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: | 10-31 | |||||
Date of reporting period: | 10-31-2018 |
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT | ![]() |
OCTOBER 31, 2018 | |
AC Alternatives® Income Fund |
Investor Class (ALNNX) |
I Class (ALNIX) |
Y Class (ALYNX) |
A Class (ALNAX) |
C Class (ALNHX) |
R Class (ALNRX) |
R6 Class (ALNDX) |
![acaltscarrotblacknobleeda04.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000189/acaltscarrotblacknobleeda04.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 | ||
Approval of Management and Subadvisory Agreements | ||
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/0000908186-18-000189/jthomasrev0514.jpg)
Dear Investor:
Thank you for reviewing this annual report for the 12 months ended October 31, 2018. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional investment and market insights, we encourage you to visit our website, americancentury.com.
Rising Rates, Heightened Volatility Challenge Investors
U.S. stocks generally delivered gains for the period, but returns were considerably weaker than the robust, double-digit results of the previous fiscal year. Early on, a backdrop of robust corporate earnings results, improving global economic growth, and growth-oriented U.S. tax reform helped drive stock prices higher. The S&P 500 Index returned more than 10% just in the first three months of the reporting period.
Investor sentiment shifted dramatically in early February, as volatility resurfaced after an extended period of relative dormancy. Better-than-expected U.S. economic data triggered expectations for rising inflation, higher interest rates, and a more-hawkish Federal Reserve (Fed). In response, U.S. Treasury yields soared, and stock prices plunged. Although this bout of market unrest quickly subsided, volatility remained a formidable force throughout the rest of the period. Stocks remained resilient, though, and the S&P 500 Index advanced 7.35% for the 12-month period. Growth stocks outpaced value stocks, and large-cap stocks outperformed small-cap stocks. Meanwhile, rising U.S. Treasury yields and Fed rate hikes weighed on interest-rate sensitive assets, including investment-grade bonds and real estate investment trusts.
Outside the U.S., economic growth moderated as the period unfolded, and global bond yields were flat to modestly higher. The U.S. dollar continued to gain ground versus other currencies, which drove down non-U.S. bond returns for unhedged investors. The strong dollar, combined with rising U.S. interest rates, geopolitical tensions, and fiscal challenges in several developing countries, led to negative results for emerging markets bonds.
With global economic growth diverging, Treasury yields rising, and volatility lingering, investors likely will face opportunities and challenges in the months ahead. We believe this scenario underscores the importance of using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a01.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000189/image48a01.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of October 31, 2018 | ||||
Average Annual Returns | ||||
Ticker Symbol | 1 year | Since Inception | Inception Date | |
Investor Class | ALNNX | 1.66% | 2.32% | 7/31/15 |
HFRX Fixed Income - Credit Index | — | -0.19% | 0.82% | — |
Bloomberg Barclays U.S. Universal Bond Index | — | -1.95% | 1.59% | — |
I Class | ALNIX | 1.87% | 2.53% | 7/31/15 |
Y Class | ALYNX | 1.92% | 2.91% | 4/10/17 |
A Class | ALNAX | 7/31/15 | ||
No sales charge | 1.41% | 2.09% | ||
With sales charge | -4.44% | 0.25% | ||
C Class | ALNHX | 0.55% | 1.30% | 7/31/15 |
R Class | ALNRX | 1.16% | 1.82% | 7/31/15 |
R6 Class | ALNDX | 2.02% | 2.72% | 7/31/15 |
Although the fund commenced operations on May 29, 2015, the performance inception date (for all classes except Y Class) reflects the date the fund began investing in accordance with its investment strategy.
Fund returns would have been lower if a portion of the fees had not been waived.
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 Life of Class |
$10,000 investment made July 31, 2015 |
Performance for other share classes will vary due to differences in fee structure. |
![chart-4eb5b05044a25c26864.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000189/chart-4eb5b05044a25c26864.jpg)
Value on October 31, 2018 | |
Investor Class — $10,776 | |
HFRX Fixed Income - Credit Index — $10,268 | |
Bloomberg Barclays U.S. Universal Bond Index — $10,527 | |
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 | R6 Class |
2.10% | 1.90% | 1.75% | 2.35% | 3.10% | 2.60% | 1.75% |
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 |
Advisor: American Century Investment Management, Inc.
Portfolio Managers: Cleo Chang and Hitesh Patel
Subadvisor: Perella Weinberg Partners Capital Management LP
Portfolio Managers: Chris Bittman, Kent Muckel, and Darren Myers
Hitesh Patel joined American Century Investments and began managing the fund in 2018.
Performance Summary
For the fiscal year ended October 31, 2018, the AC Alternatives Income Fund generated a return of 1.66%.* This compares favorably with the loss of -0.19% for the HFRX Fixed Income - Credit Index and the -1.95% decline for the Bloomberg Barclays U.S. Universal Bond Index during the same period. Fund returns reflect operating expenses, while index returns do not.
Performance Review
The global capital markets produced mixed results during the 12-month period. U.S. equities (S&P 500 Index) fared well, buoyed by strong earnings growth and corporate tax cuts. U.S. stocks gained 7.35% for the period. Meanwhile, non-U.S. equity markets experienced more headwinds than tailwinds. Concerns about growth in Europe, continued Brexit negotiations, and China’s weakening economy weighed on non-U.S. equity returns. Developed markets, as measured by the MSCI EAFE Index, lost -6.85%, while the MSCI Emerging Markets Index fell -12.52%.
The fixed-income markets also experienced some dispersion in returns. Interest rates rose across the U.S. yield curve, and the yield on the 10-year U.S. Treasury note increased 76 basis points (one basis point equals 0.01%) to 3.14%. The rise in rates led to losses in core fixed-income investments, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, which lost -2.05%. The Bloomberg Barclays U.S. Corporate High Yield Bond Index managed a gain of 0.97%, as coupon income offset the price losses stemming from rising rates. Credit spreads (the difference in yields between Treasuries and corporate bonds of similar maturity) spent most of the period in a tight range. However, in October, high-yield spreads spiked sharply wider.
Given the positive backdrop for equity markets, the portfolio's high-dividend equity sleeve managed by Perella Weinberg Partners Capital Management (PWP) aided performance, as the strategy outpaced the returns in the broader equity markets. Structured and opportunistic credit strategies managed by Good Hill Partners and ArrowMark Colorado Holdings, respectively, also posted positive returns despite the rising-rate environment. The BCSF Advisors** strategy, which benefited from bank loan exposure, generated better returns than the broad corporate high-yield bond market. The portfolio also benefited from select hedging activity, especially during a spike in market volatility in August. Finally, master limited partnerships were modestly negative for the period but experienced significant price volatility throughout the 12 months.
Outlook
Our outlook for global growth has become a bit more mixed. While the U.S. continues to press ahead, propelled by fiscal stimulus and still-supportive overall domestic financial conditions,
* 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 benchmarks, other share classes may not. See page 3 for returns for all share classes.
** Effective August 1, 2018, BCSF Advisors, LP replaced Bain Capital Credit, LP as subadvisor of the portfolio's corporate credit strategy. BCSF Advisors is a subsidiary of Bain Capital Credit.
5
Europe and Japan are following at a clearly decelerated pace. China’s economy has also lost steam and faces rising trade tensions with the U.S.
Given this backdrop, adopting late-cycle positioning seems to be appropriate, as the shift from monetary stimulus to fiscal stimulus requires a rethinking of portfolio exposures. Furthermore, markets are transitioning from a long-term trend of deflationary pressures to one of heightened inflationary influences. For nearly a generation, fixed-income markets represented a diversifier to equity market weakness, and falling interest rates helped support lofty equity valuations. Recent asset class behavior suggests this trend is ending. Thus, traditional portfolio construction relying on a 60/40 stock and bond mix likely will not yield the same results as it did in the past. We continue to believe a diversified portfolio of income-generating assets along with relative value positions and portfolio hedges remains appropriate.
When the fiscal year closed on October 31, 2018, the portfolio’s capital allocation was as follows: 26% BCSF Advisors, 20% ArrowMark Colorado Holdings, 20% Good Hill Partners, and 8% Timbercreek Investment Management. Allocations to cash and specific sleeves PWP manages accounted for the remaining balances.
6
Fund Characteristics |
OCTOBER 31, 2018 | |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 15.5% |
Asset-Backed Securities | 15.3% |
Bank Loan Obligations | 14.3% |
Exchange-Traded Funds | 11.3% |
Corporate Bonds | 11.0% |
Collateralized Loan Obligations | 10.8% |
Commercial Mortgage-Backed Securities | 8.4% |
Collateralized Mortgage Obligations | 2.5% |
Preferred Stocks | 2.0% |
U.S. Treasury Securities | 1.4% |
Convertible Bonds | 0.1% |
Convertible Preferred Stocks | 0.1% |
Corporate Bonds Sold Short | (0.1)% |
Temporary Cash Investments | 6.3% |
Other Assets and Liabilities | 1.1% |
7
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from May 1, 2018 to October 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 5/1/18 | Ending Account Value 10/31/18 | Expenses Paid During Period(1) 5/1/18 - 10/31/18 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $1,008.50 | $9.67 | 1.91% |
I Class | $1,000 | $1,008.40 | $8.66 | 1.71% |
Y Class | $1,000 | $1,009.20 | $7.90 | 1.56% |
A Class | $1,000 | $1,007.20 | $10.93 | 2.16% |
C Class | $1,000 | $1,002.40 | $14.69 | 2.91% |
R Class | $1,000 | $1,004.90 | $12.18 | 2.41% |
R6 Class | $1,000 | $1,010.30 | $7.90 | 1.56% |
Hypothetical | ||||
Investor Class | $1,000 | $1,015.58 | $9.70 | 1.91% |
I Class | $1,000 | $1,016.59 | $8.69 | 1.71% |
Y Class | $1,000 | $1,017.34 | $7.93 | 1.56% |
A Class | $1,000 | $1,014.32 | $10.97 | 2.16% |
C Class | $1,000 | $1,010.54 | $14.75 | 2.91% |
R Class | $1,000 | $1,013.06 | $12.23 | 2.41% |
R6 Class | $1,000 | $1,017.34 | $7.93 | 1.56% |
(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 184, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
9
Schedule of Investments |
OCTOBER 31, 2018
Principal Amount/Shares | Value | ||||||
COMMON STOCKS — 15.5% | |||||||
Airlines — 0.2% | |||||||
American Airlines Group, Inc. | 894 | $ | 31,362 | ||||
Copa Holdings SA, Class A | 7,880 | 570,748 | |||||
602,110 | |||||||
Automobiles — 0.5% | |||||||
General Motors Co. | 40,840 | 1,494,336 | |||||
Beverages — 0.2% | |||||||
Coca-Cola European Partners plc | 9,680 | 440,343 | |||||
Biotechnology — 0.4% | |||||||
AbbVie, Inc. | 5,240 | 407,934 | |||||
Amgen, Inc. | 2,170 | 418,354 | |||||
Gilead Sciences, Inc. | 6,090 | 415,216 | |||||
1,241,504 | |||||||
Chemicals — 0.6% | |||||||
Eastman Chemical Co. | 5,450 | 427,007 | |||||
Olin Corp. | 58,960 | 1,190,992 | |||||
1,617,999 | |||||||
Commercial Services and Supplies — 0.2% | |||||||
KAR Auction Services, Inc. | 7,580 | 431,605 | |||||
Communications Equipment — 0.2% | |||||||
Cisco Systems, Inc. | 9,310 | 425,933 | |||||
Containers and Packaging — 0.6% | |||||||
Packaging Corp. of America | 15,060 | 1,382,658 | |||||
Sonoco Products Co. | 7,860 | 428,999 | |||||
1,811,657 | |||||||
Distributors — 0.1% | |||||||
Genuine Parts Co. | 4,260 | 417,139 | |||||
Electric Utilities — 0.1% | |||||||
Alliant Energy Corp. | 9,730 | 418,195 | |||||
Electrical Equipment — 0.4% | |||||||
Hubbell, Inc. | 10,680 | 1,086,156 | |||||
Equity Real Estate Investment Trusts (REITs) — 4.5% | |||||||
AIMS AMP Capital Industrial REIT | 369,569 | 357,523 | |||||
American Campus Communities, Inc. | 7,450 | 294,350 | |||||
Automotive Properties Real Estate Investment Trust | 33,218 | 259,900 | |||||
CapitaLand Commercial Trust | 165,900 | 207,203 | |||||
CapitaLand Retail China Trust | 469,593 | 464,457 | |||||
Centuria Industrial REIT | 111,854 | 219,410 | |||||
Charter Hall Retail REIT | 101,801 | 306,384 | |||||
Chesapeake Lodging Trust | 8,603 | 252,842 | |||||
Colony Capital, Inc. | 74,288 | 436,071 | |||||
Dream Industrial Real Estate Investment Trust | 44,849 | 333,186 |
10
Principal Amount/Shares | Value | ||||||
Fortune Real Estate Investment Trust | 349,000 | $ | 381,846 | ||||
Frasers Logistics & Industrial Trust | 354,139 | 260,782 | |||||
GLP J-Reit | 310 | 306,882 | |||||
HCP, Inc. | 19,000 | 523,450 | |||||
Intervest Offices & Warehouses NV | 15,797 | 410,632 | |||||
Invesco Office J-Reit, Inc. | 3,387 | 478,776 | |||||
Keppel DC REIT | 276,600 | 265,587 | |||||
Kimco Realty Corp. | 27,996 | 450,456 | |||||
Kite Realty Group Trust | 31,967 | 506,357 | |||||
Kiwi Property Group Ltd. | 373,435 | 320,446 | |||||
Klepierre SA | 14,228 | 483,460 | |||||
Mercialys SA | 28,783 | 422,184 | |||||
Merlin Properties Socimi SA | 20,883 | 262,077 | |||||
MGM Growth Properties LLC, Class A | 15,200 | 430,008 | |||||
New South Resources Ltd.(1) | 366,758 | 442,822 | |||||
Northview Apartment Real Estate Investment Trust | 17,386 | 334,262 | |||||
NSI NV | 8,563 | 338,006 | |||||
QTS Realty Trust, Inc., Class A | 10,065 | 385,691 | |||||
Sabra Health Care REIT, Inc. | 3,696 | 80,018 | |||||
Slate Retail REIT(1) | 38,249 | 367,541 | |||||
STAG Industrial, Inc. | 15,557 | 411,638 | |||||
Star Asia Investment Corp. | 471 | 439,130 | |||||
Sunlight Real Estate Investment Trust | 456,500 | 274,763 | |||||
Ventas, Inc. | 7,800 | 452,712 | |||||
VEREIT, Inc. | 67,502 | 494,790 | |||||
Vicinity Centres | 235,885 | 442,661 | |||||
13,098,303 | |||||||
Food Products — 0.9% | |||||||
Hershey Co. (The) | 11,930 | 1,278,300 | |||||
J.M. Smucker Co. (The) | 12,170 | 1,318,254 | |||||
2,596,554 | |||||||
Gas Utilities — 0.4% | |||||||
New Jersey Resources Corp. | 27,640 | 1,246,564 | |||||
Hotels, Restaurants and Leisure — 0.9% | |||||||
Carnival Corp. | 22,920 | 1,284,437 | |||||
Las Vegas Sands Corp. | 23,910 | 1,220,127 | |||||
2,504,564 | |||||||
Household Durables — 0.6% | |||||||
Garmin Ltd. | 20,280 | 1,341,725 | |||||
Whirlpool Corp. | 4,120 | 452,211 | |||||
1,793,936 | |||||||
Industrial Conglomerates — 0.1% | |||||||
Toshiba Corp.(1) | 9,460 | 283,377 | |||||
IT Services† | |||||||
Travelport Worldwide Ltd. | 5,667 | 84,778 | |||||
Machinery — 0.1% | |||||||
Cummins, Inc. | 3,110 | 425,106 |
11
Principal Amount/Shares | Value | ||||||
Media† | |||||||
MDC Partners, Inc., Class A(1) | 34,004 | $ | 83,990 | ||||
Metals and Mining — 0.2% | |||||||
Southern Copper Corp. | 11,110 | 425,957 | |||||
Mortgage Real Estate Investment Trusts (REITs) — 0.8% | |||||||
Apollo Commercial Real Estate Finance, Inc. | 18,200 | 340,522 | |||||
Granite Point Mortgage Trust, Inc. | 27,667 | 514,883 | |||||
MFA Financial, Inc. | 47,100 | 326,403 | |||||
Starwood Property Trust, Inc. | 26,791 | 581,901 | |||||
TPG RE Finance Trust, Inc. | 25,949 | 514,309 | |||||
2,278,018 | |||||||
Multi-Utilities — 0.9% | |||||||
DTE Energy Co. | 11,350 | 1,275,740 | |||||
Public Service Enterprise Group, Inc. | 23,310 | 1,245,453 | |||||
2,521,193 | |||||||
Oil, Gas and Consumable Fuels — 1.1% | |||||||
CHC Group LLC (Ordinary Membership Interest)(1) | 1,954 | 15,632 | |||||
Chevron Corp. | 3,650 | 407,523 | |||||
Occidental Petroleum Corp. | 13,870 | 930,261 | |||||
Phillips 66 | 12,500 | 1,285,250 | |||||
Valero Energy Corp. | 4,580 | 417,192 | |||||
3,055,858 | |||||||
Personal Products — 0.2% | |||||||
Coty, Inc., Class A(1) | 40,710 | 429,491 | |||||
Pharmaceuticals — 0.6% | |||||||
Bristol-Myers Squibb Co. | 8,430 | 426,052 | |||||
Johnson & Johnson | 9,330 | 1,306,107 | |||||
1,732,159 | |||||||
Real Estate Management and Development — 0.1% | |||||||
VICI Properties, Inc. | 19,167 | 413,816 | |||||
Semiconductors and Semiconductor Equipment — 0.4% | |||||||
Maxim Integrated Products, Inc. | 25,750 | 1,288,015 | |||||
Specialty Retail — 0.2% | |||||||
Penske Automotive Group, Inc. | 9,860 | 437,587 | |||||
Trading Companies and Distributors† | |||||||
Aircastle Ltd. | 5,838 | 113,432 | |||||
TOTAL COMMON STOCKS (Cost $45,199,560) | 44,799,675 | ||||||
ASSET-BACKED SECURITIES(2) — 15.3% | |||||||
AmeriCredit Automobile Receivables, Series 2015-4, Class D, 3.72%, 12/8/21 | $ | 80,000 | 80,412 | ||||
Avant Loans Funding Trust, Series 2017-B, Class C, 4.99%, 11/15/23(3) | 500,000 | 502,162 | |||||
Avant Loans Funding Trust, Series 2018-B, Class A SEQ, 3.42%, 1/18/22(3) | 1,000,000 | 999,492 | |||||
Bear Stearns Asset Backed Securities Trust, Series 2007-2, Class A2, VRN, 2.60%, 11/25/18, resets monthly off the 1-month LIBOR plus 0.32% | 158,116 | 158,078 |
12
Principal Amount/Shares | Value | ||||||
CAL Funding II Ltd., Series 2012-1A, Class A SEQ, 3.47%, 10/25/27(3) | $ | 706,000 | $ | 696,658 | |||
CAL Funding II Ltd., Series 2013-1A, Class A SEQ, 3.35%, 3/27/28(3) | 203,167 | 200,460 | |||||
CarMax Auto Owner Trust, Series 2018-3, Class D, 3.91%, 1/15/25 | 315,000 | 313,261 | |||||
Carmax Auto Owner Trust, Series 2018-4, Class D, 4.15%, 4/15/25 | 1,000,000 | 1,001,358 | |||||
CFG Investments Ltd., Series 2017-1, Class A SEQ, 7.87%, 11/15/26(3) | 1,000,000 | 1,022,967 | |||||
CFG Investments Ltd., Series 2017-1, Class B, 9.42%, 11/15/26(3) | 1,000,000 | 1,025,778 | |||||
CLI Funding V LLC, Series 2013-2A, SEQ, 3.22%, 6/18/28(3) | 257,885 | 252,711 | |||||
CLI Funding V LLC, Series 2014-1A, Class A SEQ, 3.29%, 6/18/29(3) | 776,801 | 762,543 | |||||
CLI Funding V LLC, Series 2014-2A, Class A SEQ, 3.38%, 10/18/29(3) | 347,058 | 339,980 | |||||
Coinstar Funding LLC Series, Series 2017-1A, Class A2 SEQ, 5.22%, 4/25/47(3) | 492,500 | 496,455 | |||||
Conn's Receivables Funding LLC, Series 2018-A, Class A SEQ, 3.25%, 1/15/23(3) | 353,347 | 353,364 | |||||
Conn's Receivables Funding LLC, Series 2018-A, Class B, 4.65%, 1/15/23(3) | 800,000 | 800,216 | |||||
CPS Auto Receivables Trust, Series 2014-C, Class D, 4.83%, 8/17/20(3) | 250,000 | 252,668 | |||||
CPS Auto Receivables Trust, Series 2015-C, Class C SEQ, 3.42%, 8/16/21(3) | 313,815 | 314,348 | |||||
CPS Auto Receivables Trust, Series 2015-C, Class D SEQ, 4.63%, 8/16/21(3) | 207,000 | 209,650 | |||||
CPS Auto Trust, Series 2016-D, Class D SEQ, 4.53%, 1/17/23(3) | 750,000 | 759,323 | |||||
Credit Suisse ABS Trust, Series 2018-LD1, Class A SEQ, 3.42%, 7/25/24(3) | 588,644 | 588,443 | |||||
Credit Suisse ABS Trust, Series 2018-LD1, Class B, 4.28%, 7/25/24(3) | 750,000 | 749,230 | |||||
Cronos Containers Program I Ltd., Series 2013-1A, Class A SEQ, 3.08%, 4/18/28(3) | 569,250 | 559,137 | |||||
Drive Auto Receivables Trust, Series 2015-AA, Class D, 4.12%, 7/15/22(3) | 250,000 | 251,429 | |||||
Drive Auto Receivables Trust, Series 2017-2, Class D, 3.49%, 9/15/23 | 1,000,000 | 998,240 | |||||
DT Auto Owner Trust, Series 2014-3A, Class D, 4.47%, 11/15/21(3) | 408,252 | 408,484 | |||||
DT Auto Owner Trust, Series 2015-2A, Class D, 4.25%, 2/15/22(3) | 295,415 | 296,897 | |||||
DT Auto Owner Trust, Series 2016-1A, Class D, 4.66%, 12/15/22(3) | 1,000,000 | 1,008,441 | |||||
DT Auto Owner Trust, Series 2016-3A, Class D, 4.52%, 6/15/23(3) | 400,000 | 404,088 | |||||
Element Rail Leasing II LLC, Series 2015-1A, Class A2 SEQ, 3.59%, 2/19/45(3) | 1,225,000 | 1,209,016 | |||||
Exeter Automobile Receivables Trust, Series 2015-1A, Class C, 4.10%, 12/15/20(3) | 738,897 | 741,683 | |||||
Exeter Automobile Receivables Trust, Series 2015-1A, Class D, 5.83%, 12/15/21(3) | 1,000,000 | 1,018,268 | |||||
Exeter Automobile Receivables Trust, Series 2016-2A, Class D, 8.25%, 4/17/23(3) | 1,000,000 | 1,060,875 |
13
Principal Amount/Shares | Value | ||||||
Exeter Automobile Receivables Trust, Series 2016-3A, Class D, 6.40%, 7/17/23(3) | $ | 350,000 | $ | 361,364 | |||
Freed Abs Trust, Series 2018-2, Class A SEQ, 3.99%, 10/20/25(3) | 650,000 | 649,213 | |||||
Global SC Finance II SRL, Series 2013-1A, Class A SEQ, 2.98%, 4/17/28(3) | 157,500 | 154,500 | |||||
Global SC Finance II SRL, Series 2014-1A, Class A2 SEQ, 3.09%, 7/17/29(3) | 802,125 | 782,063 | |||||
HERO Funding Trust, Series 2016-4A, Class A2 SEQ, 4.29%, 9/20/47(3) | 586,792 | 593,438 | |||||
HERO Funding Trust, Series 2017-2A, Class A2 SEQ, 4.07%, 9/20/48(3) | 381,525 | 383,065 | |||||
Hertz Vehicle Financing II LP, Series 2016-1A, Class B, 3.72%, 3/25/20(3) | 166,000 | 166,179 | |||||
Hertz Vehicle Financing II LP, Series 2016-2A, Class B, 3.94%, 3/25/22(3) | 262,800 | 261,499 | |||||
Hertz Vehicle Financing II LP, Series 2016-2A, Class C, 4.99%, 3/25/22(3) | 370,000 | 371,963 | |||||
Hertz Vehicle Financing II LP, Series 2017-2A, Class B, 4.20%, 10/25/23(3) | 1,475,000 | 1,466,444 | |||||
Hertz Vehicle Financing II LP, Series 2017-2A, Class C, 5.31%, 10/25/23(3) | 148,000 | 149,776 | |||||
Invitation Homes Trust, Series 2018-SFR2, Class D, VRN, 3.73%, 11/17/18, resets monthly off the 1-month LIBOR plus 1.45%(3) | 1,000,000 | 1,000,474 | |||||
Invitation Homes Trust, Series 2018-SFR3, Class B, VRN, 3.44%, 11/17/18, resets monthly off the 1-month LIBOR plus 1.15%(3) | 185,000 | 185,897 | |||||
Invitation Homes Trust, Series 2018-SFR3, Class C, VRN, 3.59%, 11/17/18, resets monthly off the 1-month LIBOR plus 1.30%(3) | 370,000 | 369,609 | |||||
Kabbage Asset Securitization LLC, Series 2017-1, Class A SEQ, 4.57%, 3/15/22(3) | 1,500,000 | 1,508,561 | |||||
Kabbage Asset Securitization LLC, Series 2017-1, Class B, 5.79%, 3/15/22(3) | 800,000 | 809,654 | |||||
Mariner Finance Issuance Trust, Series 2017-AA, Class C, 6.73%, 2/20/29(3) | 800,000 | 822,220 | |||||
Marlette Funding Trust, Series 2017-1A, Class A SEQ, 2.83%, 3/15/24(3) | 214,925 | 214,857 | |||||
Marlette Funding Trust, Series 2017-2A, Class C, 4.58%, 7/15/24(3) | 1,000,000 | 1,005,748 | |||||
Marlette Funding Trust, Series 2017-3A, Class B, 3.01%, 12/15/24(3) | 1,000,000 | 992,081 | |||||
Marlette Funding Trust, Series 2017-3A, Class C, 4.01%, 12/15/24(3) | 500,000 | 498,320 | |||||
Marlette Funding Trust, Series 2018-2A, Class C, 4.37%, 7/17/28(3) | 850,000 | 846,760 | |||||
OneMain Financial Issuance Trust, Series 2015-1A, Class C, 5.12%, 3/18/26(3) | 981,000 | 991,064 | |||||
OneMain Financial Issuance Trust, Series 2016-2A, Class A SEQ, 4.10%, 3/20/28(3) | 266,074 | 267,414 | |||||
OneMain Financial Issuance Trust, Series 2016-2A, Class B, 5.94%, 3/20/28(3) | 1,000,000 | 1,018,012 | |||||
OneMain Financial Issuance Trust, Series 2016-3A, Class A SEQ, 3.83%, 6/18/31(3) | 475,000 | 472,836 | |||||
OneMain Financial Issuance Trust, Series 2017-1A, Class D, 4.52%, 9/14/32(3) | 2,500,000 | 2,450,888 |
14
Principal Amount/Shares | Value | ||||||
Sierra Timeshare Receivables Funding LLC, Series 2014-2A, Class B, 2.40%, 6/20/31(3) | $ | 52,471 | $ | 52,427 | |||
Skopos Auto Receivables Trust, Series 2015-2A, Class B, 5.71%, 2/15/21(3) | 320,004 | 321,617 | |||||
Springleaf Funding Trust, Series 2015-AA, Class A SEQ, 3.16%, 11/15/24(3) | 221,960 | 221,938 | |||||
Springleaf Funding Trust, Series 2015-AA, Class B, 3.62%, 11/15/24(3) | 130,000 | 129,561 | |||||
TAL Advantage V LLC, Series 2014-1A, Class A SEQ, 3.51%, 2/22/39(3) | 418,667 | 413,335 | |||||
TAL Advantage V LLC, Series 2014-3A, Class A SEQ, 3.27%, 11/21/39(3) | 182,500 | 178,326 | |||||
Triton Container Finance IV LLC, Series 2017-2A, Class A SEQ, 3.62%, 8/20/42(3) | 894,432 | 873,200 | |||||
United Auto Credit Securitization Trust, Series 2018-2, Class D, 4.26%, 5/10/23(3) | 1,000,000 | 1,001,518 | |||||
Vantage Data Centers Issuer LLC, Series 2018-1A, Class A2 SEQ, 4.07%, 2/16/43(3) | 1,490,000 | 1,487,439 | |||||
Vertical Bridge CC LLC, Series 2016-2A, Class A SEQ, 5.19%, 10/15/46(3) | 978,436 | 982,198 | |||||
TOTAL ASSET-BACKED SECURITIES (Cost $44,414,456) | 44,291,573 | ||||||
BANK LOAN OBLIGATIONS(4) — 14.3% | |||||||
Aerospace and Defense — 0.4% | |||||||
Accudyne Industries, LLC, 2017 Term Loan, 5.30%, 8/18/24, resets monthly off the 1-month LIBOR plus 3.00% | 106,114 | 105,868 | |||||
DAE Aviation Holdings, Inc., 1st Lien Term Loan, 6.05%, 7/7/22, resets monthly off the 1-month LIBOR plus 3.75% | 456,931 | 459,152 | |||||
Jazz Acquisition, Inc., 1st Lien Term Loan, 5.89%, 6/19/21, resets quarterly off the 3-month LIBOR plus 3.50% | 243,545 | 237,457 | |||||
Sequa Mezzanine Holdings LLC, 1st Lien Term Loan, 7.41%, 11/28/21, resets quarterly off the 3-month LIBOR plus 5.00% | 240,898 | 238,338 | |||||
Sequa Mezzanine Holdings LLC, 1st Lien Term Loan, 7.39%, 11/28/21, resets quarterly off the 3-month LIBOR plus 5.00% | 611 | 605 | |||||
1,041,420 | |||||||
Air Freight and Logistics — 0.1% | |||||||
EXC Holdings III Corp., EUR 2017 1st Lien Term Loan, 3.50%, 12/2/24, resets quarterly off the 3-month Euribor plus 3.50% | EUR | 19,822 | 22,536 | ||||
EXC Holdings III Corp., USD 2017 1st Lien Term Loan, 5.89%, 12/2/24, resets quarterly off the 3-month LIBOR plus 3.50% | $ | 386,037 | 387,967 | ||||
410,503 | |||||||
Chemicals — 0.2% | |||||||
Ascend Performance Materials Operations LLC, Term Loan B, 7.64%, 8/12/22, resets quarterly off the 3-month LIBOR plus 5.25% | 364,301 | 365,895 | |||||
Solenis International, LP, 2018 2nd Lien Term Loan, 10.81%, 6/26/24, resets quarterly off the 3-month LIBOR plus 8.50% | 250,000 | 247,500 | |||||
613,395 | |||||||
Commercial Services and Supplies — 0.6% | |||||||
Asurion LLC, 2017 Term Loan B4, 5.30%, 8/4/22, resets monthly off the 1-month LIBOR plus 3.00% | 239,641 | 240,347 |
15
Principal Amount/Shares | Value | ||||||
Asurion LLC, 2018 Term Loan B6, 5.30%, 11/3/23, resets monthly off the 1-month LIBOR plus 3.00% | $ | 238,695 | $ | 239,243 | |||
Midas Intermediate Holdco II, LLC, Incremental Term Loan B, 5.14%, 8/18/21, resets quarterly off the 3-month LIBOR plus 2.75% | 173,627 | 167,659 | |||||
Prime Security Services Borrower, LLC, 2016 1st Lien Term Loan, 5.05%, 5/2/22, resets monthly off the 1-month LIBOR plus 2.75% | 125,887 | 126,116 | |||||
Sedgwick Claims Management Services, Inc., 1st Lien Term Loan, 5.05%, 3/1/21, resets monthly off the 1-month LIBOR plus 2.75% | 463,207 | 463,679 | |||||
Stiphout Finance LLC, USD 1st Lien Term Loan, 5.30%, 10/26/22, resets monthly off the 1-month LIBOR plus 3.00% | 74,711 | 74,991 | |||||
Syniverse Holdings, Inc., 2018 1st Lien Term Loan, 7.28%, 3/9/23, resets monthly off the 1-month LIBOR plus 5.00% | 64,406 | 64,876 | |||||
TNS, Inc., 2013 Term Loan B, 6.32%, 8/14/22, resets quarterly off the 3-month LIBOR plus 4.00% | 247,212 | 248,655 | |||||
TRC Companies, Inc., Term Loan, 5.80%, 6/21/24, resets monthly off the 1-month LIBOR plus 3.50% | 94,284 | 94,668 | |||||
1,720,234 | |||||||
Communications Equipment — 0.8% | |||||||
AppLovin Corporation, 2018 Term Loan B, 6.06%, 8/15/25, resets quarterly off the 3-month LIBOR plus 3.75% | 347,553 | 351,681 | |||||
Masergy Communications, 2017 1st Lien Term Loan, 5.64%, 12/15/23, resets quarterly off the 3-month LIBOR plus 3.25% | 404,065 | 405,075 | |||||
MH Sub I, LLC, 2017 1st Lien Term Loan, 6.03%, 9/13/24, resets monthly off the 1-month LIBOR plus 3.75% | 762,786 | 766,394 | |||||
Radiate Holdco, LLC, 1st Lien Term Loan, 5.30%, 2/1/24, resets monthly off the 1-month LIBOR plus 3.00% | 484,144 | 481,118 | |||||
Tyco Electronics Subsea Communications, Term Loan B, 10/26/25(5) | 180,297 | 179,847 | |||||
2,184,115 | |||||||
Construction and Engineering — 0.1% | |||||||
KBR, Inc., Term Loan B, 6.04%, 4/25/25, resets monthly off the 1-month LIBOR plus 3.75% | 374,063 | 375,465 | |||||
Construction Materials — 0.3% | |||||||
Caelus Energy Alaska O3, LLC, 2nd Lien Term Loan, 9.84%, 4/15/20, resets quarterly off the 3-month LIBOR plus 7.50% | 176,969 | 164,433 | |||||
CPG International Inc., 2017 Term Loan, 6.25%, 5/5/24, resets semi-annually off the 6-month LIBOR plus 3.75% | 228,668 | 229,622 | |||||
Pisces Midco, Inc., 2018 Term Loan, 6.18%, 4/12/25, resets quarterly off the 3-month LIBOR plus 3.75% | 243,381 | 242,900 | |||||
U.S. Lumber Group, LLC, 2018 Term Loan B, 9/18/25(5) | 173,601 | 173,384 | |||||
810,339 | |||||||
Consumer Finance† | |||||||
ASP MCS Acquisition Corp., Term Loan B, 7.14%, 5/18/24, resets quarterly off the 3-month LIBOR plus 4.75% | 55,025 | 45,809 | |||||
Containers and Packaging — 0.5% | |||||||
BWAY Holding Company, 2017 Term Loan B, 5.66%, 4/3/24, resets quarterly off the 3-month LIBOR plus 3.25% | 486,493 | 484,365 | |||||
BWAY Holding Company, 2017 Term Loan B, 5.66%, 4/3/24, resets quarterly off the 3-month LIBOR plus 3.25% | 1,235 | 1,229 | |||||
Flex Acquisition Company, Inc., 1st Lien Term Loan, 5.26%, 12/29/23, resets quarterly off the 3-month LIBOR plus 3.00% | 511,739 | 511,420 |
16
Principal Amount/Shares | Value | ||||||
Verallia Packaging S.A.S., 2018 EUR Term Loan C, 3.25%, 8/29/25, resets monthly off the 1-month Euribor plus 3.25% | EUR | 106,667 | $ | 121,317 | |||
Verallia Packaging S.A.S., EUR Term Loan B4, 2.75%, 10/29/22, resets monthly off the 1-month Euribor plus 2.75% | EUR | 41,842 | 47,493 | ||||
Verallia Packaging S.A.S., EUR Term Loan B4, 2.75%, 10/29/22, resets monthly off the 1-month Euribor plus 2.75% | EUR | 120,334 | 136,588 | ||||
Verallia Packaging S.A.S., EUR Term Loan B4, 2.75%, 10/29/22, resets monthly off the 1-month Euribor plus 2.75% | EUR | 82,111 | 93,202 | ||||
1,395,614 | |||||||
Distributors — 0.3% | |||||||
GOBP Holdings, Inc., 1st Lien Term Loan, 6.03%, 10/18/25, resets quarterly off the 3-month LIBOR plus 3.75% | $ | 163,246 | 163,246 | ||||
IRB Holding Corp, 1st Lien Term Loan, 5.46%, 2/5/25, resets bi-monthly off the 2-month LIBOR plus 3.25% | 160,627 | 160,493 | |||||
IRB Holding Corp, 1st Lien Term Loan, 2/5/25(5) | 286,725 | 286,485 | |||||
Polyconcept Investments B.V., USD 2016 Term Loan B, 6.05%, 8/16/23, resets monthly off the 1-month LIBOR plus 3.75% | 298,019 | 299,509 | |||||
909,733 | |||||||
Diversified Consumer Services — 0.1% | |||||||
Financiere Dry Mix Solutions S.A.S., EUR 1st Lien Term Loan, 3.50%, 3/8/24, resets quarterly off the 3-month Euribor plus 3.50% | EUR | 32,595 | 37,106 | ||||
Financiere Dry Mix Solutions S.A.S., EUR 1st Lien Term Loan, 3.50%, 3/8/24, resets quarterly off the 3-month Euribor plus 3.50% | EUR | 28,521 | 32,467 | ||||
Financiere Dry Mix Solutions S.A.S., EUR 1st Lien Term Loan, 3.50%, 3/8/24, resets quarterly off the 3-month Euribor plus 3.50% | EUR | 79,857 | 90,909 | ||||
Moran Foods LLC, Term Loan, 8.30%, 12/5/23, resets monthly off the 1-month LIBOR plus 6.00% | $ | 130,276 | 93,753 | ||||
254,235 | |||||||
Diversified Financial Services — 0.5% | |||||||
AqGen Ascensus, Inc., 2017 Repriced Term Loan, 5.89%, 12/3/22, resets quarterly off the 3-month LIBOR plus 3.50% | 135,088 | 135,341 | |||||
Camelot UK Holdco Limited, 2017 Repriced Term Loan, 5.55%, 10/3/23, resets monthly off the 1-month LIBOR plus 3.25% | 5,777 | 5,784 | |||||
Camelot UK Holdco Limited, 2017 Repriced Term Loan, 5.55%, 10/3/23, resets monthly off the 1-month LIBOR plus 3.25% | 144,272 | 144,453 | |||||
Camelot UK Holdco Limited, 2017 Repriced Term Loan, 5.55%, 10/3/23, resets monthly off the 1-month LIBOR plus 3.25% | 82,165 | 82,268 | |||||
Camelot UK Holdco Limited, 2017 Repriced Term Loan, 5.55%, 10/3/23, resets monthly off the 1-month LIBOR plus 3.25% | 11,394 | 11,408 | |||||
Genuine Financial Holdings, LLC, 2018 1st Lien Term Loan, 6.14%, 7/12/25, resets quarterly off the 3-month LIBOR plus 3.75% | 500,000 | 502,033 | |||||
Hub International Limited, 2018 Term Loan B, 5.49%, 4/25/25, resets quarterly off the 3-month LIBOR plus 3.00% | 497,500 | 496,721 | |||||
Hub International Limited, 2018 Term Loan B, 5.36%, 4/25/25, resets quarterly off the 3-month LIBOR plus 3.00% | 1,250 | 1,248 | |||||
1,379,256 |
17
Principal Amount/Shares | Value | ||||||
Diversified Telecommunication Services — 1.2% | |||||||
CenturyLink, Inc., 2017 Term Loan B, 5.05%, 1/31/25, resets monthly off the 1-month LIBOR plus 2.75% | $ | 468,342 | $ | 463,951 | |||
Frontier Communications Corp., 2017 Term Loan B1, 6.06%, 6/15/24, resets monthly off the 1-month LIBOR plus 3.75% | 480,277 | 466,348 | |||||
Hargray Communications Group, Inc., 2017 Term Loan B, 5.30%, 5/16/24, resets monthly off the 1-month LIBOR plus 3.00% | 458,798 | 458,970 | |||||
Intelsat Jackson Holdings S.A., 2017 Term Loan B4, 6.79%, 1/2/24, resets monthly off the 1-month LIBOR plus 4.50% | 99,619 | 103,853 | |||||
Intelsat Jackson Holdings S.A., 2017 Term Loan B5, 6.625%, 1/2/24 | 326,455 | 335,897 | |||||
Sprint Communications, Inc., 1st Lien Term Loan B, 4.81%, 2/2/24, resets monthly off the 1-month LIBOR plus 2.50% | 266,739 | 266,947 | |||||
TDC A/S, EUR Term Loan, 3.50%, 5/31/25, resets monthly off the 1-month Euribor plus 3.50% | EUR | 498,125 | 567,976 | ||||
Telesat Canada, Term Loan B4, 4.89%, 11/17/23, resets quarterly off the 3-month LIBOR plus 2.50% | $ | 196,809 | 197,252 | ||||
Windstream Services, LLC, Repriced Term Loan B6, 6.29%, 3/29/21, resets monthly off the 1-month LIBOR plus 4.00% | 576,908 | 542,911 | |||||
Windstream Services, LLC, Term Loan B7, 5.54%, 2/17/24, resets monthly off the 1-month LIBOR plus 3.25% | 52,388 | 45,785 | |||||
3,449,890 | |||||||
Electric Utilities — 0.2% | |||||||
Compass Power Generation LLC, 2018 Term Loan B, 5.80%, 12/20/24, resets monthly off the 1-month LIBOR plus 3.50% | 127,580 | 128,633 | |||||
Gamma Infrastructure III B.V., EUR 1st Lien Term Loan B, 3.50%, 1/9/25, resets quarterly off the 3-month Euribor plus 3.50% | EUR | 163,587 | 186,137 | ||||
Research Now Group, Inc., 2017 1st Lien Term Loan, 7.80%, 12/20/24, resets monthly off the 1-month LIBOR plus 5.50% | $ | 293,330 | 294,920 | ||||
Resideo Funding Inc., Term Loan B, 10/24/25(5) | 58,955 | 59,213 | |||||
668,903 | |||||||
Energy Equipment and Services — 0.1% | |||||||
Grizzly Acquisitions Inc., 2018 Term Loan B, 10/1/25(5) | 242,809 | 244,302 | |||||
Entertainment — 0.4% | |||||||
CSC Holdings, LLC, 2017 1st Lien Term Loan, 4.53%, 7/17/25, resets monthly off the 1-month LIBOR plus 2.25% | 193,613 | 193,440 | |||||
Technicolor SA, EUR Term Loan B, 3.50%, 12/6/23, resets quarterly off the 3-month Euribor plus 3.50% | EUR | 486,161 | 524,151 | ||||
William Morris Endeavor Entertainment, LLC, 2018 1st Lien Term Loan, 5.28%, 5/18/25, resets quarterly off the 3-month LIBOR plus 2.75% | $ | 465,253 | 465,253 | ||||
William Morris Endeavor Entertainment, LLC, 2018 1st Lien Term Loan, 5.15%, 5/18/25, resets bi-monthly off the 2-month LIBOR plus 2.75% | 107 | 107 | |||||
William Morris Endeavor Entertainment, LLC, 2018 1st Lien Term Loan, 5.15%, 5/18/25, resets bi-monthly off the 2-month LIBOR plus 2.75% | 1,169 | 1,169 | |||||
William Morris Endeavor Entertainment, LLC, 2018 1st Lien Term Loan, 5.28%, 5/18/25, resets quarterly off the 3-month LIBOR plus 2.75% | 42,472 | 42,472 | |||||
1,226,592 |
18
Principal Amount/Shares | Value | ||||||
Equity Real Estate Investment Trusts (REITs) — 0.1% | |||||||
Communications Sales & Leasing, Inc., 2017 Term Loan B, 5.30%, 10/24/22, resets monthly off the 1-month LIBOR plus 3.00% | $ | 218,667 | $ | 207,351 | |||
Food and Staples Retailing — 0.1% | |||||||
Albertsons, LLC, Term Loan B7, 10/29/25(5) | 200,496 | 199,202 | |||||
Hearthside Food Solutions, LLC, 2018 Term Loan B, 5.30%, 5/23/25, resets monthly off the 1-month LIBOR plus 3.00% | 177,851 | 175,072 | |||||
374,274 | |||||||
Health Care Providers and Services — 0.9% | |||||||
Auris Luxembourg III S.a.r.l., 2018 EUR Term Loan B, 7/20/25(5) | EUR | 464,170 | 531,494 | ||||
BioClinica, Inc., 1st Lien Term Loan, 6.75%, 10/20/23, resets quarterly off the 3-month LIBOR plus 4.25% | $ | 62,033 | 59,086 | ||||
BioClinica, Inc., 1st Lien Term Loan, 6.625%, 10/20/23, resets quarterly off the 3-month LIBOR plus 4.25% | 316 | 301 | |||||
BioClinica, Inc., 1st Lien Term Loan, 6.625%, 10/20/23, resets quarterly off the 3-month LIBOR plus 4.25% | 475 | 452 | |||||
BioClinica, Inc., 1st Lien Term Loan, 6.75%, 10/20/23, resets quarterly off the 3-month LIBOR plus 4.25% | 31,017 | 29,543 | |||||
BioClinica, Inc., 1st Lien Term Loan, 6.75%, 10/20/23, resets quarterly off the 3-month LIBOR plus 4.25% | 201,607 | 192,031 | |||||
BioClinica, Inc., 1st Lien Term Loan, 6.75%, 10/20/23, resets quarterly off the 3-month LIBOR plus 4.25% | 15,508 | 14,772 | |||||
Concentra Inc., 2018 1st Lien Term Loan, 5.03%, 6/1/22, resets monthly off the 1-month LIBOR plus 2.75% | 131,746 | 132,212 | |||||
Jaguar Holding Company II, 2018 Term Loan, 4.80%, 8/18/22, resets monthly off the 1-month LIBOR plus 2.50% | 667,865 | 666,697 | |||||
nThrive, Inc., 2016 1st Lien Term Loan, 6.80%, 10/20/22, resets monthly off the 1-month LIBOR plus 4.50% | 241,933 | 243,294 | |||||
Team Health Holdings, Inc., 1st Lien Term Loan, 5.05%, 2/6/24, resets monthly off the 1-month LIBOR plus 2.75% | 93,815 | 89,007 | |||||
Tecomet Inc., 2017 Repriced Term Loan, 5.78%, 5/1/24, resets monthly off the 1-month LIBOR plus 3.50% | 95,982 | 96,202 | |||||
Wink Holdco, Inc., 1st Lien Term Loan B, 5.30%, 12/2/24, resets monthly off the 1-month LIBOR plus 3.00% | 498,119 | 497,372 | |||||
2,552,463 | |||||||
Hotels, Restaurants and Leisure — 0.2% | |||||||
1011778 B.C. Unlimited Liability Company, Term Loan B3, 4.55%, 2/16/24, resets monthly off the 1-month LIBOR plus 2.25% | 81,507 | 81,293 | |||||
1011778 B.C. Unlimited Liability Company, Term Loan B3, 4.55%, 2/16/24, resets monthly off the 1-month LIBOR plus 2.25% | 100,437 | 100,173 | |||||
NPC International, Inc., 1st Lien Term Loan, 5.80%, 4/19/24, resets monthly off the 1-month LIBOR plus 3.50% | 108,017 | 108,571 | |||||
Scientific Games International, Inc., 2018 Term Loan B5, 5.04%, 8/14/24, resets bi-monthly off the 2-month LIBOR plus 2.75% | 130,850 | 129,764 | |||||
Scientific Games International, Inc., 2018 Term Loan B5, 5.05%, 8/14/24, resets monthly off the 1-month LIBOR plus 2.75% | 31,213 | 30,954 | |||||
450,755 | |||||||
Household Durables — 0.2% | |||||||
Wilsonart LLC, 2017 Term Loan B, 5.64%, 12/19/23, resets quarterly off the 3-month LIBOR plus 3.25% | 498,737 | 499,049 |
19
Principal Amount/Shares | Value | ||||||
Industrial Conglomerates — 0.1% | |||||||
Ammeraal Beltech Holding B.V., 2018 EUR 1st Lien Term Loan B, 9/26/25(5) | EUR | 142,683 | $ | 163,327 | |||
Gates Global LLC, 2017 USD Repriced Term Loan B, 5.05%, 4/1/24, resets monthly off the 1-month LIBOR plus 2.75% | $ | 243,142 | 243,805 | ||||
407,132 | |||||||
Insurance — 0.2% | |||||||
Alliant Holdings I, Inc., 2018 Term Loan B, 5.28%, 5/9/25, resets monthly off the 1-month LIBOR plus 3.00% | 498,750 | 499,062 | |||||
Genworth Holdings, Inc., Term Loan, 6.83%, 3/7/23, resets bi-monthly off the 2-month LIBOR plus 4.50% | 43,258 | 44,231 | |||||
543,293 | |||||||
IT Services — 0.9% | |||||||
Ancestry.com Operations Inc., 2017 1st Lien Term Loan, 5.55%, 10/19/23, resets monthly off the 1-month LIBOR plus 3.25% | 438,967 | 441,271 | |||||
Everest Bidco S.A.S., 2018 EUR Term Loan, 4.00%, 7/4/25, resets quarterly off the 3-month Euribor plus 4.00% | EUR | 265,332 | 302,407 | ||||
First Data Corporation, 2017 USD Term Loan, 4.29%, 7/8/22, resets monthly off the 1-month LIBOR plus 2.00% | $ | 383,365 | 382,528 | ||||
First Data Corporation, 2024 USD Term Loan, 4.29%, 4/26/24, resets monthly off the 1-month LIBOR plus 2.00% | 322,908 | 321,529 | |||||
GTT Communications, Inc., 2018 EUR Term Loan, 3.25%, 5/31/25, resets monthly off the 1-month Euribor plus 3.25% | EUR | 371,253 | 418,749 | ||||
Netsmart Technologies, Inc., Term Loan D1, 6.05%, 4/19/23, resets monthly off the 1-month LIBOR plus 3.75% | $ | 348,984 | 351,389 | ||||
Rackspace Hosting, Inc., 2017 Incremental 1st Lien Term Loan, 5.35%, 11/3/23, resets quarterly off the 3-month LIBOR plus 3.00% | 288,380 | 280,510 | |||||
Travelport Finance (Luxembourg) S.a.r.l., 2018 Term Loan B, 4.81%, 3/17/25, resets quarterly off the 3-month LIBOR plus 2.50% | 182,984 | 183,003 | |||||
2,681,386 | |||||||
Life Sciences Tools and Services — 0.2% | |||||||
Parexel International Corporation, Term Loan B, 5.05%, 9/27/24, resets monthly off the 1-month LIBOR plus 2.75% | 542,444 | 535,751 | |||||
Syneos Health, Inc., 2018 Term Loan B, 4.30%, 8/1/24, resets monthly off the 1-month LIBOR plus 2.00% | 66,317 | 66,244 | |||||
Syneos Health, Inc., 2018 Term Loan B, 4.30%, 8/1/24, resets monthly off the 1-month LIBOR plus 2.00% | 15,245 | 15,228 | |||||
Syneos Health, Inc., 2018 Term Loan B, 4.30%, 8/1/24, resets monthly off the 1-month LIBOR plus 2.00% | 78,395 | 78,308 | |||||
695,531 | |||||||
Machinery — 0.7% | |||||||
AL Alpine AT Bidco GmbH, 2018 EUR Term Loan B, 9/30/25(5) | EUR | 210,729 | 240,109 | ||||
AL Alpine AT Bidco GmbH, 2018 Term Loan B, 9/30/25(5) | $ | 47,621 | 47,740 | ||||
Altra Industrial Motion Corp., 2018 Term Loan B, 4.30%, 10/1/25, resets monthly off the 1-month LIBOR plus 2.00% | 93,367 | 93,464 | |||||
DXP Enterprises, Inc., 2017 Term Loan B, 7.05%, 8/29/23, resets monthly off the 1-month LIBOR plus 4.75% | 66,483 | 67,107 | |||||
Filtration Group Corporation, 2018 EUR Term Loan, 3.50%, 3/29/25, resets quarterly off the 3-month Euribor plus 3.50% | EUR | 208,857 | 238,890 |
20
Principal Amount/Shares | Value | ||||||
Hayward Industries, Inc., 1st Lien Term Loan, 5.79%, 8/5/24, resets monthly off the 1-month LIBOR plus 3.50% | $ | 498,741 | $ | 500,145 | |||
Pro Mach Group, Inc., 2018 Term Loan B, 5.28%, 3/7/25, resets quarterly off the 3-month LIBOR plus 3.00% | 498,747 | 497,936 | |||||
Titan Acquisition Limited, 2018 Term Loan B, 5.30%, 3/28/25, resets monthly off the 1-month LIBOR plus 3.00% | 351,313 | 332,116 | |||||
2,017,507 | |||||||
Media — 0.7% | |||||||
Acosta Holdco, Inc., 2015 Term Loan, 5.55%, 9/26/21, resets monthly off the 1-month LIBOR plus 3.25% | 128,682 | 95,926 | |||||
Advantage Sales & Marketing, Inc., 2014 1st Lien Term Loan, 5.55%, 7/23/21, resets monthly off the 1-month LIBOR plus 3.25% | 707 | 646 | |||||
Advantage Sales & Marketing, Inc., 2014 1st Lien Term Loan, 5.55%, 7/23/21, resets monthly off the 1-month LIBOR plus 3.25% | 270,758 | 247,406 | |||||
Checkout Holding Corp., 1st Lien Term Loan, 5.81%, 4/9/21, resets quarterly off the 3-month LIBOR plus 3.50% | 350,549 | 133,209 | |||||
Getty Images, Inc., Term Loan B, 5.80%, 10/18/19, resets monthly off the 1-month LIBOR plus 3.50% | 425,701 | 421,599 | |||||
National CineMedia, LLC, 2018 Term Loan B, 5.31%, 6/20/25, resets monthly off the 1-month LIBOR plus 3.00% | 41,278 | 41,343 | |||||
Recorded Books Inc., 2018 Term Loan B, 6.89%, 8/9/25, resets quarterly off the 3-month LIBOR plus 4.50% | 92,690 | 93,732 | |||||
Unitymedia Finance LLC, Term Loan B, 4.53%, 9/30/25, resets monthly off the 1-month LIBOR plus 2.25% | 189,923 | 189,936 | |||||
Unitymedia Hessen GmbH & Co. KG, EUR Term Loan C, 2.75%, 1/15/27, resets semi-annually off the 6-month Euribor plus 2.75% | EUR | 98,508 | 112,278 | ||||
Virgin Media Bristol LLC, Term Loan K, 4.78%, 1/15/26, resets monthly off the 1-month LIBOR plus 2.50% | $ | 193,885 | 193,945 | ||||
Ziggo Secured Finance BV, EUR Term Loan F, 3.00%, 4/15/25, resets semi-annually off the 6-month Euribor plus 3.00% | EUR | 370,632 | 419,897 | ||||
1,949,917 | |||||||
Metals and Mining — 0.4% | |||||||
LTI Holdings, Inc., 2018 2nd Lien Term Loan, 9.05%, 9/6/26, resets monthly off the 1-month LIBOR plus 6.75% | $ | 16,985 | 16,953 | ||||
LTI Holdings, Inc., 2018 Add On 1st Lien Term Loan, 5.80%, 9/6/25, resets monthly off the 1-month LIBOR plus 3.50% | 233,463 | 233,536 | |||||
TurboCombustor Technology, Inc., New Term Loan B, 6.80%, 12/2/20, resets monthly off the 1-month LIBOR plus 4.50% | 432,644 | 420,747 | |||||
WireCo WorldGroup, Inc., 1st Lien Term Loan, 7.30%, 9/30/23, resets monthly off the 1-month LIBOR plus 5.00% | 254,719 | 257,266 | |||||
WireCo WorldGroup, Inc., 2016 2nd Lien Term Loan, 11.30%, 9/30/24, resets monthly off the 1-month LIBOR plus 9.00% | 250,000 | 252,500 | |||||
1,181,002 | |||||||
Oil, Gas and Consumable Fuels — 0.4% | |||||||
BCP Renaissance Parent LLC, 2017 Term Loan B, 6.03%, 10/31/24, resets quarterly off the 3-month LIBOR plus 3.50% | 72,392 | 72,754 | |||||
Keane Group Holdings, LLC, 2018 1st Lien Term Loan, 6.06%, 5/25/25, resets monthly off the 1-month LIBOR plus 3.75% | 94,419 | 92,531 | |||||
Murray Energy Corporation, 2018 Term Loan B2, 9.78%, 10/17/22, resets quarterly off the 3-month LIBOR plus 7.25% | 874,640 | 788,453 |
21
Principal Amount/Shares | Value | ||||||
Traverse Midstream Partners LLC, 2017 Term Loan, 6.60%, 9/27/24, resets semi-annually off the 6-month LIBOR plus 4.00% | $ | 44,603 | $ | 44,958 | |||
Ultra Resources, Inc., 1st Lien Term Loan, 5.47%, 4/12/24, resets quarterly off the 3-month LIBOR plus 3.00% | 218,750 | 205,703 | |||||
1,204,399 | |||||||
Personal Products — 0.1% | |||||||
KIK Custom Products, Inc., 2015 Term Loan B, 6.30%, 5/15/23, resets monthly off the 1-month LIBOR plus 4.00% | 80,238 | 79,285 | |||||
KIK Custom Products, Inc., 2015 Term Loan B, 6.30%, 5/15/23, resets monthly off the 1-month LIBOR plus 4.00% | 142,978 | 141,280 | |||||
KIK Custom Products, Inc., 2015 Term Loan B, 6.30%, 5/15/23, resets monthly off the 1-month LIBOR plus 4.00% | 99,491 | 98,310 | |||||
KIK Custom Products, Inc., 2015 Term Loan B, 6.30%, 5/15/23, resets monthly off the 1-month LIBOR plus 4.00% | 46,137 | 45,589 | |||||
364,464 | |||||||
Pharmaceuticals — 0.4% | |||||||
Packaging Coordinators Midco, Inc., 1st Lien Term Loan, 6.39%, 6/30/23, resets quarterly off the 3-month LIBOR plus 4.00% | 471,977 | 473,306 | |||||
U.S. Anesthesia Partners, Inc., 2017 Term Loan, 5.30%, 6/23/24, resets monthly off the 1-month LIBOR plus 3.00% | 658,684 | 659,711 | |||||
1,133,017 | |||||||
Real Estate Management and Development — 0.1% | |||||||
Brookfield WEC Holdings Inc., 2018 1st Lien Term Loan, 6.05%, 8/1/25, resets monthly off the 1-month LIBOR plus 3.75% | 238,092 | 239,895 | |||||
Brookfield WEC Holdings Inc., 2018 2nd Lien Term Loan, 9.05%, 8/3/26, resets monthly off the 1-month LIBOR plus 6.75% | 66,166 | 67,373 | |||||
Capital Automotive L.P., 2017 2nd Lien Term Loan, 8.31%, 3/24/25, resets monthly off the 1-month LIBOR plus 6.00% | 44,238 | 45,068 | |||||
352,336 | |||||||
Semiconductors and Semiconductor Equipment — 0.1% | |||||||
Microchip Technology Incorporated, 2018 Term Loan B, 4.31%, 5/29/25, resets monthly off the 1-month LIBOR plus 2.00% | 178,655 | 178,253 | |||||
Software — 1.7% | |||||||
Autodata, Inc., 1st Lien Term Loan, 5.55%, 12/13/24, resets monthly off the 1-month LIBOR plus 3.25% | 360,999 | 360,999 | |||||
Compuware Corporation, 2018 Term Loan B, 5.79%, 8/22/25, resets monthly off the 1-month LIBOR plus 3.50% | 52,509 | 53,012 | |||||
Epicor Software Corporation, 1st Lien Term Loan, 5.56%, 6/1/22, resets monthly off the 1-month LIBOR plus 3.25% | 508,209 | 510,155 | |||||
Kronos, Incorporated, 2017 Term Loan B, 5.34%, 11/1/23, resets quarterly off the 3-month LIBOR plus 3.00% | 497,500 | 498,938 | |||||
Mavenir Systems, Inc., 2018 Term Loan B, 8.28%, 5/8/25, resets monthly off the 1-month LIBOR plus 6.00% | 212,644 | 213,973 | |||||
Press Ganey Holdings, Inc., 2018 1st Lien Term Loan, 5.05%, 10/23/23, resets monthly off the 1-month LIBOR plus 2.75% | 405,252 | 406,265 | |||||
Project Alpha Intermediate Holding, Inc., 2017 Term Loan B, 5.94%, 4/26/24, resets quarterly off the 3-month LIBOR plus 3.50% | 273,661 | 272,977 | |||||
Quest Software US Holdings Inc., 2018 1st Lien Term Loan, 6.78%, 5/16/25, resets quarterly off the 3-month LIBOR plus 4.25% | 28,609 | 28,779 |
22
Principal Amount/Shares | Value | ||||||
Quest Software US Holdings Inc., 2018 1st Lien Term Loan, 6.78%, 5/16/25, resets quarterly off the 3-month LIBOR plus 4.25% | $ | 82,250 | $ | 82,738 | |||
Quest Software US Holdings Inc., 2018 1st Lien Term Loan, 6.78%, 5/16/25, resets quarterly off the 3-month LIBOR plus 4.25% | 87,176 | 87,694 | |||||
RP Crown Parent, LLC, 2016 Term Loan B, 5.05%, 10/12/23, resets monthly off the 1-month LIBOR plus 2.75% | 245,781 | 245,719 | |||||
Salient CRGT, Inc., 2017 Term Loan, 8.05%, 2/25/22, resets monthly off the 1-month LIBOR plus 5.75% | 104,011 | 104,791 | |||||
SolarWinds Holdings, Inc., 2018 Term Loan B, 5.30%, 2/5/24, resets monthly off the 1-month LIBOR plus 3.00% | 843,074 | 846,003 | |||||
Sophia, L.P., 2017 Term Loan B, 5.64%, 9/30/22, resets quarterly off the 3-month LIBOR plus 3.25% | 739,601 | 742,067 | |||||
STG-Fairway Acquisitions, Inc., 2015 1st Lien Term Loan, 7.78%, 6/30/22, resets quarterly off the 3-month LIBOR plus 5.25% | 491,348 | 491,756 | |||||
Weld North Education, LLC, Term Loan B, 6.64%, 2/7/25, resets quarterly off the 3-month LIBOR plus 4.25% | 107,746 | 108,150 | |||||
5,054,016 | |||||||
Specialty Retail — 0.4% | |||||||
Eyemart Express LLC, 2017 Term Loan B, 5.31%, 8/4/24, resets monthly off the 1-month LIBOR plus 3.00% | 248,744 | 249,417 | |||||
Harbor Freight Tools USA, Inc., 2018 Term Loan B, 4.80%, 8/18/23, resets monthly off the 1-month LIBOR plus 2.50% | 509,502 | 502,114 | |||||
National Vision, Inc., 2017 Repriced Term Loan, 4.80%, 11/20/24, resets monthly off the 1-month LIBOR plus 2.50% | 267,589 | 269,052 | |||||
1,020,583 | |||||||
Technology Hardware, Storage and Peripherals — 0.3% | |||||||
Dell International LLC, 2017 Term Loan A2, 4.06%, 9/7/21, resets monthly off the 1-month LIBOR plus 1.75% | 92,595 | 92,576 | |||||
Dynatrace LLC, 2018 1st Lien Term Loan, 5.55%, 8/22/25, resets monthly off the 1-month LIBOR plus 3.25% | 89,074 | 89,760 | |||||
Optiv Security, Inc., 1st Lien Term Loan, 5.55%, 2/1/24, resets monthly off the 1-month LIBOR plus 3.25% | 142,286 | 138,507 | |||||
Tempo Acquisition LLC, Term Loan, 5.30%, 5/1/24, resets monthly off the 1-month LIBOR plus 3.00% | 535,075 | 536,145 | |||||
856,988 | |||||||
Textiles, Apparel and Luxury Goods — 0.1% | |||||||
Ascena Retail Group, Inc., 2015 Term Loan B, 6.81%, 8/21/22, resets monthly off the 1-month LIBOR plus 4.50% | 277,454 | 269,894 | |||||
Trading Companies and Distributors† | |||||||
Oxbow Carbon LLC, 2017 1st Lien Term Loan B, 5.80%, 1/4/23, resets monthly off the 1-month LIBOR plus 3.50% | 42,830 | 43,223 | |||||
Transportation Infrastructure — 0.1% | |||||||
Savage Enterprises LLC, 2018 1st Lien Term Loan B, 6.77%, 8/1/25, resets monthly off the 1-month LIBOR plus 4.50% | 344,974 | 348,423 | |||||
Wireless Telecommunication Services — 0.1% | |||||||
WP CPP Holdings, LLC, 2018 Term Loan, 6.28%, 4/30/25, resets quarterly off the 3-month LIBOR plus 3.75% | 275,339 | 276,773 |
23
Principal Amount/Shares | Value | ||||||
WP CPP Holdings, LLC, 2018 Term Loan, 6.05%, 4/30/25, resets monthly off the 1-month LIBOR plus 3.75% | $ | 690 | $ | 694 | |||
277,467 | |||||||
TOTAL BANK LOAN OBLIGATIONS (Cost $41,750,281) | 41,392,528 | ||||||
EXCHANGE-TRADED FUNDS — 11.3% | |||||||
Energy Select Sector SPDR Fund | 110,395 | 7,414,128 | |||||
iShares Global Financials ETF | 101,976 | 6,328,631 | |||||
iShares Global Infrastructure ETF | 118,740 | 4,816,095 | |||||
iShares International Select Dividend ETF | 156,118 | 4,797,506 | |||||
iShares Mortgage Real Estate ETF | 60,738 | 2,592,905 | |||||
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF | 110,447 | 2,870,517 | |||||
VanEck Vectors J.P. Morgan EM Local Currency Bond ETF | 116,312 | 3,752,225 | |||||
TOTAL EXCHANGE-TRADED FUNDS (Cost $32,121,372) | 32,572,007 | ||||||
CORPORATE BONDS — 11.0% | |||||||
Aerospace and Defense — 0.3% | |||||||
BBA US Holdings, Inc., 5.375%, 5/1/26(3) | $ | 49,000 | 48,571 | ||||
BWX Technologies, Inc., 5.375%, 7/15/26(3) | 189,000 | 189,945 | |||||
Pioneer Holdings LLC / Pioneer Finance Corp., 9.00%, 11/1/22(3) | 327,000 | 335,175 | |||||
Pisces Midco, Inc., 8.00%, 4/15/26(3) | 66,000 | 64,350 | |||||
TransDigm, Inc., 6.50%, 7/15/24 | 77,000 | 78,027 | |||||
TransDigm, Inc., 6.50%, 5/15/25 | 72,000 | 71,910 | |||||
TransDigm, Inc., 6.375%, 6/15/26 | 82,000 | 80,565 | |||||
868,543 | |||||||
Air Freight and Logistics — 0.3% | |||||||
Avolon Holdings Funding Ltd., 5.50%, 1/15/23(3) | 66,000 | 65,835 | |||||
Avolon Holdings Funding Ltd., 5.125%, 10/1/23(3) | 165,000 | 162,319 | |||||
Wabash National Corp., 5.50%, 10/1/25(3) | 219,000 | 197,647 | |||||
XPO Logistics, Inc., 6.50%, 6/15/22(3) | 563,000 | 579,186 | |||||
1,004,987 | |||||||
Airlines — 0.2% | |||||||
United Continental Holdings, Inc., 5.00%, 2/1/24 | 522,000 | 514,170 | |||||
Commercial Services and Supplies — 0.6% | |||||||
APTIM Corp., 7.75%, 6/15/25(3) | 315,000 | 260,662 | |||||
Iron Mountain, Inc., 5.25%, 3/15/28(3) | 240,000 | 216,600 | |||||
KAR Auction Services, Inc., 5.125%, 6/1/25(3) | 440,000 | 418,000 | |||||
Midas Intermediate Holdco II LLC / Midas Intermediate Holdco II Finance, Inc., 7.875%, 10/1/22(3) | 344,000 | 305,300 | |||||
Prime Security Services Borrower LLC / Prime Finance, Inc., 9.25%, 5/15/23(3) | 443,000 | 469,226 | |||||
Ritchie Bros Auctioneers, Inc., 5.375%, 1/15/25(3) | 114,000 | 112,860 | |||||
ServiceMaster Co. LLC (The), 5.125%, 11/15/24(3) | 120,000 | 115,800 | |||||
1,898,448 | |||||||
Communications Equipment — 0.3% | |||||||
ViaSat, Inc., 5.625%, 9/15/25(3) | 212,000 | 197,425 | |||||
Zayo Group LLC / Zayo Capital, Inc., 6.375%, 5/15/25 | 573,000 | 588,041 |
24
Principal Amount/Shares | Value | ||||||
Zayo Group LLC / Zayo Capital, Inc., 5.75%, 1/15/27(3) | $ | 32,000 | $ | 31,447 | |||
816,913 | |||||||
Construction and Engineering — 0.4% | |||||||
AECOM, 5.125%, 3/15/27 | 760,000 | 710,600 | |||||
New Enterprise Stone & Lime Co., Inc., 6.25%, 3/15/26(3) | 212,000 | 207,230 | |||||
SBA Communications Corp., 4.875%, 7/15/22 | 126,000 | 125,685 | |||||
1,043,515 | |||||||
Construction Materials — 0.3% | |||||||
CPG Merger Sub LLC, 8.00%, 10/1/21(3) | 518,000 | 520,590 | |||||
Summit Materials LLC / Summit Materials Finance Corp., 5.125%, 6/1/25(3) | 556,000 | 499,010 | |||||
1,019,600 | |||||||
Consumer Finance — 0.1% | |||||||
Park Aerospace Holdings Ltd., 5.25%, 8/15/22(3) | 102,000 | 101,617 | |||||
Park Aerospace Holdings Ltd., 5.50%, 2/15/24(3) | 69,000 | 68,500 | |||||
170,117 | |||||||
Containers and Packaging — 0.6% | |||||||
Ardagh Packaging Finance plc / Ardagh Holdings USA, Inc., 6.00%, 2/15/25(3) | 750,000 | 705,000 | |||||
BWAY Holding Co., 7.25%, 4/15/25(3) | 270,000 | 256,500 | |||||
Multi-Color Corp., 4.875%, 11/1/25(3) | 450,000 | 412,875 | |||||
Silgan Holdings, Inc., 3.25%, 3/15/25 | EUR | 105,000 | 121,862 | ||||
W/S Packaging Holdings, Inc., 9.00%, 4/15/23(3) | $ | 250,000 | 255,625 | ||||
1,751,862 | |||||||
Diversified Consumer Services† | |||||||
frontdoor, Inc., 6.75%, 8/15/26(3) | 105,000 | 107,363 | |||||
Diversified Financial Services — 0.1% | |||||||
Travelport Corporate Finance plc, 6.00%, 3/15/26(3) | 277,000 | 278,385 | |||||
Diversified Telecommunication Services — 0.4% | |||||||
Cincinnati Bell, Inc., 7.00%, 7/15/24(3) | 80,000 | 72,400 | |||||
Cincinnati Bell, Inc., 8.00%, 10/15/25(3) | 99,000 | 90,585 | |||||
Intelsat Jackson Holdings SA, 9.50%, 9/30/22(3) | 100,000 | 116,500 | |||||
Intelsat Jackson Holdings SA, 8.50%, 10/15/24(3) | 298,000 | 293,157 | |||||
Level 3 Financing, Inc., 5.625%, 2/1/23 | 600,000 | 603,618 | |||||
1,176,260 | |||||||
Electronic Equipment, Instruments and Components — 0.1% | |||||||
WESCO Distribution, Inc., 5.375%, 6/15/24 | 263,000 | 255,767 | |||||
Entertainment — 0.7% | |||||||
Altice Finco SA, 7.625%, 2/15/25(3) | 250,000 | 223,125 | |||||
Altice Luxembourg SA, 7.75%, 5/15/22(3) | 250,000 | 232,188 | |||||
Altice Luxembourg SA, 7.625%, 2/15/25(3) | 250,000 | 214,063 | |||||
CCO Holdings LLC / CCO Holdings Capital Corp., 5.75%, 1/15/24 | 387,000 | 391,837 | |||||
CCO Holdings LLC / CCO Holdings Capital Corp., 5.75%, 2/15/26(3) | 476,000 | 472,430 | |||||
CCO Holdings LLC / CCO Holdings Capital Corp., 5.125%, 5/1/27(3) | 111,000 | 104,756 | |||||
CCO Holdings LLC / CCO Holdings Capital Corp., 5.00%, 2/1/28(3) | 119,000 | 111,414 |
25
Principal Amount/Shares | Value | ||||||
Netflix, Inc., 5.875%, 11/15/28(3) | $ | 407,000 | $ | 401,912 | |||
2,151,725 | |||||||
Equity Real Estate Investment Trusts (REITs) — 0.1% | |||||||
SBA Communications Corp., 4.875%, 9/1/24 | 212,000 | 205,375 | |||||
Food and Staples Retailing — 0.3% | |||||||
Kronos Acquisition Holdings, Inc., 9.00%, 8/15/23(3) | 323,000 | 283,433 | |||||
Sabre GLBL, Inc., 5.375%, 4/15/23(3) | 292,000 | 293,460 | |||||
Sabre GLBL, Inc., 5.25%, 11/15/23(3) | 303,000 | 300,691 | |||||
877,584 | |||||||
Food Products — 0.3% | |||||||
Matterhorn Merger Sub LLC / Matterhorn Finance Sub, Inc., 8.50%, 6/1/26(3) | 500,000 | 462,500 | |||||
Post Holdings, Inc., 5.00%, 8/15/26(3) | 485,000 | 449,231 | |||||
911,731 | |||||||
Health Care Equipment and Supplies — 0.2% | |||||||
MEDNAX, Inc., 5.25%, 12/1/23(3) | 492,000 | 493,230 | |||||
Health Care Providers and Services — 0.3% | |||||||
HCA, Inc., 5.375%, 2/1/25 | 644,000 | 649,635 | |||||
HCA, Inc., 5.375%, 9/1/26 | 103,000 | 102,485 | |||||
HCA, Inc., 4.50%, 2/15/27 | 175,000 | 170,625 | |||||
922,745 | |||||||
Hotels, Restaurants and Leisure — 0.5% | |||||||
1011778 BC ULC / New Red Finance, Inc., 5.00%, 10/15/25(3) | 228,000 | 214,320 | |||||
Delta Merger Sub, Inc., 6.00%, 9/15/26(3) | 285,000 | 280,369 | |||||
International Game Technology plc, 6.25%, 1/15/27(3) | 250,000 | 247,344 | |||||
IRB Holding Corp., 6.75%, 2/15/26(3) | 183,000 | 175,680 | |||||
Radisson Hotel Holdings AB, 6.875%, 7/15/23 | EUR | 362,000 | 444,405 | ||||
Scientific Games International, Inc., 5.00%, 10/15/25(3) | $ | 61,000 | 56,882 | ||||
Scientific Games International, Inc., 3.375%, 2/15/26(3) | EUR | 111,000 | 116,943 | ||||
1,535,943 | |||||||
Industrial Conglomerates — 0.2% | |||||||
Core & Main LP, 6.125%, 8/15/25(3) | $ | 219,000 | 206,407 | ||||
EnPro Industries, Inc., 5.75%, 10/15/26(3) | 162,000 | 160,429 | |||||
RBS Global, Inc. / Rexnord LLC, 4.875%, 12/15/25(3) | 194,000 | 182,845 | |||||
549,681 | |||||||
Insurance — 0.1% | |||||||
Genworth Holdings, Inc., 4.90%, 8/15/23 | 239,000 | 211,515 | |||||
Genworth Holdings, Inc., 4.80%, 2/15/24 | 67,000 | 58,290 | |||||
269,805 | |||||||
IT Services — 0.2% | |||||||
GTT Communications, Inc., 7.875%, 12/31/24(3) | 480,000 | 453,600 | |||||
Leisure Products — 0.1% | |||||||
Mattel, Inc., 6.75%, 12/31/25(3) | 250,000 | 239,298 | |||||
Machinery — 0.4% | |||||||
SPX FLOW, Inc., 5.875%, 8/15/26(3) | 219,000 | 211,335 | |||||
Stevens Holding Co., Inc., 6.125%, 10/1/26(3) | 39,000 | 38,956 |
26
Principal Amount/Shares | Value | ||||||
Titan Acquisition Ltd. / Titan Co-Borrower LLC, 7.75%, 4/15/26(3) | $ | 719,000 | $ | 600,365 | |||
TriMas Corp., 4.875%, 10/15/25(3) | 156,000 | 147,764 | |||||
Welbilt, Inc., 9.50%, 2/15/24 | 40,000 | 43,300 | |||||
1,041,720 | |||||||
Media — 0.9% | |||||||
CBS Radio, Inc., 7.25%, 11/1/24(3) | 269,000 | 254,541 | |||||
Cequel Communications Holdings I LLC / Cequel Capital Corp., 7.50%, 4/1/28(3) | 332,000 | 345,353 | |||||
CSC Holdings LLC, 5.375%, 2/1/28(3) | 287,000 | 271,215 | |||||
DKT Finance ApS, 9.375%, 6/17/23(3) | 500,000 | 526,875 | |||||
MDC Partners, Inc., 6.50%, 5/1/24(3) | 434,000 | 358,050 | |||||
National CineMedia LLC, 5.75%, 8/15/26 | 390,000 | 370,500 | |||||
Sirius XM Radio, Inc., 5.00%, 8/1/27(3) | 469,000 | 443,060 | |||||
Unison Ground Lease Funding LLC, 6.27%, 3/15/20(3) | 171,000 | 169,830 | |||||
2,739,424 | |||||||
Metals and Mining — 0.1% | |||||||
Compass Minerals International, Inc., 4.875%, 7/15/24(3) | 198,000 | 185,130 | |||||
Multi-Utilities† | |||||||
Clearway Energy Operating LLC, 5.75%, 10/15/25(3) | 103,000 | 101,713 | |||||
Oil, Gas and Consumable Fuels — 1.6% | |||||||
Alta Mesa Holdings LP / Alta Mesa Finance Services Corp., 7.875%, 12/15/24 | 475,000 | 427,500 | |||||
Bruin E&P Partners LLC, 8.875%, 8/1/23(3) | 437,000 | 430,991 | |||||
Chaparral Energy, Inc., 8.75%, 7/15/23(3) | 170,000 | 163,472 | |||||
Comstock Escrow Corp., 9.75%, 8/15/26(3) | 213,000 | 206,078 | |||||
Extraction Oil & Gas, Inc., 5.625%, 2/1/26(3) | 216,000 | 183,600 | |||||
Gulfport Energy Corp., 6.00%, 10/15/24 | 445,000 | 419,412 | |||||
Magnolia Oil & Gas Operating LLC / Magnolia Oil & Gas Finance Corp., 6.00%, 8/1/26(3) | 219,000 | 216,810 | |||||
Murray Energy Corp., 9% Cash plus 3% PIK, 4/15/24(3) | 189,660 | 124,227 | |||||
Parsley Energy LLC / Parsley Finance Corp., 5.375%, 1/15/25(3) | 309,000 | 303,593 | |||||
QEP Resources, Inc., 5.625%, 3/1/26 | 438,000 | 413,910 | |||||
Range Resources Corp., 5.00%, 3/15/23 | 415,000 | 402,550 | |||||
Resolute Energy Corp., 8.50%, 5/1/20 | 216,000 | 216,270 | |||||
SM Energy Co., 5.00%, 1/15/24 | 84,000 | 80,430 | |||||
SM Energy Co., 5.625%, 6/1/25 | 344,000 | 332,820 | |||||
SRC Energy, Inc., 6.25%, 12/1/25 | 339,000 | 317,389 | |||||
Talos Production LLC / Talos Production Finance, Inc., 11.00%, 4/3/22 | 500,000 | 369,532 | |||||
Ultra Resources, Inc., 6.875%, 4/15/22(3) | 100,000 | 58,000 | |||||
Ultra Resources, Inc., 7.125%, 4/15/25(3) | 125,000 | 55,625 | |||||
4,722,209 |
27
Principal Amount/Shares | Value | ||||||
Software — 0.2% | |||||||
CDK Global, Inc., 5.875%, 6/15/26 | $ | 68,000 | $ | 68,595 | |||
CDK Global, Inc., 4.875%, 6/1/27 | 256,000 | 240,960 | |||||
Sophia LP / Sophia Finance, Inc., 9.00%, 9/30/23(3) | 194,000 | 201,760 | |||||
511,315 | |||||||
Specialty Retail — 0.4% | |||||||
Ashtead Capital, Inc., 4.125%, 8/15/25(3) | 215,000 | 200,487 | |||||
Beacon Roofing Supply, Inc., 4.875%, 11/1/25(3) | 219,000 | 197,648 | |||||
Sally Holdings LLC / Sally Capital, Inc., 5.625%, 12/1/25 | 377,000 | 352,005 | |||||
SRS Distribution, Inc., 8.25%, 7/1/26(3) | 74,000 | 69,560 | |||||
United Rentals North America, Inc., 5.50%, 5/15/27 | 296,000 | 281,940 | |||||
1,101,640 | |||||||
Technology Hardware, Storage and Peripherals† | |||||||
Dell International LLC / EMC Corp., 6.02%, 6/15/26(3) | 105,000 | 109,040 | |||||
Textiles, Apparel and Luxury Goods — 0.1% | |||||||
PVH Corp., 3.125%, 12/15/27(3) | EUR | 213,000 | 235,903 | ||||
Transportation Infrastructure† | |||||||
Resideo Funding, Inc., 6.125%, 11/1/26(3) | $ | 45,000 | 45,348 | ||||
Wireless Telecommunication Services — 0.6% | |||||||
Sprint Corp., 7.875%, 9/15/23 | 615,000 | 658,050 | |||||
T-Mobile USA, Inc., 6.00%, 4/15/24 | 150,000 | 154,125 | |||||
T-Mobile USA, Inc., 6.375%, 3/1/25 | 262,000 | 270,842 | |||||
T-Mobile USA, Inc., 6.50%, 1/15/26 | 398,000 | 420,885 | |||||
Wind Tre SpA, 5.00%, 1/20/26(3) | 250,000 | 214,025 | |||||
1,717,927 | |||||||
TOTAL CORPORATE BONDS (Cost $33,357,722) | 32,028,016 | ||||||
COLLATERALIZED LOAN OBLIGATIONS(2) — 10.8% | |||||||
ALM XVIII Ltd., Series 2016-18A, Class CR, VRN, 5.44%, 1/15/19, resets quarterly off the 3-month LIBOR plus 3.00%(3) | 1,000,000 | 1,000,185 | |||||
AMMC CLO XII Ltd., Series 2013-12A, Class ER, VRN, 8.52%, 11/13/18, resets quarterly off the 3-month LIBOR plus 6.18%(3) | 1,000,000 | 998,143 | |||||
Ares XLI CLO Ltd., Series 2016-41A, Class D, VRN, 6.64%, 1/15/19, resets quarterly off the 3-month LIBOR plus 4.20%(3) | 1,000,000 | 1,013,669 | |||||
Ares XXXIII CLO Ltd., Series 2015-1A, Class E, VRN, 8.82%, 12/5/18, resets quarterly off the 3-month LIBOR plus 6.50%(3) | 700,000 | 699,899 | |||||
Ares XXXVII CLO Ltd., Series 2015-4A, Class CR, VRN, 5.09%, 1/15/19, resets quarterly off the 3-month LIBOR plus 2.65%(3) | 750,000 | 734,885 | |||||
Atrium XII, Series 12A, Class DR, VRN, 5.27%, 1/22/19, resets quarterly off the 3-month LIBOR plus 2.80%(3) | 2,000,000 | 1,989,673 | |||||
Benefit Street Partners CLO VII Ltd., Series 2015-VIIA, Class A1AR, VRN, 3.22%, 1/18/19, resets quarterly off the 3-month LIBOR plus 0.78%(3) | 500,000 | 498,482 | |||||
Bluemountain CLO Ltd., Series 2016-3A, Class C, VRN, 4.71%, 11/15/18, resets quarterly off the 3-month LIBOR plus 2.40%(3) | 800,000 | 800,730 |
28
Principal Amount/Shares | Value | ||||||
BlueMountain CLO XXIII Ltd., Series 2018-23A, Class D, VRN, 5.36%, 4/22/19, resets quarterly off the 3-month LIBOR plus 2.90%(3)(7) | $ | 500,000 | $ | 498,000 | |||
Bowman Park CLO Ltd., Series 2014-1A, Class AR, VRN, 3.49%, 11/23/18, resets quarterly off the 3-month LIBOR plus 1.18%(3) | 320,000 | 319,983 | |||||
Carlyle Global Market Strategies CLO Ltd., Series 2014-1A, Class DR, VRN, 5.05%, 1/17/19, resets quarterly off the 3-month LIBOR plus 2.6%(3) | 1,000,000 | 983,098 | |||||
CIFC Funding Ltd., Series 2013-1A, Class DR, VRN, 9.09%, 1/16/19, resets quarterly off the 3-month LIBOR plus 6.65%(3) | 1,000,000 | 1,009,245 | |||||
CIFC Funding Ltd., Series 2016-1A, Class D, VRN, 6.47%, 1/22/19, resets quarterly off the 3-month LIBOR plus 4.00%(3) | 1,000,000 | 1,009,514 | |||||
Garrison Funding Ltd., Series 2015-1A, Class CR, VRN, 6.21%, 11/25/18, resets quarterly off the 3-month LIBOR plus 3.90%(3) | 1,000,000 | 1,013,422 | |||||
Harbourview CLO VII Ltd., Series 7RA, Class D, VRN, 5.80%, 1/18/19, resets quarterly off the 3-month LIBOR plus 3.36%(3) | 2,000,000 | 1,981,281 | |||||
Jamestown CLO IV Ltd., Series 2014-4A, Class CR, VRN, 5.09%, 1/15/19, resets quarterly off the 3-month LIBOR plus 2.65%(3) | 1,000,000 | 1,000,509 | |||||
Jamestown CLO XI Ltd., Series 2018-11A, Class C, VRN, 5.76%, 1/14/19, resets quarterly off the 3-month LIBOR plus 3.25%(3) | 1,000,000 | 996,554 | |||||
JMP Credit Advisors CLO IIIR Ltd., Series 2014-1RA, Class D, VRN, 5.04%, 1/17/19, resets quarterly off the 3-month LIBOR plus 2.60%(3) | 1,000,000 | 982,710 | |||||
Madison Park Funding XV Ltd., Series 2014-15A, Class DR, VRN, 7.95%, 1/28/19, resets quarterly off the 3-month LIBOR plus 5.44%(3) | 1,750,000 | 1,759,970 | |||||
Mountain View CLO Ltd., Series 2015-9A, Class CR, VRN, 5.56%, 1/15/19, resets quarterly off the 3-month LIBOR plus 3.12%(3) | 1,000,000 | 994,494 | |||||
Northwoods Capital XVI Ltd., Series 2017-16A, Class D, VRN, 5.46%, 11/15/18, resets quarterly off the 3-month LIBOR plus 3.15%(3) | 1,000,000 | 1,002,630 | |||||
OCP CLO Ltd., Series 2016-12A, Class CR, VRN, 5.44%, 1/18/19, resets quarterly off the 3-month LIBOR plus 3.00%(3) | 1,000,000 | 1,001,619 | |||||
Octagon Investment Partners 30 Ltd., Series 2017-1A, Class A1, VRN, 3.79%, 1/22/19, resets quarterly off the 3-month LIBOR plus 1.32%(3) | 750,000 | 753,023 | |||||
OHA Credit Partners IX Ltd., Series 2013-9A, Class E, VRN, 7.47%, 1/20/19, resets quarterly off the 3-month LIBOR plus 5.00%(3) | 1,250,000 | 1,253,770 | |||||
TICP CLO I Ltd., Series 2015-1A, Class F, VRN, 9.17%, 1/22/19, resets quarterly off the 3-month LIBOR plus 6.7%(3) | 500,000 | 483,839 | |||||
TICP CLO II-2 Ltd., Series 2018-IIA, Class C, VRN, 5.42%, 1/22/19, resets quarterly off the 3-month LIBOR plus 2.95%(3) | 1,000,000 | 990,285 | |||||
TICP CLO Ltd., Series 2016-6A, Class D, VRN, 6.64%, 1/15/19, resets quarterly off the 3-month LIBOR plus 4.20%(3) | 1,000,000 | 1,007,468 | |||||
TICP CLO X Ltd., Series 2018-10A, Class D, VRN, 5.27%, 1/22/19, resets quarterly off the 3-month LIBOR plus 2.80%(3) | 1,000,000 | 989,917 |
29
Principal Amount/Shares | Value | ||||||
Venture XVI CLO Ltd., Series 2014-16A, Class DRR, VRN, 4.95%, 1/15/19, resets quarterly off the 3-month LIBOR plus 2.51%(3) | $ | 1,000,000 | $ | 985,335 | |||
Venture XVIII CLO Ltd., Series 2014-18A, Class DR, VRN, 5.54%, 1/15/19, resets quarterly off the 3-month LIBOR plus 3.10%(3) | 1,000,000 | 1,002,961 | |||||
WhiteHorse VII Ltd., Series 2013-1A, Class B1L, VRN, 6.01%, 11/24/18, resets quarterly off the 3-month LIBOR plus 3.70%(3) | 1,500,000 | 1,501,403 | |||||
TOTAL COLLATERALIZED LOAN OBLIGATIONS (Cost $31,213,707) | 31,256,696 | ||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES(2) — 8.4% | |||||||
280 Park Avenue Mortgage Trust, Series 2017-280P, Class F, VRN, 5.11%, 11/15/18, resets monthly off the 1-month LIBOR plus 2.83%(3) | 1,000,000 | 1,003,655 | |||||
BBCMS Trust, Series 2018-CBM, Class D, VRN, 4.67%, 11/15/18, resets monthly off the 1-month LIBOR plus 2.39%(3) | 1,000,000 | 1,005,221 | |||||
BHMS, Series 2018-ATLS, Class C, VRN, 4.18%, 11/15/18, resets monthly off the 1-month LIBOR plus 1.90%(3) | 1,000,000 | 1,001,913 | |||||
BX Trust, Series 2017-SLCT, Class E, VRN, 5.43%, 11/15/18, resets monthly off the 1-month LIBOR plus 3.15%(3) | 1,762,623 | 1,768,669 | |||||
BX Trust, Series 2017-SLCT, Class F, VRN, 6.53%, 11/15/18, resets monthly off the 1-month LIBOR plus 4.25%(3) | 881,312 | 885,148 | |||||
BX Trust, Series 2018-BILT, Class E, VRN, 4.70%, 11/15/18, resets monthly off the 1-month LIBOR plus 2.42%(3) | 1,000,000 | 1,004,594 | |||||
BX Trust, Series 2018-GW, Class F, VRN, 4.70%, 11/15/18, resets monthly off the 1-month LIBOR plus 2.42%(3) | 1,000,000 | 1,005,502 | |||||
BXP Trust, Series 2017-CQHP, Class E, VRN, 5.28%, 11/15/18, resets monthly off the 1-month LIBOR plus 3.00%(3) | 1,000,000 | 1,004,675 | |||||
Caesars Palace Las Vegas Trust, Series 2017-VICI, Class E, VRN, 4.35%, 11/1/18(3)(6) | 1,000,000 | 979,964 | |||||
CHT Mortgage Trust, Series 2017-CSMO, Class F, VRN, 6.02%, 11/15/18, resets monthly off the 1-month LIBOR plus 3.74%(3) | 1,000,000 | 1,004,530 | |||||
GS Mortgage Securities Corp. II, Series 2012-TMSQ, Class D, VRN, 3.46%, 11/1/18(3)(6) | 1,422,000 | 1,350,302 | |||||
GS Mortgage Securities Corp. Trust, Series 2017-500K, Class F, VRN, 4.08%, 11/15/18, resets monthly off the 1-month LIBOR plus 1.80%(3) | 1,000,000 | 1,000,978 | |||||
Hyatt Hotel Portfolio Trust, Series 2017-HYT2, Class D, VRN, 4.13%, 11/15/18, resets monthly off the 1-month LIBOR plus 1.85%(3) | 1,000,000 | 1,001,008 | |||||
J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2018-LAQ, Class E, VRN, 5.28%, 11/15/18, resets monthly off the 1-month LIBOR plus 3.00%(3) | 1,500,000 | 1,516,687 | |||||
J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2018-PHH, Class D, VRN, 3.99%, 11/15/18, resets monthly off the 1-month LIBOR plus 1.71%(3) | 1,000,000 | 999,943 | |||||
JPMorgan Chase Commercial Mortgage Securities Trust, Series 2014-BXH, Class E, VRN, 6.03%, 11/15/18, resets monthly off the 1-month LIBOR plus 3.75%(3) | 260,208 | 257,494 | |||||
JPMorgan Chase Commercial Mortgage Securities Trust, Series 2018-BCON, Class D, VRN, 3.76%, 11/1/18(3)(6) | 1,000,000 | 974,900 | |||||
Lone Star Portfolio Trust, Series 2015-LSP, Class E, VRN, 8.13%, 11/15/18, resets monthly off the 1-month LIBOR plus 5.60%(3) | 1,194,512 | 1,205,466 |
30
Principal Amount/Shares | Value | ||||||
Morgan Stanley Capital I Trust, Series 2017-JWDR, Class E, VRN, 5.33%, 11/15/18, resets monthly off the 1-month LIBOR plus 3.05%(3) | $ | 2,500,000 | $ | 2,505,416 | |||
Morgan Stanley Capital I Trust 2018-BOP, Series 2018-BOP, Class F, VRN, 4.78%, 11/15/18, resets monthly off the 1-month LIBOR plus 2.50%(3) | 1,000,000 | 1,003,298 | |||||
Palisades Center Trust, Series 2016-PLSD, Class D, 4.74%, 4/13/33(3) | 1,000,000 | 979,347 | |||||
WFRBS Commercial Mortgage Trust, Series 2014-C19, Class D, 4.23%, 3/15/47(3) | 1,000,000 | 874,981 | |||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (Cost $24,324,460) | 24,333,691 | ||||||
COLLATERALIZED MORTGAGE OBLIGATIONS(2) — 2.5% | |||||||
Private Sponsor Collateralized Mortgage Obligations — 0.5% | |||||||
Bear Stearns Asset Backed Securities I Trust, Series 2004-AC6, Class A2, VRN, 2.68%, 11/25/18, resets monthly off the 1-month LIBOR plus 0.40% | 1,033,266 | 965,269 | |||||
Sequoia Mortgage Trust, Series 2018-CH4, Class A19, VRN, 4.50%, 11/1/18(3)(6) | 391,173 | 395,325 | |||||
1,360,594 | |||||||
U.S. Government Agency Collateralized Mortgage Obligations — 2.0% | |||||||
FNMA, Series 2016-C05, Class 2M2, VRN, 6.73%, 11/25/18, resets monthly off the 1-month LIBOR plus 4.45% | 1,500,000 | 1,667,385 | |||||
FNMA, Series 2016-C06, Class 1M2, VRN, 6.53%, 11/25/18, resets monthly off the 1-month LIBOR plus 4.25% | 1,000,000 | 1,129,802 | |||||
FNMA, Series 2018-C03, Class 1M2, VRN, 4.43%, 11/25/18, resets monthly off the 1-month LIBOR plus 2.15% | 1,000,000 | 999,480 | |||||
FNMA, Series 2018-C06, Class 1M2, VRN, 4.28%, 11/25/18, resets monthly off the 1-month LIBOR plus 2.00% | 1,000,000 | 988,326 | |||||
GNMA, Series 2012-87, IO, VRN, 0.46%, 11/1/18(6) | 4,794,414 | 110,026 | |||||
GNMA, Series 2012-99, IO, SEQ, VRN, 0.52%, 11/1/18(6) | 4,133,576 | 122,397 | |||||
GNMA, Series 2014-126, IO, SEQ, VRN, 0.73%, 11/1/18(6) | 4,435,479 | 226,545 | |||||
GNMA, Series 2014-126, IO, SEQ, VRN, 0.95%, 11/1/18(6) | 5,459,051 | 324,719 | |||||
GNMA, Series 2015-85, IO, VRN, 0.58%, 11/1/18(6) | 6,196,742 | 254,783 | |||||
5,823,463 | |||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $7,533,250) | 7,184,057 | ||||||
PREFERRED STOCKS — 2.0% | |||||||
Equity Real Estate Investment Trusts (REITs) — 2.0% | |||||||
American Homes 4 Rent, 5.875% | 6,100 | 134,932 | |||||
American Homes 4 Rent, 6.50% | 11,344 | 271,348 | |||||
American Homes 4 Rent, 6.35% | 11,548 | 272,879 | |||||
Ashford Hospitality Trust, Inc., 7.375% | 1,335 | 30,892 | |||||
Brookfield Property REIT, Inc., 6.375% | 8,321 | 199,288 | |||||
Cedar Realty Trust, Inc., 6.50% | 8,551 | 182,478 | |||||
Colony Capital, Inc., 7.125% | 10,476 | 231,520 | |||||
Colony Capital, Inc., 7.125% | 12,174 | 274,767 | |||||
Colony Capital, Inc., 7.15% | 9,300 | 205,530 | |||||
Digital Realty Trust, Inc., 6.35% | 7,391 | 190,466 | |||||
Digital Realty Trust, Inc., 6.625% | 3,857 | 101,208 | |||||
Hersha Hospitality Trust, 6.50% | 1,823 | 38,465 | |||||
Hersha Hospitality Trust, 6.50% | 1,347 | 28,704 |
31
Principal Amount/Shares | Value | ||||||
Kimco Realty Corp., 5.625% | 5,819 | $ | 133,430 | ||||
Kimco Realty Corp., 5.50% | 8,232 | 185,632 | |||||
LaSalle Hotel Properties, 6.375% | 3,600 | 87,048 | |||||
LaSalle Hotel Properties, 6.30% | 10,900 | 259,965 | |||||
Monmouth Real Estate Investment Corp., 6.125% | 11,389 | 273,336 | |||||
National Retail Properties, Inc., 5.20% | 9,407 | 203,756 | |||||
Pebblebrook Hotel Trust, 6.375% | 3,200 | 77,904 | |||||
Pebblebrook Hotel Trust, 6.50% | 6,295 | 153,598 | |||||
Pennsylvania Real Estate Investment Trust, 7.20% | 1,410 | 31,640 | |||||
PS Business Parks, Inc., 5.25% | 9,744 | 212,127 | |||||
PS Business Parks, Inc., 5.70% | 1,350 | 31,671 | |||||
PS Business Parks, Inc., 5.75% | 411 | 9,778 | |||||
Public Storage, 5.875% | 1,100 | 27,896 | |||||
Public Storage, 5.20% | 7,499 | 171,352 | |||||
QTS Realty Trust, Inc., 7.125% | 10,694 | 267,350 | |||||
Rexford Industrial Realty, Inc., 5.875% | 6,501 | 151,148 | |||||
Rexford Industrial Realty, Inc., 5.875% | 4,700 | 110,685 | |||||
SITE Centers Corp., 6.50% | 11,819 | 275,974 | |||||
Summit Hotel Properties, Inc., 6.25% | 8,623 | 197,898 | |||||
Sunstone Hotel Investors, Inc., 6.95% | 10,755 | 270,596 | |||||
VEREIT, Inc., 6.70% | 5,366 | 133,506 | |||||
Vornado Realty Trust, 5.40% | 11,746 | 273,682 | |||||
Vornado Realty Trust, 5.70% | 784 | 18,526 | |||||
TOTAL PREFERRED STOCKS (Cost $5,996,090) | 5,720,975 | ||||||
U.S. TREASURY SECURITIES — 1.4% | |||||||
U.S. Treasury Notes, 2.875%, 8/15/28 (Cost $3,992,047) | $ | 4,077,000 | 3,983,675 | ||||
CONVERTIBLE BONDS — 0.1% | |||||||
Energy Equipment and Services† | |||||||
CHC Group LLC / CHC Finance Ltd., 0.00%, 10/1/20 (Acquired 3/13/17, Cost $88,344)(8)(9) | 114,377 | 114,377 | |||||
Oil, Gas and Consumable Fuels — 0.1% | |||||||
Whiting Petroleum Corp., 1.25%, 4/1/20 | 245,000 | 235,528 | |||||
TOTAL CONVERTIBLE BONDS (Cost $322,068) | 349,905 | ||||||
CONVERTIBLE PREFERRED STOCKS — 0.1% | |||||||
Equity Real Estate Investment Trusts (REITs) — 0.1% | |||||||
QTS Realty Trust, Inc., 6.50% (Cost $144,267) | 1,442 | 141,777 | |||||
TEMPORARY CASH INVESTMENTS — 6.3% | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class (Cost $18,231,713) | 18,231,713 | 18,231,713 | |||||
TOTAL INVESTMENT SECURITIES BEFORE SECURITIES SOLD SHORT — 99.0% (Cost $288,600,993) | 286,286,288 |
32
Principal Amount/Shares | Value | ||||||
CORPORATE BONDS SOLD SHORT — (0.1)% | |||||||
Equity Real Estate Investment Trusts (REITs) — (0.1)% | |||||||
CBL & Associates LP, 5.25%, 12/1/23 (Proceeds $198,848) | $ | (198,000 | ) | $ | (166,815 | ) | |
OTHER ASSETS AND LIABILITIES — 1.1% | 3,182,098 | ||||||
TOTAL NET ASSETS — 100.0% | $ | 289,301,571 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||
USD | 4,760,931 | EUR | 4,170,000 | State Street Bank & Trust Co. | 12/7/18 | $ | 24,322 |
FUTURES CONTRACTS SOLD | |||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Underlying Contract Value | Unrealized Appreciation (Depreciation) | ||||||
Euro-Bund 10-Year Bonds | 22 | December 2018 | EUR | 2,200,000 | $ | 3,993,408 | $ | (37,158 | ) | ||
S&P 500 E-Mini | 52 | December 2018 | USD | 2,600 | 7,048,860 | 480,757 | |||||
$ | 11,042,268 | $ | 443,599 |
33
NOTES TO SCHEDULE OF INVESTMENTS | ||
EUR | - | Euro |
Euribor | - | Euro Interbank Offered Rate |
FNMA | - | Federal National Mortgage Association |
GNMA | - | Government National Mortgage Association |
IO | - | Interest Only |
LIBOR | - | London Interbank Offered Rate |
PIK | - | Payment in Kind. Security may pay a cash rate and/or an in kind rate. |
resets | - | The frequency with which a security's coupon changes, based on current market conditions or an underlying index. |
SEQ | - | Sequential Payer |
USD | - | United States Dollar |
VRN | - | Variable Rate Note. Interest reset date is indicated. Rate shown is effective at the period end. |
† | Category is less than 0.05% of total net assets. |
(1) | Non-income producing. |
(2) | Final maturity date indicated, unless otherwise noted. |
(3) | 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 $118,528,525, which represented 41.0% of total net assets. Of these securities, 0.6% of total net assets were deemed illiquid under policies approved by the Board of Trustees. |
(4) | The interest rate on a bank loan obligation adjusts periodically based on a predetermined schedule. Rate shown is effective at period end. The maturity date on a bank loan obligation may be less than indicated as a result of contractual or optional prepayments. These prepayments cannot be predicted with certainty. Final maturity date is indicated. |
(5) | The interest rate will be determined upon settlement of the bank loan obligation after period end. |
(6) | The interest rate resets periodically based on the weighted average coupons of the underlying mortgage-related or asset-backed obligations. |
(7) | When-issued security. The issue price and yield are fixed on the date of the commitment, but payment and delivery are scheduled for a future date. |
(8) | Restricted security that may not be offered for public sale without being registered with the Securities and Exchange Commission and/or may be subject to resale, redemption or transferability restrictions. The aggregate value of these securities at the period end was $114,377, which represented less than 0.05% of total net assets. |
(9) | Security is a zero-coupon bond. Zero-coupon securities are issued at a substantial discount from their value at maturity. |
See Notes to Financial Statements.
34
Statement of Assets and Liabilities |
OCTOBER 31, 2018 | |||
Assets | |||
Investment securities, at value (cost of $288,600,993) | $ | 286,286,288 | |
Cash | 611,812 | ||
Foreign currency holdings, at value (cost of $436,428) | 426,101 | ||
Deposits with broker for futures contracts | 403,020 | ||
Deposits with broker for securities sold short | 266,363 | ||
Receivable for investments sold | 28,064,057 | ||
Receivable for capital shares sold | 788,808 | ||
Receivable for variation margin on futures contracts | 71,990 | ||
Unrealized appreciation on forward foreign currency exchange contracts | 24,322 | ||
Interest and dividends receivable | 1,094,011 | ||
318,036,772 | |||
Liabilities | |||
Securities sold short, at value (proceeds of $198,848) | 166,815 | ||
Payable for investments purchased | 26,994,321 | ||
Payable for capital shares redeemed | 1,014,845 | ||
Payable for variation margin on futures contracts | 96,994 | ||
Accrued management fees | 441,369 | ||
Distribution and service fees payable | 16,526 | ||
Interest expense payable on securities sold short | 4,331 | ||
28,735,201 | |||
Net Assets | $ | 289,301,571 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 290,316,757 | |
Distributable earnings | (1,015,186 | ) | |
$ | 289,301,571 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $126,369,270 | 13,092,745 | $9.65 | |||
I Class, $0.01 Par Value | $129,431,281 | 13,405,542 | $9.66 | |||
Y Class, $0.01 Par Value | $3,913,796 | 405,302 | $9.66 | |||
A Class, $0.01 Par Value | $11,992,225 | 1,242,654 | $9.65* | |||
C Class, $0.01 Par Value | $16,086,109 | 1,675,930 | $9.60 | |||
R Class, $0.01 Par Value | $7,813 | 811 | $9.63 | |||
R6 Class, $0.01 Par Value | $1,501,077 | 155,407 | $9.66 |
*Maximum offering price $10.24 (net asset value divided by 0.9425).
See Notes to Financial Statements.
35
Statement of Operations |
YEAR ENDED OCTOBER 31, 2018 | |||
Investment Income (Loss) | |||
Income: | |||
Interest | $ | 9,279,021 | |
Dividends (net of foreign taxes withheld of $53,362) | 3,552,868 | ||
12,831,889 | |||
Expenses: | |||
Management fees | 5,004,282 | ||
Distribution and service fees: | |||
A Class | 28,101 | ||
C Class | 163,593 | ||
R Class | 315 | ||
Directors' fees and expenses | 5,933 | ||
Interest expense on securities sold short | 15,738 | ||
Other expenses | 2,192 | ||
5,220,154 | |||
Fees waived(1) | (259,628 | ) | |
4,960,526 | |||
Net investment income (loss) | 7,871,363 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 128,997 | ||
Securities sold short transactions | 22,957 | ||
Forward foreign currency exchange contract transactions | 378,657 | ||
Futures contract transactions | 75,693 | ||
Swap agreement transactions | 51,903 | ||
Foreign currency translation transactions | (85,789 | ) | |
572,418 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (5,629,089 | ) | |
Securities sold short | 31,455 | ||
Forward foreign currency exchange contracts | 8,996 | ||
Futures contracts | 719,912 | ||
Swap agreements | (37,788 | ) | |
Translation of assets and liabilities in foreign currencies | 14,763 | ||
(4,891,751 | ) | ||
Net realized and unrealized gain (loss) | (4,319,333 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 3,552,030 |
(1) | Amount consists of $117,273, $113,175, $1,172, $11,163, $16,146, $52 and $647 for Investor Class, I Class, Y Class, A Class, C Class, R Class and R6 Class, respectively. |
See Notes to Financial Statements.
36
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2018 AND OCTOBER 31, 2017 | ||||||
Increase (Decrease) in Net Assets | October 31, 2018 | October 31, 2017 | ||||
Operations | ||||||
Net investment income (loss) | $ | 7,871,363 | $ | 4,611,793 | ||
Net realized gain (loss) | 572,418 | 2,163,403 | ||||
Change in net unrealized appreciation (depreciation) | (4,891,751 | ) | 3,190,445 | |||
Net increase (decrease) in net assets resulting from operations | 3,552,030 | 9,965,641 | ||||
Distributions to Shareholders | ||||||
From earnings: | ||||||
Investor Class | (3,621,683 | ) | (2,069,991 | ) | ||
I Class | (3,697,648 | ) | (1,441,260 | ) | ||
Y Class | (34,132 | ) | (68 | ) | ||
A Class | (309,010 | ) | (379,667 | ) | ||
C Class | (338,648 | ) | (169,405 | ) | ||
R Class | (207 | ) | (19,673 | ) | ||
R6 Class | (14,478 | ) | (83,364 | ) | ||
Decrease in net assets from distributions | (8,015,806 | ) | (4,163,428 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | 16,638,755 | 184,197,316 | ||||
Net increase (decrease) in net assets | 12,174,979 | 189,999,529 | ||||
Net Assets | ||||||
Beginning of period | 277,126,592 | 87,127,063 | ||||
End of period | $ | 289,301,571 | $ | 277,126,592 |
See Notes to Financial Statements.
37
Notes to Financial Statements |
OCTOBER 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 Income Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek to provide diverse sources of income.
The fund offers the Investor Class, I Class, Y Class, A Class, C Class, R 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 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.
Fixed income securities are valued at the evaluated mean as provided by independent pricing services or at the mean of the most recent bid and asked prices as provided by investment dealers. Corporate bonds, U.S. Treasury and Government Agency securities, convertible bonds and bank loan obligations are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information. Mortgage-related and asset-backed securities are valued based on models that consider trade data, prepayment and default projections, benchmark yield and spread data and estimated cash flows of each tranche of the issuer. Collateralized loan obligations are valued based on discounted cash flow models that consider trade and economic data, prepayment assumptions and default projections. Fixed income 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.
Exchange-traded notes and 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. Exchange-traded futures contracts are valued at the settlement price as provided by the appropriate exchange. Exchange-traded options contracts are valued at a mean as provided by independent pricing services. Swap agreements are valued at an evaluated mean as provided by independent pricing services or independent brokers. Forward foreign currency exchange contracts are valued at the mean of the appropriate forward exchange rate at the close of the NYSE as provided by an independent pricing service. Investments 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.
38
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 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 — Interest income is recorded on the accrual basis and includes paydown gain (loss) and accretion of discounts and amortization of premiums. Inflation adjustments related to inflation-linked debt securities are reflected as interest income. 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.
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, if any, 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. 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. 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.
39
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover certain types of investment securities and other financial instruments. American Century Investment Management, Inc. (ACIM) (the investment advisor) monitors, on a daily basis, the securities segregated to ensure the fund designates a sufficient amount of liquid assets, marked-to-market daily. The fund may also receive assets or be required to pledge assets at the custodian bank or with a broker for collateral requirements.
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. ACIM has engaged Perella Weinberg Partners Capital Management LP (PWP) as a subadvisor for the fund. PWP assists the investment advisor in making recommendations with respect to hiring, terminating, or replacing the fund’s underlying subadvisors. The fund’s underlying subadvisors at the period end were ArrowMark Colorado Holdings LLC, BCSF Advisors, LP (BCSF), Good Hill Partners LP and Timbercreek Investment Management (U.S.) LLC . Effective August 1, 2018, Bain Capital Credit, LP (BCC) was replaced by BCSF, a subsidiary of BCC, as a subadvisor to the fund. PWP determines the percentage of the fund’s portfolio allocated to each subadvisor, including PWP, in order to seek to achieve the fund’s investment objective. ACIM is responsible for entering into subadvisory agreements and overseeing the activities of each of the subadvisors including monitoring compliance with fund objectives, strategies and restrictions. ACIM pays all costs associated with retaining the subadvisors of the fund.
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. From November 1, 2017 through March 15, 2018, the investment advisor agreed to waive 0.08% of the fund’s management fee. Effective March 16, 2018, the investment advisor agreed to waive 0.11% of the fund's management fee. The investment advisor expects this waiver to continue until July 31, 2019 and cannot
terminate it prior to such date without the approval of the Board of Directors.
40
The annual management fee and the effective annual management fee after waiver for each class for the period ended October 31, 2018 are as follows:
Annual Management Fee | Effective Annual Management Fee After Waiver | |
Investor Class | 2.00% | 1.90% |
I Class | 1.80% | 1.70% |
Y Class | 1.65% | 1.55% |
A Class | 2.00% | 1.90% |
C Class | 2.00% | 1.90% |
R Class | 2.00% | 1.90% |
R6 Class | 1.65% | 1.55% |
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 services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the period ended October 31, 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.
Acquired Fund Fees and Expenses — The fund may invest in mutual funds, exchange-traded funds, and business development companies (the acquired funds). The fund will indirectly realize its pro rata share of the fees and expenses of the acquired funds in which it invests. These indirect fees and expenses are not paid out of the fund's assets but are reflected in the return realized by the fund on its investment in the acquired funds.
4. Investment Transactions
Purchases of investment securities and securities sold short, excluding short-term investments, for the period ended October 31, 2018 totaled $225,082,654, of which $5,993,354 represented U.S. Treasury and Government Agency obligations.
Sales of investment securities and securities sold short, excluding short-term investments, for the period ended October 31, 2018 totaled $202,020,852, of which $5,580,104 represented U.S. Treasury and Government Agency obligations.
41
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2018 | Year ended October 31, 2017(1) | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 90,000,000 | 85,000,000 | ||||||||
Sold | 7,410,245 | $ | 72,554,413 | 21,278,884 | $ | 205,803,534 | ||||
Issued in reinvestment of distributions | 368,063 | 3,591,393 | 213,104 | 2,062,883 | ||||||
Redeemed | (7,607,664 | ) | (74,518,593 | ) | (12,942,093 | ) | (125,895,056 | ) | ||
170,644 | 1,627,213 | 8,549,895 | 81,971,361 | |||||||
I Class/Shares Authorized | 90,000,000 | 80,000,000 | ||||||||
Sold | 7,580,804 | 74,290,441 | 13,030,700 | 127,074,687 | ||||||
Issued in reinvestment of distributions | 378,902 | 3,697,648 | 148,092 | 1,441,260 | ||||||
Redeemed | (6,229,732 | ) | (61,011,365 | ) | (2,253,142 | ) | (22,017,262 | ) | ||
1,729,974 | 16,976,724 | 10,925,650 | 106,498,685 | |||||||
Y Class/Shares Authorized | 70,000,000 | 50,000,000 | ||||||||
Sold | 408,264 | 3,998,407 | 516 | 5,001 | ||||||
Issued in reinvestment of distributions | 3,489 | 34,132 | 7 | 68 | ||||||
Redeemed | (6,974 | ) | (68,229 | ) | — | — | ||||
404,779 | 3,964,310 | 523 | 5,069 | |||||||
A Class/Shares Authorized | 25,000,000 | 35,000,000 | ||||||||
Sold | 666,452 | 6,516,756 | 3,793,956 | 36,555,230 | ||||||
Issued in reinvestment of distributions | 31,507 | 307,419 | 38,810 | 374,267 | ||||||
Redeemed | (834,537 | ) | (8,159,603 | ) | (4,598,086 | ) | (44,713,379 | ) | ||
(136,578 | ) | (1,335,428 | ) | (765,320 | ) | (7,783,882 | ) | |||
C Class/Shares Authorized | 25,000,000 | 35,000,000 | ||||||||
Sold | 523,348 | 5,095,186 | 1,440,556 | 13,860,944 | ||||||
Issued in reinvestment of distributions | 34,274 | 332,884 | 17,181 | 165,765 | ||||||
Redeemed | (800,606 | ) | (7,785,689 | ) | (825,437 | ) | (7,985,144 | ) | ||
(242,984 | ) | (2,357,619 | ) | 632,300 | 6,041,565 | |||||
R Class/Shares Authorized | 10,000,000 | 20,000,000 | ||||||||
Sold | 1,258 | 12,352 | 482 | 4,947 | ||||||
Issued in reinvestment of distributions | 21 | 207 | 2,044 | 19,673 | ||||||
Redeemed | (81,253 | ) | (793,862 | ) | (128,452 | ) | (1,249,609 | ) | ||
(79,974 | ) | (781,303 | ) | (125,926 | ) | (1,224,989 | ) | |||
R6 Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||
Sold | 154,428 | 1,515,468 | — | — | ||||||
Issued in reinvestment of distributions | 1,479 | 14,478 | 8,636 | 83,364 | ||||||
Redeemed | (304,706 | ) | (2,985,088 | ) | (142,727 | ) | (1,393,857 | ) | ||
(148,799 | ) | (1,455,142 | ) | (134,091 | ) | (1,310,493 | ) | |||
Net increase (decrease) | 1,697,062 | $ | 16,638,755 | 19,083,031 | $ | 184,197,316 |
(1) | April 10, 2017 (commencement of sale) through October 31, 2017 for the Y Class. |
42
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 36,136,378 | $ | 8,663,297 | — | |||
Asset-Backed Securities | — | 44,291,573 | — | |||||
Bank Loan Obligations | — | 41,392,528 | — | |||||
Exchange-Traded Funds | 32,572,007 | — | — | |||||
Corporate Bonds | — | 32,028,016 | — | |||||
Collateralized Loan Obligations | — | 31,256,696 | — | |||||
Commercial Mortgage-Backed Securities | — | 24,333,691 | — | |||||
Collateralized Mortgage Obligations | — | 7,184,057 | — | |||||
Preferred Stocks | 5,643,071 | 77,904 | — | |||||
U.S. Treasury Securities | — | 3,983,675 | — | |||||
Convertible Bonds | — | 349,905 | — | |||||
Convertible Preferred Stocks | — | 141,777 | — | |||||
Temporary Cash Investments | 18,231,713 | — | — | |||||
$ | 92,583,169 | $ | 193,703,119 | — | ||||
Other Financial Instruments | ||||||||
Futures Contracts | $ | 480,757 | — | — | ||||
Forward Foreign Currency Exchange Contracts | — | $ | 24,322 | — | ||||
$ | 480,757 | $ | 24,322 | — | ||||
Liabilities | ||||||||
Securities Sold Short | ||||||||
Corporate Bonds | — | $ | 166,815 | — | ||||
Other Financial Instruments | ||||||||
Futures Contracts | — | $ | 37,158 | — |
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7. Derivative Instruments
Credit Risk — The fund is subject to credit risk in the normal course of pursuing its investment objectives. The value of a bond generally declines as the credit quality of its issuer declines. Credit default swap agreements enable a fund to buy/sell protection against a credit event of a specific issuer or index. A fund may attempt to enhance returns by selling protection or attempt to mitigate credit risk by buying protection. The buyer/seller of credit protection against a security or basket of securities may pay/receive an up-front or periodic payment to compensate for/against potential default events. Changes in value, including the periodic amounts of interest to be paid or received on swap agreements, are recorded as unrealized appreciation (depreciation) on swap agreements. Upon entering into a centrally cleared swap, a fund is required to deposit cash or securities (initial margin) with a financial intermediary in an amount equal to a certain percentage of the notional amount. Subsequent payments (variation margin) are made or received daily, in cash, by a fund. The variation margin is equal to the daily change in the value and is a component of unrealized gains and losses. Realized gain or loss is recorded upon receipt or payment of a periodic settlement or termination of swap agreements. Net realized and unrealized gains or losses occurring during the holding period of swap agreements are a component of net realized gain (loss) on swap agreement transactions and change in net unrealized appreciation (depreciation) on swap agreements, respectively. The risks of entering into swap agreements include the possible lack of liquidity, failure of the counterparty to meet its obligations, and that there may be unfavorable changes in the underlying investments or instruments. The fund's average notional amount held during the period was $1,052,000.
Equity Price Risk — The fund is subject to equity price risk in the normal course of pursuing its investment objectives. A fund may enter into futures contracts or option contracts based on an equity index or specific security in order to manage its exposure to changes in market conditions. The risks of entering into equity price risk derivative instruments include the possible lack of liquidity, failure of the counterparty to meet its obligations, and that there may be unfavorable changes in the underlying investments or instruments.
A fund may purchase or write an option contract to protect against declines in market value on the underlying index or security. A purchased option contract provides the fund a right, but not an obligation, to buy (call) or sell (put) an equity-related asset at a specified exercise price within a certain period or on a specific date. A written option contract holds the corresponding obligation to sell (call writing) or buy (put writing) the underlying equity-related asset if the purchaser exercises the option contract. The buyer pays the seller an initial purchase price (premium) for this right. Option contracts purchased by a fund are accounted for in the same manner as marketable portfolio securities. The premium received by a fund for option contracts written is recorded as a liability and valued daily. The proceeds from securities sold through the exercise of option contracts are decreased by the premium paid to purchase the option contracts. A fund may recognize a realized gain or loss when the option contract is closed, exercised or expires. Net realized and unrealized gains or losses occurring during the holding period of purchased options contracts are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively. Net realized and unrealized gains or losses occurring during the holding period of written options contracts are a component of net realized gain (loss) on written options contract transactions and change in net unrealized appreciation (depreciation) on written options contracts, respectively. The fund’s average exposure to these equity price risk derivative instruments held during the period was 120 purchased options contracts.
A fund may purchase futures contracts to gain exposure to increases in market value or sell futures contracts to protect against a decline in market value. Upon entering into a futures contract, a fund is required to deposit either cash or securities in an amount equal to a certain percentage of the contract value (initial margin). Subsequent payments (variation margin) are made or received daily, in cash, by a fund. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. A fund recognizes a realized gain or loss when the contract is closed or expires. Net realized and unrealized gains or
losses occurring during the holding period of futures contracts are a component of net realized gain (loss) on futures contract transactions and change in net unrealized appreciation (depreciation) on futures contracts, respectively. The fund's average notional exposure to these equity price risk derivative instruments held during the period was $251,500 futures contracts purchased and $40,329 futures contracts sold.
44
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 or to gain exposure to the fluctuations in the value of foreign currencies. 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 $2,857,909.
Interest Rate Risk — The fund is subject to interest rate risk in the normal course of pursuing its investment objectives. The value of bonds generally declines as interest rates rise. A fund may enter into futures contracts based on a bond index or a specific underlying security. A fund may purchase futures contracts to gain exposure to increases in market value or sell futures contracts to protect against a decline in market value. Upon entering into a futures contract, a fund will segregate cash, cash equivalents or other appropriate liquid securities on its records in amounts sufficient to meet requirements. Subsequent payments (variation margin) are made or received daily, in cash, by a fund. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. A fund recognizes a realized gain or loss when the futures contract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of net realized gain (loss) on futures contract transactions and change in net unrealized appreciation (depreciation) on futures contracts, respectively. One of the risks of entering into futures contracts is the possibility that the change in value of the contract may not correlate with the changes in value of the underlying securities. The fund's average notional exposure to interest rate risk derivative instruments held during the period was $1,745,915 futures contracts sold.
Value of Derivative Instruments as of October 31, 2018
Asset Derivatives | Liability Derivatives | |||||||
Type of Risk Exposure | Location on Statement of Assets and Liabilities | Value | Location on Statement of Assets and Liabilities | Value | ||||
Equity Price Risk | Receivable for variation margin on futures contracts* | $ | 71,990 | Payable for variation margin on futures contracts* | — | |||
Foreign Currency Risk | Unrealized appreciation on forward foreign currency exchange contracts | 24,322 | Unrealized depreciation on forward foreign currency exchange contracts | — | ||||
Interest Rate Risk | Receivable for variation margin on futures contracts* | — | Payable for variation margin on futures contracts* | $ | 96,994 | |||
$ | 96,312 | $ | 96,994 |
* Included in the unrealized appreciation (depreciation) on futures contracts, as reported in the Schedule of Investments.
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Effect of Derivative Instruments on the Statement of Operations for the Year Ended October 31, 2018
Net Realized Gain (Loss) | Change in Net Unrealized Appreciation (Depreciation) | |||||||
Type of Risk Exposure | Location on Statement of Operations | Value | Location on Statement of Operations | Value | ||||
Credit Risk | Net realized gain (loss) on swap agreement transactions | $ | 51,903 | Change in net unrealized appreciation (depreciation) on swap agreements | $ | (37,788 | ) | |
Equity Price Risk | Net realized gain (loss) on futures contract transactions | 75,186 | Change in net unrealized appreciation (depreciation) on futures contracts | 757,070 | ||||
Equity Price Risk | Net realized gain (loss) on investment transactions | (32,452 | ) | Change in net unrealized appreciation (depreciation) on investments | 23,104 | |||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | 378,657 | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | 8,996 | ||||
Interest Rate Risk | Net realized gain (loss) on futures contract transactions | 507 | Change in net unrealized appreciation (depreciation) on futures contracts | (37,158 | ) | |||
$ | 473,801 | $ | 714,224 |
8. Risk Factors
ACIM utilizes multiple subadvisors to manage the fund’s assets, each employing its own particular investment strategy. Multi-manager strategies can increase the fund's portfolio turnover rate, which could result in higher levels of realized capital gains or losses, higher brokerage commissions and other transaction costs.
The fund’s investments in secured and unsecured participations in bank loan obligations and assignments of such loans may create substantial risk. The market for bank loans may not be highly liquid and the fund may have difficulty selling them. The fund’s bank loan investments typically will result in the fund having a contractual relationship only with the lender, not with the borrower. In connection with purchasing loan participations, the fund generally will have no right to enforce compliance by borrowers with loan terms nor any set off rights, and the fund may not benefit directly from any posted collateral. As a result, the fund may be subject to the credit risk of both the borrower and the lender selling the participation.
The fund may invest in collateralized debt obligations, collateralized loan obligations and other related instruments. Collateralized debt obligations are subject to credit, interest rate, valuation, and prepayment and extension risks. These securities also are subject to risk of default on the underlying asset, particularly during periods of economic downturn.
The fund may invest in foreign securities, which are generally riskier than U.S. securities. As a result the fund may be subject to foreign risk, meaning that political events (such as civil unrest, national elections and imposition of exchange controls), social and economic events (such as labor strikes and rising inflation), and natural disasters occurring in a country where the fund invests could cause the fund’s investments in that country to experience losses. For these and other reasons, securities of foreign issuers may be less liquid and more volatile. Investing in securities of companies located in emerging market countries generally is riskier than investing in securities of companies located in foreign developed countries.
Issuers of high-yield securities (also known as “junk bonds”) are more vulnerable to real or perceived economic changes (such as an economic downturn or a prolonged period of rising interest rates), political changes or adverse developments specific to an issuer. These factors may be more likely to cause an issuer of low quality bonds to default on its obligations.
The fund may also be subject to liquidity risk. During periods of market turbulence or unusually low trading activity, in order to meet redemptions it may be necessary for the fund to sell securities at prices that could have an adverse effect on the fund’s share price.
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Mortgage-related and other asset-backed securities are subject to additional risks including prepayment and extension risk. Mortgage-backed securities offered by non-governmental issuers are subject to specific risks, such as the failure of private insurers to meet their obligations and unexpectedly high rates of default on the mortgages backing the securities. Other asset-backed securities are subject to risks similar to those associated with mortgage-backed securities, as well as risks associated with the nature and servicing of the assets underlying the securities. Asset-backed securities may not have the benefit of a security interest in collateral comparable to that of mortgage assets, resulting in additional credit risk.
9. Federal Tax Information
The tax character of distributions paid during the years ended October 31, 2018 and October 31, 2017 were as follows:
2018 | 2017 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 8,015,806 | $ | 4,163,428 | ||
Long-term capital gains | — | — |
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 288,723,207 | |
Gross tax appreciation of investments | $ | 3,115,883 | |
Gross tax depreciation of investments | (5,552,802 | ) | |
Net tax appreciation (depreciation) of investments | (2,436,919 | ) | |
Gross tax appreciation on securities sold short | 32,033 | ||
Gross tax depreciation on securities sold short | — | ||
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 14,910 | ||
Net tax appreciation (depreciation) | $ | (2,389,976 | ) |
Undistributed ordinary income | $ | 1,524,787 | |
Accumulated short-term capital losses | $ | (149,997 | ) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the realization for tax purposes of unrealized gains (losses) on futures contracts.
Accumulated capital losses represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers may be carried forward for an unlimited period. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations.
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 October 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses(3) | Operating Expenses (before expense waiver)(3) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||||
2018 | $9.80 | 0.29 | (0.14) | 0.15 | (0.30) | —(4) | (0.30) | $9.65 | 1.66% | 1.91% | 2.01% | 2.99% | 2.89% | 83% | $126,369 | ||
2017 | $9.48 | 0.22 | 0.29 | 0.51 | (0.19) | — | (0.19) | $9.80 | 5.45% | 1.94% | 2.02% | 2.33% | 2.25% | 65% | $126,656 | ||
2016 | $9.61 | 0.24 | 0.04 | 0.28 | (0.41) | — | (0.41) | $9.48 | 3.03% | 2.00% | 2.01% | 2.57% | 2.56% | 98% | $41,447 | ||
2015(5) | $10.00 | 0.10 | (0.49) | (0.39) | — | — | — | $9.61 | (3.90)% | 2.00%(6) | 2.00%(6) | 2.55%(6) | 2.55%(6) | 23% | $21,898 | ||
I Class | |||||||||||||||||
2018 | $9.80 | 0.31 | (0.13) | 0.18 | (0.32) | —(4) | (0.32) | $9.66 | 1.87% | 1.71% | 1.81% | 3.19% | 3.09% | 83% | $129,431 | ||
2017 | $9.48 | 0.27 | 0.26 | 0.53 | (0.21) | — | (0.21) | $9.80 | 5.66% | 1.74% | 1.82% | 2.53% | 2.45% | 65% | $114,472 | ||
2016 | $9.61 | 0.26 | 0.05 | 0.31 | (0.44) | — | (0.44) | $9.48 | 3.19% | 1.80% | 1.81% | 2.77% | 2.76% | 98% | $7,111 | ||
2015(5) | $10.00 | 0.11 | (0.50) | (0.39) | — | — | — | $9.61 | (3.80)% | 1.80%(6) | 1.80%(6) | 2.75%(6) | 2.75%(6) | 23% | $5,769 | ||
Y Class | |||||||||||||||||
2018 | $9.81 | 0.33 | (0.15) | 0.18 | (0.33) | —(4) | (0.33) | $9.66 | 1.92% | 1.56% | 1.66% | 3.34% | 3.24% | 83% | $3,914 | ||
2017(7) | $9.69 | 0.15 | 0.10 | 0.25 | (0.13) | — | (0.13) | $9.81 | 2.61% | 1.59%(6) | 1.67%(6) | 2.80%(6) | 2.72%(6) | 65%(8) | $5 |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses(3) | Operating Expenses (before expense waiver)(3) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
A Class | |||||||||||||||||
2018 | $9.80 | 0.27 | (0.14) | 0.13 | (0.28) | —(4) | (0.28) | $9.65 | 1.41% | 2.16% | 2.26% | 2.74% | 2.64% | 83% | $11,992 | ||
2017 | $9.48 | 0.18 | 0.31 | 0.49 | (0.17) | — | (0.17) | $9.80 | 5.19% | 2.19% | 2.27% | 2.08% | 2.00% | 65% | $13,515 | ||
2016 | $9.60 | 0.22 | 0.04 | 0.26 | (0.38) | — | (0.38) | $9.48 | 2.80% | 2.25% | 2.26% | 2.32% | 2.31% | 98% | $20,328 | ||
2015(5) | $10.00 | 0.09 | (0.49) | (0.40) | — | — | — | $9.60 | (4.00)% | 2.25%(6) | 2.25%(6) | 2.30%(6) | 2.30%(6) | 23% | $9,673 | ||
C Class | |||||||||||||||||
2018 | $9.75 | 0.19 | (0.14) | 0.05 | (0.20) | —(4) | 0.20 | $9.60 | 0.55% | 2.91% | 3.01% | 1.99% | 1.89% | 83% | $16,086 | ||
2017 | $9.43 | 0.12 | 0.30 | 0.42 | (0.10) | — | (0.10) | $9.75 | 4.42% | 2.94% | 3.02% | 1.33% | 1.25% | 65% | $18,705 | ||
2016 | $9.57 | 0.14 | 0.05 | 0.19 | (0.33) | — | (0.33) | $9.43 | 2.03% | 3.00% | 3.01% | 1.57% | 1.56% | 98% | $12,129 | ||
2015(5) | $10.00 | 0.06 | (0.49) | (0.43) | — | — | — | $9.57 | (4.30)% | 3.00%(6) | 3.00%(6) | 1.55%(6) | 1.55%(6) | 23% | $9,687 | ||
R Class | |||||||||||||||||
2018 | $9.78 | 0.26 | (0.16) | 0.10 | (0.25) | —(4) | (0.25) | $9.63 | 1.16% | 2.41% | 2.51% | 2.49% | 2.39% | 83% | $8 | ||
2017 | $9.46 | 0.16 | 0.30 | 0.46 | (0.14) | — | (0.14) | $9.78 | 4.93% | 2.44% | 2.52% | 1.83% | 1.75% | 65% | $790 | ||
2016 | $9.59 | 0.19 | 0.04 | 0.23 | (0.36) | — | (0.36) | $9.46 | 2.50% | 2.50% | 2.51% | 2.07% | 2.06% | 98% | $1,956 | ||
2015(5) | $10.00 | 0.08 | (0.49) | (0.41) | — | — | — | $9.59 | (4.10)% | 2.50%(6) | 2.50%(6) | 2.05%(6) | 2.05%(6) | 23% | $1,917 |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses(3) | Operating Expenses (before expense waiver)(3) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
R6 Class | |||||||||||||||||
2018 | $9.81 | 0.31 | (0.13) | 0.18 | (0.33) | —(4) | (0.33) | $9.66 | 2.02% | 1.56% | 1.66% | 3.34% | 3.24% | 83% | $1,501 | ||
2017 | $9.48 | 0.25 | 0.31 | 0.56 | (0.23) | — | (0.23) | $9.81 | 5.93% | 1.59% | 1.67% | 2.68% | 2.60% | 65% | $2,983 | ||
2016 | $9.62 | 0.27 | 0.04 | 0.31 | (0.45) | — | (0.45) | $9.48 | 3.39% | 1.65% | 1.66% | 2.92% | 2.91% | 98% | $4,157 | ||
2015(5) | $10.00 | 0.12 | (0.50) | (0.38) | — | — | — | $9.62 | (3.80)% | 1.65%(6) | 1.65%(6) | 2.90%(6) | 2.90%(6) | 23% | $1,924 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | Ratio of operating expenses to average net assets does not include any fees and expenses of the acquired funds. |
(4) | Per share amount was less than $0.005. |
(5) | May 29, 2015 (fund inception) through October 31, 2015. |
(6) | Annualized. |
(7) | April 10, 2017 (commencement of sale) through October 31, 2017. |
(8) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2017. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the Shareholders and the Board of Directors of American Century 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® Income Fund, one of the portfolios constituting the American Century Capital Portfolios, Inc. (the “Fund”), as of October 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 the years ended October 31, 2018, October 31, 2017, October 31, 2016 and for the period May 29, 2015 (fund inception) through October 31, 2015, 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® Income Fund of the American Century Capital Portfolios, Inc. as of October 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 the years ended October 31, 2018, October 31, 2017, October 31, 2016 and for the period May 29, 2015 (fund inception) through October 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 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
December 14, 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 | 67 | 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) | 67 | 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) | 67 | None |
M. Jeannine Strandjord (1945) | Director | Since 1994 | Self-employed Consultant | 67 | Euronet Worldwide Inc. and MGP Ingredients, Inc. |
52
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 | |||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 67 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 72 | 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 | 117 | 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 each of the 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
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 |
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Investment Operations and Investment Accounting, ACS (2000 to present) |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 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 since 2012 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) |
Robert J. Leach (1966) | Vice President since 2006 | Vice President, ACS (2000 to present) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
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Approval of Management and Subadvisory Agreements |
At a meeting held on June 28, 2018, the Fund’s Board of Directors (the "Board") unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. The Board also unanimously approved the renewal of the Subadvisory Agreement with PWP (the “PWP Agreement”) and each underlying subadvisory agreement between the Advisor and each of the Fund’s underlying subadvisors (collectively, with the PWP Agreement, the “Subadvisory Agreements”). The underlying subadvisors approved by the Board were ArrowMark Colorado Holdings, LLC (previously known as Arrowpoint); Bain Capital Credit, LP; Good Hill Partners LP; and Timbercreek Investment Management (U.S.) LLC (each a “Subadvisor,” and collectively with PWP, the “Subadvisors”). Under Section 15(c) of the Investment Company Act, contracts for investment advisory services (including subadvisory services) are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Directors”), including a majority of the independent Directors, each year.
The Fund is a multi-manager fund, which means that the Advisor has retained several subadvisors, each employing its own particular investment strategy, to manage and make investment decisions with respect to the Fund’s assets. The Advisor has engaged Perella Weinberg Partners Capital Management LP (“PWP”) to manage a portion of the Fund and to identify and recommend other underlying subadvisors to manage distinct investment strategies. PWP uses a flexible and opportunistic investment strategy that allocates Fund assets among underlying subadvisors with expertise in a particular investment strategy, and supplements those strategies with its own direct investment management and hedging strategies. PWP also provides tactical allocation of assets among the various underlying subadvisors and a framework for the risk management and investment monitoring of the Fund. The Advisor provides oversight of each of these functions.
Prior to its consideration of the renewal of the management agreement and Subadvisory Agreements, the Directors requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor and each Subadvisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continuous basis and the information received was supplemental to the extensive information that the Board and its committees receive and consider throughout the year.
The Directors also conducted a review of the process by which the Board considers the renewal of the management agreements and subadvisory agreements. The Board consulted with industry experts and reviewed industry best practices and recent judicial precedent. The Directors believe that the enhancements resulting from their review resulted in increased dialogue with the Advisor and an improved process for fund shareholders.
In connection with its consideration of the renewal of the management agreement and the Subadvisory Agreements, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided and to be provided to the Fund; |
• | the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis; |
• | the investment performance of the Fund, including data comparing the Fund's performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the compliance policies, procedures, and regulatory experience of the Advisor, the Subadvisors and the Fund's service providers; |
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• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor; |
• | strategic plans of the Advisor; |
• | any economies of scale associated with the Advisor’s management of the Fund and other accounts; |
• | services provided and charges to the Advisor's other investment management clients; |
• | acquired fund fees and expenses; |
• | payments and practices in connection with financial intermediaries holding shares of the Fund and services provided by intermediaries in connection therewith; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
The Directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The independent Directors also reviewed responses to supplemental information requests provided by the Directors to the Advisor and held active discussions with the Advisor regarding the renewal of the management agreement. The independent Directors had the benefit of the advice of their independent counsel throughout the process.
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement and the Subadvisory Agreements for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement and Subadvisory Agreements, the Board based its decision on a number of factors, including without limitation, the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services, including without limitation, the following:
• | portfolio research and security selection |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services (except the independent Directors’ counsel) |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution (except amounts paid by the Fund under Rule 12b-1 plans) |
The Board noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor and Subadvisors to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor
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trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor and Subadvisors utilize teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance, and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, provides oversight of the investment performance process. It regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review detailed performance information provided by the Advisor during the management agreement renewal process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board receives a report from the Advisor regarding the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one-year period reviewed by the Board. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement and Subadvisory Agreements.
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund. The Board did not consider the profitability of the Subadvisors because each Subadvisor is paid from the unified management fee of the Advisor as a result of arms’ length negotiations.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices. With respect to each Subadvisor, as part of their oversight responsibilities, the Board approves each Subadvisor’s code of ethics and any changes thereto. Further, through the Advisor’s compliance group, the Board stays abreast of any violations of a Subadvisor’s code.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, expenses
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attributable to short sales, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent Directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. The Board specifically noted that the subadvisory fee paid to each Subadvisor under the Subadvisory Agreements, as well as the terms of the Subadvisory Agreements, were subject to an arms’ length negotiation between the Advisor and each Subadvisor and are paid by the Advisor out of its unified management fee.
Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges, and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was above the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board and the Advisor agreed to a temporary reduction of the fund's annual unified management fee of 0.11% (e.g., the Investor Class unified fee will be reduced from 2.00% to 1.89%) for at least one year, beginning August 1, 2018. The Board concluded that the management fee paid by the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the Advisor concerning the nature of the services, fees, costs and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Payments to Intermediaries. The Directors also requested and received a description of payments made to intermediaries by the Fund and the Advisor and services provided in response thereto. These payments include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Board reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 plan and that all such payments by the Advisor were made from the Advisor's resources and reasonable profits. The Board found the payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. Additionally, the Advisor may receive proprietary research from broker-dealers that execute fund portfolio transactions, which the Board concluded is likely to benefit other clients of the Advisor, as well as Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board
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concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients and, where expressly provided, these other client assets may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent Directors, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor, as well as the Subadvisory Agreements with each Subadvisor, should be renewed.
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Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time and change your withholding percentage for future distributions.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on 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. 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 October 31, 2018.
For corporate taxpayers, the fund hereby designates $671,329, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2018 as qualified for the corporate dividends received deduction.
The fund hereby designates $65,965 as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2018.
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Notes |
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Notes |
63
Notes |
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Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century 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-90982 1812 |
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Annual Report | |
October 31, 2018 | |
Global Real Estate Fund | |
Investor Class (ARYVX) | |
I Class (ARYNX) | |
Y Class (ARYYX) | |
A Class (ARYMX) | |
C Class (ARYTX) | |
R Class (ARYWX) | |
R5 Class (ARYGX) | |
R6 Class (ARYDX) |
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 | ||
Approval of Management Agreement | ||
Additional Information |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
![jthomasrev0514.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000189/jthomasrev0514.jpg)
Dear Investor:
Thank you for reviewing this annual report for the 12 months ended October 31, 2018. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional investment and market insights, we encourage you to visit our website, americancentury.com.
Rising Rates, Heightened Volatility Challenge Investors
U.S. stocks generally delivered gains for the period, but returns were considerably weaker than the robust, double-digit results of the previous fiscal year. Early on, a backdrop of robust corporate earnings results, improving global economic growth, and growth-oriented U.S. tax reform helped drive stock prices higher. The S&P 500 Index returned more than 10% just in the first three months of the reporting period.
Investor sentiment shifted dramatically in early February, as volatility resurfaced after an extended period of relative dormancy. Better-than-expected U.S. economic data triggered expectations for rising inflation, higher interest rates, and a more-hawkish Federal Reserve (Fed). In response, U.S. Treasury yields soared, and stock prices plunged. Although this bout of market unrest quickly subsided, volatility remained a formidable force throughout the rest of the period. Stocks remained resilient, though, and the S&P 500 Index advanced 7.35% for the 12-month period. Growth stocks outpaced value stocks, and large-cap stocks outperformed small-cap stocks. Meanwhile, rising U.S. Treasury yields and Fed rate hikes weighed on interest-rate sensitive assets, including investment-grade bonds and real estate investment trusts.
Outside the U.S., economic growth moderated as the period unfolded, and global bond yields were flat to modestly higher. The U.S. dollar continued to gain ground versus other currencies, which drove down non-U.S. bond returns for unhedged investors. The strong dollar, combined with rising U.S. interest rates, geopolitical tensions, and fiscal challenges in several developing countries, led to negative results for emerging markets bonds.
With global economic growth diverging, Treasury yields rising, and volatility lingering, investors likely will face opportunities and challenges in the months ahead. We believe this scenario underscores the importance of using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a01.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000189/image48a01.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2018 | |||||
Average Annual Returns | |||||
Ticker Symbol | 1 year | 5 years | Since Inception | Inception Date | |
Investor Class | ARYVX | -1.39% | 3.68% | 5.31% | 4/29/11 |
FTSE EPRA Nareit Global Index | — | -1.59% | 3.85% | 4.67% | — |
MSCI ACWI Index | — | -0.52% | 6.14% | 6.35% | — |
I Class | ARYNX | -1.18% | 3.87% | 5.52% | 4/29/11 |
Y Class | ARYYX | -1.04% | — | 3.42% | 4/10/17 |
A Class | ARYMX | 4/29/11 | |||
No sales charge | -1.64% | 3.42% | 5.05% | ||
With sales charge | -7.30% | 2.21% | 4.23% | ||
C Class | ARYTX | -2.42% | 2.63% | 4.26% | 4/29/11 |
R Class | ARYWX | -1.90% | 3.15% | 4.79% | 4/29/11 |
R5 Class | ARYGX | -1.15% | — | 3.29% | 4/10/17 |
R6 Class | ARYDX | -1.02% | 4.04% | 4.51% | 7/26/13 |
Fund returns would have been lower if a portion of the fees had not been waived.
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 April 29, 2011 |
Performance for other share classes will vary due to differences in fee structure. |
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Value on October 31, 2018 | |
Investor Class — $14,752 | |
FTSE EPRA Nareit Global Index — $14,092 | |
MSCI ACWI Index — $15,878 | |
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 |
1.12% | 0.92% | 0.77% | 1.37% | 2.12% | 1.62% | 0.92% | 0.77% |
The total annual fund operating expenses shown is as stated in the fund’s prospectus current as of the date of this report. The prospectus may vary from the expense ratio shown elsewhere in this report because it is based on a different time period, includes acquired fund fees and expenses, and, if applicable, does not include fee waivers or expense reimbursements.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
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Portfolio Commentary |
Portfolio Managers: Steven Brown and Steven Rodriguez
Performance Summary
Global Real Estate returned -1.39%* for the fiscal year ended October 31, 2018. By comparison, the FTSE EPRA Nareit Global Index (the fund’s benchmark) returned -1.59%, while the MSCI ACWI Index (a broad global stock market measure) returned -0.52%.
Global Real Estate Market Overview
As an asset class, global real estate investment trusts (REITs) declined for the 12-month period, lagging the gains of the broad global equity indices. REIT performance was buffeted by rising global interest rates, which tend to create headwinds for interest-sensitive equities such as real estate. Geographically, the weakest performance within the global REITs market came from several European and Asian countries. In Europe, slowing economic trends and concerns around Brexit created a challenging backdrop, while in Asia the ripple effect of government policy changes in China challenged REITs. Exceptions within these two regions were Germany and Japan, where listed property performance was among the best in the market.
Within the fund, a combination of strong stock selection and allocation drove outperformance versus our benchmark. While the largest contribution came from our holdings in the U.K. and Australia, the fund’s U.S.-based investments also buoyed performance, as did an overweight position in the U.S. Conversely, results were hindered by the fund’s overweight position in China. Weak stock selection in Germany and Singapore also weighed on relative performance.
U.S. Holdings Among Key Contributors
Key contributors included a number of U.S.-based investments, including health care REIT HCP, timber REIT Rayonier, residential REIT Sun Communities, and retail REIT Simon Property Group.
HCP’s real estate investments include senior living facilities, life sciences properties, and medical office buildings. Like many of its peers, the company has taken measures to improve profitability for its tenants, thereby stabilizing its own tenant credit profile and balance sheet. Investors reacted positively to these changes and bid the stock higher during the period.
Timber REIT Rayonier gained in response to improving demand trends driven by the U.S. housing recovery and increasing timber exports globally. The company owns assets in several timber-growing regions in the U.S. and New Zealand. We believe continued strength in the U.S. housing market bodes well for the price of timber. However, we eliminated our position in Rayonier after the stock reached our price target.
Sun Communities, a residential REIT that owns and develops manufactured housing communities in the U.S. and Canada, benefited from limited new supply and improvement in both employment and income measures in most of the markets in which it operates.
Continued strength in the retail sector and better-than-expected financial results supported stock gains for REIT Simon Property Group, an owner, operator, and developer of shopping malls. Against this positive backdrop, management raised is full-year outlook for the company.
* All fund returns referenced in this commentary are for Investor Class shares. Fund returns would have been lower if a portion of the fees had not been waived. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund’s benchmark, other share classes may not. See page 3 for returns for all share classes.
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Diversified Holdings Detracted
Notable detractors included GDS Holdings and Equinix, two data center real estate companies within the diversified sector. Recent outlooks provided by several cloud-computing businesses, which are the largest tenants of data centers, fell short of expectations during the period. Concerns of a potential slowdown in demand for data center companies consequently weighed on our investments in this group. Although we maintained our position in GDS, we sold our Equinix shares to fund our investment in Digital Realty Trust, a data center REIT that we believe has a more compelling risk/reward profile than Equinix. However, our outlook for data center REITs is currently under review.
Other weak performers within the diversified sector included Shimao Property Holdings, a China-based investment holding company engaged in the sale and rental of commercial and residential properties as well as the operation of hotels. Shimao traded lower in spite of strong company fundamentals. A broad-based sell-off among Chinese stocks during the period raised concerns about Shimao’s higher-than-average debt relative to its peers. Given recent concerns around China, we do not expect to see an acceleration in Shimao’s growth and consequently eliminated our position in the stock.
Elsewhere, China-based hotel operator GreenTree Hospitality Group detracted from the fund’s performance. Given the moderating growth outlook for the Chinese economy and expectations that the appetite for leisure spend will decrease, we liquidated our position in the lodging/resort name.
Outlook
In our view, global real estate securities currently are trading at an attractive discount to their net asset value and continue to offer investors healthy dividend yields. Although the consensus is that global interest rates will likely continue rising, we believe strong fundamentals combined with improved earnings profiles for many real estate companies bodes well for these stocks in the coming year.
Against this backdrop, we maintained an overweight position in North America, where our focus is on U.S.-based property companies we believe will continue to benefit from robust economic growth in the U.S. Conversely, the fund’s largest regional underweight at period-end was emerging markets. In our view, slowing economic growth in China could negatively impact other Asian economies. We consequently reduced our exposure in China, Singapore, and Hong Kong.
The industrial sector remained one of the fund’s largest sector overweights. Signs of continued strength in e-commerce trends in most global markets continues to drive our optimism for fund holdings within this sector. We also held a larger-than-benchmark stake in the residential sector, where we remain particularly upbeat about developments in the U.S. Notably, we are seeing accelerating tailwinds from strong U.S. job growth and an increase in the number of renters as the housing supply moderates and homes become less affordable.
While robust e-commerce trends provide a tailwind for industrial properties, they create a headwind for brick-and-mortar retail companies. We therefore maintained our underweight position in the retail sector. The fund also was underweight in the lodging/resorts sector, where we reduced our exposure during the period due to our concerns of a potential slowdown in demand for lodging as a result of moderating global economic growth.
6
Fund Characteristics |
OCTOBER 31, 2018 | |
Top Ten Holdings | % of net assets |
Simon Property Group, Inc. | 5.8% |
Prologis, Inc. | 4.8% |
Vonovia SE | 3.5% |
Gaming and Leisure Properties, Inc. | 3.2% |
Sun Communities, Inc. | 3.0% |
Camden Property Trust | 2.7% |
HCP, Inc. | 2.7% |
Gecina SA | 2.6% |
Alexandria Real Estate Equities, Inc. | 2.5% |
UDR, Inc. | 2.4% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 52.5% |
Foreign Common Stocks | 46.0% |
Total Common Stocks | 98.5% |
Temporary Cash Investments | 1.1% |
Other Assets and Liabilities | 0.4% |
Investments by Country | % of net assets |
United States | 52.5% |
Japan | 10.0% |
Hong Kong | 6.7% |
United Kingdom | 4.9% |
Germany | 4.5% |
Australia | 4.3% |
France | 2.6% |
Canada | 2.5% |
China | 2.4% |
Other Countries | 8.1% |
Cash and Equivalents* | 1.5% |
*Includes temporary cash investments and other assets and liabilities. |
7
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from May 1, 2018 to October 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 5/1/18 | Ending Account Value 10/31/18 | Expenses Paid During Period(1) 5/1/18 - 10/31/18 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $957.40 | $5.48 | 1.11% |
I Class | $1,000 | $958.30 | $4.49 | 0.91% |
Y Class | $1,000 | $958.30 | $3.75 | 0.76% |
A Class | $1,000 | $956.60 | $6.71 | 1.36% |
C Class | $1,000 | $952.30 | $10.38 | 2.11% |
R Class | $1,000 | $954.90 | $7.93 | 1.61% |
R5 Class | $1,000 | $958.30 | $4.49 | 0.91% |
R6 Class | $1,000 | $959.10 | $3.75 | 0.76% |
Hypothetical | ||||
Investor Class | $1,000 | $1,019.61 | $5.65 | 1.11% |
I Class | $1,000 | $1,020.62 | $4.63 | 0.91% |
Y Class | $1,000 | $1,021.37 | $3.87 | 0.76% |
A Class | $1,000 | $1,018.35 | $6.92 | 1.36% |
C Class | $1,000 | $1,014.57 | $10.71 | 2.11% |
R Class | $1,000 | $1,017.09 | $8.19 | 1.61% |
R5 Class | $1,000 | $1,020.62 | $4.63 | 0.91% |
R6 Class | $1,000 | $1,021.37 | $3.87 | 0.76% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 184, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
9
Schedule of Investments |
OCTOBER 31, 2018
Shares | Value | ||||
COMMON STOCKS — 98.5% | |||||
Australia — 4.3% | |||||
Charter Hall Group | 273,359 | $ | 1,335,696 | ||
Goodman Group | 222,025 | 1,632,017 | |||
2,967,713 | |||||
Belgium — 1.0% | |||||
Shurgard Self Storage Europe Sarl(1) | 13,814 | 387,797 | |||
VGP NV | 4,153 | 293,523 | |||
681,320 | |||||
Brazil — 1.1% | |||||
Iguatemi Empresa de Shopping Centers SA | 69,900 | 724,451 | |||
Canada — 2.5% | |||||
Boardwalk Real Estate Investment Trust | 11,372 | 423,367 | |||
Brookfield Asset Management, Inc., Class A | 22,828 | 931,536 | |||
Northview Apartment Real Estate Investment Trust | 20,564 | 395,362 | |||
1,750,265 | |||||
China — 2.4% | |||||
China Resources Land Ltd. | 220,000 | 746,243 | |||
GDS Holdings Ltd. ADR(1) | 21,991 | 516,129 | |||
Longfor Group Holdings Ltd. | 158,000 | 383,619 | |||
1,645,991 | |||||
France — 2.6% | |||||
Gecina SA | 12,219 | 1,795,029 | |||
Germany — 4.5% | |||||
Aroundtown SA | 82,049 | 681,198 | |||
Vonovia SE | 51,887 | 2,375,476 | |||
3,056,674 | |||||
Hong Kong — 6.7% | |||||
CK Asset Holdings Ltd. | 142,000 | 921,684 | |||
Link REIT | 181,500 | 1,608,560 | |||
Sino Land Co. Ltd. | 328,000 | 514,464 | |||
Swire Properties Ltd. | 220,400 | 751,816 | |||
Wharf Real Estate Investment Co. Ltd. | 125,000 | 773,883 | |||
4,570,407 | |||||
Japan — 10.0% | |||||
GLP J-Reit | 988 | 978,062 | |||
Invesco Office J-Reit, Inc. | 4,566 | 645,435 | |||
Japan Hotel REIT Investment Corp. | 1,040 | 740,125 | |||
Mitsui Fudosan Co. Ltd. | 71,800 | 1,618,817 | |||
Orix JREIT, Inc. | 897 | 1,372,112 | |||
Sumitomo Realty & Development Co. Ltd. | 28,900 | 994,538 | |||
Tokyu Fudosan Holdings Corp. | 92,700 | 522,508 | |||
6,871,597 |
10
Shares | Value | ||||
Mexico — 0.5% | |||||
Corp. Inmobiliaria Vesta SAB de CV | 267,945 | $ | 326,469 | ||
Netherlands — 1.2% | |||||
InterXion Holding NV(1) | 14,195 | 835,660 | |||
Philippines — 0.6% | |||||
Ayala Land, Inc. | 533,200 | 395,129 | |||
Singapore — 1.6% | |||||
CapitaLand Commercial Trust | 433,200 | 541,050 | |||
CapitaLand Ltd. | 253,400 | 574,433 | |||
1,115,483 | |||||
Spain — 1.4% | |||||
Inmobiliaria Colonial Socimi SA | 97,561 | 980,710 | |||
Thailand — 0.7% | |||||
Central Pattana PCL | 210,300 | 501,167 | |||
United Kingdom — 4.9% | |||||
Derwent London plc | 13,738 | 514,330 | |||
Safestore Holdings plc | 85,004 | 580,202 | |||
Segro plc | 203,543 | 1,598,997 | |||
UNITE Group plc (The) | 64,378 | 701,505 | |||
3,395,034 | |||||
United States — 52.5% | |||||
Agree Realty Corp. | 20,626 | 1,181,251 | |||
Alexandria Real Estate Equities, Inc. | 13,910 | 1,700,219 | |||
American Campus Communities, Inc. | 26,060 | 1,029,631 | |||
AvalonBay Communities, Inc. | 8,047 | 1,411,283 | |||
Blackstone Mortgage Trust, Inc., Class A | 21,696 | 732,023 | |||
Boston Properties, Inc. | 9,688 | 1,169,923 | |||
Camden Property Trust | 20,553 | 1,855,319 | |||
Columbia Property Trust, Inc. | 39,301 | 882,307 | |||
CyrusOne, Inc. | 16,960 | 902,781 | |||
Digital Realty Trust, Inc. | 15,500 | 1,600,530 | |||
Duke Realty Corp. | 35,660 | 983,146 | |||
Extra Space Storage, Inc. | 4,818 | 433,909 | |||
Gaming and Leisure Properties, Inc. | 65,391 | 2,203,023 | |||
HCP, Inc. | 66,893 | 1,842,902 | |||
Host Hotels & Resorts, Inc. | 12,822 | 245,028 | |||
Hudson Pacific Properties, Inc. | 18,502 | 560,611 | |||
Invitation Homes, Inc. | 24,171 | 528,861 | |||
Prologis, Inc. | 51,239 | 3,303,378 | |||
Regency Centers Corp. | 16,145 | 1,022,947 | |||
Rexford Industrial Realty, Inc. | 20,651 | 654,017 | |||
Simon Property Group, Inc. | 21,638 | 3,971,006 | |||
Starwood Property Trust, Inc. | 29,147 | 633,073 | |||
STORE Capital Corp. | 32,152 | 933,373 | |||
Sun Communities, Inc. | 20,801 | 2,089,876 | |||
Taubman Centers, Inc. | 9,775 | 537,723 | |||
UDR, Inc. | 42,504 | 1,665,732 |
11
Shares | Value | ||||
Vornado Realty Trust | 10,407 | $ | 708,509 | ||
Welltower, Inc. | 19,530 | 1,290,347 | |||
36,072,728 | |||||
TOTAL COMMON STOCKS (Cost $64,491,976) | 67,685,827 | ||||
TEMPORARY CASH INVESTMENTS — 1.1% | |||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.625% - 4.75%, 1/31/20 - 8/15/45, valued at $531,034), in a joint trading account at 2.00%, dated 10/31/18, due 11/1/18 (Delivery value $520,281) | 520,252 | ||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 3.00%, 5/15/45, valued at $266,419), at 1.05%, dated 10/31/18, due 11/1/18 (Delivery value $260,008) | 260,000 | ||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 785 | 785 | |||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $781,037) | 781,037 | ||||
TOTAL INVESTMENT SECURITIES — 99.6% (Cost $65,273,013) | 68,466,864 | ||||
OTHER ASSETS AND LIABILITIES — 0.4% | 287,669 | ||||
TOTAL NET ASSETS — 100.0% | $ | 68,754,533 |
SECTOR ALLOCATION | ||
(as a % of net assets) | ||
Diversified | 29.8 | % |
Residential | 19.2 | % |
Retail | 15.3 | % |
Industrial | 14.2 | % |
Office | 12.0 | % |
Health Care | 4.6 | % |
Self Storage | 2.0 | % |
Lodging/Resorts | 1.4 | % |
Cash and Equivalents* | 1.5 | % |
*Includes temporary cash investments and other assets and liabilities.
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
(1) | Non-income producing. |
See Notes to Financial Statements.
12
Statement of Assets and Liabilities |
OCTOBER 31, 2018 | |||
Assets | |||
Investment securities, at value (cost of $65,273,013) | $ | 68,466,864 | |
Foreign currency holdings, at value (cost of $11) | 11 | ||
Receivable for investments sold | 556,031 | ||
Receivable for capital shares sold | 97,227 | ||
Dividends and interest receivable | 104,421 | ||
Other assets | 304 | ||
69,224,858 | |||
Liabilities | |||
Payable for investments purchased | 315,401 | ||
Payable for capital shares redeemed | 90,260 | ||
Accrued management fees | 62,087 | ||
Distribution and service fees payable | 2,577 | ||
470,325 | |||
Net Assets | $ | 68,754,533 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 66,071,924 | |
Distributable earnings | 2,682,609 | ||
$ | 68,754,533 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $44,274,274 | 3,935,567 | $11.25 | |||
I Class, $0.01 Par Value | $14,216,199 | 1,262,539 | $11.26 | |||
Y Class, $0.01 Par Value | $4,346,308 | 385,596 | $11.27 | |||
A Class, $0.01 Par Value | $2,002,433 | 178,221 | $11.24* | |||
C Class, $0.01 Par Value | $2,359,654 | 211,022 | $11.18 | |||
R Class, $0.01 Par Value | $149,689 | 13,333 | $11.23 | |||
R5 Class, $0.01 Par Value | $5,261 | 467 | $11.27 | |||
R6 Class, $0.01 Par Value | $1,400,715 | 124,340 | $11.27 |
*Maximum offering price $11.93 (net asset value divided by 0.9425).
See Notes to Financial Statements.
13
Statement of Operations |
YEAR ENDED OCTOBER 31, 2018 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $92,592) | $ | 2,188,734 | |
Interest | 6,788 | ||
2,195,522 | |||
Expenses: | |||
Management fees | 906,071 | ||
Distribution and service fees: | |||
A Class | 6,361 | ||
C Class | 30,123 | ||
R Class | 792 | ||
Directors' fees and expenses | 1,723 | ||
Other expenses | 104 | ||
945,174 | |||
Fees waived(1) | (54,682 | ) | |
890,492 | |||
Net investment income (loss) | 1,305,030 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 3,603,356 | ||
Foreign currency translation transactions | (15,294 | ) | |
3,588,062 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (5,429,452 | ) | |
Translation of assets and liabilities in foreign currencies | 317 | ||
(5,429,135 | ) | ||
Net realized and unrealized gain (loss) | (1,841,073 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (536,043 | ) |
(1) | Amount consists of $44,514, $5,171, $315, $1,809, $2,106, $103, $3 and $661 for Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class and R6 Class, respectively. |
See Notes to Financial Statements.
14
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2018 AND OCTOBER 31, 2017 | ||||||
Increase (Decrease) in Net Assets | October 31, 2018 | October 31, 2017 | ||||
Operations | ||||||
Net investment income (loss) | $ | 1,305,030 | $ | 1,929,527 | ||
Net realized gain (loss) | 3,588,062 | 272,372 | ||||
Change in net unrealized appreciation (depreciation) | (5,429,135 | ) | 4,157,610 | |||
Net increase (decrease) in net assets resulting from operations | (536,043 | ) | 6,359,509 | |||
Distributions to Shareholders | ||||||
From earnings: | ||||||
Investor Class | (2,338,576 | ) | (2,730,807 | ) | ||
I Class | (245,001 | ) | (110,990 | ) | ||
Y Class | (196 | ) | — | |||
A Class | (87,066 | ) | (635,362 | ) | ||
C Class | (77,272 | ) | (231,702 | ) | ||
R Class | (3,174 | ) | (3,707 | ) | ||
R5 Class | (190 | ) | — | |||
R6 Class | (33,507 | ) | (410,259 | ) | ||
Decrease in net assets from distributions | (2,784,982 | ) | (4,122,827 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (11,028,014 | ) | (21,733,173 | ) | ||
Net increase (decrease) in net assets | (14,349,039 | ) | (19,496,491 | ) | ||
Net Assets | ||||||
Beginning of period | 83,103,572 | 102,600,063 | ||||
End of period | $ | 68,754,533 | $ | 83,103,572 |
See Notes to Financial Statements.
15
Notes to Financial Statements |
OCTOBER 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. Global Real Estate Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek high total investment return through a combination of capital appreciation and current income.
The fund offers the Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class and R6 Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. 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.
If the fund determines that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Directors or its delegate, in accordance with policies and procedures adopted by the Board of Directors. In its determination of fair value, the fund may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the fund to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
16
The fund monitors for significant events occurring after the close of an investment’s primary exchange but before the fund’s 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.
Distributions to Shareholders — Distributions from net investment income and net realized gains, if any, are generally declared and paid annually.
17
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 November 1, 2017 through July 31, 2018, the investment advisor agreed to waive 0.09% of the fund's management fee. Effective August 1, 2018, the investment advisor terminated the waiver and decreased the annual management fee by 0.09%.
The annual management fee and the effective annual management fee before and after waiver for each class for the period ended October 31, 2018 are as follows:
Effective Annual Management Fee | |||
Annual Management Fee* | Before Waiver | After Waiver | |
Investor Class | 1.11% | 1.18% | 1.11% |
I Class | 0.91% | 0.98% | 0.91% |
Y Class | 0.76% | 0.83% | 0.76% |
A Class | 1.11% | 1.18% | 1.11% |
C Class | 1.11% | 1.18% | 1.11% |
R Class | 1.11% | 1.18% | 1.11% |
R5 Class | 0.91% | 0.98% | 0.91% |
R6 Class | 0.76% | 0.83% | 0.76% |
*Prior to August 1, 2018, the annual management fee was 1.20% for the Investor Class, A Class, C Class
and R Class, 1.00% for the I Class and R5 Class and 0.85% for the Y Class and R6 Class.
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the C Class will pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the period ended October 31, 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.
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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 $836,298 and $588,427, respectively. The effect of interfund transactions on the Statement of Operations was $26,497 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended October 31, 2018 were $131,843,650 and $144,530,178, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2018 | Year ended October 31, 2017(1) | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||
Sold | 905,146 | $ | 10,647,692 | 2,891,989 | $ | 32,362,428 | ||||
Issued in reinvestment of distributions | 198,026 | 2,326,804 | 229,869 | 2,448,105 | ||||||
Redeemed | (3,000,049 | ) | (34,915,271 | ) | (3,208,650 | ) | (35,760,233 | ) | ||
(1,896,877 | ) | (21,940,775 | ) | (86,792 | ) | (949,700 | ) | |||
I Class/Shares Authorized | 20,000,000 | 20,000,000 | ||||||||
Sold | 1,019,982 | 11,546,605 | 600,381 | 6,863,154 | ||||||
Issued in reinvestment of distributions | 19,220 | 225,640 | 9,939 | 105,753 | ||||||
Redeemed | (350,846 | ) | (4,104,589 | ) | (282,616 | ) | (3,283,159 | ) | ||
688,356 | 7,667,656 | 327,704 | 3,685,748 | |||||||
Y Class/Shares Authorized | 70,000,000 | 50,000,000 | ||||||||
Sold | 390,675 | 4,600,718 | 451 | 5,000 | ||||||
Issued in reinvestment of distributions | 17 | 196 | — | — | ||||||
Redeemed | (5,547 | ) | (64,296 | ) | — | |||||
385,145 | 4,536,618 | 451 | 5,000 | |||||||
A Class/Shares Authorized | 15,000,000 | 15,000,000 | ||||||||
Sold | 36,611 | 433,779 | 148,553 | 1,645,456 | ||||||
Issued in reinvestment of distributions | 7,096 | 83,451 | 58,376 | 622,286 | ||||||
Redeemed | (110,015 | ) | (1,303,969 | ) | (1,417,987 | ) | (15,744,410 | ) | ||
(66,308 | ) | (786,739 | ) | (1,211,058 | ) | (13,476,668 | ) | |||
C Class/Shares Authorized | 10,000,000 | 10,000,000 | ||||||||
Sold | 6,177 | 71,778 | 19,750 | 216,122 | ||||||
Issued in reinvestment of distributions | 5,756 | 67,809 | 16,027 | 171,167 | ||||||
Redeemed | (108,373 | ) | (1,268,217 | ) | (368,067 | ) | (4,144,957 | ) | ||
(96,440 | ) | (1,128,630 | ) | (332,290 | ) | (3,757,668 | ) | |||
R Class/Shares Authorized | 10,000,000 | 10,000,000 | ||||||||
Sold | 13,285 | 156,407 | 4,374 | 49,218 | ||||||
Issued in reinvestment of distributions | 269 | 3,174 | 347 | 3,707 | ||||||
Redeemed | (10,557 | ) | (124,932 | ) | (3,662 | ) | (42,403 | ) | ||
2,997 | 34,649 | 1,059 | 10,522 | |||||||
R5 Class/Shares Authorized | 30,000,000 | 50,000,000 | ||||||||
Sold | — | — | 450 | 5,000 | ||||||
Issued in reinvestment of distributions | 17 | 190 | — | — | ||||||
17 | 190 | 450 | 5,000 | |||||||
R6 Class/Shares Authorized | 20,000,000 | 20,000,000 | ||||||||
Sold | 65,917 | 773,410 | 152,392 | 1,691,898 | ||||||
Issued in reinvestment of distributions | 2,857 | 33,507 | 38,594 | 410,259 | ||||||
Redeemed | (18,647 | ) | (217,900 | ) | (808,666 | ) | (9,357,564 | ) | ||
50,127 | 589,017 | (617,680 | ) | (7,255,407 | ) | |||||
Net increase (decrease) | (932,983 | ) | $ | (11,028,014 | ) | (1,918,156 | ) | $ | (21,733,173 | ) |
(1) | April 10, 2017 (commencement of sale) through October 31, 2017 for the Y Class and 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.
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 | ||||||||
Australia | — | $ | 2,967,713 | — | ||||
Belgium | — | 681,320 | — | |||||
Brazil | — | 724,451 | — | |||||
Canada | — | 1,750,265 | — | |||||
China | $ | 516,129 | 1,129,862 | — | ||||
France | — | 1,795,029 | — | |||||
Germany | — | 3,056,674 | — | |||||
Hong Kong | — | 4,570,407 | — | |||||
Japan | — | 6,871,597 | — | |||||
Mexico | — | 326,469 | — | |||||
Philippines | — | 395,129 | — | |||||
Singapore | — | 1,115,483 | — | |||||
Spain | — | 980,710 | — | |||||
Thailand | — | 501,167 | — | |||||
United Kingdom | — | 3,395,034 | — | |||||
Other Countries | 36,908,388 | — | — | |||||
Temporary Cash Investments | 785 | 780,252 | — | |||||
$ | 37,425,302 | $ | 31,041,562 | — |
7. Risk Factors
The fund concentrates its investments in a narrow segment of the total market. Because of this, the fund is subject to certain additional risks as compared to investing in a more diversified portfolio of investments. The fund may be subject to certain risks similar to those associated with direct investment in real estate including but not limited to: local or regional economic conditions, changes in zoning laws, changes in property values, property tax increases, overbuilding, increased competition, environmental contamination, natural disasters, and interest rate risk.
21
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. Investing in emerging markets may accentuate these risks.
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.
8. Federal Tax Information
The tax character of distributions paid during the years ended October 31, 2018 and October 31, 2017 were as follows:
2018 | 2017 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 2,784,982 | $ | 4,122,827 | ||
Long-term capital gains | — | — |
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 67,365,232 | |
Gross tax appreciation of investments | $ | 3,293,116 | |
Gross tax depreciation of investments | (2,191,484 | ) | |
Net tax appreciation (depreciation) of investments | 1,101,632 | ||
Net tax appreciation (depreciation) on translation of assets and liabilities in foreign currencies | (1,539 | ) | |
Net tax appreciation (depreciation) | $ | 1,100,093 | |
Undistributed ordinary income | $ | 1,981,539 | |
Accumulated short-term capital losses | $ | (399,023 | ) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the realization to ordinary income for tax purposes of unrealized gains on investments in passive foreign investment companies.
Accumulated capital losses represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers may be carried forward for an unlimited period. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations.
22
Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||||
2018 | $11.80 | 0.20 | (0.35) | (0.15) | (0.40) | — | (0.40) | $11.25 | (1.39)% | 1.11% | 1.18% | 1.67% | 1.60% | 169% | $44,274 | ||
2017 | $11.45 | 0.25 | 0.58 | 0.83 | (0.48) | — | (0.48) | $11.80 | 7.71% | 1.13% | 1.21% | 2.22% | 2.14% | 201% | $68,825 | ||
2016 | $11.62 | 0.15 | 0.01 | 0.16 | (0.33) | — | (0.33) | $11.45 | 1.50% | 1.16% | 1.21% | 1.31% | 1.26% | 250% | $67,798 | ||
2015 | $12.03 | 0.17 | 0.02 | 0.19 | (0.45) | (0.15) | (0.60) | $11.62 | 1.70% | 1.20% | 1.21% | 1.39% | 1.38% | 248% | $72,769 | ||
2014 | $11.54 | 0.13 | 0.88 | 1.01 | (0.37) | (0.15) | (0.52) | $12.03 | 9.29% | 1.20% | 1.20% | 1.15% | 1.15% | 275% | $69,207 | ||
I Class | |||||||||||||||||
2018 | $11.81 | 0.21 | (0.33) | (0.12) | (0.43) | — | (0.43) | $11.26 | (1.18)% | 0.91% | 0.98% | 1.87% | 1.80% | 169% | $14,216 | ||
2017 | $11.47 | 0.25 | 0.59 | 0.84 | (0.50) | — | (0.50) | $11.81 | 7.83% | 0.93% | 1.01% | 2.42% | 2.34% | 201% | $6,782 | ||
2016 | $11.63 | 0.18 | 0.02 | 0.20 | (0.36) | — | (0.36) | $11.47 | 1.79% | 0.96% | 1.01% | 1.51% | 1.46% | 250% | $2,826 | ||
2015 | $12.05 | 0.19 | 0.02 | 0.21 | (0.48) | (0.15) | (0.63) | $11.63 | 1.83% | 1.00% | 1.01% | 1.59% | 1.58% | 248% | $4,325 | ||
2014 | $11.56 | 0.15 | 0.88 | 1.03 | (0.39) | (0.15) | (0.54) | $12.05 | 9.50% | 1.00% | 1.00% | 1.35% | 1.35% | 275% | $8,848 | ||
Y Class | |||||||||||||||||
2018 | $11.81 | 0.21 | (0.32) | (0.11) | (0.43) | — | (0.43) | $11.27 | (1.04)% | 0.76% | 0.83% | 2.02% | 1.95% | 169% | $4,346 | ||
2017(3) | $11.09 | 0.13 | 0.59 | 0.72 | — | — | — | $11.81 | 6.49% | 0.78%(4) | 0.86%(4) | 1.99%(4) | 1.91%(4) | 201%(5) | $5 |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
A Class | |||||||||||||||||
2018 | $11.79 | 0.17 | (0.35) | (0.18) | (0.37) | — | (0.37) | $11.24 | (1.64)% | 1.36% | 1.43% | 1.42% | 1.35% | 169% | $2,002 | ||
2017 | $11.44 | 0.24 | 0.56 | 0.80 | (0.45) | — | (0.45) | $11.79 | 7.44% | 1.38% | 1.46% | 1.97% | 1.89% | 201% | $2,882 | ||
2016 | $11.60 | 0.12 | 0.03 | 0.15 | (0.31) | — | (0.31) | $11.44 | 1.33% | 1.41% | 1.46% | 1.06% | 1.01% | 250% | $16,651 | ||
2015 | $12.02 | 0.13 | 0.02 | 0.15 | (0.42) | (0.15) | (0.57) | $11.60 | 1.35% | 1.45% | 1.46% | 1.14% | 1.13% | 248% | $21,275 | ||
2014 | $11.53 | 0.11 | 0.87 | 0.98 | (0.34) | (0.15) | (0.49) | $12.02 | 9.02% | 1.45% | 1.45% | 0.90% | 0.90% | 275% | $16,601 | ||
C Class | |||||||||||||||||
2018 | $11.73 | 0.08 | (0.35) | (0.27) | (0.28) | — | (0.28) | $11.18 | (2.42)% | 2.11% | 2.18% | 0.67% | 0.60% | 169% | $2,360 | ||
2017 | $11.38 | 0.14 | 0.58 | 0.72 | (0.37) | — | (0.37) | $11.73 | 6.65% | 2.13% | 2.21% | 1.22% | 1.14% | 201% | $3,606 | ||
2016 | $11.55 | 0.03 | 0.02 | 0.05 | (0.22) | — | (0.22) | $11.38 | 0.47% | 2.16% | 2.21% | 0.31% | 0.26% | 250% | $7,282 | ||
2015 | $11.96 | 0.05 | 0.02 | 0.07 | (0.33) | (0.15) | (0.48) | $11.55 | 0.73% | 2.20% | 2.21% | 0.39% | 0.38% | 248% | $7,197 | ||
2014 | $11.47 | 0.02 | 0.88 | 0.90 | (0.26) | (0.15) | (0.41) | $11.96 | 8.12% | 2.20% | 2.20% | 0.15% | 0.15% | 275% | $5,428 | ||
R Class | |||||||||||||||||
2018 | $11.78 | 0.14 | (0.35) | (0.21) | (0.34) | — | (0.34) | $11.23 | (1.90)% | 1.61% | 1.68% | 1.17% | 1.10% | 169% | $150 | ||
2017 | $11.43 | 0.18 | 0.60 | 0.78 | (0.43) | — | (0.43) | $11.78 | 7.17% | 1.63% | 1.71% | 1.72% | 1.64% | 201% | $122 | ||
2016 | $11.59 | 0.10 | 0.02 | 0.12 | (0.28) | — | (0.28) | $11.43 | 1.07% | 1.66% | 1.71% | 0.81% | 0.76% | 250% | $106 | ||
2015 | $12.01 | 0.11 | 0.01 | 0.12 | (0.39) | (0.15) | (0.54) | $11.59 | 1.08% | 1.70% | 1.71% | 0.89% | 0.88% | 248% | $245 | ||
2014 | $11.52 | 0.08 | 0.87 | 0.95 | (0.31) | (0.15) | (0.46) | $12.01 | 8.74% | 1.70% | 1.70% | 0.65% | 0.65% | 275% | $382 |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
R5 Class | |||||||||||||||||
2018 | $11.81 | 0.22 | (0.34) | (0.12) | (0.42) | — | (0.42) | $11.27 | (1.15)% | 0.91% | 0.98% | 1.87% | 1.80% | 169% | $5 | ||
2017(3) | $11.10 | 0.12 | 0.59 | 0.71 | — | — | — | $11.81 | 6.40% | 0.93%(4) | 1.01%(4) | 1.84%(4) | 1.76%(4) | 201%(5) | $5 | ||
R6 Class | |||||||||||||||||
2018 | $11.82 | 0.23 | (0.33) | (0.10) | (0.45) | — | (0.45) | $11.27 | (1.02)% | 0.76% | 0.83% | 2.02% | 1.95% | 169% | $1,401 | ||
2017 | $11.47 | 0.31 | 0.56 | 0.87 | (0.52) | — | (0.52) | $11.82 | 8.09% | 0.78% | 0.86% | 2.57% | 2.49% | 201% | $877 | ||
2016 | $11.64 | 0.19 | 0.01 | 0.20 | (0.37) | — | (0.37) | $11.47 | 1.86% | 0.81% | 0.86% | 1.66% | 1.61% | 250% | $7,938 | ||
2015 | $12.06 | 0.18 | 0.04 | 0.22 | (0.49) | (0.15) | (0.64) | $11.64 | 1.99% | 0.85% | 0.86% | 1.74% | 1.73% | 248% | $7,145 | ||
2014 | $11.57 | 0.17 | 0.88 | 1.05 | (0.41) | (0.15) | (0.56) | $12.06 | 9.67% | 0.85% | 0.85% | 1.50% | 1.50% | 275% | $28 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | April 10, 2017 (commencement of sale) through October 31, 2017. |
(4) | Annualized. |
(5) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2017. |
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 Global Real Estate Fund, one of the portfolios constituting the American Century Capital Portfolios, Inc. (the “Fund”), as of October 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 Global Real Estate Fund of the American Century Capital Portfolios, Inc. as of October 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 October 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
December 14, 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 | 67 | 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) | 67 | 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) | 67 | None |
M. Jeannine Strandjord (1945) | Director | Since 1994 | Self-employed Consultant | 67 | Euronet Worldwide Inc. and MGP Ingredients, Inc. |
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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 | |||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 67 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 72 | 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 | 117 | 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 each of the 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
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 |
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Investment Operations and Investment Accounting, ACS (2000 to present) |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 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 since 2012 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) |
Robert J. Leach (1966) | Vice President since 2006 | Vice President, ACS (2000 to present) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
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Approval of Management Agreement |
At a meeting held on June 28, 2018, the Fund’s Board of Directors (the "Board") unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, the Directors requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continual basis and the information received was supplemental to the extensive information that the Board and its committees receive and consider throughout the year. The Directors also conducted a review of the process by which the Board considers the renewal of the management agreements. The Board consulted with industry experts and reviewed industry best practices and recent judicial precedent. The Directors believe that the enhancements resulting from their review resulted in increased dialogue with the Advisor and an improved process for fund shareholders.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided and to be provided to the Fund; |
• | the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis; |
• | the investment performance of the Fund, including data comparing the Fund's performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor |
• | strategic plans of the Advisor; |
• | any economies of scale associated with the Advisor’s management of the Fund and other accounts; |
• | services provided and charges to the Advisor's other investment management clients; |
• | acquired fund fees and expenses; |
• | payments and practices in connection with financial intermediaries holding shares of the Fund and the services provided by intermediaries in connection therewith; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
The Directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The independent Directors also reviewed responses to supplemental information requests provided by the Directors to the Advisor and held active discussions with the Advisor regarding the renewal of the management agreement. The independent Directors had the benefit of the advice of their independent counsel throughout the process.
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Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including without limitation the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
• | portfolio research and security selection |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services (except the independent Directors’ counsel) |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution (except amounts paid by the Fund under Rule 12b-1 plans) |
The Board noted that many of these services have expanded over time in terms of both quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance, and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, provides oversight of the investment performance process. It regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review detailed performance information provided by the Advisor during the management agreement renewal process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board receives a report from the Advisor regarding the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one-, three-, and five-year periods reviewed by the Board. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
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Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, expenses attributable to short sales, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent Directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges, and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was above the median of the total expense ratios of the Fund’s peer expense universe and was at the top of the range of its peer expense group. The Board and the Advisor agreed to a permanent change to the Fund's fee schedule that should have the effect of lowering the fund's annual unified management fee by approximately 0.09% (e.g., the Investor Class unified fee will be reduced from 1.20% to 1.11%) beginning August 1, 2018. The Board concluded that the management fee paid by
32
the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the Advisor concerning the nature of the services, fees, costs, and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Payments to Intermediaries. The Directors also requested and received a description of payments made to intermediaries by the Fund and the Advisor and services provided in response thereto. These payments include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Board reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 Plan and that all such payments by the Advisor were made from the Advisor’s resources and reasonable profits. The Board found the payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. Additionally, the Advisor may receive proprietary research from broker-dealers that execute fund portfolio transactions, which the Board concluded is likely to benefit other clients of the Advisor, as well as Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients and, where expressly provided, these other client assets may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent Directors, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
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. 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 October 31, 2018.
For corporate taxpayers, the fund hereby designates $17,022, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2018 as qualified for the corporate dividends received deduction.
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-90980 1812 |
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Annual Report | |
October 31, 2018 | |
NT Global Real Estate Fund | |
Investor Class (ANREX) | |
G Class (ANRHX) |
Table of Contents |
Performance | 2 | |
Portfolio Commentary | 3 | |
Fund Characteristics | ||
Shareholder Fee Example | ||
Schedule of Investments | ||
Statement of Assets and Liabilities | ||
Statement of Operations | ||
Statement of Changes in Net Assets | ||
Notes to Financial Statements | ||
Financial Highlights | ||
Report of Independent Registered Public Accounting Firm | ||
Management | ||
Approval of Management Agreement | ||
Additional Information |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
Performance |
Total Returns as of October 31, 2018 | ||||
Average Annual Returns | ||||
Ticker Symbol | 1 year | Since Inception | Inception Date | |
Investor Class | ANREX | -1.45% | 0.83% | 3/19/15 |
FTSE EPRA Nareit Global Index | — | -1.59% | 1.93% | — |
MSCI ACWI Index | — | -0.52% | 5.68% | — |
G Class | ANRHX | -0.43% | 1.33% | 3/19/15 |
Fund returns would have been lower if a portion of the fees had not been waived.
Growth of $10,000 Over Life of Class |
$10,000 investment made March 19, 2015 |
Performance for other share classes will vary due to differences in fee structure. |
![chart-864f24b1b6a15041b15.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000189/chart-864f24b1b6a15041b15.jpg)
Value on October 31, 2018 | |
Investor Class — $10,410 | |
FTSE EPRA Nareit Global Index — $10,715 | |
MSCI ACWI Index — $12,217 | |
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 | G Class |
1.12% | 0.77% |
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: Steven Brown and Steven Rodriguez
Performance Summary
NT Global Real Estate returned -1.45%* for the fiscal year ended October 31, 2018. By comparison, the FTSE EPRA Nareit Global Index (the fund’s benchmark) returned -1.59%, while the MSCI ACWI Index (a broad global stock market measure) returned -0.52%.
Global Real Estate Market Overview
As an asset class, global real estate investment trusts (REITs) declined for the 12-month period, lagging the gains of the broad global equity indices. REIT performance was buffeted by rising global interest rates, which tend to create headwinds for interest-sensitive equities such as real estate. Geographically, the weakest performance within the global REITs market came from several European and Asian countries. In Europe, slowing economic trends and concerns around Brexit created a challenging backdrop, while in Asia the ripple effect of government policy changes in China challenged REITs. Exceptions within these two regions were Germany and Japan, where listed property performance was among the best in the market.
Within the fund, a combination of strong stock selection and allocation drove outperformance versus our benchmark. While the largest contribution came from our holdings in the U.K. and Australia, the fund’s U.S.-based investments also buoyed performance, as did an overweight position in the U.S. Conversely, results were hindered by the fund’s underweight position in China. Weak stock selection in Germany and Singapore also weighed on relative performance.
U.S. Holdings Among Key Contributors
Key contributors included several U.S.-based investments, including timber REIT Rayonier, health care REIT HCP, residential REIT Sun Communities, and retail REIT Simon Property Group.
Rayonier gained in response to improving demand trends driven by the U.S. housing recovery and increasing timber exports globally. Rayonier owns assets in timber-growing regions in the U.S. and New Zealand. We believe continued strength in the U.S. housing market bodes well for the price of timber. However, we sold our position in Rayonier after the stock reached our price target.
HCP’s real estate investments include senior living facilities, life sciences properties, and medical office buildings. Like many of its peers, the company has taken measures to improve profitability for its tenants, thereby stabilizing its own tenant credit profile and balance sheet. Investors reacted positively to these changes and bid the stock higher during the period.
Sun Communities, a residential REIT that owns and develops manufactured housing communities in the U.S. and Canada, benefited from limited new supply and improvement in both employment and income measures in most of the markets in which it operates.
Continued strength in the retail sector and better-than-expected financial results supported stock gains for REIT Simon Property Group, an owner, operator, and developer of shopping malls. Against this positive backdrop, management raised is full-year outlook for the company.
* 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 2 for returns for all share classes.
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Diversified Holdings Detracted
Notable detractors included GDS Holdings and Equinix, two data center real estate companies within the diversified sector. Recent outlooks provided by several cloud-computing businesses, which are the largest tenants of data centers, fell short of expectations during the period. Concerns of a potential slowdown in demand for data center companies consequently weighed on our investments in this group. Although we maintained our position in GDS, we sold our Equinix shares to fund our investment in Digital Realty Trust, a data center REIT that we believe has a more compelling risk/reward profile than Equinix. However, our outlook for data center REITs is currently under review.
Other weak performers within the diversified sector included Shimao Property Holdings, a China-based investment holding company engaged in the sale and rental of commercial and residential properties as well as the operation of hotels. Shimao traded lower in spite of strong company fundamentals. A broad-based sell-off among Chinese stocks during the period raised concerns about Shimao’s higher-than-average debt relative to its peers. Given recent concerns around China, we do not expect to see an acceleration in Shimao’s growth and consequently eliminated our position in the stock.
Elsewhere, China-based hotel operator GreenTree Hospitality Group detracted from the fund’s performance. Given the moderating growth outlook for the Chinese economy and expectations that the appetite for leisure spend will decrease, we liquidated our position in the lodging/resort name.
Outlook
In our view, global real estate securities currently are trading at an attractive discount to their net asset value and continue to offer investors healthy dividend yields. Although the consensus is that global interest rates will likely continue rising, we believe strong fundamentals combined with improved earnings profiles for many real estate companies bodes well for these stocks in the coming year.
Against this backdrop, we maintained an overweight position in North America, where our focus is on U.S.-based property companies we believe will continue to benefit from robust economic growth in the U.S. Conversely, the fund was notably underweight in emerging markets. In our view, slowing economic growth in China could negatively impact other Asian economies. We consequently reduced our exposure in China, Singapore, and Hong Kong.
The industrial sector remained one of the fund’s largest sector overweights. Signs of continued strength in e-commerce trends in most global markets continues to drive our optimism for fund holdings within this sector. We also held a larger-than-benchmark stake in the residential sector, where we remain particularly upbeat about developments in the U.S. Notably, we are seeing accelerating tailwinds from strong U.S. job growth and an increase in the number of renters as the housing supply moderates and homes become less affordable.
While robust e-commerce trends provide a tailwind for industrial properties, they create a headwind for brick-and-mortar retail companies. We therefore maintained our underweight position in the retail sector. The fund also was underweight in the lodging/resorts sector, where we reduced our exposure during the period due to our concerns of a potential slowdown in demand for lodging as a result of moderating global economic growth.
4
Fund Characteristics |
OCTOBER 31, 2018 | |
Top Ten Holdings | % of net assets |
Simon Property Group, Inc. | 5.8% |
Prologis, Inc. | 4.8% |
Vonovia SE | 3.5% |
Gaming and Leisure Properties, Inc. | 3.2% |
Sun Communities, Inc. | 3.0% |
Camden Property Trust | 2.7% |
HCP, Inc. | 2.7% |
Gecina SA | 2.6% |
Alexandria Real Estate Equities, Inc. | 2.5% |
UDR, Inc. | 2.4% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 52.3% |
Foreign Common Stocks | 45.7% |
Total Common Stocks | 98.0% |
Temporary Cash Investments | 1.6% |
Other Assets and Liabilities | 0.4% |
Investments by Country | % of net assets |
United States | 52.3% |
Japan | 10.0% |
Hong Kong | 6.6% |
United Kingdom | 4.9% |
Germany | 4.4% |
Australia | 4.3% |
France | 2.6% |
Canada | 2.5% |
China | 2.4% |
Other Countries | 8.0% |
Cash and Equivalents* | 2.0% |
*Includes temporary cash investments and other assets and liabilities. |
5
Shareholder Fee Example |
Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from May 1, 2018 to October 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 5/1/18 | Ending Account Value 10/31/18 | Expenses Paid During Period(1) 5/1/18 - 10/31/18 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $957.90 | $5.48 | 1.11% |
G Class | $1,000 | $962.20 | $0.00 | 0.00%(2) |
Hypothetical | ||||
Investor Class | $1,000 | $1,019.61 | $5.65 | 1.11% |
G Class | $1,000 | $1,025.21 | $0.00 | 0.00%(2) |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 184, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
(2) | Other expenses, which include directors' fees and expenses, did not exceed 0.005%. |
6
Schedule of Investments |
OCTOBER 31, 2018
Shares | Value | ||||
COMMON STOCKS — 98.0% | |||||
Australia — 4.3% | |||||
Charter Hall Group | 1,558,327 | $ | 7,614,353 | ||
Goodman Group | 1,265,689 | 9,303,571 | |||
16,917,924 | |||||
Belgium — 1.0% | |||||
Shurgard Self Storage Europe Sarl(1) | 77,982 | 2,189,168 | |||
VGP NV | 23,382 | 1,652,579 | |||
3,841,747 | |||||
Brazil — 1.0% | |||||
Iguatemi Empresa de Shopping Centers SA | 399,400 | 4,139,422 | |||
Canada — 2.5% | |||||
Boardwalk Real Estate Investment Trust | 64,025 | 2,383,581 | |||
Brookfield Asset Management, Inc., Class A | 128,523 | 5,244,601 | |||
Northview Apartment Real Estate Investment Trust | 117,043 | 2,250,263 | |||
9,878,445 | |||||
China — 2.4% | |||||
China Resources Land Ltd. | 1,240,000 | 4,206,096 | |||
GDS Holdings Ltd. ADR(1) | 125,187 | 2,938,139 | |||
Longfor Group Holdings Ltd. | 899,000 | 2,182,743 | |||
9,326,978 | |||||
France — 2.6% | |||||
Gecina SA | 69,367 | 10,190,342 | |||
Germany — 4.4% | |||||
Aroundtown SA | 462,786 | 3,842,201 | |||
Vonovia SE | 295,902 | 13,546,904 | |||
17,389,105 | |||||
Hong Kong — 6.6% | |||||
CK Asset Holdings Ltd. | 802,500 | 5,208,813 | |||
Link REIT | 1,034,500 | 9,168,351 | |||
Sino Land Co. Ltd. | 1,848,000 | 2,898,565 | |||
Swire Properties Ltd. | 1,241,000 | 4,233,226 | |||
Wharf Real Estate Investment Co. Ltd. | 705,000 | 4,364,699 | |||
25,873,654 | |||||
Japan — 10.0% | |||||
GLP J-Reit | 5,571 | 5,514,962 | |||
Invesco Office J-Reit, Inc. | 25,890 | 3,659,729 | |||
Japan Hotel REIT Investment Corp. | 5,933 | 4,222,270 | |||
Mitsui Fudosan Co. Ltd. | 409,300 | 9,228,158 | |||
Orix JREIT, Inc. | 5,117 | 7,827,307 | |||
Sumitomo Realty & Development Co. Ltd. | 164,500 | 5,660,952 | |||
Tokyu Fudosan Holdings Corp. | 527,300 | 2,972,152 | |||
39,085,530 |
7
Shares | Value | ||||
Mexico — 0.5% | |||||
Corp. Inmobiliaria Vesta SAB de CV | 1,499,985 | $ | 1,827,607 | ||
Netherlands — 1.2% | |||||
InterXion Holding NV(1) | 80,542 | 4,741,508 | |||
Philippines — 0.6% | |||||
Ayala Land, Inc. | 3,031,000 | 2,246,129 | |||
Singapore — 1.6% | |||||
CapitaLand Commercial Trust | 2,440,900 | 3,048,592 | |||
CapitaLand Ltd. | 1,427,700 | 3,236,457 | |||
6,285,049 | |||||
Spain — 1.4% | |||||
Inmobiliaria Colonial Socimi SA | 554,974 | 5,578,750 | |||
Thailand — 0.7% | |||||
Central Pattana PCL | 1,194,400 | 2,846,383 | |||
United Kingdom — 4.9% | |||||
Derwent London plc | 78,208 | 2,927,989 | |||
Safestore Holdings plc | 480,618 | 3,280,501 | |||
Segro plc | 1,159,618 | 9,109,749 | |||
UNITE Group plc (The) | 366,181 | 3,990,149 | |||
19,308,388 | |||||
United States — 52.3% | |||||
Agree Realty Corp. | 116,790 | 6,688,563 | |||
Alexandria Real Estate Equities, Inc. | 79,141 | 9,673,404 | |||
American Campus Communities, Inc. | 148,559 | 5,869,566 | |||
AvalonBay Communities, Inc. | 45,457 | 7,972,249 | |||
Blackstone Mortgage Trust, Inc., Class A | 121,960 | 4,114,930 | |||
Boston Properties, Inc. | 54,719 | 6,607,866 | |||
Camden Property Trust | 117,166 | 10,576,575 | |||
Columbia Property Trust, Inc. | 223,539 | 5,018,451 | |||
CyrusOne, Inc. | 97,292 | 5,178,853 | |||
Digital Realty Trust, Inc. | 88,299 | 9,117,755 | |||
Duke Realty Corp. | 201,441 | 5,553,728 | |||
Extra Space Storage, Inc. | 27,274 | 2,456,296 | |||
Gaming and Leisure Properties, Inc. | 372,787 | 12,559,194 | |||
HCP, Inc. | 381,334 | 10,505,752 | |||
Host Hotels & Resorts, Inc. | 72,923 | 1,393,559 | |||
Hudson Pacific Properties, Inc. | 104,276 | 3,159,563 | |||
Invitation Homes, Inc. | 136,829 | 2,993,819 | |||
Prologis, Inc. | 292,096 | 18,831,429 | |||
Regency Centers Corp. | 90,940 | 5,761,958 | |||
Rexford Industrial Realty, Inc. | 117,659 | 3,726,261 | |||
Simon Property Group, Inc. | 123,351 | 22,637,376 | |||
Starwood Property Trust, Inc. | 163,963 | 3,561,276 | |||
STORE Capital Corp. | 183,288 | 5,320,851 | |||
Sun Communities, Inc. | 118,579 | 11,913,632 | |||
Taubman Centers, Inc. | 55,218 | 3,037,542 | |||
UDR, Inc. | 242,210 | 9,492,210 |
8
Shares | Value | ||||
Vornado Realty Trust | 59,252 | $ | 4,033,876 | ||
Welltower, Inc. | 111,334 | 7,355,837 | |||
205,112,371 | |||||
TOTAL COMMON STOCKS (Cost $369,463,604) | 384,589,332 | ||||
TEMPORARY CASH INVESTMENTS — 1.6% | |||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.625% - 4.75%, 1/31/20 - 8/15/45, valued at $4,267,518), in a joint trading account at 2.00%, dated 10/31/18, due 11/1/18 (Delivery value $4,181,104) | 4,180,872 | ||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 3.00%, 5/15/45, valued at $2,136,106), at 1.05%, dated 10/31/18, due 11/1/18 (Delivery value $2,092,061) | 2,092,000 | ||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 3,737 | 3,737 | |||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $6,276,609) | 6,276,609 | ||||
TOTAL INVESTMENT SECURITIES — 99.6% (Cost $375,740,213) | 390,865,941 | ||||
OTHER ASSETS AND LIABILITIES — 0.4% | 1,395,220 | ||||
TOTAL NET ASSETS — 100.0% | $ | 392,261,161 |
SECTOR ALLOCATION | ||
(as a % of net assets) | ||
Diversified | 29.5 | % |
Residential | 19.1 | % |
Retail | 15.2 | % |
Industrial | 14.1 | % |
Office | 12.0 | % |
Health Care | 4.6 | % |
Self Storage | 2.0 | % |
Lodging/Resorts | 1.5 | % |
Cash and Equivalents* | 2.0 | % |
*Includes temporary cash investments and other assets and liabilities.
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
(1) | Non-income producing. |
See Notes to Financial Statements.
9
Statement of Assets and Liabilities |
OCTOBER 31, 2018 | |||
Assets | |||
Investment securities, at value (cost of $375,740,213) | $ | 390,865,941 | |
Foreign currency holdings, at value (cost of $9) | 9 | ||
Receivable for investments sold | 3,126,398 | ||
Dividends and interest receivable | 614,990 | ||
394,607,338 | |||
Liabilities | |||
Payable for investments purchased | 2,241,806 | ||
Accrued management fees | 104,371 | ||
2,346,177 | |||
Net Assets | $ | 392,261,161 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 408,884,125 | |
Distributable earnings | (16,622,964 | ) | |
$ | 392,261,161 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $109,780,583 | 11,774,132 | $9.32 | |||
G Class, $0.01 Par Value | $282,480,578 | 30,020,744 | $9.41 |
See Notes to Financial Statements.
10
Statement of Operations |
YEAR ENDED OCTOBER 31, 2018 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $487,907) | $ | 11,609,083 | |
Interest | 52,104 | ||
11,661,187 | |||
Expenses: | |||
Management fees | 3,882,090 | ||
Directors' fees and expenses | 9,467 | ||
Other expenses | 8,285 | ||
3,899,842 | |||
Fees waived(1) | (2,619,367 | ) | |
1,280,475 | |||
Net investment income (loss) | 10,380,712 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 11,068,645 | ||
Foreign currency translation transactions | (79,028 | ) | |
10,989,617 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | (22,988,670 | ) | |
Translation of assets and liabilities in foreign currencies | 1,159 | ||
(22,987,511 | ) | ||
Net realized and unrealized gain (loss) | (11,997,894 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (1,617,182 | ) |
(1) | Amount consists of $76,482 and $2,542,885 for Investor Class and G Class, respectively. |
See Notes to Financial Statements.
11
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2018 AND OCTOBER 31, 2017 | ||||||
Increase (Decrease) in Net Assets | October 31, 2018 | October 31, 2017 | ||||
Operations | ||||||
Net investment income (loss) | $ | 10,380,712 | $ | 10,114,235 | ||
Net realized gain (loss) | 10,989,617 | (3,635,057 | ) | |||
Change in net unrealized appreciation (depreciation) | (22,987,511 | ) | 27,252,018 | |||
Net increase (decrease) in net assets resulting from operations | (1,617,182 | ) | 33,731,196 | |||
Distributions to Shareholders | ||||||
From earnings: | ||||||
Investor Class | (3,692,279 | ) | (4,532,618 | ) | ||
R6 Class | — | (1,286,466 | ) | |||
G Class | (12,293,326 | ) | (11,286,980 | ) | ||
Decrease in net assets from distributions | (15,985,605 | ) | (17,106,064 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (25,676,420 | ) | 28,710,763 | |||
Net increase (decrease) in net assets | (43,279,207 | ) | 45,335,895 | |||
Net Assets | ||||||
Beginning of period | 435,540,368 | 390,204,473 | ||||
End of period | $ | 392,261,161 | $ | 435,540,368 |
See Notes to Financial Statements.
12
Notes to Financial Statements |
OCTOBER 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 Global Real Estate Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek high total investment return through a combination of capital appreciation and current income. 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 Investor Class and G 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.
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.
13
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.
Distributions to Shareholders — Distributions from net investment income and net realized gains, if any, are generally declared and paid annually.
14
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc., and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC. 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 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, which may be provided indirectly through another American Century Investments mutual fund. 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 November 1, 2017 through July 31, 2018, the investment advisor agreed to waive 0.09% of the fund's management fee. Effective August 1, 2018, the investment advisor terminated the waiver and decreased the annual management fee by 0.09%. The investment advisor agreed to waive the G Class’s management fee in its entirety. The investment advisor expects this waiver to remain in effect permanently and cannot terminate it without the approval of the Board of Directors.
The annual management fee and the effective annual management fee before and after waiver for each class for the period ended October 31, 2018 are as follows:
Annual Management Fee* | Effective Annual Management Fee | ||
Before Waiver | After Waiver | ||
Investor Class | 1.11% | 1.18% | 1.11% |
G Class | 0.76% | 0.83% | 0.00% |
*Prior to August 1, 2018, the annual management fee was 1.20% for the Investor Class and 0.85% 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 $6,825,682 and $3,239,469, respectively. The effect of interfund transactions on the Statement of Operations was $137,571 in net realized gain (loss) on investment transactions.
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended October 31, 2018 were $741,156,932 and $771,233,894, respectively.
15
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2018 | Year ended October 31, 2017 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 90,000,000 | 90,000,000 | ||||||||
Sold | 609,405 | $ | 5,985,751 | 1,424,775 | $ | 12,844,944 | ||||
Issued in reinvestment of distributions | 379,084 | 3,692,279 | 512,740 | 4,532,618 | ||||||
Redeemed | (317,988 | ) | (3,153,870 | ) | (1,599,826 | ) | (14,600,064 | ) | ||
670,501 | 6,524,160 | 337,689 | 2,777,498 | |||||||
R6 Class/Shares Authorized | N/A | N/A | ||||||||
Sold | 1,321,902 | 12,086,691 | ||||||||
Issued in reinvestment of distributions | 145,528 | 1,286,466 | ||||||||
Redeemed | (4,144,860 | ) | (39,871,707 | ) | ||||||
(2,677,430 | ) | (26,498,550 | ) | |||||||
G Class/Shares Authorized | 230,000,000 | 200,000,000 | ||||||||
Sold | 1,245,433 | 12,202,353 | 6,472,163 | 61,145,332 | ||||||
Issued in reinvestment of distributions | 1,262,148 | 12,293,326 | 1,276,808 | 11,286,980 | ||||||
Redeemed | (5,750,226 | ) | (56,696,259 | ) | (2,126,720 | ) | (20,000,497 | ) | ||
(3,242,645 | ) | (32,200,580 | ) | 5,622,251 | 52,431,815 | |||||
Net increase (decrease) | (2,572,144 | ) | $ | (25,676,420 | ) | 3,282,510 | $ | 28,710,763 |
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.
16
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 | ||||||||
Australia | — | $ | 16,917,924 | — | ||||
Belgium | — | 3,841,747 | — | |||||
Brazil | — | 4,139,422 | — | |||||
Canada | — | 9,878,445 | — | |||||
China | $ | 2,938,139 | 6,388,839 | — | ||||
France | — | 10,190,342 | — | |||||
Germany | — | 17,389,105 | — | |||||
Hong Kong | — | 25,873,654 | — | |||||
Japan | — | 39,085,530 | — | |||||
Mexico | — | 1,827,607 | — | |||||
Philippines | — | 2,246,129 | — | |||||
Singapore | — | 6,285,049 | — | |||||
Spain | — | 5,578,750 | — | |||||
Thailand | — | 2,846,383 | — | |||||
United Kingdom | — | 19,308,388 | — | |||||
Other Countries | 209,853,879 | — | — | |||||
Temporary Cash Investments | 3,737 | 6,272,872 | — | |||||
$ | 212,795,755 | $ | 178,070,186 | — |
7. Risk Factors
The fund concentrates its investments in a narrow segment of the total market. Because of this, the fund is subject to certain additional risks as compared to investing in a more diversified portfolio of investments. The fund may be subject to certain risks similar to those associated with direct investment in real estate including but not limited to: local or regional economic conditions, changes in zoning laws, changes in property values, property tax increases, overbuilding, increased competition, environmental contamination, natural disasters, and interest rate risk.
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. Investing in emerging markets may accentuate these risks.
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.
8. Federal Tax Information
The tax character of distributions paid during the years ended October 31, 2018 and October 31, 2017 were as follows:
2018 | 2017 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 15,985,605 | $ | 17,106,064 | ||
Long-term capital gains | — | — |
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
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As of period end, the federal tax cost of investments and the components of distributable earnings on a tax-basis were as follows:
Federal tax cost of investments | $ | 387,927,338 | |
Gross tax appreciation of investments | $ | 15,760,667 | |
Gross tax depreciation of investments | (12,822,064 | ) | |
Net tax appreciation (depreciation) of investments | 2,938,603 | ||
Net tax appreciation (depreciation) on translation of assets and liabilities in foreign currencies | (7,472 | ) | |
Net tax appreciation (depreciation) | $ | 2,931,131 | |
Undistributed ordinary income | $ | 12,691,202 | |
Accumulated short-term capital losses | $ | (32,245,297 | ) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the realization to ordinary income for tax purposes of unrealized gains on investments in passive foreign investment companies.
Accumulated capital losses represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers may be carried forward for an unlimited period. Future capital loss carryover utilization in any given year may be subject to Internal Revenue Code limitations.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Ratio to Average Net Assets of: | ||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Distributions From Net Investment Income | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | 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 | $9.79 | 0.16 | (0.30) | (0.14) | (0.33) | $9.32 | (1.45)% | 1.11% | 1.18% | 1.66% | 1.59% | 178% | $109,781 | ||
2017 | $9.49 | 0.20 | 0.48 | 0.68 | (0.38) | $9.79 | 7.55% | 1.13% | 1.21% | 2.09% | 2.01% | 211% | $108,683 | ||
2016 | $9.57 | 0.13 | 0.01 | 0.14 | (0.22) | $9.49 | 1.58% | 1.16% | 1.21% | 1.30% | 1.25% | 264% | $102,125 | ||
2015(3) | $10.00 | 0.09 | (0.52) | (0.43) | — | $9.57 | (4.30)% | 1.19%(4) | 1.20%(4) | 1.50%(4) | 1.49%(4) | 151% | $92,086 | ||
G Class | |||||||||||||||
2018 | $9.83 | 0.27 | (0.30) | (0.03) | (0.39) | $9.41 | (0.43)% | 0.00%(5) | 0.83% | 2.77% | 1.94% | 178% | $282,481 | ||
2017 | $9.50 | 0.24 | 0.48 | 0.72 | (0.39) | $9.83 | 8.09% | 0.66% | 0.97% | 2.56% | 2.25% | 211% | $326,857 | ||
2016 | $9.59 | 0.14 | 0.01 | 0.15 | (0.24) | $9.50 | 1.74% | 0.96% | 1.01% | 1.50% | 1.45% | 264% | $262,612 | ||
2015(3) | $10.00 | 0.10 | (0.51) | (0.41) | — | $9.59 | (4.20)% | 0.99%(4) | 1.00%(4) | 1.70%(4) | 1.69%(4) | 151% | $240,740 |
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) | March 19, 2015 (fund inception) through October 31, 2015. |
(4) | Annualized. |
(5) | Ratio was less than 0.005%. |
See Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm |
To the shareholders and the Board of Directors of American Century 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 Global Real Estate Fund, one of the portfolios constituting the American Century Capital Portfolios, Inc. (the “Fund”), as of October 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 the years ended October 31, 2018, October 31, 2017, October 31, 2016 and for the period March 19, 2015 (fund inception) through October 31, 2015, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of NT Global Real Estate Fund of the American Century Capital Portfolios, Inc. as of October 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 the years ended October 31, 2018, October 31, 2017, October 31, 2016 and for the period March 19, 2015 (fund inception) through October 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 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
December 14, 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 | 67 | 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) | 67 | 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) | 67 | None |
M. Jeannine Strandjord (1945) | Director | Since 1994 | Self-employed Consultant | 67 | Euronet Worldwide Inc. and MGP Ingredients, Inc. |
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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 | |||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 67 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 72 | 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 | 117 | 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 each of the 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
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 |
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Investment Operations and Investment Accounting, ACS (2000 to present) |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 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 since 2012 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) |
Robert J. Leach (1966) | Vice President since 2006 | Vice President, ACS (2000 to present) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
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Approval of Management Agreement |
At a meeting held on June 28, 2018, the Fund’s Board of Directors (the "Board") unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, the Directors requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continual basis and the information received was supplemental to the extensive information that the Board and its committees receive and consider throughout the year. The Directors also conducted a review of the process by which the Board considers the renewal of the management agreements. The Board consulted with industry experts and reviewed industry best practices and recent judicial precedent. The Directors believe that the enhancements resulting from their review resulted in increased dialogue with the Advisor and an improved process for fund shareholders.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided and to be provided to the Fund; |
• | the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis; |
• | the investment performance of the Fund, including data comparing the Fund's performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor |
• | strategic plans of the Advisor; |
• | any economies of scale associated with the Advisor’s management of the Fund and other accounts; |
• | services provided and charges to the Advisor's other investment management clients; |
• | acquired fund fees and expenses; |
• | payments and practices in connection with financial intermediaries holding shares of the Fund and the services provided by intermediaries in connection therewith; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
The Directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The independent Directors also reviewed responses to supplemental information requests provided by the Directors to the Advisor and held active discussions with the Advisor regarding the renewal of the management agreement. The independent Directors had the benefit of the advice of their independent counsel throughout the process.
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Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including without limitation the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
• | portfolio research and security selection |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services (except the independent Directors’ counsel) |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution (except amounts paid by the Fund under Rule 12b-1 plans) |
The Board noted that many of these services have expanded over time in terms of both quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance, and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, provides oversight of the investment performance process. It regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review detailed performance information provided by the Advisor during the management agreement renewal process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board receives a report from the Advisor regarding the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one-year period reviewed by the Board. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
25
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, expenses attributable to short sales, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent Directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges, and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was above the median of the total expense ratios of the Fund’s peer expense universe and was at the top of the range of its peer expense group. The Board and the Advisor agreed to a permanent change to the Fund's fee schedule that should have the effect of lowering the fund's annual unified management fee by approximately 0.09% (e.g., the Investor Class unified fee will be reduced from 1.20% to 1.11%) beginning August 1, 2018. The Board concluded that the management fee paid by
26
the Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the Advisor concerning the nature of the services, fees, costs, and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Payments to Intermediaries. The Directors also requested and received a description of payments made to intermediaries by the Fund and the Advisor and services provided in response thereto. These payments include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Board reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 Plan and that all such payments by the Advisor were made from the Advisor’s resources and reasonable profits. The Board found the payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. Additionally, the Advisor may receive proprietary research from broker-dealers that execute fund portfolio transactions, which the Board concluded is likely to benefit other clients of the Advisor, as well as Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients and, where expressly provided, these other client assets may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent Directors, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
27
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. 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 October 31, 2018.
For corporate taxpayers, the fund hereby designates $86,867, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2018 as qualified for the corporate dividends received deduction.
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Notes |
30
Notes |
31
Notes |
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Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century 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-90988 1812 |
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Annual Report | |
October 31, 2018 | |
Real Estate Fund | |
Investor Class (REACX) | |
I Class (REAIX) | |
Y Class (ARYEX) | |
A Class (AREEX) | |
C Class (ARYCX) | |
R Class (AREWX) | |
R5 Class (ARREX) | |
R6 Class (AREDX) |
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 | ||
Approval of Management Agreement | ||
Additional Information |
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
President’s Letter |
![jthomasrev0514.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000189/jthomasrev0514.jpg)
Dear Investor:
Thank you for reviewing this annual report for the 12 months ended October 31, 2018. Annual reports help convey important information about fund returns, including market factors that affected performance during the reporting period. For additional investment and market insights, we encourage you to visit our website, americancentury.com.
Rising Rates, Heightened Volatility Challenge Investors
U.S. stocks generally delivered gains for the period, but returns were considerably weaker than the robust, double-digit results of the previous fiscal year. Early on, a backdrop of robust corporate earnings results, improving global economic growth, and growth-oriented U.S. tax reform helped drive stock prices higher. The S&P 500 Index returned more than 10% just in the first three months of the reporting period.
Investor sentiment shifted dramatically in early February, as volatility resurfaced after an extended period of relative dormancy. Better-than-expected U.S. economic data triggered expectations for rising inflation, higher interest rates, and a more-hawkish Federal Reserve (Fed). In response, U.S. Treasury yields soared, and stock prices plunged. Although this bout of market unrest quickly subsided, volatility remained a formidable force throughout the rest of the period. Stocks remained resilient, though, and the S&P 500 Index advanced 7.35% for the 12-month period. Growth stocks outpaced value stocks, and large-cap stocks outperformed small-cap stocks. Meanwhile, rising U.S. Treasury yields and Fed rate hikes weighed on interest-rate sensitive assets, including investment-grade bonds and real estate investment trusts.
Outside the U.S., economic growth moderated as the period unfolded, and global bond yields were flat to modestly higher. The U.S. dollar continued to gain ground versus other currencies, which drove down non-U.S. bond returns for unhedged investors. The strong dollar, combined with rising U.S. interest rates, geopolitical tensions, and fiscal challenges in several developing countries, led to negative results for emerging markets bonds.
With global economic growth diverging, Treasury yields rising, and volatility lingering, investors likely will face opportunities and challenges in the months ahead. We believe this scenario underscores the importance of using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a01.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000189/image48a01.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of October 31, 2018 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | REACX | 1.11% | 6.86% | 10.56% | — | 9/21/95 |
MSCI U.S. REIT Index | — | 1.69% | 7.55% | 11.35% | — | — |
S&P 500 Index | — | 7.35% | 11.33% | 13.23% | — | — |
I Class | REAIX | 1.34% | 7.08% | 10.78% | — | 6/16/97 |
Y Class | ARYEX | 1.50% | — | — | 1.30% | 4/10/17 |
A Class | AREEX | 10/6/98 | ||||
No sales charge | 0.86% | 6.60% | 10.28% | — | ||
With sales charge | -4.94% | 5.34% | 9.63% | — | ||
C Class | ARYCX | 0.11% | 5.80% | 9.46% | — | 9/28/07 |
R Class | AREWX | 0.61% | 6.33% | 10.00% | — | 9/28/07 |
R5 Class | ARREX | 1.31% | — | — | 1.14% | 4/10/17 |
R6 Class | AREDX | 1.46% | 7.23% | — | 6.50% | 7/26/13 |
Average annual returns since inception are presented when ten years of performance history is not available.
The Investor Class date is the inception date for RREEF Real Estate Securities Fund, Real Estate’s predecessor. That fund merged with Real Estate on June 13, 1997 and Real Estate was first offered to the public on June 16, 1997.
Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. A Class shares have a 5.75% maximum initial sales charge and may be subject to a maximum CDSC of 1.00%. C Class shares redeemed within 12 months of purchase are subject to a maximum CDSC of 1.00%. The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied.
Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Total returns for periods less than one year are not annualized. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. For additional information about the fund, please consult the prospectus.
3
Growth of $10,000 Over 10 Years |
$10,000 investment made October 31, 2008 |
Performance for other share classes will vary due to differences in fee structure. |
![chart-5cc9a49631e95cb9b57.jpg](https://capedge.com/proxy/N-CSR/0000908186-18-000189/chart-5cc9a49631e95cb9b57.jpg)
Value on October 31, 2018 | |
Investor Class — $27,298 | |
MSCI U.S. REIT Index — $29,332 | |
S&P 500 Index — $34,668 | |
Total Annual Fund Operating Expenses | |||||||
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class |
1.15% | 0.95% | 0.80% | 1.40% | 2.15% | 1.65% | 0.95% | 0.80% |
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: Steven Brown and Steven Rodriguez
Performance Summary
Real Estate returned 1.11%* for the fiscal year ended October 31, 2018. By comparison, the MSCI U.S. REIT Index (the fund’s benchmark) returned 1.69%, while the S&P 500 Index (a broad stock market measure) returned 7.35%.
REIT Market Overview
Real estate investment trusts (REITs) delivered marginal gains for the 12-month period yet lagged the returns of the broad U.S. equity indices. Performance was buffeted by rising U.S. interest rates, which tend to create headwinds for interest-sensitive equities such as real estate. Further pressuring REIT returns was a sell-off in early 2018 and implementation of a new U.S. tax bill. The bill reduced corporate tax rates and subsequently drove inflation expectations and interest rates higher. The effects of these negative developments were offset by strong real estate fundamentals in the U.S. and the growing dividend yields of many publicly traded U.S. real estate companies.
Areas of strength within the REITs market included the retail and self storage sectors. Strong economic growth, high consumer confidence, and wage increases continued to bode well for the retail sector. Meanwhile, stocks within the self storage sector benefited from better-than-expected demand for storage. Areas of weakness included the industrial, diversified, and office sectors. The industrial sector declined against a backdrop of increased trade rhetoric between the U.S. and China and concerns that weaker global trade could dampen demand for industrial real estate in global export markets. The poor performance of the diversified sector was driven primarily by data center REITs, which declined in response to lower-than-expected outlooks reported by a number of cloud-computing companies. Meanwhile, disappointing leasing trends contributed to weakness in the office sector.
Within the fund, sources of underperformance included negative stock selection in the office sector and a smaller-than-benchmark stake in the solid-performing health care sector. Conversely, relative results were buoyed by positive stock selection in the diversified sector, where our holdings in timber REITs delivered particularly strong results. Positive stock selection combined with an overweight position in the retail sector versus the benchmark also lifted performance. Within this sector, a focus on high-quality malls and net-lease REITs oriented toward e-commerce-resistant retailers proved especially beneficial. Another area of strength in the fund was the lodging/resorts sector, where a slight underweight position benefited performance.
Data Center REITs Among Key Detractors
On an individual stock basis, key detractors included data center REITs Equinix and CyrusOne, which declined on concerns of potentially slower leasing volumes. Nonetheless, we believe these companies continue to have relatively attractive growth expectations and maintained positions in both stocks at period-end.
Not owning retail REIT Realty Income weighed on relative performance. In our view, a below-average growth outlook makes this commercial property owner less attractive than other retail REITs. However, Realty Income was a solid performer during the period.
* 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
Other detractors included office REITs Boston Properties and Hudson Pacific Properties. Boston Properties, an owner of high-quality properties on both the East and West coasts, saw its stock pull back after management revised full-year 2018 guidance lower. We believe management’s 2019 outlook will accelerate from 2018 and, therefore, we will remain invested in Boston Properties. We also maintain a positive outlook for Hudson Pacific Properties, an owner and developer of office and media and entertainment properties in California and the Pacific Northwest. Delays in securing new tenants following a number of large-tenant moveouts put pressure on Hudson’s forward earnings expectations. We believe the company will recover from this short-term setback.
Retail and Diversified Holdings Contributed
Notable contributors included retail holdings STORE Capital and Agree Realty. Both companies are net-lease REITs, which means their tenants pay rent, plus some or all of the real estate taxes, building insurance, and maintenance fees. A robust acquisition environment within the net-lease segment as well as a focus on owning retail assets with e-commerce-resistant tenants supported stock gains for both companies. Agree Realty’s stock also advanced on strong financial results and an increase in management’s full-year acquisition guidance.
Key contributors also came from the diversified sector, where timber REIT Rayonier was a standout performer. Rayonier benefited from improving demand trends driven by the U.S. housing recovery and increasing timber exports globally. Strength in the U.S. housing market had boosted timber prices. However, we sold Rayonier after the stock reached our price target.
Other notable contributors in the diversified sector included Colony Capital, a stock we do not own. Our decision not to hold a position in this real estate and investment management company proved beneficial, as execution issues following a recent merger weighed heavily on the stock.
Elsewhere, the strong performance of lodging/resorts company Marriott International lifted portfolio results. The company benefited from a positive outlook for demand for corporate and group travel driven by tax reform and reduced regulation. After recent gains in Marriott’s share price, however, we felt the stock was fully valued and sold our position.
Outlook
In our view, REITs currently are trading at an attractive discount to their net asset value and continue to offer investors healthy dividend yields. Although expectations are that the Federal Reserve will continue raising interest rates through 2019, we believe strong real estate fundamentals combined with improved earnings profiles bodes well for U.S. real estate companies in the coming year.
We are particularly optimistic about the residential sector, a group we added to, bringing it to a top sector overweight at period-end. Strong demographics combined with good job growth provide a supportive backdrop for residential demand as supply remains in check in most markets. Declining home affordability resulting from rising interest rates provided an added tailwind for our rental residential REITs. Another sizable sector overweight was the diversified sector, where timber and data center REITs remained a focus. By period-end, however, we had fully exited our timber REITs due to above-average stock valuations and the potential for declining timber prices.
Notable sector underweights included health care. As new supply growth for senior living facilities continues to outpace demand, our outlook for these properties and for the health care sector in general remains cautious. Other headwinds facing various assets within the health care sector include risks around government reimbursement. We also were underweight in the lodging/resorts sector. After enjoying strong gains from our lodging/resorts holdings at the beginning of the period as a result of an increase in leisure spending, we took profits and reduced our exposure to the sector. We believe that, as global economic growth moderates, demand for lodging will decline.
6
Fund Characteristics |
OCTOBER 31, 2018 | |
Top Ten Holdings | % of net assets |
Simon Property Group, Inc. | 9.4% |
Prologis, Inc. | 7.4% |
Equinix, Inc. | 4.2% |
Welltower, Inc. | 4.1% |
HCP, Inc. | 4.0% |
Sun Communities, Inc. | 4.0% |
Camden Property Trust | 3.9% |
AvalonBay Communities, Inc. | 3.9% |
Regency Centers Corp. | 3.8% |
UDR, Inc. | 3.6% |
Sector Allocation | % of net assets |
Retail | 22.5% |
Residential | 20.8% |
Diversified | 19.9% |
Industrial | 11.9% |
Office | 8.6% |
Health Care | 8.1% |
Self Storage | 4.1% |
Lodging/Resorts | 3.7% |
Cash and Equivalents* | 0.4% |
*Includes temporary cash investments and other assets and liabilities. | |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 99.6% |
Temporary Cash Investments | 0.3% |
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 May 1, 2018 to October 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 5/1/18 | Ending Account Value 10/31/18 | Expenses Paid During Period(1) 5/1/18 - 10/31/18 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $1,044.10 | $5.93 | 1.15% |
I Class | $1,000 | $1,045.40 | $4.90 | 0.95% |
Y Class | $1,000 | $1,046.60 | $4.13 | 0.80% |
A Class | $1,000 | $1,043.20 | $7.21 | 1.40% |
C Class | $1,000 | $1,039.20 | $11.05 | 2.15% |
R Class | $1,000 | $1,041.80 | $8.49 | 1.65% |
R5 Class | $1,000 | $1,045.40 | $4.90 | 0.95% |
R6 Class | $1,000 | $1,046.20 | $4.13 | 0.80% |
Hypothetical | ||||
Investor Class | $1,000 | $1,019.41 | $5.85 | 1.15% |
I Class | $1,000 | $1,020.42 | $4.84 | 0.95% |
Y Class | $1,000 | $1,021.17 | $4.08 | 0.80% |
A Class | $1,000 | $1,018.15 | $7.12 | 1.40% |
C Class | $1,000 | $1,014.37 | $10.92 | 2.15% |
R Class | $1,000 | $1,016.89 | $8.39 | 1.65% |
R5 Class | $1,000 | $1,020.42 | $4.84 | 0.95% |
R6 Class | $1,000 | $1,021.17 | $4.08 | 0.80% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 184, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
9
Schedule of Investments |
OCTOBER 31, 2018
Shares | Value | ||||
COMMON STOCKS — 99.6% | |||||
Diversified — 19.9% | |||||
Blackstone Mortgage Trust, Inc., Class A | 298,982 | $ | 10,087,653 | ||
CyrusOne, Inc. | 251,878 | 13,407,466 | |||
Digital Realty Trust, Inc. | 337,258 | 34,825,261 | |||
Equinix, Inc. | 108,330 | 41,028,904 | |||
Gaming and Leisure Properties, Inc. | 815,645 | 27,479,080 | |||
InterXion Holding NV(1) | 169,108 | 9,955,388 | |||
JBG SMITH Properties | 282,420 | 10,585,102 | |||
SBA Communications Corp.(1) | 54,633 | 8,859,834 | |||
Starwood Property Trust, Inc. | 468,110 | 10,167,349 | |||
VICI Properties, Inc. | 575,011 | 12,414,487 | |||
Vornado Realty Trust | 243,299 | 16,563,796 | |||
195,374,320 | |||||
Health Care — 8.1% | |||||
HCP, Inc. | 1,415,274 | 38,990,799 | |||
Welltower, Inc. | 609,729 | 40,284,795 | |||
79,275,594 | |||||
Industrial — 11.9% | |||||
Duke Realty Corp. | 952,698 | 26,265,884 | |||
Prologis, Inc. | 1,120,751 | 72,254,817 | |||
Rexford Industrial Realty, Inc. | 554,092 | 17,548,093 | |||
116,068,794 | |||||
Lodging/Resorts — 3.7% | |||||
Hilton Worldwide Holdings, Inc. | 123,264 | 8,772,699 | |||
Host Hotels & Resorts, Inc. | 1,431,410 | 27,354,245 | |||
36,126,944 | |||||
Office — 8.6% | |||||
Alexandria Real Estate Equities, Inc. | 258,333 | 31,576,043 | |||
Boston Properties, Inc. | 234,471 | 28,314,718 | |||
Columbia Property Trust, Inc. | 634,790 | 14,251,035 | |||
Hudson Pacific Properties, Inc. | 347,301 | 10,523,220 | |||
84,665,016 | |||||
Residential — 20.8% | |||||
American Campus Communities, Inc. | 461,881 | 18,248,918 | |||
AvalonBay Communities, Inc. | 216,729 | 38,009,932 | |||
Camden Property Trust | 424,840 | 38,350,307 | |||
Essex Property Trust, Inc. | 78,958 | 19,801,087 | |||
Invitation Homes, Inc. | 718,419 | 15,719,008 | |||
Sun Communities, Inc. | 386,932 | 38,875,058 | |||
UDR, Inc. | 892,725 | 34,985,893 | |||
203,990,203 |
10
Shares | Value | ||||
Retail — 22.5% | |||||
Agree Realty Corp. | 380,519 | $ | 21,792,323 | ||
Essential Properties Realty Trust, Inc. | 565,010 | 7,684,136 | |||
National Retail Properties, Inc. | 72,435 | 3,386,336 | |||
Regency Centers Corp. | 587,960 | 37,253,146 | |||
Retail Properties of America, Inc., Class A | 827,099 | 10,148,505 | |||
Simon Property Group, Inc. | 502,384 | 92,197,512 | |||
STORE Capital Corp. | 1,089,575 | 31,630,362 | |||
Taubman Centers, Inc. | 296,095 | 16,288,186 | |||
220,380,506 | |||||
Self Storage — 4.1% | |||||
CubeSmart | 447,334 | 12,963,739 | |||
Extra Space Storage, Inc. | 299,704 | 26,991,342 | |||
39,955,081 | |||||
TOTAL COMMON STOCKS (Cost $851,478,549) | 975,836,458 | ||||
TEMPORARY CASH INVESTMENTS — 0.3% | |||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.625% - 4.75%, 1/31/20 - 8/15/45, valued at $1,909,499), in a joint trading account at 2.00%, dated 10/31/18, due 11/1/18 (Delivery value $1,870,833) | 1,870,729 | ||||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 3.00%, 5/15/45, valued at $956,252), at 1.05%, dated 10/31/18, due 11/1/18 (Delivery value $936,027) | 936,000 | ||||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 1,737 | 1,737 | |||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $2,808,466) | 2,808,466 | ||||
TOTAL INVESTMENT SECURITIES — 99.9% (Cost $854,287,015) | 978,644,924 | ||||
OTHER ASSETS AND LIABILITIES — 0.1% | 559,800 | ||||
TOTAL NET ASSETS — 100.0% | $ | 979,204,724 |
NOTES TO SCHEDULE OF INVESTMENTS |
(1) | Non-income producing. |
See Notes to Financial Statements.
11
Statement of Assets and Liabilities |
OCTOBER 31, 2018 | |||
Assets | |||
Investment securities, at value (cost of $854,287,015) | $ | 978,644,924 | |
Receivable for investments sold | 9,721,235 | ||
Receivable for capital shares sold | 429,508 | ||
Dividends and interest receivable | 138 | ||
988,795,805 | |||
Liabilities | |||
Payable for investments purchased | 6,912,327 | ||
Payable for capital shares redeemed | 1,766,272 | ||
Accrued management fees | 892,432 | ||
Distribution and service fees payable | 20,050 | ||
9,591,081 | |||
Net Assets | $ | 979,204,724 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 838,312,624 | |
Distributable earnings | 140,892,100 | ||
$ | 979,204,724 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $586,905,684 | 21,670,902 | $27.08 | |||
I Class, $0.01 Par Value | $118,458,406 | 4,362,014 | $27.16 | |||
Y Class, $0.01 Par Value | $357,428 | 13,163 | $27.15 | |||
A Class, $0.01 Par Value | $50,619,172 | 1,871,554 | $27.05* | |||
C Class, $0.01 Par Value | $6,519,143 | 247,573 | $26.33 | |||
R Class, $0.01 Par Value | $7,988,936 | 297,568 | $26.85 | |||
R5 Class, $0.01 Par Value | $5,078 | 187 | $27.16 | |||
R6 Class, $0.01 Par Value | $208,350,877 | 7,673,917 | $27.15 |
*Maximum offering price $28.70 (net asset value divided by 0.9425).
See Notes to Financial Statements.
12
Statement of Operations |
YEAR ENDED OCTOBER 31, 2018 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends | $ | 31,272,685 | |
Interest | 87,890 | ||
31,360,575 | |||
Expenses: | |||
Management fees | 10,972,792 | ||
Distribution and service fees: | |||
A Class | 158,803 | ||
C Class | 82,620 | ||
R Class | 45,604 | ||
Directors' fees and expenses | 22,600 | ||
Other expenses | 922 | ||
11,283,341 | |||
Net investment income (loss) | 20,077,234 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on investment transactions | 45,288,178 | ||
Change in net unrealized appreciation (depreciation) on investments | (55,673,400 | ) | |
Net realized and unrealized gain (loss) | (10,385,222 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 9,692,012 |
See Notes to Financial Statements.
13
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2018 AND OCTOBER 31, 2017 | ||||||
Increase (Decrease) in Net Assets | October 31, 2018 | October 31, 2017 | ||||
Operations | ||||||
Net investment income (loss) | $ | 20,077,234 | $ | 28,933,196 | ||
Net realized gain (loss) | 45,288,178 | 47,543,556 | ||||
Change in net unrealized appreciation (depreciation) | (55,673,400) | (32,253,565) | ||||
Net increase (decrease) in net assets resulting from operations | 9,692,012 | 44,223,187 | ||||
Distributions to Shareholders | ||||||
From earnings:(1) | ||||||
Investor Class | (45,370,811) | (85,484,233 | ) | |||
I Class | (9,967,018) | (17,488,039 | ) | |||
Y Class | (3,175) | (9 | ) | |||
A Class | (4,658,628) | (13,693,365 | ) | |||
C Class | (570,939) | (1,394,446 | ) | |||
R Class | (635,992) | (1,419,673 | ) | |||
R5 Class | (358) | (6 | ) | |||
R6 Class | (12,982,766) | (16,636,325 | ) | |||
Decrease in net assets from distributions | (74,189,687) | (136,116,096) | ||||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (92,339,914 | ) | (203,411,457) | |||
Net increase (decrease) in net assets | (156,837,589) | (295,304,366) | ||||
Net Assets | ||||||
Beginning of period | 1,136,042,313 | 1,431,346,679 | ||||
End of period | $ | 979,204,724 | $ | 1,136,042,313 |
(1) | Prior period presentation has been updated to reflect the current period combination of distributions to shareholders from net investment income and net realized gains. Distributions from net investment income were $(11,194,822), $(2,580,690), $(9), $(1,641,012), $(139,917), $(162,465), $(6) and $(2,753,194) for Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class and R6 Class, respectively. Distributions from net realized gains were $(74,289,411), $(14,907,349), $(12,052,353), $(1,254,529), $(1,257,208) and $(13,883,131) for Investor Class, I Class, A Class, C Class, R Class and R6 Class, respectively. |
See Notes to Financial Statements.
14
Notes to Financial Statements |
OCTOBER 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. Real Estate Fund (the fund) is one fund in a series issued by the corporation. The fund’s investment objective is to seek high total investment return through a combination of capital appreciation and current income.
The fund offers the Investor Class, I Class, Y Class, A Class, C Class, R Class, R5 Class and R6 Class. The A Class may incur an initial sales charge. The A Class and C Class may be subject to a contingent deferred sales charge. 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.
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.
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.
15
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.
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 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. (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 October 31, 2018 are as follows:
Management Fee Schedule Range | Effective Annual Management Fee | |
Investor Class | 1.00% to 1.20% | 1.15% |
I Class | 0.80% to 1.00% | 0.95% |
Y Class | 0.65% to 0.85% | 0.80% |
A Class | 1.00% to 1.20% | 1.15% |
C Class | 1.00% to 1.20% | 1.15% |
R Class | 1.00% to 1.20% | 1.15% |
R5 Class | 0.80% to 1.00% | 0.95% |
R6 Class | 0.65% to 0.85% | 0.80% |
Distribution and Service Fees — The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, C Class and R Class (collectively the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The plans provide that the C Class will pay ACIS an annual distribution and service fee of 1.00%, of which 0.25% is paid for individual shareholder services and 0.75% is paid for distribution services. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class’s daily net assets and paid monthly in arrears. The fees are used to pay financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the period ended October 31, 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 $5,764,731 and $3,616,126, respectively. The effect of interfund transactions on the Statement of Operations was $40,013 in net realized gain (loss) on investment transactions.
17
4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments, for the period ended October 31, 2018 were $1,532,103,825 and $1,666,162,863, respectively.
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2018 | Year ended October 31, 2017(1) | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 170,000,000 | 170,000,000 | ||||||||
Sold | 4,229,602 | $ | 116,310,040 | 5,233,070 | $ | 149,322,773 | ||||
Issued in reinvestment of distributions | 1,614,273 | 44,714,781 | 2,958,555 | 83,694,334 | ||||||
Redeemed | (8,382,683 | ) | (229,188,279 | ) | (13,626,337 | ) | (389,676,379 | ) | ||
(2,538,808 | ) | (68,163,458 | ) | (5,434,712 | ) | (156,659,272 | ) | |||
I Class/Shares Authorized | 50,000,000 | 60,000,000 | ||||||||
Sold | 1,169,803 | 32,041,574 | 2,286,891 | 65,508,340 | ||||||
Issued in reinvestment of distributions | 277,854 | 7,719,902 | 500,344 | 14,194,159 | ||||||
Redeemed | (2,884,943 | ) | (80,309,917 | ) | (2,941,986 | ) | (84,743,525 | ) | ||
(1,437,286 | ) | (40,548,441 | ) | (154,751 | ) | (5,041,026 | ) | |||
Y Class/Shares Authorized | 70,000,000 | 50,000,000 | ||||||||
Sold | 12,927 | 365,126 | 174 | 5,000 | ||||||
Issued in reinvestment of distributions | 61 | 1,727 | 1 | 9 | ||||||
12,988 | 366,853 | 175 | 5,009 | |||||||
A Class/Shares Authorized | 40,000,000 | 50,000,000 | ||||||||
Sold | 397,807 | 10,852,882 | 845,845 | 24,134,668 | ||||||
Issued in reinvestment of distributions | 151,205 | 4,185,126 | 455,114 | 12,873,186 | ||||||
Redeemed | (1,434,357 | ) | (39,259,621 | ) | (3,537,557 | ) | (100,816,548 | ) | ||
(885,345 | ) | (24,221,613 | ) | (2,236,598 | ) | (63,808,694 | ) | |||
C Class/Shares Authorized | 10,000,000 | 10,000,000 | ||||||||
Sold | 12,869 | 343,278 | 39,423 | 1,106,180 | ||||||
Issued in reinvestment of distributions | 17,767 | 479,962 | 38,816 | 1,077,347 | ||||||
Redeemed | (141,209 | ) | (3,725,725 | ) | (249,754 | ) | (7,075,071 | ) | ||
(110,573 | ) | (2,902,485 | ) | (171,515 | ) | (4,891,544 | ) | |||
R Class/Shares Authorized | 10,000,000 | 10,000,000 | ||||||||
Sold | 112,256 | 3,027,976 | 213,899 | 6,099,275 | ||||||
Issued in reinvestment of distributions | 19,427 | 533,938 | 39,553 | 1,113,092 | ||||||
Redeemed | (235,998 | ) | (6,461,083 | ) | (477,119 | ) | (13,883,883 | ) | ||
(104,315 | ) | (2,899,169 | ) | (223,667 | ) | (6,671,516 | ) | |||
R5 Class/Shares Authorized | 30,000,000 | 50,000,000 | ||||||||
Sold | — | — | 173 | 5,000 | ||||||
Issued in reinvestment of distributions | 13 | 358 | 1 | 6 | ||||||
13 | 358 | 174 | 5,006 | |||||||
R6 Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||
Sold | 3,277,490 | 90,908,133 | 2,275,262 | 66,033,837 | ||||||
Issued in reinvestment of distributions | 468,519 | 12,982,766 | 586,520 | 16,636,325 | ||||||
Redeemed | (2,098,505 | ) | (57,862,858 | ) | (1,707,874 | ) | (49,019,582 | ) | ||
1,647,504 | 46,028,041 | 1,153,908 | 33,650,580 | |||||||
Net increase (decrease) | (3,415,822 | ) | $ | (92,339,914 | ) | (7,066,986 | ) | $ | (203,411,457 | ) |
(1) | April 10, 2017 (commencement of sale) through October 31, 2017 for the Y Class and R5 Class. |
18
6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 975,836,458 | — | — | ||||
Temporary Cash Investments | 1,737 | $ | 2,806,729 | — | ||||
$ | 975,838,195 | $ | 2,806,729 | — |
7. Risk Factors
The fund concentrates its investments in a narrow segment of the total market. Because of this, the fund is subject to certain additional risks as compared to investing in a more diversified portfolio of investments. The fund may be subject to certain risks similar to those associated with direct investment in real estate including but not limited to: local or regional economic conditions, changes in zoning laws, changes in property values, property tax increases, overbuilding, increased competition, environmental contamination, natural disasters, and interest rate risk.
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.
8. Federal Tax Information
The tax character of distributions paid during the years ended October 31, 2018 and October 31, 2017 were as follows:
2018 | 2017 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 21,432,820 | $ | 18,467,025 | ||
Long-term capital gains | $ | 52,756,867 | $ | 117,649,071 |
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
19
As of 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 | $ | 876,190,718 | |
Gross tax appreciation of investments | $ | 116,399,809 | |
Gross tax depreciation of investments | (13,945,603 | ) | |
Net tax appreciation (depreciation) of investments | $ | 102,454,206 | |
Undistributed ordinary income | — | ||
Accumulated long-term gains | $ | 38,437,894 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
20
Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||
2018 | $28.71 | 0.51 | (0.18) | 0.33 | (0.71) | (1.25) | (1.96) | $27.08 | 1.11% | 1.15% | 1.88% | 148% | $586,906 | ||
2017 | $30.69 | 0.64 | 0.35 | 0.99 | (0.36) | (2.61) | (2.97) | $28.71 | 3.47% | 1.15% | 2.21% | 145% | $695,132 | ||
2016 | $29.69 | 0.41 | 1.41 | 1.82 | (0.82) | — | (0.82) | $30.69 | 6.19% | 1.14% | 1.32% | 149% | $909,921 | ||
2015 | $28.69 | 0.42 | 1.13 | 1.55 | (0.55) | — | (0.55) | $29.69 | 5.51% | 1.14% | 1.42% | 140% | $925,934 | ||
2014 | $24.56 | 0.30 | 4.29 | 4.59 | (0.46) | — | (0.46) | $28.69 | 18.89% | 1.14% | 1.16% | 127% | $1,025,749 | ||
I Class | |||||||||||||||
2018 | $28.79 | 0.57 | (0.19) | 0.38 | (0.76) | (1.25) | (2.01) | $27.16 | 1.34% | 0.95% | 2.08% | 148% | $118,458 | ||
2017 | $30.77 | 0.69 | 0.36 | 1.05 | (0.42) | (2.61) | (3.03) | $28.79 | 3.67% | 0.95% | 2.41% | 145% | $166,938 | ||
2016 | $29.76 | 0.46 | 1.43 | 1.89 | (0.88) | — | (0.88) | $30.77 | 6.40% | 0.94% | 1.52% | 149% | $183,181 | ||
2015 | $28.75 | 0.51 | 1.11 | 1.62 | (0.61) | — | (0.61) | $29.76 | 5.70% | 0.94% | 1.62% | 140% | $159,721 | ||
2014 | $24.61 | 0.35 | 4.30 | 4.65 | (0.51) | — | (0.51) | $28.75 | 19.17% | 0.94% | 1.36% | 127% | $387,099 | ||
Y Class | |||||||||||||||
2018 | $28.78 | 0.62 | (0.20) | 0.42 | (0.80) | (1.25) | (2.05) | $27.15 | 1.50% | 0.80% | 2.23% | 148% | $357 | ||
2017(3) | $28.68 | 0.27 | (0.12) | 0.15 | (0.05) | — | (0.05) | $28.78 | 0.54% | 0.80%(4) | 1.70%(4) | 145%(5) | $5 |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
A Class | |||||||||||||||
2018 | $28.68 | 0.45 | (0.19) | 0.26 | (0.64) | (1.25) | (1.89) | $27.05 | 0.86% | 1.40% | 1.63% | 148% | $50,619 | ||
2017 | $30.70 | 0.59 | 0.33 | 0.92 | (0.33) | (2.61) | (2.94) | $28.68 | 3.23% | 1.40% | 1.96% | 145% | $79,060 | ||
2016 | $29.69 | 0.34 | 1.41 | 1.75 | (0.74) | — | (0.74) | $30.70 | 5.92% | 1.39% | 1.07% | 149% | $153,281 | ||
2015 | $28.69 | 0.34 | 1.14 | 1.48 | (0.48) | — | (0.48) | $29.69 | 5.24% | 1.39% | 1.17% | 140% | $175,833 | ||
2014 | $24.55 | 0.24 | 4.30 | 4.54 | (0.40) | — | (0.40) | $28.69 | 18.59% | 1.39% | 0.91% | 127% | $175,133 | ||
C Class | |||||||||||||||
2018 | $27.99 | 0.24 | (0.19) | 0.05 | (0.46) | (1.25) | (1.71) | $26.33 | 0.11% | 2.15% | 0.88% | 148% | $6,519 | ||
2017 | $30.18 | 0.37 | 0.32 | 0.69 | (0.27) | (2.61) | (2.88) | $27.99 | 2.46% | 2.15% | 1.21% | 145% | $10,025 | ||
2016 | $29.22 | 0.11 | 1.37 | 1.48 | (0.52) | — | (0.52) | $30.18 | 5.10% | 2.14% | 0.32% | 149% | $15,986 | ||
2015 | $28.25 | 0.12 | 1.13 | 1.25 | (0.28) | — | (0.28) | $29.22 | 4.47% | 2.14% | 0.42% | 140% | $17,439 | ||
2014 | $24.18 | 0.04 | 4.23 | 4.27 | (0.20) | — | (0.20) | $28.25 | 17.74% | 2.14% | 0.16% | 127% | $16,972 | ||
R Class | |||||||||||||||
2018 | $28.48 | 0.38 | (0.19) | 0.19 | (0.57) | (1.25) | (1.82) | $26.85 | 0.61% | 1.65% | 1.38% | 148% | $7,989 | ||
2017 | $30.55 | 0.55 | 0.30 | 0.85 | (0.31) | (2.61) | (2.92) | $28.48 | 3.00% | 1.65% | 1.71% | 145% | $11,445 | ||
2016 | $29.55 | 0.23 | 1.43 | 1.66 | (0.66) | — | (0.66) | $30.55 | 5.64% | 1.64% | 0.82% | 149% | $19,112 | ||
2015 | $28.55 | 0.26 | 1.15 | 1.41 | (0.41) | — | (0.41) | $29.55 | 4.97% | 1.64% | 0.92% | 140% | $14,458 | ||
2014 | $24.44 | 0.16 | 4.28 | 4.44 | (0.33) | — | (0.33) | $28.55 | 18.30% | 1.64% | 0.66% | 127% | $8,743 |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
R5 Class | |||||||||||||||
2018 | $28.79 | 0.56 | (0.18) | 0.38 | (0.76) | (1.25) | (2.01) | $27.16 | 1.31% | 0.95% | 2.08% | 148% | $5 | ||
2017(3) | $28.69 | 0.25 | (0.11) | 0.14 | (0.04) | — | (0.04) | $28.79 | 0.47% | 0.95%(4) | 1.55%(4) | 145%(5) | $5 | ||
R6 Class | |||||||||||||||
2018 | $28.78 | 0.61 | (0.19) | 0.42 | (0.80) | (1.25) | (2.05) | $27.15 | 1.46% | 0.80% | 2.23% | 148% | $208,351 | ||
2017 | $30.76 | 0.72 | 0.37 | 1.09 | (0.46) | (2.61) | (3.07) | $28.78 | 3.86% | 0.80% | 2.56% | 145% | $173,431 | ||
2016 | $29.75 | 0.51 | 1.43 | 1.94 | (0.93) | — | (0.93) | $30.76 | 6.57% | 0.79% | 1.67% | 149% | $149,866 | ||
2015 | $28.74 | 0.49 | 1.17 | 1.66 | (0.65) | — | (0.65) | $29.75 | 5.86% | 0.79% | 1.77% | 140% | $174,257 | ||
2014 | $24.61 | 0.33 | 4.35 | 4.68 | (0.55) | — | (0.55) | $28.74 | 19.31% | 0.79% | 1.51% | 127% | $29,151 |
Notes to Financial Highlights |
(1) | Computed using average shares outstanding throughout the period. |
(2) | Total returns are calculated based on the net asset value of the last business day and do not reflect applicable sales charges, if any. Total returns for periods less than one year are not annualized. |
(3) | April 10, 2017 (commencement of sale) through October 31, 2017. |
(4) | Annualized. |
(5) | Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended October 31, 2017. |
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 Real Estate Fund, one of the portfolios constituting the American Century Capital Portfolios, Inc. (the “Fund”), as of October 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 Real Estate Fund of the American Century Capital Portfolios, Inc. as of October 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 October 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
December 14, 2018
We have served as the auditor of one or more American Century investment companies since 1997.
24
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 | 67 | 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) | 67 | 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) | 67 | None |
M. Jeannine Strandjord (1945) | Director | Since 1994 | Self-employed Consultant | 67 | Euronet Worldwide Inc. and MGP Ingredients, Inc. |
25
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 | |||||
John R. Whitten (1946) | Director | Since 2008 | Retired | 67 | Rudolph Technologies, Inc. |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 72 | 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 | 117 | 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.
26
Officers
The following table presents certain information about the executive officers of the funds. Each officer serves as an officer for each of the 16 (in the case of Robert J. Leach, 15) investment companies in the American Century family of funds. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. The mailing address for each officer listed below is 4500 Main Street, Kansas City, Missouri 64111.
Name (Year of Birth) | Offices with the Funds | Principal Occupation(s) During the Past Five Years |
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 |
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Investment Operations and Investment Accounting, ACS (2000 to present) |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 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 since 2012 | Senior Vice President, ACS (2017 to present); Vice President, ACS (2000 to 2017) |
Robert J. Leach (1966) | Vice President since 2006 | Vice President, ACS (2000 to present) |
David H. Reinmiller (1963) | Vice President since 2000 | Attorney, ACC (1994 to present). Also serves as Vice President, ACIM and ACS |
Ward D. Stauffer (1960) | Secretary since 2005 | Attorney, ACC (2003 to present) |
27
Approval of Management Agreement |
At a meeting held on June 28, 2018, the Fund’s Board of Directors (the "Board") unanimously approved the renewal of the management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Fund. Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated, and approved by a majority of a fund’s directors (the “Directors”), including a majority of the independent Directors, each year.
Prior to its consideration of the renewal of the management agreement, the Directors requested and reviewed extensive data and information compiled by the Advisor and certain independent providers of evaluation data concerning the Fund and the services provided to the Fund by the Advisor. This review was in addition to the oversight and evaluation undertaken by the Board and its committees on a continual basis and the information received was supplemental to the extensive information that the Board and its committees receive and consider throughout the year. The Directors also conducted a review of the process by which the Board considers the renewal of the management agreements. The Board consulted with industry experts and reviewed industry best practices and recent judicial precedent. The Directors believe that the enhancements resulting from their review resulted in increased dialogue with the Advisor and an improved process for fund shareholders.
In connection with its consideration of the renewal of the management agreement, the Board’s review and evaluation of the services provided by the Advisor included, but was not limited to, the following:
• | the nature, extent, and quality of investment management, shareholder services, and other services provided and to be provided to the Fund; |
• | the wide range of other programs and services provided and to be provided to the Fund and its shareholders on a routine and non-routine basis; |
• | the investment performance of the Fund, including data comparing the Fund's performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; |
• | the cost of owning the Fund compared to the cost of owning similar funds; |
• | the compliance policies, procedures, and regulatory experience of the Advisor and the Fund's service providers; |
• | financial data showing the cost of services provided to the Fund, the profitability of the Fund to the Advisor, and the overall profitability of the Advisor |
• | strategic plans of the Advisor; |
• | any economies of scale associated with the Advisor’s management of the Fund and other accounts; |
• | services provided and charges to the Advisor's other investment management clients; |
• | acquired fund fees and expenses; |
• | payments and practices in connection with financial intermediaries holding shares of the Fund and the services provided by intermediaries in connection therewith; and |
• | any collateral benefits derived by the Advisor from the management of the Fund. |
The Directors held two in-person meetings and one telephonic meeting to review and discuss the information provided. The independent Directors also reviewed responses to supplemental information requests provided by the Directors to the Advisor and held active discussions with the Advisor regarding the renewal of the management agreement. The independent Directors had the benefit of the advice of their independent counsel throughout the process.
28
Factors Considered
The Directors considered all of the information provided by the Advisor, the independent data providers, and independent counsel in connection with the approval. They determined that the information was sufficient for them to evaluate the management agreement for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the management agreement, the Board based its decision on a number of factors, including without limitation the following:
Nature, Extent and Quality of Services - Generally. Under the management agreement, the Advisor is responsible for providing or arranging for all services necessary for the operation of the Fund. The Board noted that the Advisor provides or arranges at its own expense a wide variety of services including without limitation the following:
• | portfolio research and security selection |
• | securities trading |
• | Fund administration |
• | custody of Fund assets |
• | daily valuation of the Fund’s portfolio |
• | shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping, and communications |
• | legal services (except the independent Directors’ counsel) |
• | regulatory and portfolio compliance |
• | financial reporting |
• | marketing and distribution (except amounts paid by the Fund under Rule 12b-1 plans) |
The Board noted that many of these services have expanded over time in terms of both quantity and complexity in response to shareholder demands, competition in the industry, changing distribution channels, and the changing regulatory environment.
Investment Management Services. The nature of the investment management services provided to the Fund is quite complex and allows Fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes by investing in or exchanging among various American Century Investments funds, and liquidity. In evaluating investment performance, the Board expects the Advisor to manage the Fund in accordance with its investment objectives and approved strategies. Further, the Directors recognize that the Advisor has an obligation to monitor trading activities, and in particular to seek the best execution of fund trades, and to evaluate the use of and payment for research. In providing these services, the Advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance, and other systems to conduct their business. The Board, directly and through its Fund Performance Review Committee, provides oversight of the investment performance process. It regularly reviews investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review detailed performance information provided by the Advisor during the management agreement renewal process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board receives a report from the Advisor regarding the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one-, three-, and five-year periods and slightly below its benchmark for the ten-year period reviewed by the Board. The Board discussed the Fund's performance with the Advisor and was satisfied with the efforts being undertaken by the Advisor. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
29
Shareholder and Other Services. Under the management agreement, the Advisor provides the Fund with a comprehensive package of transfer agency, shareholder, and other services. The Board, directly and through various committees of the Board, regularly reviews reports and evaluations of such services at its regular meetings. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund.
Ethics. The Board generally considers the Advisor’s commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the Advisor’s practices generally meet or exceed industry best practices.
Economies of Scale. The Board also reviewed information provided by the Advisor regarding the possible existence of economies of scale in connection with the management of the Fund. The Board concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. The Board concluded that the Advisor is appropriately sharing economies of scale through its competitive fee structure, offering competitive fees from fund inception, and through reinvestment in its business to provide shareholders additional content and services. The Board also noted that economies of scale are shared with the Fund and its shareholders through management fee breakpoints that serve to reduce the effective management fee as the assets of the Fund grow.
Comparison to Other Funds’ Fees. The management agreement provides that the Fund pays the Advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the Fund, other than brokerage expenses, expenses attributable to short sales, taxes, interest, extraordinary expenses, and the fees and expenses of the Fund’s independent Directors (including their independent legal counsel) and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges, and other expenses. Other than their investment advisory fees and any applicable Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The Board believes the unified fee structure is a benefit to Fund shareholders because it clearly discloses to shareholders the cost of owning Fund shares, and, since the unified fee cannot be increased without a vote of Fund shareholders, it shifts to the Advisor the risk of increased costs of operating the Fund and provides a direct incentive to minimize administrative inefficiencies. Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider comparing the Fund’s unified fee to the total expense ratios of its peers. The unified fee charged to shareholders of the Fund was above the median of the total expense ratios of the Fund’s peer expense universe and was within the range of its peer expense group. The Board concluded that the management fee paid by the
30
Fund to the Advisor under the management agreement is reasonable in light of the services provided to the Fund.
Comparison to Fees and Services Provided to Other Clients of the Advisor. The Directors also requested and received information from the Advisor concerning the nature of the services, fees, costs, and profitability of its advisory services to advisory clients other than the Fund. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the Fund. The Board analyzed this information and concluded that the fees charged and services provided to the Fund were reasonable by comparison.
Payments to Intermediaries. The Directors also requested and received a description of payments made to intermediaries by the Fund and the Advisor and services provided in response thereto. These payments include various payments made by the Fund or the Advisor to different types of intermediaries and recordkeepers for distribution and service activities provided for the Fund. The Board reviewed such information and received representations from the Advisor that all such payments by the Fund were made pursuant to the Fund's Rule 12b-1 Plan and that all such payments by the Advisor were made from the Advisor’s resources and reasonable profits. The Board found the payments to be reasonable in scope and purpose.
Collateral or “Fall-Out” Benefits Derived by the Advisor. The Board considered the existence of collateral benefits the Advisor may receive as a result of its relationship with the Fund. They concluded that the Advisor’s primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Board noted that additional assets from other clients may offer the Advisor some benefit from increased leverage with service providers and counterparties. Additionally, the Advisor may receive proprietary research from broker-dealers that execute fund portfolio transactions, which the Board concluded is likely to benefit other clients of the Advisor, as well as Fund shareholders. The Board also determined that the Advisor is able to provide investment management services to certain clients other than the Fund, at least in part, due to its existing infrastructure built to serve the fund complex. The Board concluded that appropriate allocation methodologies had been employed to assign resources and the cost of those resources to these other clients and, where expressly provided, these other client assets may be included with the assets of the Fund to determine breakpoints in the management fee schedule.
Existing Relationship. The Board also considered whether there was any reason for not continuing the existing arrangement with the Advisor. In this regard, the Board was mindful of the potential disruptions of the Fund’s operations and various risks, uncertainties, and other effects that could occur as a result of a decision not to continue such relationship. In particular, the Board recognized that most shareholders have invested in the Fund on the strength of the Advisor’s industry standing and reputation and in the expectation that the Advisor will have a continuing role in providing advisory services to the Fund.
Conclusion of the Directors. As a result of this process, the Board, including all of the independent Directors, taking into account all of the factors discussed above and the information provided by the Advisor and others in connection with its review and throughout the year, determined that the management fee is fair and reasonable in light of the services provided and that the investment management agreement between the Fund and the Advisor should be renewed.
31
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. 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 October 31, 2018.
For corporate taxpayers, the fund hereby designates $267,233, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2018 as qualified for the corporate dividends received deduction.
The fund hereby designates $54,611,915, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2018.
The fund utilized earnings and profits of $1,855,048 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
33
Notes |
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-90979 1812 |
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 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: $137,900
FY 2018: $107,380
(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: $104,750
FY 2018: $115,750
(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. |
(a)(4) | Not applicable. |
(b) | A certification by the registrant’s chief executive officer and chief financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is furnished and attached hereto as EX-99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | American Century Capital Portfolios, Inc. | ||
By: | /s/ Jonathan S. Thomas | ||
Name: | Jonathan S. Thomas | ||
Title: | President | ||
Date: | December 28, 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: | December 28, 2018 |
By: | /s/ R. Wes Campbell | |
Name: | R. Wes Campbell | |
Title: | Treasurer and | |
Chief Financial Officer | ||
(principal financial officer) | ||
Date: | December 28, 2018 |