
Securities received in-kind through subscriptions for the period ended August 31, 2019 were $20,599,697. There were no securities delivered in-kind through redemptions during the period.
5. Capital Share Transactions
The fund’s shares may only be purchased and sold on a national securities exchange through a broker-dealer. The price of the fund’s shares is based on market price, and because ETF shares trade at market prices rather than net asset value (NAV), shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The fund issues and redeems shares that have been aggregated into blocks of 25,000 shares or multiples thereof (Creation Units) to authorized participants who have entered into agreements with the fund's distributor. The fund will generally issue and redeem Creation Units in return for a basket of securities (and an amount of cash) that the fund specifies each day. Investors transacting in Creation Units for cash may also pay an additional variable charge to compensate the fund for certain transaction costs and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in proceeds from shares sold in the Statement of Changes in Net Assets.
19
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
As of period end, the fund’s investment securities were classified as Level 1. The Schedule of Investments provides additional information on the fund's portfolio holdings.
7. Risk Factors
The fund seeks to track an index. If the fund's index has high portfolio turnover, the fund may also have high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
The fund is not actively managed and does not attempt to take defensive positions under any market conditions, including declining markets. Therefore, the fund generally will not buy or sell securities unless they are added or removed from the index, even if the security is underperforming.
8. Federal Tax Information
The tax character of distributions paid during the period September 10, 2018 (fund inception) through August 31, 2019 were as follows:
2019 | |||
Distributions Paid From | |||
Ordinary income | $ | 48,485 | |
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 period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 20,296,895 | |
Gross tax appreciation of investments | $ | 2,006,672 | |
Gross tax depreciation of investments | (356,066 | ) | |
Net tax appreciation (depreciation) of investments | $ | 1,650,606 | |
Undistributed ordinary income | $ | 14,456 | |
Accumulated short-term capital losses | $ | (383,089 | ) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Accumulated capital losses represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers may be carried forward for an unlimited period. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations.
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Financial Highlights |
For a Share Outstanding Throughout the Period Indicated | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | ||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Distributions From Net Investment Income | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate(3) | Net Assets, End of Period (in thousands) | |||
2019(4) | $40.15 | 0.18 | 1.64 | 1.82 | (0.13) | $41.84 | 4.57% | 0.29%(5) | 0.48%(5) | 191% | $21,964 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day. Total returns for periods less than one year are not annualized. |
(3) | Excludes securities received or delivered in-kind. |
(4) | September 10, 2018 (fund inception) through August 31, 2019. |
(5) | Annualized. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Trustees of American Century ETF Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of American Century STOXX® U.S. Quality Growth ETF, one of the funds constituting the American Century ETF Trust (the “Fund”), as of August 31, 2019, and the related statements of operations, changes in net assets, and the financial highlights for the period from September 10, 2018 (fund inception) through August 31, 2019, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of August 31, 2019, and the results of its operations, the changes in its net assets, and the financial highlights for the period from September 10, 2018 (fund inception) through August 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2019, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
October 18, 2019
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of Trustees
The individuals listed below serve as trustees of the funds. Each trustee will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for trustees who are not “interested persons,” as that term is defined in the Investment Company Act (independent trustees). Trustees who are not also officers of the trust shall retire by December 31st of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other trustees are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The following trustees also serve in this capacity for a number of other registered investment companies in the American Century Investments family of funds: Jonathan S. Thomas, 15; Ronald J. Gilson, 8; and Stephen E. Yates, 7.
The following table presents additional information about the trustees. The mailing address for each trustee other than Jonathan S. Thomas is 330 Madison Avenue, New York, New York 10017. The mailing address for Jonathan S. Thomas 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 Trustee | Other Directorships Held During Past 5 Years |
Independent Trustees | |||||
Reginald M. Browne (1968) | Trustee and Chairman of the Board | Since 2017 (Chairman since 2019) | Principal, GTS Securities (automated capital markets trading firm)(2019 to present); Senior Managing Director, Co Global Head-ETF Group, Cantor Fitzgerald (financial services firm)(2013 to 2019) | 5 | None |
Ronald J. Gilson (1946) | Trustee | Since 2017 | Charles J. Meyers Professor of Law and Business, Emeritus, Stanford Law School (1979 to 2016); Marc and Eva Stern Professor of Law and Business, Columbia University School of Law (1992 to present) | 49 | None |
Barry A. Mendelson (1958) | Trustee | Since 2017 | Retired; Consultant regarding ETF and mutual fund matters (2015 to 2016); Principal and Senior Counsel, The Vanguard Group (investment management)(1998 to 2014) | 5 | None |
Stephen E. Yates (1948) | Trustee | Since 2017 | Retired | 72 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Trustee | Other Directorships Held During Past 5 Years |
Interested Trustees | |||||
Jonathan S. Thomas (1963) | Trustee | Since 2017 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 116 | BioMed Valley Discoveries, Inc. |
The Statement of Additional Information has additional information about the fund's trustees and is available without charge, upon request, by calling 1-800-345-6488.
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Officers
The following table presents certain information about the executive officers of the funds. Each officer, except Edward Rosenberg, serves as an officer for each of the 16 investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present); Chief Operating Officer, ACC (2012 to 2015). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries |
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Investment Operations and Investment Accounting, ACS (2000 to present) |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2017 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS |
Charles A. Etherington (1957) | General Counsel and Vice President since 2017 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
Cleo Chang (1977) | Vice President since 2019 | Senior Vice President, ACIM (2015 to present); Chief Investment Officer, Wilshire Funds Management (2005 to 2015) |
David H. Reinmiller (1963) | Vice President since 2017 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS |
Edward Rosenberg (1973) | Vice President since 2017 | Senior Vice President, ACIM (2017 to present); Senior Vice President, Flexshares Head of ETF Capital Markets, Northern Trust (2012 to 2017) |
C. Jean Wade (1964) | Vice President since 2017 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) |
Ward D. Stauffer (1960) | Secretary since 2019 | Attorney, ACS (2003 to present) |
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Approval of Management Agreement |
At a meeting held on June 13, 2019, the Fund’s Board of Trustees (the "Board") unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Trustees”), including a majority of the independent Trustees, each year.
Prior to its consideration of the renewal of the management agreement, the Trustees 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 Audit Committee on a continual basis and the information received was supplemental to the extensive information that the Board and its Audit Committee receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management and other services provided and to be provided to the Fund; |
• | the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis; |
• | the investment performance of the Fund, including data comparing the Fund's performance to appropriate benchmarks; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers; |
• | 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; |
• | strategic plans of the Advisor; |
• | any economies of scale associated with the Advisor’s management of the Fund and other accounts; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
The Trustees held one in-person meeting to review and discuss the information provided. The independent Trustees also held active discussions with the Advisor regarding the renewal of the management agreement. The independent Trustees had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Trustees considered all of the information provided by the Advisor, the independent data providers, and independent counsel in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Trustees did not identify any single factor as being all-important or controlling, and each Trustee may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including without limitation the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the
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Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
• | portfolio research and security selection |
• | 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 (except amounts paid by the Fund under Rule 12b-1 plans) |
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, 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 Trustees 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 provides oversight of the investment performance process. It regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks over different time horizons. The Trustees also review investment performance information during the management agreement renewal process. If performance concerns are identified, the Board discusses with the Advisor the reasons for such results and any efforts being undertaken to improve performance. The Fund’s performance reviewed by the Board was slightly below its benchmark. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides or arranges for a comprehensive package of services to the Fund. The Board, directly and through its Audit Committee, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Trustees have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to the Fund and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
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Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, expenses attributable to short sales, taxes, interest, extraordinary expenses, and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the Investment Company Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was above the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Trustees also requested information from the Advisor concerning the nature of the services, fees, costs, and profitability of its advisory services to funds or other advisory clients managed similarly to the Fund. The Advisor informed the Trustees that, as of March 31, 2019, it did not provide services to any other investment companies or comparable accounts that were managed similarly to the Fund.
Payments to Intermediaries. The Trustees also requested a description of payments made to intermediaries by the Fund and the Advisor and services provided in response thereto. These payments could include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Advisor informed the Trustees that, other than compensation to the Fund’s distributor and transfer agent, the Advisor was not then making payments to intermediaries related to fund distribution or shareholder services.
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 funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that
29
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 Trustees. As a result of this process, the Board, including all of the independent Trustees, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
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Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund are available without charge, upon request, by calling 1-800-345-6488. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q or as an exhibit to its reports on Form N-PORT. The fund's Forms N-Q and Form N-PORT reports are available on the SEC’s website at sec.gov.
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Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified dividend income for the fiscal year ended August 31, 2019.
For corporate taxpayers, the fund hereby designates $48,485, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended August 31, 2019 as qualified for the corporate dividends received deduction.
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Contact Us | americancenturyetfs.com | |
American Century Sales Representatives, Financial Professionals, Broker Dealers, Insurance Companies, Banks and Trust Companies | 1-833-ACI-ETFS | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century ETF Trust | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
Distributor: Foreside Fund Services, LLC - Distributor, not affiliated with American Century Investment Services, Inc. | ||
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. | ||
©2019 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-95463 1910 |
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Annual Report | |
August 31, 2019 | |
American Century® STOXX® U.S. Quality Value ETF (VALQ) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | |
Performance | |
Portfolio Commentary | |
Fund Characteristics | |
Frequency Distributions of Premiums and Discounts | |
Shareholder Fee Example | |
Schedule of Investments | |
Statement of Assets and Liabilities | |
Statement of Operations | |
Statement of Changes in Net Assets | |
Notes to Financial Statements | |
Financial Highlights | |
Report of Independent Registered Public Accounting Firm | |
Management | |
Approval of Management Agreement | |
Additional Information |
The iSTOXX American Century USA Quality Value Index is the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland (“STOXX”), Deutsche Börse Group or their licensors, which is used under license. American Century STOXX U.S. Quality Value ETF is neither sponsored nor promoted, distributed or in any other manner supported by STOXX, Deutsche Börse Group or their licensors, research partners or data providers and STOXX, Deutsche Börse Group and their licensors, research partners or data providers do not give any warranty, and exclude any liability (whether in negligence or otherwise) with respect thereto generally or specifically in relation to any errors, omissions or interruptions in the iSTOXX American Century USA Quality Value Index or its data.
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
![jthomasrev0514a66.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/jthomasrev0514a66.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended August 31, 2019. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional investment and market insights, we encourage you to visit our website, americancenturyetfs.com.
Backdrop Favored Bonds
Most broad U.S. fixed-income indices ended the period with robust returns, bolstered by a sharp decline in U.S. Treasury yields. However, U.S. and other developed markets stocks delivered notably weaker results, largely due to a global sell-off among equities in late 2018. Although most stock indices rebounded strongly in 2019, their late-2018 losses weighed on results for the entire reporting period.
Fed’s Flip Fueled Investor Optimism
In the final months of 2018, mounting concerns about slowing global economic and earnings growth, tariffs and Federal Reserve (Fed) policy soured investor sentiment, driving global stocks lower. After raising rates in September, the Fed hiked again in December and delivered a surprisingly bullish rate-hike outlook, which intensified the sell-off among stocks and other riskier assets. Meanwhile, the risk-off climate sparked a flight to quality, which drove Treasury yields lower and benefited bonds.
A key policy pivot from the Fed helped improve equity investor sentiment beginning in early 2019. The central bank abruptly ended its rate-hike campaign and adopted a dovish tone amid weaker global growth and inflation. Additionally, investors’ worst-case fears about trade and corporate earnings generally eased, which also aided stocks. At the same time, government bond yields continued to fall on moderating global growth data, muted inflation and accommodative central bank policy in the U.S., Europe and Japan. By July, concerns about global economic risks prompted the Fed to cut short-term interest rates for the first time in 10 years. This backdrop supported continued gains for fixed-income and other interest rate-sensitive assets.
Looking ahead, we expect volatility to remain a formidable factor as investors react to global growth data, trade issues, central bank policy and geopolitical developments. We believe this scenario underscores the importance of using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a16.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/image48a16.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of August 31, 2019 | |||
Average Annual Returns | |||
1 year | Since Inception | Inception Date | |
Net Asset Value | -3.60% | 0.25% | 1/11/2018 |
Market Price | -3.71% | 0.21% | 1/11/2018 |
iSTOXX® American Century USA Quality Value Index | -3.31% | 0.51% | — |
Market price is determined using the bid/ask midpoint at 4:00 p.m. Eastern time, when the net asset value (NAV) is typically calculated. Market performance does not represent the returns you would receive if you traded shares at other times. NAV prices are used to calculate market price performance prior to the date when the fund first traded on the New York Stock Exchange.
Growth of $10,000 Over Life of Fund |
$10,000 investment made January 11, 2018 |
![chart-72141cd8b92476c75eca04.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/chart-72141cd8b92476c75eca04.jpg)
Value on August 31, 2019 | |
Net Asset Value — $10,041 | |
iSTOXX® American Century USA Quality Value Index — $10,084 | |
Total Annual Fund Operating Expenses |
0.29% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-6488 or visit americancenturyetfs.com. For additional information about the fund, please consult the prospectus.
3
Portfolio Commentary |
Portfolio Managers: Peruvemba Satish and Rene Casis
Fund Strategy
American Century STOXX® U.S. Quality Value ETF seeks to track the investment results (before fees and expenses) of the iSTOXX® American Century USA Quality Value Index (the underlying index). Under normal market conditions, the fund invests at least 80% of its assets in the component securities of the underlying index.
The STOXX® USA 900 Index, which consists of the 900 largest publicly traded U.S. equity securities, defines the universe we use to create the underlying index. From that universe, we use a rules-based methodology that screens and weights stocks based on fundamental measures of quality, value and income. The resulting underlying index is designed to include high-quality securities of large- and mid-cap companies that are undervalued or have sustainable income. Although component securities of the underlying index may change from time to time, the index typically consists of 200 to 300 securities.
Performance Review
For the 12-month period ended August 31, 2019, the fund returned -3.71% on a market price basis. On a net asset value (NAV) basis, the fund returned -3.60%. For the same time period, the underlying index returned -3.31%. The fund fully replicated the underlying index’s components during the reporting period. The fund’s NAV and market price returns reflect fees and operating expenses, while the index return does not.
For the same time period, the fund underperformed market-capitalization-weighted value strategies, as measured by the Russell 1000 Value Index* (value index). The value index is an unmanaged index generally representative of the performance of U.S. large-cap value stocks. The fund’s underperformance versus the value index was largely due to the different compositions of the fund and the value index. Specifically, the fund tracks the underlying index, which pursues risk-adjusted returns by dynamically allocating among high-quality, attractively valued companies and companies offering sustainable income.
From a broad perspective, fund holdings in the consumer discretionary, information technology and health care sectors accounted for the majority of the fund’s underperformance versus the value index. From an industry perspective, security selection in the semiconductors and semiconductor equipment industry was a key detractor from relative performance. Additionally, an overweight in the biotechnology industry and an underweight in the health care equipment and supplies industry weighed on the fund’s performance compared with the value index. On the other hand, an underweight and security selection in the energy sector contributed positively to relative results. The consumer staples sector also positively impacted relative returns, stemming primarily from the fund’s holdings and relative overweight in the food products industry.
The fund’s allocation closed the 12-month period with an equal weighting to value and income. Over the course of the year, the allocation to value was as high as 80% and as low as 35%. Allocations are rebalanced monthly, based on a strategy informed by recent risk-adjusted performance.
*The Russell 1000 Value Index returns for the one year and since inception periods ended August 31, 2019 were 0.62% and 0.94%, respectively.
4
Fund Characteristics |
AUGUST 31, 2019 |
Top Ten Holdings | % of net assets |
International Business Machines Corp. | 2.9% |
AT&T, Inc. | 2.8% |
Target Corp. | 2.3% |
Chevron Corp. | 2.0% |
Kimberly-Clark Corp. | 2.0% |
PPL Corp. | 2.0% |
American Electric Power Co., Inc. | 2.0% |
Southern Co. (The) | 2.0% |
Verizon Communications, Inc. | 2.0% |
Procter & Gamble Co. (The) | 1.9% |
Top Five Industries | % of net assets |
Equity Real Estate Investment Trusts (REITs) | 13.4% |
Electric Utilities | 9.0% |
Oil, Gas and Consumable Fuels | 7.6% |
IT Services | 5.7% |
Diversified Telecommunication Services | 4.8% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 99.8% |
Temporary Cash Investments | 0.2% |
Other Assets and Liabilities | —* |
*Category is less than 0.05% of total net assets.
5
Frequency Distributions of Premiums and Discounts |
The Frequency Distribution of Premiums and Discounts chart is provided to show the frequency at which the market price for the fund was at a premium or discount to the daily net asset value (NAV). Shareholders may pay more than NAV when they buy fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented reflect past performance. Past performance is no guarantee of future results. The following table represents the period January 16, 2018 (commencement of trading) through August 31, 2019.
Premium/Discount Range (%) | Number of Days Market Price Above or Equal to NAV | Number of Days Market Price Below NAV |
0% - 0.49% | 338 | 72 |
0.50% - 0.99% | — | — |
1.00% - 1.99% | — | — |
> 2.00% | — | — |
Total | 338 | 72 |
6
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including brokerage commissions paid on purchases and sales of fund shares; and (2) ongoing costs, including management 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 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 March 1, 2019 to August 31, 2019.
Actual Expenses
The table provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of fund shares. 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 3/1/19 | Ending Account Value 8/31/19 | Expenses Paid During Period(1) 3/1/19 - 8/31/19 | Annualized Expense Ratio(1) | |
Actual | $1,000 | $1,004.10 | $1.46 | 0.29% |
Hypothetical | $1,000 | $1,023.74 | $1.48 | 0.29% |
(1) | Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 184, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
7
Schedule of Investments |
AUGUST 31, 2019
Shares | Value | |||
COMMON STOCKS — 99.8% | ||||
Aerospace and Defense — 0.9% | ||||
Arconic, Inc. | 1,054 | $ | 27,235 | |
General Dynamics Corp. | 155 | 29,647 | ||
Huntington Ingalls Industries, Inc. | 124 | 25,916 | ||
Lockheed Martin Corp. | 69 | 26,503 | ||
Raytheon Co. | 155 | 28,725 | ||
Spirit AeroSystems Holdings, Inc., Class A | 1,333 | 107,440 | ||
Textron, Inc. | 589 | 26,505 | ||
271,971 | ||||
Air Freight and Logistics — 0.2% | ||||
United Parcel Service, Inc., Class B | 651 | 77,248 | ||
Airlines — 1.2% | ||||
Alaska Air Group, Inc. | 434 | 25,918 | ||
Delta Air Lines, Inc. | 589 | 34,080 | ||
JetBlue Airways Corp.(1) | 1,643 | 28,457 | ||
Southwest Airlines Co. | 1,860 | 97,315 | ||
United Airlines Holdings, Inc.(1) | 2,077 | 175,112 | ||
360,882 | ||||
Auto Components — 0.1% | ||||
Lear Corp. | 248 | 27,840 | ||
Banks — 0.7% | ||||
Bank of America Corp. | 992 | 27,290 | ||
Bank OZK | 1,705 | 43,989 | ||
Comerica, Inc. | 806 | 49,690 | ||
Fifth Third Bancorp | 1,023 | 27,058 | ||
Popular, Inc. | 496 | 26,075 | ||
Regions Financial Corp. | 1,860 | 27,193 | ||
201,295 | ||||
Beverages — 0.2% | ||||
PepsiCo, Inc. | 465 | 63,579 | ||
Biotechnology — 3.4% | ||||
AbbVie, Inc. | 2,759 | 181,377 | ||
Amgen, Inc. | 155 | 32,336 | ||
Biogen, Inc.(1) | 589 | 129,433 | ||
Celgene Corp.(1) | 1,612 | 156,041 | ||
Gilead Sciences, Inc. | 7,967 | 506,223 | ||
Regeneron Pharmaceuticals, Inc.(1) | 93 | 26,975 | ||
1,032,385 | ||||
Building Products — 0.4% | ||||
Fortune Brands Home & Security, Inc. | 527 | 26,909 | ||
Owens Corning | 1,426 | 81,795 | ||
108,704 |
8
Shares | Value | |||
Capital Markets — 0.6% | ||||
Affiliated Managers Group, Inc. | 341 | $ | 26,131 | |
Janus Henderson Group plc | 1,426 | 27,251 | ||
Lazard Ltd., Class A | 2,852 | 97,938 | ||
State Street Corp. | 527 | 27,040 | ||
178,360 | ||||
Chemicals — 1.8% | ||||
Eastman Chemical Co. | 434 | 28,371 | ||
Huntsman Corp. | 2,759 | 54,959 | ||
LyondellBasell Industries NV, Class A | 5,983 | 462,964 | ||
546,294 | ||||
Commercial Services and Supplies — 0.2% | ||||
Republic Services, Inc. | 310 | 27,667 | ||
Waste Management, Inc. | 217 | 25,899 | ||
53,566 | ||||
Communications Equipment — 0.3% | ||||
Cisco Systems, Inc. | 620 | 29,022 | ||
F5 Networks, Inc.(1) | 217 | 27,934 | ||
Juniper Networks, Inc. | 1,116 | 25,847 | ||
82,803 | ||||
Construction and Engineering — 0.2% | ||||
EMCOR Group, Inc. | 310 | 27,106 | ||
Quanta Services, Inc. | 775 | 26,273 | ||
53,379 | ||||
Consumer Finance — 0.2% | ||||
American Express Co. | 217 | 26,120 | ||
Discover Financial Services | 403 | 32,228 | ||
58,348 | ||||
Containers and Packaging — 0.5% | ||||
Packaging Corp. of America | 1,240 | 124,719 | ||
Sonoco Products Co. | 465 | 26,598 | ||
151,317 | ||||
Diversified Consumer Services — 0.6% | ||||
H&R Block, Inc. | 7,006 | 169,685 | ||
Diversified Financial Services — 0.1% | ||||
Berkshire Hathaway, Inc., Class B(1) | 124 | 25,223 | ||
Diversified Telecommunication Services — 4.8% | ||||
AT&T, Inc. | 24,180 | 852,587 | ||
Verizon Communications, Inc. | 10,230 | 594,977 | ||
1,447,564 | ||||
Electric Utilities — 9.0% | ||||
ALLETE, Inc. | 558 | 47,837 | ||
Alliant Energy Corp. | 1,178 | 61,786 | ||
American Electric Power Co., Inc. | 6,696 | 610,340 | ||
Duke Energy Corp. | 279 | 25,875 | ||
Edison International | 372 | 26,884 | ||
Entergy Corp. | 248 | 27,984 |
9
Shares | Value | |||
Evergy, Inc. | 744 | $ | 48,360 | |
FirstEnergy Corp. | 1,643 | 75,578 | ||
IDACORP, Inc. | 465 | 51,062 | ||
NextEra Energy, Inc. | 248 | 54,332 | ||
Pinnacle West Capital Corp. | 279 | 26,592 | ||
Portland General Electric Co. | 6,510 | 370,354 | ||
PPL Corp. | 20,677 | 611,005 | ||
Southern Co. (The) | 10,447 | 608,642 | ||
Xcel Energy, Inc. | 1,395 | 89,587 | ||
2,736,218 | ||||
Electrical Equipment — 0.4% | ||||
Acuity Brands, Inc. | 217 | 27,214 | ||
Eaton Corp. plc | 713 | 57,553 | ||
Regal Beloit Corp. | 372 | 26,375 | ||
111,142 | ||||
Electronic Equipment, Instruments and Components — 0.4% | ||||
Avnet, Inc. | 651 | 27,270 | ||
Corning, Inc. | 1,023 | 28,491 | ||
Jabil, Inc. | 1,953 | 56,266 | ||
TE Connectivity Ltd. | 279 | 25,450 | ||
137,477 | ||||
Energy Equipment and Services — 1.2% | ||||
Schlumberger Ltd. | 11,160 | 361,919 | ||
Entertainment — 0.3% | ||||
Cinemark Holdings, Inc. | 2,480 | 94,637 | ||
Equity Real Estate Investment Trusts (REITs) — 13.4% | ||||
Apple Hospitality REIT, Inc. | 1,674 | 26,667 | ||
Brixmor Property Group, Inc. | 16,213 | 298,805 | ||
CubeSmart | 6,510 | 233,644 | ||
Host Hotels & Resorts, Inc. | 29,326 | 470,389 | ||
Kimco Realty Corp. | 13,547 | 248,994 | ||
Lamar Advertising Co., Class A | 5,146 | 394,441 | ||
Life Storage, Inc. | 496 | 52,556 | ||
National Retail Properties, Inc. | 7,161 | 402,090 | ||
Park Hotels & Resorts, Inc. | 1,116 | 26,282 | ||
Public Storage | 93 | 24,621 | ||
Ryman Hospitality Properties, Inc. | 2,418 | 192,618 | ||
Simon Property Group, Inc. | 3,565 | 530,971 | ||
Ventas, Inc. | 6,665 | 489,144 | ||
VEREIT, Inc. | 40,734 | 397,156 | ||
Weingarten Realty Investors | 10,106 | 267,708 | ||
Welltower, Inc. | 310 | 27,764 | ||
4,083,850 | ||||
Food and Staples Retailing — 1.3% | ||||
Kroger Co. (The) | 6,572 | 155,625 | ||
US Foods Holding Corp.(1) | 651 | 26,333 | ||
Walgreens Boots Alliance, Inc. | 3,596 | 184,079 |
10
Shares | Value | |||
Walmart, Inc. | 248 | $ | 28,337 | |
394,374 | ||||
Food Products — 3.7% | ||||
Archer-Daniels-Midland Co. | 682 | 25,950 | ||
Bunge Ltd. | 7,688 | 410,616 | ||
Conagra Brands, Inc. | 930 | 26,375 | ||
Flowers Foods, Inc. | 11,749 | 267,877 | ||
General Mills, Inc. | 1,395 | 75,051 | ||
Hershey Co. (The) | 310 | 49,129 | ||
Ingredion, Inc. | 341 | 26,349 | ||
Tyson Foods, Inc., Class A | 2,573 | 239,392 | ||
1,120,739 | ||||
Gas Utilities — 0.5% | ||||
National Fuel Gas Co. | 2,325 | 108,670 | ||
Southwest Gas Holdings, Inc. | 620 | 56,563 | ||
165,233 | ||||
Health Care Equipment and Supplies — 0.1% | ||||
Medtronic plc | 248 | 26,757 | ||
Health Care Providers and Services — 2.9% | ||||
Anthem, Inc. | 465 | 121,607 | ||
Cardinal Health, Inc. | 6,510 | 280,776 | ||
CVS Health Corp. | 434 | 26,439 | ||
DaVita, Inc.(1) | 1,426 | 80,383 | ||
Encompass Health Corp. | 434 | 26,383 | ||
HCA Healthcare, Inc. | 372 | 44,714 | ||
Laboratory Corp. of America Holdings(1) | 155 | 25,972 | ||
McKesson Corp. | 1,240 | 171,455 | ||
Quest Diagnostics, Inc. | 248 | 25,388 | ||
UnitedHealth Group, Inc. | 124 | 29,016 | ||
Universal Health Services, Inc., Class B | 248 | 35,856 | ||
867,989 | ||||
Health Care Technology — 0.1% | ||||
Cerner Corp. | 372 | 25,635 | ||
Hotels, Restaurants and Leisure — 2.7% | ||||
Aramark | 620 | 25,333 | ||
Carnival Corp. | 1,271 | 56,026 | ||
Darden Restaurants, Inc. | 403 | 48,755 | ||
Las Vegas Sands Corp. | 7,254 | 402,379 | ||
McDonald's Corp. | 217 | 47,300 | ||
Royal Caribbean Cruises Ltd. | 248 | 25,861 | ||
Six Flags Entertainment Corp. | 3,317 | 196,267 | ||
Wyndham Destinations, Inc. | 620 | 27,491 | ||
829,412 | ||||
Household Durables — 1.8% | ||||
Garmin Ltd. | 3,782 | 308,498 | ||
Mohawk Industries, Inc.(1) | 682 | 81,083 | ||
PulteGroup, Inc. | 3,937 | 133,070 |
11
Shares | Value | |||
Whirlpool Corp. | 186 | $ | 25,871 | |
548,522 | ||||
Household Products — 4.7% | ||||
Clorox Co. (The) | 1,178 | 186,313 | ||
Colgate-Palmolive Co. | 682 | 50,570 | ||
Kimberly-Clark Corp. | 4,340 | 612,417 | ||
Procter & Gamble Co. (The) | 4,898 | 588,887 | ||
1,438,187 | ||||
Independent Power and Renewable Electricity Producers — 0.1% | ||||
NRG Energy, Inc. | 744 | 27,082 | ||
Industrial Conglomerates — 0.3% | ||||
3M Co. | 465 | 75,200 | ||
Honeywell International, Inc. | 155 | 25,516 | ||
100,716 | ||||
Insurance — 1.8% | ||||
Aflac, Inc. | 527 | 26,445 | ||
Allstate Corp. (The) | 248 | 25,393 | ||
Everest Re Group Ltd. | 93 | 21,937 | ||
Fidelity National Financial, Inc. | 1,426 | 62,658 | ||
Hartford Financial Services Group, Inc. (The) | 434 | 25,293 | ||
MetLife, Inc. | 6,076 | 269,167 | ||
Principal Financial Group, Inc. | 527 | 28,047 | ||
Travelers Cos., Inc. (The) | 186 | 27,335 | ||
Unum Group | 2,976 | 75,620 | ||
561,895 | ||||
Interactive Media and Services — 0.8% | ||||
Alphabet, Inc., Class C(1) | 179 | 212,670 | ||
Facebook, Inc., Class A(1) | 186 | 34,535 | ||
247,205 | ||||
IT Services — 5.7% | ||||
Accenture plc, Class A | 124 | 24,573 | ||
Akamai Technologies, Inc.(1) | 310 | 27,630 | ||
Amdocs Ltd. | 496 | 32,111 | ||
CACI International, Inc., Class A(1) | 124 | 27,564 | ||
Cognizant Technology Solutions Corp., Class A | 3,069 | 188,406 | ||
International Business Machines Corp. | 6,448 | 873,897 | ||
Leidos Holdings, Inc. | 310 | 27,082 | ||
MAXIMUS, Inc. | 341 | 26,237 | ||
Western Union Co. (The) | 22,444 | 496,461 | ||
1,723,961 | ||||
Machinery — 0.9% | ||||
AGCO Corp. | 1,178 | 81,423 | ||
Allison Transmission Holdings, Inc. | 620 | 27,547 | ||
Caterpillar, Inc. | 217 | 25,823 | ||
Cummins, Inc. | 217 | 32,392 | ||
ITT, Inc. | 465 | 26,468 | ||
Oshkosh Corp. | 403 | 28,319 |
12
Shares | Value | |||
Parker-Hannifin Corp. | 155 | $ | 25,694 | |
Snap-on, Inc. | 186 | 27,654 | ||
275,320 | ||||
Media — 2.9% | ||||
Comcast Corp., Class A | 1,426 | 63,115 | ||
DISH Network Corp., Class A(1) | 2,263 | 75,946 | ||
Interpublic Group of Cos., Inc. (The) | 13,516 | 268,698 | ||
News Corp., Class A | 2,294 | 31,543 | ||
Omnicom Group, Inc. | 5,425 | 412,625 | ||
Tribune Media Co., Class A | 558 | 25,992 | ||
877,919 | ||||
Metals and Mining — 0.1% | ||||
Steel Dynamics, Inc. | 1,674 | 45,198 | ||
Mortgage Real Estate Investment Trusts (REITs) — 0.1% | ||||
Starwood Property Trust, Inc. | 1,116 | 26,148 | ||
Multi-Utilities — 2.3% | ||||
Ameren Corp. | 992 | 76,533 | ||
Consolidated Edison, Inc. | 4,433 | 394,094 | ||
DTE Energy Co. | 651 | 84,408 | ||
Public Service Enterprise Group, Inc. | 434 | 26,244 | ||
Sempra Energy | 341 | 48,296 | ||
WEC Energy Group, Inc. | 713 | 68,284 | ||
697,859 | ||||
Multiline Retail — 2.8% | ||||
Kohl's Corp. | 1,736 | 82,043 | ||
Nordstrom, Inc. | 1,736 | 50,292 | ||
Target Corp. | 6,634 | 710,104 | ||
842,439 | ||||
Oil, Gas and Consumable Fuels — 7.6% | ||||
Chevron Corp. | 5,208 | 613,086 | ||
ConocoPhillips | 496 | 25,881 | ||
Exxon Mobil Corp. | 372 | 25,475 | ||
HollyFrontier Corp. | 1,922 | 85,260 | ||
Occidental Petroleum Corp. | 9,238 | 401,668 | ||
Phillips 66 | 5,332 | 525,895 | ||
Plains GP Holdings LP, Class A(1) | 9,145 | 200,458 | ||
Valero Energy Corp. | 5,642 | 424,730 | ||
2,302,453 | ||||
Pharmaceuticals — 4.2% | ||||
Allergan plc | 992 | 158,442 | ||
Bristol-Myers Squibb Co. | 7,657 | 368,072 | ||
Johnson & Johnson | 1,457 | 187,021 | ||
Merck & Co., Inc. | 868 | 75,056 | ||
Pfizer, Inc. | 13,826 | 491,514 | ||
1,280,105 | ||||
Professional Services — 0.3% | ||||
ManpowerGroup, Inc. | 961 | 78,552 |
13
Shares | Value | |||
Robert Half International, Inc. | 496 | $ | 26,521 | |
105,073 | ||||
Real Estate Management and Development — 0.1% | ||||
Jones Lang LaSalle, Inc. | 217 | 29,089 | ||
Road and Rail — 0.3% | ||||
CSX Corp. | 403 | 27,009 | ||
Kansas City Southern | 217 | 27,298 | ||
Norfolk Southern Corp. | 155 | 26,978 | ||
Union Pacific Corp. | 155 | 25,104 | ||
106,389 | ||||
Semiconductors and Semiconductor Equipment — 2.0% | ||||
Applied Materials, Inc. | 589 | 28,284 | ||
Cypress Semiconductor Corp. | 1,147 | 26,393 | ||
Intel Corp. | 4,588 | 217,517 | ||
Lam Research Corp. | 124 | 26,103 | ||
Mellanox Technologies Ltd.(1) | 248 | 26,548 | ||
Micron Technology, Inc.(1) | 3,627 | 164,194 | ||
MKS Instruments, Inc. | 341 | 26,697 | ||
Qorvo, Inc.(1) | 372 | 26,572 | ||
QUALCOMM, Inc. | 372 | 28,931 | ||
Skyworks Solutions, Inc. | 341 | 25,667 | ||
596,906 | ||||
Software — 0.8% | ||||
Check Point Software Technologies Ltd.(1) | 248 | 26,710 | ||
LogMeIn, Inc. | 372 | 24,864 | ||
Microsoft Corp. | 248 | 34,189 | ||
Nuance Communications, Inc.(1) | 1,550 | 26,055 | ||
Oracle Corp. (New York) | 496 | 25,822 | ||
Symantec Corp. | 4,495 | 104,509 | ||
242,149 | ||||
Specialty Retail — 0.5% | ||||
Best Buy Co., Inc. | 372 | 23,678 | ||
Foot Locker, Inc. | 1,302 | 47,119 | ||
Gap, Inc. (The) | 2,759 | 43,565 | ||
Williams-Sonoma, Inc. | 403 | 26,517 | ||
140,879 | ||||
Technology Hardware, Storage and Peripherals — 3.2% | ||||
Apple, Inc. | 1,147 | 239,425 | ||
HP, Inc. | 8,804 | 161,025 | ||
NetApp, Inc. | 2,263 | 108,760 | ||
Seagate Technology plc | 8,990 | 451,388 | ||
960,598 | ||||
Textiles, Apparel and Luxury Goods — 0.7% | ||||
PVH Corp. | 744 | 56,395 | ||
Ralph Lauren Corp. | 651 | 57,510 |
14
Shares | Value | |||
Skechers U.S.A., Inc., Class A(1) | 1,767 | $ | 55,943 | |
Tapestry, Inc. | 2,511 | 51,852 | ||
221,700 | ||||
Thrifts and Mortgage Finance — 0.3% | ||||
Essent Group Ltd.(1) | 558 | 27,063 | ||
MGIC Investment Corp. | 2,108 | 26,666 | ||
Radian Group, Inc. | 1,147 | 25,865 | ||
79,594 | ||||
Tobacco — 1.9% | ||||
Altria Group, Inc. | 558 | 24,407 | ||
Philip Morris International, Inc. | 7,843 | 565,402 | ||
589,809 | ||||
Trading Companies and Distributors — 1.2% | ||||
HD Supply Holdings, Inc.(1) | 682 | 26,536 | ||
MSC Industrial Direct Co., Inc., Class A | 372 | 25,155 | ||
W.W. Grainger, Inc. | 103 | 28,186 | ||
Watsco, Inc. | 1,829 | 299,133 | ||
379,010 | ||||
TOTAL COMMON STOCKS (Cost $29,192,115) | 30,312,030 | |||
TEMPORARY CASH INVESTMENTS — 0.2% | ||||
State Street Institutional U.S. Government Money Market Fund, Premier Class (Cost $72,183) | 72,183 | 72,183 | ||
TOTAL INVESTMENT SECURITIES — 100.0% (Cost $29,264,298) | 30,384,213 | |||
OTHER ASSETS AND LIABILITIES† | 6,684 | |||
TOTAL NET ASSETS — 100.0% | $ | 30,390,897 |
NOTES TO SCHEDULE OF INVESTMENTS |
† | Category is less than 0.05% of total net assets. |
(1) | Non-income producing. |
See Notes to Financial Statements.
15
Statement of Assets and Liabilities |
AUGUST 31, 2019 | |||
Assets | |||
Investment securities, at value (cost of $29,264,298) | $ | 30,384,213 | |
Receivable for investments sold | 7,980,133 | ||
Dividends and interest receivable | 93,542 | ||
38,457,888 | |||
Liabilities | |||
Payable for investments purchased | 8,059,029 | ||
Accrued management fees | 7,962 | ||
8,066,991 | |||
Net Assets | $ | 30,390,897 | |
Shares outstanding (unlimited number of shares authorized) | 775,001 | ||
Net Asset Value Per Share | $ | 39.21 | |
Net Assets Consist of: | |||
Capital paid in | $ | 30,478,807 | |
Distributable earnings | (87,910 | ) | |
$ | 30,390,897 |
See Notes to Financial Statements.
16
Statement of Operations |
YEAR ENDED AUGUST 31, 2019 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends | $ | 557,738 | |
Interest | 846 | ||
558,584 | |||
Expenses: | |||
Management fees | 50,240 | ||
Net investment income (loss) | 508,344 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on investment transactions (Note 4) | (887,679 | ) | |
Change in net unrealized appreciation (depreciation) on investments | 842,893 | ||
Net realized and unrealized gain (loss) | (44,786 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 463,558 |
See Notes to Financial Statements.
17
Statement of Changes in Net Assets |
YEAR ENDED AUGUST 31, 2019 AND PERIOD ENDED AUGUST 31, 2018 | ||||||
Increase (Decrease) in Net Assets | August 31, 2019 | August 31, 2018(1) | ||||
Operations | ||||||
Net investment income (loss) | $ | 508,344 | $ | 94,339 | ||
Net realized gain (loss) | (887,679 | ) | (126,279 | ) | ||
Change in net unrealized appreciation (depreciation) | 842,893 | 277,022 | ||||
Net increase (decrease) in net assets resulting from operations | 463,558 | 245,082 | ||||
Distributions to Shareholders | ||||||
From earnings | (379,921 | ) | (64,925 | ) | ||
Capital Share Transactions | ||||||
Proceeds from shares sold | 25,969,935 | 7,110,593 | ||||
Payments for shares redeemed | (2,953,425 | ) | — | |||
Net increase (decrease) in net assets from capital share transactions | 23,016,510 | 7,110,593 | ||||
Net increase (decrease) in net assets | 23,100,147 | 7,290,750 | ||||
Net Assets | ||||||
Beginning of period | 7,290,750 | — | ||||
End of period | $ | 30,390,897 | $ | 7,290,750 | ||
Transactions in Shares of the Fund | ||||||
Sold | 675,000 | 175,001 | ||||
Redeemed | (75,000 | ) | — | |||
Net increase (decrease) in shares of the fund | 600,000 | 175,001 |
(1) | January 11, 2018 (fund inception) through August 31, 2018. |
See Notes to Financial Statements.
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Notes to Financial Statements |
AUGUST 31, 2019
1. Organization
American Century ETF Trust (the trust) was registered as a Delaware statutory trust in 2017 and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. American Century STOXX® U.S. Quality Value ETF (the fund) is one fund in a series issued by the trust. The fund's investment objective is to seek to provide investment results that closely correspond, before fees and expenses, to the performance of the iSTOXX® American Century USA Quality Value Index. Shares of the fund are listed for trading on the NYSE Arca, Inc. The fund incepted on January 11, 2018.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Trustees has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price.
Open-end management investment companies are valued at the reported net asset value per share.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Trustees or its delegate, in accordance with policies and procedures adopted by the Board of Trustees. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region.
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.
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Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and trustees of the trust are also officers and/or directors of American Century Companies, Inc. (ACC). The trust's investment advisor, American Century Investment Management, Inc. (ACIM), and the trust’s administrator, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The trust has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee). The agreement provides that all expenses of managing and operating the fund, except brokerage and other transaction fees and expenses relating to the acquisition and disposition of portfolio securities, acquired fund fees and expenses, interest, taxes, litigation expenses, extraordinary expenses and expenses incurred in connection with the provision of shareholder and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act, if any, will be paid by ACIM. The fee is computed and accrued daily based on the daily net assets of the fund and paid monthly in arrears. The annual management fee is 0.29%.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments and in-kind transactions, for the period ended August 31, 2019 were $33,923,070 and $33,599,239, respectively.
Securities received or delivered in-kind through subscriptions and redemptions for the period ended August 31, 2019 were $25,877,620 and $2,938,492, respectively. The fund incurred net realized gains of $367,836 from in-kind transactions. Net realized gain (loss) on in-kind transactions are not considered taxable for federal income tax purposes.
5. Capital Share Transactions
The fund’s shares may only be purchased and sold on a national securities exchange through a broker-dealer. The price of the fund’s shares is based on market price, and because ETF shares trade at market prices rather than net asset value (NAV), shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The fund issues and redeems shares that have been aggregated into blocks of 25,000 shares or multiples thereof (Creation Units) to authorized participants who have entered into agreements with the fund's distributor. The fund will generally issue and redeem Creation Units in return for a basket of securities (and an amount of cash) that the fund specifies each day. Investors transacting in Creation Units for cash may also
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pay an additional variable charge to compensate the fund for certain transaction costs and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in proceeds from shares sold in the Statement of Changes in Net Assets.
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
As of period end, the fund’s investment securities were classified as Level 1. The Schedule of Investments provides additional information on the fund's portfolio holdings.
7. Risk Factors
The fund seeks to track an index. If the fund's index has high portfolio turnover, the fund may also have high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
The fund is not actively managed and does not attempt to take defensive positions under any market conditions, including declining markets. Therefore, the fund generally will not buy or sell securities unless they are added or removed from the index, even if the security is underperforming.
8. Federal Tax Information
The tax character of distributions paid during the year ended August 31, 2019 and the period January 11, 2018 (fund inception) through August 31, 2018 were as follows:
2019 | 2018 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 379,921 | $ | 64,925 | ||
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.
The reclassifications, which are primarily due to in-kind transactions, were made to capital paid in $351,704 and distributable earnings $(351,704).
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As of period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 29,445,489 | |
Gross tax appreciation of investments | $ | 1,499,786 | |
Gross tax depreciation of investments | (561,062 | ) | |
Net tax appreciation (depreciation) of investments | 938,724 | ||
Undistributed ordinary income | $ | 158,760 | |
Accumulated short-term capital losses | $ | (1,074,793 | ) |
Accumulated long-term capital losses | $ | (110,601 | ) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Accumulated capital losses represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers may be carried forward for an unlimited period. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended August 31 (except as noted) | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | ||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Distributions From Net Investment Income | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate(3) | Net Assets, End of Period (in thousands) | |||
2019 | $41.66 | 1.15 | (2.68) | (1.53) | (0.92) | $39.21 | (3.60)% | 0.29% | 2.94% | 190% | $30,391 | ||
2018(4) | $40.37 | 0.55 | 1.11 | 1.66 | (0.37) | $41.66 | 4.16% | 0.29%(5) | 2.17%(5) | 77% | $7,291 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day. Total returns for periods less than one year are not annualized. |
(3) | Excludes securities received or delivered in-kind. |
(4) | January 11, 2018 (fund inception) through August 31, 2018. |
(5) | Annualized. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Trustees of American Century ETF Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of American Century STOXX® U.S. Quality Value ETF, one of the funds constituting the American Century ETF Trust (the “Fund”), as of August 31, 2019, the related statement of operations for the year then ended, the statements of changes in net assets and the financial highlights for the year ended August 31, 2019 and the period from January 11, 2018 (fund inception) through August 31, 2018, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of August 31, 2019, and the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year ended August 31, 2019 and the period from January 11, 2018 (fund inception) through August 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2019, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
October 18, 2019
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of Trustees
The individuals listed below serve as trustees of the funds. Each trustee will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for trustees who are not “interested persons,” as that term is defined in the Investment Company Act (independent trustees). Trustees who are not also officers of the trust shall retire by December 31st of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other trustees are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The following trustees also serve in this capacity for a number of other registered investment companies in the American Century Investments family of funds: Jonathan S. Thomas, 15; Ronald J. Gilson, 8; and Stephen E. Yates, 7.
The following table presents additional information about the trustees. The mailing address for each trustee other than Jonathan S. Thomas is 330 Madison Avenue, New York, New York 10017. The mailing address for Jonathan S. Thomas 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 Trustee | Other Directorships Held During Past 5 Years |
Independent Trustees | |||||
Reginald M. Browne (1968) | Trustee and Chairman of the Board | Since 2017 (Chairman since 2019) | Principal, GTS Securities (automated capital markets trading firm)(2019 to present); Senior Managing Director, Co Global Head-ETF Group, Cantor Fitzgerald (financial services firm)(2013 to 2019) | 5 | None |
Ronald J. Gilson (1946) | Trustee | Since 2017 | Charles J. Meyers Professor of Law and Business, Emeritus, Stanford Law School (1979 to 2016); Marc and Eva Stern Professor of Law and Business, Columbia University School of Law (1992 to present) | 49 | None |
Barry A. Mendelson (1958) | Trustee | Since 2017 | Retired; Consultant regarding ETF and mutual fund matters (2015 to 2016); Principal and Senior Counsel, The Vanguard Group (investment management)(1998 to 2014) | 5 | None |
Stephen E. Yates (1948) | Trustee | Since 2017 | Retired | 72 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Trustee | Other Directorships Held During Past 5 Years |
Interested Trustees | |||||
Jonathan S. Thomas (1963) | Trustee | Since 2017 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 116 | BioMed Valley Discoveries, Inc. |
The Statement of Additional Information has additional information about the fund's trustees and is available without charge, upon request, by calling 1-800-345-6488.
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Officers
The following table presents certain information about the executive officers of the funds. Each officer, except Edward Rosenberg, serves as an officer for each of the 16 investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present); Chief Operating Officer, ACC (2012 to 2015). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries |
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Investment Operations and Investment Accounting, ACS (2000 to present) |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2017 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS |
Charles A. Etherington (1957) | General Counsel and Vice President since 2017 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
Cleo Chang (1977) | Vice President since 2019 | Senior Vice President, ACIM (2015 to present); Chief Investment Officer, Wilshire Funds Management (2005 to 2015) |
David H. Reinmiller (1963) | Vice President since 2017 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS |
Edward Rosenberg (1973) | Vice President since 2017 | Senior Vice President, ACIM (2017 to present); Senior Vice President, Flexshares Head of ETF Capital Markets, Northern Trust (2012 to 2017) |
C. Jean Wade (1964) | Vice President since 2017 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) |
Ward D. Stauffer (1960) | Secretary since 2019 | Attorney, ACS (2003 to present) |
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Approval of Management Agreement |
At a meeting held on June 13, 2019, the Fund’s Board of Trustees (the "Board") unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Trustees”), including a majority of the independent Trustees, each year.
Prior to its consideration of the renewal of the management agreement, the Trustees 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 Audit Committee on a continual basis and the information received was supplemental to the extensive information that the Board and its Audit Committee receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management and other services provided and to be provided to the Fund; |
• | the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis; |
• | the investment performance of the Fund, including data comparing the Fund's performance to appropriate benchmarks; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers; |
• | 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; |
• | strategic plans of the Advisor; |
• | any economies of scale associated with the Advisor’s management of the Fund and other accounts; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
The Trustees held one in-person meeting to review and discuss the information provided. The independent Trustees also held active discussions with the Advisor regarding the renewal of the management agreement. The independent Trustees had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Trustees considered all of the information provided by the Advisor, the independent data providers, and independent counsel in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Trustees did not identify any single factor as being all-important or controlling, and each Trustee may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including without limitation the following:
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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 the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
• | portfolio research and security selection |
• | 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 (except amounts paid by the Fund under Rule 12b-1 plans) |
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, 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 Trustees 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 provides oversight of the investment performance process. It regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks over different time horizons. The Trustees also review investment performance information during the management agreement renewal process. If performance concerns are identified, the Board discusses with the Advisor the reasons for such results and any efforts being undertaken to improve performance. The Fund’s performance reviewed by the Board was below its benchmark. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides or arranges for a comprehensive package of services to the Fund. The Board, directly and through its Audit Committee, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Trustees have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to the Fund and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
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Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, expenses attributable to short sales, taxes, interest, extraordinary expenses, and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the Investment Company Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was above the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Trustees also requested information from the Advisor concerning the nature of the services, fees, costs, and profitability of its advisory services to funds or other advisory clients managed similarly to the Fund. The Advisor informed the Trustees that, as of March 31, 2019, it did not provide services to any other investment companies or comparable accounts that were managed similarly to the Fund.
Payments to Intermediaries. The Trustees also requested a description of payments made to intermediaries by the Fund and the Advisor and services provided in response thereto. These payments could include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Advisor informed the Trustees that, other than compensation to the Fund’s distributor and transfer agent, the Advisor was not then making payments to intermediaries related to fund distribution or shareholder services.
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 funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients.
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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 Trustees. As a result of this process, the Board, including all of the independent Trustees, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
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Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund are available without charge, upon request, by calling 1-800-345-6488. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q or as an exhibit to its reports on Form N-PORT. The fund's Forms N-Q and Form N-PORT reports are available on the SEC’s website at sec.gov.
32
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 August 31, 2019.
For corporate taxpayers, the fund hereby designates $379,921, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended August 31, 2019 as qualified for the corporate dividends received deduction.
33
Notes |
34
Notes |
35
Notes |
36
Notes |
37
Notes |
38
Notes |
39
Notes |
40
![]() | ||
Contact Us | americancenturyetfs.com | |
American Century Sales Representatives, Financial Professionals, Broker Dealers, Insurance Companies, Banks and Trust Companies | 1-833-ACI-ETFS | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century ETF Trust | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
Distributor: Foreside Fund Services, LLC - Distributor, not affiliated with American Century Investment Services, Inc. | ||
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. | ||
©2019 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-95460 1910 |
![acietfslockupblacka11.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/acietfslockupblacka11.jpg)
Annual Report | |
August 31, 2019 | |
American Century® Quality Diversified International ETF (QINT) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | |
Performance | |
Portfolio Commentary | |
Fund Characteristics | |
Frequency Distributions of Premiums and Discounts | |
Shareholder Fee Example | |
Schedule of Investments | |
Statement of Assets and Liabilities | |
Statement of Operations | |
Statement of Changes in Net Assets | |
Notes to Financial Statements | |
Financial Highlights | |
Report of Independent Registered Public Accounting Firm | |
Management | |
Approval of Management Agreement | |
Additional Information |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
![jthomasrev0514a66.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/jthomasrev0514a66.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended August 31, 2019. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional investment and market insights, we encourage you to visit our website, americancenturyetfs.com.
Backdrop Favored Bonds
Most broad U.S. fixed-income indices ended the period with robust returns, bolstered by a sharp decline in U.S. Treasury yields. However, U.S. and other developed markets stocks delivered notably weaker results, largely due to a global sell-off among equities in late 2018. Although most stock indices rebounded strongly in 2019, their late-2018 losses weighed on results for the entire reporting period.
Fed’s Flip Fueled Investor Optimism
In the final months of 2018, mounting concerns about slowing global economic and earnings growth, tariffs and Federal Reserve (Fed) policy soured investor sentiment, driving global stocks lower. After raising rates in September, the Fed hiked again in December and delivered a surprisingly bullish rate-hike outlook, which intensified the sell-off among stocks and other riskier assets. Meanwhile, the risk-off climate sparked a flight to quality, which drove Treasury yields lower and benefited bonds.
A key policy pivot from the Fed helped improve equity investor sentiment beginning in early 2019. The central bank abruptly ended its rate-hike campaign and adopted a dovish tone amid weaker global growth and inflation. Additionally, investors’ worst-case fears about trade and corporate earnings generally eased, which also aided stocks. At the same time, government bond yields continued to fall on moderating global growth data, muted inflation and accommodative central bank policy in the U.S., Europe and Japan. By July, concerns about global economic risks prompted the Fed to cut short-term interest rates for the first time in 10 years. This backdrop supported continued gains for fixed-income and other interest rate-sensitive assets.
Looking ahead, we expect volatility to remain a formidable factor as investors react to global growth data, trade issues, central bank policy and geopolitical developments. We believe this scenario underscores the importance of using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a16.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/image48a16.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of August 31, 2019 | ||
Since Inception | Inception Date | |
Net Asset Value | -4.32% | 9/10/2018 |
Market Price | -4.31% | 9/10/2018 |
Alpha Vee American Century Diversified International Equity Index | -3.64% | — |
Market price is determined using the bid/ask midpoint at 4:00 p.m. Eastern time, when the net asset value (NAV) is typically calculated. Market performance does not represent the returns you would receive if you traded shares at other times. NAV prices are used to calculate market price performance prior to the date when the fund first traded on the New York Stock Exchange.
Growth of $10,000 Over Life of Fund |
$10,000 investment made September 10, 2018 |
![chart-e1ebeb5b4b2cb17e3c4a04.jpg](https://capedge.com/proxy/N-CSR/0001710607-19-000129/chart-e1ebeb5b4b2cb17e3c4a04.jpg)
Value on August 31, 2019 | |
Net Asset Value — $9,568 | |
Alpha Vee American Century Diversified International Equity Index — $9,636 | |
Total Annual Fund Operating Expenses |
0.39% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-6488 or visit americancenturyetfs.com. For additional information about the fund, please consult the prospectus.
3
Portfolio Commentary |
Portfolio Managers: Peruvemba Satish and Rene Casis
Fund Strategy
American Century Quality Diversified International ETF seeks to deliver investment results that closely correspond, before fees and expenses, to the performance of the Alpha Vee American Century Diversified International Equity Index (the underlying index). The fund invests in a representative sample of securities included in the underlying index that collectively has an investment profile similar to the underlying index. Under normal market conditions, the fund invests at least 80% of its assets, exclusive of collateral held from securities lending, in the component securities of the underlying index.
The underlying index is designed to select securities with attractive growth, valuation and quality fundamentals. The universe of the index is comprised of large- and mid-capitalization equity securities of global issuers in developed and emerging markets, excluding the U.S.
Performance Review
For the period from American Century Quality Diversified International ETF’s inception on September 10, 2018, through the fund’s fiscal year-end on August 31, 2019, the fund returned -4.31%* on a market price basis. On a net asset value (NAV) basis, the fund returned -4.32%. For the same time period, the underlying index returned -3.64%. The fund’s NAV and market price returns reflect fees and operating expenses, while the index return does not.
Non-U.S. equities, as measured by the MSCI World ex-U.S. Index (world index), generally declined during the reporting period. The world index is an unmanaged index generally representative of the performance of large- and mid-cap non-U.S. equities. Underperformance versus the world index was largely due to the different compositions of the fund and the world index. The fund tracks the Alpha Vee American Century Diversified International Equity Index, distinguishing between high-quality value and growth companies, primarily in developed markets, and dynamically allocates to each category depending on the market environment.
Broadly speaking, security selection in the consumer staples, materials, health care and industrials sectors detracted from performance versus the world index, while holdings in the financials and information technology sectors contributed. Within consumer staples, an underweight position in Nestle weighed heavily on relative performance as the stock, a significant component of the world index, performed well. Among materials holdings, stock selection in the chemicals industry drove underperformance. The health care sector was another area of weakness, particularly due to selection among pharmaceutical companies. Industrials holdings hampered performance as trade disputes and global growth concerns weighed on the sector.
On the upside, selection among financials bolstered returns. An underweight position in banks proved particularly beneficial. Information technology stocks gave an additional boost to relative performance.
Dynamic allocation shifted toward growth during the reporting period. The fund’s allocation opened with a 50/50 allocation to value and growth at inception. By the end of the period, the weighting shifted to an approximately 67.8% allocation to growth and 32.2% allocation to value. Allocations are rebalanced monthly, based on a strategy informed by recent risk-adjusted performance.
* Total returns for periods less than one year are not annualized.
4
Fund Characteristics |
AUGUST 31, 2019 |
Top Ten Holdings | % of net assets |
Diageo plc | 1.8% |
Hermes International | 1.8% |
Hoya Corp. | 1.7% |
Partners Group Holding AG | 1.6% |
Goodman Group | 1.3% |
Canadian Pacific Railway Ltd. | 1.3% |
Ferrari NV | 1.2% |
Kering SA | 1.2% |
Singapore Exchange Ltd. | 1.2% |
Constellation Software, Inc. | 1.2% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 99.3% |
Temporary Cash Investments | 0.4% |
Other Assets and Liabilities | 0.3% |
Investments by Country | % of net assets |
Japan | 18.5% |
United Kingdom | 13.5% |
France | 10.1% |
Canada | 7.8% |
Switzerland | 7.6% |
Australia | 5.9% |
China | 5.1% |
Italy | 4.4% |
Netherlands | 4.1% |
Sweden | 3.2% |
Germany | 2.9% |
Denmark | 2.6% |
Spain | 2.6% |
Other Countries | 11.0% |
Cash and Equivalents* | 0.7% |
*Includes temporary cash investments and other assets and liabilities. |
5
Frequency Distributions of Premiums and Discounts |
The Frequency Distribution of Premiums and Discounts chart is provided to show the frequency at which the market price for the fund was at a premium or discount to the daily net asset value (NAV). Shareholders may pay more than NAV when they buy fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented reflect past performance. Past performance is no guarantee of future results. The following table represents the period September 12, 2018 (commencement of trading) through August 31, 2019.
Premium/Discount Range (%) | Number of Days Market Price Above or Equal to NAV | Number of Days Market Price Below NAV |
0% - 0.49% | 118 | 74 |
0.50% - 0.99% | 19 | 20 |
1.00% - 1.99% | 3 | 7 |
> 2.00% | 3 | — |
Total | 143 | 101 |
6
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including brokerage commissions paid on purchases and sales of fund shares; and (2) ongoing costs, including management 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 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 March 1, 2019 to August 31, 2019.
Actual Expenses
The table provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of fund shares. 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 3/1/19 | Ending Account Value 8/31/19 | Expenses Paid During Period(1) 3/1/19 - 8/31/19 | Annualized Expense Ratio(1) | |
Actual | $1,000 | $999.50 | $1.97 | 0.39% |
Hypothetical | $1,000 | $1,023.24 | $1.99 | 0.39% |
(1) | Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 184, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
7
Schedule of Investments |
AUGUST 31, 2019
Shares | Value | |||
COMMON STOCKS — 99.3% | ||||
Australia — 5.9% | ||||
Alumina Ltd. | 16,980 | $ | 24,825 | |
Aristocrat Leisure Ltd. | 8,180 | 163,961 | ||
ASX Ltd. | 520 | 30,239 | ||
BHP Group Ltd. | 1,000 | 24,450 | ||
CIMIC Group Ltd. | 490 | 10,234 | ||
Coca-Cola Amatil Ltd. | 2,210 | 16,185 | ||
Cochlear Ltd. | 200 | 29,376 | ||
Crown Resorts Ltd. | 1,730 | 13,999 | ||
CSL Ltd. | 190 | 30,834 | ||
Fortescue Metals Group Ltd. | 14,700 | 79,233 | ||
Goodman Group | 25,600 | 250,441 | ||
Insurance Australia Group Ltd. | 4,950 | 26,881 | ||
Magellan Financial Group Ltd. | 1,740 | 59,484 | ||
Medibank Pvt Ltd. | 17,620 | 43,212 | ||
Mirvac Group | 48,190 | 103,573 | ||
Newcrest Mining Ltd. | 1,390 | 34,651 | ||
Qantas Airways Ltd. | 3,920 | 16,137 | ||
Santos Ltd. | 6,000 | 29,146 | ||
Sonic Healthcare Ltd. | 2,740 | 54,367 | ||
South32 Ltd. | 7,070 | 12,575 | ||
Telstra Corp. Ltd. | 5,920 | 14,838 | ||
Wesfarmers Ltd. | 580 | 15,279 | ||
Woodside Petroleum Ltd. | 1,070 | 23,163 | ||
1,107,083 | ||||
Austria — 0.6% | ||||
OMV AG | 510 | 26,066 | ||
Raiffeisen Bank International AG | 1,690 | 37,008 | ||
Verbund AG | 530 | 31,605 | ||
voestalpine AG | 560 | 12,920 | ||
107,599 | ||||
Belgium — 0.9% | ||||
Ageas | 330 | 17,698 | ||
Colruyt SA | 390 | 20,001 | ||
Proximus SADP | 500 | 14,806 | ||
Telenet Group Holding NV | 1,880 | 93,870 | ||
UCB SA | 200 | 14,964 | ||
161,339 | ||||
Canada — 7.8% | ||||
Air Canada(1) | 2,000 | 67,354 | ||
Canadian Pacific Railway Ltd. | 1,000 | 241,248 | ||
Canadian Tire Corp. Ltd., Class A | 222 | 22,467 |
8
Shares | Value | |||
CGI, Inc.(1) | 777 | $ | 61,058 | |
Constellation Software, Inc. | 222 | 216,639 | ||
Dollarama, Inc. | 1,000 | 38,343 | ||
Empire Co. Ltd., Class A | 2,000 | 55,283 | ||
Great-West Lifeco, Inc. | 1,000 | 21,358 | ||
H&R Real Estate Investment Trust | 6,000 | 102,182 | ||
Husky Energy, Inc. | 2,000 | 13,381 | ||
Imperial Oil Ltd. | 1,000 | 24,586 | ||
Kirkland Lake Gold Ltd. | 2,000 | 97,441 | ||
Manulife Financial Corp. | 3,000 | 49,872 | ||
Parkland Fuel Corp. | 1,000 | 31,246 | ||
Quebecor, Inc., Class B | 1,000 | 22,569 | ||
Royal Bank of Canada | 360 | 26,978 | ||
Saputo, Inc. | 1,000 | 30,117 | ||
SmartCentres Real Estate Investment Trust | 1,000 | 23,826 | ||
Sun Life Financial, Inc. | 1,000 | 41,067 | ||
Suncor Energy, Inc. | 1,000 | 29,305 | ||
Teck Resources Ltd., Class B | 1,000 | 17,061 | ||
Thomson Reuters Corp. | 444 | 30,570 | ||
Toronto-Dominion Bank (The) | 2,000 | 108,670 | ||
Wheaton Precious Metals Corp. | 1,000 | 29,470 | ||
WSP Global, Inc. | 1,000 | 54,245 | ||
1,456,336 | ||||
China — 5.1% | ||||
Anhui Conch Cement Co. Ltd., H Shares | 15,000 | 84,521 | ||
ANTA Sports Products Ltd. | 10,000 | 82,957 | ||
Autohome, Inc. ADR(1) | 1,000 | 87,160 | ||
China Communications Services Corp. Ltd., H Shares | 40,000 | 22,411 | ||
China Resources Gas Group Ltd. | 20,000 | 98,911 | ||
CSPC Pharmaceutical Group Ltd. | 20,000 | 40,024 | ||
Guangdong Investment Ltd. | 20,000 | 42,168 | ||
Kunlun Energy Co. Ltd. | 40,000 | 34,868 | ||
NetEase, Inc. ADR | 350 | 89,250 | ||
New Oriental Education & Technology Group, Inc. ADR(1) | 350 | 39,690 | ||
Shenzhou International Group Holdings Ltd. | 7,000 | 95,146 | ||
TAL Education Group ADR(1) | 3,000 | 106,890 | ||
Tencent Holdings Ltd. | 3,000 | 124,359 | ||
948,355 | ||||
Denmark — 2.6% | ||||
Carlsberg A/S, B Shares | 380 | 56,209 | ||
Chr Hansen Holding A/S | 260 | 21,889 | ||
Coloplast A/S, B Shares | 620 | 73,990 | ||
Danske Bank A/S | 4,440 | 58,495 | ||
DSV A/S | 310 | 30,787 | ||
Genmab A/S(1) | 150 | 30,673 | ||
GN Store Nord A/S | 580 | 24,329 | ||
H Lundbeck A/S | 370 | 13,498 |
9
Shares | Value | |||
ISS A/S | 520 | $ | 13,222 | |
Novo Nordisk A/S, B Shares | 3,150 | 163,906 | ||
486,998 | ||||
Finland — 1.6% | ||||
Elisa Oyj | 580 | 29,228 | ||
Kone Oyj, B Shares | 540 | 31,280 | ||
Metso Oyj | 1,420 | 53,293 | ||
Neste Oyj | 4,930 | 155,491 | ||
Stora Enso Oyj, R Shares | 1,510 | 16,912 | ||
UPM-Kymmene Oyj | 610 | 16,472 | ||
302,676 | ||||
France — 10.1% | ||||
Amundi SA | 400 | 25,615 | ||
ArcelorMittal | 990 | 14,273 | ||
Arkema SA | 180 | 15,810 | ||
Atos SE | 570 | 43,237 | ||
AXA SA | 5,170 | 118,823 | ||
Bouygues SA | 430 | 16,361 | ||
Capgemini SE | 140 | 16,828 | ||
Cie de Saint-Gobain | 1,270 | 45,902 | ||
CNP Assurances | 720 | 13,099 | ||
Engie SA | 1,150 | 17,509 | ||
Euronext NV | 370 | 29,072 | ||
Faurecia SE | 440 | 19,261 | ||
Hermes International | 480 | 328,261 | ||
Ingenico Group SA | 330 | 32,780 | ||
Ipsen SA | 830 | 87,382 | ||
Kering SA | 480 | 232,796 | ||
L'Oreal SA | 110 | 30,115 | ||
Legrand SA | 400 | 28,289 | ||
LVMH Moet Hennessy Louis Vuitton SE | 110 | 43,900 | ||
Orange SA | 940 | 14,285 | ||
Pernod Ricard SA | 150 | 28,693 | ||
Peugeot SA | 5,450 | 122,017 | ||
Publicis Groupe SA | 1,680 | 80,701 | ||
Remy Cointreau SA | 200 | 30,262 | ||
Safran SA | 210 | 30,561 | ||
Sanofi | 2,150 | 184,964 | ||
Sartorius Stedim Biotech | 200 | 31,011 | ||
Schneider Electric SE | 550 | 46,129 | ||
SCOR SE | 660 | 26,377 | ||
Sodexo SA | 130 | 14,760 | ||
Suez | 1,090 | 16,955 | ||
Teleperformance | 150 | 32,806 | ||
Thales SA | 240 | 27,791 | ||
TOTAL SA | 300 | 14,996 | ||
Valeo SA | 550 | 15,045 |
10
Shares | Value | |||
Vinci SA | 150 | $ | 16,436 | |
1,893,102 | ||||
Germany — 2.9% | ||||
adidas AG | 210 | 62,372 | ||
Beiersdorf AG | 230 | 29,001 | ||
Carl Zeiss Meditec AG | 280 | 32,346 | ||
Covestro AG | 1,040 | 47,175 | ||
Deutsche Boerse AG | 190 | 27,986 | ||
Deutsche Lufthansa AG | 3,020 | 46,494 | ||
Deutsche Post AG | 530 | 17,452 | ||
Evonik Industries AG | 4,440 | 113,340 | ||
GEA Group AG | 530 | 14,317 | ||
Hannover Rueck SE | 180 | 28,703 | ||
MTU Aero Engines AG | 130 | 35,547 | ||
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen | 180 | 43,193 | ||
Schaeffler AG Preference Shares | 2,110 | 14,337 | ||
Symrise AG | 280 | 26,185 | ||
Telefonica Deutschland Holding AG | 5,210 | 13,288 | ||
551,736 | ||||
Hong Kong — 1.1% | ||||
Link REIT | 10,000 | 112,311 | ||
Swire Pacific Ltd., Class A | 10,000 | 97,954 | ||
210,265 | ||||
Ireland — 0.5% | ||||
Bank of Ireland Group plc | 2,720 | 10,370 | ||
CRH plc | 840 | 27,999 | ||
Glanbia plc | 2,470 | 27,133 | ||
Kingspan Group plc | 500 | 22,873 | ||
88,375 | ||||
Israel — 0.4% | ||||
Bank Hapoalim BM(1) | 1,990 | 14,598 | ||
Bank Leumi Le-Israel BM | 2,190 | 14,936 | ||
Nice Ltd.(1) | 230 | 35,209 | ||
Teva Pharmaceutical Industries Ltd.(1) | 1,530 | 10,920 | ||
75,663 | ||||
Italy — 4.4% | ||||
Banca Mediolanum SpA | 3,940 | 28,550 | ||
Davide Campari-Milano SpA | 2,770 | 26,005 | ||
Enel SpA | 2,360 | 17,137 | ||
Eni SpA | 9,470 | 142,666 | ||
EXOR NV | 240 | 16,254 | ||
Ferrari NV | 1,480 | 233,395 | ||
Fiat Chrysler Automobiles NV | 1,200 | 15,644 | ||
Leonardo SpA | 1,310 | 16,057 | ||
Mediobanca Banca di Credito Finanziario SpA | 2,730 | 27,088 | ||
Moncler SpA | 3,070 | 115,253 | ||
Poste Italiane SpA | 2,700 | 29,056 |
11
Shares | Value | |||
Recordati SpA | 2,580 | $ | 113,251 | |
Snam SpA | 5,190 | 26,286 | ||
Terna Rete Elettrica Nazionale SpA | 4,230 | 26,599 | ||
833,241 | ||||
Japan — 18.5% | ||||
Advantest Corp. | 2,000 | 82,246 | ||
Alfresa Holdings Corp. | 1,000 | 22,658 | ||
Asahi Intecc Co. Ltd. | 1,000 | 22,366 | ||
Asahi Kasei Corp. | 2,000 | 18,111 | ||
Astellas Pharma, Inc. | 11,000 | 152,546 | ||
Bandai Namco Holdings, Inc. | 1,000 | 58,882 | ||
Brother Industries Ltd. | 2,000 | 34,670 | ||
Canon, Inc. | 1,000 | 26,012 | ||
Central Japan Railway Co. | 100 | 19,798 | ||
Chugai Pharmaceutical Co. Ltd. | 2,000 | 143,200 | ||
FamilyMart UNY Holdings Co. Ltd. | 1,000 | 23,082 | ||
Fast Retailing Co. Ltd. | 100 | 58,637 | ||
Fuji Electric Co. Ltd. | 1,000 | 28,546 | ||
FUJIFILM Holdings Corp. | 1,000 | 42,856 | ||
Hamamatsu Photonics KK | 1,000 | 34,575 | ||
Hitachi Construction Machinery Co. Ltd. | 1,000 | 21,386 | ||
Hitachi Ltd. | 1,000 | 34,189 | ||
Hoya Corp. | 4,000 | 325,932 | ||
ITOCHU Corp. | 1,000 | 19,959 | ||
Itochu Techno-Solutions Corp. | 1,000 | 27,585 | ||
Japan Tobacco, Inc. | 8,000 | 169,617 | ||
Kajima Corp. | 1,000 | 12,181 | ||
KDDI Corp. | 1,000 | 26,709 | ||
Keyence Corp. | 200 | 118,517 | ||
Kirin Holdings Co. Ltd. | 1,000 | 19,770 | ||
Konica Minolta, Inc. | 6,000 | 42,734 | ||
Kose Corp. | 100 | 17,193 | ||
Lion Corp. | 1,000 | 19,455 | ||
Marubeni Corp. | 11,000 | 70,273 | ||
Medipal Holdings Corp. | 1,000 | 21,263 | ||
Mitsubishi Corp. | 1,000 | 24,353 | ||
Mitsubishi Heavy Industries Ltd. | 1,000 | 37,609 | ||
Mitsubishi Tanabe Pharma Corp. | 1,000 | 11,060 | ||
Mitsubishi UFJ Financial Group, Inc. | 3,000 | 14,426 | ||
Mitsubishi UFJ Lease & Finance Co. Ltd. | 3,000 | 16,223 | ||
Mitsui Chemicals, Inc. | 1,000 | 21,395 | ||
MonotaRO Co. Ltd. | 3,000 | 73,795 | ||
NEC Corp. | 1,000 | 42,866 | ||
Nexon Co. Ltd.(1) | 2,000 | 26,925 | ||
Nikon Corp. | 1,000 | 12,389 | ||
Nippon Paint Holdings Co. Ltd. | 1,000 | 47,388 | ||
Nissan Chemical Corp. | 1,000 | 42,348 |
12
Shares | Value | |||
NTT Data Corp. | 2,000 | $ | 25,833 | |
NTT DOCOMO, Inc. | 1,000 | 25,267 | ||
Obayashi Corp. | 2,000 | 18,446 | ||
Oji Holdings Corp. | 6,000 | 27,981 | ||
ORIX Corp. | 1,000 | 14,782 | ||
Panasonic Corp. | 2,000 | 15,452 | ||
PeptiDream, Inc.(1) | 1,000 | 52,475 | ||
Persol Holdings Co. Ltd. | 1,000 | 20,321 | ||
Pigeon Corp. | 1,000 | 36,365 | ||
Pola Orbis Holdings, Inc. | 2,000 | 47,595 | ||
Rakuten, Inc. | 1,000 | 9,430 | ||
Recruit Holdings Co. Ltd. | 7,000 | 212,285 | ||
Resona Holdings, Inc. | 3,000 | 11,786 | ||
Seiko Epson Corp. | 1,000 | 13,312 | ||
Sekisui Chemical Co. Ltd. | 1,000 | 14,424 | ||
Sekisui House Ltd. | 3,000 | 53,290 | ||
Shionogi & Co. Ltd. | 4,000 | 214,612 | ||
Shiseido Co. Ltd. | 300 | 24,561 | ||
Sony Financial Holdings, Inc. | 2,000 | 46,239 | ||
Subaru Corp. | 1,000 | 26,812 | ||
Sumitomo Chemical Co. Ltd. | 10,000 | 43,808 | ||
Sumitomo Corp. | 1,000 | 15,003 | ||
Toho Co. Ltd. | 1,000 | 42,442 | ||
Tokio Marine Holdings, Inc. | 1,000 | 51,552 | ||
Tokyo Electron Ltd. | 1,000 | 179,048 | ||
Unicharm Corp. | 1,000 | 30,760 | ||
Yahoo Japan Corp. | 24,000 | 60,144 | ||
ZOZO, Inc. | 2,000 | 39,983 | ||
3,459,733 | ||||
Netherlands — 4.1% | ||||
ASML Holding NV | 820 | 182,637 | ||
Heineken Holding NV | 170 | 16,840 | ||
Heineken NV | 250 | 26,639 | ||
ING Groep NV | 1,530 | 14,654 | ||
Koninklijke Ahold Delhaize NV | 2,720 | 63,757 | ||
Koninklijke DSM NV | 240 | 29,892 | ||
Koninklijke Philips NV | 3,120 | 147,349 | ||
Randstad NV | 310 | 14,492 | ||
Unilever NV | 2,150 | 133,632 | ||
Wolters Kluwer NV | 1,890 | 136,371 | ||
766,263 | ||||
New Zealand — 0.3% | ||||
a2 Milk Co. Ltd.(1) | 5,760 | 52,585 | ||
Norway — 1.9% | ||||
Aker BP ASA | 3,260 | 86,563 | ||
DNB ASA | 910 | 14,680 | ||
Equinor ASA | 2,260 | 38,667 |
13
Shares | Value | |||
Orkla ASA | 5,100 | $ | 46,776 | |
Salmar ASA | 950 | 45,130 | ||
Schibsted ASA, Class A | 990 | 30,180 | ||
Telenor ASA | 4,380 | 89,993 | ||
351,989 | ||||
Portugal — 0.2% | ||||
EDP - Energias de Portugal SA | 4,280 | 16,205 | ||
Galp Energia SGPS SA | 1,840 | 26,463 | ||
42,668 | ||||
Singapore — 1.5% | ||||
DBS Group Holdings Ltd. | 2,000 | 35,366 | ||
Jardine Cycle & Carriage Ltd. | 1,000 | 22,203 | ||
Singapore Exchange Ltd. | 37,000 | 218,714 | ||
Singapore Technologies Engineering Ltd. | 5,000 | 14,201 | ||
290,484 | ||||
South Korea — 1.0% | ||||
Celltrion, Inc.(1) | 50 | 6,481 | ||
LG Household & Health Care Ltd. | 90 | 87,603 | ||
NCSoft Corp. | 200 | 88,669 | ||
182,753 | ||||
Spain — 2.6% | ||||
ACS Actividades de Construccion y Servicios SA | 1,740 | 65,859 | ||
Aena SME SA | 890 | 160,739 | ||
Amadeus IT Group SA | 990 | 73,875 | ||
Banco Bilbao Vizcaya Argentaria SA | 2,760 | 13,097 | ||
Banco de Sabadell SA | 13,160 | 11,287 | ||
Enagas SA | 950 | 20,772 | ||
Mapfre SA | 5,070 | 13,221 | ||
Repsol SA | 7,900 | 115,012 | ||
Telefonica SA | 1,880 | 13,045 | ||
486,907 | ||||
Sweden — 3.2% | ||||
Alfa Laval AB | 1,330 | 24,507 | ||
Atlas Copco AB, A Shares | 1,100 | 32,876 | ||
Boliden AB | 720 | 15,932 | ||
Electrolux AB, Series B | 860 | 19,249 | ||
Hennes & Mauritz AB, B Shares | 1,070 | 20,510 | ||
Hexagon AB, B Shares | 610 | 27,120 | ||
ICA Gruppen AB | 660 | 32,392 | ||
Investor AB, B Shares | 340 | 15,955 | ||
Lundin Petroleum AB | 3,130 | 95,175 | ||
Nibe Industrier AB, B Shares | 3,080 | 38,567 | ||
Sandvik AB | 2,900 | 41,622 | ||
Skanska AB, B Shares | 990 | 18,565 | ||
SKF AB, B Shares | 2,980 | 48,118 | ||
Swedish Match AB | 1,720 | 67,524 | ||
Swedish Orphan Biovitrum AB(1) | 1,530 | 25,337 |
14
Shares | Value | |||
Tele2 AB, B Shares | 1,900 | $ | 26,824 | |
Telefonaktiebolaget LM Ericsson, B Shares | 3,120 | 24,325 | ||
Volvo AB, B Shares | 2,070 | 28,601 | ||
603,199 | ||||
Switzerland — 7.6% | ||||
ABB Ltd. | 830 | 15,728 | ||
Adecco Group AG | 310 | 16,311 | ||
Baloise Holding AG | 90 | 15,345 | ||
Barry Callebaut AG | 10 | 20,456 | ||
Chocoladefabriken Lindt & Spruengli AG | 10 | 74,031 | ||
EMS-Chemie Holding AG | 40 | 23,791 | ||
Flughafen Zurich AG | 150 | 27,530 | ||
Geberit AG | 60 | 27,294 | ||
Givaudan SA | 10 | 27,045 | ||
Helvetia Holding AG | 210 | 27,379 | ||
Logitech International SA | 1,080 | 43,781 | ||
Nestle SA | 440 | 49,361 | ||
Novartis AG | 480 | 43,180 | ||
Pargesa Holding SA | 800 | 58,497 | ||
Partners Group Holding AG | 380 | 308,240 | ||
PSP Swiss Property AG | 230 | 30,568 | ||
Roche Holding AG | 390 | 106,659 | ||
Schindler Holding AG | 130 | 29,483 | ||
SGS SA | 10 | 24,559 | ||
Sika AG | 200 | 28,723 | ||
Sonova Holding AG | 180 | 41,787 | ||
Straumann Holding AG | 170 | 133,258 | ||
Swiss Life Holding AG | 60 | 28,458 | ||
Swiss Re AG | 1,310 | 125,989 | ||
Swisscom AG | 50 | 24,968 | ||
Temenos AG(1) | 190 | 31,838 | ||
UBS Group AG(1) | 1,270 | 13,413 | ||
Zurich Insurance Group AG | 50 | 17,798 | ||
1,415,470 | ||||
Taiwan — 1.0% | ||||
Feng TAY Enterprise Co. Ltd. | 8,900 | 57,945 | ||
President Chain Store Corp. | 10,000 | 92,964 | ||
Taiwan High Speed Rail Corp. | 10,000 | 12,066 | ||
Uni-President Enterprises Corp. | 10,000 | 24,387 | ||
187,362 | ||||
United Kingdom — 13.5% | ||||
Admiral Group plc | 1,060 | 27,716 | ||
Anglo American plc | 2,490 | 53,802 | ||
Ashtead Group plc | 2,450 | 67,761 | ||
Associated British Foods plc | 530 | 14,658 | ||
Auto Trader Group plc | 8,020 | 51,922 | ||
Barratt Developments plc | 8,620 | 66,389 |
15
Shares | Value | |||
Berkeley Group Holdings plc | 1,000 | $ | 47,703 | |
BP plc | 2,300 | 14,011 | ||
British Land Co. plc (The) | 5,540 | 34,396 | ||
BT Group plc | 6,350 | 12,809 | ||
Centrica plc | 13,270 | 11,264 | ||
Coca-Cola HBC AG(1) | 1,170 | 38,899 | ||
Compass Group plc | 1,400 | 35,515 | ||
Croda International plc | 420 | 24,051 | ||
Diageo plc | 7,710 | 328,966 | ||
Evraz plc | 18,110 | 109,460 | ||
Experian plc | 900 | 27,599 | ||
Ferguson plc | 240 | 17,666 | ||
GlaxoSmithKline plc | 840 | 17,510 | ||
Glencore plc(1) | 41,470 | 119,670 | ||
Halma plc | 1,750 | 41,836 | ||
Hargreaves Lansdown plc | 6,130 | 140,201 | ||
HomeServe plc | 1,730 | 24,187 | ||
InterContinental Hotels Group plc | 2,840 | 177,258 | ||
International Consolidated Airlines Group SA | 3,880 | 19,926 | ||
Intertek Group plc | 420 | 27,764 | ||
ITV plc | 11,470 | 16,197 | ||
Kingfisher plc | 17,310 | 40,992 | ||
Lloyds Banking Group plc | 215,880 | 131,008 | ||
London Stock Exchange Group plc | 450 | 38,110 | ||
Marks & Spencer Group plc | 22,600 | 52,914 | ||
Meggitt plc | 2,480 | 18,695 | ||
Mondi plc | 800 | 15,559 | ||
Next plc | 580 | 41,929 | ||
Persimmon plc | 2,100 | 48,656 | ||
RELX plc | 1,180 | 28,260 | ||
Rightmove plc | 26,600 | 173,474 | ||
Rio Tinto plc | 670 | 33,858 | ||
Royal Dutch Shell plc, A Shares | 1,480 | 41,113 | ||
Smith & Nephew plc | 2,110 | 50,494 | ||
Spirax-Sarco Engineering plc | 380 | 37,138 | ||
Taylor Wimpey plc | 23,240 | 41,308 | ||
WM Morrison Supermarkets plc | 38,830 | 86,350 | ||
WPP plc | 6,810 | 80,464 | ||
2,529,458 | ||||
TOTAL COMMON STOCKS (Cost $18,259,147) | 18,591,639 | |||
TEMPORARY CASH INVESTMENTS — 0.4% | ||||
State Street Institutional U.S. Government Money Market Fund, Premier Class (Cost $80,660) | 80,660 | 80,660 | ||
TOTAL INVESTMENT SECURITIES — 99.7% (Cost $18,339,807) | 18,672,299 | |||
OTHER ASSETS AND LIABILITIES — 0.3% | 47,017 | |||
TOTAL NET ASSETS — 100.0% | $ | 18,719,316 |
16
MARKET SECTOR DIVERSIFICATION | ||
(as a % of net assets) | ||
Consumer Discretionary | 14.7 | % |
Industrials | 13.9 | % |
Financials | 13.8 | % |
Health Care | 13.3 | % |
Consumer Staples | 11.0 | % |
Information Technology | 8.1 | % |
Materials | 7.6 | % |
Communication Services | 7.2 | % |
Energy | 4.7 | % |
Real Estate | 3.1 | % |
Utilities | 1.9 | % |
Cash and Equivalents* | 0.7 | % |
* Includes temporary cash investments and other assets and liabilities.
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
(1) | Non-income producing. |
See Notes to Financial Statements.
17
Statement of Assets and Liabilities |
AUGUST 31, 2019 | |||
Assets | |||
Investment securities, at value (cost of $18,339,807) | $ | 18,672,299 | |
Foreign currency holdings, at value (cost of $4,781) | 4,785 | ||
Dividends and interest receivable | 47,968 | ||
18,725,052 | |||
Liabilities | |||
Accrued management fees | 5,736 | ||
Net Assets | $ | 18,719,316 | |
Shares outstanding (unlimited number of shares authorized) | 500,000 | ||
Net Asset Value Per Share | $ | 37.44 | |
Net Assets Consist of: | |||
Capital paid in | $ | 19,263,880 | |
Distributable earnings | (544,564 | ) | |
$ | 18,719,316 |
See Notes to Financial Statements.
18
Statement of Operations |
FOR THE PERIOD ENDED AUGUST 31, 2019(1) | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $48,615) | $ | 413,536 | |
Interest | 1,756 | ||
415,292 | |||
Expenses: | |||
Management fees | 52,921 | ||
Other expenses | 73 | ||
52,994 | |||
Net investment income (loss) | 362,298 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | (937,855 | ) | |
Foreign currency translation transactions | (3,121 | ) | |
(940,976 | ) | ||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | 332,492 | ||
Translation of assets and liabilities in foreign currencies | 112 | ||
332,604 | |||
Net realized and unrealized gain (loss) | (608,372 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (246,074 | ) |
(1) | September 10, 2018 (fund inception) through August 31, 2019. |
See Notes to Financial Statements.
19
Statement of Changes in Net Assets |
PERIOD ENDED AUGUST 31, 2019(1) | |||
Increase (Decrease) in Net Assets | |||
Operations | |||
Net investment income (loss) | $ | 362,298 | |
Net realized gain (loss) | (940,976 | ) | |
Change in net unrealized appreciation (depreciation) | 332,604 | ||
Net increase (decrease) in net assets resulting from operations | (246,074 | ) | |
Distributions to Shareholders | |||
From earnings | (298,490 | ) | |
Capital Share Transactions | |||
Proceeds from shares sold | 19,263,880 | ||
Net increase (decrease) in net assets | 18,719,316 | ||
Net Assets | |||
End of period | $ | 18,719,316 | |
Transactions in Shares of the Fund | |||
Sold | 500,000 |
(1) | September 10, 2018 (fund inception) through August 31, 2019. |
See Notes to Financial Statements.
20
Notes to Financial Statements |
AUGUST 31, 2019
1. Organization
American Century ETF Trust (the trust) was registered as a Delaware statutory trust in 2017 and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. American Century Quality Diversified International ETF (the fund) is one fund in a series issued by the trust. The fund's investment objective is to seek to provide investment results that closely correspond, before fees and expenses, to the performance of the Alpha Vee American Century Diversified International Equity Index. Shares of the fund are listed for trading on the NYSE Arca, Inc. The fund incepted on September 10, 2018.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Trustees has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the London Stock Exchange as provided by an independent pricing service.
Open-end management investment companies are valued at the reported net asset value per share.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Trustees or its delegate, in accordance with policies and procedures adopted by the Board of Trustees. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region.
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.
21
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Distributions to Shareholders — Distributions from net investment income, if any, are declared and paid semiannually. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and trustees of the trust are also officers and/or directors of American Century Companies, Inc. (ACC). The trust's investment advisor, American Century Investment Management, Inc. (ACIM), and the trust’s administrator, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The trust has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee). The agreement provides that all expenses of managing and operating the fund, except brokerage and other transaction fees and expenses relating to the acquisition and disposition of portfolio securities, acquired fund fees and expenses, interest, taxes, litigation expenses, extraordinary expenses and expenses incurred in connection with the provision of shareholder and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act, if any, will be paid by ACIM. The fee is computed and accrued daily based on the daily net assets of the fund and paid monthly in arrears. The annual management fee is 0.39%.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments and in-kind transactions, for the period ended August 31, 2019 were $17,837,019 and $16,222,309, respectively.
Securities received in-kind through subscriptions for the period ended August 31, 2019 were $17,616,279. There were no securities delivered in-kind through redemptions during the period.
22
5. Capital Share Transactions
The fund’s shares may only be purchased and sold on a national securities exchange through a broker-dealer. The price of the fund’s shares is based on market price, and because ETF shares trade at market prices rather than net asset value (NAV), shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The fund issues and redeems shares that have been aggregated into blocks of 50,000 shares or multiples thereof (Creation Units) to authorized participants who have entered into agreements with the fund's distributor. The fund will generally issue and redeem Creation Units in return for a basket of securities (and an amount of cash) that the fund specifies each day. Investors transacting in Creation Units for cash may also pay an additional variable charge to compensate the fund for certain transaction costs and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in proceeds from shares sold in the Statement of Changes in Net Assets.
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 322,990 | $ | 18,268,649 | — | |||
Temporary Cash Investments | 80,660 | — | — | |||||
$ | 403,650 | $ | 18,268,649 | — |
7. Risk Factors
There are certain risks involved in investing in foreign securities. These risks include those resulting from political events (such as civil unrest, national elections and imposition of exchange controls), social and economic events (such as labor strikes and rising inflation), and natural disasters. Securities of foreign issuers may be less liquid and more volatile. Investing in emerging markets or a significant portion of assets in one country or region may accentuate these risks.
The fund seeks to track an index. If the fund's index has high portfolio turnover, the fund may also have high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
The fund is not actively managed and does not attempt to take defensive positions under any market conditions, including declining markets. Therefore, the fund generally will not buy or sell securities unless they are added or removed from the index, even if the security is underperforming.
23
8. Federal Tax Information
The tax character of distributions paid during the period September 10, 2018 (fund inception) through August 31, 2019 were as follows:
Distributions Paid From | |||
Ordinary income | $ | 298,490 | |
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 period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 18,461,241 | |
Gross tax appreciation of investments | $ | 1,052,557 | |
Gross tax depreciation of investments | (841,499 | ) | |
Net tax appreciation (depreciation) of investments | 211,058 | ||
Net tax appreciation (depreciation) on translation of assets and liabilities in foreign currencies | 112 | ||
Net tax appreciation (depreciation) | $ | 211,170 | |
Undistributed ordinary income | $ | 136,479 | |
Accumulated short-term capital losses | $ | (892,213 | ) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Accumulated capital losses represent net capital loss carryovers that may be used to offset future realized
capital gains for federal income tax purposes. The capital loss carryovers may be carried forward for an
unlimited period. Future capital loss carryover utilization in any given year may be subject to Internal Revenue
Code limitations.
24
Financial Highlights |
For a Share Outstanding Throughout the Period Indicated | |||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | ||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Distributions From Net Investment Income | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate(3) | Net Assets, End of Period (in thousands) | |||
2019(4) | $39.85 | 0.98 | (2.69) | (1.71) | (0.70) | $37.44 | (4.32)% | 0.39%(5) | 2.67%(5) | 119% | $18,719 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day. Total returns for periods less than one year are not annualized. |
(3) | Excludes securities received or delivered in-kind. |
(4) | September 10, 2018 (fund inception) through August 31, 2019. |
(5) | Annualized. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Trustees of American Century ETF Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of American Century Quality Diversified International ETF, one of the funds constituting the American Century ETF Trust (the “Fund”), as of August 31, 2019, and the related statements of operations, changes in net assets, and the financial highlights for the period from September 10, 2018 (fund inception) through August 31, 2019, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of August 31, 2019, and the results of its operations, the changes in its net assets, and the financial highlights for the period from September 10, 2018 (fund inception) through August 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2019, by correspondence with the custodian and brokers. We believe that our audit provides a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
October 18, 2019
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of Trustees
The individuals listed below serve as trustees of the funds. Each trustee will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for trustees who are not “interested persons,” as that term is defined in the Investment Company Act (independent trustees). Trustees who are not also officers of the trust shall retire by December 31st of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other trustees are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The following trustees also serve in this capacity for a number of other registered investment companies in the American Century Investments family of funds: Jonathan S. Thomas, 15; Ronald J. Gilson, 8; and Stephen E. Yates, 7.
The following table presents additional information about the trustees. The mailing address for each trustee other than Jonathan S. Thomas is 330 Madison Avenue, New York, New York 10017. The mailing address for Jonathan S. Thomas 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 Trustee | Other Directorships Held During Past 5 Years |
Independent Trustees | |||||
Reginald M. Browne (1968) | Trustee and Chairman of the Board | Since 2017 (Chairman since 2019) | Principal, GTS Securities (automated capital markets trading firm)(2019 to present); Senior Managing Director, Co Global Head-ETF Group, Cantor Fitzgerald (financial services firm)(2013 to 2019) | 5 | None |
Ronald J. Gilson (1946) | Trustee | Since 2017 | Charles J. Meyers Professor of Law and Business, Emeritus, Stanford Law School (1979 to 2016); Marc and Eva Stern Professor of Law and Business, Columbia University School of Law (1992 to present) | 49 | None |
Barry A. Mendelson (1958) | Trustee | Since 2017 | Retired; Consultant regarding ETF and mutual fund matters (2015 to 2016); Principal and Senior Counsel, The Vanguard Group (investment management)(1998 to 2014) | 5 | None |
Stephen E. Yates (1948) | Trustee | Since 2017 | Retired | 72 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Trustee | Other Directorships Held During Past 5 Years |
Interested Trustees | |||||
Jonathan S. Thomas (1963) | Trustee | Since 2017 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 116 | BioMed Valley Discoveries, Inc. |
The Statement of Additional Information has additional information about the fund's trustees and is available without charge, upon request, by calling 1-800-345-6488.
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Officers
The following table presents certain information about the executive officers of the funds. Each officer, except Edward Rosenberg, serves as an officer for each of the 16 investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present); Chief Operating Officer, ACC (2012 to 2015). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries |
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Investment Operations and Investment Accounting, ACS (2000 to present) |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2017 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS |
Charles A. Etherington (1957) | General Counsel and Vice President since 2017 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
Cleo Chang (1977) | Vice President since 2019 | Senior Vice President, ACIM (2015 to present); Chief Investment Officer, Wilshire Funds Management (2005 to 2015) |
David H. Reinmiller (1963) | Vice President since 2017 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS |
Edward Rosenberg (1973) | Vice President since 2017 | Senior Vice President, ACIM (2017 to present); Senior Vice President, Flexshares Head of ETF Capital Markets, Northern Trust (2012 to 2017) |
C. Jean Wade (1964) | Vice President since 2017 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) |
Ward D. Stauffer (1960) | Secretary since 2019 | Attorney, ACS (2003 to present) |
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Approval of Management Agreement |
At a meeting held on June 13, 2019, the Fund’s Board of Trustees (the "Board") unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Trustees”), including a majority of the independent Trustees, each year.
Prior to its consideration of the renewal of the management agreement, the Trustees 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 Audit Committee on a continual basis and the information received was supplemental to the extensive information that the Board and its Audit Committee receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management and other services provided and to be provided to the Fund; |
• | the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis; |
• | the investment performance of the Fund, including data comparing the Fund's performance to appropriate benchmarks; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers; |
• | 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; |
• | strategic plans of the Advisor; |
• | any economies of scale associated with the Advisor’s management of the Fund and other accounts; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
The Trustees held one in-person meeting to review and discuss the information provided. The independent Trustees also held active discussions with the Advisor regarding the renewal of the management agreement. The independent Trustees had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Trustees considered all of the information provided by the Advisor, the independent data providers, and independent counsel in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Trustees did not identify any single factor as being all-important or controlling, and each Trustee may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including without limitation the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the
30
Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
• | portfolio research and security selection |
• | 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 (except amounts paid by the Fund under Rule 12b-1 plans) |
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, 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 Trustees 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 provides oversight of the investment performance process. It regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks over different time horizons. The Trustees also review investment performance information during the management agreement renewal process. If performance concerns are identified, the Board discusses with the Advisor the reasons for such results and any efforts being undertaken to improve performance. The Fund’s performance reviewed by the Board was below its benchmark. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
Shareholder and Other Services. Under the management agreement, the Advisor provides or arranges for a comprehensive package of services to the Fund. The Board, directly and through its Audit Committee, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Trustees have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to the Fund and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
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Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, expenses attributable to short sales, taxes, interest, extraordinary expenses, and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the Investment Company Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was below the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Trustees also requested information from the Advisor concerning the nature of the services, fees, costs, and profitability of its advisory services to funds or other advisory clients managed similarly to the Fund. The Advisor informed the Trustees that, as of March 31, 2019, it did not provide services to any other investment companies or comparable accounts that were managed similarly to the Fund.
Payments to Intermediaries. The Trustees also requested a description of payments made to intermediaries by the Fund and the Advisor and services provided in response thereto. These payments could include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Advisor informed the Trustees that, other than compensation to the Fund’s distributor and transfer agent, the Advisor was not then making payments to intermediaries related to fund distribution or shareholder services.
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 funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that
32
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 Trustees. As a result of this process, the Board, including all of the independent Trustees, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
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Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund are available without charge, upon request, by calling 1-800-345-6488. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q or as an exhibit to its reports on Form N-PORT. The fund's Forms N-Q and Form N-PORT reports are available on the SEC’s website at sec.gov.
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Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified dividend income for the fiscal year ended August 31, 2019.
For the fiscal year ended August 31, 2019, the fund intends to pass through to shareholders foreign source income of $462,151 and foreign taxes paid of $47,965, or up to the maximum amount allowable, as a foreign tax credit. Foreign source income and foreign tax expense per outstanding share on August 31, 2019 are $0.9243 and $0.0959, respectively.
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Notes |
36
Notes |
37
Notes |
38
Notes |
39
Notes |
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Contact Us | americancenturyetfs.com | |
American Century Sales Representatives, Financial Professionals, Broker Dealers, Insurance Companies, Banks and Trust Companies | 1-833-ACI-ETFS | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century ETF Trust | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
Distributor: Foreside Fund Services, LLC - Distributor, not affiliated with American Century Investment Services, Inc. | ||
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. | ||
©2019 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-95464 1910 |
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 13(a)(1) to American Century ETF Trust’s Annual Certified Shareholder Report on Form N-CSR, File No. 811-23305, on October 25, 2018, 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) | Barry A. Mendelson, Ronald J. Gilson and Stephen E. Yates 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 2018: $40,125
FY 2019: $80,480
(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 2018: $0
FY 2019: $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 2018: $0
FY 2019: $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 2018: $0
FY 2019: $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 2018: $0
FY 2019: $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 2018: $0
FY 2019: $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 2018: $0
FY 2019: $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 2018: $115,750
FY 2019: $119,500
(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.
(a) | The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The audit committee members are Barry A. Mendelson, Ronald J. Gilson, Stephen E. Yates and Reginald Browne. |
(b) | Not applicable. |
ITEM 6. INVESTMENTS.
(a) | The schedule of investments is included as part of the report to stockholders filed under Item 1 of this Form. |
(b) | Not applicable. |
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the reporting period, there were no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) | The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. |
(b) | There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. |
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 13. EXHIBITS.
(a)(1) | Registrant’s Code of Ethics for Senior Financial Officers, which is the subject of the disclosure required by Item 2 of Form N-CSR, was filed as Exhibit 13(a)(1) to American Century ETF Trust’s Certified Shareholder Report on Form N-CSR, File No. 811-21591, on File No. 811-23305, on October 25, 2018. |
(a)(2) | Separate certifications by the registrant’s principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are filed and attached hereto as EX-99.CERT. |
(a)(3) | Not applicable. |
(a)(4) | Not applicable. |
(b) | A certification by the registrant’s chief executive officer and chief financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is furnished and attached hereto as EX-99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | American Century ETF Trust | |||
By: | /s/ Patrick Bannigan | |||
Name: | Patrick Bannigan | |||
Title: | President | |||
Date: | October 25, 2019 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Patrick Bannigan | ||
Name: | Patrick Bannigan | ||
Title: | President | ||
(principal executive officer) | |||
Date: | October 25, 2019 |
By: | /s/ R. Wes Campbell | ||
Name: | R. Wes Campbell | ||
Title: | Treasurer, and Chief Financial Officer | ||
(principal financial officer) | |||
Date: | October 25, 2019 |