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 | 811-07820 | |||||
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. | ||||||
(Exact name of registrant as specified in charter) | ||||||
4500 MAIN STREET, KANSAS CITY, MISSOURI | 64111 | |||||
(Address of principal executive offices) | (Zip Code) | |||||
CHARLES A. ETHERINGTON 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111 | ||||||
(Name and address of agent for service) | ||||||
Registrant’s telephone number, including area code: | 816-531-5575 | |||||
Date of fiscal year end: | 03-31 | |||||
Date of reporting period: | 03-31-2018 |
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT | ![]() |
MARCH 31, 2018 | |
AC Alternatives® Market Neutral Value Fund | |
Investor Class (ACVVX) | |
I Class (ACVKX) | |
A Class (ACVQX) | |
C Class (ACVHX) | |
R Class (ACVWX) |
![acaltscarrotblacknobleeda01.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/acaltscarrotblacknobleeda01.jpg)
Table of Contents |
President’s Letter | 2 | |
Performance | 3 | |
Portfolio Commentary | ||
Fund Characteristics | ||
Shareholder Fee Example | ||
Schedule of Investments | ||
Statement of Assets and Liabilities | ||
Statement of Operations | ||
Statement of Changes in Net Assets | ||
Notes to Financial Statements | ||
Financial Highlights | ||
Report of Independent Registered Public Accounting Firm | ||
Management | ||
Proxy Voting Results | ||
Additional Information |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
![jthomasrev0514.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/jthomasrev0514.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended March 31, 2018. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional, updated investment and market insights, we encourage you to visit our website, americancentury.com.
Rally Rolled On, Until Volatility Resurfaced
For most of the 12-month period, broad U.S. stock and bond indices generated positive returns. Stocks generally rallied against a backdrop of robust corporate earnings results, steady economic growth, relatively low interest rates, and U.S. tax reform. For bonds, modest economic gains, relatively muted inflation, and gradual—and well telegraphed—tightening from the Federal Reserve (the Fed) continued to support positive performance.
Then, in early February, a force that was largely dormant during 2017—volatility—re-emerged. Robust U.S. wage growth triggered expectations for rising inflation, higher interest rates, and a more-hawkish Fed. Treasury yields climbed to their highest levels in several years, and stock prices plunged into correction territory. Economic data released in March helped calm the unrest, while the Fed's March rate hike, which investors had expected, had little impact. Markets recovered much of the previous weeks’ losses, until a fresh round of worries emerged. President Trump announced the U.S. would implement tariffs on certain imports from China, sparking fears of a global trade war and triggering a flight to quality in the financial markets.
Despite the resurgence of volatility late in the period, U.S. stocks (S&P 500 Index) delivered a total return of 13.99% for the 12 months. Continuing a long-standing trend, growth stocks significantly outperformed their value counterparts across the capitalization spectrum. Meanwhile, the March flight to quality helped bonds hang onto the modest gains generated ahead of the market turbulence, and investment-grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index) returned 1.20% for the 12-month period.
With inflationary pressures mounting, Treasury yields rising, volatility resurfacing, and the implications of tax reform still unfolding, investors likely will face new opportunities and challenges in the months ahead. We believe this scenario warrants a disciplined, diversified, and risk-aware approach, using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a01.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/image48a01.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of March 31, 2018 | |||||
Average Annual Returns | |||||
Ticker Symbol | 1 year | 5 years | Since Inception | Inception Date | |
Investor Class | ACVVX | -2.36% | 2.13% | 2.57% | 10/31/11 |
Bloomberg Barclays U.S. 1-3 Month Treasury Bill Index | — | 1.05% | 0.30% | 0.25% | — |
I Class | ACVKX | -2.15% | 2.35% | 2.79% | 10/31/11 |
A Class | ACVQX | 10/31/11 | |||
No sales charge | -2.58% | 1.90% | 2.32% | ||
With sales charge | -8.21% | 0.70% | 1.38% | ||
C Class | ACVHX | -3.39% | 1.12% | 1.55% | 10/31/11 |
R Class | ACVWX | -2.91% | 1.62% | 2.06% | 10/31/11 |
Fund returns would have been lower if a portion of the fees had not been waived. Prior to April 10, 2017, the
I Class was referred to as the Institutional Class.
Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum initial sales charge and may be subject to a maximum CDSC of 1.00%. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
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Growth of $10,000 Over Life of Class |
$10,000 investment made October 31, 2011 |
Performance for other share classes will vary due to differences in fee structure. |
![chart-78d0ae4b1df6522fad2.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/chart-78d0ae4b1df6522fad2.jpg)
Value on March 31, 2018 | |
Investor Class — $11,770 | |
Bloomberg Barclays U.S. 1-3 Month Treasury Bill Index — $10,160 | |
Ending value of Investor Class would have been lower if a portion of the fees had not been waived.
Total Annual Fund Operating Expenses | ||||
Investor Class | I Class | A Class | C Class | R Class |
3.96% | 3.76% | 4.21% | 4.96% | 4.46% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
4
Portfolio Commentary |
Portfolio Managers: Phil Davidson, Michael Liss, Kevin Toney, Brian Woglom, and Dan Gruemmer
Performance Summary
AC Alternatives Market Neutral Value declined -2.36%* for the fiscal year ended March 31, 2018, compared with the 1.05% return of its benchmark, the Bloomberg Barclays U.S. 1-3 Month Treasury Bill Index. The fund's return reflects operating expenses, while the index's return does not.
The foundation of the strategy is to pair long positions in more undervalued companies with short positions in overvalued companies. We believe this helps reduce the risk inherent in long/short strategies. Over the past 12-month period, however, our portfolio produced negative returns as investors’ preference for growth and momentum pressured many of our pairs.
Key Detractors
Among the top detractors from performance was a pair consisting of a long position in the Consumer Discretionary Select Sector SPDR Fund and a short position in Avis Budget Group. The short position in Avis negatively affected the portfolio’s performance as investors rewarded the stock on news of an opportunity to manage a growing fleet of autonomous vehicles. Additionally, following the hurricanes that hit in the fall of 2017, the stock benefited from diminished concerns regarding the supply/demand gap in the used car market. We continued to hold a short position in Avis because we believe the company’s high level of debt will exacerbate its overextended capacity issues, which will only be compounded by increasing threats to the rental car industry.
Our Alaska Air Group (long) and American Airlines Group (short) pair also weighed on returns. When Alaska Air Group reported its fiscal fourth-quarter results, the company provided disappointing revenue per available seat mile guidance as it worked to integrate its acquisition of Virgin America and optimize its route structure. On the other hand, American Airlines Group’s stock rose after it provided guidance above expectations.
Zimmer Biomet Holdings (long) and Stryker (short) comprise a pair of medical device companies that detracted from performance. Zimmer’s stock declined due to weak guidance, while Stryker’s stock rose due to positive earnings and guidance. We increased the weight in this pair based on the greater valuation gap between these two stocks and on our belief that the valuation gap will close.
Key Contributors
Some of the portfolio’s top-performing pairs were in the industrials sector. This included a pair consisting of a long position in W.W. Grainger, a supplier of industrial supplies and equipment, and a short position in Fastenal Company, a fastener distributor. Our long position in W.W. Grainger drove this pair’s strong performance. In January of 2018, W.W. Grainger reported fiscal fourth-quarter results that showed a stronger-than-expected gain in volumes and a smaller-than-expected decline in margins as a result of the company lowering its prices in the U.S. The company also provided 2018 guidance that exceeded expectations.
A long position in Hubbell, an electrical equipment company, paired with a short position in industrial conglomerate General Electric (GE), also buoyed returns. Hubbell’s stock outperformed
*All fund returns referenced in this commentary are for Investor Class shares. Fund returns would have been lower if a portion of the fees had not been waived. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund's benchmark, other share classes may not. See page 3 for returns for all share classes.
5
as its management team continued to drive stable, above-average growth. Additionally, the market expects Hubbell’s recent acquisition of Aclara Technologies to be cash accretive in 2018. The short position in GE also positively impacted performance as its stock declined. GE’s stock was pressured by various headwinds, including fundamental challenges in its power division, a change in CEO, a 50% dividend cut, and lowered earnings expectations for 2018. Due to GE’s significant underperformance and the narrowing of the valuation spread between Hubbell and GE, we swapped into a long GE position in December of 2017.
Our Walmart (long) and Costco Wholesale (short) pairing was beneficial as well. These companies have similar business models and are subject to similar secular trends and competition. We held the pair because a meaningful valuation discrepancy existed between the two stocks. The driver behind this pair’s strong performance was our long position in Walmart. Its stock rose substantially during the fourth quarter of 2017 as it announced strong quarterly results, reiterated guidance to grow earnings by 5% in 2018, and showcased its technology enhancements to validate its e-commerce platform.
Portfolio Positioning
AC Alternatives Market Neutral Value is designed to address several secular financial planning trends, including the need for an alternative to cash in a low interest rate environment, diversification resulting from not being correlated to equity markets, low volatility exposure, and a hedge against a rise in inflation and/or interest rates.
We continue to follow our disciplined, bottom-up process, selecting securities one at a time for the portfolio. We look for securities of companies that we believe are misvalued on both the long and short side of the market with consideration for both upside potential and downside risk. The portfolio’s current positioning reflects the individual opportunities identified by our team.
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Fund Characteristics |
MARCH 31, 2018 | |
Top Ten Long Holdings | % of net assets |
Consumer Discretionary Select Sector SPDR Fund | 4.22% |
iShares U.S. Real Estate ETF | 2.75% |
Microchip Technology, Inc. (Convertible) | 2.50% |
Ralph Lauren Corp. | 2.45% |
Royal Dutch Shell plc, Class A ADR | 2.39% |
HEICO Corp., Class A | 2.21% |
Michael Kors Holdings Ltd. | 2.17% |
Cummins, Inc. | 2.14% |
Discover Financial Services | 2.11% |
Medtronic plc | 2.06% |
Top Ten Short Holdings | % of net assets |
Stryker Corp. | (3.57)% |
Costco Wholesale Corp. | (3.44)% |
Fastenal Co. | (2.58)% |
Avis Budget Group, Inc. | (2.55)% |
American Airlines Group, Inc. | (2.44)% |
Microchip Technology, Inc. | (2.42)% |
NIKE, Inc., Class B | (2.37)% |
HEICO Corp. | (2.19)% |
Deere & Co. | (2.05)% |
Lululemon Athletica, Inc. | (1.89)% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 72.8% |
Foreign Common Stocks* | 7.6% |
Exchange-Traded Funds | 9.2% |
Convertible Bonds | 2.5% |
Domestic Common Stocks Sold Short | (76.0)% |
Foreign Common Stocks Sold Short* | (8.3)% |
Exchange-Traded Funds Sold Short | (7.6)% |
Temporary Cash Investments | 6.6% |
Other Assets and Liabilities | 93.2%** |
*Includes depositary shares, dual listed securities and foreign ordinary shares.
**Amount relates primarily to deposits for securities sold short at period end.
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Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from October 1, 2017 to March 31, 2018.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or I Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
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Beginning Account Value 10/1/17 | Ending Account Value 3/31/18 | Expenses Paid During Period(1) 10/1/17 - 3/31/18 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $989.30 | $18.10 | 3.65% |
I Class | $1,000 | $990.40 | $17.12 | 3.45% |
A Class | $1,000 | $988.10 | $19.33 | 3.90% |
C Class | $1,000 | $983.50 | $23.00 | 4.65% |
R Class | $1,000 | $986.00 | $20.55 | 4.15% |
Hypothetical | ||||
Investor Class | $1,000 | $1,006.73 | $18.26 | 3.65% |
I Class | $1,000 | $1,007.73 | $17.27 | 3.45% |
A Class | $1,000 | $1,005.49 | $19.50 | 3.90% |
C Class | $1,000 | $1,001.75 | $23.21 | 4.65% |
R Class | $1,000 | $1,004.24 | $20.74 | 4.15% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
9
Schedule of Investments |
MARCH 31, 2018
Shares/ Principal Amount | Value | |||||
COMMON STOCKS — 80.4% | ||||||
Aerospace and Defense — 5.2% | ||||||
BAE Systems plc | 810,760 | $ | 6,622,658 | |||
HEICO Corp., Class A(1) | 165,063 | 11,711,220 | ||||
L3 Technologies, Inc.(1) | 44,610 | 9,278,880 | ||||
27,612,758 | ||||||
Air Freight and Logistics — 0.2% | ||||||
United Parcel Service, Inc., Class B | 12,990 | 1,359,533 | ||||
Airlines — 2.9% | ||||||
Alaska Air Group, Inc.(1) | 115,300 | 7,143,988 | ||||
Southwest Airlines Co.(1) | 142,870 | 8,183,593 | ||||
15,327,581 | ||||||
Auto Components — 1.0% | ||||||
Lear Corp.(1) | 29,010 | 5,398,471 | ||||
Automobiles — 1.9% | ||||||
Ford Motor Co. | 196,120 | 2,173,010 | ||||
Harley-Davidson, Inc. | 88,470 | 3,793,593 | ||||
Honda Motor Co. Ltd. ADR | 119,630 | 4,154,750 | ||||
10,121,353 | ||||||
Banks — 5.7% | ||||||
Bank of Hawaii Corp. | 26,260 | 2,182,206 | ||||
Bank of the Ozarks, Inc. | 100,020 | 4,827,965 | ||||
BB&T Corp.(1) | 147,700 | 7,686,308 | ||||
PNC Financial Services Group, Inc. (The) | 39,110 | 5,914,997 | ||||
U.S. Bancorp | 148,510 | 7,499,755 | ||||
Wells Fargo & Co. | 40,140 | 2,103,737 | ||||
30,214,968 | ||||||
Beverages — 1.6% | ||||||
Boston Beer Co., Inc. (The), Class A(2) | 28,410 | 5,370,910 | ||||
PepsiCo, Inc. | 30,800 | 3,361,820 | ||||
8,732,730 | ||||||
Biotechnology — 0.5% | ||||||
Gilead Sciences, Inc. | 34,740 | 2,619,049 | ||||
Capital Markets — 1.0% | ||||||
AllianceBernstein Holding LP | 199,406 | 5,354,051 | ||||
Commercial Services and Supplies — 0.4% | ||||||
Republic Services, Inc. | 30,160 | 1,997,497 | ||||
Communications Equipment — 1.3% | ||||||
F5 Networks, Inc.(2) | 24,910 | 3,602,235 | ||||
Juniper Networks, Inc. | 145,900 | 3,549,747 | ||||
7,151,982 | ||||||
Consumer Finance — 2.1% | ||||||
Discover Financial Services(1) | 154,990 | 11,148,431 | ||||
Containers and Packaging — 0.8% | ||||||
Bemis Co., Inc. | 49,440 | 2,151,629 |
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Shares/ Principal Amount | Value | |||||
Graphic Packaging Holding Co. | 139,697 | $ | 2,144,349 | |||
4,295,978 | ||||||
Electric Utilities — 1.2% | ||||||
Edison International | 49,628 | 3,159,318 | ||||
Eversource Energy | 50,480 | 2,974,282 | ||||
6,133,600 | ||||||
Electrical Equipment — 2.7% | ||||||
Eaton Corp. plc(1) | 133,160 | 10,640,816 | ||||
Hubbell, Inc. | 29,445 | 3,585,812 | ||||
14,226,628 | ||||||
Electronic Equipment, Instruments and Components — 0.7% | ||||||
TE Connectivity Ltd. | 34,830 | 3,479,517 | ||||
Energy Equipment and Services — 0.8% | ||||||
National Oilwell Varco, Inc. | 45,380 | 1,670,438 | ||||
Schlumberger Ltd. | 42,157 | 2,730,930 | ||||
4,401,368 | ||||||
Equity Real Estate Investment Trusts (REITs) — 1.3% | ||||||
American Tower Corp. | 48,340 | 7,025,736 | ||||
Food and Staples Retailing — 2.7% | ||||||
Kroger Co. (The) | 147,130 | 3,522,292 | ||||
Walmart, Inc. | 119,760 | 10,655,047 | ||||
14,177,339 | ||||||
Food Products — 2.0% | ||||||
Conagra Brands, Inc. | 74,190 | 2,736,127 | ||||
General Mills, Inc. | 96,040 | 4,327,563 | ||||
J.M. Smucker Co. (The) | 28,340 | 3,514,443 | ||||
10,578,133 | ||||||
Gas Utilities — 0.5% | ||||||
Atmos Energy Corp. | 29,230 | 2,462,335 | ||||
Health Care Equipment and Supplies — 4.5% | ||||||
Medtronic plc | 135,810 | 10,894,678 | ||||
Siemens Healthineers AG(2) | 73,290 | 3,012,001 | ||||
Zimmer Biomet Holdings, Inc.(1) | 90,157 | 9,830,719 | ||||
23,737,398 | ||||||
Health Care Providers and Services — 0.7% | ||||||
Cigna Corp. | 21,640 | 3,629,894 | ||||
Hotels, Restaurants and Leisure — 1.3% | ||||||
Cheesecake Factory, Inc. (The) | 109,230 | 5,267,071 | ||||
McDonald's Corp. | 10,350 | 1,618,533 | ||||
6,885,604 | ||||||
Household Durables — 0.3% | ||||||
PulteGroup, Inc. | 56,233 | 1,658,311 | ||||
Industrial Conglomerates — 0.7% | ||||||
General Electric Co. | 265,820 | 3,583,254 | ||||
Insurance — 3.0% | ||||||
Chubb Ltd. | 71,582 | 9,790,270 | ||||
EMC Insurance Group, Inc. | 42,636 | 1,154,583 | ||||
MetLife, Inc. | 83,283 | 3,821,857 | ||||
ProAssurance Corp. | 22,030 | 1,069,556 | ||||
15,836,266 |
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Shares/ Principal Amount | Value | |||||
Internet Software and Services — 0.4% | ||||||
Alphabet, Inc., Class C(2) | 1,840 | $ | 1,898,494 | |||
IT Services — 0.6% | ||||||
International Business Machines Corp. | 19,270 | 2,956,596 | ||||
Machinery — 7.9% | ||||||
Allison Transmission Holdings, Inc. | 105,320 | 4,113,799 | ||||
Crane Co.(1) | 94,780 | 8,789,897 | ||||
Cummins, Inc. | 69,820 | 11,317,124 | ||||
Dover Corp. | 32,069 | 3,149,817 | ||||
IMI plc | 369,770 | 5,612,543 | ||||
Ingersoll-Rand plc | 35,540 | 3,039,025 | ||||
Rexnord Corp.(2) | 199,463 | 5,920,062 | ||||
41,942,267 | ||||||
Multiline Retail — 0.7% | ||||||
Target Corp. | 53,810 | 3,736,028 | ||||
Oil, Gas and Consumable Fuels — 4.9% | ||||||
Anadarko Petroleum Corp. | 23,120 | 1,396,679 | ||||
BP Midstream Partners LP | 284,918 | 5,082,937 | ||||
Enterprise Products Partners LP | 84,450 | 2,067,336 | ||||
EQT Corp. | 53,810 | 2,556,513 | ||||
EQT Midstream Partners LP | 33,630 | 1,985,179 | ||||
Royal Dutch Shell plc, Class A ADR | 198,335 | 12,655,757 | ||||
25,744,401 | ||||||
Pharmaceuticals — 1.7% | ||||||
Pfizer, Inc.(1) | 252,279 | 8,953,382 | ||||
Road and Rail — 1.4% | ||||||
Norfolk Southern Corp. | 15,490 | 2,103,232 | ||||
Union Pacific Corp. | 38,470 | 5,171,522 | ||||
7,274,754 | ||||||
Semiconductors and Semiconductor Equipment — 3.0% | ||||||
Cirrus Logic, Inc.(2) | 104,559 | 4,248,232 | ||||
KLA-Tencor Corp. | 43,970 | 4,793,170 | ||||
Lam Research Corp. | 21,839 | 4,436,811 | ||||
Maxim Integrated Products, Inc. | 43,070 | 2,593,675 | ||||
16,071,888 | ||||||
Software — 1.3% | ||||||
Microsoft Corp. | 29,246 | 2,669,282 | ||||
Oracle Corp. (New York) | 96,930 | 4,434,548 | ||||
7,103,830 | ||||||
Specialty Retail — 2.0% | ||||||
L Brands, Inc. | 282,360 | 10,788,976 | ||||
Textiles, Apparel and Luxury Goods — 6.9% | ||||||
Burberry Group plc | 247,370 | 5,890,910 | ||||
Gildan Activewear, Inc. | 90,630 | 2,617,567 | ||||
Hanesbrands, Inc. | 109,920 | 2,024,726 | ||||
Michael Kors Holdings Ltd.(2) | 185,250 | 11,500,320 | ||||
Ralph Lauren Corp.(1) | 116,190 | 12,990,042 | ||||
Wolverine World Wide, Inc. | 52,145 | 1,506,991 | ||||
36,530,556 |
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Shares/ Principal Amount | Value | |||||
Trading Companies and Distributors — 2.6% | ||||||
MSC Industrial Direct Co., Inc., Class A | 74,650 | $ | 6,846,152 | |||
W.W. Grainger, Inc. | 24,320 | 6,864,806 | ||||
13,710,958 | ||||||
TOTAL COMMON STOCKS (Cost $382,105,404) | 425,861,895 | |||||
EXCHANGE-TRADED FUNDS — 9.2% | ||||||
Consumer Discretionary Select Sector SPDR Fund | 220,304 | 22,314,592 | ||||
iShares Russell 1000 Value ETF | 69,213 | 8,302,791 | ||||
iShares TIPS Bond ETF | 29,480 | 3,332,714 | ||||
iShares U.S. Real Estate ETF | 192,550 | 14,531,749 | ||||
TOTAL EXCHANGE-TRADED FUNDS (Cost $45,051,413) | 48,481,846 | |||||
CONVERTIBLE BONDS — 2.5% | ||||||
Semiconductors and Semiconductor Equipment — 2.5% | ||||||
Microchip Technology, Inc., 1.625%, 2/15/25 (Cost $7,475,345) | $ | 7,464,000 | 13,252,220 | |||
TEMPORARY CASH INVESTMENTS — 6.6% | ||||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.375% - 3.625%, 2/15/23 - 5/15/47, valued at $19,519,045), in a joint trading account at 1.45%, dated 3/29/18, due 4/2/18 (Delivery value $19,096,032) | 19,092,956 | |||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.25%, 11/15/24, valued at $16,236,219), at 0.74%, dated 3/29/18, due 4/2/18 (Delivery value $15,918,309) | 15,917,000 | |||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 19,106 | 19,106 | ||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $35,029,062) | 35,029,062 | |||||
TOTAL INVESTMENT SECURITIES BEFORE SECURITIES SOLD SHORT — 98.7% (Cost $469,661,224) | 522,625,023 | |||||
SECURITIES SOLD SHORT — (91.9)% | ||||||
COMMON STOCKS SOLD SHORT — (84.3)% | ||||||
Aerospace and Defense — (5.5)% | ||||||
HEICO Corp. | (133,697 | ) | (11,606,237 | ) | ||
Northrop Grumman Corp. | (22,800 | ) | (7,959,936 | ) | ||
Raytheon Co. | (19,790 | ) | (4,271,078 | ) | ||
Rolls-Royce Holdings plc | (438,780 | ) | (5,374,326 | ) | ||
(29,211,577 | ) | |||||
Air Freight and Logistics — (0.3)% | ||||||
FedEx Corp. | (5,790 | ) | (1,390,237 | ) | ||
Airlines — (2.9)% | ||||||
American Airlines Group, Inc. | (248,500 | ) | (12,912,060 | ) | ||
Spirit Airlines, Inc. | (63,880 | ) | (2,413,386 | ) | ||
(15,325,446 | ) | |||||
Automobiles — (2.2)% | ||||||
General Motors Co. | (118,357 | ) | (4,301,093 | ) | ||
Tesla, Inc. | (28,590 | ) | (7,608,657 | ) | ||
(11,909,750 | ) | |||||
Banks — (5.8)% | ||||||
Citizens Financial Group, Inc. | (61,760 | ) | (2,592,685 | ) | ||
Comerica, Inc. | (44,150 | ) | (4,235,309 | ) |
13
Shares/ Principal Amount | Value | |||||
KeyCorp | (372,338 | ) | $ | (7,279,208 | ) | |
M&T Bank Corp. | (18,840 | ) | (3,473,342 | ) | ||
Regions Financial Corp. | (273,550 | ) | (5,082,559 | ) | ||
Zions BanCorp. | (148,820 | ) | (7,847,279 | ) | ||
(30,510,382 | ) | |||||
Beverages — (1.0)% | ||||||
Constellation Brands, Inc., Class A | (24,340 | ) | (5,547,573 | ) | ||
Capital Markets — (1.6)% | ||||||
Eaton Vance Corp. | (95,000 | ) | (5,288,650 | ) | ||
FactSet Research Systems, Inc. | (16,890 | ) | (3,368,204 | ) | ||
(8,656,854 | ) | |||||
Commercial Services and Supplies — (0.4)% | ||||||
Waste Management, Inc. | (23,500 | ) | (1,976,820 | ) | ||
Consumer Finance — (2.3)% | ||||||
American Express Co. | (31,960 | ) | (2,981,229 | ) | ||
Capital One Financial Corp. | (94,510 | ) | (9,055,948 | ) | ||
(12,037,177 | ) | |||||
Containers and Packaging — (0.4)% | ||||||
Ball Corp. | (53,850 | ) | (2,138,384 | ) | ||
Distributors — (0.9)% | ||||||
Pool Corp. | (32,940 | ) | (4,816,487 | ) | ||
Diversified Financial Services — (0.2)% | ||||||
Berkshire Hathaway, Inc., Class B | (4,900 | ) | (977,452 | ) | ||
Electric Utilities — (0.4)% | ||||||
Southern Co. (The) | (45,383 | ) | (2,026,805 | ) | ||
Electronic Equipment, Instruments and Components — (0.6)% | ||||||
Amphenol Corp., Class A | (39,180 | ) | (3,374,573 | ) | ||
Energy Equipment and Services — (0.8)% | ||||||
Halliburton Co. | (93,785 | ) | (4,402,268 | ) | ||
Equity Real Estate Investment Trusts (REITs) — (3.5)% | ||||||
AvalonBay Communities, Inc. | (19,360 | ) | (3,183,945 | ) | ||
Crown Castle International Corp. | (63,638 | ) | (6,975,361 | ) | ||
Equity Residential | (54,840 | ) | (3,379,241 | ) | ||
Essex Property Trust, Inc. | (14,210 | ) | (3,420,063 | ) | ||
Simon Property Group, Inc. | (10,280 | ) | (1,586,718 | ) | ||
(18,545,328 | ) | |||||
Food and Staples Retailing — (3.4)% | ||||||
Costco Wholesale Corp. | (96,530 | ) | (18,189,148 | ) | ||
Food Products — (2.6)% | ||||||
Kraft Heinz Co. (The) | (153,933 | ) | (9,588,487 | ) | ||
Nestle SA | (54,280 | ) | (4,297,151 | ) | ||
(13,885,638 | ) | |||||
Health Care Equipment and Supplies — (5.4)% | ||||||
Align Technology, Inc. | (19,200 | ) | (4,821,696 | ) | ||
Becton Dickinson and Co. | (8,640 | ) | (1,872,288 | ) | ||
Koninklijke Philips NV | (73,900 | ) | (2,839,979 | ) | ||
Stryker Corp. | (117,280 | ) | (18,872,697 | ) | ||
(28,406,660 | ) | |||||
Health Care Providers and Services — (0.7)% | ||||||
Anthem, Inc. | (6,930 | ) | (1,522,521 | ) |
14
Shares/ Principal Amount | Value | |||||
UnitedHealth Group, Inc. | (9,110 | ) | $ | (1,949,540 | ) | |
(3,472,061 | ) | |||||
Hotels, Restaurants and Leisure — (2.1)% | ||||||
Chipotle Mexican Grill, Inc. | (21,450 | ) | (6,930,710 | ) | ||
MGM Resorts International | (114,600 | ) | (4,013,292 | ) | ||
(10,944,002 | ) | |||||
Household Durables — (0.3)% | ||||||
Toll Brothers, Inc. | (37,520 | ) | (1,622,740 | ) | ||
Insurance — (3.0)% | ||||||
Hartford Financial Services Group, Inc. (The) | (46,470 | ) | (2,394,134 | ) | ||
Prudential Financial, Inc. | (36,203 | ) | (3,748,821 | ) | ||
Travelers Cos., Inc. (The) | (36,610 | ) | (5,083,665 | ) | ||
Unum Group | (27,440 | ) | (1,306,418 | ) | ||
Zurich Insurance Group AG | (10,920 | ) | (3,583,231 | ) | ||
(16,116,269 | ) | |||||
Internet and Direct Marketing Retail — (0.9)% | ||||||
Amazon.com, Inc. | (3,220 | ) | (4,660,435 | ) | ||
IT Services — (1.4)% | ||||||
Gartner, Inc. | (62,160 | ) | (7,311,259 | ) | ||
Leisure Products — (0.6)% | ||||||
Polaris Industries, Inc. | (25,650 | ) | (2,937,438 | ) | ||
Machinery — (10.0)% | ||||||
Caterpillar, Inc. | (47,830 | ) | (7,049,186 | ) | ||
CNH Industrial NV | (485,910 | ) | (6,025,284 | ) | ||
Deere & Co. | (69,930 | ) | (10,861,528 | ) | ||
ESCO Technologies, Inc. | (43,240 | ) | (2,531,702 | ) | ||
Illinois Tool Works, Inc. | (20,520 | ) | (3,214,663 | ) | ||
Parker-Hannifin Corp. | (33,010 | ) | (5,645,700 | ) | ||
RBC Bearings, Inc. | (48,244 | ) | (5,991,905 | ) | ||
Weir Group plc (The) | (198,930 | ) | (5,575,540 | ) | ||
Xylem, Inc. | (79,960 | ) | (6,150,523 | ) | ||
(53,046,031 | ) | |||||
Oil, Gas and Consumable Fuels — (2.4)% | ||||||
Exxon Mobil Corp. | (82,850 | ) | (6,181,439 | ) | ||
Royal Dutch Shell plc, Class B ADR | (36,810 | ) | (2,412,159 | ) | ||
Valero Energy Corp. | (45,590 | ) | (4,229,384 | ) | ||
(12,822,982 | ) | |||||
Paper and Forest Products — (0.4)% | ||||||
International Paper Co. | (40,930 | ) | (2,186,890 | ) | ||
Pharmaceuticals — (2.2)% | ||||||
AstraZeneca plc ADR | (166,402 | ) | (5,819,078 | ) | ||
Bristol-Myers Squibb Co. | (46,500 | ) | (2,941,125 | ) | ||
Sanofi | (33,460 | ) | (2,688,685 | ) | ||
(11,448,888 | ) | |||||
Real Estate Investment Trusts (REITs) — (0.6)% | ||||||
Host Hotels & Resorts, Inc. | (167,090 | ) | (3,114,558 | ) | ||
Road and Rail — (3.9)% | ||||||
Avis Budget Group, Inc. | (288,264 | ) | (13,502,286 | ) | ||
CSX Corp. | (129,880 | ) | (7,235,615 | ) | ||
(20,737,901 | ) |
15
Shares/ Principal Amount | Value | |||||
Semiconductors and Semiconductor Equipment — (4.0)% | ||||||
Analog Devices, Inc. | (91,510 | ) | $ | (8,339,306 | ) | |
Microchip Technology, Inc. | (139,960 | ) | (12,786,746 | ) | ||
(21,126,052 | ) | |||||
Specialty Retail — (0.7)% | ||||||
Tiffany & Co. | (36,279 | ) | (3,543,007 | ) | ||
Textiles, Apparel and Luxury Goods — (8.3)% | ||||||
Lululemon Athletica, Inc. | (112,192 | ) | (9,998,551 | ) | ||
LVMH Moet Hennessy Louis Vuitton SE | (19,380 | ) | (5,976,578 | ) | ||
NIKE, Inc., Class B | (188,896 | ) | (12,550,250 | ) | ||
PVH Corp. | (40,160 | ) | (6,081,429 | ) | ||
Under Armour, Inc., Class C | (230,840 | ) | (3,312,554 | ) | ||
VF Corp. | (83,670 | ) | (6,201,620 | ) | ||
(44,120,982 | ) | |||||
Trading Companies and Distributors — (2.6)% | ||||||
Fastenal Co. | (249,860 | ) | (13,639,857 | ) | ||
TOTAL COMMON STOCKS SOLD SHORT (Proceeds $407,279,882) | (446,179,911 | ) | ||||
EXCHANGE-TRADED FUNDS SOLD SHORT — (7.6)% | ||||||
Alerian MLP ETF | (956,981 | ) | (8,966,912 | ) | ||
Industrial Select Sector SPDR Fund | (40,550 | ) | (3,012,459 | ) | ||
iShares US Preferred Stock ETF | (89,110 | ) | (3,346,972 | ) | ||
PowerShares QQQ Trust Series 1 | (44,560 | ) | (7,135,393 | ) | ||
SPDR S&P Oil & Gas Exploration & Production ETF | (116,050 | ) | (4,087,281 | ) | ||
Technology Select Sector SPDR Fund | (111,314 | ) | (7,282,162 | ) | ||
Utilities Select Sector SPDR Fund | (127,816 | ) | (6,458,542 | ) | ||
TOTAL EXCHANGE-TRADED FUNDS SOLD SHORT (Proceeds $42,398,313) | (40,289,721 | ) | ||||
TOTAL SECURITIES SOLD SHORT — (91.9)% (Proceeds $449,678,195) | (486,469,632 | ) | ||||
OTHER ASSETS AND LIABILITIES(3) — 93.2% | 493,142,179 | |||||
TOTAL NET ASSETS — 100.0% | $ | 529,297,570 |
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
(1) | Security, or a portion thereof, has been pledged at the custodian bank or with a broker for collateral requirements on securities sold short. At the period end, the aggregate value of securities pledged was $108,448,886. |
(2) | Non-income producing. |
(3) | Amount relates primarily to deposits for securities sold short at period end. |
See Notes to Financial Statements.
16
Statement of Assets and Liabilities |
MARCH 31, 2018 | |||
Assets | |||
Investment securities, at value (cost of $469,661,224) | $ | 522,625,023 | |
Deposits for securities sold short | 493,639,363 | ||
Receivable for investments sold | 25,581,376 | ||
Receivable for capital shares sold | 410,725 | ||
Dividends and interest receivable | 919,158 | ||
1,043,175,645 | |||
Liabilities | |||
Securities sold short, at value (proceeds of $449,678,195) | 486,469,632 | ||
Disbursements in excess of demand deposit cash | 15,460 | ||
Payable for investments purchased | 25,327,264 | ||
Payable for capital shares redeemed | 981,428 | ||
Accrued management fees | 699,283 | ||
Distribution and service fees payable | 22,189 | ||
Dividend expense payable on securities sold short | 362,819 | ||
513,878,075 | |||
Net Assets | $ | 529,297,570 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 545,738,891 | |
Accumulated net investment loss | (1,177,928 | ) | |
Accumulated net realized loss | (31,436,041 | ) | |
Net unrealized appreciation | 16,172,648 | ||
$ | 529,297,570 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $232,629,154 | 22,657,907 | $10.27 | |||
I Class, $0.01 Par Value | $261,905,634 | 25,141,317 | $10.42 | |||
A Class, $0.01 Par Value | $12,055,274 | 1,193,856 | $10.10* | |||
C Class, $0.01 Par Value | $22,628,526 | 2,361,901 | $9.58 | |||
R Class, $0.01 Par Value | $78,982 | 7,959 | $9.92 |
*Maximum offering price $10.72 (net asset value divided by 0.9425).
See Notes to Financial Statements.
17
Statement of Operations |
YEAR ENDED MARCH 31, 2018 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $272,768) | $ | 12,794,123 | |
Interest | 4,519,518 | ||
17,313,641 | |||
Expenses: | |||
Dividend expense on securities sold short | 13,754,932 | ||
Management fees | 11,578,871 | ||
Distribution and service fees: | |||
A Class | 59,601 | ||
C Class | 292,155 | ||
R Class | 391 | ||
Directors' fees and expenses | 19,326 | ||
Other expenses | 17,934 | ||
25,723,210 | |||
Fees waived(1) | (1,589,647 | ) | |
24,133,563 | |||
Net investment income (loss) | (6,819,922 | ) | |
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 101,768,911 | ||
Securities sold short transactions | (93,626,882 | ) | |
Forward foreign currency exchange contract transactions | (67,115 | ) | |
Foreign currency translation transactions | 2,425 | ||
8,077,339 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (17,129,583 | ) | |
Securities sold short | 39,822 | ||
Forward foreign currency exchange contracts | (129,692 | ) | |
Translation of assets and liabilities in foreign currencies | 785 | ||
(17,218,668 | ) | ||
Net realized and unrealized gain (loss) | (9,141,329 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (15,961,251 | ) |
(1) | Amount consists of $828,756, $628,055, $59,601, $73,039 and $196 for Investor Class, I Class, A Class, C Class and R Class, respectively. |
See Notes to Financial Statements.
18
Statement of Changes in Net Assets |
YEARS ENDED MARCH 31, 2018 AND MARCH 31, 2017 | ||||||
Increase (Decrease) in Net Assets | March 31, 2018 | March 31, 2017 | ||||
Operations | ||||||
Net investment income (loss) | $ | (6,819,922 | ) | $ | (11,700,373 | ) |
Net realized gain (loss) | 8,077,339 | 12,486,197 | ||||
Change in net unrealized appreciation (depreciation) | (17,218,668 | ) | 18,412,884 | |||
Net increase (decrease) in net assets resulting from operations | (15,961,251 | ) | 19,198,708 | |||
Distributions to Shareholders | ||||||
From net realized gains: | ||||||
Investor Class | (6,698,830 | ) | (10,130,104 | ) | ||
I Class | (5,587,919 | ) | (4,651,007 | ) | ||
A Class | (365,770 | ) | (3,199,654 | ) | ||
C Class | (638,486 | ) | (920,441 | ) | ||
R Class | (1,837 | ) | (3,174 | ) | ||
Decrease in net assets from distributions | (13,292,842 | ) | (18,904,380 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (187,833,645 | ) | 270,349,369 | |||
Net increase (decrease) in net assets | (217,087,738 | ) | 270,643,697 | |||
Net Assets | ||||||
Beginning of period | 746,385,308 | 475,741,611 | ||||
End of period | $ | 529,297,570 | $ | 746,385,308 | ||
Accumulated net investment loss | $ | (1,177,928 | ) | $ | (206,639 | ) |
See Notes to Financial Statements.
19
Notes to Financial Statements |
MARCH 31, 2018
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. AC Alternatives Market Neutral Value Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek long-term capital growth, independent of equity market conditions.
The fund offers the Investor Class, I Class (formerly Institutional Class), A Class, C Class and R Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Fixed income securities are valued at the evaluated mean as provided by independent pricing services or at the mean of the most recent bid and asked prices as provided by investment dealers. Corporate and convertible bonds are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a
20
security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Securities Sold Short — The fund enters into short sales, which is selling securities it does not own, as part of its normal investment activities. Upon selling a security short, the fund will segregate cash, cash equivalents or other appropriate liquid securities in at least an amount equal to the current market value of the securities sold short until the fund replaces the borrowed security. Interest earned on segregated cash for securities sold short is reflected as interest income. The fund is required to pay any dividends or interest due on securities sold short. Such dividends and interest are recorded as an expense. The fund may pay fees or charges on the assets borrowed for securities sold short. These fees are calculated daily based upon the value of each security sold short and a rate that is dependent on the availability of such security. Liabilities for securities sold short are valued daily and changes in value are recorded as change in net unrealized appreciation (depreciation) on securities sold short. The fund records realized gain (loss) on a security sold short when it is terminated by the fund and includes as a component of net realized gain (loss) on securities sold short transactions.
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. Net realized and unrealized foreign currency exchange gains or losses related to securities sold short are a component of net realized gain (loss) on securities sold short transactions and change in net unrealized appreciation (depreciation) on securities sold short, respectively.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover certain types of investments, including, but not limited to, futures contracts and short sales. 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 on futures contracts and short sales.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that ACIM has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
21
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc. (ACIS), and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, expenses on securities sold short, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class. During the period ended March 31, 2018, the investment advisor agreed to waive 0.25% of the fund's management fee. The investment advisor expects this waiver to continue until July 31, 2018 and cannot terminate it prior to such date without the approval of the Board of Directors.
The annual management fee and the effective annual management fee after waiver for each class for the period ended March 31, 2018 are as follows:
Annual Management Fee | Effective Annual Management Fee After Waiver | |
Investor Class | 1.90% | 1.65% |
I Class | 1.70% | 1.45% |
A Class | 1.90% | 1.65% |
C Class | 1.90% | 1.65% |
R Class | 1.90% | 1.65% |
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Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the C Class will pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the period ended March 31, 2018 are detailed in the Statement of Operations.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $21,877,579 and $21,562,301, respectively. The effect of interfund transactions on the Statement of Operations was $1,217,266 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities and securities sold short, excluding short-term investments, for the period ended March 31, 2018 were $1,892,066,641 and $1,883,534,584, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended March 31, 2018 | Year ended March 31, 2017 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 240,000,000 | 160,000,000 | ||||||||
Sold | 14,653,809 | $ | 155,378,996 | 38,163,480 | $ | 409,848,107 | ||||
Issued in reinvestment of distributions | 640,969 | 6,627,618 | 953,814 | 10,053,201 | ||||||
Redeemed | (31,655,638 | ) | (333,048,836 | ) | (23,759,846 | ) | (254,452,883 | ) | ||
(16,360,860 | ) | (171,042,222 | ) | 15,357,448 | 165,448,425 | |||||
I Class/Shares Authorized | 150,000,000 | 60,000,000 | ||||||||
Sold | 22,670,745 | 241,153,307 | 12,817,012 | 139,407,265 | ||||||
Issued in reinvestment of distributions | 515,071 | 5,403,092 | 369,477 | 3,938,624 | ||||||
Redeemed | (15,002,218 | ) | (159,752,059 | ) | (7,696,378 | ) | (83,354,520 | ) | ||
8,183,598 | 86,804,340 | 5,490,111 | 59,991,369 | |||||||
A Class/Shares Authorized | 70,000,000 | 50,000,000 | ||||||||
Sold | 864,634 | 9,018,952 | 7,205,999 | 76,907,509 | ||||||
Issued in reinvestment of distributions | 35,896 | 365,419 | 307,598 | 3,199,016 | ||||||
Redeemed | (9,756,785 | ) | (102,303,722 | ) | (4,685,220 | ) | (49,611,414 | ) | ||
(8,856,255 | ) | (92,919,351 | ) | 2,828,377 | 30,495,111 | |||||
C Class/Shares Authorized | 25,000,000 | 15,000,000 | ||||||||
Sold | 282,807 | 2,814,310 | 2,091,153 | 21,387,959 | ||||||
Issued in reinvestment of distributions | 65,910 | 638,013 | 91,952 | 917,682 | ||||||
Redeemed | (1,427,910 | ) | (14,089,402 | ) | (782,225 | ) | (7,938,502 | ) | ||
(1,079,193 | ) | (10,637,079 | ) | 1,400,880 | 14,367,139 | |||||
R Class/Shares Authorized | 10,000,000 | 10,000,000 | ||||||||
Sold | 4,087 | 41,696 | 6,544 | 68,556 | ||||||
Issued in reinvestment of distributions | 184 | 1,837 | 309 | 3,174 | ||||||
Redeemed | (8,063 | ) | (82,866 | ) | (2,337 | ) | (24,405 | ) | ||
(3,792 | ) | (39,333 | ) | 4,516 | 47,325 | |||||
Net increase (decrease) | (18,116,502 | ) | $ | (187,833,645 | ) | 25,081,332 | $ | 270,349,369 |
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. There were no significant transfers between levels during the period.
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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 | ||||||||
Aerospace and Defense | $ | 20,990,100 | $ | 6,622,658 | — | |||
Health Care Equipment and Supplies | 20,725,397 | 3,012,001 | — | |||||
Machinery | 36,329,724 | 5,612,543 | — | |||||
Textiles, Apparel and Luxury Goods | 28,022,079 | 8,508,477 | — | |||||
Other Industries | 296,038,916 | — | — | |||||
Exchange-Traded Funds | 48,481,846 | — | — | |||||
Convertible Bonds | — | 13,252,220 | — | |||||
Temporary Cash Investments | 19,106 | 35,009,956 | — | |||||
$ | 450,607,168 | $ | 72,017,855 | — | ||||
Liabilities | ||||||||
Securities Sold Short | ||||||||
Common Stocks | ||||||||
Aerospace and Defense | $ | 23,837,251 | $ | 5,374,326 | — | |||
Food Products | 9,588,487 | 4,297,151 | — | |||||
Health Care Equipment and Supplies | 25,566,681 | 2,839,979 | — | |||||
Insurance | 12,533,038 | 3,583,231 | — | |||||
Machinery | 47,470,491 | 5,575,540 | — | |||||
Pharmaceuticals | 8,760,203 | 2,688,685 | — | |||||
Textiles, Apparel and Luxury Goods | 38,144,404 | 5,976,578 | — | |||||
Other Industries | 249,943,866 | — | — | |||||
Exchange-Traded Funds | 40,289,721 | — | — | |||||
$ | 456,134,142 | $ | 30,335,490 | — |
7. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms.The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $31,568,943.
At period end, the fund did not have any derivative instruments disclosed on the Statement of Assets and Liabilities. For the year ended March 31, 2018, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(67,115) in net realized gain (loss) on forward foreign currency exchange contract transactions and $(129,692) in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
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8. Risk Factors
The fund’s investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
The fund is subject to short sales risk. If the market price of a security increases after the fund borrows the security, the fund may suffer a loss when it replaces the borrowed security at the higher price. Any loss will be increased by the amount of compensation, interest or dividends, and transaction costs the fund must pay to the lender of the borrowed security.
There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions.
9. Federal Tax Information
The tax character of distributions paid during the years ended March 31, 2018 and March 31, 2017 were as follows:
2018 | 2017 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 6,768,945 | $ | 14,225,012 | ||
Long-term capital gains | $ | 6,523,897 | $ | 4,679,368 |
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 net operating losses, were made to capital $(4,647,061), accumulated net investment loss $5,848,633, and accumulated net realized loss $(1,201,572).
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 | $ | 477,988,864 | |
Gross tax appreciation of investments | $ | 54,523,735 | |
Gross tax depreciation of investments | (9,887,576 | ) | |
Net tax appreciation (depreciation) of investments | 44,636,159 | ||
Gross tax appreciation on securities sold short | — | ||
Gross tax depreciation on securities sold short | (54,384,004 | ) | |
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | $ | (1,351 | ) |
Net tax appreciation (depreciation) | $ | (9,749,196 | ) |
Other book-to-tax adjustments | $ | (10,427,033 | ) |
Undistributed ordinary income | — | ||
Accumulated long-term gains | $ | 4,237,502 | |
Late-year ordinary loss deferral | $ | (502,594 | ) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales. Other book-to-tax adjustments are attributable primarily to the tax deferral of losses on straddle positions.
Loss deferrals represent certain qualified losses that the fund has elected to treat as having been incurred in the following fiscal year for federal income tax purposes.
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10. 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 March 31 (except as noted) | ||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | |||||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Distributions From Net Realized Gains | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Operating Expenses (excluding expenses on securities sold short) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | ||||||||||||||||
2018 | $10.76 | (0.12) | (0.13) | (0.25) | (0.24) | $10.27 | (2.36)% | 3.82% | 4.07% | 1.66% | (1.10)% | (1.35)% | 307% | $232,629 | ||
2017 | $10.73 | (0.18) | 0.49 | 0.31 | (0.28) | $10.76 | 2.97% | 3.68% | 3.94% | 1.64% | (1.65)% | (1.91)% | 374% | $419,925 | ||
2016 | $10.44 | (0.19) | 0.65 | 0.46 | (0.17) | $10.73 | 4.42% | 3.78% | 4.08% | 1.61% | (1.82)% | (2.12)% | 679% | $253,885 | ||
2015 | $10.22 | (0.20) | 0.62 | 0.42 | (0.20) | $10.44 | 4.10% | 3.88% | 4.18% | 1.60% | (1.95)% | (2.25)% | 447% | $49,465 | ||
2014 | $10.25 | (0.04) | 0.21 | 0.17 | (0.20) | $10.22 | 1.69% | 4.09% | 4.39% | 1.60% | (0.35)% | (0.65)% | 521% | $49,665 | ||
I Class(3) | ||||||||||||||||
2018 | $10.89 | (0.09) | (0.14) | (0.23) | (0.24) | $10.42 | (2.15)% | 3.62% | 3.87% | 1.46% | (0.90)% | (1.15)% | 307% | $261,906 | ||
2017 | $10.83 | (0.16) | 0.50 | 0.34 | (0.28) | $10.89 | 3.23% | 3.48% | 3.74% | 1.44% | (1.45)% | (1.71)% | 374% | $184,717 | ||
2016 | $10.52 | (0.16) | 0.64 | 0.48 | (0.17) | $10.83 | 4.58% | 3.58% | 3.88% | 1.41% | (1.62)% | (1.92)% | 679% | $124,249 | ||
2015 | $10.28 | (0.18) | 0.62 | 0.44 | (0.20) | $10.52 | 4.28% | 3.68% | 3.98% | 1.40% | (1.75)% | (2.05)% | 447% | $6,013 | ||
2014 | $10.28 | 0.11 | 0.09 | 0.20 | (0.20) | $10.28 | 1.98% | 3.89% | 4.19% | 1.40% | (0.15)% | (0.45)% | 521% | $5,714 |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | ||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | |||||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Distributions From Net Realized Gains | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Operating Expenses (excluding expenses on securities sold short) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
A Class | ||||||||||||||||
2018 | $10.61 | (0.15) | (0.12) | (0.27) | (0.24) | $10.10 | (2.58)% | 4.07% | 4.32% | 1.91% | (1.35)% | (1.60)% | 307% | $12,055 | ||
2017 | $10.61 | (0.20) | 0.48 | 0.28 | (0.28) | $10.61 | 2.72% | 3.93% | 4.19% | 1.89% | (1.90)% | (2.16)% | 374% | $106,662 | ||
2016 | $10.36 | (0.22) | 0.64 | 0.42 | (0.17) | $10.61 | 4.07% | 4.03% | 4.33% | 1.86% | (2.07)% | (2.37)% | 679% | $76,630 | ||
2015 | $10.16 | (0.23) | 0.63 | 0.40 | (0.20) | $10.36 | 3.93% | 4.13% | 4.43% | 1.85% | (2.20)% | (2.50)% | 447% | $9,311 | ||
2014 | $10.21 | (0.07) | 0.22 | 0.15 | (0.20) | $10.16 | 1.50% | 4.34% | 4.64% | 1.85% | (0.60)% | (0.90)% | 521% | $13,640 | ||
C Class | ||||||||||||||||
2018 | $10.16 | (0.21) | (0.13) | (0.34) | (0.24) | $9.58 | (3.39)% | 4.82% | 5.07% | 2.66% | (2.10)% | (2.35)% | 307% | $22,629 | ||
2017 | $10.24 | (0.27) | 0.47 | 0.20 | (0.28) | $10.16 | 2.03% | 4.68% | 4.94% | 2.64% | (2.65)% | (2.91)% | 374% | $34,958 | ||
2016 | $10.08 | (0.29) | 0.62 | 0.33 | (0.17) | $10.24 | 3.28% | 4.78% | 5.08% | 2.61% | (2.82)% | (3.12)% | 679% | $20,902 | ||
2015 | $9.97 | (0.30) | 0.61 | 0.31 | (0.20) | $10.08 | 3.10% | 4.88% | 5.18% | 2.60% | (2.95)% | (3.25)% | 447% | $7,948 | ||
2014 | $10.10 | (0.14) | 0.21 | 0.07 | (0.20) | $9.97 | 0.72% | 5.09% | 5.39% | 2.60% | (1.35)% | (1.65)% | 521% | $6,844 | ||
R Class | ||||||||||||||||
2018 | $10.46 | (0.16) | (0.14) | (0.30) | (0.24) | $9.92 | (2.91)% | 4.32% | 4.57% | 2.16% | (1.60)% | (1.85)% | 307% | $79 | ||
2017 | $10.49 | (0.22) | 0.47 | 0.25 | (0.28) | $10.46 | 2.47% | 4.18% | 4.44% | 2.14% | (2.15)% | (2.41)% | 374% | $123 | ||
2016 | $10.26 | (0.21) | 0.61 | 0.40 | (0.17) | $10.49 | 3.91% | 4.28% | 4.58% | 2.11% | (2.32)% | (2.62)% | 679% | $76 | ||
2015 | $10.10 | (0.25) | 0.61 | 0.36 | (0.20) | $10.26 | 3.56% | 4.38% | 4.68% | 2.10% | (2.45)% | (2.75)% | 447% | $447 | ||
2014 | $10.17 | (0.18) | 0.31 | 0.13 | (0.20) | $10.10 | 1.21% | 4.59% | 4.89% | 2.10% | (0.85)% | (1.15)% | 521% | $427 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | Prior to April 10, 2017, the I Class was referred to as the Institutional Class. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Directors of American Century Capital Portfolios, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of AC Alternatives® Market Neutral Value Fund, one of the portfolios constituting the American Century Capital Portfolios, Inc. (the “Fund”), as of March 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of AC Alternatives® Market Neutral Value Fund of the American Century Capital Portfolios, Inc. as of March 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of March 31, 2018, 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
May 16, 2018
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 68 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) |
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired; Executive Vice President, ACC (2007 to 2013); President, ACS (2007 to 2013); Chief Operating Officer, ACC (2007 to 2012) | 68 | None |
Andrea C. Hall (1945) | Director | Since 1997 | Retired | 68 | None |
Jan M. Lewis (1957) | Director | Since 2011 | Retired; President and Chief Executive Officer, Catholic Charities of Northeast Kansas (human services organization) (2006 to 2013) | 68 | None |
32
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
M. Jeannine Strandjord (1945) | Director | Since 1994 | Self-employed Consultant | 68 | Euronet Worldwide Inc.; MGP Ingredients, Inc. |
John R. Whitten (1946) | Director | Since 2008 | Retired | 68 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 70 | None |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director and President | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 115 | BioMed Valley Discoveries, Inc. |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
33
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds, unless otherwise noted. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
Jonathan S. Thomas (1963) | Director and President since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present); Vice President, Client Interactions and Marketing, ACIS (2013 to 2014). Also serves as Vice President, ACIS |
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
C. Jean Wade (1964) | Vice President,Treasurer and Chief Financial Officer since 2012 | Vice President, ACS (2000 to present) |
Robert J. Leach (1966) | Vice President since 2006 and Assistant Treasurer since 2012 | Vice President, ACS (2000 to present) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present); Associate General Counsel, ACC (2001 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
34
Proxy Voting Results |
A special meeting of shareholders was held on October 18, 2017, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect four directors to the Board of Directors of American Century Capital Portfolios, Inc.:
Affirmative | Withhold | ||||||
Thomas W. Bunn | $ | 24,595,873,549 | $ | 400,991,853 | |||
Barry Fink | $ | 24,607,840,546 | $ | 389,024,856 | |||
Jan M. Lewis | $ | 24,616,409,175 | $ | 380,456,227 | |||
Stephen E. Yates | $ | 24,605,431,961 | $ | 391,433,441 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Andrea C. Hall, James A. Olson, M. Jeannine Strandjord, and John R. Whitten.
35
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time and change your withholding percentage for future distributions.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on 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. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
36
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 March 31, 2018.
The fund hereby designates $6,768,945 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended March 31, 2018.
The fund hereby designates $6,523,897, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended March 31, 2018.
37
Notes |
38
Notes |
39
Notes |
40
![]() | ||
Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2018 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-92270 1805 |
![acihorizblkb99.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/acihorizblkb99.jpg)
Annual Report | |
March 31, 2018 | |
Equity Income Fund | |
Investor Class (TWEIX) | |
I Class (ACIIX) | |
Y Class (AEIYX) | |
A Class (TWEAX) | |
C Class (AEYIX) | |
R Class (AEURX) | |
R5 Class (AEIUX) | |
R6 Class (AEUDX) |
Table of Contents |
President’s Letter | 2 | |
Performance | 3 | |
Portfolio Commentary | ||
Fund Characteristics | ||
Shareholder Fee Example | ||
Schedule of Investments | ||
Statement of Assets and Liabilities | ||
Statement of Operations | ||
Statement of Changes in Net Assets | ||
Notes to Financial Statements | ||
Financial Highlights | ||
Report of Independent Registered Public Accounting Firm | ||
Management | ||
Proxy Voting Results | ||
Additional Information |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
![jthomasrev0514.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/jthomasrev0514.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended March 31, 2018. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional, updated investment and market insights, we encourage you to visit our website, americancentury.com.
Rally Rolled On, Until Volatility Resurfaced
For most of the 12-month period, broad U.S. stock and bond indices generated positive returns. Stocks generally rallied against a backdrop of robust corporate earnings results, steady economic growth, relatively low interest rates, and U.S. tax reform. For bonds, modest economic gains, relatively muted inflation, and gradual—and well telegraphed—tightening from the Federal Reserve (the Fed) continued to support positive performance.
Then, in early February, a force that was largely dormant during 2017—volatility—re-emerged. Robust U.S. wage growth triggered expectations for rising inflation, higher interest rates, and a more-hawkish Fed. Treasury yields climbed to their highest levels in several years, and stock prices plunged into correction territory. Economic data released in March helped calm the unrest, while the Fed's March rate hike, which investors had expected, had little impact. Markets recovered much of the previous weeks’ losses, until a fresh round of worries emerged. President Trump announced the U.S. would implement tariffs on certain imports from China, sparking fears of a global trade war and triggering a flight to quality in the financial markets.
Despite the resurgence of volatility late in the period, U.S. stocks (S&P 500 Index) delivered a total return of 13.99% for the 12 months. Continuing a long-standing trend, growth stocks significantly outperformed their value counterparts across the capitalization spectrum. Meanwhile, the March flight to quality helped bonds hang onto the modest gains generated ahead of the market turbulence, and investment-grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index) returned 1.20% for the 12-month period.
With inflationary pressures mounting, Treasury yields rising, volatility resurfacing, and the implications of tax reform still unfolding, investors likely will face new opportunities and challenges in the months ahead. We believe this scenario warrants a disciplined, diversified, and risk-aware approach, using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a01.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/image48a01.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of March 31, 2018 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | TWEIX | 5.61% | 10.25% | 8.25% | — | 8/1/94 |
Russell 3000 Value Index | — | 6.81% | 10.70% | 7.84% | — | — |
S&P 500 Index | — | 13.99% | 13.30% | 9.49% | — | — |
I Class | ACIIX | 5.82% | 10.46% | 8.46% | — | 7/8/98 |
Y Class | AEIYX | — | — | — | 5.83% | 4/10/17 |
A Class | TWEAX | 3/7/97 | ||||
No sales charge | 5.36% | 9.98% | 7.98% | — | ||
With sales charge | -0.73% | 8.68% | 7.34% | — | ||
C Class | AEYIX | 4.58% | 9.17% | 7.18% | — | 7/13/01 |
R Class | AEURX | 5.11% | 9.71% | 7.70% | — | 8/29/03 |
R5 Class | AEIUX | — | — | — | 5.57% | 4/10/17 |
R6 Class | AEUDX | 5.97% | — | — | 10.00% | 7/26/13 |
Average annual returns since inception are presented when ten years of performance history is not available.
Prior to April 10, 2017, the I Class was referred to as the Institutional Class.
Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum initial sales charge and may be subject to a maximum CDSC of 1.00%. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
3
Growth of $10,000 Over 10 Years |
$10,000 investment made March 31, 2008 |
Performance for other share classes will vary due to differences in fee structure. |
![chart-4ac4fe75a3b357c1927.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/chart-4ac4fe75a3b357c1927.jpg)
Value on March 31, 2018 | |
Investor Class — $22,100 | |
Russell 3000 Value Index — $21,274 | |
S&P 500 Index — $24,771 | |
Total Annual Fund Operating Expenses | |||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class |
0.93% | 0.73% | 0.58% | 1.18% | 1.93% | 1.43% | 0.73% | 0.58% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
4
Portfolio Commentary |
Portfolio Managers: Phil Davidson, Kevin Toney, Michael Liss, and Dan Gruemmer
Performance Summary
Equity Income returned 5.61%* for the fiscal year ended March 31, 2018, underperforming the Russell 3000 Value Index, which returned 6.81%. The financials sector drove underperformance relative to the benchmark due to an underweight allocation and security selection. Stock choices in health care, utilities, and consumer discretionary also detracted from performance. Security selection and a portfolio underweight in real estate led contributors. Stock selection and an overweight allocation to information technology were also helpful. Underweighting telecommunication services and security selection in the sector benefited relative performance.
Financials and Health Care Were Key Detractors
An underweight in the financial services sector dampened relative performance. Lack of exposure to the common stock of Bank of America also detracted. Bank stocks such as Bank of America benefited from the Federal Reserve's (Fed's) interest rate increases. Stock choices in the health care sector detracted. Roche Holding hampered performance in the sector. The stock of this pharmaceutical company underperformed due to concerns over steeper-than-expected erosion from biosimilar competition in the company’s three largest products. These products account for approximately 40% of the company’s revenues and are highly profitable.
Other key detractors included General Mills. The stock underperformed after the company announced the acquisition of Blue Buffalo Pet Products, a pet food company. The company also surprised investors with weak quarterly results due to a spike in freight costs. We reduced our position. Our underweight allocation to Intel detracted from relative performance. The stock rose after the company reported better-than-expected earnings for its most recent quarter. Intel is benefiting from its focus on non-PC markets, especially the fast-growing data-center business. Intensifying retail competition and rising input costs pressured the stock of many consumer goods companies, including Procter & Gamble, a significant detractor for the fund. However, the company holds leading market share in most segments in which it competes, is introducing new products, and remains highly profitable. Schlumberger hampered performance. The supplier of equipment and services to energy companies has significant exposure to the relatively weak non-U.S. markets, which weighed on the stock.
Real Estate Led Contributors
Real estate remains a portfolio underweight, as we believe real estate investment trusts (REITs) have been generally overvalued for some time. This underweight position assisted relative performance, as higher interest rates weighed on sector performance. Stock selection in real estate was also beneficial, due in part to an investment in American Tower, a REIT that owns and operates wireless communications towers. The stock benefited from expectations for more traffic to the company’s towers as wireless telecommunication services companies offer more unlimited data plans. The company also benefited from its exposure to rapidly growing non-U.S. markets, such as India.
Stock selection and an overweight in information technology benefited performance. Maxim Integrated Products was a significant contributor in the sector. The company makes analog semiconductors for diverse end markets, including industrial, automotive, and communication.
* All fund returns referenced in this commentary are for Investor Class shares. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund's benchmark, other share classes may not. See page 3 for returns for all share classes.
5
Maxim outperformed after delivering strong quarterly results, and sales and margins are expected to increase. Semiconductor company Applied Materials turned in strong performance as the company continues to gain market share and exceed expectations. Additionally, the company raised guidance and doubled its dividend.
Elsewhere, our underweight in General Electric was a key contributor. The industrial conglomerate underperformed due to fundamental challenges in the power and financial business segments and uncertainty over asset dispositions. PNC Financial Services Group outperformed on further increases in earnings estimates due to higher fee income, healthy credit quality, lower taxes resulting from the new tax legislation, and its 21% ownership of BlackRock. Underweighting telecommunications giant AT&T aided relative performance. The stock declined as the company reported lower-than-expected quarterly revenues due to increased competition in wireless, as well as uncertainty related to the pending Time Warner acquisition. Energy company TOTAL was among the portfolio’s top contributors. The stock outperformed after reporting strong quarterly earnings and announcing enhanced capital return targets through 2020.
Portfolio Positioning
The portfolio continues to invest in quality companies where fundamentals are stable to improving but stock price valuation does not fully reflect these factors. Our process is based on individual security selection, but broad themes have emerged.
Energy was a top overweight in the portfolio at the end of the period. We hold attractively valued, higher-quality companies, including integrated oil companies with strong balance sheets and sustainable dividends. We also hold some midstream master limited partnerships that are more stable relative to peers. We have found value opportunities in consumer staples. Companies in this sector tend to offer business models that fit our investment process well. Additionally, valuations have become attractive as fundamental headwinds, including fears of increased competition, have pressured stock prices.
The portfolio ended the year underweight in the financials sector. Within financials, our main exposure is to banks. The Fed’s plan to raise interest rates bodes well for banks’ earnings, and we believe that many banks are attractively valued due to the cost-efficiency measures that have been implemented. We tend to avoid lower-quality areas within the sector, such as consumer finance and select insurance companies. Consumer discretionary continues to be a consistent underweight. We generally seek attractively valued, higher-quality companies with sustainable business models, and stocks in the consumer discretionary sector fit that profile less frequently.
6
Fund Characteristics |
MARCH 31, 2018 | |
Top Ten Holdings | % of net assets |
Procter & Gamble Co. (The) | 4.7% |
Johnson & Johnson | 4.4% |
iShares Russell 1000 Value ETF | 3.2% |
TOTAL SA | 2.9% |
Republic Services, Inc. | 2.8% |
PNC Financial Services Group, Inc. (The) | 2.6% |
Chevron Corp. | 2.3% |
Medtronic plc | 2.2% |
Schlumberger Ltd. | 2.2% |
Bank of America Corp. (Convertible) | 2.2% |
Top Five Industries | % of net assets |
Banks | 13.4% |
Oil, Gas and Consumable Fuels | 10.1% |
Pharmaceuticals | 9.0% |
Semiconductors and Semiconductor Equipment | 4.8% |
Household Products | 4.7% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 72.6% |
Foreign Common Stocks* | 6.5% |
Preferred Stocks | 5.6% |
Convertible Bonds | 4.8% |
Convertible Preferred Stocks | 4.2% |
Exchange-Traded Funds | 3.2% |
Total Equity Exposure | 96.9% |
Temporary Cash Investments | 2.6% |
Other Assets and Liabilities | 0.5% |
*Includes depositary shares, dual listed securities and foreign ordinary shares.
7
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from October 1, 2017 to March 31, 2018.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or I Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
8
Beginning Account Value 10/1/17 | Ending Account Value 3/31/18 | Expenses Paid During Period(1) 10/1/17 - 3/31/18 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $1,004.20 | $4.55 | 0.91% |
I Class | $1,000 | $1,006.30 | $3.55 | 0.71% |
Y Class | $1,000 | $1,007.00 | $2.80 | 0.56% |
A Class | $1,000 | $1,004.10 | $5.80 | 1.16% |
C Class | $1,000 | $1,000.50 | $9.53 | 1.91% |
R Class | $1,000 | $1,002.90 | $7.04 | 1.41% |
R5 Class | $1,000 | $1,005.10 | $3.55 | 0.71% |
R6 Class | $1,000 | $1,007.00 | $2.80 | 0.56% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.39 | $4.58 | 0.91% |
I Class | $1,000 | $1,021.39 | $3.58 | 0.71% |
Y Class | $1,000 | $1,022.14 | $2.82 | 0.56% |
A Class | $1,000 | $1,019.15 | $5.84 | 1.16% |
C Class | $1,000 | $1,015.41 | $9.60 | 1.91% |
R Class | $1,000 | $1,017.90 | $7.09 | 1.41% |
R5 Class | $1,000 | $1,021.39 | $3.58 | 0.71% |
R6 Class | $1,000 | $1,022.14 | $2.82 | 0.56% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
9
Schedule of Investments |
MARCH 31, 2018
Shares/ Principal Amount | Value | |||||
COMMON STOCKS — 79.1% | ||||||
Air Freight and Logistics — 1.1% | ||||||
United Parcel Service, Inc., Class B | 1,199,018 | $ | 125,489,224 | |||
Auto Components — 0.1% | ||||||
Aptiv plc | 189,098 | 16,067,657 | ||||
Automobiles — 0.5% | ||||||
Honda Motor Co. Ltd. | 1,098,200 | 38,132,276 | ||||
Toyota Motor Corp. | 298,700 | 19,467,607 | ||||
57,599,883 | ||||||
Banks — 7.7% | ||||||
Commerce Bancshares, Inc. | 1,071,037 | 64,165,827 | ||||
JPMorgan Chase & Co. | 2,146,897 | 236,094,263 | ||||
PNC Financial Services Group, Inc. (The) | 1,998,918 | 302,316,358 | ||||
SunTrust Banks, Inc. | 2,586,859 | 176,009,886 | ||||
U.S. Bancorp | 998,500 | 50,424,250 | ||||
Wells Fargo & Co. | 1,398,200 | 73,279,662 | ||||
902,290,246 | ||||||
Beverages — 1.1% | ||||||
PepsiCo, Inc. | 1,133,500 | 123,721,525 | ||||
Biotechnology — 0.1% | ||||||
Amgen, Inc. | 100,752 | 17,176,201 | ||||
Capital Markets — 2.8% | ||||||
AllianceBernstein Holding LP | 1,999,778 | 53,694,039 | ||||
Bank of New York Mellon Corp. (The) | 3,398,400 | 175,119,552 | ||||
BlackRock, Inc. | 58,900 | 31,907,308 | ||||
Northern Trust Corp. | 596,340 | 61,500,544 | ||||
322,221,443 | ||||||
Chemicals — 1.5% | ||||||
Air Products & Chemicals, Inc. | 867,500 | 137,958,525 | ||||
DowDuPont, Inc. | 599,500 | 38,194,145 | ||||
176,152,670 | ||||||
Commercial Services and Supplies — 3.4% | ||||||
Republic Services, Inc. | 4,954,161 | 328,114,083 | ||||
Waste Management, Inc. | 798,300 | 67,152,996 | ||||
395,267,079 | ||||||
Communications Equipment — 1.1% | ||||||
Cisco Systems, Inc. | 2,998,691 | 128,613,857 | ||||
Containers and Packaging — 1.2% | ||||||
Bemis Co., Inc. | 2,199,402 | 95,717,975 | ||||
International Paper Co. | 799,880 | 42,737,588 | ||||
138,455,563 | ||||||
Distributors — 0.7% | ||||||
Genuine Parts Co. | 899,400 | 80,802,096 | ||||
Diversified Telecommunication Services — 2.5% | ||||||
AT&T, Inc. | 3,498,700 | 124,728,655 |
10
Shares/ Principal Amount | Value | |||||
Verizon Communications, Inc. | 3,498,037 | $ | 167,276,129 | |||
292,004,784 | ||||||
Electric Utilities — 2.0% | ||||||
Edison International | 999,899 | 63,653,570 | ||||
Eversource Energy | 1,299,100 | 76,542,972 | ||||
Pinnacle West Capital Corp. | 1,189,817 | 94,947,397 | ||||
235,143,939 | ||||||
Electrical Equipment — 0.6% | ||||||
Emerson Electric Co. | 999,100 | 68,238,530 | ||||
Energy Equipment and Services — 2.2% | ||||||
Schlumberger Ltd. | 3,999,231 | 259,070,184 | ||||
Equity Real Estate Investment Trusts (REITs) — 3.1% | ||||||
American Tower Corp. | 691,500 | 100,502,610 | ||||
Boston Properties, Inc. | 332,200 | 40,933,684 | ||||
Public Storage | 209,000 | 41,881,510 | ||||
Weyerhaeuser Co. | 5,198,100 | 181,933,500 | ||||
365,251,304 | ||||||
Food and Staples Retailing — 1.8% | ||||||
Walmart, Inc. | 2,380,083 | 211,755,985 | ||||
Food Products — 0.9% | ||||||
General Mills, Inc. | 1,976,998 | 89,083,530 | ||||
Mondelez International, Inc., Class A | 498,800 | 20,814,924 | ||||
109,898,454 | ||||||
Gas Utilities — 3.8% | ||||||
Atmos Energy Corp. | 1,598,305 | 134,641,213 | ||||
ONE Gas, Inc.(1) | 3,038,696 | 200,614,710 | ||||
Spire, Inc. | 1,499,882 | 108,441,469 | ||||
443,697,392 | ||||||
Health Care Equipment and Supplies — 2.4% | ||||||
Medtronic plc | 3,256,336 | 261,223,274 | ||||
Siemens Healthineers AG(2) | 351,001 | 14,425,095 | ||||
275,648,369 | ||||||
Health Care Providers and Services — 0.5% | ||||||
Cardinal Health, Inc. | 61,981 | 3,884,969 | ||||
Quest Diagnostics, Inc. | 599,258 | 60,105,577 | ||||
63,990,546 | ||||||
Hotels, Restaurants and Leisure — 0.5% | ||||||
McDonald's Corp. | 399,200 | 62,426,896 | ||||
Household Products — 4.7% | ||||||
Procter & Gamble Co. (The) | 6,987,459 | 553,965,750 | ||||
Industrial Conglomerates — 1.5% | ||||||
3M Co. | 710,200 | 155,903,104 | ||||
Smiths Group plc | 797,800 | 16,965,686 | ||||
172,868,790 | ||||||
Insurance — 3.9% | ||||||
Allstate Corp. (The) | 199,200 | 18,884,160 | ||||
Chubb Ltd. | 1,398,628 | 191,290,352 | ||||
Marsh & McLennan Cos., Inc. | 2,298,005 | 189,792,233 | ||||
MetLife, Inc. | 1,198,323 | 54,991,042 | ||||
454,957,787 |
11
Shares/ Principal Amount | Value | |||||
IT Services — 1.4% | ||||||
Automatic Data Processing, Inc. | 1,298,251 | $ | 147,325,523 | |||
International Business Machines Corp. | 69,000 | 10,586,670 | ||||
157,912,193 | ||||||
Media — 0.2% | ||||||
Time Warner, Inc. | 298,300 | 28,213,214 | ||||
Oil, Gas and Consumable Fuels — 10.1% | ||||||
Chevron Corp. | 2,345,216 | 267,448,432 | ||||
Enterprise Products Partners LP | 7,999,900 | 195,837,552 | ||||
EQT Midstream Partners LP | 899,797 | 53,115,017 | ||||
Exxon Mobil Corp. | 197,100 | 14,705,631 | ||||
Occidental Petroleum Corp. | 798,977 | 51,901,546 | ||||
Royal Dutch Shell plc, A Shares | 3,798,700 | 121,149,341 | ||||
Shell Midstream Partners LP | 2,353,436 | 49,539,828 | ||||
Spectra Energy Partners LP | 2,560,249 | 86,126,776 | ||||
TOTAL SA | 5,898,858 | 335,253,562 | ||||
1,175,077,685 | ||||||
Personal Products — 0.6% | ||||||
Unilever NV CVA | 1,156,200 | 65,358,177 | ||||
Pharmaceuticals — 9.0% | ||||||
Eli Lilly & Co. | 354,778 | 27,449,174 | ||||
Johnson & Johnson | 3,999,998 | 512,599,744 | ||||
Merck & Co., Inc. | 2,499,522 | 136,148,963 | ||||
Pfizer, Inc. | 6,397,000 | 227,029,530 | ||||
Roche Holding AG | 631,900 | 144,932,511 | ||||
1,048,159,922 | ||||||
Road and Rail — 0.7% | ||||||
Norfolk Southern Corp. | 599,923 | 81,457,545 | ||||
Semiconductors and Semiconductor Equipment — 2.6% | ||||||
Applied Materials, Inc. | 1,398,203 | 77,754,069 | ||||
Intel Corp. | 697,500 | 36,325,800 | ||||
Maxim Integrated Products, Inc. | 3,176,900 | 191,312,918 | ||||
305,392,787 | ||||||
Software — 1.8% | ||||||
Microsoft Corp. | 479,936 | 43,803,759 | ||||
Oracle Corp. (New York) | 3,695,552 | 169,071,504 | ||||
212,875,263 | ||||||
Thrifts and Mortgage Finance — 1.0% | ||||||
Capitol Federal Financial, Inc.(1) | 9,194,379 | 113,550,581 | ||||
TOTAL COMMON STOCKS (Cost $7,854,589,678) | 9,240,773,521 | |||||
PREFERRED STOCKS — 5.6% | ||||||
Banks — 3.6% | ||||||
Bank of America Corp., 5.875% | 15,968,000 | 16,088,693 | ||||
Citigroup, Inc., 5.95% | 155,226,000 | 159,983,677 | ||||
U.S. Bancorp, 5.30% | 116,950,000 | 119,873,750 | ||||
Wells Fargo & Co., 5.89% | 119,958,000 | 121,828,145 | ||||
417,774,265 | ||||||
Capital Markets — 0.9% | ||||||
Goldman Sachs Group, Inc. (The), 5.30% | 109,974,000 | 110,523,870 |
12
Shares/ Principal Amount | Value | |||||
Gas Utilities — 0.8% | ||||||
Plains All American Pipeline LP, 6.125% | 102,974,000 | $ | 99,627,345 | |||
Industrial Conglomerates — 0.3% | ||||||
General Electric Co., 5.00% | 29,990,000 | 29,727,587 | ||||
TOTAL PREFERRED STOCKS (Cost $656,644,050) | 657,653,067 | |||||
CONVERTIBLE BONDS — 4.8% | ||||||
Air Freight and Logistics — 0.2% | ||||||
Wells Fargo Bank N.A., (convertible into United Parcel Service Inc.), 5.95%, 10/3/18(4)(5) | $ | 191,800 | 19,851,300 | |||
Construction Materials — 0.7% | ||||||
Citigroup Global Markets Holdings, Inc., (convertible into Martin Marietta Materials, Inc.), 10.19%, 8/14/18(4)(5) | 67,430 | 14,203,364 | ||||
Credit Suisse AG, (convertible into Martin Marietta Materials, Inc.), 7.95%, 9/7/18(4)(5) | 66,700 | 13,631,158 | ||||
Credit Suisse AG, (convertible into Martin Marietta Materials, Inc.), 5.70%, 9/14/18(4)(5) | 79,900 | 16,469,194 | ||||
Credit Suisse AG, (convertible into Martin Marietta Materials, Inc.), 5.90%, 8/23/18(4)(5) | 82,000 | 17,436,828 | ||||
Merrill Lynch International & Co. C.V., (convertible into Martin Marietta Materials, Inc.), 9.30%, 8/15/18(4)(5) | 91,700 | 19,008,766 | ||||
80,749,310 | ||||||
Energy Equipment and Services — 0.1% | ||||||
Goldman Sachs International, (convertible into Schlumberger Ltd.), 4.35%, 7/10/18(4)(5) | 226,700 | 15,105,766 | ||||
Food Products — 0.2% | ||||||
Credit Suisse AG, (convertible into Mondelez International, Inc.), 3.30%, 7/12/18(4)(5) | 464,900 | 19,544,452 | ||||
Health Care Equipment and Supplies — 0.2% | ||||||
Morgan Stanley B.V., (convertible into Zimmer Biomet Holdings, Inc.), 1.80%, 5/4/18(4)(5) | 166,900 | 19,160,116 | ||||
Health Care Providers and Services — 0.1% | ||||||
Royal Bank of Canada, (convertible into Cigna Corp.), 1.60%, 9/13/18(4)(5) | 97,600 | 16,466,882 | ||||
Multiline Retail — 0.3% | ||||||
Royal Bank of Canada, (convertible into Target Corp.), 7.10%, 5/25/18(4)(5) | 499,000 | 28,718,785 | ||||
Semiconductors and Semiconductor Equipment — 2.2% | ||||||
Microchip Technology, Inc., 1.625%, 2/15/27 | 197,956,000 | 235,017,718 | ||||
Teradyne, Inc., 1.25%, 12/15/23 | 15,915,000 | 24,305,484 | ||||
259,323,202 | ||||||
Specialty Retail — 0.8% | ||||||
Goldman Sachs International, (convertible into Lowe’s Companies, Inc.), 7.26%, 9/5/18(4)(5) | 288,100 | 25,288,823 | ||||
Merrill Lynch International & Co. C.V., (convertible into L Brands, Inc.), 16.00%, 7/12/18(4)(5) | 267,000 | 10,702,382 | ||||
Merrill Lynch International & Co. C.V., (convertible into Lowe’s Companies, Inc.), 4.80%, 5/17/18(4)(5) | 574,000 | 47,163,600 | ||||
Royal Bank of Canada, (convertible into L Brands, Inc.), 16.01%, 9/7/18(4)(5) | 333,300 | 13,494,338 | ||||
96,649,143 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $521,552,960) | 555,568,956 |
13
Shares/ Principal Amount | Value | |||||
CONVERTIBLE PREFERRED STOCKS — 4.2% | ||||||
Banks — 2.1% | ||||||
Bank of America Corp., 7.25% | 194,902 | $ | 251,316,384 | |||
Equity Real Estate Investment Trusts (REITs) — 0.6% | ||||||
Welltower, Inc., 6.50% | 1,199,657 | 66,748,916 | ||||
Machinery — 1.5% | ||||||
Stanley Black & Decker, Inc., 5.375%, 5/15/20 | 1,499,219 | 172,680,044 | ||||
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $451,056,943) | 490,745,344 | |||||
EXCHANGE-TRADED FUNDS — 3.2% | ||||||
iShares Russell 1000 Value ETF (Cost $321,526,210) | 3,109,994 | 373,074,880 | ||||
TEMPORARY CASH INVESTMENTS — 2.6% | ||||||
Federal Home Loan Bank Discount Notes, 1.25%, 4/2/18(3) | $ | 144,534,000 | 144,534,000 | |||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.375% - 3.625%, 2/15/23 - 5/15/47, valued at $76,535,917), in a joint trading account at 1.45%, dated 3/29/18, due 4/2/18 (Delivery value $74,877,248) | 74,865,186 | |||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.25%, 11/15/24, valued at $63,665,391), at 0.74%, dated 3/29/18, due 4/2/18 (Delivery value $62,418,132) | 62,413,000 | |||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 21,739,756 | 21,739,756 | ||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $303,547,002) | 303,551,942 | |||||
TOTAL INVESTMENT SECURITIES — 99.5% (Cost $10,108,916,843) | 11,621,367,710 | |||||
OTHER ASSETS AND LIABILITIES — 0.5% | 57,231,436 | |||||
TOTAL NET ASSETS — 100.0% | $ | 11,678,599,146 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||
CHF | 2,934,900 | USD | 3,124,195 | Credit Suisse AG | 6/29/18 | $ | (31,583 | ) | ||
USD | 136,163,472 | CHF | 128,783,412 | Credit Suisse AG | 6/29/18 | 459,692 | ||||
USD | 480,960,218 | EUR | 388,969,040 | UBS AG | 6/29/18 | (725,379 | ) | |||
GBP | 424,643 | USD | 606,617 | Morgan Stanley | 6/29/18 | (8,682 | ) | |||
USD | 11,719,406 | GBP | 8,289,119 | Morgan Stanley | 6/29/18 | 47,567 | ||||
USD | 1,950,766 | GBP | 1,373,857 | Morgan Stanley | 6/29/18 | 16,250 | ||||
USD | 1,819,455 | GBP | 1,280,660 | Morgan Stanley | 6/29/18 | 16,169 | ||||
USD | 385,944 | GBP | 272,848 | Morgan Stanley | 6/29/18 | 1,750 | ||||
JPY | 236,220,480 | USD | 2,263,277 | Credit Suisse AG | 6/29/18 | (30,295 | ) | |||
USD | 51,540,170 | JPY | 5,441,971,950 | Credit Suisse AG | 6/29/18 | 97,452 | ||||
USD | 2,090,436 | JPY | 220,738,140 | Credit Suisse AG | 6/29/18 | 3,808 | ||||
$ | (153,251 | ) |
14
NOTES TO SCHEDULE OF INVESTMENTS | ||
CHF | - | Swiss Franc |
CVA | - | Certificaten Van Aandelen |
EUR | - | Euro |
GBP | - | British Pound |
JPY | - | Japanese Yen |
USD | - | United States Dollar |
(1) | Affiliated Company: the fund’s holding represents ownership of 5% or more of the voting securities of the company; therefore, the company is affiliated as defined in the Investment Company Act of 1940. |
(2) | Non-income producing. |
(3) | The rate indicated is the yield to maturity at purchase. |
(4) | Equity-linked debt security. The aggregated value of these securities at the period end was $296,245,754, which represented 2.5% of total net assets. |
(5) | 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 $296,245,754, which represented 2.5% of total net assets. |
See Notes to Financial Statements.
15
Statement of Assets and Liabilities |
MARCH 31, 2018 | |||
Assets | |||
Investment securities - unaffiliated, at value (cost of $9,893,627,986) | $ | 11,307,202,419 | |
Investment securities - affiliated, at value (cost of $215,288,857) | 314,165,291 | ||
Total investment securities, at value (cost of $10,108,916,843) | 11,621,367,710 | ||
Receivable for investments sold | 100,525,059 | ||
Receivable for capital shares sold | 6,150,082 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 642,688 | ||
Dividends and interest receivable | 37,066,212 | ||
11,765,751,751 | |||
Liabilities | |||
Disbursements in excess of demand deposit cash | 1,620,365 | ||
Payable for investments purchased | 57,321,255 | ||
Payable for capital shares redeemed | 18,221,736 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 795,939 | ||
Accrued management fees | 8,408,497 | ||
Distribution and service fees payable | 784,813 | ||
87,152,605 | |||
Net Assets | $ | 11,678,599,146 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 10,020,812,184 | |
Distributions in excess of net investment income | (56,078,531 | ) | |
Undistributed net realized gain | 201,565,141 | ||
Net unrealized appreciation | 1,512,300,352 | ||
$ | 11,678,599,146 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $6,496,269,082 | 755,225,026 | $8.60 | |||
I Class, $0.01 Par Value | $2,621,898,172 | 304,536,927 | $8.61 | |||
Y Class, $0.01 Par Value | $216,014,020 | 25,066,354 | $8.62 | |||
A Class, $0.01 Par Value | $931,566,606 | 108,320,028 | $8.60* | |||
C Class, $0.01 Par Value | $627,651,373 | 72,990,830 | $8.60 | |||
R Class, $0.01 Par Value | $93,153,858 | 10,869,785 | $8.57 | |||
R5 Class, $0.01 Par Value | $653,086 | 75,897 | $8.60 | |||
R6 Class, $0.01 Par Value | $691,392,949 | 80,236,701 | $8.62 |
*Maximum offering price $9.12 (net asset value divided by 0.9425).
See Notes to Financial Statements.
16
Statement of Operations |
YEAR ENDED MARCH 31, 2018 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (including $13,833,269 from affiliates and net of foreign taxes withheld of $4,938,411) | $ | 295,040,096 | |
Interest | 46,417,018 | ||
341,457,114 | |||
Expenses: | |||
Management fees | 103,985,639 | ||
Distribution and service fees: | |||
A Class | 2,849,188 | ||
C Class | 6,836,736 | ||
R Class | 529,512 | ||
Directors' fees and expenses | 367,507 | ||
Other expenses | 313,330 | ||
114,881,912 | |||
Net investment income (loss) | 226,575,202 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions (including $20,248,209 from affiliates) | 938,488,441 | ||
Forward foreign currency exchange contract transactions | (52,368,859 | ) | |
Foreign currency translation transactions | 105,075 | ||
886,224,657 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments (including $(42,757,787) from affiliates) | (412,838,272 | ) | |
Forward foreign currency exchange contracts | (8,358,381 | ) | |
Translation of assets and liabilities in foreign currencies | 74,879 | ||
(421,121,774 | ) | ||
Net realized and unrealized gain (loss) | 465,102,883 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 691,678,085 |
See Notes to Financial Statements.
17
Statement of Changes in Net Assets |
YEARS ENDED MARCH 31, 2018 AND MARCH 31, 2017 | ||||||
Increase (Decrease) in Net Assets | March 31, 2018 | March 31, 2017 | ||||
Operations | ||||||
Net investment income (loss) | $ | 226,575,202 | $ | 208,006,955 | ||
Net realized gain (loss) | 886,224,657 | 1,106,969,093 | ||||
Change in net unrealized appreciation (depreciation) | (421,121,774 | ) | 451,113,676 | |||
Net increase (decrease) in net assets resulting from operations | 691,678,085 | 1,766,089,724 | ||||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Investor Class | (133,467,726 | ) | (129,563,399 | ) | ||
I Class | (53,387,964 | ) | (30,618,392 | ) | ||
Y Class | (3,600,971 | ) | — | |||
A Class | (16,523,339 | ) | (34,939,594 | ) | ||
C Class | (5,851,215 | ) | (5,979,666 | ) | ||
R Class | (1,430,543 | ) | (1,626,120 | ) | ||
R5 Class | (2,671 | ) | — | |||
R6 Class | (12,767,970 | ) | (8,068,622 | ) | ||
From net realized gains: | ||||||
Investor Class | (649,323,411 | ) | (400,934,887 | ) | ||
I Class | (265,153,510 | ) | (85,575,588 | ) | ||
Y Class | (21,803,401 | ) | — | |||
A Class | (94,207,788 | ) | (122,509,721 | ) | ||
C Class | (63,184,680 | ) | (39,374,591 | ) | ||
R Class | (9,833,306 | ) | (6,728,931 | ) | ||
R5 Class | (1,183 | ) | — | |||
R6 Class | (53,566,056 | ) | (22,997,300 | ) | ||
Decrease in net assets from distributions | (1,384,105,734 | ) | (888,916,811 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 69,850,724 | 1,945,344,324 | ||||
Net increase (decrease) in net assets | (622,576,925 | ) | 2,822,517,237 | |||
Net Assets | ||||||
Beginning of period | 12,301,176,071 | 9,478,658,834 | ||||
End of period | $ | 11,678,599,146 | $ | 12,301,176,071 | ||
Distributions in excess of net investment income | $ | (56,078,531 | ) | $ | (13,618,723 | ) |
See Notes to Financial Statements.
18
Notes to Financial Statements |
MARCH 31, 2018
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Equity Income Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek current income. Capital appreciation is a secondary objective.
The fund offers the Investor Class, I Class (formerly Institutional Class), Y Class, A Class, C Class, R Class, R5 Class and R6 Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. Sale of the Y Class and R5 Class commenced on April 10, 2017.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Fixed income securities are valued at the evaluated mean as provided by independent pricing services or at the mean of the most recent bid and asked prices as provided by investment dealers. Corporate bonds, U.S. Treasury and Government Agency securities and convertible bonds are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a
19
security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Equity-Linked Debt and Linked-Equity Securities — The fund may invest in hybrid equity securities, which usually convert into common stock at a date predetermined by the issuer. These securities generally offer a higher dividend yield than that of the common stock to which the security is linked. These instruments are issued by a company other than the one to which the security is linked and carry the credit of the issuer, not that of the underlying common stock. The securities’ appreciation is limited based on a predetermined final cap price at the date of the conversion. Risks of investing in these securities include, but are not limited to, a set time to capture the yield advantage, limited appreciation potential, decline in value of the underlying stock, and failure of the issuer to pay dividends or to deliver common stock at maturity.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that American Century Investment Management, Inc. (ACIM) (the investment advisor) has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
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
20
and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually. The fund may elect to treat a portion of its payment to a redeeming shareholder, which represents the pro rata share of undistributed net investment income and net realized gains, as a distribution for federal income tax purposes (tax equalization).
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc. (ACIS), and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that use very similar investment teams and strategies (strategy assets).
The management fee schedule range and the effective annual management fee for each class for the period ended March 31, 2018 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | |
Investor Class | 0.80% to 1.00% | 0.90% |
I Class | 0.60% to 0.80% | 0.70% |
Y Class | 0.45% to 0.65% | 0.55% |
A Class | 0.80% to 1.00% | 0.90% |
C Class | 0.80% to 1.00% | 0.90% |
R Class | 0.80% to 1.00% | 0.90% |
R5 Class | 0.60% to 0.80% | 0.70% |
R6 Class | 0.45% to 0.65% | 0.55% |
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the C Class will pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution
21
services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the period ended March 31, 2018 are detailed in the Statement of Operations.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $110,983,003 and $90,003,106, respectively. The effect of interfund transactions on the Statement of Operations was $5,739,960 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended March 31, 2018 were $8,756,518,475 and $9,789,408,103, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended March 31, 2018(1) | Year ended March 31, 2017 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 4,650,000,000 | 3,690,000,000 | ||||||||
Sold | 220,034,394 | $ | 2,024,700,321 | 293,507,890 | $ | 2,609,195,025 | ||||
Issued in reinvestment of distributions | 85,744,916 | 768,320,686 | 56,671,757 | 504,632,303 | ||||||
Redeemed | (352,933,378 | ) | (3,256,891,415 | ) | (189,696,984 | ) | (1,695,503,573 | ) | ||
(47,154,068 | ) | (463,870,408 | ) | 160,482,663 | 1,418,323,755 | |||||
I Class/Shares Authorized | 1,525,000,000 | 900,000,000 | ||||||||
Sold | 189,466,471 | 1,756,767,174 | 56,832,314 | 505,772,022 | ||||||
Issued in reinvestment of distributions | 31,636,282 | 283,692,561 | 12,014,795 | 107,079,509 | ||||||
Redeemed | (82,436,401 | ) | (754,037,843 | ) | (49,101,577 | ) | (441,160,610 | ) | ||
138,666,352 | 1,286,421,892 | 19,745,532 | 171,690,921 | |||||||
Y Class/Shares Authorized | 120,000,000 | N/A | ||||||||
Sold | 27,242,901 | 253,718,677 | ||||||||
Issued in reinvestment of distributions | 2,809,370 | 25,172,515 | ||||||||
Redeemed | (4,985,917 | ) | (45,825,277 | ) | ||||||
25,066,354 | 233,065,915 | |||||||||
A Class/Shares Authorized | 700,000,000 | 1,450,000,000 | ||||||||
Sold | 15,531,220 | 142,337,369 | 67,317,393 | 599,764,310 | ||||||
Issued in reinvestment of distributions | 11,661,099 | 104,352,195 | 17,235,247 | 153,324,817 | ||||||
Redeemed | (153,166,775 | ) | (1,408,340,462 | ) | (80,261,080 | ) | (716,879,699 | ) | ||
(125,974,456 | ) | (1,161,650,898 | ) | 4,291,560 | 36,209,428 | |||||
C Class/Shares Authorized | 485,000,000 | 380,000,000 | ||||||||
Sold | 7,910,258 | 72,726,799 | 23,508,729 | 208,356,587 | ||||||
Issued in reinvestment of distributions | 6,930,065 | 61,865,508 | 4,410,142 | 39,190,445 | ||||||
Redeemed | (19,731,607 | ) | (181,313,681 | ) | (16,945,928 | ) | (151,129,533 | ) | ||
(4,891,284 | ) | (46,721,374 | ) | 10,972,943 | 96,417,499 | |||||
R Class/Shares Authorized | 90,000,000 | 70,000,000 | ||||||||
Sold | 1,453,987 | 13,324,491 | 3,878,786 | 34,434,508 | ||||||
Issued in reinvestment of distributions | 1,242,566 | 11,076,926 | 926,459 | 8,213,953 | ||||||
Redeemed | (4,434,603 | ) | (40,627,431 | ) | (4,772,983 | ) | (42,240,369 | ) | ||
(1,738,050 | ) | (16,226,014 | ) | 32,262 | 408,092 | |||||
R5 Class/Shares Authorized | 50,000,000 | N/A | ||||||||
Sold | 81,148 | 738,366 | ||||||||
Issued in reinvestment of distributions | 437 | 3,854 | ||||||||
Redeemed | (5,688 | ) | (49,793 | ) | ||||||
75,897 | 692,427 | |||||||||
R6 Class/Shares Authorized | 400,000,000 | 180,000,000 | ||||||||
Sold | 34,905,890 | 318,810,650 | 37,017,253 | 333,067,159 | ||||||
Issued in reinvestment of distributions | 7,389,571 | 66,334,026 | 3,426,134 | 30,585,564 | ||||||
Redeemed | (15,915,475 | ) | (147,005,492 | ) | (15,805,023 | ) | (141,358,094 | ) | ||
26,379,986 | 238,139,184 | 24,638,364 | 222,294,629 | |||||||
Net increase (decrease) | 10,430,731 | $ | 69,850,724 | 220,163,324 | $ | 1,945,344,324 |
(1) | April 10, 2017 (commencement of sale) through March 31, 2018 for the Y Class and R5 Class. |
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6. Affiliated Company Transactions
If a fund's holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the period ended March 31, 2018 follows (amounts in thousands):
Company | Beginning Value | Purchase Cost | Sales Cost | Change in Net Unrealized Appreciation (Depreciation) | Ending Value | Ending Shares | Net Realized Gain (Loss) | Income | |||||||||||||||
Capitol Federal Financial, Inc. | $ | 148,922 | $ | 1,823 | $ | 13,805 | $ | (23,389 | ) | $ | 113,551 | 9,194 | $ | 2,377 | $ | 8,519 | |||||||
ONE Gas, Inc. | 235,879 | 12,760 | 28,655 | (19,369 | ) | 200,615 | 3,039 | 17,871 | 5,314 | ||||||||||||||
$ | 384,801 | $ | 14,583 | $ | 42,460 | $ | (42,758 | ) | $ | 314,166 | 12,233 | $ | 20,248 | $ | 13,833 |
7. 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. There were no significant transfers between levels during the period.
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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 | ||||||||
Automobiles | — | $ | 57,599,883 | — | ||||
Health Care Equipment and Supplies | $ | 261,223,274 | 14,425,095 | — | ||||
Industrial Conglomerates | 155,903,104 | 16,965,686 | — | |||||
Oil, Gas and Consumable Fuels | 718,674,782 | 456,402,903 | — | |||||
Personal Products | — | 65,358,177 | — | |||||
Pharmaceuticals | 903,227,411 | 144,932,511 | — | |||||
Other Industries | 6,446,060,695 | — | — | |||||
Preferred Stocks | — | 657,653,067 | — | |||||
Convertible Bonds | — | 555,568,956 | — | |||||
Convertible Preferred Stocks | — | 490,745,344 | — | |||||
Exchange-Traded Funds | 373,074,880 | — | — | |||||
Temporary Cash Investments | 21,739,756 | 281,812,186 | — | |||||
$ | 8,879,903,902 | $ | 2,741,463,808 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 642,688 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 795,939 | — |
8. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $788,240,691.
The value of foreign currency risk derivative instruments as of March 31, 2018, is disclosed on the Statement of Assets and Liabilities as an asset of $642,688 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $795,939 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended March 31, 2018, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(52,368,859) in net realized gain (loss) on forward foreign currency exchange contract transactions and $(8,358,381) in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
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9. Risk Factors
There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions.
10. Federal Tax Information
The tax character of distributions paid during the years ended March 31, 2018 and March 31, 2017 were as follows:
2018 | 2017 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 520,873,891 | $ | 358,935,958 | ||
Long-term capital gains | $ | 863,231,843 | $ | 529,980,853 |
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 | $ | 10,196,684,428 | |
Gross tax appreciation of investments | $ | 1,587,084,628 | |
Gross tax depreciation of investments | (162,401,346 | ) | |
Net tax appreciation (depreciation) of investments | 1,424,683,282 | ||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (380 | ) | |
Net tax appreciation (depreciation) | $ | 1,424,682,902 | |
Undistributed ordinary income | $ | 62,333,418 | |
Accumulated long-term gains | $ | 170,770,642 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales and the timing and recognition of partnership income.
11. 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 March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||
2018 | $9.13 | 0.17 | 0.37 | 0.54 | (0.17) | (0.90) | (1.07) | $8.60 | 5.61% | 0.91% | 1.86% | 75% | $6,496,269 | ||
2017 | $8.41 | 0.17 | 1.24 | 1.41 | (0.17) | (0.52) | (0.69) | $9.13 | 17.14% | 0.91% | 1.91% | 93% | $7,327,473 | ||
2016 | $8.71 | 0.21 | 0.32 | 0.53 | (0.20) | (0.63) | (0.83) | $8.41 | 6.78% | 0.94% | 2.44% | 88% | $5,399,702 | ||
2015 | $8.84 | 0.21 | 0.54 | 0.75 | (0.22) | (0.66) | (0.88) | $8.71 | 8.54% | 0.93% | 2.30% | 56% | $5,463,566 | ||
2014 | $8.47 | 0.20 | 0.92 | 1.12 | (0.20) | (0.55) | (0.75) | $8.84 | 13.64% | 0.93% | 2.31% | 57% | $5,406,362 | ||
I Class(4) | |||||||||||||||
2018 | $9.14 | 0.19 | 0.37 | 0.56 | (0.19) | (0.90) | (1.09) | $8.61 | 5.82% | 0.71% | 2.06% | 75% | $2,621,898 | ||
2017 | $8.42 | 0.19 | 1.24 | 1.43 | (0.19) | (0.52) | (0.71) | $9.14 | 17.36% | 0.71% | 2.11% | 93% | $1,515,758 | ||
2016 | $8.71 | 0.22 | 0.34 | 0.56 | (0.22) | (0.63) | (0.85) | $8.42 | 7.11% | 0.74% | 2.64% | 88% | $1,229,940 | ||
2015 | $8.85 | 0.22 | 0.54 | 0.76 | (0.24) | (0.66) | (0.90) | $8.71 | 8.63% | 0.73% | 2.50% | 56% | $1,318,193 | ||
2014 | $8.47 | 0.22 | 0.92 | 1.14 | (0.21) | (0.55) | (0.76) | $8.85 | 13.85% | 0.73% | 2.51% | 57% | $1,422,725 | ||
Y Class | |||||||||||||||
2018(5) | $9.16 | 0.20 | 0.36 | 0.56 | (0.20) | (0.90) | (1.10) | $8.62 | 5.83% | 0.56%(6) | 2.25%(6) | 75%(7) | $216,014 |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
A Class | |||||||||||||||
2018 | $9.13 | 0.14 | 0.38 | 0.52 | (0.15) | (0.90) | (1.05) | $8.60 | 5.36% | 1.16% | 1.61% | 75% | $931,567 | ||
2017 | $8.41 | 0.15 | 1.24 | 1.39 | (0.15) | (0.52) | (0.67) | $9.13 | 16.85% | 1.16% | 1.66% | 93% | $2,139,411 | ||
2016 | $8.71 | 0.18 | 0.33 | 0.51 | (0.18) | (0.63) | (0.81) | $8.41 | 6.51% | 1.19% | 2.19% | 88% | $1,934,681 | ||
2015 | $8.84 | 0.18 | 0.55 | 0.73 | (0.20) | (0.66) | (0.86) | $8.71 | 8.27% | 1.18% | 2.05% | 56% | $2,172,105 | ||
2014 | $8.47 | 0.18 | 0.91 | 1.09 | (0.17) | (0.55) | (0.72) | $8.84 | 13.36% | 1.18% | 2.06% | 57% | $2,722,731 | ||
C Class | |||||||||||||||
2018 | $9.13 | 0.08 | 0.37 | 0.45 | (0.08) | (0.90) | (0.98) | $8.60 | 4.58% | 1.91% | 0.86% | 75% | $627,651 | ||
2017 | $8.41 | 0.08 | 1.24 | 1.32 | (0.08) | (0.52) | (0.60) | $9.13 | 15.97% | 1.91% | 0.91% | 93% | $711,149 | ||
2016 | $8.71 | 0.12 | 0.33 | 0.45 | (0.12) | (0.63) | (0.75) | $8.41 | 5.72% | 1.94% | 1.44% | 88% | $562,723 | ||
2015 | $8.84 | 0.12 | 0.54 | 0.66 | (0.13) | (0.66) | (0.79) | $8.71 | 7.47% | 1.93% | 1.30% | 56% | $549,088 | ||
2014 | $8.47 | 0.12 | 0.91 | 1.03 | (0.11) | (0.55) | (0.66) | $8.84 | 12.53% | 1.93% | 1.31% | 57% | $521,688 | ||
R Class | |||||||||||||||
2018 | $9.10 | 0.13 | 0.36 | 0.49 | (0.12) | (0.90) | (1.02) | $8.57 | 5.11% | 1.41% | 1.36% | 75% | $93,154 | ||
2017 | $8.39 | 0.13 | 1.22 | 1.35 | (0.12) | (0.52) | (0.64) | $9.10 | 16.48% | 1.41% | 1.41% | 93% | $114,762 | ||
2016 | $8.69 | 0.16 | 0.33 | 0.49 | (0.16) | (0.63) | (0.79) | $8.39 | 6.27% | 1.44% | 1.94% | 88% | $105,462 | ||
2015 | $8.82 | 0.16 | 0.54 | 0.70 | (0.17) | (0.66) | (0.83) | $8.69 | 8.03% | 1.43% | 1.80% | 56% | $127,897 | ||
2014 | $8.45 | 0.16 | 0.91 | 1.07 | (0.15) | (0.55) | (0.70) | $8.82 | 13.12% | 1.43% | 1.81% | 57% | $169,852 | ||
R5 Class | |||||||||||||||
2018(5) | $9.15 | 0.21 | 0.33 | 0.54 | (0.19) | (0.90) | (1.09) | $8.60 | 5.57% | 0.71%(6) | 2.51%(6) | 75%(7) | $653 |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
R6 Class | |||||||||||||||
2018 | $9.15 | 0.21 | 0.36 | 0.57 | (0.20) | (0.90) | (1.10) | $8.62 | 5.97% | 0.56% | 2.21% | 75% | $691,393 | ||
2017 | $8.42 | 0.20 | 1.25 | 1.45 | (0.20) | (0.52) | (0.72) | $9.15 | 17.66% | 0.56% | 2.26% | 93% | $492,622 | ||
2016 | $8.72 | 0.24 | 0.32 | 0.56 | (0.23) | (0.63) | (0.86) | $8.42 | 7.14% | 0.59% | 2.79% | 88% | $246,151 | ||
2015 | $8.85 | 0.25 | 0.53 | 0.78 | (0.25) | (0.66) | (0.91) | $8.72 | 8.90% | 0.58% | 2.65% | 56% | $117,620 | ||
2014(8) | $8.94 | 0.17 | 0.46 | 0.63 | (0.17) | (0.55) | (0.72) | $8.85 | 7.41% | 0.58%(6) | 2.93%(6) | 57%(3) | $26,550 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2014. |
(4) | Prior to April 10, 2017, the I Class was referred to as the Institutional Class. |
(5) | April 10, 2017 (commencement of sale) through March 31, 2018. |
(6) | Annualized. |
(7) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2018. |
(8) | July 26, 2013 (commencement of sale) through March 31, 2014. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Directors of American Century Capital Portfolios, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Equity Income Fund, one of the portfolios constituting the American Century Capital Portfolios, Inc. (the “Fund”), as of March 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of Equity Income Fund of the American Century Capital Portfolios, Inc. as of March 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of March 31, 2018, 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
May 16, 2018
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 68 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) |
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired; Executive Vice President, ACC (2007 to 2013); President, ACS (2007 to 2013); Chief Operating Officer, ACC (2007 to 2012) | 68 | None |
Andrea C. Hall (1945) | Director | Since 1997 | Retired | 68 | None |
Jan M. Lewis (1957) | Director | Since 2011 | Retired; President and Chief Executive Officer, Catholic Charities of Northeast Kansas (human services organization) (2006 to 2013) | 68 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
M. Jeannine Strandjord (1945) | Director | Since 1994 | Self-employed Consultant | 68 | Euronet Worldwide Inc.; MGP Ingredients, Inc. |
John R. Whitten (1946) | Director | Since 2008 | Retired | 68 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 70 | None |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director and President | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 115 | BioMed Valley Discoveries, Inc. |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
32
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds, unless otherwise noted. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
Jonathan S. Thomas (1963) | Director and President since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present); Vice President, Client Interactions and Marketing, ACIS (2013 to 2014). Also serves as Vice President, ACIS |
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
C. Jean Wade (1964) | Vice President,Treasurer and Chief Financial Officer since 2012 | Vice President, ACS (2000 to present) |
Robert J. Leach (1966) | Vice President since 2006 and Assistant Treasurer since 2012 | Vice President, ACS (2000 to present) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present); Associate General Counsel, ACC (2001 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
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Proxy Voting Results |
A special meeting of shareholders was held on October 18, 2017, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect four directors to the Board of Directors of American Century Capital Portfolios, Inc.:
Affirmative | Withhold | ||||||
Thomas W. Bunn | $ | 24,595,873,549 | $ | 400,991,853 | |||
Barry Fink | $ | 24,607,840,546 | $ | 389,024,856 | |||
Jan M. Lewis | $ | 24,616,409,175 | $ | 380,456,227 | |||
Stephen E. Yates | $ | 24,605,431,961 | $ | 391,433,441 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Andrea C. Hall, James A. Olson, M. Jeannine Strandjord, and John R. Whitten.
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Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time and change your withholding percentage for future distributions.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on 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. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified dividend income for the fiscal year ended March 31, 2018.
For corporate taxpayers, the fund hereby designates $216,023,087, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended March 31, 2018 as qualified for the corporate dividends received deduction.
The fund hereby designates $305,032,071 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended March 31, 2018.
The fund hereby designates $899,787,151, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended March 31, 2018.
The fund utilized earnings and profits of $60,984,367 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
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![]() | ||
Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2018 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-92268 1805 |
![acihorizblkb99.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/acihorizblkb99.jpg)
Annual Report | |
March 31, 2018 | |
Large Company Value Fund | |
Investor Class (ALVIX) | |
I Class (ALVSX) | |
A Class (ALPAX) | |
C Class (ALPCX) | |
R Class (ALVRX) | |
R5 Class (ALVGX) | |
R6 Class (ALVDX) |
Table of Contents |
President’s Letter | 2 |
Performance | 3 |
Portfolio Commentary | |
Fund Characteristics | |
Shareholder Fee Example | |
Schedule of Investments | |
Statement of Assets and Liabilities | |
Statement of Operations | |
Statement of Changes in Net Assets | |
Notes to Financial Statements | |
Financial Highlights | |
Report of Independent Registered Public Accounting Firm | |
Management | |
Proxy Voting Results | |
Additional Information |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
![jthomasrev0514.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/jthomasrev0514.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended March 31, 2018. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional, updated investment and market insights, we encourage you to visit our website, americancentury.com.
Rally Rolled On, Until Volatility Resurfaced
For most of the 12-month period, broad U.S. stock and bond indices generated positive returns. Stocks generally rallied against a backdrop of robust corporate earnings results, steady economic growth, relatively low interest rates, and U.S. tax reform. For bonds, modest economic gains, relatively muted inflation, and gradual—and well telegraphed—tightening from the Federal Reserve (the Fed) continued to support positive performance.
Then, in early February, a force that was largely dormant during 2017—volatility—re-emerged. Robust U.S. wage growth triggered expectations for rising inflation, higher interest rates, and a more-hawkish Fed. Treasury yields climbed to their highest levels in several years, and stock prices plunged into correction territory. Economic data released in March helped calm the unrest, while the Fed's March rate hike, which investors had expected, had little impact. Markets recovered much of the previous weeks’ losses, until a fresh round of worries emerged. President Trump announced the U.S. would implement tariffs on certain imports from China, sparking fears of a global trade war and triggering a flight to quality in the financial markets.
Despite the resurgence of volatility late in the period, U.S. stocks (S&P 500 Index) delivered a total return of 13.99% for the 12 months. Continuing a long-standing trend, growth stocks significantly outperformed their value counterparts across the capitalization spectrum. Meanwhile, the March flight to quality helped bonds hang onto the modest gains generated ahead of the market turbulence, and investment-grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index) returned 1.20% for the 12-month period.
With inflationary pressures mounting, Treasury yields rising, volatility resurfacing, and the implications of tax reform still unfolding, investors likely will face new opportunities and challenges in the months ahead. We believe this scenario warrants a disciplined, diversified, and risk-aware approach, using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a01.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/image48a01.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of March 31, 2018 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | ALVIX | 3.65% | 9.87% | 6.78% | — | 7/30/99 |
Russell 1000 Value Index | — | 6.95% | 10.78% | 7.77% | — | — |
S&P 500 Index | — | 13.99% | 13.30% | 9.49% | — | — |
I Class | ALVSX | 3.85% | 10.08% | 7.00% | — | 8/10/01 |
A Class | ALPAX | 10/26/00 | ||||
No sales charge | 3.39% | 9.60% | 6.53% | — | ||
With sales charge | -2.53% | 8.31% | 5.91% | — | ||
C Class | ALPCX | 2.63% | 8.79% | 5.74% | — | 11/7/01 |
R Class | ALVRX | 3.13% | 9.34% | 6.25% | — | 8/29/03 |
R5 Class | ALVGX | — | — | — | 4.05% | 4/10/17 |
R6 Class | ALVDX | 4.01% | — | — | 8.54% | 7/26/13 |
Average annual returns since inception are presented when ten years of performance history is not available.
Prior to April 10, 2017, the I Class was referred to as the Institutional Class.
Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum initial sales charge and may be subject to a maximum CDSC of 1.00%. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
3
Growth of $10,000 Over 10 Years |
$10,000 investment made March 31, 2008 |
Performance for other share classes will vary due to differences in fee structure.
![chart-1a821925ae4f5e6d883.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/chart-1a821925ae4f5e6d883.jpg)
Value on March 31, 2018 | |
Investor Class — $19,269 | |
Russell 1000 Value Index — $21,144 | |
S&P 500 Index — $24,771 | |
Total Annual Fund Operating Expenses | ||||||
Investor Class | I Class | A Class | C Class | R Class | R5 Class | R6 Class |
0.83% | 0.63% | 1.08% | 1.83% | 1.33% | 0.63% | 0.48% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
4
Portfolio Commentary |
Portfolio Managers: Brendan Healy and Brian Woglom
Portfolio manager Brendan Healy retired from American Century Investments in April 2018. In May 2018, Phil Davidson joined Large Company Value's management team.
Performance Summary
Large Company Value returned 3.65%* for the fiscal year ended March 31, 2018, compared with the 6.95% return of its benchmark, the Russell 1000 Value Index.
Value stocks underperformed growth stocks across the capitalization spectrum during the 12-month period, creating a headwind for the fund’s performance. Within the Russell 1000 Value Index, information technology led performance, followed by financials and materials. The weakest sectors were telecommunication services, real estate, and consumer staples. The fund recorded positive absolute contributions from most sectors, led by financials and information technology. Industrials were the largest absolute detractors.
The fund’s underperformance relative to the benchmark was driven by stock selection in the industrials, health care, and financials sectors. Stock decisions in the information technology and consumer staples sectors benefited results.
Industrials Holdings Led Detractors
Security selection in the industrials sector detracted from relative performance. General Electric was a significant detractor. The industrial conglomerate underperformed due to fundamental challenges in its power and financial business segments and uncertainty over asset dispositions. We continue to believe that General Electric is a higher-quality company with best-in-class aviation and leading health care business units. Johnson Controls International also detracted despite reporting better-than-expected quarterly earnings in its fiscal fourth quarter. The stock declined as the building products company provided disappointing 2018 guidance. Management detailed profitability and growth challenges as well as an unexpected tax headwind that will pressure free cash flow.
In the health care sector, Allergan weighed on performance. Allergan is a multinational pharmaceutical that produces branded drugs and performs pharmaceutical research and development. The company’s stock declined during the period largely due to controversies surrounding its patent on Restasis, a dry-eye drug.
Other significant detractors included Schlumberger. Declining oil and gas prices as well as the company’s significant exposure to relatively weak non-U.S. markets weighed on the stock. The declining stock price allowed us to increase our position, and Schlumberger ended the period as our largest holding. Toy company Mattel declined after missing estimates and announcing the need to renegotiate the financial leverage covenants of its credit facility. Furthermore, Toys"R"Us, one of Mattel’s largest customers, unexpectedly filed for bankruptcy, creating uncertainty leading up to the holiday season. Despite the short-term disruption, we believe there will be minimal impact to long-term toy demand.
Advance Auto Parts fell in July after competitor O’Reilly Automotive preannounced that it would miss quarterly sales expectations. Advance Auto Parts then reported its own earnings miss in
*All fund returns referenced in this commentary are for Investor Class shares. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund's benchmark, other share classes may not. See page 3 for returns for all share classes.
5
August and materially lowered its fiscal year guidance. Our longer-term investment thesis remains intact, however. The retailer of aftermarket replacement parts is a market share leader in a
higher-quality industry. Extreme winter storms in the Northeastern U.S. helped drive better-than-expected quarterly results late in our reporting period. Additionally, the company is restructuring, which we think should dramatically improve profit margins.
Information Technology Benefited Performance
Holdings in several industries aided security selection in information technology. Semiconductor company Applied Materials turned in strong performance as the company continues to gain market share and exceed expectations. Additionally, the company raised guidance and doubled its dividend. Lam Research, a global supplier of semiconductor manufacturing equipment, benefited from robust orders due to strong end-market demand. Our analysis showed that the stock had reached the higher range of valuation target levels, and we eliminated our position. Revenues for Cisco Systems’ campus and data center switches exceeded expectations due to a new product cycle and higher information technology infrastructure spending. Also, tax reform gives Cisco access to its cash outside of the U.S.
Food and staples retailers benefited performance in the consumer staples sector. Walmart’s stock held up better relative to less diversified food retailers following Amazon’s announced acquisition of Whole Foods Market. The company announced solid earnings and growth in the company’s e-commerce sales. We sold part of our position in Walmart on outperformance. Our energy holdings contributed positively. TOTAL was among the portfolio’s top contributors. The stock outperformed after reporting strong quarterly earnings and announcing enhanced capital return targets through 2020. One of the portfolio’s top relative contributors was a stock we did not own. Telecommunications giant AT&T declined as the company reported lower-than-expected quarterly revenues due to increased competition in wireless.
Portfolio Positioning
We continue to use our fundamental analysis, risk/reward framework, and proprietary valuation model to invest primarily in the stocks of large companies that we believe are undervalued.
We see value in health care, where we hold higher-quality companies with compelling valuations and strong fundamentals. Several of these holdings are in the pharmaceuticals and health care equipment and supplies industries. For example, pharmaceutical company Pfizer is a top holding and one of the highest-quality companies in its industry. Its diversified product portfolio has historically generated stable returns through various economic cycles, and we believe it will be able to sustain returns through continued research and development investment.
Energy valuations remain attractive. During the first half of 2017, the energy sector declined as the price of oil fell and energy companies faced a rising service cost environment. This provided us with the opportunity to add to some of the portfolio’s energy stocks that continue to offer compelling risk/reward profiles.
The portfolio’s information technology allocation ended the period as a modest underweight. We trimmed Cisco Systems and Applied Materials after they outperformed on better-than-expected earnings, and, as mentioned earlier, we exited our position in Lam Research due to its outperformance. We maintained our underweight in the real estate and utilities sectors. Our valuation methodology shows that many real estate and utilities stocks remain overvalued, even though these sectors have recently been pressured by rising interest rates.
6
Fund Characteristics |
MARCH 31, 2018 | |
Top Ten Holdings | % of net assets |
Schlumberger Ltd. | 3.6% |
Pfizer, Inc. | 3.1% |
Johnson & Johnson | 3.0% |
TOTAL SA ADR | 2.9% |
Verizon Communications, Inc. | 2.9% |
Procter & Gamble Co. (The) | 2.9% |
Medtronic plc | 2.8% |
U.S. Bancorp | 2.7% |
Bank of America Corp. | 2.5% |
BB&T Corp. | 2.5% |
Top Five Industries | % of net assets |
Banks | 14.9% |
Oil, Gas and Consumable Fuels | 10.4% |
Pharmaceuticals | 10.3% |
Health Care Equipment and Supplies | 5.9% |
Energy Equipment and Services | 4.7% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 89.5% |
Foreign Common Stocks* | 7.7% |
Exchange-Traded Funds | 1.2% |
Total Equity Exposure | 98.4% |
Temporary Cash Investments | 1.4% |
Other Assets and Liabilities | 0.2% |
*Includes depositary shares, dual listed securities and foreign ordinary shares.
7
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from October 1, 2017 to March 31, 2018.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or I Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
8
Beginning Account Value 10/1/17 | Ending Account Value 3/31/18 | Expenses Paid During Period(1) 10/1/17 - 3/31/18 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $1,004.60 | $4.20 | 0.84% |
I Class | $1,000 | $1,005.70 | $3.20 | 0.64% |
A Class | $1,000 | $1,003.40 | $5.44 | 1.09% |
C Class | $1,000 | $999.70 | $9.17 | 1.84% |
R Class | $1,000 | $1,002.20 | $6.69 | 1.34% |
R5 Class | $1,000 | $1,005.60 | $3.20 | 0.64% |
R6 Class | $1,000 | $1,006.40 | $2.45 | 0.49% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.74 | $4.23 | 0.84% |
I Class | $1,000 | $1,021.74 | $3.23 | 0.64% |
A Class | $1,000 | $1,019.50 | $5.49 | 1.09% |
C Class | $1,000 | $1,015.76 | $9.25 | 1.84% |
R Class | $1,000 | $1,018.25 | $6.74 | 1.34% |
R5 Class | $1,000 | $1,021.74 | $3.23 | 0.64% |
R6 Class | $1,000 | $1,022.49 | $2.47 | 0.49% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
9
Schedule of Investments |
MARCH 31, 2018
Shares | Value | ||||
COMMON STOCKS — 97.2% | |||||
Aerospace and Defense — 1.1% | |||||
Textron, Inc. | 105,100 | $ | 6,197,747 | ||
United Technologies Corp. | 22,500 | 2,830,950 | |||
9,028,697 | |||||
Air Freight and Logistics — 0.8% | |||||
United Parcel Service, Inc., Class B | 62,600 | 6,551,716 | |||
Airlines — 0.5% | |||||
Southwest Airlines Co. | 71,200 | 4,078,336 | |||
Auto Components — 0.2% | |||||
Aptiv plc | 21,900 | 1,860,843 | |||
Automobiles — 1.0% | |||||
Honda Motor Co. Ltd. ADR | 244,400 | 8,488,012 | |||
Banks — 14.9% | |||||
Bank of America Corp. | 669,000 | 20,063,310 | |||
BB&T Corp. | 384,900 | 20,030,196 | |||
JPMorgan Chase & Co. | 137,400 | 15,109,878 | |||
M&T Bank Corp. | 64,400 | 11,872,784 | |||
PNC Financial Services Group, Inc. (The) | 97,700 | 14,776,148 | |||
U.S. Bancorp | 439,900 | 22,214,950 | |||
Wells Fargo & Co. | 328,500 | 17,216,685 | |||
121,283,951 | |||||
Beverages — 0.8% | |||||
PepsiCo, Inc. | 57,400 | 6,265,210 | |||
Biotechnology — 0.4% | |||||
Celgene Corp.(1) | 38,200 | 3,407,822 | |||
Building Products — 1.9% | |||||
Johnson Controls International plc | 442,500 | 15,593,700 | |||
Capital Markets — 4.6% | |||||
Ameriprise Financial, Inc. | 41,700 | 6,169,098 | |||
Bank of New York Mellon Corp. (The) | 323,400 | 16,664,802 | |||
Invesco Ltd. | 457,300 | 14,638,173 | |||
37,472,073 | |||||
Chemicals — 1.0% | |||||
DowDuPont, Inc. | 120,500 | 7,677,055 | |||
Communications Equipment — 2.0% | |||||
Cisco Systems, Inc. | 378,900 | 16,251,021 | |||
Containers and Packaging — 0.6% | |||||
WestRock Co. | 79,700 | 5,114,349 | |||
Diversified Telecommunication Services — 2.9% | |||||
Verizon Communications, Inc. | 500,500 | 23,933,910 | |||
Electric Utilities — 2.6% | |||||
Edison International | 71,100 | 4,526,226 | |||
Eversource Energy | 89,900 | 5,296,908 | |||
PPL Corp. | 73,000 | 2,065,170 | |||
Xcel Energy, Inc. | 194,300 | 8,836,764 | |||
20,725,068 |
10
Shares | Value | ||||
Electrical Equipment — 0.9% | |||||
Eaton Corp. plc | 93,900 | $ | 7,503,549 | ||
Electronic Equipment, Instruments and Components — 0.9% | |||||
TE Connectivity Ltd. | 75,710 | 7,563,429 | |||
Energy Equipment and Services — 4.7% | |||||
Baker Hughes a GE Co. | 316,700 | 8,794,759 | |||
Schlumberger Ltd. | 456,500 | 29,572,070 | |||
38,366,829 | |||||
Equity Real Estate Investment Trusts (REITs) — 0.5% | |||||
Boston Properties, Inc. | 30,800 | 3,795,176 | |||
Food and Staples Retailing — 3.7% | |||||
Sysco Corp. | 140,900 | 8,448,364 | |||
Walgreens Boots Alliance, Inc. | 117,500 | 7,692,725 | |||
Walmart, Inc. | 154,000 | 13,701,380 | |||
29,842,469 | |||||
Food Products — 4.3% | |||||
Conagra Brands, Inc. | 258,300 | 9,526,104 | |||
General Mills, Inc. | 100,300 | 4,519,518 | |||
Kellogg Co. | 64,900 | 4,219,149 | |||
Mondelez International, Inc., Class A | 407,500 | 17,004,975 | |||
35,269,746 | |||||
Health Care Equipment and Supplies — 5.9% | |||||
Abbott Laboratories | 77,500 | 4,643,800 | |||
Medtronic plc | 288,700 | 23,159,514 | |||
Siemens Healthineers AG(1) | 113,600 | 4,668,621 | |||
Zimmer Biomet Holdings, Inc. | 141,400 | 15,418,256 | |||
47,890,191 | |||||
Health Care Providers and Services — 2.7% | |||||
Cigna Corp. | 19,200 | 3,220,608 | |||
HCA Healthcare, Inc. | 73,700 | 7,148,900 | |||
Henry Schein, Inc.(1) | 65,400 | 4,395,534 | |||
McKesson Corp. | 48,200 | 6,789,934 | |||
21,554,976 | |||||
Hotels, Restaurants and Leisure — 0.5% | |||||
Carnival Corp. | 58,000 | 3,803,640 | |||
Household Products — 2.9% | |||||
Procter & Gamble Co. (The) | 295,300 | 23,411,384 | |||
Industrial Conglomerates — 1.0% | |||||
General Electric Co. | 607,300 | 8,186,404 | |||
Insurance — 3.9% | |||||
Aflac, Inc. | 183,300 | 8,021,208 | |||
Chubb Ltd. | 136,000 | 18,600,720 | |||
MetLife, Inc. | 105,100 | 4,823,039 | |||
31,444,967 | |||||
Leisure Products — 0.2% | |||||
Mattel, Inc. | 111,200 | 1,462,280 | |||
Machinery — 0.5% | |||||
Ingersoll-Rand plc | 47,600 | 4,070,276 | |||
Media — 0.5% | |||||
Time Warner, Inc. | 44,200 | 4,180,436 |
11
Shares | Value | ||||
Multiline Retail — 0.6% | |||||
Target Corp. | 72,500 | $ | 5,033,675 | ||
Oil, Gas and Consumable Fuels — 10.4% | |||||
Anadarko Petroleum Corp. | 170,000 | 10,269,700 | |||
Chevron Corp. | 165,000 | 18,816,600 | |||
Exxon Mobil Corp. | 53,500 | 3,991,635 | |||
Occidental Petroleum Corp. | 260,900 | 16,948,064 | |||
Royal Dutch Shell plc, Class B ADR | 167,300 | 10,963,169 | |||
TOTAL SA ADR | 415,700 | 23,981,733 | |||
84,970,901 | |||||
Personal Products — 0.9% | |||||
Unilever NV CVA | 135,600 | 7,665,256 | |||
Pharmaceuticals — 10.3% | |||||
Allergan plc | 48,600 | 8,178,894 | |||
Johnson & Johnson | 191,900 | 24,591,985 | |||
Merck & Co., Inc. | 323,300 | 17,610,151 | |||
Pfizer, Inc. | 712,900 | 25,300,821 | |||
Roche Holding AG | 34,700 | 7,958,788 | |||
83,640,639 | |||||
Road and Rail — 0.6% | |||||
Union Pacific Corp. | 36,200 | 4,866,366 | |||
Semiconductors and Semiconductor Equipment — 2.6% | |||||
Applied Materials, Inc. | 103,800 | 5,772,318 | |||
Intel Corp. | 151,300 | 7,879,704 | |||
QUALCOMM, Inc. | 141,000 | 7,812,810 | |||
21,464,832 | |||||
Software — 1.8% | |||||
Oracle Corp. (New York) | 314,700 | 14,397,525 | |||
Specialty Retail — 1.3% | |||||
Advance Auto Parts, Inc. | 71,200 | 8,440,760 | |||
L Brands, Inc. | 56,800 | 2,170,328 | |||
10,611,088 | |||||
Technology Hardware, Storage and Peripherals — 0.3% | |||||
Apple, Inc. | 16,400 | 2,751,592 | |||
TOTAL COMMON STOCKS (Cost $706,645,846) | 791,479,389 | ||||
EXCHANGE-TRADED FUNDS — 1.2% | |||||
iShares Russell 1000 Value ETF (Cost $9,671,332) | 82,100 | 9,848,716 | |||
TEMPORARY CASH INVESTMENTS — 1.4% | |||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.375% - 3.625%, 2/15/23 - 5/15/47, valued at $6,500,039), in a joint trading account at 1.45%, dated 3/29/18, due 4/2/18 (Delivery value $6,359,171) | 6,358,147 | ||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 11/15/26, valued at $5,408,928), at 0.74%, dated 3/29/18, due 4/2/18 (Delivery value $5,300,436) | 5,300,000 | ||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $11,658,147) | 11,658,147 | ||||
TOTAL INVESTMENT SECURITIES — 99.8% (Cost $727,975,325) | 812,986,252 | ||||
OTHER ASSETS AND LIABILITIES — 0.2% | 1,574,378 | ||||
TOTAL NET ASSETS — 100.0% | $ | 814,560,630 |
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FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||
USD | 6,840,482 | CHF | 6,469,728 | Credit Suisse AG | 6/29/18 | $ | 23,094 | |||
USD | 30,542,683 | EUR | 24,700,916 | UBS AG | 6/29/18 | (46,064 | ) | |||
USD | 9,019,472 | GBP | 6,379,460 | Morgan Stanley | 6/29/18 | 36,608 | ||||
USD | 278,669 | GBP | 196,147 | Morgan Stanley | 6/29/18 | 2,476 | ||||
JPY | 35,768,995 | USD | 342,710 | Credit Suisse AG | 6/29/18 | (4,587 | ) | |||
USD | 7,124,205 | JPY | 752,223,424 | Credit Suisse AG | 6/29/18 | 13,470 | ||||
USD | 193,027 | JPY | 20,294,858 | Credit Suisse AG | 6/29/18 | 1,181 | ||||
USD | 265,992 | JPY | 28,165,909 | Credit Suisse AG | 6/29/18 | (259 | ) | |||
$ | 25,919 |
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
CHF | - | Swiss Franc |
CVA | - | Certificaten Van Aandelen |
EUR | - | Euro |
GBP | - | British Pound |
JPY | - | Japanese Yen |
USD | - | United States Dollar |
(1) | Non-income producing. |
See Notes to Financial Statements.
13
Statement of Assets and Liabilities |
MARCH 31, 2018 | |||
Assets | |||
Investment securities, at value (cost of $727,975,325) | $ | 812,986,252 | |
Receivable for investments sold | 1,783,483 | ||
Receivable for capital shares sold | 149,507 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 76,829 | ||
Dividends and interest receivable | 1,855,702 | ||
816,851,773 | |||
Liabilities | |||
Disbursements in excess of demand deposit cash | 103,204 | ||
Payable for investments purchased | 1,441,694 | ||
Payable for capital shares redeemed | 140,150 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 50,910 | ||
Accrued management fees | 539,416 | ||
Distribution and service fees payable | 15,769 | ||
2,291,143 | |||
Net Assets | $ | 814,560,630 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 737,875,178 | |
Undistributed net investment income | 1,108,387 | ||
Accumulated net realized loss | (9,459,423 | ) | |
Net unrealized appreciation | 85,036,488 | ||
$ | 814,560,630 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $621,874,199 | 63,120,812 | $9.85 | |||
I Class, $0.01 Par Value | $20,212,710 | 2,050,533 | $9.86 | |||
A Class, $0.01 Par Value | $40,191,840 | 4,081,413 | $9.85* | |||
C Class, $0.01 Par Value | $6,050,040 | 614,396 | $9.85 | |||
R Class, $0.01 Par Value | $4,291,158 | 435,368 | $9.86 | |||
R5 Class, $0.01 Par Value | $5,204 | 528 | $9.86 | |||
R6 Class, $0.01 Par Value | $121,935,479 | 12,371,959 | $9.86 |
*Maximum offering price $10.45 (net asset value divided by 0.9425).
See Notes to Financial Statements.
14
Statement of Operations |
YEAR ENDED MARCH 31, 2018 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $289,139) | $ | 25,183,393 | |
Interest | 63,108 | ||
25,246,501 | |||
Expenses: | |||
Management fees | 6,638,779 | ||
Distribution and service fees: | |||
A Class | 115,203 | ||
C Class | 67,689 | ||
R Class | 25,703 | ||
Directors' fees and expenses | 25,844 | ||
Other expenses | 32,501 | ||
6,905,719 | |||
Net investment income (loss) | 18,340,782 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 27,542,809 | ||
Forward foreign currency exchange contract transactions | (4,486,374 | ) | |
Foreign currency translation transactions | 7,635 | ||
23,064,070 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (8,899,180 | ) | |
Forward foreign currency exchange contracts | (355,551 | ) | |
Translation of assets and liabilities in foreign currencies | (443 | ) | |
(9,255,174 | ) | ||
Net realized and unrealized gain (loss) | 13,808,896 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 32,149,678 |
See Notes to Financial Statements.
15
Statement of Changes in Net Assets |
YEARS ENDED MARCH 31, 2018 AND MARCH 31, 2017 | ||||||
Increase (Decrease) in Net Assets | March 31, 2018 | March 31, 2017 | ||||
Operations | ||||||
Net investment income (loss) | $ | 18,340,782 | $ | 17,377,360 | ||
Net realized gain (loss) | 23,064,070 | 169,367,496 | ||||
Change in net unrealized appreciation (depreciation) | (9,255,174 | ) | (34,461,174 | ) | ||
Net increase (decrease) in net assets resulting from operations | 32,149,678 | 152,283,682 | ||||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Investor Class | (12,587,826 | ) | (12,419,761 | ) | ||
I Class | (421,278 | ) | (910,606 | ) | ||
A Class | (754,663 | ) | (970,082 | ) | ||
C Class | (59,283 | ) | (85,151 | ) | ||
R Class | (71,995 | ) | (78,762 | ) | ||
R5 Class | (111 | ) | — | |||
R6 Class | (2,988,543 | ) | (2,733,954 | ) | ||
From net realized gains: | ||||||
Investor Class | (23,102,573 | ) | — | |||
I Class | (780,077 | ) | — | |||
A Class | (1,591,901 | ) | — | |||
C Class | (233,557 | ) | — | |||
R Class | (189,746 | ) | — | |||
R5 Class | (191 | ) | — | |||
R6 Class | (4,439,434 | ) | — | |||
Decrease in net assets from distributions | (47,221,178 | ) | (17,198,316 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (73,728,534 | ) | (102,207,905 | ) | ||
Net increase (decrease) in net assets | (88,800,034 | ) | 32,877,461 | |||
Net Assets | ||||||
Beginning of period | 903,360,664 | 870,483,203 | ||||
End of period | $ | 814,560,630 | $ | 903,360,664 | ||
Undistributed net investment income | $ | 1,108,387 | — |
See Notes to Financial Statements.
16
Notes to Financial Statements |
MARCH 31, 2018
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Large Company Value Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective.
The fund offers the Investor Class, I Class (formerly Institutional Class), A Class, C Class, R Class, R5 Class and R6 Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. Sale of the R5 Class commenced on April 10, 2017.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between
17
domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that American Century Investment Management, Inc. (ACIM) (the investment advisor) has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
18
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc. (ACIS), and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC. Various funds issued by American Century Asset Allocation Portfolios, Inc. own, in aggregate, 49% of the shares of the fund. Related parties do not invest in the fund for the purpose of exercising management or control.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that use very similar investment teams and strategies (strategy assets). The strategy assets of the fund also include the assets of NT Large Company Value Fund, one fund in a series issued by the corporation.
The management fee schedule range and the effective annual management fee for each class for the period ended March 31, 2018 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | |
Investor Class | 0.70% to 0.90% | 0.83% |
I Class | 0.50% to 0.70% | 0.63% |
A Class | 0.70% to 0.90% | 0.83% |
C Class | 0.70% to 0.90% | 0.83% |
R Class | 0.70% to 0.90% | 0.83% |
R5 Class | 0.50% to 0.70% | 0.63% |
R6 Class | 0.35% to 0.55% | 0.48% |
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the C Class will pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the period ended March 31, 2018 are detailed in the Statement of Operations.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $9,769,393 and $6,948,026, respectively. The effect of interfund transactions on the Statement of Operations was $58,535 in net realized gain (loss) on investment transactions.
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4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended March 31, 2018 were $457,216,152 and $566,624,616, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended March 31, 2018(1) | Year ended March 31, 2017 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 490,000,000 | 500,000,000 | ||||||||
Sold | 6,103,145 | $ | 61,859,119 | 8,949,727 | $ | 87,363,174 | ||||
Issued in reinvestment of distributions | 3,467,863 | 35,365,778 | 1,299,238 | 12,244,541 | ||||||
Redeemed | (11,912,905 | ) | (121,531,300 | ) | (19,717,686 | ) | (183,481,206 | ) | ||
(2,341,897 | ) | (24,306,403 | ) | (9,468,721 | ) | (83,873,491 | ) | |||
I Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||
Sold | 1,087,344 | 11,005,106 | 1,229,209 | 12,075,330 | ||||||
Issued in reinvestment of distributions | 103,493 | 1,056,279 | 96,436 | 903,949 | ||||||
Redeemed | (3,291,386 | ) | (33,238,442 | ) | (2,825,311 | ) | (25,938,025 | ) | ||
(2,100,549 | ) | (21,177,057 | ) | (1,499,666 | ) | (12,958,746 | ) | |||
A Class/Shares Authorized | 50,000,000 | 60,000,000 | ||||||||
Sold | 555,637 | 5,621,916 | 639,700 | 6,049,501 | ||||||
Issued in reinvestment of distributions | 210,315 | 2,144,020 | 98,918 | 933,061 | ||||||
Redeemed | (2,280,536 | ) | (23,192,893 | ) | (2,335,654 | ) | (21,555,910 | ) | ||
(1,514,584 | ) | (15,426,957 | ) | (1,597,036 | ) | (14,573,348 | ) | |||
C Class/Shares Authorized | 15,000,000 | 15,000,000 | ||||||||
Sold | 77,488 | 793,302 | 64,787 | 596,206 | ||||||
Issued in reinvestment of distributions | 23,435 | 238,769 | 5,090 | 48,282 | ||||||
Redeemed | (377,094 | ) | (3,792,393 | ) | (242,903 | ) | (2,265,111 | ) | ||
(276,171 | ) | (2,760,322 | ) | (173,026 | ) | (1,620,623 | ) | |||
R Class/Shares Authorized | 10,000,000 | 10,000,000 | ||||||||
Sold | 92,370 | 939,476 | 122,854 | 1,157,017 | ||||||
Issued in reinvestment of distributions | 24,340 | 248,316 | 8,051 | 76,287 | ||||||
Redeemed | (258,680 | ) | (2,656,868 | ) | (115,363 | ) | (1,095,600 | ) | ||
(141,970 | ) | (1,469,076 | ) | 15,542 | 137,704 | |||||
R5 Class/Shares Authorized | 50,000,000 | N/A | ||||||||
Sold | 498 | 5,000 | ||||||||
Issued in reinvestment of distributions | 30 | 302 | ||||||||
528 | 5,302 | |||||||||
R6 Class/Shares Authorized | 85,000,000 | 80,000,000 | ||||||||
Sold | 5,952,240 | 60,232,389 | 3,198,808 | 30,074,204 | ||||||
Issued in reinvestment of distributions | 728,213 | 7,427,977 | 288,808 | 2,733,954 | ||||||
Redeemed | (7,495,218 | ) | (76,254,387 | ) | (2,378,584 | ) | (22,127,559 | ) | ||
(814,765 | ) | (8,594,021 | ) | 1,109,032 | 10,680,599 | |||||
Net increase (decrease) | (7,189,408 | ) | $ | (73,728,534 | ) | (11,613,875 | ) | $ | (102,207,905 | ) |
(1) | April 10, 2017 (commencement of sale) through March 31, 2018 for the R5 Class. |
20
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments. There were no significant transfers between levels during the period.
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 | $ | 771,186,724 | $ | 20,292,665 | — | |||
Exchange-Traded Funds | 9,848,716 | — | — | |||||
Temporary Cash Investments | — | 11,658,147 | — | |||||
$ | 781,035,440 | $ | 31,950,812 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 76,829 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 50,910 | — |
7. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $61,667,959.
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The value of foreign currency risk derivative instruments as of March 31, 2018, is disclosed on the Statement of Assets and Liabilities as an asset of $76,829 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $50,910 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended March 31, 2018, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(4,486,374) in net realized gain (loss) on forward foreign currency exchange contract transactions and $(355,551) in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
8. Risk Factors
There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions.
9. Federal Tax Information
The tax character of distributions paid during the years ended March 31, 2018 and March 31, 2017 were as follows:
2018 | 2017 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 24,148,118 | $ | 17,198,316 | ||
Long-term capital gains | $ | 23,073,060 | — |
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 | $ | 737,335,962 | |
Gross tax appreciation of investments | $ | 106,643,045 | |
Gross tax depreciation of investments | (30,992,755 | ) | |
Net tax appreciation (depreciation) of investments | 75,650,290 | ||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (358 | ) | |
Net tax appreciation (depreciation) | $ | 75,649,932 | |
Undistributed ordinary income | $ | 1,108,387 | |
Post-October capital loss deferral | $ | (72,867 | ) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Loss deferrals represent certain qualified losses that the fund has elected to treat as having been incurred in the following fiscal year for federal income tax purposes.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||
2018 | $10.05 | 0.21 | 0.17 | 0.38 | (0.20) | (0.38) | (0.58) | $9.85 | 3.65% | 0.83% | 2.09% | 53% | $621,874 | ||
2017 | $8.58 | 0.18 | 1.48 | 1.66 | (0.19) | — | (0.19) | $10.05 | 19.44% | 0.83% | 1.96% | 68% | $658,031 | ||
2016 | $9.07 | 0.12 | (0.49) | (0.37) | (0.12) | — | (0.12) | $8.58 | (4.06)% | 0.84% | 1.41% | 56% | $642,746 | ||
2015 | $8.28 | 0.12 | 0.78 | 0.90 | (0.11) | — | (0.11) | $9.07 | 10.92% | 0.84% | 1.36% | 56% | $588,608 | ||
2014 | $6.92 | 0.12 | 1.36 | 1.48 | (0.12) | — | (0.12) | $8.28 | 21.57% | 0.85% | 1.64% | 35% | $574,367 | ||
I Class(8) | |||||||||||||||
2018 | $10.06 | 0.22 | 0.18 | 0.40 | (0.22) | (0.38) | (0.60) | $9.86 | 3.85% | 0.63% | 2.29% | 53% | $20,213 | ||
2017 | $8.58 | 0.19 | 1.49 | 1.68 | (0.20) | — | (0.20) | $10.06 | 19.80% | 0.63% | 2.16% | 68% | $41,746 | ||
2016 | $9.08 | 0.14 | (0.50) | (0.36) | (0.14) | — | (0.14) | $8.58 | (3.97)% | 0.64% | 1.61% | 56% | $48,495 | ||
2015 | $8.29 | 0.13 | 0.79 | 0.92 | (0.13) | — | (0.13) | $9.08 | 11.14% | 0.64% | 1.56% | 56% | $47,616 | ||
2014 | $6.93 | 0.14 | 1.36 | 1.50 | (0.14) | — | (0.14) | $8.29 | 21.78% | 0.65% | 1.84% | 35% | $81,195 | ||
A Class | |||||||||||||||
2018 | $10.05 | 0.18 | 0.17 | 0.35 | (0.17) | (0.38) | (0.55) | $9.85 | 3.39% | 1.08% | 1.84% | 53% | $40,192 | ||
2017 | $8.57 | 0.16 | 1.48 | 1.64 | (0.16) | — | (0.16) | $10.05 | 19.28% | 1.08% | 1.71% | 68% | $56,222 | ||
2016 | $9.07 | 0.10 | (0.50) | (0.40) | (0.10) | — | (0.10) | $8.57 | (4.41)% | 1.09% | 1.16% | 56% | $61,663 | ||
2015 | $8.28 | 0.10 | 0.78 | 0.88 | (0.09) | — | (0.09) | $9.07 | 10.65% | 1.09% | 1.11% | 56% | $70,462 | ||
2014 | $6.92 | 0.11 | 1.35 | 1.46 | (0.10) | — | (0.10) | $8.28 | 21.27% | 1.10% | 1.39% | 35% | $74,863 |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
C Class | |||||||||||||||
2018 | $10.05 | 0.11 | 0.17 | 0.28 | (0.10) | (0.38) | (0.48) | $9.85 | 2.63% | 1.83% | 1.09% | 53% | $6,050 | ||
2017 | $8.57 | 0.09 | 1.48 | 1.57 | (0.09) | — | (0.09) | $10.05 | 18.36% | 1.83% | 0.96% | 68% | $8,948 | ||
2016 | $9.06 | 0.03 | (0.49) | (0.46) | (0.03) | — | (0.03) | $8.57 | (5.03)% | 1.84% | 0.41% | 56% | $9,116 | ||
2015 | $8.28 | 0.03 | 0.78 | 0.81 | (0.03) | — | (0.03) | $9.06 | 9.77% | 1.84% | 0.36% | 56% | $11,505 | ||
2014 | $6.92 | 0.05 | 1.35 | 1.40 | (0.04) | — | (0.04) | $8.28 | 20.36% | 1.85% | 0.64% | 35% | $10,101 | ||
R Class | |||||||||||||||
2018 | $10.06 | 0.16 | 0.17 | 0.33 | (0.15) | (0.38) | (0.53) | $9.86 | 3.13% | 1.33% | 1.59% | 53% | $4,291 | ||
2017 | $8.58 | 0.14 | 1.48 | 1.62 | (0.14) | — | (0.14) | $10.06 | 18.95% | 1.33% | 1.46% | 68% | $5,806 | ||
2016 | $9.07 | 0.08 | (0.49) | (0.41) | (0.08) | — | (0.08) | $8.58 | (4.55)% | 1.34% | 0.91% | 56% | $4,820 | ||
2015 | $8.28 | 0.07 | 0.79 | 0.86 | (0.07) | — | (0.07) | $9.07 | 10.37% | 1.34% | 0.86% | 56% | $5,842 | ||
2014 | $6.92 | 0.09 | 1.35 | 1.44 | (0.08) | — | (0.08) | $8.28 | 20.96% | 1.35% | 1.14% | 35% | $6,135 | ||
R5 Class | |||||||||||||||
2018(3) | $10.04 | 0.23 | 0.19 | 0.42 | (0.22) | (0.38) | (0.60) | $9.86 | 4.05% | 0.63%(4) | 2.28%(4) | 53%(5) | $5 | ||
R6 Class | |||||||||||||||
2018 | $10.06 | 0.25 | 0.16 | 0.41 | (0.23) | (0.38) | (0.61) | $9.86 | 4.01% | 0.48% | 2.44% | 53% | $121,935 | ||
2017 | $8.58 | 0.22 | 1.48 | 1.70 | (0.22) | — | (0.22) | $10.06 | 19.98% | 0.48% | 2.31% | 68% | $132,608 | ||
2016 | $9.08 | 0.16 | (0.51) | (0.35) | (0.15) | — | (0.15) | $8.58 | (3.83)% | 0.49% | 1.76% | 56% | $103,643 | ||
2015 | $8.29 | 0.17 | 0.76 | 0.93 | (0.14) | — | (0.14) | $9.08 | 11.30% | 0.49% | 1.71% | 56% | $38,170 | ||
2014(6) | $7.65 | 0.10 | 0.65 | 0.75 | (0.11) | — | (0.11) | $8.29 | 9.90% | 0.50%(4) | 1.98%(4) | 35%(7) | $27 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | April 10, 2017 (commencement of sale) through March 31, 2018. |
(4) | Annualized. |
(5) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2018. |
(6) | July 26, 2013 (commencement of sale) through March 31, 2014. |
(7) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2014. |
(8) | Prior to April 10, 2017, the I Class was referred to as the Institutional Class. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Directors of American Century Capital Portfolios, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Large Company Value Fund, one of the portfolios constituting the American Century Capital Portfolios, Inc. (the “Fund”), as of March 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of Large Company Value Fund of the American Century Capital Portfolios, Inc. as of March 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of March 31, 2018, 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
May 16, 2018
We have served as the auditor of one or more American Century investment companies since 1997.
26
Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 68 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) |
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired; Executive Vice President, ACC (2007 to 2013); President, ACS (2007 to 2013); Chief Operating Officer, ACC (2007 to 2012) | 68 | None |
Andrea C. Hall (1945) | Director | Since 1997 | Retired | 68 | None |
Jan M. Lewis (1957) | Director | Since 2011 | Retired; President and Chief Executive Officer, Catholic Charities of Northeast Kansas (human services organization) (2006 to 2013) | 68 | None |
27
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
M. Jeannine Strandjord (1945) | Director | Since 1994 | Self-employed Consultant | 68 | Euronet Worldwide Inc.; MGP Ingredients, Inc. |
John R. Whitten (1946) | Director | Since 2008 | Retired | 68 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 70 | None |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director and President | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 115 | BioMed Valley Discoveries, Inc. |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
28
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds, unless otherwise noted. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
Jonathan S. Thomas (1963) | Director and President since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present); Vice President, Client Interactions and Marketing, ACIS (2013 to 2014). Also serves as Vice President, ACIS |
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
C. Jean Wade (1964) | Vice President,Treasurer and Chief Financial Officer since 2012 | Vice President, ACS (2000 to present) |
Robert J. Leach (1966) | Vice President since 2006 and Assistant Treasurer since 2012 | Vice President, ACS (2000 to present) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present); Associate General Counsel, ACC (2001 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
29
Proxy Voting Results |
A special meeting of shareholders was held on October 18, 2017, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect four directors to the Board of Directors of American Century Capital Portfolios, Inc.:
Affirmative | Withhold | ||||||
Thomas W. Bunn | $ | 24,595,873,549 | $ | 400,991,853 | |||
Barry Fink | $ | 24,607,840,546 | $ | 389,024,856 | |||
Jan M. Lewis | $ | 24,616,409,175 | $ | 380,456,227 | |||
Stephen E. Yates | $ | 24,605,431,961 | $ | 391,433,441 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Andrea C. Hall, James A. Olson, M. Jeannine Strandjord, and John R. Whitten.
30
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time and change your withholding percentage for future distributions.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on 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. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
31
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 March 31, 2018.
For corporate taxpayers, the fund hereby designates $18,682,672, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended March 31, 2018 as qualified for the corporate dividends received deduction.
The fund hereby designates $23,073,060, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended March 31, 2018.
The fund hereby designates $7,255,881 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended March 31, 2018.
32
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Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2018 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-92269 1805 |
![acihorizblkb99.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/acihorizblkb99.jpg)
Annual Report | |
March 31, 2018 | |
Mid Cap Value Fund | |
Investor Class (ACMVX) | |
I Class (AVUAX) | |
Y Class (AMVYX) | |
A Class (ACLAX) | |
C Class (ACCLX) | |
R Class (AMVRX) | |
R5 Class (AMVGX) | |
R6 Class (AMDVX) |
Table of Contents |
President’s Letter | 2 |
Performance | 3 |
Portfolio Commentary | |
Fund Characteristics | |
Shareholder Fee Example | |
Schedule of Investments | |
Statement of Assets and Liabilities | |
Statement of Operations | |
Statement of Changes in Net Assets | |
Notes to Financial Statements | |
Financial Highlights | |
Report of Independent Registered Public Accounting Firm | |
Management | |
Proxy Voting Results | |
Additional Information |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
![jthomasrev0514.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/jthomasrev0514.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended March 31, 2018. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional, updated investment and market insights, we encourage you to visit our website, americancentury.com.
Rally Rolled On, Until Volatility Resurfaced
For most of the 12-month period, broad U.S. stock and bond indices generated positive returns. Stocks generally rallied against a backdrop of robust corporate earnings results, steady economic growth, relatively low interest rates, and U.S. tax reform. For bonds, modest economic gains, relatively muted inflation, and gradual—and well telegraphed—tightening from the Federal Reserve (the Fed) continued to support positive performance.
Then, in early February, a force that was largely dormant during 2017—volatility—re-emerged. Robust U.S. wage growth triggered expectations for rising inflation, higher interest rates, and a more-hawkish Fed. Treasury yields climbed to their highest levels in several years, and stock prices plunged into correction territory. Economic data released in March helped calm the unrest, while the Fed's March rate hike, which investors had expected, had little impact. Markets recovered much of the previous weeks’ losses, until a fresh round of worries emerged. President Trump announced the U.S. would implement tariffs on certain imports from China, sparking fears of a global trade war and triggering a flight to quality in the financial markets.
Despite the resurgence of volatility late in the period, U.S. stocks (S&P 500 Index) delivered a total return of 13.99% for the 12 months. Continuing a long-standing trend, growth stocks significantly outperformed their value counterparts across the capitalization spectrum. Meanwhile, the March flight to quality helped bonds hang onto the modest gains generated ahead of the market turbulence, and investment-grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index) returned 1.20% for the 12-month period.
With inflationary pressures mounting, Treasury yields rising, volatility resurfacing, and the implications of tax reform still unfolding, investors likely will face new opportunities and challenges in the months ahead. We believe this scenario warrants a disciplined, diversified, and risk-aware approach, using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a01.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/image48a01.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of March 31, 2018 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | ACMVX | 5.51% | 12.28% | 11.10% | — | 3/31/04 |
Russell Midcap Value Index | — | 6.50% | 11.10% | 9.80% | — | — |
I Class | AVUAX | 5.72% | 12.51% | 11.32% | — | 8/2/04 |
Y Class | AMVYX | — | — | — | 5.97% | 4/10/17 |
A Class | ACLAX | 1/13/05 | ||||
No sales charge | 5.26% | 12.01% | 10.83% | — | ||
With sales charge | -0.78% | 10.69% | 10.17% | — | ||
C Class | ACCLX | 4.48% | 11.17% | — | 11.92% | 3/1/10 |
R Class | AMVRX | 5.02% | 11.73% | 10.56% | — | 7/29/05 |
R5 Class | AMVGX | — | — | — | 5.83% | 4/10/17 |
R6 Class | AMDVX | 5.88% | — | — | 11.66% | 7/26/13 |
Average annual returns since inception are presented when ten years of performance history is not available.
Fund returns would have been lower if a portion of the fees had not been waived. Prior to March 1, 2010, the A Class was referred to as the Advisor Class and did not have a front-end sales charge. Performance has been adjusted to reflect this charge. Prior to April 10, 2017, the I Class was referred to as the Institutional Class.
Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum initial sales charge and may be subject to a maximum CDSC of 1.00%. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
3
Growth of $10,000 Over 10 Years |
$10,000 investment made March 31, 2008 |
Performance for other share classes will vary due to differences in fee structure. |
![chart-3f982bd0e45e5ee7a18.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/chart-3f982bd0e45e5ee7a18.jpg)
Value on March 31, 2018 | |
Investor Class — $28,667 | |
Russell Midcap Value Index — $25,494 | |
Ending value of Investor Class would have been lower if a portion of the fees had not been waived.
Total Annual Fund Operating Expenses | |||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class |
1.01% | 0.81% | 0.66% | 1.26% | 2.01% | 1.51% | 0.81% | 0.66% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
4
Portfolio Commentary |
Portfolio Managers: Kevin Toney, Michael Liss, Phil Davidson, and Brian Woglom
Performance Summary
Mid Cap Value returned 5.51%* for the fiscal year ended March 31, 2018, compared with the 6.50% return for its benchmark, the Russell Midcap Value Index. The fund’s return reflects operating expenses, while the index’s return does not.
Over the trailing 12-month period, holdings and an overweight in the energy sector detracted from relative performance. Positions in the utilities, industrials, and health care sectors also weighed on returns. On the other hand, our information technology holdings as well as our underweight and security selection in the real estate sector contributed positively to performance.
Energy Detracted
Our overweight in the energy sector was driven by our bottom-up investment process. We held higher-quality energy stocks that offered attractive valuations, but several of these positions declined for various reasons. More specifically, Baker Hughes, a GE company, was a top detractor from performance. The oil services company underperformed due to weaker-than-expected cash flow generation and due to its large exposure to the slower-growth markets outside of North America. EQT, a diversified natural gas producer, also declined due to weak natural gas prices and the unexpected resignation of the company’s CEO. Additionally, Imperial Oil, an integrated energy company, fell as it lowered its free-cash-flow guidance due to its diminished asset productivity. Imperial also increased guidance for the capital expenditure needs of the business. As a result, our fair market value was revised lower, and we trimmed the position.
Positions in the Utilities, Industrials, and Health Care Sectors Weighed on Returns
Over the trailing 12-month period, utility company PG&E was one of the portfolio’s largest detractors from performance. Its stock declined on liability concerns after media reports linked the company’s equipment to wildfires in Northern California. The company then proactively suspended its dividend to build its cash reserve until liabilities could be determined. As a result of these events, we eliminated our position in the stock. Edison International, another holding in the utilities sector, underperformed due to similar circumstances. There was speculation that wildfires in Southern California were caused by Edison International’s equipment, raising questions about the company’s potential liability.
Industrials holding Johnson Controls International was another meaningful detractor. The building products company provided disappointing 2018 guidance, and management announced profitability and growth challenges as well as an unexpected tax headwind that is expected to pressure free cash flow.
In the health care sector, hospital operator LifePoint Health weighed on relative performance. Due in part to weak market conditions with low admissions, the company reported fiscal second- and third-quarter earnings that were below expectations and lowered fiscal-year revenue guidance. Also, four hospitals that were acquired in 2016 underperformed as they faced competitive markets.
*All fund returns referenced in this commentary are for Investor Class shares. Fund returns would have been lower if a portion of the fees had not been waived. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund's benchmark, other share classes may not. See page 3 for returns for all share classes.
5
Information Technology and Real Estate Positively Impacted Performance
Several of our holdings in the information technology sector outperformed, including semiconductor stocks Applied Materials, Lam Research, Teradyne, and Maxim Integrated Products. These companies all benefited from strong end-market demand, which in turn led to solid financial results. As these stocks outperformed, we trimmed our positions in Applied Materials and Maxim Integrated Products and eliminated Lam Research from the portfolio. Keysight Technologies, an electronic test and measurement company, was another top performer. Toward the beginning of the reporting period, we participated in an offering of new shares to fund Keysight’s acquisition of Ixia. The stock price increased from the offering price due to anticipated cost synergies resulting from the acquisition. Later in the reporting period, Keysight’s stock rose after the company reported double-digit growth in quarterly orders and authorized a new share repurchase program.
Our underweight in the real estate sector was another key contributor to performance. During the low interest rate environment, investors were drawn to real estate investment trusts (REITs) due to the relatively attractive yields that they offered. This drove prices up, causing most REITs to appear unattractive according to our valuation metrics. However, as interest rates rose during the reporting period, many REITs underperformed. Our underweight to the sector and lack of exposure to several of the benchmark’s REIT names therefore helped performance. A few of our REIT holdings also contributed to the portfolio’s results. This included American Tower, a REIT that owns and operates wireless communication towers. Its stock rose on expectations for more traffic to the company’s towers given the increase in unlimited data plans offered by wireless telecommunication services companies. The company also benefited from its exposure to rapidly growing non-U.S. markets, such as India.
Portfolio Positioning
At period-end, the portfolio’s largest sector overweights were in consumer staples and energy. Companies in the consumer staples sector tend to offer business models that fit our investment process well. Additionally, valuations in the sector have become attractive as fundamental headwinds, including fears of increased competition, have pressured stock prices. Within the energy sector, we believe we hold well-managed, higher-quality energy companies with strong balance sheets and compelling risk/reward profiles.
Conversely, the portfolio was underweight in consumer discretionary at the end of the period, as it is difficult to find higher-quality companies with sustainable business models in the sector. The portfolio also maintained a sizable underweight in real estate. Despite the recent underperformance of the real estate sector, our metrics show that many real estate stocks remain inflated.
6
Fund Characteristics |
MARCH 31, 2018 | |
Top Ten Holdings | % of net assets |
Zimmer Biomet Holdings, Inc. | 2.6% |
Northern Trust Corp. | 2.4% |
Johnson Controls International plc | 2.4% |
Weyerhaeuser Co. | 2.1% |
Conagra Brands, Inc. | 2.0% |
Invesco Ltd. | 2.0% |
BB&T Corp. | 1.9% |
WestRock Co. | 1.8% |
Hubbell, Inc. | 1.6% |
Kellogg Co. | 1.5% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 9.2% |
Banks | 8.9% |
Food Products | 8.4% |
Health Care Providers and Services | 6.2% |
Capital Markets | 6.0% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 96.5% |
Exchange-Traded Funds | 1.3% |
Total Equity Exposure | 97.8% |
Temporary Cash Investments | 2.1% |
Other Assets and Liabilities | 0.1% |
7
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from October 1, 2017 to March 31, 2018.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or I Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
8
Beginning Account Value 10/1/17 | Ending Account Value 3/31/18 | Expenses Paid During Period(1) 10/1/17 - 3/31/18 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $1,022.50 | $4.84 | 0.96% |
I Class | $1,000 | $1,023.50 | $3.83 | 0.76% |
Y Class | $1,000 | $1,024.80 | $3.08 | 0.61% |
A Class | $1,000 | $1,021.30 | $6.10 | 1.21% |
C Class | $1,000 | $1,017.90 | $9.86 | 1.96% |
R Class | $1,000 | $1,020.20 | $7.35 | 1.46% |
R5 Class | $1,000 | $1,024.10 | $3.84 | 0.76% |
R6 Class | $1,000 | $1,024.30 | $3.08 | 0.61% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.15 | $4.84 | 0.96% |
I Class | $1,000 | $1,021.14 | $3.83 | 0.76% |
Y Class | $1,000 | $1,021.89 | $3.07 | 0.61% |
A Class | $1,000 | $1,018.90 | $6.09 | 1.21% |
C Class | $1,000 | $1,015.16 | $9.85 | 1.96% |
R Class | $1,000 | $1,017.65 | $7.34 | 1.46% |
R5 Class | $1,000 | $1,021.14 | $3.83 | 0.76% |
R6 Class | $1,000 | $1,021.89 | $3.07 | 0.61% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
9
Schedule of Investments |
MARCH 31, 2018
Shares | Value | ||||
COMMON STOCKS — 96.5% | |||||
Aerospace and Defense — 1.1% | |||||
Textron, Inc. | 1,603,311 | $ | 94,547,250 | ||
Airlines — 0.9% | |||||
Southwest Airlines Co. | 1,372,347 | 78,608,036 | |||
Auto Components — 0.3% | |||||
Aptiv plc | 260,086 | 22,099,507 | |||
Automobiles — 0.9% | |||||
Honda Motor Co. Ltd. ADR | 2,209,645 | 76,740,971 | |||
Banks — 8.9% | |||||
Bank of Hawaii Corp. | 1,095,013 | 90,995,580 | |||
BB&T Corp. | 3,026,921 | 157,520,969 | |||
Comerica, Inc. | 265,750 | 25,493,397 | |||
Commerce Bancshares, Inc. | 1,532,406 | 91,806,443 | |||
M&T Bank Corp. | 643,696 | 118,671,795 | |||
PNC Financial Services Group, Inc. (The) | 278,142 | 42,066,196 | |||
SunTrust Banks, Inc. | 1,269,841 | 86,399,982 | |||
UMB Financial Corp. | 633,022 | 45,824,463 | |||
Westamerica Bancorporation(1) | 1,498,248 | 87,018,244 | |||
745,797,069 | |||||
Beverages — 0.9% | |||||
Dr Pepper Snapple Group, Inc. | 204,599 | 24,220,430 | |||
Molson Coors Brewing Co., Class B | 735,579 | 55,411,166 | |||
79,631,596 | |||||
Building Products — 2.4% | |||||
Johnson Controls International plc | 5,727,637 | 201,841,928 | |||
Capital Markets — 6.0% | |||||
Ameriprise Financial, Inc. | 681,071 | 100,757,644 | |||
Invesco Ltd. | 5,114,405 | 163,712,104 | |||
Northern Trust Corp. | 1,978,627 | 204,055,802 | |||
T. Rowe Price Group, Inc. | 308,969 | 33,359,383 | |||
501,884,933 | |||||
Commercial Services and Supplies — 0.7% | |||||
Republic Services, Inc. | 830,147 | 54,980,636 | |||
Containers and Packaging — 5.0% | |||||
Bemis Co., Inc. | 1,364,778 | 59,395,139 | |||
Graphic Packaging Holding Co. | 7,543,754 | 115,796,624 | |||
Sonoco Products Co. | 1,872,411 | 90,811,933 | |||
WestRock Co. | 2,371,614 | 152,186,470 | |||
418,190,166 | |||||
Distributors — 0.7% | |||||
Genuine Parts Co. | 665,585 | 59,796,156 | |||
Electric Utilities — 3.6% | |||||
Edison International | 1,208,890 | 76,957,938 | |||
Eversource Energy | 684,509 | 40,331,270 | |||
Pinnacle West Capital Corp. | 779,687 | 62,219,023 |
10
Shares | Value | ||||
Xcel Energy, Inc. | 2,655,732 | $ | 120,782,691 | ||
300,290,922 | |||||
Electrical Equipment — 3.8% | |||||
Eaton Corp. plc | 992,170 | 79,284,305 | |||
Emerson Electric Co. | 1,531,028 | 104,569,212 | |||
Hubbell, Inc. | 1,092,976 | 133,102,617 | |||
316,956,134 | |||||
Electronic Equipment, Instruments and Components — 2.2% | |||||
Keysight Technologies, Inc.(2) | 2,112,609 | 110,679,585 | |||
TE Connectivity Ltd. | 709,812 | 70,910,219 | |||
181,589,804 | |||||
Energy Equipment and Services — 3.2% | |||||
Baker Hughes a GE Co. | 3,872,414 | 107,536,937 | |||
Halliburton Co. | 691,845 | 32,475,204 | |||
Helmerich & Payne, Inc. | 237,969 | 15,839,217 | |||
National Oilwell Varco, Inc. | 2,986,679 | 109,939,654 | |||
265,791,012 | |||||
Equity Real Estate Investment Trusts (REITs) — 4.5% | |||||
American Tower Corp. | 427,107 | 62,075,732 | |||
Empire State Realty Trust, Inc., Class A | 1,582,161 | 26,564,483 | |||
MGM Growth Properties LLC, Class A | 2,184,339 | 57,972,357 | |||
Piedmont Office Realty Trust, Inc., Class A | 3,312,446 | 58,265,925 | |||
Weyerhaeuser Co. | 4,964,741 | 173,765,935 | |||
378,644,432 | |||||
Food and Staples Retailing — 2.1% | |||||
Sysco Corp. | 2,142,047 | 128,437,138 | |||
US Foods Holding Corp.(2) | 1,426,154 | 46,735,067 | |||
175,172,205 | |||||
Food Products — 8.4% | |||||
Conagra Brands, Inc. | 4,520,694 | 166,723,195 | |||
General Mills, Inc. | 2,571,391 | 115,866,879 | |||
J.M. Smucker Co. (The) | 648,020 | 80,360,960 | |||
Kellogg Co. | 1,983,106 | 128,921,721 | |||
Mondelez International, Inc., Class A | 2,999,400 | 125,164,962 | |||
Orkla ASA | 8,040,045 | 86,429,311 | |||
703,467,028 | |||||
Gas Utilities — 1.2% | |||||
Atmos Energy Corp. | 505,772 | 42,606,234 | |||
Spire, Inc. | 837,464 | 60,548,647 | |||
103,154,881 | |||||
Health Care Equipment and Supplies — 4.0% | |||||
Siemens Healthineers AG(2) | 1,028,934 | 42,286,121 | |||
STERIS plc | 841,848 | 78,594,929 | |||
Zimmer Biomet Holdings, Inc. | 1,999,663 | 218,043,254 | |||
338,924,304 | |||||
Health Care Providers and Services — 6.2% | |||||
Cardinal Health, Inc. | 1,521,580 | 95,372,635 | |||
Express Scripts Holding Co.(2) | 807,379 | 55,773,741 | |||
HCA Healthcare, Inc. | 637,840 | 61,870,480 | |||
Henry Schein, Inc.(2) | 855,244 | 57,480,949 | |||
LifePoint Health, Inc.(1)(2) | 2,160,747 | 101,555,109 |
11
Shares | Value | ||||
McKesson Corp. | 508,624 | $ | 71,649,863 | ||
Quest Diagnostics, Inc. | 796,657 | 79,904,697 | |||
523,607,474 | |||||
Hotels, Restaurants and Leisure — 0.5% | |||||
Carnival Corp. | 581,092 | 38,108,013 | |||
Household Durables — 0.7% | |||||
PulteGroup, Inc. | 1,985,331 | 58,547,411 | |||
Insurance — 5.3% | |||||
Aflac, Inc. | 1,345,556 | 58,881,530 | |||
Arthur J. Gallagher & Co. | 928,168 | 63,792,987 | |||
Brown & Brown, Inc. | 1,709,692 | 43,494,564 | |||
Chubb Ltd. | 827,304 | 113,150,368 | |||
ProAssurance Corp. | 661,489 | 32,115,291 | |||
Reinsurance Group of America, Inc. | 430,638 | 66,318,252 | |||
Torchmark Corp. | 340,569 | 28,665,693 | |||
Travelers Cos., Inc. (The) | 181,771 | 25,240,721 | |||
Unum Group | 309,431 | 14,732,010 | |||
446,391,416 | |||||
Machinery — 2.7% | |||||
Cummins, Inc. | 323,666 | 52,463,022 | |||
IMI plc | 3,202,829 | 48,614,044 | |||
Ingersoll-Rand plc | 781,576 | 66,832,564 | |||
PACCAR, Inc. | 646,850 | 42,802,064 | |||
Parker-Hannifin Corp. | 108,599 | 18,573,687 | |||
229,285,381 | |||||
Multi-Utilities — 1.3% | |||||
Ameren Corp. | 527,079 | 29,848,484 | |||
NorthWestern Corp. | 1,545,472 | 83,146,393 | |||
112,994,877 | |||||
Multiline Retail — 0.9% | |||||
Target Corp. | 1,062,729 | 73,785,274 | |||
Oil, Gas and Consumable Fuels — 9.2% | |||||
Anadarko Petroleum Corp. | 1,243,739 | 75,134,273 | |||
Cimarex Energy Co. | 768,360 | 71,841,660 | |||
Devon Energy Corp. | 3,079,603 | 97,900,579 | |||
EQT Corp. | 2,475,245 | 117,598,890 | |||
Imperial Oil Ltd. | 3,968,537 | 105,100,697 | |||
Marathon Petroleum Corp. | 827,675 | 60,511,319 | |||
Noble Energy, Inc. | 3,529,398 | 106,940,760 | |||
Occidental Petroleum Corp. | 1,254,442 | 81,488,552 | |||
Spectra Energy Partners LP | 1,552,314 | 52,219,843 | |||
768,736,573 | |||||
Road and Rail — 1.4% | |||||
Heartland Express, Inc. | 4,045,002 | 72,769,586 | |||
Norfolk Southern Corp. | 304,744 | 41,378,140 | |||
114,147,726 | |||||
Semiconductors and Semiconductor Equipment — 3.8% | |||||
Applied Materials, Inc. | 1,287,704 | 71,609,220 | |||
Maxim Integrated Products, Inc. | 1,733,679 | 104,402,149 | |||
Microchip Technology, Inc. | 606,017 | 55,365,713 |
12
Shares/Principal Amount | Value | |||||
Teradyne, Inc. | 1,951,806 | $ | 89,217,052 | |||
320,594,134 | ||||||
Specialty Retail — 1.2% | ||||||
Advance Auto Parts, Inc. | 832,814 | 98,730,100 | ||||
Technology Hardware, Storage and Peripherals — 0.5% | ||||||
HP, Inc. | 1,978,356 | 43,365,564 | ||||
Thrifts and Mortgage Finance — 0.8% | ||||||
Capitol Federal Financial, Inc. | 5,343,946 | 65,997,733 | ||||
Trading Companies and Distributors — 1.2% | ||||||
MSC Industrial Direct Co., Inc., Class A | 1,118,214 | 102,551,406 | ||||
TOTAL COMMON STOCKS (Cost $6,847,029,990) | 8,094,952,052 | |||||
EXCHANGE-TRADED FUNDS — 1.3% | ||||||
iShares Russell Mid-Cap Value ETF (Cost $76,080,201) | 1,216,820 | 105,169,753 | ||||
TEMPORARY CASH INVESTMENTS — 2.1% | ||||||
Federal Home Loan Bank Discount Notes, 1.43%, 4/2/18(3) | $ | 160,000,000 | 160,000,000 | |||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.375% - 3.625%, 2/15/23 - 5/15/47, valued at $10,945,721), in a joint trading account at 1.45%, dated 3/29/18, due 4/2/18 (Delivery value $10,708,508) | 10,706,783 | |||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 11/15/26, valued at $9,106,529), at 0.74%, dated 3/29/18, due 4/2/18 (Delivery value $8,925,734) | 8,925,000 | |||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 11,516 | 11,516 | ||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $179,637,077) | 179,643,299 | |||||
TOTAL INVESTMENT SECURITIES — 99.9% (Cost $7,102,747,268) | 8,379,765,104 | |||||
OTHER ASSETS AND LIABILITIES — 0.1% | 10,823,721 | |||||
TOTAL NET ASSETS — 100.0% | $ | 8,390,588,825 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||
CAD | 3,272,059 | USD | 2,554,262 | Morgan Stanley | 6/29/18 | $ | (10,341 | ) |
USD | 90,468,481 | CAD | 117,018,266 | Morgan Stanley | 6/29/18 | (509,502 | ) | |
USD | 2,225,958 | CAD | 2,867,268 | Morgan Stanley | 6/29/18 | (3,251 | ) | |
USD | 33,259,297 | EUR | 26,897,935 | UBS AG | 6/29/18 | (50,161 | ) | |
USD | 1,296,156 | EUR | 1,040,967 | UBS AG | 6/29/18 | 7,059 | ||
GBP | 1,070,184 | USD | 1,519,575 | Morgan Stanley | 6/29/18 | (12,658 | ) | |
USD | 42,025,193 | GBP | 29,724,361 | Morgan Stanley | 6/29/18 | 170,571 | ||
JPY | 294,567,571 | USD | 2,822,312 | Credit Suisse AG | 6/29/18 | (37,778 | ) | |
USD | 47,038,231 | JPY | 4,966,625,738 | Credit Suisse AG | 6/29/18 | 88,939 | ||
USD | 1,979,365 | JPY | 209,594,972 | Credit Suisse AG | 6/29/18 | (1,927 | ) | |
NOK | 16,547,286 | USD | 2,161,306 | JPMorgan Chase Bank N.A. | 6/29/18 | (44,558 | ) | |
USD | 77,796,269 | NOK | 600,836,144 | JPMorgan Chase Bank N.A. | 6/29/18 | 936,595 | ||
$ | 532,988 |
13
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
CAD | - | Canadian Dollar |
EUR | - | Euro |
GBP | - | British Pound |
JPY | - | Japanese Yen |
NOK | - | Norwegian Krone |
USD | - | United States Dollar |
(1) | Affiliated Company: the fund’s holding represents ownership of 5% or more of the voting securities of the company; therefore, the company is affiliated as defined in the Investment Company Act of 1940. |
(2) | Non-income producing. |
(3) | The rate indicated is the yield to maturity at purchase. |
See Notes to Financial Statements.
14
Statement of Assets and Liabilities |
MARCH 31, 2018 | |||
Assets | |||
Investment securities - unaffiliated, at value (cost of $6,930,354,499) | $ | 8,191,191,751 | |
Investment securities - affiliated, at value (cost of $172,392,769) | 188,573,353 | ||
Total investment securities, at value (cost of $7,102,747,268) | 8,379,765,104 | ||
Receivable for investments sold | 60,218,939 | ||
Receivable for capital shares sold | 11,051,723 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 1,203,164 | ||
Dividends and interest receivable | 11,760,310 | ||
8,463,999,240 | |||
Liabilities | |||
Disbursements in excess of demand deposit cash | 927,999 | ||
Payable for investments purchased | 48,054,551 | ||
Payable for capital shares redeemed | 17,364,972 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 670,176 | ||
Accrued management fees | 6,104,594 | ||
Distribution and service fees payable | 288,123 | ||
73,410,415 | |||
Net Assets | $ | 8,390,588,825 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 6,958,556,802 | |
Distributions in excess of net investment income | (6,008,307 | ) | |
Undistributed net realized gain | 160,488,725 | ||
Net unrealized appreciation | 1,277,551,605 | ||
$ | 8,390,588,825 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | |||
Investor Class, $0.01 Par Value | $4,223,275,501 | 247,070,061 | $17.09 | ||
I Class, $0.01 Par Value | $1,793,037,277 | 104,837,543 | $17.10 | ||
Y Class, $0.01 Par Value | $571,712 | 33,414 | $17.11 | ||
A Class, $0.01 Par Value | $540,108,332 | 31,654,260 | $17.06* | ||
C Class, $0.01 Par Value | $135,132,922 | 8,002,777 | $16.89 | ||
R Class, $0.01 Par Value | $120,024,363 | 7,053,525 | $17.02 | ||
R5 Class, $0.01 Par Value | $313,240 | 18,311 | $17.11 | ||
R6 Class, $0.01 Par Value | $1,578,125,478 | 92,282,420 | $17.10 |
* Maximum offering price $18.10 (net asset value divided by 0.9425).
See Notes to Financial Statements.
15
Statement of Operations |
YEAR ENDED MARCH 31, 2018 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (including $2,533,729 from affiliates and net of foreign taxes withheld of $2,310,153) | $ | 219,733,037 | |
Interest | 2,083,271 | ||
221,816,308 | |||
Expenses: | |||
Management fees | 78,931,364 | ||
Distribution and service fees: | |||
A Class | 1,668,375 | ||
C Class | 1,495,283 | ||
R Class | 684,578 | ||
Directors' fees and expenses | 261,211 | ||
Other expenses | 235,309 | ||
83,276,120 | |||
Fees waived(1) | (3,790,562 | ) | |
79,485,558 | |||
Net investment income (loss) | 142,330,750 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions (including $(757,383) from affiliates) (Note 4) | 781,808,450 | ||
Forward foreign currency exchange contract transactions | (14,004,829 | ) | |
Foreign currency translation transactions | (65,429 | ) | |
767,738,192 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments (including $34,385,331 from affiliates) | (424,558,795 | ) | |
Forward foreign currency exchange contracts | (698,787 | ) | |
Translation of assets and liabilities in foreign currencies | 95,861 | ||
(425,161,721 | ) | ||
Net realized and unrealized gain (loss) | 342,576,471 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 484,907,221 |
(1) | Amount consists of $1,948,833, $816,543, $30, $282,329, $64,274, $58,718, $49, and $619,786 for Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class and R6 Class, respectively. |
See Notes to Financial Statements.
16
Statement of Changes in Net Assets |
YEARS ENDED MARCH 31, 2018 AND MARCH 31, 2017 | ||||||
Increase (Decrease) in Net Assets | March 31, 2018 | March 31, 2017 | ||||
Operations | ||||||
Net investment income (loss) | $ | 142,330,750 | $ | 108,570,769 | ||
Net realized gain (loss) | 767,738,192 | 484,517,537 | ||||
Change in net unrealized appreciation (depreciation) | (425,161,721 | ) | 928,217,893 | |||
Net increase (decrease) in net assets resulting from operations | 484,907,221 | 1,521,306,199 | ||||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Investor Class | (69,026,226 | ) | (56,846,450 | ) | ||
I Class | (33,335,729 | ) | (22,574,513 | ) | ||
Y Class | (1,106 | ) | — | |||
A Class | (8,178,699 | ) | (16,809,081 | ) | ||
C Class | (902,988 | ) | (628,329 | ) | ||
R Class | (1,415,843 | ) | (1,302,759 | ) | ||
R5 Class | (1,629 | ) | — | |||
R6 Class | (26,678,396 | ) | (18,334,282 | ) | ||
From net realized gains: | ||||||
Investor Class | (328,941,203 | ) | (112,493,225 | ) | ||
I Class | (147,848,695 | ) | (39,861,571 | ) | ||
Y Class | (395 | ) | — | |||
A Class | (46,126,098 | ) | (43,015,675 | ) | ||
C Class | (11,104,764 | ) | (4,186,150 | ) | ||
R Class | (10,074,669 | ) | (4,206,839 | ) | ||
R5 Class | (10,168 | ) | — | |||
R6 Class | (108,580,202 | ) | (32,038,469 | ) | ||
Decrease in net assets from distributions | (792,226,810 | ) | (352,297,343 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (240,542,398 | ) | 925,856,847 | |||
Net increase (decrease) in net assets | (547,861,987 | ) | 2,094,865,703 | |||
Net Assets | ||||||
Beginning of period | 8,938,450,812 | 6,843,585,109 | ||||
End of period | $ | 8,390,588,825 | $ | 8,938,450,812 | ||
Undistributed (distributions in excess of) net investment income | $ | (6,008,307 | ) | $ | 1,775,021 |
See Notes to Financial Statements.
17
Notes to Financial Statements |
MARCH 31, 2018
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Mid Cap Value Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective.
The fund offers the Investor Class, I Class (formerly Institutional Class), Y Class, A Class, C Class, R Class, R5 Class and R6 Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. Sale of the Y Class and R5 Class commenced on April 10, 2017.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Fixed income securities are valued at the evaluated mean as provided by independent pricing services or at the mean of the most recent bid and asked prices as provided by investment dealers. U.S. Treasury and Government Agency securities are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a
18
security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that American Century Investment Management, Inc. (ACIM) (the investment advisor) has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
19
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually. The fund may elect to treat a portion of its payment to a redeeming shareholder, which represents the pro rata share of undistributed net investment income and net realized gains, as a distribution for federal income tax purposes (tax equalization).
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc. (ACIS), and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class. From April 1, 2017 through July 31, 2017, the investment advisor agreed to waive 0.03% of the fund's management fee. Effective August 1, 2017, the investment advisor agreed to waive 0.05% of the fund's management fee. The investment advisor expects this waiver to continue until July 31, 2018 and cannot terminate it prior to such date without the approval of the Board of Directors.
The annual management fee and the effective annual management fee after waiver for each class for the period ended March 31, 2018 are as follows:
Annual Management Fee | Effective Annual Management Fee After Waiver | |
Investor Class | 1.00% | 0.96% |
I Class | 0.80% | 0.76% |
Y Class | 0.65% | 0.61% |
A Class | 1.00% | 0.96% |
C Class | 1.00% | 0.96% |
R Class | 1.00% | 0.96% |
R5 Class | 0.80% | 0.76% |
R6 Class | 0.65% | 0.61% |
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the C Class will pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the period ended March 31, 2018 are detailed in the Statement of Operations.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the
20
investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $29,181,841 and $40,085,597, respectively. The effect of interfund transactions on the Statement of Operations was $7,770,898 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended March 31, 2018 were $4,013,369,154 and $4,711,192,778, respectively.
For the period ended March 31, 2018, the fund incurred net realized gains of $7,550,981 from redemptions in kind. A redemption in kind occurs when a fund delivers securities from its portfolio in lieu of cash payment to a redeeming shareholder.
21
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended March 31, 2018(1) | Year ended March 31, 2017 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 1,500,000,000 | 1,355,000,000 | ||||||||
Sold | 52,148,585 | $ | 926,733,097 | 95,524,450 | $ | 1,617,072,204 | ||||
Issued in reinvestment of distributions | 22,618,241 | 394,404,052 | 9,444,752 | 163,834,567 | ||||||
Redeemed | (92,664,226 | ) | (1,650,942,627 | ) | (71,970,011 | ) | (1,207,753,225 | ) | ||
(17,897,400 | ) | (329,805,478 | ) | 32,999,191 | 573,153,546 | |||||
I Class/Shares Authorized | 800,000,000 | 500,000,000 | ||||||||
Sold | 46,014,891 | 820,456,378 | 36,780,861 | 617,210,853 | ||||||
Issued in reinvestment of distributions | 9,275,295 | 161,888,494 | 2,941,214 | 51,025,611 | ||||||
Redeemed | (42,062,105 | ) | (753,279,422 | ) | (23,385,985 | ) | (392,518,202 | ) | ||
13,228,081 | 229,065,450 | 16,336,090 | 275,718,262 | |||||||
Y Class/Shares Authorized | 50,000,000 | N/A | ||||||||
Sold | 33,331 | 582,885 | ||||||||
Issued in reinvestment of distributions | 86 | 1,501 | ||||||||
Redeemed | (3 | ) | (58 | ) | ||||||
33,414 | 584,328 | |||||||||
A Class/Shares Authorized | 300,000,000 | 575,000,000 | ||||||||
Sold | 6,291,603 | 111,898,706 | 33,099,394 | 545,878,543 | ||||||
Issued in reinvestment of distributions | 2,914,841 | 50,699,575 | 3,352,353 | 58,165,063 | ||||||
Redeemed | (33,324,071 | ) | (593,005,750 | ) | (69,649,804 | ) | (1,193,566,164 | ) | ||
(24,117,627 | ) | (430,407,469 | ) | (33,198,057 | ) | (589,522,558 | ) | |||
C Class/Shares Authorized | 60,000,000 | 50,000,000 | ||||||||
Sold | 386,424 | 6,784,394 | 3,740,032 | 60,859,992 | ||||||
Issued in reinvestment of distributions | 658,516 | 11,314,159 | 253,069 | 4,388,322 | ||||||
Redeemed | (2,194,984 | ) | (38,644,638 | ) | (1,622,243 | ) | (27,028,636 | ) | ||
(1,150,044 | ) | (20,546,085 | ) | 2,370,858 | 38,219,678 | |||||
R Class/Shares Authorized | 60,000,000 | 70,000,000 | ||||||||
Sold | 907,607 | 16,056,712 | 3,141,933 | 51,925,449 | ||||||
Issued in reinvestment of distributions | 657,132 | 11,386,397 | 314,643 | 5,459,393 | ||||||
Redeemed | (3,086,353 | ) | (54,812,335 | ) | (3,241,664 | ) | (53,879,242 | ) | ||
(1,521,614 | ) | (27,369,226 | ) | 214,912 | 3,505,600 | |||||
R5 Class/Shares Authorized | 50,000,000 | N/A | ||||||||
Sold | 22,773 | 411,867 | ||||||||
Issued in reinvestment of distributions | 677 | 11,797 | ||||||||
Redeemed | (5,139 | ) | (91,450 | ) | ||||||
18,311 | 332,214 | |||||||||
R6 Class/Shares Authorized | 440,000,000 | 200,000,000 | ||||||||
Sold | 37,989,352 | 680,475,487 | 54,083,268 | 899,809,329 | ||||||
Issued in reinvestment of distributions | 7,747,040 | 135,258,598 | 2,900,453 | 50,372,751 | ||||||
Redeemed | (26,731,710 | ) | (478,130,217 | ) | (19,208,133 | ) | (325,399,761 | ) | ||
19,004,682 | 337,603,868 | 37,775,588 | 624,782,319 | |||||||
Net increase (decrease) | (12,402,197 | ) | $ | (240,542,398 | ) | 56,498,582 | $ | 925,856,847 |
(1) | April 10, 2017 (commencement of sale) through March 31, 2018 for the Y Class and R5 Class. |
22
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments. There were no significant transfers between levels during the period.
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 | $ | 7,812,521,879 | $ | 282,430,173 | — | |||
Exchange-Traded Funds | 105,169,753 | — | — | |||||
Temporary Cash Investments | 11,516 | 179,631,783 | — | |||||
$ | 7,917,703,148 | $ | 462,061,956 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 1,203,164 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 670,176 | — |
7. Affiliated Company Transactions
If a fund's holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the period ended March 31, 2018 follows (amounts in thousands):
Company | Beginning Value | Purchase Cost | Sales Cost | Change in Net Unrealized Appreciation (Depreciation) | Ending Value | Ending Shares | Net Realized Gain (Loss) | Income | |||||||||||||||
Westamerica Bancorporation | $ | 73,085 | $ | 11,634 | $ | 1,390 | $ | 3,689 | $ | 87,018 | 1,498 | $ | 124 | $ | 2,204 | ||||||||
LifePoint Health, Inc.(1) | 128,893 | 24,472 | 18,298 | (33,512 | ) | 101,555 | 2,161 | (169 | ) | — | |||||||||||||
Heartland Express, Inc.(2) | 95,196 | 11,227 | 29,091 | (4,562 | ) | (2 | ) | (2 | ) | (712 | ) | 330 | |||||||||||
$ | 297,174 | $ | 47,333 | $ | 48,779 | $ | (34,385 | ) | $ | 188,573 | 3,659 | $ | (757 | ) | $ | 2,534 |
(1) | Non-income producing |
(2) | Company was not an affiliate at March 31, 2018. |
23
8. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $309,977,990.
The value of foreign currency risk derivative instruments as of March 31, 2018, is disclosed on the Statement of Assets and Liabilities as an asset of $1,203,164 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $670,176 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended March 31, 2018, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(14,004,829) in net realized gain (loss) on forward foreign currency exchange contract transactions and $(698,787) in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
9. Federal Tax Information
The tax character of distributions paid during the years ended March 31, 2018 and March 31, 2017 were as follows:
2018 | 2017 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 220,320,242 | $ | 116,495,414 | ||
Long-term capital gains | $ | 571,906,568 | $ | 235,801,929 |
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 | $ | 7,197,663,407 | |
Gross tax appreciation of investments | $ | 1,457,883,632 | |
Gross tax depreciation of investments | (275,781,935 | ) | |
Net tax appreciation (depreciation) of investments | 1,182,101,697 | ||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 6,666 | ||
Net tax appreciation (depreciation) | $ | 1,182,108,363 | |
Undistributed ordinary income | $ | 6,541,489 | |
Accumulated long-term gains | $ | 243,382,171 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
24
Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||||
2018 | $17.76 | 0.28 | 0.71 | 0.99 | (0.27) | (1.39) | (1.66) | $17.09 | 5.51% | 0.96% | 1.00% | 1.57% | 1.53% | 47% | $4,223,276 | ||
2017 | $15.32 | 0.22 | 2.93 | 3.15 | (0.23) | (0.48) | (0.71) | $17.76 | 20.71% | 0.98% | 1.00% | 1.32% | 1.30% | 49% | $4,706,704 | ||
2016 | $16.70 | 0.19 | 0.06 | 0.25 | (0.19) | (1.44) | (1.63) | $15.32 | 1.94% | 1.00% | 1.01% | 1.19% | 1.18% | 66% | $3,554,131 | ||
2015 | $16.35 | 0.20 | 1.98 | 2.18 | (0.18) | (1.65) | (1.83) | $16.70 | 13.62% | 1.00% | 1.00% | 1.16% | 1.16% | 66% | $3,771,117 | ||
2014 | $14.53 | 0.21 | 2.77 | 2.98 | (0.20) | (0.96) | (1.16) | $16.35 | 21.02% | 1.00% | 1.00% | 1.34% | 1.34% | 67% | $3,252,177 | ||
I Class(3) | |||||||||||||||||
2018 | $17.77 | 0.32 | 0.71 | 1.03 | (0.31) | (1.39) | (1.70) | $17.10 | 5.72% | 0.76% | 0.80% | 1.77% | 1.73% | 47% | $1,793,037 | ||
2017 | $15.33 | 0.26 | 2.93 | 3.19 | (0.27) | (0.48) | (0.75) | $17.77 | 20.95% | 0.78% | 0.80% | 1.52% | 1.50% | 49% | $1,628,060 | ||
2016 | $16.71 | 0.22 | 0.06 | 0.28 | (0.22) | (1.44) | (1.66) | $15.33 | 2.14% | 0.80% | 0.81% | 1.39% | 1.38% | 66% | $1,153,899 | ||
2015 | $16.36 | 0.23 | 1.99 | 2.22 | (0.22) | (1.65) | (1.87) | $16.71 | 13.83% | 0.80% | 0.80% | 1.36% | 1.36% | 66% | $1,017,915 | ||
2014 | $14.53 | 0.24 | 2.78 | 3.02 | (0.23) | (0.96) | (1.19) | $16.36 | 21.33% | 0.80% | 0.80% | 1.54% | 1.54% | 67% | $812,521 | ||
Y Class | |||||||||||||||||
2018(4) | $17.76 | 0.32 | 0.75 | 1.07 | (0.33) | (1.39) | (1.72) | $17.11 | 5.97% | 0.61%(5) | 0.65%(5) | 1.89%(5) | 1.85%(5) | 47%(6) | $572 |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
A Class | |||||||||||||||||
2018 | $17.73 | 0.22 | 0.73 | 0.95 | (0.23) | (1.39) | (1.62) | $17.06 | 5.26% | 1.21% | 1.25% | 1.32% | 1.28% | 47% | $540,108 | ||
2017 | $15.30 | 0.18 | 2.92 | 3.10 | (0.19) | (0.48) | (0.67) | $17.73 | 20.37% | 1.23% | 1.25% | 1.07% | 1.05% | 49% | $989,014 | ||
2016 | $16.68 | 0.15 | 0.06 | 0.21 | (0.15) | (1.44) | (1.59) | $15.30 | 1.69% | 1.25% | 1.26% | 0.94% | 0.93% | 66% | $1,360,886 | ||
2015 | $16.33 | 0.15 | 2.00 | 2.15 | (0.15) | (1.65) | (1.80) | $16.68 | 13.40% | 1.25% | 1.25% | 0.91% | 0.91% | 66% | $1,464,424 | ||
2014 | $14.52 | 0.17 | 2.76 | 2.93 | (0.16) | (0.96) | (1.12) | $16.33 | 20.71% | 1.25% | 1.25% | 1.09% | 1.09% | 67% | $802,480 | ||
C Class | |||||||||||||||||
2018 | $17.58 | 0.10 | 0.71 | 0.81 | (0.11) | (1.39) | (1.50) | $16.89 | 4.48% | 1.96% | 2.00% | 0.57% | 0.53% | 47% | $135,133 | ||
2017 | $15.17 | 0.06 | 2.90 | 2.96 | (0.07) | (0.48) | (0.55) | $17.58 | 19.56% | 1.98% | 2.00% | 0.32% | 0.30% | 49% | $160,893 | ||
2016 | $16.57 | 0.03 | 0.06 | 0.09 | (0.05) | (1.44) | (1.49) | $15.17 | 0.90% | 2.00% | 2.01% | 0.19% | 0.18% | 66% | $102,906 | ||
2015 | $16.26 | 0.03 | 1.97 | 2.00 | (0.04) | (1.65) | (1.69) | $16.57 | 12.53% | 2.00% | 2.00% | 0.16% | 0.16% | 66% | $79,490 | ||
2014 | $14.49 | 0.05 | 2.75 | 2.80 | (0.07) | (0.96) | (1.03) | $16.26 | 19.75% | 2.00% | 2.00% | 0.34% | 0.34% | 67% | $60,443 |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
R Class | |||||||||||||||||
2018 | $17.69 | 0.19 | 0.71 | 0.90 | (0.18) | (1.39) | (1.57) | $17.02 | 5.02% | 1.46% | 1.50% | 1.07% | 1.03% | 47% | $120,024 | ||
2017 | $15.26 | 0.14 | 2.92 | 3.06 | (0.15) | (0.48) | (0.63) | $17.69 | 20.12% | 1.48% | 1.50% | 0.82% | 0.80% | 49% | $151,705 | ||
2016 | $16.64 | 0.11 | 0.06 | 0.17 | (0.11) | (1.44) | (1.55) | $15.26 | 1.43% | 1.50% | 1.51% | 0.69% | 0.68% | 66% | $127,581 | ||
2015 | $16.31 | 0.11 | 1.98 | 2.09 | (0.11) | (1.65) | (1.76) | $16.64 | 13.07% | 1.50% | 1.50% | 0.66% | 0.66% | 66% | $130,669 | ||
2014 | $14.51 | 0.13 | 2.76 | 2.89 | (0.13) | (0.96) | (1.09) | $16.31 | 20.41% | 1.50% | 1.50% | 0.84% | 0.84% | 67% | $110,440 | ||
R5 Class | |||||||||||||||||
2018(4) | $17.76 | 0.29 | 0.76 | 1.05 | (0.31) | (1.39) | (1.70) | $17.11 | 5.83% | 0.76%(5) | 0.80%(5) | 1.70%(5) | 1.66%(5) | 47%(6) | $313 | ||
R6 Class | |||||||||||||||||
2018 | $17.77 | 0.34 | 0.72 | 1.06 | (0.34) | (1.39) | (1.73) | $17.10 | 5.88% | 0.61% | 0.65% | 1.92% | 1.88% | 47% | $1,578,125 | ||
2017 | $15.33 | 0.29 | 2.92 | 3.21 | (0.29) | (0.48) | (0.77) | $17.77 | 21.13% | 0.63% | 0.65% | 1.67% | 1.65% | 49% | $1,302,074 | ||
2016 | $16.71 | 0.25 | 0.05 | 0.30 | (0.24) | (1.44) | (1.68) | $15.33 | 2.29% | 0.65% | 0.66% | 1.54% | 1.53% | 66% | $544,182 | ||
2015 | $16.35 | 0.26 | 1.99 | 2.25 | (0.24) | (1.65) | (1.89) | $16.71 | 14.07% | 0.65% | 0.65% | 1.51% | 1.51% | 66% | $219,661 | ||
2014(7) | $15.66 | 0.20 | 1.61 | 1.81 | (0.16) | (0.96) | (1.12) | $16.35 | 12.01% | 0.65%(5) | 0.65%(5) | 1.83%(5) | 1.83%(5) | 67%(8) | $74,570 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | Prior to April 10, 2017, the I Class was referred to as the Institutional Class. |
(4) | April 10, 2017 (commencement of sale) through March 31, 2018. |
(5) | Annualized. |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2018. |
(7) | July 26, 2013 (commencement of sale) through March 31, 2014. |
(8) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2014. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Directors of American Century Capital Portfolios, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Mid Cap Value Fund, one of the portfolios constituting the American Century Capital Portfolios, Inc. (the “Fund”), as of March 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of Mid Cap Value Fund of the American Century Capital Portfolios, Inc. as of March 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of March 31, 2018, 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
May 16, 2018
We have served as the auditor of one or more American Century investment companies since 1997.
29
Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 68 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) |
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired; Executive Vice President, ACC (2007 to 2013); President, ACS (2007 to 2013); Chief Operating Officer, ACC (2007 to 2012) | 68 | None |
Andrea C. Hall (1945) | Director | Since 1997 | Retired | 68 | None |
Jan M. Lewis (1957) | Director | Since 2011 | Retired; President and Chief Executive Officer, Catholic Charities of Northeast Kansas (human services organization) (2006 to 2013) | 68 | None |
30
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
M. Jeannine Strandjord (1945) | Director | Since 1994 | Self-employed Consultant | 68 | Euronet Worldwide Inc.; MGP Ingredients, Inc. |
John R. Whitten (1946) | Director | Since 2008 | Retired | 68 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 70 | None |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director and President | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 115 | BioMed Valley Discoveries, Inc. |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
31
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds, unless otherwise noted. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
Jonathan S. Thomas (1963) | Director and President since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present); Vice President, Client Interactions and Marketing, ACIS (2013 to 2014). Also serves as Vice President, ACIS |
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
C. Jean Wade (1964) | Vice President,Treasurer and Chief Financial Officer since 2012 | Vice President, ACS (2000 to present) |
Robert J. Leach (1966) | Vice President since 2006 and Assistant Treasurer since 2012 | Vice President, ACS (2000 to present) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present); Associate General Counsel, ACC (2001 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
32
Proxy Voting Results |
A special meeting of shareholders was held on October 18, 2017, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect four directors to the Board of Directors of American Century Capital Portfolios, Inc.:
Affirmative | Withhold | ||||||
Thomas W. Bunn | $ | 24,595,873,549 | $ | 400,991,853 | |||
Barry Fink | $ | 24,607,840,546 | $ | 389,024,856 | |||
Jan M. Lewis | $ | 24,616,409,175 | $ | 380,456,227 | |||
Stephen E. Yates | $ | 24,605,431,961 | $ | 391,433,441 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Andrea C. Hall, James A. Olson, M. Jeannine Strandjord, and John R. Whitten.
33
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time and change your withholding percentage for future distributions.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on 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. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
34
Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified dividend income for the fiscal year ended March 31, 2018.
For corporate taxpayers, the fund hereby designates $182,962,042, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended March 31, 2018 as qualified for the corporate dividends received deduction.
The fund hereby designates $88,044,993 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended March 31, 2018.
The fund hereby designates $618,347,460, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended March 31, 2018.
The fund utilized earnings and profits of $57,948,167 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
35
Notes |
36
![]() | ||
Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2018 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-92271 1805 |
![acihorizblkb99.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/acihorizblkb99.jpg)
Annual Report | |
March 31, 2018 | |
NT Large Company Value Fund | |
G Class (ACLLX) |
Table of Contents |
Performance | 2 | |
Portfolio Commentary | ||
Fund Characteristics | ||
Shareholder Fee Example | ||
Schedule of Investments | ||
Statement of Assets and Liabilities | ||
Statement of Operations | ||
Statement of Changes in Net Assets | ||
Notes to Financial Statements | ||
Financial Highlights | ||
Report of Independent Registered Public Accounting Firm | ||
Management | ||
Proxy Voting Results | ||
Additional Information |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Performance |
Total Returns as of March 31, 2018 | |||||
Average Annual Returns | |||||
Ticker Symbol | 1 year | 5 years | 10 years | Inception Date | |
G Class | ACLLX | 4.23% | 9.89% | 6.81% | 5/12/06 |
Russell 1000 Value Index | — | 6.95% | 10.78% | 7.77% | — |
S&P 500 Index | — | 13.99% | 13.30% | 9.49% | — |
Fund returns would have been lower if a portion of the fees had not been waived. Prior to July 31, 2017, the
G Class was referred to as the Institutional Class.
Growth of $10,000 Over 10 Years |
$10,000 investment made March 31, 2008 |
![chart-3246a931936b501991a.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/chart-3246a931936b501991a.jpg)
Value on March 31, 2018 | |
G Class — $19,325 | |
Russell 1000 Value Index — $21,144 | |
S&P 500 Index — $24,771 | |
Ending value of G Class would have been lower if a portion of the fees had not been waived.
Total Annual Fund Operating Expenses | |
G Class | 0.49% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
2
Portfolio Commentary |
Portfolio Managers: Brendan Healy and Brian Woglom
Portfolio manager Brendan Healy retired from American Century Investments in April 2018. In May 2018, Phil Davidson joined NT Large Company Value's management team.
Performance Summary
NT Large Company Value returned 4.23%* for the fiscal year ended March 31, 2018, compared with the 6.95% return of its benchmark, the Russell 1000 Value Index.
Value stocks underperformed growth stocks across the capitalization spectrum during the 12-month period, creating a headwind for the fund’s performance. Within the Russell 1000 Value Index, information technology led performance, followed by financials and materials. The weakest sectors were telecommunication services, real estate, and consumer staples. The fund recorded positive absolute contributions from most sectors, led by financials and information technology. Industrials were the largest absolute detractors.
The fund’s underperformance relative to the benchmark was driven by stock selection in the industrials, health care, and financials sectors. Stock decisions in the information technology and consumer staples sectors benefited results.
Industrials Holdings Led Detractors
Security selection in the industrials sector detracted from relative performance. General Electric was a significant detractor. The industrial conglomerate underperformed due to fundamental challenges in its power and financial business segments and uncertainty over asset dispositions. We continue to believe that General Electric is a higher-quality company with best-in-class aviation and leading health care business units. Johnson Controls International also detracted despite reporting better-than-expected quarterly earnings in its fiscal fourth quarter. The stock declined as the building products company provided disappointing 2018 guidance. Management detailed profitability and growth challenges as well as an unexpected tax headwind that will pressure free cash flow.
In the health care sector, Allergan weighed on performance. Allergan is a multinational pharmaceutical that produces branded drugs and performs pharmaceutical research and development. The company’s stock declined during the period largely due to controversies surrounding its patent on Restasis, a dry-eye drug.
Other significant detractors included Schlumberger. Declining oil and gas prices as well as the company’s significant exposure to relatively weak non-U.S. markets weighed on the stock. The declining stock price allowed us to increase our position, and Schlumberger ended the period as our largest holding. Toy company Mattel declined after missing estimates and announcing the need to renegotiate the financial leverage covenants of its credit facility. Furthermore, Toys"R"Us, one of Mattel’s largest customers, unexpectedly filed for bankruptcy, creating uncertainty leading up to the holiday season. Despite the short-term disruption, we believe there will be minimal impact to long-term toy demand.
Advance Auto Parts fell in July after competitor O’Reilly Automotive preannounced that it would miss quarterly sales expectations. Advance Auto Parts then reported its own earnings miss in August and materially lowered its fiscal year guidance. Our longer-term investment thesis remains
*Fund returns would have been lower if a portion of the fees had not been waived.
3
intact, however. The retailer of aftermarket replacement parts is a market share leader in a
higher-quality industry. Extreme winter storms in the Northeastern U.S. helped drive better-than-expected quarterly results late in our reporting period. Additionally, the company is restructuring, which we think should dramatically improve profit margins.
Information Technology Benefited Performance
Holdings in several industries aided security selection in information technology. Semiconductor company Applied Materials turned in strong performance as the company continues to gain market share and exceed expectations. Additionally, the company raised guidance and doubled its dividend. Lam Research, a global supplier of semiconductor manufacturing equipment, benefited from robust orders due to strong end-market demand. Our analysis showed that the stock had reached the higher range of valuation target levels, and we eliminated our position. Revenues for Cisco Systems’ campus and data center switches exceeded expectations due to a new product cycle and higher information technology infrastructure spending. Also, tax reform gives Cisco access to its cash outside of the U.S.
Food and staples retailers benefited performance in the consumer staples sector. Walmart’s stock held up better relative to less diversified food retailers following Amazon’s announced acquisition of Whole Foods Market. The company announced solid earnings and growth in the company’s e-commerce sales. We sold part of our position in Walmart on outperformance. Our energy holdings contributed positively. TOTAL was among the portfolio’s top contributors. The stock outperformed after reporting strong quarterly earnings and announcing enhanced capital return targets through 2020. One of the portfolio’s top relative contributors was a stock we did not own. Telecommunications giant AT&T declined as the company reported lower-than-expected quarterly revenues due to increased competition in wireless.
Portfolio Positioning
We continue to use our fundamental analysis, risk/reward framework, and proprietary valuation model to invest primarily in the stocks of large companies that we believe are undervalued.
We see value in health care, where we hold higher-quality companies with compelling valuations and strong fundamentals. Several of these holdings are in the pharmaceuticals and health care equipment and supplies industries. For example, pharmaceutical company Pfizer is a top holding and one of the highest-quality companies in its industry. Its diversified product portfolio has historically generated stable returns through various economic cycles, and we believe it will be able to sustain returns through continued research and development investment.
Energy valuations remain attractive. During the first half of 2017, the energy sector declined as the price of oil fell and energy companies faced a rising service cost environment. This provided us with the opportunity to add to some of the portfolio’s energy stocks that continue to offer compelling risk/reward profiles.
The portfolio’s information technology allocation ended the period as a modest underweight. We trimmed Cisco Systems and Applied Materials after they outperformed on better-than-expected earnings, and, as mentioned earlier, we exited our position in Lam Research due to its outperformance. We maintained our underweight in the real estate and utilities sectors. Our valuation methodology shows that many real estate and utilities stocks remain overvalued, even though these sectors have recently been pressured by rising interest rates.
4
Fund Characteristics |
MARCH 31, 2018 | |
Top Ten Holdings | % of net assets |
Schlumberger Ltd. | 3.6% |
Pfizer, Inc. | 3.1% |
Johnson & Johnson | 3.0% |
TOTAL SA ADR | 2.9% |
Verizon Communications, Inc. | 2.9% |
Procter & Gamble Co. (The) | 2.9% |
Medtronic plc | 2.9% |
U.S. Bancorp | 2.7% |
BB&T Corp. | 2.5% |
Bank of America Corp. | 2.4% |
Top Five Industries | % of net assets |
Banks | 14.9% |
Oil, Gas and Consumable Fuels | 10.5% |
Pharmaceuticals | 10.3% |
Health Care Equipment and Supplies | 5.9% |
Energy Equipment and Services | 4.7% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 89.4% |
Foreign Common Stocks* | 7.9% |
Exchange-Traded Funds | 1.2% |
Total Equity Exposure | 98.5% |
Temporary Cash Investments | 1.2% |
Other Assets and Liabilities | 0.3% |
*Includes depositary shares, dual listed securities and foreign ordinary shares.
5
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from October 1, 2017 to March 31, 2018.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 10/1/17 | Ending Account Value 3/31/18 | Expenses Paid During Period(1) 10/1/17 - 3/31/18 | Annualized Expense Ratio(1) | |
Actual | ||||
G Class | $1,000 | $1,008.80 | $0.05 | 0.01% |
Hypothetical | ||||
G Class | $1,000 | $1,024.88 | $0.05 | 0.01% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, 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. |
6
Schedule of Investments |
MARCH 31, 2018
Shares | Value | ||||
COMMON STOCKS — 97.3% | |||||
Aerospace and Defense — 1.1% | |||||
Textron, Inc. | 246,300 | $ | 14,524,311 | ||
United Technologies Corp. | 50,600 | 6,366,492 | |||
20,890,803 | |||||
Air Freight and Logistics — 0.8% | |||||
United Parcel Service, Inc., Class B | 144,800 | 15,154,768 | |||
Airlines — 0.5% | |||||
Southwest Airlines Co. | 164,700 | 9,434,016 | |||
Auto Components — 0.2% | |||||
Aptiv plc | 50,000 | 4,248,500 | |||
Automobiles — 1.0% | |||||
Honda Motor Co. Ltd. ADR | 562,400 | 19,532,152 | |||
Banks — 14.9% | |||||
Bank of America Corp. | 1,539,000 | 46,154,610 | |||
BB&T Corp. | 898,500 | 46,757,940 | |||
JPMorgan Chase & Co. | 312,200 | 34,332,634 | |||
M&T Bank Corp. | 149,700 | 27,598,692 | |||
PNC Financial Services Group, Inc. (The) | 228,100 | 34,497,844 | |||
U.S. Bancorp | 1,026,900 | 51,858,450 | |||
Wells Fargo & Co. | 766,800 | 40,187,988 | |||
281,388,158 | |||||
Beverages — 0.8% | |||||
PepsiCo, Inc. | 132,000 | 14,407,800 | |||
Biotechnology — 0.4% | |||||
Celgene Corp.(1) | 88,700 | 7,912,927 | |||
Building Products — 1.9% | |||||
Johnson Controls International plc | 1,032,400 | 36,381,776 | |||
Capital Markets — 4.6% | |||||
Ameriprise Financial, Inc. | 97,300 | 14,394,562 | |||
Bank of New York Mellon Corp. (The) | 755,000 | 38,905,150 | |||
Invesco Ltd. | 1,067,500 | 34,170,675 | |||
87,470,387 | |||||
Chemicals — 0.9% | |||||
DowDuPont, Inc. | 271,600 | 17,303,636 | |||
Communications Equipment — 2.0% | |||||
Cisco Systems, Inc. | 877,400 | 37,631,686 | |||
Containers and Packaging — 0.6% | |||||
WestRock Co. | 185,100 | 11,877,867 | |||
Diversified Telecommunication Services — 2.9% | |||||
Verizon Communications, Inc. | 1,158,500 | 55,399,470 | |||
Electric Utilities — 2.6% | |||||
Edison International | 165,200 | 10,516,632 | |||
Eversource Energy | 205,600 | 12,113,952 | |||
PPL Corp. | 176,700 | 4,998,843 | |||
Xcel Energy, Inc. | 450,700 | 20,497,836 | |||
48,127,263 |
7
Shares | Value | ||||
Electrical Equipment — 0.9% | |||||
Eaton Corp. plc | 213,800 | $ | 17,084,758 | ||
Electronic Equipment, Instruments and Components — 0.9% | |||||
TE Connectivity Ltd. | 175,329 | 17,515,367 | |||
Energy Equipment and Services — 4.7% | |||||
Baker Hughes a GE Co. | 735,100 | 20,413,727 | |||
Schlumberger Ltd. | 1,056,600 | 68,446,548 | |||
88,860,275 | |||||
Equity Real Estate Investment Trusts (REITs) — 0.5% | |||||
Boston Properties, Inc. | 72,300 | 8,908,806 | |||
Food and Staples Retailing — 3.7% | |||||
Sysco Corp. | 326,300 | 19,564,948 | |||
Walgreens Boots Alliance, Inc. | 272,000 | 17,807,840 | |||
Walmart, Inc. | 357,800 | 31,833,466 | |||
69,206,254 | |||||
Food Products — 4.4% | |||||
Conagra Brands, Inc. | 599,600 | 22,113,248 | |||
General Mills, Inc. | 234,000 | 10,544,040 | |||
Kellogg Co. | 151,400 | 9,842,514 | |||
Mondelez International, Inc., Class A | 950,600 | 39,668,538 | |||
82,168,340 | |||||
Health Care Equipment and Supplies — 5.9% | |||||
Abbott Laboratories | 178,400 | 10,689,728 | |||
Medtronic plc | 671,100 | 53,835,642 | |||
Siemens Healthineers AG(1) | 264,600 | 10,874,271 | |||
Zimmer Biomet Holdings, Inc. | 330,100 | 35,994,104 | |||
111,393,745 | |||||
Health Care Providers and Services — 2.6% | |||||
Cigna Corp. | 44,400 | 7,447,656 | |||
HCA Healthcare, Inc. | 172,100 | 16,693,700 | |||
Henry Schein, Inc.(1) | 148,800 | 10,000,848 | |||
McKesson Corp. | 110,900 | 15,622,483 | |||
49,764,687 | |||||
Hotels, Restaurants and Leisure — 0.5% | |||||
Carnival Corp. | 135,400 | 8,879,532 | |||
Household Products — 2.9% | |||||
Procter & Gamble Co. (The) | 685,300 | 54,330,584 | |||
Industrial Conglomerates — 1.0% | |||||
General Electric Co. | 1,405,200 | 18,942,096 | |||
Insurance — 3.9% | |||||
Aflac, Inc. | 427,800 | 18,720,528 | |||
Chubb Ltd. | 317,500 | 43,424,475 | |||
MetLife, Inc. | 239,500 | 10,990,655 | |||
73,135,658 | |||||
Leisure Products — 0.2% | |||||
Mattel, Inc. | 255,400 | 3,358,510 | |||
Machinery — 0.5% | |||||
Ingersoll-Rand plc | 110,600 | 9,457,406 | |||
Media — 0.5% | |||||
Time Warner, Inc. | 102,700 | 9,713,366 |
8
Shares | Value | ||||
Multiline Retail — 0.6% | |||||
Target Corp. | 165,700 | $ | 11,504,551 | ||
Oil, Gas and Consumable Fuels — 10.5% | |||||
Anadarko Petroleum Corp. | 396,600 | 23,958,606 | |||
Chevron Corp. | 381,400 | 43,494,856 | |||
Exxon Mobil Corp. | 123,900 | 9,244,179 | |||
Occidental Petroleum Corp. | 608,700 | 39,541,152 | |||
Royal Dutch Shell plc, Class B ADR | 388,300 | 25,445,299 | |||
TOTAL SA ADR | 961,000 | 55,440,090 | |||
197,124,182 | |||||
Personal Products — 1.0% | |||||
Unilever NV CVA | 314,800 | 17,795,151 | |||
Pharmaceuticals — 10.3% | |||||
Allergan plc | 112,500 | 18,932,625 | |||
Johnson & Johnson | 446,400 | 57,206,160 | |||
Merck & Co., Inc. | 743,200 | 40,482,104 | |||
Pfizer, Inc. | 1,655,400 | 58,750,146 | |||
Roche Holding AG | 81,200 | 18,624,023 | |||
193,995,058 | |||||
Road and Rail — 0.6% | |||||
Union Pacific Corp. | 83,100 | 11,171,133 | |||
Semiconductors and Semiconductor Equipment — 2.6% | |||||
Applied Materials, Inc. | 240,300 | 13,363,083 | |||
Intel Corp. | 349,800 | 18,217,584 | |||
QUALCOMM, Inc. | 329,100 | 18,235,431 | |||
49,816,098 | |||||
Software — 1.8% | |||||
Oracle Corp. (New York) | 728,200 | 33,315,150 | |||
Specialty Retail — 1.3% | |||||
Advance Auto Parts, Inc. | 164,900 | 19,548,895 | |||
L Brands, Inc. | 131,900 | 5,039,899 | |||
24,588,794 | |||||
Technology Hardware, Storage and Peripherals — 0.3% | |||||
Apple, Inc. | 38,100 | 6,392,418 | |||
TOTAL COMMON STOCKS (Cost $1,568,342,982) | 1,835,583,128 | ||||
EXCHANGE-TRADED FUNDS — 1.2% | |||||
iShares Russell 1000 Value ETF (Cost $22,561,497) | 191,700 | 22,996,332 | |||
TEMPORARY CASH INVESTMENTS — 1.2% | |||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.375% - 3.625%, 2/15/23 - 5/15/47, valued at $12,009,743), in a joint trading account at 1.45%, dated 3/29/18, due 4/2/18 (Delivery value $11,749,471) | 11,747,578 | ||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 1.625%, 5/15/26, valued at $9,991,848), at 0.74%, dated 3/29/18, due 4/2/18 (Delivery value $9,793,805) | 9,793,000 |
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Shares | Value | ||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 12,221 | $ | 12,221 | ||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $21,552,799) | 21,552,799 | ||||
TOTAL INVESTMENT SECURITIES — 99.7% (Cost $1,612,457,278) | 1,880,132,259 | ||||
OTHER ASSETS AND LIABILITIES — 0.3% | 6,195,220 | ||||
TOTAL NET ASSETS — 100.0% | $ | 1,886,327,479 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||
USD | 16,007,123 | CHF | 15,139,537 | Credit Suisse AG | 6/29/18 | $ | 54,040 | |||
USD | 70,964,428 | EUR | 57,391,369 | UBS AG | 6/29/18 | (107,028 | ) | |||
USD | 20,934,017 | GBP | 14,806,601 | Morgan Stanley | 6/29/18 | 84,967 | ||||
USD | 646,786 | GBP | 455,253 | Morgan Stanley | 6/29/18 | 5,748 | ||||
JPY | 82,309,667 | USD | 788,626 | Credit Suisse AG | 6/29/18 | (10,556 | ) | |||
USD | 16,393,833 | JPY | 1,730,975,669 | Credit Suisse AG | 6/29/18 | 30,997 | ||||
USD | 444,183 | JPY | 46,701,424 | Credit Suisse AG | 6/29/18 | 2,717 | ||||
USD | 612,087 | JPY | 64,813,860 | Credit Suisse AG | 6/29/18 | (596 | ) | |||
$ | 60,289 |
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
CHF | - | Swiss Franc |
CVA | - | Certificaten Van Aandelen |
EUR | - | Euro |
GBP | - | British Pound |
JPY | - | Japanese Yen |
USD | - | United States Dollar |
(1) | Non-income producing. |
See Notes to Financial Statements.
10
Statement of Assets and Liabilities |
MARCH 31, 2018 | |||
Assets | |||
Investment securities, at value (cost of $1,612,457,278) | $ | 1,880,132,259 | |
Receivable for investments sold | 4,984,759 | ||
Receivable for capital shares sold | 31,386 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 178,469 | ||
Dividends and interest receivable | 4,296,805 | ||
1,889,623,678 | |||
Liabilities | |||
Disbursements in excess of demand deposit cash | 154,369 | ||
Payable for investments purchased | 2,837,703 | ||
Payable for capital shares redeemed | 185,947 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 118,180 | ||
3,296,199 | |||
Net Assets | $ | 1,886,327,479 | |
G Class Capital Shares, $0.01 Par Value | |||
Shares authorized | 920,000,000 | ||
Shares outstanding | 168,837,769 | ||
Net Asset Value Per Share | $ | 11.17 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 1,625,298,038 | |
Undistributed net investment income | 3,339,499 | ||
Accumulated net realized loss | (10,044,491 | ) | |
Net unrealized appreciation | 267,734,433 | ||
$ | 1,886,327,479 |
See Notes to Financial Statements.
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Statement of Operations |
YEAR ENDED MARCH 31, 2018 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $663,225) | $ | 56,575,712 | |
Interest | 183,685 | ||
56,759,397 | |||
Expenses: | |||
Management fees | 10,191,474 | ||
Directors' fees and expenses | 58,353 | ||
Other expenses | 65,347 | ||
10,315,174 | |||
Fees waived - G Class | (6,247,796 | ) | |
4,067,378 | |||
Net investment income (loss) | 52,692,019 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 106,165,671 | ||
Forward foreign currency exchange contract transactions | (9,768,141 | ) | |
Foreign currency translation transactions | 12,465 | ||
96,409,995 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (61,400,665 | ) | |
Forward foreign currency exchange contracts | (740,440 | ) | |
Translation of assets and liabilities in foreign currencies | 304 | ||
(62,140,801 | ) | ||
Net realized and unrealized gain (loss) | 34,269,194 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 86,961,213 |
See Notes to Financial Statements.
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Statement of Changes in Net Assets |
YEARS ENDED MARCH 31, 2018 AND MARCH 31, 2017 | ||||||
Increase (Decrease) in Net Assets | March 31, 2018 | March 31, 2017 | ||||
Operations | ||||||
Net investment income (loss) | $ | 52,692,019 | $ | 38,974,306 | ||
Net realized gain (loss) | 96,409,995 | 141,155,638 | ||||
Change in net unrealized appreciation (depreciation) | (62,140,801 | ) | 142,242,655 | |||
Net increase (decrease) in net assets resulting from operations | 86,961,213 | 322,372,599 | ||||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
G Class | (49,067,307 | ) | (34,615,462 | ) | ||
R6 Class | (1,038,414 | ) | (3,794,678 | ) | ||
From net realized gains: | ||||||
G Class | (146,697,861 | ) | (70,093,076 | ) | ||
R6 Class | — | (7,482,182 | ) | |||
Decrease in net assets from distributions | (196,803,582 | ) | (115,985,398 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 89,662,460 | 59,914,703 | ||||
Net increase (decrease) in net assets | (20,179,909 | ) | 266,301,904 | |||
Net Assets | ||||||
Beginning of period | 1,906,507,388 | 1,640,205,484 | ||||
End of period | $ | 1,886,327,479 | $ | 1,906,507,388 | ||
Undistributed net investment income | $ | 3,339,499 | $ | 1,529,842 |
See Notes to Financial Statements.
13
Notes to Financial Statements |
MARCH 31, 2018
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. NT Large Company Value Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective. The fund is not permitted to invest in securities issued by companies assigned the Global Industry Classification Standard or the Bloomberg Industry Classification Standard for the tobacco industry. The fund offers the G Class (formerly Institutional Class). On July 31, 2017, all outstanding R6 Class shares were converted to G Class shares and the fund discontinued offering the R6 Class.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between
14
domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that American Century Investment Management, Inc. (ACIM) (the investment advisor) has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
15
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc., and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC. Various funds issued by American Century Asset Allocation Portfolios, Inc. own, in aggregate, 100% of the shares of the fund. Related parties do not invest in the fund for the purpose of exercising management or control.
Management Fees —The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that use very similar investment teams and strategies (strategy assets). The strategy assets of the fund also include the assets of Large Company Value Fund, one fund in a series issued by the corporation. The management fee schedule ranges from 0.35% to 0.55% for the G Class. Prior to July 31, 2017, the management fee schedule ranged from 0.50% to 0.70% for the G Class and 0.35% to 0.55% for the R6 Class. Effective July 31, 2017, the investment advisor agreed to waive the G Class’s management fee in its entirety. The investment advisor expects this waiver to remain in effect permanently and cannot terminate it without the approval of the Board of Directors. The effective annual management fee for the period ended March 31, 2018 was 0.52% before waiver and 0.19% after waiver for the G Class.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $22,668,101 and $14,759,194, respectively. The effect of interfund transactions on the Statement of Operations was $562,256 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended March 31, 2018 were $1,100,914,902 and $1,168,228,063, respectively.
16
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended March 31, 2018 | Year ended March 31, 2017 | |||||||||
Shares | Amount | Shares | Amount | |||||||
G Class/Shares Authorized | 920,000,000 | 825,000,000 | ||||||||
Sold | 36,358,869 | $ | 431,890,150 | 15,821,549 | $ | 178,636,197 | ||||
Issued in reinvestment of distributions | 16,806,758 | 195,765,168 | 9,020,530 | 104,708,538 | ||||||
Redeemed | (27,835,044 | ) | (332,586,166 | ) | (26,032,560 | ) | (301,671,984 | ) | ||
25,330,583 | 295,069,152 | (1,190,481 | ) | (18,327,249 | ) | |||||
R6 Class/Shares Authorized | N/A | 70,000,000 | ||||||||
Sold | 2,076,788 | 24,637,192 | 8,331,107 | 95,411,193 | ||||||
Issued in reinvestment of distributions | 87,042 | 1,038,414 | 969,886 | 11,276,860 | ||||||
Redeemed | (19,287,096 | ) | (231,082,298 | ) | (2,466,464 | ) | (28,446,101 | ) | ||
(17,123,266 | ) | (205,406,692 | ) | 6,834,529 | 78,241,952 | |||||
Net increase (decrease) | 8,207,317 | $ | 89,662,460 | 5,644,048 | $ | 59,914,703 |
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. There were no significant transfers between levels during the period.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 1,788,289,683 | $ | 47,293,445 | — | |||
Exchange-Traded Funds | 22,996,332 | — | — | |||||
Temporary Cash Investments | 12,221 | 21,540,578 | — | |||||
$ | 1,811,298,236 | $ | 68,834,023 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 178,469 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 118,180 | — |
17
7. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $139,543,199.
The value of foreign currency risk derivative instruments as of March 31, 2018, is disclosed on the Statement of Assets and Liabilities as an asset of $178,469 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $118,180 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended March 31, 2018, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(9,768,141) in net realized gain (loss) on forward foreign currency exchange contract transactions and $(740,440) in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
8. Risk Factors
There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions.
18
9. Federal Tax Information
The tax character of distributions paid during the years ended March 31, 2018 and March 31, 2017 were as follows:
2018 | 2017 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 71,510,035 | $ | 38,410,140 | ||
Long-term capital gains | $ | 125,293,547 | $ | 77,575,258 |
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 1,641,791,108 | |
Gross tax appreciation of investments | $ | 294,700,192 | |
Gross tax depreciation of investments | (56,359,041 | ) | |
Net tax appreciation (depreciation) of investments | 238,341,151 | ||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | (838 | ) | |
Net tax appreciation (depreciation) | $ | 238,340,313 | |
Undistributed ordinary income | $ | 3,345,406 | |
Accumulated long-term gains | $ | 34,393,169 | |
Post-October capital loss deferral | $ | (15,049,447 | ) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Loss deferrals represent certain qualified losses that the fund has elected to treat as having been incurred in the following fiscal year for federal income tax purposes.
19
Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
G Class(3) | |||||||||||||||
2018 | $11.87 | 0.32 | 0.21 | 0.53 | (0.30) | (0.93) | (1.23) | $11.17 | 4.23% | 0.20%(4) | 2.68%(4) | 57% | $1,886,327 | ||
2017 | $10.58 | 0.25 | 1.80 | 2.05 | (0.24) | (0.52) | (0.76) | $11.87 | 19.67% | 0.63% | 2.17% | 79% | $1,703,216 | ||
2016 | $12.38 | 0.18 | (0.78) | (0.60) | (0.18) | (1.02) | (1.20) | $10.58 | (4.92)% | 0.64% | 1.57% | 61% | $1,531,294 | ||
2015 | $12.18 | 0.19 | 1.14 | 1.33 | (0.18) | (0.95) | (1.13) | $12.38 | 11.01% | 0.64% | 1.52% | 68% | $1,391,730 | ||
2014 | $10.45 | 0.21 | 2.03 | 2.24 | (0.20) | (0.31) | (0.51) | $12.18 | 21.75% | 0.65% | 1.81% | 35% | $1,324,951 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day. Total returns for periods less than one year are not annualized. |
(3) | Prior to July 31, 2017, the G Class was referred to as the Institutional Class. |
(4) | The ratio of operating expenses to average net assets before expense waiver and the ratio of net investment income (loss) to average net assets before expense waiver was 0.53% and 2.35%, respectively. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Directors of American Century Capital Portfolios, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of NT Large Company Value Fund, one of the portfolios constituting the American Century Capital Portfolios, Inc. (the “Fund”), as of March 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of NT Large Company Value Fund of the American Century Capital Portfolios, Inc. as of March 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of March 31, 2018, 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
May 16, 2018
We have served as the auditor of one or more American Century investment companies since 1997.
21
Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 68 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) |
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired; Executive Vice President, ACC (2007 to 2013); President, ACS (2007 to 2013); Chief Operating Officer, ACC (2007 to 2012) | 68 | None |
Andrea C. Hall (1945) | Director | Since 1997 | Retired | 68 | None |
Jan M. Lewis (1957) | Director | Since 2011 | Retired; President and Chief Executive Officer, Catholic Charities of Northeast Kansas (human services organization) (2006 to 2013) | 68 | None |
22
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
M. Jeannine Strandjord (1945) | Director | Since 1994 | Self-employed Consultant | 68 | Euronet Worldwide Inc.; MGP Ingredients, Inc. |
John R. Whitten (1946) | Director | Since 2008 | Retired | 68 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 70 | None |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director and President | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 115 | BioMed Valley Discoveries, Inc. |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
23
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds, unless otherwise noted. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
Jonathan S. Thomas (1963) | Director and President since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present); Vice President, Client Interactions and Marketing, ACIS (2013 to 2014). Also serves as Vice President, ACIS |
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
C. Jean Wade (1964) | Vice President,Treasurer and Chief Financial Officer since 2012 | Vice President, ACS (2000 to present) |
Robert J. Leach (1966) | Vice President since 2006 and Assistant Treasurer since 2012 | Vice President, ACS (2000 to present) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present); Associate General Counsel, ACC (2001 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
24
Proxy Voting Results |
A special meeting of shareholders was held on October 18, 2017, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect four directors to the Board of Directors of American Century Capital Portfolios, Inc.:
Affirmative | Withhold | ||||||
Thomas W. Bunn | $ | 24,595,873,549 | $ | 400,991,853 | |||
Barry Fink | $ | 24,607,840,546 | $ | 389,024,856 | |||
Jan M. Lewis | $ | 24,616,409,175 | $ | 380,456,227 | |||
Stephen E. Yates | $ | 24,605,431,961 | $ | 391,433,441 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Andrea C. Hall, James A. Olson, M. Jeannine Strandjord, and John R. Whitten.
25
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time and change your withholding percentage for future distributions.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on 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. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
26
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 March 31, 2018.
For corporate taxpayers, the fund hereby designates $41,797,383, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended March 31, 2018 as qualified for the corporate dividends received deduction.
The fund hereby designates $125,293,547, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended March 31, 2018.
The fund hereby designates $21,404,314 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended March 31, 2018.
27
Notes |
28
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Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2018 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-92290 1805 |
![acihorizblkb99.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/acihorizblkb99.jpg)
Annual Report | |
March 31, 2018 | |
NT Mid Cap Value Fund | |
G Class (ACLMX) |
Table of Contents |
Performance | 2 | |
Portfolio Commentary | ||
Fund Characteristics | ||
Shareholder Fee Example | ||
Schedule of Investments | ||
Statement of Assets and Liabilities | ||
Statement of Operations | ||
Statement of Changes in Net Assets | ||
Notes to Financial Statements | ||
Financial Highlights | ||
Report of Independent Registered Public Accounting Firm | ||
Management | ||
Proxy Voting Results | ||
Additional Information |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Performance |
Total Returns as of March 31, 2018 | |||||
Average Annual Returns | |||||
Ticker Symbol | 1 year | 5 years | 10 years | Inception Date | |
G Class | ACLMX | 6.30% | 12.66% | 11.52% | 5/12/06 |
Russell Midcap Value Index | — | 6.50% | 11.10% | 9.80% | — |
Fund returns would have been lower if a portion of the fees had not been waived. Prior to July 31, 2017, the G class was referred to as the Institutional Class.
Growth of $10,000 Over 10 Years |
$10,000 investment made March 31, 2008 |
![chart-fbf7653b72be569faa3.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/chart-fbf7653b72be569faa3.jpg)
Value on March 31, 2018 | |
G Class — $29,763 | |
Russell Midcap Value Index — $25,494 | |
Ending value of G Class would have been lower if a portion of the fees had not been waived.
Total Annual Fund Operating Expenses | |
G Class | 0.66% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
2
Portfolio Commentary |
Portfolio Managers: Kevin Toney, Michael Liss, Phil Davidson, and Brian Woglom
Performance Summary
NT Mid Cap Value returned 6.30%* for the fiscal year ended March 31, 2018, compared with the 6.50% return for its benchmark, the Russell Midcap Value Index. The fund’s return reflects operating expenses, while the index’s return does not.
Over the trailing 12-month period, holdings and an overweight in the energy sector detracted from relative performance. Positions in the utilities, industrials, and health care sectors also weighed on returns. On the other hand, our information technology holdings as well as our underweight and security selection in the real estate sector contributed positively to performance.
Energy Detracted
Our overweight in the energy sector was driven by our bottom-up investment process. We held higher-quality energy stocks that offered attractive valuations, but several of these positions declined for various reasons. More specifically, Baker Hughes, a GE company, was a top detractor from performance. The oil services company underperformed due to weaker-than-expected cash flow generation and due to its large exposure to the slower-growth markets outside of North America. EQT, a diversified natural gas producer, also declined due to weak natural gas prices and the unexpected resignation of the company’s CEO. Additionally, Imperial Oil, an integrated energy company, fell as it lowered its free-cash-flow guidance due to its diminished asset productivity. Imperial also increased guidance for the capital expenditure needs of the business. As a result, our fair market value was revised lower, and we trimmed the position.
Positions in the Utilities, Industrials, and Health Care Sectors Weighed on Returns
Over the trailing 12-month period, utility company PG&E was one of the portfolio’s largest detractors from performance. Its stock declined on liability concerns after media reports linked the company’s equipment to wildfires in Northern California. The company then proactively suspended its dividend to build its cash reserve until liabilities could be determined. As a result of these events, we eliminated our position in the stock. Edison International, another holding in the utilities sector, underperformed due to similar circumstances. There was speculation that wildfires in Southern California were caused by Edison International’s equipment, raising questions about the company’s potential liability.
Industrials holding Johnson Controls International was another meaningful detractor. The building products company provided disappointing 2018 guidance, and management announced profitability and growth challenges as well as an unexpected tax headwind that is expected to pressure free cash flow.
In the health care sector, hospital operator LifePoint Health weighed on relative performance. Due in part to weak market conditions with low admissions, the company reported fiscal second- and third-quarter earnings that were below expectations and lowered fiscal-year revenue guidance. Also, four hospitals that were acquired in 2016 underperformed as they faced competitive markets.
*Fund returns would have been lower if a portion of the fees had not been waived.
3
Information Technology and Real Estate Positively Impacted Performance
Several of our holdings in the information technology sector outperformed, including semiconductor stocks Applied Materials, Lam Research, Teradyne, and Maxim Integrated Products. These companies all benefited from strong end-market demand, which in turn led to solid financial results. As these stocks outperformed, we trimmed our positions in Applied Materials and Maxim Integrated Products and eliminated Lam Research from the portfolio. Keysight Technologies, an electronic test and measurement company, was another top performer. Toward the beginning of the reporting period, we participated in an offering of new shares to fund Keysight’s acquisition of Ixia. The stock price increased from the offering price due to anticipated cost synergies resulting from the acquisition. Later in the reporting period, Keysight’s stock rose after the company reported double-digit growth in quarterly orders and authorized a new share repurchase program.
Our underweight in the real estate sector was another key contributor to performance. During the low interest rate environment, investors were drawn to real estate investment trusts (REITs) due to the relatively attractive yields that they offered. This drove prices up, causing most REITs to appear unattractive according to our valuation metrics. However, as interest rates rose during the reporting period, many REITs underperformed. Our underweight to the sector and lack of exposure to several of the benchmark’s REIT names therefore helped performance. A few of our REIT holdings also contributed to the portfolio’s results. This included American Tower, a REIT that owns and operates wireless communication towers. Its stock rose on expectations for more traffic to the company’s towers given the increase in unlimited data plans offered by wireless telecommunication services companies. The company also benefited from its exposure to rapidly growing non-U.S. markets, such as India.
Portfolio Positioning
At period-end, the portfolio’s largest sector overweights were in consumer staples and energy. Companies in the consumer staples sector tend to offer business models that fit our investment process well. Additionally, valuations in the sector have become attractive as fundamental headwinds, including fears of increased competition, have pressured stock prices. Within the energy sector, we believe we hold well-managed, higher-quality energy companies with strong balance sheets and compelling risk/reward profiles.
Conversely, the portfolio was underweight in consumer discretionary at the end of the period, as it is difficult to find higher-quality companies with sustainable business models in the sector. The portfolio also maintained a sizable underweight in real estate. Despite the recent underperformance of the real estate sector, our metrics show that many real estate stocks remain inflated.
4
Fund Characteristics |
MARCH 31, 2018 | |
Top Ten Holdings | % of net assets |
Zimmer Biomet Holdings, Inc. | 2.6% |
Northern Trust Corp. | 2.4% |
Johnson Controls International plc | 2.4% |
Weyerhaeuser Co. | 2.1% |
Conagra Brands, Inc. | 2.0% |
Invesco Ltd. | 1.9% |
BB&T Corp. | 1.9% |
WestRock Co. | 1.8% |
Hubbell, Inc. | 1.6% |
Kellogg Co. | 1.5% |
Top Five Industries | % of net assets |
Oil, Gas and Consumable Fuels | 9.2% |
Banks | 8.9% |
Food Products | 8.4% |
Health Care Providers and Services | 6.2% |
Capital Markets | 6.0% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 96.6% |
Exchange-Traded Funds | 1.3% |
Total Equity Exposure | 97.9% |
Temporary Cash Investments | 1.7% |
Other Assets and Liabilities | 0.4% |
5
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from October 1, 2017 to March 31, 2018.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value 10/1/17 | Ending Account Value 3/31/18 | Expenses Paid During Period(1) 10/1/17 - 3/31/18 | Annualized Expense Ratio(1) | |
Actual | ||||
G Class | $1,000 | $1,027.80 | $0.05 | 0.01% |
Hypothetical | ||||
G Class | $1,000 | $1,024.88 | $0.05 | 0.01% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, 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. |
6
Schedule of Investments |
MARCH 31, 2018
Shares | Value | ||||
COMMON STOCKS — 96.6% | |||||
Aerospace and Defense — 1.1% | |||||
Textron, Inc. | 197,173 | $ | 11,627,292 | ||
Airlines — 0.9% | |||||
Southwest Airlines Co. | 168,281 | 9,639,136 | |||
Auto Components — 0.3% | |||||
Aptiv plc | 31,802 | 2,702,216 | |||
Automobiles — 0.9% | |||||
Honda Motor Co. Ltd. ADR | 268,706 | 9,332,159 | |||
Banks — 8.9% | |||||
Bank of Hawaii Corp. | 133,161 | 11,065,679 | |||
BB&T Corp. | 368,915 | 19,198,337 | |||
Comerica, Inc. | 32,483 | 3,116,094 | |||
Commerce Bancshares, Inc. | 187,378 | 11,225,816 | |||
M&T Bank Corp. | 78,709 | 14,510,791 | |||
PNC Financial Services Group, Inc. (The) | 33,824 | 5,115,542 | |||
SunTrust Banks, Inc. | 155,272 | 10,564,707 | |||
UMB Financial Corp. | 76,979 | 5,572,510 | |||
Westamerica Bancorporation | 183,201 | 10,640,314 | |||
91,009,790 | |||||
Beverages — 0.9% | |||||
Dr Pepper Snapple Group, Inc. | 24,884 | 2,945,768 | |||
Molson Coors Brewing Co., Class B | 89,451 | 6,738,344 | |||
9,684,112 | |||||
Building Products — 2.4% | |||||
Johnson Controls International plc | 696,279 | 24,536,872 | |||
Capital Markets — 6.0% | |||||
Ameriprise Financial, Inc. | 82,799 | 12,249,284 | |||
Invesco Ltd. | 621,942 | 19,908,364 | |||
Northern Trust Corp. | 242,624 | 25,021,813 | |||
T. Rowe Price Group, Inc. | 37,560 | 4,055,353 | |||
61,234,814 | |||||
Commercial Services and Supplies — 0.7% | |||||
Republic Services, Inc. | 100,951 | 6,685,985 | |||
Containers and Packaging — 5.0% | |||||
Bemis Co., Inc. | 165,909 | 7,220,360 | |||
Graphic Packaging Holding Co. | 926,030 | 14,214,560 | |||
Sonoco Products Co. | 227,619 | 11,039,522 | |||
WestRock Co. | 286,779 | 18,402,608 | |||
50,877,050 | |||||
Distributors — 0.7% | |||||
Genuine Parts Co. | 80,939 | 7,271,560 | |||
Electric Utilities — 3.6% | |||||
Edison International | 147,008 | 9,358,529 | |||
Eversource Energy | 83,212 | 4,902,851 | |||
Pinnacle West Capital Corp. | 94,003 | 7,501,439 |
7
Shares | Value | ||||
Xcel Energy, Inc. | 324,770 | $ | 14,770,540 | ||
36,533,359 | |||||
Electrical Equipment — 3.8% | |||||
Eaton Corp. plc | 120,924 | 9,663,037 | |||
Emerson Electric Co. | 187,209 | 12,786,375 | |||
Hubbell, Inc. | 132,912 | 16,186,023 | |||
38,635,435 | |||||
Electronic Equipment, Instruments and Components — 2.2% | |||||
Keysight Technologies, Inc.(1) | 256,908 | 13,459,410 | |||
TE Connectivity Ltd. | 87,039 | 8,695,196 | |||
22,154,606 | |||||
Energy Equipment and Services — 3.2% | |||||
Baker Hughes a GE Co. | 469,961 | 13,050,817 | |||
Halliburton Co. | 86,544 | 4,062,375 | |||
Helmerich & Payne, Inc. | 29,180 | 1,942,221 | |||
National Oilwell Varco, Inc. | 365,586 | 13,457,221 | |||
32,512,634 | |||||
Equity Real Estate Investment Trusts (REITs) — 4.5% | |||||
American Tower Corp. | 51,939 | 7,548,814 | |||
Empire State Realty Trust, Inc., Class A | 193,947 | 3,256,370 | |||
MGM Growth Properties LLC, Class A | 265,629 | 7,049,794 | |||
Piedmont Office Realty Trust, Inc., Class A | 406,052 | 7,142,455 | |||
Weyerhaeuser Co. | 600,330 | 21,011,550 | |||
46,008,983 | |||||
Food and Staples Retailing — 2.1% | |||||
Sysco Corp. | 260,487 | 15,618,801 | |||
US Foods Holding Corp.(1) | 173,429 | 5,683,268 | |||
21,302,069 | |||||
Food Products — 8.4% | |||||
Conagra Brands, Inc. | 549,747 | 20,274,669 | |||
General Mills, Inc. | 315,311 | 14,207,914 | |||
J.M. Smucker Co. (The) | 79,462 | 9,854,082 | |||
Kellogg Co. | 243,096 | 15,803,671 | |||
Mondelez International, Inc., Class A | 367,678 | 15,343,203 | |||
Orkla ASA | 977,387 | 10,506,768 | |||
85,990,307 | |||||
Gas Utilities — 1.2% | |||||
Atmos Energy Corp. | 60,801 | 5,121,876 | |||
Spire, Inc. | 100,985 | 7,301,216 | |||
12,423,092 | |||||
Health Care Equipment and Supplies — 4.1% | |||||
Siemens Healthineers AG(1) | 126,131 | 5,183,608 | |||
STERIS plc | 102,603 | 9,579,016 | |||
Zimmer Biomet Holdings, Inc. | 245,126 | 26,728,539 | |||
41,491,163 | |||||
Health Care Providers and Services — 6.2% | |||||
Cardinal Health, Inc. | 185,033 | 11,597,869 | |||
Express Scripts Holding Co.(1) | 98,629 | 6,813,291 | |||
HCA Healthcare, Inc. | 77,565 | 7,523,805 | |||
Henry Schein, Inc.(1) | 104,702 | 7,037,021 | |||
LifePoint Health, Inc.(1) | 264,098 | 12,412,606 |
8
Shares | Value | ||||
McKesson Corp. | 62,220 | $ | 8,764,931 | ||
Quest Diagnostics, Inc. | 96,845 | 9,713,554 | |||
63,863,077 | |||||
Hotels, Restaurants and Leisure — 0.5% | |||||
Carnival Corp. | 70,664 | 4,634,145 | |||
Household Durables — 0.7% | |||||
PulteGroup, Inc. | 242,563 | 7,153,183 | |||
Insurance — 5.3% | |||||
Aflac, Inc. | 161,632 | 7,073,016 | |||
Arthur J. Gallagher & Co. | 113,028 | 7,768,414 | |||
Brown & Brown, Inc. | 209,056 | 5,318,385 | |||
Chubb Ltd. | 101,160 | 13,835,653 | |||
ProAssurance Corp. | 80,885 | 3,926,967 | |||
Reinsurance Group of America, Inc. | 52,657 | 8,109,178 | |||
Torchmark Corp. | 42,903 | 3,611,146 | |||
Travelers Cos., Inc. (The) | 22,899 | 3,179,755 | |||
Unum Group | 37,943 | 1,806,466 | |||
54,628,980 | |||||
Machinery — 2.7% | |||||
Cummins, Inc. | 39,348 | 6,377,917 | |||
IMI plc | 384,879 | 5,841,875 | |||
Ingersoll-Rand plc | 96,400 | 8,243,164 | |||
PACCAR, Inc. | 78,661 | 5,204,998 | |||
Parker-Hannifin Corp. | 13,269 | 2,269,397 | |||
27,937,351 | |||||
Multi-Utilities — 1.3% | |||||
Ameren Corp. | 65,301 | 3,697,996 | |||
NorthWestern Corp. | 187,850 | 10,106,330 | |||
13,804,326 | |||||
Multiline Retail — 0.9% | |||||
Target Corp. | 128,727 | 8,937,515 | |||
Oil, Gas and Consumable Fuels — 9.2% | |||||
Anadarko Petroleum Corp. | 151,247 | 9,136,831 | |||
Cimarex Energy Co. | 93,438 | 8,736,453 | |||
Devon Energy Corp. | 374,500 | 11,905,355 | |||
EQT Corp. | 303,425 | 14,415,722 | |||
Imperial Oil Ltd. | 486,057 | 12,872,484 | |||
Marathon Petroleum Corp. | 101,492 | 7,420,080 | |||
Noble Energy, Inc. | 429,199 | 13,004,730 | |||
Occidental Petroleum Corp. | 153,774 | 9,989,159 | |||
Spectra Energy Partners LP | 188,772 | 6,350,290 | |||
93,831,104 | |||||
Road and Rail — 1.4% | |||||
Heartland Express, Inc. | 491,756 | 8,846,690 | |||
Norfolk Southern Corp. | 37,501 | 5,091,886 | |||
13,938,576 | |||||
Semiconductors and Semiconductor Equipment — 3.8% | |||||
Applied Materials, Inc. | 156,593 | 8,708,137 | |||
Maxim Integrated Products, Inc. | 211,989 | 12,765,978 | |||
Microchip Technology, Inc. | 73,695 | 6,732,775 |
9
Shares | Value | ||||
Teradyne, Inc. | 237,351 | $ | 10,849,314 | ||
39,056,204 | |||||
Specialty Retail — 1.2% | |||||
Advance Auto Parts, Inc. | 101,276 | 12,006,270 | |||
Technology Hardware, Storage and Peripherals — 0.5% | |||||
HP, Inc. | 240,581 | 5,273,535 | |||
Thrifts and Mortgage Finance — 0.8% | |||||
Capitol Federal Financial, Inc. | 662,902 | 8,186,840 | |||
Trading Companies and Distributors — 1.2% | |||||
MSC Industrial Direct Co., Inc., Class A | 135,981 | 12,470,817 | |||
TOTAL COMMON STOCKS (Cost $828,535,393) | 987,374,557 | ||||
EXCHANGE-TRADED FUNDS — 1.3% | |||||
iShares Russell Mid-Cap Value ETF (Cost $9,212,611) | 147,930 | 12,785,590 | |||
TEMPORARY CASH INVESTMENTS — 1.7% | |||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.375% - 3.625%, 2/15/23 - 5/15/47, valued at $9,729,248), in a joint trading account at 1.45%, dated 3/29/18, due 4/2/18 (Delivery value $9,518,397) | 9,516,864 | ||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 11/15/26, valued at $8,092,059), at 0.74%, dated 3/29/18, due 4/2/18 (Delivery value $7,933,652) | 7,933,000 | ||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 10,336 | 10,336 | |||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $17,460,200) | 17,460,200 | ||||
TOTAL INVESTMENT SECURITIES — 99.6% (Cost $855,208,204) | 1,017,620,347 | ||||
OTHER ASSETS AND LIABILITIES — 0.4% | 4,009,590 | ||||
TOTAL NET ASSETS — 100.0% | $ | 1,021,629,937 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||
CAD | 400,754 | USD | 312,840 | Morgan Stanley | 6/29/18 | $ | (1,266 | ) |
USD | 11,080,365 | CAD | 14,332,120 | Morgan Stanley | 6/29/18 | (62,403 | ) | |
USD | 272,630 | CAD | 351,176 | Morgan Stanley | 6/29/18 | (398 | ) | |
USD | 4,064,844 | EUR | 3,287,379 | UBS AG | 6/29/18 | (6,131 | ) | |
USD | 171,193 | EUR | 137,488 | UBS AG | 6/29/18 | 932 | ||
GBP | 130,859 | USD | 185,809 | Morgan Stanley | 6/29/18 | (1,548 | ) | |
USD | 5,138,713 | GBP | 3,634,605 | Morgan Stanley | 6/29/18 | 20,857 | ||
JPY | 36,018,843 | USD | 345,104 | Credit Suisse AG | 6/29/18 | (4,619 | ) | |
USD | 5,751,695 | JPY | 607,304,168 | Credit Suisse AG | 6/29/18 | 10,875 | ||
USD | 211,094 | JPY | 22,352,788 | Credit Suisse AG | 6/29/18 | (205 | ) | |
NOK | 1,943,583 | USD | 253,859 | JPMorgan Chase Bank N.A. | 6/29/18 | (5,234 | ) | |
NOK | 1,745,302 | USD | 223,333 | JPMorgan Chase Bank N.A. | 6/29/18 | (72 | ) | |
USD | 9,528,515 | NOK | 73,590,625 | JPMorgan Chase Bank N.A. | 6/29/18 | 114,715 | ||
$ | 65,503 |
10
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
CAD | - | Canadian Dollar |
EUR | - | Euro |
GBP | - | British Pound |
JPY | - | Japanese Yen |
NOK | - | Norwegian Krone |
USD | - | United States Dollar |
(1) | Non-income producing. |
See Notes to Financial Statements.
11
Statement of Assets and Liabilities |
MARCH 31, 2018 | |||
Assets | |||
Investment securities, at value (cost of $855,208,204) | $ | 1,017,620,347 | |
Receivable for investments sold | 8,224,250 | ||
Receivable for capital shares sold | 37,790 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 147,379 | ||
Dividends and interest receivable | 1,436,855 | ||
1,027,466,621 | |||
Liabilities | |||
Disbursements in excess of demand deposit cash | 117,880 | ||
Payable for investments purchased | 5,636,928 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 81,876 | ||
5,836,684 | |||
Net Assets | $ | 1,021,629,937 | |
G Class Capital Shares, $0.01 Par Value | |||
Shares authorized | 550,000,000 | ||
Shares outstanding | 77,140,391 | ||
Net Asset Value Per Share | $ | 13.24 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 832,378,451 | |
Undistributed net investment income | 235,357 | ||
Undistributed net realized gain | 26,538,277 | ||
Net unrealized appreciation | 162,477,852 | ||
$ | 1,021,629,937 |
See Notes to Financial Statements.
12
Statement of Operations |
YEAR ENDED MARCH 31, 2018 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $281,780) | $ | 26,875,537 | |
Interest | 166,328 | ||
27,041,865 | |||
Expenses: | |||
Management fees | 7,420,754 | ||
Directors' fees and expenses | 31,892 | ||
Other expenses | 28,609 | ||
7,481,255 | |||
Fees waived(1) | (4,757,484 | ) | |
2,723,771 | |||
Net investment income (loss) | 24,318,094 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 93,499,197 | ||
Forward foreign currency exchange contract transactions | (1,697,033 | ) | |
Foreign currency translation transactions | 71 | ||
91,802,235 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (48,112,762 | ) | |
Forward foreign currency exchange contracts | (77,650 | ) | |
Translation of assets and liabilities in foreign currencies | 4,128 | ||
(48,186,284 | ) | ||
Net realized and unrealized gain (loss) | 43,615,951 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 67,934,045 |
(1) | Amount consists of $4,746,276 and $11,208 for G Class and R6 Class, respectively. |
See Notes to Financial Statements.
13
Statement of Changes in Net Assets |
YEARS ENDED MARCH 31, 2018 AND MARCH 31, 2017 | ||||||
Increase (Decrease) in Net Assets | March 31, 2018 | March 31, 2017 | ||||
Operations | ||||||
Net investment income (loss) | $ | 24,318,094 | $ | 15,338,407 | ||
Net realized gain (loss) | 91,802,235 | 67,792,609 | ||||
Change in net unrealized appreciation (depreciation) | (48,186,284) | 104,625,026 | ||||
Net increase (decrease) in net assets resulting from operations | 67,934,045 | 187,756,042 | ||||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
G Class | (23,096,584) | (14,789,427) | ||||
R6 Class | (365,288) | (1,637,258) | ||||
From net realized gains: | ||||||
G Class | (81,662,819 | ) | (29,600,703) | |||
R6 Class | — | (3,155,941) | ||||
Decrease in net assets from distributions | (105,124,691) | (49,183,329) | ||||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 11,132,295 | 6,724,385 | ||||
Net increase (decrease) in net assets | (26,058,351) | 145,297,098 | ||||
Net Assets | ||||||
Beginning of period | 1,047,688,288 | 902,391,190 | ||||
End of period | $ | 1,021,629,937 | $ | 1,047,688,288 | ||
Undistributed net investment income | $ | 235,357 | $ | 142,852 |
See Notes to Financial Statements.
14
Notes to Financial Statements |
MARCH 31, 2018
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. NT Mid Cap Value Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective. The fund is not permitted to invest in securities issued by companies assigned the Global Industry Classification Standard or the Bloomberg Industry Classification Standard for the tobacco industry. The fund offers the G Class (formerly Institutional Class). On July 31, 2017, all outstanding R6 Class shares were converted to G Class shares and the fund discontinued offering the R6 Class.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between
15
domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that American Century Investment Management, Inc. (ACIM) (the investment advisor) has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
16
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc., and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC. Various funds issued by American Century Asset Allocation Portfolios, Inc. own, in aggregate, 100% of the shares of the fund. Related parties do not invest in the fund for the purpose of exercising management or control.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The annual management fee is 0.65% for the G Class. Prior to July 31, 2017, the annual management fee was 0.80% for the G Class and 0.65% for the R6 Class. From April 1, 2017 through July 30, 2017, the investment advisor agreed to waive 0.03% of the fund's management fee. Effective July 31, 2017, the investment advisor agreed to waive the G Class’s management fee in its entirety. The investment advisor expects this waiver to remain in effect permanently and cannot terminate it without the approval of the Board of Directors. The effective annual management fee for the period ended March 31, 2018 was 0.70% before waiver and 0.24% after waiver for the G Class.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $4,875,509 and $5,817,740, respectively. The effect of interfund transactions on the Statement of Operations was $851,042 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended March 31, 2018 were $528,709,044 and $575,322,937, respectively.
17
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended March 31, 2018 | Year ended March 31, 2017 | |||||||||
Shares | Amount | Shares | Amount | |||||||
G Class/Shares Authorized | 550,000,000 | 525,000,000 | ||||||||
Sold | 14,251,886 | $ | 197,749,634 | 4,361,165 | $ | 57,191,676 | ||||
Issued in reinvestment of distributions | 7,743,905 | 104,759,403 | 3,292,025 | 44,390,130 | ||||||
Redeemed | (12,739,594 | ) | (178,048,521 | ) | (10,151,164 | ) | (135,939,215 | ) | ||
9,256,197 | 124,460,516 | (2,497,974 | ) | (34,357,409 | ) | |||||
R6 Class/Shares Authorized | N/A | 50,000,000 | ||||||||
Sold | 855,387 | 11,802,674 | 3,702,300 | 48,692,735 | ||||||
Issued in reinvestment of distributions | 26,318 | 365,288 | 355,086 | 4,793,199 | ||||||
Redeemed | (8,999,664 | ) | (125,496,183 | ) | (928,328 | ) | (12,404,140 | ) | ||
(8,117,959 | ) | (113,328,221 | ) | 3,129,058 | 41,081,794 | |||||
Net increase (decrease) | 1,138,238 | $ | 11,132,295 | 631,084 | $ | 6,724,385 |
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. There were no significant transfers between levels during the period.
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 | $ | 952,969,822 | $ | 34,404,735 | — | |||
Exchange-Traded Funds | 12,785,590 | — | — | |||||
Temporary Cash Investments | 10,336 | 17,449,864 | — | |||||
$ | 965,765,748 | $ | 51,854,599 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 147,379 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 81,876 | — |
18
7. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $38,394,542.
The value of foreign currency risk derivative instruments as of March 31, 2018, is disclosed on the Statement of Assets and Liabilities as an asset of $147,379 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $81,876 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended March 31, 2018, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(1,697,033) in net realized gain (loss) on forward foreign currency exchange contract transactions and $(77,650) in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
8. Federal Tax Information
The tax character of distributions paid during the years ended March 31, 2018 and March 31, 2017 were as follows:
2018 | 2017 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 33,534,916 | $ | 16,568,951 | ||
Long-term capital gains | $ | 71,589,775 | $ | 32,614,378 |
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 | $ | 868,478,105 | |
Gross tax appreciation of investments | $ | 179,605,429 | |
Gross tax depreciation of investments | (30,463,187 | ) | |
Net tax appreciation (depreciation) of investments | 149,142,242 | ||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 1,255 | ||
Net tax appreciation (depreciation) | $ | 149,143,497 | |
Undistributed ordinary income | $ | 2,165,971 | |
Accumulated long-term gains | $ | 37,942,018 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
19
Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
G Class(3) | |||||||||||||||||
2018 | $13.79 | 0.31 | 0.55 | 0.86 | (0.30) | (1.11) | (1.41) | $13.24 | 6.30% | 0.24% | 0.70% | 2.27% | 1.81% | 51% | $1,021,630 | ||
2017 | $11.97 | 0.20 | 2.30 | 2.50 | (0.22) | (0.46) | (0.68) | $13.79 | 20.98% | 0.78% | 0.80% | 1.55% | 1.53% | 60% | $935,804 | ||
2016 | $12.82 | 0.17 | 0.05 | 0.22 | (0.17) | (0.90) | (1.07) | $11.97 | 2.13% | 0.80% | 0.81% | 1.39% | 1.38% | 67% | $842,671 | ||
2015 | $12.62 | 0.18 | 1.56 | 1.74 | (0.17) | (1.37) | (1.54) | $12.82 | 14.05% | 0.80% | 0.80% | 1.37% | 1.37% | 67% | $762,209 | ||
2014 | $11.41 | 0.19 | 2.15 | 2.34 | (0.18) | (0.95) | (1.13) | $12.62 | 21.19% | 0.80% | 0.80% | 1.55% | 1.55% | 69% | $596,655 |
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) | Prior to July 31, 2017, the G Class was referred to as the Institutional Class. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Directors of American Century Capital Portfolios, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of NT Mid Cap Value Fund, one of the portfolios constituting the American Century Capital Portfolios, Inc. (the “Fund”), as of March 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of NT Mid Cap Value Fund of the American Century Capital Portfolios, Inc. as of March 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of March 31, 2018, 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
May 16, 2018
We have served as the auditor of one or more American Century investment companies since 1997.
21
Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 68 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) |
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired; Executive Vice President, ACC (2007 to 2013); President, ACS (2007 to 2013); Chief Operating Officer, ACC (2007 to 2012) | 68 | None |
Andrea C. Hall (1945) | Director | Since 1997 | Retired | 68 | None |
Jan M. Lewis (1957) | Director | Since 2011 | Retired; President and Chief Executive Officer, Catholic Charities of Northeast Kansas (human services organization) (2006 to 2013) | 68 | None |
22
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
M. Jeannine Strandjord (1945) | Director | Since 1994 | Self-employed Consultant | 68 | Euronet Worldwide Inc.; MGP Ingredients, Inc. |
John R. Whitten (1946) | Director | Since 2008 | Retired | 68 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 70 | None |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director and President | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 115 | BioMed Valley Discoveries, Inc. |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
23
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds, unless otherwise noted. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
Jonathan S. Thomas (1963) | Director and President since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present); Vice President, Client Interactions and Marketing, ACIS (2013 to 2014). Also serves as Vice President, ACIS |
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
C. Jean Wade (1964) | Vice President,Treasurer and Chief Financial Officer since 2012 | Vice President, ACS (2000 to present) |
Robert J. Leach (1966) | Vice President since 2006 and Assistant Treasurer since 2012 | Vice President, ACS (2000 to present) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present); Associate General Counsel, ACC (2001 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
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Proxy Voting Results |
A special meeting of shareholders was held on October 18, 2017, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect four directors to the Board of Directors of American Century Capital Portfolios, Inc.:
Affirmative | Withhold | ||||||
Thomas W. Bunn | $ | 24,595,873,549 | $ | 400,991,853 | |||
Barry Fink | $ | 24,607,840,546 | $ | 389,024,856 | |||
Jan M. Lewis | $ | 24,616,409,175 | $ | 380,456,227 | |||
Stephen E. Yates | $ | 24,605,431,961 | $ | 391,433,441 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Andrea C. Hall, James A. Olson, M. Jeannine Strandjord, and John R. Whitten.
25
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time and change your withholding percentage for future distributions.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on 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. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
26
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 March 31, 2018.
For corporate taxpayers, the fund hereby designates $21,715,794, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended March 31, 2018 as qualified for the corporate dividends received deduction.
The fund hereby designates $10,073,044 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended March 31, 2018.
The fund hereby designates $71,589,775, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended March 31, 2018.
27
Notes |
28
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Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2018 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-92291 1805 |
![acihorizblkb99.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/acihorizblkb99.jpg)
Annual Report | |
March 31, 2018 | |
Small Cap Value Fund | |
Investor Class (ASVIX) | |
I Class (ACVIX) | |
Y Class (ASVYX) | |
A Class (ACSCX) | |
C Class (ASVNX) | |
R Class (ASVRX) | |
R5 Class (ASVGX) | |
R6 Class (ASVDX) |
Table of Contents |
President’s Letter | 2 | |
Performance | 3 | |
Portfolio Commentary | ||
Fund Characteristics | ||
Shareholder Fee Example | ||
Schedule of Investments | ||
Statement of Assets and Liabilities | ||
Statement of Operations | ||
Statement of Changes in Net Assets | ||
Notes to Financial Statements | ||
Financial Highlights | ||
Report of Independent Registered Public Accounting Firm | ||
Management | ||
Proxy Voting Results | ||
Additional Information |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
![jthomasrev0514.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/jthomasrev0514.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended March 31, 2018. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional, updated investment and market insights, we encourage you to visit our website, americancentury.com.
Rally Rolled On, Until Volatility Resurfaced
For most of the 12-month period, broad U.S. stock and bond indices generated positive returns. Stocks generally rallied against a backdrop of robust corporate earnings results, steady economic growth, relatively low interest rates, and U.S. tax reform. For bonds, modest economic gains, relatively muted inflation, and gradual—and well telegraphed—tightening from the Federal Reserve (the Fed) continued to support positive performance.
Then, in early February, a force that was largely dormant during 2017—volatility—re-emerged. Robust U.S. wage growth triggered expectations for rising inflation, higher interest rates, and a more-hawkish Fed. Treasury yields climbed to their highest levels in several years, and stock prices plunged into correction territory. Economic data released in March helped calm the unrest, while the Fed's March rate hike, which investors had expected, had little impact. Markets recovered much of the previous weeks’ losses, until a fresh round of worries emerged. President Trump announced the U.S. would implement tariffs on certain imports from China, sparking fears of a global trade war and triggering a flight to quality in the financial markets.
Despite the resurgence of volatility late in the period, U.S. stocks (S&P 500 Index) delivered a total return of 13.99% for the 12 months. Continuing a long-standing trend, growth stocks significantly outperformed their value counterparts across the capitalization spectrum. Meanwhile, the March flight to quality helped bonds hang onto the modest gains generated ahead of the market turbulence, and investment-grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index) returned 1.20% for the 12-month period.
With inflationary pressures mounting, Treasury yields rising, volatility resurfacing, and the implications of tax reform still unfolding, investors likely will face new opportunities and challenges in the months ahead. We believe this scenario warrants a disciplined, diversified, and risk-aware approach, using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a01.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/image48a01.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of March 31, 2018 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | ASVIX | 5.41% | 11.14% | 10.67% | — | 7/31/98 |
Russell 2000 Value Index | — | 5.13% | 9.95% | 8.61% | — | — |
I Class | ACVIX | 5.57% | 11.34% | 10.90% | — | 10/26/98 |
Y Class | ASVYX | — | — | — | 7.43% | 4/10/17 |
A Class | ACSCX | 12/31/99 | ||||
No sales charge | 5.02% | 10.86% | 10.39% | — | ||
With sales charge | -1.04% | 9.56% | 9.73% | — | ||
C Class | ASVNX | 4.41% | 10.03% | — | 10.60% | 3/1/10 |
R Class | ASVRX | 4.82% | 10.57% | — | 11.15% | 3/1/10 |
R5 Class | ASVGX | — | — | — | 7.32% | 4/10/17 |
R6 Class | ASVDX | 5.73% | — | — | 10.10% | 7/26/13 |
Average annual returns since inception are presented when ten years of performance history is not available. Prior to March 1, 2010, the A Class was referred to as the Advisor Class and did not have a front-end sales charge. Performance prior to that date has been adjusted to reflect this charge. Prior to April 10, 2017, the
I Class was referred to as the Institutional Class.
Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum initial sales charge and may be subject to a maximum CDSC of 1.00%. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
3
Growth of $10,000 Over 10 Years |
$10,000 investment made March 31, 2008 |
Performance for other share classes will vary due to differences in fee structure. |
![chart-0876e8e0bfa551eba37.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/chart-0876e8e0bfa551eba37.jpg)
Value on March 31, 2018 | |
Investor Class — $27,582 | |
Russell 2000 Value Index — $22,849 | |
Total Annual Fund Operating Expenses | |||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class |
1.25% | 1.05% | 0.90% | 1.50% | 2.25% | 1.75% | 1.05% | 0.90% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
4
Portfolio Commentary |
Portfolio Managers: Jeff John and Miles Lewis
Performance Summary
Small Cap Value returned 5.41%* for the fiscal year ended March 31, 2018, compared with the 5.13% return of its benchmark, the Russell 2000 Value Index.
Small Cap Value rose during the fiscal year, outpacing its benchmark, the Russell 2000 Value Index. Stock selection in the information technology and financials sectors boosted relative performance, as did an underweight allocation to the energy sector. Conversely, stock choices in the consumer staples sector and fund positioning among health care holdings weighed on fund returns.
In selecting stocks for the fund, we look for equity securities of smaller companies whose stock price may not reflect the company’s value. We attempt to purchase the stocks of these undervalued companies and hold each stock until the price has increased to, or is higher than, a level we believe more accurately reflects the fair value of the company.
Information Technology Holdings Contributed to Performance
Stock selection in the information technology sector was a key contributor to the fund’s outperformance. A position in CSRA outperformed on news that the government information technology services contractor is being acquired. General Dynamics and CACI participated in a bidding war to purchase CSRA at an attractive premium. CSRA eventually accepted General Dynamics’ all-cash offer. We trimmed the holding on strength in its stock price. Teradata, a provider of database-related products and services, was another top contributor, turning in strong performance over the period. Its stock rose as the company demonstrated progress in transitioning toward a more revenue-recurring, subscription-based model. The company also boasts solid free cash flow and a strong balance sheet.
Security selection and an overweight allocation in the financials sector contributed to performance as well. Insurance company Validus Holdings was a key contributor. In the fall, shares of Validus fell on the heels of hurricanes that hit Texas, Florida, and Puerto Rico. In the final quarter of the fiscal year, the stock rallied after American International Group announced an all-cash deal to purchase Validus at a premium. We trimmed our position following the announcement of the deal.
Consumer Staples Holdings Weighed on Performance
Stock selection in the consumer staples sector detracted from relative returns in the period. Shares of TreeHouse Foods underperformed as the private-label food manufacturer faced higher shipping and input costs. The company also struggled to integrate an acquisition that took place in early 2016. However, TreeHouse is hiring a new CEO who is expected to focus on integration and drive operational efficiency. Edgewell Personal Care also weighed on performance. Shares of the consumer products company underperformed as it continued to experience weakness in its shaving business due to increased competition and higher input prices.
Holdings in the health care sector weighed on returns, due to both an underweight in the sector and to stock selection. The fund’s avoidance of biotechnology companies hindered performance.
* | All fund returns referenced in this commentary are for Investor Class shares. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund's benchmark, other share classes may not. See page 3 for returns for all share classes. |
5
Among individual holdings, medical distributor Owens & Minor was a key detractor. The company demonstrated weaker-than-expected earnings and increased its already-high debt level in order to make an expensive acquisition. We exited the position during the year due to the company’s deteriorating balance sheet and because we lost confidence in management’s ability to allocate capital effectively.
Portfolio Positioning
We continue to build the portfolio using a bottom-up, stock-specific process. Through our fundamental research, we seek higher-quality, lower-volatility, small-sized companies temporarily selling at a discount.
We continue to be overweight in the materials sector, where we favor specialized containers and packaging as well as specialty chemical companies. Both niches tend to have attractive free cash flow and virtually no commodity exposure, creating consumer staples-like businesses at attractive valuations. We also maintain an overweight in the industrials sector, where we have identified several attractively valued, higher-quality stocks. In recent months, we took advantage of valuation opportunities to increase several existing industrials positions as well as initiate new holdings in the sector.
Attractive valuations allowed us to initiate new positions in higher-quality insurance and bank companies in recent months. Our bank exposure, which makes up a meaningful portion of the portfolio’s financials weight, remains focused on higher-quality regional banks that offer geographical diversification.
In terms of underweight exposure, we have continued to avoid the utilities sector. Despite the sector’s recent underperformance, our metrics show that valuations remain too rich for our investment process. Additionally, it has been difficult for us to find higher-quality utilities stocks. The portfolio’s underweight in health care is largely driven by our lack of exposure to the biotechnology industry. Stocks in that industry tend not to meet our higher-quality, lower-volatility investment criteria.
6
Fund Characteristics |
MARCH 31, 2018 | |
Top Ten Holdings | % of net assets |
Compass Diversified Holdings | 2.7% |
Silgan Holdings, Inc. | 2.6% |
Graphic Packaging Holding Co. | 2.6% |
Valley National Bancorp | 2.5% |
BankUnited, Inc. | 2.4% |
Bank of the Ozarks, Inc. | 2.3% |
FNB Corp. | 2.0% |
CSW Industrials, Inc. | 1.9% |
Belden, Inc. | 1.9% |
Minerals Technologies, Inc. | 1.9% |
Top Five Industries | % of net assets |
Banks | 20.0% |
Insurance | 9.0% |
Containers and Packaging | 6.7% |
Equity Real Estate Investment Trusts (REITs) | 6.3% |
Electronic Equipment, Instruments and Components | 5.8% |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 98.0% |
Convertible Preferred Stocks | 0.5% |
Total Equity Exposure | 98.5% |
Temporary Cash Investments | 1.1% |
Other Assets and Liabilities | 0.4% |
7
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from October 1, 2017 to March 31, 2018.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or I Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
8
Beginning Account Value 10/1/17 | Ending Account Value 3/31/18 | Expenses Paid During Period(1) 10/1/17 - 3/31/18 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $1,016.40 | $6.33 | 1.26% |
I Class | $1,000 | $1,016.80 | $5.33 | 1.06% |
Y Class | $1,000 | $1,018.30 | $4.58 | 0.91% |
A Class | $1,000 | $1,014.80 | $7.59 | 1.51% |
C Class | $1,000 | $1,011.50 | $11.33 | 2.26% |
R Class | $1,000 | $1,013.20 | $8.83 | 1.76% |
R5 Class | $1,000 | $1,017.80 | $5.33 | 1.06% |
R6 Class | $1,000 | $1,017.20 | $4.58 | 0.91% |
Hypothetical | ||||
Investor Class | $1,000 | $1,018.65 | $6.34 | 1.26% |
I Class | $1,000 | $1,019.65 | $5.34 | 1.06% |
Y Class | $1,000 | $1,020.39 | $4.58 | 0.91% |
A Class | $1,000 | $1,017.40 | $7.59 | 1.51% |
C Class | $1,000 | $1,013.66 | $11.35 | 2.26% |
R Class | $1,000 | $1,016.16 | $8.85 | 1.76% |
R5 Class | $1,000 | $1,019.65 | $5.34 | 1.06% |
R6 Class | $1,000 | $1,020.39 | $4.58 | 0.91% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
9
Schedule of Investments |
MARCH 31, 2018
Shares | Value | ||||
COMMON STOCKS — 98.0% | |||||
Aerospace and Defense — 0.9% | |||||
Esterline Technologies Corp.(1) | 180,000 | $ | 13,167,000 | ||
Banks — 20.0% | |||||
Bank of the Ozarks, Inc. | 720,000 | 34,754,400 | |||
BankUnited, Inc. | 900,000 | 35,982,000 | |||
Boston Private Financial Holdings, Inc. | 985,000 | 14,824,250 | |||
FCB Financial Holdings, Inc., Class A(1) | 425,000 | 21,717,500 | |||
First Hawaiian, Inc. | 875,000 | 24,351,250 | |||
FNB Corp. | 2,180,000 | 29,321,000 | |||
Home BancShares, Inc. | 1,110,000 | 25,319,100 | |||
LegacyTexas Financial Group, Inc. | 590,000 | 25,263,800 | |||
Popular, Inc. | 230,000 | 9,572,600 | |||
Southside Bancshares, Inc. | 120,792 | 4,196,314 | |||
Texas Capital Bancshares, Inc.(1) | 120,000 | 10,788,000 | |||
UMB Financial Corp. | 355,000 | 25,698,450 | |||
Valley National Bancorp | 3,045,000 | 37,940,700 | |||
299,729,364 | |||||
Building Products — 3.5% | |||||
Apogee Enterprises, Inc. | 275,000 | 11,921,250 | |||
CSW Industrials, Inc.(1) | 644,721 | 29,044,681 | |||
Gibraltar Industries, Inc.(1) | 365,379 | 12,368,079 | |||
53,334,010 | |||||
Capital Markets — 2.3% | |||||
Ares Management LP | 1,090,000 | 23,326,000 | |||
Donnelley Financial Solutions, Inc.(1) | 635,000 | 10,902,950 | |||
34,228,950 | |||||
Chemicals — 5.0% | |||||
Innophos Holdings, Inc. | 605,000 | 24,327,050 | |||
Innospec, Inc. | 200,000 | 13,720,000 | |||
Minerals Technologies, Inc. | 415,000 | 27,784,250 | |||
PolyOne Corp. | 230,000 | 9,779,600 | |||
75,610,900 | |||||
Commercial Services and Supplies — 2.6% | |||||
Ceco Environmental Corp. | 886,088 | 3,943,092 | |||
Deluxe Corp. | 165,000 | 12,211,650 | |||
InnerWorkings, Inc.(1) | 1,915,000 | 17,330,750 | |||
LSC Communications, Inc. | 160,000 | 2,792,000 | |||
Multi-Color Corp. | 52,681 | 3,479,580 | |||
39,757,072 | |||||
Construction and Engineering — 1.3% | |||||
Dycom Industries, Inc.(1) | 135,000 | 14,530,050 |
10
Shares | Value | ||||
Valmont Industries, Inc. | 35,000 | $ | 5,120,500 | ||
19,650,550 | |||||
Containers and Packaging — 6.7% | |||||
Bemis Co., Inc. | 540,000 | 23,500,800 | |||
Graphic Packaging Holding Co. | 2,525,000 | 38,758,750 | |||
Silgan Holdings, Inc. | 1,405,000 | 39,129,250 | |||
101,388,800 | |||||
Diversified Financial Services — 2.7% | |||||
Compass Diversified Holdings | 2,460,000 | 40,344,000 | |||
Electrical Equipment — 1.1% | |||||
AZZ, Inc. | 330,000 | 14,421,000 | |||
Thermon Group Holdings, Inc.(1) | 120,000 | 2,689,200 | |||
17,110,200 | |||||
Electronic Equipment, Instruments and Components — 5.8% | |||||
Avnet, Inc. | 540,000 | 22,550,400 | |||
Belden, Inc. | 410,000 | 28,265,400 | |||
OSI Systems, Inc.(1) | 210,000 | 13,706,700 | |||
Tech Data Corp.(1) | 105,000 | 8,938,650 | |||
VeriFone Systems, Inc.(1) | 840,000 | 12,919,200 | |||
86,380,350 | |||||
Energy Equipment and Services — 1.2% | |||||
Cactus, Inc., Class A(1) | 115,000 | 3,096,950 | |||
Dril-Quip, Inc.(1) | 210,000 | 9,408,000 | |||
FTS International, Inc.(1) | 94,883 | 1,744,899 | |||
Helix Energy Solutions Group, Inc.(1) | 220,000 | 1,273,800 | |||
Keane Group, Inc.(1) | 100,000 | 1,480,000 | |||
Liberty Oilfield Services, Inc., Class A(1) | 75,000 | 1,266,750 | |||
18,270,399 | |||||
Equity Real Estate Investment Trusts (REITs) — 6.3% | |||||
Armada Hoffler Properties, Inc. | 175,000 | 2,395,750 | |||
CareTrust REIT, Inc. | 495,000 | 6,633,000 | |||
Community Healthcare Trust, Inc. | 315,000 | 8,108,100 | |||
EPR Properties | 80,000 | 4,432,000 | |||
Kite Realty Group Trust | 1,335,000 | 20,332,050 | |||
Lexington Realty Trust | 535,000 | 4,210,450 | |||
MedEquities Realty Trust, Inc. | 1,085,000 | 11,403,350 | |||
Medical Properties Trust, Inc. | 715,000 | 9,295,000 | |||
RLJ Lodging Trust | 210,000 | 4,082,400 | |||
Sabra Health Care REIT, Inc. | 540,000 | 9,531,000 | |||
Summit Hotel Properties, Inc. | 315,000 | 4,287,150 | |||
Urstadt Biddle Properties, Inc., Class A | 165,000 | 3,184,500 | |||
Weingarten Realty Investors | 215,000 | 6,037,200 | |||
93,931,950 | |||||
Food Products — 2.7% | |||||
Hain Celestial Group, Inc. (The)(1) | 290,000 | 9,300,300 | |||
John B Sanfilippo & Son, Inc. | 145,000 | 8,391,150 |
11
Shares | Value | ||||
TreeHouse Foods, Inc.(1) | 580,000 | $ | 22,196,600 | ||
39,888,050 | |||||
Health Care Providers and Services — 0.6% | |||||
Providence Service Corp. (The)(1) | 140,000 | 9,679,600 | |||
Hotels, Restaurants and Leisure — 0.7% | |||||
Red Robin Gourmet Burgers, Inc.(1) | 195,000 | 11,310,000 | |||
Household Durables — 1.5% | |||||
Helen of Troy Ltd.(1) | 255,000 | 22,185,000 | |||
Household Products — 0.8% | |||||
Energizer Holdings, Inc. | 200,000 | 11,916,000 | |||
Insurance — 9.0% | |||||
AMERISAFE, Inc. | 370,384 | 20,463,716 | |||
Aspen Insurance Holdings Ltd. | 300,000 | 13,455,000 | |||
Hanover Insurance Group, Inc. (The) | 120,000 | 14,146,800 | |||
James River Group Holdings Ltd. | 570,000 | 20,217,900 | |||
Kinsale Capital Group, Inc. | 180,000 | 9,239,400 | |||
RenaissanceRe Holdings Ltd. | 165,000 | 22,854,150 | |||
RLI Corp. | 245,000 | 15,530,550 | |||
Validus Holdings Ltd. | 280,000 | 18,886,000 | |||
134,793,516 | |||||
IT Services — 5.6% | |||||
CSRA, Inc. | 580,000 | 23,913,400 | |||
EVERTEC, Inc. | 1,380,000 | 22,563,000 | |||
Presidio, Inc.(1) | 860,000 | 13,450,400 | |||
Teradata Corp.(1) | 605,000 | 24,000,350 | |||
83,927,150 | |||||
Leisure Products — 0.6% | |||||
Malibu Boats, Inc., Class A(1) | 177,237 | 5,886,041 | |||
MCBC Holdings, Inc.(1) | 115,000 | 2,898,000 | |||
8,784,041 | |||||
Machinery — 4.8% | |||||
Actuant Corp., Class A | 825,000 | 19,181,250 | |||
EnPro Industries, Inc. | 325,000 | 25,148,500 | |||
Global Brass & Copper Holdings, Inc. | 580,000 | 19,401,000 | |||
Graham Corp. | 335,000 | 7,175,700 | |||
Rexnord Corp.(1) | 55,000 | 1,632,400 | |||
72,538,850 | |||||
Media — 1.2% | |||||
Entravision Communications Corp., Class A | 3,300,000 | 15,510,000 | |||
Townsquare Media, Inc., Class A | 240,000 | 1,903,200 | |||
17,413,200 | |||||
Mortgage Real Estate Investment Trusts (REITs) — 0.9% | |||||
Granite Point Mortgage Trust, Inc. | 355,000 | 5,871,700 | |||
Two Harbors Investment Corp. | 475,000 | 7,300,750 | |||
13,172,450 | |||||
Oil, Gas and Consumable Fuels — 1.2% | |||||
Ardmore Shipping Corp.(1) | 940,000 | 7,144,000 |
12
Shares | Value | ||||
Extraction Oil & Gas, Inc.(1) | 520,000 | $ | 5,959,200 | ||
Scorpio Tankers, Inc. | 413,920 | 811,283 | |||
WildHorse Resource Development Corp.(1) | 190,000 | 3,627,100 | |||
17,541,583 | |||||
Personal Products — 1.2% | |||||
Edgewell Personal Care Co.(1) | 360,000 | 17,575,200 | |||
Professional Services — 0.8% | |||||
Huron Consulting Group, Inc.(1) | 315,000 | 12,001,500 | |||
Road and Rail — 0.2% | |||||
Heartland Express, Inc. | 205,000 | 3,687,950 | |||
Semiconductors and Semiconductor Equipment — 1.3% | |||||
Cypress Semiconductor Corp. | 455,000 | 7,716,800 | |||
Kulicke & Soffa Industries, Inc.(1) | 475,000 | 11,879,750 | |||
19,596,550 | |||||
Specialty Retail — 2.5% | |||||
Camping World Holdings, Inc., Class A | 600,000 | 19,350,000 | |||
MarineMax, Inc.(1) | 355,000 | 6,904,750 | |||
Penske Automotive Group, Inc. | 252,946 | 11,213,096 | |||
37,467,846 | |||||
Technology Hardware, Storage and Peripherals — 1.1% | |||||
Cray, Inc.(1) | 810,000 | 16,767,000 | |||
Trading Companies and Distributors — 1.9% | |||||
DXP Enterprises, Inc.(1) | 200,000 | 7,790,000 | |||
Foundation Building Materials, Inc.(1) | 975,024 | 14,537,608 | |||
GMS, Inc.(1) | 60,033 | 1,834,608 | |||
MSC Industrial Direct Co., Inc., Class A | 50,000 | 4,585,500 | |||
28,747,716 | |||||
TOTAL COMMON STOCKS (Cost $1,331,470,519) | 1,471,896,747 | ||||
CONVERTIBLE PREFERRED STOCKS — 0.5% | |||||
Machinery — 0.5% | |||||
Rexnord Corp., 5.75%, 11/15/19 (Cost $5,988,255) | 120,000 | 7,713,600 | |||
TEMPORARY CASH INVESTMENTS — 1.1% | |||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.375% - 3.625%, 2/15/23 - 5/15/47, valued at $8,962,947), in a joint trading account at 1.45%, dated 3/29/18, due 4/2/18 (Delivery value $8,768,704) | 8,767,291 | ||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.00%, 11/15/26, valued at $7,456,830), at 0.74%, dated 3/29/18, due 4/2/18 (Delivery value $7,309,601) | 7,309,000 | ||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 8,987 | 8,987 | |||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $16,085,278) | 16,085,278 | ||||
TOTAL INVESTMENT SECURITIES — 99.6% (Cost $1,353,544,052) | 1,495,695,625 | ||||
OTHER ASSETS AND LIABILITIES — 0.4% | 5,389,875 | ||||
TOTAL NET ASSETS — 100.0% | $ | 1,501,085,500 |
13
NOTES TO SCHEDULE OF INVESTMENTS |
(1) | Non-income producing. |
See Notes to Financial Statements.
14
Statement of Assets and Liabilities |
MARCH 31, 2018 | |||
Assets | |||
Investment securities, at value (cost of $1,353,544,052) | $ | 1,495,695,625 | |
Cash | 532,158 | ||
Receivable for investments sold | 14,061,856 | ||
Receivable for capital shares sold | 1,681,452 | ||
Dividends and interest receivable | 1,856,867 | ||
1,513,827,958 | |||
Liabilities | |||
Payable for investments purchased | 9,207,648 | ||
Payable for capital shares redeemed | 2,046,336 | ||
Accrued management fees | 1,459,464 | ||
Distribution and service fees payable | 29,010 | ||
12,742,458 | |||
Net Assets | $ | 1,501,085,500 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 1,291,613,864 | |
Undistributed net investment income | 3,732,462 | ||
Undistributed net realized gain | 63,587,601 | ||
Net unrealized appreciation | 142,151,573 | ||
$ | 1,501,085,500 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||
Investor Class, $0.01 Par Value | $687,877,026 | 79,631,042 | $8.64 | |
I Class, $0.01 Par Value | $411,986,465 | 47,238,714 | $8.72 | |
Y Class, $0.01 Par Value | $131,319 | 15,034 | $8.73 | |
A Class, $0.01 Par Value | $116,762,832 | 13,665,275 | $8.54* | |
C Class, $0.01 Par Value | $2,687,753 | 328,669 | $8.18 | |
R Class, $0.01 Par Value | $3,284,105 | 386,208 | $8.50 | |
R5 Class, $0.01 Par Value | $5,366 | 615 | $8.73 | |
R6 Class, $0.01 Par Value | $278,350,634 | 31,903,905 | $8.72 |
*Maximum offering price $9.06 (net asset value divided by 0.9425).
See Notes to Financial Statements.
15
Statement of Operations |
YEAR ENDED MARCH 31, 2018 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (including $756,309 from affiliates and net of foreign taxes withheld of $14,375) | $ | 26,122,455 | |
Interest | 247,091 | ||
26,369,546 | |||
Expenses: | |||
Management fees | 17,811,488 | ||
Distribution and service fees: | |||
A Class | 313,655 | ||
C Class | 21,424 | ||
R Class | 15,626 | ||
Directors' fees and expenses | 46,769 | ||
Other expenses | 39,576 | ||
18,248,538 | |||
Net investment income (loss) | 8,121,008 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions (including $5,686,209 from affiliates) | 202,915,944 | ||
Forward foreign currency exchange contract transactions | 5,621 | ||
202,921,565 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments (including ($298,233) from affiliates) | (124,327,403 | ) | |
Forward foreign currency exchange contracts | (37,841 | ) | |
(124,365,244 | ) | ||
Net realized and unrealized gain (loss) | 78,556,321 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 86,677,329 |
See Notes to Financial Statements.
16
Statement of Changes in Net Assets |
YEARS ENDED MARCH 31, 2018 AND MARCH 31, 2017 | ||||||
Increase (Decrease) in Net Assets | March 31, 2018 | March 31, 2017 | ||||
Operations | ||||||
Net investment income (loss) | $ | 8,121,008 | $ | 7,822,819 | ||
Net realized gain (loss) | 202,921,565 | 203,481,708 | ||||
Change in net unrealized appreciation (depreciation) | (124,365,244 | ) | 178,137,336 | |||
Net increase (decrease) in net assets resulting from operations | 86,677,329 | 389,441,863 | ||||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Investor Class | (2,152,827 | ) | (4,647,788 | ) | ||
I Class | (2,385,206 | ) | (4,114,600 | ) | ||
Y Class | (28 | ) | — | |||
A Class | (109,194 | ) | (651,385 | ) | ||
C Class | — | (285 | ) | |||
R Class | — | (7,918 | ) | |||
R5 Class | (22 | ) | — | |||
R6 Class | (1,453,277 | ) | (1,402,136 | ) | ||
From net realized gains: | ||||||
Investor Class | (91,337,226 | ) | (33,783,589 | ) | ||
I Class | (63,297,513 | ) | (22,113,072 | ) | ||
Y Class | (662 | ) | — | |||
A Class | (15,531,727 | ) | (6,659,384 | ) | ||
C Class | (317,339 | ) | (26,597 | ) | ||
R Class | (414,021 | ) | (143,466 | ) | ||
R5 Class | (662 | ) | — | |||
R6 Class | (31,132,870 | ) | (5,577,060 | ) | ||
Decrease in net assets from distributions | (208,132,574 | ) | (79,127,280 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 66,977,658 | (141,324,571 | ) | |||
Net increase (decrease) in net assets | (54,477,587 | ) | 168,990,012 | |||
Net Assets | ||||||
Beginning of period | 1,555,563,087 | 1,386,573,075 | ||||
End of period | $ | 1,501,085,500 | $ | 1,555,563,087 | ||
Undistributed net investment income | $ | 3,732,462 | $ | 2,253,490 |
See Notes to Financial Statements.
17
Notes to Financial Statements |
MARCH 31, 2018
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Small Cap Value Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective.
The fund offers the Investor Class, I Class (formerly Institutional Class), Y Class, A Class, C Class, R Class, R5 Class and R6 Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. Sale of the Y Class and R5 Class commenced on April 10, 2017.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between
18
domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that American Century Investment Management, Inc. (ACIM) (the investment advisor) has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually. The fund may elect to treat a portion of its payment to a redeeming shareholder, which represents the pro rata share of undistributed net investment income and net realized gains, as a distribution for federal income tax purposes (tax equalization).
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The
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maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc. (ACIS), and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that use very similar investment teams and strategies (strategy assets).
The management fee schedule range and the effective annual management fee for each class for the period ended March 31, 2018 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | |
Investor Class | 1.00% to 1.25% | 1.25% |
I Class | 0.80% to 1.05% | 1.05% |
Y Class | 0.65% to 0.90% | 0.90% |
A Class | 1.00% to 1.25% | 1.25% |
C Class | 1.00% to 1.25% | 1.25% |
R Class | 1.00% to 1.25% | 1.25% |
R5 Class | 0.80% to 1.05% | 1.05% |
R6 Class | 0.65% to 0.90% | 0.90% |
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the C Class will pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the period ended March 31, 2018 are detailed in the Statement of Operations.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $5,106,529 and $9,023,279, respectively. The effect of interfund transactions on the Statement of Operations was $2,187,813 in net realized gain (loss) on investment transactions.
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4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended March 31, 2018 were $1,375,556,988 and $1,456,036,347, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended March 31, 2018(1) | Year ended March 31, 2017 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 530,000,000 | 575,000,000 | ||||||||
Sold | 13,655,808 | $ | 126,053,160 | 16,894,263 | $ | 148,292,430 | ||||
Issued in reinvestment of distributions | 10,565,708 | 91,480,014 | 4,182,615 | 37,023,384 | ||||||
Redeemed | (26,621,472 | ) | (243,195,829 | ) | (26,036,632 | ) | (221,392,102 | ) | ||
(2,399,956 | ) | (25,662,655 | ) | (4,959,754 | ) | (36,076,288 | ) | |||
I Class/Shares Authorized | 380,000,000 | 400,000,000 | ||||||||
Sold | 21,037,259 | 195,108,451 | 10,400,947 | 90,289,454 | ||||||
Issued in reinvestment of distributions | 6,236,884 | 54,538,296 | 2,659,311 | 23,663,986 | ||||||
Redeemed | (28,934,108 | ) | (265,355,798 | ) | (32,110,870 | ) | (269,634,819 | ) | ||
(1,659,965 | ) | (15,709,051 | ) | (19,050,612 | ) | (155,681,379 | ) | |||
Y Class/Shares Authorized | 50,000,000 | N/A | ||||||||
Sold | 14,955 | 132,166 | ||||||||
Issued in reinvestment of distributions | 79 | 690 | ||||||||
15,034 | 132,856 | |||||||||
A Class/Shares Authorized | 90,000,000 | 160,000,000 | ||||||||
Sold | 2,274,718 | 20,516,603 | 2,738,285 | 23,466,773 | ||||||
Issued in reinvestment of distributions | 1,820,578 | 15,570,340 | 824,305 | 7,259,487 | ||||||
Redeemed | (5,633,747 | ) | (51,264,045 | ) | (7,396,839 | ) | (62,304,032 | ) | ||
(1,538,451 | ) | (15,177,102 | ) | (3,834,249 | ) | (31,577,772 | ) | |||
C Class/Shares Authorized | 10,000,000 | 10,000,000 | ||||||||
Sold | 212,947 | 1,862,168 | 106,330 | 925,018 | ||||||
Issued in reinvestment of distributions | 38,700 | 317,339 | 3,109 | 26,882 | ||||||
Redeemed | (59,921 | ) | (520,640 | ) | (8,849 | ) | (74,470 | ) | ||
191,726 | 1,658,867 | 100,590 | 877,430 | |||||||
R Class/Shares Authorized | 10,000,000 | 10,000,000 | ||||||||
Sold | 111,097 | 1,011,895 | 136,632 | 1,175,294 | ||||||
Issued in reinvestment of distributions | 48,594 | 414,021 | 17,131 | 151,384 | ||||||
Redeemed | (126,291 | ) | (1,137,625 | ) | (114,803 | ) | (981,752 | ) | ||
33,400 | 288,291 | 38,960 | 344,926 | |||||||
R5 Class/Shares Authorized | 50,000,000 | N/A | ||||||||
Sold | 537 | 5,000 | ||||||||
Issued in reinvestment of distributions | 78 | 684 | ||||||||
615 | 5,684 | |||||||||
R6 Class/Shares Authorized | 150,000,000 | 50,000,000 | ||||||||
Sold | 14,365,364 | 132,796,610 | 19,432,466 | 162,082,591 | ||||||
Issued in reinvestment of distributions | 3,725,552 | 32,586,147 | 788,291 | 6,979,196 | ||||||
Redeemed | (4,765,877 | ) | (43,941,989 | ) | (10,461,852 | ) | (88,273,275 | ) | ||
13,325,039 | 121,440,768 | 9,758,905 | 80,788,512 | |||||||
Net increase (decrease) | 7,967,442 | $ | 66,977,658 | (17,946,160 | ) | $ | (141,324,571 | ) |
(1) | April 10, 2017 (commencement of sale) through March 31, 2018 for the Y Class and R5 Class. |
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6. Affiliated Company Transactions
If a fund's holding represents ownership of 5% or more of the voting securities of a company, the company is affiliated as defined in the 1940 Act. A summary of transactions for each company which is or was an affiliate at or during the period ended March 31, 2018 follows (amounts in thousands):
Company | Beginning Value | Purchase Cost | Sales Cost | Change in Net Unrealized Appreciation (Depreciation) | Ending Value | Ending Shares | Net Realized Gain (Loss) | Income | ||||||||||||||
CSW Industrials, Inc.(1)(2) | $ | 26,124 | $ | 8,848 | $ | 10,460 | $ | 4,533 | (2) | (2) | $ | 2,038 | — | |||||||||
Entravision Communications Corp., Class A(2) | 29,109 | 14,991 | 23,759 | (4,831 | ) | (2) | (2) | 3,648 | $ | 756 | ||||||||||||
$ | 55,233 | $ | 23,839 | $ | 34,219 | $ | (298 | ) | — | — | $ | 5,686 | $ | 756 |
(1) Non-income producing.
(2) Company was not an affiliate at March 31, 2018.
7. 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. There were no significant transfers between levels during the period.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 1,471,896,747 | — | — | ||||
Convertible Preferred Stocks | — | $ | 7,713,600 | — | ||||
Temporary Cash Investments | 8,987 | 16,076,291 | — | |||||
$ | 1,471,905,734 | $ | 23,789,891 | — |
8. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the
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holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $4,199,566.
At period end, the fund did not have any derivative instruments disclosed on the Statement of Assets and Liabilities. For the year ended March 31, 2018, the effect of foreign currency risk derivative instruments on the Statement of Operations was $5,621 in net realized gain (loss) on forward foreign currency exchange contract transactions and $(37,841) in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
9. Risk Factors
The fund invests in common stocks of small companies. Because of this, the fund may be subject to greater risk and market fluctuations than a fund investing in larger, more established companies.
10. Federal Tax Information
The tax character of distributions paid during the years ended March 31, 2018 and March 31, 2017 were as follows:
2018 | 2017 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 83,250,525 | $ | 40,179,667 | ||
Long-term capital gains | $ | 124,882,049 | $ | 38,947,613 |
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 1,376,208,921 | |
Gross tax appreciation of investments | $ | 185,803,849 | |
Gross tax depreciation of investments | (66,317,145 | ) | |
Net tax appreciation (depreciation) | $ | 119,486,704 | |
Undistributed ordinary income | $ | 28,253,288 | |
Accumulated long-term gains | $ | 61,731,644 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||
2018 | $9.39 | 0.04 | 0.47 | 0.51 | (0.03) | (1.23) | (1.26) | $8.64 | 5.41% | 1.26% | 0.42% | 90% | $687,877 | ||
2017 | $7.55 | 0.04 | 2.28 | 2.32 | (0.06) | (0.42) | (0.48) | $9.39 | 31.15% | 1.25% | 0.47% | 90% | $770,415 | ||
2016 | $9.16 | 0.04 | (0.59) | (0.55) | (0.03) | (1.03) | (1.06) | $7.55 | (6.25)% | 1.26% | 0.43% | 95% | $656,974 | ||
2015 | $9.88 | 0.06 | 0.48 | 0.54 | (0.05) | (1.21) | (1.26) | $9.16 | 6.18% | 1.24% | 0.66% | 78% | $815,048 | ||
2014 | $9.45 | 0.06 | 2.04 | 2.10 | (0.08) | (1.59) | (1.67) | $9.88 | 23.27% | 1.22% | 0.62% | 111% | $948,338 | ||
I Class(3) | |||||||||||||||
2018 | $9.47 | 0.06 | 0.46 | 0.52 | (0.04) | (1.23) | (1.27) | $8.72 | 5.57% | 1.06% | 0.62% | 90% | $411,986 | ||
2017 | $7.61 | 0.06 | 2.29 | 2.35 | (0.07) | (0.42) | (0.49) | $9.47 | 31.43% | 1.05% | 0.67% | 90% | $463,119 | ||
2016 | $9.22 | 0.05 | (0.58) | (0.53) | (0.05) | (1.03) | (1.08) | $7.61 | (6.02)% | 1.06% | 0.63% | 95% | $517,247 | ||
2015 | $9.94 | 0.08 | 0.48 | 0.56 | (0.07) | (1.21) | (1.28) | $9.22 | 6.35% | 1.04% | 0.86% | 78% | $599,932 | ||
2014 | $9.50 | 0.08 | 2.05 | 2.13 | (0.10) | (1.59) | (1.69) | $9.94 | 23.45% | 1.02% | 0.82% | 111% | $874,415 | ||
Y Class | |||||||||||||||
2018(4) | $9.32 | 0.08 | 0.61 | 0.69 | (0.05) | (1.23) | (1.28) | $8.73 | 7.43% | 0.91%(5) | 0.95%(5) | 90%(6) | $131 |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
A Class | |||||||||||||||
2018 | $9.31 | 0.01 | 0.46 | 0.47 | (0.01) | (1.23) | (1.24) | $8.54 | 5.02% | 1.51% | 0.17% | 90% | $116,763 | ||
2017 | $7.49 | 0.02 | 2.26 | 2.28 | (0.04) | (0.42) | (0.46) | $9.31 | 30.82% | 1.50% | 0.22% | 90% | $141,505 | ||
2016 | $9.09 | 0.01 | (0.57) | (0.56) | (0.01) | (1.03) | (1.04) | $7.49 | (6.41)% | 1.51% | 0.18% | 95% | $142,568 | ||
2015 | $9.81 | 0.04 | 0.48 | 0.52 | (0.03) | (1.21) | (1.24) | $9.09 | 5.96% | 1.49% | 0.41% | 78% | $384,891 | ||
2014 | $9.40 | 0.04 | 2.02 | 2.06 | (0.06) | (1.59) | (1.65) | $9.81 | 22.92% | 1.47% | 0.37% | 111% | $433,905 | ||
C Class | |||||||||||||||
2018 | $9.01 | (0.05) | 0.45 | 0.40 | — | (1.23) | (1.23) | $8.18 | 4.41% | 2.26% | (0.58)% | 90% | $2,688 | ||
2017 | $7.29 | (0.05) | 2.20 | 2.15 | (0.01) | (0.42) | (0.43) | $9.01 | 29.78% | 2.25% | (0.53)% | 90% | $1,234 | ||
2016 | $8.93 | (0.04) | (0.57) | (0.61) | — | (1.03) | (1.03) | $7.29 | (7.13)% | 2.26% | (0.57)% | 95% | $265 | ||
2015 | $9.71 | (0.03) | 0.47 | 0.44 | (0.01) | (1.21) | (1.22) | $8.93 | 5.14% | 2.24% | (0.34)% | 78% | $138 | ||
2014 | $9.35 | (0.04) | 2.01 | 1.97 | (0.02) | (1.59) | (1.61) | $9.71 | 21.94% | 2.22% | (0.38)% | 111% | $114 | ||
R Class | |||||||||||||||
2018 | $9.28 | (0.01) | 0.46 | 0.45 | — | (1.23) | (1.23) | $8.50 | 4.82% | 1.76% | (0.08)% | 90% | $3,284 | ||
2017 | $7.48 | —(7) | 2.25 | 2.25 | (0.03) | (0.42) | (0.45) | $9.28 | 30.41% | 1.75% | (0.03)% | 90% | $3,275 | ||
2016 | $9.09 | —(7) | (0.58) | (0.58) | — | (1.03) | (1.03) | $7.48 | (6.65)% | 1.76% | (0.07)% | 95% | $2,346 | ||
2015 | $9.83 | 0.02 | 0.47 | 0.49 | (0.02) | (1.21) | (1.23) | $9.09 | 5.65% | 1.74% | 0.16% | 78% | $2,138 | ||
2014 | $9.42 | 0.01 | 2.03 | 2.04 | (0.04) | (1.59) | (1.63) | $9.83 | 22.64% | 1.72% | 0.12% | 111% | $4,517 | ||
R5 Class | |||||||||||||||
2018(4) | $9.32 | 0.06 | 0.62 | 0.68 | (0.04) | (1.23) | (1.27) | $8.73 | 7.32% | 1.06%(5) | 0.65%(5) | 90%(6) | $5 |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
R6 Class | |||||||||||||||
2018 | $9.47 | 0.07 | 0.47 | 0.54 | (0.06) | (1.23) | (1.29) | $8.72 | 5.73% | 0.91% | 0.77% | 90% | $278,351 | ||
2017 | $7.62 | 0.07 | 2.28 | 2.35 | (0.08) | (0.42) | (0.50) | $9.47 | 31.45% | 0.90% | 0.82% | 90% | $176,015 | ||
2016 | $9.23 | 0.07 | (0.59) | (0.52) | (0.06) | (1.03) | (1.09) | $7.62 | (5.86)% | 0.91% | 0.78% | 95% | $67,173 | ||
2015 | $9.94 | 0.11 | 0.48 | 0.59 | (0.09) | (1.21) | (1.30) | $9.23 | 6.62% | 0.89% | 1.01% | 78% | $39,898 | ||
2014(8) | $10.38 | 0.07 | 1.14 | 1.21 | (0.06) | (1.59) | (1.65) | $9.94 | 12.46% | 0.87%(5) | 1.06%(5) | 111%(9) | $13,430 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | Prior to April 10, 2017, the I Class was referred to as the Institutional Class. |
(4) | April 10, 2017 (commencement of sale) through March 31, 2018. |
(5) | Annualized. |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2018. |
(7) | Per share amount was less than $0.005. |
(8) | July 26, 2013 (commencement of sale) through March 31, 2014. |
(9) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2014. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Directors of American Century Capital Portfolios, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Small Cap Value Fund, one of the portfolios constituting the American Century Capital Portfolios, Inc. (the “Fund”), as of March 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of Small Cap Value Fund of the American Century Capital Portfolios, Inc. as of March 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of March 31, 2018, 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
May 16, 2018
We have served as the auditor of one or more American Century investment companies since 1997.
27
Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 68 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) |
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired; Executive Vice President, ACC (2007 to 2013); President, ACS (2007 to 2013); Chief Operating Officer, ACC (2007 to 2012) | 68 | None |
Andrea C. Hall (1945) | Director | Since 1997 | Retired | 68 | None |
Jan M. Lewis (1957) | Director | Since 2011 | Retired; President and Chief Executive Officer, Catholic Charities of Northeast Kansas (human services organization) (2006 to 2013) | 68 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
M. Jeannine Strandjord (1945) | Director | Since 1994 | Self-employed Consultant | 68 | Euronet Worldwide Inc.; MGP Ingredients, Inc. |
John R. Whitten (1946) | Director | Since 2008 | Retired | 68 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 70 | None |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director and President | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 115 | BioMed Valley Discoveries, Inc. |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
29
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds, unless otherwise noted. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
Jonathan S. Thomas (1963) | Director and President since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present); Vice President, Client Interactions and Marketing, ACIS (2013 to 2014). Also serves as Vice President, ACIS |
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
C. Jean Wade (1964) | Vice President,Treasurer and Chief Financial Officer since 2012 | Vice President, ACS (2000 to present) |
Robert J. Leach (1966) | Vice President since 2006 and Assistant Treasurer since 2012 | Vice President, ACS (2000 to present) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present); Associate General Counsel, ACC (2001 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
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Proxy Voting Results |
A special meeting of shareholders was held on October 18, 2017, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect four directors to the Board of Directors of American Century Capital Portfolios, Inc.:
Affirmative | Withhold | ||||||
Thomas W. Bunn | $ | 24,595,873,549 | $ | 400,991,853 | |||
Barry Fink | $ | 24,607,840,546 | $ | 389,024,856 | |||
Jan M. Lewis | $ | 24,616,409,175 | $ | 380,456,227 | |||
Stephen E. Yates | $ | 24,605,431,961 | $ | 391,433,441 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Andrea C. Hall, James A. Olson, M. Jeannine Strandjord, and John R. Whitten.
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Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time and change your withholding percentage for future distributions.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on 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. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified dividend income for the fiscal year ended March 31, 2018.
For corporate taxpayers, the fund hereby designates $17,807,826, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended March 31, 2018 as qualified for the corporate dividends received deduction.
The fund hereby designates $79,890,911 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended March 31, 2018.
The fund hereby designates $131,007,623, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended March 31, 2018.
The fund utilized earnings and profits of $9,226,704 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
33
Notes |
34
Notes |
35
Notes |
36
![]() | ||
Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2018 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-92272 1805 |
![acihorizblkb99.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/acihorizblkb99.jpg)
Annual Report | |
March 31, 2018 | |
Value Fund | |
Investor Class (TWVLX) | |
I Class (AVLIX) | |
Y Class (AVUYX) | |
A Class (TWADX) | |
C Class (ACLCX) | |
R Class (AVURX) | |
R5 Class (AVUGX) | |
R6 Class (AVUDX) |
Table of Contents |
President’s Letter | 2 | |
Performance | 3 | |
Portfolio Commentary | ||
Fund Characteristics | ||
Shareholder Fee Example | ||
Schedule of Investments | ||
Statement of Assets and Liabilities | ||
Statement of Operations | ||
Statement of Changes in Net Assets | ||
Notes to Financial Statements | ||
Financial Highlights | ||
Report of Independent Registered Public Accounting Firm | ||
Management | ||
Proxy Voting Results | ||
Additional Information |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
![jthomasrev0514.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/jthomasrev0514.jpg)
Dear Investor:
Thank you for reviewing this annual report for the period ended March 31, 2018. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional, updated investment and market insights, we encourage you to visit our website, americancentury.com.
Rally Rolled On, Until Volatility Resurfaced
For most of the 12-month period, broad U.S. stock and bond indices generated positive returns. Stocks generally rallied against a backdrop of robust corporate earnings results, steady economic growth, relatively low interest rates, and U.S. tax reform. For bonds, modest economic gains, relatively muted inflation, and gradual—and well telegraphed—tightening from the Federal Reserve (the Fed) continued to support positive performance.
Then, in early February, a force that was largely dormant during 2017—volatility—re-emerged. Robust U.S. wage growth triggered expectations for rising inflation, higher interest rates, and a more-hawkish Fed. Treasury yields climbed to their highest levels in several years, and stock prices plunged into correction territory. Economic data released in March helped calm the unrest, while the Fed's March rate hike, which investors had expected, had little impact. Markets recovered much of the previous weeks’ losses, until a fresh round of worries emerged. President Trump announced the U.S. would implement tariffs on certain imports from China, sparking fears of a global trade war and triggering a flight to quality in the financial markets.
Despite the resurgence of volatility late in the period, U.S. stocks (S&P 500 Index) delivered a total return of 13.99% for the 12 months. Continuing a long-standing trend, growth stocks significantly outperformed their value counterparts across the capitalization spectrum. Meanwhile, the March flight to quality helped bonds hang onto the modest gains generated ahead of the market turbulence, and investment-grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index) returned 1.20% for the 12-month period.
With inflationary pressures mounting, Treasury yields rising, volatility resurfacing, and the implications of tax reform still unfolding, investors likely will face new opportunities and challenges in the months ahead. We believe this scenario warrants a disciplined, diversified, and risk-aware approach, using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a01.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/image48a01.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of March 31, 2018 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | TWVLX | 3.38% | 9.91% | 8.14% | — | 9/1/93 |
Russell 1000 Value Index | — | 6.95% | 10.78% | 7.77% | — | — |
S&P 500 Index | — | 13.99% | 13.30% | 9.49% | — | — |
I Class | AVLIX | 3.58% | 10.14% | 8.36% | — | 7/31/97 |
Y Class | AVUYX | — | — | — | 3.94% | 4/10/17 |
A Class | TWADX | 10/2/96 | ||||
No sales charge | 3.13% | 9.68% | 7.87% | — | ||
With sales charge | -2.82% | 8.39% | 7.24% | — | ||
C Class | ACLCX | 2.40% | 8.82% | 7.06% | — | 6/4/01 |
R Class | AVURX | 2.87% | 9.40% | 7.61% | — | 7/29/05 |
R5 Class | AVUGX | — | — | — | 3.80% | 4/10/17 |
R6 Class | AVUDX | 3.74% | — | — | 8.86% | 7/26/13 |
Average annual returns since inception are presented when ten years of performance history is not available.
Prior to April 10, 2017, the I Class was referred to as the Institutional Class.
Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum initial sales charge and may be subject to a maximum CDSC of 1.00%. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
3
Growth of $10,000 Over 10 Years |
$10,000 investment made March 31, 2008 |
Performance for other share classes will vary due to differences in fee structure. |
![chart-879790ed452b54d6ac8.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000075/chart-879790ed452b54d6ac8.jpg)
Value on March 31, 2018 | |
Investor Class — $21,881 | |
Russell 1000 Value Index — $21,144 | |
S&P 500 Index — $24,771 | |
Total Annual Fund Operating Expenses | |||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class |
0.98% | 0.78% | 0.63% | 1.23% | 1.98% | 1.48% | 0.78% | 0.63% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
4
Portfolio Commentary |
Portfolio Managers: Michael Liss, Kevin Toney, Phil Davidson, Brian Woglom, Dan Gruemmer, and Philip Sundell
In April 2017, Philip Sundell joined Value’s management team.
Performance Summary
Value returned 3.38%* for the fiscal year ended March 31, 2018, compared with the 6.95% return of its benchmark, the Russell 1000 Value Index.
Value stocks underperformed growth stocks across the capitalization spectrum during the 12-month period, creating a headwind for the fund’s performance. Within the Russell 1000 Value Index, information technology led performance, followed by financials and materials. The weakest sectors were telecommunication services, real estate, and consumer staples. The fund recorded positive absolute contributions from most sectors, led by financials and information technology. Industrials were the largest absolute detractors.
The fund’s underperformance relative to the benchmark was driven by stock selection in the industrials and health care sectors. Stock decisions in the information technology and consumer staples sectors benefited results, as did an underweight in the real estate sector.
Industrials Holdings Led Detractors
Security selection in the industrials sector detracted from relative performance. General Electric was a significant detractor. The industrial conglomerate underperformed due to fundamental challenges in its power and financial business segments and uncertainty over asset dispositions. We continue to believe that General Electric is a higher-quality company with best-in-class aviation and leading health care business units.
In the health care sector, Teva Pharmaceutical Industries weighed on performance. Teva’s stock declined after it missed second-quarter earnings-per-share expectations, lowered guidance for fiscal year 2017, and significantly cut its dividend. Additionally, Teva’s core U.S. generics business faced greater price erosion and increased competition. Hospital operator LifePoint Health declined after it reported earnings that were below expectations due in part to weak market conditions with low admissions. Also, four hospitals that were acquired in 2016 underperformed as they faced competitive markets. We bought additional shares of the stock on weakness in its price.
Other significant detractors included toy company Mattel, which declined after missing estimates and announcing the need to renegotiate the financial leverage covenants of its credit facility. Furthermore, Toys"R"Us, one of Mattel’s largest customers, unexpectedly filed for bankruptcy, creating uncertainty leading up to the holiday season. Despite the short-term disruption, we believe there will be minimal impact to long-term toy demand. The stock of electric utility PG&E underperformed after media reports linked PG&E’s equipment to the recent Northern California wildfires, creating liability concerns. The stock fell further after the company proactively suspended its dividend to build its cash reserve until liabilities can be determined. Advance Auto Parts fell in July after competitor O’Reilly Automotive preannounced that it would miss quarterly sales expectations. Advance Auto Parts then reported its own earnings miss in August and materially lowered its fiscal-year guidance. Our longer-term investment thesis, however, remains intact. The
*All fund returns referenced in this commentary are for Investor Class shares. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the index, other share classes may not. See page 3 for returns for all share classes.
5
retailer of aftermarket replacement parts is a market share leader in a higher-quality industry.
Extreme winter storms in the Northeastern U.S. helped drive better-than-expected quarterly results late in our reporting period. Additionally, the company is in the process of restructuring, which we think should dramatically improve profit margins.
Information Technology Benefited Performance
Holdings in the electronic equipment and components industry aided security selection in information technology. TE Connectivity was a significant contributor. The company designs and manufactures products for automotive, industrial, and harsh environments. It delivered better-than-expected quarterly earnings and revenues and provided a positive outlook for fiscal year 2018, due in part to strong demand for autonomous driving technologies. Keysight Technologies also outperformed. This electronic test and measurement company has been successful in serving growth markets such as 5G, next-generation wireless, aerospace, and automotive. Keysight reported double-digit growth in quarterly orders and authorized a new share-repurchase program. Semiconductor company Applied Materials turned in strong performance as the company continued to gain market share and exceed expectations. Additionally, the company raised guidance due to strong demand in the memory and display end markets.
Other major contributors included holding an underweight position in integrated oil company Exxon Mobil. Exxon declined after its most recent quarterly results came in below expectations, and its cash flow estimates were revised downward. PNC Financial Services Group outperformed on further increases in earnings estimates due to higher fee income, healthy credit quality, lower taxes resulting from the new tax legislation, and its 21% ownership of BlackRock.
Portfolio Positioning
We continue to follow our disciplined, bottom-up process, selecting securities one at a time for the portfolio. We look for higher-quality companies of all sizes whose stock price may not reflect the company’s value.
Energy valuations remain attractive. During the first half of 2017, the energy sector declined as the price of oil fell and energy companies faced a rising service-cost environment. This provided us the opportunity to add to some of the portfolio's energy stocks that continue to offer compelling risk/reward profiles. The sector ended our fiscal year as the largest overweight relative to the benchmark.
We see value in health care, another portfolio overweight. Our health care holdings offer some of the most attractive risk/reward profiles. We have identified opportunities across industries, including pharmaceuticals, health care providers and services, and health care equipment and supplies.
The portfolio’s largest underweights at the end of the period were utilities and real estate, where we see elevated valuations. Investors had been drawn to utilities and real estate stocks because of the yields they offered during an extended period of low interest rates. As interest rates have risen, these stocks have come under pressure. Despite this recent underperformance, our valuation methodology shows that many stocks in these sectors remain overvalued.
6
Fund Characteristics |
MARCH 31, 2018 | |
Top Ten Holdings | % of net assets |
JPMorgan Chase & Co. | 3.4% |
Procter & Gamble Co. (The) | 3.2% |
Pfizer, Inc. | 3.0% |
Wells Fargo & Co. | 2.8% |
General Electric Co. | 2.7% |
Bank of America Corp. | 2.6% |
Merck & Co., Inc. | 2.5% |
Johnson & Johnson | 2.4% |
AT&T, Inc. | 2.3% |
Berkshire Hathaway, Inc.* | 2.2% |
*Includes all classes of the issuer held by the fund. | |
Top Five Industries | % of net assets |
Banks | 14.3% |
Oil, Gas and Consumable Fuels | 13.6% |
Pharmaceuticals | 10.6% |
Health Care Providers and Services | 4.6% |
Health Care Equipment and Supplies | 4.0% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 92.6% |
Foreign Common Stocks* | 5.4% |
Total Common Stocks | 98.0% |
Temporary Cash Investments | 1.7% |
Other Assets and Liabilities | 0.3% |
*Includes depositary shares, dual listed securities and foreign ordinary shares.
7
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from October 1, 2017 to March 31, 2018.
Actual Expenses
The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century Investments fund, or I Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all personal accounts (including American Century Investments Brokerage accounts) registered under your Social Security number. Personal accounts include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Investments Brokerage accounts, you are currently not subject to this fee. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund’s share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
8
Beginning Account Value 10/1/17 | Ending Account Value 3/31/18 | Expenses Paid During Period(1) 10/1/17 - 3/31/18 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $1,013.10 | $4.92 | 0.98% |
I Class | $1,000 | $1,014.10 | $3.92 | 0.78% |
Y Class | $1,000 | $1,013.60 | $3.16 | 0.63% |
A Class | $1,000 | $1,011.90 | $6.17 | 1.23% |
C Class | $1,000 | $1,007.20 | $9.91 | 1.98% |
R Class | $1,000 | $1,010.60 | $7.42 | 1.48% |
R5 Class | $1,000 | $1,014.10 | $3.92 | 0.78% |
R6 Class | $1,000 | $1,014.80 | $3.16 | 0.63% |
Hypothetical | ||||
Investor Class | $1,000 | $1,020.05 | $4.94 | 0.98% |
I Class | $1,000 | $1,021.04 | $3.93 | 0.78% |
Y Class | $1,000 | $1,021.79 | $3.18 | 0.63% |
A Class | $1,000 | $1,018.80 | $6.19 | 1.23% |
C Class | $1,000 | $1,015.06 | $9.95 | 1.98% |
R Class | $1,000 | $1,017.55 | $7.44 | 1.48% |
R5 Class | $1,000 | $1,021.04 | $3.93 | 0.78% |
R6 Class | $1,000 | $1,021.79 | $3.18 | 0.63% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 182, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
9
Schedule of Investments |
MARCH 31, 2018
Shares | Value | ||||
COMMON STOCKS — 98.0% | |||||
Aerospace and Defense — 0.5% | |||||
United Technologies Corp. | 116,170 | $ | 14,616,509 | ||
Air Freight and Logistics — 0.4% | |||||
United Parcel Service, Inc., Class B | 111,360 | 11,654,938 | |||
Automobiles — 1.2% | |||||
General Motors Co. | 533,259 | 19,378,632 | |||
Honda Motor Co. Ltd. | 558,800 | 19,402,946 | |||
38,781,578 | |||||
Banks — 14.3% | |||||
Bank of America Corp. | 2,723,310 | 81,672,067 | |||
BB&T Corp. | 590,280 | 30,718,171 | |||
BOK Financial Corp. | 72,596 | 7,186,278 | |||
Comerica, Inc. | 98,037 | 9,404,689 | |||
JPMorgan Chase & Co. | 987,361 | 108,580,089 | |||
M&T Bank Corp. | 107,330 | 19,787,359 | |||
PNC Financial Services Group, Inc. (The) | 278,503 | 42,120,794 | |||
U.S. Bancorp | 1,340,302 | 67,685,251 | |||
Wells Fargo & Co. | 1,720,558 | 90,174,445 | |||
457,329,143 | |||||
Beverages — 0.4% | |||||
PepsiCo, Inc. | 121,350 | 13,245,353 | |||
Building Products — 0.9% | |||||
Johnson Controls International plc | 808,629 | 28,496,086 | |||
Capital Markets — 3.8% | |||||
Ameriprise Financial, Inc. | 89,230 | 13,200,686 | |||
Franklin Resources, Inc. | 262,040 | 9,087,547 | |||
Goldman Sachs Group, Inc. (The) | 127,474 | 32,105,602 | |||
Invesco Ltd. | 905,021 | 28,969,722 | |||
Northern Trust Corp. | 259,567 | 26,769,145 | |||
State Street Corp. | 119,865 | 11,954,136 | |||
122,086,838 | |||||
Commercial Services and Supplies — 0.3% | |||||
Republic Services, Inc. | 163,060 | 10,799,464 | |||
Communications Equipment — 2.0% | |||||
Cisco Systems, Inc. | 1,474,779 | 63,253,271 | |||
Containers and Packaging — 0.3% | |||||
Sonoco Products Co. | 170,500 | 8,269,250 | |||
Diversified Financial Services — 2.2% | |||||
Berkshire Hathaway, Inc., Class A(1) | 159 | 47,556,900 | |||
Berkshire Hathaway, Inc., Class B(1) | 115,620 | 23,063,878 | |||
70,620,778 | |||||
Diversified Telecommunication Services — 3.6% | |||||
AT&T, Inc. | 2,030,490 | 72,386,968 | |||
Verizon Communications, Inc. | 875,900 | 41,885,538 | |||
114,272,506 |
10
Shares | Value | ||||
Electric Utilities — 1.0% | |||||
Edison International | 189,776 | $ | 12,081,140 | ||
PG&E Corp. | 486,756 | 21,383,191 | |||
33,464,331 | |||||
Electrical Equipment — 1.0% | |||||
Emerson Electric Co. | 270,470 | 18,473,101 | |||
Hubbell, Inc. | 114,261 | 13,914,705 | |||
32,387,806 | |||||
Electronic Equipment, Instruments and Components — 1.3% | |||||
Keysight Technologies, Inc.(1) | 342,807 | 17,959,659 | |||
TE Connectivity Ltd. | 237,629 | 23,739,137 | |||
41,698,796 | |||||
Energy Equipment and Services — 3.9% | |||||
Baker Hughes a GE Co. | 837,439 | 23,255,681 | |||
Halliburton Co. | 203,583 | 9,556,186 | |||
Helmerich & Payne, Inc. | 95,213 | 6,337,377 | |||
National Oilwell Varco, Inc. | 679,413 | 25,009,192 | |||
Schlumberger Ltd. | 952,320 | 61,691,290 | |||
125,849,726 | |||||
Equity Real Estate Investment Trusts (REITs) — 0.5% | |||||
Weyerhaeuser Co. | 445,240 | 15,583,400 | |||
Food and Staples Retailing — 2.1% | |||||
Sysco Corp. | 178,992 | 10,732,360 | |||
US Foods Holding Corp.(1) | 382,570 | 12,536,819 | |||
Walmart, Inc. | 480,781 | 42,775,086 | |||
66,044,265 | |||||
Food Products — 3.9% | |||||
Conagra Brands, Inc. | 957,635 | 35,317,579 | |||
General Mills, Inc. | 470,370 | 21,194,872 | |||
Kellogg Co. | 367,804 | 23,910,938 | |||
Mondelez International, Inc., Class A | 1,090,306 | 45,498,469 | |||
125,921,858 | |||||
Health Care Equipment and Supplies — 4.0% | |||||
Abbott Laboratories | 395,690 | 23,709,745 | |||
Medtronic plc | 707,540 | 56,758,859 | |||
Siemens Healthineers AG(1) | 358,498 | 14,733,199 | |||
Zimmer Biomet Holdings, Inc. | 294,523 | 32,114,788 | |||
127,316,591 | |||||
Health Care Providers and Services — 4.6% | |||||
Cardinal Health, Inc. | 300,180 | 18,815,282 | |||
Cigna Corp. | 48,330 | 8,106,874 | |||
Express Scripts Holding Co.(1) | 359,949 | 24,865,277 | |||
HCA Healthcare, Inc. | 262,570 | 25,469,290 | |||
Henry Schein, Inc.(1) | 102,590 | 6,895,074 | |||
LifePoint Health, Inc.(1) | 643,620 | 30,250,140 | |||
McKesson Corp. | 178,920 | 25,204,461 | |||
Universal Health Services, Inc., Class B | 72,607 | 8,597,395 | |||
148,203,793 | |||||
Hotels, Restaurants and Leisure — 0.3% | |||||
Carnival Corp. | 140,987 | 9,245,927 |
11
Shares | Value | ||||
Household Products — 3.4% | |||||
Kimberly-Clark Corp. | 75,250 | $ | 8,287,283 | ||
Procter & Gamble Co. (The) | 1,281,104 | 101,565,925 | |||
109,853,208 | |||||
Industrial Conglomerates — 2.7% | |||||
General Electric Co. | 6,497,084 | 87,580,692 | |||
Insurance — 3.2% | |||||
Aflac, Inc. | 311,416 | 13,627,564 | |||
Chubb Ltd. | 225,923 | 30,899,489 | |||
MetLife, Inc. | 620,748 | 28,486,126 | |||
Reinsurance Group of America, Inc. | 133,309 | 20,529,586 | |||
Unum Group | 150,710 | 7,175,303 | |||
100,718,068 | |||||
Leisure Products — 0.4% | |||||
Mattel, Inc. | 994,992 | 13,084,145 | |||
Machinery — 0.5% | |||||
IMI plc | 1,011,960 | 15,360,005 | |||
Metals and Mining — 0.4% | |||||
BHP Billiton Ltd. | 643,070 | 14,224,927 | |||
Multiline Retail — 0.8% | |||||
Target Corp. | 353,454 | 24,540,311 | |||
Oil, Gas and Consumable Fuels — 13.6% | |||||
Anadarko Petroleum Corp. | 513,210 | 31,003,016 | |||
Apache Corp. | 345,205 | 13,283,488 | |||
Chevron Corp. | 583,757 | 66,571,648 | |||
Cimarex Energy Co. | 232,477 | 21,736,600 | |||
ConocoPhillips | 559,933 | 33,198,428 | |||
Devon Energy Corp. | 1,076,135 | 34,210,332 | |||
EOG Resources, Inc. | 182,060 | 19,165,456 | |||
EQT Corp. | 507,491 | 24,110,897 | |||
Exxon Mobil Corp. | 318,789 | 23,784,847 | |||
Imperial Oil Ltd. | 297,726 | 7,884,823 | |||
Noble Energy, Inc. | 1,133,600 | 34,348,080 | |||
Occidental Petroleum Corp. | 941,433 | 61,155,488 | |||
Royal Dutch Shell plc, B Shares | 444,190 | 14,313,992 | |||
TOTAL SA | 874,304 | 49,689,877 | |||
434,456,972 | |||||
Pharmaceuticals — 10.6% | |||||
Allergan plc | 223,130 | 37,550,548 | |||
Bristol-Myers Squibb Co. | 142,940 | 9,040,955 | |||
Johnson & Johnson | 604,709 | 77,493,458 | |||
Merck & Co., Inc. | 1,471,817 | 80,169,872 | |||
Pfizer, Inc. | 2,743,653 | 97,372,245 | |||
Roche Holding AG | 107,710 | 24,704,353 | |||
Teva Pharmaceutical Industries Ltd. ADR | 725,607 | 12,400,624 | |||
338,732,055 | |||||
Road and Rail — 1.0% | |||||
Heartland Express, Inc. | 1,722,782 | 30,992,848 | |||
Semiconductors and Semiconductor Equipment — 3.5% | |||||
Applied Materials, Inc. | 104,044 | 5,785,887 | |||
Intel Corp. | 1,297,887 | 67,593,955 |
12
Shares/Principal Amount | Value | |||||
QUALCOMM, Inc. | 601,770 | $ | 33,344,075 | |||
Teradyne, Inc. | 137,169 | 6,269,995 | ||||
112,993,912 | ||||||
Software — 2.1% | ||||||
Microsoft Corp. | 115,372 | 10,530,002 | ||||
Oracle Corp. (New York) | 1,262,029 | 57,737,827 | ||||
68,267,829 | ||||||
Specialty Retail — 1.4% | ||||||
Advance Auto Parts, Inc. | 296,340 | 35,131,107 | ||||
Lowe's Cos., Inc. | 122,574 | 10,755,868 | ||||
45,886,975 | ||||||
Technology Hardware, Storage and Peripherals — 0.6% | ||||||
Hewlett Packard Enterprise Co. | 451,225 | 7,914,487 | ||||
HP, Inc. | 451,225 | 9,890,852 | ||||
17,805,339 | ||||||
Textiles, Apparel and Luxury Goods — 0.9% | ||||||
Ralph Lauren Corp. | 139,790 | 15,628,522 | ||||
Tapestry, Inc. | 223,567 | 11,761,860 | ||||
27,390,382 | ||||||
Trading Companies and Distributors — 0.4% | ||||||
MSC Industrial Direct Co., Inc., Class A | 136,237 | 12,494,295 | ||||
TOTAL COMMON STOCKS (Cost $2,439,428,880) | 3,133,524,170 | |||||
TEMPORARY CASH INVESTMENTS — 1.7% | ||||||
Federal Home Loan Bank, 1.43%, 4/2/18(2) | $ | 30,000,000 | 30,000,000 | |||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.375% - 3.625%, 2/15/23 - 5/15/47, valued at $13,635,324), in a joint trading account at 1.45%, dated 3/29/18, due 4/2/18 (Delivery value $13,339,822) | 13,337,673 | |||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 2.25%, 11/15/24, valued at $11,343,783), at 0.74%, dated 3/29/18, due 4/2/18 (Delivery value $11,119,914) | 11,119,000 | |||||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $54,455,506) | 54,456,673 | |||||
TOTAL INVESTMENT SECURITIES — 99.7% (Cost $2,493,884,386) | 3,187,980,843 | |||||
OTHER ASSETS AND LIABILITIES — 0.3% | 8,578,847 | |||||
TOTAL NET ASSETS — 100.0% | $ | 3,196,559,690 |
13
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||
AUD | 458,467 | USD | 354,378 | JPMorgan Chase Bank N.A. | 6/29/18 | $ | (2,169 | ) | ||
USD | 10,894,668 | AUD | 14,133,593 | JPMorgan Chase Bank N.A. | 6/29/18 | 36,781 | ||||
USD | 392,879 | AUD | 507,764 | JPMorgan Chase Bank N.A. | 6/29/18 | 2,797 | ||||
USD | 5,988,609 | CAD | 7,746,086 | Morgan Stanley | 6/29/18 | (33,727 | ) | |||
USD | 18,739,353 | CHF | 17,723,681 | Credit Suisse AG | 6/29/18 | 63,265 | ||||
USD | 48,159,726 | EUR | 38,948,423 | UBS AG | 6/29/18 | (72,634 | ) | |||
USD | 21,413,007 | GBP | 15,145,390 | Morgan Stanley | 6/29/18 | 86,911 | ||||
USD | 1,016,070 | GBP | 717,121 | Morgan Stanley | 6/29/18 | 6,298 | ||||
JPY | 72,858,825 | USD | 698,075 | Credit Suisse AG | 6/29/18 | (9,344 | ) | |||
USD | 14,696,555 | JPY | 1,551,765,150 | Credit Suisse AG | 6/29/18 | 27,788 | ||||
USD | 495,657 | JPY | 52,485,075 | Credit Suisse AG | 6/29/18 | (483 | ) | |||
$ | 105,483 |
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
AUD | - | Australian Dollar |
CAD | - | Canadian Dollar |
CHF | - | Swiss Franc |
EUR | - | Euro |
GBP | - | British Pound |
JPY | - | Japanese Yen |
USD | - | United States Dollar |
(1) | Non-income producing. |
(2) | The rate indicated is the yield to maturity at purchase. |
See Notes to Financial Statements.
14
Statement of Assets and Liabilities |
MARCH 31, 2018 | |||
Assets | |||
Investment securities, at value (cost of $2,493,884,386) | $ | 3,187,980,843 | |
Receivable for investments sold | 6,935,709 | ||
Receivable for capital shares sold | 2,735,372 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 223,840 | ||
Dividends and interest receivable | 6,843,810 | ||
3,204,719,574 | |||
Liabilities | |||
Disbursements in excess of demand deposit cash | 323,465 | ||
Payable for investments purchased | 1,904,013 | ||
Payable for capital shares redeemed | 3,171,510 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 118,357 | ||
Accrued management fees | 2,524,492 | ||
Distribution and service fees payable | 118,047 | ||
8,159,884 | |||
Net Assets | $ | 3,196,559,690 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 2,534,416,935 | |
Undistributed net investment income | 761 | ||
Accumulated net realized loss | (32,059,634 | ) | |
Net unrealized appreciation | 694,201,628 | ||
$ | 3,196,559,690 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $2,043,211,630 | 236,146,409 | $8.65 | |||
I Class, $0.01 Par Value | $648,241,443 | 74,767,067 | $8.67 | |||
Y Class, $0.01 Par Value | $1,037,888 | 119,706 | $8.67 | |||
A Class, $0.01 Par Value | $116,377,362 | 13,460,409 | $8.65* | |||
C Class, $0.01 Par Value | $28,948,253 | 3,401,065 | $8.51 | |||
R Class, $0.01 Par Value | $158,219,788 | 18,288,180 | $8.65 | |||
R5 Class, $0.01 Par Value | $5,191 | 599 | $8.67 | |||
R6 Class, $0.01 Par Value | $200,518,135 | 23,131,734 | $8.67 |
*Maximum offering price $9.18 (net asset value divided by 0.9425).
See Notes to Financial Statements.
15
Statement of Operations |
YEAR ENDED MARCH 31, 2018 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $727,827) | $ | 84,719,084 | |
Interest | 662,334 | ||
85,381,418 | |||
Expenses: | |||
Management fees | 30,322,648 | ||
Distribution and service fees: | |||
A Class | 319,870 | ||
C Class | 324,419 | ||
R Class | 709,157 | ||
Directors' fees and expenses | 98,796 | ||
Other expenses | 84,389 | ||
31,859,279 | |||
Net investment income (loss) | 53,522,139 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 201,719,305 | ||
Forward foreign currency exchange contract transactions | (6,441,118 | ) | |
Foreign currency translation transactions | (41,385 | ) | |
195,236,802 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (136,288,859 | ) | |
Forward foreign currency exchange contracts | (653,309 | ) | |
Translation of assets and liabilities in foreign currencies | (212 | ) | |
(136,942,380 | ) | ||
Net realized and unrealized gain (loss) | 58,294,422 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 111,816,561 |
See Notes to Financial Statements.
16
Statement of Changes in Net Assets |
YEARS ENDED MARCH 31, 2018 AND MARCH 31, 2017 | ||||||
Increase (Decrease) in Net Assets | March 31, 2018 | March 31, 2017 | ||||
Operations | ||||||
Net investment income (loss) | $ | 53,522,139 | $ | 46,977,544 | ||
Net realized gain (loss) | 195,236,802 | 156,585,284 | ||||
Change in net unrealized appreciation (depreciation) | (136,942,380 | ) | 350,875,020 | |||
Net increase (decrease) in net assets resulting from operations | 111,816,561 | 554,437,848 | ||||
Distributions to Shareholders | ||||||
From net investment income: | ||||||
Investor Class | (31,929,403 | ) | (32,451,256 | ) | ||
I Class | (10,054,845 | ) | (8,999,573 | ) | ||
Y Class | (2,549 | ) | — | |||
A Class | (1,515,298 | ) | (1,686,305 | ) | ||
C Class | (148,441 | ) | (124,530 | ) | ||
R Class | (1,371,454 | ) | (863,803 | ) | ||
R5 Class | (84 | ) | — | |||
R6 Class | (3,527,513 | ) | (1,637,770 | ) | ||
From net realized gains: | ||||||
Investor Class | (118,423,502 | ) | (39,808,812 | ) | ||
I Class | (36,529,555 | ) | (8,710,810 | ) | ||
Y Class | (288 | ) | — | |||
A Class | (6,827,040 | ) | (2,478,897 | ) | ||
C Class | (1,771,482 | ) | (522,862 | ) | ||
R Class | (8,415,554 | ) | (1,703,290 | ) | ||
R5 Class | (288 | ) | — | |||
R6 Class | (10,158,117 | ) | (1,805,048 | ) | ||
Decrease in net assets from distributions | (230,675,413 | ) | (100,792,956 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (70,448,871 | ) | 96,621,471 | |||
Net increase (decrease) in net assets | (189,307,723 | ) | 550,266,363 | |||
Net Assets | ||||||
Beginning of period | 3,385,867,413 | 2,835,601,050 | ||||
End of period | $ | 3,196,559,690 | $ | 3,385,867,413 | ||
Undistributed net investment income | $ | 761 | — |
See Notes to Financial Statements.
17
Notes to Financial Statements |
MARCH 31, 2018
1. Organization
American Century Capital Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company and is organized as a Maryland corporation. Value Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek long-term capital growth. Income is a secondary objective.
The fund offers the Investor Class, I Class (formerly Institutional Class), Y Class, A Class, C Class, R Class, R5 Class and R6 Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. Sale of the Y Class and R5 Class commenced on April 10, 2017.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the fund in preparation of its financial statements. The fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Directors has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price. Equity securities initially expressed in local currencies are translated into U.S. dollars at the mean of the appropriate currency exchange rate at the close of the NYSE as provided by an independent pricing service.
Fixed income securities are valued at the evaluated mean as provided by independent pricing services or at the mean of the most recent bid and asked prices as provided by investment dealers. U.S. Treasury and Government Agency securities are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share. Repurchase agreements are valued at cost, which approximates fair value. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a
18
security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region. The fund also monitors for significant fluctuations between domestic and foreign markets, as evidenced by the U.S. market or such other indicators that the Board of Directors, or its delegate, deems appropriate. If significant fluctuations in foreign markets are identified, the fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that American Century Investment Management, Inc. (ACIM) (the investment advisor) has determined are creditworthy pursuant to criteria adopted by the Board of Directors. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with certain other funds in the American Century Investments family of funds, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
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Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid quarterly. Distributions from net realized gains, if any, are generally declared and paid annually. The fund may elect to treat a portion of its payment to a redeeming shareholder, which represents the pro rata share of undistributed net investment income and net realized gains, as a distribution for federal income tax purposes (tax equalization).
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc. (ACIS), and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The corporation has entered into a management agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee (the fee) per class. The agreement provides that all expenses of managing and operating the fund, except distribution and service fees, brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses, will be paid by ACIM. The fee is computed and accrued daily based on each class's daily net assets and paid monthly in arrears. The difference in the fee among the classes is a result of their separate arrangements for non-Rule 12b-1 shareholder services. It is not the result of any difference in advisory or custodial fees or other expenses related to the management of the fund’s assets, which do not vary by class. The rate of the fee is determined by applying a fee rate calculation formula. This formula takes into account the fund’s assets as well as certain assets, if any, of other clients of the investment advisor outside the American Century Investments family of funds (such as subadvised funds and separate accounts) that use very similar investment teams and strategies (strategy assets).
The management fee schedule range and the effective annual management fee for each class for the period ended March 31, 2018 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | |
Investor Class | 0.85% to 1.00% | 0.97% |
I Class | 0.65% to 0.80% | 0.77% |
Y Class | 0.50% to 0.65% | 0.62% |
A Class | 0.85% to 1.00% | 0.97% |
C Class | 0.85% to 1.00% | 0.97% |
R Class | 0.85% to 1.00% | 0.97% |
R5 Class | 0.65% to 0.80% | 0.77% |
R6 Class | 0.50% to 0.65% | 0.62% |
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the C Class will pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the period ended March 31, 2018 are detailed in the Statement of Operations.
Directors' Fees and Expenses — The Board of Directors is responsible for overseeing the investment advisor’s management and operations of the fund. The directors receive detailed information about the fund and its investment advisor regularly throughout the year, and meet at least quarterly with management of the
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investment advisor to review reports about fund operations. The fund’s officers do not receive compensation from the fund.
Interfund Transactions — The fund may enter into security transactions with other American Century Investments funds and other client accounts of the investment advisor, in accordance with the 1940 Act rules and procedures adopted by the Board of Directors. The rules and procedures require, among other things, that these transactions be effected at the independent current market price of the security. During the period, the interfund purchases and sales were $16,000,405 and $15,654,022, respectively. The effect of interfund transactions on the Statement of Operations was $2,949,262 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended March 31, 2018 were $1,115,800,011 and $1,298,980,113, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended March 31, 2018(1) | Year ended March 31, 2017 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 1,520,000,000 | 1,640,000,000 | ||||||||
Sold | 38,239,252 | $ | 341,794,990 | 56,251,252 | $ | 483,211,934 | ||||
Issued in reinvestment of distributions | 16,645,732 | 147,677,850 | 8,061,133 | 70,925,680 | ||||||
Redeemed | (83,829,750 | ) | (752,701,212 | ) | (59,036,495 | ) | (508,891,695 | ) | ||
(28,944,766 | ) | (263,228,372 | ) | 5,275,890 | 45,245,919 | |||||
I Class/Shares Authorized | 500,000,000 | 575,000,000 | ||||||||
Sold | 28,587,515 | 257,956,737 | 15,028,430 | 129,001,523 | ||||||
Issued in reinvestment of distributions | 5,152,094 | 45,809,199 | 2,016,980 | 17,685,960 | ||||||
Redeemed | (17,258,883 | ) | (154,296,019 | ) | (29,337,402 | ) | (247,996,653 | ) | ||
16,480,726 | 149,469,917 | (12,291,992 | ) | (101,309,170 | ) | |||||
Y Class/Shares Authorized | 50,000,000 | N/A | ||||||||
Sold | 119,399 | 1,065,642 | ||||||||
Issued in reinvestment of distributions | 322 | 2,837 | ||||||||
Redeemed | (15 | ) | (143 | ) | ||||||
119,706 | 1,068,336 | |||||||||
A Class/Shares Authorized | 90,000,000 | 160,000,000 | ||||||||
Sold | 3,529,282 | 31,579,275 | 5,774,791 | 49,728,772 | ||||||
Issued in reinvestment of distributions | 812,002 | 7,195,896 | 425,838 | 3,753,179 | ||||||
Redeemed | (8,506,421 | ) | (76,208,050 | ) | (6,535,938 | ) | (55,226,915 | ) | ||
(4,165,137 | ) | (37,432,879 | ) | (335,309 | ) | (1,744,964 | ) | |||
C Class/Shares Authorized | 30,000,000 | 30,000,000 | ||||||||
Sold | 533,342 | 4,686,329 | 1,135,830 | 9,766,081 | ||||||
Issued in reinvestment of distributions | 207,225 | 1,804,521 | 65,993 | 579,208 | ||||||
Redeemed | (1,310,789 | ) | (11,560,137 | ) | (715,498 | ) | (6,017,956 | ) | ||
(570,222 | ) | (5,069,287 | ) | 486,325 | 4,327,333 | |||||
R Class/Shares Authorized | 100,000,000 | 70,000,000 | ||||||||
Sold | 5,375,932 | 48,069,823 | 4,960,151 | 42,461,865 | ||||||
Issued in reinvestment of distributions | 1,104,583 | 9,787,008 | 289,845 | 2,567,093 | ||||||
Redeemed | (1,211,218 | ) | (10,903,868 | ) | (1,088,087 | ) | (9,353,854 | ) | ||
5,269,297 | 46,952,963 | 4,161,909 | 35,675,104 | |||||||
R5 Class/Shares Authorized | 50,000,000 | N/A | ||||||||
Sold | 557 | 5,001 | ||||||||
Issued in reinvestment of distributions | 42 | 372 | ||||||||
599 | 5,373 | |||||||||
R6 Class/Shares Authorized | 130,000,000 | 50,000,000 | ||||||||
Sold | 12,243,329 | 110,457,423 | 14,828,872 | 130,218,397 | ||||||
Issued in reinvestment of distributions | 1,539,010 | 13,685,630 | 387,795 | 3,442,818 | ||||||
Redeemed | (9,594,882 | ) | (86,357,975 | ) | (2,204,604 | ) | (19,233,966 | ) | ||
4,187,457 | 37,785,078 | 13,012,063 | 114,427,249 | |||||||
Net increase (decrease) | (7,622,340 | ) | $ | (70,448,871 | ) | 10,308,886 | $ | 96,621,471 |
(1) | April 10, 2017 (commencement of sale) through March 31, 2018 for the Y Class and R5 Class. |
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6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments. There were no significant transfers between levels during the period.
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 | ||||||||
Automobiles | $ | 19,378,632 | $ | 19,402,946 | — | |||
Health Care Equipment and Supplies | 112,583,392 | 14,733,199 | — | |||||
Machinery | — | 15,360,005 | — | |||||
Metals and Mining | — | 14,224,927 | — | |||||
Oil, Gas and Consumable Fuels | 362,568,280 | 71,888,692 | — | |||||
Pharmaceuticals | 314,027,702 | 24,704,353 | — | |||||
Other Industries | 2,164,652,042 | — | — | |||||
Temporary Cash Investments | — | 54,456,673 | — | |||||
$ | 2,973,210,048 | $ | 214,770,795 | — | ||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 223,840 | — | ||||
Liabilities | ||||||||
Other Financial Instruments | ||||||||
Forward Foreign Currency Exchange Contracts | — | $ | 118,357 | — |
7. Derivative Instruments
Foreign Currency Risk — The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The value of foreign investments held by a fund may be significantly affected by changes in foreign currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar declines against such foreign currency. A fund may enter into forward foreign currency exchange contracts to reduce a fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by a fund and the resulting unrealized appreciation or depreciation are determined daily. Realized gain or loss is recorded upon the termination of the contract. Net realized and unrealized gains or losses occurring during the holding period of forward foreign currency exchange contracts are a component of net realized gain (loss) on forward foreign currency exchange contract transactions and change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts, respectively. A fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses, up to the fair value, may arise if the counterparties do not perform under the contract terms. The fund's
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average U.S. dollar exposure to foreign currency risk derivative instruments held during the period was $105,496,555.
The value of foreign currency risk derivative instruments as of March 31, 2018, is disclosed on the Statement of Assets and Liabilities as an asset of $223,840 in unrealized appreciation on forward foreign currency exchange contracts and a liability of $118,357 in unrealized depreciation on forward foreign currency exchange contracts. For the year ended March 31, 2018, the effect of foreign currency risk derivative instruments on the Statement of Operations was $(6,441,118) in net realized gain (loss) on forward foreign currency exchange contract transactions and $(653,309) in change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.
8. Risk Factors
There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political, social and economic developments, fluctuations in currency exchange rates, the possible imposition of exchange controls, and other foreign laws or restrictions.
9. Federal Tax Information
The tax character of distributions paid during the years ended March 31, 2018 and March 31, 2017 were as follows:
2018 | 2017 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 69,911,340 | $ | 45,763,237 | ||
Long-term capital gains | $ | 160,764,073 | $ | 55,029,719 |
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 2,601,693,472 | |
Gross tax appreciation of investments | $ | 698,891,851 | |
Gross tax depreciation of investments | (112,604,480 | ) | |
Net tax appreciation (depreciation) of investments | 586,287,371 | ||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 449 | ||
Net tax appreciation (depreciation) | $ | 586,287,820 | |
Accumulated long-term gains | $ | 75,894,983 | |
Post-October capital loss deferral | $ | (40,048 | ) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
Loss deferrals represent certain qualified losses that the fund has elected to treat as having been incurred in the following fiscal year for federal income tax purposes.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||
2018 | $8.98 | 0.14 | 0.17 | 0.31 | (0.13) | (0.51) | (0.64) | $8.65 | 3.38% | 0.98% | 1.59% | 35% | $2,043,212 | ||
2017 | $7.73 | 0.13 | 1.39 | 1.52 | (0.12) | (0.15) | (0.27) | $8.98 | 19.79% | 0.98% | 1.48% | 46% | $2,380,747 | ||
2016 | $8.55 | 0.13 | (0.28) | (0.15) | (0.15) | (0.52) | (0.67) | $7.73 | (1.53)% | 0.98% | 1.65% | 48% | $2,009,044 | ||
2015 | $8.46 | 0.13 | 0.62 | 0.75 | (0.13) | (0.53) | (0.66) | $8.55 | 8.91% | 0.97% | 1.54% | 45% | $2,003,967 | ||
2014 | $7.11 | 0.13 | 1.34 | 1.47 | (0.12) | — | (0.12) | $8.46 | 20.82% | 0.98% | 1.60% | 49% | $2,406,139 | ||
I Class(3) | |||||||||||||||
2018 | $9.00 | 0.16 | 0.17 | 0.33 | (0.15) | (0.51) | (0.66) | $8.67 | 3.58% | 0.78% | 1.79% | 35% | $648,241 | ||
2017 | $7.75 | 0.14 | 1.40 | 1.54 | (0.14) | (0.15) | (0.29) | $9.00 | 19.98% | 0.78% | 1.68% | 46% | $524,448 | ||
2016 | $8.56 | 0.15 | (0.27) | (0.12) | (0.17) | (0.52) | (0.69) | $7.75 | (1.21)% | 0.78% | 1.85% | 48% | $546,782 | ||
2015 | $8.47 | 0.15 | 0.62 | 0.77 | (0.15) | (0.53) | (0.68) | $8.56 | 9.10% | 0.77% | 1.74% | 45% | $1,215,076 | ||
2014 | $7.12 | 0.14 | 1.34 | 1.48 | (0.13) | — | (0.13) | $8.47 | 21.03% | 0.78% | 1.80% | 49% | $749,868 | ||
Y Class | |||||||||||||||
2018(4) | $8.98 | 0.19 | 0.17 | 0.36 | (0.16) | (0.51) | (0.67) | $8.67 | 3.94% | 0.63%(5) | 2.15%(5) | 35%(6) | $1,038 |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
A Class | |||||||||||||||
2018 | $8.98 | 0.12 | 0.17 | 0.29 | (0.11) | (0.51) | (0.62) | $8.65 | 3.13% | 1.23% | 1.34% | 35% | $116,377 | ||
2017 | $7.73 | 0.11 | 1.39 | 1.50 | (0.10) | (0.15) | (0.25) | $8.98 | 19.49% | 1.23% | 1.23% | 46% | $158,200 | ||
2016 | $8.54 | 0.11 | (0.27) | (0.16) | (0.13) | (0.52) | (0.65) | $7.73 | (1.65)% | 1.23% | 1.40% | 48% | $138,798 | ||
2015 | $8.45 | 0.11 | 0.62 | 0.73 | (0.11) | (0.53) | (0.64) | $8.54 | 8.64% | 1.22% | 1.29% | 45% | $365,063 | ||
2014 | $7.10 | 0.11 | 1.34 | 1.45 | (0.10) | — | (0.10) | $8.45 | 20.55% | 1.23% | 1.35% | 49% | $362,439 | ||
C Class | |||||||||||||||
2018 | $8.84 | 0.05 | 0.17 | 0.22 | (0.04) | (0.51) | (0.55) | $8.51 | 2.40% | 1.98% | 0.59% | 35% | $28,948 | ||
2017 | $7.62 | 0.04 | 1.36 | 1.40 | (0.03) | (0.15) | (0.18) | $8.84 | 18.45% | 1.98% | 0.48% | 46% | $35,124 | ||
2016 | $8.43 | 0.05 | (0.27) | (0.22) | (0.07) | (0.52) | (0.59) | $7.62 | (2.42)% | 1.98% | 0.65% | 48% | $26,542 | ||
2015 | $8.36 | 0.05 | 0.60 | 0.65 | (0.05) | (0.53) | (0.58) | $8.43 | 7.77% | 1.97% | 0.54% | 45% | $29,473 | ||
2014 | $7.03 | 0.05 | 1.33 | 1.38 | (0.05) | — | (0.05) | $8.36 | 19.64% | 1.98% | 0.60% | 49% | $25,869 | ||
R Class | |||||||||||||||
2018 | $8.98 | 0.10 | 0.16 | 0.26 | (0.08) | (0.51) | (0.59) | $8.65 | 2.87% | 1.48% | 1.09% | 35% | $158,220 | ||
2017 | $7.73 | 0.08 | 1.40 | 1.48 | (0.08) | (0.15) | (0.23) | $8.98 | 19.18% | 1.48% | 0.98% | 46% | $116,917 | ||
2016 | $8.55 | 0.09 | (0.28) | (0.19) | (0.11) | (0.52) | (0.63) | $7.73 | (2.02)% | 1.48% | 1.15% | 48% | $68,477 | ||
2015 | $8.46 | 0.09 | 0.62 | 0.71 | (0.09) | (0.53) | (0.62) | $8.55 | 8.37% | 1.47% | 1.04% | 45% | $52,623 | ||
2014 | $7.10 | 0.09 | 1.35 | 1.44 | (0.08) | — | (0.08) | $8.46 | 20.39% | 1.48% | 1.10% | 49% | $37,076 | ||
R5 Class | |||||||||||||||
2018(4) | $8.98 | 0.16 | 0.19 | 0.35 | (0.15) | (0.51) | (0.66) | $8.67 | 3.80% | 0.78%(5) | 1.78%(5) | 35%(6) | $5 |
For a Share Outstanding Throughout the Years Ended March 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
R6 Class | |||||||||||||||
2018 | $9.00 | 0.17 | 0.17 | 0.34 | (0.16) | (0.51) | (0.67) | $8.67 | 3.74% | 0.63% | 1.94% | 35% | $200,518 | ||
2017 | $7.75 | 0.16 | 1.39 | 1.55 | (0.15) | (0.15) | (0.30) | $9.00 | 20.16% | 0.63% | 1.83% | 46% | $170,432 | ||
2016 | $8.56 | 0.16 | (0.27) | (0.11) | (0.18) | (0.52) | (0.70) | $7.75 | (1.06)% | 0.63% | 2.00% | 48% | $45,959 | ||
2015 | $8.47 | 0.17 | 0.61 | 0.78 | (0.16) | (0.53) | (0.69) | $8.56 | 9.27% | 0.62% | 1.89% | 45% | $34,116 | ||
2014(7) | $7.77 | 0.14 | 0.66 | 0.80 | (0.10) | — | (0.10) | $8.47 | 10.41% | 0.62%(5) | 2.58%(5) | 49%(8) | $3,140 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | Prior to April 10, 2017, the I Class was referred to as the Institutional Class. |
(4) | April 10, 2017 (commencement of sale) through March 31, 2018. |
(5) | Annualized. |
(6) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2018. |
(7) | July 26, 2013 (commencement of sale) through March 31, 2014. |
(8) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended March 31, 2014. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Directors of American Century Capital Portfolios, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Value Fund, one of the portfolios constituting the American Century Capital Portfolios, Inc. (the “Fund”), as of March 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of Value Fund of the American Century Capital Portfolios, Inc. as of March 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of March 31, 2018, 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
May 16, 2018
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of Directors
The individuals listed below serve as directors of the funds. Each director will continue to serve in this capacity until death, retirement, resignation or removal from office. The board has adopted a mandatory retirement age for directors who are not “interested persons,” as that term is defined in the Investment Company Act (independent directors). Independent directors shall retire by December 31 of the year in which they reach their 75th birthday.
Mr. Thomas is an “interested person” because he currently serves as President and Chief Executive Officer of American Century Companies, Inc. (ACC), the parent company of American Century Investment Management, Inc. (ACIM or the advisor). The other directors (more than three-fourths of the total number) are independent. They are not employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, American Century Investment Services, Inc. (ACIS) and American Century Services, LLC (ACS), and they do not have any other affiliations, positions or relationships that would cause them to be considered “interested persons” under the Investment Company Act. The directors serve in this capacity for seven (in the case of Jonathan S. Thomas, 16; and Stephen E. Yates, 8) registered investment companies in the American Century Investments family of funds.
The following table presents additional information about the directors. The mailing address for each director is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
Thomas W. Bunn (1953) | Director | Since 2017 | Retired | 68 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) |
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired; Executive Vice President, ACC (2007 to 2013); President, ACS (2007 to 2013); Chief Operating Officer, ACC (2007 to 2012) | 68 | None |
Andrea C. Hall (1945) | Director | Since 1997 | Retired | 68 | None |
Jan M. Lewis (1957) | Director | Since 2011 | Retired; President and Chief Executive Officer, Catholic Charities of Northeast Kansas (human services organization) (2006 to 2013) | 68 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
M. Jeannine Strandjord (1945) | Director | Since 1994 | Self-employed Consultant | 68 | Euronet Worldwide Inc.; MGP Ingredients, Inc. |
John R. Whitten (1946) | Director | Since 2008 | Retired | 68 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 70 | None |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director and President | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 115 | BioMed Valley Discoveries, Inc. |
The Statement of Additional Information has additional information about the fund's directors and is available without charge, upon request, by calling 1-800-345-2021.
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Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds, unless otherwise noted. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
Jonathan S. Thomas (1963) | Director and President since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present); Vice President, Client Interactions and Marketing, ACIS (2013 to 2014). Also serves as Vice President, ACIS |
Charles A. Etherington (1957) | General Counsel since 2007 and Senior Vice President since 2006 | Attorney, ACC (1994 to present); Vice President, ACC (2005 to present); General Counsel, ACC (2007 to present). Also serves as General Counsel, ACIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM and ACS |
C. Jean Wade (1964) | Vice President,Treasurer and Chief Financial Officer since 2012 | Vice President, ACS (2000 to present) |
Robert J. Leach (1966) | Vice President since 2006 and Assistant Treasurer since 2012 | Vice President, ACS (2000 to present) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present); Associate General Counsel, ACC (2001 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
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Proxy Voting Results |
A special meeting of shareholders was held on October 18, 2017, to vote on the following proposal. The proposal received the required votes and was adopted. A summary of voting results is listed below.
To elect four directors to the Board of Directors of American Century Capital Portfolios, Inc.:
Affirmative | Withhold | ||||||
Thomas W. Bunn | $ | 24,595,873,549 | $ | 400,991,853 | |||
Barry Fink | $ | 24,607,840,546 | $ | 389,024,856 | |||
Jan M. Lewis | $ | 24,616,409,175 | $ | 380,456,227 | |||
Stephen E. Yates | $ | 24,605,431,961 | $ | 391,433,441 |
The other directors whose term of office continued after the meeting include Jonathan S. Thomas, Andrea C. Hall, James A. Olson, M. Jeannine Strandjord, and John R. Whitten.
32
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time and change your withholding percentage for future distributions.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on 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. The fund’s Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The fund also makes its complete schedule of portfolio holdings for the most recent quarter of its fiscal year available on its website at americancentury.com and, upon request, by calling 1-800-345-2021.
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Other Tax Information
The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund hereby designates up to the maximum amount allowable as qualified dividend income for the fiscal year ended March 31, 2018.
For corporate taxpayers, the fund hereby designates $69,911,340, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended March 31, 2018 as qualified for the corporate dividends received deduction.
The fund hereby designates $17,967,078 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended March 31, 2018.
The fund hereby designates $175,333,469, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended March 31, 2018.
The fund utilized earnings and profits of $14,569,396 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
34
Notes |
35
Notes |
36
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Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2018 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-92273 1805 |
ITEM 2. CODE OF ETHICS.
(a) | The registrant has adopted a Code of Ethics for Senior Financial Officers that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions. |
(b) | No response required. |
(c) | None. |
(d) | None. |
(e) | Not applicable. |
(f) | The registrant’s Code of Ethics for Senior Financial Officers was filed as Exhibit 12 (a)(1) to American Century Asset Allocation Portfolios, Inc.’s Annual Certified Shareholder Report on Form N-CSR, File No. 811-21591, on September 29, 2005, and is incorporated herein by reference. |
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) | The registrant’s board has determined that the registrant has at least one audit committee financial expert serving on its audit committee. |
(a)(2) | John R. Whitten, Andrea C. Hall and Jan M. Lewis 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 2017: $196,500
FY 2018: $180,600
(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 2017:$0 FY 2018:$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 2017:$0 FY 2018:$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 2017: $0
FY 2018: $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 2017: $0
FY 2018: $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 2017:$0 FY 2018:$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 2017:$0 FY 2018:$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 2017: $829,350
FY 2018: $104,750
(h) | The registrant’s investment adviser and accountant have notified the registrant’s audit committee of all non-audit services that were rendered by the registrant’s accountant to the registrant’s investment adviser, its parent company, and any entity controlled by, or under common control with the investment adviser that provides services to the registrant, which services were not required to be pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The notification provided to the registrant’s audit committee included sufficient details regarding such services to allow the registrant’s audit committee to consider the continuing independence of its principal accountant. |
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) | The schedule of investments is included as part of the report to stockholders filed under Item 1 of this Form. |
(b) | Not applicable. |
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the reporting period, there were no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) | The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. |
(b) | There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. |
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 13. EXHIBITS.
(a)(1) | Registrant’s Code of Ethics for Senior Financial Officers, which is the subject of the disclosure required by Item 2 of Form N-CSR, was filed as Exhibit 12(a)(1) to American Century Asset Allocation Portfolios, Inc.’s Certified Shareholder Report on Form N-CSR, File No. 811-21591, on September 29, 2005. |
(a)(2) | Separate certifications by the registrant’s principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are filed and attached hereto as EX-99.CERT. |
(a)(3) | Not applicable. |
(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 Capital Portfolios, Inc. | ||
By: | /s/ Jonathan S. Thomas | ||
Name: | Jonathan S. Thomas | ||
Title: | President | ||
Date: | May 25, 2018 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Jonathan S. Thomas | |
Name: | Jonathan S. Thomas | |
Title: | President | |
(principal executive officer) | ||
Date: | May 25, 2018 |
By: | /s/ C. Jean Wade | |
Name: | C. Jean Wade | |
Title: | Vice President, Treasurer, and | |
Chief Financial Officer | ||
(principal financial officer) | ||
Date: | May 25, 2018 |