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: | 10-31-2019 |
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT | ![]() |
OCTOBER 31, 2019 | |
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) |
![acaltscarrotblacknobleeda05.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/acaltscarrotblacknobleeda05.jpg)
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | 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 |
![jthomasrev0514a01.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/jthomasrev0514a01.jpg)
Dear Investor:
Thank you for reviewing this annual report for the 12 months ended October 31, 2019. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment and market insights, please visit americancentury.com.
Stocks, Bonds Delivered Solid Gains
U.S. and global stocks, bonds and real estate investments generally delivered strong gains for the 12-month period. Stocks and other riskier assets rebounded from a late-2018 sell-off to post robust returns for the 12 months overall. Global bonds benefited from safe-haven buying early in the period and a declining interest rate environment overall.
Fed’s Policy Pivot Improved Investor Sentiment
In the final months of 2018, mounting concerns about slowing global economic and earnings growth, tariffs and Federal Reserve (Fed) policy soured investor sentiment, driving global stocks lower. After raising rates in September 2018, the Fed hiked again in December and delivered a surprisingly bullish 2019 rate-hike outlook, which intensified the sell-off among stocks and other riskier assets. Meanwhile, the risk-off climate sparked a flight to quality, which drove U.S. and other government bond yields lower and benefited global bond returns.
A key policy pivot from the Fed helped improve equity investor sentiment beginning in early 2019. The central bank abruptly ended its rate-hike campaign and adopted a dovish tone amid weaker global growth and inflation. Additionally, investors’ worst-case fears about trade and corporate earnings generally eased, which also aided stocks and other riskier assets. At the same time, government bond yields continued to fall on moderating global growth data, muted inflation and accommodative central bank policy in the U.S., Europe and Japan. By July, concerns about global economic risks prompted the Fed to cut short-term interest rates for the first time in 10 years. The Fed followed up with additional rate cuts in September and October. This backdrop supported continued gains for fixed-income and other interest rate-sensitive assets.
Looking ahead, we expect volatility to remain a formidable factor as investors react to global growth and trade trends, central bank policy and geopolitical developments. We believe this scenario underscores the importance of using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a16.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/image48a16.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of October 31, 2019 | ||||
Average Annual Returns | ||||
Ticker Symbol | 1 year | Since Inception | Inception Date | |
Investor Class | ALNNX | 2.74% | 2.42% | 7/31/15 |
HFRX Fixed Income - Credit Index | — | 2.36% | 1.18% | — |
Bloomberg Barclays U.S. Universal Bond Index | — | 11.36% | 3.81% | — |
I Class | ALNIX | 2.95% | 2.63% | 7/31/15 |
Y Class | ALYNX | 3.10% | 2.98% | 4/10/17 |
A Class | ALNAX | 7/31/15 | ||
No sales charge | 2.38% | 2.16% | ||
With sales charge | -3.51% | 0.75% | ||
C Class | ALNHX | 1.73% | 1.40% | 7/31/15 |
R Class | ALNRX | 2.23% | 1.92% | 7/31/15 |
R6 Class | ALNDX | 2.99% | 2.78% | 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-23c83f9bc1375230955a07.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/chart-23c83f9bc1375230955a07.jpg)
Value on October 31, 2019 | |
Investor Class — $11,071 | |
HFRX Fixed Income - Credit Index — $10,510 | |
Bloomberg Barclays U.S. Universal Bond Index — $11,723 | |
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 |
1.76% | 1.56% | 1.41% | 2.01% | 2.76% | 2.26% | 1.41% |
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: Kent Muckel and Darren Myers
Effective August 1, 2019, Chris Bittman left the subadvisor's portfolio management team.
Performance Summary
For the fiscal year ended October 31, 2019, the AC Alternatives Income Fund generated a return of 2.74%.* This compares favorably to the 2.36% return generated by the HFRX Fixed Income - Credit Index. The Bloomberg Barclays U.S. Universal Bond Index returned 11.36% for the period. Fund returns reflect operating expenses, while index returns do not.
Performance Review
Global capital markets withstood price volatility early in the portfolio’s fiscal year, as riskier assets generally produced favorable results. U.S. equities, as measured by the S&P 500 Index, gained 14.33% for the fiscal year, largely due to multiple expansion as earnings growth slowed. Large-cap U.S. stocks, as measured by the Russell 1000 Index, returned 14.15% and outpaced other segments of the global equity markets. U.S. small-cap stocks, as measured by the Russell 2000 Index, gained 4.90% for the period, while non-U.S. equities, as measured by the MSCI All Country World ex-U.S. Index, returned 11.27%.
Undoubtedly, the shift in market sentiment was due to the changing monetary policies of global central banks. The Federal Reserve (Fed) ended 2018 with an outlook for continued monetary tightening. As asset prices dropped and the growth outlook began to weaken, the Fed began to backpedal on additional rate hikes and eventually began a new easing cycle in July 2019. The Fed cut rates three times during the period, marking the first easing since December 2008. As market participants began to price in more dovish central banks, interest rates fell back to historically low levels. The U.S. 10-year Treasury yield fell 145 basis points for the fiscal year, from 3.14% on October 31, 2018, to 1.69% on October 31, 2019. The benchmark 10-year Treasury touched an intraperiod low yield of 1.46%, while the yield on the U.S. 30-year Treasury bond fell below 2.00% for the first time.
Global rates also reached historically low levels. For example, Germany’s 10-year bund reached a low yield of -0.71% in August 2019. The steep fall in interest rates drove robust fixed-income performance, and the Bloomberg Barclays U.S. Aggregate Bond Index rallied to a 12-month return of 11.51%. High-yield bonds, as measured by the Bloomberg Barclays U.S. Corporate High-Yield Bond Index, underperformed, returning 8.38% as high-yield credit spreads increased modestly.
Benefiting from falling interest rates and positive equity markets, the income-focused real estate investment trust (REIT) strategy managed by Timbercreek Investment Management was the largest driver of fund performance. The high-dividend equity sleeve managed by American Century Investment Management also generated positive performance for the fund, despite the negative influence of the sleeve’s market hedges. Structured credit strategies managed by Good Hill
* 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.
5
Partners and ArrowMark Colorado Holdings also posted positive returns, but they lagged core fixed-income markets due to less interest rate exposure in both portfolios. Marathon Asset Management took over management of the fund’s high-yield and bank loan exposure.** This sleeve trailed the broad high-yield market, as bank loans and market hedges were detractors. Although certain hedging strategies aided performance during periods of heightened market volatility, they detracted from performance overall, given the strong risk-on performance from the equity and fixed-income markets.
In response to increasing macro and geopolitical risks and weakening U.S. economic fundamentals stemming from a manufacturing slowdown, we employed S&P futures and Russell 2000 futures hedges to help reduce risk. Similarly, we purchased high-yield credit default swaps and iTraxx credit default swap index hedges to help mitigate broad credit risks. These hedges helped reduce portfolio volatility and offset losses during periodic market sell-offs throughout the fiscal year. But they also detracted from overall portfolio performance, as risk assets rallied in response to the Fed's easing policy.
Outlook
Last year, our economic growth outlook was becoming more mixed and cautious. While this view was directionally correct, we did not discount into portfolio positioning the response by central banks. Looking ahead, we expect sluggish U.S. and global economic growth with heightened risk stemming from various geopolitical factors. Furthermore, equity and fixed-income valuations appear less attractive than they did a year ago. Equities are trading at or near all-time highs, while credit spreads remain low and range-bound. Therefore, we believe risk markets may be unable to duplicate returns of the past year. Accordingly, we believe security selection, tactical positioning and active rebalancing will be necessary to generate attractive absolute returns. We expect a more volatile environment to unfold as central bank easing measures produce less market stimulus.
As of October 31, 2019, the portfolio’s capital allocation was as follows: 29% Marathon Asset Management; 21% ArrowMark Colorado Holdings; 20% Good Hill Partners and 8% Timbercreek Investment Management. Allocations to cash and specific sleeves American Century Investment Management manages accounted for the remaining balances.
** Effective December 3, 2018, Marathon Asset Management was added as a subadvisor to the fund. Effective January 15, 2019, BCSF Advisors was removed as a subadvisor to the fund.
6
Fund Characteristics |
OCTOBER 31, 2019 | |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 18.9% |
Asset-Backed Securities | 15.8% |
Corporate Bonds | 13.9% |
Collateralized Loan Obligations | 12.0% |
Bank Loan Obligations | 11.8% |
Commercial Mortgage-Backed Securities | 9.9% |
Collateralized Mortgage Obligations | 4.0% |
Exchange-Traded Funds | 3.0% |
Preferred Stocks | 2.5% |
Convertible Bonds | —* |
Corporate Bonds Sold Short | (2.3)% |
Exchange-Traded Funds Sold Short | (0.7)% |
Convertible Bonds Sold Short | (0.6)% |
Common Stocks Sold Short | (0.3)% |
Temporary Cash Investments | 10.8% |
Other Assets and Liabilities | 1.3% |
*Category is less than 0.05% of total net assets. |
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, 2019 to October 31, 2019.
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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period(1) 5/1/19 - 10/31/19 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $1,006.60 | $9.71 | 1.92% |
I Class | $1,000 | $1,007.60 | $8.70 | 1.72% |
Y Class | $1,000 | $1,008.40 | $7.95 | 1.57% |
A Class | $1,000 | $1,004.30 | $10.96 | 2.17% |
C Class | $1,000 | $1,001.60 | $14.73 | 2.92% |
R Class | $1,000 | $1,004.10 | $12.22 | 2.42% |
R6 Class | $1,000 | $1,008.40 | $7.95 | 1.57% |
Hypothetical | ||||
Investor Class | $1,000 | $1,015.53 | $9.75 | 1.92% |
I Class | $1,000 | $1,016.54 | $8.74 | 1.72% |
Y Class | $1,000 | $1,017.29 | $7.98 | 1.57% |
A Class | $1,000 | $1,014.27 | $11.02 | 2.17% |
C Class | $1,000 | $1,010.49 | $14.80 | 2.92% |
R Class | $1,000 | $1,013.01 | $12.28 | 2.42% |
R6 Class | $1,000 | $1,017.29 | $7.98 | 1.57% |
(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, 2019
Principal Amount/Shares | Value | ||||||
COMMON STOCKS — 18.9% | |||||||
Aerospace and Defense — 0.2% | |||||||
Lockheed Martin Corp. | 1,573 | $ | 592,518 | ||||
Air Freight and Logistics — 0.6% | |||||||
United Parcel Service, Inc., Class B | 15,028 | 1,730,775 | |||||
Automobiles — 0.2% | |||||||
General Motors Co. | 13,394 | 497,721 | |||||
Biotechnology — 0.7% | |||||||
Amgen, Inc. | 8,842 | 1,885,556 | |||||
Chemicals — 0.3% | |||||||
Eastman Chemical Co. | 6,710 | 510,228 | |||||
Olin Corp. | 25,311 | 464,204 | |||||
974,432 | |||||||
Containers and Packaging — 0.7% | |||||||
Packaging Corp. of America | 5,338 | 584,297 | |||||
Sonoco Products Co. | 25,154 | 1,451,386 | |||||
2,035,683 | |||||||
Distributors — 0.6% | |||||||
Genuine Parts Co. | 15,657 | 1,606,095 | |||||
Electric Utilities — 0.2% | |||||||
Alliant Energy Corp. | 11,175 | 596,074 | |||||
Equity Real Estate Investment Trusts (REITs) — 5.2% | |||||||
Automotive Properties Real Estate Investment Trust | 54,012 | 470,775 | |||||
Befimmo SA | 4,786 | 309,046 | |||||
Brixmor Property Group, Inc. | 24,313 | 535,372 | |||||
Centuria Industrial REIT | 191,653 | 451,490 | |||||
Colony Capital, Inc. | 74,339 | 416,298 | |||||
CT Real Estate Investment Trust | 36,216 | 407,227 | |||||
Dream Industrial Real Estate Investment Trust | 48,820 | 498,171 | |||||
Fortune Real Estate Investment Trust | 290,000 | 339,213 | |||||
Frasers Logistics & Industrial Trust | 409,339 | 378,908 | |||||
Healthcare Trust of America, Inc., Class A | 15,170 | 470,270 | |||||
Healthpeak Properties, Inc. | 14,839 | 558,243 | |||||
Highwoods Properties, Inc. | 10,373 | 485,456 | |||||
ICADE | 3,894 | 381,378 | |||||
Invesco Office J-Reit, Inc. | 2,156 | 435,325 | |||||
Invincible Investment Corp. | 370 | 233,931 | |||||
Keppel DC REIT | 391,917 | 575,580 | |||||
Kiwi Property Group Ltd. | 305,385 | 310,911 | |||||
Klepierre SA | 12,541 | 467,163 | |||||
Land Securities Group plc | 30,874 | 377,329 | |||||
Medical Properties Trust, Inc. | 23,100 | 478,863 | |||||
MGM Growth Properties LLC, Class A | 14,500 | 452,545 |
10
Principal Amount/Shares | Value | ||||||
National Storage REIT | 419,416 | $ | 537,290 | ||||
Northview Apartment Real Estate Investment Trust | 25,309 | 554,565 | |||||
NSI NV | 7,863 | 359,036 | |||||
Park Hotels & Resorts, Inc. | 9,857 | 229,175 | |||||
QTS Realty Trust, Inc., Class A | 8,586 | 460,124 | |||||
Spirit Realty Capital, Inc. | 9,404 | 468,695 | |||||
STAG Industrial, Inc. | 16,258 | 504,648 | |||||
Star Asia Investment Corp. | 240 | 261,528 | |||||
Sunlight Real Estate Investment Trust | 510,500 | 345,575 | |||||
VEREIT, Inc. | 42,802 | 421,172 | |||||
VICI Properties, Inc. | 22,254 | 524,082 | |||||
Viva Energy REIT | 230,595 | 459,129 | |||||
Weingarten Realty Investors | 15,644 | 496,384 | |||||
14,654,897 | |||||||
Food Products — 0.9% | |||||||
Flowers Foods, Inc. | 72,901 | 1,583,410 | |||||
Hershey Co. (The) | 4,264 | 626,253 | |||||
J.M. Smucker Co. (The) | 4,360 | 460,765 | |||||
2,670,428 | |||||||
Gas Utilities — 0.3% | |||||||
National Fuel Gas Co. | 8,938 | 404,981 | |||||
New Jersey Resources Corp. | 10,528 | 459,021 | |||||
864,002 | |||||||
Hotels, Restaurants and Leisure — 0.4% | |||||||
Carnival Corp. | 28,526 | 1,223,480 | |||||
Household Durables — 0.4% | |||||||
Garmin Ltd. | 6,160 | 577,500 | |||||
Whirlpool Corp. | 3,818 | 580,794 | |||||
1,158,294 | |||||||
IT Services — 1.3% | |||||||
International Business Machines Corp. | 11,279 | 1,508,341 | |||||
Western Union Co. (The) | 82,005 | 2,055,045 | |||||
3,563,386 | |||||||
Machinery — 0.8% | |||||||
Cummins, Inc. | 3,172 | 547,107 | |||||
PACCAR, Inc. | 22,201 | 1,688,608 | |||||
2,235,715 | |||||||
Media — 0.5% | |||||||
Interpublic Group of Cos., Inc. (The) | 68,506 | 1,490,006 | |||||
Pacifico, Inc. | 883 | 3,642 | |||||
1,493,648 | |||||||
Metals and Mining — 0.5% | |||||||
Southern Copper Corp. | 41,902 | 1,490,873 | |||||
Mortgage Real Estate Investment Trusts (REITs) — 0.9% | |||||||
Granite Point Mortgage Trust, Inc. | 33,755 | 627,843 | |||||
MFA Financial, Inc. | 59,938 | 454,930 | |||||
Starwood Property Trust, Inc. | 29,737 | 731,530 |
11
Principal Amount/Shares | Value | ||||||
TPG RE Finance Trust, Inc. | 32,440 | $ | 656,261 | ||||
2,470,564 | |||||||
Multi-Utilities — 2.0% | |||||||
Consolidated Edison, Inc. | 18,348 | 1,692,052 | |||||
Dominion Energy, Inc. | 20,374 | 1,681,874 | |||||
DTE Energy Co. | 12,564 | 1,599,648 | |||||
Public Service Enterprise Group, Inc. | 11,873 | 751,680 | |||||
5,725,254 | |||||||
Oil, Gas and Consumable Fuels — 0.3% | |||||||
Antero Midstream Corp.(2) | 42,000 | 270,480 | |||||
Energy Transfer LP(2) | 7,900 | 99,461 | |||||
Marathon Petroleum Corp. | 8,588 | 549,203 | |||||
919,144 | |||||||
Pharmaceuticals — 0.6% | |||||||
Bristol-Myers Squibb Co. | 11,349 | 651,092 | |||||
Johnson & Johnson | 8,737 | 1,153,634 | |||||
1,804,726 | |||||||
Professional Services — 0.4% | |||||||
Nielsen Holdings plc | 62,408 | 1,258,145 | |||||
Real Estate Management and Development — 0.3% | |||||||
Carmila SA | 22,028 | 428,966 | |||||
Cibus Nordic Real Estate AB | 12,826 | 183,316 | |||||
Sun Hung Kai Properties Ltd. | 21,000 | 315,718 | |||||
928,000 | |||||||
Specialty Retail — 0.2% | |||||||
Penske Automotive Group, Inc. | 11,673 | 568,709 | |||||
Textiles, Apparel and Luxury Goods — 0.2% | |||||||
Tapestry, Inc. | 16,321 | 422,061 | |||||
Trading Companies and Distributors — 0.2% | |||||||
MSC Industrial Direct Co., Inc., Class A | 6,282 | 459,905 | |||||
TOTAL COMMON STOCKS (Cost $49,849,573) | 53,830,085 | ||||||
ASSET-BACKED SECURITIES — 15.8% | |||||||
AmeriCredit Automobile Receivables, Series 2015-4, Class D, 3.72%, 12/8/21 | $ | 80,000 | 80,672 | ||||
Avant Loans Funding Trust, Series 2017-B, Class C, 4.99%, 11/15/23(3) | 445,768 | 448,026 | |||||
Avant Loans Funding Trust, Series 2018-B, Class A SEQ, 3.42%, 1/18/22(3) | 274,784 | 275,654 | |||||
Avant Loans Funding Trust, Series 2019-A, Class B, 3.80%, 12/15/22(3) | 1,000,000 | 1,013,663 | |||||
Avis Budget Rental Car Funding AESOP LLC, Series 2019-3A, Class A SEQ, 2.36%, 3/20/26(3) | 1,000,000 | 1,002,207 | |||||
Bear Stearns Asset Backed Securities Trust, Series 2007-2, Class A2, VRN, 2.14%, (1-month LIBOR plus 0.32%), 1/25/47 | 25,922 | 26,051 | |||||
CAL Funding II Ltd., Series 2012-1A, Class A SEQ, 3.47%, 10/25/27(3) | 529,500 | 530,832 | |||||
CAL Funding II Ltd., Series 2013-1A, Class A SEQ, 3.35%, 3/27/28(3) | 157,167 | 157,418 |
12
Principal Amount/Shares | Value | ||||||
CarMax Auto Owner Trust, Series 2017-4, Class A4 SEQ, 2.33%, 5/15/23 | $ | 500,000 | $ | 504,017 | |||
Carmax Auto Owner Trust, Series 2018-4, Class D, 4.15%, 4/15/25 | 1,000,000 | 1,046,453 | |||||
CFG Investments Ltd., Series 2019-1, Class A SEQ, 5.56%, 8/15/29(3) | 636,364 | 639,122 | |||||
CFG Investments Ltd., Series 2019-1, Class B, 7.62%, 8/15/29(3) | 1,000,000 | 1,008,310 | |||||
Chesapeake Funding II LLC, Series 2018-1A, Class D, 3.92%, 4/15/30(3) | 800,000 | 821,504 | |||||
CLI Funding V LLC, Series 2013-2A, SEQ, 3.22%, 6/18/28(3) | 207,073 | 207,537 | |||||
CLI Funding V LLC, Series 2014-1A, Class A SEQ, 3.29%, 6/18/29(3) | 657,011 | 659,809 | |||||
CLI Funding V LLC, Series 2014-2A, Class A SEQ, 3.38%, 10/18/29(3) | 270,755 | 271,740 | |||||
Coinstar Funding LLC, Series 2017-1A, Class A2 SEQ, 5.22%, 4/25/47(3) | 487,500 | 507,308 | |||||
Conn's Receivables Funding LLC, Series 2018-A, Class A SEQ, 3.25%, 1/15/23(3) | 106,449 | 106,908 | |||||
Conn's Receivables Funding LLC, Series 2018-A, Class B, 4.65%, 1/15/23(3) | 323,723 | 325,986 | |||||
Conn's Receivables Funding LLC, Series 2019-A, Class A SEQ, 3.40%, 10/16/23(3) | 504,734 | 508,858 | |||||
CPS Auto Receivables Trust, Series 2015-C, Class D SEQ, 4.63%, 8/16/21(3) | 199,438 | 201,216 | |||||
CPS Auto Trust, Series 2016-D, Class D SEQ, 4.53%, 1/17/23(3) | 750,000 | 763,870 | |||||
Credit Suisse ABS Trust, Series 2018-LD1, Class A SEQ, 3.42%, 7/25/24(3) | 46,020 | 46,097 | |||||
Credit Suisse ABS Trust, Series 2018-LD1, Class B, 4.28%, 7/25/24(3) | 750,000 | 753,254 | |||||
Credit Suisse ABS Trust, Series 2018-LD1, Class C, 5.17%, 7/25/24(3) | 600,000 | 610,954 | |||||
Cronos Containers Program I Ltd., Series 2013-1A, Class A SEQ, 3.08%, 4/18/28(3) | 442,750 | 443,215 | |||||
Drive Auto Receivables Trust, Series 2017-2, Class D, 3.49%, 9/15/23 | 1,000,000 | 1,008,630 | |||||
DT Auto Owner Trust, Series 2016-1A, Class D, 4.66%, 12/15/22(3) | 530,314 | 531,801 | |||||
DT Auto Owner Trust, Series 2016-3A, Class D, 4.52%, 6/15/23(3) | 285,851 | 287,515 | |||||
DT Auto Owner Trust, Series 2017-2A, Class D, 3.89%, 1/15/23(3) | 800,000 | 806,927 | |||||
DT Auto Owner Trust, Series 2018-2A, Class D, 4.15%, 3/15/24(3) | 1,000,000 | 1,030,699 | |||||
DT Auto Owner Trust, Series 2018-3A, Class B, 3.56%, 9/15/22(3) | 500,000 | 506,054 | |||||
Element Rail Leasing II LLC, Series 2015-1A, Class A2, 3.59%, 2/19/45 | 1,225,000 | 1,229,892 | |||||
Exeter Automobile Receivables Trust, Series 2015-3A, Class D, 6.55%, 10/17/22(3) | 600,000 | 609,867 | |||||
Exeter Automobile Receivables Trust, Series 2016-2A, Class D, 8.25%, 4/17/23(3) | 1,000,000 | 1,052,162 | |||||
Exeter Automobile Receivables Trust, Series 2016-3A, Class D, 6.40%, 7/17/23(3) | 350,000 | 365,880 | |||||
Freed Abs Trust, Series 2018-2, Class A SEQ, 3.99%, 10/20/25(3) | 283,342 | 285,582 |
13
Principal Amount/Shares | Value | ||||||
Global SC Finance II SRL, Series 2013-1A, Class A SEQ, 2.98%, 4/17/28(3) | $ | 122,500 | $ | 122,708 | |||
Global SC Finance II SRL, Series 2014-1A, Class A2 SEQ, 3.09%, 7/17/29(3) | 662,625 | 664,495 | |||||
HERO Funding Trust, Series 2016-4A, Class A2 SEQ, 4.29%, 9/20/47(3) | 460,733 | 483,760 | |||||
HERO Funding Trust, Series 2017-2A, Class A2 SEQ, 4.07%, 9/20/48(3) | 305,175 | 316,481 | |||||
Hertz Fleet Lease Funding LP, Series 2018-1, Class A1, VRN, 2.44%, (1-month LIBOR plus 0.50%), 5/10/32(3) | 879,025 | 879,498 | |||||
Hertz Vehicle Financing II LP, Series 2016-2A, Class C, 4.99%, 3/25/22(3) | 370,000 | 379,491 | |||||
Hertz Vehicle Financing II LP, Series 2017-2A, Class B, 4.20%, 10/25/23(3) | 1,475,000 | 1,535,861 | |||||
Invitation Homes Trust, Series 2018-SFR2, Class D, VRN, 3.36%, (1-month LIBOR plus 1.45%), 6/17/37(3) | 1,000,000 | 1,000,556 | |||||
Invitation Homes Trust, Series 2018-SFR3, Class B, VRN, 3.04%, (1-month LIBOR plus 1.15%), 7/17/37(3) | 185,000 | 185,001 | |||||
Invitation Homes Trust, Series 2018-SFR3, Class C, VRN, 3.19%, (1-month LIBOR plus 1.30%), 7/17/37(3) | 370,000 | 369,812 | |||||
Kabbage Funding LLC, Series 2019-1, Class C, 4.61%, 3/15/24(3) | 635,571 | 644,819 | |||||
Mariner Finance Issuance Trust, Series 2017-BA, Class A SEQ, 2.92%, 12/20/29(3) | 700,000 | 702,283 | |||||
Marlette Funding Trust, Series 2017-2A, Class C, 4.58%, 7/15/24(3) | 1,000,000 | 1,005,508 | |||||
Marlette Funding Trust, Series 2017-3A, Class B, 3.01%, 12/15/24(3) | 640,359 | 640,769 | |||||
Marlette Funding Trust, Series 2017-3A, Class C, 4.01%, 12/15/24(3) | 500,000 | 504,245 | |||||
Marlette Funding Trust, Series 2018-2A, Class C, 4.37%, 7/17/28(3) | 850,000 | 867,129 | |||||
MVW Owner Trust, Series 2014-1A, Class A SEQ, 2.25%, 9/22/31(3) | 637,929 | 637,896 | |||||
New Residential Mortgage LLC, Series 2018-FNT1, Class E, 4.89%, 5/25/23(3) | 753,098 | 763,667 | |||||
OneMain Direct Auto Receivables Trust, Series 2018-1A, Class D, 4.40%, 1/14/28(3) | 1,000,000 | 1,035,555 | |||||
OneMain Financial Issuance Trust, Series 2015-1A, Class C, 5.12%, 3/18/26(3) | 515,767 | 516,803 | |||||
OneMain Financial Issuance Trust, Series 2016-3A, Class A SEQ, 3.83%, 6/18/31(3) | 475,000 | 489,443 | |||||
OneMain Financial Issuance Trust, Series 2017-1A, Class D, 4.52%, 9/14/32(3) | 2,500,000 | 2,533,284 | |||||
Sierra Timeshare Receivables Funding LLC, Series 2015-2A, Class B, 3.02%, 6/20/32(3) | 533,875 | 534,243 | |||||
Sierra Timeshare Receivables Funding LLC, Series 2018-2A, Class A SEQ, 3.50%, 6/20/35(3) | 967,958 | 991,691 | |||||
Sofi Consumer Loan Program Trust, Series 2018-2, Class B, 3.79%, 4/26/27(3) | 650,000 | 666,966 | |||||
TAL Advantage V LLC, Series 2014-1A, Class A SEQ, 3.51%, 2/22/39(3) | 340,167 | 340,451 | |||||
TAL Advantage V LLC, Series 2014-3A, Class A SEQ, 3.27%, 11/21/39(3) | 152,500 | 152,962 | |||||
Triton Container Finance IV LLC, Series 2017-2A, Class A SEQ, 3.62%, 8/20/42(3) | 800,630 | 799,266 | |||||
United Auto Credit Securitization Trust, Series 2018-2, Class D, 4.26%, 5/10/23(3) | 1,000,000 | 1,015,079 |
14
Principal Amount/Shares | Value | ||||||
Vantage Data Centers Issuer LLC, Series 2018-1A, Class A2 SEQ, 4.07%, 2/16/43(3) | $ | 1,475,000 | $ | 1,533,728 | |||
Vertical Bridge CC LLC, Series 2016-2A, Class A SEQ, 5.19%, 10/15/46(3) | 967,184 | 995,188 | |||||
Westlake Automobile Receivables Trust, Series 2019-2A, Class C, 2.84%, 7/15/24(3) | 1,000,000 | 1,010,059 | |||||
TOTAL ASSET-BACKED SECURITIES (Cost $44,494,289) | 44,994,387 | ||||||
CORPORATE BONDS — 13.9% | |||||||
Airlines — 0.7% | |||||||
Azul Investments LLP, 5.875%, 10/26/24 | 750,000 | 775,320 | |||||
Virgin Australia Holdings Ltd., 7.875%, 10/15/21(2)(3) | 500,000 | 515,000 | |||||
Virgin Australia Holdings Ltd., 8.125%, 11/15/24(3)(4) | 700,000 | 694,750 | |||||
1,985,070 | |||||||
Auto Components — 0.6% | |||||||
Cooper-Standard Automotive, Inc., 5.625%, 11/15/26(2)(3) | 1,000,000 | 855,000 | |||||
Tenneco, Inc., 4.875%, 4/15/22 | EUR | 500,000 | 556,683 | ||||
Tenneco, Inc., 5.00%, 7/15/26 | $ | 500,000 | 400,000 | ||||
1,811,683 | |||||||
Capital Markets — 0.3% | |||||||
Compass Group Diversified Holdings LLC, 8.00%, 5/1/26(3) | 300,000 | 324,000 | |||||
FS Energy & Power Fund, 7.50%, 8/15/23(3) | 600,000 | 609,840 | |||||
933,840 | |||||||
Chemicals — 0.8% | |||||||
Foxtrot Escrow Issuer LLC / Foxtrot Escrow Corp., 12.25%, 11/15/26(3)(4) | 250,000 | 251,875 | |||||
FXI Holdings, Inc., 7.875%, 11/1/24(2)(3) | 700,000 | 626,500 | |||||
Nufarm Australia Ltd. / Nufarm Americas, Inc., 5.75%, 4/30/26(2)(3) | 700,000 | 707,000 | |||||
Tronox, Inc., 6.50%, 4/15/26(3) | 700,000 | 674,625 | |||||
2,260,000 | |||||||
Commercial Services and Supplies — 0.7% | |||||||
Cimpress NV, 7.00%, 6/15/26(2)(3) | 500,000 | 530,000 | |||||
LSC Communications, Inc., 8.75%, 10/15/23(2)(3) | 2,000,000 | 1,370,000 | |||||
1,900,000 | |||||||
Communications Equipment — 0.2% | |||||||
CommScope Technologies LLC, 6.00%, 6/15/25(3) | 500,000 | 450,125 | |||||
Distributors — 0.2% | |||||||
Resideo Funding, Inc., 6.125%, 11/1/26(3) | 500,000 | 505,000 | |||||
Diversified Financial Services — 0.8% | |||||||
Jefferies Finance LLC / JFIN Co-Issuer Corp., 7.25%, 8/15/24(2)(3) | 1,250,000 | 1,265,625 | |||||
Jefferies Finance LLC / JFIN Co-Issuer Corp., 6.25%, 6/3/26(2)(3) | 1,000,000 | 1,030,000 | |||||
2,295,625 | |||||||
Diversified Telecommunication Services — 2.0% | |||||||
Embarq Corp., 8.00%, 6/1/36(2) | 1,000,000 | 995,000 | |||||
Frontier Communications Corp., 8.00%, 4/1/27(2)(3) | 1,500,000 | 1,578,750 | |||||
Level 3 Financing, Inc., 5.25%, 3/15/26(2) | 621,000 | 649,721 |
15
Principal Amount/Shares | Value | ||||||
Oi SA, 10.00% Cash or 8.00% Cash plus 4.00% PIK, 7/27/25 (Acquired 7/31/19 - 8/22/19, Cost $1,157,684)(1)(5) | $ | 1,200,000 | $ | 1,090,500 | |||
Windstream Services LLC / Windstream Finance Corp., 8.625%, 10/31/25(2)(3)(6) | 1,500,000 | 1,509,375 | |||||
5,823,346 | |||||||
Electronic Equipment, Instruments and Components — 0.1% | |||||||
Sensata Technologies, Inc., 4.375%, 2/15/30(3) | 200,000 | 201,875 | |||||
Equity Real Estate Investment Trusts (REITs) — 0.6% | |||||||
CoreCivic, Inc., 4.625%, 5/1/23 | 500,000 | 470,625 | |||||
ESH Hospitality, Inc., 4.625%, 10/1/27(3) | 500,000 | 502,550 | |||||
GEO Group, Inc. (The), 5.875%, 1/15/22(2) | 790,000 | 767,287 | |||||
1,740,462 | |||||||
Food and Staples Retailing — 0.2% | |||||||
Rite Aid Corp., 6.125%, 4/1/23(3) | 600,000 | 513,030 | |||||
Food Products — 0.3% | |||||||
Cooke Omega Investments, Inc. / Alpha VesselCo Holdings, Inc., 8.50%, 12/15/22(2)(3) | 1,000,000 | 977,500 | |||||
Health Care Providers and Services — 0.2% | |||||||
Tenet Healthcare Corp., 4.875%, 1/1/26(3) | 500,000 | 517,813 | |||||
Internet and Direct Marketing Retail — 0.1% | |||||||
GrubHub Holdings, Inc., 5.50%, 7/1/27(3) | 200,000 | 188,000 | |||||
IT Services — 0.2% | |||||||
Tempo Acquisition LLC / Tempo Acquisition Finance Corp., 6.75%, 6/1/25(3) | 500,000 | 516,875 | |||||
Machinery — 0.2% | |||||||
Wabash National Corp., 5.50%, 10/1/25(2)(3) | 469,000 | 459,620 | |||||
Media — 0.9% | |||||||
Clear Channel Worldwide Holdings, Inc., 5.125%, 8/15/27(3) | 500,000 | 521,715 | |||||
Cumulus Media New Holdings, Inc., 6.75%, 7/1/26(3) | 500,000 | 531,250 | |||||
iHeartCommunications, Inc., 8.375%, 5/1/27(2) | 670,000 | 721,925 | |||||
Urban One, Inc., 7.375%, 4/15/22(2)(3) | 750,000 | 727,500 | |||||
2,502,390 | |||||||
Metals and Mining — 0.4% | |||||||
Allegheny Technologies, Inc., 7.875%, 8/15/23 | 500,000 | 546,400 | |||||
Petra Diamonds US Treasury plc, 7.25%, 5/1/22 | 800,000 | 564,000 | |||||
1,110,400 | |||||||
Oil, Gas and Consumable Fuels — 1.4% | |||||||
Buckeye Partners LP, 3.95%, 12/1/26 | 500,000 | 462,290 | |||||
Cheniere Energy Partners LP, 4.50%, 10/1/29(2)(3) | 500,000 | 511,875 | |||||
Energy Ventures Gom LLC / EnVen Finance Corp., 11.00%, 2/15/23(3) | 600,000 | 592,500 | |||||
Genesis Energy LP / Genesis Energy Finance Corp., 6.50%, 10/1/25(2) | 1,000,000 | 953,750 | |||||
Gulfport Energy Corp., 6.00%, 10/15/24 | 300,000 | 194,250 | |||||
Peabody Energy Corp., 6.00%, 3/31/22(3) | 450,000 | 418,500 | |||||
SunCoke Energy Partners LP / SunCoke Energy Partners Finance Corp., 7.50%, 6/15/25(2)(3) | 1,000,000 | 855,000 | |||||
3,988,165 |
16
Principal Amount/Shares | Value | ||||||
Real Estate Management and Development — 0.4% | |||||||
Five Point Operating Co. LP / Five Point Capital Corp., 7.875%, 11/15/25(3) | $ | 400,000 | $ | 379,068 | |||
Realogy Group LLC / Realogy Co-Issuer Corp., 9.375%, 4/1/27(2)(3) | 833,000 | 822,588 | |||||
1,201,656 | |||||||
Road and Rail — 0.6% | |||||||
Algeco Global Finance plc, 8.00%, 2/15/23(3) | 600,000 | 594,000 | |||||
XPO CNW, Inc., 6.70%, 5/1/34(2) | 1,107,000 | 1,115,302 | |||||
1,709,302 | |||||||
Specialty Retail — 1.0% | |||||||
eG Global Finance plc, 6.75%, 2/7/25(3) | 750,000 | 752,812 | |||||
Guitar Center, Inc., 9.50%, 10/15/21(3) | 800,000 | 746,000 | |||||
Hema Bondco I BV, VRN, 6.25%, (3-month EURIBOR plus 6.25%), 7/15/22(2) | EUR | 500,000 | 408,306 | ||||
Superior Plus LP / Superior General Partner, Inc., 7.00%, 7/15/26(2)(3) | $ | 1,000,000 | 1,080,000 | ||||
2,987,118 | |||||||
Thrifts and Mortgage Finance — 0.7% | |||||||
Freedom Mortgage Corp., 10.75%, 4/1/24(2)(3) | 1,000,000 | 1,012,500 | |||||
Freedom Mortgage Corp., 8.125%, 11/15/24(3) | 600,000 | 565,500 | |||||
Quicken Loans, Inc., 5.25%, 1/15/28(3) | 500,000 | 517,500 | |||||
2,095,500 | |||||||
Wireless Telecommunication Services — 0.3% | |||||||
Digicel International Finance Ltd. / Digicel Holdings Bermuda Ltd., 8.75%, 5/25/24(2)(3) | 1,000,000 | 952,500 | |||||
TOTAL CORPORATE BONDS (Cost $40,166,809) | 39,626,895 | ||||||
COLLATERALIZED LOAN OBLIGATIONS — 12.0% | |||||||
Ares XLI CLO Ltd., Series 2016-41A, Class D, VRN, 6.20%, (3-month LIBOR plus 4.20%), 1/15/29(3) | 2,500,000 | 2,494,926 | |||||
Ares XXXVII CLO Ltd., Series 2015-4A, Class CR, VRN, 4.65%, (3-month LIBOR plus 2.65%), 10/15/30(3) | 750,000 | 689,709 | |||||
Atrium XII, Series 2012-A, Class DR, VRN, 4.75%, (3-month LIBOR plus 2.80%), 4/22/27(3) | 2,000,000 | 1,954,405 | |||||
Ballyrock CLO Ltd., Series 2018-1A, Class C, VRN, 5.12%, (3-month LIBOR plus 3.15%), 4/20/31(3) | 800,000 | 748,483 | |||||
Benefit Street Partners CLO VII Ltd., Series 2015-VIIA, Class A1AR, VRN, 2.78%, (3-month LIBOR plus 0.78%), 7/18/27(3) | 480,373 | 479,369 | |||||
BlueMountain CLO Ltd., Series 2015-4A, Class FR, VRN, 9.97%, (3-month LIBOR plus 8.00%), 4/20/30(3) | 750,000 | 639,668 | |||||
BlueMountain CLO XXIII Ltd., Series 2018-23A, Class D, VRN, 4.87%, (3-month LIBOR plus 2.90%), 10/20/31(3) | 500,000 | 466,956 | |||||
Bowman Park CLO Ltd., Series 2014-1A, Class AR, VRN, 3.33%, (3-month LIBOR plus 1.18%), 11/23/25(3) | 218,083 | 218,430 | |||||
Carlyle Global Market Strategies CLO Ltd., Series 2014-1A, Class DR, VRN, 4.60%, (3-month LIBOR plus 2.60%), 4/17/31(3) | 1,000,000 | 892,474 | |||||
CIFC Funding Ltd., Series 2013-1A, Class DR, VRN, 8.65%, (3-month LIBOR plus 6.65%), 7/16/30(3) | 1,000,000 | 900,079 | |||||
Cutwater Ltd., Series 2014-2A, Class CR, VRN, 5.75%, (3-month LIBOR plus 3.75%), 1/15/27(3) | 1,500,000 | 1,489,092 |
17
Principal Amount/Shares | Value | ||||||
Garrison Funding Ltd., Series 2015-1A, Class CR, VRN, 6.03%, (3-month LIBOR plus 3.90%), 9/21/29(3) | $ | 1,000,000 | $ | 986,825 | |||
Harbourview CLO VII Ltd., Series 2007-RA, Class D, VRN, 5.36%, (3-month LIBOR plus 3.36%), 7/18/31(3) | 2,000,000 | 1,806,508 | |||||
Highbridge Loan Management Ltd., Series 2011-A17, Class D, VRN, 6.33%, (3-month LIBOR plus 3.60%), 5/6/30(3) | 1,750,000 | 1,676,311 | |||||
Jamestown CLO IV Ltd., Series 2014-4A, Class CR, VRN, 4.65%, (3-month LIBOR plus 2.65%), 7/15/26(3) | 1,000,000 | 991,509 | |||||
Jamestown CLO XI Ltd., Series 2018-11A, Class C, VRN, 5.25%, (3-month LIBOR plus 3.25%), 7/14/31(3) | 1,000,000 | 941,106 | |||||
JMP Credit Advisors CLO IIIR Ltd., Series 2014-1RA, Class D, VRN, 4.60%, (3-month LIBOR plus 2.60%), 1/17/28(3) | 1,000,000 | 962,128 | |||||
Madison Park Funding XV Ltd., Series 2014-15A, Class DR, VRN, 7.38%, (3-month LIBOR plus 5.44%), 1/27/26(3) | 1,750,000 | 1,656,750 | |||||
Midocean Credit CLO VII, Series 2017-7A, Class D, VRN, 5.88%, (3-month LIBOR plus 3.88%), 7/15/29(3) | 1,000,000 | 986,279 | |||||
Milos CLO Ltd., Series 2017-1A, Class D, VRN, 5.37%, (3-month LIBOR plus 3.40%), 10/20/30(3) | 500,000 | 477,957 | |||||
Mountain View CLO Ltd., Series 2015-9A, Class CR, VRN, 5.12%, (3-month LIBOR plus 3.12%), 7/15/31(3) | 1,000,000 | 919,395 | |||||
Northwoods Capital XVI Ltd., Series 2017-16A, Class D, VRN, 5.31%, (3-month LIBOR plus 3.15%), 11/15/30(3) | 1,000,000 | 918,268 | |||||
OCP CLO Ltd., Series 2015-8A, Class CR, VRN, 4.80%, (3-month LIBOR plus 2.80%), 4/17/27(3) | 1,250,000 | 1,234,673 | |||||
Octagon Investment Partners 30 Ltd., Series 2017-1A, Class A1, VRN, 3.29%, (3-month LIBOR plus 1.32%), 3/17/30(3) | 750,000 | 749,336 | |||||
TICP CLO I Ltd., Series 2015-1A, Class F, VRN, 8.67%, (3-month LIBOR plus 6.70%), 7/20/27(3) | 500,000 | 428,418 | |||||
TICP CLO I-2 Ltd., Series 2018-IA, Class C, VRN, 4.98%, (3-month LIBOR plus 3.04%), 4/26/28(3) | 1,000,000 | 949,145 | |||||
TICP CLO Ltd., Series 2018-IIA, Class C, VRN, 4.92%, (3-month LIBOR plus 2.95%), 4/20/28(3) | 1,000,000 | 977,647 | |||||
TICP CLO VI Ltd., Series 2016-6A, Class DR, VRN, 5.30%, (3-month LIBOR plus 3.30%), 1/15/29(3) | 1,000,000 | 991,204 | |||||
TICP CLO X Ltd., Series 2018-10A, Class D, VRN, 4.77%, (3-month LIBOR plus 2.80%), 4/20/31(3) | 1,000,000 | 932,310 | |||||
Venture XVI CLO Ltd., Series 2014-16A, Class DRR, VRN, 4.51%, (3-month LIBOR plus 2.51%), 1/15/28(3) | 1,000,000 | 941,921 | |||||
Venture XVIII CLO Ltd., Series 2014-18A, Class DR, VRN, 5.10%, (3-month LIBOR plus 3.10%), 10/15/29(3) | 1,000,000 | 930,366 | |||||
Venture XXIV CLO Ltd., Series 2016-24A, Class E, VRN, 8.69%, (3-month LIBOR plus 6.72%), 10/20/28(3) | 1,000,000 | 953,277 | |||||
Voya CLO Ltd., Series 2014-1A, Class DR2, VRN, 8.00%, (3-month LIBOR plus 6.00%), 4/18/31(3) | 500,000 | 436,530 | |||||
York CLO 3 Ltd., Series 2016-1A, Class ER, VRN, 8.37%, (3-month LIBOR plus 6.40%), 10/20/29(3) | 1,375,000 | 1,283,167 | |||||
TOTAL COLLATERALIZED LOAN OBLIGATIONS (Cost $35,683,312) | 34,104,621 | ||||||
BANK LOAN OBLIGATIONS(7) — 11.8% | |||||||
Airlines — 0.2% | |||||||
LifeMiles Ltd., Term Loan B, 7.30%, (1-month LIBOR plus 5.50%), 8/18/22 | 645,146 | 612,888 | |||||
Auto Components — 0.3% | |||||||
Adient US LLC, Term Loan B, 6.46%, (3-month LIBOR plus 4.25%), 5/6/24 | 125,000 | 122,343 |
18
Principal Amount/Shares | Value | ||||||
Adient US LLC, Term Loan B, 6.89%, (3-month LIBOR plus 4.25%), 5/6/24 | $ | 373,750 | $ | 365,808 | |||
Truck Hero, Inc., 1st Lien Term Loan, 5.54%, (1-month LIBOR plus 3.75%), 4/21/24 | 496,193 | 457,738 | |||||
945,889 | |||||||
Automobiles — 0.3% | |||||||
Thor Industries, Inc., EUR Term Loan B, 4.00%, (1-month EURIBOR plus 4.00%), 2/1/26 | EUR | 685,504 | 759,443 | ||||
Thor Industries, Inc., USD Term Loan B, 5.81%, (1-month LIBOR plus 3.75%), 2/1/26 | $ | 165,334 | 162,027 | ||||
921,470 | |||||||
Beverages — 0.3% | |||||||
Sunshine Investments B.V., USD Term Loan B3, 5.41%, (3-month LIBOR plus 3.25%), 3/28/25 | 1,000,000 | 1,001,250 | |||||
Capital Markets — 1.1% | |||||||
Getty Images, Inc., 2019 EUR Term Loan B, 5.00%, (1-month EURIBOR plus 5.00%), 2/19/26 | EUR | 1,000,000 | 1,112,233 | ||||
Jane Street Group, LLC, 2018 Term Loan B, 4.79%, (1-month LIBOR plus 3.00%), 8/25/22 | $ | 997,481 | 995,401 | ||||
Jefferies Finance LLC, 2019 Term Loan, 5.75%, (1-month LIBOR plus 3.75%), 6/3/26 | 997,500 | 981,291 | |||||
3,088,925 | |||||||
Chemicals — 0.2% | |||||||
Hexion Inc, USD Exit Term Loan, 5.60%, (3-month LIBOR plus 3.50%), 7/1/26 | 698,250 | 696,941 | |||||
Commercial Services and Supplies — 0.2% | |||||||
4L Technologies Inc., 1st Lien Term Loan, 6.29%, (1-month LIBOR plus 4.50%), 5/8/20 | 647,466 | 349,499 | |||||
Constellis Holdings, LLC, 2017 1st Lien Term Loan, 6.86%, (2-month LIBOR plus 5.00%), 4/21/24 | 757 | 399 | |||||
Constellis Holdings, LLC, 2017 1st Lien Term Loan, 6.93%, (3-month LIBOR plus 5.00%), 4/21/24 | 295,172 | 155,703 | |||||
505,601 | |||||||
Construction and Engineering — 0.3% | |||||||
PowerTeam Services, LLC, 2018 1st Lien Term Loan, 3/6/25(8) | 1,000,000 | 872,500 | |||||
Distributors — 0.2% | |||||||
Spin Holdco Inc., 2017 Term Loan B, 5.25%, (3-month LIBOR plus 3.25%), 11/14/22 | 498,724 | 485,187 | |||||
Diversified Consumer Services — 0.3% | |||||||
KUEHG Corp., 2018 Incremental Term Loan, 5.85%, (3-month LIBOR plus 3.75%), 2/21/25 | 552,601 | 547,075 | |||||
KUEHG Corp., 2018 Incremental Term Loan, 5.85%, (3-month LIBOR plus 3.75%), 2/21/25 | 192,370 | 190,447 | |||||
737,522 | |||||||
Diversified Financial Services — 0.7% | |||||||
IG Investment Holdings, LLC, 2018 1st Lien Term Loan, 5.79%, (1-month LIBOR plus 4.00%), 5/23/25 | 746,222 | 736,431 | |||||
MPH Acquisition Holdings LLC, 2016 Term Loan B, 4.85%, (3-month LIBOR plus 2.75%), 6/7/23 | 1,000,000 | 940,510 | |||||
Syniverse Holdings, Inc., 2018 1st Lien Term Loan, 6.92%, (3-month LIBOR plus 5.00%), 3/9/23 | 63,759 | 57,543 | |||||
TNS, Inc., 2013 Term Loan B, 5.93%, (3-month LIBOR plus 4.00%), 8/14/22 | 247,086 | 242,968 | |||||
1,977,452 |
19
Principal Amount/Shares | Value | ||||||
Diversified Telecommunication Services — 1.7% | |||||||
Connect Finco Sarl, Term Loan B, 9/23/26(8) | $ | 600,000 | $ | 591,843 | |||
Coral-US Co-Borrower, LLC, Term Loan B4, 5.04%, (1-month LIBOR plus 3.25%), 1/30/26 | 874,667 | 878,310 | |||||
Frontier Communications Corp., 2017 Term Loan B1, 5.54%, (1-month LIBOR plus 3.75%), 6/15/24 | 475,413 | 474,641 | |||||
Intelsat Jackson Holdings S.A., 2017 Term Loan B3, 5.68%, (6-month LIBOR plus 3.75%), 11/27/23 | 1,099,619 | 1,099,624 | |||||
Windstream Services, LLC, Repriced Term Loan B6, 9.75%, (Prime plus 5.00%), 3/29/21(6) | 1,323,523 | 1,342,548 | |||||
Windstream Services, LLC, Term Loan B7, 9.00%, (Prime plus 4.25%), 2/17/24(6) | 552,254 | 553,787 | |||||
4,940,753 | |||||||
Energy Equipment and Services — 0.3% | |||||||
McDermott Technology Americas Inc, 2018 1st Lien Term Loan, 7.10%, (3-month LIBOR plus 5.00%), 5/9/25 | 698,228 | 424,348 | |||||
McDermott Technology Americas Inc, Super Priority Term Loan, 10/21/21(8) | 290,538 | 299,496 | |||||
723,844 | |||||||
Equity Real Estate Investment Trusts (REITs) — 0.1% | |||||||
Communications Sales & Leasing, Inc., 2017 Term Loan B, 6.79%, (1-month LIBOR plus 5.00%), 10/24/22 | 216,441 | 208,894 | |||||
Food and Staples Retailing† | |||||||
Moran Foods LLC, Term Loan, 8.10%, (3-month LIBOR plus 6.00%), 12/5/23 | 128,950 | 53,054 | |||||
Health Care Equipment and Supplies — 0.3% | |||||||
Lifescan Global Corporation, 2018 1st Lien Term Loan, 8.06%, (6-month LIBOR plus 6.00%), 10/1/24 | 946,565 | 849,542 | |||||
Lifescan Global Corporation, 2018 1st Lien Term Loan, 8.09%, (3-month LIBOR plus 6.00%), 10/1/24 | 17,812 | 15,986 | |||||
865,528 | |||||||
Health Care Providers and Services — 0.6% | |||||||
Envision Healthcare Corporation, 2018 1st Lien Term Loan, 5.54%, (1-month LIBOR plus 3.75%), 10/10/25 | 248,125 | 201,524 | |||||
Kindred Healthcare LLC, 2018 1st Lien Term Loan, 6.81%, (1-month LIBOR plus 5.00%), 6/19/25 | 702,638 | 702,638 | |||||
Tivity Health Inc, Term Loan A, 6.04%, (1-month LIBOR plus 4.25%), 3/8/24 | 825,000 | 824,484 | |||||
1,728,646 | |||||||
Hotels, Restaurants and Leisure — 0.6% | |||||||
Areas Worldwide SA, EUR Term Loan B, 4.75%, (1-month EURIBOR plus 4.75%), 7/2/26 | EUR | 1,000,000 | 1,120,179 | ||||
Mohegan Tribal Gaming Authority, 2016 Term Loan A, 5.54%, (1-month LIBOR plus 3.75%), 10/13/21 | $ | 480,076 | 466,375 | ||||
1,586,554 | |||||||
Industrial Conglomerates — 0.2% | |||||||
Travelport Finance (Luxembourg) S.a.r.l., 2019 Term Loan, 7.10%, (3-month LIBOR plus 5.00%), 5/29/26 | 500,000 | 467,188 | |||||
Interactive Media and Services — 0.3% | |||||||
MH Sub I, LLC, 2017 1st Lien Term Loan, 5.54%, (1-month LIBOR plus 3.75%), 9/13/24 | 755,081 | 737,737 | |||||
Internet and Direct Marketing Retail — 0.3% | |||||||
Lands' End, Inc., Term Loan B, 5.04%, (1-month LIBOR plus 3.25%), 4/4/21 | 890,826 | 860,204 |
20
Principal Amount/Shares | Value | ||||||
IT Services — 0.3% | |||||||
Blackhawk Network Holdings, Inc, 2018 1st Lien Term Loan, 4.79%, (1-month LIBOR plus 3.00%), 6/15/25 | $ | 992,462 | $ | 985,907 | |||
Media — 0.1% | |||||||
Checkout Holding Corp., First Out Term Loan, 9.35%, (1-month LIBOR plus 7.50%), 2/15/23 | 44,424 | 36,844 | |||||
Checkout Holding Corp., Last Out Term Loan, 2.85%, (1-month LIBOR plus 1.00% Cash and 9.50% PIK), 8/15/23 | 57,699 | 25,460 | |||||
Gamma Infrastructure III B.V., EUR 1st Lien Term Loan B, 3.50%, (6-month EURIBOR plus 3.50%), 1/9/25 | EUR | 163,587 | 181,537 | ||||
243,841 | |||||||
Oil, Gas and Consumable Fuels — 0.5% | |||||||
California Resources Corporation, 2017 1st Lien Term Loan, 6.55%, (1-month LIBOR plus 4.75%), 12/31/22 | $ | 750,000 | 649,125 | ||||
EMG Utica, LLC, Term Loan, 5.54%, (1-month LIBOR plus 3.75%), 3/27/20 | 494,832 | 492,358 | |||||
Murray Energy Corporation, 2018 Term Loan B2, 9.35%, (3-month LIBOR plus 7.25%), 10/17/22(6)(10) | 868,059 | 285,865 | |||||
1,427,348 | |||||||
Pharmaceuticals — 0.1% | |||||||
Alvogen Pharma US, Inc., 2018 Term Loan B, 6.54%, (1-month LIBOR plus 4.75%), 4/2/22 | 480,769 | 419,873 | |||||
Professional Services — 0.3% | |||||||
Dun & Bradstreet Corporation (The), Term Loan, 6.80%, (1-month LIBOR plus 5.00%), 2/6/26 | 1,000,000 | 1,004,060 | |||||
Road and Rail — 0.3% | |||||||
Daseke, Inc., 2017 Term Loan B, 6.79%, (1-month LIBOR plus 5.00%), 2/27/24 | 494,962 | 469,596 | |||||
Savage Enterprises LLC, 2018 1st Lien Term Loan B, 5.93%, (1-month LIBOR plus 4.00%), 8/1/25 | 295,381 | 298,057 | |||||
767,653 | |||||||
Software — 0.4% | |||||||
STG-Fairway Acquisitions, Inc., 2015 1st Lien Term Loan, 7.04%, (1-month LIBOR plus 5.25%), 6/30/22 | 491,348 | 491,552 | |||||
Weld North Education, LLC, Term Loan B, 6.36%, (3-month LIBOR plus 4.25%), 2/15/25 | 633,778 | 631,401 | |||||
1,122,953 | |||||||
Specialty Retail — 0.6% | |||||||
84 Lumber Company, 2017 Term Loan B, 7.07%, (1-month LIBOR plus 5.25%), 10/25/23 | 474,892 | 475,880 | |||||
Jo-Ann Stores, Inc., 2016 Term Loan, 6.93%, (3-month LIBOR plus 5.00%), 10/20/23 | 498,666 | 382,414 | |||||
PetSmart, Inc., Consenting Term Loan, 5.93%, (1-month LIBOR plus 4.00%), 3/11/22 | 418,858 | 409,346 | |||||
Serta Simmons Bedding, LLC, 1st Lien Term Loan, 5.35%, (1-month LIBOR plus 3.50%), 11/8/23 | 220,408 | 131,253 | |||||
Serta Simmons Bedding, LLC, 1st Lien Term Loan, 5.42%, (1-month LIBOR plus 3.50%), 11/8/23 | 774,477 | 461,201 | |||||
1,860,094 | |||||||
Textiles, Apparel and Luxury Goods — 0.3% | |||||||
Strategic Partners Acquisition Corp., 2016 Term Loan, 5.54%, (1-month LIBOR plus 3.75%), 6/30/23 | 859,814 | 860,889 |
21
Principal Amount/Shares | Value | ||||||
Wireless Telecommunication Services — 0.4% | |||||||
Digicel International Finance Limited, 2017 Term Loan B, 5.34%, (6-month LIBOR plus 3.25%), 5/28/24 | $ | 694,685 | $ | 594,206 | |||
Sprint Communications, Inc., 2018 Term Loan B, 4.81%, (1-month LIBOR plus 3.00%), 2/2/24 | 493,756 | 491,596 | |||||
1,085,802 | |||||||
TOTAL BANK LOAN OBLIGATIONS (Cost $35,543,986) | 33,796,447 | ||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES — 9.9% | |||||||
280 Park Avenue Mortgage Trust, Series 2017-280P, Class F, VRN, 4.74%, (1-month LIBOR plus 2.83%), 9/15/34(3) | 1,000,000 | 1,008,790 | |||||
Ashford Hospitality Trust, Series 2018-ASHF, Class E, VRN, 5.01%, (1-month LIBOR plus 3.10%), 4/15/35(3) | 1,500,000 | 1,510,564 | |||||
BBCMS Trust, Series 2018-CBM, Class D, VRN, 4.30%, (1-month LIBOR plus 2.39%), 7/15/37(3) | 1,000,000 | 1,007,353 | |||||
BHMS, Series 2018-ATLS, Class C, VRN, 3.81%, (1-month LIBOR plus 1.90%), 7/15/35(3) | 2,000,000 | 2,008,380 | |||||
BX Commercial Mortgage Trust, Series 2019-IMC, Class E, VRN, 4.07%, (1-month LIBOR plus 2.15%), 4/15/34(3) | 2,490,000 | 2,507,156 | |||||
BX Trust, Series 2017-SLCT, Class E, VRN, 5.06%, (1-month LIBOR plus 3.15%), 7/15/34(3) | 1,700,000 | 1,719,285 | |||||
BX Trust, Series 2017-SLCT, Class F, VRN, 6.16%, (1-month LIBOR plus 4.25%), 7/15/34(3) | 850,000 | 858,028 | |||||
BX Trust, Series 2018-BILT, Class E, VRN, 4.33%, (1-month LIBOR plus 2.42%), 5/15/30(3) | 1,000,000 | 1,003,069 | |||||
BX Trust, Series 2018-GW, Class F, VRN, 4.33%, (1-month LIBOR plus 2.42%), 5/15/35(3) | 1,000,000 | 1,007,305 | |||||
BXP Trust, Series 2017-CQHP, Class E, VRN, 4.91%, (1-month LIBOR plus 3.00%), 11/15/34(3) | 1,000,000 | 1,001,180 | |||||
Caesars Palace Las Vegas Trust, Series 2017-VICI, Class E, VRN, 4.35%, 10/15/34(3) | 1,000,000 | 1,040,101 | |||||
CAMB Commercial Mortgage Trust, Series 2019-LIFE, Class A, VRN, 2.99%, (1-month LIBOR plus 1.07%), 12/15/37(3) | 900,000 | 903,857 | |||||
CHT Mortgage Trust, Series 2017-CSMO, Class F, VRN, 5.66%, (1-month LIBOR plus 3.74%), 11/15/36(3) | 1,000,000 | 1,005,762 | |||||
GS Mortgage Securities Corp. II, Series 2012-TMSQ, Class D, VRN, 3.46%, 12/10/30(3) | 1,422,000 | 1,444,181 | |||||
GS Mortgage Securities Corp. Trust, Series 2017-500K, Class F, VRN, 3.71%, (1-month LIBOR plus 1.80%), 7/15/32(3) | 1,000,000 | 1,002,255 | |||||
Hawaii Hotel Trust, Series 2019-MAUI, Class F, VRN, 4.66%, (1-month LIBOR plus 2.75%), 5/15/38(3) | 1,000,000 | 1,007,899 | |||||
Hilton Orlando Trust, Series 2018-ORL, Class E, VRN, 4.56%, (1-month LIBOR plus 2.65%), 12/15/34(3) | 1,000,000 | 1,007,648 | |||||
J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2018-PHH, Class D, VRN, 3.62%, (1-month LIBOR plus 1.71%), 6/15/35(3) | 1,000,000 | 1,002,236 | |||||
J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2018-BCON, Class D, VRN, 3.76%, 1/5/31(3) | 1,000,000 | 1,026,558 | |||||
Lone Star Portfolio Trust, Series 2015-LSP, Class E, VRN, 7.76%, (1-month LIBOR plus 5.85%), 9/15/28(3) | 1,279,834 | 1,294,003 | |||||
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2014-C15, Class D, VRN, 4.91%, 4/15/47(3) | 1,250,000 | 1,325,194 | |||||
Morgan Stanley Capital I Trust, Series 2018-BOP, Class F, VRN, 4.41%, (1-month LIBOR plus 2.50%), 8/15/33(3) | 1,000,000 | 1,004,036 | |||||
Palisades Center Trust, Series 2016-PLSD, Class D, 4.74%, 4/13/33(3) | 1,575,000 | 1,521,448 | |||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (Cost $27,871,464) | 28,216,288 |
22
Principal Amount/Shares | Value | ||||||
COLLATERALIZED MORTGAGE OBLIGATIONS — 4.0% | |||||||
Private Sponsor Collateralized Mortgage Obligations — 1.1% | |||||||
Bear Stearns Asset Backed Securities I Trust, Series 2004-AC6, Class A2, VRN, 2.22%, (1-month LIBOR plus 0.40%), 11/25/34 | $ | 918,869 | $ | 837,510 | |||
COLT 2019-1 Mortgage Loan Trust, Series 2019-1, Class A2 SEQ, VRN, 3.91%, 3/25/49(3) | 951,621 | 966,983 | |||||
COLT Mortgage Loan Trust, Series 2019-2, Class A2 SEQ, VRN, 3.44%, 5/25/49(3) | 531,257 | 541,470 | |||||
Sequoia Mortgage Trust, Series 2018-CH4, Class A19, VRN, 4.50%, 10/25/48(3) | 235,823 | 244,727 | |||||
Sequoia Mortgage Trust, Series 2019-CH1, Class A19, VRN, 4.50%, 3/25/49(3) | 534,451 | 546,407 | |||||
3,137,097 | |||||||
U.S. Government Agency Collateralized Mortgage Obligations — 2.9% | |||||||
FHLMC, Series 2015-DN1, Class M3, VRN, 5.97%, (1-month LIBOR plus 4.15%), 1/25/25 | 1,195,987 | 1,238,696 | |||||
FHLMC, Series 2015-HQA2, Class M2, VRN, 4.62%, (1-month LIBOR plus 2.80%), 5/25/28 | 1,227,641 | 1,234,855 | |||||
FNMA, Series 2016-C05, Class 2M2, VRN, 6.27%, (1-month LIBOR plus 4.45%), 1/25/29 | 1,342,749 | 1,414,429 | |||||
FNMA, Series 2016-C06, Class 1M2, VRN, 6.07%, (1-month LIBOR plus 4.25%), 4/25/29 | 1,500,000 | 1,596,398 | |||||
FNMA, Series 2017-C06, Class 1M2, VRN, 4.47%, (1-month LIBOR plus 2.65%), 2/25/30 | 1,000,000 | 1,022,063 | |||||
FNMA, Series 2018-C03, Class 1M2, VRN, 3.97%, (1-month LIBOR plus 2.15%), 10/25/30 | 1,000,000 | 1,006,442 | |||||
GNMA, Series 2012-87, IO, VRN, 0.46%, 8/16/52 | 4,652,605 | 98,850 | |||||
GNMA, Series 2012-99, IO, SEQ, VRN, 0.52%, 10/16/49 | 3,942,498 | 102,144 | |||||
GNMA, Series 2014-126, IO, SEQ, VRN, 0.73%, 2/16/55 | 4,100,683 | 187,929 | |||||
GNMA, Series 2014-126, IO, SEQ, VRN, 0.94%, 2/16/55 | 5,046,994 | 271,775 | |||||
GNMA, Series 2015-85, IO, VRN, 0.56%, 7/16/57 | 5,567,782 | 210,002 | |||||
8,383,583 | |||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $12,115,656) | 11,520,680 | ||||||
EXCHANGE-TRADED FUNDS — 3.0% | |||||||
iShares Mortgage Real Estate ETF | 143,320 | 6,202,890 | |||||
SPDR S&P Oil & Gas Exploration & Production ETF | 110,200 | 2,327,424 | |||||
TOTAL EXCHANGE-TRADED FUNDS (Cost $8,464,705) | 8,530,314 | ||||||
PREFERRED STOCKS — 2.5% | |||||||
Equity Real Estate Investment Trusts (REITs) — 2.3% | |||||||
American Homes 4 Rent, 5.875% | 9,600 | 254,880 | |||||
American Homes 4 Rent, 5.875% | 13,233 | 345,911 | |||||
American Homes 4 Rent, 6.25% | 16,968 | 456,948 | |||||
Colony Capital, Inc., 7.125% | 8,746 | 208,942 | |||||
Colony Capital, Inc., 8.75% | 7,945 | 202,677 | |||||
Digital Realty Trust, Inc., 5.25% | 17,677 | 461,546 | |||||
Monmouth Real Estate Investment Corp., 6.125% | 23,899 | 597,475 | |||||
Pebblebrook Hotel Trust, 6.30% | 17,476 | 447,036 | |||||
Pebblebrook Hotel Trust, 6.375% | 10,404 | 276,226 |
23
Principal Amount/Shares | Value | ||||||
PS Business Parks, Inc., 5.20% | 12,363 | $ | 320,820 | ||||
PS Business Parks, Inc., 5.25% | 12,144 | 314,530 | |||||
Public Storage, 4.90% | 20,632 | 524,053 | |||||
Public Storage, 5.125% | 8,362 | 214,987 | |||||
QTS Realty Trust, Inc., 7.125% | 14,590 | 392,179 | |||||
Rexford Industrial Realty, Inc., 5.875% | 11,901 | 313,275 | |||||
Rexford Industrial Realty, Inc., 5.875% | 7,700 | 201,047 | |||||
Spirit Realty Capital, Inc., 6.00% | 2,325 | 60,752 | |||||
Summit Hotel Properties, Inc., 6.25% | 10,665 | 285,289 | |||||
VEREIT, Inc., 6.70% | 10,758 | 273,253 | |||||
Vornado Realty Trust, 5.40% | 14,021 | 354,731 | |||||
6,506,557 | |||||||
Mortgage Real Estate Investment Trusts (REITs) — 0.2% | |||||||
Invesco Mortgage Capital, Inc., 7.50% | 6,700 | 178,756 | |||||
MFA Financial, Inc., 7.50% | 13,905 | 355,551 | |||||
534,307 | |||||||
TOTAL PREFERRED STOCKS (Cost $6,695,304) | 7,040,864 | ||||||
CONVERTIBLE BONDS† | |||||||
Energy Equipment and Services† | |||||||
CHC Group LLC / CHC Finance Ltd., 0.00%, 10/1/20 (Acquired 3/13/17, Cost $101,169)(5)(9) (Cost $101,169) | $ | 114,377 | 34,313 | ||||
TEMPORARY CASH INVESTMENTS — 10.8% | |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class (Cost $30,682,121) | 30,682,121 | 30,682,121 | |||||
TOTAL INVESTMENT SECURITIES BEFORE SECURITIES SOLD SHORT — 102.6% (Cost $291,668,388) | 292,377,015 | ||||||
CORPORATE BONDS SOLD SHORT — (2.3)% | |||||||
Energy Equipment and Services — (0.3)% | |||||||
Precision Drilling Corp., 144A, 7.125%, 1/15/26 | $ | (1,000,000 | ) | (870,000 | ) | ||
Food Products — (0.3)% | |||||||
Kraft Heinz Foods Co., 4.625%, 1/30/29 | (800,000 | ) | (874,164 | ) | |||
Oil, Gas and Consumable Fuels — (1.0)% | |||||||
Continental Resources, Inc., 4.375%, 1/15/28 | (1,000,000 | ) | (1,032,162 | ) | |||
EQT Corp., 3.00%, 10/1/22 | (1,000,000 | ) | (954,412 | ) | |||
Range Resources Corp., 5.00%, 8/15/22 | (1,000,000 | ) | (950,000 | ) | |||
(2,936,574 | ) | ||||||
Road and Rail — (0.7)% | |||||||
Loxam SAS, 3.25%, 1/14/25 | EUR | (1,000,000 | ) | (1,114,742 | ) | ||
United Rentals North America, Inc., 6.50%, 12/15/26 | $ | (700,000 | ) | (760,375 | ) | ||
(1,875,117 | ) | ||||||
TOTAL CORPORATE BONDS SOLD SHORT (Proceeds $6,581,577) | (6,555,855 | ) | |||||
EXCHANGE-TRADED FUNDS SOLD SHORT — (0.7)% | |||||||
iShares 7-10 Year Treasury Bond ETF (Proceeds $2,000,695) | (18,350 | ) | (2,064,558 | ) | |||
24
Principal Amount/Shares | Value | ||||||
CONVERTIBLE BONDS SOLD SHORT — (0.6)% | |||||||
Automobiles — (0.6)% | |||||||
Tesla, Inc., 1.25%, 3/1/21 (Proceeds $1,746,658) | $ | (1,700,000 | ) | $ | (1,852,310 | ) | |
COMMON STOCKS SOLD SHORT — (0.3)% | |||||||
Energy Equipment and Services† | |||||||
Hi-Crush, Inc. | (21,100 | ) | (25,109 | ) | |||
Pharmaceuticals — (0.1)% | |||||||
Dr Reddy's Laboratories Ltd. ADR | (2,650 | ) | (103,747 | ) | |||
Software — (0.1)% | |||||||
SVMK, Inc. | (17,000 | ) | (312,800 | ) | |||
Specialty Retail — (0.1)% | |||||||
Carvana Co. | (3,500 | ) | (283,780 | ) | |||
TOTAL COMMON STOCKS SOLD SHORT (Proceeds $639,684) | (725,436 | ) | |||||
TOTAL SECURITIES SOLD SHORT (Proceeds $10,968,614) | (11,198,159 | ) | |||||
OTHER ASSETS AND LIABILITIES — 1.3% | 3,716,502 | ||||||
TOTAL NET ASSETS — 100.0% | $ | 284,895,358 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | ||||||||||
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||
USD | 5,090,452 | EUR | 4,600,000 | State Street Bank and Trust Co. | 11/25/19 | $ | (46,887 | ) | ||
USD | 497,394 | EUR | 451,000 | State Street Bank and Trust Co. | 11/25/19 | (6,288 | ) | |||
$ | (53,175 | ) |
FUTURES CONTRACTS PURCHASED | |||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Underlying Contract Value | Unrealized Appreciation (Depreciation) | ||||||
CBOE Volatility Index (VIX) | 260 | November 2019 | USD | 260,000 | $ | 3,971,500 | $ | (345,982 | ) | ||
S&P 500 E-Mini Consumer Staples Select Sector Index | 100 | December 2019 | USD | 10,000 | 6,138,000 | (8,159 | ) | ||||
$ | 10,109,500 | $ | (354,141 | ) |
FUTURES CONTRACTS SOLD | |||||||||||
Reference Entity | Contracts | Expiration Date | Notional Amount | Underlying Contract Value | Unrealized Appreciation (Depreciation) | ||||||
CBOE Volatility Index (VIX) | 247 | December 2019 | USD | 247,000 | $ | 4,131,075 | $ | 193,451 | |||
Euro-Bund 10-Year Bonds | 49 | December 2019 | EUR | 4,900,000 | 9,386,630 | 239,244 | |||||
Russell 2000 E-Mini Index | 73 | December 2019 | USD | 3,650 | 5,706,410 | 65,219 | |||||
S&P 500 E-Mini | 42 | December 2019 | USD | 2,100 | 6,375,180 | (46,057 | ) | ||||
$ | 25,599,295 | $ | 451,857 |
25
CENTRALLY CLEARED CREDIT DEFAULT SWAP AGREEMENTS | |||||||||||||||
Reference Entity | Type | Fixed Rate Received (Paid) Quarterly | Termination Date | Notional Amount | Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Value^ | ||||||||
Markit CDX North America High Yield Index Series 31 | Buy | (5.00)% | 12/20/23 | $ | 16,800,000 | $ | (642,784 | ) | $ | (757,292 | ) | $ | (1,400,076 | ) | |
Markit CDX North America High Yield Index Series 32 | Buy | (5.00)% | 6/20/24 | $ | 3,960,000 | (271,279 | ) | (50,129 | ) | (321,408 | ) | ||||
Markit iTraxx Europe Crossover Index Series 31 | Buy | (5.00)% | 6/20/24 | EUR | 4,000,000 | (474,577 | ) | 29,777 | (444,800 | ) | |||||
$ | (1,388,640 | ) | $ | (777,644 | ) | $ | (2,166,284 | ) |
^The value for credit default swap agreements serves as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability or profit at the period end. Increasing values in absolute terms when compared to the notional amount of the credit default swap agreement represent a deterioration of the referenced entity's credit soundness and an increased likelihood or risk of a credit event occurring as defined in the agreement.
26
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
CDX | - | Credit Derivatives Indexes |
EUR | - | Euro |
EURIBOR | - | Euro Interbank Offered Rate |
FHLMC | - | Federal Home Loan Mortgage Corporation |
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. |
SEQ | - | Sequential Payer |
USD | - | United States Dollar |
VRN | - | Variable Rate Note. The rate adjusts periodically based upon the terms set forth in the security’s offering documents. The rate shown is effective at the period end and the reference rate and spread, if any, is indicated. |
† | Category is less than 0.05% of total net assets. |
(1) | The security's rate was paid in cash at the last payment date. |
(2) | Security, or a portion thereof, has been pledged at the custodian bank or with a broker for collateral requirements on forward foreign currency exchange contracts, futures contracts, securities sold short and/or swap agreements. At the period end, the aggregate value of securities pledged was $22,366,797. |
(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 $134,674,704, which represented 47.3% of total net assets. |
(4) | When-issued security. The issue price and yield are fixed on the date of the commitment, but payment and delivery are scheduled for a future date. |
(5) | 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 $1,124,813, which represented 0.4% of total net assets. |
(6) | Security is in default. |
(7) | 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. |
(8) | The interest rate will be determined upon settlement of the bank loan obligation after period end. |
(9) | Security is a zero-coupon bond. Zero-coupon securities are issued at a substantial discount from their value at maturity. |
(10) | Non-income producing. |
See Notes to Financial Statements.
27
Statement of Assets and Liabilities |
OCTOBER 31, 2019 | |||
Assets | |||
Investment securities, at value (cost of $291,668,388) | $ | 292,377,015 | |
Cash | 10,692 | ||
Foreign currency holdings, at value (cost of $1,110,749) | 1,120,358 | ||
Deposits with broker for swap agreements | 818,454 | ||
Deposits with broker for futures contracts | 1,385,887 | ||
Receivable for investments sold | 7,400,799 | ||
Receivable for capital shares sold | 737,440 | ||
Receivable for variation margin on futures contracts | 100,513 | ||
Receivable for variation margin on swap agreements | 46,349 | ||
Interest and dividends receivable | 1,280,258 | ||
305,277,765 | |||
Liabilities | |||
Securities sold short, at value (proceeds of $10,968,614) | 11,198,159 | ||
Payable for investments purchased | 7,887,409 | ||
Payable for capital shares redeemed | 752,244 | ||
Payable for variation margin on futures contracts | 39,931 | ||
Unrealized depreciation on forward foreign currency exchange contracts | 53,175 | ||
Accrued management fees | 347,205 | ||
Distribution and service fees payable | 14,939 | ||
Interest expense payable on securities sold short | 81,574 | ||
Fees and charges payable on borrowings for securities sold short | 7,771 | ||
20,382,407 | |||
Net Assets | $ | 284,895,358 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 287,870,643 | |
Distributable earnings | (2,975,285 | ) | |
$ | 284,895,358 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $47,186,804 | 4,922,002 | $9.59 | |||
I Class, $0.01 Par Value | $198,265,744 | 20,673,586 | $9.59 | |||
Y Class, $0.01 Par Value | $13,113,965 | 1,367,220 | $9.59 | |||
A Class, $0.01 Par Value | $9,737,276 | 1,015,900 | $9.58* | |||
C Class, $0.01 Par Value | $14,981,049 | 1,571,586 | $9.53 | |||
R Class, $0.01 Par Value | $39,768 | 4,155 | $9.57 | |||
R6 Class, $0.01 Par Value | $1,570,752 | 163,724 | $9.59 |
*Maximum offering price $10.16 (net asset value divided by 0.9425).
See Notes to Financial Statements.
28
Statement of Operations |
YEAR ENDED OCTOBER 31, 2019 | |||
Investment Income (Loss) | |||
Income: | |||
Interest | $ | 12,459,923 | |
Dividends (net of foreign taxes withheld of $59,091) | 3,475,773 | ||
15,935,696 | |||
Expenses: | |||
Dividend expense on securities sold short | 13,704 | ||
Interest expense on securities sold short | 197,628 | ||
Fees and charges on borrowings for securities sold short | 68,178 | ||
Management fees | 5,364,136 | ||
Distribution and service fees: | |||
A Class | 28,943 | ||
C Class | 157,907 | ||
R Class | 130 | ||
Directors' fees and expenses | 9,196 | ||
Other expenses | 18,450 | ||
5,858,272 | |||
Fees waived(1) | (327,975 | ) | |
5,530,297 | |||
Net investment income (loss) | 10,405,399 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | (227,384 | ) | |
Securities sold short transactions | 95,534 | ||
Forward foreign currency exchange contract transactions | 287,653 | ||
Futures contract transactions | (3,539,050 | ) | |
Swap agreement transactions | (246,598 | ) | |
Foreign currency translation transactions | 19,277 | ||
(3,610,568 | ) | ||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | 3,023,332 | ||
Securities sold short | (261,578 | ) | |
Forward foreign currency exchange contracts | (77,497 | ) | |
Futures contracts | (345,883 | ) | |
Swap agreements | (777,644 | ) | |
Translation of assets and liabilities in foreign currencies | 5,972 | ||
1,566,702 | |||
Net realized and unrealized gain (loss) | (2,043,866 | ) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 8,361,533 |
(1) | Amount consists of $96,275, $190,890, $8,981, $12,735, $17,370, $28 and $1,696 for Investor Class, I Class, Y Class, A Class, C Class, R Class and R6 Class, respectively. |
See Notes to Financial Statements.
29
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2019 AND OCTOBER 31, 2018 | ||||||
Increase (Decrease) in Net Assets | October 31, 2019 | October 31, 2018 | ||||
Operations | ||||||
Net investment income (loss) | $ | 10,405,399 | $ | 7,871,363 | ||
Net realized gain (loss) | (3,610,568 | ) | 572,418 | |||
Change in net unrealized appreciation (depreciation) | 1,566,702 | (4,891,751 | ) | |||
Net increase (decrease) in net assets resulting from operations | 8,361,533 | 3,552,030 | ||||
Distributions to Shareholders | ||||||
From earnings: | ||||||
Investor Class | (3,026,992 | ) | (3,621,683 | ) | ||
I Class | (6,172,501 | ) | (3,697,648 | ) | ||
Y Class | (312,923 | ) | (34,132 | ) | ||
A Class | (368,895 | ) | (309,010 | ) | ||
C Class | (381,551 | ) | (338,648 | ) | ||
R Class | (846 | ) | (207 | ) | ||
R6 Class | (57,924 | ) | (14,478 | ) | ||
Decrease in net assets from distributions | (10,321,632 | ) | (8,015,806 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (2,446,114 | ) | 16,638,755 | |||
Net increase (decrease) in net assets | (4,406,213 | ) | 12,174,979 | |||
Net Assets | ||||||
Beginning of period | 289,301,571 | 277,126,592 | ||||
End of period | $ | 284,895,358 | $ | 289,301,571 |
See Notes to Financial Statements.
30
Notes to Financial Statements |
OCTOBER 31, 2019
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.
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.
Hybrid securities are valued at the evaluated mean as provided by independent pricing services or at the mean of the most recent bid and asked prices as provided by investment dealers. Preferred stocks and convertible preferred stocks with perpetual maturities are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
31
Open-end management investment companies are valued at the reported net asset value per share. Exchange-traded futures contracts are valued at the settlement price as provided by the appropriate exchange. Swap agreements are valued at an evaluated mean as provided by independent pricing services or independent brokers. 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.
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. 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. 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
32
losses related to securities sold short are a component of net realized gain (loss) on securities sold short transactions and change in net unrealized appreciation (depreciation) on securities sold short, respectively.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover certain types of 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, Good Hill Partners LP, Marathon Asset Management, LP and Timbercreek Investment Management (U.S.) LLC. Effective December 3, 2018, Marathon Asset Management, LP was added as a subadvisor to the fund. Effective January 15, 2019, BCSF Advisors, LP was removed 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. During the period ended October 31, 2019, the investment advisor agreed to waive 0.11% of the fund's management fee. The investment advisor expects this waiver to to continue until July 31, 2020 and cannot
33
terminate it without the approval of the Board of Directors. Effective August 1, 2019, the investment advisor decreased the annual management fee by 0.30%.
The annual management fee and the effective annual management fee before and after waiver for each class for the period ended October 31, 2019 are as follows:
Annual Management Fee* | Effective Annual Management Fee | ||
Before Waiver | After Waiver | ||
Investor Class | 1.70% | 1.92% | 1.81% |
I Class | 1.50% | 1.72% | 1.61% |
Y Class | 1.35% | 1.57% | 1.46% |
A Class | 1.70% | 1.92% | 1.81% |
C Class | 1.70% | 1.92% | 1.81% |
R Class | 1.70% | 1.92% | 1.81% |
R6 Class | 1.35% | 1.57% | 1.46% |
*Prior to August 1, 2019, the annual management fee was 2.00% for the Investor Class, A Class, C Class and R Class, 1.80% for the I Class and 1.65% 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, 2019 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, 2019 totaled $298,750,579, of which $5,606,539 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, 2019 totaled $318,542,192, of which $6,929,896 represented U.S. Treasury and Government Agency obligations.
34
5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2019 | Year ended October 31, 2018 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 100,000,000 | 90,000,000 | ||||||||
Sold | 6,138,617 | $ | 59,164,040 | 7,410,245 | $ | 72,554,413 | ||||
Issued in reinvestment of distributions | 317,039 | 3,016,584 | 368,063 | 3,591,393 | ||||||
Redeemed | (14,626,399 | ) | (141,483,457 | ) | (7,607,664 | ) | (74,518,593 | ) | ||
(8,170,743 | ) | (79,302,833 | ) | 170,644 | 1,627,213 | |||||
I Class/Shares Authorized | 160,000,000 | 90,000,000 | ||||||||
Sold | 18,036,004 | 174,400,734 | 7,580,804 | 74,290,441 | ||||||
Issued in reinvestment of distributions | 645,406 | 6,172,406 | 378,902 | 3,697,648 | ||||||
Redeemed | (11,413,366 | ) | (109,901,184 | ) | (6,229,732 | ) | (61,011,365 | ) | ||
7,268,044 | 70,671,956 | 1,729,974 | 16,976,724 | |||||||
Y Class/Shares Authorized | 30,000,000 | 70,000,000 | ||||||||
Sold | 971,992 | 9,383,347 | 408,264 | 3,998,407 | ||||||
Issued in reinvestment of distributions | 32,680 | 312,923 | 3,489 | 34,132 | ||||||
Redeemed | (42,754 | ) | (412,308 | ) | (6,974 | ) | (68,229 | ) | ||
961,918 | 9,283,962 | 404,779 | 3,964,310 | |||||||
A Class/Shares Authorized | 30,000,000 | 25,000,000 | ||||||||
Sold | 536,366 | 5,139,494 | 666,452 | 6,516,756 | ||||||
Issued in reinvestment of distributions | 38,515 | 367,286 | 31,507 | 307,419 | ||||||
Redeemed | (801,635 | ) | (7,700,149 | ) | (834,537 | ) | (8,159,603 | ) | ||
(226,754 | ) | (2,193,369 | ) | (136,578 | ) | (1,335,428 | ) | |||
C Class/Shares Authorized | 30,000,000 | 25,000,000 | ||||||||
Sold | 235,654 | 2,245,061 | 523,348 | 5,095,186 | ||||||
Issued in reinvestment of distributions | 40,042 | 380,350 | 34,274 | 332,884 | ||||||
Redeemed | (380,040 | ) | (3,642,749 | ) | (800,606 | ) | (7,785,689 | ) | ||
(104,344 | ) | (1,017,338 | ) | (242,984 | ) | (2,357,619 | ) | |||
R Class/Shares Authorized | 20,000,000 | 10,000,000 | ||||||||
Sold | 5,763 | 55,478 | 1,258 | 12,352 | ||||||
Issued in reinvestment of distributions | 89 | 846 | 21 | 207 | ||||||
Redeemed | (2,508 | ) | (24,320 | ) | (81,253 | ) | (793,862 | ) | ||
3,344 | 32,004 | (79,974 | ) | (781,303 | ) | |||||
R6 Class/Shares Authorized | 20,000,000 | 20,000,000 | ||||||||
Sold | 9,983 | 96,528 | 154,428 | 1,515,468 | ||||||
Issued in reinvestment of distributions | 6,062 | 57,924 | 1,479 | 14,478 | ||||||
Redeemed | (7,728 | ) | (74,948 | ) | (304,706 | ) | (2,985,088 | ) | ||
8,317 | 79,504 | (148,799 | ) | (1,455,142 | ) | |||||
Net increase (decrease) | (260,218 | ) | $ | (2,446,114 | ) | 1,697,062 | $ | 16,638,755 |
35
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 | $ | 44,748,515 | $ | 9,081,570 | — | |||
Asset-Backed Securities | — | 44,994,387 | — | |||||
Corporate Bonds | — | 39,626,895 | — | |||||
Collateralized Loan Obligations | — | 34,104,621 | — | |||||
Bank Loan Obligations | — | 33,796,447 | — | |||||
Commercial Mortgage-Backed Securities | — | 28,216,288 | — | |||||
Collateralized Mortgage Obligations | — | 11,520,680 | — | |||||
Exchange-Traded Funds | 8,530,314 | — | — | |||||
Preferred Stocks | 7,040,864 | — | — | |||||
Convertible Bonds | — | 34,313 | — | |||||
Temporary Cash Investments | 30,682,121 | — | — | |||||
$ | 91,001,814 | $ | 201,375,201 | — | ||||
Other Financial Instruments | ||||||||
Futures Contracts | $ | 258,670 | $ | 239,244 | — | |||
Liabilities | ||||||||
Securities Sold Short | ||||||||
Corporate Bonds Sold Short | — | $ | 6,555,855 | — | ||||
Exchange-Traded Funds Sold Short | $ | 2,064,558 | — | — | ||||
Convertible Bonds Sold Short | — | 1,852,310 | — | |||||
Common Stocks Sold Short | 725,436 | — | — | |||||
$ | 2,789,994 | $ | 8,408,165 | — | ||||
Other Financial Instruments | ||||||||
Futures Contracts | $ | 400,198 | — | — | ||||
Swap Agreements | — | $ | 2,166,284 | — | ||||
Forward Foreign Currency Exchange Contracts | — | 53,175 | — | |||||
$ | 400,198 | $ | 2,219,459 | — |
36
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 $21,810,280.
Equity Price Risk — The fund is subject to equity price risk in the normal course of pursuing its investment objectives. A fund may enter into futures contracts based on an equity index in order to manage its exposure to changes in market conditions. A fund may purchase futures contracts to gain exposure to increases in market value or sell futures contracts to protect against a decline in market value. Upon entering into a futures contract, a fund is required to deposit either cash or securities in an amount equal to a certain percentage of the contract value (initial margin). Subsequent payments (variation margin) are made or received daily, in cash, by a fund. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. A fund recognizes a realized gain or loss when the contract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of net realized gain (loss) on futures contract transactions and change in net unrealized appreciation (depreciation) on futures contracts, respectively. One of the risks of entering into futures contracts is the possibility that the change in value of the contract may not correlate with the changes in value of the underlying securities. The fund's average notional exposure to equity price risk derivative instruments held during the period was $271,750 futures contracts purchased and $179,679 futures contracts sold.
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 $5,044,226.
37
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 $8,296,808 futures contracts sold.
Value of Derivative Instruments as of October 31, 2019
Asset Derivatives | Liability Derivatives | |||||||
Type of Risk Exposure | Location on Statement of Assets and Liabilities | Value | Location on Statement of Assets and Liabilities | Value | ||||
Credit Risk | Receivable for variation margin on swap agreements* | $ | 46,349 | Payable for variation margin on swap agreements* | — | |||
Equity Price Risk | Receivable for variation margin on futures contracts* | 78,767 | Payable for variation margin on futures contracts* | — | ||||
Foreign Currency Risk | Unrealized appreciation on forward foreign currency exchange contracts | — | Unrealized depreciation on forward foreign currency exchange contracts | $ | 53,175 | |||
Interest Rate Risk | Receivable for variation margin on futures contracts* | 21,746 | Payable for variation margin on futures contracts* | 39,931 | ||||
$ | 146,862 | $ | 93,106 |
* Included in the unrealized appreciation (depreciation) on futures contracts or centrally cleared swap agreements, as applicable, as reported in the Schedule of Investments.
Effect of Derivative Instruments on the Statement of Operations for the Year Ended October 31, 2019
Net Realized Gain (Loss) | Change in Net Unrealized Appreciation (Depreciation) | |||||||
Type of Risk Exposure | Location on Statement of Operations | Value | Location on Statement of Operations | Value | ||||
Credit Risk | Net realized gain (loss) on swap agreement transactions | $ | (246,598 | ) | Change in net unrealized appreciation (depreciation) on swap agreements | $ | (777,644 | ) |
Equity Price Risk | Net realized gain (loss) on futures contract transactions | (2,845,612 | ) | Change in net unrealized appreciation (depreciation) on futures contracts | (622,285 | ) | ||
Foreign Currency Risk | Net realized gain (loss) on forward foreign currency exchange contract transactions | 287,653 | Change in net unrealized appreciation (depreciation) on forward foreign currency exchange contracts | (77,497 | ) | |||
Interest Rate Risk | Net realized gain (loss) on futures contract transactions | (693,438 | ) | Change in net unrealized appreciation (depreciation) on futures contracts | 276,402 | |||
$ | (3,497,995 | ) | $ | (1,201,024 | ) |
38
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's investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
There are certain risks involved in investing in foreign securities. These risks include those resulting from political events (such as civil unrest, national elections and imposition of exchange controls), social and economic events (such as labor strikes and rising inflation), and natural disasters. Securities of foreign issuers may be less liquid and more volatile. Investing in emerging markets or a significant portion of assets in one country or region may accentuate these risks.
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.
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, 2019 and October 31, 2018 were as follows:
2019 | 2018 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 10,321,632 | $ | 8,015,806 | ||
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.
39
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 | $ | 292,562,551 | |
Gross tax appreciation of investments | $ | 7,000,582 | |
Gross tax depreciation of investments | (7,186,118 | ) | |
Net tax appreciation (depreciation) of investments | (185,536 | ) | |
Gross tax appreciation on securities sold short | 142,367 | ||
Gross tax depreciation on securities sold short | (371,912 | ) | |
Net tax appreciation (depreciation) on derivatives and translation of assets and liabilities in foreign currencies | 20,881 | ||
Net tax appreciation (depreciation) | $ | (394,200 | ) |
Undistributed ordinary income | $ | 1,740,724 | |
Accumulated short-term capital losses | $ | (631,025 | ) |
Accumulated long-term capital losses | $ | (3,690,784 | ) |
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 swap agreements and 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.
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. The adoption of ASU 2017-08 did not materially impact the financial statements.
40
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 | |||||||||||||||||
2019 | $9.65 | 0.33 | (0.06) | 0.27 | (0.33) | — | (0.33) | $9.59 | 2.74% | 1.91% | 2.02% | 3.43% | 3.32% | 111% | $47,187 | ||
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 | |||||||||||||||||
2019 | $9.66 | 0.35 | (0.07) | 0.28 | (0.35) | — | (0.35) | $9.59 | 2.95% | 1.71% | 1.82% | 3.63% | 3.52% | 111% | $198,266 | ||
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 | |||||||||||||||||
2019 | $9.66 | 0.37 | (0.08) | 0.29 | (0.36) | — | (0.36) | $9.59 | 3.10% | 1.56% | 1.67% | 3.78% | 3.67% | 111% | $13,114 | ||
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 | |||||||||||||||||
2019 | $9.65 | 0.30 | (0.06) | 0.24 | (0.31) | — | (0.31) | $9.58 | 2.38% | 2.16% | 2.27% | 3.18% | 3.07% | 111% | $9,737 | ||
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 | |||||||||||||||||
2019 | $9.60 | 0.23 | (0.07) | 0.16 | (0.23) | — | (0.23) | $9.53 | 1.73% | 2.91% | 3.02% | 2.43% | 2.32% | 111% | $14,981 | ||
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 | |||||||||||||||||
2019 | $9.63 | 0.29 | (0.07) | 0.22 | (0.28) | — | (0.28) | $9.57 | 2.23% | 2.41% | 2.52% | 2.93% | 2.82% | 111% | $40 | ||
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 | |||||||||||||||||
2019 | $9.66 | 0.36 | (0.07) | 0.29 | (0.36) | — | (0.36) | $9.59 | 2.99% | 1.56% | 1.67% | 3.78% | 3.67% | 111% | $1,571 | ||
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 funds constituting the American Century Capital Portfolios, Inc. (the "Fund"), as of October 31, 2019, 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 years ended October 31, 2019, 2018, 2017, 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, 2019, 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 years ended October 31, 2019, 2018, 2017, 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, 2019, by correspondence with the custodian, brokers, and agent banks; 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 16, 2019
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of 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 | 66 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) |
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 66 | None |
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 66 | None |
Rajesh K. Gupta (1960) | Director | Since 2019 | Partner Emeritus, SeaCrest Investment Management and SeaCrest Wealth Management (2019 to Present); Chief Executive Officer and Chief Investment Officer, SeaCrest Investment Management (2006 to 2019); Chief Executive Officer and Chief Investment Officer, SeaCrest Wealth Management (2008 to 2019) | 66 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
Lynn Jenkins (1963) | Director | Since 2019 | United States Representative, U.S. House of Representatives (2009 to 2018) | 66 | MGP Ingredients, Inc. |
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 66 | None |
John R. Whitten (1946) | Director | Since 2008 | Retired | 66 | Onto Innovation Inc.; Rudolph Technologies, Inc. (2006 to 2019) |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 81 | None |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 125 | 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 |
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present); Chief Operating Officer, ACC (2012-2015). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries |
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Investment Operations and Investment Accounting, ACS (2000 to present) |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS |
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 26, 2019, 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; Good Hill Partners LP; Marathon Asset Management, L.P.; 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 serve as a subadvisor for 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 continual basis and the information received was supplemental to the extensive information that the Board and its committees receive and consider throughout the year.
In connection with its consideration of the renewal of the management agreement 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; |
• | 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; |
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• | 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 three 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 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
49
investment performance information for the Fund, together with comparative information for appropriate benchmarks and/or peer groups of similarly-managed funds, over different time horizons. The Directors also review investment performance information during the management agreement renewal process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one- and three-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 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, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. The Board found the services provided by the Advisor to the Fund under the management agreement to be competitive and of high quality.
Costs of Services and Profitability. The Advisor provides detailed information concerning its cost of providing various services to the Fund, its profitability in managing the Fund (pre- and post-distribution), its overall profitability, and its financial condition. The Directors have reviewed with the Advisor the methodology used to prepare this financial information. This information is considered in evaluating the Advisor’s financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. The Board concluded that the Advisor’s profits were reasonable in light of the services provided to the Fund. 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 attributable to short sales, taxes, interest, extraordinary expenses, fees and expenses of the Fund’s independent Directors (including their independent legal counsel), and expenses incurred in connection with the provision of shareholder services and distribution services under a plan adopted pursuant to Rule 12b-1 under the Investment Company Act. The Board specifically noted that the subadvisory fee paid to each Subadvisor under the Subadvisory Agreements, as well as
50
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 both 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 0.30%, and 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 1.70% to 1.59%) for at least one year, beginning August 1, 2019. 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 such 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
51
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 American Century Investments’ website at americancentury.com/proxy and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on americancentury.com/proxy. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q or as an exhibit to its reports on Form N-PORT. The fund’s Forms N-Q and Form N-PORT reports are available on the SEC’s website at sec.gov. 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, 2019.
For corporate taxpayers, the fund hereby designates $1,015,720, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2019 as qualified for the corporate dividends received deduction.
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Notes |
55
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. | ||
©2019 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90982 1912 |
![acihorizblkd33.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/acihorizblkd33.jpg)
Annual Report | |
October 31, 2019 | |
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) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | |
Performance | |
Portfolio Commentary | |
Fund Characteristics | |
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 |
![jthomasrev0514a01.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/jthomasrev0514a01.jpg)
Dear Investor:
Thank you for reviewing this annual report for the 12 months ended October 31, 2019. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment and market insights, please visit americancentury.com.
Stocks, Bonds Delivered Solid Gains
U.S. and global stocks, bonds and real estate investments generally delivered strong gains for the 12-month period. Stocks and other riskier assets rebounded from a late-2018 sell-off to post robust returns for the 12 months overall. Global bonds benefited from safe-haven buying early in the period and a declining interest rate environment overall.
Fed’s Policy Pivot Improved Investor Sentiment
In the final months of 2018, mounting concerns about slowing global economic and earnings growth, tariffs and Federal Reserve (Fed) policy soured investor sentiment, driving global stocks lower. After raising rates in September 2018, the Fed hiked again in December and delivered a surprisingly bullish 2019 rate-hike outlook, which intensified the sell-off among stocks and other riskier assets. Meanwhile, the risk-off climate sparked a flight to quality, which drove U.S. and other government bond yields lower and benefited global bond returns.
A key policy pivot from the Fed helped improve equity investor sentiment beginning in early 2019. The central bank abruptly ended its rate-hike campaign and adopted a dovish tone amid weaker global growth and inflation. Additionally, investors’ worst-case fears about trade and corporate earnings generally eased, which also aided stocks and other riskier assets. At the same time, government bond yields continued to fall on moderating global growth data, muted inflation and accommodative central bank policy in the U.S., Europe and Japan. By July, concerns about global economic risks prompted the Fed to cut short-term interest rates for the first time in 10 years. The Fed followed up with additional rate cuts in September and October. This backdrop supported continued gains for fixed-income and other interest rate-sensitive assets.
Looking ahead, we expect volatility to remain a formidable factor as investors react to global growth and trade trends, central bank policy and geopolitical developments. We believe this scenario underscores the importance of using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a16.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/image48a16.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
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Performance |
Total Returns as of October 31, 2019 | |||||
Average Annual Returns | |||||
Ticker Symbol | 1 year | 5 years | Since Inception | Inception Date | |
Investor Class | ARYVX | 28.60% | 7.11% | 7.81% | 4/29/11 |
FTSE EPRA Nareit Global Index | — | 20.59% | 6.05% | 6.43% | — |
MSCI ACWI Index | — | 12.59% | 7.08% | 7.06% | — |
I Class | ARYNX | 28.84% | 7.31% | 8.03% | 4/29/11 |
Y Class | ARYYX | 29.01% | — | 12.76% | 4/10/17 |
A Class | ARYMX | 4/29/11 | |||
No sales charge | 28.21% | 6.82% | 7.54% | ||
With sales charge | 20.79% | 5.57% | 6.79% | ||
C Class | ARYTX | 27.28% | 6.03% | 6.73% | 4/29/11 |
R Class | ARYWX | 27.90% | 6.55% | 7.27% | 4/29/11 |
R5 Class | ARYGX | 28.73% | — | 12.57% | 4/10/17 |
R6 Class | ARYDX | 28.92% | 7.45% | 8.07% | 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.
3
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. |
![chart-36010c5221c25c94984a07.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/chart-36010c5221c25c94984a07.jpg)
Value on October 31, 2019 | |
Investor Class — $18,971 | |
FTSE EPRA Nareit Global Index — $16,994 | |
MSCI ACWI Index — $17,877 | |
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 |
1.11% | 0.91% | 0.76% | 1.36% | 2.11% | 1.61% | 0.91% | 0.76% |
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
Global Real Estate returned 28.60%* for the fiscal year ended October 31, 2019. By comparison, the FTSE EPRA Nareit Global Index (the fund’s benchmark) returned 20.59%, while the MSCI ACWI Index (a broad global stock market measure) returned 12.59%.
Global Real Estate Market Overview
Global real estate stocks rose for the 12-month period, while also outperforming the broader global equity market, as investors sought defensive investments in a volatile environment. Lower global bond yields also provided a tailwind for real estate investments, while many U.S. real estate companies provided steady or slightly accelerating earnings growth outlooks. Industrial was the strongest-performing sector of the index, as the build-out of e-commerce distribution networks fueled demand for infill industrial properties. Positive fundamentals also supported health care real estate, which also provided investors a defensive haven from market volatility. Lodging/resorts was the weakest-performing real estate sector, as rising operating costs and tepid top-line growth pressured lodging profit margins. The retail sector also lagged as e-commerce competition and retailer bankruptcies led to store closures and rising vacancy rates, especially for shopping malls.
The fund’s relative outperformance was driven by both stock selection and allocation decisions. Stock selection and an underweight in retail were particularly beneficial, as the fund avoided underperforming mall-based retailers that were notable index detractors. Stock selection and an overweight in industrial also aided relative performance. No individual sectors detracted from relative performance. From a geographic standpoint, fund holdings in the U.S. were strong relative contributors, while investments in Sweden detracted moderately.
U.S. Holdings Among Key Contributors
U.S.-based residential real estate investment trust (REIT) Sun Communities, one of the nation’s largest owners of manufactured housing communities, was a leading contributor to relative performance. The stock rose as the company reported solid financial results, supported by excellent supply/demand characteristics and a strong balance sheet. Affordability issues in some markets have also driven demand for lower cost housing alternatives, such as the manufactured home communities.
Americold Realty Trust, a new holding added during the year, was another top contributor. This U.S.-based industrial REIT invests in temperature-controlled supply chain facilities. In our view, the institutionalization of food distribution to grocers is improving the company’s ability to drive pricing power with high incremental returns. Americold is also expanding through strategic acquisitions as it capitalizes on industry consolidation.
Charter Hall Group, another standout contributor, is an Australia-based commercial real estate manager and property owner with investments in various asset classes. The stock rose as the company continued to report strong earnings, fueled by growth in assets under management and robust real estate operating performance. In our view, it remains positioned for robust long-term operating performance due to its expanding property portfolio.
*All fund returns referenced in this commentary are for Investor Class shares. Fund returns would have been lower if a portion of the fees had not been waived. Performance for other share classes will vary due to differences in fee structure; when Investor Class performance exceeds that of the fund’s benchmark, other share classes may not. See page 3 for returns for all share classes.
5
Hong Kong-Based Property Developer Was a Top Detractor
Hong Kong-based real estate developer New World Development was a prominent detractor. The stock declined as political unrest and rioting in Hong Kong, combined with the U.S.-China trade war, sent the Hong Kong economy into a recession. We eliminated the position soon after the violence in Hong Kong escalated.
France-based office REIT Gecina also detracted. The stock lagged the broader real estate index as reduced European economic forecasts dampened expectations for office space demand in Paris. Elevated supply in the market is also putting pressure on the company’s ability to quickly lease up its developments. We continue to own the stock as we believe it offers an attractive valuation and above-average earnings growth potential because of the company’s well-located development pipeline in Paris.
CIFI Holdings Group, another detractor, is a residential real estate developer in mainland China. China-based property developers were challenged by tighter government policies and an economic slowdown worsened by the U.S.-China trade war. We eliminated the position as we believe margin pressures could weaken the company’s future earnings growth.
Outlook
We continue to see evidence of solid fundamentals for real estate, including positive supply/demand balances in many asset markets, as well as continued strong capital spending by technology companies investing in e-commerce distribution, towers and data centers. At the same time, we have remained mindful of investing in companies with solid balance sheet fundamentals and strong earnings growth prospects.
Industrial remains our largest sector overweight, as we believe the build-out of e-commerce distribution networks, especially to facilitate last-mile delivery, will drive sector investment. The fund also remains overweight in residential and office, and we added to our residential weighting as we believe supply/demand imbalances in some key residential markets have created opportunities.
We reduced exposure to retail, another sector underweight, as global economic weakness, trade conflicts and competition from online retailers have challenged the sector. Within retail, we have focused on net-lease REITs that acquire single-tenant, service-oriented properties such as car washes and fitness centers. We also reduced exposure to the diversified sector, moving to an underweight, as we believe excess supply could pressure near-term earnings for U.S. data center REITs, in particular.
From a regional standpoint, stock selection led to a moderate overweight in North America, as we added to our U.S. exposure. Stock selection also led to a reduced position in Europe, which ended the period as a regional underweight. The portfolio is underweight in Asia, although we added to our Japan weighting and ended the period modestly overweight in the country.
6
Fund Characteristics |
OCTOBER 31, 2019 | |
Top Ten Holdings | % of net assets |
Prologis, Inc. | 4.0% |
Healthpeak Properties, Inc. | 3.7% |
Americold Realty Trust | 3.3% |
Sun Communities, Inc. | 3.3% |
Alexandria Real Estate Equities, Inc. | 3.0% |
Camden Property Trust | 3.0% |
Rexford Industrial Realty, Inc. | 2.9% |
Equity Residential | 2.8% |
Invitation Homes, Inc. | 2.5% |
Vonovia SE | 2.4% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 54.3% |
Foreign Common Stocks | 43.7% |
Rights | —* |
Total Equity Exposure | 98.0% |
Temporary Cash Investments | 4.6% |
Temporary Cash Investments - Securities Lending Collateral | 0.4% |
Other Assets and Liabilities | (3.0)% |
*Category is less than 0.05% of total net assets. | |
Investments by Country | % of net assets |
United States | 54.3% |
Japan | 10.6% |
United Kingdom | 4.3% |
China | 4.1% |
Germany | 3.9% |
Australia | 3.9% |
Hong Kong | 3.3% |
Canada | 2.8% |
Singapore | 2.4% |
Netherlands | 2.2% |
Other Countries | 6.2% |
Cash and Equivalents* | 2.0% |
*Includes temporary cash investments, temporary cash investments - securities lending collateral 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, 2019 to October 31, 2019.
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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period(1) 5/1/19 - 10/31/19 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $1,127.90 | $5.95 | 1.11% |
I Class | $1,000 | $1,128.70 | $4.88 | 0.91% |
Y Class | $1,000 | $1,129.60 | $4.08 | 0.76% |
A Class | $1,000 | $1,126.30 | $7.29 | 1.36% |
C Class | $1,000 | $1,121.60 | $11.28 | 2.11% |
R Class | $1,000 | $1,125.50 | $8.63 | 1.61% |
R5 Class | $1,000 | $1,128.70 | $4.88 | 0.91% |
R6 Class | $1,000 | $1,129.70 | $4.08 | 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, 2019
Shares | Value | |||
COMMON STOCKS — 98.0% | ||||
Australia — 3.9% | ||||
Charter Hall Group | 134,101 | $ | 1,042,819 | |
Goodman Group | 163,356 | 1,617,909 | ||
NEXTDC Ltd.(1)(2) | 84,574 | 372,609 | ||
3,033,337 | ||||
Belgium — 1.0% | ||||
Shurgard Self Storage SA | 10,757 | 364,117 | ||
VGP NV | 4,238 | 395,210 | ||
759,327 | ||||
Brazil — 0.7% | ||||
Cyrela Brazil Realty SA Empreendimentos e Participacoes | 78,000 | 525,316 | ||
Canada — 2.8% | ||||
Allied Properties Real Estate Investment Trust | 18,005 | 732,449 | ||
Granite Real Estate Investment Trust | 10,170 | 503,597 | ||
Northview Apartment Real Estate Investment Trust | 25,516 | 559,101 | ||
Summit Industrial Income REIT(1) | 43,722 | 424,904 | ||
2,220,051 | ||||
China — 4.1% | ||||
China Resources Land Ltd. | 76,000 | 323,730 | ||
GDS Holdings Ltd. ADR(1) | 24,856 | 1,035,998 | ||
Longfor Group Holdings Ltd. | 199,500 | 825,808 | ||
Shimao Property Holdings Ltd. | 181,500 | 608,993 | ||
Times China Holdings Ltd. | 258,000 | 456,215 | ||
3,250,744 | ||||
France — 1.0% | ||||
Gecina SA | 4,466 | 766,544 | ||
Germany — 3.9% | ||||
Aroundtown SA | 57,669 | 486,624 | ||
LEG Immobilien AG | 5,722 | 657,250 | ||
Vonovia SE | 35,816 | 1,907,448 | ||
3,051,322 | ||||
Hong Kong — 3.3% | ||||
ESR Cayman Ltd.(1) | 11,800 | 25,554 | ||
Link REIT | 134,500 | 1,463,427 | ||
Sun Hung Kai Properties Ltd. | 76,000 | 1,142,596 | ||
2,631,577 | ||||
India — 0.3% | ||||
Embassy Office Parks REIT | 38,000 | 221,202 | ||
Japan — 10.6% | ||||
Advance Residence Investment Corp. | 216 | 717,260 | ||
Comforia Residential REIT, Inc. | 219 | 713,761 | ||
GLP J-Reit | 671 | 875,549 | ||
Invesco Office J-Reit, Inc. | 6,223 | 1,256,505 |
10
Shares | Value | |||
Mitsubishi Estate Co. Ltd. | 84,100 | $ | 1,629,538 | |
Mitsui Fudosan Co. Ltd. | 56,100 | 1,434,164 | ||
Orix JREIT, Inc. | 755 | 1,706,763 | ||
8,333,540 | ||||
Mexico — 0.7% | ||||
Corp. Inmobiliaria Vesta SAB de CV | 328,428 | 553,000 | ||
Netherlands — 2.2% | ||||
InterXion Holding NV(1) | 19,597 | 1,728,847 | ||
Philippines — 0.8% | ||||
Ayala Land, Inc. | 694,000 | 662,917 | ||
Singapore — 2.4% | ||||
CapitaLand Commercial Trust | 252,100 | 379,379 | ||
CapitaLand Ltd. | 250,200 | 658,390 | ||
Mapletree Commercial Trust | 492,800 | 843,549 | ||
1,881,318 | ||||
Spain — 0.6% | ||||
Inmobiliaria Colonial Socimi SA | 39,425 | 509,472 | ||
Sweden — 1.1% | ||||
Fabege AB | 58,760 | 877,099 | ||
United Kingdom — 4.3% | ||||
Safestore Holdings plc | 91,643 | 831,887 | ||
Segro plc | 151,262 | 1,655,108 | ||
UNITE Group plc (The) | 60,774 | 885,877 | ||
3,372,872 | ||||
United States — 54.3% | ||||
Acadia Realty Trust | 2,332 | 65,249 | ||
Agree Realty Corp. | 22,340 | 1,759,722 | ||
Alexandria Real Estate Equities, Inc. | 15,038 | 2,387,283 | ||
American Tower Corp. | 3,041 | 663,181 | ||
Americold Realty Trust | 64,763 | 2,596,349 | ||
Brixmor Property Group, Inc. | 40,002 | 880,844 | ||
Camden Property Trust | 20,585 | 2,354,306 | ||
Cousins Properties, Inc. | 4,891 | 196,276 | ||
CyrusOne, Inc. | 5,266 | 375,360 | ||
Equinix, Inc. | 2,609 | 1,478,729 | ||
Equity Residential | 24,997 | 2,216,234 | ||
Essential Properties Realty Trust, Inc. | 36,333 | 932,305 | ||
Extra Space Storage, Inc. | 3,557 | 399,344 | ||
Gaming and Leisure Properties, Inc. | 25,614 | 1,033,781 | ||
Healthpeak Properties, Inc. | 76,888 | 2,892,527 | ||
Hudson Pacific Properties, Inc. | 31,748 | 1,140,388 | ||
Invitation Homes, Inc. | 63,670 | 1,960,399 | ||
Kilroy Realty Corp. | 17,353 | 1,456,437 | ||
Prologis, Inc. | 35,522 | 3,117,411 | ||
Rexford Industrial Realty, Inc. | 46,715 | 2,246,524 | ||
Ryman Hospitality Properties, Inc. | 9,046 | 761,402 | ||
SBA Communications Corp. | 3,256 | 783,556 |
11
Shares | Value | |||
Spirit Realty Capital, Inc. | 28,038 | $ | 1,397,414 | |
STORE Capital Corp. | 43,741 | 1,771,511 | ||
Sun Communities, Inc. | 15,772 | 2,565,316 | ||
UDR, Inc. | 35,543 | 1,786,036 | ||
VICI Properties, Inc. | 67,799 | 1,596,666 | ||
Welltower, Inc. | 19,868 | 1,801,829 | ||
42,616,379 | ||||
TOTAL COMMON STOCKS (Cost $60,864,339) | 76,994,864 | |||
RIGHTS† | ||||
Singapore† | ||||
Mapletree Commerical Trust(1) (Cost $—) | 18,332 | 1,213 | ||
TEMPORARY CASH INVESTMENTS — 4.6% | ||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.625% - 2.25%, 3/31/21 - 5/15/26, valued at $2,733,915), in a joint trading account at 1.50%, dated 10/31/19, due 11/1/19 (Delivery value $2,677,080) | 2,676,968 | |||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 1.625%, 9/30/26, valued at $915,825), at 0.65%, dated 10/31/19, due 11/1/19 (Delivery value $893,016) | 893,000 | |||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 1,665 | 1,665 | ||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $3,571,633) | 3,571,633 | |||
TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL(3) — 0.4% | ||||
State Street Navigator Securities Lending Government Money Market Portfolio (Cost $339,734) | 339,734 | 339,734 | ||
TOTAL INVESTMENT SECURITIES — 103.0% (Cost $64,775,706) | 80,907,444 | |||
OTHER ASSETS AND LIABILITIES — (3.0)% | (2,353,169 | ) | ||
TOTAL NET ASSETS — 100.0% | $ | 78,554,275 |
SECTOR ALLOCATION | ||
(as a % of net assets) | ||
Diversified | 22.6 | % |
Residential | 21.5 | % |
Industrial | 17.9 | % |
Office | 12.5 | % |
Retail | 10.6 | % |
Health Care | 6.0 | % |
Specialty | 3.3 | % |
Self Storage | 2.1 | % |
Lodging/Resorts | 1.0 | % |
Data Centers | 0.5 | % |
Cash and Equivalents* | 2.0 | % |
*Includes temporary cash investments, temporary cash investments - securities lending collateral and other assets and liabilities.
12
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
† Category is less than 0.05% of total net assets.
(1) | Non-income producing. |
(2) | Security, or a portion thereof, is on loan. At the period end, the aggregate value of securities on loan was $365,155. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. |
(3) | Investment of cash collateral from securities on loan. At the period end, the aggregate market value of the collateral held by the fund was $385,402, which includes securities collateral of $45,668. |
See Notes to Financial Statements.
13
Statement of Assets and Liabilities |
OCTOBER 31, 2019 | |||
Assets | |||
Investment securities, at value (cost of $64,435,972) — including $365,155 of securities on loan | $ | 80,567,710 | |
Investment made with cash collateral received for securities on loan, at value (cost of $339,734) | 339,734 | ||
Total investment securities, at value (cost of $64,775,706) | 80,907,444 | ||
Foreign currency holdings, at value (cost of $11) | 11 | ||
Receivable for investments sold | 1,281,113 | ||
Receivable for capital shares sold | 83,093 | ||
Dividends and interest receivable | 120,048 | ||
Securities lending receivable | 180 | ||
Other assets | 314 | ||
82,392,203 | |||
Liabilities | |||
Payable for collateral received for securities on loan | 339,734 | ||
Payable for investments purchased | 3,378,124 | ||
Payable for capital shares redeemed | 59,039 | ||
Accrued management fees | 58,641 | ||
Distribution and service fees payable | 2,390 | ||
3,837,928 | |||
Net Assets | $ | 78,554,275 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 61,963,463 | |
Distributable earnings | 16,590,812 | ||
$ | 78,554,275 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $35,303,343 | 2,535,145 | $13.93 | |||
I Class, $0.01 Par Value | $20,173,235 | 1,447,491 | $13.94 | |||
Y Class, $0.01 Par Value | $16,809,683 | 1,204,861 | $13.95 | |||
A Class, $0.01 Par Value | $1,771,114 | 127,358 | $13.91* | |||
C Class, $0.01 Par Value | $2,206,373 | 159,398 | $13.84 | |||
R Class, $0.01 Par Value | $340,663 | 24,509 | $13.90 | |||
R5 Class, $0.01 Par Value | $6,773 | 486 | $13.94 | |||
R6 Class, $0.01 Par Value | $1,943,091 | 139,363 | $13.94 |
*Maximum offering price $14.76 (net asset value divided by 0.9425).
See Notes to Financial Statements.
14
Statement of Operations |
YEAR ENDED OCTOBER 31, 2019 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $62,199) | $ | 1,714,450 | |
Interest | 13,427 | ||
Securities lending, net | 340 | ||
1,728,217 | |||
Expenses: | |||
Management fees | 637,097 | ||
Distribution and service fees: | |||
A Class | 4,770 | ||
C Class | 22,345 | ||
R Class | 1,167 | ||
Directors' fees and expenses | 1,969 | ||
Other expenses | 3,310 | ||
670,658 | |||
Fees waived(1) | (1,742 | ) | |
668,916 | |||
Net investment income (loss) | 1,059,301 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 2,222,788 | ||
Foreign currency translation transactions | (7,302 | ) | |
2,215,486 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | 12,937,887 | ||
Translation of assets and liabilities in foreign currencies | 1,942 | ||
12,939,829 | |||
Net realized and unrealized gain (loss) | 15,155,315 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 16,214,616 |
(1) | Amount consists of $716, $498, $376, $43, $55, $8 and $46 for Investor Class, I Class, Y Class, A Class, C Class, R Class and R6 Class, respectively. |
See Notes to Financial Statements.
15
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2019 AND OCTOBER 31, 2018 | ||||||
Increase (Decrease) in Net Assets | October 31, 2019 | October 31, 2018 | ||||
Operations | ||||||
Net investment income (loss) | $ | 1,059,301 | $ | 1,305,030 | ||
Net realized gain (loss) | 2,215,486 | 3,588,062 | ||||
Change in net unrealized appreciation (depreciation) | 12,939,829 | (5,429,135 | ) | |||
Net increase (decrease) in net assets resulting from operations | 16,214,616 | (536,043 | ) | |||
Distributions to Shareholders | ||||||
From earnings: | ||||||
Investor Class | (1,322,298 | ) | (2,338,576 | ) | ||
I Class | (539,742 | ) | (245,001 | ) | ||
Y Class | (215,983 | ) | (196 | ) | ||
A Class | (68,764 | ) | (87,066 | ) | ||
C Class | (62,401 | ) | (77,272 | ) | ||
R Class | (5,647 | ) | (3,174 | ) | ||
R5 Class | (208 | ) | (190 | ) | ||
R6 Class | (58,775 | ) | (33,507 | ) | ||
Decrease in net assets from distributions | (2,273,818 | ) | (2,784,982 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (4,141,056 | ) | (11,028,014 | ) | ||
Net increase (decrease) in net assets | 9,799,742 | (14,349,039 | ) | |||
Net Assets | ||||||
Beginning of period | 68,754,533 | 83,103,572 | ||||
End of period | $ | 78,554,275 | $ | 68,754,533 |
See Notes to Financial Statements.
16
Notes to Financial Statements |
OCTOBER 31, 2019
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.
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.
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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. The fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. Securities lending income is net of fees and rebates earned by the lending agent for its services.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that 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.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover certain types of investment securities and other financial instruments. ACIM monitors, on a daily basis, the securities segregated to ensure the fund designates a sufficient amount of liquid assets, marked-to-market daily. The fund may also receive assets or be required to pledge assets at the custodian bank or with a broker for collateral requirements.
Income Tax Status — It is the fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The fund files U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
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Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income and net realized gains, if any, are generally declared and paid annually. The fund may elect to treat a portion of its payment to a redeeming shareholder, which represents the pro rata share of undistributed net investment income and net realized gains, as a distribution for federal income tax purposes (tax equalization).
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
Securities Lending — Securities are lent to qualified financial institutions and brokers. State Street Bank & Trust Co. serves as securities lending agent to the fund pursuant to a Securities Lending Agreement. The lending of securities exposes the fund to risks such as: the borrowers may fail to return the loaned securities, the borrowers may not be able to provide additional collateral, the fund may experience delays in recovery of the loaned securities or delays in access to collateral, or the fund may experience losses related to the investment collateral. To minimize certain risks, loan counterparties pledge collateral in the form of cash and/or securities. The lending agent has agreed to indemnify the fund in the case of default of any securities borrowed. Cash collateral received is invested in the State Street Navigator Securities Lending Government Money Market Portfolio, a money market mutual fund registered under the 1940 Act. The loans may also be secured by U.S. government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. By lending securities, the fund seeks to increase its net investment income through the receipt of interest and fees. Such income is reflected separately within the Statement of Operations. The value of loaned securities and related collateral outstanding at period end, if any, are shown on a gross basis within the Schedule of Investments and Statement of Assets and Liabilities.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged, and the remaining contractual maturity of those transactions as of October 31, 2019.
Remaining Contractual Maturity of Agreements | ||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | ||||||||
Securities Lending Transactions(1) | ||||||||||||
Common Stocks | $ | 339,734 | — | — | — | $ | 339,734 | |||||
Gross amount of recognized liabilities for securities lending transactions | $ | 339,734 |
(1) | Amount represents the payable for cash collateral received for securities on loan. This will generally be in the Overnight and Continuous column as the securities are typically callable on demand. |
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc. (ACIS), and the corporation’s transfer agent, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
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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. Effective August 1, 2019, the investment advisor agreed to waive 0.01% of the fund's management fee. The investment advisor expects this waiver to continue until July 31, 2020 and cannot terminate it prior to such date without the approval of the Board of Directors. The impact of this waiver to the ratio of operating expenses to average net assets was less than 0.005% for each class for the period ended October 31, 2019.
The annual management fee for each class is as follows:
Investor Class | I Class | Y Class | A Class | C Class | R Class | R5 Class | R6 Class |
1.11% | 0.91% | 0.76% | 1.11% | 1.11% | 1.11% | 0.91% | 0.76% |
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, 2019 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 sales were $70,398 and there were no interfund purchases. The effect of interfund transactions on the Statement of Operations was $(3,073) 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, 2019 were $75,235,915 and $80,859,174, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2019 | Year ended October 31, 2018 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||
Sold | 883,706 | $ | 11,517,118 | 905,146 | $ | 10,647,692 | ||||
Issued in reinvestment of distributions | 119,326 | 1,310,194 | 198,026 | 2,326,804 | ||||||
Redeemed | (2,403,454 | ) | (28,801,898 | ) | (3,000,049 | ) | (34,915,271 | ) | ||
(1,400,422 | ) | (15,974,586 | ) | (1,896,877 | ) | (21,940,775 | ) | |||
I Class/Shares Authorized | 40,000,000 | 20,000,000 | ||||||||
Sold | 877,304 | 10,955,838 | 1,019,982 | 11,546,605 | ||||||
Issued in reinvestment of distributions | 49,202 | 539,742 | 19,220 | 225,640 | ||||||
Redeemed | (741,554 | ) | (8,837,423 | ) | (350,846 | ) | (4,104,589 | ) | ||
184,952 | 2,658,157 | 688,356 | 7,667,656 | |||||||
Y Class/Shares Authorized | 30,000,000 | 70,000,000 | ||||||||
Sold | 847,286 | 10,531,542 | 390,675 | 4,600,718 | ||||||
Issued in reinvestment of distributions | 19,267 | 211,357 | 17 | 196 | ||||||
Redeemed | (47,288 | ) | (605,519 | ) | (5,547 | ) | (64,296 | ) | ||
819,265 | 10,137,380 | 385,145 | 4,536,618 | |||||||
A Class/Shares Authorized | 20,000,000 | 15,000,000 | ||||||||
Sold | 9,492 | 118,974 | 36,611 | 433,779 | ||||||
Issued in reinvestment of distributions | 5,915 | 65,004 | 7,096 | 83,451 | ||||||
Redeemed | (66,270 | ) | (826,654 | ) | (110,015 | ) | (1,303,969 | ) | ||
(50,863 | ) | (642,676 | ) | (66,308 | ) | (786,739 | ) | |||
C Class/Shares Authorized | 20,000,000 | 10,000,000 | ||||||||
Sold | 6,706 | 82,709 | 6,177 | 71,778 | ||||||
Issued in reinvestment of distributions | 4,924 | 54,217 | 5,756 | 67,809 | ||||||
Redeemed | (63,254 | ) | (772,620 | ) | (108,373 | ) | (1,268,217 | ) | ||
(51,624 | ) | (635,694 | ) | (96,440 | ) | (1,128,630 | ) | |||
R Class/Shares Authorized | 20,000,000 | 10,000,000 | ||||||||
Sold | 14,117 | 176,646 | 13,285 | 156,407 | ||||||
Issued in reinvestment of distributions | 510 | 5,618 | 269 | 3,174 | ||||||
Redeemed | (3,451 | ) | (43,337 | ) | (10,557 | ) | (124,932 | ) | ||
11,176 | 138,927 | 2,997 | 34,649 | |||||||
R5 Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||
Issued in reinvestment of distributions | 19 | 208 | 17 | 190 | ||||||
R6 Class/Shares Authorized | 25,000,000 | 20,000,000 | ||||||||
Sold | 35,578 | 447,728 | 65,917 | 773,410 | ||||||
Issued in reinvestment of distributions | 5,363 | 58,775 | 2,857 | 33,507 | ||||||
Redeemed | (25,918 | ) | (329,275 | ) | (18,647 | ) | (217,900 | ) | ||
15,023 | 177,228 | 50,127 | 589,017 | |||||||
Net increase (decrease) | (472,474 | ) | $ | (4,141,056 | ) | (932,983 | ) | $ | (11,028,014 | ) |
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6. Fair Value Measurements
The fund’s investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the fund. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
• | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | ||||||||
Australia | — | $ | 3,033,337 | — | ||||
Belgium | — | 759,327 | — | |||||
Brazil | — | 525,316 | — | |||||
Canada | — | 2,220,051 | — | |||||
China | $ | 1,035,998 | 2,214,746 | — | ||||
France | — | 766,544 | — | |||||
Germany | — | 3,051,322 | — | |||||
Hong Kong | — | 2,631,577 | — | |||||
India | — | 221,202 | — | |||||
Japan | — | 8,333,540 | — | |||||
Mexico | — | 553,000 | — | |||||
Philippines | — | 662,917 | — | |||||
Singapore | — | 1,881,318 | — | |||||
Spain | — | 509,472 | — | |||||
Sweden | — | 877,099 | — | |||||
United Kingdom | — | 3,372,872 | — | |||||
Other Countries | 44,345,226 | — | — | |||||
Rights | — | 1,213 | — | |||||
Temporary Cash Investments | 1,665 | 3,569,968 | — | |||||
Temporary Cash Investments - Securities Lending Collateral | 339,734 | — | — | |||||
$ | 45,722,623 | $ | 35,184,821 | — |
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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 political events (such as civil unrest, national elections and imposition of exchange controls), social and economic events (such as labor strikes and rising inflation), and natural disasters. Securities of foreign issuers may be less liquid and more volatile. Investing in emerging markets or a significant portion of assets in one country or region may accentuate these risks.
The fund’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, 2019 and October 31, 2018 were as follows:
2019 | 2018 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 2,273,818 | $ | 2,784,982 | ||
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 | $ | 67,423,517 | |
Gross tax appreciation of investments | $ | 13,583,444 | |
Gross tax depreciation of investments | (99,517 | ) | |
Net tax appreciation (depreciation) of investments | $ | 13,483,927 | |
Net tax appreciation (depreciation) on translation of assets and liabilities in foreign currencies | 181 | ||
Net tax appreciation (depreciation) | $ | 13,484,108 | |
Undistributed ordinary income | $ | 2,302,862 | |
Accumulated long-term gains | $ | 803,842 |
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.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Operating Expenses (before expense waiver) | Net Investment Income (Loss) | Net Investment Income (Loss) (before expense waiver) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||||
2019 | $11.25 | 0.20 | 2.90 | 3.10 | (0.42) | — | (0.42) | $13.93 | 28.60% | 1.12% | 1.12% | 1.58% | 1.58% | 118% | $35,303 | ||
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 | ||
I Class | |||||||||||||||||
2019 | $11.26 | 0.22 | 2.91 | 3.13 | (0.45) | — | (0.45) | $13.94 | 28.84% | 0.92% | 0.92% | 1.78% | 1.78% | 118% | $20,173 | ||
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 | ||
Y Class | |||||||||||||||||
2019 | $11.27 | 0.24 | 2.90 | 3.14 | (0.46) | — | (0.46) | $13.95 | 29.01% | 0.77% | 0.77% | 1.93% | 1.93% | 118% | $16,810 | ||
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 | |||||||||||||||||
2019 | $11.24 | 0.17 | 2.90 | 3.07 | (0.40) | — | (0.40) | $13.91 | 28.21% | 1.37% | 1.37% | 1.33% | 1.33% | 118% | $1,771 | ||
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 | ||
C Class | |||||||||||||||||
2019 | $11.18 | 0.07 | 2.90 | 2.97 | (0.31) | — | (0.31) | $13.84 | 27.28% | 2.12% | 2.12% | 0.58% | 0.58% | 118% | $2,206 | ||
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 | ||
R Class | |||||||||||||||||
2019 | $11.23 | 0.13 | 2.91 | 3.04 | (0.37) | — | (0.37) | $13.90 | 27.90% | 1.62% | 1.62% | 1.08% | 1.08% | 118% | $341 | ||
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 |
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 | |||||||||||||||||
2019 | $11.27 | 0.22 | 2.90 | 3.12 | (0.45) | — | (0.45) | $13.94 | 28.73% | 0.92% | 0.92% | 1.78% | 1.78% | 118% | $7 | ||
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 | |||||||||||||||||
2019 | $11.27 | 0.24 | 2.89 | 3.13 | (0.46) | — | (0.46) | $13.94 | 28.92% | 0.77% | 0.77% | 1.93% | 1.93% | 118% | $1,943 | ||
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 |
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 funds constituting the American Century Capital Portfolios, Inc. (the "Fund"), as of October 31, 2019, 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, 2019, 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, 2019, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
December 16, 2019
We have served as the auditor of one or more American Century investment companies since 1997.
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Management |
The Board of 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 | 66 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) |
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 66 | None |
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 66 | None |
Rajesh K. Gupta (1960) | Director | Since 2019 | Partner Emeritus, SeaCrest Investment Management and SeaCrest Wealth Management (2019 to Present); Chief Executive Officer and Chief Investment Officer, SeaCrest Investment Management (2006 to 2019); Chief Executive Officer and Chief Investment Officer, SeaCrest Wealth Management (2008 to 2019) | 66 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
Lynn Jenkins (1963) | Director | Since 2019 | United States Representative, U.S. House of Representatives (2009 to 2018) | 66 | MGP Ingredients, Inc. |
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 66 | None |
John R. Whitten (1946) | Director | Since 2008 | Retired | 66 | Onto Innovation Inc.; Rudolph Technologies, Inc. (2006 to 2019) |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 81 | None |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 125 | 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 |
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present); Chief Operating Officer, ACC (2012-2015). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries |
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Investment Operations and Investment Accounting, ACS (2000 to present) |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS |
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 26, 2019, 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.
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 three 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 for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or
31
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 investment performance information during the management agreement renewal process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one- and five-year periods and at its benchmark for the three-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.
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, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading
32
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, 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 Investment Company Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. 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 at the top of 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 0.01% (e.g., the Investor Class unified fee will be reduced from 1.11% to 1.10%) for at least one year, beginning August 1, 2019. 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
33
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 such 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.
34
Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time and change your withholding percentage for future distributions.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com/proxy and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on americancentury.com/proxy. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q or as an exhibit to its reports on Form N-PORT. The fund’s Forms N-Q and Form N-PORT reports are available on the SEC’s website at sec.gov. 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.
35
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, 2019.
For corporate taxpayers, the fund hereby designates $600, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2019 as qualified for the corporate dividends received deduction.
The fund hereby designates $7,709, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2019.
The fund utilized earnings and profits of $32,596 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
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Notes |
37
Notes |
38
Notes |
39
Notes |
40
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Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century 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. | ||
©2019 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90980 1912 |
![acihorizblkd33.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/acihorizblkd33.jpg)
Annual Report | |
October 31, 2019 | |
NT Global Real Estate Fund | |
Investor Class (ANREX) | |
G Class (ANRHX) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
Performance | |
Portfolio Commentary | |
Fund Characteristics | |
Shareholder Fee Example | |
Schedule of Investments | |
Statement of Assets and Liabilities | |
Statement of Operations | |
Statement of Changes in Net Assets | |
Notes to Financial Statements | |
Financial Highlights | |
Report of Independent Registered Public Accounting Firm | |
Management | |
Approval of Management Agreement | |
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, 2019 | ||||
Average Annual Returns | ||||
Ticker Symbol | 1 year | Since Inception | Inception Date | |
Investor Class | ANREX | 28.60% | 6.28% | 3/19/15 |
FTSE EPRA Nareit Global Index | — | 20.59% | 5.70% | — |
MSCI ACWI Index | — | 12.59% | 7.14% | — |
G Class | ANRHX | 30.03% | 6.95% | 3/19/15 |
Fund returns would have been lower if a portion of the fees had not been waived. Extraordinary performance is attributable in part to unusually favorable market conditions and may not be repeated or consistently achieved in the future.
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-e37d11a3b24d5b13b32.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/chart-e37d11a3b24d5b13b32.jpg)
Value on October 31, 2019 | |
Investor Class — $13,251 | |
FTSE EPRA Nareit Global Index — $12,922 | |
MSCI ACWI Index — $13,755 | |
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 |
1.11% | 0.76% |
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 30.03%* for the fiscal year ended October 31, 2019. By comparison, the FTSE EPRA Nariet Global Index (the fund’s benchmark) returned 20.59%, while the MSCI ACWI Index (a broad global stock market measure) returned 12.59%.
Global Real Estate Market Overview
Global real estate stocks rose for the 12-month period, while also outperforming the broader global equity market, as investors sought defensive investments in a volatile environment. Lower global bond yields also provided a tailwind for real estate investments, while many U.S. real estate companies provided steady or slightly accelerating earnings growth outlooks. Industrial was the strongest-performing sector of the index, as the build-out of e-commerce distribution networks fueled demand for infill industrial properties. Positive fundamentals also supported health care real estate, which also provided investors a defensive haven from market volatility. Lodging/resorts was the weakest-performing real estate sector, as rising operating costs and tepid top-line growth pressured lodging profit margins. The retail sector also lagged as e-commerce competition and retailer bankruptcies led to store closures and rising vacancy rates, especially for shopping malls.
The fund’s relative outperformance was driven by both stock selection and allocation decisions. Stock selection and an underweight in retail were particularly beneficial, as the fund avoided underperforming mall-based retailers that were notable index detractors. An overweight and stock selection in industrial also aided relative performance. No individual sectors detracted from relative performance. From a geographic standpoint, fund holdings in the U.S. were strong relative contributors, while investments in Sweden detracted moderately.
U.S. Holdings Among Key Contributors
U.S.-based residential real estate investment trust (REIT) Sun Communities, one of the nation’s largest owners of manufactured housing communities, was a leading contributor to relative performance. The stock rose as the company reported solid financial results, supported by excellent supply/demand characteristics and a strong balance sheet. Affordability issues in some markets have also driven demand for lower cost housing alternatives, such as the manufactured home communities.
Americold Realty Trust, a new holding added during the year, was another top contributor. This U.S.-based industrial REIT invests in temperature-controlled supply chain facilities. In our view, the institutionalization of food distribution to grocers is improving the company’s ability to drive pricing power with high incremental returns. Americold is also expanding through strategic acquisitions as it capitalizes on industry consolidation.
Charter Hall Group, another standout contributor, is an Australia-based commercial real estate manager and property owner with investments in various asset classes. The stock rose as the company continued to report strong earnings, fueled by growth in assets under management and robust real estate operating performance. In our view, it remains positioned for robust long-term operating performance due to its expanding property portfolio.
*All fund returns referenced in this commentary are for G 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 G Class performance exceeds that of the fund’s benchmark, other share classes may not. See page 2 for returns for all share classes.
3
Hong Kong-Based Property Developer Was a Top Detractor
Hong Kong-based real estate developer New World Development was a prominent detractor. The stock declined as political unrest and rioting in Hong Kong, combined with the U.S.-China trade war, sent the Hong Kong economy into a recession. We eliminated the position soon after the violence in Hong Kong escalated.
China-based residential real estate developers CIFI Holdings Group and Times China Holdings were also notable detractors, as tighter government policies and an economic slowdown worsened by the U.S.-China trade war pressured the country’s property sector. We eliminated our investment in CIFI Holdings, as we believe margin pressures could weaken the company’s future earnings growth. We held onto our investment in Times China, however. The stock is attractively valued, and we believe the company has the potential for above-average expected earnings growth driven by its residential sales and urban redevelopment projects.
Outlook
We continue to see evidence of solid fundamentals for real estate, including positive supply/demand balances in many asset markets, as well as continued strong capital spending by technology companies investing in e-commerce distribution, towers and data centers. At the same time, we have remained mindful of investing in companies with solid balance sheet fundamentals and strong earnings growth prospects.
Industrial remains our largest sector overweight, as we believe the build-out of e-commerce distribution networks, especially to facilitate last-mile delivery, will drive sector investment. The fund also remains overweight in residential and office, and we added to our residential weighting as we believe supply/demand imbalances in some key residential markets have created opportunities.
We reduced exposure to retail, another sector underweight, as global economic weakness, trade conflicts and competition from online retailers have challenged the sector. Within retail, we have focused on net-lease REITs that acquire single-tenant, service-oriented properties such as car washes and fitness centers. We also reduced exposure to the diversified sector, moving to an underweight, as we believe excess supply could pressure near-term earnings for U.S. data center REITs, in particular.
From a regional standpoint, stock selection led to a moderate overweight in North America, as we added to our U.S. exposure. Stock selection also led to a reduced position in Europe, which ended the period as a regional underweight. The portfolio is underweight in Asia, including Japan.
4
Fund Characteristics |
OCTOBER 31, 2019 | |
Top Ten Holdings | % of net assets |
Prologis, Inc. | 4.0% |
Healthpeak Properties, Inc. | 3.7% |
Americold Realty Trust | 3.3% |
Sun Communities, Inc. | 3.3% |
Camden Property Trust | 3.1% |
Alexandria Real Estate Equities, Inc. | 3.0% |
Rexford Industrial Realty, Inc. | 3.0% |
Equity Residential | 2.9% |
Invitation Homes, Inc. | 2.5% |
Vonovia SE | 2.4% |
Types of Investments in Portfolio | % of net assets |
Domestic Common Stocks | 54.7% |
Foreign Common Stocks | 44.2% |
Rights | —* |
Total Equity Exposure | 98.9% |
Temporary Cash Investments | 1.3% |
Temporary Cash Investments - Securities Lending Collateral | —* |
Other Assets and Liabilities | (0.2)% |
*Category is less than 0.05% of total net assets. | |
Investments by Country | % of net assets |
United States | 54.7% |
Japan | 10.6% |
United Kingdom | 4.3% |
China | 4.2% |
Germany | 3.9% |
Australia | 3.9% |
Hong Kong | 3.4% |
Canada | 2.8% |
Singapore | 2.5% |
Netherlands | 2.3% |
Other Countries | 6.3% |
Cash and Equivalents* | 1.1% |
*Includes temporary cash investments, temporary cash investments - securities lending collateral 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, 2019 to October 31, 2019.
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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period(1) 5/1/19 - 10/31/19 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $1,128.70 | $6.01 | 1.12% |
G Class | $1,000 | $1,135.10 | $0.05 | 0.01% |
Hypothetical | ||||
Investor Class | $1,000 | $1,019.56 | $5.70 | 1.12% |
G Class | $1,000 | $1,025.16 | $0.05 | 0.01% |
(1) | Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 184, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
6
Schedule of Investments |
OCTOBER 31, 2019
Shares | Value | |||
COMMON STOCKS — 98.9% | ||||
Australia — 3.9% | ||||
Charter Hall Group | 610,106 | $ | 4,744,407 | |
Goodman Group | 741,508 | 7,344,037 | ||
NEXTDC Ltd.(1)(2) | 398,338 | 1,754,966 | ||
13,843,410 | ||||
Belgium — 1.0% | ||||
Shurgard Self Storage SA | 49,233 | 1,666,503 | ||
VGP NV | 19,272 | 1,797,191 | ||
3,463,694 | ||||
Brazil — 0.7% | ||||
Cyrela Brazil Realty SA Empreendimentos e Participacoes | 361,300 | 2,433,291 | ||
Canada — 2.8% | ||||
Allied Properties Real Estate Investment Trust | 82,511 | 3,356,571 | ||
Granite Real Estate Investment Trust | 46,338 | 2,294,559 | ||
Northview Apartment Real Estate Investment Trust | 118,581 | 2,598,320 | ||
Summit Industrial Income REIT(2) | 202,100 | 1,964,073 | ||
10,213,523 | ||||
China — 4.2% | ||||
China Resources Land Ltd. | 348,000 | 1,482,345 | ||
GDS Holdings Ltd. ADR(2) | 113,907 | 4,747,644 | ||
Longfor Group Holdings Ltd. | 913,000 | 3,779,263 | ||
Shimao Property Holdings Ltd. | 833,500 | 2,796,669 | ||
Times China Holdings Ltd. | 1,184,000 | 2,093,636 | ||
14,899,557 | ||||
France — 1.0% | ||||
Gecina SA | 20,467 | 3,512,955 | ||
Germany — 3.9% | ||||
Aroundtown SA | 263,910 | 2,226,933 | ||
LEG Immobilien AG | 26,185 | 3,007,704 | ||
Vonovia SE | 163,904 | 8,729,014 | ||
13,963,651 | ||||
Hong Kong — 3.4% | ||||
ESR Cayman Ltd.(2) | 57,400 | 124,304 | ||
Link REIT | 614,000 | 6,680,624 | ||
Sun Hung Kai Properties Ltd. | 349,000 | 5,246,923 | ||
12,051,851 | ||||
India — 0.3% | ||||
Embassy Office Parks REIT | 173,200 | 1,008,214 | ||
Japan — 10.6% | ||||
Advance Residence Investment Corp. | 988 | 3,280,801 | ||
Comforia Residential REIT, Inc. | 992 | 3,233,109 | ||
GLP J-Reit | 3,070 | 4,005,867 |
7
Shares | Value | |||
Invesco Office J-Reit, Inc. | 28,295 | $ | 5,713,130 | |
Mitsubishi Estate Co. Ltd. | 385,900 | 7,477,275 | ||
Mitsui Fudosan Co. Ltd. | 257,700 | 6,587,950 | ||
Orix JREIT, Inc. | 3,434 | 7,762,945 | ||
38,061,077 | ||||
Mexico — 0.7% | ||||
Corp. Inmobiliaria Vesta SAB de CV | 1,520,001 | 2,559,345 | ||
Netherlands — 2.3% | ||||
InterXion Holding NV(2) | 93,034 | 8,207,459 | ||
Philippines — 0.8% | ||||
Ayala Land, Inc. | 3,156,430 | 3,015,059 | ||
Singapore — 2.5% | ||||
CapitaLand Commercial Trust | 1,146,700 | 1,725,642 | ||
CapitaLand Ltd. | 1,144,000 | 3,010,384 | ||
Mapletree Commercial Trust | 2,417,000 | 4,137,292 | ||
8,873,318 | ||||
Spain — 0.7% | ||||
Inmobiliaria Colonial Socimi SA | 182,465 | 2,357,914 | ||
Sweden — 1.1% | ||||
Fabege AB | 269,281 | 4,019,505 | ||
United Kingdom — 4.3% | ||||
Safestore Holdings plc | 419,976 | 3,812,322 | ||
Segro plc | 693,191 | 7,584,892 | ||
UNITE Group plc (The) | 278,508 | 4,059,694 | ||
15,456,908 | ||||
United States — 54.7% | ||||
Acadia Realty Trust | 10,958 | 306,605 | ||
Agree Realty Corp. | 102,234 | 8,052,972 | ||
Alexandria Real Estate Equities, Inc. | 68,380 | 10,855,325 | ||
American Tower Corp. | 13,823 | 3,014,520 | ||
Americold Realty Trust | 296,374 | 11,881,634 | ||
Brixmor Property Group, Inc. | 183,060 | 4,030,981 | ||
Camden Property Trust | 96,970 | 11,090,459 | ||
Cousins Properties, Inc. | 22,379 | 898,069 | ||
CyrusOne, Inc. | 24,100 | 1,717,848 | ||
Equinix, Inc. | 11,918 | 6,754,884 | ||
Equity Residential | 118,328 | 10,490,960 | ||
Essential Properties Realty Trust, Inc. | 165,208 | 4,239,237 | ||
Extra Space Storage, Inc. | 16,277 | 1,827,419 | ||
Gaming and Leisure Properties, Inc. | 117,217 | 4,730,878 | ||
Healthpeak Properties, Inc. | 351,867 | 13,237,237 | ||
Hudson Pacific Properties, Inc. | 145,288 | 5,218,745 | ||
Invitation Homes, Inc. | 295,119 | 9,086,714 | ||
Kilroy Realty Corp. | 78,984 | 6,629,127 | ||
Prologis, Inc. | 162,562 | 14,266,441 | ||
Rexford Industrial Realty, Inc. | 220,054 | 10,582,397 | ||
Ryman Hospitality Properties, Inc. | 41,875 | 3,524,619 |
8
Shares | Value | |||
SBA Communications Corp. | 15,069 | $ | 3,626,355 | |
Spirit Realty Capital, Inc. | 128,310 | 6,394,970 | ||
STORE Capital Corp. | 200,171 | 8,106,926 | ||
Sun Communities, Inc. | 72,177 | 11,739,589 | ||
UDR, Inc. | 164,230 | 8,252,558 | ||
VICI Properties, Inc. | 310,268 | 7,306,811 | ||
Welltower, Inc. | 91,050 | 8,257,324 | ||
196,121,604 | ||||
TOTAL COMMON STOCKS (Cost $270,779,203) | 354,062,335 | |||
RIGHTS† | ||||
Singapore† | ||||
Mapletree Commerical Trust(2) (Cost $—) | 89,431 | 5,916 | ||
TEMPORARY CASH INVESTMENTS — 1.3% | ||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.625% - 2.25%, 3/31/21 - 5/15/26, valued at $3,583,500), in a joint trading account at 1.50%, dated 10/31/19, due 11/1/19 (Delivery value $3,509,003) | 3,508,857 | |||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 1.625%, 9/30/26, valued at $1,194,554), at 0.65%, dated 10/31/19, due 11/1/19 (Delivery value $1,171,021) | 1,171,000 | |||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 1,689 | 1,689 | ||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $4,681,546) | 4,681,546 | |||
TEMPORARY CASH INVESTMENTS - SECURITIES LENDING COLLATERAL(3)† | ||||
State Street Navigator Securities Lending Government Money Market Portfolio (Cost $91,089) | 91,089 | 91,089 | ||
TOTAL INVESTMENT SECURITIES — 100.2% (Cost $275,551,838) | 358,840,886 | |||
OTHER ASSETS AND LIABILITIES — (0.2)% | (559,344 | ) | ||
TOTAL NET ASSETS — 100.0% | $ | 358,281,542 |
SECTOR ALLOCATION | ||
(as a % of net assets) | ||
Diversified | 23.0 | % |
Residential | 21.7 | % |
Industrial | 18.0 | % |
Office | 12.7 | % |
Retail | 10.6 | % |
Health Care | 6.0 | % |
Specialty | 3.3 | % |
Self Storage | 2.1 | % |
Lodging/Resorts | 1.0 | % |
Data Centers | 0.5 | % |
Cash and Equivalents* | 1.1 | % |
*Includes temporary cash investments, temporary cash investments - securities lending collateral and other assets and liabilities.
9
NOTES TO SCHEDULE OF INVESTMENTS | ||
ADR | - | American Depositary Receipt |
† Category is less than 0.05% of total net assets.
(1) | Security, or a portion thereof, is on loan. At the period end, the aggregate value of securities on loan was $1,719,865. The amount of securities on loan indicated may not correspond with the securities on loan identified because securities with pending sales are in the process of recall from the brokers. |
(2) | Non-income producing. |
(3) | Investment of cash collateral from securities on loan. At the period end, the aggregate market value of the collateral held by the fund was $1,815,225, which includes securities collateral of $1,724,136. |
See Notes to Financial Statements.
10
Statement of Assets and Liabilities |
OCTOBER 31, 2019 | |||
Assets | |||
Investment securities, at value (cost of $275,460,749) — including $1,719,865 of securities on loan | $ | 358,749,797 | |
Investment made with cash collateral received for securities on loan, at value (cost of $91,089) | 91,089 | ||
Total investment securities, at value (cost of $275,551,838) | 358,840,886 | ||
Foreign currency holdings, at value (cost of $8) | 8 | ||
Receivable for investments sold | 8,333,609 | ||
Dividends and interest receivable | 640,807 | ||
Securities lending receivable | 310 | ||
367,815,620 | |||
Liabilities | |||
Payable for collateral received for securities on loan | 91,089 | ||
Payable for investments purchased | 8,051,829 | ||
Payable for capital shares redeemed | 1,304,253 | ||
Accrued management fees | 86,907 | ||
9,534,078 | |||
Net Assets | $ | 358,281,542 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 294,226,989 | |
Distributable earnings | 64,054,553 | ||
$ | 358,281,542 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $94,161,060 | 8,134,494 | $11.58 | |||
G Class, $0.01 Par Value | $264,120,482 | 22,610,734 | $11.68 |
See Notes to Financial Statements.
11
Statement of Operations |
YEAR ENDED OCTOBER 31, 2019 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends (net of foreign taxes withheld of $355,245) | $ | 9,878,207 | |
Interest | 53,057 | ||
Securities lending, net | 9,627 | ||
9,940,891 | |||
Expenses: | |||
Management fees | 3,127,338 | ||
Directors' fees and expenses | 11,314 | ||
Other expenses | 29,131 | ||
3,167,783 | |||
Fees waived(1) | (2,018,134 | ) | |
1,149,649 | |||
Net investment income (loss) | 8,791,242 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investment transactions | 18,706,874 | ||
Foreign currency translation transactions | (44,984 | ) | |
18,661,890 | |||
Change in net unrealized appreciation (depreciation) on: | |||
Investments | 68,163,320 | ||
Translation of assets and liabilities in foreign currencies | 4,930 | ||
68,168,250 | |||
Net realized and unrealized gain (loss) | 86,830,140 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 95,621,382 |
(1) | Amount consists of $2,385 and $2,015,749 for Investor Class and G Class, respectively. |
See Notes to Financial Statements.
12
Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2019 AND OCTOBER 31, 2018 | ||||||
Increase (Decrease) in Net Assets | October 31, 2019 | October 31, 2018 | ||||
Operations | ||||||
Net investment income (loss) | $ | 8,791,242 | $ | 10,380,712 | ||
Net realized gain (loss) | 18,661,890 | 10,989,617 | ||||
Change in net unrealized appreciation (depreciation) | 68,168,250 | (22,987,511 | ) | |||
Net increase (decrease) in net assets resulting from operations | 95,621,382 | (1,617,182 | ) | |||
Distributions to Shareholders | ||||||
From earnings: | ||||||
Investor Class | (3,245,373 | ) | (3,692,279 | ) | ||
G Class | (11,698,497 | ) | (12,293,326 | ) | ||
Decrease in net assets from distributions | (14,943,870 | ) | (15,985,605 | ) | ||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (114,657,131 | ) | (25,676,420 | ) | ||
Net increase (decrease) in net assets | (33,979,619 | ) | (43,279,207 | ) | ||
Net Assets | ||||||
Beginning of period | 392,261,161 | 435,540,368 | ||||
End of period | $ | 358,281,542 | $ | 392,261,161 |
See Notes to Financial Statements.
13
Notes to Financial Statements |
OCTOBER 31, 2019
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.
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.
14
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. The fund may apply a model-derived factor to the closing price of equity securities traded on foreign securities exchanges. The factor is based on observable market data as provided by an independent pricing service.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The fund may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. Securities lending income is net of fees and rebates earned by the lending agent for its services.
Foreign Currency Translations — All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. The fund may enter into spot foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of investment securities, dividend and interest income, spot foreign currency exchange contracts, and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net realized and unrealized foreign currency exchange gains or losses related to investment securities are a component of net realized gain (loss) on investment transactions and change in net unrealized appreciation (depreciation) on investments, respectively.
Repurchase Agreements — The fund may enter into repurchase agreements with institutions that 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.
Segregated Assets — In accordance with the 1940 Act, the fund segregates assets on its books and records to cover certain types of investment securities and other financial instruments. ACIM monitors, on a daily basis, the securities segregated to ensure the fund designates a sufficient amount of liquid assets, marked-to-market daily. The fund may also receive assets or be required to pledge assets at the custodian bank or with a broker for collateral requirements.
15
Multiple Class — All shares of the fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets.
Distributions to Shareholders — Distributions from net investment income and net realized gains, if any, are generally declared and paid annually.
Indemnifications — Under the corporation’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business, the fund enters into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
Securities Lending — Securities are lent to qualified financial institutions and brokers. State Street Bank & Trust Co. serves as securities lending agent to the fund pursuant to a Securities Lending Agreement. The lending of securities exposes the fund to risks such as: the borrowers may fail to return the loaned securities, the borrowers may not be able to provide additional collateral, the fund may experience delays in recovery of the loaned securities or delays in access to collateral, or the fund may experience losses related to the investment collateral. To minimize certain risks, loan counterparties pledge collateral in the form of cash and/or securities. The lending agent has agreed to indemnify the fund in the case of default of any securities borrowed. Cash collateral received is invested in the State Street Navigator Securities Lending Government Money Market Portfolio, a money market mutual fund registered under the 1940 Act. The loans may also be secured by U.S. government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. By lending securities, the fund seeks to increase its net investment income through the receipt of interest and fees. Such income is reflected separately within the Statement of Operations. The value of loaned securities and related collateral outstanding at period end, if any, are shown on a gross basis within the Schedule of Investments and Statement of Assets and Liabilities.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged, and the remaining contractual maturity of those transactions as of October 31, 2019.
Remaining Contractual Maturity of Agreements | ||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | ||||||||
Securities Lending Transactions(1) | ||||||||||||
Common Stocks | $ | 91,089 | — | — | — | $ | 91,089 | |||||
Gross amount of recognized liabilities for securities lending transactions | $ | 91,089 |
(1) | Amount represents the payable for cash collateral received for securities on loan. This will generally be in the Overnight and Continuous column as the securities are typically callable on demand. |
3. Fees and Transactions with Related Parties
Certain officers and directors of the corporation are also officers and/or directors of American Century Companies, Inc. (ACC). The corporation’s investment advisor, ACIM, the corporation's distributor, American Century Investment Services, Inc., 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.
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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. Effective August 1, 2019, the investment advisor agreed to waive 0.01% of the fund’s management fee. The investment advisor expects this waiver to continue until July 31, 2020 and cannot terminate it prior such date without the approval of the Board of Directors. The impact of this waiver to the ratio of operating expenses to average net assets was less than 0.005%. The investment advisor agreed to waive the G Class's management fee in its entirety. The investment advisor expects this waiver to remain in effect permanently and cannot terminate it without the approval of the Board of Directors.
The annual management fee for each class is as follows:
Investor Class | G Class |
1.11% | 0.00%(1) |
(1) | Annual management fee before waiver was 0.76%. |
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 $168,477 and $745,914, respectively. The effect of interfund transactions on the Statement of Operations was $337 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, 2019 were $423,441,419 and $539,532,484, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2019 | Year ended October 31, 2018 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 90,000,000 | 90,000,000 | ||||||||
Sold | 174,356 | $ | 1,535,358 | 609,405 | $ | 5,985,751 | ||||
Issued in reinvestment of distributions | 355,852 | 3,245,373 | 379,084 | 3,692,279 | ||||||
Redeemed | (4,169,846 | ) | (42,466,392 | ) | (317,988 | ) | (3,153,870 | ) | ||
(3,639,638 | ) | (37,685,661 | ) | 670,501 | 6,524,160 | |||||
G Class/Shares Authorized | 190,000,000 | 230,000,000 | ||||||||
Sold | 940,364 | 9,363,967 | 1,245,433 | 12,202,353 | ||||||
Issued in reinvestment of distributions | 1,282,730 | 11,698,497 | 1,262,148 | 12,293,326 | ||||||
Redeemed | (9,633,104 | ) | (98,033,934 | ) | (5,750,226 | ) | (56,696,259 | ) | ||
(7,410,010 | ) | (76,971,470 | ) | (3,242,645 | ) | (32,200,580 | ) | |||
Net increase (decrease) | (11,049,648 | ) | $ | (114,657,131 | ) | (2,572,144 | ) | $ | (25,676,420 | ) |
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.
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The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | ||||||||
Australia | — | $ | 13,843,410 | — | ||||
Belgium | — | 3,463,694 | — | |||||
Brazil | — | 2,433,291 | — | |||||
Canada | — | 10,213,523 | — | |||||
China | $ | 4,747,644 | 10,151,913 | — | ||||
France | — | 3,512,955 | — | |||||
Germany | — | 13,963,651 | — | |||||
Hong Kong | — | 12,051,851 | — | |||||
India | — | 1,008,214 | — | |||||
Japan | — | 38,061,077 | — | |||||
Mexico | — | 2,559,345 | — | |||||
Philippines | — | 3,015,059 | — | |||||
Singapore | — | 8,873,318 | — | |||||
Spain | — | 2,357,914 | — | |||||
Sweden | — | 4,019,505 | — | |||||
United Kingdom | — | 15,456,908 | — | |||||
Other Countries | 204,329,063 | — | — | |||||
Rights | — | 5,916 | — | |||||
Temporary Cash Investments | 1,689 | 4,679,857 | — | |||||
Temporary Cash Investments - Securities Lending Collateral | 91,089 | — | — | |||||
$ | 209,169,485 | $ | 149,671,401 | — |
7. Risk Factors
The fund is owned by a relatively small number of shareholders, and in the event such shareholders redeem, the ongoing operations of the fund may be at risk.
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 political events (such as civil unrest, national elections and imposition of exchange controls), social and economic events (such as labor strikes and rising inflation), and natural disasters. Securities of foreign issuers may be less liquid and more volatile. Investing in emerging markets or a significant portion of assets in one country or region may accentuate these risks.
The fund’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.
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8. Federal Tax Information
The tax character of distributions paid during the years ended October 31, 2019 and October 31, 2018 were as follows:
2019 | 2018 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 14,943,870 | $ | 15,985,605 | ||
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 | $ | 289,191,989 | |
Gross tax appreciation of investments | $ | 70,161,517 | |
Gross tax depreciation of investments | (512,620 | ) | |
Net tax appreciation (depreciation) of investments | $ | 69,648,897 | |
Net tax appreciation (depreciation) on translation of assets and liabilities in foreign currencies | (2,511 | ) | |
Net tax appreciation (depreciation) | $ | 69,646,386 | |
Undistributed ordinary income | $ | 15,339,686 | |
Accumulated short-term capital losses | $ | (20,931,519 | ) |
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 | |||||||||||||||
2019 | $9.32 | 0.16 | 2.43 | 2.59 | (0.33) | $11.58 | 28.60% | 1.12% | 1.12% | 1.60% | 1.60% | 117% | $94,161 | ||
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 | |||||||||||||||
2019 | $9.41 | 0.28 | 2.42 | 2.70 | (0.43) | $11.68 | 30.03% | 0.01% | 0.77% | 2.71% | 1.95% | 117% | $264,120 | ||
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 funds constituting the American Century Capital Portfolios, Inc. (the "Fund"), as of October 31, 2019, 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 years ended October 31, 2019, 2018, 2017, 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, 2019, 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 years ended October 31, 2019, 2018, 2017, 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, 2019, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
December 16, 2019
We have served as the auditor of one or more American Century investment companies since 1997.
23
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 | 66 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) |
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 66 | None |
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 66 | None |
Rajesh K. Gupta (1960) | Director | Since 2019 | Partner Emeritus, SeaCrest Investment Management and SeaCrest Wealth Management (2019 to Present); Chief Executive Officer and Chief Investment Officer, SeaCrest Investment Management (2006 to 2019); Chief Executive Officer and Chief Investment Officer, SeaCrest Wealth Management (2008 to 2019) | 66 | None |
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Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
Lynn Jenkins (1963) | Director | Since 2019 | United States Representative, U.S. House of Representatives (2009 to 2018) | 66 | MGP Ingredients, Inc. |
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 66 | None |
John R. Whitten (1946) | Director | Since 2008 | Retired | 66 | Onto Innovation Inc.; Rudolph Technologies, Inc. (2006 to 2019) |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 81 | None |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 125 | 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.
25
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 |
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present); Chief Operating Officer, ACC (2012-2015). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries |
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Investment Operations and Investment Accounting, ACS (2000 to present) |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS |
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) |
26
Approval of Management Agreement |
At a meeting held on June 26, 2019, 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.
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 three 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 for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or
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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 investment performance information during the management agreement renewal process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. 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.
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, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance
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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, 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 Investment Company Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. 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 at the top of 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 0.01% (e.g., the Investor Class unified fee will be reduced from 1.11% to 1.10%) for at least one year, beginning August 1, 2019. 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
29
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 such 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.
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Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time and change your withholding percentage for future distributions.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com/proxy and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on americancentury.com/proxy. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q or as an exhibit to its reports on Form N-PORT. The fund’s Forms N-Q and Form N-PORT reports are available on the SEC’s website at sec.gov. 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, 2019.
For corporate taxpayers, the fund hereby designates $3,683, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2019 as qualified for the corporate dividends received deduction.
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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. | ||
©2019 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90988 1912 |
![acihorizblkd33.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/acihorizblkd33.jpg)
Annual Report | |
October 31, 2019 | |
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) |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the fund or your financial intermediary electronically by calling or sending an email request to your appropriate contacts as listed on the back cover of this report.
You may elect to receive all future reports in paper free of charge. You can inform the fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an email request to your appropriate contacts as listed on the back cover of this report. Your election to receive reports in paper will apply to all funds held with the fund complex/your financial intermediary.
Table of Contents |
President’s Letter | 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 |
![jthomasrev0514a01.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/jthomasrev0514a01.jpg)
Dear Investor:
Thank you for reviewing this annual report for the 12 months ended October 31, 2019. Annual reports help convey important information about fund returns, including market factors that affected performance. For additional investment and market insights, please visit americancentury.com.
Stocks, Bonds Delivered Solid Gains
U.S. and global stocks, bonds and real estate investments generally delivered strong gains for the 12-month period. Stocks and other riskier assets rebounded from a late-2018 sell-off to post robust returns for the 12 months overall. Global bonds benefited from safe-haven buying early in the period and a declining interest rate environment overall.
Fed’s Policy Pivot Improved Investor Sentiment
In the final months of 2018, mounting concerns about slowing global economic and earnings growth, tariffs and Federal Reserve (Fed) policy soured investor sentiment, driving global stocks lower. After raising rates in September 2018, the Fed hiked again in December and delivered a surprisingly bullish 2019 rate-hike outlook, which intensified the sell-off among stocks and other riskier assets. Meanwhile, the risk-off climate sparked a flight to quality, which drove U.S. and other government bond yields lower and benefited global bond returns.
A key policy pivot from the Fed helped improve equity investor sentiment beginning in early 2019. The central bank abruptly ended its rate-hike campaign and adopted a dovish tone amid weaker global growth and inflation. Additionally, investors’ worst-case fears about trade and corporate earnings generally eased, which also aided stocks and other riskier assets. At the same time, government bond yields continued to fall on moderating global growth data, muted inflation and accommodative central bank policy in the U.S., Europe and Japan. By July, concerns about global economic risks prompted the Fed to cut short-term interest rates for the first time in 10 years. The Fed followed up with additional rate cuts in September and October. This backdrop supported continued gains for fixed-income and other interest rate-sensitive assets.
Looking ahead, we expect volatility to remain a formidable factor as investors react to global growth and trade trends, central bank policy and geopolitical developments. We believe this scenario underscores the importance of using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
![image48a16.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/image48a16.jpg)
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
Performance |
Total Returns as of October 31, 2019 | ||||||
Average Annual Returns | ||||||
Ticker Symbol | 1 year | 5 years | 10 years | Since Inception | Inception Date | |
Investor Class | REACX | 30.15% | 8.81% | 14.13% | — | 9/21/95 |
MSCI U.S. REIT Index | — | 23.63% | 8.34% | 13.69% | — | — |
S&P 500 Index | — | 14.33% | 10.77% | 13.69% | — | — |
I Class | REAIX | 30.39% | 9.02% | 14.35% | — | 6/16/97 |
Y Class | ARYEX | 30.59% | — | — | 11.87% | 4/10/17 |
A Class | AREEX | 10/6/98 | ||||
No sales charge | 29.78% | 8.53% | 13.84% | — | ||
With sales charge | 22.32% | 7.26% | 13.17% | — | ||
C Class | ARYCX | 28.84% | 7.73% | 13.00% | — | 9/28/07 |
R Class | AREWX | 29.49% | 8.27% | 13.56% | — | 9/28/07 |
R5 Class | ARREX | 30.39% | — | — | 11.70% | 4/10/17 |
R6 Class | AREDX | 30.60% | 9.19% | — | 10.02% | 7/26/13 |
Average annual returns since inception are presented when ten years of performance history is not available. Extraordinary performance is attributable in part to unusually favorable market conditions and may not be repeated or consistently achieved in the future.
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, 2009 |
Performance for other share classes will vary due to differences in fee structure. |
![chart-2904f86f13e05e77993a07.jpg](https://capedge.com/proxy/N-CSR/0000908186-19-000212/chart-2904f86f13e05e77993a07.jpg)
Value on October 31, 2019 | |
Investor Class — $37,509 | |
MSCI U.S. REIT Index — $36,095 | |
S&P 500 Index — $36,096 | |
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 30.15%* for the fiscal year ended October 31, 2019. By comparison, the MSCI U.S. REIT Index (the fund’s benchmark) returned 23.63%, while the S&P 500 Index (a broad stock market measure) returned 14.33%.
REIT Market Overview
Falling interest rates provided a tailwind for real estate stocks, which significantly outperformed the broader equity market. U.S. real estate fundamentals also remained solid. Rental prices have trended above inflation in most asset classes and markets, leading to improved earnings stability. U.S. real estate stocks also had little exposure to non-U.S. risks (i.e., Brexit or China trade war) that buffeted the broader stock market. Industrial was the strongest-performing index sector, as the build-out of e-commerce distribution networks fueled demand for infill industrial properties. Lodging/resorts was the weakest-performing real estate sector, as rising operating costs and tepid top-line growth pressured lodging profit margins.
Within the fund, stock selection was a strong driver of relative performance, especially in the retail sector where we focused on net-lease real estate investment trusts (REITs) oriented toward e-commerce-resistant retailers. Stock selection and an overweight in the industrial sector also contributed strongly. No individual sector detracted from relative performance.
Standout Contributors Included Residential and Net-Lease Retail REITs
Residential REIT Sun Communities, one of the nation’s largest owners of manufactured housing communities, was a top contributor to relative performance. The stock rose as the company reported solid financial results, supported by excellent supply/demand characteristics and a strong balance sheet. Affordability issues in some markets have also driven demand for lower cost housing alternatives, such as the manufactured home communities.
Underweight exposure to mall-based retail REIT Simon Property Group also contributed to relative performance, as the stock declined in a difficult environment for mall-based retailers. We fully liquidated our investment due to our growing concerns over retailer bankruptcies, store closures and rent reductions in the multitenant retail space.
Essential Properties Realty Trust, another top contributor, is a U.S.-based net-lease retail REIT that focuses on single-tenant properties. The stock rose as the company benefited from a positive acquisition environment. Despite a challenging environment for retail REITs, we continue to find the company attractive due to its above-average dividend yield and healthy earnings growth outlook. We also continue to favor net-lease REITs because of their longer lease periods and greater rent stability, as compared to their multitenant peers.
*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
Lodging REIT Was a Key Detractor
Host Hotels & Resorts, a lodging/resorts REIT, was a notable detractor from relative performance. The stock declined as the company lowered its 2019 earnings outlook. A moderating U.S. economic outlook also created uncertainty for lodging demand. We continue to own Host Hotels.
Data center REIT CyrusOne was another prominent detractor. The stock underperformed after the company issued disappointing earnings guidance. Despite this setback, we believe the company offers relatively attractive long-term growth potential, and we maintained an investment in the stock at period-end.
Not owning W.P. Carey, a triple-net-lease REIT in the diversified sector, also dampened on relative performance. The stock rose strongly during the period, supported by robust financial results. We continue to see more attractive risk/reward in other triple-net-lease REITs with better growth.
Outlook
As we look ahead, we continue to see solid fundamentals for real estate, including positive supply/demand balances in many asset markets, as well as continued strong capital spending by technology companies investing in e-commerce distribution, towers and data centers. At the same time, we remain mindful of investing in companies with solid balance sheet fundamentals and strong earnings growth prospects.
Industrial ended the period as our largest sector overweight, and we added to our weighting over the period. Within the sector, we have shifted away from suburban big-box warehouses, a market segment where supply has caught up to demand. Instead, we have invested in companies that invest in infill industrial sites in demand to build out last-mile e-commerce distribution.
We continue to be overweight residential as we believe demographic trends, low interest rates and demand for affordable housing will act as tailwinds for the sector, benefiting companies such as Sun Communities. We also added to our office weighting, moving to a moderate overweight, given what we view to be attractive fundamentals in key markets, especially on the West Coast.
Self storage remains a prominent underweight as we believe excess capacity in the storage market could lead to increased price competition. We also moved to an underweight in retail, scaling back our exposure because of our concerns that economic uncertainty, trade conflicts and e-commerce competition could further challenge the sector. Within retail, our focus remains on net-lease REITs that acquire single-tenant, service-oriented properties such as car washes and gyms.
6
Fund Characteristics |
OCTOBER 31, 2019 | |
Top Ten Holdings | % of net assets |
Prologis, Inc. | 6.3% |
Equity Residential | 6.1% |
Equinix, Inc. | 6.1% |
Healthpeak Properties, Inc. | 5.3% |
Welltower, Inc. | 4.9% |
Sun Communities, Inc. | 4.5% |
UDR, Inc. | 4.3% |
Camden Property Trust | 4.0% |
Alexandria Real Estate Equities, Inc. | 3.9% |
Americold Realty Trust | 3.6% |
Sector Allocation | % of net assets |
Residential | 22.5% |
Industrial | 14.8% |
Retail | 14.8% |
Office | 12.0% |
Health Care | 11.8% |
Diversified | 11.8% |
Specialty | 4.4% |
Self Storage | 3.4% |
Lodging/Resorts | 3.1% |
Data Centers | 0.8% |
Cash and Equivalents* | 0.6% |
*Includes temporary cash investments and other assets and liabilities. | |
Types of Investments in Portfolio | % of net assets |
Common Stocks | 99.4% |
Temporary Cash Investments | 0.7% |
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, 2019 to October 31, 2019.
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 5/1/19 | Ending Account Value 10/31/19 | Expenses Paid During Period(1) 5/1/19 - 10/31/19 | Annualized Expense Ratio(1) | |
Actual | ||||
Investor Class | $1,000 | $1,154.80 | $6.30 | 1.16% |
I Class | $1,000 | $1,155.80 | $5.22 | 0.96% |
Y Class | $1,000 | $1,157.10 | $4.40 | 0.81% |
A Class | $1,000 | $1,153.20 | $7.65 | 1.41% |
C Class | $1,000 | $1,148.90 | $11.70 | 2.16% |
R Class | $1,000 | $1,151.90 | $9.00 | 1.66% |
R5 Class | $1,000 | $1,155.80 | $5.22 | 0.96% |
R6 Class | $1,000 | $1,156.70 | $4.40 | 0.81% |
Hypothetical | ||||
Investor Class | $1,000 | $1,019.36 | $5.90 | 1.16% |
I Class | $1,000 | $1,020.37 | $4.89 | 0.96% |
Y Class | $1,000 | $1,021.12 | $4.13 | 0.81% |
A Class | $1,000 | $1,018.10 | $7.17 | 1.41% |
C Class | $1,000 | $1,014.32 | $10.97 | 2.16% |
R Class | $1,000 | $1,016.84 | $8.44 | 1.66% |
R5 Class | $1,000 | $1,020.37 | $4.89 | 0.96% |
R6 Class | $1,000 | $1,021.12 | $4.13 | 0.81% |
(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, 2019
Shares | Value | |||
COMMON STOCKS — 99.4% | ||||
Data Centers — 0.8% | ||||
CyrusOne, Inc. | 116,955 | $ | 8,336,552 | |
Diversified — 11.8% | ||||
American Assets Trust, Inc. | 311,765 | 15,264,014 | ||
American Tower Corp. | 44,097 | 9,616,674 | ||
Equinix, Inc. | 112,082 | 63,525,836 | ||
InterXion Holding NV(1) | 173,494 | 15,305,641 | ||
JBG SMITH Properties | 238,169 | 9,588,684 | ||
SBA Communications Corp. | 41,356 | 9,952,321 | ||
123,253,170 | ||||
Health Care — 11.8% | ||||
Healthpeak Properties, Inc. | 1,466,988 | 55,188,089 | ||
Omega Healthcare Investors, Inc. | 378,837 | 16,683,981 | ||
Welltower, Inc. | 569,970 | 51,690,579 | ||
123,562,649 | ||||
Industrial — 14.8% | ||||
Americold Realty Trust | 952,771 | 38,196,589 | ||
Prologis, Inc. | 747,422 | 65,593,755 | ||
Rexford Industrial Realty, Inc. | 755,786 | 36,345,749 | ||
Terreno Realty Corp. | 274,155 | 15,465,084 | ||
155,601,177 | ||||
Lodging/Resorts — 3.1% | ||||
Host Hotels & Resorts, Inc. | 1,031,226 | 16,901,794 | ||
Ryman Hospitality Properties, Inc. | 189,233 | 15,927,742 | ||
32,829,536 | ||||
Office — 12.0% | ||||
Alexandria Real Estate Equities, Inc. | 255,085 | 40,494,744 | ||
Boston Properties, Inc. | 197,651 | 27,117,717 | ||
Cousins Properties, Inc. | 472,196 | 18,949,225 | ||
Hudson Pacific Properties, Inc. | 490,131 | 17,605,506 | ||
Kilroy Realty Corp. | 262,643 | 22,043,627 | ||
126,210,819 | ||||
Residential — 22.5% | ||||
Camden Property Trust | 366,687 | 41,937,992 | ||
Equity Residential | 720,443 | 63,874,476 | ||
Invitation Homes, Inc. | 1,221,782 | 37,618,668 | ||
Sun Communities, Inc. | 293,245 | 47,696,299 | ||
UDR, Inc. | 896,039 | 45,025,960 | ||
236,153,395 | ||||
Retail — 14.8% | ||||
Acadia Realty Trust | 289,665 | 8,104,827 | ||
Agree Realty Corp. | 351,481 | 27,686,158 | ||
Brixmor Property Group, Inc. | 1,041,940 | 22,943,519 |
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Shares | Value | |||
Essential Properties Realty Trust, Inc. | 742,876 | $ | 19,062,198 | |
Realty Income Corp. | 449,695 | 36,780,554 | ||
Spirit Realty Capital, Inc. | 372,045 | 18,542,723 | ||
STORE Capital Corp. | 541,412 | 21,927,186 | ||
155,047,165 | ||||
Self Storage — 3.4% | ||||
Extra Space Storage, Inc. | 312,090 | 35,038,344 | ||
Specialty — 4.4% | ||||
Gaming and Leisure Properties, Inc. | 500,770 | 20,211,077 | ||
VICI Properties, Inc. | 1,101,508 | 25,940,514 | ||
46,151,591 | ||||
TOTAL COMMON STOCKS (Cost $753,867,871) | 1,042,184,398 | |||
TEMPORARY CASH INVESTMENTS — 0.7% | ||||
Repurchase Agreement, BMO Capital Markets Corp., (collateralized by various U.S. Treasury obligations, 1.625% - 2.25%, 3/31/21 - 5/15/26, valued at $5,401,639), in a joint trading account at 1.50%, dated 10/31/19, due 11/1/19 (Delivery value $5,289,345) | 5,289,124 | |||
Repurchase Agreement, Fixed Income Clearing Corp., (collateralized by various U.S. Treasury obligations, 1.625%, 9/30/26, valued at $1,801,786), at 0.65%, dated 10/31/19, due 11/1/19 (Delivery value $1,765,032) | 1,765,000 | |||
State Street Institutional U.S. Government Money Market Fund, Premier Class | 2,671 | 2,671 | ||
TOTAL TEMPORARY CASH INVESTMENTS (Cost $7,056,795) | 7,056,795 | |||
TOTAL INVESTMENT SECURITIES — 100.1% (Cost $760,924,666) | 1,049,241,193 | |||
OTHER ASSETS AND LIABILITIES — (0.1)% | (800,941 | ) | ||
TOTAL NET ASSETS — 100.0% | $ | 1,048,440,252 |
NOTES TO SCHEDULE OF INVESTMENTS |
(1) | Non-income producing. |
See Notes to Financial Statements.
11
Statement of Assets and Liabilities |
OCTOBER 31, 2019 | |||
Assets | |||
Investment securities, at value (cost of $760,924,666) | $ | 1,049,241,193 | |
Receivable for investments sold | 12,188,959 | ||
Receivable for capital shares sold | 963,224 | ||
Dividends and interest receivable | 356,171 | ||
1,062,749,547 | |||
Liabilities | |||
Payable for investments purchased | 10,710,353 | ||
Payable for capital shares redeemed | 2,676,369 | ||
Accrued management fees | 902,354 | ||
Distribution and service fees payable | 20,219 | ||
14,309,295 | |||
Net Assets | $ | 1,048,440,252 | |
Net Assets Consist of: | |||
Capital (par value and paid-in surplus) | $ | 715,703,903 | |
Distributable earnings | 332,736,349 | ||
$ | 1,048,440,252 |
Net Assets | Shares Outstanding | Net Asset Value Per Share | ||||
Investor Class, $0.01 Par Value | $565,825,899 | 17,100,695 | $33.09 | |||
I Class, $0.01 Par Value | $160,057,799 | 4,823,377 | $33.18 | |||
Y Class, $0.01 Par Value | $416,821 | 12,562 | $33.18 | |||
A Class, $0.01 Par Value | $52,718,559 | 1,595,577 | $33.04* | |||
C Class, $0.01 Par Value | $5,907,536 | 183,922 | $32.12 | |||
R Class, $0.01 Par Value | $10,447,912 | 318,709 | $32.78 | |||
R5 Class, $0.01 Par Value | $6,637 | 200 | $33.19 | |||
R6 Class, $0.01 Par Value | $253,059,089 | 7,627,653 | $33.18 |
See Notes to Financial Statements.
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Statement of Operations |
YEAR ENDED OCTOBER 31, 2019 | |||
Investment Income (Loss) | |||
Income: | |||
Dividends | $ | 27,095,234 | |
Interest | 96,769 | ||
27,192,003 | |||
Expenses: | |||
Management fees | 10,066,860 | ||
Distribution and service fees: | |||
A Class | 124,336 | ||
C Class | 61,106 | ||
R Class | 43,740 | ||
Directors' fees and expenses | 29,655 | ||
Other expenses | 14,480 | ||
10,340,177 | |||
Net investment income (loss) | 16,851,826 | ||
Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on investment transactions | 75,435,288 | ||
Change in net unrealized appreciation (depreciation) on investments | 163,958,618 | ||
Net realized and unrealized gain (loss) | 239,393,906 | ||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 256,245,732 |
See Notes to Financial Statements.
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Statement of Changes in Net Assets |
YEARS ENDED OCTOBER 31, 2019 AND OCTOBER 31, 2018 | ||||||
Increase (Decrease) in Net Assets | October 31, 2019 | October 31, 2018 | ||||
Operations | ||||||
Net investment income (loss) | $ | 16,851,826 | $ | 20,077,234 | ||
Net realized gain (loss) | 75,435,288 | 45,288,178 | ||||
Change in net unrealized appreciation (depreciation) | 163,958,618 | (55,673,400) | ||||
Net increase (decrease) in net assets resulting from operations | 256,245,732 | 9,692,012 | ||||
Distributions to Shareholders | ||||||
From earnings: | ||||||
Investor Class | (34,228,520) | (45,370,811 | ) | |||
I Class | (7,208,192) | (9,967,018 | ) | |||
Y Class | (23,911) | (3,175 | ) | |||
A Class | (2,890,574) | (4,658,628 | ) | |||
C Class | (333,356) | (570,939 | ) | |||
R Class | (462,507) | (635,992 | ) | |||
R5 Class | (338) | (358 | ) | |||
R6 Class | (13,581,804) | (12,982,766 | ) | |||
Decrease in net assets from distributions | (58,729,202) | (74,189,687) | ||||
Capital Share Transactions | ||||||
Net increase (decrease) in net assets from capital share transactions (Note 5) | (128,281,002 | ) | (92,339,914) | |||
Net increase (decrease) in net assets | 69,235,528 | (156,837,589) | ||||
Net Assets | ||||||
Beginning of period | 979,204,724 | 1,136,042,313 | ||||
End of period | $ | 1,048,440,252 | $ | 979,204,724 |
See Notes to Financial Statements.
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Notes to Financial Statements |
OCTOBER 31, 2019
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.
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.
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. 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.
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Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or 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.
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.
16
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, 2019 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, 2019 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 $1,102,074 and $3,282,021, respectively. The effect of interfund transactions on the Statement of Operations was $(286,077) 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, 2019 were $897,318,434 and $1,063,932,130, respectively.
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5. Capital Share Transactions
Transactions in shares of the fund were as follows:
Year ended October 31, 2019 | Year ended October 31, 2018 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Investor Class/Shares Authorized | 150,000,000 | 170,000,000 | ||||||||
Sold | 2,524,012 | $ | 73,940,932 | 4,229,602 | $ | 116,310,040 | ||||
Issued in reinvestment of distributions | 1,258,097 | 33,533,336 | 1,614,273 | 44,714,781 | ||||||
Redeemed | (8,352,316 | ) | (238,545,626 | ) | (8,382,683 | ) | (229,188,279 | ) | ||
(4,570,207 | ) | (131,071,358 | ) | (2,538,808 | ) | (68,163,458 | ) | |||
I Class/Shares Authorized | 50,000,000 | 50,000,000 | ||||||||
Sold | 2,796,139 | 83,062,331 | 1,169,803 | 32,041,574 | ||||||
Issued in reinvestment of distributions | 193,750 | 5,244,204 | 277,854 | 7,719,902 | ||||||
Redeemed | (2,528,526 | ) | (73,771,377 | ) | (2,884,943 | ) | (80,309,917 | ) | ||
461,363 | 14,535,158 | (1,437,286 | ) | (40,548,441 | ) | |||||
Y Class/Shares Authorized | 30,000,000 | 70,000,000 | ||||||||
Sold | — | — | 12,927 | 365,126 | ||||||
Issued in reinvestment of distributions | 440 | 11,829 | 61 | 1,727 | ||||||
Redeemed | (1,041 | ) | (31,599 | ) | — | — | ||||
(601 | ) | (19,770 | ) | 12,988 | 366,853 | |||||
A Class/Shares Authorized | 40,000,000 | 40,000,000 | ||||||||
Sold | 326,083 | 9,481,547 | 397,807 | 10,852,882 | ||||||
Issued in reinvestment of distributions | 100,584 | 2,672,619 | 151,205 | 4,185,126 | ||||||
Redeemed | (702,644 | ) | (20,116,487 | ) | (1,434,357 | ) | (39,259,621 | ) | ||
(275,977 | ) | (7,962,321 | ) | (885,345 | ) | (24,221,613 | ) | |||
C Class/Shares Authorized | 20,000,000 | 10,000,000 | ||||||||
Sold | 10,147 | 292,497 | 12,869 | 343,278 | ||||||
Issued in reinvestment of distributions | 10,875 | 277,797 | 17,767 | 479,962 | ||||||
Redeemed | (84,673 | ) | (2,381,647 | ) | (141,209 | ) | (3,725,725 | ) | ||
(63,651 | ) | (1,811,353 | ) | (110,573 | ) | (2,902,485 | ) | |||
R Class/Shares Authorized | 20,000,000 | 10,000,000 | ||||||||
Sold | 131,331 | 3,794,663 | 112,256 | 3,027,976 | ||||||
Issued in reinvestment of distributions | 15,393 | 406,514 | 19,427 | 533,938 | ||||||
Redeemed | (125,583 | ) | (3,579,712 | ) | (235,998 | ) | (6,461,083 | ) | ||
21,141 | 621,465 | (104,315 | ) | (2,899,169 | ) | |||||
R5 Class/Shares Authorized | 20,000,000 | 30,000,000 | ||||||||
Issued in reinvestment of distributions | 13 | 338 | 13 | 358 | ||||||
R6 Class/Shares Authorized | 60,000,000 | 50,000,000 | ||||||||
Sold | 1,909,147 | 55,995,617 | 3,277,490 | 90,908,133 | ||||||
Issued in reinvestment of distributions | 504,384 | 13,581,524 | 468,519 | 12,982,766 | ||||||
Redeemed | (2,459,795 | ) | (72,150,302 | ) | (2,098,505 | ) | (57,862,858 | ) | ||
(46,264 | ) | (2,573,161 | ) | 1,647,504 | 46,028,041 | |||||
Net increase (decrease) | (4,474,183 | ) | $ | (128,281,002 | ) | (3,415,822 | ) | $ | (92,339,914 | ) |
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. |
18
• | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
• | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments.
The following is a summary of the level classifications as of period end. The Schedule of Investments provides additional information on the fund’s portfolio holdings.
Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||
Investment Securities | ||||||||
Common Stocks | $ | 1,042,184,398 | — | — | ||||
Temporary Cash Investments | 2,671 | $ | 7,054,124 | — | ||||
$ | 1,042,187,069 | $ | 7,054,124 | — |
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.
8. Federal Tax Information
The tax character of distributions paid during the years ended October 31, 2019 and October 31, 2018 were as follows:
2019 | 2018 | |||||
Distributions Paid From | ||||||
Ordinary income | $ | 20,288,544 | $ | 21,432,820 | ||
Long-term capital gains | $ | 38,440,658 | $ | 52,756,867 |
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 | $ | 779,729,843 | |
Gross tax appreciation of investments | $ | 274,021,523 | |
Gross tax depreciation of investments | (4,510,173 | ) | |
Net tax appreciation (depreciation) of investments | $ | 269,511,350 | |
Undistributed ordinary income | $ | 1,082,968 | |
Accumulated long-term gains | $ | 62,142,031 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
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Financial Highlights |
For a Share Outstanding Throughout the Years Ended October 31 (except as noted) | |||||||||||||||
Per-Share Data | Ratios and Supplemental Data | ||||||||||||||
Income From Investment Operations: | Distributions From: | Ratio to Average Net Assets of: | |||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Investment Income | Net Realized Gains | Total Distributions | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate | Net Assets, End of Period (in thousands) | |||
Investor Class | |||||||||||||||
2019 | $27.08 | 0.48 | 7.24 | 7.72 | (0.58) | (1.13) | (1.71) | $33.09 | 30.15% | 1.16% | 1.66% | 93% | $565,826 | ||
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 | ||
I Class | |||||||||||||||
2019 | $27.16 | 0.54 | 7.25 | 7.79 | (0.64) | (1.13) | (1.77) | $33.18 | 30.39% | 0.96% | 1.86% | 93% | $160,058 | ||
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 | ||
Y Class | |||||||||||||||
2019 | $27.15 | 0.59 | 7.25 | 7.84 | (0.68) | (1.13) | (1.81) | $33.18 | 30.59% | 0.81% | 2.01% | 93% | $417 | ||
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 | |||||||||||||||
2019 | $27.05 | 0.41 | 7.22 | 7.63 | (0.51) | (1.13) | (1.64) | $33.04 | 29.78% | 1.41% | 1.41% | 93% | $52,719 | ||
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 | ||
C Class | |||||||||||||||
2019 | $26.33 | 0.19 | 7.02 | 7.21 | (0.29) | (1.13) | (1.42) | $32.12 | 28.84% | 2.16% | 0.66% | 93% | $5,908 | ||
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 | ||
R Class | |||||||||||||||
2019 | $26.85 | 0.33 | 7.17 | 7.50 | (0.44) | (1.13) | (1.57) | $32.78 | 29.49% | 1.66% | 1.16% | 93% | $10,448 | ||
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 |
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 | |||||||||||||||
2019 | $27.16 | 0.53 | 7.27 | 7.80 | (0.64) | (1.13) | (1.77) | $33.19 | 30.39% | 0.96% | 1.86% | 93% | $7 | ||
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 | |||||||||||||||
2019 | $27.15 | 0.58 | 7.26 | 7.84 | (0.68) | (1.13) | (1.81) | $33.18 | 30.60% | 0.81% | 2.01% | 93% | $253,059 | ||
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 |
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 funds constituting the American Century Capital Portfolios, Inc. (the "Fund"), as of October 31, 2019, 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, 2019, 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, 2019, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
December 16, 2019
We have served as the auditor of one or more American Century investment companies since 1997.
23
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 | 66 | SquareTwo Financial; Barings (formerly Babson Capital Funds Trust) (2013 to 2016) |
Chris H. Cheesman (1962) | Director | Since 2019 | Retired. Senior Vice President & Chief Audit Executive, AllianceBernstein (1999 to 2018) | 66 | None |
Barry Fink (1955) | Director | Since 2012 (independent since 2016) | Retired | 66 | None |
Rajesh K. Gupta (1960) | Director | Since 2019 | Partner Emeritus, SeaCrest Investment Management and SeaCrest Wealth Management (2019 to Present); Chief Executive Officer and Chief Investment Officer, SeaCrest Investment Management (2006 to 2019); Chief Executive Officer and Chief Investment Officer, SeaCrest Wealth Management (2008 to 2019) | 66 | None |
24
Name (Year of Birth) | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of American Century Portfolios Overseen by Director | Other Directorships Held During Past 5 Years |
Independent Directors | |||||
Lynn Jenkins (1963) | Director | Since 2019 | United States Representative, U.S. House of Representatives (2009 to 2018) | 66 | MGP Ingredients, Inc. |
Jan M. Lewis (1957) | Director | Since 2011 | Retired | 66 | None |
John R. Whitten (1946) | Director | Since 2008 | Retired | 66 | Onto Innovation Inc.; Rudolph Technologies, Inc. (2006 to 2019) |
Stephen E. Yates (1948) | Director and Chairman of the Board | Since 2012 (Chairman since 2018) | Retired | 81 | None |
Interested Director | |||||
Jonathan S. Thomas (1963) | Director | Since 2007 | President and Chief Executive Officer, ACC (2007 to present). Also serves as Chief Executive Officer, ACS; Executive Vice President, ACIM; Director, ACC, ACIM and other ACC subsidiaries | 125 | 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.
25
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 |
Patrick Bannigan (1965) | President since 2019 | Executive Vice President and Director, ACC (2012 to present); Chief Financial Officer, Chief Accounting Officer and Treasurer, ACC (2015 to present); Chief Operating Officer, ACC (2012-2015). Also serves as President, ACS; Vice President, ACIM; Chief Financial Officer, Chief Accounting Officer and/or Director, ACIM, ACS and other ACC subsidiaries |
R. Wes Campbell (1974) | Chief Financial Officer and Treasurer since 2018 | Investment Operations and Investment Accounting, ACS (2000 to present) |
Amy D. Shelton (1964) | Chief Compliance Officer and Vice President since 2014 | Chief Compliance Officer, American Century funds, (2014 to present); Chief Compliance Officer, ACIM (2014 to present); Chief Compliance Officer, ACIS (2009 to present). Also serves as Vice President, ACIS |
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) |
26
Approval of Management Agreement |
At a meeting held on June 26, 2019, 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.
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 three 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 for the Fund. In connection with their review, the Directors did not identify any single factor as being all-important or
27
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 investment performance information during the management agreement renewal process. If performance concerns are identified, the Fund receives special reviews until performance improves, during which the Board discusses with the Advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. The Fund’s performance was above its benchmark for the one-, three-, five-, and ten-year periods reviewed by the Board. The Board found the investment management services provided by the Advisor to the Fund to be satisfactory and consistent with the management agreement.
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, technology support (including cyber security), new products and services offered to Fund shareholders, securities trading
28
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, 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 Investment Company Act. Under the unified fee structure, the Advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. 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 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
29
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 such 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.
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Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
If you don’t want us to withhold on this amount, you must notify us to not withhold the federal income tax. You may notify us in writing or in certain situations by telephone or through other electronic means. For systematic withdrawals, your withholding election will remain in effect until revoked or changed by filing a new election. You have the right to revoke your election at any time and change your withholding percentage for future distributions.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the fund's investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the fund is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century Investments’ website at americancentury.com/proxy and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on americancentury.com/proxy. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q or as an exhibit to its reports on Form N-PORT. The fund’s Forms N-Q and Form N-PORT reports are available on the SEC’s website at sec.gov. 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, 2019.
For corporate taxpayers, the fund hereby designates $46,485, or up to the maximum amount allowable, of ordinary income distributions paid during the fiscal year ended October 31, 2019 as qualified for the corporate dividends received deduction.
The fund hereby designates $42,651,384, or up to the maximum amount allowable, as long-term capital gain distributions (20% rate gain distributions) for the fiscal year ended October 31, 2019.
The fund hereby designates $4,753,023, as qualified short-term capital gain distributions for purposes of Internal Revenue Code Section 871 for the fiscal year ended October 31, 2019.
The fund utilized earnings and profits of $5,646,013 distributed to shareholders on redemption of shares as part of the dividends paid deduction (tax equalization).
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Contact Us | americancentury.com | |
Automated Information Line | 1-800-345-8765 | |
Investor Services Representative | 1-800-345-2021 or 816-531-5575 | |
Investors Using Advisors | 1-800-378-9878 | |
Business, Not-For-Profit, Employer-Sponsored Retirement Plans | 1-800-345-3533 | |
Banks and Trust Companies, Broker-Dealers, Financial Professionals, Insurance Companies | 1-800-345-6488 | |
Telecommunications Relay Service for the Deaf | 711 | |
American Century Capital Portfolios, Inc. | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
©2019 American Century Proprietary Holdings, Inc. All rights reserved. CL-ANN-90979 1912 |
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, Jan M. Lewis, Chris H. Cheesman and Lynn M. Jenkins are the registrant’s designated audit committee financial experts. They are “independent” as defined in Item 3 of Form N-CSR. |
(a)(3) | Not applicable. |
(b) | No response required. |
(c) | No response required. |
(d) | No response required. |
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) | Audit Fees. |
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were as follows:
FY 2018: $107,380
FY 2019: $103,480
(b) | Audit-Related Fees. |
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were as follows:
For services rendered to the registrant:
FY 2018: $0
FY 2019: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X (relating to certain engagements for non-audit services with the registrant’s investment adviser and its affiliates):
FY 2018: $0
FY 2019: $0
(c) | Tax Fees. |
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were as follows:
For services rendered to the registrant:
FY 2018: $0
FY 2019: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X (relating to certain engagements for non-audit services with the registrant’s investment adviser and its affiliates):
FY 2018: $0
FY 2019: $0
(d) | All Other Fees. |
The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were as follows:
For services rendered to the registrant:
FY 2018: $0
FY 2019: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X (relating to certain engagements for non-audit services with the registrant’s investment adviser and its affiliates):
FY 2018: $0
FY 2019: $0
(e)(1) | In accordance with paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation S-X, before the accountant is engaged by the registrant to render audit or non-audit services, the engagement is approved by the registrant’s audit committee. Pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, the registrant’s audit committee also pre-approves its accountant’s engagements for non-audit services with the registrant’s investment adviser, its parent company, and any entity controlled by, or under common control with the investment adviser that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant. |
(e)(2) | All services described in each of paragraphs (b) through (d) of this Item were pre-approved before the engagement by the registrant’s audit committee pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation S-X. Consequently, none of such services were required to be approved by the audit committee pursuant to paragraph (c)(7)(i)(C). |
(f) | The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than 50%. |
(g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant were as follows: |
FY 2018: $115,750
FY 2019: $119,500
(h) | The registrant’s investment adviser and accountant have notified the registrant’s audit committee of all non-audit services that were rendered by the registrant’s accountant to the registrant’s investment adviser, its parent company, and any entity controlled by, or under common control with the investment adviser that provides services to the registrant, which services were not required to be pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The notification provided to the registrant’s audit committee included sufficient details regarding such services to allow the registrant’s audit committee to consider the continuing independence of its principal accountant. |
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
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/ Patrick Bannigan | ||
Name: | Patrick Bannigan | ||
Title: | President | ||
Date: | December 30, 2019 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Patrick Bannigan | |
Name: | Patrick Bannigan | |
Title: | President | |
(principal executive officer) | ||
Date: | December 30, 2019 |
By: | /s/ R. Wes Campbell | |
Name: | R. Wes Campbell | |
Title: | Treasurer and | |
Chief Financial Officer | ||
(principal financial officer) | ||
Date: | December 30, 2019 |